EXHIBIT 10.98
CONTRIBUTION AGREEMENT
This CONTRIBUTION AGREEMENT (this "Agreement"), is entered
into as of December 31, 2001 by and between CAPITAL SENIOR LIVING A, INC., a
Delaware corporation ("Contributing Member") and BRE/CSL HOLDINGS L.L.C., a
Delaware limited liability company (the "Blackstone Member"), on behalf of
itself and the Venture (as hereinafter defined).
RECITALS
1. Contributing Member owns real property in Arkansas,
California, Indiana and Nebraska, the legal description of each such property
being contained in Exhibit A (collectively, the "Land") and all buildings,
facilities, improvements located thereon (the "Improvements") together with all
appurtenant rights, privileges, easements, tenements, hereditaments,
rights-of-way and other appurtenances, including without limitation all
development rights, if any appurtenant to the Land (the "Related Rights"; the
Land, the Improvements and the Related Rights, collectively, the "Property").
2. On the Contribution Date (as defined herein) (i)
Contributing Member and Blackstone Member desire to form a limited liability
company (the "Venture") pursuant to the terms of the Limited Liability Company
Agreement attached hereto as Exhibit B (the "Venture Agreement") and (ii)
Contributing Member desires to contribute the Property to the Venture subject to
the Permitted Encumbrances (as defined herein), in exchange for Contributing
Member becoming a (i) Member (as set forth in the Venture Agreement) in the
Venture and (ii) receiving the Sharing Percentage (as defined herein) in the
Venture on the terms and conditions of this Agreement.
In consideration of the foregoing and the mutual
representations, warranties, covenants, and agreements herein contained,
Contributing Member and Blackstone Member agree as follows:
SECTION 1
1.1. Definitions. Unless the context otherwise requires, the
following terms shall have the following meanings for purposes of this
Agreement:
"Actual Knowledge of Contributing Member" shall mean the
actual knowledge of James A. Stroud, Lawrence A. Cohen, Ralph Beattie,
Keith Johanessen, Leslie Tejada, Karen Shaffer, David Beatherd, Wes
Spear, Tracy Cornforth, Michael Hume, Diane Kindle, or Nina Alter.
"Affiliate" means, with respect to any person, any person
directly or indirectly controlling, controlled by, or under common
control with such other person.
"Affiliate Arrangements" shall have the meaning given to it in
Section 5.13(b).
"Agreed Value" shall mean $37,500,000, which shall be adjusted
as follows: (i) the Agreed Value shall be increased by $7,750 for each
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basis point that the weighted average interest rate on the Initial
Financing is below 7.08%, (ii) the Agreed Value shall be decreased by
$7,750 for each basis point that the weighted average interest rate on
the Initial Financing exceeds 7.08%, and (iii) if the sum of
Contribution Costs plus Excluded Legal Fees is less than $936,000, the
Agreed Value shall increase by an amount equal to difference between
$936,000 and the sum of Contribution Costs plus Excluded Legal Fees.
"Agreement" means this Contribution Agreement, as it may be
amended, supplemented or modified from time to time.
"Assets" shall have the meaning given to it in Section 2.1(a).
"Blackstone Indemnitee" means Blackstone Member, the Venture,
and any Affiliates of Blackstone Member and the Venture (except for
Contributing Member).
"Blackstone Indemnitor" shall have the meaning given to it in
Section 7.1(c).
"Blackstone Member" means BRE/CSL Holdings L.L.C., a Delaware
limited liability company.
"BRE/CSL Agreements" means the collective reference to this
Agreement, the Management Agreement and the Venture Agreement.
"Business" means the independent living and/or assisted
living, and related business at the Property.
"Cash Contribution" shall mean an amount equal to 90%
multiplied by the difference between (a) the sum of (i) the Agreed
Value (as adjusted by the prorations set forth in Section 2.4), (ii)
the Transaction Expenses, and (iii) any reserves required by a lender
in connection with the Initial Financing and (b) the original principal
amount of the Initial Financing. For illustrative purposes only, an
example of a calculation of the Cash Contribution is set forth on
Exhibit C.
"Claims" shall have the meaning given to it in Section
2.1(a)(iv).
"Code" means the Internal Revenue Code of 1986, as amended
from time to time, or any successor statute. Any reference herein to a
particular provision of the Code shall mean, where appropriate, the
corresponding provision in any successor statute.
"Contracts" shall have the meaning given to it in Section
2.1(a)(v).
"Contribution Costs" shall mean all costs incurred by the
Venture (an estimate of such costs is set forth on Schedule A) in
connection with the transactions contemplated by this Agreement and the
Financing including without limitation financing fees, legal fees
(excluding the Excluded Legal Fees), costs for Surveys, Title Reports,
and Title Policies, but excluding the Refinancing Fee.
"Contribution Date" shall have the meaning given to it in
Section 3.6.
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"Conveyance Instruments" shall have the meaning given to it in
Section 2.2.
"Contributing Member" means Capital Senior Living A, Inc., a
Delaware corporation.
"Contributing Member Indemnitee" means Contributing Member and
any Affiliates of Contributing Member.
"Contributing Member Indemnitor" shall have the meaning given
to it in Section 7.1(b).
"Environmental Laws" means all federal, state, and local laws,
statutes, regulations, orders, decrees, judgments, and common law
relating to the protection of human health, natural resources or the
environment, as amended from time to time, including but not limited to
(i) CERCLA, (ii) the Resource Conservation and Recovery Act, (iii) the
Hazardous Materials Transportation Act, (iv) the Clean Air Act, (v)
Clean Water Act, (vi) the Toxic Substances Control Act, (vii) the Safe
Drinking Water Act, and (viii) the Occupational Safety and Health Act,
and any similar state laws.
"Escrow Agent" shall mean Chicago Title Insurance Company
(National Business Unit, Dallas).
"Excluded Legal Fees" means legal fees incurred by Blackstone
Member directly related to the negotiation of the BRE/CLS Agreements.
"Files and Records" shall have the meaning given to it in
Section 2.1(a)(xi).
"Financial Statements shall have the meaning given it in
Section 5.5.
"Governmental Bonds and Deposits" shall have the meaning given
to it in Section 2.1(a)(ix).
"Hazardous Materials" shall mean substances defined as
"hazardous substances," "hazardous materials," or "toxic substances" in
the Comprehensive Environmental Response, Compensation and Liability Act
of 1980, as amended, 42 U.S.C. Sec. 9601, et seq.; the Hazardous
Materials Transportation Act, 49 U.S.C. Section 1801, et seq.; or the
Resource Conservation and Recovery Act, 42 U.S.C. Section 6901, et. seq.
or in the regulations adopted and publications promulgated pursuant to
said laws.
"Improvements" has the meaning set forth in the recitals to
this Agreement.
"Indemnitee" means Contributing Member Indemnitee and
Blackstone Member Indemnitee.
"Indemnitee Affiliate" means the employees, successors, and
assigns of each Indemnitee, and, with respect to each corporate
Indemnitee, its directors, officers, and shareholders and with respect
to each partnership or limited liability company Indemnitee, its
partners or members and their respective agents.
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"Indemnitor" means Contributing Member Indemnitor and
Blackstone Indemnitor.
"Initial Financing" shall mean the financing obtained by the
Venture on the Contribution Date which shall be secured by the Assets.
"Intangible Property" shall have the meaning given to it in
Section 2.1(a)(iii).
"Intellectual Property" shall have the meaning given to it in
Section 2.1(a)(iii).
"Land" has the meaning set forth in the recitals to this
Agreement.
"Legal Requirement" means any material legal requirement of
any applicable governmental authority.
"Liabilities" shall have meaning given to it in Section 2.3.
"Losses" shall have the meaning given to it in Section 7.1(b).
"Management Agreement" shall have the meaning given to it in
the Venture Agreement.
"Permits" shall have the meaning given to it in Section
2.1(a)(viii).
"Permitted Encumbrances" shall mean (i) liens for current
Taxes not yet due and payable; (ii) easements, rights-of-way, building
or use restrictions, exceptions, variances, reservations, or similar
encumbrances of record affecting, but not materially interfering with
the present use of, any portion of the Property; and (iii) exceptions
to title set forth in the Title Policy and approved by Blackstone
Member in accordance with this Agreement.
"Personal Property" shall have the meaning given to it in
Section 2.1(a)(ii).
"Property" has the meaning set forth in the recitals to this
Agreement.
"Property Entities" shall have the meaning given to it in the
Venture Agreement.
"Refinancing Fee" shall have the meaning given to it in the
Venture Agreement.
"Related Rights" has the meaning set forth in the recitals to
this Agreement.
"Rents" shall have the meaning given to it in Section 2.4(f).
"Residents" means residents in occupancy at the Property
pursuant to Residency Agreements.
"Residency Agreements" means the agreements in place whereby
Residents are in occupancy at the Property.
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"Returns" means Tax returns, statements, reports, and forms
(including information returns and reports) required to be filed or
furnished with respect to the Assets or in connection with the
Business;
"Sharing Percentage" shall have the meaning given to it in the
Venture Agreement.
