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SECURITIES AND EXCHANGE COMMISSION
Washington, D.C. 20549
FORM 8-K
CURRENT REPORT
PURSUANT TO SECTION 13 OR 15(d) OF THE SECURITIES EXCHANGE ACT OF 1934
Date of Report (Date of earliest event reported): April 16, 1998
Commission file number 0-26980
ARV ASSISTED LIVING, INC.
(Exact name of Registrant as specified in its charter)
CALIFORNIA 33-0160968
(STATE OR OTHER JURISDICTION OF (I.R.S. EMPLOYER
INCORPORATION OR ORGANIZATION) IDENTIFICATION NO.)
245 FISCHER AVENUE, D-1
COSTA MESA, CA 92626
(ADDRESS OF PRINCIPAL EXECUTIVE OFFICE) (ZIP CODE)
REGISTRANTS TELEPHONE NUMBER, INCLUDING AREA CODE: (714) 751-7400
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ITEM 2. ACQUISITION OR DISPOSITION OF ASSETS
PURCHASE AND SALE AGREEMENTS
As of February 12, 1998, ARV Assisted Living, Inc. ("ARV") entered into Purchase
and Sale Agreements with The Hillsdale Group, L.P., a California limited
partnership; 270 Center Associates, Limited Partnership, a California limited
partnership; and TH Group, Inc., a California corporation, to purchase interests
in thirteen (13) senior housing communities located in California, containing
approximately 1,900 units, for approximately $88 million. The transaction is
expected to occur in phases beginning April 16, 1998 through July 1998.
On April 16, 1998, the purchases of two communities, a general partnership
interest and four management agreements were completed.
The following is a description of the closed transactions.
THE ACQUIRED COMMUNITIES
Golden Creek Inn
The Company acquired Golden Creek Inn from TH Group Inc., an unrelated third
party, pursuant to a Purchase and Sale Agreement dated February 12, 1998, as
amended. Golden Creek Inn is a 167-unit assisted living community located in
Irvine, California.
Hillcrest Inn
The Company acquired Hillcrest Inn from 270 Center Associates, Limited
Partnership, an unrelated third party, pursuant to a Purchase and Sale Agreement
dated February 12, 1998, as amended. Hillcrest Inn is a 138-unit assisted living
community located in Thousand Oaks, California.
THE ACQUIRED GENERAL PARTNERSHIP INTEREST
The Company acquired a 20 percent (20%) general partnership interest in WHW
Associates, a California general partnership, pursuant to a Purchase and Sale
Agreement dated February 12, 1998. WHW Associates is a general partner of Fifty
Peninsula Partners, a California limited partnership, which owns Sterling Court,
a 149-unit assisted living community located in San Mateo, California..
THE ACQUIRED MANAGEMENT CONTRACTS
The Company acquired the rights, title and interest as manager in four
management agreements, from The Hillsdale Group, L.P. The management agreements
acquired are for senior housing communities identified as follows: Sterling
Court, a 149-unit assisted living community located in San Mateo, California;
Palo Alto Commons, a 140-unit assisted living community located in Palo Alto,
California; San Carlos Retirement Center, an 85-unit assisted living community
located in San Carlos, California; and The Altenheim, a 210-unit assisted living
community located in Oakland, California.
TERMS OF PURCHASE
The purchase prices of the assets acquired were as follows: Golden Creek Inn -
$14.5 million; Hillcrest Inn - $27.5 million; general partnership interest -
$1.2 million; and the management contracts - $1.325 million. A portion of the
purchase price was paid from cash on hand with the balance consisting of
mortgage financing assumed by the Company.
The Company believes that the purchase price negotiated with the Seller reflects
the location, occupancy rates and the condition of the communities.
Additionally, the Company believes that the location of the acquired and managed
communities in relation to the Company's existing communities will provide
opportunities to achieve management efficiencies and operational economies of
scale.
The Company is confident that its experience in assisted living communities and
its knowledge of the senior housing market, including the operation of fifty
other assisted living communities, will enable it to achieve operating
efficiencies while maintaining the occupancy rates at full market rent.
Management believes that the acquisition of these communities will allow the
Company to increase its competive advantages in California, where 30 of the 50
assisted living communities currently operated or managed are located.
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MORTGAGE FINANCING
Concurrent with the purchase, the Company assumed existing mortgage financing
with an outstanding balance of $15.25 million secured by Golden Creek Inn and
Hillcrest Inn (balances of $2.25 million and $13.0 million, respectively). The
loans bear interest at LIBOR plus 2.5% require monthly payments of interest only
until August 1998 (Golden Creek Inn) and October 1998 (Hillcrest Inn).
Thereafter, the loans require monthly payments of principal and interest based
upon a 25-year amortization schedule. The outstanding balance of the loans plus
all accrued and unpaid interest is due and payable in 2002.
SPECIAL RISKS
The success of the communities depends to a large extent on increasing gross
revenues, holding or decreasing costs, and on the abilities of the on-site
management teams which the Company assembles. Additionally, the success of this
acquisition will depend in large part on the Company's ability to integrate the
existing management and staff into the Company's operations. To achieve
increased revenue and stable operating cost goals, policies used by the former
owners may need to be altered. This could result in short term resident
dissatisfaction and/or relocation. Moreover, given that the communities are not
newly constructed, unforeseen circumstances could necessitate major renovation
or more refurbishing than originally planned. The relatively low vacancy rates
enjoyed throughout the primary market may induce other operators to create new,
competitive facilities.
ITEM 7. FINANCIAL STATEMENTS AND EXHIBITS.
(a) Financial Statements
All financial statements and pro forma financial statements required
pursuant to Rule 3-14 of Regulation S-X with respect to the Registrants
acquisitions will be filed within 60 days of this report.
(b) Exhibits
<TABLE>
<CAPTION>
Number Exhibit
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<S> <C>
10.1 Purchase and Sale Agreement by and between 270
Center Associates, Limited Partnership and ARV
Assisted Living, Inc. dated as of February 12,
1998.
10.2 Amendment to Purchase and Sale Agreement by and
between 270 Center Associated, Limited Partnership
and ARV Assisted Living, Inc. dated as of March 2,
1998
10.3 Second Amendment to Purchase and Sale Agreement by
and between 270 Center Associated, Limited
Partnership and ARV Assisted Living, Inc. dated as
of April 10, 1998
10.4 Purchase and Sale Agreement by and between TH
Group, Inc. and ARV Assisted Living, Inc. dated as
of February 12, 1998.
10.5 Amendment to Purchase and Sale Agreement by and
between TH Group, Inc. and ARV Assisted Living,
Inc. dated as of March 2, 1998
10.6 Second Amendment to Purchase and Sale Agreement by
and between TH Group, Inc. and ARV Assisted Living,
Inc. dated as of April 10, 1998
10.7 Purchase and Sale Agreement by and between The
Hillsdale Group, LP and ARV Assisted Living, Inc.
dated as of February 12, 1998.
</TABLE>
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<TABLE>
<S> <C>
10.8 Amendment to Purchase and Sale Agreement by and
between The Hillsdale Group, LP and ARV Assisted
Living, Inc. dated as of March 2, 1998
10.9 Second Amendment to Purchase and Sale Agreement by
and between The Hillsdale Group, LP and ARV
Assisted Living, Inc. dated as of April 6, 1998
</TABLE>
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Pursuant to the requirements of the Securities Exchange Act of 1934, the
Registrant has duly caused this report to be signed on its behalf by the
undersigned, thereunto duly authorized.
ARV Assisted Living, Inc.
By: /s/ Sheila M. Muldoon
----------------------------------------------------
Sheila M. Muldoon
Senior Vice President and General Counsel
(Duly authorized officer)
Date: May 8, 1998
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Exhibit 10.1
PURCHASE AND SALE AGREEMENT
BY AND BETWEEN
270 CENTER ASSOCIATES, LIMITED PARTNERSHIP
AS SELLER
AND
ARV ASSISTED LIVING, INC.
A CALIFORNIA CORPORATION
AS BUYER
FEBRUARY 12, 1998
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Exhibit A Real Properties
Exhibit B-1 Tangible Personal Property
Exhibit B-2 Trade Names
Exhibit C All Contracts
Exhibit D Excluded Assets
Exhibit E Loan Documents
Exhibit F Allocations of Purchase Price
Exhibit G ALTA Table A Requirements
Exhibit H Exceptions to Disapproved Title Matters
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PURCHASE AND SALE AGREEMENT
(270 Center)
THIS PURCHASE AND SALE AGREEMENT (this "Agreement") is entered
into on February 12, 1998 (the "Effective Date"), by and between 270 CENTER
ASSOCIATES, LIMITED PARTNERSHIP, a California limited partnership ("Seller"),
and ARV ASSISTED LIVING, INC., a California corporation ("Buyer").
RECITALS
A. Seller owns certain real properties improved with assisted
living facilities located in the State of California.
B. Buyer desires to purchase such properties and rights from
Seller and Seller desires to sell such properties and rights to Buyer, on the
terms and subject to the conditions contained in this Agreement.
C. The properties subject to this Agreement are currently
managed by The Hillsdale Group, L.P., a California limited Partnership
("Hillsdale").
NOW THEREFORE, in consideration of the mutual covenants and
agreements contained in this Agreement, Buyer and Seller agree as follows:
1. Purchase and Sale
1.1 Assets. Subject to all of the terms and conditions of this
Agreement, Seller agrees to sell to Buyer and Buyer agrees to purchase from
Seller the following (all of which are herein collectively called the "Assets"):
1.1.1 Those certain real properties described on Exhibit A and
all of Seller's right, title and interest in and to all easements, rights and
privileges appurtenant thereto, including any right, title and interest of
Seller in and to adjacent streets, alleys or rights of way, together with all of
Seller's right title and interest in and to and all improvements, structures,
equipment and fixtures currently located on or under the land (each such
improved real property is herein called an "Owned Property" or "Property" and
collectively the "Owned Properties" or "Properties"). The assisted living
facilities located on each Property are sometimes individually referred to
herein as a "Facility" and collectively as the "Facilities.")
1.1.2 All of Seller's right, title and interest in and to (i)
all tangible personal property of any kind or nature whether located on each
Property or primarily used in connection with the ownership, operation,
construction, management, improvement, development or maintenance of such
Property (including but not limited to all architectural and engineering plans,
specifications and drawings for any existing, proposed or partially completed
Facilities and those items of tangible personal property listed on Exhibit B-1),
and (ii) all intangible property, if any, owned or held by Seller that pertains
primarily to the ownership, operation, construction, development, management,
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improvement, maintenance, use or operation of each Property, including but not
limited to all transferable licenses, permits and approvals for the operation,
construction, use or development of each Facility, all entitlements, all
warranties, guaranties, bonds and indemnities or other coverage (other than
insurance policies and proceeds thereof except to the extent provided in Section
4.5 below) relating to a Facility and in effect as of the Closing, except to the
extent the foregoing applies to matters for which Seller remains liable after
the Closing, all telephone numbers for telephones located at the Facilities, any
right, title or interest which each Seller may have in and to any service marks,
trademarks, logos or trade names owned or primarily used or employed by Seller
in conjunction with the operation of a Facility, specifically including the
names noted on Exhibit B-2 and any derivative thereof and any trade marks
related thereto and all goodwill associated with a Facility and any of the
foregoing, and all original books and records relating to a Facility (except
where originals are not available or must be retained by Seller for tax or
regulatory purposes, in which event copies will be provided) (collectively, the
"Personal Property").
1.1.3 All of Seller's right, title and interest in and to any
and all contracts and other agreements relating to a Property together with all
supplements, amendments and modifications thereto that are listed on Exhibit C,
together with any other contracts relating to a Property (not listed on Exhibit
C) which may be terminated by Buyer after the Closing in 30 days or less
(collectively, the "Contracts"), other than Seller's right, title and interest
in and to any Rejected Contracts (as defined in Section 3.3.2 below). Seller
shall use reasonable efforts to list all the Contracts on Exhibit C.
Notwithstanding the foregoing, the Assets shall not include
those items listed on Exhibit D.
1.2 Purchase Price The aggregate purchase price of the Assets (the
"Purchase Price") shall be the sum of U.S.$49,200,000, which shall include the
amount of any Indebtedness (as defined below) which is assumed by the Buyer at
the time of the Closing (as defined in Section 2.2) and is not discharged by
Buyer in connection with the Closing. Said purchase price shall be allocated
among the Properties as set forth on Exhibit E. Buyer and Seller acknowledge
that the allocations of the Purchase Price were determined pursuant to arm's
length bargaining regarding the fair market values of the Assets. Buyer and
Seller hereby agree to be bound by such allocations for purposes of determining
any income, gain, loss, depreciation or other deductions in respect of such
Assets. Notwithstanding the foregoing, Seller and Buyer will revisit the Exhibit
E allocations within sixty (60) days following the Closing and will use best
efforts to agree on any necessary adjustment at such time. Buyer and Seller
further agree to prepare and file all tax returns (including Form 8594, if
applicable) in a manner consistent with such allocations and will not take any
position contrary to such allocations in any administrative or judicial
proceeding. Notwithstanding the foregoing, if the Internal Revenue Service, or
some other governmental taxing authority, challenges the allocations of the
Purchase Price set forth on Exhibit E in any administrative or judicial
proceeding, Seller or Buyer, as the case may be, shall be allowed to settle or
compromise such dispute in such manner as that party determines to be
practicable, irrespective of whether such settlement is contrary to the specific
terms of this Agreement regarding purchase price allocations. Seller and Buyer
will cooperate to keep each other informed of any such proceeding and will use
their best efforts to
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cooperate if any issue arises from such proceeding. Seller and Buyer agree to
prepare any other financial reports in a manner substantially consistent with
such allocations.
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1.3 The Purchase Price shall be payable as follows:Payment of Purchase
Price
1.3.1 Buyer shall be credited with the balance of the
principal, interest and other amounts due and/or accrued as of the Closing Date
(the "Indebtedness") under those certain loan agreements affecting the Owned
Properties and described on Exhibit F (the "Loans"). Buyer shall assume the
Indebtedness (subject to the terms of the Indebtedness) effective as of the
Closing Date and Seller shall pay any fees or other lender-imposed charges
relating to such assumption (the "Assumption Fees"). Notwithstanding the
foregoing, if a lender's consent is required in connection with the Closing and
such consent is not obtained by Closing, then Buyer shall pay the Indebtedness
evidenced by such Loan in full at Closing (provided that, Seller shall pay any
prepayment penalties) and acquire such Owned Property free and clear of the
Loan. Seller shall cooperate with Hillsdale in obtaining any required lender
consents.
1.3.2 Prior to the Closing Date, Buyer shall deposit into
Escrow the balance of the Purchase Price, subject to adjustment by reason of any
applicable prorations and the allocation of closing costs described below. The
deposit required by this Section 1.3.2 shall be made by wire transfer of federal
funds or in another immediately available form.
1.4 Certain Definitions. The purchase and sale contemplated by this
Agreement is one of three transactions. Said other transactions are referred to
herein as the "Hillsdale Transaction" and the "TH Group Transaction," and the
purchase and sale agreements governing said transactions are herein called the
"Hillsdale Agreement" and the "TH Group Agreement," respectively. (This
Agreement, the Hillsdale Agreement and TH Group Agreement are herein referred to
singularly and collectively as the "3-Agreements."
2. Opening of Escrow.
2.1 Escrow; Escrow Holder. On the Effective Date, an escrow (the
"Escrow") shall be opened with Chicago Title Company, 388 Market Street, Suite
1300, San Francisco, CA 94111 Attention: Pat Davisson, 415/788-0871 ("Escrow
Holder"). (The Effective Date is also referred to herein as the "Opening of
Escrow.")
2.2 Escrow Instructions. The terms and conditions set forth in this
Agreement shall constitute both an agreement between Seller and Buyer and escrow
instructions for Escrow Holder. Seller and Buyer shall promptly execute and
deliver to Escrow Holder any separate or additional escrow instructions
requested by Escrow Holder which are consistent with the terms of this
Agreement. Any separate or additional instructions shall not modify or amend the
provisions of this Agreement unless signed by both Buyer and Seller. As used in
this Agreement, "Closing" means the consummation of the purchase and sale of
Assets contemplated by this Agreement.
2.3 Closing Date. The Closing shall occur (and Escrow shall close) on
or before April 1, 1998 (the "Closing Date").
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3. Actions Pending Closing.
3.1 Deliveries by Seller.
3.1.1 Within ten (10) days after Opening of Escrow, Seller
shall deliver to Buyer a copy of a current ALTA or CLTA extended coverage
preliminary title report for each Owned Property (each herein called a "PTR" and
all collectively the "PTRs") issued by Chicago Title Company (the "Title
Company") showing the condition of title to each such Property, and, to the
extent available, accompanied by true, correct and legible copies of all
documents referred to therein. Seller shall request Title Company to prepare a
plat or sketch showing all material easements affecting each such Property.
Seller shall provide or cause Hillsdale to provide Buyer with a copy of any
existing "as-built" survey for each Property (each herein called a "Survey" and
all collectively the "Surveys") in Seller's or Hillsdale's possession or
control; provided, however, that if any such Survey meeting at least the minimum
ALTA standards (including but not limited to ALTA Table A requirements set forth
on Exhibit G hereto) is not available for a Property or cannot be re-certified
prior to the Closing to Buyer and to the Title Company to enable the issuance to
Buyer of an ALTA extended coverage policy of title insurance for such Property,
then Buyer shall not be deemed to have received the PTR for such Property for
purposes of Section 3.2 below until the earlier of (i) the date Buyer obtains a
Survey certified to Buyer and the Title Company meeting the above requirements
for each Property (ii) thirty (30) days after receipt of the other items
described in this Section 3.1.1.
3.1.2 Prior to the Effective Date Seller has caused, and shall
continue to cause Hillsdale to make available to Buyer for inspection and/or
copying copies of such non-privileged documents and materials that relate in any
material way to a Property that are in Hillsdale's possession, including,
without limitation, copies of the following documents if in Hillsdale's
possession: all Contracts (including but not limited to tenant leases, Facility
Admission Agreements (as defined below), service contracts, employee contracts,
maintenance agreements, vendors contracts, construction contracts, architect's
agreements, leasing brokerage agreements, parking agreements, consultant
agreements, warranties, guaranties, title or casualty insurance policies,
management contracts, bonds and all other contracts and agreements relating in
any material way to each Property), together with all California Department of
Social Services ("DSS") annual surveys of each Property, DHS reports or
citations, in each case only relating to the period of Seller's ownership of the
Property, fire marshal reports, evidence of zoning, environmental reports,
governmental licenses, certificates of occupancy or other permits and approvals,
existing surveys of the Property including any as-built surveys for the
improvements, wetland reports, soils reports, architectural drawings, plans and
specifications, engineering tests and structural or other reports prepared for
each Property or each Facility (collectively, the "Reports"), and all sources of
revenue and expenses (including but not limited to tax bills or assessments and
utilities bills), correspondence, claims, notices and other books and records
related to each Property, whether audited or unaudited (collectively, the
"Records").
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3.2 Buyer's Review of Title.
3.2.1 Buyer shall have ten (10) days following the receipt of
each PTR for an Owned Property (an "Owned PTR") within which to deliver to
Seller written notice of Buyer's disapproval of any matters materially adversely
affecting title as shown on any Owned PTR ("Disapproved Exceptions"); provided,
however, Disapproved Exceptions shall not include the Loans to be assumed by
Buyer pursuant to Section 1.3.2, those matters listed on Exhibit H or any
easement, encroachment, right or other non-monetary lien that in Buyer's
reasonable determination does not materially and adversely affect any Owned
Property. Buyer's failure to provide such notice on or before such date shall
constitute Buyer's approval of the condition of title as shown on the Owned
PTRs.
3.2.2 If Buyer timely notifies Seller of its Disapproved
Exceptions, Seller shall remove all monetary Disapproved Exceptions from title
at Closing and, subject to Section 8.1.2 below, shall use reasonable efforts to
remove all non-monetary Disapproved Exceptions from title before the Closing
Date.
3.2.3 Except for the Disapproved Exceptions, all (i) exceptions
to title shown on an Owned PTR, (ii) current installments of general and special
real property taxes and assessments which are a lien not yet delinquent, and
(iii) any encumbrance arising from the acts or omissions of Buyer, are herein
called the "Permitted Exceptions."
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3.3 Buyer's Review of the Property, Reports, Records and Contracts.
3.3.1 Buyer's Review of the Property. Buyer acknowledges that
prior to the Effective Date Seller and Hillsdale provided Buyer with access to
the Properties and to the Contracts, Reports and Records (defined in Sections
1.1.2 and 3.1.2), and that Buyer has completed its financial and market-related
reviews of the Properties. On or before March 16, 1998 (the "Inspection
Completion Date"), Buyer shall have (i) caused the preparation of, obtained and
reviewed all such follow-up structural and mechanical engineering and
environmental reports for each Property as Buyer considers reasonably necessary,
and (ii) completed its review of all license transfer and other regulatory
compliance matters for each Property. Seller agrees to grant to Buyer, its
agents, employees, representatives or contractors (collectively, "Buyer's
Agents"), at Buyer's expense, the right, upon twenty-four (24) hours prior
written or oral notice to Seller, to enter onto the Properties solely for the
purpose of conducting such reviews and inspections. Buyer shall conduct all such
inspections in a reasonable manner consistent with and not likely to disturb the
normal operations of Buyer or of Hillsdale and so as to minimize any disruption
to the residents of the Properties. Such inspections may include the right to
conduct such groundwater and other engineering or geological tests on the
Properties as Buyer deems necessary; provided, however, that Seller's prior
consent (not to be unreasonably withheld or delayed) shall be required as to the
method used and the location of any invasive tests or borings. Seller shall have
the right to have one or more of its or Hillsdale's representatives or agents
accompany Buyer and Buyer's Agents at all times while Buyer or Buyer's Agents
are on a Property. Promptly after undertaking any testing or inspection, Buyer
shall restore each Property to its condition prior to any such test or
inspection. Upon Seller's request, Buyer shall provide Seller with the results
of any test, report, study or other document or information obtained by Buyer in
connection with any of its inspections. Buyer shall, at its sole cost and
expense, clean up any Property, in whatever manner necessary, due to any
contamination or disturbance caused by Buyer's or Buyer's Agents so that such
Property shall be returned to as good condition as existed prior to such entry.
If, after the Effective Date and on the basis of such inspections and clauses
(i) and (ii) only, Buyer discovers any matter that materially adversely affects
Buyer's intended use, management, development, ownership or operation of a
Property (an "Objection Item"), then on or before the Inspection Completion Date
Buyer shall notify Seller in writing of all such Objection Items. Buyer's
failure to provide such notice on or before the Inspection Completion Date shall
constitute Buyer's approval of all such matters and of the condition of each
Property. All Objection Items shall be subject to Section 8.1.2 below.
Notwithstanding anything to the contrary, no matter pertaining to the Rossmoor
RCFE shall be considered an Objection Item except only for the amount by which
the aggregate cost of matters affecting the structural frame is greater than
$1,500,000.
3.3.2 Buyer's Review of the Contracts. On or before the
Inspection Completion Date, Buyer shall notify Seller in writing of those
Contracts listed on Exhibit C that Buyer does not wish to assume at Closing.
Seller shall cause or cause Hillsdale to cause all such Contracts to be
terminated at or after the Closing in the shortest time permissible under such
Contracts, provided such Contract can be terminated in accordance with its
terms, without penalty or liability to Buyer (such Contracts to be terminated
are herein collectively, the "Rejected Contracts"). Without limiting any other
provision of this Agreement, from and after the Closing Seller shall remain
solely responsible for all obligations and liability of Seller under all
Rejected Contracts. Buyer shall not
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have any responsibility or liability under any Rejected Contract from and after
the Closing; provided, however, that notwithstanding the foregoing, Buyer shall
assume at Closing all Facility Admission Agreements (as defined below) to which
Seller is a party in effect at each Property at Closing.
3.3.3 Confidentiality. Any and all information that Buyer
and/or Buyer's Agents discover, obtain or generate in connection with or
resulting from Buyer's Inspection and work under Section 3.3 hereof, shall be
subject to the terms of that certain confidentiality agreement between Buyer and
Hillsdale dated December 30, 1997 (the "Confidentiality Agreement").
3.4 Operation of Property Pending Closing. During the period from the
date hereof until the Closing Date, Seller and Hillsdale, as manager, shall
continue to operate and maintain each Facility in the ordinary course of
business and in a manner consistent with Seller's past practice (including
retaining Hillsdale as manager) and will not take any action or fail to take
action that would be inconsistent with this Agreement or the consummation of the
Closing. Without limiting the generality of the foregoing, without the prior
written consent of Buyer (which consent shall not be unreasonably withheld or
delayed), Seller shall not:
(a) sell, assign, transfer or encumber any of the Assets or any
interests therein (whether by operation of law or otherwise), except for
inventory sold in the ordinary course of business; provided, however, that
Seller shall at all times maintain and sell inventory consistent with its past
practices;
(b) enter into any new lease, contract, agreement or other
understanding relating to or affecting in any way any of the Assets, except in
the ordinary course of business and consistent with past practices;
(c) extend, amend, modify or terminate any management agreement
or other Contract which Buyer has elected to assume as provided in Section 3.3.2
above except for non-material contracts and in the ordinary course of business
(of which Seller shall give Buyer notice);
(d) Intentionally Omitted;
(e) allow or permit to be done any act by which any of the
policies of insurance with respect to any Property may be suspended, impaired or
canceled;
(f) fail to maintain the Assets in substantially their current
state of repair, excepting normal wear and tear or fail to replace consistent
with Seller's past practice inoperable, worn-out or obsolete or destroyed
Assets;
(g) make any settlement or compromises with tax authorities
relating to the Assets.
(h) remove any tangible Personal Property from a Property
unless it is replaced with a comparable type and equal quality and quantity as
existed as of the time of such removal; or
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(i) fail to maintain in existence all licenses, permits and
approvals necessary or appropriate for the ownership, operation, management, use
or maintenance of any Property.
3.5 Communications with Customers and Suppliers; Public Disclosure.
Seller, Hillsdale and Buyer shall mutually agree upon all communications with
suppliers, customers and clients relating to this Agreement, the Hillsdale
Agreement and the TH Group Agreement and the transactions contemplated
thereunder prior to the Closing Date. Prior to and after the Closing, neither
party shall release to the public any information with respect to this
Agreement, the Hillsdale Agreement and the TH Group Agreement and the
transactions contemplated hereby except as mutually approved in advance by
Buyer, Hillsdale and Seller, such approval not to be unreasonably withheld or
delayed; provided however, to the extent (and only to the extent) that any of
Buyer, Hillsdale or Seller is required by judicial process or by law to release
any such information, such approval of the other party shall be sought but need
not be obtained as a condition to such release. The provisions of the
immediately preceding sentence shall survive the Closing or any termination of
this Agreement.
4. Representations and Warranties.
4.1 Representations and Warranties of Buyer. Buyer hereby represents,
warrants and covenants to and agrees with Seller that each of the
representations and warranties set forth below in this Section 4.1 is true in
all material respects as of the Effective Date.
4.1.1 Buyer's Authority. Buyer has full power to execute and
deliver this Agreement and all related documents, and to carry out the
transactions contemplated herein. This Agreement is valid, binding and
enforceable against Buyer in accordance with its terms, except as such
enforceability may be limited by creditors' rights, laws and applicable
principles of equity. Each individual executing this Agreement on behalf of
Buyer represents and warrants to Seller that he or she is duly authorized to do
so and thereby to bind Buyer.
4.1.2 Availability of Funds. Buyer has available funds to pay
the Purchase Price.
4.2 Representations and Warranties of Seller. Seller hereby represents,
warrants and covenants to and agrees with Buyer that each of the representations
and warranties set forth below in this Section 4.2 is true in all material
respects as of the Effective Date.
4.2.1 Seller's Authority. Seller has full power to execute and
deliver this Agreement and all related documents, and to carry out the
transactions contemplated herein. This Agreement is valid, binding and
enforceable against Seller in accordance with its terms except as such
enforceability may be limited by creditors' rights, laws and applicable
principles of equity. Each individual executing this Agreement on behalf of
Seller represents and warrants to Buyer that he or she is duly authorized to do
so and thereby to bind Seller.
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4.3 Reaffirmation. The representations and warranties of Buyer and
Seller set forth in Sections 4.1 and 4.2 are true and correct in all material
respects as of the date of this Agreement. The Closing shall constitute Buyer's
and Seller's re-affirmations of those representations and warranties as of the
Closing. At either party's election, however, such party may require the other
party to execute a document reaffirming those representations and warranties and
deliver the same to the requesting party upon the Closing. Each party shall be
entitled to rely upon those representations and warranties by the other party,
notwithstanding any inspection or investigation of the Property which was made
or could have been made by Buyer.
