<PAGE> 1
As filed with the Securities and Exchange Commission on September 8, 1997
REGISTRATION NO. 333-33379
===============================================================================
U.S. SECURITIES AND EXCHANGE COMMISSION
WASHINGTON, D.C. 20549
--------------------
AMENDMENT NO. 1
TO
FORM S-1
REGISTRATION STATEMENT UNDER THE SECURITIES ACT OF 1933
--------------------
CAPITAL SENIOR LIVING CORPORATION
(Exact name of registrant as specified in its charter)
<TABLE>
<S> <C> <C>
DELAWARE 8361 75-2678809
(State or other jurisdiction of (Primary industrial (I.R.S. Employer
incorporation or organization) classification code number) Identification No.)
DAVID R. BRICKMAN, ESQ.
CAPITAL SENIOR LIVING CORPORATION
14160 DALLAS PARKWAY, SUITE 300 14160 DALLAS PARKWAY, SUITE 300
DALLAS, TEXAS 75240 DALLAS, TEXAS 75240
(972) 770-5600 (972) 770-5600
(Address, including zip code, and telephone number, (Name, address, including zip code,
including area code, of registrant's principal and telephone number, including
executive offices and principal place of business) area code, of agent for service)
--------------------
Copies to:
L. STEVEN LESHIN, ESQ. ROBERT E. KING, JR., ESQ.
JENKENS & GILCHRIST, A PROFESSIONAL ROGERS & WELLS
CORPORATION 200 PARK AVENUE
1445 ROSS AVENUE, SUITE 3200 NEW YORK, NEW YORK 10166
DALLAS, TEXAS 75202 (212) 878-8000
(214) 855-4500
</TABLE>
--------------------
APPROXIMATE DATE OF COMMENCEMENT OF PROPOSED SALE TO THE PUBLIC: As soon
as practicable after the effective date of this Registration Statement.
--------------------
If any of the securities being registered on this Form are to be offered
on a delayed or continuous basis pursuant to Rule 415 under the Securities Act
of 1933, check the following box. [ ]
If this Form is filed to register additional securities for an offering
pursuant to Rule 462(b) under the Securities Act, check the following box and
list the Securities Act registration statement number of the earlier effective
registration statement for the same offering. [ ]
If this Form is a post-effective amendment filed pursuant to Rule 462(c)
under the Securities Act, check the following box and list the Securities Act
registration statement number of the earlier effective registration statement
for the same offering. [ ]
If delivery of the prospectus is expected to be made pursuant to Rule
434, please check the following box. [ ]
THE REGISTRANT HEREBY AMENDS THIS REGISTRATION STATEMENT ON SUCH DATE OR
DATES AS MAY BE NECESSARY TO DELAY ITS EFFECTIVE DATE UNTIL THE REGISTRANT
SHALL FILE A FURTHER AMENDMENT WHICH SPECIFICALLY STATES THAT THIS REGISTRATION
STATEMENT SHALL THEREAFTER BECOME EFFECTIVE IN ACCORDANCE WITH SECTION 8(a) OF
THE SECURITIES ACT OF 1933, AS AMENDED, OR UNTIL THIS REGISTRATION STATEMENT
SHALL BECOME EFFECTIVE ON SUCH DATE AS THE COMMISSION, ACTING PURSUANT TO
SECTION 8(a), MAY DETERMINE.
===============================================================================
<PAGE> 2
PART II
INFORMATION NOT REQUIRED IN PROSPECTUS
ITEM 16. EXHIBITS AND FINANCIAL STATEMENT SCHEDULES
(a) EXHIBITS
1 Form of Underwriting Agreement
3.1 Amended and Restated Certificate of Incorporation of the Registrant
3.2 Amended and Restated Bylaws of the Registrant
*4 Specimen certificate for Common Stock of the Registrant
*5 Opinion of Jenkens & Gilchrist, a Professional Corporation, with
respect to the legality of the securities being registered
+10.1 Asset Purchase Agreement, dated as of July 8, 1997, by and between
Capital Senior Living Communities, L.P. and Capital Senior Living
Corporation
+10.2 Contribution Agreement, dated as of August 1, 1997, by and among
Capital Senior Living Corporation, Jeffrey L. Beck, James A. Stroud,
Senior Living Trust, and Lawrence A. Cohen
+10.3 Stock Purchase and Stockholders' Agreement, dated as of November 1,
1996, by and among Capital Senior Living Corporation, Jeffrey L.
Beck, Senior Living Trust, and Lawrence Cohen
+10.4 Exchange Agreement, dated as of June 30, 1997, by and between
Lawrence A. Cohen and Jeffrey L. Beck
+10.5 Exchange Agreement, dated as of June 30, 1997, by and among
Lawrence A. Cohen and James A. Stroud
10.6 1997 Omnibus Stock and Incentive Plan
+10.7 Senior Living Agreement, by and between Capital Senior Living, Inc.
and New World Development (China) Limited
+10.8 Amended and Restated Loan Agreement, dated as of June 30, 1997, by
and between Lehman Brothers Holdings Inc., d/b/a Lehman capital, A
Division of Lehman Brothers Holdings Inc., and Capital Senior Living
Communities, L.P.
10.9 Employment Agreement, dated as of May 7, 1997, by and between
Capital Senior Living, Inc. and Jeffrey L. Beck
10.10 Employment Agreement, dated as of May 7, 1997, by and between
Capital Senior Living, Inc. and James A. Stroud
+10.11 Employment Agreement, dated as of November 1, 1996, by and between
Capital Senior Living Corporation and Lawrence A. Cohen
+10.12 Employment Agreement, dated as of November 26, 1996, by and between
Capital Senior Living, Inc. and David R. Brickman
+10.13 Employment Agreement, dated as of November 26, 1996, by and between
Capital Senior Living, Inc. and Keith N. Johannessen
+10.14 Engagement Letter, dated as of June 30, 1997, by and between Lehman
Brothers Holdings Inc. D/B/A Lehman Capital, A Division of Lehman
Brothers Holdings Inc. and Capital Senior Living Corporation
II-1
<PAGE> 3
+10.15 Lease Agreement, dated as of June 1, 1997, by and between G&L
Gardens, LLC, as lessor, and Capital Senior Management 1, Inc., as
lessee
+10.16 Pre-Opening Consulting Agreement, dated as of June 16, 1997, by and
between The Emmaus Calling, Inc., as owner, and Capital Senior
Management 1, Inc., as consultant
+10.17 Management Agreement, dated as of February 1, 1995, by and between
Capital Senior Living Communities, L.P., as owner, and Capital
Senior Living, Inc., as manager, regarding Canton Regency Retirement
Community, in Canton, Ohio
+10.18 Management Agreement, dated as of February 1, 1995, by and between
Capital Senior Living Communities, L.P., as owner, and Capital
Senior Living, Inc., as manager, regarding Cottonwood Village, in
Cottonwood, Arizona
+10.19 Management Agreement, dated as of February 1, 1995, by and between
Capital Senior Living Communities, L.P., as owner, and Capital
Senior Living, Inc., as manager, regarding The Harrison At Eagle
Valley, in Indianapolis, Indiana
+10.20 Management Agreement, dated as of February 1, 1995, by and between
Capital Senior Living Communities, L.P., as owner and Capital Senior
Living, Inc., as manager, regarding Towne Centre, in Merrillville,
Indiana
+10.21 Management Agreement, dated as of August 1, 1996, by and between
Capital Senior Living, Inc., as manager, and Cambridge Nursing Home
Limited Liability Company, as lessee
+10.22 Management Agreement, dated as of April 1, 1996, by and between
Buckner Retirement Services, Inc. and Capital Senior Management 1,
Inc.
+10.23 Management Agreement, dated as of May 23, 1997, by and between The
Emmaus Calling, Inc., as owner, and Capital Senior Management 1,
Inc., as manager
+10.24 Property Management Agreement, dated as of February 1, 1995, by and
between NHP Retirement Housing Partners I Limited Partnership, as
owner, and Capital Senior Living, Inc., as agent
+10.25 Management Agreement, dated as of April 1, 1997, by and between
Buckner Retirement Services, Inc. and Capital Senior Management 1,
Inc.
+10.26 Management Agreement, dated as of November 30, 1992, by and between
Capital Realty Group Senior Housing, Inc. d/b/a Capital Senior
Living, Inc., as manager, and Jacques-Miller Healthcare Properties,
L.P., as owner
+10.27 Management Agreement, dated as of July 29, 1996, by and between ILM
I Lease Corporation, as owner, and Capital Senior Management 2,
Inc., as manager, and Capital Senior Living, Inc., as guarantor
+10.28 Management Agreement, dated as of July 29, 1996, by and between ILM
II Lease Corporation, as owner, and Capital Senior Management 2,
Inc., as manager, and Capital Senior Living, Inc., as guarantor
10.29 Option Agreement, by and between Capital Realty Group Corporation,
as optionor, and Capital Senior Living Corporation, as optionee
10.30 Development Agreement, by and between Capital Senior Development,
Inc., as developer, and Tri Point Communities, L.P., as owner
10.31 Development and Turnkey Services Agreement, dated as of September 1,
1997, by and between Capital Senior Development Corporation and Tri
Point Communities, L.P.
10.32 Management Agreement, by and between Tri Point Communities, L.P., as
owner, and Capital Senior Living, Inc.
II-2
<PAGE> 4
+23.1 Consent of Ernst & Young LLP
+23.2 Consent of KPMG Peat Marwick LLP
*23.3 Consent of Dr. Victor Nee to Nomination as Director
*23.4 Consent of J. Frank Miller, III to Nomination as Director
*23.5 Consent of Jenkens & Gilchrist, a Professional Corporation (included
in Exhibit 5)
+24 Power of Attorney
(b) FINANCIAL STATEMENT SCHEDULES
Not applicable.
- ---------
+Previously filed
*To be filed by amendment
II-3
<PAGE> 5
SIGNATURES
Pursuant to the requirements of the Securities Act of 1933, the Registrant
has duly caused this Amendment No. 1 to the Registration Statement to be signed
on its behalf by the undersigned, thereunto duly authorized, in the City of
Dallas, State of Texas, on the 8th day of September, 1997.
CAPITAL SENIOR LIVING CORPORATION
By: /s/ James A. Stroud
------------------------------------
James A. Stroud
Co-Chairman of the Board and
Chief Operating Officer
Pursuant to the requirements of the Securities Act of 1933, this Amendment
No. 1 to the Registration Statement has been signed by the following persons in
the capacities and on the dates indicated.
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<CAPTION>
Signature Title Date
--------- ----- ----
<S> <C> <C>
*Jeffrey L. Beck Co-Chairman of the Board, Chief September 8, 1997
- --------------------------------------- Executive Officer (Principal
Jeffrey L. Beck Executive Officer)
/s/James A. Stroud Co-Chairman of the Board, Chief
- --------------------------------------- Operating Officer September 8, 1997
James A. Stroud
*Lawrence A. Cohen Vice Chairman, Chief Financial September 8, 1997
- --------------------------------------- Officer (Principal Financial and
Lawrence A. Cohen Accounting officer)
*James A. Stroud September 8, 1997
- ---------------------------------------
James A, Stroud, Attorney-in-Fact
</TABLE>
II-4
<PAGE> 6
EXHIBIT INDEX
<TABLE>
<CAPTION>
Exhibit
Number Document Description
------- --------------------
<S> <C>
1 Form of Underwriting Agreement
3.1 Amended and Restated Certificate of Incorporation of the
Registrant
3.2 Bylaws of the Registrant
10.6 1997 Omnibus Stock and Incentive Plan
10.9 Employment Agreement, dated as of May 7, 1997, by and
between Capital Senior Living, Inc. and Jeffrey L. Beck
10.10 Employment Agreement, dated as of May 7, 1997, by and
between Capital Senior Living, Inc. and James A. Stroud
10.29 Option Agreement, by and between Capital Realty Group
Corporation, as optionor, and Capital Senior Living
Corporation, as optionee
10.30 Development Agreement, by and between Capital Senior
Development, Inc., as developer, and Tri Point Communities,
L.P., as owner
10.31 Development and Turnkey Services Agreement, dated as of
September 1, 1997, by and between Capital Senior
Development Corporation and Tri Point Communities, L.P.
10.32 Management Agreement, by and between Tri Point Communities,
L.P., as owner, and Capital Senior Living, Inc.
</TABLE>
<PAGE> 1
EXHIBIT 1
9,000,000
CAPITAL SENIOR LIVING CORPORATION
Common Stock
UNDERWRITING AGREEMENT
_, 1997
LEHMAN BROTHERS INC.
J.C. BRADFORD & CO.
SMITH BARNEY, INC.
As Representatives of the several
Underwriters named in Schedule 1,
c/o Lehman Brothers Inc.
Three World Financial Center
New York, New York 10285
Dear Sirs:
Capital Senior Living Corporation, a Delaware corporation (the
"Company"), proposes to sell 9,000,000 shares (the "Firm Stock") of the
Company's common stock, par value $.01 per share (the "Common Stock"). In
addition, the Company proposes to grant to the Underwriters named in Schedule 1
hereto (the "Underwriters") an option to purchase up to an additional 1,350,000
shares of the Common Stock on the terms and for the purposes set forth in
Section 2 (the "Option Stock"). The Firm Stock and the Option Stock, if
purchased, are hereinafter collectively called the "Stock." This is to confirm
the agreement concerning the purchase of the Stock from the Company by the
Underwriters named in Schedule 1 hereto (the "Underwriters").
1. Representations, Warranties and Agreements of the
Company and the Contributed Entities]. The Company and Capital Senior Living,
Inc., Capital Senior Management 1, Inc., Capital Senior Management 2, Inc.,
Capital Senior Development, Inc. and Quality Home Care, Inc. (the "Contributed
Entities"), jointly and severally, represent, warrant and agree that:
(a) A registration statement on Form S-1 with
respect to the Stock has (i) been prepared at the request of
the Company in conformity with the requirements of the United
States Securities Act of 1933 (the "Securities Act") and the
rules and regulations (the "Rule and Regulations") of the
United States Securities and Exchange Commission (the
"Commission") thereunder, (ii) been filed with the Commission
under the Securities Act and (iii) become effective under the
Securities Act pursuant to notice by the Commission. Copies of
such
<PAGE> 2
registration statement have been delivered by the Company to
you as the representatives (the "Representatives") of the
Underwriters. As used in this Agreement, "Effective Time"
means the date and the time as of which such registration
statement, or the most recent post-effective amendment
thereto, if any, or the date on which any registration
statement filed pursuant to Rule 462(b) of the Rules and
Regulations (a "Rule 462(b) Registration Statement"), if any,
was declared effective by the Commission; "Effective Date"
means the date of the Effective Time; "Preliminary Prospectus"
means each prospectus included in such registration statement,
or amendments thereof, before it became effective under the
Securities Act and any prospectus filed with the Commission by
the Company with the consent of the Representatives pursuant
to Rule 424(a) of the Rules and Regulations; "Registration
Statement" means such registration statement, as amended at
the Effective Time, including all information contained in the
final prospectus filed with the Commission pursuant to Rule
424(b) of the Rules and Regulations in accordance with Section
3(a) hereof and deemed to be a part of the registration
statement as of the Effective Time pursuant to paragraph (b)
of Rule 430A of the Rules and Regulations and any Rule 462(b)
Registration Statement; and "Prospectus" means such final
prospectus, as first filed with the Commission pursuant to
paragraph (1) or (4) of Rule 424(b) of the Rules and
Regulations. The Commission has not issued any order
preventing or suspending the use of any Preliminary
Prospectus.
(b) The Registration Statement conforms, and the
Prospectus and any further amendments or supplements to the
Registration Statement or the Prospectus will, when they
become effective or are filed with the Commission, as the case
may be, conform in all respects to the requirements of the
Securities Act and the Rules and Regulations and do not and
will not, as of the applicable effective date (as to the
Registration Statement and any amendment thereto) and as of
the applicable filing date (as to the Prospectus and any
amendment or supplement thereto) contain an untrue statement
of a material fact or omit to state a material fact required
to be stated therein or necessary to make the statements
therein not misleading; provided that no representation or
warranty is made as to information contained in or omitted
from the Registration Statement or the Prospectus in reliance
upon and in conformity with written information furnished to
the Company through the Representatives by or on behalf of any
Underwriter specifically for inclusion therein or for use in
the preparation thereof.
(c) Each of the Company and the Contributed
Entities has been duly incorporated and is validly existing as
a corporation in good standing under the laws of its
jurisdiction of incorporation, and is duly qualified to do
business and is in good standing as a foreign corporation in
each jurisdiction in which its ownership or lease of property
or the conduct of its business requires such qualification,
and has all power and authority necessary to own or hold its
properties and to conduct the business in which it is engaged.
At the First Delivery Date, the Contributed Entities will
constitute the only subsidiaries of the Company.
2
<PAGE> 3
(d) Each of HealthCare Properties, L.P. ("HCP")
and NHP Retirement Housing Partners I, L.P. ("NHP") has been
validly formed and is in existence as a limited partnership
under the Revised Uniform Limited Partnership Act of the State
of Delaware and is duly qualified to do business as a foreign
partnership in each jurisdiction in which its ownership or
lease of property or the conduct of its business requires such
qualification, and has all power and authority necessary to
own or hold its properties and to conduct the business in
which it is engaged.
(e) The Company has an authorized capitalization
as set forth in the Prospectus, and all of the issued shares
of capital stock of the Company have been duly and validly
authorized and issued, are fully paid and non-assessable and
conform in all material respects to the description thereof
contained in the Prospectus; and all of the capital stock of
the Contributed Entities and the issued partnership interests
of HCP and NHP have been duly and validly authorized and
issued and are fully paid and non- assessable, and will, at
the First Delivery Date, be owned by the Company in the
percentage interests described in the Registration Statement
directly or indirectly, and free and clear of all liens,
encumbrances, equities or claims.
(f) The shares of the Stock have been duly and
validly authorized and, when issued and delivered against
payment therefor as provided herein, will be duly and validly
issued, fully paid and non-assessable.
(g) This Agreement has been duly authorized,
executed and delivered by the Company and the Contributed
Entities.
(h) The execution, delivery and performance of
this Agreement by the Company and the Contributed Entities and
the consummation of the transactions contemplated hereby and
the consummation by the Company and the Contributed Entities
and their stockholders of the formation transactions described
in the Prospectus under the caption "The Company--Formation
Transactions" (such actions are herein collectively called the
"Formation Transactions") will not conflict with or result in
a breach or violation of any of the terms or provisions of, or
constitute a default under, any indenture, mortgage, deed of
trust, loan agreement or other agreement or instrument to
which the Company or any of the Contributed Entities is a
party or by which the Company or any of the Contributed
Entities is bound or to which any of the property or assets of
the Company or any of the Contributed Entities is subject,
except for such conflicts, breaches or violations or defaults
the results of which would not have a material adverse effect
on the business, properties or results of operations of the
Company, the Contributed Entities and the Acquired Assets (as
defined in the Prospectus), taken as a whole (herein, a
"Material Adverse Effect"), nor will such actions result in
any violation of the provisions of the charter or by-laws of
the Company or Contributed Entities or any statute or any
order, rule or regulation of any court or governmental agency
or body having jurisdiction over the Company or any of the
Contributed Entities or any of their respective subsidiaries
or any of their properties or assets; and except for the
registration of the Stock under the Securities Act and such
consents, approvals, authorizations, registrations or
3
<PAGE> 4
qualifications as may be required under the Exchange Act and
applicable state securities laws in connection with the
purchase and distribution of the Stock by the Underwriters and
the bylaws, rules and regulations of the National Association
of Securities Dealers, Inc., and no consent, approval,
authorization or order of, or filing or registration with, any
such court or governmental agency or body is required for the
execution, delivery and performance of this Agreement by the
Company and the Contributed Entities and the consummation of
the transactions contemplated hereby and the Formation
Transactions.
(i) There are no contracts, agreements or
understandings between the Company and any person granting
such person the right to require the Company to file a
registration statement under the Securities Act with respect
to any securities of the Company owned or to be owned by such
person, except as described in the Registration Statement and
Prospectus, or to require the Company to include such
securities in the securities registered pursuant to the
Registration Statement or in any securities being registered
pursuant to any other registration statement filed by the
Company under the Securities Act.
(j) Except as described in the Prospectus, the
Company has not sold or issued any shares of Common Stock
during the six-month period preceding the date of the
Prospectus, including any sales pursuant to Rule 144A under,
or Regulations D or S of, the Securities Act other than shares
issued pursuant to a stock incentive plan.
(k) None of the Company, the Contributed Entities,
NHP or HCP has sustained, since the date of the latest audited
financial statements included in the Prospectus, any material
loss or interference with its business from fire, explosion,
flood or other calamity, whether or not covered by insurance,
or from any labor dispute or court or governmental action,
order or decree, otherwise than as set forth or contemplated
in the Prospectus; and, since such date, there has not been
any change in the capital stock or long-term debt of any of
the Company, the Contributed Entities, NHP or HCP or any
material adverse change, or any development involving a
prospective material adverse change, in or affecting the
general affairs, management, financial position, stockholders'
equity or results of operations of the Company and the
Contributed Entities, NHP and HCP for such purpose taking all
such entities as a whole otherwise than as set forth or
contemplated in the Prospectus.
(l) The financial statements (including the
related notes) filed as part of the Registration Statement or
included in the Prospectus present fairly the financial
condition and results of operations of the entities purported
to be shown thereby, at the dates and for the periods
indicated, and have been prepared in conformity with generally
accepted accounting principles applied on a consistent basis
throughout the periods involved.
(m) Ernst & Young LLP ("Ernst & Young"), who have
certified certain financial statements of the Company, whose
report appears in the Prospectus and who have delivered the
initial letter referred to in Section 7(h) hereof, are
4
<PAGE> 5
independent public accountants as required by the Securities
Act and the Rules and Regulations.
(n) The Company, the Contributed Entities, NHP and
HCP have good and marketable title in fee simple to all real
property and good and marketable title to all personal
property owned by them, in each case free and clear of all
liens, encumbrances and defects except such as are described
in the Prospectus or such as do not materially interfere with
the use made and proposed to be made of such property by the
Company, the Contributed Entities, NHP and HCP; and all real
property and buildings held under lease by the Company, the
Contributed Entities, NHP and HCP is held by it under valid,
subsisting and enforceable leases, with such exceptions as are
not material and do not interfere with the use made and
proposed to be made of such property and buildings by the
Company or such Contributed Entity, NHP or HCP.
(o) Except as described in the Prospectus, the
Company and each of the Contributed Entities, NHP and HCP
carries, or is covered by, insurance in such amounts and
covering such risks as is adequate for the conduct of its
business and the value of its properties and as is customary
for companies engaged in similar businesses in similar
industries.
(p) The Company and each of the Contributed
Entities, NHP and HCP has such permits, licenses, franchises
and authorizations of governmental or regulatory authorities
("permits") as are necessary to own, lease and operate its
properties and to conduct its business except where the
failure to possess any permit would not result in a Material
Adverse Effect; the Company and each of the Contributed
Entities, NHP and HCP has fulfilled and performed all of its
material obligations with respect to such permits and no event
has occurred which allows or results in, or after notice or
lapse of time would allow or result in, revocation or
termination thereof or in any other material impairment of the
rights of the holder of any such permit except as would not
result in a Material Adverse Effect. None of the Company or
the Contributed Entities is aware of any existing or imminent
matter which could reasonably be expected to materially and
adversely impact its operations or business prospects other
than as disclosed in the Prospectus.
(q) Except as described in the Prospectus, there
are no legal or governmental proceedings pending to which the
Company or any of the Contributed Entities, NHP or HCP is a
party or of which any property or assets of the Company, any
of the Contributed Entities, NHP or HCP is the subject which,
if determined adversely to the Company, any of the Contributed
Entities, NHP or HCP might result in a Material Adverse
Effect; and to the best of the Company's knowledge, no such
proceedings are threatened or contemplated by governmental
authorities or threatened by others.
(r) There are no contracts or other documents
which are required to be described in the Prospectus or filed
as exhibits to the Registration Statement by the Securities
Act or by the Rules and Regulations which have not been
described
5
<PAGE> 6
in the Prospectus or filed as exhibits to the Registration
Statement or incorporated therein by reference as permitted by
the Rules and Regulations.
(s) No relationship, direct or indirect, exists
between or among the Company on the one hand, and the
directors, officers, stockholders, customers or suppliers of
the Company on the other hand, which is required to be
described in the Prospectus which is not so described.
(t) Except as described in the Prospectus, no
labor disturbance by the employees of the Company or any of
the Contributed Entities exists or, to the knowledge of the
Company, is imminent which might reasonably be expected to
have a Material Adverse Effect.
(u) The Company and each of the Contributed
Entities is in compliance in all material respects with all
presently applicable provisions of the Employee Retirement
Income Security Act of 1974, as amended, including the
regulations and published interpretations thereunder
("ERISA"); no "reportable event" (as defined in ERISA) has
occurred with respect to any "pension plan" (as defined in
ERISA) for which the Company or any of the Contributed
Entities would have any liability; none of the Company or any
of the Contributed Entities has incurred or expects to incur
liability under (i) Title IV of ERISA with respect to
termination of, or withdrawal from, any "pension plan" or (ii)
Sections 412 or 4971 of the Internal Revenue Code of 1986, as
amended, including the regulations and published
interpretations thereunder (the "Code"); and each "pension
plan" for which the Company or any Contributed Entity would
have any liability that is intended to be qualified under
Section 401(a) of the Code is so qualified in all material
respects and nothing has occurred, whether by action or by
failure to act, which would cause the loss of such
qualification.
(v) The Company and each Contributed Entity has
filed all federal, state and local income and franchise tax
returns required to be filed through the date hereof and have
paid all taxes due thereon, and no tax deficiency has been
determined adversely to the Company or any of the Contributed
Entities which has had a Material Adverse Effect on the
consolidated financial position, stockholders' equity, results
of operations, business or prospects of the Company, nor does
the Company have any knowledge of any tax deficiency which, if
determined adversely to the Company or any of the Contributed
Entities, might reasonably be expected to have a Material
Adverse Effect.
(w) The Company (i) makes and keeps accurate books
and records and (ii) maintains internal accounting controls
which provide reasonable assurance that (A) transactions are
executed in accordance with management's authorization, (B)
transactions are recorded as necessary to permit preparation
of its financial statements and to maintain accountability for
its assets, (C) access to its assets is permitted only in
accordance with management's authorization and (D) the
reported accountability for its assets is compared with
existing assets at reasonable intervals.
6
<PAGE> 7
(x) None of the Company, the Contributed Entities,
NHP or HCP (i) is in violation of its charter or by-laws or
its certificate of limited partnership or agreement of limited
partnership, as the case may be, (ii) is in default in any
material respect, and no event has occurred which, with notice
or lapse of time or both, would constitute such a default, in
the due performance or observance of any term, covenant or
condition contained in any material indenture, mortgage, deed
of trust, loan agreement or other agreement or instrument to
which it is a party or by which it is bound or to which any of
its properties or assets is subject except for such defaults
as would not reasonably be expected to have a Material Adverse
Effect or (iii) is in violation in any material respect of any
law, ordinance, governmental rule, regulation or court decree
to which it or its property or assets may be subject or has
failed to obtain any material license, permit, certificate,
franchise or other governmental authorization or permit
necessary to the ownership of its property or to the conduct
of its business except as would not reasonably be expected to
have a Material Adverse Effect.
(y) Neither the Company nor any of the Contributed
Entities, nor any director, officer or, to the knowledge of
the Company, any agent, employee or other person associated
with or acting on behalf of the Company or the Contributed
Entities has used any corporate funds for any unlawful
contribution, gift, entertainment or other unlawful expense
relating to political activity; made any direct or indirect
unlawful payment to any foreign or domestic government
official or employee from corporate funds; violated or is in
violation of any provision of the Foreign Corrupt Practices
Act of 1977; or made any bribe, rebate, payoff, influence
payment, kickback or other unlawful payment.
(z) There has been no storage, disposal,
generation, manufacture, refinement, transportation, handling
or treatment of toxic wastes, medical wastes, hazardous wastes
or hazardous substances by any of the Company, the Contributed
Entities, NHP or HCP (or, to the knowledge of the Company, any
of their predecessors in interest) at, upon or from any of the
property now or previously owned or leased by the Company, the
Contributed Entities, NHP or HCP in violation of any
applicable law, ordinance, rule, regulation, order, judgment,
decree or permit or which would require remedial action under
any applicable law, ordinance, rule, regulation, order,
judgment, decree or permit, except for any violation or
remedial action which would not have, or could not be
reasonably likely to have, singularly or in the aggregate with
all such violations and remedial actions, a Material Adverse
Effect; there has been no spill, discharge, leak, emission,
injection, escape, dumping or release of any kind onto such
property or into the environment surrounding such property of
any toxic wastes, medical wastes, solid wastes, hazardous
wastes or hazardous substances due to or caused by the
Company, any Contributed Entity, NHP or HCP with respect to
which the Company or any of the Contributed Entities has
knowledge, except for any such spill, discharge, leak,
emission, injection, escape, dumping or release which would
not have or would not be reasonably likely to have, singularly
or in the aggregate with all such spills, discharges, leaks,
emissions, injections, escapes, dumpings and releases, a
Material Adverse Effect; and the terms "hazardous wastes",
"toxic wastes", "hazardous substances" and "medical wastes"
shall have the meanings
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<PAGE> 8
specified in any applicable local, state, federal and foreign
laws or regulations with respect to environmental protection.
(aa) None of the Company or any of the Contributed
Entities is an "investment company" or a person "controlled"
by an "investment company" within the meanings of such terms
under the Investment Company Act of 1940 and the rules and
regulations of the Commission thereunder.
(bb) Each of the senior living facilities in which
the Company will own an interest following consummation of the
Formation Transactions currently holds (or has pending a
renewal application for) a license authorizing such facility
to furnish the senior living services described in the
Prospectus.
(cc) The Company has not distributed and will not
distribute prior to the later of (i) the Closing Date, or any
date on which Option Stock is to be purchased, as the case may
be, and (ii) completion of the distribution of the Stock, any
offering material in connection with the offering and sale of
the Stock other than any Preliminary Prospectuses filed as
part of the Registration Statement, the Prospectus, the
Registration Statement and other materials, if any, permitted
by the Securities Act.
2. Purchase of the Stock by the Underwriters. On the
basis of the representations and warranties contained in, and subject to the
terms and conditions of, this Agreement, the Company agrees to sell 9,000,000
shares of the Firm Stock to the several Underwriters and each of the
Underwriters, severally and not jointly, agrees to purchase the number of
shares of the Firm Stock set opposite that Underwriter's name in Schedule 1
hereto. Each Underwriter shall be obligated to purchase from the Company that
number of shares of the Firm Stock which represents the same proportion of the
number of shares of the Firm Stock to be sold by the Company as the number of
shares of the Firm Stock set forth opposite the name of such Underwriter in
Schedule 1 represents of the total number of shares of the Firm Stock to be
purchased by all of the Underwriters pursuant to this Agreement. The respective
purchase obligations of the Underwriters with respect to the Firm Stock shall
be rounded among the Underwriters to avoid fractional shares, as the
Representatives may determine.
In addition, the Company grants to the Underwriters an option
to purchase up to 1,350,000 shares of Option Stock. Such option is granted
solely for the purpose of covering over-allotments in the sale of Firm Stock
and is exercisable as provided in Section 4 hereof. Shares of Option Stock
shall be purchased severally for the account of the Underwriters in proportion
to the number of shares of Firm Stock set opposite the name of such
Underwriters in Schedule 1 hereto. The respective purchase obligations of each
Underwriter with respect to the Option Stock shall be adjusted by the
Representatives so that no Underwriter shall be obligated to purchase Option
Stock other than in 100 share amounts. The price of both the Firm Stock and
any Option Stock shall be $[______] per share.
The Company shall not be obligated to deliver any of the Stock
to be delivered on the First Delivery Date or the Second Delivery Date (as
hereinafter defined), as the case may be, except upon payment for all the Stock
to be purchased on such Delivery Date as provided herein.
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<PAGE> 9
3. Offering of Stock by the Underwriters.
Upon authorization by the Representatives of the release of
the Firm Stock, the several Underwriters propose to offer the Firm Stock for
sale upon the terms and conditions set forth in the Prospectus.
It is understood that 450,000 shares of the Firm Stock will be
reserved by the several Underwriters for offer and sale upon the terms and
conditions set forth in the Prospectus and in accordance with the rules and
regulations of the National Association of Securities Dealers, Inc. to certain
individuals, including directors and employees of the Company and other
entities with whom directors of the Company are affiliated, and members of
their families to purchase shares of Firm Stock in form satisfactory to the
Representatives, and that any allocation of such Firm Stock among such persons
will be made in accordance with timely directions received by the
Representatives from the Company; provided, that under no circumstances will
the Representatives or any Underwriter be liable to the Company or to any such
person for any action taken or omitted in good faith in connection with such
offering to employees and persons having business relationships with the
Company and its subsidiaries. It is further understood that any shares of such
Firm Stock which are not purchased by such persons will be offered by the
Underwriters to the public upon the terms and conditions set forth in the
Prospectus.
4. Delivery of and Payment for the Stock. Delivery of
and payment for the Firm Stock shall be made at the office of Jenkens &
Gilchrist, 1445 Ross Ave., Suite 3200, Dallas, Texas 75202, at 10:00 A.M., New
York City time, on the third full business day following the date of this
Agreement or at such other date or place as shall be determined by agreement
between the Representatives and the Company. This date and time are sometimes
referred to as the "First Delivery Date." On the First Delivery Date, the
Company shall deliver or cause to be delivered certificates representing the
Firm Stock to the Representatives for the account of each Underwriter against
payment to or upon the order of the Company of the purchase price by wire
transfer of immediately available funds. Time shall be of the essence, and
delivery at the time and place specified pursuant to this Agreement is a
further condition of the obligation of each Underwriter hereunder. Upon
delivery, the Firm Stock shall be registered in such names and in such
denominations as the Representatives shall request in writing not less than two
full business days prior to the First Delivery Date. For the purpose of
expediting the checking and packaging of the certificates for the Common Stock,
the Company shall make the certificates representing the Firm Stock available
for inspection by the Representatives in New York, New York, not later than
2:00 P.M., New York City time, on the business day prior to the First Delivery
Date.
At any time on or before the thirtieth day after the date of
this Agreement the option granted in Section 3 may be exercised by written
notice being given to the Company by the Representatives. Such notice shall set
forth the aggregate number of shares of Option Stock as to which the option is
being exercised, the names in which the shares of Option Stock are to be
registered, the denominations in which the shares of Option Stock are to be
issued and the date and time, as determined by the Representatives, when the
shares of Option Stock are to be delivered; provided, however, that this date
and time shall not be earlier than the First Delivery Date nor earlier than the
third business day after the date on which the option shall have been exercised
nor later than the fifth business day after the date on which the option shall
have been exercised. (The date and time the shares of Option Stock are
delivered are sometimes referred
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<PAGE> 10
to as the "Second Delivery Date" and the First Delivery Date and the Second
Delivery Date are sometimes each referred to as a "Delivery Date").
Delivery of and payment for the Option Stock shall be made at
the place specified in the first sentence of the first paragraph of this
Section 4 (or at such other place as shall be determined by agreement between
the Representatives and the Company) at 10:00 A.M., New York City time, on the
Second Delivery Date. On the Second Delivery Date, the Company shall deliver or
cause to be delivered the certificates representing the Option Stock to the
Representatives for the account of each Underwriter against payment to or upon
the order of the Company of the purchase price by wire transfer of immediately
available funds. Time shall be of the essence, and delivery at the time and
place specified pursuant to this Agreement is a further condition of the
obligation of each Underwriter hereunder. Upon delivery, the Option Stock shall
be registered in such names and in such denominations as the Representatives
shall request in the aforesaid written notice. For the purpose of expediting
the checking and packaging of the certificates for the Option Stock, the
Company shall make the certificates representing the Option Stock available for
inspection by the Representatives in New York, New York, not later than 2:00
P.M., New York City time, on the business day prior to the Second Delivery
Date.
5. Further Agreements of the Company and the
Contributing Entities. The Company and the Contributing Entities, jointly and
severally, agree:
(a) To prepare the Prospectus in a form as to
which the Representatives do not reasonably object and to file
such Prospectus pursuant to Rule 424(b) under the Securities
Act not later than the Commission's close of business on the
second business day following the execution and delivery of
this Agreement or, if applicable, such earlier time as may be
required by Rule 430A(a)(3) under the Securities Act; to make
no further amendment or any supplement to the Registration
Statement or to the Prospectus except as permitted herein; to
advise the Representatives, promptly after it receives notice
thereof, of the time when any amendment to the Registration
Statement has been filed or becomes effective or any
supplement to the Prospectus or any amended Prospectus has
been filed and to furnish the Representatives with copies
thereof; to advise the Representatives, promptly after it
receives notice thereof, of the issuance by the Commission of
any stop order or of any order preventing or suspending the
use of any Preliminary Prospectus or the Prospectus, of the
suspension of the qualification of the Stock for offering or
sale in any jurisdiction, of the initiation or threatening of
any proceeding for any such purpose, or of any request by the
Commission for the amending or supplementing of the
Registration Statement or the Prospectus or for additional
information; and, in the event of the issuance of any stop
order or of any order preventing or suspending the use of any
Preliminary Prospectus or the Prospectus or suspending any
such qualification, to use promptly its best efforts to obtain
its withdrawal;
(b) To furnish promptly to each of the
Representatives and to counsel for the Underwriters a signed
copy of the Registration Statement as originally filed with
the Commission, and each amendment thereto filed with the
Commission, including all consents and exhibits filed
therewith;
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<PAGE> 11
(c) To deliver promptly to the Representatives
such number of the following documents as the Representatives
shall reasonably request: (i) conformed copies of the
Registration Statement as originally filed with the Commission
and each amendment thereto (in each case excluding exhibits
other than this Agreement) and (ii) each Preliminary
Prospectus, the Prospectus and any amended or supplemented
Prospectus; and, if the delivery of a prospectus is required
at any time after the Effective Time in connection with the
offering or sale of the Stock or any other securities relating
thereto and if at such time any events shall have occurred as
a result of which the Prospectus as then amended or
supplemented would include an untrue statement of a material
fact or omit to state any material fact necessary in order to
make the statements therein, in the light of the circumstances
under which they were made when such Prospectus is delivered,
not misleading, or, if for any other reason it shall be
necessary to amend or supplement the Prospectus in order to
comply with the Securities Act, to notify the Representatives
and, upon their request, to file such document and to prepare
and furnish without charge to each Underwriter and to any
dealer in securities as many copies as the Representatives may
from time to time reasonably request of an amended or
supplemented Prospectus which will correct such statement or
omission or effect such compliance;
(d) To file promptly with the Commission any
amendment to the Registration Statement or the Prospectus or
any supplement to the Prospectus that may, in the judgment of
the Company or the Representatives, be required by the
Securities Act or requested by the Commission;
(e) Prior to filing with the Commission any
amendment to the Registration Statement or supplement to the
Prospectus or any Prospectus pursuant to Rule 424 of the Rules
and Regulations, to furnish a copy thereof to the
Representatives and counsel for the Underwriters and the
Company will not file any such amendment or supplement to
which you reasonably object;
(f) As soon as practicable after the Effective
Date (it being understood that the Company shall have until at
least 410 days after the end of the Company's current fiscal
quarter), to make generally available to the Company's
security holders and to deliver to the Representatives an
earnings statement of the Company and its subsidiaries (which
need not be audited) complying with Section 11(a) of the
Securities Act and the Rules and Regulations (including, at
the option of the Company, Rule 158);
(g) For a period of five years following the
Effective Date, to furnish to the Representatives copies of
all materials mailed generally by the Company to its
shareholders and all public reports and all reports and
financial statements furnished by the Company to the principal
national securities exchange upon which the Common Stock may
be listed pursuant to requirements of or agreements with such
exchange or to the Commission pursuant to the Exchange Act or
any rule or regulation of the Commission thereunder;
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<PAGE> 12
(h) The Company will cooperate with the
Representatives and their counsel in order to qualify the
Stock for offering and sale under the securities laws of such
jurisdictions as the Representatives may request and to comply
with such laws so as to permit the continuance of sales and
dealings therein in such jurisdictions for as long as may be
necessary to complete the distribution of the Stock; provided
that in connection therewith the Company shall not be required
to qualify as a foreign corporation or to file a general
consent to service of process in any jurisdiction;
(i) For a period of 180 days from the date of the
Prospectus, not to, directly or indirectly, offer for sale,
sell or otherwise dispose of (or enter into any transaction or
device which is designed to, or could be expected to, result
in the disposition by any person at any time in the future of)
any shares of Common Stock (other than the Stock and shares
issued pursuant to a stock incentive plan or a merger or
business combination with any other senior or assisted living
company) or sell or grant options, rights or warrants with
respect to any shares of Common Stock (other than the grant of
options pursuant to option plans existing on the date hereof),
without the prior written consent of Lehman Brothers Inc.; and
to cause each officer and director of the Company to furnish
to the Representatives, prior to the First Delivery Date, a
letter or letters, in form and substance reasonably
satisfactory to counsel for the Underwriters, pursuant to
which each such person shall agree not to, directly or
indirectly, offer for sale, sell or otherwise dispose of (or
enter into any transaction or device which is designed to, or
could be expected to, result in the disposition by any person
at any time in the future of) any shares of Common Stock for a
period of 180 days from the date of the Prospectus, without
the prior written consent of Lehman Brothers Inc. provided,
however, such prohibition shall not apply to gifts and
transfers to any person or entity who agrees to be similarly
bound;
(j) Prior to the Effective Date, to apply for the
listing of the Stock on the New York Stock Exchange and to use
its best efforts to complete that listing, subject only to
official notice of issuance prior to the First Delivery Date;
(k) Prior to filing with the Commission any
reports on Form SR pursuant to Rule 463 of the Rules and
Regulations, to furnish a copy thereof to the counsel for the
Underwriters and receive and consider its comments thereon,
and to deliver promptly to the Representatives a signed copy
of each report on Form SR filed by it with the Commission;
(l) To apply the net proceeds from the sale of the
Stock being sold by the Company substantially as set forth in
the Prospectus; and
(m) To take such steps as shall be necessary to
ensure that neither the Company nor any Contributed Entity
shall become an "investment company" within the meaning of
such term under the Investment Company Act of 1940 and the
rules and regulations of the Commission thereunder.
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<PAGE> 13
6. Expenses. The Company agrees to pay (a) the costs
incident to the authorization, issuance, sale and delivery of the Stock and any
taxes payable in that connection; (b) the costs incident to the preparation,
printing and filing under the Securities Act of the Registration Statement and
any amendments and exhibits thereto; (c) the costs of distributing the
Registration Statement as originally filed and each amendment thereto and any
post-effective amendments thereof (including, in each case, exhibits), any
Preliminary Prospectus, the Prospectus and any amendment or supplement to the
Prospectus, all as provided in this Agreement; (d) the costs of producing and
distributing this Agreement and any other related documents in connection with
the offering, purchase, sale and delivery of the stock; (e) the filing fees
incident to securing any required review by the National Association of
Securities Dealers, Inc. of the terms of sale of the Stock; (f) any applicable
listing or other fees; (g) the fees and expenses of qualifying the Stock under
the securities laws of the several jurisdictions as provided in Section 5(h)
and of preparing, printing and distributing a Blue Sky Memorandum (including
related reasonable fees and expenses of counsel to the Underwriters); (h) all
reasonable costs and expenses of the Underwriters, including the fees and
disbursements of counsel for the Underwriters, incident to the offer and sale
of shares of the Stock by the Underwriters to certain individuals, including
directors and employees of the Company and other entities with whom directors
of the Company are affiliated, and members of their families, as described in
Section 3; and (i) all other costs and expenses incident to the performance of
the obligations of the Company under this Agreement; provided that, except as
provided in this Section 6 and in Section 11 the Underwriters shall pay their
own costs and expenses, including the costs and expenses of their counsel, any
transfer taxes on the Stock which they may sell and the expenses of advertising
any offering of the Stock made by the Underwriters.
7. Conditions of Underwriters' Obligations. The
respective obligations of the Underwriters hereunder are subject to the
accuracy, when made and on each Delivery Date, of the representations and
warranties of the Company and the Contributed Entities contained herein, to the
performance by the Company and the Contributed Entities of their respective
obligations hereunder, and to each of the following additional terms and
conditions:
(a) The Prospectus shall have been timely filed
with the Commission in accordance with Section 5(a); no stop
order suspending the effectiveness of the Registration
Statement or any part thereof shall have been issued and no
proceeding for that purpose shall have been initiated or
threatened by the Commission; and any request of the
Commission for inclusion of additional information in the
Registration Statement or the Prospectus or otherwise shall
have been complied with.
(b) No Underwriter shall have discovered and
disclosed to the Company on or prior to such Delivery Date
that the Registration Statement or the Prospectus or any
amendment or supplement thereto contains an untrue statement
of a fact which, in the opinion of Rogers & Wells, counsel for
the Underwriters, is material or omits to state a fact which,
in the opinion of such counsel, is material and is required to
be stated therein or is necessary to make the statements
therein not misleading.
(c) All corporate proceedings and other legal
matters incident to the authorization, form and validity of
this Agreement, the Stock, the Registration
13
<PAGE> 14
Statement and the Prospectus, and all other legal matters
relating to this Agreement and the transactions contemplated
hereby shall be reasonably satisfactory in all material
respects to counsel for the Underwriters, and the Company and
the Contributing Entities shall have furnished to such counsel
all documents and information that they may reasonably request
to enable them to pass upon such matters.
(d) Jenkens & Gilchrist, a Professional
Corporation, shall have furnished to the Representatives its
written opinion, as counsel to the Company, addressed to the
Underwriters and dated such Delivery Date, in form and
substance reasonably satisfactory to the Representatives, to
the effect that:
(i) The Company and each of the
Contributed Entities has been duly incorporated and
is validly existing as a corporation in good standing
under the laws of the state of its incorporation, is
duly qualified to do business and is in good standing
as a foreign corporation in each jurisdiction in
which its ownership or lease of property or the
conduct of its business requires such qualification
except when the failure to be so qualified would not
reasonably be expected to have a Material Adverse
Effect, and has all requisite corporate power and
authority necessary to own or hold its properties and
conduct the businesses in which it is engaged;
(ii) The Company has an authorized
capitalization as set forth in the Prospectus, and
all of the issued shares of capital stock of the
Company (including the shares of Stock being
delivered on such Delivery Date) have been duly and
validly authorized and issued, are fully paid and
non-assessable and conform in all material respects
to the description thereof contained in the
Prospectus; and all of the issued shares of capital
stock of each Contributed Entity have been duly and
validly authorized and issued and are fully paid,
non-assessable and are owned directly or indirectly
by the Company, free and clear of all liens,
encumbrances, equities or claims;
(iii) There are no preemptive or other
rights to subscribe for or to purchase, nor any
restriction upon the voting or transfer of, any
shares of the Stock pursuant to the Company's charter
or by-laws or any agreement or other instrument known
to such counsel;
(iv) To such counsel's knowledge, there
are no legal or governmental actions, suits or
proceedings pending or threatened against the Company
or any Contributed Entity that were required to be
described in the Prospectus, which are not described
as required;
(v) The Registration Statement was
declared effective under the Securities Act as of the
date and time specified in such opinion, the
Prospectus was filed with the Commission pursuant to
the subparagraph of Rule 424(b) of the Rules and
Regulations specified in such opinion on the
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<PAGE> 15
date specified therein and no stop order suspending
the effectiveness of the Registration Statement has
been issued and, to the knowledge of such counsel, no
proceeding for that purpose is pending or threatened
by the Commission;
(vi) The Registration Statement and the
Prospectus and any further amendments or supplements
thereto made by the Company prior to such Delivery
Date (other than the financial statements and related
schedules therein and other financial or statistical
data included therein, as to which such counsel need
express no opinion) comply as to form in all material
respects with the requirements of the Securities Act
and the Rules and Regulations;
(vii) To the best of such counsel's
knowledge, there are no contracts or other documents
which are required to be described in the Prospectus
or filed as exhibits to the Registration Statement by
the Securities Act or by the Rules and Regulations
which have not been described or filed as exhibits to
the Registration Statement or incorporated therein by
reference as permitted by the Rules and Regulations;
(viii) This Agreement has been duly
authorized, executed and delivered by the Company and
the Contributed Entities;
(ix) The issue and sale of the shares of
Stock being delivered on such Delivery Date by the
Company and the compliance by the Company and the
Contributed Entities with all of the provisions of
this Agreement and the consummation of the
transactions contemplated hereby and the Formation
Transactions will not conflict with or result in a
breach or violation of any of the terms or provisions
of, or constitute a default under, any indenture,
mortgage, deed of trust, loan agreement or other
agreement or instrument to which the Company or any
of the Contributed Entities is a party or by which
the Company or any of the Contributed Entities is
bound or to which any of the property or assets of
the Company or any of the Contributed Entities is
subject and which has been identified to such counsel
as material to the Company or the Contributed
Entities, nor will such actions result in any
violation of the provisions of the charter or by-laws
of the Company or any of the Contributed Entities or
any statute (other than State securities or Blue Sky
laws, as to which counsel need express no opinion) or
any order, rule or regulation of any court or
governmental agency or body having jurisdiction over
the Company or any of the Contributed Entities or any
of their respective subsidiaries or any of their
properties or assets; and, except for the
registration of the Stock under the Securities Act
and such consents, approvals, authorizations,
registrations or qualifications as may be required
under the Exchange Act and applicable state
securities laws in connection with the purchase and
distribution of the Stock by the Underwriters, no
consent, approval, authorization or order of, or
filing or registration with, any such court or
governmental agency or body is required for the
execution, delivery and
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<PAGE> 16
performance of this Agreement by the Company or any
of the Contributed Entities and the consummation of
the transactions contemplated hereby and the
Formation Transactions (other than the acquisition of
the Acquired Assets); and
(x) To the best of such counsel's
knowledge, except as described in the Prospectus,
there are no contracts, agreements or understandings
between the Company and any person granting such
person the right to require the Company to file a
registration statement under the Securities Act with
respect to any securities of the Company owned or to
be owned by such person or to require the Company to
include such securities in the securities registered
pursuant to the Registration Statement or in any
securities being registered pursuant to any other
registration statement filed by the Company under the
Securities Act.
In rendering such opinion, such counsel may state that its
opinion is limited to matters governed by the Federal laws of
the United States of America, the laws of the State of Texas
and the General Corporation Law of the State of Delaware and
that such counsel is not admitted in the State of Delaware.
Such counsel shall also have furnished to the Representatives
a written statement, addressed to the Underwriters and dated
such Delivery Date, in form and substance satisfactory to the
Representatives, to the effect that (x) such counsel has acted
as counsel to the Company in connection with the preparation
of the Registration Statement, and (y) based on the foregoing,
no facts have come to the attention of such counsel which lead
it to believe that the Registration Statement, as of the
Effective Date, contained any untrue statement of a material
fact or omitted to state a material fact required to be stated
therein or necessary in order to make the statements therein
not misleading, or that the Prospectus contains any untrue
statement of a material fact or omits to state a material fact
required to be stated therein or necessary in order to make
the statements therein, in light of the circumstances under
which they were made, not misleading. The foregoing opinion
and statement may be qualified by a statement to the effect
that such counsel does not assume any responsibility for the
accuracy, completeness or fairness of the statements contained
in the Registration Statement or the Prospectus except for the
statements made in the Prospectus under the captions "Business
- Government Regulation," "Description of Capital Stock" and
"Shares Eligible for Future Sale", insofar as such statements
relate to the Stock and concern legal matters, and such
counsel may further state that it expresses no opinion as to
the financial statements and financial schedules and other
financial and statistical information contained in the
Registration Statement and Prospectus.
(e) Brown & Wood shall have furnished to the
Representatives its written opinion, as counsel to Capital
Senior Living Communities, L.P. ("CSLC"), addressed to the
Underwriters and dated such Delivery Date, in form and
substance reasonably satisfactory to the Representatives, to
the effect that:
16
<PAGE> 17
(i) Capital Senior Living Communities,
L.P. ("CSLC") has been duly formed and is validly
exiting as a limited partnership under the Revised
Uniform Limited Partnership Act of the State of
Delaware;
(ii) The Asset Purchase Agreement, dated
as of July 8, 1997 between CSLC and Capital Senior
Living Corporation has been duly authorized, executed
and delivered by CSLC and constitutes the legal,
valid and binding obligation of CSLC and is
enforceable against CSLC in accordance with its
terms, except as such enforceability may be limited
by bankruptcy, insolvency, reorganization,
moratorium, fraudulent conveyance or similar laws
affecting creditors rights generally; and
(iii) The execution and delivery by CSLC of
the Asset Purchase Agreement and the compliance by
CSLC with all of the provisions of the Asset Purchase
Agreement and the consummation by CSLC of the
transactions contemplated by the Asset Purchase
Agreement will not conflict with or result in a
breach or violation of any of the terms or provisions
of, or constitute a default under any indenture,
mortgage, deed of trust, loan agreement or other
agreement or instrument to which CSLC is a party or
by which CSLC is bound or to which any of the
property or assets of CSLC is subject and which has
been identified to such counsel as material to CSLC,
nor will such actions result in any violation of the
provisions of the certificate of limited partnership
or limited partnership agreement of CSLC or any
statute or any order, rule or regulation of any court
or governmental agency or body having jurisdiction
over CSLC or any of its properties or assets; and,
except for the filing of an information statement
pursuant to Section 14 of the Exchange Act, no
consent, approval, authorization or order of, or
filing or registration with, any such court or
governmental agency or body is required for the
execution, delivery and performance of the Asset
Purchase Agreement by CSLC and the consummation by
CSLC of the transaction contemplated by the Asset
Purchase Agreement.