"Tax" means (i) any net income, alternative or add-on minimum
tax, gross income, gross receipts, sales, use, ad valorem, franchise,
capital, paid-up capital, profits, greenmail, license, withholding,
payroll, employment, excise, severance, stamp, occupation, premium,
property, environmental or windfall profit tax, custom, duty, or other
tax, governmental fee, or other like assessment or charge of any kind
whatsoever, together with any interest or any penalty, addition to tax,
or additional amount imposed by a Taxing Authority, and (ii) liability
for the payment of any amounts of the type described in (i) as a result
of any express obligations to indemnify any other Person.
"Taxing Authority" means any governmental authority
responsible for the imposition of any such tax (domestic or foreign).
"Tenant Leases" shall have the meaning given to it in Section
2.1(a)(vi).
"Title Company" shall mean Chicago Title Insurance Company
(National Business Unit, Dallas).
"Transaction Expenses" shall mean an amount equal to the sum
of Contribution Costs and the Refinancing Fee.
"Venture" means BRE/CSL L.L.C., a Delaware limited liability
company.
"Venture Agreement" has the meaning set forth in the recitals
to this Agreement.
SECTION 2
CONTRIBUTION OF ASSETS BY CONTRIBUTING MEMBER
2.1. Contribution of the Assets.
(a) Subject to the terms and conditions of this Agreement, on
the Contribution Date, Contributing Member agrees to assign, transfer and
deliver to the Venture subject to the Permitted Encumbrances, and Blackstone
Member agrees to cause the Venture to accept the following properties,
interests, and assets (collectively, the "Assets"):
(i) The Property;
(ii) All fixtures, machinery, equipment, furnishings, vehicles,
appliances, computer hardware, art work and other tangible property
(including, without limitation, general operating inventory, maintenance
and operating supplies, fuel, and spare parts for such machinery and
equipment) owned by the Contributing Member located on, or used at, the
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Property or otherwise used exclusively in connection with the Business
(collectively, the "Personal Property");
(iii) All of the following owned by Contributing Member or
exclusively issued or licensed to Contributing Member and used in
connection with the operation of the Property: (1) trademarks, trade
names, service marks and other intellectual property rights (including,
without limitation, the name "West Shores", "Villa Santa Barbara",
"Crowne Point" and "The Harrison at Eagle Valley" and any derivative
thereof) (collectively, the "Intellectual Property"), (2) warranties and
guaranties held by Contributing Member; (iii) computer software used in
connection with any computer systems located at the Property; (iv)
direct dial telephone numbers for the Property; and (v) all goodwill in
connection with the ownership, operation and maintenance of the
Properties (collectively, the "Intangible Property");
(iv) To the extent transferable, all of Contributing Member's
rights, claims, credits, causes of action, or rights of setoff against
third parties relating to the Assets, including, without limitation,
unliquidated rights under manufacturers' and vendors' warranties and
guaranties but excluding all amounts representing reimbursements for
items paid by Contributing Member (collectively, the "Claims");
(v) To the extent transferable, all leases and purchase money
security agreements for any equipment, machinery, vehicles, furniture or
other personal property located at the Property and used in the
operation of the Property which are held by or on behalf of Contributing
Member; all maintenance, service and supply contracts, and credit card
service agreements; and all other contracts and agreements which are
held by Contributing Member or its Affiliates in connection with the
operation of the Business (collectively, the "Contracts"), together with
all deposits made or held by Contributing Member thereunder;
(vi) All leases, subleases, and to the extent transferable,
licenses, concessions, and similar agreements granting an interest to
any other person or entity for the use and occupancy of any portion of
the Properties (the "Tenant Leases") excluding the Residency Agreements,
together with all security deposits thereunder;
(vii) The Residency Agreements together with all security
deposits thereunder;
(viii) All certificates of occupancy and other transferable
licenses, certificates of need, permits, registrations, authorizations,
use agreements, orders, or approvals (including, without limitation, if
applicable, medicare and medicaid provider agreements) of governmental
or quasi-governmental agencies and authorities (whether federal, state,
local, municipal, or foreign) or private parties relating to the
construction, use, operation, or enjoyment of the Assets and the
provision of services at the Property (collectively, the "Permits");
(ix) All transferable bonds or deposits made by Contributing
Member or its predecessors in title (or its agents) with any
governmental agency or authority or with any utility company or third
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party relating to the construction, use, operation, or enjoyment of the
Assets (collectively, the "Governmental Bonds and Deposits");
(x) All prepaid rentals and other prepaid expenses arising from
payments made by Contributing Member in the ordinary and usual course of
the operation of the Business prior to the close of business on the
Contribution Date;
(xi) Originals or copies of all books, records, files, and
papers, manuals, plans of operations, and budgets whether in hard copy
or computer format, used in the Business, including without limitation,
sales, marketing and advertising materials, Residency Agreements, leases
and all related correspondence, lists of present suppliers, and
personnel and employment records and, with respect to information
relating to Tax, only information that is necessary for the preparation
of any Tax returns to be filed by the Venture after the Contribution
Date or the determination of the Tax basis of the Assets (collectively,
the "Files and Records"); and
(xii) All lists of Residents and/or tenants associated with the
Assets.
Notwithstanding anything to the contrary contained herein, in
no event will the Assets (i) include cash on hand as of the Contribution Date
(except for all security deposits being held with, or on behalf of, Contributing
Member in connection with the Assets), or (ii) any accounts receivable arising
out of Residency Agreements, Tenant Leases, services or otherwise in connection
with the operation of the Business through and including the close of business
on the day prior to the Contribution Date.
2.2. Conveyance Instruments. In order to effectuate the
contribution of the Assets as contemplated by this Section 2, Contributing
Member will execute and deliver, or cause to be executed and delivered, all such
documents or instruments of assignment, transfer, or conveyance, in each case
dated the Contribution Date, as Blackstone Member shall reasonably deem
necessary or appropriate to vest in or confirm title to the Assets to the
Venture or a wholly owned subsidiary of the Venture (collectively, the
"Conveyance Instruments") in form and substance reasonably acceptable to
Blackstone Member including without limitation the following:
(a) A Deed for each Property with covenants against grantor's
acts only, as customarily used in each applicable State where a Property
is located;
(b) A Bill of Sale conveying the Personal Property to the
Venture;
(c) An Assignment and Assumption of Tenant Leases assigning the
Tenant Leases to the Venture and pursuant to which the Venture assumes
the obligations assigned from and after the Contribution Date;
(d) An Assignment and Assumption of Residency Agreements
assigning the Residency Agreements to the Venture and pursuant to which
the Venture assumes the obligations assigned from and after the
Contribution Date;
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(e) An Assignment and Assumption of Contracts assigning the
Contracts to the Venture and pursuant to which the Venture assumes the
obligations assigned from and after the Contribution Date;
(f) A General Assignment and Assumption assigning the Intangible
Property, the Claims, the Permits, the Governmental Bonds and Deposits,
and the Files and Records to the Venture and pursuant to which the
Venture assumes the obligations assigned from and after the Contribution
Date; and
(g) a certificate of registration of title for any vehicle used
in connection with a Property and owned by Contributing Member,
conveying such vehicle to the Venture.
2.3. No Liabilities Assumed. Except as set forth on Schedule
2.3, the Venture is not assuming any liability or obligation of Contributing
Member (or any predecessor owner of all or part of its business and assets) of
whatever nature whether absolute, contingent, or fixed, liquidated or
unliquidated, matured or not yet due ("Liabilities"), and all Liabilities shall
be retained by and remain liabilities of Contributing Member including without
limitation any liability for Tax arising from or with respect to the Assets or
the operations of the Business, which is incurred in or attributable to any
period prior to the Contribution Date.
2.4. Prorations. The following items of revenue and expense
shall be prorated, adjusted and appropriated between the Contributing Member and
the Venture as of 11:59 P.M., Eastern Standard Time, on the day immediately
preceding the Contribution Date, and the net amount thereof either shall
increase the Agreed Value or be credited against the Agreed Value:
(a) Taxes, on the basis of the best available estimates for such
Taxes that will be due and payable on the Property for the tax period up
to the Contribution Date, such amounts to be adjusted as soon as the
actual Tax amounts become available;
(b) Water rates and charges;
(c) Sewer taxes and rents;
(d) Permit, license and inspection fees, if any, on the basis of
the fiscal year for which levied, if the rights with respect thereto are
transferable to the Venture;
(e) Operating Costs. All costs and expenses of operating the
Property (including insurance) and amounts paid or payable under the
Contracts;
(f) Rents. If Contributing Member receives any rents from
tenants under the Tenant Leases or Residents under Residency Agreements
after the Contribution Date ("Rents"), then such collections shall first
be applied to Rents accruing after the Contribution Date, second to Rent
attributable to the month in which the Contribution Date occurs (which
shall be prorated in accordance with this Section 2.4), and third to any
pre-Contribution Date obligations under such Tenant Lease or Residency
Agreement remaining unpaid to Contributing Member. Nothing in this
paragraph shall restrict Contributing Member's right to collect
delinquent Rents owed to Contributing Member for periods prior to the
Contribution Date directly from a tenant or a Resident, provided that
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Contributing Member shall have no right to terminate Tenants Leases or
Residency Agreements or institute any dispossessory proceedings.