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<PAGE> 13
4.4 Condemnation. If, prior to Closing, any portion of any Property
shall be condemned or becomes the subject of any pending or threatened
condemnation action, Seller shall promptly notify Buyer thereof. If the
condemnation or the pending or threatened condemnation action relates to all or,
in Buyer's reasonable opinion, a significant portion of any Property (where
"significant portion" means that Buyer would be unable to operate or manage the
Facility in substantially the same manner as currently being operated or managed
by Seller if such portion of the Property were taken by condemnation), Buyer
shall have the right to terminate the 3-Agreements on written notice to Seller
delivered within five (5) business days after receipt of Seller's notice.
Buyer's failure to deliver such notice within such five (5) business day period
shall irrevocably constitute Buyer's election to acquire the Property under this
Agreement and the other 3-Agreements. In the event Buyer exercises its
termination rights hereunder, all of the 3-Agreements shall be terminated. In
the event Buyer elects not to so terminate the 3-Agreements then the Agreements
shall remain in full force and effect, regardless of such condemnation or
threatened or pending action, and Seller shall assign to Buyer all of its
rights, if any, as owner of the Condemned Property, as the case may be, to any
condemnation award and all claims in connection therewith, and Buyer shall have
the right during the pendency of this Agreement to participate with Seller in
the condemnation proceeding and, after the Closing, the sole right to negotiate
and otherwise deal with the condemning authority in respect of such matter.
4.5 Damage or Destruction. In the event of any damage to or destruction
of a Property prior to the Closing, Seller shall promptly notify Buyer thereof.
If, in Buyer's reasonable opinion, all or a significant portion of the Property
has been damaged (where "significant portion" means that Buyer would, because of
such damage, be unable for a period greater than three (3) months to operate or
manage the Facility in substantially the same manner as currently being operated
or managed by Seller), Buyer shall have the right to terminate the 3-Agreements
on written notice to Seller delivered within five (5) business days after
receipt of Seller's notice. Buyer's failure to deliver such notice within such
five (5) business day period shall irrevocably constitute Buyer's election to
acquire the Properties under all of the 3-Agreements. If Buyer exercises its
termination rights hereunder, all of the 3-Agreements shall be terminated. In
the event Buyer elects not to so terminate the 3-Agreements, then the
3-Agreements shall remain in full force and effect, regardless of such damage or
destruction, Seller shall have no obligation to repair any such damage or
destruction, Seller shall assign to Buyer all of its rights to any insurance
proceeds and all claims in the connection therewith and Buyer shall be credited
at the Closing with the deductible portion of such proceeds. Seller agrees
during the period between the Effective Date and the Closing Date to carry
rental loss insurance on the Properties covering a period of 24 months.
4.6 Cooperation. In connection with Buyer's assumption of the
Indebtedness, Buyer agrees to provide to Seller, upon request, such reasonable
financial and other information regarding Buyer as may be requested by any
lender under the Loan, and such information as may be required under Section 5.9
of the Hillsdale Agreement as if Buyer were Hillsdale with respect thereto.
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5. Intentionally Omitted.
6. Conditions To Closing.
6.1 Conditions to the Obligations of Buyer. Subject to the provisions
of Section 8 below, the obligations of Buyer to consummate the transactions
contemplated by this Agreement shall be subject to the satisfaction or written
waiver, on or before the Closing Date, of the following conditions:
6.1.1 Concurrent Closings. The Hillsdale Transaction and the TH
Group Transaction shall be closed concurrently with the Closing.
6.2 Conditions to the Obligations of Seller. The obligations of Seller
to consummate the transactions contemplated by this Agreement shall be subject
to the satisfaction or written waiver, on or before the Closing Date, of the
following conditions:
6.2.1 Concurrent Closings. The Hillsdale Transaction and the TH
Group Transaction shall be closed concurrently with the Closing.
7. Closing
7.1 Deposits into Escrow
7.1.1 Deposits by Seller. At least one (1) business day prior to
the Closing Date, Seller shall deposit into Escrow:
(a) Grant deeds conveying fee simple title to each Owned
Property to Buyer (the "Deeds") on the Title Company's form and reasonably
acceptable to Buyer and in all cases subject only to the Permitted Exceptions
(defined in Section 3.2.3). Evidence of delivery of such title to the Owned
Properties shall be issuance by Title Company of an ALTA Extended Coverage
Policy of Title Insurance (1992) covering each Owned Property in the amount of
the Purchase Price allocated for each such Owned Property as shown on Exhibit E,
insuring Buyer as the owner of each Property as of the Closing Date, subject
only to the Permitted Exceptions in each case (collectively, the Title Policy");
provided that, Seller shall pay only the cost of a standard coverage owner's and
Buyer shall pay the excess premium required.
(b) An affidavit or qualifying statement which satisfies
the requirements of Section 1445 of the Internal Revenue Code of 1986, as
amended, and the regulations thereunder (the "Non-Foreign Affidavit").
(c) A Withholding Exemption Certificate on Form 590, or
if Seller is a non-California resident, a certificate issued by the California
Franchise Tax Board, pursuant to the Revenue and Taxation Code Sections 18805
and 2613 1, stating either the amount of withholding
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required from Seller's proceeds or that Seller is exempt from such withholding
requirement (the "Withholding Certificate").
(d) The document required by Section 4.3, if required by
Buyer.
(e) Any required Consents.
(f) A counterpart original of a Bill of Sale ("Bill of
Sale"), duly executed by Seller, assigning and conveying to Buyer all of
Seller's right, title and interest in and to the Personal Property for each
Property (and shall include, as an exhibit thereto, a list of the furniture,
fixtures and equipment owned by Seller for each Property to the extent
reasonably obtainable), and reasonably satisfactory in form and substance to
each party.
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(g) A counterpart original of an Assignment and
Assumption Agreement (the "Assignment and Assumption Agreement"), duly executed
by Seller, assigning all of Seller's right, title and interest in and the
Contracts affecting each Property and the Facility Admission Agreements, and
reasonably satisfactory in form and substance to each party.
7.1.2 Deposits by Buyer. Except as otherwise provided herein,
at least one (1) business day prior to the Closing Date, Buyer, and to the
extent applicable, Hillsdale shall deposit into Escrow:
(a) Funds in accordance with the provisions of Section
1.3.
(b) The document required by Section 4.3, if required by
Seller.
(c) A counterpart original of the Assignment and
Assumption Agreement, duly executed by Buyer, assuming all of Seller's
obligations in and the Contracts affecting each Property and the Facility
Admission Agreements, and reasonably satisfactory in form and substance to each
party.
7.1.3 Other Deposits. Seller and Buyer and, if applicable,
Hillsdale, shall each deposit such other instruments, duly executed and
acknowledged or notarized where appropriate, and funds as are reasonably
required by Escrow Holder or otherwise required to close Escrow and consummate
the sale and transfer of the Assets in accordance with the terms of this
Agreement and to issue the Title Policy (including but not limited to any
owner's affidavit reasonably required by Title Company in connection therewith).
7.2 Prorations.
7.2.1 Prorated Items. The following prorations shall be made
as of 12:01 a.m. on the day the Closing occurs on the basis of a 365-day year.
At least five (5) business days prior to the Closing Date, Escrow Holder shall
deliver to Seller and Buyer a tentative closing and proration schedule setting
forth a preliminary determination of all closing costs described below and the
following prorations:
(a) Rentals, prepaid rentals and prepaid payments for
each Property, together with any and all accrued interest thereon (collectively,
"Rent") shall be prorated on the basis that Buyer shall receive a credit for all
Rent which Seller has actually received before the Closing which is allocable to
the period after the Closing. Buyer shall be obligated to use reasonable efforts
to pursue for the benefit of Seller the collection of Rent not received as of
the Closing which is allocable to the period prior to the Closing. Buyer shall
also cooperate with Seller in Seller's efforts to collect such Rent. Seller
shall be entitled to any such Rent collected after the Closing if and when
received by either Buyer or Seller to the extent such payment specifically
indicates that it is for a period prior to Closing; provided, however, as to
Rent from self-pay private pay patients and residents only, whether or not
designated as for a period prior to Closing, Buyer shall first be entitled
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<PAGE> 17
to apply such rent to any post-closing current or delinquent Rent of such
patients or residents and to deduct therefrom any reasonable third-party costs
incurred by Buyer in collection thereof.
(b) Real estate taxes and assessments shall be prorated
as of the Closing on the basis of the most recent tax statement for each .
(c) All utility charges, costs of maintenance, and other
items of expense for each Property shall be prorated as of the Closing on the
basis of schedules prepared by Seller for that purpose and reasonably approved
by Buyer, with post-closing adjustments made between Seller and Buyer by cash
payment upon demand to the party entitled thereto.
(d) For purposes of calculating prorations under this
Section 7.2, except as otherwise set forth herein, all items of income and
expenses for the period prior to the Closing Date will be for the account of
Seller, and all items of income and expense for the period on and after the
Closing Date will be for the account of Buyer.
(e) All other items customarily prorated as of the
Closing Date in similar transactions shall be calculated by Escrow Holder on the
basis of information obtained by Escrow Holder or provided by Seller or Buyer at
the request of Escrow Holder, in accordance with Escrow Holder's normal policies
and practices.
7.3 Payment of Closing Costs.
7.3.1 Closing Costs Borne by Seller. Seller shall bear and
Escrow Holder shall discharge on Seller's behalf out of the sums payable to
Seller hereunder one-half (1/2) of Escrow Holder's fee, the portion of the costs
associated with the standard coverage premium for each Title Policy for each
Property in the amount of the allocated Purchase Price, the cost of any existing
Surveys as provided in Section 3.1.1, the documentary transfer tax, if any,
required in connection with the transfer of the Owned Properties to Buyer, the
sums necessary to obtain and the cost of recording any reconveyance required by
this Agreement, any prepayment or other charges arising from the prepayment by
Seller of any Indebtedness where a required lender's consent to the transfer
could not be obtained (as provided in Section 1.3.2), any transfer taxes,
assumption fees or other charges arising as a result of the assumption of the
Indebtedness by Buyer, and any additional costs and charges customarily charged
to sellers in transactions of this type in accordance with common escrow
practices in the county in which each Owned Property is located.
7.3.2 Closing Costs Borne by Buyer. Buyer shall deposit with
Escrow Holder, at least one (1) day prior to Closing, for disbursement by Escrow
Holder, one-half (1/2) of Escrow Holder's fee, all costs and expenses of the
Title Policy for each Owned Property in excess of the premium to be borne by
Seller (including, without limitation, any additional premium charged for any
extended coverage policy or endorsements requested by Buyer and the cost of
updating or re-certifying any existing Survey or obtaining any New Survey as
provided in Section 3.1.1 which may be required by the Title Company in
connection therewith), all sales and use taxes, if any, required in connection
with the transfer of the Personal Property to Buyer resulting from its purchase
of the
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Owned Properties, the recording fees, if any, required in connection with the
transfer of the Owned Properties to Buyer, the HSR Act filing fees, and any
additional charges customarily charged to buyers in transactions of this type in
accordance with common escrow practices in the county in which each Owned
Property is located.
7.4 Closing of Escrow
7.4.1 Escrow Holder shall hold the Closing on the Closing Date
if: (i) it has received in a timely manner all the funds and materials required
to be delivered into Escrow by Buyer and Seller; and (ii) it has received
assurances satisfactory to Escrow Holder that, effective as of the Closing, the
Title Company will issue to Buyer the standard or extended Title Policies, as
applicable pursuant to Section 7.6, with respect to each Property.
7.4.2 To Close the Escrow, Escrow Holder shall:
(a) Cause the Deeds to be recorded and thereafter
mailed to Buyer, and deliver to Buyer duly executed originals of the Bill of
Sale, Assignment and Assumption Agreement, the Required Consents, the
Non-Foreign Affidavit and Withholding Certificate and the accrued interest on
the Deposit; and
(b) Deliver to Seller duly executed originals of
the Assignment and Assumption Agreement, and the wire transfer of federal funds
in the amount of the Purchase Price plus or less any net debit or credit to
Seller by reason of the prorations and allocations of closing costs provided for
in this Agreement.
7.4.3 Pursuant to Section 6045 of the Internal Revenue Code,
Escrow Holder shall be designated the closing agent hereunder and shall be
solely responsible for complying with the tax reform act of 1986 with regard to
reporting all settlement information to the Internal Revenue Service.
7.5 Possession. Possession of the Assets (including all keys, lock
combinations and similar items to gain access thereto) shall be delivered to
Buyer effective as of 12:01 a.m. on the Closing Date.
7.6 Title Insurance. At Closing, Title Company shall issue, or re-issue
with such endorsements as may be required in connection with the assignment of
the Assets, an ALTA Extended Coverage Policy of Title Insurance (1992) covering
each Owned Property subject only to the Permitted Exceptions in each case
(collectively, the "Title Policy"), in the amount of the Purchase Price
allocated for each such Owned Property as shown on Exhibit F, insuring Buyer's
interest in or as the owner or tenant of each applicable Property as of the
Closing Date; provided, that Seller shall pay only the cost of a standard
coverage owner's policy for each Owned Property and each Leased Property (to the
extent obtainable) and Buyer shall pay the excess premium required for each
Property.
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8. Termination; Remedies.
8.1 Right to Terminate.
8.1.1 Termination Rights. Subject to the provisions of Section
8.1.2, this Agreement may be terminated at any time after April 30, 1998 if the
Closing has not occurred by such date, time being of the essence:
(a) By the mutual written agreement of the parties;
(b) By Buyer, if any condition set forth in Section
6.1 has not been satisfied;
(c) By Seller, if any condition set forth in
Section 6.2 has not been satisfied.
8.1.2 Default by Seller; Change in Circumstances.
Notwithstanding anything to the contrary contained in this Agreement, (i) if
Seller fails to disclose one or more matters which were required to be disclosed
in the Disclosure Schedule or if a change in circumstances occurs after the
Effective Date, where, in either event, any of Seller's representations and
warranties in Section 4 of this Agreement will not be accurate in any material
respect as of the Closing Date, or (ii) if Seller materially breaches any of its
warranties, representations, covenants, agreements and obligations hereunder and
fails to cure such breach in a timely manner and prior to Closing, or (iii) if
Buyer has timely notified Seller of a Disapproved Exception under Section 3.2.1
above and such Disapproved Exception will not be removed by Closing, or (iv) if
Buyer has timely notified Seller of any Objection Item under Section 3.3.1 above
and such Objection Item will not be removed or cured by Closing (the matters
described in the foregoing clauses (i)-(iv) are collectively called the
"Problems") then such Problems will be aggregated with the Problems under the
Hillsdale Agreement and the TH Group Agreement and be subject to the provisions
of Section 8.1.3 of the Hillsdale Agreement. If as a result of the provisions of
such Section 8.1.3 of the Hillsdale Agreement the Purchase Price of any Property
hereunder needs adjusting, Seller will so adjust such Purchase Price.
8.2 Cross Default. Notwithstanding anything to the contrary, (a) the
termination (without Closing) of the transaction under any of the 3-Agreements
shall cause the termination of this Agreement, (b) the material breach by Seller
or Hillsdale under any of the 3-Agreements giving rise to a claim for specific
performance by Buyer shall constitute a default by Seller under all of the
3-Agreements and (c) the material breach by Buyer under any of the 3-Agreements
giving rise to a claim for liquidated damages by Seller or Hillsdale shall
constitute the default by Buyer of all three agreements.
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9. General Provisions.
9.1 Counterparts. This Agreement may be executed in counterparts, each
of which shall be deemed an original, but all of which, taken together, shall
constitute one and the same instrument.
9.2 Entire Agreement. This Agreement and the Confidentiality Agreement
and the other 3-Agreements contain the entire integrated agreement between the
parties respecting the subject matter of this Agreement and supersedes all prior
understandings and agreements, whether oral or in writing, between the parties
respecting the subject matter of this Agreement. There are no representations,
agreements, arrangements or understandings, oral or in writing, between or among
the parties to this Agreement relating to the subject matter of this Agreement
which are not fully expressed in this Agreement and the Confidentiality
Agreement and the other 3-Agreements. The terms of this Agreement and the
Confidentiality Agreement and the other 3-Agreements are intended by the parties
as a final expression of their agreement with respect to those terms and they
may not be contradicted by evidence of any prior agreement or of any
contemporaneous agreement. The parties further intend that this Agreement and
the Confidentiality Agreement and the other 3-Agreements constitute the complete
and exclusive statement of its terms and that no extrinsic evidence whatsoever
other than the Confidentiality Agreement and the other 3-Agreements may be
introduced in any judicial proceeding involving this Agreement.
9.3 Legal Advice, Neutral Interpretation; Headings. Each party has
received independent legal advice from its attorneys with respect to the
advisability of executing this Agreement and the meaning of the provisions
hereof. The provisions of this Agreement shall be construed as to their fair
meaning, and not for or against any party based upon any attribution to such
party as the source of the language in question. Headings used in this Agreement
are for convenience of reference only and shall not be used in construing this
Agreement.
9.4 Choice of Law. This Agreement shall be governed by the laws of the
State of California.
9.5 Severability. If any term, covenant, condition or provision of this
Agreement, or the application thereof to any person or circumstance, shall to
any extent be held by a court of competent jurisdiction to be invalid, void or
unenforceable, the remainder of the terms, covenants, conditions or provisions
of this Agreement, or the application thereof to any person or circumstance,
shall remain in full force and effect and shall in no way be affected, impaired
or invalidated thereby.
9.6 Waiver of Covenants, Condition or Remedies. The waiver by one party
of the performance of any covenant, condition or promise under this Agreement
shall not invalidate this Agreement nor shall it be considered a waiver by it of
any other covenant, condition or promise under this Agreement. The waiver by
either or both parties of the time for performing any act under this Agreement
shall not constitute a waiver of the time for performing any other act or an
identical act required to be performed at a later time. The exercise of any
remedy provided in this Agreement
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shall not be a waiver of any consistent remedy provided by law, and the
provision in this Agreement for any remedy shall not exclude other consistent
remedies unless they are expressly excluded.
9.7 Exhibits. All exhibits to which reference is made in this Agreement
and which are attached hereto are deemed incorporated in this Agreement.
9.8 Amendment. This Agreement may be amended at any time by the written
agreement of Buyer and Seller. All amendments, changes, revisions and discharges
of this Agreement, in whole or in part, and from time to time, shall be binding
upon the parties despite any lack of legal consideration, so long as the same
shall be in writing and executed by the parties hereto.
9.9 Relationship of Parties. The parties agree that their relationship
is that of seller and buyer, and that nothing contained herein shall constitute
either party the agent or legal representative of the other for any purpose
whatsoever, nor shall this Agreement be deemed to create any form of business
organization between the parties hereto, nor is either party granted any right
or authority to assume or create any obligation or responsibility on behalf of
the other party, nor shall either party be in any way liable for any debt of the
other.
9.10 No Third Party Benefit. Except as to the parties to the
3-Agreements, this Agreement is intended to benefit only the parties hereto and
no other person or entity has or shall acquire any rights hereunder.
9.11 Time of the Essence. Time shall be of the essence as to all dates
and times of performance, whether contained herein or contained in any escrow
instructions to be executed pursuant to this Agreement, and all escrow
instructions shall contain a provision to this effect.
9.12 Further Acts. Each party agrees to perform any further acts and to
execute, acknowledge and deliver any documents which may be reasonably necessary
to carry out the provisions of this Agreement.
9.13 Recordation, Actions to Clear Title. Buyer shall not record this
Agreement, any memorandum of this Agreement, any assignment of this Agreement or
any other document which would cause a cloud on the title to any of the
Properties. If Buyer fails to complete its purchase of the Assets for any
reason, or if this Agreement shall terminate for any reason not due to Seller's
default hereunder, then upon Buyer's receipt of all sums to which it is entitled
under Section 8.1.3(c) and 8.2.1 of the Hillsdale Agreement, Buyer shall, at no
cost to Seller, promptly execute, acknowledge and deliver to Seller, all within
ten (10) days after written request from Seller, a quitclaim deed prepared by
Seller at no cost to Buyer and reasonably satisfactory to Buyer, in recordable
form, in favor of Seller and any other documents reasonably requested by Seller
to remove the cloud on title to the Properties that may exist as the result of
the existence of this Agreement or any escrow relating to this Agreement. In the
event Buyer fails to so execute and deliver any such document, in addition to
any damages payable to Seller pursuant to this Agreement, Buyer shall pay all
losses, damages, costs and expenses, including but not limited to Seller's
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reasonable attorneys' fees, incurred in connection with Buyer's breach of its
obligations under this Section 9.13 or the clearing of any such cloud on title.
9.14 Attorneys' Fees. In the event of any litigation involving the
parties to this Agreement to enforce any provision of this Agreement, to enforce
any remedy available upon default under this Agreement, or seeking a declaration
of the rights of either party under this Agreement, the prevailing parry shall
be entitled to recover from the other such attorneys' fees and costs as may be
reasonably incurred, including the costs of reasonable investigation,
preparation and professional or expert consultation incurred by reason of such
litigation. All other attorneys' fees and costs relating to this Agreement and
the transactions contemplated hereby shall be borne by the party incurring the
same.
9.15 Brokers. Except as to a fee to be paid by Hillsdale to Fremont
Realty Capital, L.L.C., Buyer and Seller each represents and warrants to the
other that (a) it has not dealt with any brokers or finders in connection with
the purchase and sale of the Assets and (b) insofar as such party knows, no
other broker or other person is entitled to any commission or finder's fee in
connection with the purchase and sale of the Assets. Seller and Buyer each
agrees to indemnify and hold harmless the other against any loss, liability,
damage, cost, claim or expense incurred by reason of any brokerage fee,
commission or finder's fee which is payable or alleged to be payable to any
broker or finder because of any agreement, act, omission or statement of the
indemnifying party.
9.16 Manner of Giving Notice. All notices and demands which either
party is required or desires to give to the other shall be given in writing by
personal delivery, express courier service or by telecopy followed by delivery
promptly thereafter of a hard copy to the address or telecopy number set forth
below for the respective party, provided that if any party gives notice of a
change of name, address or telecopy number notices to that party shall
thereafter be given as demanded in that notice. All notices and demands so given
shall be effective upon receipt by the party to whom notice or a demand is being
given.
To Seller:
270 Center Associates
c/o Fremont Properties, Inc.
50 Fremont, Suite 3500
San Francisco, CA 94105
Attention: Mark H. Simpson
Telephone: (415) 284-8160
Facsimile: (415) 284-8504
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with a copy to:
The Fremont Group
50 Fremont, Suite 3700
San Francisco, CA 94105
Attention: General Counsel
Telephone: (415) 284-8700
Facsimile: (415) 512-5121
To the Buyer: ARV Assisted Living, Inc.
245 Fischer Avenue, Suite D-1
Costa Mesa, CA 92626-4539
Attention: Howard Phanstiel
Telephone: (714) 435-4334
Facsimile: (714) 435-7102
With copies to:
ARV Assisted Living, Inc.
245 Fischer Avenue, Suite D-1
Costa Mesa, CA 92626-4539
Attention: General Counsel
Latham & Watkins
650 Town Center Drive, 20th floor
Costa Mesa, CA 92626-1925
Attn: David C. Meckler or
Joseph I. Bentley
Telephone: (714) 540-1235
Facsimile: (714) 755-8290
9.17 Survival. Except as may be otherwise specified in this Agreement
the representations or warranties of Seller made in this Agreement shall survive
the Closing for a period of twelve (12) months only. All other indemnities
contained in this Agreement or in the Deeds or other assignments, bills of sale
or exhibits or schedules thereto executed and delivered by Buyer and Seller at
the Closing shall survive the Closing and the consummation of the purchase and
sale of the Assets.
9.18 Assignment. Except as otherwise provided in this Agreement,
neither Buyer nor Seller may assign its interest in this Agreement or any rights
or obligations hereunder without the prior written consent of the other party;
provided, that Buyer without such consent may assign all such interest, rights
and obligations to any affiliated entity controlled, controlling or under common
control with Buyer which shall assume all such obligations and liabilities
hereunder, but without releasing Buyer therefrom without Seller's prior written
consent.
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9.19 Calculation of Time Periods. Unless otherwise specified, in
computing any period of time described herein, the last day of the act or event
after which the designated period of time begins to run is not to be included
and the last day of the period so computed is to be included, unless such last
day is a Saturday, Sunday or legal holiday for national banks in California, in
which event the period shall run until the end of the next day which is neither
a Saturday, Sunday or legal holiday. The last day of any period of time
described herein shall be deemed to end at 6:00 p.m. California time.
9.20 Tax-Deferred Exchange. In the event that Seller so elects, Buyer
agrees to accommodate Seller in effecting a tax-deferred exchange of the
Properties under Internal Revenue Code Section 1031, as amended, at no cost to
Buyer. In connection therewith, Seller shall have the right to assign its rights
under this Agreement; provided, however, that Seller shall not be released from
any of its obligations hereunder as a result of such assignment; and provided,
further, such accommodation by Buyer shall not require Buyer to take title to
any property other than the Properties.
IN WITNESS WHEREOF, the parties have duly executed this
Agreement as of the day and year first above written.
"SELLER" 270 CENTER ASSOCIATES, LIMITED PARTNERSHIP,
a California limited partnership
By: Fremont Properties, Inc., its general partner
By: /s/ Mark H. Simpson
-----------------------------------
Mark H. Simpson, President
"BUYER": ARV ASSISTED LIVING, INC.
a California corporation
By: /s/ Sheila M. Muldoon
--------------------------------------------
Sheila M. Muldoon, Vice President
"HILLSDALE" THE HILLSDALE GROUP, L.P.,
only with respect to its obligations
hereunder as manager
By: Hillsdale Advisors, L.L.C., its general partner
By: Fremont Group, L.L.C., its managing member
By: /s/ Mark H. Simpson
--------------------------------------
Its: Managing Director
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Exhibit 10.2
AMENDMENT TO PURCHASE AND SALE AGREEMENT
This Amendment to Purchase and Sale Agreement ("Amendment") amends that certain
Purchase and Sale Agreement (the "Agreement") by and between 270 Center
Associates, Limited Partnership ("Seller"), and ARV Assisted Living, Inc., a
California corporation ("Buyer), dated as of February 12, 1998. All capitalized
terms not defined herein shall have the same definition as in the Agreement.
1. Section 2.3 of the Agreement is hereby amended to state as follows: "The
Closing shall occur (and Escrow shall close) on or before April 16, 1998
(the "Closing Date")."
2. This Amendment may be executed in counterparts, each of which shall be
deemed an original, but all of which, taken together, shall constitute one
and the same instrument.
3. Except as amended herein, the Agreement shall remain in full force and
effect.
IN WITNESS WHEREOF, the parties have executed this Amendment as of this 2nd day
of March, 1998.
"SELLER" 270 CENTER ASSOCIATES, LIMITED PARTNERSHIP,
a California limited partnership
By: Fremont Properties, Inc., its general partner
By: /s/ Mark H. Simpson
--------------------------------------------
Mark H. Simpson, President
23
<PAGE> 2
"BUYER": ARV Assisted Living, Inc.
a California corporation
By: /s/ Sheila M. Muldoon
-------------------------------------
Sheila M. Muldoon, Vice President
24
<PAGE> 1
Exhibit 10.3
SECOND AMENDMENT TO PURCHASE AND SALE AGREEMENT
This Second Amendment to Purchase and Sale Agreement ("Second Amendment") amends
that certain Purchase and Sale Agreement (the "Agreement") by and between 270
Center Associates, Limited Partnership, a California limited partnership
("Seller"), and ARV Assisted Living, Inc., a California corporation ("Buyer"),
dated as of February 12, 1998, and amended as of March 2, 1998. All capitalized
terms not defined herein shall have the same definition as in the Agreement.
1. Section 1.2 of the Agreement is amended to delete therefrom Exhibit E,
Allocation of Purchase Price, and to add thereto the new Exhibit E,
Amended Allocation of Purchase Price, attached hereto. In addition, the
first sentence of Section 1.2 is hereby amended to delete "$49,200,000"
and to substitute "$45,200,000" therefor.
2. Section 1.3.2 is hereby amended to delete therefrom the first sentence and
to add thereto the following sentence:
Prior to the Initial Closing (defined in Section 2.3 below), Buyer
shall deposit into Escrow sufficient funds to fund the Purchase Price
allocated to the "Initial Closing Properties" on Exhibit E, and shall
deposit into the Second Escrow (as defined below) $17.7 million (the
"Second Deposit") to be retained as liquidated damages under Section 8.3
below, subject to adjustment by reason of any applicable prorations and
the allocation of closing costs described below.
3. The following is hereby added to the end of Section 1.3.2:
Interest on the Second Deposit shall accrue to the benefit of Seller. All
net income for the period from and including April 16, 1998 to the B/R Closing
(defined in Section 2.3 below) from Rossmore and The Berkshire shall be held by
Seller for the benefit of Buyer and shall be paid to Buyer after offsetting
therefrom certain management fees payable by Buyer to Seller under Section 5.10
of the Hillsdale Agreement, as amended.
