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
28
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
1
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
1
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.
2
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
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").
4
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
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.
6
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
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
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.
9
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.
10
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.
11
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:
12
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
13
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.
14
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
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
16
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
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
18
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