FORM OF RIGHT OF FIRST REFUSAL AGREEMENT
This Right of First Refusal Agreement ("Agreement") is entered
into and is effective as of the day of 1998, by and
among Genesis Health Ventures, Inc. ("Genesis"), ElderTrust, a Maryland real
estate investment trust (which expects to qualify as a real investment trust for
federal income tax purposes) ("ElderTrust") and ElderTrust Operating Limited
Partnership, a Delaware limited partnership ("ETOLP") (ElderTrust and ETOLP are
sometimes collectively referred to in this Agreement as the "REIT").
BACKGROUND:
A. The REIT has undertaken, or concurrently with the offering
of shares in ElderTrust (the "Offering"), will undertake, a series of
transactions involving the REIT, Genesis and certain properties, including
certain assisted living facilities, one independent living facility and certain
skilled nursing facilities owned or managed by Genesis or certain of its
subsidiaries.
B. The REIT and Genesis have determined that is in their
mutual best interest to grant to each other certain rights of first refusal with
respect to the sale, financing, leasing or management of assisted living
facilities, independent living facilities and skilled nursing facilities now
owned or to be acquired by Genesis or the REIT.
NOW, THEREFORE, in consideration of the mutual covenants and
promises of the parties, and for other good and valuable consideration, the
receipt and sufficiency of which are hereby acknowledged, the parties hereto
agree as follows:
1. Definitions. As used in this Agreement, the following terms
shall have the following meanings (applicable to both the singular and plural
terms of the words defined):
1.1. "Affiliate" means: (i) any other Person (as defined
below) directly or indirectly controlling, controlled by, or under common
control with the Person to which such term applies; or (ii) as to any natural
Person, such Person's spouse, child, grandchild, sibling, parent, aunt, uncle or
cousin, as well as the spouse of any of the foregoing. In addition, (1) as to
any corporation, real estate investment trust or business trust, any Person with
any of the foregoing relationships to any Person in control of such corporation,
real estate investment trust or business trust shall be deemed to be an
Affiliate of such corporation, real estate investment trust or business trust,
and (2) as to any partnership or limited liability company, any Person with any
of the foregoing relationships to any Person in control of such partnership or
limited liability company as a general partner or managing member or otherwise
shall be deemed to be an Affiliate of such partnership or limited liability
company. For purposes of this Agreement, "control" as applied to any Person
means the possession either directly or indirectly, of the power to direct or
cause the direction of the management, policies and decision-making of such
Person whether through the ownership of voting interest, by contract or
otherwise. "Control" also shall include, without limitation, the possession of
direct or indirect equity or beneficial interest in more than fifty percent
(50%) of the profits or voting control of any entity.
1.2. "Basic Business Terms" shall mean, at a minimum, the
following terms: (i) the sales price and/or rent; (ii) the amount and terms of
any assumable third party financing; (iii) the state of title to be transferred;
(iv) the date of closing; (v) the proration of closing costs and the allocation
between buyer and seller of any brokerage commissions; (vi) the lease term (if
applicable); (vii) the form of consideration; (viii) the security deposit
required, if any; (ix) the interest rates, if applicable; and (x) all other
material business terms and conditions, including, without limitation, any
rights of first refusal, options or renewal rights.
1.3. "Covered Facility" means an assisted living, an
independent living (i.e., (in each case) a residential facility providing
limited medical and daily living assistance to its elderly residents) or a
skilled nursing facility.
1.4. "Developer" means any Person who or which is, at any
time during the Term of this Agreement, developing an assisted living facility
or an independent living facility.
1.5. "Finance" shall mean to provide or the providing of
funds to finance the construction, acquisition or refinancing of one or more
Covered Facilities (whether individually or together with one or more other
Covered Facilities), including, without limitation, any off-balance sheet
financing of a skilled nursing facility as described in Section 3.3 hereof, and
"Financing" and "Financed" shall have meanings correlative to the foregoing.
