PURCHASE AND SALE AGREEMENT
This Purchase and Sale Agreement ("Agreement") is made and entered into
this 30th day of March, 2004 (the "Execution Date") by and between Lodi Care
Group LLC, a Washington limited liability company, Aurora Bay/Columbus, L.L.C.,
a Georgia limited liability company, Aurora Bay/Hattiesburg, L.L.C., a
Mississippi limited liability company, Spring Creek Group, Ltd., a Texas limited
partnership, Bedford Care Group, Ltd., a Texas limited partnership, Tyler Group,
Ltd., a Texas limited partnership, White Rock Care Group, Ltd., a Texas limited
partnership, El Paso Care Group, Ltd., a Texas limited partnership and Lubbock
Group, Ltd., a Texas limited partnership (each of the foregoing individually, a
"Seller" and collectively, "Sellers") and Emeritus Corporation, a Washington
corporation "Purchaser") and Aurora Bay Investments, LLC, a Washington limited
liability company ("ABI"), and JCI, LLC, a Washington limited liability company
("JCI" and together with ABI, the "Guarantors").
RECITALS
A. Sellers are the owner of those certain parcels of the Real Property
and the Facilities (as hereinafter defined).
B. Sellers are interested in selling the Real Property and the
Facilities to Purchaser and Purchaser is interested in purchasing the same from
Sellers (the "Transaction").
C. Purchaser has advised Sellers that the ultimate purchaser of certain
of the Sellers' Assets (as hereinafter defined) shall be Nationwide Health
Properties, Inc., a Real Estate Investment Trust organized under the laws of the
State of Maryland or an affiliate or subsidiary thereof ("NHP") and that NHP
shall then concurrently with its acquisition thereof lease them back to
Purchaser or ESC (as hereinafter defined).
D. Sellers and Purchaser are interested in documenting the terms and
conditions of the Transaction.
1. PURCHASE AND SALE 1. PURCHASE AND SALE
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On the terms and conditions set forth herein, Sellers shall sell to
Purchaser or NHP, as applicable, and Purchaser or NHP, as applicable, shall
purchase from Sellers the following:
(a) (A) FACILITY.The real property situated in the States of
California, Georgia, Mississippi and Texas, which is more particularly described
in Exhibit A attached hereto (the "Real Property") and the improvements thereon
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that constitute those certain Alzheimer Special Care Centers as described on
Exhibit B attached hereto (the "Facilities") together with all tenements,
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hereditaments, rights, privileges, interests, easements and appurtenances now or
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hereafter belonging or in any way pertaining to the Real Property and/or the
Facilities.
(b) All fixtures (the "Fixtures") attached or appurtenant to the Real
Property;
(c) All furnishings, equipment, tools, machinery, fixtures, appliances
and all other tangible personal property located on or about the Real Property
or the Facilities which is owned by Sellers (collectively, the "Personal
Property");
(d) All of the permits, licenses, approvals, entitlements and other
governmental and quasi-governmental authorizations including, without
limitation, certificates of occupancy and other similar permits relating to all
or any part of the Real Property or the Facilities and all amendments,
modifications, supplements, general conditions and addenda thereto, required in
connection with the use, operation or maintenance of the Facilities (the
"Permits and Approvals"). As used herein, "quasi-governmental" shall include the
providers of all utility services to the Property;
(e) All original reports, drawings, plans, blueprints, studies,
specifications, certificates of occupancy, building permits and grading permits
relating to all or any part of the Real Property or the Facilities and all
amendments, modifications, supplements, general conditions and addenda thereto
(the "Reports and Studies");
(f) All warranties, representations and guaranties with respect to the
Real Property and the Facilities, whether express or implied, which Seller now
holds or under which Seller is the beneficiary (the "Warranties");
(g) All of Seller's legal and equitable claims, causes of action, and
rights against the architects, engineers, designers, contrac-tors,
subcontractors, suppliers and mate-rialmen and any other party who has supplied
labor, services, materials or equipment, directly or indirectly, in connection
with the design, planning, construc-tion, manufacturing or operation of all or
any part of the Real Property and the Facilities (the "Claims");
(h) All inventories of every kind and nature whatsoever (specifically
including, but not limited to, all pharmacy supplies, medical supplies, office
supplies, other supplies and foodstuffs) owned by Sellers as of the date of this
Agreement or hereafter acquired, and relating to the Facilities, except
inventory sold or consumed in the ordinary course of business from and after the
date of this Agreement (the "Inventory").
(i) All rights to the telephone and facsimile numbers of the Facilities
and their sequential numbers, lien waivers, surety agreements, bonds,
warranties, guaranties, utility use agreements, covenants, commitments, permits,
certificates, approvals, and other intangible personal property of every kind
and nature whatsoever owned by Sellers as of the date of this Agreement or
hereafter acquired, which can be legally transferred and which relate directly
to the Facilities, other than cash (on hand or in banks) and accounts, notes,
interest, and other receivables arising from the operation of the Facilities
prior to the Closing Date (the "Intangible Property").