(f) The Representatives shall have received from
Rogers & Wells counsel for the Underwriters, such opinion or
opinions, dated such Delivery Date, with respect to the
issuance and sale of the Stock, the Registration Statement,
the Prospectus and other related matters as the
Representatives may reasonably require, and the Company shall
have furnished to such counsel such documents as they
reasonably request for the purpose of enabling them to pass
upon such matters.
(g) At the time of execution of this Agreement,
the Representatives shall have received from Ernst & Young LLP
a letter, in form and substance satisfactory to the
Representatives, addressed to the Underwriters and dated the
date hereof (i) confirming that they are independent public
accountants within the meaning of the Securities Act and are
in compliance with the applicable requirements relating to the
qualification of accountants under Rule 2-01 of Regulation S-X
of the Commission, (ii) stating, as of the date hereof (or,
with
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<PAGE> 18
respect to matters involving changes or developments since the
respective dates as of which specified financial information
is given in the Prospectus, as of a date not more than five
days prior to the date hereof), the conclusions and findings
of such firm with respect to the financial information and
other matters ordinarily covered by accountants' "comfort
letters" to underwriters in connection with registered public
offerings.
(h) With respect to the letter of Ernst & Young
referred to in the preceding paragraph and delivered to the
Representatives concurrently with the execution of this
Agreement (the "initial letter"), the Company shall have
furnished to the Representatives a letter (the "bring-down
letter") of such accountants, addressed to the Underwriters
and dated such Delivery Date (i) confirming that they are
independent public accountants within the meaning of the
Securities Act and are in compliance with the applicable
requirements relating to the qualification of accountants
under Rule 2-01 of Regulation S-X of the Commission, (ii)
stating, as of the date of the bring-down letter (or, with
respect to matters involving changes or developments since the
respective dates as of which specified financial information
is given in the Prospectus, as of a date not more than five
days prior to the date of the bring-down letter), the
conclusions and findings of such firm with respect to the
financial information and other matters covered by the initial
letter and (iii) confirming in all material respects the
conclusions and findings set forth in the initial letter.
(i) The Company shall have furnished to the
Representatives a certificate, dated such Delivery Date, of
its Chairman of the Board, its President or a Vice President
and its chief financial officer stating that:
(i) The representations,
warranties and agreements of the Company in Section 1
are true and correct as of such Delivery Date; the
Company has complied with all its agreements
contained herein; and the conditions set forth in
Sections 7(a) and 7(j) have been fulfilled; and
(ii) They have carefully examined
the Registration Statement and the Prospectus and, in
their opinion (A) as of the Effective Date, the
Registration Statement and Prospectus did not include
any untrue statement of a material fact and did not
omit to state a material fact required to be stated
therein or necessary to make the statements therein,
as to the Prospectus, in light of the circumstances
under which they were made, not misleading, and (B)
since the Effective Date, no event has occurred which
should have been set forth in a supplement or
amendment to the Registration Statement or the
Prospectus.
(j) (i) None of the Company, the Contributed
Entities, NHP or HCP shall have sustained since the date of
the latest audited financial statements included in the
Prospectus any material loss or interference with its business
from fire, explosion, flood or other calamity, whether or not
covered by insurance, or from any labor dispute or court or
governmental action, order or decree, otherwise than as set
forth or contemplated in the Prospectus or (ii) since such
date there shall not
18
<PAGE> 19
have been any change in the capital stock or long-term debt of
the Company or any of the Contributed Entities or any change,
or any development involving a prospective change, in or
affecting the general affairs, management, financial position,
stockholders' equity or results of operations of the Company,
the Contributed Entities, NHP and HCP, taken as a whole,
otherwise than as set forth or contemplated in the Prospectus,
the effect of which, in any such case described in clause (i)
or (ii), is, in the judgment of the Representatives, so
material and adverse as to make it impracticable or
inadvisable to proceed with the public offering or the
delivery of the Stock being delivered on such Delivery Date on
the terms and in the manner contemplated in the Prospectus.
(k) Subsequent to the execution and delivery of
this Agreement, there shall not have occurred any of the
following: (i) trading in securities generally on the New York
Stock Exchange or the American Stock Exchange or in the
over-the-counter market, or trading in any securities of the
Company on any exchange or in the over-the-counter market,
shall have been suspended or minimum prices shall have been
established on any such exchange or such market by the
Commission, by such exchange or by any other regulatory body
or governmental authority having jurisdiction, (ii) a banking
moratorium shall have been declared by Federal or state
authorities, (iii) the United States shall have become engaged
in hostilities, there shall have been an escalation in
hostilities involving the United States or there shall have
been a declaration of a national emergency or war by the
United States or (iv) there shall have occurred such a
material adverse change in general economic, political or
financial conditions (or the effect of international
conditions on the financial markets in the United States shall
be such) as to make it, in the judgment of a majority in
interest of the several Underwriters, impracticable or
inadvisable to proceed with the public offering or delivery of
the Stock being delivered on such Delivery Date on the terms
and in the manner contemplated in the Prospectus.
(l) The New York Stock Exchange shall have approved
the Stock for listing, subject only to official notice of
issuance and evidence of satisfactory distribution.
(m) The Company shall have furnished the
Representatives with "lock-up" letters signed by the directors
and officers of the Company substantially in the form
contemplated by Section 5(i).
All opinions, letters, evidence and certificates mentioned
above or elsewhere in this Agreement shall be deemed to be in compliance with
the provisions hereof only if they are in form and substance reasonably
satisfactory to counsel for the Underwriters.
19
<PAGE> 20
8. Indemnification and Contribution.
(a) The Company and the Contributed Entities shall,
jointly and severally, indemnify and hold harmless each Underwriter, its
officers and employees, and each person, if any, who controls any Underwriter
within the meaning of the Securities Act, from and against any loss, claim,
damage or liability, joint or several, or any action in respect thereof
(including, but not limited to, any loss, claim, damage, liability or action
relating to purchases and sales of Stock), to which that Underwriter, officer,
employee or controlling person may become subject, under the Securities Act or
otherwise, insofar as such loss, claim, damage, liability or action arises out
of, or is based upon, (i) any untrue statement or alleged untrue statement of a
material fact contained (A) in any Preliminary Prospectus, the Registration
Statement or the Prospectus or in any amendment or supplement thereto or (B) in
any blue sky application or other document prepared or executed by the Company
(or based upon any written information furnished by the Company) specifically
for the purpose of qualifying any or all of the Stock under the securities laws
of any state or other jurisdiction (any such application, document or
information being hereinafter called a "Blue Sky Application"), (ii) the
omission or alleged omission to state in any Preliminary Prospectus, the
Registration Statement or the Prospectus, or in any amendment or supplement
thereto, or in any Blue Sky Application any material fact required to be stated
therein or necessary to make the statements therein not misleading or (iii) any
act or failure to act or any alleged act or failure to act by any Underwriter
in connection with, or relating in any manner to, the Stock or the offering
contemplated hereby, and which is included as part of or referred to in any
loss, claim, damage, liability or action arising out of or based upon matters
covered by clause (i) or (ii) above provided that the Company shall not be
liable under this clause (iii) to the extent that it is determined in a final
judgment by a court of competent jurisdiction that such loss, claim, damage,
liability or action resulted directly from any such acts or failures to act
undertaken or omitted to be taken by such Underwriter through its gross
negligence or willful misconduct), and shall reimburse each Underwriter and
each such officer, employee or controlling person promptly upon demand for any
legal or other expenses reasonably incurred by that Underwriter, officer,
employee or controlling person in connection with investigating or defending or
preparing to defend against any such loss, claim, damage, liability or action
as such expenses are incurred; provided, however, that the Company shall not be
liable in any such case to the extent that any such loss, claim, damage,
liability or action arises out of, or is based upon, any untrue statement or
alleged untrue statement or omission or alleged omission made in any
Preliminary Prospectus, the Registration Statement or the Prospectus, or in any
such amendment or supplement, or in any Blue Sky Application, in reliance upon
and in conformity with written information furnished to the Company through the
Representatives by or on behalf of any Underwriter specifically for inclusion
therein or for use in the preparation thereof; provided, further, that the
indemnity agreement contained in this Section with respect to any Preliminary
Prospectus shall not inure to the benefit of any Underwriter (or of any person
controlling such Underwriter) on account of any loss, claim, damage, liability,
action or proceeding arising out of or based upon an untrue statement or
alleged untrue statement of a material fact, or omission or alleged omission of
a material fact, made therein, with respect to the sale of the Stock by such
Underwriter to any person if a copy of the Preliminary Prospectus or Prospectus
or any amendment or supplement thereto (if any amendment or supplement thereto
shall have been furnished to such Underwriter) correcting such untrue statement
or alleged untrue statement or omission or alleged omission shall not have been
given or sent to such person by or on behalf of such Underwriter with or prior
to the written confirmation of the sale involved. The foregoing indemnity
agreement is in addition
20
<PAGE> 21
to any liability which the Company may otherwise have to any Underwriter or to
any officer, employee or controlling person of that Underwriter.
(b) Each Underwriter, severally and not jointly, shall
indemnify and hold harmless the Company, and each of the Contributed Entities,
each of their officers and employees, each of their directors, and each person,
if any, who controls the Company and each of the Contributed Entities, within
the meaning of the Securities Act, from and against any loss, claim, damage or
liability, joint or several, or any action in respect thereof, to which the
Company and each of the Contributed Entities, or any such director, officer,
employee or controlling person may become subject, under the Securities Act or
otherwise, insofar as such loss, claim, damage, liability or action arises out
of, or is based upon, (i) any untrue statement or alleged untrue statement of a
material fact contained (A) in any Preliminary Prospectus, the Registration
Statement or the Prospectus or in any amendment or supplement thereto, or (B)
in any Blue Sky Application or (ii) the omission or alleged omission to state
in any Preliminary Prospectus, the Registration Statement or the Prospectus, or
in any amendment or supplement thereto, or in any Blue Sky Application any
material fact required to be stated therein or necessary to make the statements
therein not misleading, but in each case only to the extent that the untrue
statement or alleged untrue statement or omission or alleged omission was made
in reliance upon and in conformity with written information furnished to the
Company through the Representatives by or on behalf of that Underwriter
specifically for inclusion therein or for use in the preparation thereof, and
shall reimburse the Company and any such director, officer or controlling
person for any legal or other expenses reasonably incurred by the Company or
any such director, officer or controlling person in connection with
investigating or defending or preparing to defend against any such loss, claim,
damage, liability or action as such expenses are incurred. The foregoing
indemnity agreement is in addition to any liability which any Underwriter may
otherwise have to the Company or any such director, officer, employee or
controlling person.
(c) Promptly after receipt by an indemnified party under
this Section 8 of notice of any claim or the commencement of any action, the
indemnified party shall, if a claim in respect thereof is to be made against
the indemnifying party under this Section 8, notify the indemnifying party in
writing of the claim or the commencement of that action; provided, however,
that the failure to notify the indemnifying party shall not relieve it from any
liability which it may have under this Section 8 except to the extent it has
been materially prejudiced by such failure and, provided further, that the
failure to notify the indemnifying party shall not relieve it from any
liability which it may have to an indemnified party otherwise than under this
Section 8. If any such claim or action shall be brought against an indemnified
party, and it shall notify the indemnifying party thereof, the indemnifying
party shall be entitled to participate therein and, to the extent that it
wishes, jointly with any other similarly notified indemnifying party, to assume
the defense thereof with counsel reasonably satisfactory to the indemnified
party. After notice from the indemnifying party to the indemnified party of its
election to assume the defense of such claim or action, the indemnifying party
shall not be liable to the indemnified party under this Section 8 for any legal
or other expenses subsequently incurred by the indemnified party in connection
with the defense thereof other than reasonable costs of investigation;
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 a conflict between the positions of
the indemnifying party and the indemnified party in conducting the defense of
any such action or that there may be legal
21
<PAGE> 22
defenses available to it and/or other indemnified parties that are different
from or additional to those available to the indemnifying party, the
indemnified party or parties shall have the right to select separate counsel to
assume such legal defenses and to otherwise participate in the defense of such
action on behalf of such indemnified party or parties (it being understood,
however, that the indemnifying party shall not be liable for the expenses of
more than one separate counsel). No indemnifying party shall (i) without the
prior written consent of the indemnified parties (which consent shall not be
unreasonably withheld), settle or compromise or consent to the entry of any
judgment with respect to any pending or threatened claim, action, suit or
proceeding in respect of which indemnification or contribution may be sought
hereunder (whether or not the indemnified parties are actual or potential
parties to such claim or action) unless such settlement, compromise or consent
includes an unconditional release of each indemnified party from all liability
arising out of such claim, action, suit or proceeding, or (ii) be liable for
any settlement of any such action effected without its written consent (which
consent shall not be unreasonably withheld), but if settled with the consent of
the indemnifying party or if there be a final judgment of the plaintiff in any
such action, the indemnifying party agrees to indemnify and hold harmless any
indemnified party from and against any loss or liability by reason of such
settlement or judgment.
(d) If the indemnification provided for in this Section 8
shall for any reason be unavailable and is therefore insufficient to hold
harmless an indemnified party under Section 8(a) or 8(b) in respect of any
loss, claim, damage or liability, or any action in respect thereof, referred to
therein, then each indemnifying party shall, in lieu of indemnifying such
indemnified party, contribute to the amount paid or payable by such indemnified
party as a result of such loss, claim, damage or liability, or action in
respect thereof, (i) in such proportion as shall be appropriate to reflect the
relative benefits received by the Company on the one hand and the Underwriters
on the other from the offering of the Stock or (ii) if the allocation provided
by clause (i) above is not permitted by applicable law, in such proportion as
is appropriate to reflect not only the relative benefits referred to in clause
(i) above but also the relative fault of the Company, on the one hand, and the
Underwriters, on the other, with respect to the statements or omissions which
resulted in such loss, claim, damage or liability, or action in respect
thereof, as well as any other relevant equitable considerations. The relative
benefits received by the Company on the one hand, and the Underwriters, on the
other, with respect to such offering shall be deemed to be in the same
proportion as the total net proceeds from the offering of the Stock purchased
under this Agreement (before deducting expenses) received by the Company on the
one hand, and the total underwriting discounts and commissions received by the
Underwriters with respect to the shares of the Stock purchased under this
Agreement, on the other hand, bear to the total gross proceeds from the
offering of the shares of the Stock under this Agreement, in each case as set
forth in the table on the cover page of the Prospectus. The relative fault
shall be determined by reference to whether the untrue or alleged untrue
statement of a material fact or omission or alleged omission to state a
material fact relates to information supplied by the Company or the
Underwriters, the intent of the parties and their relative knowledge, access to
information and opportunity to correct or prevent such statement or omission.
The Company and the Underwriters agree that it would not be just and equitable
if contributions pursuant to this Section 8(d) were to be determined by pro
rata allocation (even if the Underwriters were treated as one entity for such
purpose) or by any other method of allocation which does not take into account
the equitable considerations referred to herein. The amount paid or payable by
an indemnified party as a result of the loss, claim, damage or liability, or
action in respect thereof, referred to above in this Section shall be deemed to
include, for purposes of this Section 8(d),
22
<PAGE> 23
any legal or other expenses reasonably incurred by such indemnified party in
connection with investigating or defending any such action or claim.
Notwithstanding the provisions of this Section 8(d), no Underwriter shall be
required to contribute any amount in excess of the amount by which the total
price at which the Stock underwritten by it and distributed to the public was
offered to the public exceeds the amount of any damages which such Underwriter
has otherwise paid or become liable to pay by reason of any untrue or alleged
untrue statement or omission or alleged omission. No person guilty of
fraudulent misrepresentation (within the meaning of Section 11(f) of the
Securities Act) shall be entitled to contribution from any person who was not
guilty of such fraudulent misrepresentation. The Underwriters' obligations to
contribute as provided in this Section 8(d) are several in proportion to their
respective underwriting obligations and not joint.
(e) The Underwriters severally confirm and the Company
acknowledges that the statements with respect to the public offering of the
Stock by the Underwriters set forth on the cover page of, the legend concerning
over-allotments on the inside front cover page of and the concession and
reallowance figures appearing under the caption "Underwriting" in, the
Prospectus are correct and constitute the only information concerning such
Underwriters furnished in writing to the Company by or on behalf of the
Underwriters specifically for inclusion in the Registration Statement and the
Prospectus.
9. Defaulting Underwriters.
If, on either Delivery Date, any Underwriter defaults in the
performance of its obligations under this Agreement, the remaining
non-defaulting Underwriters shall be obligated to purchase the Stock which the
defaulting Underwriter agreed but failed to purchase on such Delivery Date in
the respective proportions which the number of shares of the Firm Stock set
opposite the name of each remaining non-defaulting Underwriter in Schedule 1
hereto bears to the total number of shares of the Firm Stock set opposite the
names of all the remaining non-defaulting Underwriters in Schedule 1 hereto;
provided, however, that the remaining non-defaulting Underwriters shall not be
obligated to purchase any of the Stock on such Delivery Date if the total
number of shares of the Stock which the defaulting Underwriter or Underwriters
agreed but failed to purchase on such date exceeds 9.09% of the total number of
shares of the Stock to be purchased on such Delivery Date, and any remaining
non-defaulting Underwriter shall not be obligated to purchase more than 110% of
the number of shares of the Stock which it agreed to purchase on such Delivery
Date pursuant to the terms of Section 2. If the foregoing maximums are
exceeded, the remaining non-defaulting Underwriters, or those other
underwriters satisfactory to the Representatives who so agree, shall have the
right, but shall not be obligated, to purchase, in such proportion as may be
agreed upon among them, all the Stock to be purchased on such Delivery Date. If
the remaining Underwriters or other underwriters satisfactory to the
Representatives do not elect to purchase the shares which the defaulting
Underwriter or Underwriters agreed but failed to purchase on such Delivery
Date, this Agreement (or, with respect to the Second Delivery Date, the
obligation of the Underwriters to purchase, and of the Company to sell, the
Option Stock) shall terminate without liability on the part of any
non-defaulting Underwriter or the Company or the Contributed Entities, except
that the Company and the Contributed Entities will continue to be liable for
the payment of expenses to the extent set forth in Sections 6 and 11. As used
in this Agreement, the term "Underwriter" includes, for all purposes of this
Agreement unless the context requires otherwise, any party not listed in
Schedule
23
<PAGE> 24
1 hereto who, pursuant to this Section 9, purchases Firm Stock which a
defaulting Underwriter agreed but failed to purchase.
Nothing contained herein shall relieve a defaulting
Underwriter of any liability it may have to the Company for damages caused by
its default. If other underwriters are obligated or agree to purchase the Stock
of a defaulting or withdrawing Underwriter, either the Representatives or the
Company may postpone the Delivery Date for up to seven full business days in
order to effect any changes that in the opinion of counsel for the Company or
counsel for the Underwriters may be necessary in the Registration Statement,
the Prospectus or in any other document or arrangement.
10. Termination. The obligations of the Underwriters
hereunder may be terminated by the Representatives by notice given to and
received by the Company prior to delivery of and payment for the Firm Stock if,
prior to that time, any of the events described in Sections 7(l) and 7(m),
shall have occurred or if the Underwriters shall decline to purchase the Stock
for any reason permitted under this Agreement.
11. Reimbursement of Underwriters' Expenses. If (a) the
Company shall fail to tender the Stock for delivery to the Underwriters by
reason of any failure, refusal or inability on the part of the Company or the
Contributed Entities to perform any agreement on its part to be performed, or
because any other condition of the Underwriters' obligations hereunder required
to be fulfilled by the Company or the Contributed Entities is not fulfilled,
the Company and the Contributed Entities will reimburse the Underwriters for
all reasonable out-of-pocket expenses (including fees and disbursements of
counsel (such fees, but not disbursements, being subject to a maximum amount of
$225,000) incurred by the Underwriters in connection with this Agreement and
the proposed purchase of the Stock, and upon demand the Company and the
Contributed Entities shall pay such amount thereof to the Representatives. If
this Agreement is terminated pursuant to Section 9 by reason of the default of
one or more Underwriters, neither the Company nor any Contribution shall be
obligated to reimburse any defaulting Underwriter on account of those expenses.
12. Notices, etc. All statements, requests, notices and
agreements hereunder shall be in writing, and:
(a) if to the Underwriters, shall be delivered or
sent by mail, telex or facsimile transmission to Lehman
Brothers Inc., Three World Financial Center, New York, New
York 10285, Attention: Syndicate Department (Fax:
212-526-6588), with a copy, in the case of any notice pursuant
to Section 10(d), to the Director of Litigation, Office of the
General Counsel, Lehman Brothers Inc., 3 World Financial
Center, 10th Floor, New York, NY 10285;
(b) if to the Company shall be delivered or sent
by mail, telex or facsimile transmission to the address of the
Company set forth in the Registration Statement, Attention:
David R. Brickman (Fax: 972-770-5666) with a copy to L. Steven
Leshin, Jenkens & Gilchrist, 1445 Ross Ave., Suite 3200,
Dallas, Texas 75202;
24
<PAGE> 25
provided, however, that any notice to an Underwriter pursuant to Section 8(c)
shall be delivered or sent by mail, telex or facsimile transmission to such
Underwriter at its address set forth in its acceptance telex to the
Representatives, which address will be supplied to any other party hereto by
the Representatives upon request. Any such statements, requests, notices or
agreements shall take effect at the time of receipt thereof. The Company and
the Contributed Entities shall be entitled to act and rely upon any request,
consent, notice or agreement given or made on behalf of the Underwriters by
Lehman Brothers Inc. on behalf of the Representatives.
13. Persons Entitled to Benefit of Agreement. This
Agreement shall inure to the benefit of and be binding upon the Underwriters,
the Company, the Contributed Entities and their respective successors. This
Agreement and the terms and provisions hereof are for the sole benefit of only
those persons, except that (A) the representations, warranties, indemnities and
agreements of the Company and the Contributed Entities contained in this
Agreement shall also be deemed to be for the benefit of the person or persons,
if any, who control any Underwriter within the meaning of Section 5 of the
Securities Act and (B) the indemnity agreement of the Underwriters contained in
Section 8(c) of this Agreement shall be deemed to be for the benefit of
directors of the Company and the Contributed Entities, officers of the Company
who have signed the Registration Statement and any person controlling the
Company within the meaning of Section 15 of the Securities Act. Nothing in this
Agreement is intended or shall be construed to give any person, other than the
persons referred to in this Section 13, any legal or equitable right, remedy or
claim under or in respect of this Agreement or any provision contained herein.
14. Survival. The respective indemnities,
representations, warranties and agreements of the Company, the Contributed
Entities and the Underwriters contained in this Agreement or made by or on
behalf on them, respectively, pursuant to this Agreement, shall survive the
delivery of and payment for the Stock and shall remain in full force and
effect, regardless of any investigation made by or on behalf of any of them or
any person controlling any of them.
15. Definition of the Terms "Business Day" and
"Subsidiary". For purposes of this Agreement, (a) "business day" means any day
on which the New York Stock Exchange, Inc. is open for trading and (b)
"subsidiary" has the meaning set forth in Rule 405 of the Rules and
Regulations.
16. Governing Law. THIS AGREEMENT SHALL BE GOVERNED BY
AND CONSTRUED IN ACCORDANCE WITH THE LAWS OF NEW YORK.
17. Counterparts. This Agreement may be executed in one
or more counterparts and, if executed in more than one counterpart, the
executed counterparts shall each be deemed to be an original but all such
counterparts shall together constitute one and the same instrument.
18. Headings. The headings herein are inserted for
convenience of reference only and are not intended to be part of, or to affect
the meaning or interpretation of, this Agreement.
25
<PAGE> 26
If the foregoing correctly sets forth the agreement among the
Company, the Contributed Entities and the Underwriters, please indicate your
acceptance in the space provided for that purpose below.
Very truly yours,
CAPITAL SENIOR LIVING CORPORATION
By
-----------------------------------
Title:
The Contributed Entities named in
Section 1 of this Agreement:
CAPITAL SENIOR LIVING, INC.
By
-----------------------------------
Title:
CAPITAL SENIOR MANAGEMENT 1, INC.
By
-----------------------------------
Title:
CAPITAL SENIOR MANAGEMENT 2, INC.
By
-----------------------------------
Title:
CAPITAL SENIOR DEVELOPMENT, INC.
By
-----------------------------------
Title:
26
<PAGE> 27
QUALITY HOME CARE, INC.
By
-----------------------------------
Title:
LEHMAN BROTHERS INC.
J.C. BRADFORD & CO.
SMITH BARNEY, INC.
For themselves and as Representatives
of the several Underwriters named
in Schedule 1 hereto
By LEHMAN BROTHERS INC.
By
----------------------------------
Authorized Representative
27
<PAGE> 28
SCHEDULE 1
<TABLE>
<CAPTION>
Number of
Underwriters Shares
------------ ---------
<S> <C>
Lehman Brothers Inc. . . . . . . . . . . . . . . . . .
------
J.C. Bradford & Co. . . . . . . . . . . . . . . . . . .
------
Smith Barney, Inc. . . . . . . . . . . . . . . . . . .
------
Total . . . . . . . . . . . . . . . . . . . . 9,000,000
=========
</TABLE>
28
<PAGE> 1
EXHIBIT 3.1
AMENDED AND RESTATED
CERTIFICATE OF INCORPORATION
OF
CAPITAL SENIOR LIVING CORPORATION
Capital Senior Living Corporation, a corporation organized and
existing under the laws of Delaware (the "Corporation"), hereby certifies as
follows:
A. The name of the Corporation is Capital Senior Living
Corporation. The original Certificate of Incorporation of the Corporation was
filed with the Secretary of State of the State of Delaware on October 25, 1996.
B. This Amended and Restated Certificate has been adopted in
accordance with the provisions of Sections 242 and 245 of the General
Corporation Law of the State of Delaware.
C. The text of the Amended and Restated Certificate of
Incorporation of the Corporation is hereby restated and amended to read in its
entirety as follows:
FIRST: The name of the Corporation is Capital Senior Living
Corporation.
SECOND: The address of the registered office of the Corporation in the
State of Delaware is 1209 Orange Street, City of Wilmington 19801, County of
New Castle. The name of the registered agent of the Corporation at such
address is The Corporation Trust Company.
THIRD: (a) The nature of the business or purposes to be conducted or
promoted by the Corporation is to engage in any lawful business, act or
activity for which corporations may be organized under the General Corporation
Law of the State of Delaware.
(b) The private property of the stockholders shall not
be subject to the payment of corporate debts to any extent whatsoever.
FOURTH: The total number of shares of capital stock which the
Corporation shall have authority to issue is 65,000,000 shares of Common Stock,
at a par value of $.01 per share, and 15,000,000 shares of Preferred Stock, at
a par value of $.01 per share.
The following is a statement of the designations, preferences,
limitations and relative rights, including voting rights, in respect of the
classes of stock of the Corporation and of the authority with respect thereto
expressly vested in the Board of Directors of the Corporation:
A. Common Stock
1. Each share of Common Stock of the Corporation shall have
identical rights and privileges in every respect. The holders of shares of
Common Stock shall be entitled to vote upon
<PAGE> 2
all matters submitted to a vote of the stockholders of the Corporation and
shall be entitled to one vote for each share of Common Stock held.
2. Subject to the prior rights and preferences, if any,
applicable to shares of the Preferred Stock or any series thereof, the holders
of shares of the Common Stock shall be entitled to receive such dividends
(payable in cash, stock or otherwise) as may be declared thereon by the Board
of Directors at any time and from time to time out of any funds of the
Corporation legally available therefor.
3. In the event of any voluntary or involuntary liquidation,
dissolution or winding-up 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 or any series thereof, the holders of shares of the Common
Stock shall be entitled to receive all of the remaining assets of the
Corporation available for distribution to its stockholders, ratably in
proportion to the number of shares of the Common Stock held by them.
Liquidation, dissolution or winding-up of the Corporation, as such terms are
used in this subparagraph (3), shall not be deemed to be occasioned by or to
include any merger, consolidation or other business combination of the
Corporation with or into one or more corporations or other entities, any
acquisition or exchange of the outstanding shares of one or more classes or
series of the Corporation or any sale, lease, exchange or other disposition of
all or a part of the assets of the Corporation.
B. Preferred Stock
1. Shares of the Preferred Stock may be issued from time to time
in one or more classes or series, the shares of each series to have such voting
powers, designations, preferences, rights and qualifications, limitations or
restrictions, as shall be stated and expressed herein or in a resolution or
resolutions providing for the issue of such series adopted by the Board of
Directors of the Corporation (or a duly authorized committee thereof). Each
such series of Preferred Stock shall be designated so as to distinguish the
shares thereof from the shares of all other series and classes. The Board of
Directors of the Corporation (or a duly authorized committee thereof) is hereby
expressly authorized, subject to the limitations provided by law, to establish
and designate series of the Preferred Stock, to fix the number of shares
constituting each series and to fix the voting powers, designations,
preferences, rights and qualifications, limitations or restrictions of the
shares of each series and the variations of the relative rights and preferences
as between series, and to increase and to decrease the number of shares
constituting each series, provided that the Board of Directors (or a duly
authorized committee thereof) may not decrease the number of shares within a
series to less than the number of shares within such series that are then
issued. The relative powers, preferences, rights and qualifications,
limitations or restrictions may vary between and among series of Preferred
Stock in any and all respects so long as all shares of the same series are
identical in all respects, except that shares of any such series issued at
different times may have different dates from which dividends thereon cumulate.
The authority of the Board of Directors of the Corporation (or a duly
authorized committee thereof) with respect to each series shall include, but
shall not be limited to, the authority to determine the following:
(a) The designation of such class or series;
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(b) The number of shares initially constituting such
class or series;
(c) The rate or rates and the times at which dividends on
the shares of such class or series shall be paid, the periods in
respect of which dividends are payable, the conditions upon such
dividends, the relationship and preferences, if any, of such dividends
to dividends payable on any other class or series of shares, whether
or not such dividends shall be cumulative, partially cumulative or
noncumulative, if such dividends shall be cumulative or partially
cumulative, the date or dates from and after which, and the amounts in
which, they shall accumulate, whether such dividends shall be share
dividends, cash or other dividends or any combination thereof, and if
such dividends shall include share dividends, whether such share
dividends shall be payable in shares of the same or any other class or
series of shares of the Corporation (whether now or hereafter
authorized), or any combination thereof and the other terms and
conditions, if any, applicable to dividends on shares of such Series;
(d) Whether or not the shares of such series shall be
redeemable or subject to repurchase at the option of the Corporation
or the holder thereof or upon the happening of a specified event, if
such shares shall be redeemable, the terms and conditions of such
redemption, including but not limited to the date or dates upon or
after which such shares shall be redeemable, the amount per share
which shall be payable upon such redemption, which amount may vary
under different conditions and at different redemption dates and
whether such amount shall be payable in cash, property or rights,
including securities of the Corporation or another corporation;
(e) The rights of the holders of shares of such series
(which may vary depending upon the circumstances or nature of such
liquidation, dissolution or winding up) in the event of the voluntary
or involuntary liquidation, dissolution or winding up of the
Corporation and the relationship or preference, if any, of such rights
to rights of holders of stock of any other class or series. A
liquidation, dissolution or winding up of the Corporation, as such
terms are used in this subparagraph (e), shall not be deemed to be
occasioned by or to include any merger, consolidation or other
business combination of the Corporation with or into one or more
corporations or other entities, any acquisition or exchange of the
outstanding shares of one or more classes or series of the Corporation
or any sale, lease, exchange or other disposition of all or a part of
the assets of the Corporation;
(f) Whether or not the shares of such series shall have
voting powers and, if such shares shall have such voting powers, the
terms and conditions thereof, including, but not limited to, the right
of the holders of such shares to vote as a separate class either alone
or with the holders of shares of one or more other classes or series
of stock and the right to have one vote or more (or less) than one
vote per share;
(g) Whether or not a sinking fund shall be provided for
the redemption of the shares of such series and, if such a sinking
fund shall be provided, the terms and conditions thereof;
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(h) Whether or not a purchase fund shall be provided for
the shares of such series and, if such a purchase fund shall be
provided, the terms and conditions thereof;
(i) Whether or not the shares of such series, at the
option of either the Corporation or the holder thereof or upon the
happening of a specified event, shall be convertible into stock of any
other class or series and, if such shares shall be so convertible, the
terms and conditions of conversion, including, but not limited to, any
provision for the adjustment of the conversion rate or the conversion
price;
(j) Whether or not the shares of such series, at the
option of either the Corporation or the holder thereof or upon the
happening of a specified event, shall be exchangeable for securities,
indebtedness or property of the Corporation and, if such shares shall
be so exchangeable, the terms and conditions of exchange, including,
but not limited to, any provision for the adjustment of the exchange
rate or the exchange price; and
(k) Any other preferences, limitations and relative
rights as shall not be inconsistent with the provisions of this
Article Fourth or the limitations provided by law.
2. Except as otherwise provided herein, as required by law or in
any resolution of the Board of Directors (or a duly authorized committee
thereof) creating any series of Preferred Stock, the holders of shares of
Preferred Stock an all series thereof who are entitled to vote shall vote
together with the holders of shares of Common Stock, and not separately by
class.
FIFTH: The business and affairs of the Corporation shall be managed by
or under the direction of the Board of Directors. The Board of Directors may
exercise all such authority and powers of the Corporation and do all such
lawful acts and things as are not by statute or the Certificate of
Incorporation directed or required to be exercised or done by the stockholders.
A. Number of Directors
The number of directors of the Corporation (exclusive of directors, if
any, entitled to be elected by the holders of one or more series of the
Preferred Stock of the Corporation which may be outstanding, voting separately
as a series or class) shall be fixed from time to time by action of not less
than two-thirds of the members of the Board of Directors then in office, though
less than a quorum, but in no event shall be less than three nor more than
nine.
B. Classes
Subject to the rights, if any, of any series of preferred Stock then
outstanding, the directors shall be divided into three classes, designated
Class I, Class II and Class III. The initial Class I director is Lawrence A.
Cohen, the initial Class II director is [James A. Stroud] and the initial Class
III director is [Jeffrey L. Beck]; provided, however, if there shall be any
increase in the number of directors in excess of three directors, then
automatically upon such increase the directors in such classes shall be
redesignated (provided such individuals continue as directors at
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the time of the increase) so that Lawrence A. Cohen shall be a Class II
director and James A. Stroud and Jeffrey L. Beck shall be Class III directors.
The number of directors in each class shall be the whole number contained in
the quotient arrived at by dividing the authorized number of directors by
three, and if a fraction is also contained in such quotient then if such
fraction is one-third (1/3) the extra director shall be a member of Class III
and if the fraction is two-thirds (2/3) one of the extra directors shall be a
member of Class III and the other shall be a member of Class II. Directors
shall serve for staggered terms of three years each, except that initially the
Class I directors will serve until the Corporation's 1998 annual meeting of
stockholders, the Class II directors will serve until the Corporation's 1999
annual meeting and the Class III directors will serve until the Corporation's
2000 annual meeting. At each annual meeting of stockholders following the
first annual meeting of stockholders, directors shall be elected to succeed
those directors whose terms expire for a term of office to expire at the third
succeeding annual meeting of stockholders after their election. All directors
shall hold office until the annual meeting of stockholders for the year in
which their term expires and until their successors are duly elected and
qualified, or until their earlier death, resignation, disqualification or
removal.
C. Vacancies
Subject to the rights, if any, of the holders of any series of
Preferred Stock then outstanding, newly created directorships resulting from
any increase in the authorized number of directors or any vacancies in the
Board of Directors resulting from death, resignation, disqualification or
removal may be filled only by a majority vote of the directors then in office,
though less than a quorum, and directors so chosen shall hold office for a term
expiring at the annual meeting of stockholders at which the term of office of
the class to which they have been elected expires and until such director's
successor shall have been duly elected and qualified.
D. Removal
Any director or the entire Board of Directors may be removed only for
cause and only by the vote of the holders of a majority of the securities of
the Corporation then entitled to vote at an election of directors.
SIXTH: Nominations of persons for election to the Board of Directors
may be made at an annual meeting of stockholders or special meeting of
stockholders called by the Board of Directors for the purpose of electing
directors (i) by or at the direction of the Board of Directors or (ii) by any
stockholder of the Corporation entitled to vote for the election of directors
at such meeting who complies with the notice of procedures set forth in this
Article Sixth. Such nominations, other than those made by or at the direction
of the Board of Directors, shall be made pursuant to timely notice in writing
to the Secretary of the Corporation. To be timely, a stockholder's notice must
be delivered to or mailed and received at the principal executive offices of
the Corporation not less than 60 days nor more than 90 days prior to the
scheduled date of the meeting, regardless of any postponement, deferral or
adjournment of that meeting to a later date; provided, however, that if less
than 70 days' notice or prior public disclosure of the date of the meeting is
given or made to stockholders, notice by the stockholder to be timely must be
so delivered or received not later than the close of business on the 10th day
following the earlier of
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(i) the day on which such notice of the date of the meeting was mailed or (ii)
the day on which such public disclosure was made.
A stockholder's notice to the Secretary shall set forth (i) as to each
person whom the stockholder proposes to nominate for election or reelection as
a director (a) the name, age, business address and residence address of such
person, (b) the principal occupation or employment of such person, (c) the
class and number of shares of the Corporation which are beneficially owned by
such person on the date of such stockholder's notice and (d) any other
information relating to such person that is required to be disclosed in
solicitations of proxies for election of directors, or is otherwise required,
in each case pursuant to Regulation 14A under the Securities Exchange Act of
1934, or any successor statute thereto (the "Exchange Act") (including, without
limitation, such person's written consent to being named in the proxy statement
as a nominee and to serving as a director if elected); (ii) as to the
stockholder giving notice (a) the name and address, as such information appears
on the Corporation's books, of such stockholder and any other stockholders
known by such stockholder to be supporting such nominee(s), (b) the class and
number of shares of the Corporation which are beneficially owned by such
stockholder and each other stockholder known by such stockholder to be
supporting such nominee(s) on the date of such stockholder notice, (c) a
representation that the stockholder is a holder of record of stock of the
Corporation entitled to vote at such meeting and intends to appear in person or
by proxy at the meeting to nominate the person or persons specified in the
notice; and (iii) a description of all arrangements or understandings between
the stockholder and each nominee and other person or persons (naming such
person or persons) pursuant to which the nomination or nominations are to be
made by the stockholder.
Subject to the rights, if any, of the holders of any series of
Preferred Stock then outstanding, no person shall be eligible for election as a
director of the Corporation unless nominated in accordance with the procedures
set forth in this Article Sixth. The chairman of the meeting shall, if the
facts warrant, determine and declare to the meeting that a nomination was not
made in accordance with the procedures prescribed by this Article Sixth and if
he should so determine, he shall so declare to the meeting and the defective
nomination shall be disregarded.
SEVENTH: At the annual meeting of stockholders, only such business
shall be conducted, and only such proposals shall be acted upon, as shall have
been properly brought before the annual meeting of stockholders (i) by or at
the direction of the Board of Directors or (ii) by a stockholder of the
Corporation who complies with the procedures set forth in this Article Seventh.
For business or a proposal to be properly brought before an annual meeting of
stockholders by a stockholder, the stockholder must have given timely notice
thereof in writing to the Secretary of the Corporation. To be timely, a
stockholder's notice must be delivered to or mailed and received at the
principal executive offices of the Corporation not less than 60 days nor more
than 90 days prior to the scheduled date of the annual meeting, regardless of
any postponement, deferral or adjournment of that meeting to a later date;
provided, however, that if less than 70 days' notice or prior public disclosure
of the date of the annual meeting is given or made to stockholders, notice by
the stockholder to be timely must be so delivered or mailed and received not
later than the close of business on the 10th day follow the earlier of (i) the
day on which such notice of the date of the meeting was mailed or (ii) the day
on which such public disclosure was made.
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A stockholder's notice to the Secretary shall set forth as to each
matter the stockholder proposes to bring before an annual meeting of
stockholders (i) a description, in 500 words or less, of the business desired
to be brought before the annual meeting and the reasons for conducting such
business at the annual meeting, (ii) the name and address, as such information
appears on the Corporation's books, of the stockholder proposing such business
and any other stockholder known by such stockholder to be supporting such
proposal, (iii) the class and number of shares of the Corporation that are
beneficially owned by such stockholder and each other stockholder known by such
stockholder to be supporting such proposal on the date of such stockholder's
notice, (iv) a description, in 500 words or less, of any interest of the
stockholder in such proposal and (v) a representation that the stockholder is a
holder of record of stock of the Corporation on and intend to appear in person
or by proxy at the meeting to present the proposal specified in the notice.
The chairman of the meeting shall, if the facts warrant, determine and
declare to the meeting that the business was not properly brought before the
meeting in accordance with the procedures prescribed by this Article Seventh,
and if he should so determine, he shall so declare to the meeting and any such
business not properly brought before the meeting shall not be transacted.
Notwithstanding the foregoing, nothing in this Article Seventh shall be
interpreted or construed to require the inclusion of information about any such
proposal in any proxy statement distributed by, at the direction of, or on
behalf of, the Board of Directors.
EIGHTH: Any action required or permitted to be taken at any annual or
special meeting of stockholders may only be taken upon the vote of the
stockholders at an annual or special meeting duly called and may not be taken
by written consent of the stockholders, unless such consent is unanimous.
NINTH: Subject to the rights of the holders of any series of
Preferred Stock, special meetings of the stockholders, unless otherwise
prescribed by statute, may be called at any time only by the Chairman of the
Board of Directors or a majority of the members of the Board of Directors then
in office or by stockholders possessing at least 25% of the voting power of all
issued and outstanding voting stock entitled to vote generally in the election
of directors.
TENTH: The Board of Directors is expressly authorized to adopt, amend
or repeal the Bylaws of the Corporation by a majority vote of the directors
then in office. Any Bylaws made by the directors under the powers conferred
hereby may be amended or repealed by the directors or by the stockholders as
provided herein. Notwithstanding the foregoing and anything contained in this
Certificate of Incorporation to the contrary, the Bylaws shall not be amended
or repealed by the stockholders without the affirmative vote of the holders of
a least two-thirds (2/3) of all issued and outstanding voting stock of the
Corporation entitled to vote generally in the election of directors voting
together as a single class.
ELEVENTH: Whenever a compromise or arrangement is proposed between the
Corporation and its creditors or any class of them and/or between the
Corporation and its stockholders or any class of them, any court of equitable
jurisdiction within the State of Delaware may, on the application in a summary
way of the Corporation or of any creditor or stockholder thereof or on the
application of any receiver or receivers appointed for the Corporation under
the
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provisions of Section 291 of Title 8 of the Delaware Code or on the application
of trustees in dissolution or of any receiver or receivers appointed for the
Corporation under the provisions of Section 279 of Title 8 of the Delaware
Code, order a meeting of the creditors or class of creditors, and/or of the
stockholders or class of stockholders of the Corporation, as the case may be,
to be summoned in such manner as the said court directs. If a majority in
number representing three-fourths in value of the creditors or class of
creditors, and/or of the stock holders or class of stockholders of the
Corporation, as the case may be, agree to any compromise or arrangement and to
any reorganization of the Corporation as a consequence of such compromise or
arrangement, the said compromise or arrangement and the said reorganization
shall, if sanctioned by the court to which the said application has been made,
be binding on all the creditors or class of creditors, and/or on all the
stockholders or class of stockholders, of the Corporation, as the case may be,
and also on the Corporation.
TWELFTH: No director of the Corporation shall be liable to the
Corporation 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 Corporation or its stockholders, (ii) for acts or
omissions not in good faith or which involve intentional misconduct or a
knowing violation of law, (iii) under Section 174 of the Delaware General
Corporation Law, or (iv) for any transaction from which the director derived an
improper personal benefit. In addition to the circumstances in which a director
of the Corporation is not personally liable as set forth in the preceding
sentence, a director of the Corporation shall not be liable to the fullest
extent permitted by any amendment to the Delaware General Corporation Law
hereafter enacted that further limits the liability of a director.
THIRTEENTH: The Corporation shall indemnify any person who was, is,
or is threatened to be made a party to a proceeding (as hereinafter defined) by
reason of the fact that he or she (i) is or was a director or officer of the
Corporation or (ii) while a director or officer of the Corporation, is or was
serving at the request of the Corporation as a director, officer, partner,
venturer, proprietor, trustee, employee, agent, or similar functionary of
another foreign or domestic corporation, partnership, joint venture, sole
proprietorship, trust, employee benefit plan, or other enterprise, to the
fullest extent permitted under the Delaware General Corporation Law, as the
same exists or may hereafter be amended. Such right shall be a contract right
and as such shall inure to the benefit of any director or officer who is
elected and accepts the position of director or officer of the Corporation or
elects to continue to serve as a director or officer of the Corporation while
this Article Thirteenth is in effect. Any repeal or amendment of this Article
Thirteenth shall be prospective only and shall not limit the rights of any such
director or officer or the obligations of the Corporation with respect to any
claim arising from or related to the services of such director or officer in
any of the foregoing capacities prior to any such repeal or amendment to this
Article Thirteenth. Such right shall include the right to be paid by the
Corporation expenses (including without limitation attorneys' fees) actually
and reasonably incurred by him in defending any such proceeding in advance of
its final disposition to the maximum extent permitted under the Delaware
General Corporation Law, as the same exists or may hereafter be amended. If a
claim for indemnification or advancement of expenses hereunder is not paid in
full by the Corporation within sixty (60) days after a written claim has been
received by the Corporation, the claimant may at any time thereafter bring suit
against the Corporation to
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recover the unpaid amount of the claim, and if successful in whole or in part,
the claimant shall also be entitled to be paid the expenses of prosecuting such
claim. It shall be a defense to any such action that such indemnification or
advancement of costs of defense is not permitted under the Delaware General
Corporation Law, but the burden of proving such defense shall be on the
Corporation. Neither the failure of the Corporation (including its Board of
Directors or any committee thereof, independent legal counsel, or stockholders)
to have made its determination prior to the commencement of such action that
indemnification of, or advancement of costs of defense to, the claimant is
permissible in the circumstances nor any actual determination by the
Corporation (including its Board of Director or any committee thereof,
independent legal counsel, or stockholders) that such indemnification or
advancement is not permissible shall be a defense to the action or create a
presumption that such indemnification or advance is not permissible. In the
event of the death of any person having a right of indemnification under the
foregoing provisions, such right shall inure to the benefit of his or her
heirs, executors, administrators, and personal representatives. The rights
conferred above shall not be exclusive of any other right which any person may
have or hereafter acquire under any statute, bylaw, resolution of stockholders
or directors, agreement, or otherwise.
The Corporation may also indemnify any employee or agent of the
Corporation to the fullest extent permitted by law.
As used herein, the term "preceding" means any threatened, pending, or
completed action, suit, or proceeding, whether civil, criminal, administrative,
arbitrative, or investigative, any appeal in such an action, suit, or
proceeding, or any inquiry or investigation that could lead to such an action,
suit, or proceeding.
FOURTEENTH: The Corporation reserves the right to amend, add, alter,
change, repeal or adopt any provision contained in this Certificate of
Incorporation, in the manner now or hereafter prescribed by statute, and all
rights conferred upon stockholders herein are granted subject to this
reservation. In addition to any affirmative vote required by applicable law or
any other provision of this Certificate of Incorporation or specified in any
agreement, and in addition to any voting rights granted to or held by the
holders of any series of Preferred Stock, the affirmative vote of the holders
of not less than two-thirds (2/3) of the voting power of all issued and
outstanding voting stock of the Corporation entitled to vote generally in the
election of directors shall be required to amend, add, alter, change, repeal or
adopt any provisions of this Certificate of Incorporation except for Articles
First, Second, Third and the first part of Article Fourth through and including
part A thereof.
IN WITNESS WHEREOF, the Corporation has caused this Amended and
Restated Certificate of Incorporation to be signed by its Chief Executive
Officer and Secretary this ____ day of __________, 1997.
-----------------------------------------
Jeffrey L. Beck, Chief Executive Officer
- --------------------------------
James A. Stroud, Secretary
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EXHIBIT 3.2
AMENDED AND RESTATED
BYLAWS
OF
CAPITAL SENIOR LIVING CORPORATION
<PAGE> 2
TABLE OF CONTENTS
<TABLE>
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PREAMBLE
ARTICLE ONE: OFFICES
1.1 Registered Office and Agent . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 1
1.2 Other Offices . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 1
ARTICLE TWO: SHAREHOLDERS
2.1 Annual Meetings . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 1
2.2 Special Meetings . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 1
2.3 Place of Meetings . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 2
2.4 Notice . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 2
2.5 Voting List . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 2
2.6 Voting of Shares . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 2
2.7 Quorum . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 3
2.8 Majority Vote; Withdrawal of Quorum . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 3
2.9 Method of Voting; Proxies . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 3
2.10 Closing of Transfer Records; Record Date . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 3
2.11 Officers Duties at Meeting . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 4
2.12 Action Without Meeting . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 4
ARTICLE THREE: DIRECTORS
3.1 Management . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 4
3.2 Number; Election; Term; Qualification . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 4
3.3 Changes in Number . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 5
3.4 Removal . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 5
3.5 Vacancies . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 5
3.6 Place of Meetings . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 5
3.7 First Meeting . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 5
3.8 Regular Meetings . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 6
3.9 Special Meetings; Notice . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 6
3.10 Quorum; Majority Vote . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 6
3.11 Procedure; Minutes . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 6
3.12 Presumption of Assent . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 6
3.13 Compensation . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 6
3.14 Action Without Meeting . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 7
</TABLE>
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ARTICLE FOUR: COMMITTEES
4.1 Designation . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 7
4.2 Number; Qualification; Term . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 7
4.3 Authority . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 7
4.4 Committee Changes . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 8
4.5 Regular Meetings . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 8
4.6 Special Meetings . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 8
4.7 Quorum; Majority Vote . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 8
4.8 Minutes . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 8
4.9 Compensation . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 9
4.10 Responsibility . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 9
ARTICLE FIVE: GENERAL PROVISIONS RELATING TO MEETINGS
5.1 Notice . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 9
5.2 Waiver of Notice . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 9
5.3 Telephone and Similar Meetings . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 9
ARTICLE SIX: OFFICERS AND OTHER AGENTS
6.1 Number; Titles; Election; Term; Qualification . . . . . . . . . . . . . . . . . . . . . . . . . . . . 9
6.2 Removal . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 10
6.3 Vacancies . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 10
6.4 Authority . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 10
6.5 Compensation . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 10
6.6 Chairman of the Board or Co-Chairmen of the Board . . . . . . . . . . . . . . . . . . . . . . . . . 10
6.7 Chief Executive Officer . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 10
6.8 Chief Operating Officer . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 10
6.9 Chief Financial Officer . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 11
6.10 President . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 11
6.11 Vice Presidents . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 11
6.12 Treasurer . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 11
6.13 Assistant Treasurers . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 11
6.14 Secretary . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 12
6.15 Assistant Secretary . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 12
ARTICLE SEVEN: CERTIFICATES AND SHAREHOLDERS
7.1 Certificated and Uncertificated Shares . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 12
7.2 Certificates for Certificated Shares . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 12
7.3 Issuance . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 12
7.4 Consideration for Shares . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 13
7.5 Lost, Stolen, or Destroyed Certificates . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 13
7.6 Transfer of Shares . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 13
</TABLE>
(ii)
<PAGE> 4
<TABLE>
<S> <C>
7.7 Registered Shareholders . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 14
7.8 Legends . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 14
7.9 Regulations . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 14
ARTICLE EIGHT: CERTAIN AFFILIATED TRANSACTIONS
8.1 Material Transaction . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 14
8.2 Transactions with Tri Point . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 15
ARTICLE NINE: MISCELLANEOUS PROVISIONS
9.1 Dividends . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 15
9.2 Books and Records . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 15
9.3 Fiscal Year . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 15
9.4 Seal . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 15
9.5 Attestation by the Secretary . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 15
9.6 Resignation . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 15
9.7 Securities of Other Corporations . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 16
9.8 Amendment of Bylaws . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 16
9.9 Invalid Provisions . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 16
9.10 Headings; Table of Contents . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 16
</TABLE>
(iii)
<PAGE> 5
BYLAWS
OF
CAPITAL SENIOR LIVING CORPORATION
A Delaware Corporation
PREAMBLE
These bylaws are subject to, and governed by, the General Corporation
Law of the State of Delaware and the certificate of incorporation of Capital
Senior Living Corporation (the "Corporation"). In the event of a direct
conflict between the provisions of these bylaws and the mandatory provisions of
the General Corporation Law of the State of Delaware or the provisions of the
certificate of incorporation of the Corporation, such provisions of the General
Corporation Law of the State of Delaware or the certificate of incorporation of
the Corporation, as the case may be, will be controlling.
ARTICLE ONE: OFFICES
1.1 Registered Office and Agent. The registered office and
registered agent of the Corporation shall be as designated from time to time by
the appropriate filing by the Corporation in the office of the Secretary of
State of Delaware.
1.2 Other Offices. The Corporation may also have offices at such
other places, both within and without the State of Delaware, as the board of
directors may from time to time determine or the business of the Corporation
may require.
ARTICLE TWO: SHAREHOLDERS
2.1 Annual Meetings. An annual meeting of shareholders of the
Corporation shall be held during each calendar year on such date and at such
time as shall be designated from time to time by the board of directors and
stated in the notice of the meeting, if not a legal holiday in the place where
the meeting is to be held, and, if a legal holiday in such place, then on the
next business day following, at the time specified in the notice of the
meeting. At such meeting, the shareholders shall elect directors and transact
such other business as may properly be brought before the meeting.
2.2 Special Meetings. Unless otherwise prescribed by statute and
subject to any rights of holders of Preferred Stock, a special meeting of the
shareholders may be called at any time only by the chairman or a co-chairman of
the board of directors, or by a majority of the members of the board of
directors then in office, and shall be called by the president at the request
of shareholders possessing at least twenty-five percent of the voting power of
all issued and
<PAGE> 6
outstanding voting stock entitled to vote generally in the election of
directors. Only business within the purpose or purposes described in the
notice of special meeting may be conducted at such special meeting.