(g) Other Revenues. All other items customarily apportioned in
connection with the sale of similar properties.
2.5. Allocation of Consideration. Contributing Member and
Blackstone Member agree that the amount and type of consideration paid by the
Venture for the Assets (including the interest in the Venture and the Cash
Contribution) shall be allocated among the Assets in accordance with Section
1060 of the Code and the regulations promulgated thereunder, as set forth in
Schedule 2.5, for purposes of this Agreement and for federal, state and local,
income, transfer and real estate tax purposes. Contributing Member and
Blackstone Member agree to file, or cause the Venture to file, all tax returns
in accordance with such allocation unless otherwise required pursuant to a final
"determination" (within the meaning of Section 1313 of the Code). The provisions
of this Section 2.5 shall survive the Contribution Date.
2.6. Treatment of Contribution. The transfer of the Assets by
Contributing Member (i) to the extent exchanged for an interest in the Venture
shall be reported by the parties hereto as governed by Section 721(a) of the
Code and (ii) to the extent exchanged for any consideration other than an
interest in the Venture shall be reported by the parties as governed by Section
1001 and Section 1012. The provisions of this Section 2.6 shall survive the
Contribution Date. The Venture shall allocate pursuant to Treasury Regulation
ss. 1.163-8T the maximum amount of the proceeds of the New Debt to the repayment
of the Existing Financing, Transaction Expenses, and the funding of Venture
reserves or any other Venture item other than distributions to the Contributing
Member under Section 5.5 of the Venture Agreement.
2.7. Provision for Tax Liabilities. Contributing Member and
Blackstone Member shall make, or cause the Venture to make, allocations with
respect to the Assets contributed in exchange for an interest in the Venture in
accordance with the "remedial method" as described in Treasury Regulation
1.704-3(d). On the Contribution Date, Contributing Member shall deliver a FIRPTA
affidavit in the form set forth in the regulations under Section 1445 of the
Code.
SECTION 3
CERTAIN ACTIONS PRIOR TO THE CONTRIBUTION DATE
3.1. Deposit. If Blackstone Member elects in its sole discretion
to proceed with the transactions contemplated hereby, Blackstone Member shall
deposit the sum of Five Hundred Thousand Dollars ($500,000) (together with all
interest accrued thereon, the "Deposit") on or prior to ten days after the date
hereof with Escrow Agent, to be held by Escrow Agent pursuant to and in
accordance with the provisions of this Agreement. The failure of Blackstone
Member to deposit the Deposit shall be deemed Blackstone Member's election to
terminate this Agreement and thereafter neither party shall have any obligations
hereunder.
3.2. Cancellation of Contracts. Prior to the Contribution Date,
Blackstone Member shall provide to Contributing Member in writing a list of any
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Contracts that Blackstone Member desires cancelled (the "Cancelled Contracts").
Contributing Member shall, within 30 days of receipt of the list of Cancelled
Contracts from Blackstone Member, cancel the Cancelled Contracts.
Notwithstanding anything contained herein, the Cancelled Contracts shall not be
assigned by the Contributing Member to Blackstone Member or the Venture.
3.3. Right of Inspection. Blackstone Member, from
time-to-time prior to the Contribution Date, upon reasonable notice to
Contributing Member, may inspect the Property.
3.4. Title Insurance.
(i) Survey. Contributing Member has delivered to Blackstone
Member the most recent surveys that Contributing Member has in its file
of each Property (the "Surveys").
(ii) Evidence of Title. Contributing Member has obtained reports
of title for the Property issued by the Title Company (the "Title
Reports"). The legal descriptions embodied within said Title Reports
shall conform in all respects to the legal description on the Surveys.
(iii) Objections to Title. In the event the Title Reports
contain any exceptions to title, except for the Permitted Encumbrances,
Blackstone Member shall have 20 days from and after the date hereof to
reasonably approve or object to the condition of title disclosed in the
Title Reports. Blackstone Member's approval of any such exceptions to
title which are not Permitted Encumbrances shall be a condition
precedent to Blackstone Member's obligation to close the transaction
contemplated by this Agreement, which condition Blackstone Member
reserves the right to waive. Any exceptions to which Blackstone Member
does not object in writing during the 20-day period shall be deemed
approved. If written objection to the title is timely made (a "Title
Objection"), Contributing Member shall have ten days from its receipt of
the Title Objection, either, as Contributing Member shall elect (except
as provided below), (a) to remedy the title matter or (b) to decline to
remedy the title matter. If Contributing Member elects the option
described in clause (b) above and, if Blackstone Member has not elected
to waive such defect, the Deposit shall be refunded to Blackstone Member
and this Agreement shall terminate and neither party shall have any
further obligations hereunder. If Contributing Member elects to but is
unable to remedy the title matter within the time specified, the Deposit
shall be refunded to Blackstone Member and this Agreement shall
terminate and neither party shall have any further obligations
hereunder. Notwithstanding anything contained herein, Contributing
Member shall be required to remedy all liens against the Property prior
to the Contribution Date, which can be discharged for a liquidated
amount or which were created by Contributing Member after the date
hereof. It shall be a condition precedent to Blackstone Member's
obligations to close that all Title Objections be cured to the
satisfaction of Blackstone Member.
3.5. Covenants. Contributing Member agrees that, prior to
the Contribution Date, it shall:
(i) Operate the Assets in the ordinary course of business;
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(ii) Comply with all Legal Requirements;
(iii) Without the written consent of Blackstone Member, not
allow any new Residency Agreements to be entered into other than at
current rent rates and in the ordinary course of business, and which
Residency Agreements contains provisions consistent with the current
standard form of Residency Agreement;
(iv) Without the written consent of Blackstone Member, not allow
any new Tenant Lease or Contract to be entered into or amend, modify or
terminate any existing Tenant Lease or Contract except at the end of
stated term;
(v) Without the written consent of Blackstone Member, not
create, incur or suffer to exist any mortgage, deed of trust, lien,
pledge or other encumbrance in any way affecting any portion of the
Property, other than existing financing and Permitted Encumbrances;
(vi) Maintain and operate the current insurance coverages on the
Property;
(vii) Continue to pay or cause to be paid all payroll expenses,
taxes and assessments, water and sewer charges, utilities and
obligations under the Contracts;
(viii) Without the written consent of Blackstone Member, not
(and shall not permit any agent, partner or affiliate to) offer to sell,
finance, joint venture or otherwise dispose of (or solicit or accept any
such offer involving the sale, financing (except the Initial Financing),
joint venture or disposition of) the Assets or any interest therein
(whether directly or indirectly, debt or equity) or negotiate or
otherwise enter into discussions for the sale, financing (except the
Initial Financing), joint venture or disposition of all or any part of
the Assets or any interest therein (whether directly or indirectly, debt
or equity) as applicable, with any other party. Notwithstanding anything
contained herein, nothing in this subsection shall prohibit Contributing
Member from negotiating and discussing the Initial Financing with Fannie
Mae or its representatives, provided that Contributing Member shall not
enter into the Initial Financing without the prior written consent of
Blackstone Member; and
(ix) Cooperate in all reasonable respects with Blackstone Member
and any prospective lender to obtain the Initial Financing.
3.6. Contribution Date. Blackstone Member shall deliver to
Contributing Member a notice setting forth the Contribution Date (the
"Contribution Date"), provided that the Contribution Date is no later than March
31, 2002, unless extended by Blackstone Member in order to obtain a new or
assigned license necessary to operate one or more of the Properties, provided
that in no event will the Contribution Date be extended beyond June 30, 2002.
3.7. Conditions Precedent to Blackstone Member's Obligations.
Blackstone Member's obligation to consummate this Agreement is subject to the
satisfaction or waiver by Blackstone Member, at or before the Contribution Date,
of the following conditions:
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(a) Contributing Member's delivery to Blackstone Member and the
Venture of the items to be delivered by Contributing Member set forth in
Section 4.1;
(b) Title Company's delivery to the Venture of an Owner's title
insurance policy together with endorsements required by Blackstone
Member, without standard exceptions for parties in possession,
mechanics' liens, and matters of survey, and subject only to the
Permitted Encumbrances, in the amount of the Agreed Value, naming the
Venture as the insured (the "Title Policy");
(c) the transfer of all Permits and if required by law to
continue to operate the Business, the issuance of new Permits to the
Venture;
(d) the Initial Financing is obtained substantially on the terms
and conditions set forth on the term sheet attached hereto as Exhibit D
(the "Initial Financing Term Sheet"), provided that if the lender under
the Initial Financing requires escrows or reserves for capital
expenditures in an amount greater than $500,000, the closing condition
in this subparagraph (d) shall be deemed not to have been satisfied;
(e) all of the representations and warranties of Contributing
Member contained in this Agreement be true and correct in all material
respects when made, and shall be true and correct in all material
respects on the Contribution Date with the same effect as if made on and
as of such date. Solely for purposes of determining the satisfaction or
non-satisfaction of the condition precedent set forth in this paragraph
(e), the representations and warranties of Contributing Member shall be
deemed to have been made without any qualification for Actual Knowledge
or similar qualifications. To evidence the foregoing, Contributing
Member shall deliver to Blackstone Member on the Contribution Date a
certificate to that effect in form reasonably satisfactory to Blackstone
Member, dated as of such Contribution Date, signed by an authorized
officer of Contributing Member, which certificate shall have the effect
of a representation and warranty of Contributing Member made on and as
of the Contribution Date;
(f) Contributing Member has performed all covenants and
agreements required to be performed on or prior to the Contribution
Date; and
(g) title to the Property is delivered to the Venture in
accordance with the terms of this Agreement.