4. Section 2.2 is amended to delete the last sentence thereof.
5. Section 2.3 of the Agreement is hereby amended to state as follows:
The Closing shall occur (and Escrow shall close) as follows:
(a) on May 4, 1998, for The Berkshire Property and the Rossmore
Property (the "B/R Closing"); and
(b) on April 16, 1998 for the remaining Property (the "Initial
Closing").
Notwithstanding the foregoing, no Closing shall occur unless and until the
Initial Closing occurs.
As used in this Agreement, unless specifically provided otherwise,
"Closing" shall mean the Initial or the B/R Closing, as the context
requires, and "Closing Date" shall mean the date of such applicable
Closing.
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<PAGE> 2
6. The following paragraph shall be added to the end of Section 4.4:
Notwithstanding the foregoing, in the event that, after the Initial
Closing but prior to any other Closing, any portion of any remaining
Property shall be condemned or becomes the subject of any pending or
threatened condemnation action, Seller shall promptly notify Buyer
thereof, this Agreement shall remain in full force, and Buyer shall be
deemed to have elected pursuant to the provisions of this Section 5.2 not
to terminate this Agreement as to such Property.
7. The following paragraph shall be added to the end of Section 4.5:
Notwithstanding the foregoing, in the event of any damage to or
destruction to any un-purchased Property after the Initial Closing but
prior to any other Closing, Seller shall promptly notify Buyer thereof,
this Agreement shall remain in full force, and Buyer shall be deemed to
have elected pursuant to the provisions of this Section 5.2 not to
terminate this Agreement as to such Property.
8. Article 6 shall be amended to that the references therein to the "Closing"
or "Closing Date" shall read "Initial Closing" and "Initial Closing Date."
9. Section 8.1.1 shall be amended to delete therefrom the date "April 30,
1998" and to add thereto the date "June 1, 1998."
10. Notwithstanding anything to the contrary in this Agreement, the
determinations under Section 8.1.2 shall be made as if Seller's interest
in all of the Properties were to be sold to Buyer on the Initial Closing
Date. The provisions of Section 8.1 shall not apply to any Closing
thereafter, and Buyer shall be deemed to have elected to acquire the
remaining Properties in all circumstances.
11. Section 8.2 shall be amended to insert after the phrase "Notwithstanding
anything to the contrary," the words "prior to the Initial Closing."
12. A new Section 8.3 shall be added as follows:
8.3 Buyer's Breach at a Subsequent Closing. IN THE EVENT THAT FOLLOWING
THE INITIAL CLOSING DATE BUYER BREACHES ITS OBLIGATION TO ACQUIRE EACH
REMAINING PROPERTY HEREUNDER AT ITS SPECIFIED CLOSING DATE, THEN THE
ESCROW AGENT SHALL PAY TO SELLER FROM THE SECOND DEPOSIT, AS APPLICABLE,
THE ALLOCATED PURCHASE PRICE OF SUCH PROPERTY, AS SHOWN ON EXHIBIT E,
TOGETHER WITH ACCRUED INTEREST THEREON, WHICH AMOUNT(S) SHALL BE RETAINED
BY SELLER AS LIQUIDATED DAMAGES, AND NOT AS A PENALTY, TOGETHER WITH
REASONABLE FEES AND DISBURSEMENTS OF ATTORNEYS INCURRED BY SELLER IN
ENFORCING THIS SECTION 8.2, AND THE COLLECTION OF SUCH AMOUNT SHALL BE IN
LIEU OF ANY AND ALL OTHER REMEDIES WHICH ARE OR MAY BE AVAILABLE TO SELLER
AT LAW OR IN EQUITY.
INITIAL: /s/ MHS___ INITIAL: /s/ SMM__
13. This Second Amendment may be executed in counterparts, each of which shall
be deemed an original, but all of which, taken together, shall constitute
one and the same instrument.
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<PAGE> 3
14. Except as amended herein, the Agreement shall remain in full force and
effect.
IN WITNESS WHEREOF, the parties have executed this Second Amendment
effective as of the 10th day of April, 1998.
"SELLER" 270 Center Associates, Limited Partnership
a California limited partnership
By: Fremont Properties, Inc., general partner
By: /s/ Mark H. Simpson
----------------------------------
Its: President
----------------------------------
"BUYER" ARV Assisted Living, Inc.
a California corporation
By: /s/ Sheila M. Muldoon
---------------------------------------------
Sheila M. Muldoon, Senior Vice President
27
<PAGE> 1
Exhibit 10.4
PURCHASE AND SALE AGREEMENT
BY AND BETWEEN
TH GROUP, INC.
A CALIFORNIA CORPORATION
AS SELLER
AND
ARV ASSISTED LIVING, INC.
A CALIFORNIA CORPORATION
AS BUYER
FEBRUARY 12, 1998
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<PAGE> 2
EXHIBITS
Exhibit A Real Properties
Exhibit B-1 Tangible Personal Property
Exhibit B-2 Trade names
Exhibit C All Contracts
Exhibit D Excluded Assets
Exhibit E Loan Documents
Exhibit F ALTA Table A Requirements
Exhibit G Exceptions to Disapproved Title Matters
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<PAGE> 3
PURCHASE AND SALE AGREEMENT
(TH Group)
THIS PURCHASE AND SALE AGREEMENT (this "Agreement") is entered
into on February 12, 1998 (the "Effective Date"), by and between TH GROUP, INC.,
a California corporation ("Seller" or "Seller"), and ARV ASSISTED LIVING, INC.,
a California corporation ("Buyer").
RECITALS
A. Seller owns that certain real property improved with an
assisted living facility located in the State of California.
B. Buyer desires to purchase such property and rights from Seller
and Seller desires to sell such properties and rights to Buyer, on the terms and
subject to the conditions contained in this Agreement.
C. The property subject to this Agreement is currently managed by
The Hillsdale Group, L.P., a California limited partnership ("Hillsdale").
NOW THEREFORE, in consideration of the mutual covenants and
agreements contained in this Agreement, Buyer and Seller agree as follows:
1. Purchase and Sale.
1.1 Assets. Subject to all of the terms and conditions of this
Agreement, Seller agrees to sell to Buyer and Buyer agrees to purchase from
Seller the following (all of which are herein collectively called the "Assets"):
1.1.1 Those certain real property described on Exhibit A and all
of Seller's right, title and interest in and to all easements, rights and
privileges appurtenant thereto, including any right, title and interest of
Seller in and to adjacent streets, alleys or rights of way, together with all of
Seller's right title and interest in and to and all improvements, structures,
equipment and fixtures currently located on or under the land (such improved
real property is herein called the "Owned Property" or "Property"). The assisted
living facility located on the Property is sometimes referred to herein as the
"Facility."
1.1.2 All of Seller's right, title and interest in and to (i) all
tangible personal property of any kind or nature whether located on the Property
or primarily used in connection with the ownership, operation, construction,
management, improvement, development or maintenance of the Property (including
but not limited to all architectural and engineering plans, specifications and
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<PAGE> 4
drawings for the existing, Facility and those items of tangible personal
property listed on Exhibit B-1), and (ii) all intangible property, if any, owned
or held by Seller that pertains primarily to the ownership, operation,
construction, development, management, improvement, maintenance, use or
operation of the Property, including but not limited to all transferable
licenses, permits and approvals for the operation, construction, use or
development of the Facility, all entitlements, all warranties, guaranties, bonds
and indemnities or other coverage (other than insurance policies and proceeds
thereof except to the extent provided in Section 4.5 below) relating to the
Facility and in effect as of the Closing, except to the extent the foregoing
applies to matters for which Seller remains liable after the Closing, all
telephone numbers for telephones located at the Facility, any right, title or
interest which each Seller may have in and to any service marks, trademarks,
logos or trade names owned or primarily used or employed by Seller in
conjunction with the operation of the Facility, specifically including the names
noted on Exhibit B-2 and any derivative thereof and any trade marks related
thereto and all goodwill associated with the Facility and any of the foregoing,
and all original books and records relating to a Facility (except where
originals are not available or must be retained by Seller for tax or regulatory
purposes, in which event copies will be provided) (collectively, the "Personal
Property").
1.1.3 All of Seller's right, title and interest in and to any and
all contracts and other agreements relating to the Property together with all
supplements, amendments and modifications thereto that are listed on Exhibit C,
together with any other contracts relating to the Property (not listed on
Exhibit C) which may be terminated by Buyer after the Closing in 30 days or less
(collectively, the "Contracts"), other than Seller's right, title and interest
in and to any Rejected Contracts (as defined in Section 3.3.2 below). Seller
shall use reasonable efforts to list all the Contracts on Exhibit C.
Notwithstanding the foregoing, the Assets shall not include those
items listed on Exhibit D.
1.2 Purchase Price. The aggregate purchase price of the Assets (the
"Purchase Price") shall be the sum of U.S.$12,500,000.00, which shall include
the amount of any Indebtedness (as defined below) which is assumed by the Buyer
at the time of the Closing (as defined in Section 2.2) and is not discharged by
Buyer in connection with the Closing. Buyer and Seller acknowledge that the
Purchase Price was determined pursuant to arm's length bargaining regarding the
fair market values of the Assets. Buyer and Seller hereby agree to be bound by
such Purchase Price for purposes of determining any income, gain, loss,
depreciation or other deductions in respect of such Assets. Notwithstanding the
foregoing, Seller and Buyer will revisit the Purchase Price within sixty (60)
days following the Closing and will use best efforts to agree on any necessary
adjustment at such time. Buyer and Seller further agree to prepare and file all
tax returns (including Form 8594, if applicable) in a manner consistent with
such Purchase Price and will not take any position contrary to such allocations
in any administrative or judicial proceeding. Notwithstanding the foregoing, if
the Internal Revenue Service, or some other governmental taxing authority,
challenges the Purchase Price in any administrative or judicial proceeding,
Seller or Buyer, as the case may be, shall be allowed to settle or compromise
such dispute in such manner as that party determines to be practicable,
irrespective of whether such settlement is contrary to the specific terms of
this Agreement regarding the Purchase Price. Seller and Buyer will cooperate to
keep each other informed of any such proceeding and will use their best efforts
to cooperate if any issue arises from such proceeding. Seller and Buyer agree to
prepare any other financial reports in a manner substantially consistent with
the Purchase Price.
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<PAGE> 5
1.3 Payment of Purchase Price. The Purchase Price shall be payable as
follows:
1.3.1 Buyer shall be credited with the balance of the principal,
interest and other amounts due and/or accrued as of the Closing Date (the
"Indebtedness") under that certain loan agreement affecting the Property and
described on Exhibit E (the "Loan"). Buyer shall assume the Indebtedness
(subject to the terms of the Indebtedness) effective as of the Closing Date and
Seller shall pay any fees or other lender-imposed charges relating to such
assumption (the "Assumption Fees"). Notwithstanding the foregoing, if the
lender's consent is required in connection with the Closing and such consent is
not obtained by Closing, then Buyer shall pay the Indebtedness evidenced by such
Loan in full at Closing (provided that, Seller shall pay any prepayment
penalties) and acquire such Owned Property free and clear of the Loan. Seller
shall cooperate with Hillsdale in obtaining any required lender consents.
1.3.2 Prior to the Closing Date, Buyer shall deposit into Escrow
the balance of the Purchase Price, subject to adjustment by reason of any
applicable prorations and the allocation of closing costs described below. The
deposit required by this Section 1.3.2 shall be made by wire transfer of federal
funds or in another immediately available form.
1.4 Certain Definitions. The purchase and sale contemplated by this
Agreement is one of three transactions. Said other transactions are referred to
herein as the "Hillsdale Transaction" and the "270 Transaction," and the
purchase and sale agreements governing said transactions are herein called the
"Hillsdale Agreement" and the "270 Agreement," respectively. (This Agreement,
the Hillsdale Agreement and 270 Agreement are herein referred to singularly and
collectively as the "3-Agreements.")
2. Opening of Escrow.
2.1 Escrow; Escrow Holder. On the Effective Date, an escrow (the
"Escrow") shall be opened with Chicago Title Company, 388 Market Street, Suite
1300, San Francisco, CA 94111 Attention: Pat Davisson, 415/788-0871 ("Escrow
Holder"). (The Effective Date is also referred to herein as the "Opening of
Escrow.")
2.2 Escrow Instructions. The terms and conditions set forth in this
Agreement shall constitute both an agreement between Seller and Buyer and escrow
instructions for Escrow Holder. Seller and Buyer shall promptly execute and
deliver to Escrow Holder any separate or additional escrow instructions
requested by Escrow Holder which are consistent with the terms of this
Agreement. Any separate or additional instructions shall not modify or amend the
provisions of this Agreement unless signed by both Buyer and Seller. As used in
this Agreement, "Closing" means the consummation of the purchase and sale of
Assets contemplated by this Agreement.
2.3 Closing Date. The Closing shall occur (and Escrow shall close) on or
before April 1, 1998 (the "Closing Date").
3
<PAGE> 6
3. Actions Pending Closing.
3.1 Deliveries by Seller.
3.1.1 Within ten (10) days after Opening of Escrow, Seller shall
deliver to Buyer a copy of a current ALTA or CLTA extended coverage preliminary
title report for the Property (the "PTR") issued by Chicago Title Company (the
"Title Company") showing the condition of title to the Property, and, to the
extent available, accompanied by true, correct and legible copies of all
documents referred to therein. Seller shall request Title Company to prepare a
plat or sketch showing all material easements affecting such Property. Seller
shall provide or cause Hillsdale to provide Buyer with a copy of any existing
"as-built" survey for the Property (the "Survey") in Seller's or Hillsdale's
possession or control; provided, however, that if a Survey meeting at least the
minimum ALTA standards (including but not limited to ALTA Table A requirements
set forth on Exhibit F hereto) is not available for the Property or cannot be
re-certified prior to the Closing to Buyer and to the Title Company to enable
the issuance to Buyer of an ALTA extended coverage policy of title insurance for
the Property, then Buyer shall not be deemed to have received the PTR for such
Property for purposes of Section 3.2 below until the earlier of (i) the date
Buyer obtains a Survey certified to Buyer and the Title Company meeting the
above requirements for the Property or (ii) thirty (30) days after receipt of
the other items described in this Section 3.1.1.
3.1.2 Prior to the Effective Date Seller has caused, and shall
continue to cause Hillsdale to make available to Buyer for inspection and/or
copying copies of such non-privileged documents and materials that relate in any
material way to the Property that are in Hillsdale's possession, including,
without limitation, copies of the following documents if in Hillsdale's
possession: all Contracts (including but not limited to tenant leases, Facility
Admission Agreements (as defined below), service contracts, employee contracts,
maintenance agreements, vendors contracts, construction contracts, architect's
agreements, leasing brokerage agreements, parking agreements, consultant
agreements, warranties, guaranties, title or casualty insurance policies,
management contracts, bonds and all other contracts and agreements relating in
any material way to the Property), together with all California Department of
Social Services ("DSS") annual surveys of the Property, DHS reports or
citations, in each case only relating to the period of Seller's ownership of the
Property, fire marshal reports, evidence of zoning, environmental reports,
governmental licenses, certificates of occupancy or other permits and approvals,
existing surveys of the Property including any as-built surveys for the
improvements, wetland reports, soils reports, architectural drawings, plans and
specifications, engineering tests and structural or other reports prepared for
the Property or the Facility (collectively, the "Reports"), and all sources of
revenue and expenses (including but not limited to tax bills or assessments and
utilities bills), correspondence, claims, notices and other books and records
related to the Property, whether audited or unaudited (collectively, the
"Records").
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<PAGE> 7
3.2 Buyer's Review of Title.
3.2.1 Buyer shall have ten (10) days following the receipt of the
PTR for the Property (an "Owned PTR") within which to deliver to Seller written
notice of Buyer's disapproval of any matters materially adversely affecting
title as shown on the PTR ("Disapproved Exceptions"); provided, however,
Disapproved Exceptions or Leased Disapproved Exceptions shall not include the
Loan to be assumed by Buyer pursuant to Section 1.3.2, those matters listed on
Exhibit G or any easement, encroachment, right or other non-monetary lien that
in Buyer's reasonable determination does not materially and adversely affect the
Property. Buyer's failure to provide such notice on or before such date shall
constitute Buyer's approval of the condition of title as shown on the PTR.
3.2.2 If Buyer timely notifies Seller of its Disapproved
Exceptions, Seller shall remove all monetary Disapproved Exceptions from title
at Closing and, subject to Section 8.1.2 below, shall use reasonable efforts to
remove all non-monetary Disapproved Exceptions from title before the Closing
Date.
3.2.3 Except for the Disapproved Exceptions, all (i) exceptions
to title shown on the PTR, (ii) current installments of general and special real
property taxes and assessments which are a lien not yet delinquent, and (iii)
any encumbrance arising from the acts or omissions of Buyer are herein called
the "Permitted Exceptions."
5
<PAGE> 8
3.3 Buyer's Review of the Property, Reports, Records and Contracts.3
Buyer's Review of .he Property, Reports, Records and Contracts
3.3.1 Buyer's Review of the Property. Buyer acknowledges that
prior to the Effective Date Seller and Hillsdale provided Buyer with access to
the Property and to the Contracts, Reports and Records (defined in Sections
1.1.2 and 3.1.2), and that Buyer has completed its financial and market-related
reviews of the Property. On or before March 16, 1998 (the "Inspection Completion
Date"), Buyer shall have (i) caused the preparation of, obtained and reviewed
all such follow-up structural and mechanical engineering and environmental
reports for the Property as Buyer considers reasonably necessary, and (ii)
completed its review of all license transfer and other regulatory compliance
matters for the Property. Seller agrees to grant to Buyer, its agents,
employees, representatives or contractors (collectively, "Buyer's Agents"), at
Buyer's expense, the right, upon twenty-four (24) hours prior written or oral
notice to Seller, to enter onto the Property solely for the purpose of
conducting such reviews and inspections. Buyer shall conduct all such
inspections in a reasonable manner consistent with and not likely to disturb the
normal operations of Buyer of Hillsdale and so as to minimize any disruption to
the residents of the Property. Such inspections may include the right to conduct
such groundwater and other engineering or geological tests on the Property as
Buyer deems necessary; provided, however, that Seller's prior consent (not to be
unreasonably withheld or delayed) shall be required as to the method used and
the location of any invasive tests or borings. Seller shall have the right to
have one or more of its or Hillsdale's representatives or agents accompany Buyer
and Buyer's Agents at all times while Buyer or Buyer's Agents are on the
Property. Promptly after undertaking any testing or inspection, Buyer shall
restore the Property to its condition prior to any such test or inspection. Upon
Seller's request, Buyer shall provide Seller with the results of any test,
report, study or other document or information obtained by Buyer in connection
with any of its inspections. Buyer shall, at its sole cost and expense, clean up
the Property, in whatever manner necessary, due to any contamination or
disturbance caused by Buyer or Buyer's Agents so that the Property shall be
returned to as good condition as existed prior to such entry. If, after the
Effective Date and on the basis of such inspections and clauses (i) and (ii)
only, Buyer discovers any matter that materially adversely affects Buyer's
intended use, management, development, ownership or operation of the Property
(an "Objection Item"), then on or before the Inspection Completion Date Buyer
shall notify Seller in writing of all such Objection Items. Buyer's failure to
provide such notice on or before the Inspection Completion Date shall constitute
Buyer's approval of all such matters and of the condition of the Property. All
Objection Items shall be subject to Section 8.1.2 below.
3.3.2 Buyer's Review of the Contracts. On or before the
Inspection Completion Date, Buyer shall notify Seller in writing of those
Contracts listed on Exhibit C that Buyer does not wish to assume at Closing.
Seller shall cause or cause Hillsdale to cause all such Contracts to be
terminated at or after the Closing in the shortest time permissible under such
Contracts, provided such Contract can be terminated in accordance with its
terms, without penalty or liability to Buyer (such Contracts to be terminated
are herein collectively, the "Rejected Contracts"). Without limiting any other
provision of this Agreement, from and after the Closing Seller shall remain
solely responsible for all obligations and liability of Seller under all
Rejected Contracts. Buyer shall not have any responsibility or liability under
any Rejected Contract from and after the Closing; provided, however, that
notwithstanding the foregoing, Buyer shall assume at Closing all Facility
Admission Agreements (as defined below) to which Seller is a party in effect at
the Property at Closing.
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<PAGE> 9
3.3.3 Confidentiality. Any and all information that Buyer and/or
Buyer's Agents discover, obtain or generate in connection with or resulting from
Buyer's Inspection and work under Section 3.3 hereof, shall be subject to the
terms of that certain confidentiality agreement between Buyer and Hillsdale
dated December 30, 1997 (the "Confidentiality Agreement").
3.4 Operation of Property Pending Closing. During the period from the
date hereof until the Closing Date, Seller and Hillsdale, as manager, shall
continue to operate and maintain the Facility in the ordinary course of business
and in a manner consistent with Seller's past practice (including retaining
Hillsdale as manager) and will not take any action or fail to take action that
would be inconsistent with this Agreement or the consummation of the Closing.
Without limiting the generality of the foregoing, without the prior written
consent of Buyer (which consent shall not be unreasonably withheld or delayed),
Seller shall not:
(a) sell, assign, transfer or encumber any of the Assets or any
interests therein (whether by operation of law or otherwise), except for
inventory sold in the ordinary course of business; provided, however, that
Seller shall at all times maintain and sell inventory consistent with its past
practices;
(b) enter into any new lease, contract, agreement or other
understanding relating to or affecting in any way any of the Assets, except in
the ordinary course of business and consistent with past practices;
(c) extend, amend, modify or terminate any management agreement
or other Contract which Buyer has elected to assume as provided in Section 3.3.2
above except for non-material contracts and in the ordinary course of business
(of which Seller shall give Buyer notice);
(d) Intentionally omitted.
(e) allow or permit to be done any act by which any of the
policies of insurance with respect to the Property may be suspended, impaired or
canceled;
(f) fail to maintain the Assets in substantially their current
state of repair, excepting normal wear and tear or fail to replace consistent
with Seller's past practice inoperable, worn-out or obsolete or destroyed
Assets;
(g) make any settlement or compromises with tax authorities
relating to the Assets.
(h) remove any tangible Personal Property from the Property
unless it is replaced with a comparable type and equal quality and quantity as
existed as of the time of such removal; or
(i) fail to maintain in existence all licenses, permits and
approvals necessary or appropriate for the ownership, operation, management, use
or maintenance of the Property.
3.5 Communications with Customers and Suppliers; Public Disclosure.
Seller, Hillsdale and Buyer shall mutually agree upon all communications with
suppliers, customers and clients relating to this Agreement, the 270 Agreement
and the Hillsdale Agreement and the transactions contemplated thereunder prior
to the Closing Date. Prior to and after the Closing, neither party shall
7
<PAGE> 10
release to the public any information with respect to this Agreement, the 270
Agreement and the Hillsdale Agreement and the transactions contemplated hereby
except as mutually approved in advance by Buyer, Hillsdale and Seller, such
approval not to be unreasonably withheld or delayed; provided however, to the
extent (and only to the extent) that any of Buyer, Hillsdale or Seller is
required by judicial process or by law to release any such information, such
approval of the other party shall be sought but need not be obtained as a
condition to such release. The provisions of the immediately preceding sentence
shall survive the Closing or any termination of this Agreement.
4. Representations and Warranties.
4.1 Representations and Warranties of Buyer. Buyer hereby represents,
warrants and covenants to and agrees with Seller that each of the er
representations and warranties set forth below in this Section 4.1 is true in
all material respects as of the Effective Date.
4.1.1 Buyer's Authority. Buyer has full power to execute and
deliver this Agreement and all related documents, and to carry out the
transactions contemplated herein. This Agreement is valid, binding and
enforceable against Buyer in accordance with its terms, except as such
enforceability may be limited by creditors' rights, laws and applicable
principles of equity. Each individual executing this Agreement on behalf of
Buyer represents and warrants to Seller that he or she is duly authorized to do
so and thereby to bind Buyer.
4.1.2 Availability of Funds. Buyer has available funds to pay the
Purchase Price.
4.2 Representations and Warranties of Seller. Seller hereby represents,
warrants and covenants to and agrees with Buyer that each of the ler
representations and warranties set forth below in this Section 4.2 is true in
all material respects as of the Effective Date.
4.2.1 Seller's Authority. Seller has full power to execute and
deliver this Agreement and all related documents, and to carry out the
transactions contemplated herein. This Agreement is valid, binding and
enforceable against Seller in accordance with its terms except as such
enforceability may be limited by creditors' rights, laws and applicable
principles of equity. Each individual executing this Agreement on behalf of
Seller represents and warrants to Buyer that he or she is duly authorized to do
so and thereby to bind Seller.
4.3 Reaffirmation. The representations and warranties of Buyer and
Seller set forth in Sections 4.1 and 4.2 are true and correct in all material
respects as of the date of this Agreement. The Closing shall constitute Buyer's
and Seller's re-affirmations of those representations and warranties as of the
Closing. At either party's election, however, such party may require the other
party to execute a document reaffirming those representations and warranties and
deliver the same to the requesting party upon the Closing. Each party shall be
entitled to rely upon those representations and warranties by the other party,
notwithstanding any inspection or investigation of the Property which was made
or could have been made by Buyer.
4.4 Condemnation. If, prior to Closing, any portion of the Property
shall be condemned or becomes the subject of any pending or threatened
condemnation action, Seller shall promptly notify Buyer thereof. If the
condemnation or the pending or threatened condemnation action relates to all or,
in Buyer's reasonable opinion, a significant portion of the Property (where
"significant portion" means that Buyer would be unable to operate or manage the
Facility in substantially the same manner
8
<PAGE> 11
as currently being operated or managed by Seller if such portion of the Property
were taken by condemnation), Buyer shall have the right to terminate this
Agreement and the others 3-Agreements collectively as to all Properties
thereunder, on written notice to Seller delivered within five (5) business days
after receipt of Seller's notice. Buyer's failure to deliver such notice within
such five (5) business day period shall irrevocably constitute Buyer's election
to acquire the Property under this Agreement and the other 3-Agreements. In the
event Buyer exercises its termination rights hereunder, all of the 3-Agreements
shall be terminated. In the event Buyer elects not to so terminate the
3-Agreements, then the 3-Agreements shall remain in full force and effect,
regardless of such condemnation or threatened or pending action, and Seller
shall assign to Buyer all of its rights, if any, as owner, of the Condemned
Property, as the case may be, to any condemnation award and all claims in
connection therewith, and Buyer shall have the right during the pendency of this
Agreement to participate with Seller in the condemnation proceeding and, after
the Closing, the sole right to negotiate and otherwise deal with the condemning
authority in respect of such matter.
4.5 Damage or Destruction. In the event of any damage to or destruction
of the Property prior to the Closing, Seller shall promptly notify Buyer
thereof. If, in Buyer's reasonable opinion, all or a significant portion of the
Property has been damaged (where "significant portion" means that Buyer would,
because of such damage, be unable for a period greater than three (3) months to
operate or manage the Facility in substantially the same manner as currently
being operated or managed by Seller), Buyer shall have the right to terminate
the 3-Agreements on written notice to Seller delivered within five (5) business
days after receipt of Seller's notice. Buyer's failure to deliver such notice
within such five (5) business day period shall irrevocably constitute Buyer's
election to acquire the Property under all of the 3-Agreements. If Buyer
exercises its termination rights hereunder, all of the 3-Agreements shall be
terminated. In the event Buyer elects not to terminate the 3-Agreements, then
the 3-Agreements shall remain in full force and effect, regardless of such
damage or destruction, Seller shall have no obligation to repair any such damage
or destruction, Seller shall assign to Buyer all of its rights to any insurance
proceeds and all claims in the connection therewith and Buyer shall be credited
at the Closing with the deductible portion of such proceeds. Seller agrees
during the period between the Effective Date and the Closing to carry rental
loss insurance on the Properties covering a period of 24 months.
4.6 Cooperation. In connection with Buyer's assumption of the
Indebtedness, Buyer agrees to provide to Seller, upon request, such reasonable
financial and other information regarding Buyer as may be requested by any
lender under the Loan and such information as may be required under Section 5.9
of the Hillsdale Agreement as if Buyer were Hillsdale with respect thereto.
5. Intentionally Omitted.
6. Conditions To Closing.
6.1 Conditions to the Obligations of Buyer. Subject to the provisions of
Section 8 below, the obligations of Buyer to consummate the transactions
contemplated by this Agreement shall be subject to the satisfaction or written
waiver, on or before the Closing Date, of the following conditions:
6.1.1 Concurrent Closings. The Hillsdale Transaction the 270
Transactions shall be closed concurrently with the Closing.
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<PAGE> 12
6.2 Conditions to the Obligation of Seller. The obligations of Seller to
consummate the transactions contemplated by this Agreement shall be ler subject
to the satisfaction or written waiver, on or before the Closing Date, of each of
the following conditions:
6.2.1 Concurrent Closings. The Hillsdale Transaction and the 270
Transaction shall be closed concurrently with the Closing.