2.3 Place of Meetings. The annual meeting of shareholders may be
held at any place within or without the State of Delaware designated by the
board of directors. Special meetings of shareholders may be held at any place
within or without the State of Delaware designated by the person or persons
calling such special meeting as provided in Section 2.2 above. Meetings of
shareholders shall be held at the principal office of the Corporation unless
another place is designated for meetings in the manner provided herein.
2.4 Notice. Except as otherwise provided by law, written or
printed notice stating the place, day, and hour of each meeting of the
shareholders and, in case of a special meeting, the purpose or purposes for
which the meeting is called, shall be delivered not less than ten nor more than
sixty days before the date of the meeting by or at the direction of the
president, the secretary, or the person calling the meeting, to each
shareholder of record entitled to vote at such meeting.
2.5 Voting List. At least ten days before each meeting of
shareholders, the secretary shall prepare a complete list of shareholders
entitled to vote at such meeting, arranged in alphabetical order, including the
address of each shareholder and the number of voting shares held by each
shareholder. For a period of ten days prior to such meeting, such list shall
be kept on file at the registered office or principal place of business of the
Corporation and shall be subject to inspection by any shareholder during
ordinary business hours. Such list shall be produced at such meeting, and at
all times during such meeting shall be subject to inspection by any
shareholder. The original stock ledger shall be the only evidence as to who
are the shareholders entitled to examine such list.
2.6 Voting of Shares. Treasury shares and shares of the
Corporation's own stock owned by another corporation the majority of the voting
stock of which is owned or controlled by the Corporation shall not be shares
entitled to vote or to be counted in determining the total number of
outstanding shares. Shares standing in the name of another domestic or foreign
corporation of any type or kind may be voted by such officer, agent, or proxy
as the bylaws of such corporation may authorize or, in the absence of such
authorization, as the board of directors of such corporation may determine.
Shares held by an administrator, executor, guardian, or conservator may be
voted by him, either in person or by proxy, without transfer of such shares
into his name so long as such shares form a part of the estate served by him
and are in the possession of such estate. Shares held by a trustee may be
voted by him, either in person or by proxy, only after the shares have been
transferred into his name as trustee. Shares standing in the name of a
receiver may be voted by such receiver, and shares held by or under the control
of a receiver may be voted by such receiver without transfer of such shares
into his name if authority to do so is contained in the court order by which
such receiver was appointed. A shareholder whose shares are pledged shall be
entitled to vote such shares until they have been transferred into the name of
the pledgee, and thereafter, the pledgee shall be entitled to vote such shares.
2
<PAGE> 7
2.7 Quorum. The holders of a majority of the outstanding shares
entitled to vote, present in person or represented by proxy, shall constitute a
quorum at any meeting of shareholders, except as otherwise provided by law, the
certificate of incorporation or these bylaws. If a quorum shall not be present
at any meeting of shareholders, a majority of the shareholders entitled to vote
at the meeting, who are present in person or represented by proxy, may adjourn
the meeting from time to time, without notice other than announcement at the
meeting, until a quorum shall be present or represented. At any reconvening of
an adjourned meeting at which a quorum shall be present or represented by
proxy, any business may be transacted which could have been transacted at the
original meeting, if a quorum has been present or represented. If the
adjournment is for more than thirty days, or if after the adjournment a new
record date is fixed for the adjourned meeting, a notice of the adjourned
meeting shall be given to each stockholder of record entitled to vote at the
meeting.
2.8 Majority Vote; Withdrawal of Quorum. If a quorum is present
in person or represented by proxy at any meeting, the vote of the holders of a
majority of the outstanding shares entitled to vote, present in person or
represented by proxy, shall decide any questions brought before such meeting,
unless the question is one on which, by express provision of law, the
certificate of incorporation, or these bylaws, a different vote is required, in
which event such express provision shall govern and control the decision of
such question. The shareholders present at a duly convened meeting may
continue to transact business until adjournment, notwithstanding any withdrawal
of shareholders which may leave less than a quorum remaining.
2.9 Method of Voting; Proxies. Every shareholder of record shall
be entitled at every meeting of shareholders to one vote on each matter
submitted to a vote, for every share standing in his name on the stock ledger
of the Corporation except to the extent that the voting rights of the shares of
any class or classes are increased, limited, or denied by the certificate of
incorporation. Such stock ledger shall be the only evidence as to the identity
of shareholders entitled to vote. At any meeting of shareholders, every
shareholder having the right to vote may vote either in person or by a proxy
executed in writing by the shareholder or by his duly authorized
attorney-in-fact. Each such proxy shall be filed with the secretary of the
Corporation before, or at the time of, the meeting. No proxy shall be valid
after 3 years from the date of its execution, unless otherwise provided in the
proxy. If no date is stated on a proxy, such proxy shall be presumed to have
been executed on the date of the meeting at which it is to be voted. Each
proxy shall be revocable unless the proxy form conspicuously states that the
proxy is irrevocable and the proxy is coupled with an interest.
2.10 Closing of Transfer Records; Record Date. For the purpose of
determining shareholders entitled to notice of, or to vote at, any meeting of
shareholders or any adjournment thereof, or entitled to receive a distribution
(other than a distribution involving a purchase or redemption by the
Corporation of any of its own shares) or a share dividend, or in order to make
a determination of shareholders for any other proper purpose, the board of
directors may provide that the stock ledger of the Corporation shall be closed
for a stated period but not to exceed in any event sixty days. If the stock
ledger is closed for the purpose of determining shareholders entitled to notice
of, or to vote at, a meeting of shareholders, such records shall be closed for
at least ten days immediately preceding such meeting. In lieu of closing the
stock ledger, the board of
3
<PAGE> 8
directors may fix in advance a date as the record date for any such
determination of shareholders, such date in any case to be not more than sixty
days and, in case of a meeting of shareholders, not less than ten days prior to
the date on which the particular action requiring such determination of
shareholders is to be taken. If the stock ledger is not closed and if no
record date is fixed for the determination of shareholders entitled to notice
of, or to vote at, a meeting of shareholders or entitled to receive a
distribution (other than a distribution involving a purchase or redemption by
the Corporation of any of its own shares) or a share dividend, the date next
preceding the date on which the notice of the meeting is mailed or the date on
which the resolution of the board of directors declaring such distribution or
share dividend is adopted, as the case may be, shall be the record date for
such determination of shareholders. When a determination of shareholders
entitled to vote at any meeting of shareholders has been made as provided in
this Section 2.10, such determination shall apply to any adjournment thereof
except where the determination has been made through the closing of the stock
ledger and the stated period of closing has expired.
2.11 Officers Duties at Meetings. The chief executive officer or
chief operating officer shall preside at, and the secretary shall prepare
minutes of, each meeting of shareholders, and in the absence of either such
officer, his duties shall be performed by some person or persons elected by the
vote of the holders of a majority of the outstanding shares entitled to vote,
present in person or represented by proxy.
2.12 Action Without Meeting. Any action required or permitted to
be taken at any annual or special meeting of shareholders may only be taken
upon the vote of the shareholders at an annual or special meeting duly called
and may not be taken by written consent, unless such consent is unanimous. Any
such unanimous consent shall have the same force and effect, as of the date
stated therein, as a vote of such shareholders and may be stated as such in any
document filed with the Secretary of State of Delaware or in any certificate or
other document delivered to any person. The consent may be in one or more
counterparts so long as each shareholder signs one of the counterparts. The
signed consent or consents of shareholders shall be placed in the minute books
of the Corporation.
ARTICLE THREE: DIRECTORS
3.1 Management. The powers of the Corporation shall be exercised
by or under the authority of, and the business and affairs of the Corporation
shall be managed under the direction of, the board of directors.
3.2 Number; Election; Term; Qualification. The number of
directors which shall constitute the board of directors shall be not less than
three. The first board of directors shall consist of the number of directors
named in the certificate of incorporation. Thereafter, the number of directors
which shall constitute the entire board of directors and whether such board is
classified shall be determined by the provisions of the certificate of
incorporation or if not so provided in the certificate of incorporation, as
determined by resolution of the board of directors at any meeting thereof or by
the shareholders at any meeting thereof, but shall never be less than three.
At each annual meeting of shareholders, directors shall be elected to hold
office for a term
4
<PAGE> 9
of office expiring at the annual meeting of shareholders at which the term of
office of the class, if any, to which they have been elected expires and until
their successors are elected and qualified. At least for the period from the
consummation of the initial public offering of the Corporation until the first
anniversary of such initial public offering, except during a period not to
exceed 90 days following the death, resignation, incapacity or removal of a
director prior to expiration of each director's term of office, a majority of
the board of directors shall be comprised of persons who are not related to any
member of the families of Jeffrey L. Beck or James A. Stroud and are not
officers or employees of the Corporation. No director need be a shareholder, a
resident of the State of Delaware, or a citizen of the United States.
3.3 Changes in Number. No decrease in the number of directors
constituting the entire board of directors shall have the effect of shortening
the term of any incumbent director. Any directorship to be filled by reason of
an increase in the number of directors may be filled only by a majority vote of
the directors then in office, though less than a quorum, for a term of office
expiring at the annual meeting of shareholders at which the term of office of
the class, if any, to which they have been elected expires. Notwithstanding
the foregoing, whenever the holders of any class or series of shares are
entitled to elect one or more directors by the provisions of the certificate of
incorporation, any newly created directorship(s) of such class or series to be
filled by reason of an increase in the number of such directors may be filled
by the affirmative vote of a majority of the directors elected by such class or
series then in office or by a sole remaining director so elected.
3.4 Removal. Any director or the entire board of directors may be
removed only for cause and only by the vote of the holders of a majority of the
shares then entitled to vote at the election of directors. For purposes
hereof, "cause" shall mean gross neglect or willful misconduct in the
performance of his duties as a director.
3.5 Vacancies. Any vacancy occurring in the board of directors
may be filled only by a majority vote of the directors then in office, though
less than a quorum of the board of directors. A director elected to fill a
vacancy shall be elected to serve for the unexpired term of his predecessor in
office. Notwithstanding the foregoing, whenever the holders of any class or
series of shares are entitled to elect one or more directors, any vacancies in
such directorship(s) may be filled by the affirmative vote of a majority of the
directors elected by such class or series then in office or by a sole remaining
director so elected.
3.6 Place of Meetings. The board of directors may hold its
meetings in such place or places within or without the State of Delaware as the
board of directors may from time to time determine.
3.7 First Meeting. Each newly elected board of directors may hold
its first meeting for the purpose of organization and the transaction of
business, if a quorum is present, immediately after and at the same place as
the annual meeting of shareholders, and notice of such meeting shall not be
necessary.
5
<PAGE> 10
3.8 Regular Meetings. Regular meetings of the board of directors
may be held without notice at such times and places as may be designated from
time to time by resolution of the board of directors and communicated to all
directors.
3.9 Special Meetings; Notice. Special meetings of the board of
directors shall be held whenever called by the president or by any director.
The person calling any special meeting shall cause notice of such special
meeting, including therein the time and place of such special meeting, to be
given to each director at least two days before such special meeting. Neither
the business to be transacted at, nor the purpose of, any special meeting of
the board of directors need be specified in the notice or waiver of notice of
any special meeting.
3.10 Quorum; Majority Vote. At all meetings of the board of
directors, a majority of the entire board of directors shall constitute a
quorum for the transaction of business. If a quorum is not present at a
meeting, a majority of the directors present may adjourn the meeting from time
to time, without notice other than an announcement at the meeting, until a
quorum is present. The act of a majority of the directors present at a meeting
at which a quorum is in attendance shall be the act of the board of directors,
unless the act of a greater number is required by law, the certificate of
incorporation, or these bylaws.
3.11 Procedure; Minutes. At meetings of the board of directors,
business shall be transacted in such order as the board of directors may
determine from time to time. The board of directors shall appoint at each
meeting a person to preside at the meeting and a person to act as secretary of
the meeting. The secretary of the meeting shall prepare minutes of the meeting
which shall be delivered to the secretary of the Corporation for placement in
the minute books of the Corporation.
3.12 Presumption of Assent. A director of the Corporation who is
present at any meeting of the board of directors at which action on any matter
is taken shall be presumed to have assented to the action unless his dissent
shall be entered in the minutes of the meeting or unless he shall file his
written dissent to such action with the person acting as secretary of the
meeting before the adjournment thereof or shall forward any dissent by
certified or registered mail to the secretary of the Corporation immediately
after the adjournment of the meeting. Such right to dissent shall not apply to
a director who voted in favor of such action.
3.13 Compensation. Directors, in their capacity as directors, may
receive, by resolution of the board of directors, a fixed sum and expenses of
attendance, if any, for attending meetings of the board of directors or a
stated salary. No director shall be precluded from serving the Corporation in
any other capacity or receiving compensation therefor.
6
<PAGE> 11
3.14 Action Without Meeting. Any action which may be taken, or
which is required by law, the certificate of incorporation, or these bylaws to
be taken, at a meeting of the board of directors or any committee may be taken
without a meeting if a consent in writing, setting forth the action so taken,
shall have been signed by all of the members of the board of directors or
committee, as the case may be, entitled to vote with respect to the subject
matter thereof, and such consent shall have the same force and effect, as of
the date stated therein, as a vote of such members of the board of directors or
committee, as the case may be, and may be stated as such in any document or
instrument filed with the Secretary of State of Delaware or in any certificate
or other document delivered to any person. The consent may be in one or more
counterparts so long as each director or committee member signs one of the
counterparts. The signed consent shall be placed in the minute books of the
Corporation.
ARTICLE FOUR: COMMITTEES
4.1 Designation. The board of directors may, by resolution
adopted by a majority of the entire board of directors, designate one or more
committees.
4.2 Number; Qualification; Term. Each committee shall consist of
one or more directors appointed by resolution adopted by a majority of the
entire board of directors. The number of committee members may be increased or
decreased from time to time by resolution adopted by a majority of the entire
board of directors. Each committee member shall serve as such until the
earliest of (i) the expiration of his term as director, (ii) his resignation as
a committee member or as a director, or (iii) his removal, as a committee
member or as a director.
4.3 Authority. Each committee, to the extent expressly provided
in the resolution establishing such committee, shall have and may exercise all
of the authority of the board of directors in the management of the business
and property of the Corporation, including, without limitation, the power and
authority to declare a dividend and to authorize the issuance of shares of the
Corporation. Notwithstanding the foregoing, however, no committee shall have
the authority of the board of directors in reference to:
(a) amending the certificate of incorporation;
(b) approving a plan of merger;
(c) recommending to the shareholders the sale, lease, or
exchange of all or substantially all of the property
and assets of the Corporation otherwise than in the
usual and regular course of its business;
(d) recommending to the shareholders a voluntary
dissolution of the Corporation or a revocation
thereof;
(e) amending, altering, or repealing these bylaws or
adopting new bylaws;
7
<PAGE> 12
(f) filling vacancies in the board of directors or of any
committee;
(g) filling any directorship to be filled by reason of an
increase in the number of directors;
(h) electing or removing officers of the Corporation or
members or alternate members of any committee;
(i) fixing the compensation of any committee member; or
(j) altering or repealing any resolution of the board of
directors that by its terms provides that it shall
not be amendable or repealable.
4.4 Committee Changes. The board of directors shall have the
power at any time to fill vacancies in, to change the membership of, and to
discharge any committee. However, a committee member may be removed by the
board of directors, only if, in the judgment of the board of directors, the
best interests of the Corporation will be served thereby.
4.5 Regular Meetings. Regular meetings of any committee may be
held without notice at such time and place as may be designated from time to
time by the committee and communicated to all members thereof.
4.6 Special Meetings. Special meetings of any committee may be
held whenever called by any committee member. The committee member calling any
special meeting shall cause notice of such special meeting, including therein
the time and place of such special meeting, to be given to each committee
member at least two days before such special meeting. Neither the business to
be transacted at, nor the purpose of, any special meeting of any committee need
be specified in the notice or waiver of notice of any special meeting.
4.7 Quorum; Majority Vote. At meetings of any committee, a
majority of the number of members designated by the board of directors as
comprising the committee shall constitute a quorum for the transaction of
business. If a quorum is not present at a meeting of any committee, a majority
of the members present may adjourn the meeting from time to time, without
notice other than an announcement at the meeting, until a quorum is present.
The act of a majority of the members present at any meeting at which a quorum
is in attendance shall be the act of a committee, unless the act of a greater
number is required by law, the certificate of incorporation, or these bylaws.
4.8 Minutes. Each committee shall cause minutes of its
proceedings to be prepared and shall report the same to the board of directors
upon the request of the board of directors. The minutes of the proceedings of
each committee shall be delivered to the secretary of the Corporation for
placement in the minute books of the Corporation.
8
<PAGE> 13
4.9 Compensation. Committee members may, by resolution of the
board of directors, be allowed a fixed sum and expenses of attendance, if any,
for attending any committee meetings or a stated salary.
4.10 Responsibility. The designation of any committee and the
delegation of authority to it shall not operate to relieve the board of
directors or any director of any responsibility imposed upon it or such
director by law.
ARTICLE FIVE: GENERAL PROVISIONS RELATING TO MEETINGS
5.1 Notice. Whenever by law, the certificate of incorporation, or
these bylaws, notice is required to be given to any committee member, director,
or shareholder and no provision is made as to how such notice shall be given,
it shall be construed to mean that any such notice may be given (a) in person,
(b) in writing, by mail, postage prepaid, addressed to such committee member,
director, or shareholder at his address as it appears on the books of the
Corporation or, in the case of a shareholder, the share transfer records of the
Corporation, or (c) by any other method permitted by law. Any notice required
or permitted to be given by mail shall be deemed to be delivered and given at
the time when the same is deposited in the United States mail, postage prepaid,
and addressed as aforesaid. Any notice required or permitted to be given by
telegram, telex, cable, telecopier, or similar means shall be deemed to be
delivered and given at the time transmitted with all charges prepaid and
addressed as aforesaid.
5.2 Waiver of Notice. Whenever by law, the certificate of
incorporation, or these bylaws, any notice is required to be given to any
committee member, shareholder, or director of the Corporation, a waiver thereof
in writing signed by the person or persons entitled to such notice, whether
before or after the time notice should have been given, shall be equivalent to
the giving of such notice. Attendance of a committee member, shareholder, or
director at a meeting shall constitute a waiver of notice of such meeting,
except where such person attends for the express purpose of objecting to the
transaction of any business on the ground that the meeting is not lawfully
called or convened.
5.3 Telephone and Similar Meetings. Shareholders, directors, or
committee members may participate in and hold a meeting by means of a
conference telephone or similar communications equipment by means of which
persons participating in the meeting can hear each other. Participation in
such a meeting shall constitute presence in person at such meeting, except
where a person participates in the meeting for the express purpose of objecting
to the transaction of any business on the ground that the meeting is not
lawfully called or convened.
ARTICLE SIX: OFFICERS AND OTHER AGENTS
6.1 Number; Titles; Election; Term; Qualification. The officers
of the Corporation shall be a president and a secretary. The Corporation may
also have a chairman of the board or co-chairmen of the board, a chief
executive officer, a chief operating officer, a chief financial
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<PAGE> 14
officer, one or more vice presidents (and, in the case of each vice president,
with such descriptive title, if any, as the board of directors shall
determine), a treasurer, one or more assistant treasurers, one or more
assistant secretaries, and such other officers and such agents as the board of
directors may from time to time elect or appoint. Such officers shall have the
powers and duties as may be prescribed by the board of directors. The board of
directors shall elect a president and secretary at its first meeting at which a
quorum shall be present after the annual meeting of shareholders or whenever a
vacancy exists. The board of directors then, or from time to time, may also
elect or appoint one or more other officers or agents as it shall deem
advisable. Each officer and agent shall hold office for the term for which he
is elected or appointed and until his successor has been elected or appointed
and qualified. Any person may hold any number of offices. No officer or agent
need be a shareholder, a director, a resident of the State of Delaware, or a
citizen of the United States.
6.2 Removal. Any officer or agent elected or appointed by the
board of directors may be removed by the board of directors whenever in its
judgment the best interest of the Corporation will be served thereby, but such
removal shall be without prejudice to the contract rights, if any, of the
person so removed. Election or appointment of an officer or agent shall not of
itself create contract rights.
6.3 Vacancies. Any vacancy occurring in any office of the
Corporation may be filled by the board of directors.
6.4 Authority. Officers shall have such authority and perform
such duties in the management of the Corporation as are provided in these
bylaws or as may be determined by resolution of the board of directors not
inconsistent with these bylaws.
6.5 Compensation. The compensation, if any, of officers and
agents shall be fixed from time to time by the board of directors; provided,
that the board of directors may by resolution delegate to any one or more
officers of the Corporation the authority to fix such compensation.
6.6 Chairman of the Board or Co-Chairmen of the Board. If elected
by the board of directors, the chairman of the board or co-chairmen of the
board shall have such powers and duties as may be prescribed by the board of
directors.
6.7 Chief Executive Officer. Subject to the supervision of the
board of directors, the chief executive officer of the Corporation shall have
general executive charge, management, and control of the properties and
operations of the Corporation in the ordinary course of its business, with all
such powers with respect to such properties and operations as may be reasonably
incident to such responsibilities. The chief executive officer shall have such
other powers and duties as may be prescribed by the board of directors.
6.8 Chief Operating Officer. Subject to the supervision of the
board of directors, the chief operating officer of the Corporation shall have
general executive charge, management, and control of the properties and
operations of the Corporation in the ordinary course of its business,
10
<PAGE> 15
with all such powers with respect to such properties and operations as may be
reasonably incident to such responsibilities. The chief operating officer
shall have such other powers and duties as may be prescribed by the board of
directors.
6.9 Chief Financial Officer. Subject to the supervision of the
board of directors, the chief financial officer shall have overall
responsibility for the financial planning, record keeping and reporting of the
Corporation in the ordinary course of its business, with all such powers as may
be reasonably incident to such responsibilities. The chief financial officer
shall have such other powers and duties as may be prescribed by the board of
directors.
6.10 President. The President shall be the chief administrative
officer of the Corporation and, subject to the supervision of the board of
directors, shall have charge of the actual day-to-day operations and management
of the Corporation and its property with all such powers with respect to such
properties and operations as may be reasonably incident to such
responsibilities.
6.11 Vice Presidents. Each vice president shall have such powers
and duties as may be prescribed by the board of directors or as may be
delegated from time to time by the president, the chief executive officer or
the chief operating officer and (in the order as designated by the board of
directors, or in the absence of such designation, as determined by the length
of time each has held the office of vice president continuously) shall exercise
the powers of the president during that officer's absence or inability to act.
As between the Corporation and third parties, any action taken by a vice
president in the performance of the duties of the president shall be conclusive
evidence of the absence or inability to act of the president at the time such
action was taken.
6.12 Treasurer. The treasurer shall have custody of the
Corporation's funds and securities, shall keep full and accurate accounts of
receipts and disbursements, and shall deposit all moneys and valuable effects
in the name and to the credit of the Corporation in such depository or
depositories as may be designated by the board of directors. The treasurer
shall audit all payrolls and vouchers of the Corporation, receive, audit, and
consolidate all operating and financial statements of the Corporation and its
various departments, shall supervise the accounting and auditing practices of
the Corporation, and shall have charge of matters relating to taxation.
Additionally, the treasurer shall have the power to endorse for deposit,
collection, or otherwise all checks, drafts, notes, bills of exchange, and
other commercial paper payable to the Corporation and to give proper receipts
and discharges for all payments to the Corporation. The treasurer shall
perform such other duties as may be prescribed by the board of directors or as
may be delegated from time to time by the president.
6.13 Assistant Treasurers. Each assistant treasurer shall have
such powers and duties as may be prescribed by the board of directors or as may
be delegated from time to time by the president. The assistant treasurers (in
the order as designated by the board of directors or, in the absence of such
designation, as determined by the length of time each has held the office of
assistant treasurer continuously) shall exercise the powers of the treasurer
during that officer's absence or inability to act. As between the Corporation
and third parties, any action taken by an assistant treasurer in the
performance of the duties of the treasurer shall be conclusive evidence of the
absence or inability to act of the treasurer at the time such action was taken.
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6.14 Secretary. The secretary shall maintain minutes of all
meetings of the board of directors, of any committee, and of the shareholders
or consents in lieu of such minutes in the Corporation's minute books, and
shall cause notice of such meetings to be given when requested by any person
authorized to call such meetings. The secretary may sign with the chief
executive officer, in the name of the Corporation, all contracts of the
Corporation and affix the seal of the Corporation thereto. The secretary shall
have charge of the certificate books, share transfer records, stock ledgers,
and such other stock books and papers as the board of directors may direct, all
of which shall at all reasonable times be open to inspection by any director at
the office of the Corporation during business hours. The secretary shall
perform such other duties as may be prescribed by the board of directors or as
may be delegated from time to time by the president.
6.15 Assistant Secretary. The board of directors may elect an
assistant secretary. The assistant secretary shall have all of the same powers
and duties as the secretary and may act in place of the secretary in all
matters. The assistant secretary may sign with the chief operating officer, in
the name of the Corporation, all contracts of the Corporation and affix the
seal of the Corporation thereto.
ARTICLE SEVEN: CERTIFICATES AND SHAREHOLDERS
7.1 Certificated and Uncertificated Shares. The shares of the
Corporation may be either certificated shares or uncertificated shares. As
used herein, the term "certificated shares" means shares represented by
instruments in bearer or registered form, and the term "uncertificated shares"
means shares not represented by instruments and the transfers of which are
registered upon books maintained for that purpose by or on behalf of the
Corporation.
7.2 Certificates for Certificated Shares. The certificates
representing certificated shares of stock of the Corporation shall be in such
form as shall be approved by the board of directors in conformity with law.
The certificates shall be consecutively numbered, shall be entered as they are
issued in the books of the Corporation or in the records of the Corporation's
designated transfer agent, if any, and shall state upon the face thereof: (a)
that the Corporation is organized under the laws of the State of Delaware; (b)
the name of the person to whom issued; (c) the number and class of shares and
the designation of the series, if any, which such certificate represents; (d)
the par value of each share represented by such certificate, or a statement
that the shares are without par value; and (e) such other matters as may be
required by law. The certificates shall be signed by two separate persons
holding such officerships of the Corporation as are designated by the board of
directors to sign the certificates. Any of or all of the signatures on the
certificates may be facsimile. The certificates may be sealed with the seal of
the Corporation or a facsimile thereof.
7.3 Issuance. Shares with or without par value may be issued for
such consideration and to such persons as the board of directors may from time
to time determine, except in the case of shares with par value the
consideration must be at least equal to the par value of such shares. Shares
may not be issued until the full amount of the consideration has been paid.
After the issuance of uncertificated shares, the Corporation or the transfer
agent of the Corporation shall
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<PAGE> 17
send to the registered owner of such uncertificated shares a written notice
containing the information required to be stated on certificates representing
shares of stock as set forth in Section 7.2 above and such additional
information as may be required by Section 8.408 of the Delaware Uniform
Commercial Code as currently in effect and as the same may be amended from time
to time hereafter.
7.4 Consideration for Shares. The consideration for the issuance
of shares shall consist of money paid, labor done (including services actually
performed for the Corporation), or property (tangible or intangible) actually
received. In the absence of fraud in the transaction, the judgment of the board
of directors as to the value of consideration received shall be conclusive.
When consideration as provided by law has been paid, the shares shall be deemed
to have been issued and shall be considered fully paid and nonassessable. The
consideration received for shares shall be allocated by the board of directors,
in accordance with law, between stated capital and surplus accounts.
7.5 Lost, Stolen, or Destroyed Certificates. The Corporation
shall issue a new certificate or certificates in place of any certificate
representing shares previously issued if the registered owner of the
certificate:
(a) Claim. Makes proof by affidavit, in form and
substance satisfactory to the board of directors or
any proper officer, that a previously issued
certificate representing shares has been lost,
destroyed, or stolen;
(b) Timely Request. Requests the issuance of a new
certificate before the Corporation has notice that
the certificate has been acquired by a purchaser for
value in good faith and without notice of an adverse
claim;
(c) Bond. If required by the board of directors or any
proper officer, in its or such officer's discretion,
delivers to the Corporation a bond or indemnity
agreement in such form, with such surety or sureties,
and with such fixed or open penalty, as the board of
directors or such officer may direct, in its or such
officer's discretion, to indemnify the Corporation
(and its transfer agent and registrar, if any)
against any claim that may be made on account of the
alleged loss, destruction, or theft of the
certificate; and
(d) Other Requirements. Satisfies any other reasonable
requirements imposed by the board of directors.
7.6 Transfer of Shares. Shares of stock of the Corporation shall
be transferable only on the books of the Corporation by the shareholders
thereof in person or by their duly authorized attorneys or legal
representatives. With respect to certificated shares, upon surrender to the
Corporation or the transfer agent of the Corporation for transfer of a
certificate representing shares duly endorsed and accompanied by any reasonable
assurances that such endorsements are genuine and effective as the Corporation
may require and after compliance with any applicable law relating to the
collection of taxes, the Corporation or its transfer agent shall, if it has no
notice of an
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<PAGE> 18
adverse claim or if it has discharged any duty with respect to any adverse
claim, issue one or more new certificates to the person entitled thereto,
cancel the old certificate, and record the transaction upon its books. With
respect to uncertificated shares, upon delivery to the Corporation or the
transfer agent of the Corporation of an instruction originated by an
appropriate person (as prescribed by Section 8.308 of the Delaware Uniform
Commercial Code as currently in effect and as the same may be amended from time
to time hereafter) and accompanied by any reasonable assurances that such
instruction is genuine and effective as the Corporation may require and after
compliance with any applicable law relating to the collection of taxes, the
Corporation or its transfer agent shall, if it has no notice of an adverse
claim or has discharged any duty with respect to any adverse claim, record the
transaction upon its books, and shall send to the new registered owner of such
uncertificated shares, and, if the shares have been transferred subject to a
registered pledge, to the registered pledgee, a written notice containing the
information required to be stated on certificates representing shares of stock
set forth in Section 7.2 above and such additional information as may be
required by Section 8.408 of the Delaware Uniform Commercial Code as currently
in effect and as the same may be amended from time to time hereafter.
7.7 Registered Shareholders. The Corporation shall be entitled to
treat the shareholder of record as the shareholder in fact of any shares and,
accordingly, shall not be bound to recognize any equitable or other claim to or
interest in such shares on the part of any other person, whether or not it
shall have actual or other notice thereof, except as otherwise provided by law.
7.8 Legends. The board of directors shall cause an appropriate
legend to be placed on certificates representing shares of stock as may be
deemed necessary or desirable by the board of directors in order for the
Corporation to comply with applicable federal or state securities or other
laws.
7.9 Regulations. The board of directors shall have the power and
authority to make all such rules and regulations as it may deem expedient
concerning the issue, transfer, registration, or replacement of certificates
representing shares of stock of the Corporation.
ARTICLE EIGHT: CERTAIN AFFILIATED TRANSACTIONS
8.1 Material Transaction. Any material transaction (or series of
related transactions) between the Corporation and any director, officer or
shareholder of the Corporation holding 5% or more of the voting shares of the
Corporation ("5% shareholder") or any corporation, partnership, association or
other organization in which any such director, officer or 5% shareholder is an
officer, director or is directly or indirectly financially interested must be
approved by a majority of the disinterested directors upon such directors'
determination that the terms of the transaction are no less favorable to the
Corporation than those that could have been obtained from third parties. The
determination of whether a transaction (or series of related transactions) is
material shall be made by a majority of the disinterested directors.
8.2 Transactions with Tri Point. Any material transaction (or
series of related transactions) between the Corporation and Tri Point
Communities, L.P. must be approved by all
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of the disinterested directors upon such directors' determination that the
terms of the transaction are no less favorable to the Corporation than those
that could have been obtained from third parties. The determination of whether
a transaction (or series of related transactions) is material shall be made by
a majority of the disinterested directors.
ARTICLE NINE: MISCELLANEOUS PROVISIONS
9.1 Dividends. Subject to provisions of applicable statutes and
the certificate of incorporation, dividends may be declared by and at the
discretion of the board of directors at any meeting and may be paid in cash, in
property, or in shares of stock of the Corporation.
9.2 Books and Records. The Corporation shall keep complete and
correct books and records of account and shall keep minutes of the proceedings
of its shareholders, the board of directors, and any committee. The
Corporation shall keep at its registered office or principal place of business,
or at the office of its transfer agent or registrar, a record of the original
issuance of shares issued by the Corporation and a record of each transfer of
those shares that have been presented to the Corporation for registration of
transfer, giving the names and addresses of all past and current shareholders
and the number and class of the shares held by each of such shareholders.
9.3 Fiscal Year. The fiscal year of the Corporation shall be
fixed by the board of directors.
9.4 Seal. The seal, if any, of the Corporation shall be in such
form as may be approved from time to time by the board of directors. If the
board of directors approves a seal, the affixation of such seal shall not be
required to create a valid and binding obligation against the Corporation.
9.5 Attestation by the Secretary. With respect to any deed, deed
of trust, mortgage, or other instrument executed by the Corporation through its
duly authorized officer or officers, the attestation to such execution by the
secretary of the Corporation shall not be necessary to constitute such deed,
deed of trust, mortgage, or other instrument a valid and binding obligation
against the Corporation unless the resolutions, if any, of the board of
directors authorizing such execution expressly state that such attestation is
necessary.
9.6 Resignation. Any director, committee member, officer, or
agent may resign by so stating at any meeting of the board of directors or by
giving written notice to the board of directors, the president, or the
secretary. Such resignation shall take effect at the time specified in the
statement made at the board of directors' meeting or in the written notice, but
in no event may the effective time of such resignation be prior to the time
such statement is made or such notice is given. If no effective time is
specified in the resignation, the resignation shall be effective immediately.
Unless a resignation specifies otherwise, it shall be effective without being
accepted.
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9.7 Securities of Other Corporations. The president or any vice
president of the Corporation shall have the power and authority to transfer,
endorse for transfer, vote, consent, or take any other action with respect to
any securities of another issuer which may be held or owned by the Corporation
and to make, execute, and deliver any waiver, proxy, or consent with respect to
any such securities.
9.8 Amendment of Bylaws. The power to amend or repeal these
bylaws or to adopt new bylaws is vested in the board of directors; provided
that any proposed amendment to or repeal of the penultimate sentence of Section
3.2 hereof or Article 8 hereof must be approved by a majority of the directors
of the Corporation who are not employees of the Corporation, and in each case
subject to the right of the shareholders to amend or repeal these bylaws by the
affirmative vote of the holders of two-thirds of the shares entitled to vote in
the election of directors.
9.9 Invalid Provisions. If any part of these bylaws is held
invalid or inoperative for any reason, the remaining parts, so far as is
possible and reasonable, shall remain valid and operative.
9.10 Headings; Table of Contents. The headings and table of
contents used in these bylaws are for convenience only and do not constitute
matter to be construed in the interpretation of these bylaws.
The undersigned, the secretary of the Corporation, hereby certifies
that the foregoing bylaws were adopted by the board of directors of the
Corporation as of ____________, 1997.
-------------------------------------
James A. Stroud, Secretary
16
<PAGE> 1
EXHIBIT 10.6
1997 OMNIBUS STOCK AND INCENTIVE PLAN
FOR
CAPITAL SENIOR LIVING CORPORATION
<PAGE> 2
TABLE OF CONTENTS
<TABLE>
<S> <C> <C>
1. Purpose . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 1
-------
2. Definitions . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 1
-----------
(a) "Affiliate" . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 1
(b) "Agreed Price" . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 1
(c) "Award" . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 1
(d) "Available Shares" . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 1
(e) "Board" . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 1
(f) "Cause" . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 1
(g) "Change in Control" . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 1
(h) "Change in Control Price" . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 2
(i) "Code" . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 2
(j) "Committee" . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 2
(k) "Common Stock" . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 2
(l) "Company" . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 2
(m) "Consultant" . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 3
(n) "Date of Grant" . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 3
(o) "Director" . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 3
(p) "Disability" . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 3
(q) "Effective Date" . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 3
(r) "Eligible Person" . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 3
(s) "Fair Market Value" . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 3
(t) "Holder" . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 3
(u) "Immediate Family" . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 3
(v) "Incentive Stock Option" . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 4
(w) "Limited SAR" . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 4
(x) "Non-Employee Director" . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 4
(y) "Non-qualified Stock Option" . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 4
(z) "Option" . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 4
(aa) "Optionee" . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 4
(bb) "Option Price" . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 4
(cc) "Option Proceeds" . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 4
(dd) "Outside Director" . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 4
(ee) "Outside Director Option" . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 4
(ff) "Parent" . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 4
(gg) "Performance Award" . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 4
(hh) "Performance Period" . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 4
(ii) "Plan" . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 4
(jj) "Plan Year" . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 5
(kk) "Potential Change In Control" . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 5
(ll) "Reacquired Shares" . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 5
(mm) "Restriction(s)" . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 5
(nn) "Restricted Period" . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 5
</TABLE>
i
<PAGE> 3
<TABLE>
<S> <C> <C>
(oo) "Restricted Shares" . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 5
(pp) "Restricted Share Award" . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 5
(qq) "Restricted Share Distributions" . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 5
(rr) "SAR" . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 5
(ss) "Section 162(m) Maximum" . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 5
(tt) "Share(s)" . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 5
(uu) "Spread" . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 5
(vv) "Subsidiary" . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 5
(ww) "1933 Act" . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 6
(xx) "1934 Act" . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 6
3. Award of Available Shares . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 6
-------------------------
4. Conditions for Grant of Awards . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 6
------------------------------
5. Grant of Options . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 7
----------------
6. Option Price . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 8
------------
7. Exercise of Options . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 8
-------------------
8. Exercisability of Options . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 8
-------------------------
9. Termination of Option Period . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 8
----------------------------
10. Incentive Stock Options for 10% Shareholder . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 9
-------------------------------------------
11. Non-qualified Stock Options . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 9
---------------------------
12. Restricted Share Awards . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 9
-----------------------
13. Performance Awards . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 10
------------------
14. Acceleration on Change in Control . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 11
---------------------------------
15. Adjustment of Available Shares . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 11
------------------------------
16. Transferability of Awards . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 12
-------------------------
17. Issuance of Shares . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 13
------------------
18. Stock Appreciation Rights and Limited Stock Appreciation Rights . . . . . . . . . . . . . . . . . . . . . . 13
---------------------------------------------------------------
19. Administration of the Plan . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 16
--------------------------
20. Tax Withholding . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 17
---------------
</TABLE>
ii
<PAGE> 4
<TABLE>
<S> <C> <C>
21. Interpretation . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 18
--------------
22. Amendment and Discontinuation of the Plan . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 18
-----------------------------------------
23. Section 83(b) Election . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 19
----------------------
24. Awards to Outside Directors . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 19
---------------------------
25. Effective Date and Termination Date . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 20
-----------------------------------
</TABLE>
iii
<PAGE> 5
1997 OMNIBUS STOCK AND INCENTIVE PLAN
FOR
CAPITAL SENIOR LIVING CORPORATION
1. PURPOSE. The purpose of this Plan is to advance the interests
of Capital Senior Living Corporation and increase shareholder value by
providing additional incentives to attract, retain and motivate those qualified
and competent employees, Directors and Consultants upon whose efforts and
judgment its success is largely dependent.
2. DEFINITIONS. As used herein, the following terms shall have
the meaning indicated:
(a) "AFFILIATE" means any entity other than the Parent that is
designated by the Board as a participating employer under the Plan, provided
that the Parent directly or indirectly owns at least 20% of the combined voting
power of all classes of stock of such entity or at least 20% of the ownership
interests in such entity.
(b) "AGREED PRICE" shall relate to the grant of a SAR or Limited
SAR under an Award, and shall mean the value assigned to the Available Shares
in the Award which will form the basis for calculating the Spread on the date
of exercise of the SAR or Limited SAR, which assigned value may be any value
determined by the Committee, including the Fair Market Value of the Shares on
the Date of Grant.
(c) "AWARD" shall mean either an Option, an SAR, a Restricted
Share Award, or a Performance Award, except that where it shall be appropriate
to identify the specific type of Award, reference shall be made to the specific
type of Award.
(d) "AVAILABLE SHARES" shall mean, at each time of reference, the
total number of Shares described in SECTION 3 with respect to which the
Committee may grant an Award, all of which Available Shares shall be held in
the Parent's treasury or shall be made available from authorized and unissued
Shares.
(e) "BOARD" shall mean the Board of Directors of the Parent.
(f) "CAUSE" shall mean (i) a final, nonappealable conviction of a
holder for commission of a felony involving moral turpitude, (ii) Holder's
willful gross misconduct that causes material economic harm to the Company or
that brings substantial discredit to the Company's reputation, or (iii)
Holder's material failure or refusal to perform his duties if Holder has failed
to cure such failure or refusal to perform within thirty (30) days after the
Company notifies Holder in writing of such failure or refusal to perform.
(g) "CHANGE IN CONTROL" shall mean the first to occur of (i) a
merger, consolidation, statutory share exchange or sale, lease, exchange or
other transfer (in one transaction or a series of related transactions) of all
or substantially all of the assets of the Company that requires the consent or
vote of the holders of the Parent's Common Stock, other than a consolidation,
merger or share
1
<PAGE> 6
exchange of the Parent in which the holders of the Parent's Common Stock
immediately prior to such transaction have the same proportionate ownership of
common stock of the surviving corporation immediately after such transaction;
(ii) the shareholders of the Parent approve any plan or proposal for the
liquidation or dissolution of the Company; (iii) the cessation of control (by
virtue of their not constituting a majority of Directors) of the Board of
Directors of the Parent by the individuals (the "Continuing Directors") who (x)
on the Effective Date were Directors or (y) become Directors after the date of
this Agreement and whose election or nomination for election by the Parent's
shareholders was approved by a vote of at least two-thirds of the Directors
then in office who were Directors at the Effective Date or whose election or
nomination for election was previously so approved; (iv) the acquisition of
beneficial ownership (within the meaning of Rule 13d-3 under the Exchange Act)
of an aggregate of 20% or more of the voting power of the Parent's outstanding
voting securities by any person or group (as such term is used in Rule 13d-5
under the Exchange Act) who beneficially owned less than 15% of the voting
power of the Parent's outstanding voting securities on the Effective Date, or
the acquisition of beneficial ownership of an additional 5% of the voting power
of the Parent's outstanding voting securities by any person or group who
beneficially owned at least 15% of the voting power of the Parent's outstanding
voting securities on the Effective Date; provided, however, that
notwithstanding the foregoing, an acquisition shall not be described hereunder
if the acquiror is (x) a trustee or other fiduciary holding securities under an
employee benefit plan of the Company and acting in such capacity, (y) a
wholly-owned subsidiary of the Parent or a corporation owned, directly or
indirectly, by the shareholders of the Parent in the same proportions as their
ownership of voting securities of the Parent or (z) any other person whose
acquisition of shares of voting securities is approved in advance by a majority
of the Continuing Directors; or (v) in a Title 11 bankruptcy proceeding, the
appointment of a trustee or the conversion of a case involving the Company to a
case under Chapter 7.
(h) "CHANGE IN CONTROL PRICE" shall mean the highest price per
share paid in any transaction reported on the NYSE or such other exchange or
market as is the principal trading market for the Common Stock, or paid or
offered in any bona fide transaction related to a Potential or actual Change in
Control at any time during the 60 day period immediately preceding such
occurrence, in each case as determined by the Committee except that, in the
case of Stock Appreciation Rights relating to Incentive Stock Options, such
price shall be based only on transactions reported for the date on which the
Holder exercises such Stock Appreciation Rights or, where applicable, the date
on which a cash out occurs.
(i) "CODE" shall mean the Internal Revenue Code of 1986, as now or
hereafter amended.
(j) "COMMITTEE" shall mean the a Committee composed entirely of
Non-Employee Directors, not less than 2 in number, unless the Board expressly
elects to act as the Committee.
(k) "COMMON STOCK" shall mean the common stock, par value $.01 per
share, of the Parent.
(l) "COMPANY" shall mean the Parent, its Subsidiaries and
Affiliates, except when it shall be appropriate to refer only to Capital Senior
Living Corporation, then it shall be referred to as "Parent".
2
<PAGE> 7
(m) "CONSULTANT" shall mean any person or entity who or which is
engaged by the Company to render consulting services and is compensated for
such consulting services and any director of the Employer whether compensated
for such services or not; provided that, in the event the Company registers any
security under Section 12 of the Securities Exchange Act of 1934, as amended,
the term Consultant shall thereafter not include Directors who are not
compensated for their services and are paid only a director's fee by the
Employer.
(n) "DATE OF GRANT" shall mean the date on which the Committee
takes formal action to grant an Award, provided that it is followed, as soon as
reasonably possible, by written notice to the Eligible Person receiving the
Award.
(o) "DIRECTOR" shall mean a member of the Board.
(p) "DISABILITY" shall mean a Holder's present incapacity
resulting from an injury or illness (either mental or physical) which, in the
reasonable opinion of the Committee based on such medical evidence as it deems
necessary, will result in death or can be expected to continue for a period of
at least twelve (12) months and will prevent the Holder from performing the
normal services required of the Holder by the Company, provided, however, that
such disability did not result, in whole or in part: (i) from chronic
alcoholism; (ii) from addiction to narcotics; (ii) from a felonious
undertaking; or (iv) from an intentional self-inflicted wound.
(q) "EFFECTIVE DATE" shall mean September 1, 1997.
(r) "ELIGIBLE PERSON" shall mean employees of the Company who the
Committee determines have the capacity to substantially contribute to the
success of the Company.
(s) "FAIR MARKET VALUE" shall mean, as of a particular date, the
closing sale price of Shares, which shall be (i) if the Shares are listed or
admitted for trading on any United States national securities exchange, the
last reported sale price of the Shares on such exchange as reported in any
newspaper of general circulation or (ii) if the Shares are quoted on NASDAQ, or
any similar system of automated dissemination of quotations of securities
prices in common use, the mean between the closing high bid and low asked
quotations for such day on such system. If neither clause (i) nor clause (ii)
is applicable, the fair market value shall be determined by any fair and
reasonable means prescribed by the Committee.
(t) "HOLDER" shall mean, at each time of reference, each person
(including, but not limited to an Optionee) with respect to whom an Award is in
effect, except that where it should be appropriate to distinguish between a
Holder with respect to an Option and a Holder with respect to a different type
of Award, reference shall be made to Optionee; and provided further that to the
extent provided under, and subject to the conditions of, the Award, it shall
refer to the person who succeeds to the rights of the Holder upon the death of
the Holder.
(u) "IMMEDIATE FAMILY" means any child, stepchild, grandchild,
parent stepparent, grandparent, spouse, sibling, mother-in-law, father-in-law,
son-in-law, daughter-in-law, brother-in-law, or sister-in-law, and shall
include adoptive relationships.
3
<PAGE> 8
(v) "INCENTIVE STOCK OPTION" shall mean an Option that is an
incentive stock option as defined in Section 422 of the Code.
(w) "LIMITED SAR" shall mean a limited stock appreciation right as
defined in SECTION 18 hereof.
(x) "NON-EMPLOYEE DIRECTOR" means a member of the Board who is a
Non-Employee Director within the meaning of Rule 16b-3(b)(3) promulgated under
the 1934 Act and an outside director within the meaning of Treasury Regulation
Sec. 162-27(e)(3) promulgated under the Code.
(y) "NON-QUALIFIED STOCK OPTION" shall mean an Option that is not
an Incentive Stock Option.
(z) "OPTION" (when capitalized) shall mean any Incentive Stock
Option and Non-qualified Stock Option granted under this Plan, except that,
where it shall be appropriate to identify a specific type of Option, reference
shall be made to the specific type of Option; provided, further, without
limitation, that a single Option may include both Incentive Stock Option and
Non-qualified Stock Option provisions.
(aa) "OPTIONEE" shall mean a person to whom an Option is granted
(often referred to as a Holder).
(bb) "OPTION PRICE" shall mean the price per Share which is
required to be paid by the Optionee in order to exercise his right to acquire
the Share under the terms of the Option.
(cc) "OPTION PROCEEDS" shall mean the cash proceeds received by the
Company from the exercise of Options reduced by any such amounts previously
used to purchase Reacquired Shares.
(dd) "OUTSIDE DIRECTOR" means a member of the Board who is not an
officer or employee of the Company.
(ee) "OUTSIDE DIRECTOR OPTION" means an award to an Outside
Director under SECTION 24 below.
(ff) "PARENT" shall mean Capital Senior Living Corporation, a
Delaware corporation.
(gg) "PERFORMANCE AWARD" shall mean the award which is granted
contingent upon the attainment of the performance objectives during the
Performance Period, all as described more fully in SECTION 13.
(hh) "PERFORMANCE PERIOD" shall mean the period described in
SECTION 13 with respect to which the performance objectives relate.
(ii) "PLAN" shall mean this 1997 Omnibus Stock and Incentive Plan
For Capital Senior Living Corporation
4
<PAGE> 9
(jj) "PLAN YEAR" shall mean the Parent's fiscal year.
(kk) "POTENTIAL CHANGE IN CONTROL" shall mean the first to occur of
(i) approval by shareholders of an agreement by the Parent, the consummation of
which would result in a Change in Control; or (ii) the acquisition of
beneficial ownership, directly or indirectly, by any entity, person or group
(other than the Company or any Company employee benefit plan of securities of
the Company representing 5% or more of the combined voting power of the
Parent's outstanding securities and the adoption by the Committee of a
resolution to the effect that a Potential Change in Control has occurred for
purposes of this Plan.
(ll) "REACQUIRED SHARES" shall mean Shares, if any, reacquired by
the Company on the open market with the Option Proceeds, provided that the
aggregate of such Reacquired Shares may not exceed fifty percent (50%) of the
aggregate Shares (excluding Reacquired Shares) authorized in SECTION 3.
(mm) "RESTRICTION(S)" shall mean the restrictions applicable to
Available Shares subject to an Award which prohibit the "transfer" of such
Available Shares, and which constitute "a substantial risk of forfeiture" of
such Available Shares, as those terms are defined under Section 83(a)(1) of the
Code.
(nn) "RESTRICTED PERIOD" shall mean the period during which
Restricted Shares shall be subject to Restrictions.
(oo) "RESTRICTED SHARES" shall mean the Available Shares granted to
an Eligible Person which are subject to Restrictions.
(pp) "RESTRICTED SHARE AWARD" shall mean the award of Restricted
Shares.
(qq) "RESTRICTED SHARE DISTRIBUTIONS" shall mean any amounts,
whether Shares, cash or other property (other than regular cash dividends) paid
or distributed by the Parent with respect to Restricted Shares during a
Restricted Period.
(rr) "SAR" shall mean a stock appreciation right as defined in
SECTION 18 hereof.
(ss) "SECTION 162(M) MAXIMUM" shall mean 100,000 Shares.
(tt) "SHARE(S)" shall mean a share or shares of Common Stock.
(uu) "SPREAD" shall mean the difference between the Option Price,
or the Agreed Price, as the case may be, of the Share(s) and the Fair Market
Value of such Share(s), on the date of reference.
(vv) "SUBSIDIARY" shall mean any corporation (other than the
Parent) in any unbroken chain of corporations beginning with the Parent if, at
the time of the granting of the Award, each of the corporations, other than the
last corporation in the unbroken chain, owns stock possessing 50%
5
<PAGE> 10
or more of the total combined voting power of all classes of stock in one of
the other corporations in such unbroken chain.
(ww) "1933 ACT" shall mean the Securities Act of 1933, as amended.
(xx) "1934 ACT" shall mean the Securities Exchange Act of 1934, as
amended.
3. AWARD OF AVAILABLE SHARES. As of the Effective Date, 560,000
Shares shall automatically, and without further action, become Available
Shares. To the extent any Award shall terminate, expire or be canceled, or the
Award shall be paid in cash, the Available Shares subject to such Award (or
with respect to which the Award is measured), shall remain Available Shares.
Such number shall be increased automatically by the number of Reacquired
Shares; provided, however, that Incentive Stock Options may not be issued after
560,000 Shares have been issued under the Plan. No person whose compensation
may be subject to the limitations on deductibility under Section 162(m) of the
Code shall be eligible to receive Awards pursuant to this Plan in any Plan Year
which relate to Shares which exceed the Section 162(m) Maximum.
4. CONDITIONS FOR GRANT OF AWARDS.
(a) Without limiting the generality of the provisions hereof which
deal specifically with each form of Award, Awards shall only be granted to such
one or more Eligible Persons as shall be selected by the Committee.
(b) In granting Awards, the Committee shall take into
consideration the contribution the Eligible Person has made or may be
reasonably expected to make to the success of the Company and such other
factors as the Committee shall determine. The Committee shall also have the
authority to consult with and receive recommendations from officers and other
personnel of the Company with regard to these matters. The Committee may from
time to time in granting Awards under the Plan prescribe such other terms and
conditions concerning such Awards as it deems appropriate, including, without
limitation, relating an Award to achievement of specific goals established by
the Committee or to the continued employment of the Eligible Person for a
specified period of time, provided that such terms and conditions are not
inconsistent with the provisions of this Plan.
(c) Incentive Stock Options may be granted only to Employees, and
all other Awards may be granted to either Employees, Consultants or
Non-Employee Directors. Outside Directors are eligible to receive Awards only
pursuant to SECTION 24.
(d) The Plan shall not confer upon any Holder any right with
respect to continuation of employment by, or consulting relationship with, the
Company, nor shall it interfere in any way with his right or the Company's
right to terminate his employment, consulting relationship or Directorship at
any time, nor shall the reference to "Company" confer an employment
relationship on a Consultant.
(e) The Awards granted to Eligible Persons shall be in addition to
regular salaries, pension, life insurance or other benefits related to their
service to the Company. Neither the Plan nor any Award granted under the Plan
shall confer upon any person any right to continuance of employment by the
Company; and provided, further, that nothing herein shall be deemed to limit
the ability of the Company to enter into any other compensation arrangements
with any Eligible Person.