3.8. Conditions Precedent to Contributing Member's Obligations.
Contributing Member's obligation to consummate this Agreement is subject to the
satisfaction or waiver by Contributing Member, at or before the Contribution
Date, of the following conditions:
(a) Blackstone Member's delivery to Contributing Member of the
deliveries to be delivered by Blackstone Member set forth in Section
4.1; and
(b) all of the representations and warranties of Blackstone
Member contained in this Agreement be true and correct in all material
respects when made, and shall be true and correct in all material
respects on the Contribution Date with the same effect as if made on and
as of such date. Solely for purposes of determining the satisfaction or
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non-satisfaction of the condition precedent set forth in this paragraph
(b), the representations and warranties of Blackstone Member shall be
deemed to have been made without any qualification for Actual Knowledge
or similar qualifications. To evidence the foregoing, Blackstone Member
shall deliver to Contributing Member on the Contribution Date a
certificate to that effect in form reasonably satisfactory to
Contributing Member, dated as of such Contribution Date, signed by an
authorized officer of Blackstone Member, which certificate shall have
the effect of a representation and warranty of Blackstone Member made on
and as of the Contribution Date.
SECTION 4
EVENTS OCCURRING ON THE CONTRIBUTION DATE
4.1. Deliveries by Contributing Member, Blackstone Member
and the Venture.
(a) On or prior to the Contribution Date, Contributing Member
and Blackstone Member will deliver to the other, or shall cause the Venture to
deliver to Contributing Member, the following:
(i) The Conveyance Instruments;
(ii) the Venture Agreement;
(iii) the Management Agreement;
(iv) a Closing Statement in form and substance acceptable to
Contributing Member and Blackstone Member; and
(v) Such additional documents to be executed by Contributing
Member or Blackstone Member as may be reasonably requested by the other
party in order to effectuate the transaction contemplated hereby
(including, without limitation, any other documents required under
applicable Legal Requirements to convey the Assets to the Venture or to
record any Deed or any other conveyancing document).
(b) Blackstone Member shall contribute the Cash Contribution,
less the Deposit to the Venture and Blackstone Member and Contributing Member
shall cause the Title Company to deliver the Deposit to the Venture.
(c) Contributing Member shall deliver the following to
Blackstone Member:
(i) A non-foreign person affidavit sworn to by Contributing
Member as required by Section 1445 of the Code;
(ii) a certificate as to the incumbency and signature of
officers or other authorized representatives of Contributing Member,
certified copies of the articles of organization of Contributing Member,
and a copy of the general authorizing resolutions of the board of
Contributing Member, certified as of the Contribution Date by the
Secretary or an Assistant Secretary or other authorized representative
of such person, which authorize the execution, delivery and performance
by such person of this Agreement and all documents contemplated hereby
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to which such person is a party, together with such other documents and
evidence with respect to Contributing Member and as Blackstone Member
may reasonably request in order to establish the consummation of the
transactions contemplated by this Agreement, the taking of all corporate
proceedings in connection therewith and compliance with the conditions
herein set forth;
(iii) any required real estate transfer tax declaration or
similar documents required in connection with any tax imposed by any
governmental authority in connection with the transaction contemplated
hereunder;
(iv) all originals (or copies if originals are not available) of
the Tenant Leases, the Residency Agreements, the Contracts, the Permits,
the Files and Records and keys and lock combinations and/or security
codes with respect to the Property; and
(v) valid certificates of insurance for the insurance policies
required to be carried pursuant to the Management Agreement, evidencing
(A) the issuance of such policies, (B) the payment of all premiums
currently due and payable, (C) coverage which meets all of the
requirements set forth in the Management Agreements.
(d) Contributing Member shall deliver to the Title Company such
evidence or documents as may be reasonably required by the Title Company in
order to delete pre-printed exceptions relating to: (i) mechanics' or
materialmen's liens; (ii) parties in possession; (iii) the status and capacity
of the Contributing Member and the authority of the person or persons who are
executing the various documents on behalf of the Contributing Member in
connection with the contribution of the Assets and or the legal existence of the
Contributing Member and such other title affidavits and indemnities required by
the Title Company to enable the Title Company to issue the Title Policy as
required hereby
(e) Contributing Member and Blackstone Member shall instruct the
Escrow Agent to deliver the Deposit to Contributing Member; and
(f) All other previously undelivered items required to be
delivered by Contributing Member, Blackstone Member, and the Venture, at or
prior to the Contribution Date pursuant to the terms of this Agreement and the
Venture Agreement.
4.2. Effect of Contributions. In exchange for its transfer of
the Assets to the Venture as provided herein on the Contribution Date, (i)
Contributing Member shall become a Member in the Venture pursuant to the terms
of the Venture Agreement; (ii) Contributing Member shall receive the Sharing
Percentage in the Venture as set forth in Schedule A to the Venture Agreement;
(iii) the Capital Account of Contributing Member shall be credited with such
amount set forth beside its name in Schedule A of the Venture Agreement; and
(iv) Blackstone Member and Contributing Member shall cause the Venture to apply
and distribute the Cash Contribution and the Deposit in accordance with the
terms of the Venture Agreement.
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SECTION 5
REPRESENTATIONS AND WARRANTIES OF
CONTRIBUTING MEMBER
5.1. Organization. Contributing Member is a corporation which is
duly organized, validly existing, and in good standing under the laws of its
state of formation, with the power and authority to own, lease, and operate its
properties and to carry on its business as now being conducted.
5.2. Authority. Contributing Member has the power and authority
to execute and deliver this Agreement and to consummate the transactions
contemplated hereby. The execution and delivery by Contributing Member of this
Agreement and the documents contemplated in this Agreement, and the consummation
of the transactions contemplated hereby have been duly authorized by the board
of directors of Contributing Member; no other proceedings on the part of
Contributing Member or any other person or entity, are necessary to authorize
Contributing Member to enter into this Agreement or to consummate the
transactions contemplated hereby. This Agreement is, and the other documents to
be delivered by Contributing Member pursuant hereto (when executed and delivered
by Contributing Member) will be, valid and enforceable obligations of
Contributing Member, binding on Contributing Member in accordance with their
terms.
5.3. No Conflicts. The execution of this Agreement and the
consummation of this Agreement in accordance with its terms do not and will not
result in a breach of the terms and conditions of, nor constitute a default
under or violation of, Contributing Member's organizational documents or any
law, regulation, court order, mortgage, note, bond, indenture, agreement,
license or other agreement or obligation to which Contributing Member is now a
party or by which the Property may be bound or affected, except for transfer of
the Property subject to the existing mortgage indebtedness, until such debt is
repaid immediately following the contribution hereunder.
5.4. Certain Tax Matters.
(a) Except as otherwise specifically disclosed on Schedule
5.4(a) hereto, Contributing Member
(i) Has filed or will file or furnish when due in accordance
with all applicable laws all material Returns;
(ii) Has caused all Returns to be (and as to any Returns not
filed as of the date hereof, will cause such Returns to be) complete and
accurate in all material respects;
(iii) Has timely paid (or adequate provision has been made) for
all Taxes shown as due and payable on the Returns that have been filed
or are being apportioned pursuant to this Agreement; and
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(iv) Is not subject to any liens for Taxes now due and payable
on the Assets.
(b) Contributing Member shall submit to the Venture a list of
states and other jurisdictions to which any Tax is currently being paid by
Contributing Member.
(c) None of the Assets is (A) an asset or property that is or
will be required to be treated as described in Section 168(f)(8) of the Internal
Revenue Code of 1954 and in effect immediately before the Tax Reform Act of
1986, or (B) tax-exempt use property within the meaning of Section 268(h)(1) of
the Code.