7. Closing.
. 7.1 Deposits into Escrow.
7.1.1 Deposits by Seller. At least one (1) business day prior to
the Closing Date, Seller shall deposit into Escrow:
(a) Grant deeds conveying fee simple title to the
Property to Buyer (the "Deeds") on the Title Company's form and reasonably
acceptable to Buyer, subject only to the Permitted Exceptions (defined in
Section 3.2.3). Evidence of delivery of such title to the Property shall be
issuance by Title Company of an ALTA Extended Coverage Policy of Title Insurance
(1992) covering the Property, in the amount of the Purchase Price, insuring
Buyer as the owner of the Property as of the Closing Date, subject only to the
Permitted Exceptions (collectively, the "Title Policy"); provided that, Seller
shall pay only the cost of a standard coverage owner's policy and Buyer shall
pay the excess premium required.
(b) An affidavit or qualifying statement which satisfies
the requirements of Section 1445 of the Internal Revenue Code of 1986, as
amended, and the regulations thereunder (the "Non-Foreign Affidavit").
(c) A Withholding Exemption Certificate on Form 590, or
if Seller is a non-California resident, a certificate issued by the California
Franchise Tax Board, pursuant to the Revenue and Taxation Code Sections 18805
and 2613 1, stating either the amount of withholding required from Seller's
proceeds or that Seller is exempt from such withholding requirement (the
"Withholding Certificate").
(d) The document required by Section 4.3, if required by
Buyer.
(e) Any required consents.
(f) A counterpart original of a Bill of Sale ("Bill of
Sale"), duly executed by Seller, assigning and conveying to Buyer all of
Seller's right, title and interest in and to the Personal Property for the
Property (and shall include, as an exhibit thereto, a list of the furniture,
fixtures and equipment owned by Seller for the Property to the extent reasonably
obtainable), and reasonably satisfactory in form and substance to each party.
(g) A counterpart original of an Assignment and
Assumption Agreement (the "Assignment and Assumption Agreement"), duly executed
by Seller, assigning all of Seller's right, title and interest in and the
Contracts affecting the Property and the Facility Admission Agreements, and
reasonably satisfactory in form and substance to each party.
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<PAGE> 13
7.1.2 Deposits by Buyer. Except as otherwise provided herein, at
least one (1) business day prior to the Closing Date, Buyer, and to the extent
applicable, Hillsdale shall deposit into Escrow:
(a) Funds in accordance with the provisions of Section
1.3.
(b) The document required by Section 4.3, if required by
Seller.
(c) A counterpart original of the Assignment and
Assumption Agreement, duly executed by Buyer, assuming all of Seller's
obligations in and the Contracts affecting the Property and the Facility
Admission Agreements, and reasonably satisfactory in form and substance to each
party.
7.1.3 Other Deposits. Seller and Buyer and, if applicable,
Hillsdale shall each deposit such other instruments, duly executed and
acknowledged or notarized where appropriate, and funds as are reasonably
required by Escrow Holder or otherwise required to close Escrow and consummate
the sale and transfer of the Assets in accordance with the terms of this
Agreement and to issue the Title Policy (including but not limited to any
owner's affidavit reasonably required by Title Company in connection therewith).
7.2 Prorations.
7.2.1 Prorated Items. The following prorations shall be made as
of 12:01 a.m. on the day the Closing occurs on the basis of a 365-day year. At
least five (5) business days prior to the Closing Date, Escrow Holder shall
deliver to Seller and Buyer a tentative closing and proration schedule setting
forth a preliminary determination of all closing costs described below and the
following prorations:
(a) Rentals, prepaid rentals and prepaid payments for
the Property, together with any and all accrued interest thereon (collectively,
"Rent") shall be prorated on the basis that Buyer shall receive a credit for all
Rent which Seller has actually received before the Closing which is allocable to
the period after the Closing. Buyer shall be obligated to use reasonable efforts
to pursue for the benefit of Seller the collection of Rent not received as of
the Closing which is allocable to the period prior to the Closing. Buyer shall
also cooperate with Seller in Seller's efforts to collect such Rent. Seller
shall be entitled to any such Rent collected after the Closing if and when
received by either Buyer or Seller to the extent such payment specifically
indicates that it is for a period prior to Closing; provided, however, as to
Rent from self-pay private pay patients and residents only, whether or not
designated as for a period prior to Closing, Buyer shall first be entitled to
apply such rent to any post-closing current or delinquent Rent of such patients
or residents and to deduct therefrom any reasonable third-party costs incurred
by Buyer in collection thereof.
(b) Real estate taxes and assessments shall be prorated
as of the Closing on the basis of the most recent tax statement for the
Property.
(c) All utility charges, costs of maintenance, and other
items of expense for the Property shall be prorated as of the Closing on the
basis of schedules prepared by Seller for that purpose and reasonably approved
by Buyer, with post-closing adjustments made between Seller and Buyer by cash
payment upon demand to the party entitled thereto.
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<PAGE> 14
(d) For purposes of calculating prorations under this
Section 7.2, except as otherwise set forth herein, all items of income and
expenses for the period prior to the Closing Date will be for the account of
Seller, and all items of income and expense for the period on and after the
Closing Date will be for the account of Buyer.
(e) All other items customarily prorated as of the
Closing Date in similar transactions shall be calculated by Escrow Holder on the
basis of information obtained by Escrow Holder or provided by Seller or Buyer at
the request of Escrow Holder, in accordance with Escrow Holder's normal policies
and practices.
7.3 Payment of Closing Costs.
7.3.1 Closing Costs Borne by Seller. Seller shall bear and Escrow
Holder shall discharge on Seller's behalf out of the sums payable to Seller
hereunder one-half (1/2) of Escrow Holder's fee, the portion of the costs
associated with the standard coverage premium for the Title Policy for the
Property in the amount of the Purchase Price, the cost of any existing Surveys
as provided in Section 3.1.1, the documentary transfer tax, if any, required in
connection with the transfer of the Property to Buyer, the sums necessary to
obtain and the cost of recording any reconveyance required by this Agreement,
any prepayment or other charges arising from the prepayment by Seller of any
Indebtedness where a required lender's consent to the transfer could not be
obtained (as provided in Section 1.3.2), any transfer taxes, assumption fees or
other charges arising as a result of the assumption of the Indebtedness by
Buyer, and any additional costs and charges customarily charged to sellers in
transactions of this type in accordance with common escrow practices in the
county in which the Property is located.
7.3.2 Closing Costs Borne by Buyer. Buyer shall deposit with
Escrow Holder, at least one (1) day prior to Closing, for disbursement by Escrow
Holder, one-half (1/2) of Escrow Holder's fee, all costs and expenses of the
Title Policy for the Property in excess of the premium to be borne by Seller
(including, without limitation, any additional premium charged for any extended
coverage policy or endorsements requested by Buyer and the cost of updating or
re-certifying any existing Survey or obtaining any New Survey as provided in
Section 3.1.1 which may be required by the Title Company in connection
therewith), all sales and use taxes, if any, required in connection with the
transfer of the Personal Property to Buyer resulting from its purchase of the
Property, the recording fees, if any, required in connection with the transfer
of the Property to Buyer, the HSR Act filing fees, and any additional charges
customarily charged to buyers in transactions of this type in accordance with
common escrow practices in the county in which the Property is located.
7.4 Closing of Escrow.
7.4.1 Escrow Holder shall hold the Closing on the Closing Date
if: (i) it has received in a timely manner all the funds and materials required
to be delivered into Escrow by Buyer and Seller; and (ii) it has received
assurances satisfactory to Escrow Holder that, effective as of the Closing, the
Title Company will issue to Buyer the standard or extended Title Policies, as
applicable pursuant to Section 7.6, with respect to the Property.
7.4.2 To Close the Escrow, Escrow Holder shall:
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<PAGE> 15
(a) Cause the Deed to be recorded and thereafter mailed
to Buyer, and deliver to Buyer duly executed originals of the Bill of Sale,
Assignment and Assumption Agreement, the Required Consents, the Non-Foreign
Affidavit and Withholding Certificate and the accrued interest on the Deposit;
and
(b) Deliver to Seller duly executed originals of the
Assignment and Assumption Agreement, and the wire transfer of federal funds in
the amount of the Purchase Price plus or less any net debit or credit to Seller
by reason of the prorations and allocations of closing costs provided for in
this Agreement.
7.4.3 Pursuant to Section 6045 of the Internal Revenue Code,
Escrow Holder shall be designated the closing agent hereunder and shall be
solely responsible for complying with the tax reform act of 1986 with regard to
reporting all settlement information to the Internal Revenue Service.
7.5 Possession. Possession of the Assets (including all keys, lock
combinations and similar items to gain access thereto) shall be delivered to
Buyer effective as of 12:01 a.m. on the Closing Date.
7.6 Title Insurance. At Closing, Title Company shall issue, or re-issue
with such endorsements as may be required in connection with the assignment of
the Assets, an ALTA Extended Coverage Policy of Title Insurance (1992) covering
the Property subject only to the Permitted Exceptions in each case
(collectively, the "Title Policy") in the amount of the Purchase Price for the
Property, insuring Buyer's interest in the Property as of the Closing Date;
provided, that Seller shall pay only the cost of a standard coverage owner's
policy for the Property and Buyer shall pay the excess premium required for the
Property.
8. Termination; Remedies.
8.1 Right to Terminate
8.1.1 Termination Rights. Subject to the provisions of Section
8.1.2, this Agreement may be terminated at any time after April 30, 1998 if the
Closing has not occurred by such date, time being of the essence:
(a) By the mutual written agreement of the parties;
(b) By Buyer, if any condition set forth in Section 6.1
has not been satisfied;
(c) By Seller, if any condition set forth in Section 6.2
has not been satisfied.
8.1.2 Default by Seller; Change in Circumstances. Notwithstanding
anything to the contrary contained in this Agreement, (i) if Seller fails to
disclose one or more matters which were required to be disclosed in the
Disclosure Schedule or if a change in circumstances occurs after the Effective
Date, where, in either event, any of Seller's representations and warranties in
Section 4 of this Agreement will not be accurate in any material respect as of
the Closing Date, or (ii) if Seller
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<PAGE> 16
materially breaches any of its warranties, representations, covenants,
agreements and obligations hereunder and fails to cure such breach in a timely
manner and prior to Closing, or (iii) if Buyer has timely notified Seller of a
Disapproved Exception under Section 3.2.1 above and such Disapproved Exception
will not be removed by Closing, or (iv) if Buyer has timely notified Seller of
any Objection Item under Section 3.3.1 above and such Objection Item will not be
removed or cured by Closing (the matters described in the foregoing clauses
(i)-(iv) are collectively called the "Problems"), then such Problems will be
aggregated with the Problems under the Hillsdale Agreement and the 270 Agreement
and be subject to the provisions of Section 8.1.3 of the Hillsdale Agreement. If
as a result of the provisions of such Section 8.1.3 of the Hillsdale Agreement
the Purchase Price of the Property hereunder needs adjusting, Seller will so
adjust such Purchase Price.
8.2 Cross Default. Notwithstanding anything to the contrary, (a) the
termination (without Closing) of the transaction under any of the 3-Agreements
shall cause the termination of this Agreement, (b) the material breach by Seller
under any of the 3-Agreements giving rise to a claim for specific performance by
Buyer shall constitute a default by Seller or Hillsdale under all of the
3-Agreements and (c) the material breach by Buyer under any of the 3-Agreements
giving rise to a claim for liquidated damages by Seller or Hillsdale shall
constitute the default by Buyer of all three agreements.
9. General Provisions.
9.1 Counterparts. This Agreement may be executed in counterparts, each
of which shall be deemed an original, but all of which, taken together, shall
constitute one and the same instrument.
9.2 Entire Agreement. This Agreement and the Confidentiality Agreement
and the other 3-Agreements contain the entire integrated agreement between the
parties respecting the subject matter of this Agreement and supersedes all prior
understandings and agreements, whether oral or in writing, between the parties
respecting the subject matter of this Agreement. There are no representations,
agreements, arrangements or understandings, oral or in writing, between or among
the parties to this Agreement relating to the subject matter of this Agreement
which are not fully expressed in this Agreement and the Confidentiality
Agreement and the other 3-Agreements. The terms of this Agreement and the
Confidentiality Agreement and the other 3-Agreements are intended by the parties
as a final expression of their agreement with respect to those terms and they
may not be contradicted by evidence of any prior agreement or of any
contemporaneous agreement. The parties further intend that this Agreement and
the Confidentiality Agreement and the other 3-Agreements constitute the complete
and exclusive statement of its terms and that no extrinsic evidence whatsoever
other than the Confidentiality Agreement and the other 3-Agreements may be
introduced in any judicial proceeding involving this Agreement.
9.3 Legal Advice, Neutral Interpretation; Headings. Each party has
received independent legal advice from its attorneys with respect to the
advisability of executing this Agreement and the meaning of the provisions
hereof. The provisions of this Agreement shall be construed as to their fair
meaning, and not for or against any party based upon any attribution to such
party as the source of the language in question. Headings used in this Agreement
are for convenience of reference only and shall not be used in construing this
Agreement.
9.4 Choice of Law. This Agreement shall be governed by the laws of the
State of California.
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<PAGE> 17
9.5 Severability. If any term, covenant, condition or provision of this
Agreement, or the application thereof to any person or circumstance, shall to
any extent be held by a court of competent jurisdiction to be invalid, void or
unenforceable, the remainder of the terms, covenants, conditions or provisions
of this Agreement, or the application thereof to any person or circumstance,
shall remain in full force and effect and shall in no way be affected, impaired
or invalidated thereby.
9.6 Waiver of Covenants, Conditions or Remedies. The waiver by one party
of the performance of any covenant, condition or promise under this Agreement
shall not invalidate this Agreement nor shall it be considered a waiver by it of
any other covenant, condition or promise under this Agreement. The waiver by
either or both parties of the time for performing any act under this Agreement
shall not constitute a waiver of the time for performing any other act or an
identical act required to be performed at a later time. The exercise of any
remedy provided in this Agreement shall not be a waiver of any consistent remedy
provided by law, and the provision in this Agreement for any remedy shall not
exclude other consistent remedies unless they are expressly excluded.
9.7 Exhibits. All exhibits to which reference is made in this Agreement
and which are attached hereto are deemed incorporated in this Agreement.
9.8 Amendment. This Agreement may be amended at any time by the written
agreement of Buyer and Seller. All amendments, changes, revisions and discharges
of this Agreement, in whole or in part, and from time to time, shall be binding
upon the parties despite any lack of legal consideration, so long as the same
shall be in writing and executed by the parties hereto.
9.9 Relationship of Parties. The parties agree that their relationship
is that of seller and buyer, and that nothing contained herein shall constitute
either party the agent or legal representative of the other for any purpose
whatsoever, nor shall this Agreement be deemed to create any form of business
organization between the parties hereto, nor is either party granted any right
or authority to assume or create any obligation or responsibility on behalf of
the other party, nor shall either party be in any way liable for any debt of the
other.
9.10 No Third Party Benefit. Except as to the parties to the
3-Agreements, this Agreement is intended to benefit only the parties hereto and
no other person or entity has or shall acquire any rights hereunder.
9.11 Time of the Essence. Time shall be of the essence as to all dates
and times of performance, whether contained herein or contained in any escrow
instructions to be executed pursuant to this Agreement, and all escrow
instructions shall contain a provision to this effect.
9.12 Further Acts. Each party agrees to perform any further acts and to
execute, acknowledge and deliver any documents which may be reasonably necessary
to carry out the provisions of this Agreement.
9.13 Recordation, Actions to Clear Title. Buyer shall not record this
Agreement, any memorandum of this Agreement, any assignment of this Agreement or
any other document which would cause a cloud on the title to the Property. If
Buyer fails to complete its purchase of the Assets for any reason, or if this
Agreement shall terminate for any reason not due to Seller's default hereunder,
then upon Buyer's receipt of all sums to which it is entitled under Section
8.1.3(c) and
15
<PAGE> 18
Section 8.2.1 of the Hillsdale Agreement Buyer shall, at no cost to Seller,
promptly execute, acknowledge and deliver to Seller, all within ten (10) days
after written request from Seller, a quitclaim deed prepared by Seller at no
cost to Buyer and reasonably satisfactory to Buyer, in recordable form, in favor
of Seller and any other documents reasonably requested by Seller to remove the
cloud on title to the Property that may exist as the result of the existence of
this Agreement or any escrow relating to this Agreement. In the event Buyer
fails to so execute and deliver any such document, in addition to any damages
payable to Seller pursuant to this Agreement, Buyer shall pay all losses,
damages, costs and expenses, including but not limited to Seller's reasonable
attorneys' fees, incurred in connection with Buyer's breach of its obligations
under this Section 9.13 or the clearing of any such cloud on title.
9.14 Attorneys' Fees. In the event of any litigation involving the
parties to this Agreement to enforce any provision of this Agreement, to enforce
any remedy available upon default under this Agreement, or seeking a declaration
of the rights of either party under this Agreement, the prevailing parry shall
be entitled to recover from the other such attorneys' fees and costs as may be
reasonably incurred, including the costs of reasonable investigation,
preparation and professional or expert consultation incurred by reason of such
litigation. All other attorneys' fees and costs relating to this Agreement and
the transactions contemplated hereby shall be borne by the party incurring the
same.
9.15 Brokers. Except as to a fee to be paid by Hillsdale to Fremont
Realty Capital, L.L.C., Buyer and Seller each represents and warrants to the
other that (a) it has not dealt with any brokers or finders in connection with
the purchase and sale of the Assets and (b) insofar as such party knows, no
other broker or other person is entitled to any commission or finder's fee in
connection with the purchase and sale of the Assets. Seller and Buyer each
agrees to indemnify and hold harmless the other against any loss, liability,
damage, cost, claim or expense incurred by reason of any brokerage fee,
commission or finder's fee which is payable or alleged to be payable to any
broker or finder because of any agreement, act, omission or statement of the
indemnifying party.
9.16 Manner of Giving Notice. All notices and demands which either party
is required or desires to give to the other shall be given in writing by
personal delivery, express courier service or by telecopy followed by delivery
promptly thereafter of a hard copy to the address or telecopy number set forth
below for the respective party, provided that if any party gives notice of a
change of name, address or telecopy number notices to that party shall
thereafter be given as demanded in that notice. All notices and demands so given
shall be effective upon receipt by the party to whom notice or a demand is being
given.
To Seller: TH Group, Inc.
c/o Richard Stein
1199 Howard Avenue, Suite 200
Burlingame, CA 94010
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<PAGE> 19
with a copy to:
The Fremont Group
50 Fremont, Suite 3700
San Francisco, CA 94105
Attention: General Counsel
Telephone: (415) 284-8700
Facsimile: (415) 512-5121
To the Buyer: ARV Assisted Living, Inc.
245 Fischer Avenue, Suite D-1
Costa Mesa, CA 92626-4539
Attention: Howard Phanstiel
Telephone: (714) 435-4334
Facsimile: (714) 435-7102
With copies to:
ARV Assisted Living, Inc.
245 Fischer Avenue, Suite D-1
Costa Mesa, CA 92626-4539
Attention: General Counsel
Latham & Watkins
650 Town Center Drive, 20th floor
Costa Mesa, CA 92626-1925
Attn: David C. Meckler or
Joseph I. Bentley
Telephone: (714) 540-1235
Facsimile: (714) 755-8290
9.17 Survival. Except as may be otherwise specified in this Agreement
the representations or warranties of Seller made in this Agreement shall survive
the Closing for a period of twelve (12) months only. All other indemnities
contained in this Agreement or in the Deeds or other assignments, bills of sale
or exhibits or schedules thereto executed and delivered by Buyer and Seller at
the Closing shall survive the Closing and the consummation of the purchase and
sale of the Assets.
9.18 Assignment. Except as otherwise provided in this Agreement,
neither Buyer nor Seller may assign its interest in this Agreement or any rights
or obligations hereunder without the prior written consent of the other party;
provided, that Buyer without such consent may assign all such interest, rights
and obligations to any affiliated entity controlled, controlling or under common
control with Buyer which shall assume all such obligations and liabilities
hereunder, but without releasing Buyer therefrom without Seller's prior written
consent.
9.19 Calculation of Time Periods. Unless otherwise specified, in
computing any period of time described herein, the last day of the act or event
after which the designated period of time begins to run is not to be included
and the last day of the period so computed is to be included, unless such
17
<PAGE> 20
last day is a Saturday, Sunday or legal holiday for national banks in
California, in which event the period shall run until the end of the next day
which is neither a Saturday, Sunday or legal holiday. The last day of any period
of time described herein shall be deemed to end at 6:00 p.m. California time.
9.20 Tax-Deferred Exchange. In the event that Seller so elects, Buyer
agrees to accommodate Seller in effecting a tax-deferred exchange of the
Property under Internal Revenue Code Section 1031, as amended, at no cost to
Buyer. In connection therewith, Seller shall have the right to assign its rights
under this Agreement; provided, however, that Seller shall not be released from
any of its obligations hereunder as a result of such assignment; and provided,
further, such accommodation by Buyer shall not require Buyer to take title to
any property other than the Property.
IN WITNESS WHEREOF, the parties have duly executed this Agreement
as of the day and year first above written.
"SELLER" TH GROUP, INC.
a California corporation
By: /s/ Richard B. Stein
------------------------------------
Its: President
------------------------------------
"BUYER": ARV ASSISTED LIVING, INC.,
a California corporation
By: /s/ Sheila M. Muldoon
------------------------------------
Sheila M. Muldoon
Vice President
NOTE: PLEASE SEE NEXT PAGE (PAGE 20) FOR SIGNATURE
OF THE HILLSDALE GROUP
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<PAGE> 21
"HILLSDALE" THE HILLSDALE GROUP, L.P.,
only with respect to its obligations
hereunder as manager
By: Hillsdale Advisors, L.L.C., its general partner
By: Fremont Group, L.L.C., its managing member
By: /s/ Mark H. Simpson
--------------------------------------------
Its: Managing Director
--------------------------------------------
19
<PAGE> 1
Exhibit 10.5
AMENDMENT TO PURCHASE AND SALE AGREEMENT
This Amendment to Purchase and Sale Agreement ("Amendment") amends that certain
Purchase and Sale Agreement (the "Agreement") by and between TH Group, Inc., a
California corporation ("Seller"), and ARV Assisted Living, Inc., a California
corporation ("Buyer), dated as of February 12, 1998. All capitalized terms not
defined herein shall have the same definition as in the Agreement.
4. Section 2.3 of the Agreement is hereby amended to state as follows: "The
Closing shall occur (and Escrow shall close) on or before April 16, 1998
(the "Closing Date")."
5. This Amendment may be executed in counterparts, each of which shall be
deemed an original, but all of which, taken together, shall constitute one
and the same instrument.
6. Except as amended herein, the Agreement shall remain in full force and
effect.
IN WITNESS WHEREOF, the parties have executed this Amendment as of this 2nd day
of March, 1998.
"SELLER" TH Group, Inc.,
a California corporation
By: /s/ Richard B. Stein
----------------------------------------
Name: Richard B. Stein
----------------------------------------
Its: President
----------------------------------------
"BUYER": ARV Assisted Living, Inc.
a California corporation
By: /s/ Sheila M. Muldoon
----------------------------------------
Sheila M. Muldoon, Vice President
20
<PAGE> 1
Exhibit 10.6
SECOND AMENDMENT TO PURCHASE AND SALE AGREEMENT
This Second Amendment to Purchase and Sale Agreement ("Second Amendment") amends
that certain Purchase and Sale Agreement (the "Agreement") by and between TH
Group, Inc., a California corporation ("Seller"), and ARV Assisted Living, Inc.,
a California corporation ("Buyer"), dated as of February 12, 1998, and amended
as of March 2, 1998. All capitalized terms not defined herein shall have the
same definition as in the Agreement.
15. Section 1.2 of the Agreement is amended to delete therefrom the reference
to U.S.$12,500,000.00 and to substitute therefor U.S.$14,500,000.00.
16. Sections 6.1.1 and 6.2.1 shall be amended to read:
Concurrent Closings. The Initial Closings under the Hillsdale
Transaction and the 270 Transactions shall be closed concurrently with
the Closing.
17. Section 8.1.1 shall be amended to delete therefrom the date "April 30,
1998" and to add thereto the date "June 1, 1998."
18. This Second Amendment may be executed in counterparts, each of which shall
be deemed an original, but all of which, taken together, shall constitute
one and the same instrument.
19. Except as amended herein, the Agreement shall remain in full force and
effect.
IN WITNESS WHEREOF, the parties have executed this Second Amendment
effective as of the 6th day of April, 1998.
"SELLER" TH Group, Inc.
a California Corporation
By: /s/ Richard B. Stein
--------------------------------
Its: President
--------------------------------
"BUYER" ARV Assisted Living, Inc.
a California corporation
By: /s/ Sheila M. Muldoon
--------------------------------
Sheila M. Muldoon, Senior Vice President
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Exhibit 10.7
PURCHASE AND SALE AGREEMENT
BY AND BETWEEN
THE HILLSDALE GROUP, L.P.
A CALIFORNIA LIMITED PARTNERSHIP
AS SELLER
AND
ARV ASSISTED LIVING, INC.
A CALIFORNIA CORPORATION
AS BUYER
FEBRUARY 12, 1998
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EXHIBITS
Exhibit A Real Properties
Exhibit A-1 Development Agreement
Exhibit B Lease Agreements
Exhibit C Management Agreements
Exhibit D-1 Tangible Personal Property
Exhibit D-2 Trade names
Exhibit E Contracts
Exhibit F Excluded Assets
Exhibit G Allocations of Purchase Price
Exhibit H Loan Documents
Exhibit I ALTA Table A Requirements
Exhibit J Exceptions to Disapproved Title Matters
Exhibit K Notice of Sale Required by DSS
Exhibit L Disclosure Schedule (including employee list)
Exhibit M Rent Roll
Exhibit N Material Contracts
Exhibit O-1 to O-3 Form of Estoppel Statements
Exhibit P Required Consents
Exhibit Q Audit
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PURCHASE AND SALE AGREEMENT
(Hillsdale Group)
THIS PURCHASE AND SALE AGREEMENT (this "Agreement") is entered
into on February 12, 1998 (the "Effective Date"), by and between THE HILLSDALE
GROUP, L.P., a California limited partnership ("Hillsdale" or "Seller"), and ARV
ASSISTED LIVING, INC., a California corporation ("Buyer").
RECITALS
A. Hillsdale owns, manages and/or leases or has the right to
acquire, lease or manage certain real properties improved or to be improved with
assisted living facilities and one nursing care facility and located in the
States of California and Nevada.
B. Buyer desires to purchase such properties and rights from
Hillsdale and Hillsdale desires to sell such properties and rights to Buyer, on
the terms and subject to the conditions contained in this Agreement.
C. Hillsdale manages those three certain real properties improved
with assisted living facilities and located in California, all as more described
in that certain Purchase Agreement of even date herewith (the "270 Agreement")
between 270 Center Associates, Limited Partnership ("270 Center"), as Seller,
and Buyer, as buyer (the "270 Properties").
D. Hillsdale also manages that certain real property improved
with an assisted living facility located in California, all as more described in
that certain Purchase Agreement of even date herewith (the "TH Group Agreement")
between TH Group, Inc. ("TH Group"), as seller, and buyer (the "TH Group
Properties", and together with the 270 Properties, herein called the "Outside
Properties"). This Agreement, the 270 Agreement and the TH Group Agreement are
sometimes collectively referred to as the "3-Agreements").
NOW THEREFORE, in consideration of the mutual covenants and
agreements contained in this Agreement, Buyer and Seller agree as follows:
1. Purchase and Sale.
1.1 Assets. Subject to all of the terms and conditions of this
Agreement, Hillsdale agrees to sell to Buyer and Buyer agrees to purchase from
Hillsdale the following (all of which are herein collectively called the
"Assets"):
1.1.1 Those certain real properties described on Exhibit A and
all of Seller's right, title and interest in and to all easements, rights and
privileges appurtenant thereto, including any right, title and interest of
Seller in and to adjacent streets, alleys or rights of way, together with all of
Seller's right title and interest in and to and all improvements, structures,
equipment and fixtures currently located on or under the land (each such
improved real property is herein called an "Owned Property").
1.1.2 All of Seller's right, title and interest in and to the
development agreement listed on Exhibit A-1 (such agreement is herein called the
"Development Agreement," and the unimproved real property burdened by such
Development Agreement is herein called the
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"Development Property") together with all other right title and interest of
Seller with respect to or relating to the Development Property.
1.1.3 All of Seller's right, title and interest as lessee or
sublessee, as the case may be, in and to the leases and subleases (together with
any and all amendments and/or supplements thereto) listed on Exhibit B (each
such lease or sublease is herein called a "Lease Agreement," and the improved
real property burdened by such Lease Agreement is herein called a "Leased
Property"), together with all other right, title and interest of Seller with
respect or relating to any Leased Property, including all rights of first
refusal or options to purchase with respect thereto.