6
<PAGE> 11
(f) The Committee shall determine in each case whether periods of
military or government service shall constitute a continuation of employment
for the purposes of this Plan or any Award.
(g) Notwithstanding any provision hereof to the contrary, each
Award which in whole or in part involves the issuance of Available Shares may
provide for the issuance of such Available Shares for consideration consisting
of such consideration as the Committee may determine, including (without
limitation) as compensation for past services rendered.
5. GRANT OF OPTIONS.
(a) The Committee may grant to Optionees from time to time Options
alone, in addition to, or in tandem with , other Awards granted under the Plan
and/or cash Awards made outside of the Plan, to purchase some or all of the
Available Shares. An Option granted hereunder shall be either an Incentive
Stock Option or a Non-qualified Stock Option, shall be evidenced by a written
agreement that shall contain such provisions as shall be selected by the
Committee, which may incorporate the terms of this Plan by reference, and which
clearly shall state whether it is (in whole or in part) an Incentive Stock
Option or a Non-qualified Stock Option.
(b) The aggregate Fair Market Value (determined as of the Date of
Grant) of the Available Shares with respect to which any Incentive Stock Option
is exercisable for the first time by an Optionee during any calendar year under
the Plan and all such plans of the Company (as defined in Section 425 of the
Code) shall not exceed $100,000.
(c) A Non-qualified Stock Option shall not be transferable by the
Holder without the prior written consent of the Committee other than (i)
transfers by the Holder to a member of his or her Immediate Family or a trust
for the benefit of the optionee or a member of his or her Immediate Family, or
(ii) transfers by will or by the laws of descent and distribution. An
Incentive Stock Option shall not be transferable by the Holder otherwise than
by will or by the laws of descent and distribution. All Options shall be
exercisable, during the Holder's lifetime, only by the Holder.
(d) In the case of a Non-qualified Stock Option or a Holder who
elects to make a disqualifying disposition (as defined in Section 422(a)(1) of
the Code) of Shares acquired pursuant to the exercise of an Incentive Stock
Option, the Committee in its discretion may award at the time of grant or
thereafter the right to receive upon exercise of such Option a cash bonus
calculated to pay part or all of the federal and state, if any, income tax
incurred by the Holder upon such exercise.
(e) The Committee may at any time offer to buy out for a payment
in cash, Common Stock, or Restricted Stock an Option previously granted, based
on such terms and conditions as the Committee shall establish and communicate
to the Holder at the time that such offer is made.
(f) If the Option agreement so provides at Date of Grant or
(except in the case of an Incentive Stock Option) is amended after Date of
Grant and prior to exercise to so provide (with the Holder's consent), the
Committee may require that all or part of the Shares to be issued with respect
7
<PAGE> 12
to the Spread take the form of Restricted Stock, which shall be valued on the
date of exercise on the basis of the Fair Market Value of such Restricted Stock
determined without regard to the transferability and forfeiture restrictions
involved.
(g) Without limitation, the Committee may condition the exercise
of any Option upon the attainment of specified performance goals or other
factors as the Committee may determine, in its sole discretion. Unless
specifically provided in the Option agreement, any such conditional Option
shall vest twelve (12) months prior to its expiration if the conditions to
exercise have not theretofore been satisfied.
6. OPTION PRICE.
(a) The Option Price shall be any price determined by the
Committee; provided, however, that the Option Price may not be less than the
par value of the Common Stock, and in the case of an Incentive Stock Option,
shall not be less than one hundred percent (100%) of the Fair Market Value per
Share on the Date of Grant.
(b) Unless further limited by the Committee in any Option, the
Option Price shall be paid solely in cash, by certified or cashier's check, by
wire transfer, by money order, with Common Stock (but with Shares only if
expressly permitted by the terms of the Option), or by a combination of the
above; provided, however, that the Committee may accept a personal check in
full or partial payment. If the Option Price is permitted to be, and is, paid
in whole or in part with Common Stock, the value of the Common Stock
surrendered shall its Fair Market Value on the date surrendered.
7. EXERCISE OF OPTIONS. An Option shall be deemed exercised when
(i) the Committee has received written notice of such exercise in accordance
with the terms of the Option, and (ii) full payment of the aggregate Option
Price of the Available Shares as to which the Option is exercised has been
made. Separate stock certificates shall be issued by the Parent for any
Available Shares acquired as a result of exercising an Incentive Stock Option
and a Non-qualified Stock Option.
8. EXERCISABILITY OF OPTIONS.
(a) Each Option shall become exercisable in whole or in part and
cumulatively, and shall expire, according to the terms of the Option to the
extent not inconsistent with the express provisions of this Plan; and provided
further, without limitation, that in the case of the grant of an Option to an
officer (as that term is used in Rule 16a-1 promulgated under the 1934 Act) or
any similar rule which may subsequently be in effect, the Committee may provide
that no Available Shares acquired on the exercise of such Option shall be
transferable during such 6 month period following the Date of Grant.
(b) The Committee, in its sole discretion, may accelerate the date
on which all or any portion of an otherwise unexercisable Option may be
exercised or a restriction will lapse.
9. TERMINATION OF OPTION PERIOD.
(a) As provided in SECTION 5, and without limitation, each Option
shall be evidenced by an agreement that may contain any provisions selected by
the Committee; provided, however, that
8
<PAGE> 13
in each case, unless terminated earlier under the express terms of the Option,
the unexercised portion of an Option shall automatically and without notice
terminate and become null and void on the earlier of (i) the date that Optionee
ceases to be employed by the Company, if such cessation is for Cause, (ii) the
tenth (10th) anniversary of the Date of Grant; and (iii) solely in the case of
an Incentive Stock Option, three months after the date that Optionee ceases to
be employed by the Company regardless of the reason therefor, other than a
cessation by reason of death, or Disability, in which case the date of
termination may be extended under the terms of the Incentive Stock Option
agreement.
(b) Notwithstanding any provision of SECTION 14(a) to the
contrary, if provided in an Option, the Committee may, by giving written notice
("CANCELLATION NOTICE"), cancel, effective upon the date of the consummation of
any of the transactions described in SUBSECTION 14(a), all or any portion of
such Option which remains unexercised on such date. Such Cancellation Notice
shall be given a reasonable period of time (but not less than 15 days) prior to
the proposed date of such cancellation, and may be given either before or after
shareholder approval of such corporate transaction.
10. INCENTIVE STOCK OPTIONS FOR 10% SHAREHOLDER. Notwithstanding
any other provisions of the Plan to the contrary, an Incentive Stock Option
shall not be granted to any person owning directly (or indirectly through
attribution under Section 425(d) of the Code) at the Date of Grant, stock
possessing more than 10% of the total combined voting power of all classes of
stock of the Company (as defined in Section 425 of the Code) at the Date of
Grant, unless the Option Price of such Incentive Stock Option is at least 110%
of the Fair Market Value on the Date of Grant of the Available Shares subject
to such Incentive Stock Option, and the period during which the Incentive Stock
Option may be exercised does not exceed five (5) years from the Date of Grant.
11. NON-QUALIFIED STOCK OPTIONS. Non-qualified Stock Options may
be granted hereunder and shall contain such terms and provisions as shall be
determined by the Committee, except that each such Non-qualified Stock Option
(i) must be clearly designated as a Non-qualified Stock Option; (ii) may be
granted for Available Shares which become exercisable in excess of the limits
contained in SUBSECTION 5(B); and (iii) shall not be subject to SECTION 10
hereof. If both Incentive Stock Options and Non-qualified Stock Options are
granted to an Optionee, the right to exercise, to the full extent thereof,
Options of either type shall not be contingent in whole or in part upon the
exercise of, or failure to exercise, Options of the other type.
12. RESTRICTED SHARE AWARDS.
(a) Each Restricted Share Award shall be evidenced by an agreement
that may contain any provisions selected by the Committee, including, without
limitation, a provision allowing the Holder, prior to the date on which the
Restrictions lapse with respect to the Restricted Shares of reference, or
within a period of 10 days after such lapse where such lapse is accelerated, to
elect to receive cash in an amount equal to the Fair Market Value of some or
all of the Restricted Shares on the date the Restrictions with respect to such
Restricted Shares lapse, in lieu of retaining the corresponding formerly
Restricted Shares; and provided, further, that in the event such a provision is
included in the Restricted Share Award of an officer (as defined in SECTION
18(l) the election to receive cash in lieu of Restricted Shares shall be
subject to the same limitations on exercise as are set forth in SECTION 18(l).
As a condition to the grant of a Restricted Share Award, the Committee shall
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<PAGE> 14
require the Eligible Person receiving the Restricted Share Award to pay at
least an amount equal to the par value of the Restricted Shares granted under
such Restricted Share Award, and such Restricted Share Award shall
automatically terminate if such payment is not received within 30 days
following the Date of Grant. Except as otherwise provided in the express
terms and conditions of each Restricted Share Award, the Eligible Person
receiving the Restricted Share Award shall have all of the rights of a
shareholder with respect to such Restricted Shares including, but not limited
to, voting rights and the right to receive any dividends paid, subject only to
the retention provisions of the Restricted Share Distributions.
(b) The Restrictions on Restricted Shares shall lapse in whole, or
in installments, over whatever Restricted Period shall be selected by the
Committee; provided, however, that a complete lapse of Restrictions always
shall occur on or before the 9th anniversary of the Date of Grant.
(c) The Committee may accelerate the date on which Restrictions
lapse with respect to any Restricted Shares.
(d) During the Restricted Period, the certificates representing
the Restricted Shares, and any Restricted Share Distributions, shall be
registered in the Holder's name and bear a restrictive legend disclosing the
Restrictions, the existence of the Plan, and the existence of the applicable
agreement granting such Restricted Share Award. Such certificates shall be
deposited by the Holder with the Company, together with stock powers or other
instruments of assignment, each endorsed in blank, which will permit the
transfer to the Company of all or any portion of the Restricted Shares, and any
assets constituting Restricted Share Distributions, which shall be forfeited in
accordance with the applicable agreement granting such Restricted Share Award.
Restricted Shares shall constitute issued and outstanding Common Stock for all
corporate purposes and the Holder shall have all rights, powers and privileges
of a Holder of unrestricted Shares except that the Holder will not be entitled
to delivery of the stock certificates until all Restrictions shall have
terminated, and the Company will retain custody of all related Restricted Share
Distributions (which will be subject to the same Restrictions, terms, and
conditions as the related Restricted Shares) until the conclusion of the
Restricted Period with respect to the related Restricted Shares; and provided,
further, that any Restricted Share Distributions shall not bear interest or be
segregated into a separate account but shall remain a general asset of the
Company, subject to the claims of the Company's creditors, until the conclusion
of the applicable Restricted Period; and provided, finally, that any material
breach of any terms of the agreement granting the Restricted Share Award, as
reasonably determined by the Committee will cause a forfeiture of both
Restricted Shares and Restricted Share Distributions.
13. PERFORMANCE AWARDS.
(a) The Committee may grant Performance Awards, which may in the
sole discretion of the Committee represent a Share or be related to the
increase in value of a Share, or be contingent on the Company's achievement of
the specified performance measures during the Performance Period, including,
without limitation, performance shares, convertible preferred stock,
convertible debentures, exchangeable securities and Restricted Share Awards or
Options valued by reference to earnings per Share or Subsidiary performance,
may be granted either alone, in addition to, or in tandem with, other Awards
and cash awards made outside of the Plan. The Committee shall establish the
performance measures for each Performance Period, and such performance
measures, and the duration of any
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<PAGE> 15
Performance Period, may differ with respect to each Eligible Person who
receives a Performance Award, or with respect to separate Performance Awards
issued to the same Eligible Person. The performance measures, the medium of
payment, the Performance Period(s) and any other conditions to the Company's
obligation to pay such Performance Award in full or in part, shall be set forth
in the written agreement evidencing each Performance Award.
(b) The Committee shall determine the manner and medium of payment
of each Performance Award.
(c) Unless otherwise expressly provided in the agreement
evidencing the Performance Award, the Holder of the Performance Award must
remain employed by the Company until the end of the Performance Period in order
to be entitled to any payment under such Performance Award; provided, however,
that the Committee expressly may provide in the agreement granting such
Performance Award that such Holder may become entitled to a specified portion
of the amount earned under such Performance Award based on one or more
specified period(s) of time between the Date of Grant of such Performance Award
and such Holder's termination of employment by the Company prior to the end of
the Performance Period.
14. ACCELERATION ON CHANGE IN CONTROL.
(a) In the event of either a Change in Control, or a Potential
Change in Control, unless otherwise expressly provided by the Committee prior
to such event, (i) all Awards, other than Performance Awards, shall become
fully exercisable, nonforfeitable, or the Restricted Period shall terminate, as
the case may be (hereafter, in this SECTION 14, such Award shall be
"accelerated") and (ii) the value of all outstanding Non-qualified Stock
Options, Stock Appreciation Rights, Restricted Stock, and Outside Director
Options shall be cashed out on the basis of the Change in Control Price,
effective as the date of the Change in Control, or on such other date as the
Committee may determine prior to the Change in Control.
(b) Notwithstanding any provisions hereof to the contrary, if an
Award is accelerated under SUBSECTION 14(b), the portion of the Award which is
accelerated is limited to that portion which can be accelerated without causing
the Holder to have an "excess parachute payment" as determined under Section
280G of the Code, determined by taking into account all of the Holder's
"parachute payments" determined under Section 280G of the Code, all as
reasonably determined by the Committee.
15. ADJUSTMENT OF AVAILABLE SHARES.
(a) If at any time while the Plan is in effect or Awards with
respect to Available Shares are outstanding, there shall be any increase or
decrease in the number of issued and outstanding Shares through the declaration
of a stock dividend or through any recapitalization resulting in a stock
split-up, combination or exchange of Shares, then and in such event:
(i) appropriate adjustment shall be made in the maximum
number of Available Shares which may be granted under SECTION 3, and
in the Available Shares which are then subject to each Award, so that
the same proportion of the Parent's issued and outstanding Common
Stock shall continue to be subject to grant under SECTION 3, and to
such Award, and
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<PAGE> 16
(ii) in addition, and without limitation, in the case of
each Award (including, without limitation, Options) which requires the
payment of consideration by the Holder in order to acquire Shares, an
appropriate adjustment shall be made in the consideration (including,
without limitation the Option Price) required to be paid to acquire
the each Share, so that (i) the aggregate consideration to acquire all
of the Shares subject to the Award remains the same and, (ii) so far
as possible (and without disqualifying an Incentive Stock Option) as
reasonably determined by the Committee in its sole discretion, the
relative cost of acquiring each Share subject to such Award remains
the same.
(b) The Committee may change the terms of Options outstanding
under this Plan, with respect to the Option Price or the number of Available
Shares subject to the Options, or both, when, in the Committee's judgment, such
adjustments become appropriate by reason of a corporate transaction (as defined
in Treasury Regulation Section 1.425-1(a)(1)(ii)); provided, however, that if
by reason of such corporate transaction an Incentive Stock Option is assumed or
a new option is substituted therefore, the Committee may only change the terms
of such Incentive Stock Option such that (i) the excess of the aggregate Fair
Market Value of the Shares subject to option immediately after the substitution
or assumption, over the aggregate option price of such Shares, is not more than
the excess of the aggregate Fair Market Value of all Available Shares subject
to the Option immediately before such substitution or assumption over the
aggregate Option Price of such Available Shares, and (ii) the new option, or
the assumption of the old Incentive Stock Option does not give the Optionee
additional benefits which he did not have under the old Incentive Stock Option.
(c) Except as otherwise expressly provided herein, the issuance by
the Parent of shares of its capital stock of any class, or securities
convertible into shares of capital stock of any class, either in connection
with direct sale or upon the exercise of rights or warrants to subscribe
therefor, or upon conversion of shares or obligations of the Parent convertible
into such shares or other securities, shall not affect, and no adjustment by
reason thereof shall be made with respect to Available Shares subject to Awards
granted under the Plan.
(d) Without limiting the generality of the foregoing, the
existence of outstanding Awards with respect to Available Shares granted under
the Plan shall not affect in any manner the right or power of the Parent to
make, authorize or consummate (1) any or all adjustments, recapitalizations,
reorganizations or other changes in the Parent's capital structure or its
business; (2) any merger or consolidation of the Parent; (3) any issue by the
Parent of debt securities, or preferred or preference stock which would rank
above the Available Shares subject to outstanding Awards; (4) the dissolution
or liquidation of the Parent; (5) any sale, transfer or assignment of all or
any part of the assets or business of the Company; or (6) any other corporate
act or proceeding, whether of a similar character or otherwise.
16. TRANSFERABILITY OF AWARDS. Each Award shall provide that such
Award shall not be transferable by the Holder otherwise than by will or the
laws of descent and distribution, or, if so provided in the Award, (a) that
such Award is transferable, in whole or in part, without payment of
consideration, to members of the Holder's Immediate Family, to trusts for such
Immediate Family
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<PAGE> 17
members, or to partnerships whose only partners are such
Immediate Family members, or (b) except as prohibited by Rule 16b-3, to a
person or other entity for which the Holder is entitled to a deduction for a
"charitable contribution" under Section 170(a)(i) of the Code (provided, in
each such case that no further transfer by any such permitted transferee(s)
shall be permitted); provided, further, that in each case the exercise of the
Award will remain the power and responsibility of the Holder and that so long
as the Holder lives, only such Holder (even if pursuant to the legal direction
of the person to whom a charitable contribution has been made) or his guardian
or legal representative shall have the rights set forth in such Award.
17. ISSUANCE OF SHARES. No Holder or other person shall be, or
have any of the rights or privileges of, the owner of Shares subject to an
Award unless and until certificates representing such Common Stock shall have
been issued and delivered to such Holder or other person. As a condition of
any issuance of Common Stock, the Committee may obtain such agreements or
undertakings, if any, as the Committee may deem necessary or advisable to
assure compliance with any such law or regulation including, but not limited
to, the following:
(i) a representation, warranty or agreement by the Holder
to the Parent, at the time any Shares are transferred, that he is
acquiring the Shares to be issued to him for investment and not with a
view to, or for sale in connection with, the distribution of any such
Shares; and
(ii) a representation, warranty or agreement to be bound
by any legends that are, in the opinion of the Committee, necessary or
appropriate to comply with the provisions of any securities law deemed
by the Committee to be applicable to the issuance of the Shares and
are endorsed upon the Share certificates.
Share certificates issued to the Holder receiving such Shares who are
parties to any shareholders agreement or any similar agreement shall bear the
legends contained in such agreements. Notwithstanding any provision hereof to
the contrary, no Shares shall be required to be issued with respect to an Award
unless counsel for the Parent shall be reasonably satisfied that such issuance
will be in compliance with applicable Federal or state securities laws.
18. STOCK APPRECIATION RIGHTS AND LIMITED STOCK APPRECIATION
RIGHTS.
(a) The Committee shall have authority to grant a SAR, or to grant
a Limited SAR with respect to all or some of the Available Shares covered by
any Option ("RELATED OPTION"), or with respect to, or as some or all of, a
Performance Award ("RELATED PERFORMANCE AWARD"). A SAR or Limited SAR granted
with respect to an Incentive Stock Option must be granted on the Date of Grant
of such related Option. A SAR or Limited SAR granted with respect to a Related
Non-qualified Stock Option or a Performance Award, may be granted on or after
the Date of Grant of such Related Option or Related Performance Award.
(b) For the purposes of this SECTION 18, the following definitions
shall apply:
(i) The term "OFFER" shall mean any tender offer or
exchange offer for thirty percent (30%) or more of the outstanding
Common Stock of the Parent, other than one made by the PARENT;
provided that the corporation, person or other entity making the Offer
acquires Common Stock pursuant to such Offer.
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<PAGE> 18
(ii) The term "OFFER PRICE PER SHARE" shall mean the
highest price per Share paid in any Offer which is in effect at any
time during the period beginning on the sixtieth (60th) day prior to
the date on which a Limited SAR is exercised and ending on the date on
which the Limited SAR is exercised. Any securities or properties
which are a part or all of the consideration paid or to be paid for
Common Stock in the Offer shall be valued in determining the Offer
Price Per Share at the higher of (1) the valuation placed on such
securities or properties by the person making such Offer, or (2) the
valuation placed on such securities or properties by the Committee.
(iii) The term "LIMITED SAR" shall mean a right granted
under this Plan with respect to a Related Option or Related
Performance Award, that shall entitle the Holder to an amount in cash
equal to the Offer Spread in the event an Offer is made.
(iv) The term "OFFER SPREAD" shall mean, with respect to
each Limited SAR, an amount equal to the product of (1) the excess of
(A) the Offer Price Per Share immediately preceding the date of
exercise over (B) (x) if the Limited SAR is granted in tandem with an
Option, then the Option Price per Share of the Related Option, or (y)
if the Limited SAR is issued with respect to a Performance Award, the
Agreed Price under the Related Performance Award, multiplied by (2)
the number of Available Shares with respect to which such Limited SAR
is being exercised; provided, however that with respect to any Limited
SAR granted in tandem with an Incentive Stock Option, in no event
shall the Offer Spread exceed the amount permitted to be treated as
the Offer Spread under applicable Treasury Regulations or other legal
authority without disqualifying the Option as an Incentive Stock
Option.
(v) The term "SAR" shall mean a right granted under this
Plan, including, without limitation, a right granted in tandem with an
Award, that shall entitle the Holder thereof to an amount in cash
equal to the Spread.
(vi) The term "SAR SPREAD" shall mean with respect to each
SAR an amount equal to the product of (1) the excess of (A) the Fair
Market Value per Share on the date of exercise over (B) (x) if the SAR
is granted in tandem with an Option, then the Option Price per Share
of the Related Option, (y) if the SAR is granted in tandem with a
Performance Award, the Agreed Price under the Related Performance
Award, or (z) if the SAR is granted by itself with respect to a
designated number of Available Shares, then whichever of the FMV of
the Available Shares on the Date of Grant, or the Agreed Price, shall
be designated in the SAR agreement, in each case multiplied by (2) the
number of Available Shares with respect to which such SAR is being
exercised; provided, however, that with respect to any SAR granted in
tandem with an Incentive Stock Option, in no event shall the SAR
Spread exceed the amount permitted to be treated as the SAR Spread
under applicable Treasury Regulations or other legal authority without
disqualifying the Option as an Incentive Stock Option.
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<PAGE> 19
(c) To exercise the SAR or Limited SAR, the Holder shall:
(i) Give written notice thereof to the Company,
specifying the SAR or Limited SAR being exercised and the number or
Available Shares with respect to which such SAR or Limited SAR is
being exercised, and
(ii) If requested by the Company, deliver within a
reasonable time the agreement evidencing the SAR or Limited SAR being
exercised, and the Related Option agreement, or Related Performance
Award agreement, to the Secretary of the Company who shall endorse or
cause to be endorsed thereon a notation of such exercise and return
all agreements to the Holder.
(d) As soon as practicable after the exercise of a SAR or Limited
SAR, the Company shall pay to the Holder (i) cash, (ii) at the request of the
Holder and the approval of the Committee, or in accordance with the terms of
the Award, Shares, or (iii) a combination of cash and Shares, having a Fair
Market Value equal to either the SAR Spread, or to the Offer Spread, as the
case may be; provided, however, that the Company may, in its sole discretion,
withhold from such payment any amount necessary to satisfy the Company's
obligation for federal and state withholding taxes with respect to such
exercise.
(e) A SAR or Limited SAR may be exercised only if and to the
extent that it is permitted under the terms of the Award which, in the case of
a Related Option, shall be only when such Related Option is eligible to be
exercised; provided, however, a Limited SAR may be exercised only during the
period beginning on the first day following the date of expiration of the Offer
and ending on the thirtieth (30th) day following such date.
(f) Upon the exercise or termination of a Related Option, or the
payment or termination of a Related Performance Award, the SAR or Limited SAR
with respect to such Related Option or Related Performance Award likewise shall
terminate.
(g) A SAR or Limited SAR shall be transferable only to the extent,
if any, that the Related Award is transferable, and under the same conditions.
(h) A SAR or Limited SAR granted with respect to an Incentive
Stock Option may be exercised only when the Fair Market Value of the Available
Shares exceeds the Option Price.
(i) Each SAR or Limited SAR shall be on such terms and conditions
not inconsistent with this Plan as the Committee may determine and shall be
evidenced by a written agreement.
(j) The Holder shall have no rights as a stockholder with respect
to the related Available Shares as a result of the grant of a SAR or Limited
SAR.
(k) With respect to a Holder who, on the date of a proposed
exercise of a SAR or Limited SAR, is an officer (as that term is used in Rule
16a-1 promulgated under the 1934 Act or any similar rule which may subsequently
be in effect), and who would receive cash in whole or in part upon the proposed
exercise of his SAR, or Limited SAR such proposed exercise may only occur as
permitted
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by Rule 16b-3, including without limitation paragraph (e)(3)(iii) (or any
similar rule which may subsequently be in effect promulgated pursuant to
Section 16(b) of the 1934 Act) which, at the date of adopting this Plan, among
other things, permits exercise during a period beginning on the third (3rd)
business day following the Parent's public release of quarterly or annual
summary statements of sales and earnings and ending on the twelfth (12th)
business day following such public release.
19. ADMINISTRATION OF THE PLAN.
(a) The Plan shall be administered by the Committee and, except
for the powers reserved to the Board in SECTION 22 hereof, the Committee shall
have all of the administrative powers under Plan. The initial Committee shall
be the Compensation Committee of the Board. In the event there are not at
least two Non- Employee Directors on the Board, the Plan shall be administered
by the Board and all references herein to the Committee shall refer to the
Board.
(b) The Committee, from time to time, may adopt rules and
regulations for carrying out the purposes of the Plan and, without limitation,
may delegate all of what, in its sole discretion, it determines to be
ministerial duties to an officer of the Parent. The determinations under, and
the interpretations of, any provision of the Plan or an Award by the Committee
shall, in all cases, be in its sole discretion, and shall be final and
conclusive.
(c) Any and all determinations and interpretations of the
Committee shall be made either (i) by a majority vote of the members of the
Committee at a meeting duly called, with at least 3 days prior notice and a
general explanation of the subject matter given to each member, or (ii) without
a meeting, by the written approval of all members of the Committee.
(d) No member of the Committee shall be liable for any action
taken or omitted to be taken by him or by any other member of the Committee
with respect to the Plan, and to the extent of liabilities not otherwise
insured under a policy purchased by the Company, the Company does hereby
indemnify and agree to defend and save harmless any member of the Committee
with respect to any liabilities asserted or incurred in connection with the
exercise and performance of their powers and duties hereunder, unless such
liabilities are judicially determined to have arisen out of such member's gross
negligence, fraud or bad faith. Such indemnification shall include attorney's
fees and all other costs and expenses reasonably incurred in defense of any
action arising from such act of commission or omission. Nothing herein shall
be deemed to limit the Company's ability to insure itself with respect to its
obligations hereunder.
(e) In particular, and without limitation, the Committee shall
have the authority, consistent with the terms of the Plan:
(i) to select the officers, key employees of and
consultants to the Company to whom Awards may from time to time be
granted hereunder;
(ii) to determine whether and to what extent Awards are to
be granted hereunder to one or more eligible persons;
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<PAGE> 21
(iii) to determine the number of Shares to be covered by
each such Award granted hereunder;
(iv) to determine the terms and conditions, not
inconsistent with the terms of the Plan, of any Award granted
hereunder (including, but not limited to, the Agreed Value and any
restriction or limitation, or any vesting acceleration or waiver of
forfeiture restrictions, based in each case on such factors as the
Committee shall determine, in its sole discretion); and to amend or
waive any such terms and conditions to the extent permitted by the
Plan;
(v) to determine whether and under what circumstances an
Option may be settled in cash or Restricted Shares instead of Shares;
(vi) to determine whether, to what extent, and under what
circumstances Awards under the Plan are to be made, and operate, on a
tandem basis vis-a-vis other Awards under the Plan and/or cash awards
made outside of the Plan;
(vii) to determine whether and to what extent, and under
what circumstances Shares and other amounts payable with respect to an
Award shall be deferred either automatically or at the election of the
Holder (including providing for and determining the amount (if any) of
any deemed earnings on any deferred amount during any deferral
period); and
(viii) to determine whether to require payment of tax
withholding requirements in Shares and to impose any holding period
required to satisfy Section 16 under the Exchange Act.
(f) The Committee shall have the authority to adopt, alter, and
repeal such rules, guidelines, and practices governing the Plan as it shall,
from time to time, deem advisable; to interpret the terms and provisions of the
Plan and any Award issued under the Plan (and any agreements relating thereto);
and to otherwise supervise the administration of the Plan; provided, however,
that to the extent that this Plan otherwise requires the approval of the Board
or the shareholders of the Parent, all decisions of the Committee shall be
subject to such Board or shareholder approval. Subject to the foregoing, and
without limitation, all decisions made by the Committee pursuant to the
provisions of the Plan shall be made in the Committee's sole discretion and
shall be final and binding on all persons, including the Company and Holders.
20. TAX WITHHOLDING. On or immediately prior to the date on which
a payment is made to a Holder hereunder or, if earlier, the date on which an
amount is required to be included in the income of the Holder as a result of an
Award, the Holder shall be required to pay to the Company, in cash or in Shares
(including, but not limited to, the reservation to the Company of the requisite
number of Available Shares otherwise payable to such Holder with respect to
such Award) the amount which the Company reasonably determines to be necessary
in order for the Company to comply with applicable federal or state tax
withholding requirements, and the collection of employment taxes, if
applicable; provided, further, that the Committee may require that such payment
be made in cash.
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21. INTERPRETATION.
(a) If any provision of the Plan is held invalid for any reason,
such holding shall not affect the remaining provisions hereof, but instead the
Plan shall be construed and enforced as if such provision had never been
included in the Plan.
(b) THIS PLAN SHALL BE GOVERNED BY THE LAWS OF THE STATE OF TEXAS.
(c) Headings contained in this Agreement are for convenience only
and shall in no manner be construed as part of this Plan.
(d) Any reference to the masculine, feminine, or neuter gender
shall be a reference to such other gender as is appropriate.
(e) The Plan is intended to constitute an "unfunded" plan for
incentive and deferred compensation. With respect to any payments not yet made
to a Holder, nothing contained herein shall give any such Holder any rights
that are greater than those of a general creditor of the Company. In its sole
discretion, the Committee may authorize the creation of trusts or other
arrangements to meet the obligations created under the Plan to deliver Common
Stock or payments in lieu of or with respect to Awards hereunder; provided,
however, that, unless the Committee otherwise determines with the consent of
the affected Holder, the existence of such trusts or other arrangements is
consistent with the "unfunded" status of the Plan.
(f) Nothing contained in this Plan shall prevent the Board from
adopting other or additional compensation arrangements, subject to shareholder
approval if such approval is required; and such arrangements may be either
generally applicable or applicable only in specific cases.
22. AMENDMENT AND DISCONTINUATION OF THE PLAN. The Board, or the
Committee (subject to the prior written authorization of the Board), may from
time to time amend the Plan or any Award; provided, however, that [except to
the extent provided in SECTION 9(B) AND 15 hereof] no such amendment may,
without approval by the shareholders of the Parent, (a) increase the number of
Available Shares or change the class of Eligible Persons, (b) permit the
granting of Awards which expire beyond the maximum 10-year period described in
SUBSECTION 9(A)(II), (c) extend the termination date of the Plan as set forth
in SECTION 25, (d) increase the Section 162(m) Maximum; (e) amend SECTION 24 so
as to materially increase the benefits to Outside Directors; or (f) make any
change for which applicable law or regulatory authority (including the
regulatory authority of the NYSE or any other market or exchange on which the
Common Stock is traded) would require shareholder approval or for which
shareholder approval would be required to secure all deductibility of
compensation received under the Plan under Section 162(m) of the Code; and
provided, further, that no amendment or suspension of the Plan or any Award
issued hereunder shall, except as specifically permitted in this Plan or under
the terms of such Award, substantially impair any Award previously granted to
any Holder without the consent of such Holder. Solely for purposes of
computing the Section 162(m) Maximum, if any Award(s) previously granted is
canceled and new Award(s) having a lower Option Price or other more favorable
terms for the Holder are substituted in their place, both the initial Award(s)
and the replacement Award(s) will be deemed to be outstanding (although the
canceled Award(s) will not be exercisable or deemed outstanding for any other
purposes).
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23. SECTION 83(b) ELECTION. If as a result of receiving an Award,
a Holder receives Restricted Shares subject to a "substantial risk of
forfeiture", then such Holder may elect under Section 83(b) of the Code to
include in his gross income, for his taxable year in which the Restricted
Shares are transferred to him, the excess of the Fair Market Value (determined
without regard to any Restriction other than one which by its terms will never
lapse), of such Restricted Shares at the Date of Grant, over the amount paid
for the Restricted Shares. If the Holder makes the Section 83(b) election
described above, the Holder shall (i) make such election in a manner that is
satisfactory to the Committee, (ii) provide the Committee with a copy of such
election, (iii) agree to promptly notify the Company if any Internal Revenue
Service or state tax agent, on audit or otherwise, questions the validity or
correctness of such election or of the amount of income reportable on account
of such election, and (iv) agree to such federal and state income withholding
as the Committee may reasonably require in its sole and absolute discretion.
24. AWARDS TO OUTSIDE DIRECTORS.
(a) The provisions of this SECTION 24 shall apply only to Awards
to Outside Directors in accordance with this SECTION 24. The Committee shall
have no authority to determine the timing of or the terms or conditions of any
award under this SECTION 24.
(b) At the date of the Parent's initial public offering, each
person serving as an Outside Director on such date will receive a Non-qualified
Stock Option to purchase 9,000 Shares at a per Share Option Price equal to the
initial public offering price. Such Option shall vest and become exercisable
with respect 3,000 Shares on each of the annual meeting of shareholders
("Annual Meeting") dates, beginning with the Annual Meeting in 1998.
(c) If any person who was not previously a member of the Board is
elected or appointed an Outside Director following the initial public offering
but prior to the date of the Annual Meeting in the year 2000, such Outside
Director will receive a Non-qualified Stock Option to purchase 7,000 Shares if
such Outside Director's service begins prior to the second anniversary of the
initial public offering, and 5,000 Shares if such Outside Directors service
begins after the second anniversary of the initial public offering but prior to
the date of the Annual Meeting in the year 2000. It is intended that such
grant may be increased or decreased to extent deemed appropriate by the Board,
in its sole discretion, to reflect the extent to which Director's expected
service prior to the Annual Meeting in 2000 may exceed two years or may be less
than one full year. The Option Price of each option granted pursuant to this
SECTION 24(c) shall equal the Fair Market Value on the Date of Grant. Options
granted under this SECTION 24(c) shall vest and become exercisable with respect
to 33.3% of the Shares on each Annual Meeting date following the Date of Grant.
(d) On the date of each Annual Meeting, beginning with the Annual
Meeting in 2000, unless this Plan has been previously terminated, each Outside
Director who will continue as a Director following such meeting will receive a
Non-qualified Stock Option to purchase 3,000 Shares. The Option Price per each
Option granted pursuant to this SECTION 24(d) shall equal the Fair Market Value
per Share on the Date of Grant. Such Option shall vest and become exercisable
with respect
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<PAGE> 24
to all 3,000 Shares on the date of the next Annual Meeting if the Holder has
been a member of the Board until such date (whether or not such Holder will
remain a Director following such Annual Meeting).
(e) No Outside Director Option shall be exercisable prior to
vesting. Each Outside Director Option shall expire, if unexercised, on the
tenth anniversary of the Date of Grant. The Option Price may be paid in cash
or in Common Stock, including Shares subject to the Outside Director Option.
(f) Upon termination of an Outside Director's service as a
Director, all Outside Director Options theretofore exercisable and held by such
Outside Director will remain vested and exercisable through the expiration date
and all remaining Outside Director Options held by such Outside Director will
become exercisable and vested and remain so through the expiration date to the
extent of any Shares that would have become exercisable and vested within a
period of less than twelve months following the date of termination of his or
her status as Director. Any unvested Outside Director Options held by the
Outside Director on the date of termination of his or her status as Director
will be forfeited to the extent of any Shares that would not have become vested
and exercisable until at least twelve months from the date of termination of
his or her status as Director. The Board may, in its sole discretion, elect to
accelerate the vesting of any Outside Director Options in connection with the
termination of his or her status as Director.
(g) The Board, in its sole discretion, may determine to reduce the
size of any Outside Director Option prior to Date of Grant or to postpone the
vesting and exercisability of any Outside Director Option prior to Date of
Grant.
25. EFFECTIVE DATE AND TERMINATION DATE. The Plan shall be
effective as of its Effective Date, and shall terminate on the tenth
anniversary of such Effective Date.
CAPITAL SENIOR LIVING
CORPORATION
-----------------------------------
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<PAGE> 1
EXHIBIT 10.9
EMPLOYMENT AGREEMENT
THIS EMPLOYMENT AGREEMENT ("Agreement") is made and entered into on
the 7th day of May, 1997, by and between Capital Senior Living Corporation, a
Delaware corporation ("CSL" or "the Company"), and Jeffrey L. Beck, an
individual residing in the State of Texas ("Employee").
1. EMPLOYMENT COMMENCEMENT; APPOINTMENT, TITLE AND DUTIES.
A) This Agreement shall commence upon the date on which
the Company, or a Designated Affiliate of the Company
(hereinafter defined) which controls the Company or
into which the Company merges, consolidates or
otherwise combines, has consummated a public offering
of its common stock ("Employment Commencement Date").
This Agreement shall terminate in the event the
Employment Commencement Date does not occur on or
before June 30, 1998.
B) CSL hereby employs Employee to serve in the positions
of Chief Executive Officer and as Co- Chairman of its
Board of Directors and a member of the Executive
Committee of the Board. In such capacity, Employee
shall report to the Board of Directors of CSL and
shall have such powers, duties and responsibilities
as are customarily assigned to the Chief Executive
Officer and Co-Chairman. In addition Employee shall
have such other duties and responsibilities as may
reasonably be assigned to him by the Company's Board
of Directors, including serving with the consent or
at the request of CSL on the board of directors of
affiliated corporations.
2. TERM OF AGREEMENT. The initial term of this Agreement shall be
for a four (4) year period commencing on the Employment Commencement Date;
however, the term of this Agreement shall automatically be extended on each
anniversary of the Employment Commencement Date so that there are three (3)
years remaining on the term of the Agreement. Except as set forth in Paragraph
14, this Agreement shall terminate upon the earlier of: (i) the date of the
voluntary resignation of Employee, (ii) the date of Employee's death or
determination of Employee's disability (as defined in Paragraph 6 below), (iii)
the date of notice by CSL to Employee that this Agreement is being terminated
by CSL whether "for cause" (as defined in Paragraph 6 below) or without cause,
or (iv) upon the date a notice of intent to resign for "good reason" (as
defined in Paragraph 6 below) is delivered to the Company by Employee.
3. ACCEPTANCE OF POSITION. Employee hereby accepts the positions
assigned by the Board of Directors, and agrees that during the term of this
Agreement he will perform his duties in a reasonable amount of time. Employee
agrees to perform his duties faithfully, diligently and to the best of his
ability, to use his best efforts to advance the best interests of the Company
at all times.
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<PAGE> 2
4. SALARY AND BENEFITS. During the term of this Agreement:
A) CSL shall pay to Employee a base salary at an annual
rate of not less than $175,000.00 per annum, paid
in approximately equal installments no less
frequently than semi-monthly. Employee shall be
eligible for an annual bonus, if available, as
determined by the Compensation Committee of the
Company (or the Company's Board of Directors if no
Compensation Committee has been established),
starting with the Employment Commencement Date.
Employee shall receive a performance and compensation
review on or about each anniversary of the Employment
Commencement Date. The Company shall deduct from
Employee's compensation and bonus all applicable
local, state, Federal or foreign taxes, including,
but not limited to, income tax, withholding tax,
social security tax and pension contributions (if
any).
B) Employee shall participate in all health, retirement,
Company-paid insurance, sick leave, disability,
expense reimbursement and other benefit programs, if
any, which CSL makes available, in its sole
discretion, to its senior executives; however,
nothing herein shall be construed to obligate the
Company to establish or maintain any employee benefit
program. The Company may purchase and maintain in
force a death and disability insurance policy in an
amount at all times equal to not less than an amount
equal to Employee's annual base salary multiplied by
three (3). The Company shall be the beneficiary of
said policy and shall use said policy for the
purposes described in Paragraph 7(A)(i), below.
Reimbursement of Employee's reasonable and necessary
business expenses incurred in the pursuit of the
business of the Company or any of its affiliates
shall be made to Employee upon his presentation to
the Company of itemized bills, vouchers or
accountings prepared in conformance with applicable
regulations of the Internal Revenue Service and the
policies and guidelines of the Company.
C) Employee shall be entitled to a minimum vacation time
in an amount of eight (8) weeks per year.
D) The Company agrees to provide Employee with a car
allowance of $300.00 per month, which shall be paid
when Employee's base salary is paid, gasoline credit
cards, and a long distance telephone credit card.
The Company also agrees to promptly reimburse
Employee for the cost of obtaining a mobile phone and
the monthly charges from the use of such mobile phone
upon Employee's submission of reasonably satisfactory
documentation of those costs and expenses to the
Company.
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<PAGE> 3
5. STOCK OPTIONS. If the Company adopts a stock option plan or other
incentive compensation plan, Employee shall receive options to purchase Company
Common Stock. The number of shares of Common Stock of the Company covered by
options to be granted to Employee and the exercise price of the options shall
be determined by the Compensation Committee, if it exists, and in the absence
of a Compensation Committee, by the Board of Directors. The number of shares,
exercise price and other terms of such options shall be at least as favorable
to Employee as those contained in options granted to the Company's chief
executive officer or any other officer of the Company and its subsidiaries.
6. CERTAIN TERMS DEFINED. For purposes of this Agreement:
A) Employee shall be deemed to be disabled if a physical
or mental condition shall occur and persist which, in
the written opinion of two (2) licensed physicians,
has rendered Employee unable to perform the duties of
Chief Executive Officer, Co-Chairman and member of
the Board of Directors of CSL for a period of ninety
(90) consecutive calendar days or more, and which
condition, in the opinion of such physicians, is
likely to continue for an indefinite period of time,
rendering Employee unable to return to his duties for
CSL. One (1) of the two (2) physicians shall be
selected in good faith by the Board of Directors of
CSL, and the other of the two (2) physicians shall be
selected in good faith by Employee. In the event
that the two (2) physicians selected do not agree as
to whether Employee is disabled, as described above,
then said two (2) physicians shall mutually agree
upon a third (3rd) physician whose written opinion as
to Employee's condition shall be conclusive upon CSL
and Employee for purposes of this Agreement.
B) A termination of Employee's employment by CSL shall
be deemed to be "for cause" if it is based upon (i) a
final, nonappealable conviction of Employee for
commission of a felony involving moral turpitude,
(ii) Employee's willful gross misconduct that causes
material economic harm to the Company or that brings
substantial discredit to the Company's reputation, or
(iii) Employee's material failure or refusal to
perform his duties in accordance with this Agreement,
if Employee has failed to cure such failure or
refusal to perform within thirty (30) days after the
Company notifies Employee in writing of such failure
or refusal to perform.
C) A resignation by Employee shall not be deemed to be
voluntary, and shall be deemed to be a resignation
for "good reason" if it is based upon (i) a material
diminution or change in Employee's duties, base
salary or annual minimum bonus which is not part of
an overall diminution or change for all executive
officers of the Company, or (ii) a material breach by
CSL of the Company's obligations to Employee under
this Agreement or under
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<PAGE> 4
the Company's stock option or incentive compensation
plan, if adopted, or (iii) a relocation of the
company's principal executive offices to any county
other than Dallas County or any county contiguous
thereto.
D) "Designated Affiliate of the Company" shall mean
Capital Senior Living Corporation, Capital Senior
Development, Inc., Capital Senior Management 1, Inc.,
Capital Senior Management 2, Inc. or other
affiliated entities formed to provide similar
services, such as Capital Senior Management 3, Inc.,
and Quality Home Health Care, Inc.
E) "Registration Event" shall mean the termination by
the Company, whether "for cause" or without cause of
Employee's employment by the Company or any
Designated Affiliate of the Company, or Employee's
resignation for good reason. The date on which a
Registration Event occurs shall be the date of
termination.
F) "Affiliate" with regard to Employee means a person
that is controlled by him. For purposes of this
definition, "Control" when used with respect to any
person means the power to direct the management and
policies of such person, whether through the
ownership of voting securities, by contract or
otherwise.
7. CERTAIN BENEFITS AND OBLIGATIONS UPON TERMINATION.
A) In the event that Employee's employment terminates
(i) because of death or disability, (ii) because CSL
has terminated Employee other than "for cause," as
described above, or (iii) because Employee has
voluntarily resigned for "good reason," as described
above, then,
i) CSL shall pay Employee in accordance with its
Corporate Policies and Procedures Manual his
base salary plus his minimum annual bonus for
the balance of the term of this Agreement,
but not less than two (2) years (base salary
plus minimum annual bonus for three (3) years
if termination due to a Fundamental Change)
from the date of the notice of termination,
and Employee shall retain all his Company
stock options that are vested; provided,
however, the benefits described in this
Paragraph 7(A)(i) shall terminate at such
time as Employee materially breaches the
provisions of Paragraphs 8 or 9 hereof;
ii) A Fundamental Change shall be defined as any
of the following: (A) a merger,
consolidation, statutory share exchange or
sale, lease, exchange or other transfer (in
one transaction or a series of related
transactions) of all or substantially all of
the assets of the Company that requires the
consent or vote of the holders of the
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<PAGE> 5
Company's Common Stock, other than a
consolidation, merger or share exchange of
the Company in which the holders of the
Company's Common Stock immediately prior to
such transaction have the same proportionate
ownership of Common Stock of the surviving
corporation immediately after such
transaction; (B) the stockholders of the
Company approve any plan or proposal for the
liquidation or dissolution of the Company;
(C) the cessation of control (by virtue of
their not constituting a majority of
directors) of the Board of Directors of the
Company by the individuals (the "Continuing
Directors") who (x) at the date of this
Agreement were directors or (y) become
directors after the date of this Agreement
and whose election or nomination for election
by the Company's stockholders was approved by
a vote of at least two-thirds of the
directors then in office who were directors
at the date of this Agreement or whose
election or nomination for election was
previously so approved; (D) the acquisition
of beneficial ownership (within the meaning
of Rule 13d- 3 under the Securities Exchange
Act of 1934) of an aggregate of 20% or more
of the voting power of the Company's
outstanding voting securities by any person
or group (as such term is used in Rule 13d-5
under the Securities Exchange Act of 1934)
who beneficially owned less than 15% of the
voting power of the Company's outstanding
voting securities on the date of this
Agreement, or the acquisition of beneficial
ownership of an additional 5% of the voting
power of the Company's outstanding voting
securities by any person or group who
beneficially owned at least 15% of the voting
power of the Company's outstanding voting
securities on the date of this Agreement;
provided, however, that notwithstanding the
foregoing, an acquisition shall not
constitute a Fundamental Change hereunder if
the acquiror is (x) a trustee or other
fiduciary holding securities under an
employee benefit plan of the Company and
acting in such capacity, (y) a wholly-owned
subsidiary of the Company or a corporation
owned, directly or indirectly, by the
stockholders of the Company in the same
proportions as their ownership of voting
securities of the Company or (z) any other
person whose acquisition of shares of voting
securities is approved in advance by a
majority of the Continuing Directors; or (E)
in a Title 11 bankruptcy proceeding, the
appointment of a trustee or the conversion of
a case involving the Company to a case under
Chapter 7.
iii) All accrued but unpaid or unused vacation,
sick pay and expense reimbursement shall be
calculated in accordance with CSL's Corporate
Policies and Procedures Manual and shall be
promptly paid to Employee upon such
termination.
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<PAGE> 6
B) In the event that Employee's employment terminates
for any other cause other than those set forth in
Paragraph 7(A), then,
i) CSL shall promptly pay Employee his base
salary and prorated minimum base bonus, up to
and through the date of termination; and
ii) All accrued but unpaid or unused vacation,
sick pay and expense reimbursement shall be
calculated in accordance with CSL's Corporate
Policies and Procedures Manual and promptly
paid to Employee.
C) In the event that Employee's employment terminates by
reason of his death, all benefits provided in this
Paragraph 7 shall be paid to Employee's estate or as
his executor or personal representative shall direct,
but payment may be deferred until Employee's executor
or personal representative has been appointed and
qualified pursuant to the law in effect in Employee's
jurisdiction of residence at the time of his death;
D) Registration Right.
i) Upon and following the occurrence of a
Registration Event, Employee shall have the
right, but not the obligation, to:
(A) Upon the written request of the
Employee delivered to the Company,
the Company will cause up to 100% of
the shares of Common Stock
beneficially owned by Employee
(directly or indirectly) as of the
date of such termination, plus all
shares of Common Stock that Employee
may acquire after his termination
pursuant to the exercise of stock
options held by Employee
(collectively, the "Registrable
Securities") to be included in a
registration statement under the
Securities Act of 1933, as amended
("Securities Act"). The Company
will not be required to file more
than two (2) registration statements
under this Paragraph D(i)(A) and
shall not be required to file more
than one registration statement
under this paragraph D(i)(A) during
each 12 month period after the date
of the Registration Event; and
(B) If the Company at any time 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 respect to registration
statements on Forms S-4 or S-8 or
another form not
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<PAGE> 7
available for registering the
Registrable Securities for sale to
the public), each such time it will
give written notice to Employee of
its intention so to do. Upon the
written request of Employee,
received by the Company within 30
days after the giving of any such
notice by the Company, the Company
will cause the Registrable
Securities 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 Employee (in
accordance with its written request)
of such Registrable Securities so
registered; provided, however, that
if the managing underwriter of the
Company's offering delivers in good
faith a written opinion to Employee
that either because of (A) the kind
of securities which the Employee or
the Company intends to include in
the offering or (B) the size of the
offering which Employee or the
Company intend to make, the success
of the offering or the market for
the Company's common stock would be
materially and adversely affected by
the inclusion of the Registrable
Securities requested to be included
(I) in the event that the size of
the offering is the basis for the
managing underwriter's opinion, the
amount of the securities to be
offered for the account of the
Employee and each other person
registering securities of the
Company pursuant to similar
incidental registration rights shall
be reduced pro rata to the extent
necessary to reduce the total amount
of securities to be included in such
offering to the amount reasonably
recommended by such managing
underwriter; and (II) in the event
that the combination of securities
to be offered is the basis of such
managing underwriter's opinion, 1)
the Registrable Securities and other
securities to be included in such
offering shall be reduced as
described in clause (I) above or, 2)
if the actions described in clause
(I) would, in the reasonable
judgment of the managing
underwriter, be insufficient to
substantially eliminate the material
and adverse effect that inclusion of
the Registrable Securities requested
to be included would have on such
offering, such Registrable
Securities will be excluded from
such offering. Notwithstanding the
foregoing provisions, the Company
may withdraw any registration
statement referred to in this
Paragraph D(i)(B) without thereby
incurring any liability to
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<PAGE> 8
Employee. The Company shall not be
required to register shares of
Registrable Securities of Employee
after the Company has filed two (2)
registration statements which
included Registrable Securities and
such registration statements have
become effective, remained effective
for the period of distribution, and
the transaction described therein
were closed.
(ii) If and whenever the Company is required by
Paragraph 7D(i)(A) to effect a demand
registration or Paragraph 7D(i)(B) to effect
a piggy back registration, the Company shall
as expeditiously as possible:
(a) prepare and file with the Securities
and Exchange Commission
("Commission") a registration
statement (which, in the case of an
underwritten public offering shall
be on Form S-1, Form S-2, Form S-3,
any successor forms thereto, 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 ( as determined
hereinafter ); provided, however
that the Company may postpone the
filing, effectiveness, supplementing
or amending of the registration
statement for up to 90 days if, in
the good faith opinion of the
Company's Board of Directors, the
registration or sale of Registrable
Securities would adversely affect a
material financing, acquisition,
disposition of assets or stock,
merger or other comparable
transaction or would require the
Company to make public disclosure of
information the public disclosure of
which would have a material adverse
effect upon the Company. During any
time that the Company defers
amending or supplementing the
registration statement, the holders
of Registrable Securities shall
discontinue disposing of Registrable
Securities;
(b) subject to the proviso in
subparagraph (a), 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
of distribution and comply with the
provisions of the Securities Act
with respect to the disposition of
all Registrable Securities
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<PAGE> 9
covered by such registration
statement in accordance with the
intended method of disposition set
forth in such registration
statement for such period;
(c) furnish to Employee 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 the Registrable
Securities covered by such
registration statement;
(d) use its best efforts to register or
qualify the Registrable Securities
covered by such registration
statement under the securities or
"blue sky" laws of such
jurisdictions as the Employee 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;
(e) use its best efforts to list or
qualify for quotation the
Registrable Securities covered by
such registration statement with any
securities exchange or inter-dealer
quotation system on which the common
stock of the Company is then listed
or quoted;
(f) notify Employee at any time when a
prospectus relating to Registrable
Securities is required to be
delivered under the Securities Act
or the happening of any event as a
result of which the prospectus
included in such registration
statement contains an untrue
statement of a material fact or
omits any fact necessary to make the
statements therein not misleading,
and, at the request of Employee, the
Company will prepare a supplement or
amendment to such prospectus so
that, as thereafter delivered to the
purchasers of such Registrable
Securities, such prospectus will not
contain an untrue statement of a
material fact or omit to state any
fact necessary to make the
statements therein not misleading,
provided that the 180-day period
described below will be tolled from
the time a prospectus contains such
a statement or omission until a
prospectus correcting such statement
or
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<PAGE> 10
omission has been delivered to the
Employee and may be delivered to the
purchasers of such Registrable
Securities in compliance with the
Securities Act.