5.5. Financial Statements. Attached hereto as Schedule 5.5 are
true and correct copies of an unaudited balance sheet and statement of income
for Contributing Member and an unaudited balance sheet, statement of income,
rent roll and statement of cash flows for the most recent fiscal year on an
individual Property basis (the "Financial Statements"). The Financial Statements
present fairly, in all material respects, the financial position and results of
Contributing Member and the Property, respectively as of such dates and its
results of operations and cash flows for such periods, in accordance with
applicable law and generally accepted accounting principles consistently
applied. There are no material expenses relating to any Property not shown on
the Financial Statements. There are no liabilities or obligations related to the
Business which would reasonably be expected to have a material adverse effect on
the Business or the Property except as have been disclosed to the Venture.
5.6. Title. To the Actual Knowledge of Contributing Member,
Contributing Member has good and marketable fee title to the Property, free and
clear of all liens except Permitted Encumbrances.
5.7. Zoning. To the Actual Knowledge of Contributing Member, the
Property and the use thereof complies in all material respects with all
applicable building and zoning ordinances and codes. Contributing Member has not
received any notices of violation of any such ordinances and codes, and to the
Actual Knowledge of Contributing Member, there are not facts, circumstances,
conditions or occurrences on the Property, that could reasonably be expected to
result in any violation of such ordinances and codes.
5.8. Litigation. As of the Contribution Date, except as set
forth in Schedule 5.8, there is no suit, claim, action, investigation or
proceeding pending or to the Actual Knowledge of Contributing Member, threatened
in writing against Contributing Member that relates to the Business, the
Property or the Assets.
5.9. No Adverse Parties In Possession. To the Actual Knowledge
of Contributing Member, there are no adverse or other parties in possession of
the Property, except for Residents pursuant to the Residency Agreements and
tenants pursuant to the Tenant Leases.
5.10. Compliance with Laws.
(a) Compliance Generally. Contributing Member has not received
any notice of any impending order or requirement which would cause additional
expenditures to be made to bring the Property and the Assets into compliance
with Legal Requirement. To the Actual Knowledge of Contributing Member, the
17
Assets comply in all material respects with all applicable municipal, county,
state and federal laws, regulations, ordinances and orders and with all
applicable municipal health and building laws and regulations. No Governmental
Authority having jurisdiction over Contributing Member or the Property has
issued and delivered any citations with respect to any material deficiencies or
other matters that fail to conform in all material respects to applicable
statutes, regulations or ordinances and that have not been corrected as of the
date hereof or that shall not have been corrected on or prior to the
Contribution Date. Contributing Member has not received written or oral notice
from any agency supervising or having authority over the Property or services
provided at the Property requiring such Property or any service, staff, or
practice provided at the Property to be modified, restricted or conditioned as
to service or eligibility or be reworked or redesigned or additional furniture,
fixtures, equipment or inventory to be provided at the Property so as to conform
or comply with any existing in any applicable law, code or standard.
(b) Contributing Member's Permits. Schedule 5.10(b) attached
hereto contains a true and complete list of the Permits. The Permits are all of
the licenses, permits, approvals, certificates of need, qualifications and the
like which are necessary for the ownership and operation by Contributing Member
of the Business and the Assets, including without limitation each Property. The
Permits are in full force and effect and no such Permit is conditional or
restricted.
(c) Compliance of Facility with State Licensure Requirements. As
of the Contribution Date, each Property shall meet, in all material respects,
all standards and conditions for the provision of services at the Property and
the operation of the Business at the Property to the extent such standards and
conditions are applicable to such Property and is not subject to any variances
or waivers with respect to licensure or operational requirements.
(d) Work Order, Statements of Deficiencies. Except as set forth
on Schedule 5.10(d), there are no pending work orders or statements of
deficiencies relating to any Property which have been required or issued by any
state department of health or any insurance company, police or fire department,
sanitation, health or work authorities or any other federal, state, or municipal
authority.
(e) Environmental Matters. To the Actual Knowledge of
Contributing Member, the Property is not in violation of any federal, state or
local law, ordinance or regulation relating to industrial hygiene or to the
environmental conditions on, under or about the Property, including, but not
limited to, soil and groundwater condition. Neither Contributing Member, nor to
the Actual Knowledge of Contributing Member, any third party, has used,
generated, manufactured, stored or disposed of on, under or about the Property
or transported to or from the Property, or incorporated into any improvements
now or at any time thereon, any Hazardous Materials. Contributing Member has not
received any notice of any claim or citation of noncompliance with respect to
any violation of Environmental Laws and, to the Actual Knowledge of Contributing
Member, there are no facts, circumstances, conditions or occurrences on the
Property that could reasonably be expected to result in the violation of any
such Environmental Laws or cause to be subject to any restrictions on the
existing or contemplated development, use or transferability thereof under any
Environmental Laws. To the Actual Knowledge of Contributing Member, there are no
18
underground storage tanks under the Property. Contributing Member has not
released or agreed to any limitation of liability of any person, firm or entity
with respect to its or their obligations arising with respect to the Property
pursuant to any of the foregoing laws or regulations or any state law or
regulation regarding Hazardous Materials. To the Actual Knowledge of
Contributing Member, Contributing Member has obtained, maintained and complied
in all material respects with all permits, licenses and other approvals required
under any Environmental Laws
5.11. Assets and Liabilities.
(a) Liabilities. Except as set forth in Schedule 2.3 attached
hereto, there are no Liabilities.
(b) Encumbrances. After giving effect to the transfer to the
Venture as of the Contribution Date, the Property will not be subject to any
encumbrance except (i) any encumbrance accepted by the Venture, (ii) any
encumbrance created by the Venture, and (iii) any Permitted Encumbrances. If,
subsequent to the Contribution Date, any mechanics or other lien, charge or
order for the payment of money shall be filed against the Property or against
the Venture or its assigns, based upon any act or omission of Contributing
Member, its agents, servants, or employees, or any contractor or subcontractor
connected with work on a Property prior to the Contribution Date (whether or not
such lien, charge, or order shall be valid or enforceable as such), within
thirty (30) days after notice to Contributing Member of the filing thereof,
Contributing Member (and not the Venture) shall take such action, by bonding,
deposit, payment or otherwise, as will remove and satisfy such lien of record as
against the Property.
5.12. Casualty and Condemnation. There are no unrepaired
casualty damage to any Property and there are no pending or, to the Actual
Knowledge of Contributing Member, threatened eminent domain or condemnation
proceedings, with respect to the Property or any portion thereof.
5.13. Contractual Matters.
(a) Contracts. Schedule 5.13(a) attached hereto contains a true
and complete list of all Contracts, between Contributing Member and any other
person or entity currently in effect in connection with the Property or the
operation thereof. Contributing Member has heretofore delivered to the Venture a
true and complete copy of each such Contract listed in Schedule 5.13(a). Each
Contract listed on Schedule 5.13(a) is in full force and effect, and, to the
Actual Knowledge of Contributing Member, neither Contributing Member nor any
other party to any such Contract is in default of its respective obligations
thereunder, and to the Actual Knowledge of Contributing Member, no event exists
which, with notice or passage of time, would become an event of default by
Contributing Member thereunder.
(b) Transactions with Affiliates. Except as set forth in
Schedule 5.13(b) attached hereto, no Affiliate of Contributing Member is an
officer, director, employee, consultant, competitor, customer, or supplier of,
or is a party to any Contract with, Contributing Member in connection with any
Property (collectively, "Affiliate Arrangements"). Unless the Venture otherwise
agrees in writing, Contributing Member shall terminate or cause to be terminated
each such Affiliate Arrangement described in Schedule 5.13(b) hereto on or
19
before the Contribution Date, provided, however, that the Venture hereby
approves and consents to the continued management and administration of the
Property by Capital Senior Living, Inc., an Affiliate of Contributing Member and
the provision of home care services by Quality Home Care, Inc., an Affiliate of
Contributing Member. Except as disclosed on Schedule 5.13(b), there is no
Intellectual Property that any such Affiliate owns or is licensed or otherwise
has the right to use and which is necessary to the operation of the Property.
(c) Insurance. Attached as Schedule 5.13(c) hereto is a list of
all insurance coverage maintained by Contributing Member as of the Effective
Date in connection with the Property and the operation thereof. All such
insurance coverage is in full force and effect (with no overdue premium) in the
amounts set forth on Schedule 5.13(c). All prepaid insurance policies shall be
assigned if permitted by the insurance company, to the Venture on the
Contribution Date.
5.14. Finder's or Broker's Fee. Contributing Member has not
engaged in any conduct that has given or will give rise to any liability for any
fee, compensation, or reimbursement for expenses to any agent, finder, or
broker, either in the nature of a finder's fee or otherwise, in connection with
the transactions contemplated hereby.
5.15. Residents. Except for the default notice provisions that
are required by law or that are contained within the Residency Agreements which
have been provided to Blackstone Member by Contributing Member with respect to
the Property, there are no agreements with Residents at the Property that are
not terminable in accordance with the provisions of such Residency Agreements
and in accordance with applicable law or that would require the owner of the
Property to provide the care at the Property for the duration of the Resident's
stay for no or minimal consideration.