1.1.4 All of Seller's right, title and interest as manager in and
to the management agreements listed on Exhibit C (each such management agreement
is herein called a "Management Agreement," and the improved or unimproved real
property burdened by such Management Agreement is herein called a "Managed
Property"), together with all other right, title and interest of Seller with
respect or relating to any Managed Property, including any partnership or other
equity ownership interests therein and any and all rights of first refusal or
options to purchase with respect thereto. (The Owned Properties, Leased
Properties, Managed Properties, the Development Property and the Outside
Properties are sometimes individually referred to herein as a "Property" and
collectively as the "Properties," and the assisted living facilities or skilled
nursing facility located on each Property are sometimes individually referred to
herein as a "Facility" and collectively as the "Facilities.")
1.1.5 All of Seller's right, title and interest in and to (i) all
tangible personal property of any kind or nature whether located on each
Property or primarily used in connection with the ownership, operation,
construction, management, improvement, development or maintenance of such
Property (including but not limited to all architectural and engineering plans,
specifications and drawings for any existing, proposed or partially completed
Facilities and those items of tangible personal property listed on Exhibit D-1),
and (ii) all intangible property, if any, owned or held by Seller that pertains
primarily to the ownership, operation, construction, development, management,
improvement, maintenance, use or operation of each Property or Outside Property
including but not limited to all transferable licenses, permits and approvals
for the operation, construction, use or development of each Facility, all
entitlements, all warranties, guaranties, bonds and indemnities or other
coverage (other than insurance policies and proceeds thereof except to the
extent provided in Section 5.3 below) relating to a Facility and in effect as of
the Closing, except to the extent the foregoing applies to matters for which
Seller remains liable after the Closing, all telephone numbers for telephones
located at the Facilities, any right, title or interest which each Seller may
have in and to any service marks, trademarks, logos or trade names owned or
primarily used or employed by Hillsdale in conjunction with the operation of a
Facility, specifically including the names noted on Exhibit D-2 and any
derivative thereof and any trade marks related thereto and all goodwill
associated with a Facility and any of the foregoing, and all original books and
records relating to a Facility (except where originals are not available or must
be retained by Seller for tax or regulatory purposes, in which event copies will
be provided) (collectively, the "Personal Property").
1.1.6 All of Seller's right, title and interest in and to any and
all contracts and other agreements relating to a Property or Outside Property
together with all supplements, amendments and modifications thereto that are
listed on Exhibit E, together with any other contracts relating to a Property
(whether or not listed on Exhibit E) which may be terminated by Buyer after the
Closing in 30 days or less (collectively, the "Contracts"), other than Seller's
right, title and interest in and to any Rejected Contracts (as defined in
Section 3.3.2 below). Seller shall use reasonable efforts to list all the
Contracts on Exhibit E.
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Notwithstanding the foregoing, the Assets shall not include those
items listed on Exhibit F.
1.2 Purchase Price. The aggregate purchase price of the Assets and the
Outside Properties shall be the sum of U.S.$88,000,000, which shall include the
amount of any Indebtedness (as defined below) which is assumed by the Buyer at
the time of the Closing (as defined in Section 2.2) and is not discharged by
Buyer in connection with the Closing. Said purchase price shall be allocated
among the Properties as set forth on Exhibit G. The purchase price for the
Assets under this Agreement is the sum of U.S. $26,300,000 (the "Purchase
Price"). Buyer and Seller acknowledge that the allocations of the Purchase Price
were determined pursuant to arm's length bargaining regarding the fair market
values of the Assets. Buyer and Seller hereby agree to be bound by such
allocations for purposes of determining any income, gain, loss, depreciation or
other deductions in respect of such Assets. Notwithstanding the foregoing,
Seller and Buyer will revisit the Exhibit G allocations within sixty (60) days
following the Closing and will use best efforts to agree on any necessary
adjustment at such time. Buyer and Seller further agree to prepare and file all
tax returns (including Form 8594, if applicable) in a manner consistent with
such allocations and will not take any position contrary to such allocations in
any administrative or judicial proceeding. Notwithstanding the foregoing, if the
Internal Revenue Service, or some other governmental taxing authority,
challenges the allocations of the Purchase Price set forth on Exhibit G in any
administrative or judicial proceeding, Seller or Buyer, as the case may be,
shall be allowed to settle or compromise such dispute in such manner as that
party determines to be practicable, irrespective of whether such settlement is
contrary to the specific terms of this Agreement regarding purchase price
allocations. Seller and Buyer will cooperate to keep each other informed of any
such proceeding and will use their best efforts to cooperate if any issue arises
from such proceeding. Seller and Buyer agree to prepare any other financial
reports in a manner substantially consistent with such allocations.
1.3 Payment of Purchase Price. The Purchase Price shall be payable as
follows: of Purchase Price
1.3.1 On the Effective Date, Buyer shall deliver to Escrow Holder
(as defined below), by wire transfer, the sum of Fourteen Million Dollars
($14,000,000.00) (the "Deposit"). If the purchase and sale contemplated by this
Agreement is consummated, then the Deposit shall be credited against the
Purchase Price and paid to Seller at the Closing. If the purchase and sale
contemplated by this Agreement fails to occur, the Deposit shall be remitted to
Seller or Buyer, as appropriate, in accordance with the provisions of this
Agreement. The Escrow Holder shall be authorized to invest the Deposit in such
reasonable manner as Buyer may direct (subject to Seller's reasonable approval);
provided, however, that from and after March 16, 1998, the Escrow Holder shall
invest the Deposit only in such manner as will allow Escrow Holder to disburse
the Deposit on two (2) days' notice. Due to the magnitude of the Deposit, the
parties agree that all interest or other earnings on the Deposit shall not
become part of the Deposit, but shall be either applied to the Purchase Price or
refunded and disbursed to Buyer regardless of the party who becomes entitled to
the Deposit pursuant to any other provisions of this Agreement.
1.3.2 Buyer shall be credited with the balance of the principal,
interest and other amounts due and/or accrued as of the Closing Date (the
"Indebtedness") under those certain loan agreements affecting the Owned
Properties and described on Exhibit H (the "Loans"). Buyer shall assume the
Indebtedness (subject to the terms of the Indebtedness) effective as of the
Closing Date and Seller shall pay any fees or other lender-imposed charges
relating to such assumption (the "Assumption Fees"). Notwithstanding the
foregoing, if a lender's consent is required in connection with the Closing and
such consent is not obtained by Closing, then Buyer shall pay the Indebtedness
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evidenced by such Loan in full at Closing (provided that, Seller shall pay any
prepayment penalties) and acquire such Owned Property free and clear of the
Loan.
1.3.3 Prior to the Closing Date, Buyer shall deposit into Escrow
the balance of the Purchase Price, subject to adjustment by reason of any
applicable prorations and the allocation of closing costs described below. The
deposit required by this Section 1.3.3 shall be made by wire transfer of federal
funds or in another immediately available form.
1.4 Woodside Terrace. Woodside Terrace Partners, a California general
partnership controlled by Seller ("WTP"), owns the fee interest in the Woodside
Terrace Property (the "WT Property"), which is managed by Seller under a
management agreement (the "WT Management Agreement"). WTP and Seller have
reached an agreement in principle to sell the WT Property, which is being
renovated to include an Alzheimer's Care Unit, to Woodside Advanced Senior Care,
Inc., a California nonprofit public benefit corporation (the "WT Buyer"), for
$39,400,000, with Seller remaining as manager of the WT Property under a
modified management agreement. The sale is subject to the WT Buyer's receipt of
a loan from the City of Redwood City (the "Issuer") to be funded with the
proceeds of the Issuer's Senior Living Facilities Revenue Bonds (Woodside
Terrace) Series 1998. In connection with the issuance of the bonds and the sale
of the WT Property (the "WT Transaction"), Seller will agree to provide a
working capital loan of up to $1,250,000 to the WT Buyer (the "WT Working
Capital Loan") and will receive from the WT Buyer three promissory notes
(collectively, the "WT Subordinate Debt") representing the WT Buyer's
subordinate obligations to pay Seller a deferred development fee and a deferred
brokerage fee and to repay certain advances made by Seller to fund a portion of
the costs of issuance of the bonds. A portion of the purchase price for the WT
Property will be paid by delivery to WTP of the Issuer's Senior Living
Facilities Revenue 1998 Note (Woodside Terrace) for $3,500,000 (the "WT Deferred
Purchase Price Note"). Payments on the WT Deferred Purchase Price Note and the
WT Subordinate Debt and repayment of draws on the WT Working Capital Loan will
be subject to the terms and conditions of a Trust Indenture.
Buyer has reviewed drafts of the documents which are being prepared for
the WT Transaction. Assuming no significant changes from the terms and
conditions set forth in those draft documents, upon satisfaction of the WT
Property Sale Conditions (as defined below), Buyer shall purchase from Seller
and WTP, and Seller and WTP shall sell to Buyer WTP's and Seller's rights to the
WT Subordinate Debt and the WT Deferred Purchase Price Note and Buyer agrees to
assume Seller's obligations under the WT Working Capital Loan (such purchased
and assumed rights and obligations are herein called the "WT Rights"), for the
amounts allocated to the WT Property on Exhibit G (the "WT Allocated Amounts"),
upon satisfaction of the conditions to the sale of the WT Property to the WT
Buyer (the "WT Property Sale Conditions").
From and after the Effective Date, Seller and Buyer will cooperate with
the WT Buyer, the Issuer and the other parties to the WT Transaction to modify
all applicable documents to disclose that, at the closing of the sale of the WT
Property, Buyer will replace Seller as the manager under the WT Management
Agreement, as modified in connection with the WT Transaction, and as the lender
under the WT Working Capital Loan. At the Closing hereunder, Buyer, Seller and
WTP will establish with the Escrow Holder, under escrow instructions mutually
acceptable to all parties, a separate escrow (the "WT Escrow"), into which Buyer
will deposit cash in the amount of the WT Allocated Amount and Seller and WTP
will deposit a duly executed assignment(s) of the WT Rights (the "WT Rights
Assignment") in a mutually acceptable form. From and after the Closing, and
pending satisfaction of the WT Property Sale Conditions or earlier abandonment
of the WT Transaction, Seller will remain as manager under the WT Management
Agreement and will be entitled to all fees payable thereunder. Upon satisfaction
of the WT Property Sale Conditions, the
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Escrow Holder will distribute (i) to WTP and Seller, their respective WT
Allocated Amounts, and (ii) to Buyer, the WT Rights Assignment and the interest
on the WT Allocated Amount. In the event the WT Property Sale Conditions are not
satisfied on or before July 1, 1998, the Escrow Holder will return the WT
Allocated Amounts, together with all interest thereon, to Buyer and the WT
Rights Assignment to WTP and Seller, and all further rights and obligations of
the parties to one another hereunder with respect to the WT Property shall
terminate. Notwithstanding the foregoing, Buyer may, at its option and upon
written notice to Seller, extend such date to no later than August 1, 1998 to
allow for the WT Property Sale Conditions to be satisfied.
1.5 Encino Hills. Hillsdale owns a leasehold interest in the Encino
Hills Property (the "EH Property") under a December 1997 Lease with ADF
Enterprises ("ADF"). ADF and Hillsdale have reached an agreement in principle to
exchange the EH Property so that Hillsdale will acquire fee title to EH
Property. ADF and Hillsdale have entered into a Transaction Agreement and an
Exchange Agreement to accommodate said exchange (the "EH Transaction").
Buyer desires to purchase Hillsdale's fee interest in the EH Property
for the amount allocated to the EH Property on Exhibit G (the "EH Allocated
Amount"), upon satisfaction of the conditions to the exchange of the EH Property
to Hillsdale (the "EH Property Sale Conditions"), and the conveyance of the EH
Property to Hillsdale (the "Conveyance") and Hillsdale desires to sell the EH
Property fee interest to Buyer for the EH Allocated Amount upon satisfaction of
the EH Property Sale Conditions and the Conveyance.
At the Closing hereunder, Buyer and Hillsdale will establish with the
Escrow Holder, under escrow instructions mutually acceptable to both parties, a
separate escrow (the "EH Escrow") into which Buyer will deposit cash in the
amount of the EH Allocated Amount. From and after the Closing, and pending
satisfaction of the EH Property Sale Conditions and the Conveyance, or earlier
abandonment of the EH Transaction, Hillsdale will remain as lessee of the EH
Property. Upon satisfaction of the EH Property Sale Conditions and the
Conveyance, the Escrow Holder will distribute to Hillsdale the EH Allocated
Amount, and record and deliver to Buyer the grant deed to the EH Property. In
the event the EH Property Sale Conditions are not satisfied on or before July 1,
1998, the Escrow Holder will return the EH Allocated Amount, together with all
interest thereon, to Buyer and the grant deed to Hillsdale, and all further
rights and obligations of the parties to each other hereunder with respect to
the EH Property shall terminate. Notwithstanding the foregoing, Buyer may at its
option and upon written notice to Seller, extend such date no later than August
1, 1998 to allow for the EH Property Sale Conditions to be satisfied.
2. Opening of Escrow.
2.1 Escrow; Escrow Holder. On the Effective Date, an escrow (the
"Escrow") shall be opened with Chicago Title Company, 388 Market Street, Suite
1300, San Francisco, CA 94111 Attention: Pat Davisson, 415/788-0871 ("Escrow
Holder"). (The Effective Date is also referred to herein as the "Opening of
Escrow.")
2.2 Escrow Instructions. The terms and conditions set forth in this
Agreement shall constitute both an agreement between Seller and Buyer and escrow
instructions for Escrow Holder. Seller and Buyer shall promptly execute and
deliver to Escrow Holder any separate or additional escrow instructions
requested by Escrow Holder which are consistent with the terms of this
Agreement. Any separate or additional instructions shall not modify or amend the
provisions of this
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Agreement unless signed by both Buyer and Seller. As used in this Agreement,
"Closing" means the consummation of the purchase and sale of Assets contemplated
by this Agreement.
2.3 Closing Date. The Closing shall occur (and Escrow shall close) on or
before April 1, 1998 (the "Closing Date").
3. Actions Pending Closing.
3.1 Deliveries by Hillsdale.
3.1.1 Within ten (10) days after Opening of Escrow, Hillsdale
shall deliver to Buyer a copy of a current ALTA or CLTA extended coverage
preliminary title report for each Owned Property and each Leased Property (each
herein called a "PTR" and all collectively the "PTRs") issued by Chicago Title
Company (the "Title Company") showing the condition of title to each such
Property, and, to the extent available, accompanied by true, correct and legible
copies of all documents referred to therein. Hillsdale shall request Title
Company to prepare a plat or sketch showing all material easements affecting
each such Property. Hillsdale shall provide Buyer with a copy of any existing
"as-built" survey for each Owned or Leased Property (each herein called a
"Survey" and all collectively the "Surveys") in Hillsdale's possession or
control; provided, however, that if any such Survey meeting at least the minimum
ALTA standards (including but not limited to ALTA Table A requirements set forth
on Exhibit I hereto) is not available for an Owned or Leased Property or cannot
be re-certified prior to the Closing to Buyer and to the Title Company to enable
the issuance to Buyer of an ALTA extended coverage policy of title insurance for
such Owned or Leased Property, then Buyer shall not be deemed to have received
the PTR for such Owned or Leased Property for purposes of Section 3.2 below
until the earlier of (i) the date Buyer obtains a Survey certified to Buyer and
the Title Company meeting the above requirements for such Owned Property or
Leased Property (ii) thirty (30) days after receipt of the other items described
in this Section 3.1.1 for such Owned or Leased Property.
3.1.2 Prior to the Effective Date Hillsdale has, and continuing
thereafter Hillsdale shall make available to Buyer for inspection and/or copying
copies of such non-privileged documents and materials that relate in any
material way to a Property that are in Hillsdale's possession, including,
without limitation, copies of the following documents if in Hillsdale's
possession: all Contracts (including but not limited to tenant leases, Facility
Admission Agreements (as defined below), service contracts, employee contracts,
maintenance agreements, vendors contracts, construction contracts, architect's
agreements, leasing brokerage agreements, parking agreements, consultant
agreements, warranties, guaranties, title or casualty insurance policies,
management contracts, bonds and all other contracts and agreements relating in
any material way to each Property), together with all California Department of
Social Services ("DSS") and California Department of Health Services ("DHS")
annual surveys of each Property, Medicare provider reports and DHS and DSS
reports or citations, in each case only relating to the period of Seller's
ownership of the Property, fire marshal reports, evidence of zoning,
environmental reports, governmental licenses, certificates of occupancy or other
permits and approvals, existing surveys of the Property including any as-built
surveys for the improvements, wetland reports, soils reports, architectural
drawings, plans and specifications, engineering tests and structural or other
reports prepared for each Property or each Facility (collectively, the
"Reports"), and all sources of revenue and expenses (including but not limited
to tax bills or assessments and utilities bills), correspondence, claims,
notices and other books and records related to each Property, whether audited or
unaudited (collectively, the "Records").
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3.2 Buyer's Review of Title.
3.2.1 Buyer shall have ten (10) days following the receipt of
each PTR for an Owned Property (an "Owned PTR") and a Leased Property (a "Leased
PTR"), within which to deliver to Hillsdale written notice of Buyer's
disapproval of any matters materially adversely affecting title as shown on any
Owned PTR ("Disapproved Exceptions") or as shown on any Leased PTR (the "Leased
Disapproved Exceptions"); provided, however, Disapproved Exceptions or Leased
Disapproved Exceptions shall not include the Loans to be assumed by Buyer
pursuant to Section 1.3.2, those matters listed on Exhibit J or any easement,
encroachment, right or other non-monetary lien that in Buyer's reasonable
determination does not materially and adversely affect any Owned or Leased
Property. Buyer's failure to provide such notice on or before such date shall
constitute Buyer's approval of the condition of title as shown on the Owned PTRs
and Leased PTRs.
3.2.2 If Buyer timely notifies Hillsdale of its Disapproved
Exceptions, Hillsdale shall remove all monetary Disapproved Exceptions from
title at Closing and, subject to Section 8.1.3 below, shall use reasonable
efforts to remove all non-monetary Disapproved Exceptions from title before the
Closing Date. Hillsdale shall also use reasonable efforts to remove all
non-monetary Leased Disapproved Exceptions from title before the Closing Date
provided such efforts (i) are permitted under the applicable Lease Agreement and
(ii) do not cause Hillsdale any expense.
3.2.3 Except for the Disapproved Exceptions, all (i) exceptions
to title shown on an Owned PTRs, (ii) current installments of general and
special real property taxes and assessments which are a lien not yet delinquent,
(iii) any encumbrance arising from the acts or omissions of Buyer, and (iv)
exceptions to title shown on a Leased PTR (except those removed as a result of
Seller's reasonable efforts) are herein called the "Permitted Exceptions."
<PAGE> 10
3.3 Buyer's Review of the Properties, Reports, Records and Contracts.
3.3.1 Buyer's Review of the Property. Buyer acknowledges that
prior to the Effective Date Hillsdale provided Buyer with access to the
Properties and to the Contracts, Reports and Records (defined in Sections 1.1.6
and 3.1.2), and that Buyer has completed its financial and market-related
reviews of the Properties. On or before March 16, 1998 (the "Inspection
Completion Date"), Buyer shall have (i) caused the preparation of, obtained and
reviewed all such follow-up structural and mechanical engineering and
environmental reports for each Property as Buyer considers reasonably necessary,
and (ii) completed its review of all license transfer and other regulatory
compliance matters for each Property. Hillsdale agrees to grant to Buyer, its
agents, employees, representatives or contractors (collectively, "Buyer's
Agents"), at Buyer's expense, the right, upon twenty-four (24) hours prior
written or oral notice to Hillsdale, to enter onto the Properties solely for the
purpose of conducting such reviews and inspections. Buyer shall conduct all such
inspections in a reasonable manner consistent with and not likely to disturb the
normal operations of Hillsdale and so as to minimize any disruption to the
residents of the Properties. Such inspections may include the right to conduct
such groundwater and other engineering or geological tests on the Owned
Properties and Leased Properties as Buyer deems necessary; provided, however,
that Hillsdale's prior consent (not to be unreasonably withheld or delayed)
shall be required as to the method used and the location of any invasive tests
or borings. Hillsdale shall have the right to have one or more of its
representatives or agents accompany Buyer and Buyer's Agents at all times while
Buyer or Buyer's Agents are on a Property. Promptly after undertaking any
testing or inspection, Buyer shall restore each Property to its condition prior
to any such test or inspection. Upon Hillsdale's request, Buyer shall provide
Hillsdale with the results of any test, report, study or other document or
information obtained by Buyer in connection with any of its inspections. Buyer
shall, at its sole cost and expense, clean up any Property, in whatever manner
necessary, due to any contamination or disturbance caused by Buyer or Buyer's
Agents so that such Property shall be returned to as good condition as existed
prior to such entry. If, after the Effective Date and on the basis of such
inspections described in clauses (i) and (ii) only, Buyer discovers any matter
that materially adversely affects Buyer's intended use, management, development,
ownership or operation of a Property (an "Objection Item"), then on or before
the Inspection Completion Date Buyer shall notify Hillsdale in writing of all
such Objection Items. Buyer's failure to provide such notice on or before the
Inspection Completion Date shall constitute Buyer's approval of all such matters
and of the condition of each Property. All Objection Items shall be subject to
Section 8.1.3 below. Notwithstanding anything to the contrary, no matter
pertaining to the Rossmoor RCFE shall be considered an Objection Item except
only for the amount by which the aggregate cost of matters affecting the
structural frame only for such Facility is greater than $1,500,000.
3.3.2 Buyer's Review of the Contracts. On or before the
Inspection Completion Date, Buyer shall notify Hillsdale in writing of those
Contracts listed on Exhibit E (other than Material Contracts) that Buyer does
not wish to assume at Closing. Hillsdale shall cause all such Contracts (other
than Material Contracts) to be terminated at or after the Closing in the
shortest time permissible under such Contracts, provided such Contract can be
terminated in accordance with its terms, without penalty or liability to Buyer
(such Contracts to be terminated are herein collectively, the "Rejected
Contracts"). Without limiting any other provision of this Agreement, from and
after the Closing Hillsdale shall remain solely responsible for all obligations
and liability of Hillsdale under all Rejected Contracts. Buyer shall not have
any responsibility or liability under any Rejected Contract from and after the
Closing; provided, however, that notwithstanding the foregoing, Buyer shall
assume at Closing all Facility Admission Agreements (as defined below) to which
Hillsdale is a party in effect at each Property at Closing.
<PAGE> 11
3.3.3 Buyer's Indemnification Regarding Due Diligence Efforts.
Buyer hereby agrees to hold harmless, protect, defend and indemnify and hereby
releases each Seller under the 3-Agreements, its respective officers, directors,
partners, employees, contractors, agents, subsidiaries, affiliates and its and
their respective successors and assigns ("Seller Indemnitees") and each Property
and each owner of a Property from and against any and all claims, demands,
causes of actions, losses, liabilities, liens, encumbrances, costs or expenses
(including without limitation reasonable attorneys' fees and litigation costs)
arising out of, connected with or incidental to any injuries to persons
(including death) or property (real or personal), or liens which attached to the
Property, by reason of Buyer or Buyer's Agents' activities on such Property.
This indemnity shall survive the Closing and the termination of this Agreement
and shall not be limited in any way by any other terms of this Agreement.
3.3.4 Confidentiality. Any and all information that Buyer and/or
Buyer's Agents discover, obtain or generate in connection with or resulting from
Buyer's Inspection and work under Section 3.3 hereof, shall be subject to the
terms of that certain confidentiality agreement between Buyer and Hillsdale
dated December 30, 1997 (the "Confidentiality Agreement").
3.4 Licenses.
(a) RCFE Licenses. With respect to each Property that is operated
as an assisted-living facility, prior to the Closing, Buyer shall use diligent
efforts to obtain for each Property all licenses, permits or approvals required
by any governmental agency or authority with jurisdiction over such Property, so
that on or as soon as possible after the Closing Date Buyer shall have all legal
right and authority to operate a residential care facility for the elderly (as
defined in California Health and Safety Code Sections 1569 et seq. and herein
called a "RCFE") located on the Property with respect to those living units in
each assisted living Facility operated as RCFE units as of the Effective Date.
Buyer shall be fully responsible for and shall pay all costs and fees required
to be paid in connection with the transfer or issuance of any and all licenses
and permits, as well as any licenses with respect to the operation of each
Property issued by the DSS, and shall pay all license application fees in
connection therewith, as well as applying for and obtaining any and all new
licenses, permits, certificates and/or approvals necessary or appropriate in
connection with the operation of the Property and the consummation of the
purchase and sale of the Assets. Buyer shall diligently prosecute its
applications in accordance with the rules and procedures set forth under
applicable law. At Buyer's request, Hillsdale shall cooperate with Buyer in
Buyer's efforts to obtain such licenses, at no out-of-pocket cost to Hillsdale.
Hillsdale shall fully comply, at its cost, with the requirements of California
Health and Safety Code Section 1569.191, which requires Hillsdale to notify the
DSS and each resident of the sale of a Facility promptly upon execution and
delivery of this Agreement and to take certain other actions as more fully set
forth therein. The form of such notices are attached hereto as Exhibit K.
(b) SNF Licenses. With respect to the portion of the Hillsdale
Manor Facility that is operated as a skilled nursing facility (the "SNF
Facility"), prior to the Closing, Buyer shall use diligent efforts to obtain for
each Property all licenses, permits or approvals, and/or any other licenses
required by any governmental agency or authority with jurisdiction over such
Property, so that on or as soon as possible after the Closing Date Buyer shall
have all legal right and authority to operate a skilled nursing facility (as
defined in California Health and Safety Code Sections ___ et seq. and herein
called a "SNF") located on the Property. Buyer shall be fully responsible for
and shall pay all costs and fees required to be paid in connection with the
transfer or issuance of any and all licenses and permits, as well as any
licenses with respect to the operation of each Property issued by the DHS,
<PAGE> 12
and shall pay all transfer and license application fees in connection therewith,
as well as applying for and obtaining any and all new licenses, permits,
certificates and/or approvals necessary or appropriate in connection with the
operation of the Property and the consummation of the purchase and sale of the
Assets. Buyer shall diligently pursue its applications in accordance with the
rules and procedures set forth under applicable law. At Buyer's request,
Hillsdale shall cooperate with Buyer in Buyer's efforts to obtain such licenses,
at no out of pocket cost to Hillsdale.
3.5 Access to Hillsdale's Employees. After the Effective Date, Buyer
shall have the right to meet with the employees of Hillsdale who are employed
directly at each Property (each such employee is herein called an "Employee"),
for the purpose of introducing Buyer to such Employees and helping to ensure a
smooth transition to the new ownership. Buyer agrees that such meetings will be
conducted in accordance with procedures reasonably established by Seller, and
that Buyer shall not use such meetings to conduct interviews or otherwise to
perform evaluations of the Employees except to assess capabilities of the
Employees. A representative of Hillsdale shall be present at any such meeting
between Buyer and any Employee, and shall have the right to terminate any such
meeting if, in such representative's reasonable opinion, such meeting is likely
to have a detrimental effect on the continued operation of the Property during
the period prior to the Closing Date. Buyer shall have the right to meet with
the Facility manager of each Property after the Effective Date hereof (whether
before or after the Inspection Completion Date) for purposes of obtaining
information to assist Buyer in its due diligence review of the Property, and
Hillsdale shall have the right to have a representative present at such meeting.
3.6 Operation of Property Pending Closing. During the period from the
date hereof until the Closing Date, Hillsdale shall continue to operate and
maintain each Facility in the ordinary course of business and in a manner
consistent with Hillsdale's past practice and will not take any action or fail
to take action that would be inconsistent with this Agreement or the
consummation of the Closing. Without limiting the generality of the foregoing,
without the prior written consent of Buyer (which consent shall not be
unreasonably withheld or delayed), Hillsdale shall not:
(a) sell, assign, transfer or encumber any of the Assets or any
interests therein (whether by operation of law or otherwise), except for
inventory sold in the ordinary course of business; provided, however, that
Hillsdale shall at all times maintain and sell inventory consistent with its
past practices;
(b) enter into any new lease, contract, agreement or other
understanding relating to or affecting in any way any of the Assets, except in
the ordinary course of business and consistent with past practices;
(c) extend, amend, modify or terminate any Lease Agreement,
Management Agreement or other Contract which Buyer has elected to assume as
provided in Section 3.3.2 above except for non-material contracts and in the
ordinary course of business (of which Seller shall give Buyer notice);
(d) terminate the employment of any Employee other than in the
ordinary course of business;
(e) allow or permit to be done any act by which any of the
policies of insurance with respect to any Property may be suspended, impaired or
canceled;
<PAGE> 13
(f) fail to maintain the Assets in substantially their current
state of repair, excepting normal wear and tear or fail to replace consistent
with Hillsdale's past practice inoperable, worn-out or obsolete or destroyed
Assets;
(g) make any settlement or compromises with tax authorities
relating to the Assets.