(g) notify the Employee immediately, and
confirm the notice in writing, (1)
when the registration statement
becomes effective, (2) of the
issuance by the Commission of any
stop order or of the initiation, or
the threatening, of any proceedings
for that purpose, (3) of the receipt
by the Company of any notification
with respect to the suspension of
qualification of the Registrable
Securities for sale in any
jurisdiction or of the initiation,
or the threatening, of any
proceedings for that purpose, and
(4) of the receipt of any comments,
or requests for additional
information, from the Commission or
any state regulatory authority. If
the Commission or any state
regulatory authority shall enter
such a stop order or order
suspending qualification at any
time, the Company will promptly use
its best reasonable efforts to
obtain the lifting of such order;
and
(h) otherwise use its best efforts to
comply with-all applicable rules and
regulations of the Commission, and
make available to its security
holders as soon as reasonably
practicable, but not later than 15
months after the effective date of
the registration statement, a
statement covering a period of at
least 12 months beginning after the
effective date of the registration
statement, which earnings statement
shall satisfy the provisions of
Section 11(a) of the Securities Act.
For purposes hereof, the period of distribution of Registrable
Securities 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 Registrable Securities in
any other registration shall be deemed to extend until the earlier of the sale
of all Registrable Securities covered thereby or 180 days after the effective
date thereof.
In connection with each registration hereunder, Employee will furnish
to the Company in writing such information with respect to it as a stockholder
as reasonably shall be necessary in order to assure compliance with federal and
applicable state securities laws.
In connection with each registration pursuant to Paragraph 7(D) hereof
covering an underwritten public offering, the Company and Employee agree to use
their best efforts to select a managing underwriter (and any co- managers) and
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.
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<PAGE> 11
(iii) All expenses incurred by the Company in
complying with Paragraph 7(D) hereof,
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 Employee but excluding
any Selling Expenses, are called
"Registration Expenses." All underwriting
discounts and selling commissions applicable
to the sale of Registrable Securities are
called "Selling Expenses."
(a) The Company shall pay all
Registration Expenses attributable
to the shares of Registrable
Securities included in the
registration in connection with each
registration statement under
Paragraph 7(D) hereof.
(b) All Selling Expenses in connection
with each registration statement
under Paragraph 7(D) hereof shall be
borne by the Employee and any other
selling stockholder in proportion to
the number of shares sold by each
stockholder, or by such other
selling stockholders.
(iv) Subject to applicable law, the Company will
indemnify each underwriter, the Employee and
each person controlling any of them, against
all claims, losses, damages and liabilities,
including legal and other expenses reasonably
incurred, arising out of any untrue statement
of a material fact contained in the
registration statement, or any omission to
state a material fact required to be stated
in the registration statement or necessary to
make the statements not misleading, or
arising out of any violation by the Company
of the Securities Act, any state securities
or "blue-sky" laws or any applicable rule or
regulation. This indemnification will not
apply to any claims, losses, damages or
liabilities to the extent that they may have
been caused by an untrue statement or
omission based upon information furnished in
writing to the Company by such underwriter,
the Employee or controlling person,
respectively, expressly for use in the
registration statement. With respect to such
untrue statement or omission in the
information furnished in writing to the
Company by the Employee, the Employee will
indemnify the underwriters, the Company, its
directors and officers, and each person
controlling
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<PAGE> 12
any of them against any losses, claims,
damages, expenses or liabilities to which any
of them may become subject as a result of
such untrue statement or omission.
(v) The registration rights of the Employee under
this Agreement may be transferred to any
trust formed by Employee to hold shares of
common stock and to any member of the family
of the Employee.
E) In the event of any merger, consolidation or share
exchange pursuant to which the Company is not the
surviving or resulting corporation, the Company's
obligations under this Paragraph 7 shall be assumed
by such surviving or resulting corporation.
F) The Employee shall not be required to mitigate the
amount of any payment provided for in this Paragraph
7 by seeking other employment or otherwise.
8. CONFIDENTIALITY. Employee hereby acknowledges his understanding
that as a result of his employment by CSL, he will have access to, and
possession of, valuable and important confidential or proprietary data,
documents and information concerning CSL, its operations and its future plans.
Employee hereby agrees that he will not, either during the term of his
employment with CSL, or at any time after the term of his employment with CSL,
divulge or communicate to any person or entity, or direct any employee or agent
of CSL or of his to divulge or communicate to any person or entity, or use to
the detriment of CSL or for the benefit of any other person or entity, or make
or remove any copies of, such confidential information or proprietary data or
information, whether or not marked or otherwise identified as confidential or
secret. Upon any termination of this Agreement for any reason whatsoever,
Employee shall surrender to CSL any and all materials, including but not
limited to drawings, manuals, reports, documents, lists, photographs, maps,
surveys, plans, specifications, accountings and any and all other materials
relating to the Company or any of its business, including all copies thereof,
that Employee has in his possession, whether or not such material was created
or compiled by Employee, but excluding, however, personal memorabilia belonging
to Employee and notes taken by him as a member of the Board of Directors. With
the exception of such excluded items, materials, etc., Employee acknowledges
that all such material is solely the property of CSL, and that Employee has no
right, title or interest in or to such materials. Notwithstanding anything to
the contrary set forth in this Paragraph 8, the provisions of this Paragraph 8
shall not apply to information which: (i) is or becomes generally available to
the public other than as a result of disclosure by Employee, or (ii) is already
known to Employee as of the date of this Agreement from sources other than CSL,
or (iii) is required to be disclosed by law or by regulatory or judicial
process.
9. NON-COMPETITION; NON-SOLICITATION. Employee hereby agrees that
during the term of his employment with the Company and for a period of one (1)
year after any termination for any reason whatsoever of this Agreement, he will
not and will cause his Affiliates not to, directly or indirectly, acquire,
develop or operate senior living facilities anywhere in the United States,
other than through the Company
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<PAGE> 13
and its subsidiaries except as otherwise requested by the Company. CSL hereby
acknowledges and agrees that (i) Employee's ownership of a class of securities
listed on a stock exchange or traded on the over-the-counter market that
represents five percent (5%) or less of the number of shares of such class of
securities then issued and outstanding, and (ii) Employee's services to Tri
Point Communities, L.P. and Tri Point Development, Inc. to own and develop
senior living facilities for the benefit of the Company shall not constitute a
violation of this Paragraph 9. Following the termination for any reason of
Employee's employment, Employee shall not for himself or any third party,
directly or indirectly employ, solicit for employment, or recommend for
employment any person employed by the Company or its affiliated companies
during the period of such person's employment and for a period of two (2) years
thereafter.
The parties hereto have carefully considered the necessity for
protection of the goodwill and business of the Company and the scope of such
protection. Employee acknowledges that the restrictions, prohibitions and
other provisions of this Section 9 are reasonable, fair and equitable in scope,
terms and duration, are necessary and essential to protect the legitimate
business interests and goodwill of the Company, are a material inducement to
the Company to enter into the transactions contemplated by this Agreement and
that adequate consideration has been and will be received by Employee for such
restrictions, prohibitions and other provisions.
10. WORK PRODUCT. The Employee agrees that all innovations,
improvements, developments, methods, designs, analyses, reports and all similar
or related information which relates to the Company's or any of its
subsidiaries' or affiliates' actual or anticipated business, or existing or
future products or services and which are conceived, developed or made by the
Employee while employed by the Company ("Work Product") belong to the Company
or such subsidiary or affiliate. The Employee will promptly disclose such Work
Product to the Board and perform all actions reasonably requested by the Board
(whether during or after the employment period) to establish and to confirm
such ownership (including, without limitation, assignments, consents, powers of
attorney and other instruments).
11. LEGAL ACTION. In the event of a breach by Employee of the
provisions of Paragraphs 8, 9, or 10, Employee and the Company agree that the
Company, shall, in addition to any other available remedies, be entitled to an
injunction restraining Employee from violating the terms of the applicable
Paragraph and that said injunction is appropriate and proper relief for such
violation.
12. NOTICES. All notices and other communications provided to either
party hereto under this Agreement shall be in writing and delivered by hand
delivery, overnight courier service or certified mail, return receipt
requested, to the party being notified at said party's address set forth
adjacent to said party's signature on this Agreement, or at such other address
as may be designated by a party in a notice to the other party given in
accordance with this Agreement. Notices given by hand delivery or overnight
courier service shall be deemed received on the date of delivery shown on the
courier's delivery receipt or log. Notices given by certified mail shall be
deemed received three (3) days after deposit in the U.S. Mail.
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<PAGE> 14
13. CONSTRUCTION. In construing this Agreement, if any portion of
this Agreement shall be found to be invalid or unenforceable, the remaining
terms and provisions of this Agreement shall be given effect to the maximum
extent permitted without considering the void, invalid or unenforceable
provision. In construing this Agreement, the singular shall include the
plural, the masculine shall include the feminine and neuter genders, as
appropriate, and no meaning or effect shall be given to the captions of the
paragraphs in this Agreement, which are inserted for convenience of reference
only.
14. CHOICE OF LAW; SURVIVAL. This Agreement shall be governed and
construed in accordance with the internal laws of the State of Texas without
resort to choice of law principles. The provisions of Paragraphs 7, 8, 9, and
10 shall survive the termination of this Agreement for any reason whatsoever.
15. INTEGRATION; AMENDMENTS. This is an integrated Agreement. This
Agreement constitutes and is intended as a final expression and a complete and
exclusive statement of the understanding and agreement of the parties hereto
with respect to the subject matter of this Agreement. All negotiations,
discussions and writings between the parties hereto relating to the subject
matter of this Agreement are merged into this Agreement, and there are no
rights conferred, nor promises, agreements, conditions, undertakings,
warranties or representations, oral or written, expressed or implied, between
the undersigned parties as to such matters other than as specifically set forth
herein. No amendment or modification of or addendum to, this Agreement shall
be valid unless the same shall be in writing and signed by the parties hereto.
No waiver of any of the provisions of this Agreement shall be valid unless in
writing and signed by the party against whom it is sought to be enforced.
16. BINDING EFFECT. This Agreement is binding upon and shall inure
to the benefit of the parties hereto and their respective heirs, personal
representatives, successors and assigns; PROVIDED, HOWEVER, that Employee shall
not be entitled to assign his interest in this Agreement (except for an
assignment by operation of law to his estate), or any portion hereof, or any
rights hereunder, to any party. Any attempted assignment by Employee in
violation of this Paragraph 16 shall be null, void, ab initio and of no effect
of any kind or nature whatsoever.
IN WITNESS WHEREOF, the parties have executed this Agreement on the
date set forth above to be effective as of the date specified in the preamble
of this Agreement.
CAPITAL SENIOR LIVING
CORPORATION
a Delaware corporation
Address:
14160 Dallas Parkway, #300
Dallas, TX 75240 By: /s/ JAMES A. STROUD
-------------------------
Its: COO
------------------------
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<PAGE> 15
EMPLOYEE: JEFFREY L. BECK
Address:
6211 Raintree Court /s/ JEFFREY L. BECK
Dallas, TX 75240 ----------------------------
Jeffrey L. Beck
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<PAGE> 1
EXHIBIT 10.10
EMPLOYMENT AGREEMENT
THIS EMPLOYMENT AGREEMENT ("Agreement") is made and entered into on
the 7th day of May, 1997, by and between Capital Senior Living Corporation, a
Delaware corporation ("CSL" or "the Company"), and James A. Stroud, an
individual residing in the State of Texas ("Employee").
1. EMPLOYMENT COMMENCEMENT; APPOINTMENT, TITLE AND DUTIES.
A) This Agreement shall commence upon the date on which
the Company, or a Designated Affiliate of the Company
(hereinafter defined) which controls the Company or
into which the Company merges, consolidates or
otherwise combines, has consummated a public offering
of its common stock ("Employment Commencement Date").
This Agreement shall terminate in the event the
Employment Commencement Date does not occur on or
before June 30, 1998.
B) CSL hereby employs Employee to serve in the positions
of Chief Operating Officer and as Co- Chairman of its
Board of Directors and a member of the Executive
Committee of the Board. In such capacity, Employee
shall report to the Board of Directors of CSL and
shall have such powers, duties and responsibilities
as are customarily assigned to the Chief Operating
Officer and Co-Chairman. In addition Employee shall
have such other duties and responsibilities as may
reasonably be assigned to him by the Company's Board
of Directors, including serving with the consent or
at the request of CSL on the board of directors of
affiliated corporations.
2. TERM OF AGREEMENT. The initial term of this Agreement shall be
for a four (4) year period commencing on the Employment Commencement Date;
however, the term of this Agreement shall automatically be extended on each
anniversary of the Employment Commencement Date so that there are three (3)
years remaining on the term of the Agreement. Except as set forth in Paragraph
14, this Agreement shall terminate upon the earlier of: (i) the date of the
voluntary resignation of Employee, (ii) the date of Employee's death or
determination of Employee's disability (as defined in Paragraph 6 below), (iii)
the date of notice by CSL to Employee that this Agreement is being terminated
by CSL whether "for cause" (as defined in Paragraph 6 below) or without cause,
or (iv) upon the date a notice of intent to resign for "good reason" (as
defined in Paragraph 6 below) is delivered to the Company by Employee.
3. ACCEPTANCE OF POSITION. Employee hereby accepts the positions
assigned by the Board of Directors, and agrees that during the term of this
Agreement he will perform his duties in a reasonable amount of time. Employee
agrees to perform his duties faithfully, diligently and to the best of his
ability, to use his best efforts to advance the best interests of the Company
at all times.
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<PAGE> 2
4. SALARY AND BENEFITS. During the term of this Agreement:
A) CSL shall pay to Employee a base salary at an annual
rate of not less than $175,000.00 per annum, paid
in approximately equal installments no less
frequently than semi-monthly. Employee shall be
eligible for an annual bonus, if available, as
determined by the Compensation Committee of the
Company (or the Company's Board of Directors if no
Compensation Committee has been established),
starting with the Employment Commencement Date.
Employee shall receive a performance and compensation
review on or about each anniversary of the Employment
Commencement Date. The Company shall deduct from
Employee's compensation and bonus all applicable
local, state, Federal or foreign taxes, including,
but not limited to, income tax, withholding tax,
social security tax and pension contributions (if
any).
B) Employee shall participate in all health, retirement,
Company-paid insurance, sick leave, disability,
expense reimbursement and other benefit programs, if
any, which CSL makes available, in its sole
discretion, to its senior executives; however,
nothing herein shall be construed to obligate the
Company to establish or maintain any employee benefit
program. The Company may purchase and maintain in
force a death and disability insurance policy in an
amount at all times equal to not less than an amount
equal to Employee's annual base salary multiplied by
three (3). The Company shall be the beneficiary of
said policy and shall use said policy for the
purposes described in Paragraph 7(A)(i), below.
Reimbursement of Employee's reasonable and necessary
business expenses incurred in the pursuit of the
business of the Company or any of its affiliates
shall be made to Employee upon his presentation to
the Company of itemized bills, vouchers or
accountings prepared in conformance with applicable
regulations of the Internal Revenue Service and the
policies and guidelines of the Company.
C) Employee shall be entitled to a minimum vacation time
in an amount of eight (8) weeks per year.
D) The Company agrees to provide Employee with a car
allowance of $300.00 per month, which shall be paid
when Employee's base salary is paid, gasoline credit
cards, and a long distance telephone credit card.
The Company also agrees to promptly reimburse
Employee for the cost of obtaining a mobile phone and
the monthly charges from the use of such mobile phone
upon Employee's submission of reasonably satisfactory
documentation of those costs and expenses to the
Company.
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<PAGE> 3
5. STOCK OPTIONS. If the Company adopts a stock option plan or other
incentive compensation plan, Employee shall receive options to purchase Company
Common Stock. The number of shares of Common Stock of the Company covered by
options to be granted to Employee and the exercise price of the options shall
be determined by the Compensation Committee, if it exists, and in the absence
of a Compensation Committee, by the Board of Directors. The number of shares,
exercise price and other terms of such options shall be at least as favorable
to Employee as those contained in options granted to the Company's chief
executive officer or any other officer of the Company and its subsidiaries.
6. CERTAIN TERMS DEFINED. For purposes of this Agreement:
A) Employee shall be deemed to be disabled if a physical
or mental condition shall occur and persist which, in
the written opinion of two (2) licensed physicians,
has rendered Employee unable to perform the duties of
Chief Operating Officer, Co-Chairman and member of
the Board of Directors of CSL for a period of ninety
(90) consecutive calendar days or more, and which
condition, in the opinion of such physicians, is
likely to continue for an indefinite period of time,
rendering Employee unable to return to his duties for
CSL. One (1) of the two (2) physicians shall be
selected in good faith by the Board of Directors of
CSL, and the other of the two (2) physicians shall be
selected in good faith by Employee. In the event
that the two (2) physicians selected do not agree as
to whether Employee is disabled, as described above,
then said two (2) physicians shall mutually agree
upon a third (3rd) physician whose written opinion as
to Employee's condition shall be conclusive upon CSL
and Employee for purposes of this Agreement.
B) A termination of Employee's employment by CSL shall
be deemed to be "for cause" if it is based upon (i) a
final, nonappealable conviction of Employee for
commission of a felony involving moral turpitude,
(ii) Employee's willful gross misconduct that causes
material economic harm to the Company or that brings
substantial discredit to the Company's reputation, or
(iii) Employee's material failure or refusal to
perform his duties in accordance with this Agreement,
if Employee has failed to cure such failure or
refusal to perform within thirty (30) days after the
Company notifies Employee in writing of such failure
or refusal to perform.
C) A resignation by Employee shall not be deemed to be
voluntary, and shall be deemed to be a resignation
for "good reason" if it is based upon (i) a material
diminution or change in Employee's duties, base
salary or annual minimum bonus which is not part of
an overall diminution or change for all executive
officers of the Company, or (ii) a material breach by
CSL of the Company's obligations to Employee under
this Agreement or under
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<PAGE> 4
the Company's stock option or incentive compensation
plan, if adopted, or (iii) a relocation of the
company's principal executive offices to any county
other than Dallas County or any county contiguous
thereto.
D) "Designated Affiliate of the Company" shall mean
Capital Senior Living Corporation, Capital Senior
Development, Inc., Capital Senior Management 1, Inc.,
Capital Senior Management 2, Inc. or other
affiliated entities formed to provide similar
services, such as Capital Senior Management 3, Inc.,
and Quality Home Health Care, Inc.
E) "Registration Event" shall mean the termination by
the Company, whether "for cause" or without cause of
Employee's employment by the Company or any
Designated Affiliate of the Company, or Employee's
resignation for good reason. The date on which a
Registration Event occurs shall be the date of
termination.
F) "Affiliate" with regard to Employee means a person
that is controlled by him. For purposes of this
definition, "Control" when used with respect to any
person means the power to direct the management and
policies of such person, whether through the
ownership of voting securities, by contract or
otherwise.
7. CERTAIN BENEFITS AND OBLIGATIONS UPON TERMINATION.
A) In the event that Employee's employment terminates
(i) because of death or disability, (ii) because CSL
has terminated Employee other than "for cause," as
described above, or (iii) because Employee has
voluntarily resigned for "good reason," as described
above, then,
i) CSL shall pay Employee in accordance with its
Corporate Policies and Procedures Manual his
base salary plus his minimum annual bonus for
the balance of the term of this Agreement,
but not less than two (2) years (base salary
plus minimum annual bonus for three (3) years
if termination due to a Fundamental Change)
from the date of the notice of termination,
and Employee shall retain all his Company
stock options that are vested; provided,
however, the benefits described in this
Paragraph 7(A)(i) shall terminate at such
time as Employee materially breaches the
provisions of Paragraphs 8 or 9 hereof;
ii) A Fundamental Change shall be defined as any
of the following: (A) a merger,
consolidation, statutory share exchange or
sale, lease, exchange or other transfer (in
one transaction or a series of related
transactions) of all or substantially all of
the assets of the Company that requires the
consent or vote of the holders of the
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<PAGE> 5
Company's Common Stock, other than a
consolidation, merger or share exchange of
the Company in which the holders of the
Company's Common Stock immediately prior to
such transaction have the same proportionate
ownership of Common Stock of the surviving
corporation immediately after such
transaction; (B) the stockholders of the
Company approve any plan or proposal for the
liquidation or dissolution of the Company;
(C) the cessation of control (by virtue of
their not constituting a majority of
directors) of the Board of Directors of the
Company by the individuals (the "Continuing
Directors") who (x) at the date of this
Agreement were directors or (y) become
directors after the date of this Agreement
and whose election or nomination for election
by the Company's stockholders was approved by
a vote of at least two-thirds of the
directors then in office who were directors
at the date of this Agreement or whose
election or nomination for election was
previously so approved; (D) the acquisition
of beneficial ownership (within the meaning
of Rule 13d- 3 under the Securities Exchange
Act of 1934) of an aggregate of 20% or more
of the voting power of the Company's
outstanding voting securities by any person
or group (as such term is used in Rule 13d-5
under the Securities Exchange Act of 1934)
who beneficially owned less than 15% of the
voting power of the Company's outstanding
voting securities on the date of this
Agreement, or the acquisition of beneficial
ownership of an additional 5% of the voting
power of the Company's outstanding voting
securities by any person or group who
beneficially owned at least 15% of the voting
power of the Company's outstanding voting
securities on the date of this Agreement;
provided, however, that notwithstanding the
foregoing, an acquisition shall not
constitute a Fundamental Change hereunder if
the acquiror is (x) a trustee or other
fiduciary holding securities under an
employee benefit plan of the Company and
acting in such capacity, (y) a wholly-owned
subsidiary of the Company or a corporation
owned, directly or indirectly, by the
stockholders of the Company in the same
proportions as their ownership of voting
securities of the Company or (z) any other
person whose acquisition of shares of voting
securities is approved in advance by a
majority of the Continuing Directors; or (E)
in a Title 11 bankruptcy proceeding, the
appointment of a trustee or the conversion of
a case involving the Company to a case under
Chapter 7.
iii) All accrued but unpaid or unused vacation,
sick pay and expense reimbursement shall be
calculated in accordance with CSL's Corporate
Policies and Procedures Manual and shall be
promptly paid to Employee upon such
termination.
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<PAGE> 6
B) In the event that Employee's employment terminates
for any other cause other than those set forth in
Paragraph 7(A), then,
i) CSL shall promptly pay Employee his base
salary and prorated minimum base bonus, up to
and through the date of termination; and
ii) All accrued but unpaid or unused vacation,
sick pay and expense reimbursement shall be
calculated in accordance with CSL's Corporate
Policies and Procedures Manual and promptly
paid to Employee.
C) In the event that Employee's employment terminates by
reason of his death, all benefits provided in this
Paragraph 7 shall be paid to Employee's estate or as
his executor or personal representative shall direct,
but payment may be deferred until Employee's executor
or personal representative has been appointed and
qualified pursuant to the law in effect in Employee's
jurisdiction of residence at the time of his death;
D) Registration Right.
i) Upon and following the occurrence of a
Registration Event, Employee shall have the
right, but not the obligation, to:
(A) Upon the written request of the
Employee delivered to the Company,
the Company will cause up to 100% of
the shares of Common Stock
beneficially owned by Employee
(directly or indirectly) as of the
date of such termination, plus all
shares of Common Stock that Employee
may acquire after his termination
pursuant to the exercise of stock
options held by Employee
(collectively, the "Registrable
Securities") to be included in a
registration statement under the
Securities Act of 1933, as amended
("Securities Act"). The Company
will not be required to file more
than two (2) registration statements
under this Paragraph D(i)(A) and
shall not be required to file more
than one registration statement
under this paragraph D(i)(A) during
each 12 month period after the date
of the Registration Event; and
(B) If the Company at any time 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 respect to registration
statements on Forms S-4 or S-8 or
another form not
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<PAGE> 7
available for registering the
Registrable Securities for sale to
the public), each such time it will
give written notice to Employee of
its intention so to do. Upon the
written request of Employee,
received by the Company within 30
days after the giving of any such
notice by the Company, the Company
will cause the Registrable
Securities 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 Employee (in
accordance with its written request)
of such Registrable Securities so
registered; provided, however, that
if the managing underwriter of the
Company's offering delivers in good
faith a written opinion to Employee
that either because of (A) the kind
of securities which the Employee or
the Company intends to include in
the offering or (B) the size of the
offering which Employee or the
Company intend to make, the success
of the offering or the market for
the Company's common stock would be
materially and adversely affected by
the inclusion of the Registrable
Securities requested to be included
(I) in the event that the size of
the offering is the basis for the
managing underwriter's opinion, the
amount of the securities to be
offered for the account of the
Employee and each other person
registering securities of the
Company pursuant to similar
incidental registration rights shall
be reduced pro rata to the extent
necessary to reduce the total amount
of securities to be included in such
offering to the amount reasonably
recommended by such managing
underwriter; and (II) in the event
that the combination of securities
to be offered is the basis of such
managing underwriter's opinion, 1)
the Registrable Securities and other
securities to be included in such
offering shall be reduced as
described in clause (I) above or, 2)
if the actions described in clause
(I) would, in the reasonable
judgment of the managing
underwriter, be insufficient to
substantially eliminate the material
and adverse effect that inclusion of
the Registrable Securities requested
to be included would have on such
offering, such Registrable
Securities will be excluded from
such offering. Notwithstanding the
foregoing provisions, the Company
may withdraw any registration
statement referred to in this
Paragraph D(i)(B) without thereby
incurring any liability to
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<PAGE> 8
Employee. The Company shall not be
required to register shares of
Registrable Securities of Employee
after the Company has filed two (2)
registration statements which
included Registrable Securities and
such registration statements have
become effective, remained effective
for the period of distribution, and
the transaction described therein
were closed.
(ii) If and whenever the Company is required by
Paragraph 7D(i)(A) to effect a demand
registration or Paragraph 7D(i)(B) to effect
a piggy back registration, the Company shall
as expeditiously as possible:
(a) prepare and file with the Securities
and Exchange Commission
("Commission") a registration
statement (which, in the case of an
underwritten public offering shall
be on Form S-1, Form S-2, Form S-3,
any successor forms thereto, 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 ( as determined
hereinafter ); provided, however
that the Company may postpone the
filing, effectiveness, supplementing
or amending of the registration
statement for up to 90 days if, in
the good faith opinion of the
Company's Board of Directors, the
registration or sale of Registrable
Securities would adversely affect a
material financing, acquisition,
disposition of assets or stock,
merger or other comparable
transaction or would require the
Company to make public disclosure of
information the public disclosure of
which would have a material adverse
effect upon the Company. During any
time that the Company defers
amending or supplementing the
registration statement, the holders
of Registrable Securities shall
discontinue disposing of Registrable
Securities;
(b) subject to the proviso in
subparagraph (a), 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
of distribution and comply with the
provisions of the Securities Act
with respect to the disposition of
all Registrable Securities
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<PAGE> 9
covered by such registration
statement in accordance with the
intended method of disposition set
forth in such registration statement
for such period;
(c) furnish to Employee 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 the Registrable
Securities covered by such
registration statement;
(d) use its best efforts to register or
qualify the Registrable Securities
covered by such registration
statement under the securities or
"blue sky" laws of such
jurisdictions as the Employee 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;
(e) use its best efforts to list or
qualify for quotation the
Registrable Securities covered by
such registration statement with any
securities exchange or inter-dealer
quotation system on which the common
stock of the Company is then listed
or quoted;
(f) notify Employee at any time when a
prospectus relating to Registrable
Securities is required to be
delivered under the Securities Act
or the happening of any event as a
result of which the prospectus
included in such registration
statement contains an untrue
statement of a material fact or
omits any fact necessary to make the
statements therein not misleading,
and, at the request of Employee, the
Company will prepare a supplement or
amendment to such prospectus so
that, as thereafter delivered to the
purchasers of such Registrable
Securities, such prospectus will not
contain an untrue statement of a
material fact or omit to state any
fact necessary to make the
statements therein not misleading,
provided that the 180-day period
described below will be tolled from
the time a prospectus contains such
a statement or omission until a
prospectus correcting such statement
or
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<PAGE> 10
omission has been delivered to the
Employee and may be delivered to the
purchasers of such Registrable
Securities in compliance with the
Securities Act.
(g) notify the Employee immediately, and
confirm the notice in writing, (1)
when the registration statement
becomes effective, (2) of the
issuance by the Commission of any
stop order or of the initiation, or
the threatening, of any proceedings
for that purpose, (3) of the receipt
by the Company of any notification
with respect to the suspension of
qualification of the Registrable
Securities for sale in any
jurisdiction or of the initiation,
or the threatening, of any
proceedings for that purpose, and
(4) of the receipt of any comments,
or requests for additional
information, from the Commission or
any state regulatory authority. If
the Commission or any state
regulatory authority shall enter
such a stop order or order
suspending qualification at any
time, the Company will promptly use
its best reasonable efforts to
obtain the lifting of such order;
and
(h) otherwise use its best efforts to
comply with-all applicable rules and
regulations of the Commission, and
make available to its security
holders as soon as reasonably
practicable, but not later than 15
months after the effective date of
the registration statement, a
statement covering a period of at
least 12 months beginning after the
effective date of the registration
statement, which earnings statement
shall satisfy the provisions of
Section 11(a) of the Securities Act.
For purposes hereof, the period of distribution of Registrable
Securities 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 Registrable Securities in
any other registration shall be deemed to extend until the earlier of the sale
of all Registrable Securities covered thereby or 180 days after the effective
date thereof.
In connection with each registration hereunder, Employee will furnish
to the Company in writing such information with respect to it as a stockholder
as reasonably shall be necessary in order to assure compliance with federal and
applicable state securities laws.
In connection with each registration pursuant to Paragraph 7(D) hereof
covering an underwritten public offering, the Company and Employee agree to use
their best efforts to select a managing underwriter (and any co- managers) and
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.
-10-
<PAGE> 11
(iii) All expenses incurred by the Company in
complying with Paragraph 7(D) hereof,
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 Employee but excluding
any Selling Expenses, are called
"Registration Expenses." All underwriting
discounts and selling commissions applicable
to the sale of Registrable Securities are
called "Selling Expenses."
(a) The Company shall pay all
Registration Expenses attributable
to the shares of Registrable
Securities included in the
registration in connection with each
registration statement under
Paragraph 7(D) hereof.
(b) All Selling Expenses in connection
with each registration statement
under Paragraph 7(D) hereof shall be
borne by the Employee and any other
selling stockholder in proportion to
the number of shares sold by each
stockholder, or by such other
selling stockholders.
(iv) Subject to applicable law, the Company will
indemnify each underwriter, the Employee and
each person controlling any of them, against
all claims, losses, damages and liabilities,
including legal and other expenses reasonably
incurred, arising out of any untrue statement
of a material fact contained in the
registration statement, or any omission to
state a material fact required to be stated
in the registration statement or necessary to
make the statements not misleading, or
arising out of any violation by the Company
of the Securities Act, any state securities
or "blue-sky" laws or any applicable rule or
regulation. This indemnification will not
apply to any claims, losses, damages or
liabilities to the extent that they may have
been caused by an untrue statement or
omission based upon information furnished in
writing to the Company by such underwriter,
the Employee or controlling person,
respectively, expressly for use in the
registration statement. With respect to such
untrue statement or omission in the
information furnished in writing to the
Company by the Employee, the Employee will
indemnify the underwriters, the Company, its
directors and officers, and each person
controlling
-11-
<PAGE> 12
any of them against any losses, claims,
damages, expenses or liabilities to which any
of them may become subject as a result of
such untrue statement or omission.
(v) The registration rights of the Employee under
this Agreement may be transferred to any
trust formed by Employee to hold shares of
common stock and to any member of the family
of the Employee.
E) In the event of any merger, consolidation or share
exchange pursuant to which the Company is not the
surviving or resulting corporation, the Company's
obligations under this Paragraph 7 shall be assumed
by such surviving or resulting corporation.
F) The Employee shall not be required to mitigate the
amount of any payment provided for in this Paragraph
7 by seeking other employment or otherwise.
8. CONFIDENTIALITY. Employee hereby acknowledges his understanding
that as a result of his employment by CSL, he will have access to, and
possession of, valuable and important confidential or proprietary data,
documents and information concerning CSL, its operations and its future plans.
Employee hereby agrees that he will not, either during the term of his
employment with CSL, or at any time after the term of his employment with CSL,
divulge or communicate to any person or entity, or direct any employee or agent
of CSL or of his to divulge or communicate to any person or entity, or use to
the detriment of CSL or for the benefit of any other person or entity, or make
or remove any copies of, such confidential information or proprietary data or
information, whether or not marked or otherwise identified as confidential or
secret. Upon any termination of this Agreement for any reason whatsoever,
Employee shall surrender to CSL any and all materials, including but not
limited to drawings, manuals, reports, documents, lists, photographs, maps,
surveys, plans, specifications, accountings and any and all other materials
relating to the Company or any of its business, including all copies thereof,
that Employee has in his possession, whether or not such material was created
or compiled by Employee, but excluding, however, personal memorabilia belonging
to Employee and notes taken by him as a member of the Board of Directors. With
the exception of such excluded items, materials, etc., Employee acknowledges
that all such material is solely the property of CSL, and that Employee has no
right, title or interest in or to such materials. Notwithstanding anything to
the contrary set forth in this Paragraph 8, the provisions of this Paragraph 8
shall not apply to information which: (i) is or becomes generally available to
the public other than as a result of disclosure by Employee, or (ii) is already
known to Employee as of the date of this Agreement from sources other than CSL,
or (iii) is required to be disclosed by law or by regulatory or judicial
process.
9. NON-COMPETITION; NON-SOLICITATION. Employee hereby agrees that
during the term of his employment with the Company and for a period of one (1)
year after any termination for any reason whatsoever of this Agreement, he will
not and will cause his Affiliates not to, directly or indirectly, acquire,
develop or operate senior living facilities anywhere in the United
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<PAGE> 13
States, other than through the Company and its subsidiaries except as otherwise
requested by the Company. CSL hereby acknowledges and agrees that (i)
Employee's ownership of a class of securities listed on a stock exchange or
traded on the over-the-counter market that represents five percent (5%) or less
of the number of shares of such class of securities then issued and
outstanding, and (ii) Employee's services to Tri Point Communities, L.P. and
Tri Point Development, Inc. to own and develop senior living facilities for the
benefit of the Company shall not constitute a violation of this Paragraph 9.
Following the termination for any reason of Employee's employment, Employee
shall not for himself or any third party, directly or indirectly employ,
solicit for employment, or recommend for employment any person employed by the
Company or its affiliated companies during the period of such person's
employment and for a period of two (2) years thereafter.
The parties hereto have carefully considered the necessity for
protection of the goodwill and business of the Company and the scope of such
protection. Employee acknowledges that the restrictions, prohibitions and
other provisions of this Section 9 are reasonable, fair and equitable in scope,
terms and duration, are necessary and essential to protect the legitimate
business interests and goodwill of the Company, are a material inducement to
the Company to enter into the transactions contemplated by this Agreement and
that adequate consideration has been and will be received by Employee for such
restrictions, prohibitions and other provisions.
10. WORK PRODUCT. The Employee agrees that all innovations,
improvements, developments, methods, designs, analyses, reports and all similar
or related information which relates to the Company's or any of its
subsidiaries' or affiliates' actual or anticipated business, or existing or
future products or services and which are conceived, developed or made by the
Employee while employed by the Company ("Work Product") belong to the Company
or such subsidiary or affiliate. The Employee will promptly disclose such Work
Product to the Board and perform all actions reasonably requested by the Board
(whether during or after the employment period) to establish and to confirm
such ownership (including, without limitation, assignments, consents, powers of
attorney and other instruments).
11. LEGAL ACTION. In the event of a breach by Employee of the
provisions of Paragraphs 8, 9, or 10, Employee and the Company agree that the
Company, shall, in addition to any other available remedies, be entitled to an
injunction restraining Employee from violating the terms of the applicable
Paragraph and that said injunction is appropriate and proper relief for such
violation.
12. NOTICES. All notices and other communications provided to either
party hereto under this Agreement shall be in writing and delivered by hand
delivery, overnight courier service or certified mail, return receipt
requested, to the party being notified at said party's address set forth
adjacent to said party's signature on this Agreement, or at such other address
as may be designated by a party in a notice to the other party given in
accordance with this Agreement. Notices given by hand delivery or overnight
courier service shall be deemed received on the date of delivery shown on the
courier's delivery receipt or log. Notices given by certified mail shall be
deemed received three (3) days after deposit in the U.S. Mail.
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<PAGE> 14
13. CONSTRUCTION. In construing this Agreement, if any portion of
this Agreement shall be found to be invalid or unenforceable, the remaining
terms and provisions of this Agreement shall be given effect to the maximum
extent permitted without considering the void, invalid or unenforceable
provision. In construing this Agreement, the singular shall include the
plural, the masculine shall include the feminine and neuter genders, as
appropriate, and no meaning or effect shall be given to the captions of the
paragraphs in this Agreement, which are inserted for convenience of reference
only.
14. CHOICE OF LAW; SURVIVAL. This Agreement shall be governed and
construed in accordance with the internal laws of the State of Texas without
resort to choice of law principles. The provisions of Paragraphs 7, 8, 9, and
10 shall survive the termination of this Agreement for any reason whatsoever.
15. INTEGRATION; AMENDMENTS. This is an integrated Agreement. This
Agreement constitutes and is intended as a final expression and a complete and
exclusive statement of the understanding and agreement of the parties hereto
with respect to the subject matter of this Agreement. All negotiations,
discussions and writings between the parties hereto relating to the subject
matter of this Agreement are merged into this Agreement, and there are no
rights conferred, nor promises, agreements, conditions, undertakings,
warranties or representations, oral or written, expressed or implied, between
the undersigned parties as to such matters other than as specifically set forth
herein. No amendment or modification of or addendum to, this Agreement shall
be valid unless the same shall be in writing and signed by the parties hereto.
No waiver of any of the provisions of this Agreement shall be valid unless in
writing and signed by the party against whom it is sought to be enforced.
16. BINDING EFFECT. This Agreement is binding upon and shall inure
to the benefit of the parties hereto and their respective heirs, personal
representatives, successors and assigns; PROVIDED, HOWEVER, that Employee shall
not be entitled to assign his interest in this Agreement (except for an
assignment by operation of law to his estate), or any portion hereof, or any
rights hereunder, to any party. Any attempted assignment by Employee in
violation of this Paragraph 16 shall be null, void, ab initio and of no effect
of any kind or nature whatsoever.
IN WITNESS WHEREOF, the parties have executed this Agreement on the
date set forth above to be effective as of the date specified in the preamble
of this Agreement.
CAPITAL SENIOR LIVING
CORPORATION
a Delaware corporation
Address:
14160 Dallas Parkway, #300
Dallas, TX 75240 By:/s/ JEFFREY L. BECK
-------------------------
Its: CEO
------------------------
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<PAGE> 15
EMPLOYEE: JAMES A. STROUD
Address:
7229 Mason Dells /s/ JAMES A. STROUD
Dallas, TX 75230 ----------------------------
James A. Stroud
-15-
<PAGE> 1
EXHIBIT 10.29
OPTION AGREEMENT
THIS OPTION AGREEMENT (this "Agreement") is entered into effective as
of the ______ day of ____________, 1997, by and between CAPITAL REALTY GROUP
CORPORATION, a Texas corporation ("Optionor") and CAPITAL SENIOR LIVING
CORPORATION, a Delaware corporation or its assigns ("Optionee").
RECITALS
WHEREAS, Optionor owns all of the issued and outstanding stock (the
"Stock") of Capital Realty Group Senior Housing, Inc., a Texas corporation
("Senior Housing");
WHEREAS, Senior Housing is the sole general partner of Healthcare
Properties, L.P., a Delaware limited partnership ("HCP") and of NHP Retirement
Housing Partners I Limited Partnership, a Delaware limited partnership ("NHP");
WHEREAS, Optionee desires to secure an option to purchase the stock
from Optionor on the terms and conditions set forth herein;
NOW, THEREFORE, in consideration of the Option Payment (hereinafter
defined) and other good and valuable consideration, the receipt and adequacy of
which is hereby acknowledged, Optionor and Optionee hereby agree as follows:
ARTICLE I
GRANT OF OPTION
Upon the terms and conditions hereinafter set forth, Optionor agrees
to grant to Optionee an option to purchase the Stock (the "Option") on the
Closing Date (hereinafter defined). The Option herein granted is irrevocable
for the Option Period (hereinafter defined), but shall expire at 5:00 o'clock
p.m. on the last day of the Option Period without notice to Optionee unless
extended or exercised as provided in this Agreement.
ARTICLE II
TERMS OF OPTION
2.1 Purchase Price. In the event Optionee exercises the Option
granted herein, the "Purchase Price" (herein so called) for the Stock shall be
the Fair Market Value of the Stock (as hereinafter defined), payable in cash at
the closing of the transaction as provided herein. The "Fair Market Value of
the Stock" shall be the fair market value of the general partner interest in HCP
and NHP as agreed to by the parties hereto, or as appraised by Senior Living
Valuation Services, Inc. in the event the parties cannot so agree.
<PAGE> 2
2.2 Option Payment. As consideration for this Option, Optionee
shall pay to Optionor on the date hereof the non-refundable sum of One Hundred
and No/100 Dollars ($100.00) (the "Option Payment").
2.3 Duration of Option. The Option granted hereby shall be
exercisable by Optionee at any time from and after the date hereof through the
date which is the tenth anniversary of the date hereof (the "Option Period").
2.4 Inspection of Records and Access. During the Option Period,
Optionee and Optionee's agents, contractors, servants, consultants and employees
shall have the right to inspect the books and records of Optionor relating to
Senior Housing after reasonable notice to Optionor at Optionee's sole cost and
expense. Optionor agrees to give reasonable access to Optionee for the
purposes of inspecting such books and records.
ARTICLE III
EXERCISE OF OPTION
3.1 Exercise of Option. Optionee may exercise the Option by
delivering written notice thereof to Optionor during the Option Period and the
deposit with Optionor of the sum of Five Thousand Dollars ($5,000.00) as
"Earnest Money" (herein so called). The Earnest Money will be held by Optionor
and disbursed in accordance with the terms of the Agreement. Any such notice,
if sent by registered or certified mail, shall be considered delivered on the
date when such notice is deposited in the United States mail, postage prepaid,
certified or registered mail, return receipt requested, addressed to Optionor at
the address set forth in Section 4.4 of this Agreement. In addition, any such
notice, if delivered personally, shall be deemed delivered on the date of such
personal delivery. Upon Optionee's exercise of the Option and deposit of the
Earnest Money, this Agreement shall constitute a contract for sale of the Stock
between Optionor and Optionee, and the date of closing (the "Closing Date") of
the transaction contemplated herein shall be thirty days after the date Optionor
receives Optionee's notice that Optionee has exercised the Option.
3.2 Optionor's Obligations at Closing. At closing, Optionor shall
deliver or cause to be delivered to Optionee the following:
(a) The original stock certificate(s) evidencing the
Stock, with stock power(s) endorsed in blank.
(b) Evidence of Optionor's authority to consummate the
transactions contemplated by this Agreement.
(c) Such other documents as reasonably required by
Optionee to effectuate the closing.
3.3 Optionee's Obligations at Closing. At closing, Optionee shall
deliver or cause to be delivered to Optionor the following:
2
<PAGE> 3
(a) The Purchase Price in good federal funds less
appropriate credit for the Earnest Money.
(b) Such other documents as reasonably required by
Optionor to effectuate the closing.
3.4 Closing Date Balance Sheet of Senior Housing. It is the
intention of the parties hereto that on the Closing Date, the balance sheet of
Senior Housing will show no assets or liabilities other than the general partner
interests in HCP and NHP. Optionor shall take all action necessary so that all
assets and liabilities of Senior Housing other than such general partner
interests are removed from the balance sheet of Senior Housing on or prior to
the Closing Date. Such action may include the distribution by Senior Housing
of cash, cash equivalents, notes receivable and accounts receivable to Optionor
or other appropriate parties.
3.5 Closing Costs. All costs in connection with the closing of
the sale and purchase of the Stock shall be paid by Optionee. Attorneys' fees
of each party shall be borne and paid exclusively by the party incurring same,
without reimbursement.
3.6 Default and Remedies.
(a) In the event that the Option is exercised, and in the
event Optionor should fail to consummate the sale of the Stock for any
reason, except Optionee's default or failure of title, Optionee may,
as its sole and exclusive remedy either (i) enforce specific
performance of this Agreement or (ii) be entitled to payment from
Optionor of a liquidated amount equal to the Earnest Money paid by
Optionee to Optionor pursuant to this Agreement.
(b) In the event the Option is exercised and in the event
Optionee should fail to consummate the purchase of the Stock for any
reason except Optionor's default, Optionor, as its sole and exclusive
remedy, shall have the right to either (i) terminate this Agreement and
receive the Earnest Money as liquidated damages, and thereafter,
Optionee shall have no further right with respect to the Stock, or (ii)
enforce specific performance of the Agreement.
ARTICLE IV
MISCELLANEOUS
4.1 Further Assurances. Optionor and Optionee agree that at any
time, or from time to time, after the execution of this Agreement and whether
before or after the exercise of the Option, Optionor or Optionee will, upon
request of the other, execute and deliver such further documents and do such
further acts and things as such other party may reasonably in order to effect
fully the purposes of this Agreement.
4.2 Survival of Terms. All covenants and agreements contained in
this Agreement shall survive the exercise of the Option and shall continue in
full force and effect until the transfer of the Stock to Optionee and the
payment of the Purchase Price.
3
<PAGE> 4
4.3 Binding Effect. This Agreement and each of the covenants and
agreements contained herein shall be binding upon and shall inure to the benefit
of the respective parties hereto and their respective legal representatives,
successors and assigns.
4.4 Notices. Any notice or other written instrument required to be
delivered pursuant to this Agreement shall be deemed to be delivered when
personally delivered or three days after deposit in the United States mail,
postage prepaid, registered or certified mail, return receipt requested,
addressed to Optionor or Optionee, as the case may be, at the following
addresses, as such address may be changed from time to time by written notice
to the other party:
IF TO OPTIONOR: IF TO OPTIONEE:
--------------- --------------
CAPITAL REALTY GROUP CAPITAL SENIOR LIVING
CORPORATION CORPORATION
14160 Dallas Parkway 14160 Dallas Parkway
Suite 300 Suite 300
Dallas, Texas 75240 Dallas, Texas 75240
4.5 Entirety and Amendments. This Agreement embodies the entire
agreement between the parties and supersedes all prior agreements and
understandings, if any, relating to the Stock, and may be amended or
supplemented only by an instrument in writing executed by the party against
whom enforcement is sought.
4.6 Governing Law. This Agreement shall be performed in the State
of Texas, and all of the terms and provisions hereof shall be governed by, and
construed in accordance with, the laws of the State of Texas.
4.7 Multiple Counterparts. This Agreement may be executed in a
number of identical counterparts. If so executed, each of the counterparts is
an original for all purposes, and all the counterparts shall, collectively,
constitute but one agreement. In making proof of this Agreement, it shall not
be necessary to produce or account for more than one counterpart.
4.8 Headings. All headings herein are inserted only for
convenience and ease of reference and are not to be considered in the
construction or interpretation of any provision of this Agreement.
4.9 Time of the Essence. Time is of the essence with respect to
this Agreement. References to "days" shall mean calendar days; provided,
however, in the event the last date for performance of an obligation or delivery
of any notice hereunder falls on a Saturday, Sunday, or a federal holiday, the
date for such performance or delivery of such notice shall be postponed until
the next ensuing business day. Performance of an obligation or delivery of a
notice must be accomplished by 5:00 p.m. on a given date to be considered
completed on such date.
4.10 Assignment. Optionee shall not have the right to assign its
interest in this Agreement without the prior written consent of Optionor, which
consent may be withheld in Optionor's discretion.
4
<PAGE> 5
4.11 Date of Agreement. The "date of this Agreement" or "the date
hereof" shall for all purposes be the date first written above.
ARTICLE V
ASSIGNMENT OF FEES AND DISTRIBUTIONS
5.1 Assignment of Fees and Distribution. In consideration of the
Option Payment and the agreements set forth herein, Senior Housing hereby
assigns to Optionee the right of Senior Housing to receive any distributions or
fees accruing to the general partner from HCP and NHP during the Option Period.
Any such distributions or fees received by Senior Housing from HCP or NHP shall
be paid over by Senior Housing to Optionee.
IN WITNESS WHEREOF, the parties hereto have executed this Agreement as
of the day and year first written above.
OPTIONOR:
CAPITAL REALTY GROUP CORPORATION,
a Texas corporation
By:
--------------------------------
Name: Jeffery L. Beck
Title: Chief Executive Officer
By:
--------------------------------
Name: James A. Stroud
Title: Chief Operating Officer
OPTIONEE:
CAPITAL SENIOR LIVING CORPORATION,
a Delaware corporation
By:
--------------------------------
Name:
------------------------------
Title:
-----------------------------
5
<PAGE> 6
SENIOR HOUSING:
For purposes of Article V Only
CAPITAL REALTY GROUP SENIOR
HOUSING, INC.
a Texas Corporation
By:
--------------------------------
Name:
------------------------------
Title:
-----------------------------
6
<PAGE> 1
EXHIBIT 10.30
DEVELOPMENT AGREEMENT
THIS DEVELOPMENT AGREEMENT (this "Agreement") is by and between Capital Senior
Development, Inc., a Texas corporation (the "Developer"), and Tri Point
Communities, L.P., a Texas limited partnership (the "Owner"), and is entered
into for the purpose of reducing to a formal writing all of the parties
understandings with respect to the development and construction of a proposed
senior living project to be comprised of units (the "Project") to be located on
land as described below (the "Property").
In consideration of the undertakings of each of the parties to the other:
IT IS AGREED:
ARTICLE I
Representations
The parties make each of the following material representations:
Section 1.1 - Title to Property. The Owner shall have good, record
and marketable title in fee simple to the Property consisting of approximately
_______ (___) acres of land as more fully described in Exhibit "A". Exhibit
"A" and each of the other Exhibits referred to in this Agreement shall be
incorporated into this Agreement by such reference as if fully set forth in
this Agreement. The Property shall be (i) free and clear of any and all
encumbrances which would, in the Developer's sole discretion, impair the
construction or operation of the Project except as set forth on Exhibit "B",
and (ii) free of any hazardous wastes or materials except as set forth on
Exhibit "C".
Section 1.2 - Encumbrances.
(a) The Owner and the Developer acknowledge that the Property will
be subject to the easements, assessments, conditions, contracts, rights,
claims, encroachments, restrictions and other encumbrances as set forth on
Exhibit "B" (the "Existing Encumbrances"), to physical conditions disclosed by
a boundary survey to be prepared by ____________ entitled
"____________________" dated ___________, (Map No. ________ ) for the
Property, and will be subject to those easements, conditions, contracts,
rights, licenses, encroachments, restrictions and other encumbrances resulting
from the Developer securing regulatory, development and construction approvals
for the Project and attendant site improvements. The Owner and the Developer
each represents to the other that it has reviewed or shall review the boundary
survey and the topographical survey of the Property and has made a physical
inspection of the Property and is satisfied with as to the site characteristics
and attributes in all material respects.
(b) Concurrently with the execution of this Agreement, the Owner
shall provide the Developer with copies of all engineering, architectural and
any other plans, studies and surveys title reports, environmental assessments,
appraisals and other information regarding the Property or the Project which
are in the Owner's possession, custody or control.
<PAGE> 2
(c) The Owner represents, to the best of its knowledge, that the
Property has only the apparent site and off-site conditions, if any, as set
forth on Exhibit "D" which require the implementation of the measures, if any,
as set forth on Exhibit "D".
(d) Commencing on the date the Developer elects to commence
construction in accordance with this Agreement, the Owner shall provide the
Developer with full possession and complete control of the Property for
purposes of performing the Developer's obligations hereunder.
Section 1.3 - Permit and Approvals.
(a) The Developer represents that it shall use its best efforts to
obtain, prior to the date of the Closing (as defined in Article III hereof),
all state, federal, county and municipal land use approvals and permits,
licenses, easements, and utility agreements which are necessary for the
development, construction and opening of the Project on the Property as set
forth on Exhibit "E" (the "Developer's Approvals"). The Developer covenants to
diligently use its best efforts to obtain all of the Approvals in an
expeditious manner. In the event that the Developer is unable to obtain the
Approvals, the Developer shall have no liability whatsoever to the Owner, or
any other party and at the Owner's or the Developer's option, this Agreement
shall be terminated without recourse to either party hereto at law or in
equity.
(b) The Owner represents that it shall use its best efforts to
obtain, prior to the date of the Closing (as defined in Article III hereof),
all state, federal, county and municipal land use approvals and permits,
licenses, easements, and utility agreements which are necessary for the
development, construction and operation of the Project on the Property as set
forth on Exhibit "F" (the "Owner's Approvals"). The Owner covenants to
diligently use its best efforts to obtain all of the Approvals in an
expeditious manner. In the event that the Owner is unable to obtain the
Approvals, the Owner shall have no liability whatsoever to the Developer, or
any other party and at the Owner's or the Developer's option, this Agreement
shall be terminated without recourse to either party hereto at law or in
equity.
(c) For the sole purpose of permitting the Developer to construct
the Project, the Owner grants to the Developer, to the extent required by the
Developer in order that the purpose of this Agreement be effectuated, the
rights under the Approvals and any other grants of rights, permits, approvals,
or licenses, which may be necessary to complete the performance of the
Developer's obligations hereunder; provided, however that no transfer or
assignment of any of the foregoing shall occur which is prohibited by
applicable law or the respective terms hereof.