5.16. Consents. The execution, delivery and performance of this
Agreement and the transactions contemplated herein will not require any consent,
approval, authorization, order, or declaration of, or any filing or registration
with, any court, any Governmental Authority, or any other person or entity, the
absence of which would materially impair the ability of the Venture, or any
manager of the Property from providing services at the Property, except in
connection with the Permits listed on Schedule 5.16 hereto.
5.17. Employees. Contributing Member does not have any
employees.
5.18. Suppliers, No Illegal Payments, Etc. Contributing Member
has not: (a) directly or indirectly given or agreed to give any illegal gift,
contribution, payment or similar benefit to any supplier, customer, governmental
official or employee or other person who was, is or may be in a position to help
or hinder Contributing Member (or assist in connection with any actual or
proposed transaction) or refer any resident or made or agreed to make any
illegal contribution, or reimbursed any illegal political gift or contribution
made by any other person, to any candidate for federal, state, local or foreign
public office which might subject Contributing Member to any damage or penalty
in any civil, criminal or governmental litigation or proceeding or the
non-continuation of which has had or might have any material adverse effect on
the Property; or (b) established or maintained any unrecorded fund or asset or
made any false entries on any books or records for any purpose.
20
5.19. Residency Agreements. Attached to Schedule 5.19 is a true
and complete copy of the current standard form of Residency Agreements. There
are no material undisclosed amendments or agreements to such Residency
Agreement, nor any special rates, services or concessions promised to any
resident of any Facility except as disclosed in the Residency Agreements or the
rent rolls attached as Schedule 5.5 hereto. The Residency Agreements comply in
all material respects with all applicable municipal, county, state and federal
laws, regulations, ordinances and orders and with all applicable municipal
health and building laws.
5.20. Tenant Leases. Schedule 5.20 sets forth a true and
accurate list of all Tenant Leases, and all amendments or modifications to, and
side letters modifying in any material respect the terms thereof. Each Tenant
Lease is in full force and effect in accordance with the terms thereof; each
represents the entire agreement between the parties thereto with respect to the
occupancy of the portion of the Property occupied thereunder. Neither
Contributing Member nor any Affiliate has given or received any notice claiming
the existence of any default under any Tenant Lease, which default remains
uncured. As of the date of this Agreement, no party to any Tenant Lease has paid
rent or fees for more than one month in advance or claims or is entitled to any
offset against such amounts. Contributing Member has delivered Blackstone Member
true and complete copies of the Tenant Leases and all amendments, modifications
and letter agreements relating thereto.
5.21. Intellectual Property. Schedule 5.21 sets forth a true and
accurate list of the Intellectual Property.
5.22. Governmental Bonds and Deposits. Schedule 5.22 sets forth
a true and accurate list of the Governmental Bonds and Deposits.
5.23. Contracts with Affiliated and Nonaffiliated Healthcare
Providers. Except as set forth in Schedule 5.23, Contributing Member represents
that there are no agreements, memoranda of understanding, contracts,
stipulations, pricing schedules, referral agreements, transfer agreements, or
other similar arrangements between Contributing Member and any third party
pursuant to which healthcare services are arranged or provided at any Property
(collectively the "Healthcare Contracts"). Contributing Member represents that
it will not enter into any Healthcare Contract without the prior written consent
of Blackstone Member.
5.24. Medicaid/Medicare Facility. Contributing Member represents
and warrants that Residents at the Property and Contributing Member do not
submit payment for services provided at the Property to Medicare or Medicaid for
payment except as set forth in Schedule 5.24. To the extent Contributing Member
plans to provide Medicaid services pursuant to any state or federal Medicaid
Community-Based Waiver Program or other substantially similar program,
Contributing Member will notify Blackstone Member 30 days in advance of such
intention to confirm the same is consistent with the plan or operations of the
Property. Upon such confirmation, Contributing Member agrees to maintain such
program in compliance with all state and federal laws and regulations for the
reimbursement of Medicaid services at the Property.
21
SECTION 6
REPRESENTATIONS AND WARRANTIES OF BLACKSTONE MEMBER
6.1. Organization.
Blackstone Member is a limited liability company which is duly
organized, validly existing, and in good standing under the laws of its state of
formation, with the power and authority to own, lease and operate its properties
and to carry on its business as now being conducted.
6.2. Authority. Blackstone Member has the power and authority to
execute and deliver this Agreement and to consummate the transactions
contemplated hereby. The execution and delivery by Blackstone Member of this
Agreement and the documents contemplated in this Agreement, and the consummation
of the transactions contemplated hereby have been duly authorized by the members
of Blackstone Member; no other proceedings on the part of Blackstone Member or
any other person or entity, are necessary to authorize Blackstone Member to
enter into this Agreement or to consummate the transactions contemplated hereby.
This Agreement is, and the other documents to be delivered by Blackstone Member
pursuant hereto (when executed and delivered by Blackstone Member) will be,
valid and enforceable obligations of Blackstone Member, binding on Blackstone
Member in accordance with their terms.
6.3. Litigation. There is no suit, claim, action, investigation
or proceeding pending or to the actual knowledge of Blackstone Member threatened
against or affecting Blackstone Member or any of its affiliates which if
adversely determined would be reasonably expected to prevent or materially delay
the ability of Blackstone Member to perform its obligations hereunder.
6.4. Consents. To the actual knowledge of Blackstone Member, the
execution, delivery and performance of this Agreement and the transactions
contemplated herein will not require any consent, approval, authorization,
order, or declaration of, or any filing or registration with, any court, any
Governmental Authority, or any other person or entity, the absence of which
would materially impair the ability of the Venture, or any manager of the
Property from providing services at the Property.
6.5. No Conflicts. The execution of this Agreement and the
consummation of this Agreement in accordance with its terms do not and will not
result in a breach of the terms and conditions of, nor constitute a default
under or violation of, Blackstone Member's organizational documents or any law,
regulation, court order, mortgage, note, bond, indenture, agreement, license or
other agreement or obligation to which Blackstone Member is now a party or by
which the Property may be bound or affected.
6.6. Finder's or Broker's Fee. Blackstone Member has not engaged
in any conduct that has given or will give rise to any liability for any fee,
compensation, or reimbursement for expenses to any agent, finder, or broker,
either in the nature of a finder's fee or otherwise, in connection with the
22
transactions contemplated hereby, except for the Refinancing Fee to be paid to
the Venture in accordance with the Venture Agreement.
SECTION 7
SURVIVAL OF REPRESENTATIONS; INDEMNIFICATION
7.1. Survival: Indemnification.
(a) The covenants, agreements, representations, and warranties
of the parties hereto contained herein or in any certificate or other writing
delivered pursuant hereto or in connection herewith shall survive the
Contribution Date for a period of 12 months. Notwithstanding the preceding
sentence, any covenant, agreement, representation, or warranty in respect of
which indemnity may be sought under this Section 7 shall survive the time at
which it would otherwise terminate pursuant to such sentence, if notice of the
inaccuracy or breach thereof giving rise to such indemnity shall have been given
to the party against whom such indemnity may be sought, prior to such time,
subject to applicable statutes of limitation.
(b) Contributing Member and its successors and assigns (each a
"Contributing Member Indemnitor"), jointly and severally, hereby agree to
indemnify each Blackstone Indemnitee and Blackstone Indemnitee Affiliate against
and agree to hold them harmless from any and all actual damage, loss, liability,
and expense (including, without limitation, reasonable expenses of investigation
and attorney's fees and expenses in connection with any action, suit,
proceeding, claim, investigation, or other loss, but not including any
consequential or punitive damages or losses) ( "Losses") incurred by such
Blackstone Indemnitee arising out of any breach in any material respect of any
covenant or agreement or of any inaccuracy or omission in any material respect
in any representation or warranty made by Contributing Member pursuant to this
Agreement.
(c) Blackstone Member and its successors and assigns (each a
"Blackstone Indemnitor"), jointly and severally, hereby agree to indemnify each
Contributing Member Indemnitee and Contributing Member Indemnitee Affiliate
against and agree to hold them harmless from any and all actual Losses incurred
by such Contributing Member Indemnitee arising out of any breach in any material
respect of any covenant or agreement or of any inaccuracy or omission in any
material respect in any representation or warranty made by Blackstone Member
pursuant to this Agreement.