(j) All manuals, policies, procedures, handbooks, marketing materials,
books and records related to the ownership and operation of the Facilities
other than the financial records of Seller which relate to the period prior to
the Closing Date and any proprietary materials of Seller or JEA (as hereinafter
defined) containing the name or logo of Seller or JEA, but including all files
for the persons employed at the Facilities on the Closing Date and for the
persons residing at the Facilities on the Closing Date (the "Books and
Records").
(k) The vehicles located at the Facilities and described in Exhibit C
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hereto (the "Vehicles"), three of which are leased and the leases for which are
included in the Assumed Operating Contracts (as hereinafter defined) (the
"Vehicle Leases").
(l) The names of the Facilities and any related logos (the "Facility
Names").
Hereinafter the assets described in Section 1(a) through (l) shall
sometimes be collectively referred to as "Sellers' Assets."
Except as specifically provided in this Agreement, Purchaser does not
hereby or in connection herewith assume any liability of Sellers or any other
party whatsoever in relation to Sellers' Assets. Purchaser agrees to use its
good faith efforts, at no cost or expense to Purchaser, to secure a release of
the applicable Sellers from liability under the Vehicles Leases from and after
the Closing, it being understood and agreed that Purchaser shall not be in
breach of its obligations under this Agreement if it is unable to secure such a
release but that instead the indemnity set forth in Section 14(b)(i) shall
apply.
2. PURCHASE PRICE 2. PURCHASE PRICE
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(a) The aggregate base purchase price ("Purchase Price") payable by
Purchaser or NHP to Sellers for the Sellers' Assets shall be Forty-Eight Million
Dollars ($48,000,000.00) (the "Purchase Price") The Purchase Price shall be
allocated as follows:
FACILITY PURCHASE PRICE ALLOCATION
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Creekside $ 4,575,617
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Heritage Hills $ 5,370,214
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Oak Hollow $ 4,942,605
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Pine Meadow $ 4,949,736
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Pinehurst $ 5,415,964
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Quail Ridge $ 6,731,438
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Stone Bridge $ 5,651,181
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Austin Gardens $ 5,857,088
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Desert Springs $ 4,506,157
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TOTAL $48,000,000
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(b) The Purchase Price shall be payable as follows:
(i) EXISTING FINANCING. At the Closing of the purchase and sale of the
Facility located in Lubbock, Texas (the "Quail Ridge Facility"), Purchaser shall
assume or shall cause NHP to assume all of Sellers' rights and obligations under
the existing financing which is secured by the Facility located in Lubbock,
Texas (the "Existing Financing") and the documents executed by such Sellers in
connection therewith or as security therefor (the "Loan Documents"), true and
correct copies of which have been provided by the applicable Seller to Purchaser
prior to the execution of this Agreement. Sellers and Purchaser acknowledge and
agree that as of March 1, 2004 the outstanding principal balance of the Existing
Financing was Three Million Nine Hundred Eighty Nine Thousand Six Hundred Twenty
Four and 49/100 Dollars ($3,989,624.49). Purchaser agrees to use, or to cause
NHP to use, its good faith efforts, at no cost or expense to Purchaser or NHP,
to secure a release of the applicable Seller or any guarantor of the obligations
of the applicable Seller from liability under the Existing Financing from and
after the Closing, it being understood and agreed that neither Purchaser nor NHP
shall be in breach of its obligations under this Agreement if it is unable to
secure such a release but that instead the indemnity set forth in Section
14(b)(i) shall apply.
(ii) CASH BALANCE.(C) CASH BALANCE. At the Closing of the purchase
and sale of the Quail Ridge Facility, the balance of the portion of the Purchase
Price allocated above to the Quail Ridge Facility (plus or minus any costs and
pro-rations for which Sellers and/or Purchaser are responsible under the terms
hereof) shall be paid by wire transfer of immediately available funds at Closing
and at the Closing of the purchase and sale of the remaining Facilities, the
entire portion of the Purchase Price allocated to such Facilities (plus or minus
any costs and pro-rations for which Sellers and/or Purchaser are responsible
under the terms hereof) shall be paid by wire transfer of immediately available
funds at Closing (the "Cash Balance").
(c) ADDITIONAL PURCHASE PRICE. In addition to the Purchase Price, on
April 1, 2007 (the "Additional Purchase Price Payment Date"), Purchaser shall
pay to Sellers as additional consideration for the Sellers' Assets an amount
determined based on the improvement in the net operating income of the
Facilities from the Initial Closing Date (as defined below) to the Additional
Consideration Payment Date (the "Additional Purchase Price"); provided, however,
in no event shall the Additional Purchase Price exceed Two Million and no/100
Dollars ($2,000,000) (the "Additional Purchase Price Cap"). The amount of the
Additional Price shall be determined and shall be payable in the manner set
forth in Exhibit D hereto.