Section 1.4 - Documentation. The Owner shall provide or obtain
construction and permanent financing for the Property, the Project, the
Personal Property (as defined herein) and related development costs
(collectively, the "Project Loan") which shall be sufficient, together with the
Owner's equity contributions, if necessary (which shall in no event exceed ten
percent(10%) of the Contract Price), to pay the full amount of the Contract
Price (as defined herein). The Owner covenants that it will provide fully and
in a timely fashion all reasonable documentation required by the Owner's lender
in connection with the Project Loan. Such documentation shall
2
<PAGE> 3
include, but is not limited to, all zoning and plan approvals, all utility
letters indicating positive availability of service, inventory of concessions
made to and agreements with any or all municipal bodies, site plans, title
policies, and all other regulatory body approvals. The Owner also covenants
that it will, in a timely manner, provide whatever financial or other
information the Owner's lender might reasonably require in connection with the
Developer's applications for financing for the construction of the Project and
as required by such lender in connection with the Project Loan. The Owner will
use its best efforts to pursue its application for construction and permanent
financing for the Project.
Section 1.5 - Other Agreements. The Owner and the Developer each
represents to the other that neither entering into this Agreement nor
performing their respective obligations hereunder will violate any other
agreements or documents by which either may be bound.
Section 1.6 - Utility Services. The Owner represents that, to the
best of its knowledge, all utility services required to construct and operate
the Project (including, without limitation, public water, sewer and
electricity) are currently available to the Property in the capacities required
to operate the Project. No work need be performed by or on behalf of the
Developer to make such utilities available to the Property for the construction
or operation of the Project, except for the matters, if any, set forth on
Exhibit "D". Copies of letters from the providers of such utility services
confirming such availability are annexed hereto as Exhibit "G".
Section 1.7 - Good Standing of The Developer. The Developer
represents that it is duly organized, validly existing and in good standing
under the laws of the state of the State of Texas. The Developer represents
that it is empowered and authorized to execute, deliver and perform its
obligations under this Agreement, and, upon such execution and delivery and
subject to the conditions subsequent set forth in Section 5.1, this Agreement
shall be valid, binding and legal obligation of the Developer, enforceable in
accordance with its terms and, duly authorized by a vote of its Board of
Directors in compliance with its certificate of incorporation and bylaws and
all applicable laws of the state of its incorporation.
Section 1.8 - Good Standing of The Owner. The Owner represents that
it is duly organized and validly existing under the laws of the State of
Delaware. The Owner represents that it is empowered and authorized to execute,
deliver and perform its obligations under this Agreement, and upon such
execution and delivery and subject to Section 5.1, this Agreement shall be the
valid, binding and legal obligation of the Owner, enforceable in accordance
with its terms and duly authorized by its general partner in compliance with
its limited partnership agreement and all applicable laws of the State of
Texas.
ARTICLE II
Construction of the Project
Section 2.1 - Control of Construction. Subject to the express
provisions contained herein, it is the intention of the parties that the
Developer shall have sole, complete and absolute authority and discretion to
decide any and all issues pertaining to the construction of the Project,
including,
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without limitation, the expenditure of funds, the incurring of costs and all of
the other matters referred to herein, so long as the same are in compliance
with Approvals, the Final Plans (as defined below) and all applicable laws.
Section 2.2 - Architectural and Engineering Services. The parties
acknowledge that [________________] and their consulting engineers (the
"Architect and Engineers") have or will be retained by the Owner. The Owner
will be responsible for payment of the architectural fees due to the Architect,
pursuant to the contract with respect to the Project dated
_____________________ (said contracts herein collectively, the "Architectural
Contract"). The Owner represents and warrants to the Developer that a true,
accurate and complete copy of the Architectural Contract is attached hereto as
Exhibit "H". The Developer shall not be responsible to the Owner, or any other
party for any errors, omissions, breaches or failures thereof, or any damages
resulting from the acts or omissions of the Architect.
Section 2.3 - Other Professionals and General Assumed Obligations.
The Owner represents that it has not engaged any architects or any engineers,
consultants, accountants, or other professionals with respect to the Project,
other than the Architect, which the Owner shall be obligated to pay. The
Developer neither assumes nor shall be obliged for any debts, liabilities or
obligations of the Owner or related to the Property or the Project other than
payments due to the Architect under the Architectural Contract.
Section 2.4 - Plans and Specifications.
(a) The Architect and Engineers retained by the Owner shall, under
the direction of the Developer and after consultation with the Owner, prepare
basic design plans (the "Basic Plans"). As a part of this process, the
Developer may engage engineers, including the site engineers, to perform test
borings and other soil testing at the Property for purposes of property
locating the Property on the Project. The Developer, the Architects and the
Engineers shall consult with the Owner during the process of preparing the
Basic Plans. The Developer, Architect and the Engineers shall have access to
the Project for all such tests and surveys.
(b) Within two (2) weeks after the date of the Architect's and the
Engineer's completion of the Basic Plans and delivery to the Owner, the
Developer, the Owner, the Architect and Engineers shall meet to review and
approve the Basic Plans. The parties shall initial the Basic Plans to indicate
their approval of such Basic Plans.
(c) Upon the approval by the parties of the Basic Plans, the
Developer shall direct the Architect and the Engineers to prepare final plans,
specifications and a site plan (collectively the "Final Plans") based on the
Basic Plans. Within two (2) weeks after the completion of the Final Plans and
their delivery to the Owner, the parties will meet to review and approve the
same, and make any necessary revisions. The Owner agrees that it will not
unreasonably withhold its approval of the Final Plans if they conform in all
respects to the Basic Plans. The parties agree to use their best efforts to
reasonable conclusion concerning the acceptability of the Final Plans and
Personal Property (see Section 2.6). The parties shall initial the Final Plans
as an indication of their approval of the same.
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Section 2.5 - Construction. The Developer shall construct the Project
in a workmanlike manner and in accordance with the Final Plans and all
applicable laws subject, to field changes and minor design changes approved by
the Owner. The Project is to be licensed for the unit complement described
above and shall be constructed in accordance with the requirements in effect on
the date of this Agreement as set forth by all federal, state and local
governmental agencies having jurisdiction of the Project, including Life Safety
Code requirements imposed by the Federal Department of Health and Human
Services.
Section 2.6 - Personal Property.
(a) The Developer will furnish the specific items of personal
property contained in Exhibit "I" (the "Furniture, Furnishings & Equipment" or
"F F & E") required for the Project within the allowance (defined below). The
allowance for the "F F & E" is [______________ ($_______)] (the"F F & E
Allowance"), which F F & E Allowance shall be included in the Contract Price
(as defined below).
(b) In the event that the cost of the F F & E furnished pursuant
to subsection 2.6 (a) above shall exceed the F F & E Allowance, any such excess
approved by Owner shall be an increase to the Contract Price.
(c) In order to reduce the risk that the F F & E will be delivered
prior to the Closing contemplated herein, the Owner covenants that it shall
approve such F F & E as soon as practicable but not later than approximately
six (6) months prior to the estimated date of Physical Completion (defined
below).
(d) F F & E does not include kitchen and laundry equipment.
Section 2.7 - Changes. The Owner agrees that the Developer shall also
have the right to make changes in the Final Plans and in the Personal Property
only if required by any federal, state or local governmental authority having
jurisdiction over the Project, or if required due to the unavailability of any
construction materials or Personal Property and approved by Owner. The Owner
shall be notified of any such changes in the Final Plans or substitutions in
the Personal Property, provided, that, such changes result in construction,
space, design, personal property, equipment and interior and exterior design
comparable in overall design and quality to that shown on the Final Plans. Any
change that results in the loss or adjustment of square footage in the Project
will require approval by the Owner.
Section 2.8 - Commencement of Construction. Construction of the
Project will start on or prior to the date which is thirty (30) days after the
satisfaction of the last of the conditions set forth in Section 5.1 to be
satisfied, or as soon thereafter as weather and ground conditions permit but
not later than __________.
Section 2.9 - Continuity of Construction. Construction, once
undertaken, shall proceed in a continuous and reasonably expeditious manner
until Physical completion (as such term is defined in Section 2.10) is
achieved, which shall not occur later than eighteen (18) months after
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the completion of the foundation for the Project. Any delays caused by acts of
God, fire, accident, casualty, cessation of activity due to refusal to work by
labor, or any other cause not attributable to the failure of the Developer to
use reasonable care and due diligence, however, shall be excused by the Owner,
provided that the Developer shall use its best efforts to minimize any such
delays and shall resume construction at the earliest possible time.
Section 2.10 - Completion of Construction.
(a) For the purposes of this Agreement, the terms "Physical
Completion" or "Physically Completed" shall mean the date on which the building
and improvements described and set forth in the Final Plans have been completed
and the Project shall have been approved for and received a certificate for
temporary or permanent occupancy by the local building inspector, and by the
State Fire Marshall in the event his or her approval is required (the
"Certificate of Occupancy"). Physical Completion shall be deemed to have been
achieved notwithstanding that any of such officials or agencies have issued a
Certificate of Occupancy with conditions or a Punch-List listing items
requiring completion or correction, so long as such conditions or Punch-List
items do not prevent or prohibit occupancy as determined by the Owner, in its
sole discretion.
(b) The Developer will use its reasonable best efforts to notify
the Owner at least ninety (90) days prior to the time that the Developer
estimates that the Project will be Physically Completed, whereupon the Owner
will diligently proceed to fulfill all other conditions necessary for licensure
and the Owner will apply in a timely manner for all licenses and permits
necessary to commence operation of the Project as set forth on Exhibit "E-2".
After such notice from the Developer, the Owner, to the extent necessary to
perform administrative activities may, so long as it does not interfere with
completion of construction, enter upon the Property in an effort to coordinate
initial licensure.
Section 2.11 - The Owner's Noninvolvement. The Owner shall have
access to the construction site while construction is in progress, but it shall
not be empowered to interfere with construction, provided, however that the
Owner's agents shall have the right to view the construction in progress and
shall have access to the site for the purpose of equipping the Project and
preparing the Project for operation.
Section 2.12 - Punch-List. If, at any time after the Project has been
Physically Completed, there shall exist any item or items requiring completion
or correction, then the Developer agrees to use all reasonable diligence to
complete or correct such item or items so that each conforms to the Final
Plans. The parties shall make a Punch-List of the items requiring completion
or correction (the "Punch List"). Each item on the Punch-List shall be
assigned a reasonable value based upon the reasonable cost of completion or
correction of the same or such other value as may be required by the Owner's
lender ("Punch-List Amount"). The Developer shall give its written undertaking
to complete each such item within forty-five (45) days (or such other period of
time as is mutually agreed upon by the parties) after transfer of title,
further agreeing to permit the Owner to complete any such items, at the
Developer's expense, if the Developer has failed to complete the same within
the forty-five (45) day time period.
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Section 2.13 - Work and Warranties. Upon completion of construction,
landscaping and installation of Personal Property, the Developer will assign to
the Owner, in addition to an warranties created by law, all warranties and
guarantees received from designers, the general contractor and suppliers of
equipment and furnishings, to the extent assignable. The Developer will agree
to remedy any defect in construction caused by poor workmanship or materials
which are brought to its attention by written notice within a period of one (1)
year from the date of the issuance of the Certificate of Occupancy. Aside from
the foregoing, the Owner hereby waives and the Developer hereby disclaims all
other expressed, and implied warranties of every kind or nature with respect to
the Project and the Personal Property, including, without limitation, waiving
all IMPLIED WARRANTIES OF MERCHANTABILITY AND FITNESS FOR A PARTICULAR PURPOSE.
Section 2.14 - Subcontractors. The Developer agrees to indemnify and
save the Owner harmless from claims for payment by any subcontractor who
furnishes materials or supplies or performs labor or services in the
prosecution of the work pursuant to this Agreement. The Developer will select
subcontractors acceptable to Owner in its sole discretion.
Section 2.15 - Financing Arrangements.
(a) The Owner will obtain the Project Loan which shall be
sufficient, together with the Owner's equity contributions if necessary (which
shall in no event exceed ten percent (10%) of the Contract Price) to pay the
full amount of the Contract Price. This Agreement may be terminated by either
the Developer or the Owner without further recourse to either party (except for
reimbursement of Project related expenses) in the event that the closing and
funding of the construction loan financing with respect to the Project pursuant
to the Project Loan (with all conditions precedent to such closing either
satisfied or irrevocably waived by the lender) shall not have occurred by
__________.
The Owner and the Developer also contemplate that the Property and
Project, together with all fixtures, furnishing, equipment, and articles of
personal property now owned or hereafter acquired by the Owner which are or may
be attached to or used in connection with the Property or Project, together
with any and all replacements thereto and substitutions therefor, and all
proceeds thereof; and all present and future rents, issues, leases, and profits
of the Property and Project will serve as security for the payment obligations
to any lenders relating to the Project Loan or otherwise, and that the Owner
will be the principal obligor for the repayment of all financial obligations
thereunder after the transfer of title to the Owner. The Owner therefore,
agrees to execute and deliver all commitments, promissory notes, mortgages,
collateral assignments, documents, certificates, affidavits, and other writings
required to be executed by any lender in connection with such financing.
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ARTICLE III
Closing
Section 3.1 - Date of Closing. The delivery of possession of the
Property and Project to the Owner and payment of the Contract Price, less one
hundred fifty percent (150%) of the value of the Punch-List, shall take place
contemporaneously within three (3) working days after Physical Completion of
the Project but in no event later than the date established in Section 2.9 (the
"Closing"); provided, however, that the Developer has completed its obligations
as set forth in this Agreement, including, but not limited to, Sections 2.10
and 2.13.
Section 3.2 - Contract Price.
(a) The price to be paid by the Owner to the Developer for the
development, construction and furnishing of the Project and for the Property
shall be ____________________________________ Dollars ($_________________) plus
the reasonable costs incurred as the result of any unforeseen site conditions
and cost of F F & E in excess of the F F & E Allowance approved by Owner (the
"Contract Price").
(b) In addition to the Contract Price, if the Closing does not
take place within three (3) business days after Physical Completion due to
delays incurred through the fault of or through circumstances under the control
of the Owner, the Owner shall pay to the Developer interest, payable monthly in
arrears, on the Contract Price accruing from the date which is three (3) days
after Physical Completion to the date of which is three (3) days after delivery
of possession of the Project pursuant to Section 3.1; such monthly interest
shall be computed at a rate equal to the Prime Rate as announced by Bank One,
N.A. from time to time plus two percent (2%) per annum.
Section 3.3 - Payment of Contract Price. At the time of transfer of
title, the balance of the Contract Price not paid through the Developer's
requisitions under the construction financing for the Project shall be paid by
the Owner to the Developer by wire transfer, certified check or other mutually
acceptable means less any Punch-List Amount or retainage required by the
Owner's lender.
Section 3.4 - Form of Conveyance and Status of Title. The Project and
Personal Property shall be conveyed by warranty bill of sale. The Project and
Personal Property may be subject to the mortgages and security interests
described in Section 2.15.
ARTICLE IV
Additional Responsibilities of Parties
Section 4.1 - The Developer's Responsibilities. In addition to its
obligations elsewhere expressed in this Agreement, the Developer shall have the
following responsibilities:
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(a) To obtain and pay for necessary building permits and the
Certificate of Occupancy;
(b) To pay for all labor and material required to develop,
construct and furnish the Project in accordance with the Final Plans (except as
otherwise expressly set forth herein) and to pay for the Personal Property to
be provided;
(c) The Developer shall at all times, commencing with the date
upon which construction begins, carry the following types of insurance with an
insurance carrier or carriers acceptable to the Owner and Owner's lender:
(i) workman's compensation insurance fully covering all persons
engaged in the performance of this Agreement, in accordance with applicable
law.
(ii) Public liability insurance covering death or bodily injury
with limits of not less than $300,000 for one person and $1,000,000 for any one
accident or disaster; and property damage coverage limits of not less than
$100,000; all of which insurance shall name the Owner and Owner's lender as an
additional insured.
(iii) "Builders Risk" insurance against damage or destruction by
fire and full extended coverage, including vandalism and malicious mischief,
covering all improvements to be erected hereunder and all materials for the
same which are on or about the Property, in an amount equal to the full
insurable value of such improvements and materials; such insurance to be
payable to the Owner, the Developer and the Owner's lender as their interests
may appear, with a standard mortgagee endorsement to the Owner's lender or its
assigns as mortgagee.
The Developer shall furnish to the Owner and the Owner's lender if
required by such lender, duplicate policies of insurance as set forth in
subparagraphs (i), (ii), and (iii) hereof. Each of such policies shall, if the
insurance carriers so permit, contain a provision to the effect that they may
not be canceled except upon ten (10) days prior written notice to the Owner and
the Owner's lender.
(d) At Closing, the Developer shall deliver to the Owner, at the
Owner's option:
(i) duly executed waivers of mechanic's liens signed by
each subcontractor which provided labor or materials on the Project; or
(ii) reasonable proof of payment or proof of a provision
for payment to such subcontractors; or
(iii) an indemnification to the Owner with respect to same.
Section 4.2 - The Owner's Responsibilities. In addition to its
obligations elsewhere expressed in this Agreement, the Owner shall have the
following responsibilities:
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(a) To expeditiously pursue obtaining commitments for financing
the contemplated construction, including the furnishing of financial
statements, providing an appraisal of the Property and Project and by execution
of applications, notes, mortgages, assumption agreements and other documents
reasonably necessary to effectuate such financing or the financing of the
Personal Property.
(b) To pay for all professional and other staff personnel required
for the pre-opening and operation of the Project in sufficient time to permit
licensure by the Department at the date of physical completion.
(c) To Pay to the Developer, in addition to the Contract Price,
the costs approved by Owner for correcting unusual site conditions. Such
payment shall be made on the basis of the actual costs of correcting the same
plus ten percent (10%) of such costs to cover the Developer's overhead expenses
and shall be due and payable upon the transfer of title to the Owner. For the
purpose of this Agreement, the term unusual site conditions shall include,
without limitation, any of the following which have not been noted in the Final
Plans or otherwise disclosed in the due diligence materials:
(i) unusual soil or water conditions requiring
extraordinary preparation, i.e., piles, curtain drains, retaining
walls, blasting or rip-rap;
(ii) tying in of water, sewer or other utility services
beyond the locations as shown in the Final Plans;
(iii) holding tanks and pumps for the water system or the
sprinkler system;
(iv) water purification or filter system;
(v) leaching field; and
(vi) any requirement imposed upon the Developer by
governmental agencies having jurisdiction, if not provided for in the
Final Plans, because of reasons other than errors or omissions in such
Final Plans, such as requirements imposed as conditions for the
granting of any of the Approvals.
(d) The Owner shall be solely responsible for the removal of any
hazardous wastes and materials, if any, from the Property, at the Owner's sole
cost and expense, and not as part of the Contract Price.
Section 4.3 - Indemnification. The Developer hereby agrees to
indemnify and hold the Owner harmless from all liabilities, claims, and demands
for personal injury or property damage arising out of or caused by any act or
omission of the Developer, its subcontractors, agents, or employees, or arising
in or about the Property at any time from the date of this Agreement until
transfer of title. The Developer further covenants to use proper care and
caution in the performance of its work hereunder so as not to cause damage to
any adjoining or adjacent
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property, and the Developer shall indemnify and hold the Owner harmless from
any liabilities, claims, or demands for damage to such adjoining or adjacent
property.
ARTICLE V
Contingencies
Section 5.1 - Required Occurrences. This Agreement and the
undertakings of the Developer shall, at the election of the Owner be contingent
upon the occurrence of each of the following:
(a) Approvals. All of the Approvals and current utility
availability letters shall have been obtained by _.
(b) Title. An Owner's title insurance policy commitment and Class
A-2 ALTA survey, satisfactory to the Developer, in its sole discretion, shall
have been obtained by the Owner which confirms that there are no exceptions or
conditions which would render title to the Property unmarketable or which will
prohibit or restrict the construction or operation of the Project or which
would prevent an institutional lender from closing a construction or permanent
mortgage loan for the Project in the usual course of its business.
(c) Additional Due Diligence Regarding the Property. The
Developer shall have received due diligence information concerning the
Property, satisfactory to the Developer, in its sole discretion, including,
without limitation, soil tests and utility service confirmations to the extent
not currently available. On or before the expiration of any inspection periods
regarding the Property, the Developer shall notify the Owner of any issues.
(d) Purchase of the Property. The Owner shall have purchased good
record, marketable fee simple title to the Property as set forth in Section 1.1
by ________________________________________________________________________.
(e) Construction Financing. The Owner shall have received
construction financing in the full amount of the Contract Price by
________________________________________________________________________________
___________________.
Section 5.2 - Failure of Contingencies. In the event that any one or
more of the contingencies set forth in this Article is not satisfied, waived or
deferred by the parties in writing, within the period of time set forth above,
then, upon Notice, either party may terminate this Agreement. In such event,
neither party shall have any further responsibility or liability to the other.
The Developer reserves the right, at its option, to waive or defer any one or
more of the conditions precedent.
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ARTICLE VI
Additional Covenants of The Owner and The Developer
Section 6.1 - Indemnification by The Owner. The Owner hereby
indemnities and defends the Developer against any claims for unpaid fees or
costs associated with the Property or the Project incurred by or on behalf of
the Owner or the Developer as a result of any claim by any broker. The parties
acknowledge that no broker was responsible for procuring the transactions set
forth in this Agreement, nor any part hereof, and each party will indemnify and
defend the other from any and all claims, actual or threatened, for a
commission or other compensation by any third person with whom such party has
had dealings.
Section 6.2 - Confidentiality. The Owner, its partners, affiliates,
agents, servants and employees and the Developer, its affiliates, agents,
servants and employees hereby agree:
(a) To maintain in the strictest confidence the identity of the
other party; the contents of this Agreement; the negotiations between the
parties on the terms of this Agreement; and any of the Owner's proprietary
information, including, without limitation, architectural designs and plans,
construction plans and specifications and standards, financing sources, and
other information regarding the Project and the business affairs and operations
of the Owner and the Developer's proprietary information, including, without
limitation, financial information, projects, copies of leases, real estate
appraisals, and other information regarding the Project and the business
affairs and operations of the Developer which any of said parties obtain from
the other party in the course of negotiations for or performance of the
transactions contemplated hereby (the "Confidential Information");
(b) Not to disclose, without the other party's prior written
consent (except to the extent disclosure is required by applicable law or
regulation), any Confidential Information except to such parties, own agents,
servants and employees, bankers, consultants and other advisors to whom
disclosure is necessary in order to effectuate the transactions contemplated
hereby; and
(c) To comply therewith for a period of two (2) years commencing
on the date of this Agreement.
Section 6.3 - Provision of Further Information. The Developer agrees
to supply complete financial information and any other data required in
connection with the construction or permanent financing for the Project and to
execute, and cause to execute, any and all documents which are required by the
terms thereof.
Section 6.4 - Management Agreement. The Owner agrees that the
Developer or its affiliate shall have the right to manage the Project beginning
approximately one hundred twenty (120) days prior to completion pursuant to the
terms of a Management Agreement, substantially in the form attached hereto as
Exhibit "J".
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ARTICLE VII
Concluding Provisions
Section 7.1 - Entire Agreement. All prior understandings, letters of
intent, and agreements between the parties are merged in and superseded by this
Agreement (including all Exhibits hereto).
Section 7.2 - Representations. None of the parties shall be bound by
any promises, representations, or agreements except as herein expressly set
forth.
Section 7.3 - Amendments. This Agreement may not be amended, waived,
modified, altered or changed in any respect whatsoever except by a further
agreement, in writing, executed by each of the parties and consented to by the
Owner.
Section 7.4 - Joint Effort. The preparation of this Agreement has
been a joint effort of the parties, and the resulting document shall not be
construed more severely against one of the parties than the other.
Section 7.5 - Brokers. Each of the Owner and the Developer represents
and warrants to the other that no broker or finder has acted on its behalf in
connection with this Agreement or the transactions contemplated hereby or
referred to herein; and each agrees to indemnify and hold and save the other
harmless from any claim or demand for commission or other compensation by any
broker, finder or similar agent claiming to have been employed by or on behalf
of such party.
Section 7.6 - Assignment. The Developer shall have no right to assign
has rights nor delegate its obligations under this Agreement to another entity
or person without the prior written consent of the Owner except that the
Developer shall have the right to assign this Agreement to, merge with or
consolidate with an "Affiliate" (defined herein as defined in the Securities
and Exchange Act of 1934 and the regulations thereunder) in connection with a
public offering, merger or transfer.
Section 7.7 - Notices, All notices which may be given to any of the
parties hereunder shall be in writing and shall be hand delivered or sent by
registered or certified mail, return receipt requested, or by Federal Express,
and postage prepaid as follows:
(a) In the event that notice is directed to the Owner, it shall be
sent to Tri Point Communities, L.P., 14160 Dallas Parkway, Suite 300, Dallas,
Texas 75240, Attn: Charles Allison, Vice President, or at such other address or
addresses the Owner shall from time to time designate by notice to the
Developer.
(b) In the event that notice is directed to the Developer, it
shall be sent to Capital Senior Development, Inc., 14160 Dallas Parkway, Suite
300, Dallas, Texas 75240, Attn: James
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Bloomquist, Vice President, at the same address; or at such other address or
addresses as the Developer shall from time- to-time designate by notice to the
Owner.
The effective date of any such notice shall be the earlier of actual receipt by
the addressee or three (3) days after such notice is properly deposited for
mailing.
Section 7.8 - Arbitration. Any dispute or controversy arising between
the parties involving the interpretation or application of any provisions of
the Agreement, or arising out of this Agreement, or concerning the construction
of the proposed Project or the furbishing thereof shall be submitted to and
determined by arbitration in accordance with the rules of the American
Arbitration Association then in effect.
Section 7.9 - Captions. The captions of this Agreement are for
convenience and reference only and in no way define, describe, extend or limit
the scope or intent of this Agreement or the intent of any provision hereof.
Section 7.10 - Successors. This Agreement shall be binding upon the
parties hereto, their respective heirs, executors, administrators, successors,
and assigns.
Section 7.11 - Counterparts. This Agreement may be executed in
counterparts, each of which shall be deemed an original.
Section 7.12 - Severability. The invalidity or unenforceability of
one or more of the phrases, sentences, provisions, clauses, Sections or
Articles contained in this Agreement shall not affect the validity or
enforceability of this remaining portions so long as the material purposes of
this Agreement can be determined and effectuated.
Section 7.13 - Effective Date. This Agreement shall be deemed to be
effective as of the date set forth below.
Section 7.14 - No Offer. The delivery of an unexecuted copy of this
Agreement shall not be deemed an offer. No rights are to be conferred upon any
party until this Agreement has been executed and delivered to each party.
Section 7.15 - Governing Law. This Agreement shall be governed by the
laws of the State of Texas.
Dated this ____ day of ____________, 199__ and executed under seal.
TRI POINT COMMUNITIES, L.P.
By:
-------------------------
Name:
Title:
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CAPITAL SENIOR DEVELOPMENT, INC.
By:
-------------------------
Name:
Title:
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EXHIBITS A - I
Documents in Planning and Zoning Files
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EXHIBIT 10.31
DEVELOPMENT AND TURNKEY SERVICES AGREEMENT
This Development and Turnkey Services Agreement (this "Agreement") is
entered into by and between Capital Senior Living Corporation, a Delaware
corporation ("Capital"), and Tri Point Communities, L.P., a Texas limited
partnership ("Tri Point"), this 1st day of September, 1997.
RECITALS:
WHEREAS, Tri Point has been established to own and/or operate assisted
living facilities, independent living facilities, skilled nursing facilities
and other related medical facilities (each a "Facility" and collectively the
"Facilities"); and
WHEREAS, Tri Point desires to have Capital develop, construct, market
and manage the Facilities; and
WHEREAS, Capital and its related entities have expertise in
coordinating the development and construction of assisted living facilities,
independent living facilities, skilled nursing facilities and other related
medical facilities;
NOW THEREFORE, for good and valuable consideration, the receipt and
sufficiency of which are hereby acknowledged, and in consideration of the
undertakings of each of the parties to the other, the parties hereto agree as
follows:
1. Engagement. Tri Point hereby retains Capital and Capital
hereby agrees to provide the Services as set forth in Section (2) below.
2. Capital's Duties. Capital's duties under this Agreement shall
be divided into three (3) phases, a development phase, construction phase, and
a post-construction phase (collectively, the "Services"), and shall be as
follows:
I. Development Phase
(a) Filing of Applications for Permits, Consents and Approvals.
Coordination, advice, recommendations and consultations with respect to the
filing of all necessary documents required by any applicable federal, state or
local government under applicable law in order obtain any required permit,
approval, consent or certificate ("Permit"), including, without limitation, any
applicable certificate of need for any Facility, including, without limitation,
the preparation and filing by or on behalf of Tri Point of application forms,
notices of intent to file and other legal notices.
(b) Prosecution of Permit Applications and Appeals. Prosecution
of Permit applications, preparation of responses to appropriate governmental
agencies comments with respect to completeness review as to Permit applications,
preparation of responses to taxpayer groups and others with respect to such
applications, including attendance at public hearings and meetings with
community groups and health planning organizations. Capital shall appeal with
all due diligence,
<PAGE> 2
on behalf of Tri Point, any denials of Permit applications or challenges to the
granting thereof which Tri Point elects to contest. The cost of such appeals
shall be included in the Contract Price (as defined herein) of each Facility.
(c) Site Selection. Capital shall assist Tri Point in locating an
appropriate site for each Facility ("Site"). Capital shall be responsible for
obtaining financing on behalf of and acceptable to Tri Point for all funds
necessary to secure land options, purchase agreements and to acquire all land,
easements, rights of way and rights of egress or ingress for any such Site;
provided, however, that prior to incurring any non-refundable costs and expenses
with respect to the location and/or procurement of any such Site, Capital shall
first obtain the written approval of Tri Point as to the amount thereof. At
Capital's cost (to be included in each Contract Price), the amount of which
shall be subject to Tri Point's prior approval, Capital shall order a Phase I
Environmental Report to determine the presence or absence of hazardous waste or
materials on any such Site. At Capital's cost (to be included in each Contract
Price), Capital shall coordinate the title examination to determine that the
Site is not subject to any easements, encumbrances, restrictions or agreements
which adversely affect the ability of Capital to develop and construct the
Facility or the ability of Tri Point to operate the intended Facility thereon.
To date, Capital has identified and Tri Point has approved for development each
of the Sites identified on Exhibit A attached hereto.
(d) Zoning Approvals. Capital shall provide assistance in
obtaining all applicable governmental permits and approvals for the construction
of each Facility, including, without limitation, coordination, advice,
recommendations and consultations with respect to the filing of all necessary
documents to obtain zoning and inland/wetlands approvals ("Zoning Approvals");
Capital shall prepare all applications for and prosecute the same for all Zoning
Approvals required for any Facility. All filing, notice and reasonable legal
fees in connection therewith shall be included in the Contract Price. Capital
shall not have the right to retain legal counsel without the prior approval of
Tri Point which shall not be unreasonably withheld, delayed or conditioned.
(e) Tri Point Representative. Tri Point shall appoint a
representative to communicate with Capital with respect to each Facility (the
"Tri Point Representative"). Capital shall, on a periodic basis not less
frequently than bi-weekly (or more frequently as reasonably requested by Tri
Point) communicate in person or by telephone (at Tri Point's option) with the
Tri Point Representative to report with respect to the progress and status of
each Facility and to obtain the opinions, views and direction of the Tri Point
Representative with respect to the completion of each Facility.
(f) Decision Making. Nothing herein shall be construed as imposing
any obligation on Tri Point to proceed with the construction of the Facilities
whether or not the Zoning Approvals for the applicable Facilities are granted,
it being understood and agreed that Tri Point shall have a period of thirty (30)
days after written notice from Capital to Tri Point of the issuance of a final,
non-appealable Zoning Approvals (the "Election Deadline") in which to make such
determination as to such Facility and it being further understood and agreed
that, except as otherwise provided in this Agreement, in the event Tri Point so
elects to proceed, it shall then enter into a development agreement in the form
attached hereto as Exhibit B (the "Development Agreement" and collectively
"Development Agreements") with Capital with respect to the applicable Facility
within ten (10) days after the Election Deadline. In the event Tri Point fails
to notify Capital of its determination within such thirty (30) day period, Tri
Point shall be deemed to have elected, and shall be obligated to
2
<PAGE> 3
proceed with,the Facility. In such event, Capital may transmit a copy of any
such Development Agreement executed by a representative of Capital to Tri Point
and within five (5) days of receipt of such agreement, Tri Point shall cause an
authorized representative to execute such copy and return the same to Capital.
II. Construction Phase
Upon the execution of a Development Agreement for a Facility, the
parties' rights and obligations shall be as described in each Development
Agreement which shall include, without limitation, the following:
(a) Plans and Specifications. All of the Facilities shall be
constructed by Capital pursuant to plans and specifications approved by Tri
Point in all material respects.
(b) Contract Price. The contract price for the construction and
furnishing (subject to an allowance set forth below) of the subject Facility
under the applicable Development Agreement (herein the "Contract Price") shall
be an amount equal to the costs incurred by Capital in the development and
construction of such Facility plus an amount to be agreed upon between four
percent (4%) and seven percent (7%) for overhead and profit.
(c) FF&E. The Contract Price for each Facility will include an
allowance ("FF&E Allowance") for furniture, fixtures & equipment ("FF&E") equal
to the amount of the allowance therefor as agreed upon by Capital and Tri Point.
Tri Point will make selections in a timely fashion and all items will be ordered
by Capital. Any amounts expended for FF&E above the FF&E Allowance therefore
will be an increase adjustment to the Contract Price, the cost of which will be
passed through to Tri Point at Capital's actual cost. Capital will endeavor to
obtain the lowest possible cost for such items. Prior to incurring any costs
in excess of the FF&E Allowance, Capital shall use its reasonable best efforts
to notify Tri Point in writing of the estimated amount of such excess. Capital
will, upon request, provide Tri Point with documentation of the costs incurred
by Capital for which reimbursement is sought.
(d) Unusual Site Conditions. The costs by Capital in remedying
unusual site conditions will be an increase adjustment to the Contract Price
for each Facility to the extent that such costs exceed an agreed upon allowance
therefor as a result of unusual site conditions not identifiable by Capital
after the exercise of reasonable diligence at the time the Site was acquired.
At such time as Capital becomes aware of any such unusual site conditions,
Capital shall promptly notify Tri Point of the same and of the amount by which
the estimated cost to correct said site conditions shall exceed such allowance.
Capital will endeavor to obtain the lowest possible cost in remedying such
unusual site conditions and will charge Tri Point for Capital's actual cost
incurred.
(e) Financing. Capital will arrange for the provision of
construction and permanent financing for each of the Facilities on terms
acceptable to Tri Point, in its sole discretion. Notwithstanding the foregoing,
Capital shall not have any obligation to guaranty the payment or performance
obligations of Tri Point under the terms of such financing.
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<PAGE> 4
(f) Occupancy Development Program. Capital will prepare and
recommend to Tri Point, for its approval, an occupancy development program for
the Facility and budget for the cost of such program which shall include the
planning and arranging for the creative services, production, type, mix, copy,
placement and purchase of the material and media as necessary to implement said
occupancy development program.
III. Post-Construction Phase
Each Facility unless otherwise agreed upon by Tri Point and Capital
prior to the execution of the Development Agreement, shall be managed by Capital
Senior Living, Inc. or an affiliate of Capital Senior Living, Inc. ("Manager")
pursuant to the terms of a Management Agreement (a copy of which shall be
attached to the Development Agreement as an exhibit thereto) in form and
substance mutually agreeable to the parties ("Management Agreement"). Manager
shall be responsible for establishing all policies and objectives for the
Facility subject to the approval of Tri Point. In the event of the termination
of the Management Agreement, Tri Point may either elect to manage the Facility
itself or may select such management firm as it desires.
The parties' rights and obligations shall be as described in each
Management Agreement which shall include, without limitation, the following:
(a) Manager shall provide consultant and management services,
install operating procedures and take such steps as it deems necessary, all
subject to and in accordance with the policies and guidelines approved by Tri
Point to prepare the Facility for occupancy and operation.
(b) Manager shall recruit and train, at its expense a competent
executive director acceptable to the Tri Point for the supervision of the
administrative functions of each Facility. Such executive director shall be
qualified to meet the requirements established by all federal, state and/or
local administrative bodies or agencies having jurisdiction over each Facility.
(c) Manager shall assist Tri Point in the licensing, equipping and
staffing phases of each Facility. The staff of each Facility shall be employees
of the Manager.
(d) Manager shall furnish and install operating procedures, systems
and controls developed by it for the purposes of providing effective management
techniques and functions for the benefit of the Residents of each Facility.
(e) Manager shall assist in the preparation of each initial
operating budget and annual operating budgets for each Facility for each year of
the term of the Management Agreement. Following the initial occupancy of each
Facility, Manager will report to Tri Point at least once each month on the
financial status of each Facility during the previous month.
(f) Manager shall receive a monthly management fee under the
Management Agreement equal to five percent (5%) of Gross Revenues generated
during the proceeding month provided that the monthly management fee shall not
be less than Five Thousand Dollars ($5,000.00), and a marketing lease-up fee of
Five Hundred Dollars ($500.00) for each unit leased at the time the unit is
initially occupied.
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<PAGE> 5
(g) The Management Agreement shall also provide, at the option of
Capital, that Capital will have the right to lease each Facility upon the terms
and conditions set forth in a mutually agreeable lease agreement (which shall
be attached to each Management Agreement as an Exhibit thereto).
3. Agency. Capital shall be designated as Tri Point's agent for
purposes of performing all of the above services; provided, however, that
Capital shall consult with and secure the approval of Tri Point prior to signing
any applications or documents in Tri Point's name.
4. Costs and Expenses. Capital shall be responsible for all costs
and expenses incurred by Capital in the performance of its obligations
hereunder, including but not limited to, the payment of all compensation and
benefits to employees of Capital and any normal and customary transportation or
incidental business related expenses incurred by employees of Capital. In the
event a final, non-appealable Permit is not granted or final and a Facility is
not constructed or in the event Tri Point elects not to proceed with a project
after the granting thereof in accordance with the terms contained hereinabove,
to the extent not previously or directly paid by Tri Point, Tri Point will
reimburse Capital for all reasonable and documented out-of-pocket expenses
incurred by it, if any, in connection with the provision of the foregoing
services.
5. Independent Agreements. The agreements with respect to each
Facility as set forth herein are independent of the agreements with respect to
any other Facilities since there is no guaranty that a suitable Site or other
condition precedent will be met with respect to any particular Facility.
6. Indemnity. Capital agrees at all times to indemnify and defend
Tri Point affiliates, and its respective employees, officers, directors,
servants and agents (collectively, the "Tri Point Parties") and hold and save
the Tri Point Parties harmless of and from and against any and all liabilities
and indebtedness, obligations, losses, damages, costs and expenses (including
reasonable attorneys' fees) suffered or incurred by the Tri Point Parties by
reason of any claim or demand brought by anyone or any action or proceeding
instituted or judgment rendered against the Tri Point Parties arising out of or
resulting in any manner from Capital's breach or failure to perform Capital's
material obligations, responsibilities or duties as required by this Agreement,
Capital's failure to be appropriately licensed to perform the services required
of it hereunder, or any negligent willful act or omission of Capital or any of
its subcontractors, agents or employees.
Tri Point agrees at all times to indemnify and defend Capital and its
affiliates and their respective employees, officers, directors, servants and
agents (collectively, the "Capital Parties") and hold and save the Capital
Parties harmless of and from and against any and all liabilities and
indebtedness, obligations, losses, damages, costs and expenses (including
reasonable attorneys' fees) suffered or incurred by the Capital Parties, by
reason of any claim or demand brought by anyone or any action or proceeding
instituted or judgment rendered against the Capital Parties arising out of or
resulting in any manner from Tri Point's breach or failure to perform, Tri
Point's material obligations, responsibilities or duties as required by this
Agreement, or any negligent willful act or omission of Tri Point or any of its
subcontractors, agents or employees.
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<PAGE> 6
7. Termination. Tri Point and Capital shall not be required to
proceed with the execution and delivery of any additional Development Agreements
for additional Facilities in the event of a material default by the other party
with respect to one or more Facilities then under construction which is not
cured within any applicable cure period provided for in the applicable
Development Agreement. In the event of the termination of any Development
Agreement, any amounts due on account of services performed prior to the
effective date of termination which have not been previously paid will be paid
(pro rata through the effective date of termination) promptly following
termination less any damages sustained by the non-breaching party as a result
of the breach. Any such termination shall not affect the rights of the parties
under this Agreement which relate to events prior to such termination, including
without limitation, rights under this Section 7.
8. Notices. All notices which may be given to any of the parties
hereunder shall be in writing and shall be either sent by telecopy transmission
to a telecopy machine located in the office of Tri Point or Capital, as the case
may be, or hand delivered or sent by registered or certified mail, return
receipt requested, or by Federal Express or similar nationally recognized
overnight delivery servicer providing a receipt, and postage prepaid as follows:
To Capital:
Capital Senior Living Corporation
14160 Dallas Parkway, Suite 300
Dallas, Texas
Attention: Keith N. Johannessen, President
With a copy to:
Capital Senior Living Corporation
14160 Dallas Parkway, Suite 300
Dallas, Texas
Attention: David R. Brickman, VP and General Counsel
To Tri Point:
Tri Point Communities, L.P.
14160 Dallas Parkway, Suite 300
Dallas, Texas
Attention: Charles W. Allison, Vice President
Such addresses may be changed from time to time by notice from Tri
Point or Capital to the others.
The effective date of any such notice shall be the date of actual
receipt at Tri Point's address or Capital's address, as applicable, if hand
delivered, sent by overnight delivery or sent by facsimile transmission or
registered mail, or three (3) days after such notice is properly deposited for
mailing if sent by United States mail.
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<PAGE> 7
9. General Provisions:
(a) Gender, Number. Whenever the context requires, the use herein
of (i) the neuter general includes the masculine and feminine genders; and (ii)
the singular number includes the plural number.
(b) Entire Agreement. This Agreement and any document executed
pursuant hereto contains the entire agreement between the parties relating to
the transactions contemplated hereby and all prior or contemporaneous
agreements, understandings, representations and statements, oral or written, are
merged into and superseded by this Agreement.
(c) Modifications. No modifications, waiver or discharge of this
Agreement will be valid unless it is in writing and signed by the parties
hereto.
(d) Attorneys' Fees and Costs. If either party commences an action
for the interpretation, reformation, enforcement or rescission of this
Agreement, the prevailing party will be entitled to recover from the other party
reasonable attorneys' fees and court and other costs incurred, including without
limitation, its costs and fees on appeal.
(e) Counterparts. This Agreement may be executed in any number of
counterparts, each of which shall be deemed to be an original, but all of which
together will constitute one instrument.
(f) Applicable Laws. This Agreement shall be construed and
enforceable in accordance with the laws of the Texas.
(g) Time of Essence. Time is strictly of the essence with respect
to each and every term, condition, obligation and provision herein.
(h) Further Instruments. Each party hereto shall from time to time
execute and deliver such further instruments as the other party or its counsel
may reasonably request to effectuate the intent of this Agreement.
(i) Joint Effort. The preparation of this Agreement has been a
joint effort of the parties, and the resulting document shall not be construed
more severely against one of the parties than the other.
(j) Captions. The captions of this Agreement are for convenience
and reference only and in no way define, describe, extend or limit the scope or
intent of this Agreement or the intent of any provision hereof.
(k) Severability. The invalidity or unenforceability of one or
more of the phrases, sentences, provisions, clauses, sections or Articles
contained in this Agreement shall not affect the validity or enforceability of
the remaining portions, so long as the material purposes of this Agreement can
be determined and effectuated.
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<PAGE> 8
(l) Exhibits. The Exhibits attached to this Agreement are hereby
incorporated by reference and made a part of this Agreement.
(m) Successors. Subject to the limitations on assignment set forth
in Section 9(o), this Agreement shall be binding upon the parties hereto, their
respective successors and assigns.
(n) Brokers. Each of Tri Point and Capital represent and warrant
to the other that no broker or finder has acted on its behalf in connection with
this Agreement, or the transactions contemplated hereby or referred to herein.
Each of Tri Point and Capital agrees to indemnify and hold the other harmless
from any claim or demand for commission or other compensation by any broker,
finder or similar agent claiming to have been employed by or on behalf of such
party.
(o) Assignment. Tri Point shall have no right to assign its rights
or delegate its obligations under this Agreement to another entity or person
without the prior written consent of Capital except that this Agreement, or
this Agreement as it relates to a specific Facility, may be assigned by Tri
Point, in whole or in part, to an affiliate of Tri Point without the consent of
Capital, provided that Tri Point shall remain primarily liable for payment and
performance of all obligations under this Agreement after the assignment.
Capital shall have no right to assign its rights or delegate its obligations
under this Agreement to another entity or person without the prior written
consent of Tri Point, except that this Agreement may be assigned by Capital, in
whole or in part, to an affiliate of Capital without the consent of Tri Point,
provided that Capital shall remain primarily liable after such assignment. Each
of Tri Point and Capital shall promptly provide the other with notice of an
assignment permitted by the terms hereof without the consent of the other party.
The term "affiliate" shall mean any entity which is controlled by, under common
control with, or which controls, Tri Point or Capital, as the case may be.
(p) Cooperation. Both parties agree that they shall cooperate with
each other in allowing Capital to perform its duties under this Agreement,
including, without limitation, Tri Point providing prompt responses to all
inquiries made by Capital in connection with all aspects of the work for each
Facility, including, without limitation, the selection of the FF&E for each
Facility and all background documentation (including without limitation
financials, census data and corporate documents) needed to complete, file and
prosecute the Permit applications and Zoning Approvals and will sign all
applications as necessary.
(q) Development Agreement to Control. In the event that any of the
terms or conditions set forth herein are inconsistent with or contrary to any
of those set forth in an applicable Development Agreement for a Facility, then
the terms and conditions set forth in such Development Agreement shall control.
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<PAGE> 9
EXECUTED as an instrument under seal effective as of the date first set
forth above.
CAPITAL SENIOR LIVING CORPORATION
By:
-----------------------------------------
Name: Keith N. Johannessen
Its President
TRI POINT COMMUNITIES, L.P.
By:
-----------------------------------------
By:
--------------------------------------
Name:
Its:
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<PAGE> 10
EXHIBIT A
<TABLE>
<CAPTION>
- --------------------------------------------------------------------------------
RESIDENT CAPACITY
- --------------------------------------------------------------------------------
ASSISTED INDEPENDENT SKILLED
SITE LOCATION LIVING LIVING NURSING OWNERSHIP MANAGER
- --------------------------------------------------------------------------------
<S> <C> <C> <C> <C> <C>
</TABLE>
10
<PAGE> 11
EXHIBIT B
TO
DEVELOPMENT AND TURNKEY SERVICES AGREEMENT
DEVELOPMENT AGREEMENT
Between
CAPITAL SENIOR LIVING CORPORATION
And
TRI POINT COMMUNITIES, L.P.
11
<PAGE> 1
EXHIBIT 10.32
MANAGEMENT AGREEMENT
THIS MANAGEMENT AGREEMENT (the "Agreement") entered into this ______
day of __________________________________, 199______ by and between Tri Point
Communities, L.P., ("Owner"), a ________________________________________
organized under the laws of the state of Texas, and CAPITAL SENIOR LIVING,
INC., ("Capital"), a corporation organized under the laws of the state of
Texas.
PREAMBLE
OWNER by this Agreement is engaging Capital to provide management
services relating to the operation of _________________________ ("Facility"),
a senior living community located in _____________________________________,
________________________________.
This Agreement is founded on the following assumptions:
Owner retains primary responsibility to:
a. Establish the policies of the Facility and to plan
for its short-range and long-range goals.
b. Review and evaluate the performance of Capital in
carrying out the established policies and in
attaining the goals established by Owner.
c. Annually review and approve the budget.
d. Annually review the policies and goals which have
been established.
Capital assumes primary responsibility to:
a. Implement the policies established by Owner.
b. Supervise the day-to-day management of the Facility,
including all resident activities.
c. Provide to Owner full, timely and accurate
information as to past operations.
d. Provide to Owner projections and recommendations
relating to the future operations of the Facility.
The parties therefore agree as follows:
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<PAGE> 2
I. RESPONSIBILITIES OF CAPITAL
A. RECOMMENDED POLICIES. Capital shall recommend policies and
goals to be established by Owner and shall evaluate such
policies and goals on an ongoing basis.
B. MANAGEMENT DUTIES. Capital shall supervise the operation of
the Facility, provide management services, install operating
procedures and oversee day-to-day operations, all subject to
and in accordance with the budgets approved by and policies
established by Owner.
C. MARKETING DUTIES. Capital shall manage and supervise the
marketing program. Capital shall establish and periodically
review the residency agreement and if required, recommend
changes thereof.
D. EMPLOYEES. All Facility-based Employees, including the
administrative employees, shall be employees of Capital.
Capital shall have sole authority over Facility-based
Employees and Non-Facility-based Employees who are directly
responsible for the Facility and all matters pertaining
thereto and shall be responsible for all actions and omissions
of such employees occurring pursuant to Capital's employee
policy manual. All costs of hiring, equipping and providing
the services of Facility-based Employees, including, but not
limited to, compensation, health insurance, employer liability
insurance, payroll taxes, bonding, workers compensation
insurance, benefits and vacations shall be an expense of
Capital. To the extent the above-stated expenses are incurred
in accordance with the Facility Budget or approved by Owner,
they shall be reimbursed from the Facility operations or Owner
as the case may be.
E. OPERATING PROCEDURES. Capital shall develop, install and
maintain operating procedures, systems and controls.
F. FACILITY EXPANSION. Capital shall make recommendations
regarding remodeling or expansion of the Facility.
G. BUDGETS. Capital shall prepare for review and approval by
Owner based on reasonable standards annual operating budgets
for revenue, expense and cash flow of the Facility and a
capital expenditures budget. Budgets shall be prepared in
advance of each fiscal year. Cash flow projections shall
accompany each operating budget. It is to be understood that
budgets are only estimates and guidelines of future results
and that budget overruns may occur from time to time.
H. FINANCIAL CONTROLS. Capital shall establish and maintain a
system of financial controls for the Facility.
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<PAGE> 3
I. MONTHLY FINANCIAL STATEMENTS. Capital shall provide to Owner,
on a monthly basis, financial statements and related financial
reports. Such statements and reports shall be provided by the
20th day after the end of the month. These reports shall be
in the form attached as Exhibit "A."
J. MARKETING REPORTS. Capital shall, on a weekly and monthly
basis, provide sales and occupancy reports to Owner, as well
as the results of the annual resident satisfaction survey.
K. LEGAL COUNSEL. Capital, at Facility expense, shall coordinate
with Owner the utilization of legal counsel relating to
Facility operations.
L. RENTAL COLLECTIONS AND DISBURSEMENTS. Capital shall collect
the revenues from the residents and, on behalf of Owner,
deposit all such funds in a residential depository account at
a FDIC insured bank approved by Owner. The style of the
account shall be in the name of the Facility with designated
representatives from Owner and Capital being the only parties
authorized to draw from said account.
On an as needed basis, Capital shall transfer the funds from
the above stated account into an Operating Expense Account in
the name of the Facility. The account shall be in a FDIC
insured bank approved by Owner. The style of the account
shall be in the name of the Facility with designated
representatives from Owner and Capital being the only parties
authorized to draw from said account. Capital shall pay out
of such Operating Expense Account all operating expenses for
which payment has been approved in accordance with the budget
or approved by Owner (including Capital's Management Fee and
any other sums due to Capital from Owner), and all other sums
properly payable pursuant to any of the provisions of this
Agreement. Capital shall hold, remit or expend the balance of
such funds, if any, as Owner may direct. These funds shall
not be co-mingled with funds from any other projects and/or
facilities managed and/or operated by Capital.
M. ACCOUNTING SYSTEMS AND SOFTWARE. Capital shall provide to
Owner, during the term of this Agreement, appropriate on-site
accounting systems and software, which shall include complete
accounting, bookkeeping and record keeping services for the
Facility, specifically including, but not limited to, resident
billings, accounts payable, accounts receivable, general
ledger and inventory records and maintain demographic
information on the residents. Acquisition of software for
Facility based operations, software maintenance and update
charges will be budgeted expenses of the Facility. Payroll
processing may be delegated to a third party, the cost of
which will be the responsibility of the Facility.
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<PAGE> 4
II. OWNER'S RESPONSIBILITIES
A. POLICIES. Owner shall establish the policies for the
Facility.
B. GOALS. Owner shall establish the short range and long range
goals of the Facility.
C. BUDGETS. Owner shall review and approve budgets for the
operation of the Facility.
D. CAPITAL'S PERFORMANCE. Owner shall review and evaluate the
performance of Capital in carrying out the policies for the
Facility.
E. LEGAL COUNSEL. Owner shall obtain legal counsel to perform
all necessary legal services relating to Owner's ownership of
the Facility.
F. AUDITS. Owner, at its discretion, may engage certified public
accountants to perform annual audits of the Facility as well
as prepare any other reports required for federal or state
regulatory agencies which require licensure and/or
certification. Every quarter, upon receipt of reasonable
notice to Capital, all financial records pertaining to the
Facility will be open for inspection and review by Owner's
representatives. All labor and expense associated with such
review shall be borne by Owner.
G. DIRECTIVES. In order to assure proper coordination, Owner
shall issue any directions concerning the operations of the
Facility only through the President or Vice President of
Capital.
H. OPERATING REPORTS. During the term of this Agreement, Owner
shall, within fourteen (14) days of issuance, furnish to
Capital copies of any and all Facility-related reports,
including the annual audit (if any).
I. CHANGE OF RESIDENCY AGREEMENT. Owner shall not change the
Residency Agreement without consulting with and seeking
approval of Capital unless required to do so to comply with
any applicable law or regulation.
J. DECISIONS. Owner shall examine documents submitted by Capital
and render decisions pertaining thereto promptly to avoid
unreasonable delay.
K. UNIFORM ACCOUNTS. Facility shall use the uniform chart of
accounts recommended by Capital.
L. FURNISHING INFORMATION. Owner agrees at its expense to
install and maintain a computer terminal at the Facility
compatible with the mainframe computer currently in use by
Capital and to transmit data to Capital via telephone lines.