1.6. "Financing Notice" shall mean a written notice
delivered to the REIT by Genesis stating that Genesis, a Genesis Affiliate or a
Developer desires to obtain Financing for one or more assisted living facilities
or independent living facilities, which notice sets forth (i) the location and,
if applicable, the name of each facility, (ii) the proposed use of the Financing
(e.g., construction, acquisition or refinancing) and (iii) the estimated amount
of such Financing.
1.7. "Genesis Market" shall mean the counties in which
Genesis or one of its Affiliates, or The Multicare Companies, Inc. or one of its
Affiliates, now or during the term of this Agreement owns or operates assisted
living, independent living or skilled nursing facilities and any counties
contiguous to such counties, but shall not include counties in the states of
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Illinois or Wisconsin unless Genesis acquires additional Covered Facilities in
such states after the date hereof.
1.8. "Lease Offer" shall mean a bona fide offer made to, or
acceptance of an offer made by, the REIT by a Person who or which is not an
Affiliate of Genesis to lease one or more Covered Facilities owned or to be
acquired by the REIT (whether individually or together with one or more other
Covered Facilities or any other properties or assets) which the REIT intends to
accept.
1.9. "Lease Notice" means a written notice delivered to
Genesis by the REIT stating that it has received or made a Lease Offer, which
notice sets forth (i) the name of the proposed lessee and (ii) the Basic
Business Terms of the proposed lease, and which is accompanied by a copy of the
Lease Offer (if in writing) and a copy of the proposed lease, if available.
1.10. "Management Notice" shall mean a written notice
delivered to Genesis by the REIT stating that an Owner of one or more Covered
Facilities in the Genesis Market Financed by the REIT intends to enter into one
or more management agreements with respect to such Covered Facilities and/or has
received a Management Offer with respect to such Covered Facilities, which
notice sets forth (i) the name of any proposed manager (if applicable) and (ii)
the material terms of any proposed management agreement, and which is
accompanied by a copy of any Management Offer (if in writing) and a copy of any
proposed management agreement, if available.
1.11. "Management Offer" shall mean a bona fide offer made
to, or by, an Owner by, or to, a Person who or which is not an Affiliate of such
Owner proposing to manage one or more existing or proposed Covered Facilities in
the Genesis Market which are Financed by the REIT (whether individually or
together with one or more other Covered Facilities or any other properties or
assets).
1.12. "Off-Balance Sheet Financing Notice" shall mean a
written notice delivered to the REIT by Genesis stating that Genesis or a
Genesis Affiliate desires to undertake a transaction involving off-balance sheet
Financing of one or more skilled nursing facilities presently owned by Genesis
or a Genesis Affiliate, which notice sets forth (i) the location and, if
applicable, the name of each skilled nursing facility with respect to which
Genesis or such Genesis Affiliate desires to obtain off-balance sheet Financing
and (ii) the proposed financing structure to be used for such off-balance sheet
Financing.
1.13. "Owner" shall mean the owner of one or more Covered
Facilities in the Genesis Market Financed by the REIT.
1.14. "Person" shall mean a natural person or a
corporation, real estate investment trust, business trust, partnership, trust,
limited liability company or other entity.
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1.15. "Purchase Offer" shall mean a bona fide offer made
to, or acceptance of an offer made by, Genesis or a Genesis Affiliate by a
Person who or which is not an Affiliate of Genesis proposing to purchase from
Genesis or a Genesis Affiliate and lease back to Genesis or a Genesis Affiliate
one or more Covered Facilities, which Genesis or a Genesis Affiliate intends to
accept.
1.16. "Transfer" means the sale, ground lease for a term of
not less than 29 years, transfer of control or conveyance by deed, assignment,
quitclaim or otherwise, whereby a Person or its Affiliate transfers its interest
in a Covered Facility, but shall not include (i) a transfer by a Person to an
Affiliate of such Person or (ii) any change in control of Genesis, and
"Transferring" and "Transferred" shall have meanings correlative to the
foregoing.