(h) remove any tangible Personal Property from a Property unless
it is replaced with a comparable type and equal quality and quantity as existed
as of the time of such removal; or
(i) fail to maintain in existence all licenses, permits and
approvals necessary or appropriate for the ownership, operation, management, use
or maintenance of any Property.
3.7 Communications with Customers and Suppliers; Public Disclosure.
Seller and Buyer shall mutually agree upon all communications with suppliers,
customers and clients relating to any of the 3-Agreements and the transactions
contemplated thereunder prior to the Closing Date. Prior to and after the
Closing, neither party shall release to the public any information with respect
to any of the 3-Agreements and the transactions contemplated thereby except as
mutually approved in advance by Buyer and Seller, such approval not to be
unreasonably withheld or delayed; provided however, to the extent (and only to
the extent) that either Buyer or Seller is required by judicial process or by
law to release any such information, such approval of the other party shall be
sought but need not be obtained as a condition to such release. The provisions
of the immediately preceding sentence shall survive the Closing or any
termination of this Agreement.
3.8 Employment of Seller's Employees. Except as otherwise provided in
the Post-Closing Management Agreements (as defined in Section 5.10 below)
effective as of the Closing Date, Buyer shall hire all Employees who are then
employed by Seller at their then current wage or salary levels, and Seller shall
pay all such Employees their wages or salaries to the Closing Date plus accrued
vacation time. Such payment shall be treated as an expense of the applicable
Property. Notwithstanding anything else herein, in no event shall Buyer assume
any employee benefit obligation of Seller with respect to any Employee.
4. Representations and Warranties.
4.1 Representations and Warranties of Buyer. Buyer hereby represents,
warrants and covenants to and agrees with Seller that each of the
representations and warranties set forth below in this Section 4.1 is true in
all material respects as of the Effective Date. Buyer and Seller agree that only
for purposes of this Section 4 the following defined terms shall include the
matters covered by such defined terms in each of the 3-Agreements: "Assets,"
"Owned Property(ies)," "Disclosure Schedule," "Facility," "Facility Admission
Agreements," and "Material Contracts."
4.1.1 Buyer's Investigation. Buyer acknowledges and agrees as
follows: (i) except as specifically set forth in this Agreement, Seller has made
no representations or warranties of any kind whatsoever, express or implied, in
connection with this Agreement, the purchase of the Assets by Buyer, the
physical condition of any Property or whether any Asset is appropriate for
Buyer's intended use; (ii) on or prior to the Inspection Completion Date Buyer
will have (or will have chosen not to have) fully investigated the Assets and
all matters pertaining thereto; (iii) Buyer, in entering into this Agreement and
in completing its purchase of the Assets, is relying entirely on its own
investigation of the Assets and the express representations, warranties and
covenants of Seller set forth herein; (iv) on or prior to the Inspection
Completion Date, Buyer will be aware (or will have
<PAGE> 14
chosen not to be aware) of all zoning regulations, regulatory compliance, other
governmental requirements, site and physical conditions, and other matters
affecting the use and condition of the Assets; and (v) Buyer shall purchase the
Assets in "AS IS" condition as of the Closing Date, subject to the express
representations, warranties and covenants of Seller set forth herein.
4.1.2 Buyer's Authority. Buyer has full power to execute and
deliver this Agreement and all related documents, and to carry out the
transactions contemplated herein. This Agreement is valid, binding and
enforceable against Buyer in accordance with its terms, except as such
enforceability may be limited by creditors' rights, laws and applicable
principles of equity. Each individual executing this Agreement on behalf of
Buyer represents and warrants to Seller that he or she is duly authorized to do
so and thereby to bind Buyer.
4.1.3 Consents. Buyer has obtained the approval of its Board of
Directors to this transaction, and is not required to obtain any other material
consents or approvals to consummate the transactions contemplated in this
Agreement, other than in connection with or in compliance with the provisions of
the Hart-Scott-Rodino Antitrust Improvements Act of 1976, as amended, and the
rules and regulations promulgated thereunder (the "HSR Act"). With respect to
compliance with the HSR Act, within ten (10) days after the Effective Date,
Buyer shall, at its expense, make any and all filings required to be made by
Buyer under the HSR Act.
4.1.4 Litigation. To Buyer's actual knowledge there is no
litigation, investigation or other proceeding pending or threatened against or
relating to Buyer, its properties or business, which is material to this
Agreement or which would prevent Buyer from performing its obligations
hereunder, and to Buyer's actual knowledge, the transaction contemplated herein
has not been challenged by any governmental agency or any other person.
4.1.5 Availability of Funds. Buyer has available funds to pay the
Purchase Price.
4.2 Representations and Warranties of Seller. Seller hereby represents,
warrants and covenants to and agrees with Buyer that except as set forth in the
Disclosure Schedule attached hereto as Exhibit L, each of the representations
and warranties set forth below in this Section 4.2 is true in all material
respects as of the Effective Date. As used herein, the words "to Seller's actual
knowledge," or other words of similar effect, shall mean the actual present
knowledge of Richard Stein, CEO, Andrew Bradley, Jr., Chief Development Officer,
Louis Swart, Chief Operating Officer, and Gary Collins, Vice President, Health
Care Operations, after due inquiry of the Administrator/Manager of each Facility
(other than Rossmore) and Gary Homan, Vice President, Finance. Seller represents
and warrants that (i) such named individuals have the principal business
responsibility for the collective operation of the Properties and (ii) no
officers or responsible managers of Seller are more familiar with the Properties
collectively than such named individuals.
4.2.1 Seller's Authority. Seller has full power to execute and
deliver this Agreement and all related documents, and to carry out the
transactions contemplated herein. This Agreement is valid, binding and
enforceable against Seller in accordance with its terms except as such
enforceability may be limited by creditors' rights, laws and applicable
principles of equity. Each individual executing this Agreement on behalf of
Seller represents and warrants to Buyer that he or she is duly authorized to do
so and thereby to bind Seller.
4.2.2 Necessary Action and Consents. Seller will use diligent
efforts to take all action and obtain all material consents prior to Closing
necessary for it to lawfully enter into and carry out the terms of the
3-Agreements, including but not limited to any necessary filings in
<PAGE> 15
connection with or in compliance with the HSR Act. With respect to compliance
with the HSR Act, within ten (10) days after the Effective Date, Seller shall,
at its expense, make or cause to be made any and all filings required to be made
by Seller (or any affiliate of Seller) under the HSR Act.
4.2.3 Litigation. To Seller's actual knowledge there is no
litigation, investigation or other proceeding pending or threatened against or
relating to Seller, its properties or business, which is material to any of the
Assets or to the 3-Agreements, or which would prevent any Seller under any of
the 3-Agreements from performing its obligations thereunder, and to Seller's
actual knowledge, the transactions contemplated by the 3-Agreements have not
been challenged by any governmental agency or any other person.
4.2.4 Books and Records. To Seller's actual knowledge, (i) all of
the books and records maintained by or under the control of Hillsdale with
respect to its ownership and/or operation of the Assets are true, accurate and
correct in all material respects and have been made available to Buyer or
Buyer's Agents for inspection on or prior to the Effective Date pursuant to
Section 3.1.2 above, and (ii) there has been no material change in the Assets
from that disclosed in such books and records.
4.2.5 Properties. At Closing, the Seller will have and will
transfer good and marketable fee simple title to the Owned Assets (subject to
all matters shown in the Owned PTRs). With respect to each Leased Property, at
Closing (i) Seller will have and will transfer an unencumbered interest in the
leasehold estate owned by the Seller with respect thereto and (ii) the Seller
will enjoy peaceful and undisturbed possession of all the Leased Property
subject to matters shown in the Leased PTRs and to the Contracts.
4.2.6 The Facility Admission Agreements. Prior to or concurrently
with the execution of this Agreement, Seller has made available to Buyer for
copying or review copies of each of the admission agreements and/or lease
agreements with the residents of each Facility on the Properties which are
currently in effect (collectively the "Facility Admission Agreements"). To
Seller's actual knowledge, each of the Facility Admission Agreements provided to
Buyer is in full force and effect, and none of the Facility Admission Agreements
has been modified or amended except as set forth in any amendment made available
to Buyer. To Seller's actual knowledge, Seller is neither in default of any of
its obligations under any Facility Admission Agreement nor, to Seller's actual
knowledge, is there any default or any action which, with the passage of time or
the giving of notice or both, would constitute a default under any Facility
Admission Agreements by any of the residents who are parties thereto (other than
non-payment of rent).
4.2.7 Rent Roll. Attached hereto as Exhibit M is a true and
correct rent roll as of January 31, 1998 or later date, which identifies each of
the residents of each Facility on the Properties, the monthly rent currently
being paid by each such resident, the date to which said rent has been paid, the
amount of any security deposit and the commencement date of its Facility
Admission Agreement. Seller shall update the rent roll on a monthly basis
between the date hereof and the Closing Date (or more frequently if reasonably
requested by Buyer), and the same shall be true, accurate and correct in all
material respects as of each date the same is given, as applicable.
4.2.8 Liens. There are no mechanics', materialmen's or similar
claims or Liens presently claimed or, to Seller's actual knowledge, which will
be claimed against any Owned Property or Leased Property for work performed or
commenced prior to the date hereof at the request of Seller or of which Seller
has knowledge.
<PAGE> 16
4.2.9 Environmental Matters. To Seller's actual knowledge, except
in accordance with and in full compliance in all material respects with
applicable governmental laws, regulations and requirements (collectively, the
"Environmental Laws") associated with Hazardous Materials (as defined in Section
5.1 below), Seller has not released into the environment or discharged, placed
or disposed of any Hazardous Materials, or caused the same to be so released
into the environment or discharged, placed or disposed of at, on or under any
Property. In addition, to Seller's actual knowledge: (i) no Hazardous Materials
are located on any Property or in any Facility on a Property or have been
released into the environment or discharged, placed or disposed of in, on or
under any Property or any Facility on a Property except in accordance in all
material respects with applicable Environmental Laws; (ii) no underground
storage tanks are or have been located on any Owned Property; (iii) no Property
has ever been used as a dump for waste material; (iv) no material claims have
been made or threatened by any third party with respect to any Property relating
to damage, contribution, cost recovery, compensation, loss or injury relating to
any Hazardous Materials; and (v) in all material respects each Property and each
Facility and their prior uses by Seller comply with all applicable Environmental
Laws.
4.2.10 Leases or Other Agreements. To Seller's actual knowledge,
except for the Facility Admission Agreements, the Material Contracts, any matter
shown on a Leased or Owned PTR, and other miscellaneous non-material
arrangements such as leases with beauty salons, vendor machine concessions,
laundry machine contracts, etc., there are no leases, subleases, licenses,
occupancy agreements, options, rights, concessions or other agreements or
arrangements, written or oral, granting to any person the right to purchase, use
or occupy all or any portion of any Owned or Leased Property.
4.2.11 Compliance With Law.
(a) To Seller's actual knowledge, operation of each
Owned and Leased Facility and each Owned and Leased Property is in compliance in
all material respects (or waivers have been obtained) with all currently
applicable municipal, county, state and federal laws, regulations, ordinances,
and orders (including, without limitation, such laws, regulations and ordinances
relating to health care, the health care industry, the provision of health care
services, third party reimbursement (including Medicare) (collectively, the
"Health Care Laws") and the currently applicable rules, regulations and orders
issued by the DHS and the DSS, herein referred to respectively as the "DHS Laws"
or the "DSS Laws") and with all municipal, health, building and zoning by-laws
and regulations (including, without limitation, applicable building and zoning
codes) where the failure to comply therewith or to obtain a waiver therefrom
could have a material adverse effect on the Owned or Leased Property or the
operation of the Facility located thereon (collectively, "Currently Applicable
Laws");
(b) To Seller's actual knowledge, there are no
outstanding deficiencies or work orders of any governmental authority having
jurisdiction over any Owned or Leased Property requiring conformity to any
applicable statute, regulation, ordinance or by-law pertaining thereto; and
(c) To Seller's actual knowledge, there is no claim,
requirement or demand of any agency supervising or having authority over any
Facility located on any Owned or Leased Property to rework or redesign it or to
provide additional furniture, fixtures or equipment so as to conform to or
comply with any existing law, code or standard which has not been fully
satisfied prior to the date hereof or which will not be satisfied prior to the
Closing Date.
<PAGE> 17
4.2.12 No Special Assessment. To Sellers' actual knowledge,
Seller has not received notice of any special assessments relating to any Owned
or Leased Property or any portion thereof, and to Seller's actual knowledge,
there is no pending or threatened special assessment relating thereto.
4.2.13 Contracts. All "Material Contracts" are listed on Exhibit
N. Prior to or concurrently with the execution of this Agreement, Seller has
made available to Buyer for review or copy true and correct copies of all
Contracts identified or described on Exhibit N. Each of the Material Contracts
is in full force and effect and none of the Material Contracts has been modified
or amended except as set forth in any amendment made available to Buyer by
Seller. Seller is not in default of any of its material obligations under any
Material Contract nor is Seller aware of any default or any action which, with
the passage of time or the giving of notice or both would constitute a default,
under any Material Contract by any other party thereto. "Material Contract" as
used herein shall include the Lease Agreements, Contribution Rights or Option
Agreements relating to Lease Agreements, the Management Agreements, the
documents referred to in Section 1.4 and the Loan Documents.
4.2.14 Facilities. To Seller's actual knowledge, (i) the SNF
Facility is duly and properly licensed to operate a SNF in compliance in all
material respects with all DHS Laws, and (ii) each RCFE unit in an assisted
living Facility is duly and properly licensed to operate as a RCFE in compliance
in all material respects with all DSS Laws. To Seller's actual knowledge, there
is no action pending or recommended by any state or federal agency having
jurisdiction thereof, or any action of any other type, which would have a
material adverse effect on any Facility, or Seller's business therein.
4.2.15 Inventory. To Seller's actual knowledge, all inventories
of perishable and nonperishable food, central supplies, linen, housekeeping and
other supplies located at each Facility are, and shall be at the time of
Closing, in sufficient condition and quantity to operate such Facility at normal
capacity as required by DHS and DSS regulations.
4.2.16 Employee Matters.
(a) The Disclosure Schedule sets forth a list of all of
Seller's Employees located at each Property and contains a current correct and
complete list of hourly wage, salary and other compensation of such Employees.
(b) To the actual knowledge of Seller, no collective
bargaining agreement grievance is pending or threatened against Seller or any
other entity with respect to the Employees. Except as set forth in the
Disclosure Schedule, within the past one year, there have not to Seller's actual
knowledge been any jurisdictional disputes or organizing activities by or with
respect to the Employees. Seller is not a party to any collective bargaining
agreement affecting the Employees or any agreement obligating Seller or Buyer to
accept or impose any such agreement in connection with any of the Employees or
Properties.
(c) Seller is not a joint employer with any other legal
entity, nor does it control labor relations or operations of any other legal
entity.
(d) Seller has no knowledge that the transactions
contemplated by this Agreement will result in a significant number of departures
of the Employees.
<PAGE> 18
4.2.17 [Intentionally Omitted].
4.2.18 License Suspensions. To Seller's actual knowledge, neither
Seller, nor any of the Facilities, have received any notice of, nor does the
Seller have any knowledge of, any violation (or of any investigation,
inspection, audit or other proceeding by any governmental entity involving
allegations of any violation) of any Health Care Law involving or relating to
Seller or any of the Facilities which has not been dismissed or otherwise
disposed of.
4.2.19 Operations of the SNF.
(a) Medicare Compliance. With respect to the SNF
Facility, to the Seller's actual knowledge:
(i) All material reports, documents and
notices including without limitation all Medicare cost reports required to be
filed, maintained or furnished by Seller to any governmental agency by such
Facility have been so filed, maintained or furnished, and all such reports,
documents and notices were complete and correct in all material respects on the
date filed (or were corrected in or supplemented by a subsequent filing) such
that no liability exists with respect to such filing;
(ii) Such Facility is eligible to receive
payment under Title XVIII of the Social Security Act and under Title XIX of such
Act, and there are no actions, appeals or investigations pending or threatened
before any entity, commission, board or agency, including an intermediary or
carrier or the Administrator of the Health Care Financing Administration, with
respect to any Medicare claims or reports filed by such Facility on or before
the date hereof or program compliance matters, which would reasonably be
expected to have a material adverse effect on the operation of the Facility;
(iii) Other than regularly scheduled audits
and reviews, no validation review, peer review or program integrity review
related to such Facility has been conducted by any entity, commission, board or
agency in connection with the Medicare program, and no such reviews are
scheduled, pending or threatened against or affecting the business; and
(iv) None of Seller, or the officers,
directors or managing employees or other employees or agents of Seller engaged
in any activities which are prohibited under criminal law, or are cause for
civil penalties or mandatory or permissive exclusion from Medicare, or any other
state health care program or federal health care program under Sections 1320a-7,
1320a-7a, 1320a-7b or 1395nn of Title ___ of the United States Code, or the
regulations promulgated pursuant to such statutes or regulations or related
state or local statutes.
4.3 Reaffirmation. The representations and warranties of Buyer and
Seller set forth in Sections 4.1 and 4.2 are true and correct in all material
respects as of the date of this Agreement. The Closing shall constitute Buyer's
and Seller's re-affirmations of those representations and warranties as of the
Closing. At either party's election, however, such party may require the other
party to execute a document reaffirming those representations and warranties and
deliver the same to the requesting party upon the Closing. Each party shall be
entitled to rely upon those representations and warranties by the other party,
notwithstanding any inspection or investigation of the Property which was made
or could have been made by Buyer.
<PAGE> 19
4.4 Estoppel Statements. Seller shall use best efforts (without
expenditure of funds except as set forth below herein) to obtain and deliver to
Buyer prior to the Closing an estoppel statement or certificate (the
"Estoppels") executed by each lender under a Loan to be assumed by Buyer as
provided under any of the 3-Agreements, each lessor under a Lease Agreement, the
Master Lessor under the Willow Glen lease and each owner under a Management
Agreement in substantially the forms attached as Exhibits O-1 - O-3 hereto,
respectively and dated no more than thirty (30) days prior to the Closing;
provided that, Seller need not use economic incentives (except as set forth
below) or commence litigation against any such party in order to obtain any such
Estoppel; and provided further, if the Closing is extended for any reason Seller
shall have no obligation to obtain new Estoppels. Seller shall be required to
expend up to $10,000 per Estoppel with respect to Willow Glen and Hillsdale
Manor. Seller shall deliver copies of the completed Estoppels to Buyer as Seller
receives the same. Buyer shall notify Seller within ten (10) days of receipt of
any Estoppel if Buyer determines that such Estoppel is not acceptable to Buyer
in Buyer's reasonable determination, along with the reasons for such
determination. If Buyer fails to give such notice within such ten (10) day
period, then any such Estoppel shall be deemed acceptable to Buyer. Unaccepted
Estoppels shall be subject to Section 8.1.3 below.
5. Additional Agreements of the Parties.
5.1 Hazardous Material Indemnification and Waiver.
5.1.1 Buyer, on behalf of itself, its successors, assigns and
successors-in-interest, shall protect, defend, indemnify, hold harmless and
hereby releases Seller Indemnitees from and against any and all liabilities,
claims, demands, suits, judgments, causes of action (including, but not limited
to, causes of action arising under the Comprehensive Environmental Response
Compensation and Liability Act of 1980, 42 U.S.C. Section 9601 et seq.
hereinafter referred to as "CERCLA"), losses, costs, damages, injuries,
penalties, enforcement actions, fines, taxes, remedial actions, removal and
disposal costs, investigation and remediation costs and expenses (including but
not limited to reasonable attorneys' fees, litigation, arbitration and
administrative proceeding costs, expert and consultant fees and laboratory
costs), sums reasonably paid in settlement of claims, whether direct or indirect
known or unknown, to the extent arising out of, related in any way to, or
resulting from or in connection with, in whole or in part, the presence in, on,
under, or about a Property under any of the 3-Agreements of Hazardous Materials,
to the extent that such Hazardous Materials, (a) become present in, on, under or
about such Property during Buyer's tenure as owner, occupier or manager of such
Property and such Hazardous Materials had not already been present there prior
to the Closing Date, or (b) become non-compliant with applicable federal, state
or local laws as a result of Buyer's acts or omissions.
5.1.2 Seller shall protect, defend, indemnify, hold harmless, and
hereby releases Buyer and its officers and directors from and against any and
all liabilities, claims, demands, suits, judgments, causes of action (including,
but not limited to, causes of action arising under CERCLA), losses, costs,
damages, injuries, penalties, enforcement actions, fines, taxes, remedial
actions, removal and disposal costs, investigation and remediation costs and
expenses (including but not limited to reasonable attorneys' fees, litigation,
arbitration, and administrative proceeding costs, expert and consultant fees and
laboratory costs), sums reasonably paid in settlement of claims, whether direct
or indirect, known or unknown, to the extent arising out of, related in any way
to, or resulting from or in connection with, in whole or in part, the presence
in, on, under or about a Property under any of the 3-Agreements of Hazardous
Materials, to the extent that such Hazardous Materials (a) became present in,
on, under or about such Property during the tenure of any Seller under any of
the 3-Agreements as the owner, occupier, or manager of such Property and that as
of the
<PAGE> 20
Closing Date were not (or if known by the parties would not have been) in
compliance with applicable federal, state, or local laws or (b) became present
in, on, or under or about such Property prior to Buyer's tenure as the owner,
occupier, or manager of such Property and that as of the Closing Date had become
noncompliant with applicable federal, state, or local laws as a result of the
acts or omissions of any Seller under any of the 3-Agreements. By way of
example, Seller would not be obligated to defend Buyer against claims arising
out of the presence of a Hazardous Material that became present on a Property
prior to such tenure of Seller unless the same became non-compliant with
applicable federal, state or local laws as a result of the acts or omissions of
any Seller under any of the 3-Agreements.
5.1.3 Further, the parties specifically agree that the
indemnities provided in Sections 5.1.1 and 5.1.2 shall specifically exclude any
claims for loss of good will and/or consequential damages, and each party hereby
releases the other party (and the other Sellers under the 3-Agreements) and the
other persons covered by the respective indemnity from and against any liability
for any such excluded claims.
5.1.4 As used herein, the term "Hazardous Material(s)" means any
chemical, substance, material, controlled substance, object, condition, waste
living organisms or combination thereof which is or may be hazardous to human
health or safety or to the environment due to its radioactivity, ignitability,
corrosivity, reactivity, explosivity, toxicity, carcinogenicity, mutagenicity,
phytotoxicity, infectiousness or other harmful or potentially harmful properties
or effects, including, without limitation, petroleum hydrocarbons and petroleum
products, lead, asbestos, radon, polychlorinated biphenyls (PCBs) and all of
those chemicals, substances, materials, controlled substances, objects,
conditions, wastes, living organisms or combinations thereof which are now or
become in the future listed, defined or regulated in any manner by any federal,
state or local law based upon, directly or indirectly, such properties or
effects.
5.1.5 The indemnities (but not the releases) under this Section
5.1 shall expire and terminate on the fifth anniversary of the Closing Date
except as to claims in litigation, or as to which written notice of a discovery
of a condition that would give rise to a claim under the Indemnity has been
delivered to the other party as of said fifth anniversary.
5.2 Condemnation. If, prior to Closing, any portion of any Property
shall be condemned or becomes the subject of any pending or threatened
condemnation action, Seller shall promptly notify Buyer thereof. If the
condemnation or the pending or threatened condemnation action relates to all or,
in Buyer's reasonable opinion, a significant portion of any Property (where
"significant portion" means that Buyer would be unable to operate or manage the
Facility in substantially the same manner as currently being operated or managed
by Seller if such portion of the Property were taken by condemnation), Buyer
shall have the right to terminate the 3-Agreements and the other 3-Agreements
collectively, as to all Properties thereunder on written notice to Seller
delivered within five (5) business days after receipt of Seller's notice.
Buyer's failure to deliver such notice within such five (5) business day period
shall irrevocably constitute Buyer's election to acquire such Property. In the
event Buyer exercises its termination rights hereunder, all of the 3-Agreements
shall be terminated. In the event Buyer elects not to so terminate the
3-Agreements, then the 3-Agreements shall remain in full force and effect,
regardless of such condemnation or threatened or pending action, and Seller
shall assign to Buyer all of its rights, if any, as owner, lessee or manager of
the Condemned Property, as the case may be, to any condemnation award and all
claims in connection therewith, and Buyer shall have the right during the
pendency of this Agreement to participate with Seller in the condemnation
proceeding and, after the Closing, the sole right to negotiate and otherwise
deal with the condemning authority in respect of such matter; provided, however,
with respect to a Leased or
<PAGE> 21
Managed Property, such right of Buyer to so negotiate and deal shall be only to
the extent Seller is so permitted under the applicable Lease or Management
Agreement.
5.3 Damage or Destruction. In the event of any damage to or destruction
of a Property prior to the Closing, Seller shall promptly notify Buyer thereof.
If, in Buyer's reasonable opinion, all or a significant portion of the Property
has been damaged (where "significant portion" means that Buyer would, because of
such damage, be unable for a period greater than three (3) months to operate or
manage the Facility in substantially the same manner as currently being operated
or managed by Seller), Buyer shall have the right to terminate the 3-Agreements
on written notice to Seller delivered within five (5) business days after
receipt of Seller's notice. Buyer's failure to deliver such notice within such
five (5) business day period shall irrevocably constitute Buyer's election to
acquire the Properties. If Buyer exercises its termination rights hereunder, all
of the 3-Agreements shall be terminated. In the event Buyer elects not to so
terminate the 3-Agreements, then the 3-Agreements shall remain in full force and
effect, regardless of such damage or destruction, Seller shall have no
obligation to repair any such damage or destruction, Seller shall assign to
Buyer all of its rights to any insurance proceeds and all claims in the
connection therewith (to the extent Seller has any such right under the
applicable Lease or Management Agreement with respect to a Leased or Managed
Property) and with respect only to an Owned or Leased Property, Buyer shall be
credited at the Closing with the deductible portion of such proceeds. Seller
agrees during the period between the Effective Date and the Closing to carry
rental loss insurance on the Properties covering a period of 24 months.
5.4 Indemnification. With respect only for purposes of this Section 5.4,
the following defined terms shall include the matters covered by such defined
terms in each of the 3-Agreements: "Assets," "Contracts," "Properties," and
"Rejected Contracts."
5.4.1 Seller's Indemnification. From and after the Closing,
Seller shall indemnify, defend and hold Buyer and Buyer Indemnitees harmless
from and against any and all damage, loss or liability resulting from:
(a) Except as otherwise specifically provided in any of
the 3-Agreements, (i) non-contractual claims of third-parties relating to the
use, operation or ownership of the Assets which exist at the Closing Date,
allocable to periods at or before the Closing Date, but only during the period
any Seller under any of the 3-Agreements owned and operated the Assets, (ii) any
obligations of Seller with respect to the Resident Deposits, (iii) breaches
prior to Closing by any Seller prior to Closing prior to Closing of its
obligations under any Contract assumed by Buyer, (iv) any obligations with
respect to any Rejected Contract, whether allocable to a period prior to or
after the Closing, (v) with respect only to the SNF Facility, any obligations
with respect to patient trust funds and (vi) claims of the DHS, DSS, or other
Medicare related governmental agency which exist at the Closing Date with
respect to any of the Properties.
5.4.2 Any and all damage, loss, or liability resulting from any
breach by any Seller under any of the 3-Agreements of any of its representations
and warranties under said 3-Agreements (subject to Section 8.1.3).
5.4.3 For purposes of Section 5.4, an obligation shall be deemed
to "exist" as of the Closing Date if it relates to an event which occurred prior
to the Closing Date even if it is not asserted until after the Closing Date.
<PAGE> 22
5.5 Buyer's Indemnification. With respect only for purposes of this
Section 5.5, the following defined terms shall include the matters covered by
such defined terms in each of the 3-Agreements: "Assets," "Contracts," and
"Properties."
5.5.1 From and after the Closing, Buyer shall indemnify, defend
and hold each Seller under any of the 3-Agreements each and such Seller's
Indemnitees harmless from and against any and all damage, loss or liability
resulting from:
5.5.2 Except as otherwise provided in this Agreement, (i) any
non-contractual claims of third-parties relating to the use, operation or
ownership of the Assets from and after the Closing Date, (ii) breaches by Buyer
on or after Closing of its obligations under any Contract assumed by Buyer and
(iii) claims of the DHS, DSS, or other Medicare related governmental agency
which arise from and after the Closing Date with respect to any of the
Properties.
5.5.3 Any and all damage, loss or liability resulting from any
breach by Buyer of its representations and warranties under any of the
3-Agreements.