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3. CLOSING 3. CLOSING
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(a) THE CLOSING DATE.(a) The Closing Date. Provided all of the
conditions to closing set forth in this Agreement have been satisfied or waived,
the closing (the "Closing") of the Transaction shall take place on March 31,
2004 (the "Initial Closing Date"); provided, however, in the event the
conditions to Closing have not been satisfied or waived as of the Initial
Closing Date as to any or all of the Facilities, provided the conditions to
Closing have been satisfied with respect to no less than five (5) Facilities,
then Purchaser shall be required to close the Transaction with respect to those
Facilities as to which the conditions to closing have been satisfied or waived
and shall have the right to defer the Closing with respect to the remaining
Facilities for a period of up to ninety (90) days; provided, however, in no
event shall a Closing occur later than June 30, 2004 (the "Outside Closing
Date"), it being understood and agreed that if the conditions to Closing have
not been satisfied as of the Outside Closing Date, either party shall have the
right to exercise the termination rights set forth in Paragraph 15 with respect
to the affected Facility or Facilities. Any and all references herein to the
"Closing" shall mean the Closing with respect to the Facilities at the point in
time being referred to which are being conveyed to Purchaser by the applicable
Sellers, it being understood and agreed that the parties contemplate that there
will be more than one Closing occurring under this Purchase Agreement and that,
with respect to each of the Facilities, the "Closing Date" shall mean the date
on which the Closing occurs with respect to each such Facility.
(b) THE CLOSING PROCESS. (b) The Closing Process. Closing shall
occur through escrow and accordingly, at or prior to the Closing, Purchaser and
Sellers shall deposit in escrow with Chicago Title Insurance Company (the "Title
Company") all documents and monies necessary to close this transaction as herein
provided. Time is of the essence of this Agreement. Closing shall occur in
accordance with the procedures and instructions given by Sellers and Purchaser
to the Title Company prior to Closing.
4. 4. [RESERVED]CONVEYANCES/DELIVERIES AT CLOSING
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(a) SELLERS' CLOSING DELIVERIES. At Closing, each of the Sellers shall
deliver, or cause to be delivered, the following documents to the Title Company
for recording and/or delivery to Purchaser or NHP, as applicable:
(i) A Special or Limited Warranty or Grant Deed with respect to
the Real Property and Facility owned by it (collectively the "Deeds"), which
Deeds shall be in form and substance acceptable to Sellers and Purchaser;
(ii) A Bill of Sale in favor of NHP with respect to the Sellers'
Assets described in Sections 1(b) through (g) and (i) (the "NHP Bill of Sale")
and a Bill of Sale in favor of Purchaser or ESC with respect to the Sellers'
Assets described in Sections 1(h) and (j) through (l) and with respect to the
Assumed Operating Contracts in effect at such Facility (the "Emeritus Bill of
Sale" and together with the NHP Bill of Sale, the "Bills of Sale") and which, in
each case, are located at the Real Property and Facility owned by such Seller,
which shall be in the form and substance acceptable to Seller, NHP and Purchaser
or ESC, as applicable;
(iv) An affidavit executed by each of the Sellers under penalty of
perjury, stating such Seller's United States taxpayer identification numbers and
that such Seller is not a foreign person, in accordance with the Internal
Revenue Code, Section 1445(b)(2);
(v) A Termination of the Management Agreement(s) between each of the
Sellers and Jerry Erwin & Associates, Inc. dba JEA Senior Living ("JEA") with
respect to the Facility owned by it (the "Management Termination Agreements"),
be shall be in form and substance acceptable to Sellers and Purchaser;
(vi) An Owner's Affidavit duly executed by each of the Sellers in such
form and content as may be reasonably required by the Title Company;
(vii) The New Management Agreement (as hereinafter defined) and the
Lodi Consulting Agreement (as hereinafter defined);
(viii) The Interim Subleases (as hereinafter defined), if and to the
extent applicable;
(ix) Such other affidavits and documents as may be customarily and
reasonably required for the issuance of the Title Policies in accordance with
the terms of the Agreement;
(x) Documentation, reasonably acceptable to Purchaser and the Title
Company, confirming the authority of such Seller to execute and deliver this
Agreement and all of the documents described in this Paragraph 4 and to
consummate the Transaction; and
(xi) Any documents to which the applicable Seller may be a party in
connection with the assumption of the Existing Financing.