7.2. Control of Litigation.
(a) The Indemnitees and Indemnitee Affiliates agree to give
prompt notice to the Indemnitors of the assertion of any claim, or the
commencement of any suit, action, or proceeding in respect of which indemnity
may be sought under Section 7.1(b) or 7.1(c) of this Agreement and of any Losses
which any such Indemnitee deems to be within the ambit of Section 7.1(b) or
7.1(c) of this Agreement other than relating to Taxes (specifying with
reasonable particularity the basis therefor) and will give the Indemnitors such
information with respect thereto as the Indemnitors may reasonably request. The
Indemnitors may, at their own expense, participate in and, upon notice to such
Indemnitee, assume the defense of any such suit, action, or proceeding; provided
that the Indemnitors' counsel is reasonably satisfactory to such Indemnitee. The
Indemnitors shall thereafter consult with such Indemnitee upon such Indemnitee's
23
reasonable request for such consultation from time to time with respect to such
suit, action, or proceeding, and the Indemnitors shall not, without such
Indemnitee's consent, which consent shall not be unreasonably withheld, settle
or compromise any such suit, action, or claim. If the Indemnitors assume such
defense, such Indemnitees shall have the right (but not the duty) to participate
in the defense thereof and to employ counsel, at their own expense, separate
from the counsel employed by the Indemnitors. For any period during which the
Indemnitors have not assumed the defense thereof, the Indemnitors shall be
liable for the fees and expenses of counsel employed by any Indemnitee;
provided, however, that the Indemnitors shall not be liable for the fees or
expenses of more than one counsel employed by any Indemnitee in any jurisdiction
for all Indemnitees. If the Indemnitees assume the defense thereof, the
Indemnitees shall thereafter consult with the Indemnitors upon the Indemnitors'
reasonable request for such consultation from time to time with respect to such
suit, action, or proceeding and the Indemnitees shall not, without the
Indemnitors' consent, which consent shall not be unreasonably withheld, settle
or compromise any such suit, action, or claim. Whether or not the Indemnitors
choose to defend or prosecute any claim, all of the parties hereof shall
cooperate in the defense or prosecution thereof.
(b) The Indemnitors shall not be liable under Sections 7.1
hereof with respect to any Losses resulting from a claim or demand the defense
of which the Indemnitors were not offered the opportunity to assume as provided
under Section 7.2(a) hereof to the extent the Indemnitors' liability under
Sections 7.1 hereof is prejudiced as a result thereof.
7.3. Transfer Taxes. Contributing Member shall pay, or cause to
be paid, all Taxes or recording fees imposed on any transfers by Contributing
Member of real property and tangible and intangible personal property, including
without limitation intellectual property, applicable to the transfers of the
Assets contemplated by this Agreement and all sales and use Taxes applicable to
transfers by Contributing Member of the Assets contemplated by this Agreement.
7.4. Cooperation on Tax Matters. Contributing Member and
Blackstone Member shall cooperate fully, and cause the Venture to cooperate
fully, as and to the extent reasonably requested by the other party, in
connection with any audit, litigation, or other proceeding with respect to
Taxes. Such cooperation shall include the retention and (upon the other party's
request) the provision of records and information which are reasonably relevant
to any such audit, litigation, or other proceeding and making employees
available on a mutually convenient basis to provide additional information and
explanation of any material provided hereunder. Contributing Member and
Blackstone Member agree (a) to retain, or cause the Venture to retain, all books
and records which are relevant to the determination of the Tax liabilities
pertinent to the Assets and Contributing Member relating to any period prior to
the Contribution Date until the expiration of the applicable statute of
limitations and to abide by all record retention agreements entered into with
any Taxing Authority, and (b) to give the other party reasonable written notice
prior to destroying or discarding any such books and records and, if the other
party so requests, Contributing Member, Blackstone Member, or the Venture, as
the case may be, shall allow the other party to take possession of such books
and records.
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SECTION 8
MISCELLANEOUS PROVISIONS
8.1. Defaults.
(a) Contributing Member Default. If Contributing Member shall
default in its obligation to convey the Assets to the Venture in accordance with
the terms of this Agreement, then Blackstone Member, at its sole option, may (i)
terminate this Agreement, in which event Escrow Agent shall refund to Blackstone
Member, the Deposit and neither party shall thereafter have any further rights
or obligations hereunder and (ii) bring an action against Contributing Member
for specific performance and/or actual damages.
(b) Blackstone Member Default. If Blackstone Member shall
default in its obligation to close in accordance with this Agreement, the
parties hereto agree that Contributing Member's sole and exclusive remedy shall
be to terminate this Agreement and retain the Deposit as liquidated damages.
Upon such termination, neither party to this Agreement shall have any further
rights or obligations. It is expressly understood and agreed that in the event
of Blackstone Member's default, Contributing Member's damages would be
impossible to ascertain and that the Deposit constitutes a fair and reasonable
amount of compensation in such event and in no event shall the delivery of the
Deposit be construed as punitive damages.
8.2. Escrow.
(i) The Deposit shall be held in escrow by Escrow Agent upon
the following terms and conditions:
(ii) Escrow Agent shall deposit the Deposit in an
interest-bearing account or invest the Deposit in a money market or
monetary fund approved by Contributing Member;
(iii) Escrow Agent shall deliver to Contributing Member the
Deposit on the Contribution Date upon the conveyance of the Assets to
the Venture in accordance with the terms of this Agreement; and
(iv) If this Agreement is terminated in accordance with the
terms hereof, or if the Assets are not conveyed to the Venture in
accordance with this Agreement by reason of the failure of either party
to comply with such party's obligations hereunder, Escrow Agent shall
pay the Deposit (together with all interest thereon, if any) to
Contributing Member and/or Blackstone Member, as the case may be, in
accordance with the provisions of this Agreement.
(b) It is agreed that:
(i) The duties of Escrow Agent are only as herein specifically
provided, and, except for the provisions of Section 8.2(c) hereof, are
purely ministerial in nature, and Escrow Agent shall incur no liability
whatsoever except for its own willful misconduct or gross negligence;
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(ii) Escrow Agent shall not be liable or responsible for the
collection of the proceeds of any checks used to pay the Deposit;
(iii) In the performance of its duties hereunder, Escrow Agent
shall be entitled to rely upon any document, instrument or signature
believed by it to be genuine and signed by either of the other parties
or their successors;
(iv) Escrow Agent shall only rely upon any notice of
instructions in writing and purportedly signed by Contributing Member
and Blackstone Member;
(v) Escrow Agent shall not be bound by any modification,
cancellation or rescission of this Agreement unless in writing and
signed by it, Contributing Member and Blackstone Member;
(vi) Contributing Member and Blackstone Member shall jointly
and severally reimburse and indemnify Escrow Agent for, and hold it
harmless against, any and all loss, liability, costs or expenses in
connection herewith, including reasonable attorneys' fees and
disbursements, incurred without willful misconduct or gross negligence
on the part of Escrow Agent arising out of or in connection with its
acceptance of, or the performance of its duties and obligations under,
this Agreement, as well as the reasonable costs and expenses of
defending against any claim or liability arising out of or relating to
this Agreement;
(vii) Each of Contributing Member and Blackstone Member hereby
releases and forever discharges Escrow Agent from any liability arising
out of any act done or omitted to be done by Escrow Agent in good faith
in the performance of its duties hereunder; and
(viii) Escrow Agent may resign for any reason upon ten days
written notice to Contributing Member and Blackstone Member. If a
successor Escrow Agent is not appointed by Contributing Member and
Blackstone Member within such ten day period, Escrow Agent may petition
a court of competent jurisdiction to name a successor.
(c) Escrow Agent is acting as a stakeholder only with respect to
the Deposit. Escrow Agent, except (i) in the event of the conveyance of the
Assets to the Venture or (ii) if the Deposit is required to be delivered to
Blackstone Member pursuant to subsection 3.4(iii) or Section 3.7, shall not
deliver the Deposit except on seven days' prior written notice to the parties
and only if neither party shall object within such seven day period. If there is
any dispute as to whether Escrow Agent is obligated to deliver all or any
portion of the Deposit or as to whom such Deposit is to be delivered, Escrow
Agent shall not make any delivery, but in such event Escrow Agent may hold the
same until receipt by Escrow Agent of an authorization in writing, signed by all
of the parties having any interest in such dispute, directing the disposition of
the Deposit (together with all interest thereon, if any), or in the absence of
such authorization, Escrow Agent may hold the Deposit (together with all
interest thereon, if any), until the final determination of the rights of the
parties in an appropriate proceeding. If such written authorization is not given
or proceedings for such determination are not initiated within 30 days after the
date Escrow Agent shall have received written notice of such dispute, and
26
thereafter diligently continued, Escrow Agent may, but is not required to, bring
an appropriate action or proceeding for leave to deposit the Deposit (together
with all interest thereon, if any), with a court of competent jurisdiction
pending such determination. Escrow Agent shall be reimbursed for all costs and
expenses of such action or proceeding including, without limitation, reasonable
attorneys' fees and disbursements, by the party determined not to be entitled to
the Deposit, or if the Deposit is split between the parties hereto, such costs
of Escrow Agent shall be split, pro rata, between Contributing Member and
Blackstone Member, in inverse proportion to the amount of the Deposit received
by each. Upon making delivery of the Deposit (together with all interest
thereon, if any), in the manner provided in this Agreement, Escrow Agent shall
have no further obligation or liability hereunder.
(d) Escrow Agent has executed this Agreement solely to confirm
that Escrow Agent has received the Deposit (if the Deposit is made by check,
subject to collection) and will hold the Deposit, in escrow, pursuant to the
provisions of this Agreement.
8.3. Amendment and Modification. This Agreement may be amended,
modified, or supplemented only by written agreement of the parties hereto.