5.6 Resident Security Deposits.
5.6.1 No Transfer of Resident Security Deposits. Seller
acknowledges that it is Buyer's corporate policy not to collect security
deposits from residents of Buyer's existing facilities. Accordingly, on or prior
to the Closing Date, Seller shall return to each resident of each Owned Property
or Leased Property or Outside Property any resident security deposit made by
such resident (each a "Resident Deposit") and shall deliver to Buyer on the
Closing reasonable evidence that the same has occurred. Buyer shall not accept
any of Seller's financial or custodial obligations with respect thereto, it
being the intent and purpose of this provision that Seller will retain all
fiduciary and custodial obligations with respect to said Resident Deposits and
shall satisfy such obligations by returning the same to the respective residents
on or prior to the Closing. In no event shall Buyer assume any such obligations
nor shall Buyer be accountable to the residents and prospective residents of the
Facility with respect thereto.
5.6.2 Indemnity for Resident Security Deposits. Consistent with
the foregoing, Seller will indemnify and hold Buyer and Buyer Indemnitees
harmless from all liabilities, claims and demands in respect of the Resident
Deposits.
5.7 Cooperation. In connection with Buyer's assumption of the
Indebtedness, Buyer agrees to provide to Seller, upon request, such reasonable
financial and other information regarding Buyer as may be requested by any
lender under a Loan under the Outside Agreements.
5.8 Consents. Notwithstanding anything to the contrary in any of the
3-Agreements, any such Agreement shall not constitute an agreement to assign or
transfer any contract, lease, permit, license or other agreement if any such
assignment or transfer would constitute a breach or violation under such
contract, lease, permit, license or other agreement or adversely affect the
rights of Buyer or Seller thereunder, and any such transfer or assignment that
requires the consent or approval of a third party shall be made subject to such
consent or approval being obtained. Seller shall use diligent efforts to obtain
such material approvals and consents as are required to sell and assign the
Assets under each of the 3-Agreements to Buyer; provided, however, that each
party shall make such necessary filings required to be made by such party under
the HSR Act as provided in Sections 4.1.3 and 4.2.2 above and shall cooperate
fully with the other party for such purpose. If required, the applicable filing
or application fee which is payable under the HSR Act shall be paid by Buyer. If
<PAGE> 23
any such consent or approval other than a consent or approval listed on Exhibit
P (such Exhibit P consents are herein called the "Consents") is not obtained on
or prior to the Closing Date, the parties shall close the transactions
contemplated hereby except for such matters requiring consent notwithstanding
that such consent or approval has not been obtained, and Seller shall continue
to use diligent efforts to obtain any such approval or consent after the Closing
Date until such time as such consent or approval has been obtained, and Seller
shall cooperate with Buyer in any lawful and economically feasible arrangement
to provide that Buyer shall receive the Assets under each of the 3-Agreements.
5.9 8-K and Audit Requirements. Seller covenants and agrees that
commencing upon the Effective Date and continuing for ninety (90) days after the
Closing Date, Seller shall comply with the provisions of Exhibit Q. The
foregoing covenant shall survive the Closing for the period stated herein and
shall be specifically enforceable by Buyer. Buyer shall use best efforts to
minimize any operational disruption caused by this provision.
5.10 RCFE and SNF Operating Arrangements. At the Closing, Buyer and
Seller shall enter into agreements on terms reasonably satisfactory to both
parties (collectively, the "Post-Closing Operating Management or Lease
Agreements") whereby Seller agrees to manage some or all of the Facilities for
Buyer after the Closing. Said agreements shall terminate on May 31 and shall
provide for a management fee of $167,000 per month. Facility level Employees
shall remain in the employ of Seller until the management of each such Facility
is transferred to Buyer whereupon Buyer shall hire said Employees.
5.11 Licensing Arrangements. At the Closing, Buyer and Seller shall
enter into agreements on terms reasonably satisfactory to both parties
(collectively, the "Licensing Agreements") whereby Seller agrees to allow Buyer
to operate the Facilities under authority of Seller's regulatory licenses. Said
agreements shall terminate at the six month anniversary of the Closing; provided
that, Buyer shall have the option to renew each Licensing Agreement on a
Facility by Facility basis for a license fee of $10,000 per month per Facility,
for a maximum of six additional months.
5.12 Outside Agreements. Seller hereby agrees to cause 270 Center and TH
Group to execute their respective Outside Agreements effective as of the
Effective Date.
6. Conditions To Closing.
6.1 Representations and Warranties. Subject to the provisions of Section
8 below, the obligations of Buyer to consummate the transactions contemplated by
this Agreement shall be subject to the satisfaction or written waiver, on or
before the Closing Date, of each of the following conditions:
6.1.1 Representations and Warranties. Each of the representations
and warranties made by each Seller under its 3-Agreement (including all Exhibits
and Schedules thereto), shall be true and correct in all material respects on
the date made and as of the Closing Date.
6.1.2 Performance. With respect to agreements, covenants, and
obligations contained in any of the 3-Agreements and required to be performed or
complied with by the Seller thereto on or prior to the Closing Date, such Seller
shall have performed or complied with, in all material respects, such
agreements, covenants and obligations, except where such failure to perform
shall not have a material adverse effect.
<PAGE> 24
6.1.3 Governmental Approvals and Filings. All approvals and all
declarations, filings and registrations with government agencies required to
consummate the transactions contemplated by each of the 3-Agreements [including
but not limited to approvals required under the HSR Act (or the expiration of
the required waiting period) but specifically excluding licenses, permits or
other approvals required from the DHS or the DSS in connection with the
operation of the RCFE Units and the SNF Facility], shall have been obtained or
made, and shall be in full force and effect, except where failure to obtain or
make such an approval, declaration, filing or registration does not have a
material adverse effect.
6.1.4 Third Party Consents. All Consents shall have been obtained
or given and shall be in full force and effect.
6.1.5 No Injunction. There shall not be in effect any preliminary
or permanent injunction or other order issued by any state or federal court
which prevents the transactions contemplated by any of the 3-Agreements and no
proceedings with respect to any such injunction or order shall be pending.
6.1.6 Title Insurance. Title Company shall be in a position to
issue the Title Policy as provided in Section 7.6 below with respect to the
Owned Properties and the Leased Properties, and Title Policies with respect to
the Outside Properties as required by the Outside Agreements.
6.1.7 Concurrent Closings. The transaction contemplated by the
270 Agreement, and the transactions contemplated under the TH Group Agreement
shall be closed concurrently with the Closing.
6.2 Conditions to the Obligations of Seller. The obligations of Seller
to consummate the transactions contemplated by this Agreement shall be subject
to the satisfaction or written waiver, on or before the Closing Date, of each of
the following conditions:
6.2.1 Representations and Warranties. Each of the representations
and warranties made by Buyer in each of the 3-Agreements shall be true and
correct in all material respects on the date made and as of the Closing Date.
6.2.2 Performance. With respect to agreements, covenants and
obligations in any of the 3-Agreements required to be performed or complied with
by Buyer on or prior to the Closing Date, Buyer shall have performed or complied
with, in all material respects, such agreements, covenants and obligations,
except where such failure to perform shall not have a material adverse effect.
6.2.3 Governmental Approvals and Filings. All approvals and all
declarations, filings and registrations with government agencies required to
consummate the transactions contemplated by each of the 3-Agreements [including
but not limited to approvals required under the HSR Act (or the expiration of
the required waiting period) but specifically excluding licenses, permits or
other approvals required from the DHS or the DSS in connection with the
operation of the RCFE Units and the SNF Facility] shall have been obtained or
made, and shall be in full force and effect, except where failure to obtain or
make such an approval, declaration, filing or registration does not have a
material adverse effect.
6.2.4 Third Party Consents. All Consents shall have been obtained
or given and shall be in full force and effect.
<PAGE> 25
6.2.5 No Injunction. There shall not be in effect any preliminary
or permanent injunction or other order issued by any state or federal court
which prevents the transactions contemplated by any of the 3-Agreements, and no
proceedings with respect to any such injunction or order shall be pending.
6.2.6 Execution of Documents and Deliveries. The agreements and
funds required to be executed and/or delivered by Buyer under any of the
3-Agreements shall have been duly executed and delivered at the Closing.
6.2.7 Concurrent Closings. The transaction contemplated by the
270 Agreement, and the transaction contemplated under the TH Group Agreement
shall be closed concurrently with the Closing.
7. Closing.
7.1 Deposits into Escrow.
7.1.1 Deposits by Seller. At least one (1) business day prior to
the Closing Date, Seller shall deposit into Escrow:
(a) Grant deeds conveying fee simple title to each Owned
Property to Buyer (the "Deeds") on the Title Company's form and reasonably
acceptable to Buyer and recordable assignments assigning Seller's interests in
and to the leasehold estates created by each Lease Agreement in form reasonably
acceptable to Buyer, in all cases subject only to the Permitted Exceptions
(defined in Section 3.2.3). Evidence of delivery of such title to the Owned
Properties and assignments of the leasehold estates created by the Lease
Agreements, as applicable, shall be issuance by Title Company of an ALTA
Extended Coverage Policy of Title Insurance (1992) covering each Owned Property
and the tenant's leasehold interest in each Leased Property, in the amount of
the Purchase Price allocated for each such Owned Property or Leased Property as
shown on Exhibit G, insuring Buyer as the owner or tenant of each applicable
Property as of the Closing Date, subject only to the Permitted Exceptions in
each case (collectively, the Title Policy"); provided that, Seller shall pay
only the cost of a standard coverage owner's or lessee's policy and Buyer shall
pay the excess premium required in each case.
(b) An affidavit or qualifying statement which satisfies
the requirements of Section 1445 of the Internal Revenue Code of 1986, as
amended, and the regulations thereunder (the "Non-Foreign Affidavit").
(c) A Withholding Exemption Certificate on Form 590, or
if Seller is a non-California resident, a certificate issued by the California
Franchise Tax Board, pursuant to the Revenue and Taxation Code Sections 18805
and 2613 1, stating either the amount of withholding required from Seller's
proceeds or that Seller is exempt from such withholding requirement (the
"Withholding Certificate").
(d) The document required by Section 4.3, if required by
Buyer.
(e) The Estoppels received under Section 4.4 and the
Required Consents.
<PAGE> 26
(f) The Post-Closing Operating Management or Lease
Agreements.
(g) The Post-Closing License Agreements.
(h) A counterpart original of a Bill of Sale ("Bill of
Sale"), duly executed by Seller, assigning and conveying to Buyer all of
Seller's right, title and interest in and to the Personal Property for each
Property (and shall include, as an exhibit thereto, a list of the furniture,
fixtures and equipment owned by Seller for each Property, to the extent
reasonably obtainable), and reasonably satisfactory in form and substance to
each party.
(i) A counterpart original of an Assignment and
Assumption Agreement (the "Assignment and Assumption Agreement"), duly executed
by Seller, assigning all of Seller's right, title and interest in and to the
Contracts affecting each Property (other than the Lease Agreements) and the
Facility Admission Agreements, and reasonably satisfactory in form and substance
to each party.
(j) A Rent Roll in the form of Exhibit M, dated as close
to the Closing Date as is reasonably possible, certified by Seller to be true
and correct to Seller's actual knowledge as of the date shown therein.
7.1.2 Deposits by Buyer. Except as otherwise provided herein, at
least one (1) business day prior to the Closing Date, Buyer shall deposit into
Escrow:
(a) Funds in accordance with the provisions of Section
1.3.
(b) The document required by Section 4.3, if required by
Seller.
(c) The Post-Closing Management or Lease Agreements.
(d) The Post-Closing License Agreements.
(e) A counterpart original of the Assignment and
Assumption Agreement, duly executed by Buyer, assuming all of Seller's
obligations in and to the Contracts affecting each Property (other than the
Lease Agreements) and the Facility Admission Agreements, and reasonably
satisfactory in form and substance to each party.
7.1.3 Other Deposits. Seller and Buyer shall each deposit such
other instruments, duly executed and acknowledged or notarized where
appropriate, and funds as are reasonably required by Escrow Holder or otherwise
required to close Escrow and consummate the sale and transfer of the Assets in
accordance with the terms of this Agreement and to issue the Title Policy
(including but not limited to any owner's or lessee's affidavit reasonably
required by Title Company in connection therewith).
7.2 Prorations.
7.2.1 Prorated Items. The following prorations shall be made as
of 12:01 a.m. on the day the Closing occurs on the basis of a 365-day year. At
least five (5) business days prior to the Closing Date, Escrow Holder shall
deliver to Seller and Buyer a tentative closing and proration schedule setting
forth a preliminary determination of all closing costs described below and the
following prorations:
<PAGE> 27
(a) Rentals, prepaid rentals and prepaid payments for
each Owned and Leased Property, and such payments on any approved sublease of a
Leased Property, together with any and all accrued interest thereon
(collectively, "Rent") shall be prorated on the basis that Buyer shall receive a
credit for all Rent which Seller has actually received before the Closing which
is allocable to the period after the Closing. Buyer shall be obligated to use
reasonable efforts to pursue for the benefit of Seller the collection of Rent
not received as of the Closing which is allocable to the period prior to the
Closing. Buyer shall also cooperate with Seller in Seller's efforts to collect
such Rent. Seller shall be entitled to any such Rent collected after the Closing
if and when received by either Buyer or Seller to the extent such payment
specifically indicates that it is for a period prior to Closing; provided,
however, as to Rent from self-pay private pay patients and residents only,
whether or not designated as for a period prior to Closing, Buyer shall first be
entitled to apply such rent to any post-closing current or delinquent Rent of
such patients or residents and to deduct therefrom any reasonable third-party
costs incurred by Buyer in collection thereof.
(b) Rents owing by Seller under any Lease Agreement for
a Leased Property shall be prorated as of the Closing Date; provided however,
rent owed by Seller for the Leased Property known as Willow Glen Villa will be
prorated on the basis of a rent statement mutually approved by Buyer and Seller.
(c) All Medicare reimbursements, payor reimbursements,
provider payments and other accounts receivable relating to the period prior to
the Closing shall belong to Seller. Buyer shall assist Seller in the billing and
collection of such reimbursements, payments and receivables, and shall promptly
remit to Seller any funds collected or received for the account of Seller
including a copy of the remittance advice, if any. Such assistance shall
include, if necessary, providing copies of records requested by governmental
agencies or other payors and meeting with such agencies and payors. Seller shall
reimburse Buyer for any reasonable third party costs incurred by Buyer in
connection with providing such assistance.
(d) Real estate taxes and assessments shall be prorated
as of the Closing on the basis of the most recent tax statement for each Owned
and Leased Property.
(e) All utility charges, costs of maintenance, and
other items of expense for each Owned and Leased Property shall be prorated as
of the Closing on the basis of schedules prepared by Seller for that purpose and
reasonably approved by Buyer, with post-closing adjustments made between Seller
and Buyer by cash payment upon demand to the party entitled thereto.
(f) The management fee under the Management Agreement
for each Managed Property shall be prorated as of the Closing.
(g) For purposes of calculating prorations under this
Section 7.2, except as otherwise set forth herein, all items of income and
expenses for the period prior to the Closing Date will be for the account of
Seller, and all items of income and expense for the period on and after the
Closing Date will be for the account of Buyer.
(h) All other items customarily prorated as of the
Closing Date in similar transactions shall be calculated by Escrow Holder on the
basis of information obtained by Escrow Holder or provided by Seller or Buyer at
the request of Escrow Holder, in accordance with Escrow Holder's normal policies
and practices.
<PAGE> 28
7.3 Payment of Closing Costs.
7.3.1 Closing Costs Borne by Seller. Seller shall bear and Escrow
Holder shall discharge on Seller's behalf out of the sums payable to Seller
hereunder one-half (1/2) of Escrow Holder's fee, the portion of the costs
associated with the standard coverage premium for each Title Policy for each
Owned Property and Leased Property in the amount of the allocated Purchase Price
for such Properties, the cost of any existing Surveys as provided in Section
3.1.1, the documentary transfer tax, if any, required in connection with the
transfer of the Owned Properties to Buyer, the sums necessary to obtain and the
cost of recording any reconveyance required by this Agreement, any prepayment or
other charges arising from the prepayment by Seller of any Indebtedness where a
required lender's consent to the transfer could not be obtained (as provided in
Section 1.3.2), any transfer taxes, assumption fees or other charges arising as
a result of the assumption of the Indebtedness by Buyer, and any additional
costs and charges customarily charged to sellers in transactions of this type in
accordance with common escrow practices in the county in which each Owned
Property or Leased Property is located.
7.3.2 Closing Costs Borne by Buyer. Buyer shall deposit with
Escrow Holder, at least one (1) day prior to Closing, for disbursement by Escrow
Holder, one-half (1/2) of Escrow Holder's fee, all costs and expenses of the
Title Policy for each Owned Property or Leased Property in excess of the premium
to be borne by Seller (including, without limitation, any additional premium
charged for any extended coverage policy or endorsements requested by Buyer and
the cost of updating or re-certifying any existing Survey or obtaining any New
Survey as provided in Section 3.1.1 which may be required by the Title Company
in connection therewith), all sales and use taxes, if any, required in
connection with the transfer of the Personal Property to Buyer resulting from
its purchase of the Owned and Leased Properties, the recording fees, if any,
required in connection with the transfer of the Owned Properties to Buyer, the
HSR Act filing fees, and any additional charges customarily charged to buyers in
transactions of this type in accordance with common escrow practices in the
county in which each Owned Property or Leased Property is located.
7.4 Closing of Escrow.
7.4.1 Escrow Holder shall hold the Closing on the Closing Date
if: (i) it has received in a timely manner all the funds and materials required
to be delivered into Escrow by Buyer and Seller; and (ii) it has received
assurances satisfactory to Escrow Holder that, effective as of the Closing, the
Title Company will issue to Buyer the standard or extended Title Policies, as
applicable pursuant to Section 7.6, with respect to each Owned and Leased
Property.
7.4.2 To Close the Escrow, Escrow Holder shall:
(a) Cause the Deeds to be recorded and thereafter mailed
to Buyer, and deliver to Buyer duly executed originals of the Bill of Sale,
Assignment and Assumption Agreement, the Estoppels, the Required Consents, the
Post-Closing Operating Management or Lease Agreements, the Post-Closing License
Agreements, the Non-Foreign Affidavit and Withholding Certificate, the certified
Rent Roll and the accrued interest on the Deposit; and
(b) Deliver to Seller duly executed originals of the
Assignment and Assumption Agreement and the Post-Closing Management or Lease
Agreement, and, by wire transfer, federal funds in the amount of the Purchase
Price plus or less any net debit or credit to Seller by reason of the prorations
and allocations of closing costs provided for in this Agreement.
<PAGE> 29
7.4.3 Pursuant to Section 6045 of the Internal Revenue Code,
Escrow Holder shall be designated the closing agent hereunder and shall be
solely responsible for complying with the tax reform act of 1986 with regard to
reporting all settlement information to the Internal Revenue Service.
7.5 Possession. Possession of the Assets (including all keys, lock
combinations and similar items to gain access thereto) shall be delivered to
Buyer effective as of 12:01 a.m. on the Closing Date.
7.6 Title Insurance. At Closing, Title Company shall issue, or re-issue
with such endorsements as may be required in connection with the assignment of
the Assets, an ALTA Extended Coverage Policy of Title Insurance (1992) covering
each Owned Property subject only to the Permitted Exceptions in each case
(collectively, the "Title Policy") and the tenant's leasehold interest in each
Leased Property, in the amount of the Purchase Price allocated for each such
Owned Property or Leased Property as shown on Exhibit G, insuring Buyer's
interest in or as the owner or tenant of each applicable Property as of the
Closing Date; provided, that Seller shall pay only the cost of a standard
coverage owner's policy for each Owned Property and each Leased Property (to the
extent obtainable) and Buyer shall pay the excess premium required for each
Owned Property and the entire premium for each Leased Property. Notwithstanding
the foregoing, if for any reason a Title Policy cannot be obtained for any
Leased Property, said failure shall not prevent the Closing from occurring or
otherwise affect the parties hereto.
8. Termination; Remedies.
8.1 Right to Terminate.
8.1.1 Termination Rights. Subject to the provisions of Section
8.1.3, this Agreement may be terminated at any time after April 30, 1998 (or if
applicable such later date on which the ten (10) business day cure period
referred to in Section 8.1.2 shall have expired), if the Closing has not
occurred by such date (or such later date if applicable), time being of the
essence:
(a) By the mutual written agreement of the parties;
(b) By Buyer, if any condition set forth in Section 6.1
has not been satisfied;
(c) By Seller, if any condition set forth in Section 6.2
has not been satisfied.
8.1.2 Notice and Cure. If Buyer desires to terminate this
Agreement pursuant to Section 8.1.1(b) due to the breach by Seller of any of its
warranties, representations, covenants, agreements or obligations hereunder, or
if Seller desires to terminate this Agreement pursuant to Section 8.1.1(c) due
to the breach by Buyer of any of its warranties, representations, covenants,
agreements or obligations hereunder, then such terminating party or parties
shall first give written notice to the breaching party or parties and the
breaching party or parties shall have ten (10) business days to cure such breach
(time being of the essence).
8.1.3 Default by Seller; Change in Circumstances. Notwithstanding
anything to the contrary contained in this Agreement, (i) if Seller fails to
disclose one or more matters which were
<PAGE> 30
required to be disclosed in the Disclosure Schedule or if a change in
circumstances occurs after the Effective Date, where, in either event, any of
Seller's representations and warranties in Section 4 of this Agreement will not
be accurate in any material respect as of the Closing Date, or (ii) if Seller
materially breaches any of its warranties, representations, covenants,
agreements and obligations hereunder and fails to cure such breach within the
ten business day period provided for in Section 8.1.2 above, or (iii) if Buyer
has timely notified Seller of a Disapproved Exception under Section 3.2.1 above
and such Disapproved Exception will not be removed by Closing, or (iv) if Buyer
has timely notified Seller of any Objection Item under Section 3.3.1 above or of
any Unacceptable Estoppel under Section 4.4 above and such Objection Item or
Unacceptable Estoppel will not be removed or cured by Closing (the matters
described in the foregoing clauses (i)-(iv) are collectively called the
"Problems" and, together with the Problems described in Section 8.1.2 of the 270
Agreement and of the TH Group Agreement, are herein collectively called the
"Aggregate Problems"), then:
(a) if the cost to remedy the Aggregate Problems plus
the adverse impact on the value of the Assets (as mutually agreed by Buyer and
Seller) caused by any Aggregate Problems arising out of any violation of any
Environmental Law that cannot be remedied by the expenditure of money (the
"Value Impact") does not exceed $500,000 in the aggregate, then Buyer shall
nonetheless be required to close the transactions contemplated by the
3-Agreements (provided that the conditions to Buyer's obligation to close set
forth in Sections 6.1.3-6.1.6 are otherwise satisfied in all material respects),
in which case Buyer shall be deemed to have waived the Aggregate Problems; and
(b) if the cost to remedy the Aggregate Problems plus
the Value Impact exceeds $500,000 in the aggregate, and Seller elects to reduce
the Purchase Price of the Properties (including the Outside Properties) by the
amount by which such damages exceed $500,000, then Buyer shall nonetheless be
required to close the transactions contemplated by the 3-Agreements (provided
that the conditions to Buyer's obligation to close set forth in Sections
6.1.3-6.1.6 of such Agreements are otherwise satisfied in all material
respects), in which case Buyer shall be deemed to have waived the Aggregate
Problems, and
(c) if the cost to remedy the Aggregate Problems plus
the Value Impact exceeds $500,000 in the aggregate, and Seller is not willing to
reduce the Purchase Price of the Properties (including the Outside Properties)
by the amount by which such damages exceed $500,000, then Buyer's sole remedy
shall be to terminate the 3-Agreements by written notice to Seller given within
five (5) days after notice by Seller of Seller's election whether or not it will
credit Buyer for such amount. If Buyer so terminates the 3-Agreements, the
Deposit and all interest accrued thereon shall be returned to Buyer. Buyer's
failure to respond within such 5-day period shall be deemed to constitute
Buyer's election to so terminate the 3-Agreements.
Each of Seller and Buyer shall notify the other in writing of any
matter which such party reasonably believes constitutes an Aggregate Problem or
a value Impact within five (5) days of such party's determination that the
Aggregate Problem or a Value Impact exists (each, a "Problem Notice"). Each
Problem Notice shall specify in reasonable detail the nature of the matter and
the Seller's or Buyer's (as applicable) determination of the cost to remedy the
Aggregate Problems plus the Value Impact, if any. If Buyer and Seller disagree
on whether the cost to remedy all Aggregate Problems plus the Value Impact
specified in Problem Notices equals or exceeds $500,000, then Buyer and Seller
shall use best efforts to select an independent arbitrator to resolve the
dispute. If Buyer and Seller fail to select a mutually agreed arbitrator within
five days after either Buyer or Seller first proposes an arbitrator, then Buyer
and Seller shall each propose an arbitrator within such
<PAGE> 31
five day period and the two arbitrators so proposed shall select a third person
to serve as the sole arbitrator. The sole arbitrator shall have not less than
five years of experience in the relevant subject areas involved in the Aggregate
Problems and/or Value Impact. The sole arbitrator shall independently determine
the total cost to remedy the Aggregate Problems plus the Value Impact, if any
(the "Final Cost"). If the Final Cost is closer to the Seller's determination of
the total cost to remedy the Aggregate Problems plus the Value Impact (the
"Seller's Number"), then the Seller's Number shall be used for all purposes in
this Section 8.1.3. Likewise, if the Final Cost is closer to the Buyer's
determination of the total cost to remedy the Aggregate Problems plus the Value
Impact (the "Buyer's Number"), then the Buyer's Number shall be used for all
purposes in this Section 8.1.3.
8.2 Rights on Breach. If this Agreement is terminated pursuant to
Section 8.1, all liabilities and obligations of the parties under this Agreement
shall terminate, except as follows:
8.2.1 Buyer's Breach. SUBJECT TO SECTION 8.1.3, IN THE EVENT OF
TERMINATION BY SELLER PURSUANT TO SECTION 8.1.1(c), DUE TO THE MATERIAL BREACH
BY BUYER OF ANY OF ITS WARRANTIES, REPRESENTATIONS, COVENANTS, AGREEMENTS OR
OBLIGATIONS HEREUNDER, THE ESCROW AGENT SHALL PAY TO SELLER THE DEPOSIT
(EXCLUDING INTEREST ACCRUED THEREON), WHICH DEPOSIT SHALL BE RETAINED BY SELLER
AS LIQUIDATED DAMAGES, AND NOT AS A PENALTY, TOGETHER WITH REASONABLE FEES AND
DISBURSEMENTS OF ATTORNEYS INCURRED BY SELLERS IN ENFORCING THIS SECTION 8.2.1),
AND THE COLLECTION OF SUCH AMOUNT SHALL BE IN LIEU OF ANY AND ALL OTHER REMEDIES
WHICH ARE OR MAY BE AVAILABLE TO SELLER AT LAW OR IN EQUITY.
INITIAL: /s/ MHS INITIAL: /s/ SMM
------- -------
8.2.2 Seller's Failure to Convey. In the event the conveyance of
the Assets does not occur solely because of a material breach by Seller of its
obligation to convey the Assets under this Agreement or under any of the other
3-Agreements, then Buyer shall be entitled, in addition to any other remedy
available at law, to seek enforcement of the 3-Agreements by a decree of
specific performance requiring Seller to convey the Assets to Buyer in
accordance with the 3-Agreements.
8.3 Cross Default. Notwithstanding anything to the contrary, (a) the
termination (without Closing) of the transaction under any of the 3-Agreements
shall cause the termination of this Agreement, (b) the material breach by Seller
under any of the 3-Agreements giving rise to a claim for specific performance by
Buyer shall constitute a default by Seller under all of the 3-Agreements and (c)
the material breach by Buyer under any of the 3-Agreements giving rise to a
claim for liquidated damages by Seller shall constitute the default by Buyer of
all of the 3-Agreements.
9. General Provisions.
9.1 Counterparts. This Agreement may be executed in counterparts, each
of which shall be deemed an original, but all of which, taken together, shall
constitute one and the same instrument.
9.2 Entire Agreement. This Agreement and the Confidentiality Agreement
and the Outside Agreements contains the entire integrated agreement between the
parties respecting the subject matter of this Agreement and supersedes all prior
understandings and agreements, whether oral or in writing, between the parties
respecting the subject matter of this Agreement. There are no representations,
agreements, arrangements or understandings, oral or in writing, between or among
<PAGE> 32
the parties to this Agreement relating to the subject matter of this Agreement
which are not fully expressed in this Agreement and the Confidentiality
Agreement and the Outside Agreements. The terms of this Agreement and the
Confidentiality Agreement and the Outside Agreements are intended by the parties
as a final expression of their agreement with respect to those terms and they
may not be contradicted by evidence of any prior agreement or of any
contemporaneous agreement. The parties further intend that this Agreement and
the Confidentiality Agreement and the Outside Agreements constitute the complete
and exclusive statement of its terms and that no extrinsic evidence whatsoever
other than the Confidentiality Agreement and the Outside Agreements may be
introduced in any judicial proceeding involving this Agreement.