1.17. "Transfer Notice" means a written notice delivered to
the REIT by Genesis stating that Genesis or a Genesis Affiliate intends to
Transfer one or more Covered Facilities and/or has received a Purchase Offer
with respect to one or more Covered Facilities, which notice sets forth (i) the
name and identity of the proposed Transferee and (ii) the Basic Business Terms
of the Purchase Offer, together with a copy of the Purchase Offer (if in
writing) and any written notice of the Purchase Offer.
1.18. "Transferee" means any Person who or which has made a
Purchase Offer to Genesis or a Genesis Affiliate.
2. Term. The term of this Agreement ("Term") shall commence as
of the date first above written and shall continue for three years. Thereafter,
this Agreement shall automatically renew for successive one-year renewal Terms
unless Genesis or the REIT shall have given notice to the other, not less than
six months prior to the end of the initial Term or any such renewal Term, that
it has elected to terminate this Agreement as of the end of the then current
Term.
3. First Refusal and Other Rights of the REIT. Genesis hereby
grants to the REIT the following rights:
3.1. If, during the Term, Genesis or a Genesis Affiliate
desires to Transfer one or more Covered Facilities owned by Genesis or a Genesis
Affiliate in a transaction or transactions where Genesis or a Genesis Affiliate
will lease back the Transferred Covered Facilities from the Transferee, Genesis
shall first offer to the REIT (or at the election of the REIT, to an Affiliate
of the REIT) the opportunity to purchase and lease back to Genesis or a Genesis
Affiliate designated by Genesis the subject Covered Facilities on the same terms
and conditions as contained in any Purchase Offer by giving a Transfer Notice to
the REIT. Upon the written request of the REIT, Genesis shall deliver to the
REIT copies of all material contracts affecting the subject Covered Facility
which will survive any Transfer. The REIT shall have twenty (20) days after the
receipt of the Transfer Notice to deliver to Genesis a written acceptance of the
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Purchase Offer on the terms and conditions set forth in the Transfer Notice. The
parties shall enter into a definitive acquisition agreement within fifteen (15)
business days after the acceptance of a Purchase Offer by the REIT.
Notwithstanding anything set forth in this Section 3.1, the right of first
refusal set forth herein shall not apply to any proposed Transfer and lease of a
Covered Facility by Genesis or a Genesis Affiliate involving a commercial bank
or an Affiliate of a commercial bank or any similar financial institution.
3.2. If, during the Term, a Developer desires to enter into
a real estate secured-Financing to Finance one or more assisted living
facilities or independent living facilities to be operated by Genesis or a
Genesis Affiliate, Genesis or its Affiliates shall use its reasonable business
efforts to cause the Developer to provide a Financing Notice to the REIT and to
grant to the REIT (or at the election of the REIT, to an Affiliate of the REIT)
the opportunity to make a proposal to the Developer to Finance one or more of
the subject assisted living facilities or independent living facilities. The
Developer shall not be obligated to accept any such Financing proposal of the
REIT, even if the terms and conditions of such Financing proposal are more
favorable than the terms and conditions of other Financing proposals received by
the Developer with respect to the Financing of the subject assisted living
facilities or independent living facilities.
3.3. If, during the Term, Genesis or a Genesis Affiliate
determines to Finance one or more skilled nursing facilities presently owned by
Genesis or a Genesis Affiliate in a transaction where the liability resulting
from such Financing would not be reflected on the balance sheet of Genesis,
(i.e., an off-balance sheet Financing), Genesis or the Genesis Affiliate, as the
case may be, shall provide an Off-Balance Sheet Financing Notice to the REIT and
grant to the REIT (or at the election of the REIT, to an Affiliate of the REIT)
the opportunity to make a proposal to Genesis or to such Genesis Affiliate to
provide off-balance sheet Financing with respect to such skilled nursing
facilities. Neither Genesis nor any Genesis Affiliate shall be obligated to
accept any such off-balance sheet Financing proposal of the REIT, even if the
terms and conditions of such off-balance sheet Financing proposal are more
favorable than the terms and conditions of other off-balance sheet Financing
proposals received by Genesis or any Genesis Affiliate.