8.4. Waiver of Compliance; Consents. Any failure of a party to
comply with any obligation, covenant, agreement, or condition herein may be
waived by the other party; provided, however, that any such waiver may be made
only by a written instrument signed by the party granting such waiver, but such
waiver or failure to insist upon strict compliance with such obligation,
covenant, agreement, or condition shall not operate as a waiver of, or estoppel
with respect to, any subsequent or other failure. Whenever this Agreement
requires or permits consent by or on behalf of any party hereto, such consent
shall be given in writing in a manner consistent with the requirements for a
waiver of compliance as set forth in this Section 8.4, with appropriate notice
in accordance with Section 8.10 of this Agreement.
8.5. Assignment. This Agreement and all of the provisions hereof
shall be binding upon and inure to the benefit of the parties hereto, the
Venture, and their respective successors and permitted assigns. Any party may
assign any of its rights hereunder to an Affiliate, but no such assignment shall
relieve it of its obligations hereunder. Nothing in this Agreement, expressed or
implied, is intended or shall be construed to confer upon any person other than
the parties, any successors and permitted assigns, any rights, remedy, or claim
under or by reason of this Agreement or any provisions herein contained.
8.6. Expenses. Except as otherwise contemplated herein, whether
or not the transactions contemplated by this Agreement shall be consummated, all
fees and expenses (including all fees of counsel, actuaries, and accountants)
incurred by any party in connection with the negotiation and execution of this
Agreement and the Venture Agreement shall be borne by such party.
8.7. Further Assurances. From time to time, at the request of
Contributing Member or Blackstone Member and without further consideration, each
party, at its own expense, will, and cause the Venture to execute and deliver,
such other documents, and take such other action, as Contributing Member or
Blackstone Member may reasonably request in order to consummate more effectively
the transactions contemplated hereby and to vest in the Venture good and
27
marketable title to the Assets. Contributing Member hereby constitutes and
appoints, effective as of the Contribution Date, the Venture and its successors
and permitted assigns as the true and lawful attorney of Contributing Member
with full power of substitution in the name of the Venture or in the name of
Contributing Member, but for the benefit of the Venture, to collect for the
account of the Venture any items of Assets and to institute and prosecute all
proceedings which the Venture may in its reasonable discretion deem proper in
order to assert or enforce any right, title, or interest in, to, or under the
Assets, and to defend or compromise any and all action, suits, or proceedings in
respect of the Assets. The Venture shall be entitled to retain for its own
account any amounts collected pursuant to the foregoing powers, including any
amounts payable as interest in respect thereof.
8.8. Governing Law. This Agreement shall be governed by and
construed in accordance with the Laws of the State of New York.
8.9. Counterparts. This Agreement may be executed in two or more
counterparts, each of which shall be deemed an original, but all of which
together shall constitute one and the same instrument and shall become a binding
Agreement when one or more of the counterparts have been signed by each of the
parties and delivered to the other party.
8.10. Notices. All notices and other communications hereunder
shall be in writing and shall be deemed to have been duly given if delivered by
hand or if mailed by registered or certified mail (return receipt requested) or
sent by facsimile to the parties at the following addresses (or at such other
address for a party as shall be specified by like notice):
Contributing Member:
Capital Senior Living A, Inc.
14160 Dallas Parkway, Suite 300
Dallas, Texas 75240
Attn: Lawrence A. Cohen
Chief Executive Officer
Facsimile: (212) 551-1774
With a copy to:
David R. Brickman, Esq.
Capital Senior Living
14160 Dallas Parkway
Suite 300
Dallas, Texas 75240
Facsimile: (972) 770-5666
and to:
Winston W. Walp II, Esq.
Jenkens & Gilchrist, P.C.
1445 Ross Avenue, Suite 3200
Dallas, Texas 75202-2799
Facsimile: (214) 855-4300
28
Blackstone Member:
BRE/CSL HOLDINGS L.L.C.
c/o The Blackstone Group
345 Park Avenue
New York, New York 10154
Attention: Stavros Galiotos
Facsimile: (212) 583-5730
With a copy to:
Simpson Thacher & Bartlett
425 Lexington Avenue
New York, New York 10017
Attention: Scott M. Kobak, Esq.
Facsimile: (212) 455-2502
8.11. Headings. The article and section headings contained in
this Agreement are for reference purposes only and shall not affect in any way
the meaning or interpretation of this Agreement.
8.12. Entire Agreement. This Agreement, including the exhibits,
schedules, and other documents and instruments referred to herein, together with
the Venture Agreement, embodies the entire agreement and understanding of the
parties hereto in respect of the subject matter contained herein. This Agreement
supersedes all prior agreements and understandings between the parties with
respect to such subject matter.
8.13. Severability. If any one or more provisions contained in
this Agreement shall, for any reason, be held to be invalid, illegal, or
unenforceable in any respect, such invalidity, illegality, or unenforceability
shall not affect any other provision of this Agreement, but this Agreement shall
be construed as if such invalid, illegal, or unenforceable provision had never
been contained herein.
8.14. Exhibits. All Exhibits attached hereto are hereby
incorporated in and made a part as if set forth in full herein.
8.15. WAIVER OF JURY TRIAL. CONTRIBUTING MEMBER AND BLACKSTONE
MEMBER WAIVE TRIAL BY JURY IN ANY ACTION, PROCEEDING OR COUNTERCLAIM BROUGHT BY
ANY OF THEM AGAINST THE OTHER ON ALL MATTERS ARISING OUT OF THIS AGREEMENT OR
THE USE AND OCCUPANCY OF THE PROPERTY (EXCEPT CLAIMS FOR PERSONAL INJURY OR
PROPERTY DAMAGE).
8.16. CONSENT TO JURISDICTION. CONTRIBUTING MEMBER AND
BLACKSTONE MEMBER HEREBY IRREVOCABLY SUBMIT AND CONSENT TO THE NONEXCLUSIVE
29
JURISDICTION AND VENUE OF ANY STATE OR FEDERAL COURT HAVING JURISDICTION OVER
NEW YORK COUNTY, NEW YORK OR ANY COUNTY IN WHICH A PROPERTY IS LOCATED FOR ANY
ACTION OR PROCEEDING TO ENFORCE OR DEFEND ANY MATTER ARISING FROM OR RELATED TO
THIS AGREEMENT ANY DOCUMENT EXECUTED BY CONTRIBUTING MEMBER, BLACKSTONE MEMBER
OR THE VENTURE IN CONNECTION WITH THIS AGREEMENT. CONTRIBUTING MEMBER AND
BLACKSTONE MEMBER HEREBY IRREVOCABLY WAIVE, TO THE FULLEST EXTENT PERMITTED BY
LAW, THE DEFENSE OF AN INCONVENIENT FORUM TO THE MAINTENANCE OF ANY SUCH ACTION
OR PROCEEDING.
CONTRIBUTING MEMBER AGREES NOT TO INSTITUTE ANY LEGAL ACTION
OR PROCEEDING AGAINST BLACKSTONE MEMBER OR ANY DIRECTOR, OFFICER, EMPLOYEE,
AGENT OR PROPERTY OF BLACKSTONE MEMBER, CONCERNING ANY MATTER ARISING OUT OF OR
RELATING TO THIS AGREEMENT OR ANY RELATED DOCUMENT IN ANY COURT OTHER THAN A
STATE OR FEDERAL COURT HAVING JURISDICTION OVER NEW YORK COUNTY, NEW YORK
CONTRIBUTING MEMBER AND BLACKSTONE MEMBER HEREBY CONSENT TO
SERVICE OF PROCESS BY THE OTHER PARTY IN ANY MANNER AND IN ANY JURISDICTION
PERMITTED BY LAW. NOTHING HEREIN SHALL AFFECT OR IMPAIR CONTRIBUTING MEMBER'S
AND BLACKSTONE MEMBER'S RIGHT TO SERVE LEGAL PROCESS IN ANY MANNER PERMITTED BY
LAW, OR CONTRIBUTING MEMBER'S AND BLACKSTONE MEMBER'S RIGHT TO BRING ANY ACTION
OR PROCEEDING AGAINST CONTRIBUTING MEMBER, BLACKSTONE MEMBER OR THE PROPERTY OF
CONTRIBUTING MEMBER, BLACKSTONE MEMBER OR THE VENTURE IN THE COURTS OF ANY OTHER
JURISDICTION.
30
IN WITNESS WHEREOF, the parties hereto have duly executed this
Agreement as of the day and year first above written.
CONTRIBUTING MEMBER:
-------------------
CAPITAL SENIOR LIVING A, INC.,
a Delaware corporation
By:___________________________________
Name:_________________________________
Title:________________________________
BLACKSTONE MEMBER:
-----------------
BRE/CSL HOLDINGS L.L.C.,
a Delaware limited liability company
By:___________________________________
Name:_________________________________
Title:________________________________
The undersigned has executed this
Agreement solely to confirm its
acceptance of the duties
of Escrow Agent as set forth in
Section 8.2 hereof.
CHICAGO TITLE INSURANCE COMPANY
By:___________________________________
Name:_________________________________
Title:________________________________