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<PAGE> 5
M. RIGHT OF FIRST REFUSAL (SALE).
1. After the opening of the Facility, Owner hereby
grants to Capital a right of first refusal in the
event that Owner decides to sell the Facility to a
non-affiliated, third party during the initial term
of this Agreement. This right of first refusal shall
be effective only if this Agreement is then in full
operation and effect. Owner shall furnish Capital
with a written copy of the terms and conditions of
the proposed sale, which terms and conditions shall
be certified by Owner as bona fide and Capital shall
have thirty (30) days from the date of receipt of
such written copy within which to notify Owner
whether Capital desires to exercise its rights of
first refusal to purchase the Facility on the same
terms and conditions. If Capital fails to notify
Owner of its desire to exercise its right of first
refusal within such thirty (30) day period, Capital
shall be deemed to have not exercised its right of
first refusal hereunder.
2. If Capital exercises its right of first refusal,
Capital shall have an additional sixty (60) days
following expiration of the thirty (30) day notice
period within which to obtain financing to purchase
the Facility. Capital shall notify Owner whether it
has obtained financing to purchase the Facility
within such sixty (60) day period. If Capital fails
to notify Owner of its having obtained financing
within such sixty (60) day period, Capital shall be
deemed not to have obtained the requisite financing.
3. If Capital gives timely notice of the exercise of its
right of first refusal and having obtained the
requisite financing to purchase the Facility, the
closing on the sale to Capital shall take place
within thirty (30) days after the expiration of the
sixty (60) day period on materially the same terms
and conditions as set forth in the bona fide offer;
provided, however, that Capital shall furnish Owner
with a non-refundable deposit equal to five percent
(5%) of the purchase price, to be credited with
interest earned thereon against the purchase price at
the closing in order to extend the closing for such
thirty (30) day period.
4. If Capital fails to give timely notice of the
exercise of its rights of first refusal or having
obtained the requisite financing to purchase the
Facility, Owner shall be free to close on the sale to
the proposed purchaser, with the closing to take
place within one hundred eighty (180) days after the
failure of Capital to give timely notice, but only on
materially the same terms and conditions as set forth
in the bona fide offer. If such closing to the
proposed purchaser does not occur within
5
<PAGE> 6
such one hundred eighty (180) day period or if the
terms and conditions of the proposed sale are not
materially the same as set forth in the bona fide
offer, the Facility may not be sold without Capital
once again being offered the right to exercise its
right of first refusal hereunder.
5. Capital shall agree to enter into a Subordination
Agreement on reasonable terms and conditions with any
lender from whom Owner obtains a loan secured by the
Facility.
N. OPTION TO LEASE.
The Owner hereby agrees that so long as Capital is not in
default in the performance of any duty or any obligation
hereunder, the Manager shall have the option to lease the
Facility at any time during the term of this Agreement
(including any extension thereof) by providing the Owner with
at least ninety (90) days prior written notice of such
election. Within thirty (30) days after the receipt of the
Manager's notice to lease, the parties shall enter into a
lease agreement substantially in the form attached hereto as
Exhibit "B" (the "Lease"), which Lease shall include, without
limitation, a ten (10) year initial term (with three (3)
five-year renewal terms) and rental payments equal to the fair
market value (which will be a negotiated percentage of total
project costs) as determined immediately prior to the initial
term of the Lease and immediately prior to any renewal terms.
III. INSURANCE.
A. Capital shall maintain, in full force and effect, at the
Facility's expense, the following insurance protecting Owner
and Capital and their officers and employees:
1. Employee's fidelity insurance
2. Workers compensation and employers liability insurance
3. Professional liability insurance
4. Comprehensive general public liability insurance and
overlying umbrella liability coverage against loss or
liability for damages for personal injury or death
occurring on, in or about the Facility.
Such policy or policies shall be written by a responsible
insurance company or companies satisfactory to Owner and in
kind and amounts satisfactory to Owner. Certificates of
insurance showing compliance with the foregoing requirements
shall be furnished by Capital to Owner. Certificates shall
state
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<PAGE> 7
that the policy or policies will not be canceled or altered
without at least 30 days prior written notice to Owner.
B. Owner shall procure and maintain, in full force and effect, at
Owner's expense the following insurance protecting Owner and
Capital and their officers and employees:
1. Property Insurance for loss or damage by fire and
other perils insurable under the broad form of
extended coverage insurance available in the area
where the Facility is located, and improvements, and
contents thereof, constituting all or any portion of
the Facility.
2. Insurance for automobiles owned or hired by Owner and
used in connection with the Facility.
Such policy or policies shall be written by a responsible
insurance company or companies satisfactory to Capital in kind
and amounts satisfactory to Capital. Certificates of
insurance showing compliance with the foregoing requirements
shall be furnished by Owner to Capital. Certificates shall
state that the policy or policies will not be canceled or
altered without at lease thirty (30) days prior written notice
to Capital.
IV. TERM AND TERMINATION OF THIS AGREEMENT.
A. TERM AND TERMINATION WITHOUT CAUSE. This Agreement shall
commence on the date set forth on the first page hereof.
Payment under Section V shall commence on the date of the
first resident move-in. The term of this Agreement shall
continue for a period of ten (10) years from the date of the
first resident move-in (the "Initial Term") and continue for
the Initial Term unless terminated by law or otherwise
according to its terms. Capital shall have the option to
extend the term of this Agreementfor an additional five (5)
year renewal option on the same terms and conditions as herein
provided (the "Extended Term").
B. If Owner terminates the Agreement prior to the expiration of
the Initial Term without cause or if Capital terminates this
Agreement during the Initial Term for cause as provided in
Paragraph IV. B. below, severance compensation in an amount
equal to the then-current monthly management fee times the
number of months remaining in the Initial Term shall be paid
to Capital upon the effective date of termination. Any such
termination shall be effective upon the expiration of the
ninety (90) day period following the giving of the notice or
on such later date as may be specified in the notice.
7
<PAGE> 8
C. TERMINATION FOR CAUSE.
1. This Agreement may be terminated by Owner for cause
for the following reasons:
a. In the event of material breach by Capital of
a material term hereof, which breach is not
cured within sixty (60) days after notice by
Owner.
b. In the event that a petition in bankruptcy is
filed by Capital or its permitted assignee,
or in the event Capital or its permitted
assignee makes an assignment for the benefit
of creditors or takes advantage of an
insolvency act, by notice to Capital or
assignee.
c. In the event that (i) Capital's or any
permitted assignee's corporate existence is
dissolved and the duties under this Agreement
are not assumed by Capital or an affiliate of
Capital (ii), Capital or any permitted
assignee ceases to do business for any
reason, by notice to Capital or such assignee
and the duties under this Agreement are not
assumed by Capital or Capital's Affiliate.
d. At any time after the Initial Term, with or
without cause.
2. This Agreement may be terminated for cause by Capital
in the event that Capital fails to receive
reimbursement of reimbursable expenses or any
compensation due Capital pursuant to the terms of
this Agreement or any other compensation due Capital,
and such failure continues for a period of sixty (60)
days after Capital's written notice thereof to Owner,
however, that this Agreement shall not be so
terminated if Owner pays Capital all such expenses
and compensation then due and payable on or before
the expiration of said sixty (60) day period.
3. No termination of this Agreement shall affect any
obligation owing by either party hereto to the other
which accrued prior to the effective date of such
termination.
C. COVENANTS SURVIVING TERMINATION. The termination of this
Agreement shall not terminate the right of Owner or Capital to
indemnification relating to events occurring during the term
of this Agreement under Article VI. K. and to protection of
Owner's or Capital's property rights under Article VI.B.
8
<PAGE> 9
V. COMPENSATION
A. OPERATIONS MANAGEMENT FEES. Owner shall pay to Capital a fee
in the amount set forth below, payable by the fifteenth day of
each month. Payment shall commence on the date of the first
resident move-in.
1. The amount to be paid monthly shall be 5% of Gross
Revenues generated during the immediately proceeding
month provided that the monthly management fee shall
not be less than Five Thousand Dollars ($5,000.00)
("Monthly Management Fee"). "Gross Revenues" shall
be defined as gross monthly revenues from the
operation of the Facility. Gross Revenues shall not
include (i) security deposits received from residents
and, if applicable, interest accrued thereon for the
benefit of the residents until such deposits or
interest are applied for rental payments; (ii)
proceeds from the sale or depositions of all or any
part of such Facility; (iii) insurance proceeds
received by Owner as a result of any insured loss
(except proceeds for rent loss insurance; (iv)
capital contributions made by any partner of Owner;
(v) loans by Owner; and (vi) proceeds from capital,
financing and any other transactions not in the
ordinary course of operation of such Facility. The
Monthly Management Fee for the Facility shall be
payable monthly in arrears following calculations
thereof upon submission of a monthly statement for
such Facility from Capital. It is agreed between
Owner and Capital that if the Gross Revenues of the
Facility are insufficient to pay all disbursements,
including the Monthly Management Fee or any portion
thereof, then Owner shall remain responsible for such
disbursements. It is further agreed between Owner
and Capital that in no event will any disbursement be
made to Owner from any Facility Account until all
accrued and unpaid fees to Capital and repayments, if
any, to Capital for Capital's advancement of funds to
cover any insufficiencies in such Facility's Rental
or Payroll Account have been paid in full.
2. In addition to the Monthly Management Fee stated
above, Owner shall also pay Capital a marketing
lease-up fee of $500.00 for each unit leased at the
time the unit is initially occupied.
B. CERTAIN EXPENSES. In accordance with the Annual Budgets, the
Facility will reimburse Capital for the cost of reasonable
transportation, lodging and meal expenses for
non-Facility-based employees of Capital or its outside
consultants when traveling in connection with the performance
of the services being performed pursuant to this Agreement,
together with any reasonable long distance telephone expenses,
copying, mailing or
9
<PAGE> 10
express shipments and other miscellaneous out of pocket
expenses that relate to the marketing and management of the
Facility. Relocation, education, professional memberships and
licensing expenses of the Facility-based administrative
employees shall also be an expense of the Facility subject to
Owner's prior approval.
VI. MISCELLANEOUS
A. INSURANCE-SUBROGATION. No indemnity shall be paid to the
other party under this Agreement where the claim, damage,
liability, loss or expense incurred was required to be insured
against by such other party. Any insurance policies obtained
by the parties pursuant to this Agreement shall contain
provisions or have the effect of waiving any right of
subrogation by the insurer of one party against the other
party or its insurer.
B. PROPERTY OF CAPITAL. Trade names, including the name "Product
2000," architectural and design concepts and plans, ideas and
documents, forms, occupancy development material, specifically
for and related to Owner and/or its Facility shall be the
exclusive property of Owner. Trade names, ideas and
documents, forms and occupancy development material, not
directly related to the Facility and supplied by Capital are
to be considered proprietary and will remain the property of
Capital. Either party may only use such materials which are
the property of the other and information in the operation and
management of the Facility, and may not use such materials or
information after termination of this Agreement for the
development or expansion of the Facility or for new projects
for itself or others without the written consent of the party
owning such material or information.
C. STATUS OF PARTIES. It is expressly understood and agreed that
Capital shall act as an independent contractor in the
performance of this Agreement. No provision hereof shall be
deemed or construed to create a partnership or a joint venture
between Owner with respect to the Facility or otherwise.
D. ADDITIONAL ACTION. In order to carry out the intent and
spirit of this Agreement, Owner and Capital will do all acts
and things necessary including the execution of other
agreements.
E. ENTIRE AGREEMENT. This Agreement sets forth the entire
Agreement between Capital and Owner. Any change or
modification of this Agreement must be in writing and signed
by all parties hereto.
F. BINDING EFFECT. This Agreement shall be binding upon and
shall inure to the benefit of the parties hereto, their
successors and assigns.
10
<PAGE> 11
G. ASSIGNMENT, ETC. Except for an assignment by Capital to an
affiliate, Capital shall not, without Owner's prior written
approval (which approval shall not be unreasonably withheld),
assign any of its rights or obligations under this Agreement.
H. GOVERNING LAW. This Agreement, its interpretation, validity
and performance shall be governed by the laws of the State of
Texas.
I. NON-COMPETE. Without the prior written consent of Capital,
for a period of three years following termination of this
Agreement, Owner will not employ or engage any person who was
a Capital employee assigned to the administrative staff of the
Facility at any time during the last twelve (12) months of the
term of this Agreement. This section shall not apply to Owner
upon sale of the Facility or termination of the Agreement by
Owner for cause.
J. CONDITIONS BEYOND CONTROL OF PARTIES. Neither party shall be
held liable for failure to comply with any of the terms of
this Agreement when such failure has been caused solely by
fire, labor dispute, strike, war, insurrection, government
restrictions, force majeure, or act of God beyond the control
and without fault on the part of the party involved, provided
such party uses due diligence to remedy such default.
Circumstances are likely to arise from time to time which may
require that budgets be exceeded, and Capital shall not be
liable for budget overruns.
K. INDEMNIFICATION. Owner will indemnify and hold harmless
Capital from any and all liability arising incident to Owner's
performance of its duties under this Agreement. Capital will
indemnify and hold harmless Owner from any and all liabilities
arising incident to Capital's performance of its duties under
this Agreement.
Owner shall also indemnify and hold Capital harmless against
any and all losses, costs or expenses incurred by Capital by
reason of, arising out of or in any way related to
noncompliance by the Facility with all applicable state,
federal and local laws, ordinances, rules and regulations
relating to the physical condition of the property of the
Facility, provided Capital shall promptly notify Owner of
Capital's knowledge of any such noncompliance.
L. ARBITRATION. In the event of any dispute, claim or
controversy of any kind between the parties, concerning this
Agreement or the termination of this Agreement, the matter
shall be submitted to arbitration in accordance with rules of
the American Arbitration Association. The parties jointly
shall agree on an arbitrator. If the parties are unable to
agree, in good faith within a reasonable time, on the
selection of an arbitrator, either party may request
appointment of an arbitrator chosen by the American
11
<PAGE> 12
Arbitration Association who shall be the Selected Arbitrator.
Such arbitrator shall be limited in his decision to a choice
between the final position as requested by each party. Said
arbitration shall be held in Dallas/Ft. Worth, Texas or such
other place as is mutually agreeable. The arbitration
decision shall be final and binding on both parties unless the
arbitration is fraudulent or so grossly erroneous as to
necessarily imply bad faith. Costs of arbitration are to be
shared by both parties equally, provided that the arbitrator
may choose to award the costs of arbitration against the
losing party if the arbitrator determined that the final
position urged by the losing party was not reasonable.
12
<PAGE> 13
CAPITAL SENIOR LIVING, INC.
- --------------------------------------
By: By:
----------------------------- ----------------------------
Title: Title:
-------------------------- -------------------------
13
<PAGE> 14
EXHIBIT B
FACILITY LEASE AGREEMENT
TRI POINT COMMUNITIES, L.P.
as
Lessor
AND
CAPITAL SENIOR _________, INC.
as
Lessee
Dated as of _________________________________, 19__
For Premises Located At
_______________________________________________
_______________________________________________
_______________________________________________
_______________________________________________
<PAGE> 15
TABLE OF CONTENTS
<TABLE>
<CAPTION>
Page
----
<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 . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 2
2.1 Definitions . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 2
2.2 Rules of Construction . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 14
ARTICLE 3 RENT . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 15
3.1 Rent for Land, Leased Improvements, Related Rights and Fixtures . . . . . . . . . . . . . . 15
3.2 Intentionally Omitted . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 15
3.3 Intentionally Omitted . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 15
3.4 Additional Charges . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 15
3.5 Intentionally Omitted . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 16
3.6 Net Lease . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 16
3.7 No Lessee Termination or Offset . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 16
3.7.1 No Termination . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 16
3.7.2 Waiver . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 16
3.7.3 Independent Covenants . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 16
3.8 Abatement of Rent Limited . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 16
ARTICLE 4 IMPOSITIONS; TAXES; UTILITIES, INSURANCE PAYMENTS . . . . . . . . . . . . . . . . . . . . . . . . . 17
4.1 Payment of Impositions . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 17
4.1.1 Lessee To Pay . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 17
4.1.2 Installment Elections . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 17
4.1.3 Returns and Reports . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 17
4.1.4 Refunds . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 18
4.1.5 Protest . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 18
4.2 Notice of Impositions . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 18
4.3 Adjustment of Impositions . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 18
4.4 Utility Charges . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 18
4.5 Insurance Premiums . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 18
4.6 Deposits . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 19
4.6.1 Lessor's Option . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 19
4.6.2 Use of Deposits . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 19
</TABLE>
ii
<PAGE> 16
<TABLE>
<S> <C> <C>
4.6.3 Deficits . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 20
4.6.4 Other Properties . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 20
4.6.5 Transfers . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 20
4.6.6 Security . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 20
4.6.7 Return . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 20
4.6.8 Receipts . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 21
ARTICLE 5 OWNERSHIP OF LEASED PROPERTY AND PERSONAL PROPERTY;
INSTALLATION, REMOVAL AND REPLACEMENT OF
PERSONAL PROPERTY . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 21
5.1 Ownership of the Leased Property . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 21
5.2 Personal Property; Removal and Replacement of Personal Property . . . . . . . . . . . . . . 21
5.2.1 Lessee To Equip Facility . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 21
5.2.2 Sufficient Personal Property . . . . . . . . . . . . . . . . . . . . . . . . . . . 21
5.2.3 Removal and Replacement; Lessor's Option to Purchase . . . . . . . . . . . . . . . 21
ARTICLE 6 SECURITY FOR LEASE OBLIGATIONS . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 22
6.1 Security for Lessee's Obligations . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 22
6.1.1 Security . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 22
6.1.2 Purchase-Money Security Interests, Receivables
and Equipment Leases . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 22
ARTICLE 7 CONDITION AND USE OF LEASED PROPERTY;
MANAGEMENT AGREEMENTS . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 22
7.1 Condition of the Leased Property . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 22
7.2 Use of the Leased Property; Compliance; Management . . . . . . . . . . . . . . . . . . . . 23
7.2.1 Obligation to Operate . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 23
7.2.2 Permitted Uses . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 23
7.2.3 Compliance with Insurance Requirements . . . . . . . . . . . . . . . . . . . . . . 24
7.2.4 No Waste . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 24
7.2.5 No Impairment . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 24
7.2.6 No Liens . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 24
7.2.7 Compliance with Legal Requirements . . . . . . . . . . . . . . . . . . . . . . . . 24
7.2.8 Management Agreements . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 24
ARTICLE 8 REPAIRS; RESTRICTIONS . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 25
8.1 Maintenance and Repair . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 25
8.1.1 Lessee's Responsibility . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 25
8.1.2 No Lessor Obligation . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 26
8.1.3 Lessee May Not Obligate Lessor . . . . . . . . . . . . . . . . . . . . . . . . . . 26
8.2 Encroachments; Title Restrictions . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 27
</TABLE>
iii
<PAGE> 17
<TABLE>
<S> <C> <C>
ARTICLE 9 MATERIAL STRUCTURAL WORK AND
CAPITAL ADDITIONS . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 27
9.1 Lessor's Approval . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 27
9.2 General Provisions as to Capital Additions and Certain
Material Structural Work . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 27
9.2.1 No Liens . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 28
9.2.2 Lessee's Proposal Regarding Capital Additions
and Material Structural Work . . . . . . . . . . . . . . . . . . . . . . . . . . . 28
9.2.3 Lessor's Options Regarding Capital Additions
and Material Structural Work . . . . . . . . . . . . . . . . . . . . . . . . . . . 28
9.2.4 Lessor May Elect to Finance Capital Additions
or Material Structural Work . . . . . . . . . . . . . . . . . . . . . . . . . . . . 28
9.3 Capital Additions and Material Structural Work Financed by Lessor . . . . . . . . . . . . . 28
9.3.1 Lessee's Financing Request . . . . . . . . . . . . . . . . . . . . . . . . . . . . 28
9.3.2 Lessor's General Requirements . . . . . . . . . . . . . . . . . . . . . . . . . . . 29
9.3.3 Payment of Costs . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 30
9.4 General Limitations . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 30
9.5 Non-Capital Additions . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 31
ARTICLE 10 WARRANTIES AND REPRESENTATIONS . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 31
10.1 Representations and Warranties . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 31
10.1.1 Existence; Power; Qualification . . . . . . . . . . . . . . . . . . . . . . . . . . 31
10.1.2 Valid and Binding . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 32
10.1.3 Single Purpose . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 32
10.1.4 No Violation . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 32
10.1.5 Consents and Approvals . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 32
10.1.6 No Liens or Insolvency Proceedings . . . . . . . . . . . . . . . . . . . . . . . . 32
10.1.7 No Burdensome Agreements . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 33
10.1.8 Commercial Acts . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 33
10.1.9 Adequate Capital, Not Insolvent . . . . . . . . . . . . . . . . . . . . . . . . . . 33
10.1.10 Not Delinquent . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 33
10.1.11 No Affiliate Debt . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 33
10.1.12 Taxes Current . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 33
10.1.13 Financials Complete and Accurate . . . . . . . . . . . . . . . . . . . . . . . . . 33
10.1.14 Pending Actions, Notices and Reports . . . . . . . . . . . . . . . . . . . . . . . 34
10.1.15 Compliance with Legal and Other Requirements . . . . . . . . . . . . . . . . . . . 35
10.1.16 No Action By Governmental Authority . . . . . . . . . . . . . . . . . . . . . . . . 35
10.1.17 Property Matters . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 35
10.1.18 Third Party Payor Agreements . . . . . . . . . . . . . . . . . . . . . . . . . . . 37
10.1.19 Rate Limitations . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 37
10.1.20 Free Care . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 37
10.1.21 No Proposed Changes . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 37
10.1.22 ERISA . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 38
</TABLE>
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<TABLE>
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10.1.23 No Broker . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 38
10.1.24 No Improper Payments . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 38
10.1.25 Nothing Omitted . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 38
10.1.26 No Margin Security . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 39
10.1.27 No Default . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 39
10.1.28 Principal Place of Business . . . . . . . . . . . . . . . . . . . . . . . . . . . . 39
10.1.29 Labor Matters . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 39
10.1.30 Intellectual Property . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 39
10.1.31 Management Agreements . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 39
10.2 Continuing Effect of Representations and Warranties . . . . . . . . . . . . . . . . . . . . 39
ARTICLE 11 FINANCIAL AND OTHER COVENANTS . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 40
11.1 Status Certificates . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 40
11.2 Financial Statements; Reports; Notice and Information . . . . . . . . . . . . . . . . . . . 40
11.2.1 Obligation To Furnish . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 40
11.2.2 Responsible Officer . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 43
11.2.3 No Material Omission . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 43
11.2.4 Confidentiality . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 43
11.3 Financial Covenants . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 44
11.3.1 No Indebtedness . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 44
11.3.2 No Guaranties . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 44
11.4 Affirmative Covenants . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 44
11.4.1 Maintenance of Existence . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 44
11.4.2 Materials . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 44
11.4.3 Compliance With Legal Requirements And Applicable
Agreements . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 45
11.4.4 Books And Records . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 45
11.4.5 Participation in Third Party Payor Programs . . . . . . . . . . . . . . . . . . . . 45
11.4.6 Conduct of its Business . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 45
11.4.7 Address . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 45
11.4.8 Subordination of Affiliate Transactions . . . . . . . . . . . . . . . . . . . . . . 46
11.4.9 Inspection . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 46
11.4.10 Additional Property . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 46
11.5 Additional Negative Covenants . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 46
11.5.1 Restrictions Relating to Lessee . . . . . . . . . . . . . . . . . . . . . . . . . . 46
11.5.2 No Liens . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 47
11.5.3 Limits on Affiliate Transactions . . . . . . . . . . . . . . . . . . . . . . . . . 47
11.5.4 Intentionally Omitted . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 47
11.5.5 No Default . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 47
11.5.6 Intentionally Omitted . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 47
11.5.7 Intentionally Omitted . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 47
11.5.8 ERISA . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 48
11.5.9 Forgiveness of Indebtedness . . . . . . . . . . . . . . . . . . . . . . . . . . . . 48
11.5.10 Value of Assets . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 48
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11.5.11 Changes in Fiscal Year and Accounting Procedures . . . . . . . . . . . . . . . . . 48
ARTICLE 12 INSURANCE AND INDEMNITY . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 48
12.1 General Insurance Requirements . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 48
12.1.1 Types and Amounts of Insurance . . . . . . . . . . . . . . . . . . . . . . . . . . 48
12.1.2 Insurance Company Requirements . . . . . . . . . . . . . . . . . . . . . . . . . . 50
12.1.3 Policy Requirements . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 50
12.1.4 Notices; Certificates and Policies . . . . . . . . . . . . . . . . . . . . . . . . 50
12.1.5 Lessor's Right to Place Insurance . . . . . . . . . . . . . . . . . . . . . . . . . 51
12.1.6 Payment of Proceeds . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 51
12.1.7 Irrevocable Power of Attorney . . . . . . . . . . . . . . . . . . . . . . . . . . . 51
12.1.8 Blanket Policies . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 52
12.1.9 No Separate Insurance . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 52
12.1.10 Assignment of Unearned Premiums . . . . . . . . . . . . . . . . . . . . . . . . . . 52
12.2 Indemnity . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 52
12.2.1 Indemnification . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 52
12.2.2 Indemnified Parties . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 53
12.2.3 Limitation on Lessor Liability . . . . . . . . . . . . . . . . . . . . . . . . . . 53
12.2.4 Risk of Loss . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 53
ARTICLE 13 FIRE AND CASUALTY . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 54
13.1 Restoration Following Fire or Other Casualty . . . . . . . . . . . . . . . . . . . . . . . 54
13.1.1 Following Fire or Casualty . . . . . . . . . . . . . . . . . . . . . . . . . . . . 54
13.1.2 Procedures . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 54
13.1.3 Disbursement of Insurance Proceeds . . . . . . . . . . . . . . . . . . . . . . . . 55
13.2 Disposition of Insurance Proceeds . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 58
13.2.1 Proceeds To Be Released to Pay For Work . . . . . . . . . . . . . . . . . . . . . . 58
13.2.2 Proceeds Not To Be Released . . . . . . . . . . . . . . . . . . . . . . . . . . . . 59
13.2.3 Lessee Responsible for Short-Fall . . . . . . . . . . . . . . . . . . . . . . . . . 60
13.3 Tangible Personal Property . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 60
13.4 Restoration of Certain Improvements and the Tangible
Personal Property . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 60
13.5 No Abatement of Rent . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 60
13.6 Termination of Certain Rights . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 60
13.7 Waiver . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 60
13.8 Application of Rent Loss and/or Business Interruption Insurance . . . . . . . . . . . . . . 60
13.9 Obligation To Account . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 61
ARTICLE 14 CONDEMNATION . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 61
14.1 Parties' Rights and Obligations . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 61
14.2 Total Taking . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 61
14.3 Partial or Temporary Taking . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 61
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14.4 Restoration . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 62
14.5 Award Distribution . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 62
14.6 Control of Proceedings . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 62
ARTICLE 15 PERMITTED CONTESTS . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 63
15.1 Lessee's Right to Contest . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 63
15.2 Lessor's Cooperation . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 64
15.3 Lessee's Indemnity . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 64
ARTICLE 16 DEFAULT . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 64
16.1 Events of Default . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 64
16.2 Remedies . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 67
16.3 Damages . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 68
16.4 Lessee Waivers . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 69
16.5 Application of Funds . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 69
16.6 Intentionally omitted . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 69
16.7 Lessors's Right to Cure . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 70
16.8 No Waiver By Lessor . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 70
16.9 Right of Forbearance . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 71
16.10 Cumulative Remedies . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 71
ARTICLE 17 SURRENDER OF LEASED PROPERTY OR LEASE; HOLDING
OVER . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 71
17.1 Surrender . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 71
17.2 Transfer of Permits and Contracts . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 71
17.3 No Acceptance of Surrender . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 72
17.4 Holding Over . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 72
ARTICLE 18 PURCHASE OF THE LEASED PROPERTY . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 73
18.1 Purchase of the Leased Property . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 73
18.2 Appraisal . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 73
18.2.1 Designation of Appraisers . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 73
18.2.2 Appraisal Process . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 73
18.2.3 Specific Enforcement and Costs . . . . . . . . . . . . . . . . . . . . . . . . . . 74
ARTICLE 19 SUBLETTING AND ASSIGNMENT . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 74
19.1 Subletting and Assignment . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 74
19.2 Permitted Sublease . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 75
19.3 Attornment . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 75
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ARTICLE 20 TITLE TRANSFERS AND LIENS GRANTED BY LESSOR . . . . . . . . . . . . . . . . . . . . . . . . . . . . 75
20.1 No Merger of Title . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 75
20.2 Transfers By Lessor . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 75
20.3 Lessor May Grant Liens . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 75
20.4 Subordination and Non-Disturbance . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 76
ARTICLE 21 LESSOR OBLIGATIONS . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 76
21.1 Quiet Enjoyment . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 76
21.2 Memorandum of Lease . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 77
21.3 Default by Lessor . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 77
ARTICLE 22 NOTICES . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 77
ARTICLE 23 INTENTIONALLY OMITTED . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 78
ARTICLE 24 MISCELLANEOUS PROVISIONS . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 78
24.1 Broker's Fee Indemnification . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 78
24.2 No Joint Venture or Partnership . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 78
24.3 Amendments, Waivers and Modifications . . . . . . . . . . . . . . . . . . . . . . . . . . . 78
24.4 Captions and Headings . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 79
24.5 Time is of the Essence . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 79
24.6 Counterparts . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 79
24.7 Entire Agreement . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 79
24.8 WAIVER OF JURY TRIAL . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 79
24.9 Successors and Assigns . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 80
24.10 No Third Party Beneficiaries . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 80
24.11 Governing Law . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 80
24.12 General . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 81
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EXHIBIT A LEGAL DESCRIPTION OF THE LAND
EXHIBIT B PERMITTED ENCUMBRANCES
EXHIBIT C NATIONAL ACCOUNTS AND LOCAL DISCOUNTS
EXHIBIT D OPEN COST REPORTS
EXHIBIT E RATE LIMITATIONS
EXHIBIT F FREE CARE REQUIREMENTS
EXHIBIT G CURRENT RATES
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FACILITY LEASE AGREEMENT
This FACILITY LEASE AGREEMENT ("Lease") is dated as of the
______________ day of _______________________________ ___, 19____ and is
between Tri Point Communities, L.P. ("Lessor"), a Texas limited partnership
having its principal office at 14160 Dallas Parkway, Suite 300, Dallas, Texas
75240, and Capital Senior ____________________________, Inc. ("Lessee"), a
Delaware corporation, having its principal office at 14160 Dallas Parkway,
Suite 300, Dallas, Texas 75240.
ARTICLE 1
LEASED PROPERTY; TERM; CONSTRUCTION; EXTENSIONS
1.1 Leased Property. Upon and subject to the terms and conditions
hereinafter set forth, the Lessor leases to the Lessee and the Lessee rents and
leases from the Lessor all of the 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 benefiting 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");
The Leased Property is leased in its present condition, AS IS, without
representation or warranty of any kind, express or implied, by the 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,
<PAGE> 23
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 ten
(10) years later on ___________________ (the "Expiration Date"); provided,
however, that this Lease may be sooner terminated as hereinafter provided. In
addition, the 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, the 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 Lessee's extension options shall be exercised by the
Lessee by giving written notice to the 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. The Lessee shall have no right to rescind any such
notice once given. The 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.
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, Section and other subdivisions of
this Lease or the other applicable Lease Document.
Accounts: As defined in the UCC.
Accreditation Body: Persons having or claiming jurisdiction over the
accreditation, certification, evaluation or operation of the Facility.
Additional Charges: As defined in Article 3.
Additional Land: As defined in Section 9.3.
2
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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, five percent (5%) 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.
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.
Award: All compensation, sums or anything of value awarded, paid or
received on a total or partial Condemnation.
Bankruptcy Code: Subsection 365(h) of the United States Bankruptcy
Code, 11 U.S.C. [S]365(h), as the same may hereafter be amended and including
any successor provision thereto.
Base Rent: As defined in Section 3.1.
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 the Lessor's depository bank is
located.
Capital Additions: Collectively, all new buildings and additional
structures annexes 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 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 beds 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 the
Lessee whether paid for by the Lessee or the 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, the Lessor.
Casualty: As defined in Section 13.1.
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Chattel Paper: As defined in the UCC.
Code: The Internal Revenue Code of 1986, as amended.
Commencement Date: As defined in Section 1.2.
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 the 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.
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 this Lease.
Contracts: All agreements (including, without limitation, 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 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.
Date of Taking: The date the Condemnor has the right to possession of
the property being condemned.
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Documents: As defined in the UCC.
Encumbrance: As defined in Section 20.3.
Environmental Laws: Collectively, all Legal Requirements applicable
to (i) environmental conditions on, under or emanating from the Leased Property
and (ii) the generation, storage, transportation, utilization, disposal,
management or release (whether or not on, under or from the Leased Property) of
Hazardous Substances by the Lessee.
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.
Extended Terms: As defined in Section 1.3.
Facility: The __________unit, [INSERT DESCRIPTION OF FACILITY]
facility [OPTIONAL: to be] known as [INSERT NAME] [OPTIONAL: to be
constructed] on the Land (together with related parking and other amenities)].
Failure to Operate: As defined in Article 16.
Failure to Perform: As defined in 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 the Lessee had been
constructed.
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 the Lessor and the Lessee (including, without
limitations as a negotiated percentage of total project costs) and (c) not
taking into account any reduction in value resulting from any Lien to which the
Leased Property, the Lessee or the Lessor is otherwise required to remove 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
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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 the
Lessor in any way in connection with the financing of any Capital Addition.
Fiscal Quarter: Each of the three (3) month periods commencing on
January lst, April 1st, July 1st and October lst.
Fiscal Year: The twelve (12) month period from January 1st to
December 31st.
Fixtures: As defined in Article 1.
GAAP: Generally accepted accounting principles, consistently applied
throughout the relevant period.
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.
Gross Revenues: Collectively, all revenues generated by reason of the
operation of the Leased Property (including any Capital Additions), whether or
not directly or indirectly received or to be received by the Lessee, including,
without limitation, all resident revenues received or receivable for the use
of, or otherwise by reason of, all rooms, units and other facilities provided,
meals served, services performed, space or facilities subleased or goods sold
on or from the Leased Property and further including, without limitation,
except as otherwise specifically provided below, any consideration received
under any subletting, licensing, or other arrangements with any Person relating
to the possession or use of the Leased Property and all revenues from all
ancillary services provided at or relating to the Leased Property; provided,
however, that Gross Revenues shall not include non-operating revenues such as
interest income or gain from the sale of assets not sold in the ordinary course
of business; and provided, further, that there shall be excluded or deducted
(as the case may be from such revenues):
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(i) contractual allowances (relating to any period during
the Term of this Lease and thereafter until the Rent hereunder is paid in full)
for billings not paid by or received from the appropriate Governmental Agencies
or Third Party Payors,
(ii) allowances according to GAAP for uncollectible
accounts,
(iii) all proper resident billing credits and adjustments
according to GAAP relating to health care accounting,
(iv) federal, state or local sales, use, gross receipts
and excise taxes and any tax upon or measured by said Gross 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,
(v) provider discounts for hospital or other medical
facility utilization contracts;
(vi) the cost of any federal, state or local governmental
program imposed specially to provide or finance indigent patient care (other
than Medicare, Medicaid and the like); and
(vii) deposits refundable to residents of the Facility.
To the extent that the Leased Property is subleased or occupied by an
Affiliate of the Lessee, Gross Revenues calculated for all purposes of this
Lease shall include the Gross Revenues of such Sublessee with respect to the
premises demised under the applicable Sublease (i.e., the Gross Revenues
generated from the operations conducted on such subleased portion of the Leased
Property) and the rent received or receivable from such Sublessee pursuant to
such Subleases shall be excluded from Gross Revenues for all such purposes. As
to any Sublease between the Lessee and a non- Affiliate of the Lessee, only the
rental actually received by the Lessee from such non-Affiliate shall be
included in Gross Revenues.
Hazardous Substances: Collectively, (i) any "hazardous material,"
"hazardous substance," "hazardous waste," "oil," "regulated substance," "toxic
substance," "restricted hazardous waste", "special waste" or words of similar
import as defined under any of the Environmental Laws; (ii) asbestos in any
form; (iii) urea formaldehyde foam insulation; (iv) polychlorinated biphenyl
(v) radon gas; (vi) flammable explosives; (vii) radioactive materials; (viii)
any chemical, containment, solvent, material, pollutant or substance that may
be dangerous or detrimental to the Leased Property, the environment, or the
health and safety of the residents and other occupants of the Leased Property
or of the owners or occupants of any other real property nearby the Leased
Property and (iv) any substance, the generation, storage, transportation,
utilization, disposal, management, release or location of which, on, under or
from the Leased Property is prohibited or otherwise regulated pursuant to any
of the Environmental Laws.
Impositions: Collectively, all taxes (including, without limitation,
all capital stock and franchise taxes of the Lessor, all ad valorem, property,
sales, use, single business, gross receipts,
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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 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 the Lessee), which at any time prior to during or in respect of the
Term hereof and thereafter until the Leased Property is surrendered to the
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) the Lessor or the 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
the Lessee to pay (1) any tax based on net income (whether denominated as a
franchise or capital stock or other tax) imposed on the Lessor or any other
Person, except the Lessee or its successors, (2) any net revenue tax of the
Lessor or any other Person, except the Lessee and its successors, (3) any tax
imposed with respect to the sale, exchange or other disposition by the 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 the Lessee is obligated to pay
pursuant to the first sentence of this definition and which is in effect at any
time during the Term hereof is totally or partially repealed, and a tax,
assessment, tax levy or charge set forth in clause (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 the Lessee shall be equitably apportioned based upon all
properties owned by the 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 five (5) years as calculated by the Federal Reserve Board.
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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.
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.
Lease Documents: Collectively, this Lease, 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 the Lessee's obligations relating to
the Leased Property, including, without limitation, the Lessee's obligations
hereunder.
Lease Obligations: Collectively, all indebtedness, covenants,
liabilities, obligations, agreements and undertakings (other than the Lessor's
obligations) under this Lease and the other Lease Documents.
Leased Improvements: As defined in Article 1.
Leased Property: As defined in Article 1.
Leasing Group: Collectively, the Lessee, 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 health-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 the 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
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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 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's Election Notice: As defined in Section 14.3.
Lessor: As defined in the preamble of this Lease and its successors
and assigns.
Lessor's Investment: The sum of (i) _____ plus (ii) the aggregate
amount of all Subsequent Investments.
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
the Lessee or any Sublessee and any other Person pursuant to which the 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
the 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.
Medicaid: The medical assistance program established by Title XIX of
the Social Security Act (42 USC [ss] 1396 et seq.) and any statute succeeding
thereto.
Medicare: The health insurance program for the aged and disabled
established by Title XVIII of the Social Security Act (42 USC [ss] 1395 et
seq.) and any statute succeeding thereto.
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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 the Lessee signed on behalf
of the Lessee by the Chairman of the Board of Directors, the President, any
Vice President or the Treasurer of the Lessee, or another officer authorized to
so sign by the Board of Directors or By-Laws of the 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.
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 the
Lessor.
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.
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.
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Primary Intended Use: The use of the Facility as a [ ] facility
with _________ ( ) units or such additional number of units 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.
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 the Lessor.
Principal Place of Business: As defined in Section 10.1.
Proceeds: As defined in the UCC.
Provider Agreements: All participation, provider and reimbursement
agreements or arrangements now or hereafter in effect for the benefit of the
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 the Lessee's or such Sublessee's participation in any Third Party Payor
Program.
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 the 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: [________________________]
Rent: Collectively, the Base Rent, the Additional Charges and all
other sums payable under this Lease and the other Lease Documents.
Rent Adjustment Date: Each ______ anniversary of the Commencement
Date during the Term of the Lease, including, without limitation, any Extended
Terms.
Rent Insurance Proceeds: As defined in Section 13.8.
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.
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Retainage: As defined in Section 13.1.
State: The state or commonwealth in which the Leased Property is
located.
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 the Lessee, encumbering or affecting the Leased
Property.
Sublessee: Any sublessee, licensee, concessionaire, tenant or other
occupant under any of the Subleases, but, excluding any resident of the
Facility under any Resident Agreement.
Subsequent Investments: The aggregate amount of all sums expended and
liabilities incurred by the 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 other personal property owned or leased (pursuant to
equipment leases) by the 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 the Lessee or any Sublessee presently or in the future may
participate, including without limitation,
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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.
UCC: The Uniform Commercial Code as in effect from time to time in
the (INSERT STATE].
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 the 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.
Work: As defined in Section 13.1.
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 the
Lessor's attorneys shall be deemed to include, without limitation, special
counsel and local counsel for the 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
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"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 Rent for Land, Leased Improvements, Related Rights and
Fixtures. The Lessee will pay to the Lessor, in lawful money of the United
States of America, at the Lessor's address set forth herein or at such other
place or to such other Person as the Lessor from time to time may designate in
writing, rent for the Leased Property, as follows: The Lessee shall pay to the
Lessor a base rent (the "Base Rent") per annum that is equal to [INSERT AMOUNT
DOLLARS ($ ) equal to a negotiated percentage of total project costs determined
immediately prior to the Initial Term and immediately prior to any Extended
Terms] and that is payable in advance in equal, consecutive monthly
installments due on the first day of each calendar month, commencing on
__________________________; provided, however, that on each Rent Adjustment
Date, the Base Rent shall be adjusted to equal the Base Rent then in effect
multiplied by _____________________.
3.2 Intentionally Omitted.
3.3 Intentionally Omitted.
3.4 Additional Charges. Subject to the rights to contest as set
forth in Article 15, in addition to-the Base Rent, (a) the 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
the Lessee assumes or agrees to pay under this Lease, and (b) in the event of
any failure on the part of the Lessee to pay any of those items referred to in
clause (a) above, the 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 the 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 the
Lessee pays any Additional Charges to the Lessor pursuant to any requirement of
this Lease, the 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.
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3.5 Intentionally Omitted.
3.6 Net Lease. The Rent shall be paid absolutely net to the
Lessor, so that this Lease shall yield to the Lessor the full amount of the
installments of Base Rent and Additional Charges throughout the Term.
3.7 No Lessee Termination or Offset.
3.7.1 No Termination. Except as may be otherwise specifically and
expressly provided in this Lease, the 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 the 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 the Lessor and the 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, the Lessee's
use of the Leased Property or the interference with such use by any Person
(other than the Lessor, except to the extent permitted hereunder) or by reason
of eviction by paramount title; (c) any claim that the Lessee has or might have
against the Lessor, (d) any default or breach of any warranty by the Lessor
under this Lease or any other Lease Document, (e) any bankruptcy, insolvency,
reorganization, composition, readjustment, liquidation, dissolution, winding up
or other proceedings affecting the Lessor or any assignee or transferee of the
Lessor or (f) any other cause whether similar or dissimilar to any of the
foregoing, other than a discharge of the Lessee from any of the Lease
Obligations as a matter of law.
3.7.2 Waiver. The 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 the Lessee to any abatement, reduction,
suspension or deferment of the Rent or other sums payable by the Lessee
hereunder, except as otherwise specifically and expressly provided in this
Lease.
3.7.3 Independent Covenants. The obligations of the Lessor and the
Lessee hereunder shall be separate and independent covenants and agreements and
the Rent and all other sums payable by the 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,
Base Rent then due during the Lease Year in which such Taking occurs shall be
reduced to equal the product of (i) the then current Base Rent multiplied by
(ii) the difference between one minus a fraction the numerator of which is the
Award, the denominator of which is the fair Market Value of the Leased
Property, and (b) in the case of such a temporary
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Taking, by reducing the Base Rent for the period of such a temporary Taking, by
the net amount of the Award received by the Lessor.
For the purposes of this Section 3.8, the "net amount of the Award
received by the Lessor" shall mean the Award paid to the Lessor on account of
such Taking, minus all costs and expenses incurred by the Lessor in connection
therewith, and minus any amounts paid to or for the account of the 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 Section 4.1.2 and
Article 15, the 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 the Lessee will
promptly furnish the 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.
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), the 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 the 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. The 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 the
Lessor's net income, gross receipts, franchise taxes and taxes on its capital
stock, and the 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. The Lessor and the 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, the Lessee shall file
all personal property tax returns in such jurisdictions where it may legally so
file. The Lessor, to the extent it possesses the same, and the 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.
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Where the Lessor is legally required to file personal property tax returns, if
the Lessee notifies the Lessor of the obligation to do so in each year at least
thirty (30) days prior to the date any protest must be filed, the Lessee will
be provided with copies of assessment notices so as to enable the 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 the Lessee shall be paid over to or retained by the Lessee.
If a Lease Default shall have occurred and be continuing, at the Lessor's
option, such funds shall be paid over to the Lessor and/or retained by the
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 the Lessor, at the Lessee's
option and sole cost and expense, and subject to compliance with the provisions
of Article 15, the Lessee may contest, protest, appeal, or institute such other
proceedings as the Lessee may deem appropriate to effect a reduction of any
Imposition and the Lessor, at the Lessee's cost and expense as aforesaid, shall
fully cooperate in a reasonable manner with the Lessee in connection with such
protest, appeal or other action.
4.2 Notice of Impositions. The Lessor shall give prompt notice to
the Lessee of all Impositions payable by the Lessee hereunder of which the
Lessor at any time has knowledge, but the Lessor's failure to give any such
notice shall in no way diminish the 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 the Lessor and the Lessee,
whether or not such Impositions are imposed before or after such expiration or
termination, and the Lessee's obligation to pay its prorated share thereof
shall survive such expiration or termination.
4.4 Utility Charges. The 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 the Lessee
surrenders the Leased Property in the manner required by this Lease.
4.5 Insurance Premiums. The 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 the Lessee yields up the
Leased Property in the manner required by this Lease. All such premiums shall
be paid annually in advance and the Lessee shall furnish the Lessor with
evidence satisfactory to the 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, the Lessee may pay such insurance premiums to
the insurer in monthly installments so long as the applicable insurer is
contractually obligated to give the 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 the
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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 the Lessor at the times required hereunder, the 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 the
Lessee to the Lessor.
4.6 Deposits.
4.6.1 Lessor's Option. At the option of the Lessor, which may be
exercised at any time, the Lessee shall, upon written request of the Lessor, on
the first day on 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 the
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 the Lessee hereunder shall be estimated
by the Lessor with an appropriate adjustment to be promptly made between the
Lessor and the Lessee as soon as such amount becomes determinable. In
addition, the 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 the 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 the Lessee under this
Section 4.6 shall be held by the Lessor and shall be applied in payment of the
Impositions or insurance premiums, as the case may be, when due. Any such
deposits may be commingled with other assets of the Lessor, and shall be
deposited by the Lessor at such bank as the Lessor may, from time to time
select, and the Lessor shall not be liable to the Lessee or any other Person
(a) based on the 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, the Lessor shall
bear no responsibility for the financial condition of, nor any act or omission
by, the Lessor's depository bank. The income from such investment or interest
on such deposit shall be paid to the 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. The Lessee shall give not less than
ten (10) days prior written notice to the 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 the 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, the
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Lessee shall not be in default hereunder by virtue of the failure of the Lessor
to pay such Imposition or such insurance premium and the Lessor shall pay any
interest or fine assessed by virtue of the Lessor's failure to pay such
Imposition or insurance premium.
4.6.3 Deficits. If for any reason any deposit held by the 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 the Lessor, the Lessee shall deposit an
additional amount with the Lessor, increasing the deposit held by the Lessor so
that the 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. The 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
the Lessor, the Lessee shall deposit with the Lessor the amount in excess of
the sums previously deposited with the 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 the entire amount of such Imposition and the
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 the Lessor's
interest under this Lease, the original the 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 then in its possession to such
assignee (as the subsequent holder of the Lessor's interest in this Lease) and
upon such transfer, the original the 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
the Lessee shall look solely to said assignee, as the subsequent holder of the
Lessor's interest under this Lease, in reference thereto. The original the
Lessor named herein or the applicable successor in interest transferring the
deposits shall provide written notice to the Lessee of such transfer.
4.6.6 Security. All amounts deposited with the Lessor pursuant to
the provisions of this Section 4.6 shall be held by the Lessor as additional
security for the payment and performance of the Obligations and, upon the
occurrence of any Lease Default, the 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, are sums then held by the Lessor under this Section 4.6 shall be
refunded to the Lessee.
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4.6.8 Receipts. The Lessee shall deliver to the Lessor copies of
all notices, demands, claims, bills and receipts in relation to the Impositions
and insurance premiums immediately upon receipt thereof by the Lessee.
ARTICLE 5
OWNERSHIP OF LEASED PROPERTY AND PERSONAL PROPERTY;
INSTALLATION, REMOVAL AND REPLACEMENT OF
PERSONAL PROPERTY
5.1 Ownership of the Leased Property. The Lessee acknowledges
that the Leased Property is the property of the Lessor and that the Lessee has
only the right to the exclusive possession and use of the Leased Property upon
the terms and conditions of this Lease.
5.2 Personal Property; Removal and Replacement of Personal
Property.
5.2.1 Lessee To Equip Facility. The 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, 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 the Lessee.
5.2.2 Sufficient Personal Property. The 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 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, the Lessee shall (a) furnish all necessary replacements of
obsolete items of the Tangible Personal Property during the Term, unless the
Lessee provides the Lessor with an explanation (reasonably acceptable to the
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 the Lessor, deliver to the Lessor, a
detailed inventory of all such Tangible Personal Property.
5.2.3 Removal and Replacement; Lessor's Option to Purchase. The
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 TWENTY-FIVE THOUSAND DOLLARS ($25,000),
individually or ONE HUNDRED THOUSAND DOLLARS ($100,000) collectively, except if
such Tangible Personal Property is simultaneously suitably replaced or the
Lessee provides the Lessor with an explanation (reasonably satisfactory to the
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, the 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 the Lessee
or the Lessor. Upon the expiration or earlier termination of this Lease, the
Lessor shall have the
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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 the Lessor) upon payment of its
book value (the Lessee's cost, minus depreciation), but not in excess of its
fair market value or (b) requiring the Lessee to remove the Tangible Personal
Property. If the Lessor exercises its option to purchase the Tangible Personal
Property, the price to be paid by the 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 the Lessor and (ii) applied to the Lease
Obligations before any payment to the Lessee. If the Lessor requires the
removal of the Tangible Personal Property, then all of the Tangible Personal
Property that is not removed by the Lessee within ten (10) days following such
request shall be considered abandoned by the Lessee and may be appropriated,
sold, destroyed or otherwise disposed of by the Lessor without first giving
notice thereof to the Lessee, without any payment to the Lessee and without any
obligation to account therefor.
ARTICLE 6
SECURITY FOR LEASE OBLIGATIONS
6.1 Security for Lessee's Obligations.
6.1.1 Security. Notwithstanding anything to the contrary set forth
herein, in no event shall the Lessee be required to grant to the Lessor any
security interest in Receivables; provided, however, upon any Lease Default or
the expiration or earlier termination of this Lease, the Lessee shall provide
the Lessor with copies of its books and records relating to Receivables, even
if excluded from the security granted to the Lessor, so as to facilitate
continuity of patient care and billing.
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 11.3.1, the 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 institutional lender which is providing
a working capital line of credit to the Lessee for the exclusive use of the
Facility. Security interests granted by the Lessee in full compliance with the
provisions of this Section 6.1.2 are referred to as "Permitted Prior Security
Interests."
ARTICLE 7
CONDITION AND USE OF LEASED PROPERTY;
MANAGEMENT AGREEMENTS
7.1 Condition of the Leased Property. The Lessee acknowledges
receipt and delivery of possession of the Leased Property and that the Lessee
has examined and otherwise has acquired
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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. The Lessee is leasing the Leased
Property "AS-IS" in its present condition. The Lessee waives any claim or
action against the Lessor in respect to the condition of the Leased Property.
THE 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 RELATING TO THE DESIGN, CONDITION AND/OR USE OF THE
LEASED PROPERTY ARE TO BE BORNE BY THE LESSEE. THE LESSEE HEREBY ASSUMES ALL
RISK OF THE PHYSICAL CONDITION OF THE LEASED PROPERTY, THE SUITABILITY OF THE
LEASED PROPERTY FOR THE 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 the Lessor, at any time and from time to time
during the Term, the Lessee shall engage one (1) or more independent
professional consultants, engineers and inspectors, qualified to do business in
the State and acceptable to the Lessor to perform any environmental and/or
structural investigations and/or other inspections of the Leased Property and
the Facility as the 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 the Lessor reasonably determines that the results
of such testing or inspections are unsatisfactory, within thirty (30) days of
notice from the Lessor, the Lessee shall commence such appropriate remedial
actions as may be reasonably requested by the 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. The 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. During the entire Term, the Lessee shall use
the Leased Property, or permit the Leased Property to be used, only for the
Primary Intended Use. The 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 the Lessor, which consent may be withheld in the Lessor's sole and
absolute discretion.
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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 the Lessee, any Manager or any other Person sell or
otherwise provide to any residents, other occupants or invitees therein, or
permit to be kept, used or sold in or about the Leased Property, any article
which may he prohibited by any Legal Requirement or by any of the Insurance
Requirements. Furthermore, the 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. The Lessee shall not commit or suffer to be
committed any waste on, in or under the Leased Property, nor shall the Lessee
cause or permit any nuisance thereon.
7.2.5 No Impairment. The lessee shall neither suffer nor permit the
Leased Property to be used in such a manner as (a) might reasonably tend to
impair the Lessor's title thereto or (b) may reasonably make possible a claim
or claims of adverse usage or adverse possession by the public or if implied
dedication of the Leased Property.
7.2.6 No Liens. Except as permitted pursuant to Section 6.1.2, the
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.