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4. First Refusal and Other Rights of Genesis. The REIT hereby
grants to Genesis the following rights of first refusal:
4.1. If, during the Term, the REIT (or an Affiliate of the
REIT) acquires a Covered Facility located in the Genesis Market from a third
party, and desires to lease such Covered Facility (or if, due to the termination
of any lease with respect to a Covered Facility between the REIT and any Person
who or which is not an Affiliate of Genesis by reason of expiration,
termination, default or otherwise, the REIT intends to enter into a new lease
with respect to such Covered Facility) (whether, in any such case, such Covered
Facility is to be leased individually or together with one or more other
properties or assets, provided that at least thirty-three percent (33%) of such
properties are located in the Genesis Market), the REIT shall first offer to
Genesis (or at Genesis' election an Affiliate of Genesis) the opportunity to
lease the Covered Facilities from the REIT on the same terms and conditions as
contained in any Lease Offer by giving a Lease Notice to Genesis. Genesis shall
have twenty (20) days after the receipt of the Lease Notice to deliver to the
REIT a written acceptance of the Lease Offer, which written acceptance shall set
forth the agreement of Genesis to all of the terms and conditions set forth in
the Lease Notice. The parties shall enter into a definitive lease agreement
within fifteen (15) business days after the acceptance of the Lease Offer by
Genesis. The foregoing right of first refusal shall not apply if the proposed
lessee of the Covered Facilities is the Person who or which developed the
Covered Facility or Transferred the Covered Facility to the REIT or an Affiliate
of such Person.
4.2. If, during the Term, the REIT Finances one or more
Covered Facilities located in the Genesis Market and a manager is to be engaged
by the Owner (or if there is a default under an existing management agreement
relating to one or more Covered Facilities and a new manager is to be engaged by
the Owner) (whether, in any such case, any such Covered Facility is to be
managed individually or together with one or more other Covered Facilities or
any other properties or assets), the REIT shall deliver a Management Notice to
Genesis. The REIT shall use reasonable business efforts to cause the Owner to
enter into a management agreement with Genesis or a Genesis Affiliate, or, if
applicable, to permit Genesis to manage the Covered Facility upon the same terms
and conditions as set forth in any Management Offer. Genesis shall have twenty
(20) days after receipt of a Management Notice to deliver to the REIT and the
Owner a written management proposal, or, if applicable, an acceptance of the
Management Offer, which acceptance shall set forth the agreement of Genesis to
all of the terms of the Management Notice. The foregoing obligation shall not
apply if the proposed manager of the Covered Facility is an Affiliate of the
Owner or an Affiliate of the developer of the Covered Facility.
5. Failure to Exercise Right of First Refusal. If a party
hereto does not elect to exercise a right of first refusal granted under this
Agreement on the terms and conditions set forth herein, then, during the
six-month period ("Six-Month Unrestricted Period") following the expiration of
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the right of first refusal, Genesis or the REIT, as applicable, may Transfer,
Finance or lease the subject Covered Facility, free and clear of the terms and
conditions contained in the most recently delivered Transfer Notice, Lease
Notice or Management Notice, as the case may be. If, upon the expiration of the
Six-Month Unrestricted Period, Genesis or the REIT, as applicable, has not
consummated a Transfer or leasing of, or a management agreement with respect to,
the subject Covered Facility, then such other party may not Transfer or lease,
or enter into a management agreement with respect to a subject Covered Facility
without giving a new Transfer Notice, Lease Notice or Management Notice, as the
case may be, in accordance with the terms and conditions of this Agreement.