9.3 Legal Advice, Neutral Interpretation; Headings. Each party has
received independent legal advice from its attorneys with respect to the
advisability of executing this Agreement and the meaning of the provisions
hereof. The provisions of this Agreement shall be construed as to their fair
meaning, and not for or against any party based upon any attribution to such
party as the source of the language in question. Headings used in this Agreement
are for convenience of reference only and shall not be used in construing this
Agreement.
9.4 Choice of Law. This Agreement shall be governed by the laws of the
State of California.
9.5 Severability. If any term, covenant, condition or provision of this
Agreement, or the application thereof to any person or circumstance, shall to
any extent be held by a court of competent jurisdiction to be invalid, void or
unenforceable, the remainder of the terms, covenants, conditions or provisions
of this Agreement, or the application thereof to any person or circumstance,
shall remain in full force and effect and shall in no way be affected, impaired
or invalidated thereby.
9.6 Waiver of Covenants, Conditions or Remedies. The waiver by one party
of the performance of any covenant, condition or promise under this Agreement
shall not invalidate this Agreement nor shall it be considered a waiver by it of
any other covenant, condition or promise under this Agreement. The waiver by
either or both parties of the time for performing any act under this Agreement
shall not constitute a waiver of the time for performing any other act or an
identical act required to be performed at a later time. The exercise of any
remedy provided in this Agreement shall not be a waiver of any consistent remedy
provided by law, and the provision in this Agreement for any remedy shall not
exclude other consistent remedies unless they are expressly excluded.
9.7 Exhibits. All exhibits to which reference is made in this Agreement
and which are attached hereto are deemed incorporated in this Agreement.
9.8 Amendment. This Agreement may be amended at any time by the written
agreement of Buyer and Seller. All amendments, changes, revisions and discharges
of this Agreement, in whole or in part, and from time to time, shall be binding
upon the parties despite any lack of legal consideration, so long as the same
shall be in writing and executed by the parties hereto.
9.9 Relationship of Parties. The parties agree that their relationship
is that of seller and buyer, and that nothing contained herein shall constitute
either party the agent or legal representative of the other for any purpose
whatsoever, nor shall this Agreement be deemed to create any form of business
organization between the parties hereto, nor is either party granted any right
or authority to assume or create any obligation or responsibility on behalf of
the other party, nor shall either party be in any way liable for any debt of the
other.
<PAGE> 33
9.10 No Third Party Benefit. Except as to the parties to the Outside
Agreements, this Agreement is intended to benefit only the parties hereto and no
other person or entity has or shall acquire any rights hereunder.
9.11 Time of the Essence. Time shall be of the essence as to all dates
and times of performance, whether contained herein or contained in any escrow
instructions to be executed pursuant to this Agreement, and all escrow
instructions shall contain a provision to this effect.
9.12 Further Acts. Each party agrees to perform any further acts and to
execute, acknowledge and deliver any documents which may be reasonably necessary
to carry out the provisions of this Agreement.
9.13 Recordation, Actions to Clear Title. Buyer shall not record this
Agreement, any memorandum of this Agreement, any assignment of this Agreement or
any other document which would cause a cloud on the title to any of the
Properties. If Buyer fails to complete its purchase of the Assets for any
reason, or if this Agreement shall terminate for any reason not due to Seller's
default hereunder, then upon Buyer's receipt of all sums to which it may be
entitled under Section 8.1.3(c) and 8.2.1, Buyer shall, at no cost to Seller,
promptly execute, acknowledge and deliver to Seller, all within ten (10) days
after written request from Seller, a quitclaim deed prepared by Seller at no
cost to Buyer and reasonably satisfactory to Buyer, in recordable form, in favor
of Seller and any other documents reasonably requested by Seller to remove the
cloud on title to the Properties that may exist as the result of the existence
of this Agreement or any escrow relating to this Agreement. In the event Buyer
fails to so execute and deliver any such document, in addition to any damages
payable to Seller pursuant to this Agreement, Buyer shall pay all losses,
damages, costs and expenses, including but not limited to Seller's reasonable
attorneys' fees, incurred in connection with Buyer's breach of its obligations
under this Section 9.13 or the clearing of any such cloud on title.
9.14 Attorneys' Fees. In the event of any litigation involving the
parties to this Agreement to enforce any provision of this Agreement, to enforce
any remedy available upon default under this Agreement, or seeking a declaration
of the rights of either party under this Agreement, the prevailing parry shall
be entitled to recover from the other such attorneys' fees and costs as may be
reasonably incurred, including the costs of reasonable investigation,
preparation and professional or expert consultation incurred by reason of such
litigation. All other attorneys' fees and costs relating to this Agreement and
the transactions contemplated hereby shall be borne by the party incurring the
same.
9.15 Brokers. Except as to a fee to be paid by Seller to Fremont Realty
Capital, L.L.C., Buyer and Seller each represents and warrants to the other that
(a) it has not dealt with any brokers or finders in connection with the purchase
and sale of the Assets and (b) insofar as such party knows, no other broker or
other person is entitled to any commission or finder's fee in connection with
the purchase and sale of the Assets. Seller and Buyer each agrees to indemnify
and hold harmless the other against any loss, liability, damage, cost, claim or
expense incurred by reason of any brokerage fee, commission or finder's fee
which is payable or alleged to be payable to any broker or finder because of any
agreement, act, omission or statement of the indemnifying party.
9.16 Manner of Giving Notice. All notices and demands which either party
is required or desires to give to the other shall be given in writing by
personal delivery, express courier service or by telecopy followed by delivery
promptly thereafter of a hard copy to the address or telecopy number set forth
below for the respective party, provided that if any party gives notice of a
change of name, address or telecopy number notices to that party shall
thereafter be given as demanded in that
<PAGE> 34
notice. All notices and demands so given shall be effective upon receipt by the
party to whom notice or a demand is being given.
To Seller: The Hillsdale Group, L.P.
1199 Howard Avenue, Suite 200
Burlingame, California 94010-4227
Attention: Mr. Richard Stein
Telephone: (415) 348-6783
Facsimile: (415) 348-6853
with a copy to:
Fremont Realty Capital
50 Fremont, Suite 3500
San Francisco, CA 94105
Attention: Mark H. Simpson
Telephone: (415) 284-8160
Facsimile: (415) 284-8504
with a copy to:
The Fremont Group
50 Fremont, Suite 3700
San Francisco, CA 94105
Attention: General Counsel
Telephone: (415) 284-8700
Facsimile: (415) 512-5121
To the Buyer: ARV Assisted Living, Inc.
245 Fischer Avenue, Suite D-1
Costa Mesa, CA 92626-4539
Attention: Howard Phanstiel
Telephone: (714) 435-4334
Facsimile: (714) 435-7102
With copies to:
ARV Assisted Living, Inc.
245 Fischer Avenue, Suite D-1
Costa Mesa, CA 92626-4539
Attention: General Counsel
Latham & Watkins
650 Town Center Drive, 20th floor
Costa Mesa, CA 92626-1925
Attn: David C. Meckler or
Joseph I. Bentley
Telephone: (714) 540-1235
Facsimile: (714) 755-8290
<PAGE> 35
9.17 Survival. Except as may be otherwise specified in this Agreement
the representations or warranties of Seller made in this Agreement shall survive
the Closing for a period of twelve (12) months only. All other indemnities
contained in this Agreement or in the Deeds or other assignments, bills of sale
or exhibits or schedules thereto executed and delivered by Buyer and Seller at
the Closing shall survive the Closing and the consummation of the purchase and
sale of the Assets.
9.18 Assignment. Except as otherwise provided in this Agreement, neither
Buyer nor Seller may assign its interest in this Agreement or any rights or
obligations hereunder without the prior written consent of the other party;
provided, that Buyer without such consent may assign all such interest, rights
and obligations to any affiliated entity controlled, controlling or under common
control with Buyer which shall assume all such obligations and liabilities
hereunder, but without releasing Buyer therefrom without Seller's prior written
consent.
9.19 Noncompetition. As an inducement for Buyer to enter into this
Agreement and to consummate the transactions contemplated hereby, during the
one-year period from and after the Closing Date Andrew V. Bradley, Jr., Chief
Development Officer and Richard B. Stein, Chief Executive Officer (individually
and collectively, the "Stakeholder") shall not, individually or collectively:
(a) Solicit for employment any Employee who is employed by Buyer
at the Closing; provided, however, the foregoing prohibition shall not prohibit
a Stakeholder from hiring any such Employee who (i) initiates discussions
regarding such employment without any direct or indirect solicitation by a
Stakeholder, (ii) responds to any general solicitations by a Stakeholder, such
as advertisements for employment published in newspapers or magazines, or (iii)
has been terminated by Buyer prior to commencement of employment discussions
with a Stakeholder; or
(b) Solicit owners of the Leased and Managed Properties with
respect to the purchase or management of any of such Properties, provided,
however, the foregoing prohibition shall not prohibit a Stakeholder from
soliciting an owner regarding the purchase or management of such a Property if
it is generally known to the public that such Property is for sale or that the
owner of the Property is seeking to sell the Property or seeking new management.
The Stakeholders each acknowledge that Buyer has legitimate
protectable business interest at stake and that breach of this covenant could
harm Buyer and that the restrictions and prohibitions contained in this covenant
are reasonable.
Notwithstanding the foregoing, the foregoing provisions shall not
apply with respect to Seller's activities at Woodside Terrace or at Encino Hills
unless and until the Woodside Terrace Closing and the Encino Hills Closing
occurs.
9.20 Calculation of Time Periods. Unless otherwise specified, in
computing any period of time described herein, the last day of the act or event
after which the designated period of time begins to run is not to be included
and the last day of the period so computed is to be included, unless such last
day is a Saturday, Sunday or legal holiday for national banks in California, in
which event the period shall run until the end of the next day which is neither
a Saturday, Sunday or legal holiday. The last day of any period of time
described herein shall be deemed to end at 6:00 p.m. California time.
IN WITNESS WHEREOF, the parties have duly executed this Agreement
as of the day and year first above written.
<PAGE> 36
"HILLSDALE" The Hillsdale Group, L.P.,
a California limited partnership
By: Hillsdale Advisors, L.L.C., its general partner
By: FremontGroup, L.L.C., its managing member
"BUYER": ARV Assisted Living, Inc.
a California corporation
/s/ Sheila M. Muldoon
-------------------------------------------------
By:
----------------------------------------------
Sheila M. Muldoon, Vice President
/s/ Richard Stein
---------------------------------------------------
RICHARD STEIN, as to Section 9.19 only
/s/ Andrew Bradley, Jr.
---------------------------------------------------
ANDREW BRADLEY, JR., as to Section 9.19 only
Woodside Terrace Partners,
as to Section 1.4 only
By: The Hillsdale Group, L.P.
-----------------------------------------------
Its: General Partner
----------------------------------------------
By: /s/ Richard B. Stein
-----------------------------------------------
Its: Chief Executive Officer
----------------------------------------------
<PAGE> 1
Exhibit 10.8
AMENDMENT TO PURCHASE AND SALE AGREEMENT
This Amendment to Purchase and Sale Agreement ("Amendment") amends that certain
Purchase and Sale Agreement (the "Agreement") by and between The Hillsdale
Group, L.P., a California limited partnership ("Seller"), and ARV Assisted
Living, Inc., a California corporation ("Buyer), dated as of February 12, 1998.
All capitalized terms not defined herein shall have the same definition as in
the Agreement.
7. Section 1.3.1 is amended to state as follows: "On the Effective Date, Buyer
shall deliver to Escrow Holder (as defined below), by wire transfer, the
sum of Fourteen Million Dollars ($14,000,000.00) (the "Full Deposit"). On
March 16, 1998, Escrow Holder shall, upon receipt of written instructions
from Buyer and Seller, release to Seller the sum of Four Million Dollars
($4,000,000) (the "Released Deposit"), to be credited against the Purchase
Price, and shall retain the balance (the "Deposit Balance") in Escrow. (As
used herein, the term "Deposit" shall refer to the Full Deposit through
March 16, 1998 and the Deposit Balance thereafter.) If the purchase and
sale contemplated by this Agreement is consummated, then the Full Deposit
shall be credited against the Purchase Price and the Deposit Balance shall
be paid to Seller at the Closing. If the purchase and sale contemplated by
this Agreement fails to occur, Escrow Holder shall remit the Deposit
Balance to Seller or Buyer, as appropriate, in accordance with the
provisions of this Agreement. In the event the purchase and sale
contemplated by this Agreement fails to occur due to any reason other than
a breach by Buyer giving rise to liquidated damages pursuant to Section
8.2.1 below, Seller shall remit to Buyer the Released Deposit. The Escrow
Holder shall be authorized to invest the Full Deposit in such reasonable
manner as Buyer may direct (subject to Seller's reasonable approval) so
long as the Released Deposit is available for release to Seller on March
16, 1998; provided, however, that from and after March 16, 1998, the Escrow
Holder shall invest the Deposit Balance only in such manner as will allow
Escrow Holder to disburse the Deposit on two (2) days' notice. Due to the
magnitude of the Deposit, the parties agree that all interest or other
earnings thereon shall not become part of the Deposit, but shall be either
applied to the Purchase Price or refunded and disbursed to Buyer regardless
of the party who becomes entitled to the Deposit pursuant to any other
provisions of this Agreement.
8. Section 2.3 of the Agreement is hereby amended to state as follows: "The
Closing shall occur (and Escrow shall close) on or before April 16, 1998
(the "Closing Date")."
9. Section 5.10 of the Agreement is hereby amended to state as follows: "Buyer
and Seller shall, at the Closing, enter into an agreement on terms
reasonably satisfactory to both parties (the "Post-Closing Operating
Management or Lease Agreement") whereby Seller agrees to manage some or all
of the Facilities for Buyer after the Closing. Said agreement shall
terminate on May 16, 1998 and shall provide for a management fee of
$167,000, payable at the Closing. Facility level Employees shall remain in
the employ of Seller until the management of each such Facility (which may
occur at different times during the month) is transferred to Buyer
whereupon Buyer shall hire said Employees."
10. The second to last sentence of Section 8.1.3(c) shall be changed from the
following: "If Buyer so terminates the 3-Agreements, the Deposit and all
interest accrued thereon shall be returned to Buyer" to the following: "If
Buyer so terminates the 3-Agreements, the Deposit Balance and all interest
accrued thereon shall be returned to Buyer by Escrow Holder and the
Released Deposit shall be returned to Buyer by Seller."
11. This Amendment may be executed in counterparts, each of which shall be
deemed an original, but all of which, taken together, shall constitute one
and the same instrument.
<PAGE> 2
12. Except as amended herein, the Agreement shall remain in full force and
effect.
IN WITNESS WHEREOF, the parties have executed this Amendment as of this 2nd day
of March, 1998.
"HILLSDALE" The Hillsdale Group, L.P.,
a California limited partnership
By: Hillsdale Advisors, L.L.C., its general partner
By: Fremont Group, L.L.C., its managing member
By: /s/ Mark H. Simpson
------------------------------------
Name: Mark H. Simpson
----------------------------------
Its: Managing Director
-----------------------------------
"BUYER": ARV Assisted Living, Inc.
a California corporation
By: /s/ Sheila M. Muldoon
---------------------------------------
Sheila M. Muldoon, Vice President
<PAGE> 1
Exhibit 10.9
SECOND AMENDMENT TO PURCHASE AND SALE AGREEMENT
This Second Amendment to Purchase and Sale Agreement ("Second Amendment") amends
that certain Purchase and Sale Agreement (the "Agreement") by and between the
Hillsdale Group, L.P., a California limited partnership ("Seller"), and ARV
Assisted Living, Inc., a California corporation ("Buyer"), dated as of February
12, 1998, and amended as of March 2, 1998. All capitalized terms not defined
herein shall have the same definition as in the Agreement.
1. Section 1.2 of the Agreement is amended to delete therefrom Exhibit G,
Allocation of Purchase Price, and to add thereto the new Exhibit G, Amended
Allocation of Purchase Price, attached hereto. In addition, the third
sentence of Section 1.2 is hereby amended to delete "$26,300,000" and to
substitute "$28,300,000" therefor.
2. Section 1.3.3 is hereby amended in its entirety to read as follows:
Prior to the Initial Closing (defined in Section 2.3), Buyer shall deposit
into Escrow sufficient funds to fund the balance of the Purchase Price
allocated to the "Initial Closing Properties" under the 3-Agreements on
Exhibit G (the total of which is $44,575,000). In addition, Buyer and
Seller shall establish a second escrow with the Escrow Holder (the "Second
Escrow"), into which Buyer shall deposit, on the Initial Closing Date,
$21.725 million (the "Second Deposit"), subject to adjustment by reason of
any applicable prorations and the allocation of closing costs described
below. The deposits required by this Section 1.3.3 shall be made by wire
transfer of federal funds or in another immediately available form.
Interest on the Second Deposit shall be credited as follows: (1) Seller
shall be credited with the interest allocated to the HM Property and the
WGV Property (defined in Section 1.6 below) at the HM/WGV Closing (defined
in Section 2.3 below); and (2) Buyer shall be credited with the interest
allocated to the EH Property and interest on the WT Allocated Amount at the
EH Closing and the WT Closing (as those terms are defined in Section 2.3
below), respectively.
3. The third paragraph of Section 1.4 of the Agreement is amended to delete
therefrom the last sentence thereof, to revise the reference therein to
"July 1, 1998" to read "September 1, 1998," and to revise each reference
therein to "Closing" to read "Initial Closing."
4. The third paragraph of Section 1.4 of the Agreement is further amended to
replace the second sentence thereof with the following:
Prior to the Initial Closing, Buyer will deposit into the Second Escrow
cash in the amount of the WT Allocated Amount and Seller and WTP will
deposit a duly executed assignment(s) of the WT Rights (the "WT Rights
Assignment") in a mutually acceptable form.
5. Section 1.5 of the Agreement is amended to replace the third paragraph
thereof with the following:
<PAGE> 2
Prior to the Initial Closing, Buyer will deposit into the Second Escrow, as
part of the Second Deposit, cash in the amount of $4.0 million. From and
after the Initial Closing, and pending satisfaction of the EH Property Sale
Conditions and the Conveyance, or earlier abandonment of the EH
Transaction, Hillsdale will remain as lessee of the EH Property. At the
Initial Closing, Buyer and Hillsdale shall also enter into an agreement on
terms reasonably satisfactory to both parties (the "Transition Agreement").
Buyer shall be entitled to a fee equal to five percent of gross revenues
from the EH Property during the term of the Transition Agreement, which fee
may be payable to Buyer as an offset against other sums due Seller
hereunder or outside of this Agreement. The term of the Transition
Agreement shall commence on May 18, 1998 and shall terminate at 12:00 a.m.
on the earlier of the EH Closing Date (as defined in Section 2.3 below) or
September 1, 1998. At least one day prior to the EH Closing Date, Buyer
shall deposit into the Second Escrow cash, which, when taken together with
the $4.0 million deposit, shall equal the EH Allocated Amount. On the EH
Closing Date, the Escrow Holder will distribute to Hillsdale from the
Second Escrow the EH Allocated Amount and record and deliver to Buyer the
grant deed to the EH Property. In the event the EH Property Sale Conditions
are not satisfied on or before September 1, 1998, the Escrow Holder will
return the EH Allocated Amount, together with all interest thereon, to
Buyer and the grant deed to Seller, and all further rights and obligations
of the parties to one another hereunder with respect to the EH Property
shall terminate. Notwithstanding the foregoing, if on the EH Closing Date
Buyer breaches its obligation to acquire the EH Property for any reason,
then the Escrow Holder shall pay to Seller the $4.0 million deposit and
shall pay to Buyer the accrued interest thereon, all as provided for in
Section 8.1.2(b) below.
6. A new Section 1.6 shall be added as follows:
Hillsdale Manor and Willow Glen Villa. Hillsdale owns a leasehold (or
sub-leasehold) interest in the Properties known as Hillsdale Manor (the "HM
Property") and Willow Glen Villa (the "WGV Property").
Prior to the Initial Closing, Buyer will deposit into the Second Escrow
cash in the amount of the Purchase Price allocated to such Properties on
Exhibit G hereto (the "HM/WGV Allocated Amount"). Upon the HM/WGV Closing
Date (as defined in Section 2.3 below), the Escrow Holder will distribute
to Seller the HM/WGV Allocated Amount, and deliver to Buyer and Hillsdale
fully executed copies of the Assignments of Leases/Management Agreements
(as defined in Section 7.1.1 below) relating thereto. All net income from
the HM Property and the WGV Property shall be held by Seller for the
benefit of Buyer for the period from, and including, April 16, 1998 until
the HM/WGV Closing Date, against which Seller may offset the management fee
payable to Seller under Section 5.10. If on the HM/WGV Closing Date Buyer
breaches its obligation to acquire the HM Property and/or the WGV Property
for any reason, then the Escrow Holder shall pay to Seller the HM Allocated
Amount and/or the WGV Allocated Amount, as appropriate, including all
interest accrued thereon, all as provided for in Section 8.1.2(b) below.
7. Section 2.2 is amended to delete the last sentence thereof.
8. Section 2.3 of the Agreement is hereby amended to state as follows:
The Closing shall occur (and Escrow shall close) as follows:
<PAGE> 3
(a) on May 18, 1998, for the HM Property and the WGV Property (the
"HM/WGV Closing");
(b) on July 1, 1998 for the EH Property (the "EH Closing");
(c) on the date the WT Property Sale Conditions are satisfied (the
"WT Closing"), subject to the provisions of Section 1.4 above;
and
(d) on April 16, 1998 for all of the remaining Properties owned by
Seller (the "Initial Closing").
Notwithstanding the foregoing, no Closing shall occur unless and until the
Initial Closing occurs.
As used in this Agreement, unless specifically provided otherwise,
"Closing" shall mean the Initial Closing, the HM/WGV Closing, the EH
Closing or the WT Closing, as the context requires, and "Closing Date"
shall mean the date of such applicable Closing.
9. Except as to the EH Closing and the WT Closing (in which case only Sections
4.4 and 5.10 shall be amended, to the extent the same apply to such
Properties, as set forth herein), Sections 4.3, 4.4, 5.10 and 5.11 and
Article 6 shall be amended so that the references therein to the "Closing"
or "Closing Date" shall read "Initial Closing" and "Initial Closing Date."
As to the EH Closing and the WT Closing, the reaffirmation as provided for
in Section 4.3 of the representations and warranties set forth in Article 4
shall be given at such times as provided on EXHIBIT AA attached hereto.
10. The following paragraph shall be added to the end of Section 5.2:
Notwithstanding the foregoing, in the event that, after the Initial Closing
but prior to any other Closing, any portion of any remaining Property shall
be condemned or becomes the subject of any pending or threatened
condemnation action, Seller shall promptly notify Buyer thereof, this
Agreement shall remain in full force, and Buyer shall be deemed to have
elected pursuant to the provisions of this Section 5.2 not to terminate
this Agreement as to such Property.
11. The following paragraph shall be added to the end of Section 5.3:
Notwithstanding the foregoing, in the event of any damage to or destruction
to any unpurchased Property after the Initial Closing but prior to any
other Closing, Seller shall promptly notify Buyer thereof, this Agreement
shall remain in full force, and Buyer shall be deemed to have elected
pursuant to the provisions of this Section 5.2 not to terminate this
Agreement as to such Property.
12. Section 5.10 shall be amended to change "May 16, 1998" to "May 18, 1998."
13. Sections 7.1.1 and 7.1.2 shall be amended to provide that each party shall
additionally deposit into Escrow, at the time of the Initial Closing, duly
executed assignment and assumption documents in forms reasonably acceptable
to both parties, whereby Seller assigns to Buyer, and Buyer assumes from
Seller, effective as of the applicable Closing, all of Seller's right,
title and interest in and to (i) the Development Agreement, the Lease
Agreements and the Management Agreements (collectively, the "Assignments of
Lease/Management
<PAGE> 4
Agreements") and (ii) the WHW Partnership Interest (as described on Exhibit
A attached hereto).
14. Section 8.1.1 shall be amended to delete therefrom the date "April 30,
1998" and to add thereto the date "June 1, 1998" and to amend the reference
therein to "Closing" to read "Initial Closing."
15. Notwithstanding anything to the contrary in this Agreement, the
determinations under Section 8.1.3 with respect to all Properties shall be
made as if Seller's interest in all of the Properties were to be sold to
Buyer on the Initial Closing Date. Except as provided herein below with
respect to the EH Property and the WT Property, the provisions of Section
8.1 shall not apply to any Closing after the Initial Closing, and Buyer
shall be deemed to have elected to acquire the remaining Properties in all
circumstances. With respect to each of the EH Closing and the WT Closing,
Section 8.1.3 shall be applicable only to Problems arising under clauses
(i) or (ii) of Section 8.1.3 prior to such applicable Closing Date but
after the Initial Closing Date (the "New Problems"). If the New Problems
affecting either the EH Property or the WT Property, when added to the
Aggregate Problems affecting the Properties at the Initial Closing, exceeds
the $500,000 threshold set forth in sub-Sections (a), (b) and (c), then
Buyer's rights and obligations under such sub-Section shall be to buy or
not buy (as required by such sub-Sections) the Property so affected.
16. The current paragraph of Section 8.2.1 shall be re-named "(a) Buyer's
Breach at Initial Closing," and two new paragraphs "(b) Buyer's Breach at a
Subsequent Closing" and "(c) Buyer's Breach at the WT Closing"," shall be
added to such Section 8.2.1 as follows:
(b) Buyer's Breach at a Subsequent Closing. NOTWITHSTANDING THE PROVISIONS
OF CLAUSE (a) OF THIS SECTION 8.2.1, IN THE EVENT THAT FOLLOWING THE
INITIAL CLOSING DATE BUYER BREACHES ITS OBLIGATION TO ACQUIRE EACH
REMAINING PROPERTY HEREUNDER (OTHER THAN THE WT PROPERTY) AT ITS SPECIFIED
CLOSING DATE, THEN THE ESCROW AGENT SHALL PAY TO SELLER FROM THE SECOND
DEPOSIT, AS APPLICABLE, THE FOLLOWING AMOUNT(S):
<PAGE> 5
PROPERTY AMOUNT OF LIQUIDATED DAMAGES
- -------- --------------------------------
If Buyer breaches as to the WGV Property The Allocated Purchase Price of
or the HM Property such Property, as shown on
Exhibit G, together with accrued
interest thereon
If Buyer breaches as to the EH Property $4.0 million, and no interest
thereon
WHICH AMOUNT (S) SHALL BE RETAINED BY SELLER AS LIQUIDATED DAMAGES, AND NOT
AS A PENALTY, TOGETHER WITH REASONABLE FEES AND DISBURSEMENTS OF ATTORNEYS
INCURRED BY SELLERS IN ENFORCING THIS SECTION 8.2.1, AND THE COLLECTION OF
SUCH AMOUNT SHALL BE IN LIEU OF ANY AND ALL OTHER REMEDIES WHICH ARE OR MAY
BE AVAILABLE TO SELLER AT LAW OR IN EQUITY.
INITIAL: /s/ MHS INITIAL: /s/ SMM
------- -------
(c) Buyer's Breach at the WT Closing. Notwithstanding the provisions of
clause (a) of this Section 8.2.1, in the event that following the Initial
Closing Date Buyer breaches its obligation to acquire the WT Property, then
the parties agree that the provisions of the Agreement, before being
affected by the provisions of this Second Amendment (other than this clause
(c)), shall control as to such circumstance.
17. Section 8.3 shall be amended to insert after the phrase "Notwithstanding
anything to the contrary," the words "prior to the Initial Closing."
18. This Second Amendment may be executed in counterparts, each of which shall
be deemed an original, but all of which, taken together, shall constitute
one and the same instrument.
19. Except as amended herein, the Agreement shall remain in full force and
effect.
20. IN WITNESS WHEREOF, the parties have executed this Second Amendment
effective as of the 6th day of April, 1998.
"HILLSDALE" "BUYER"
The Hillsdale Group, L.P., ARV Assisted Living, Inc.
a California limited partnership a California corporation
By: Hillsdale Advisors, L.L.C., its general partner
By: Fremont Group, L.L.C., its managing member By: /s/ Sheila M. Muldoon
---------------------
Sheila M. Muldoon,
Senior Vice President
By: /s/ Mark H. Simpson
-----------------------------
Its: Managing Director
-----------------------------
<PAGE> 6
"WTP"
Woodside Terrace Partners
BY: THE HILLSDALE GROUP, L.P., GENERAL PARTNER
By: /s/ Mark H. Simpson
-------------------------------------------
Its: MANAGING DIRECTOR OF FREMONG GROUP, L.L.C.,
-------------------------------------------
MANAGING MEMBER OF GENERAL PARTNER
-------------------------------------------