7.2.7 Compliance with Legal Requirements. The Lessee covenants and
agrees that the Leased Property shall not be used for any unlawful purpose and
that the 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 or desirable 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, the Lessee may, upon prior written notice to the
Lessor, contest any Legal Requirement to the extent permitted by, and in
accordance with, Article 15.
7.2.8 Management Agreements. From and after the Commencement Date,
the Lessee shall not enter into any Management Agreement without the prior
written approval of the Lessor, in each instance, which approval shall not be
unreasonably withheld. The Lessee shall not, without the prior written
approval of the 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 the Lessee of any of its remedies under
the Management Agreement as a result of any default by the
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Manager thereunder), (d) any assignment by the Manager of its interest under
the Management Agreement or (e) any material amendment of the Management
Agreement. In addition, the 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 the Lessor shall be
provided notice of any defaults thereunder and, at the Lessor's option, an
opportunity to cure such default. The Lessee shall furnish to the Lessor,
within three (3) days after receipt thereof, or after the mailing or service
thereof by the Lessee, as the case may be, a copy of each notice of default
which the 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 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, the 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 the 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 the 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
the Lessee to the Lessor or such receiver, and, the Lessor shall have the same
rights and remedies for failure to pay such costs on demand as for the 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. The Lessee, at its sole cost and
expense, shall keep the Leased Property and all private roadways, sidewalks and
curbs appurtenant thereto which are under the Lessee's control in good order
and repair (whether or not the need for such repairs occurs as a result of the
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, the 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 or unforeseen
or arising by reason of a condition (concealed or otherwise) existing prior to
the commencement
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of, or during, the Term and thereafter until the Lessee surrenders the Leased
Property in the manner required by this Lease. In addition, the 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 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. The 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, the Lessee shall obtain the 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 the Lessee in connection with such Material Structural Work.
Notwithstanding the foregoing, in the event of a bona fide emergency during
which the Lessee is unable to contact the appropriate representatives of the
Lessor, the Lessee may commence such Material Structural Work as may be
necessary in order to address such emergency without the Lessor's prior
approval, provided, however, that the Lessee shall immediately thereafter
advise the Lessor of such emergency and the nature and scope of the Material
Structural Work commenced and shall obtain the Lessor's approval of the
remaining Material Structural Work to be completed.
8.1.2 No Lessor Obligation. The 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 the Lessor shall be construed as (a) constituting the
consent or request of the 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 (b) giving the 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 the 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
the Lessor in the Leased Property. Without limiting the generality of the
foregoing, the right title and interest of the 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
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to the Leased Property at or by the request of the Lessee or any other Person
other than the Lessor. The 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 the Lessor, the
Lessee shall, at its sole cost and expense, subject to the 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 the 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, the 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 and nothing contained
herein shall limit the Lessee's obligations to operate the Leased Property 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. The 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.
ARTICLE 9
MATERIAL STRUCTURAL WORK AND
CAPITAL ADDITIONS
9.1 Lessor's Approval. Without the prior written consent of the
Lessor, which consent may be withheld by the Lessor, in its sole and absolute
discretion, the 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 the Lessor has granted its
prior written approval, the following terms and conditions shall apply unless
otherwise expressly set forth in the Lessor's written approval.
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9.2.1 No Liens. The 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 the Lessee desires to undertake any Capital Addition or
material Structural Work, the Lessee shall submit to the Lessor in writing a
proposal setting forth in reasonable detail any proposed Capital Addition or
Material Structural Work and shall provide to the 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 the 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
out and a good faith estimate of the change, if any, in the Gross Revenues that
the Lessee anticipates will result from the construction of such Capital
Addition.
9.2.3 Lessor's Options Regarding Capital Additions and Material
Structural Work. The 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 the 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 the
Lessor may in its discretion impose or (d) any combination of the foregoing.
Unless the Lessor notifies the Lessee in writing of a contrary election within
forty-five (45) days of the Lessee's request, the 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 the 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. The Lessee may request that the
Lessor provide or arrange financing for a Capital Addition or Material
Structural Work by providing to the Lessor such information about the Capital
Addition or Material Structural Work as the Lessor may reasonably request,
including, without limitation, all information referred to in Section 9.2
above. The Lessee understands, however, that the Lessor shall be under no
obligation to agree to such request. Nevertheless, the Lessor shall use
reasonable efforts to notify the Lessee, within forty-five (45) days of receipt
of such information, as to whether the 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 the Lessor's
then existing terms and prevailing conditions to compensate the Lessor for the
additional funds advanced by it). The Lessee may withdraw its request by
notice to the Lessor at any time before such time as the Lessee accepts the
Lessor's
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terms and conditions. All advances of funds for any such financing shall be
made in accordance with the 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 the Lessor agrees to
finance the proposed Capital Addition or Material Structural Work and the
Lessee accepts the Lessor's proposal therefor, in addition to all other items
which the Lessor or any applicable Financing Party may reasonably require, the
Lessee shall provide to the Lessor the following:
(a) prior to any advance of funds, (i) any information,
opinions, certificates, Permits or documents reasonably requested by the Lessor
or an applicable Financing Party which are necessary to confirm that the 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 the 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 the Lessor and any applicable Financing Party are
furnished with reasonable 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 the 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 the Lessor so as to vest title to the Capital Addition or
the applicable Material Structural Work in the 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 the Lessor, providing for any changes required by the Lessor
including, without limitation, changes in the Base Rent and the legal
description of the Land;
(d) upon payment therefor, a deed conveying to the 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 the Lessor;
(e) upon completion of the Capital Addition or the
Material Structural Work, a final as-built survey thereof reasonably
satisfactory to the Lessor, if required by the 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 the Lessor and any Financing
Party (i) updating the same without any additional exception except as may be
reasonably permitted by the Lessor, (ii) if applicable, including the
Additional Land in the
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premises covered by such title insurance policy and (iii) increasing the
coverage thereof by an amount equal to any amount paid by the 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
in any Additional Land conveyed to the Lessor pursuant to subparagraph (d) free
and clear of all Liens except those approved by the Lessor and (ii) a lender's
policy of title insurance reasonably satisfactory in form and substance to any
applicable Financing Party;
(h) following the completion of the Capital Addition or
the Material Structural Work, if reasonably deemed necessary by the Lessor, an
appraisal of the Leased Property by an M.A.I. appraiser acceptable to the
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 twenty-five percent (125%) 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 the 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 the
Lessee authorizing the execution and delivery of the lease amendment and any
other documents and instruments as may be reasonably required by the 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, the Lessee shall be deemed to have agreed to pay, upon
demand, all costs and expenses reasonably incurred by the Lessor and any Person
participating with the 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 the
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 the 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
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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 the Lessee shall have obtained the prior written approval
of the Lessor, which approval may be withheld in the 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.
9.5 Non-Capital Additions. The 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, the
Lessee shall always comply with and satisfy the conditions of Section 9.4,
mutatis, mutandis. The 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 he paid by
the 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 the
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 the Lessee is unable to contact the
appropriate representatives of the Lessor, the Lessee may commence such
additions, modifications and improvements as may be necessary in order to
address such emergency without the Lessor's prior approval, as long as the
Lessee immediately thereafter advises the Lessor of such emergency and the
nature and scope of the additions, modifications and improvements performed and
obtains the Lessor's approval of the remaining work to be completed.
ARTICLE 10
WARRANTIES AND REPRESENTATIONS
10.1 Representations and Warranties. The Lessee hereby represents
and warrants to, and covenants and agrees with, the Lessor that:
10.1.1 Existence; Power; Qualification. The Lessee is a corporation
duly organized, validly existing and in good standing under the laws of
___________. The 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;
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10.1.2 Valid and Binding. The Lessee is duly authorized to make and
enter into all of the Lease Documents to which the Lessee is a party and to
carry out the transactions contemplated therein. All of the Lease Documents to
which the Lessee is a party have been duly executed and delivered by the
Lessee, and each is a legal, valid and binding obligation of the Lessee,
enforceable in accordance with its terms.
10.1.3 Single Purpose. The 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 operation of the Leased Property for the
Primary intended Use.
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 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 the Lessor of the Lease Documents
to which it is a party).
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 the 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 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.
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10.1.7 No Burdensome Agreements. The Lessee 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. The 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. The Lessee has not created, incurred,
guaranteed, endorsed, assumed or suffered to exist any liability (whether
direct or contingent) for borrowed money from any Affiliate of the Lessee that
is not fully subordinated to the Lease Obligations pursuant to a written
agreement in form and substance acceptable to the Lessor.
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 the 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
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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 the Lessor
continue to be reasonable (with respect to the material assumptions upon which
such projections are based) and the 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) action or investigation pending or, to the best
knowledge and belief of the Lessee, threatened, anticipated or contemplated
(nor, to the knowledge of the 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,
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) The most recent utilization reviews relating to the
Leased Property 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 of the Leased Property. No claims or
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assertions have been made in any utilization review that any of the practices
or procedures used at the Leased Property are improper or inappropriate other
than such claims or assertions which singly and in the aggregate will not have
a material adverse impact on the Leased Property; and
(d) The Lessee has delivered or caused to be delivered to
the Lessor true and correct copies of all licenses, inspection surreys 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) The 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 the Lessee. Without
limiting the foregoing, the 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 the 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) The Facility is accredited by [INSERT ANY OTHER
APPLICABLE ORGANIZATIONS] and there are no deficiencies in either the Leased
Property or any services provided at the Facility that would prevent the
extension of the accreditation of the Facility by (INSERT ANY OTHER APPLICABLE
ORGANIZATIONS] after their next regularly scheduled inspections.
10.1.16 No Action By Governmental Authority. There is no action
pending or, to the best knowledge and belief of the 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 the 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 the
Lessee shall warrant and defend the Lessor's title to the Leased Property
against any and all claims and demands of every kind and nature whatsoever;
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(b) There is no Condemnation or similar proceeding
pending with respect ro or affecting the Leased Property, and the Lessee is not
aware, to the best of the Lessee's knowledge and belief, that any such
proceeding is contemplated;
(c) No part of the Leased Property has been damaged by
any fire or other casualty. The Leased Improvements are 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 Leased Property in accordance with the
Primary Intended Use;
(e) 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 the Lessee is included within the
definition of the Leased Property;
(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;
(h) All utilities necessary for the use and operation of
the Facility are 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 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 the Lessor to be readily obtainable; and
(i) The Lessee has made no structural alterations or
improvements to any of the Leased Improvements that changed the foot-print of
any of the Leased Improvements, added an additional story to any of the Leased
Improvements, decreased the amount of parking available on the Leased Property
or otherwise involved any alteration which would be regulated by applicable
zoning requirements and the Lessee has no actual knowledge of any such
structural alteration or improvement made to any of the Leased Improvements
during the last ten (10) years
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and has no knowledge of any such structural alteration or renovation made to
any of the Leased Improvements or any such decrease in parking during such
period.
10.1.18 Third Party Payor Agreements.
(a) The Lessee or the Facility is fully qualified as a
provider of services under and participates in all Third Party Payor Programs
and referral programs as is necessary for the prudent operation of the Facility
in the good faith exercise of commercially reasonable business judgment.
(b) Attached hereto as EXHIBIT C is a list of national
accounts and local discount agreements, which constitute all of the agreements
between the Lessee or the Facility, on the one hand, and Third Party Payors on
the other hand, pursuant to which the Lessee or the Facility agrees to provide
services based on a discount factor from the rates regularly charged for
services rendered by the 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.
(d) All cost reports and financial reports submitted to
any Third Party Payor with respect to the Facility by any member of the Leasing
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 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. As of the date hereof, no
cost reports for the Facility remain open or unsettled other than those listed
on EXHIBIT D.
10.1.19 Rate Limitations. Except as disclosed on EXHIBIT E, 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 F, there are no
Contracts, Permits or Legal Requirements which require that a percentage of
beds or slots in any program at the Facility be reserved for Medicaid or
Medicare eligible residents or that the Facility provide a certain amount of
welfare, free or charity care or discounted or government assisted patient
care.
10.1.21 No Proposed Changes. The 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
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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 the Lessee or the
Facility obtain a certificate of need, Section 1122 approval or the equivalent,
which the 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 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 the 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
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prevent all statements contained herein and therein from being misleading.
There is no fact within the special knowledge of the Lessee which has not been
disclosed herein or in writing to the Lessor that materially adversely affects,
or in the future, insofar as the 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. The 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 Lessor's 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. The 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 the Lessee is located at 14160 Dallas Parkway,
Suite 300, Dallas, Texas 75240 (the "Principal Place of Business").
10.1.29 Labor Matters. There are no proceedings now pending, nor, to
the best of the 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.
10.1.30 Intellectual Property. The 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.
10.2 Continuing Effect of Representations and Warranties. All
representations and warranties contained in this Lease and the other Lease
Documents shall constitute continuing
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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 the 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, in the second and third sentences of Section 10.1.13, and in the
second and third sentences of Section 10.1.18(d) 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 the Lessor, the Lessee shall furnish to the 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 mortgagee of the Leased Property as the Lessor may
request and may be relied upon by the 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. The Lessee will furnish and shall
cause to be furnished to the Lessor the following statements, information and
other materials:
(a) Annual Statements. Within ninety (90) days after the
end of each of their respective fiscal years, (i) a copy of the Consolidated
Financials for each of (x) the Lessee 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 the Lessor and certified
as true and correct by the Lessee or the applicable Sublessee, as the case may
be (and, without limiting anything else contained herein, the Consolidated
Financials for the 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 the Lessee and each
Sublessee, stating whether, to the best of the signer's knowledge and belief
after making due inquiry, the Lessee 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
the Lessee or the applicable Sublessee, as the case may be, regarding the
existence of any reportable conditions or
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material weaknesses and (iv) a statement certified as true and correct by the
Lessee setting forth all Subleases 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 such Subleases
as may be reasonably requested by the Lessor.
(b) 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 assisted living matters and
(ii) Contracts (involving payments in the aggregate in excess of $100,000 per
annum), including, without limitation, all Provider Agreements.
(c) 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.
(d) 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 the 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, the 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 Authority, Accreditation Body or Third Party Payor and the
response(s) thereto made by or on behalf of the Lessee or any Sublessee.
(e) 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 the Lessee or any Sublessee to any
Governmental Authority, Accreditation Body or any Third Party Payor with
respect to the Leased Property.
(f) Other Information. with reasonable promptness, such
other information as the 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.
(g) 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
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giving of notice or the passage of time, or both, could constitute a Lease
Default, a written statement of the Lessee setting forth the details of such
Lease Default, event or circumstance and the action which the Lessee proposes
to take with respect thereto.
(h) 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.
(i) 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 the Lessor, any letter of comments directed by such accountant to the
management of any such member of the Leasing Group.
(j) Adverse Developments. Promptly after the Lessee
acquires knowledge thereof, written notice of:
(i) the potential termination of any Permit or Provider
Agreement necessary for the 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 the 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 the Lessee or the Facility for the participation in any
Medicaid, Medicare or other Third Party Pavor 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 the
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.
(k) Responses To Inspection Reports. Within thirty (30)
days after receipt of an inspection report relating to the Leased Property from
the Lessor, a written response describing in detail prepared plans to address
concerns raised by the inspection report.
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(l) 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 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.
(m) Annual Budgets. At least thirty (30) days prior to
the end of each Fiscal Year, the Lessee, any sublessee and/or any manager shall
submit to the 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, the Lessee any Sublessee and/or any
Manager shall submit to the 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 the 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 the 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. The Lessor shall afford any information
received pursuant to the provisions of the Lease Documents the same degree of
confidentiality that the Lessor affords similar information proprietary to the
Lessor; provided, however, that the 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 the Lessor has
provided such information in accordance with the terms hereof) and provided,
further, that the Lessor shall have the unconditional right to (a) disclose any
such information as the 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 the Lessor and
any member of the Leasing Group. Without limiting the foregoing, the Lessor
may also utilize any information furnished to it hereunder as and to the extent
(i) counsel to the 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) the Lessor is required or requested by
any Governmental Authority to disclose any such information and/or (iii) the
Lessor is requested to disclose any such information by any of its lenders or
potential lenders. The Lessor shall not be liable in any way for any
subsequent disclosure of such
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information by any Person to whom the Lessor provided such information in
accordance with the terms hereof. Nevertheless, in connection with any such
disclosure, the Lessor shall inform the recipient of any such information of
the confidential nature thereof. The Lessor 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. The Lessee covenants and agrees that,
throughout the Term and as long as the Lessee is in possession of the Leased
Property;
11.3.1 No Indebtedness. The Lessee shall not create, incur, assume
or suffer to exist any liability for borrowed money except (i) Indebtedness to
the 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 the Lessor in accordance with the terms of
Article 9 hereof, (v) Indebtedness to an Affiliate, provided, that, such
Indebtedness is fully subordinated to this Lease pursuant to a written
agreement in form and substance acceptable to the Lessor, and (vi) other
Indebtedness of the Lessee in the aggregate amount not to exceed ___________
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
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.
11.3.2 No Guaranties. The 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. The Lessee covenants and agrees that
throughout the Term and any periods thereafter that the Lessee remains in
possession of the Leased Property:
11.4.1 Maintenance of Existence. If the Lessee is a corporation,
trust or partnership, during the entire time that this Lease remains in full
force and effect, the 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, the Lessee
shall not suffer the use in connection with any renovations or other
construction relating to the Leased Property of any
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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 the
Lessee does not have absolute and unencumbered title, and 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 renovations
or construction, subject to the Lessee's right to contest to the extent
provided for in Article 15.
11.4.3 Compliance With Legal Requirements And Applicable Agreements.
The 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.
11.4.4 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
operation of the Leased Property).
11.4.5 Participation in Third Party Payor Programs. The 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. The Lessee will maintain, and cause
any Sublessee and any Manager to maintain, experienced and competent
professional management with respect to its business and with respect to the
Leased Property. The Lessee, any Sublessee and any Manager shall conduct, in
the ordinary course, the operation of the Facility, and the Lessee and any
Sublessee shall not enter into any other business or venture during the Term,
or such time as the Lessee or any Sublessee is in possession of the Leased
Property.
11.4.7 Address. The Lessee shall provide the Lessor thirty (30)
days' prior written notice of any change of its Principal Place of Business
from its current Principal Place of Business. The Lessee shall maintain all
books and records relating to its business, solely at its Principal Place of
Business and at the Leased Property. The Lessee shall not (a) remove any books
or records relating to the Lessee's business from either the Leased Property or
the Lessee's Principal Place of Business or (b) relocate its Principal Place of
Business until after receipt of a certificate from the Lessor, signed by an
officer thereof, stating that the 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.
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11.4.8 Subordination of Affiliate Transactions. Without limiting the
provisions of any other Section of this Lease, any payments to be made by the
Lessee to (a) any member of the Leasing Group (or any Affiliate of any member
of the Leasing Group) or (b) any Affiliate of the Lessee, in connection with
any transaction between the 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 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, the 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 the
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,
the Lessee shall permit the 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, the 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), the Lessee
shall (i) provide the Lessor with prior notice of such acquisition and (ii)
shall take such actions and enter into such agreements as the Lessor shall
reasonably request in order to grant the 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 the
Lessor.
11.5 Additional Negative Covenants. The Lessee covenants and
agrees that, throughout the Term and such time as the Lessee remains in
possession of the Leased Property:
11.5.1 Restrictions Relating to Lessee. Except as may otherwise be
expressly provided in any of the other Lease Documents, the Lessee shall not,
without the prior written consent of the Lessor, in each instance, which
consent may be withheld in the sole and absolute discretion of the 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 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 11.3.1(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
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equals or is less than TWENTY-FIVE THOUSAND DOLLARS ($25,000), individually, or
ONE HUNDRED THOUSAND DOLLARS ($100,000) 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 the
Lessee provides the Lessor with an explanation (reasonably satisfactory to the
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 the Lessee in the ordinary course of
business; and (vi) subject to the terms of the [Shareholder Guarantee
Agreement], distributions to the shareholders of the Lessee;
(b) permit the use of the Facility 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. The 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 the
Lessee's interest therein) or the 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 the Lessor, (d) Liens for those taxes of the Lessor
which the 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 the 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 the Lessor.
11.5.3 Limits on Affiliate Transactions. The 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 the making of any loan or other extension of credit,
except in the ordinary course of, and pursuant to the reasonable requirements
of, the 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 Intentionally Omitted.
11.5.5 No Default. The Lessee shall not commit any default or breach
under any of the Lease Documents.
11.5.6 Intentionally Omitted.
11.5.7 Intentionally Omitted.
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11.5.8 ERISA. The 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 the Lessor to the amount
of the aggregate past service liability thereby created.
11.5.9 Forgiveness of Indebtedness. The 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 the Lessor as of the date hereof, the Lessee will not
write up (by creating an appraisal surplus or otherwise) the value of any
assets of the Lessee; above their cost to the Lessee, less the depreciation
regularly allowable thereon.
11.5.11 Changes in Fiscal Year and Accounting Procedures. The Lessee
shall not, without the prior written consent of the Lessor, in each instance,
which consent may be withheld in the 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-the 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 the Lessee.
ARTICLE 12
INSURANCE AND INDEMNITY
12.1 General Insurance Requirements. During the Term of this Lease
and thereafter until the Lessee surrenders the Leased Property in the manner
required by this Lease, the 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. The Lessee's insurance shall
include the following:
(a) property loss and physical damage insurance on an
all-risk basis (with only such exceptions as the 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 the 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 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
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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 situates 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 the 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 the Lessor;
(d) earthquake insurance (if deemed necessary by the
Lessor) in limits and with deductibles acceptable to the Lessor;
(e) environmental impairment liability insurance (if
available) in limits and with deductibles acceptable to the 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 the Lessor in its reasonable discretion shall approve)
covering the Tangible Personal Property for the full replacement cost thereof
and with a deductible not in excess of one percent (10%) 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 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;
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(k) subsidence insurance (if deemed necessary by the
Lessor) in limits acceptable to the Lessor; and
(l) such other insurance as the 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 the 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 the 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
the 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 canceled or
materially modified except upon thirty (30) days, prior written notice to the
Lessor and any Fee Mortgagee;
(d) be payable to the 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 the Lessor and any Fee Mortgagee;
(f) expressly waive any right of subrogation on the part
of the insurer against the Lessor, any Fee Mortgagee or the Leasing Group; and
(g) otherwise be in such forms as shall be reasonably
acceptable to the Lessor.
12.1.4 Notices; Certificates and Policies. The Lessee shall promptly
provide to the Lessor copies of any and all notices (including notice of
non-renewal), claims and demands which the Lessee receives from insurers of the
Leased Property. At least ten (10) days prior to the
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expiration of any insurance policy required hereunder, the Lessee shall deliver
to the Lessor certificates and evidence of insurance relating to all renewals
and replacements thereof, together with evidence, satisfactory to the Lessor,
of payment of the premiums thereon. The Lessee shall deliver to the 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) ninety (90) days after the effective date of each
such policy and (b) ten (10) days after receipt thereof by the Lessee.
12.1.5 Lessor's Right to Place Insurance. If the Lessee shall fail
to obtain any insurance policy required hereunder by the Lessor, or shall fail
to deliver the certificate and evidence of insurance relating to any such
policy to the Lessor, or if any insurance policy required hereunder (or any
part thereof) shall expire or be canceled or become void or voidable by reason
of any breach of any condition thereof, or if the 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 the Lessor, the 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 the Lessor, and, at its option, the
Lessor may obtain such insurance and pay the premium or premiums therefor; in
which event any amount so paid or advanced by the 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
the Lessee to the 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 damage, subject to the rights of any Fee
Mortgagee, all proceeds shall be paid to the Lessor alone (rather than jointly
to the Lessee and the Lessor). The Lessor is hereby authorized to adjust and
compromise any such loss with the consent of the Lessee or, following any Lease
Default, whether or not cured, without the consent of the Lessee, and to
collect and receive such proceeds in the name of the Lessor and the Lessee, and
the Lessee appoints the Lessor (or any agent designated by the Lessor) as the
Lessee's attorney-in-fact with full power of substitution, to endorse the
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 the 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 the 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 the 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 the Lessee may suffer and shall survive the
same. Such power of attorney, is provided solely to protect the interests of
the Lessor and shall not impose
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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
willful misconduct.
12.1.8 Blanket Policies. Notwithstanding anything to the contrary
contained herein, the 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 the Lessee and its Affiliates;
provided, however, that the coverage afforded to the 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. The Lessee shall not, on the 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 the 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 the Lessor, are
included therein as insureds and (b) losses are payable under said insurance in
the same manner as losses are required to be payable under this Lease. The
Lessee shall immediately notify the 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 insurance policy or policies.
12.1.10 Assignment of Unearned Premiums. The Lessee hereby assigns to
the Lessor all rights of the Lessee in and to any unearned premiums allocable
to the Leased Property on any insurance policy required hereunder to be
furnished by the Lessee which may become payable or are refundable after the
occurrence of an Event of Default hereunder. In the event that this Lease is
terminated for any reason (other than the purchase of the Leased Property by
the Lessee), the insurance policies required to be maintained hereunder,
including all right, title and interest of the Lessee thereunder, shall become
the absolute property of the Lessor.
12.2 Indemnity.
12.2.1 Indemnification. Except with respect to the gross negligence
or willful misconduct of the Lessor or any of the other indemnified Parties, as
to which no indemnity is provided, the Lessee 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
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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 '@rom 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 Lessee under this Section 12.2.1 shall be a demand
obligation of the Lessee to the 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 Lessor, 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 the Lessor nor any
Affiliate of the 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 the Lessee and the Lessor
shall not in any manner be held responsible therefor. Notwithstanding the
foregoing, the Lessor shall not be released from liability for any injury,
loss, damage or liability suffered directly by the Lessee to the extent caused
directly by the gross negligence or willful misconduct of the 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 the 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
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foreclosures, levies or executions of Liens (other than those created by the
Lessor in accordance with the provisions of Article 20) is assumed by the
Lessee and, in the absence of the gross negligence or willful misconduct as set
forth in Section 12.2.3, the 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 the Lessee to any abatement
of Rent (except for an abatement, if any, as specifically provided for in
Section 3.8).
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"), the Lessee shall give immediate written notice thereof
to the Lessor and, subject to the terms of this Article 13, the 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 twenty (120) 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 two-hundred and
seventy (270) 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, the Lessee shall comply with the following requirements:
(a) The Lessee shall furnish to the Lessor complete plans
and specifications for the work (collectively, the "Plans and Specifications"),
for the 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 the 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;
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(b) The Lessee shall furnish to the 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;
(c) The Lessee shall furnish to the 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 the Lessor and which the Lessor shall be
required to apply toward restoration of the Leased Property as provided in
Section 13.2;
(d) The Lessee shall furnish to the 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 the
Lessee; and
(e) The Lessee shall not commence any of the work until
the Lessee shall have complied with the requirements set forth in clauses (a)
through (d) immediately above, as applicable, and, thereafter, the 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 the Lessee is unable to contact the appropriate
representatives of the Lessor, the Lessee may commence such work as may be
necessary in order to address such emergency without the Lessor's prior
approval, as long as the Lessee immediately thereafter advises the Lessor of
such emergency and the nature and scope of the Work performed and obtains the
Lessor's approval of the remaining Work to be completed.
13.1.3 Disbursement of Insurance Proceeds. If, as provided in
Section 13.2, the 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 the Lessee in accordance with the terms and
conditions of this Lease, the 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. The Lessor shall
not be required to make disbursements more often than at thirty (30) day
intervals. The 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, the Lessee
shall have received the 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.
(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
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(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 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 staling 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 the 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 paid, might become the basis of a vendor's, mechanic's, laborer's or
materialman's statutory or other similar Lien upon the Leased Property.
(c) The Lessee shall deliver to the 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. The 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 the
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, the Lessee shall deliver to
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the Lessor, upon the request of the 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) The Lessee shall deliver to the Lessor (i) an opinion
of counsel (satisfactory to the 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 the 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.
The Lessor, at its option, may waive any of the foregoing requirements in whole
or in part in any instance. Upon compliance by the Lessee with the foregoing
requirements (excerpt for such requirements, if any, as the Lessor may have
expressly elected to waive), and to the extent of (x) the insurance proceeds,
if any, which the 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 the Lessee, the Lessor shall make available for payment to the
Persons named in the work Certificate the respective amounts stated in said
certificates) 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 Lessor that the Work
shall be fully completed in accordance with the Plans and Specifications and
the requirements of the 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, the Lessee shall
promptly deliver to the 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 the Lessor
insuring the Leased Property against all mechanic's
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and materialman's liens accompanied by the final lien waivers from the general
contractor and all subcontractors;
(iii) a certificate by the Lessee in form and substance
reasonably satisfactory to the Lessor, listing all costs and expenses in
connection with the completion of the Work and the amount paid by the 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 the 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, the Lessee shall obtain
and deliver to the Lessor a permanent certificate of occupancy for the Leased
Property.
Upon completion of the Work and delivery of the documents required
pursuant to the provisions of this Section 13.1, the Lessor shall pay the
Retainage to the Lessee or to those Persons entitled thereto and if there shall
be insurance proceeds or cash deposits, other than the Retainage, held by the
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, the Lessor shall pay over
such proceeds or cash deposits to the Lessee.
No inspections or any approvals of the work during or after
construction shall constitute a warranty or representation by the 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 the Lessor are
performed solely for the benefit of the Lessor to assure the payment and
performance of the Lease Obligations and are not for the benefit of the 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, the 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;
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(c) The Lessee demonstrates to the Lessor's satisfaction
that the Lessee has the financial ability to satisfy the Lease Obligations
during such repair or restoration; and
(d) no sublease (excluding Resident Agreements) material
to the operation of the Facility immediately prior to such damage or taking
shall have been canceled 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.
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) the 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 two hundred and seventy (270) 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 the Lessee may either (i)
acquire the Leased Property from the Lessor for a purchase price equal to the
greater of (x).the Lessor's 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, the Lessee shall be entitled
upon payment of the full purchase price to receive all property insurance
proceeds (less any costs and expenses incurred by the Lessor in collecting the
same), or (ii) terminate this Lease, in which event (subject to the provisions
of the last sentence of this Section 13.2.1.) the Lessor shall be entitled to
receive and retain the insurance proceeds; provided, however, that the Lessee
shall only have such right of termination effective upon payment to the 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 the Lessor (net of costs and expenses incurred by the
Lessor in collecting the same) accruals (3) the greater of the Lessor's
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, the Lessor shall assign to the Lessee
any outstanding insurance claims.
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13.2.3 Lessee Responsible for Short-Fall. If the cost of the Work
exceeds the amount of proceeds received by the Lessor from the property
insurance required under Article 12 (net of costs and expenses incurred by the
Lessor in collecting the same), the 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 the Lessee to the Lessor together with any
other property insurance proceeds for application to the cost of the work.
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 the 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, the Lessor shall pay such insurance proceeds to the Lessee to
reimburse the 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 the Lessee is required or elects to restore the Facility, the
Lessee shall either (a) restore (i) all alterations and improvements to the
Leased Property made by the 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 the Lessee to extend the
Term of this Lease, granted to the Lessee herein and any right of the Lessee to
purchase the Leased Property contained in this Lease to be terminated and to be
without further force or effect.
13.7 Waiver. The 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 the 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 the Lessor and dealt
with as follows:
(a) if the Work has been promptly and diligently
commenced by the 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, the Lessor shall each month pay to the 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 co the rental loss and/or
business interruption for the preceding month minus an amount
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accrual 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 the Lessee or is not in the process of being completed in
accordance with this Lease, the Rent 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 protected by the Lessor, shall be held by the 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 the
Lessor (net of costs and expenses incurred by the Lessor in collecting the
same) exceed the amounts required under clauses (a) and (b) above, the excess
shall be paid to the 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, the Lessor may at its option use or release the
Rent Insurance Proceeds to pay for the Work and, if a Lease Default exists, the
Lessor may apply all such insurance proceeds towards the Lease Obligations or
hold such proceeds as security therefor.
13.9 Obligation To Account. Upon the Lessee's written request,
which may not be made not more than once in any three (3) month period, the
Lessor shall provide the Lessee with a written accounting of the application of
all insurance proceeds received by the 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 temporarily Unsuitable For Its Primary Intended Use for
a period not likely to, or which does not, exceed two hundred and seventy (270)
days. If, however, the Leased Property is thereby so rendered permanently or
temporarily Unsuitable For Its Primary Intended Use: (a) the 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) the Lessee
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shall have the right to acquire the Leased Property from the Lessor (i) 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 Lessor's 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, the Lessor may overrule the Lessee's election under clause (a) or
(b) and instead either (1) terminate this Lease as of the date when the Lessee
is required to surrender possession of the portion of the Leased Property so
taken or (2) compel the 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 unit
capacity of the Facility if operated in accordance with its Primary Intended
Use. The Lessee shall exercise its election under this Section 14.3 by giving
the Lessor notice thereof ("Lessee's Election Notice") within sixty (60) days
after the Lessee receives notice of the Taking. The Lessor shall exercise its
option to overrule the Lessee's election under this Section 14.3 by giving the
Lessee notice of the Lessor's exercise of its rights under Section 14.3 within
thirty (30) days after the Lessor receives the Lessee's Election Notice. If,
as the result of any such partial or temporary Taking, this Lease is not
terminated as provided above, the 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.@, the Lessee shall accomplish all necessary restoration and the
Lessor shall release the net proceeds of such Award to reimburse the 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), the 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 the Lessor and Rent shall be abated as set forth
in Section 3.7.
14.5 Award Distribution. In the event the 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 the Lessee and the Lessor
agrees to assign to the Lessee all of the Lessor's rights thereto in any other
event, the entire Award shall belong to and be paid to the Lessor.
14.6 Control of Proceedings. Subject to the rights of any Fee
Mortgagee, unless and until the 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 against the Condemnor shall
be conducted, prosecuted and settled by the Lessor; provided, however, that the
Lessor shall keep the Lessee apprised of the progress of all such proceedings
and shall solicit
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the Lessee's advice with respect thereto and shall give due consideration to
any such advice. In addition, the Lessee shall reimburse the 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, the Lessee's obligation to so reimburse the Lessor shall be diminished
by the amount of the Award, if any, received by the Lessor which is in excess
of the Lessor's 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, the Lessee,
any Sublessee or any Manager on their own or on the Lessor's behalf (or in the
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 the 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 the 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 the 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), the Lessee shall deliver to the Lessor an Officer's
Certificate and opinion of counsel, if the 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) the Lessee shall give such cash
security as may be demanded in good faith by the 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
the Lessor or any member of the Leasing Group, the 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 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 the Lessee to contest the payment of Rent or any other sums payable by
the Lessee to the Lessor under any of the Lease Documents.
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15.2 Lessor's Cooperation. The Lessor, at the Lessee's sole cost
and expense, shall execute and deliver to the Lessee such authorizations and
other documents as may reasonably be required in any such contest, so long as
the same does not expose the Lessor to any civil or criminal liability, and, if
reasonably requested by the Lessee or if the Lessor so desires, the Lessor
shall join as a party therein.
15.3 Lessee's Indemnity. The Lessee, as more particularly provided
for in Section 12.2, shall indemnify, defend (with counsel acceptable to the
Lessor) and save the Lessor harmless against any liability, cost or expense of
any kind, including without limitation, attorneys, fees and expenses that may
be imposed upon the 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 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 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 (v) below (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, (4) 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
value of, or the Lessor's rights with respect to, the Leased Property;
(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 is a continuing representation or warranty
pursuant to Section 10.2;
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(e) 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;
(f) 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;
(g) 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;
(h) in the event that, without the prior written consent
of the Lessor, in each instance, which consent may be withheld by the Lessor 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 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
if such member of the Leasing Group shall be a operation of law or otherwise),
partnership, joint venture, syndicate or other group;
iii. more than [ percent ( %)], in the aggregate, of 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;
(i) 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;
(j) if, without the prior written consent of the Lessor,
in each instance, which consent may be withheld by the Lessor in its sole and
absolute discretion, the Lessee's or any Sublessee's interest in the Leased
Property shall be, directly or indirect mortgaged, encumbered
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(by any voluntary or involuntary Lien other than Permitted Encumbrances),
subleased, sold, assigned, hypothecated or otherwise transferred (whether by
operation of law or otherwise);
(k) 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 Lessee or any Sublessee, whether or not the applicable
creditor or obligee elects to declare the obligations of the 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 or remedy that, in the Lessor's reasonable opinion, may impair the
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
the 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 the 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 ONE HUNDRED THOUSAND DOLLARS ($100,000);
(l) intentionally omitted;
(m) 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 lot 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 map or line of credit shall mean and
include any line of credit established in an amount equal to or greater than
FIVE HUNDRED THOUSAND DOLLARS ($500,000);
(n) except as a result of Casualty or a partial or
complete Condemnation, if the Lessee or any Sublessee ceases operation of the
Facility for a period in excess of thirty (30) days (a "Failure to Operate");
(o) if one or more judgments against the Lessee or any
Sublessee or attachments against the 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;
(p) 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 Leasing
Group and either (i) enforcement proceedings shall have been commenced by any
creditor upon such award or judgment or (ii) such award or
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judgment shall continue unsatisfied and in effect for a period of ten (10)
consecutive days without an insurance company satisfactory to the Lessor (in
its sole and absolute discretion) having agreed to fund such award or judgment
in a manner satisfactory to the Lessor (in its sole and absolute discretion)
and in either case such award or judgment shall, in the reasonable opinion of
the Lessor, have a material adverse affect on the ability of any member of the
Leasing Group to operate the Facility;
(q) if 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 the Lessor, in each instance, which consent may be withheld in the
Lessor's reasonable discretion, shall not be renewed or extended upon the
expiration of the stated term thereof;
(r) if, after the 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 the 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 the Lessee or such
Sublessee is declared ineligible to continue its participation in the Medicare
and/or Medicaid programs;
(s) 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 the operation of the Facility in accordance with the
Primary Intended Use; and
(t) 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;
(u) the appointment of a temporary manager (or operator)
for the Leased Property by any Governmental Authority; or
(v) 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 an allegation of abuse or neglect or
to take any action to eliminate an emergency situation then existing at the
Facility.
16.2 Remedies.
(a) if any Lease Default shall have occurred, the Lessor
may at its option terminate this Lease by giving the 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 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 the Lessor shall have
specifically elected by a written
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notice to so terminate the Lease) and all rights of the Lessee under this Lease
shall cease. Notwithstanding the foregoing, in the event of the Lessee's
failure to pay Rent, if such Rent remains unpaid beyond ten (10) days from the
due date thereof, the 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 the 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 the Lessor, and no other act done by or on
behalf of the Lessor, shall constitute an acceptance of surrender of the Leased
Property by the Lessee or reduce the 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 the Lessor.
(b) To the extent permitted under applicable law, the
Lessee shall pay as Additional Charges all costs and expenses (including,
without limitation, attorneys, fee and expenses) reasonably incurred by or on
behalf of the 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,
the Lessee shall, to the extent permitted under applicable law, if required by
the Lessor so to do, upon not less than ten (10) days' prior notice from the
Lessor, immediately surrender to the Lessor the Leased Property pursuant to the
provisions of Paragraph (a) of this Section and quit the same, and the Lessor
may enter upon and repossess the Leased Property by reasonable force, summary
proceedings, ejectment or otherwise, and may remove the 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 residents 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 the Lessor may claim ownership of
the Tangible Personal Property as set forth in Section 5.2.3 hereof or the
Lessor may exercise its rights as secured party under the Security Agreement.
The Lessor shall use reasonable, good faith efforts to relet the Leased
Property or otherwise mitigate damages suffered by the Lessor as a result of
the Lessee's breach of this Lease.
(d) In addition to all of the rights and remedies of the
Lessor set forth in this Lease and the other Lease Documents, if the 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 the Lessee shall also
pay to the Lessor (i) a late payment service charge (in order to partially
defray the 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 the Lessee hereunder or to relieve the
Lessee of its obligation to pay such sums at the time or times required by this
Lease.
16.3 Damages. None of (a) the termination of this Lease pursuant
to Section 16.2, (b) the eviction of the Lessee or the repossession of the
Leased Property, (c) the failure or inability of the Lessor, notwithstanding
reasonable good faith efforts, to relet the Leased Property, (d) the
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reletting of the Leased Property or (e) the failure of the Lessor to collect or
receive any rentals due upon any such reletting, shall relieve the Lessee of
its liability and obligations hereunder, all of which shall survive any such
termination, repossession or reletting. In any such event, the Lessee shall
forthwith pay to the Lessor all Rent due and payable with respect to the Leased
Property to and including the date of such termination, repossession or
eviction. Thereafter, the Lessee shall forthwith pay to the Lessor, at the
Lessor's option, either:
(i) the sum of: (x) all Rent that is due and unpaid at
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 the Lessor for all damage proximately caused bv the 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 the Lessee's right of possession or other rights under this
Lease had not been terminated, or if the 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 the Lessor may enforce, by action or otherwise, any other term
or covenant of this Lease. There shall be credited against the Lessee's
obligation under this Clause (ii) amounts actually collected by the Lessor from
another tenant to whom the Leased Property may have actually been leased or, if
the Lessor is operating the Leased Property for its own account, the actual net
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 of capitalization (highest present worth)
reasonably applicable at the time of such determination and allowed by
applicable law.
16.4 Lessee Waivers. If this Lease is terminated pursuant to
Section 16.2, the 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 the
Lessee which are received by the 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 the Lessor may reasonably determine
or as may be required by the laws of the State.
16.6 Intentionally omitted.
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16.7 Lessors's Right to Cure. If the 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, the Lessor, after five (5) Business Days' prior notice to the 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 the 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 the Lessor's opinion, ma be necessary or appropriate therefore No such entry
shall be deemed an eviction of the Lessee. All sums so paid by the 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 the Lessee to the Lessor on demand as an Additional Charge.
The obligations of the Lessee and rights of the Lessor contained in this
Article shall survive the expiration or earlier termination of this Lease.
16.8 No Waiver By Lessor. The 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 the 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
failure, delay or waiver, give the Lessor does not intend to, from insisting
upon the strict representations and warranties Lessor can exercise any of its
the Lessor must thereafter, as a result of such notice to the Lessee or any
other Person that or may not, give a further waiver or to refrain performance
of the terms, conditions, covenants, set forth in the Lease Documents before
the 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 the Lessor and the Lessee or any other
Person.
The acceptance by the 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 the 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 the Lessor. Any failure by
the 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 the 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
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the maximum extent not prohibited by applicable law, the 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 the Lessor and, except as may be otherwise specifically agreed to by
the Lessor in writing, no forbearance on the part of the Lessor, no extension of
the time for the payment of the whole or any part of the Obligations, and no
other indulgence given by the Lessor to the Lessee or any other Person, shall
operate to release or in any manner affect the original liability of the Lessee
or such other Persons, or to limit, prejudice or impair any right of the 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 the Lessee and all those claiming by, through or under the 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 the
Lessor under any of the other Lease Documents or at law or in equity, all of
which are hereby reserved by the Lessor, and this Lease is made and accepted
without prejudice to any such rights and remedies. All of the rights and
remedies of the Lessor under each of the Lease Documents shall be separate and
cumulative and may be exercised concurrently or successively in the Lessor's
sole and absolute discretion.
ARTICLE 17
SURRENDER OF LEASED PROPERTY OR LEASE; HOLDING OVER
17.1 Surrender. The Lessee shall, upon the expiration or prior
termination of the Term (unless the Lessee has concurrently purchased the
Leased Property in accordance with the terms hereof), vacate and surrender the
Leased Property to the 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 the 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 the Lessor, and (c) any damage or destruction
resulting from a Casualty or Taking that the 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 the Lessee has
concurrently purchased the Leased Property in accordance with the terms
hereof), upon any request made from time to time by the Lessor, the Lessee
shall (a) promptly and diligently use its best effort s 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 the Lessor
or its designee and/or (ii) arrange for the transfer or assignment of such
Permits and Contracts to the 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
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fullest extent possible) and assist the Lessor or its designee in obtaining
such Permits and Contracts (whether by transfer, assignment or otherwise).
Such efforts and cooperation on the part of the 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
the Lessor. Furthermore, the Lessee shall not take any action or refrain from
taking any action which would defer, delay or jeopardize the process of the
Lessor or its designee obtaining said Permits and Contracts (whether by
transfer, assignment or otherwise). Without limiting the foregoing, the 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.
The Lessee hereby appoints the Lessor as its attorney-in-fact, with
full power of substitution to take such actions, in the event that the Lessee
fails to comply with any request made by the Lessor hereunder, as the 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 the 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 the Lessee may suffer and
shall survive the same. Such power of attorney 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 willful misconduct.
17.3 No Acceptance of Surrender. Except at the expiration of the
Term in the ordinary course, no surrender to the 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 the Lessor and no act by the Lessor or any
representative or agent of the Lessor, other than such a written acceptance by
the Lessor, shall constitute an acceptance of any such surrender.
17.4 Holding Over. If, for any reason, the 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 the 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 the Lessee pursuant to the provisions of this Lease with respect to
the Leased Property. During such period of tenancy, the 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 the Lessor to the holding over of the Lessee after the
expiration or earlier termination of this Lease.
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ARTICLE 18
PURCHASE OF THE LEASED PROPERTY
18.1 Purchase of the Leased Property. If this Lease is in full
force and effect and there exists no Event of Default which has not been cured
within the applicable grace period, then the Lessee shall have the option
exercisable on not less than six (6) months nor more than twenty-four (24)
months notice to purchase the Leased Property beginning on the anniversary of
the Commencement Date at a purchase price equal to the Fair Market Value of the
Leased Property. In the event the Lessee purchases the Leased Property from
the Lessor pursuant to any of the terms of this Lease, the Lessor shall, upon
receipt from the 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 the Lessee a deed with covenants
only against acts of the Lessor conveying the entire interest of the Lessor in
and to the Leased Property to the 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 the Lessee, any Liens created in accordance
with the terms of this Lease or consented to by the Lessee, the claims of all
Persons claiming by through or under the Lessee, any other matters assented to
by the Lessee and all matters for which the Lessee has responsibility under any
of the Lease Documents, but otherwise not subject to any other Lien created by
the Lessor from and after the Commencement Date (other than an Encumbrance
permitted under Article 20 which the Lessee elects to assume). The applicable
purchase price shall be paid in cash to the Lessor, or as the Lessor may
direct, in federal or other immediately available funds except as otherwise
mutually agreed by the Lessor and the Lessee. All expenses of such conveyance,
including, without limitation, title examination costs, standard (and extended)
coverage title insurance premiums, attorneys, fees incurred by the Lessor in
connection with such conveyance, recording and transfer taxes and recording
fees and other similar charges shall be paid by the 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, the Lessor (or the Lessee, as the case may be) shall by
notice to the Lessee (or the 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 the Lessee's or the
Lessor's request, then the determination of such appraiser shall be final and
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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 (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 the Lessor or the 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
fifty percent (50%) of the sum of the remaining two determinations shall be
final and Binding upon the Lessor and the 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. The Lessor and the 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.
ARTICLE 19
SUBLETTING AND ASSIGNMENT
19.1 Subletting and Assignment. Except as set forth in Section
19.2, the Lessee may not, without the prior written consent of the Lessor,
which consent may be withheld in the 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 the Lessee or sales, pledges, hypothecations or other
transfers (including, without limitation, any transfer by operation of law) of
the capital or the assets of the Lessee. Any such assignment, pledge, sale,
hypothecation or other transfer made without the Lessor's consent shall be void
and of no force and effect.
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19.2 Permitted Sublease. Notwithstanding the foregoing, the Lessee
shall have the right to enter into Resident Agreements without the prior
consent of the Lessor.
19.3 Attornment. The Lessee shall insert in each Sublease approved
by the 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 the Lessor hereunder, (b) in the event this Lease shall terminate before the
expiration of such Sublease, the Sublessee thereunder will, at the Lessor's
option, attorn to the 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 the Lessor stating that the Lessee is in default under this
Lease, the Sublessee shall thereafter be obligated to pay all rentals accruing
under said Sublease directly to the Lessor or as the Lessor may direct. All
rentals received from the Sublessee by the Lessor shall be credited against the
amounts owing by the 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 the 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 the
Lessor hereunder arising or accruing from and after the date of such conveyance
or transfer, the original the 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 the 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 the Lessee,
but subject to the terms and conditions set forth below in this Section 20.3,
the 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"), whether to secure any
borrowing or ocher means of financing or refinancing, provided that the Lessee
shall have no obligation to make payments under such Encumbrances. The 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
the
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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, the Lessor shall obtain and deliver to
the 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) the Lessee shall not he disturbed in peaceful
enjoyment of the Leased Property nor shall this Lease be terminated or canceled
at any time, except in the event that the Lessor shall have the right to
terminate this Lease under the terms and provisions expressly set forth herein,
(ii) the 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 the 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 the 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 the Lessor.
At the request from time to time by any Fee Mortgagee, the Lessee
shall (a) subordinate this Lease and all of the Lessee's rights and estate
hereunder to the Fee Mortgage held by such Fee Mortgagee and (b) agree that the
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 the Lessor under this Lease for the balance of the Term then
remaining. To effect the intent and purpose of the immediately preceding
sentence, the Lessee agrees to execute and deliver such instruments in
recordable form as are reasonably requested by the 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.
ARTICLE 21
LESSOR OBLIGATIONS
21.1 Quiet Enjoyment. As long as the 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 per-form its obligations thereunder, the Lessee shall
peaceably and quietly have, hold and enjoy the Leased Property throughout the
Term, free of any claim or other action by the Lessor or anyone claiming by,
through or under the Lessor, but subject to the Permitted Encumbrances and such
Liens as may hereafter be
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consented to by the Lessee. No failure by the Lessor to comply with the
foregoing covenant shall give the 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 the Lessee hereunder. Notwithstanding the
foregoing, the Lessee shall have the right by separate and independent action
to pursue any claim it may have against the Lessor as a result of a breach by
the Lessor of the covenant of quiet enjoyment contained in this Article 21.
21.2 Memorandum of Lease. The Lessor and the 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. The
Lessee shall pay all recording costs and taxes associated therewith.
21.3 Default by Lessor. The Lessor shall be in default of its
obligations under this Lease only if the 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 the Lessee (or 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 the 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 the 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 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 the Lessee:
-------------------------------------------
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With a copy to:
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If to the Lessor:
-------------------------------------------
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With copies to:
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or such other address as the Lessor or the Lessee shall hereinafter from time
to time designate by a written notice to the others given in such manner. Any
notice given to the Lessee by the Lessor at any time shall not imply that such
notice or any further or similar notice was or is required.
ARTICLE 23
INTENTIONALLY OMITTED
ARTICLE 24
MISCELLANEOUS PROVISIONS
24.1 Broker's Fee Indemnification. The Lessee shall and hereby
agrees to indemnify, defend (with counsel acceptable to the Lessor) and hold
the 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. Notwithstanding the foregoing, the Lessor shall have the
option of conducting its own defense against any such claims with counsel of
the Lessor's choice, but at the expense of the Lessee, as aforesaid. This
indemnification shall include all attorneys' fees and expenses and court costs
reasonably incurred by the 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 the
Lessor and the Lessee. The Lessee is not the agent or representative of the
Lessor and nothing contained herein or in any of the other Lease Documents
shall make, or be construed to make, the Lessor liable to any Person for goods
delivered to the Lessee, services performed with respect to the Leased Property
at the direction of the Lessee or for debts or claims accruing against the
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
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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 Permits and/or the Contracts.
References herein and in the other Lease Documents to any of the Lease
Documents, the Management 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, extension, substitution, revisions, consolidation or modification of
any of the Lease Documents or any Management Agreement, Permit and/or the
Contract is not intended to constitute an agreement or consent by the Lessor to
any such renewal, replacement, amendment, substitution, revision, consolidation
or modification; but, rather as a reference only to those instances where the
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 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.
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.
24.8 WAIVER OF JURY TRIAL. TO THE MAXIMUM EXTENT PERMITTED BY
APPLICABLE LAW, THE LESSOR AND THE 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
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TO THE LEASE OR ANY OF THE LEASE DOCUMENTS. The Lessee hereby certifies that
neither the Lessor nor any of the Lessor's representatives, agents or counsel
has represented expressly or otherwise that the 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 the Lessor has been induced by this
waiver (among other things) to enter into the transactions evidenced by this
Lease and the other Lease Documents and further acknowledges that the 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 is 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 the Lessee and
the Lessee's legal representatives and permitted successors and assigns and (b)
the Lessor and any other Person who may now or hereafter hold the interest of
the Lessor under this Lease and their respective successors and assigns.
Notwithstanding the foregoing, the 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 the Lessor, in each instance, which consent may be
withheld in the 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 the Lessor, its successors, assigns and
participants (if any, the Indemnified Parties, the Lessee, 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 the 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 the 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 the Lessor at any time, if, in the
Lessor's sole and absolute discretion, the Lessor deems it advisable or
desirable to do so.
24.11 Governing Law. This Lease shall be construed and the rights
and obligations of the Lessor and the Lessee shall be determined in accordance
with the laws of the State of Texas.
The 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
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exercise of any remedy under any of the Lease Documents and expressly waives
any and all objections the Lessee may have as to venue in any of such courts.
24.12 General. Anything contained in this Lease to the contrary
notwithstanding, all claims against, and liabilities of, the Lessee or the
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.
The 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.
IN WITNESS WHEREOF, the parties have caused this Lease to be executed
and attested by their respective officers thereunto duly authorized.
WITNESS: LESSEE:
- -------------------------------- By:
Name: --------------------------------
Name:
Title:
WITNESS: LESSOR:
- -------------------------------- By:
Name: --------------------------------
Name:
Title:
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EXHIBIT A
LEGAL DESCRIPTION OF THE LAND
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EXHIBIT B
PERMITTED ENCUMBRANCES
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EXHIBIT C
NATIONAL ACCOUNTS AND LOCAL DISCOUNTS
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EXHIBIT D
OPEN COST REPORTS
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EXHIBIT E
RATE LIMITATIONS
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EXHIBIT F
FREE CARE REQUIREMENTS
87