6. Miscellaneous.
6.1. Complete Agreement; Construction. This Agreement, and
the other agreements and documents referred to herein, shall constitute the
entire agreement between the parties with respect to the subject matter thereof
and shall supersede all previous negotiations, commitments and writings with
respect to such subject matter.
6.2. Governing Law. This Agreement shall be governed by and
construed in accordance with the laws of the jurisdiction of the Commonwealth of
Pennsylvania without regard to the principles of conflicts of laws thereof.
6.3. Notices. All notices and other communications required
or permitted hereunder shall be in writing, shall be deemed to be duly given
upon actual receipt, and shall be delivered (i) in person, (ii) by registered or
certified mail, postage prepaid, (iii) by nationally recognized overnight
delivery service or (iv) by facsimile or other generally accepted means of
electronic transmission, provided that a copy of any notice delivered pursuant
to this clause (iv) shall also be sent contemporaneously pursuant to clause
(ii), addressed as follows (or to such other address(es) as may be specified by
like notice to the other parties):
To Genesis and any of its Affiliates: Genesis Health Ventures, Inc.
148 W. State Street
Kennett Square, PA 19348
Attn.: Chief Executive Officer
Attn.: Law Department
To the REIT: ElderTrust
415 McFarlan Road
Suite 202
Kennett Square, PA 19348
Attn.: President
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6.4. Amendments. No amendment, modification or supplement
to this Agreement shall be binding on any party hereto unless it is in writing
and signed by the parties in interest.
6.5. Successors and Assigns. Neither this Agreement nor any
rights or obligations hereunder shall be assignable by a party to this Agreement
without the prior, express written consent of the other parties. This Agreement
and all of the provisions hereof shall be binding upon and inure to the benefit
of the parties to this Agreement and their respective successors and permitted
assigns.
6.6. No Third-Party Beneficiaries. This Agreement is solely
for the benefit of the parties to this Agreement and shall not be deemed to
confer upon third parties any remedy, claim, liability, reimbursement, claims or
action or other right in excess of those existing without reference to this
Agreement.
6.7. Titles and Headings. Titles and headings to paragraphs
and sections in this Agreement are inserted for the convenience of reference
only and are not intended to be a part of or to affect the meaning of this
Agreement.
6.8. Maximum Legal Enforceability; Time of Essence. The
provisions hereof shall be considered severable such that if any provision or
part hereof is ever held to be invalid, void or illegal under any law or ruling,
all remaining provisions hereof shall remain in full force and effect to the
maximum extent permitted by law. Any non-material provision of this Agreement
which is prohibited or unenforceable in any jurisdiction shall, as to such
jurisdiction, be ineffective to the extent of such prohibition or
unenforceability without invalidating or rendering unenforceable any of the
remaining provisions hereof, and any such prohibition or unenforceability in any
jurisdiction shall not invalidate or render unenforceable such provision in any
other jurisdiction. Without prejudice to any rights or remedies otherwise
available to any party to this Agreement, each party hereto acknowledges that
damages would not be an adequate remedy for any breach of the provisions of this
Agreement and agrees that the obligations of the parties hereunder shall be
specifically enforceable. Time shall be of the essence as to each and every
provision of this Agreement.
6.9. Counterparts. This Agreement may be executed in one or
more counterparts, each of which shall constitute an original and all of which
shall be one and the same agreement.
6.10. Further Assurances. The parties to this Agreement
will execute and deliver or cause the execution and delivery of such further
instruments and documents, and will take such other actions, as any other party
to the Agreement may reasonably request in order to effectuate the purpose of
this Agreement and to carry out the terms hereof.
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IN WITNESS WHEREOF, the parties hereto have caused this
Agreement to be duly executed as of the day and year first written above.
GENESIS HEALTH VENTURES, INC. ELDERTRUST
By: By:
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ELDERTRUST OPERATING LIMITED PARTNERSHIP
By its General Partner, ElderTrust
By:
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