(b) PURCHASERS DELIVERIES. At Closing Purchaser shall deliver or cause to be
delivered to the Title Company for recording and/or delivery to Sellers:
(i) The portion of the Cash Balance due at Closing pursuant to
Paragraph 2(b);
(ii) The New Management Agreement and the Lodi Consulting Agreement;
(iii) The Interim Subleases, if and to the extent applicable;
(iv) The Emeritus Bill of Sale;
(v) Documents evidencing the assumption of the Existing Financing by
Purchaser or NHP; and
(vi) Documentation, reasonably acceptable to Sellers and the Title
Company, confirming the authority of Purchaser to execute and deliver this
Agreement and all of the documents described in this Paragraph 4 and to
consummate the Transaction.
5. COSTS AND PRORATIONS 5. COSTS AND PRORATIONS
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(a) COSTS AND EXPENSES.(A) COSTS AND EXPENSES. Costs and expenses
associated with the sale of Sellers' Assets to Purchaser or NHP shall be
allocated between the parties as follows:
(i) Sellers shall pay any state, county, or local transfer, sales,
excise or use tax due and payable by virtue of the transfer to Purchaser of the
Real Property and Facilities;
(ii) Sellers shall pay (A) One Hundred Eighteen Thousand Two
Hundred Seventy Two and no/100 Dollars ($118,272) toward the cost of the Owner's
Title Policies (as defined below), including the survey endorsement, for all of
the Facilities other than the Quail Ridge Facility (the "Sellers Title Insurance
Cost Contribution"), (B) two thirds of the cost of the Owner's Title Policy,
excluding the survey endorsement, for the Quail Ridge Facility and (C) the cost
of any other endorsements required to resolve any objections to title set forth
in the Title and Survey Objection Letters (as defined below), if and to the
extent Sellers agree to cure such objections in accordance with the terms of
this Agreement;
(iii) Purchaser shall pay (A) the cost, if any, of the Owner's Title
Policies for all of the Facilities other than the Quail Ridge Facility in excess
of the Sellers Title Insurance Cost Contribution, (B) one third of the cost
of the Owner's Title Policy for the Quail Ridge Facility, (C) the cost of the
survey endorsement for the Quail Ridge Facility and (D) the cost of the Surveys
(as defined below).
(iv) Except as otherwise provided in Paragraph 5(a)(viii),
Purchaser shall pay the cost of any recording fees;
(v) Purchaser and Sellers shall each pay their own attorney's
fees;
(vi) Purchaser and Sellers shall share any escrow fees on a 50-50
basis;
(vii) Purchaser will bear all costs associated with its Due
Diligence Review (as defined below) and shall reimburse Sellers for the due
diligence expenses incurred by Sellers as described and in the amounts set forth
in Exhibit E;
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(viii) In the event Sellers elect to cure any objections Purchaser
makes to the items described in the Title Commitments, then Sellers shall pay
the cost of obtaining and recording any releases necessary to deliver title to
the Sellers' Assets in accordance with the terms of this Agreement; and
(ix) Purchaser shall pay or shall cause NHP to pay any costs and fees
associated with the assumption of the Existing Financing.
(b) PRORATIONS AND ADJUSTMENTS. (b) Prorations and Adjustments.
(i) All revenues (including but not limited to rent due from the
residents of the Facilities) and expenses (including but not limited to payroll
and employee benefits) related to the ownership or operation of the Sellers'
Assets shall be prorated as of the Closing Date, with Sellers responsible
therefor for the period prior to the Closing Date and with Purchaser responsible
therefor for the period from and after the Closing Date.
(ii) Real and personal property taxes shall be prorated as of the
Closing Date, with Sellers responsible therefor for the period prior to the
Closing Date and with Purchaser respon-sible therefor for the period from and
after the Closing Date.
(iii) Sellers shall arrange for a final statement with respect to all
utilities serving the Real Property and the Facilities as of the Closing Date
and shall pay all fees identified thereon and Purchaser shall arrange for all
such utilities to be billed in its name from and after the Closing Date and
shall pay all fees due therefor as of the Closing Date.
(iv) In the event Purchaser receives a credit against its license
application fees for any amounts paid by Sellers for the period covered by
Purchaser' license, Purchaser shall remit to Sellers at closing an amount equal
to such credit.
(v) Purchaser shall receive a credit at each applicable Closing against
the Purchaser Cash Payment for the amounts due to Purchaser from the applicable
Seller for the cost of certain repairs to the Facilities as set forth more fully
in Exhibit F.
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6. POSSESSION 6. POSSESSION
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On the Closing Date, Sellers shall deliver to Purchaser and/or NHP
possession of the Facilities, subject only to rights of residents of the
Facilities and the rights of Sellers under the Interim Subleases, if applicable,
and of JEA under the New Management Agreement.
7. REPRESENTATIONS AND WARRANTIES OF SELLER 7. REPRESENTATIONS
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AND WARRANTIES OF SELLER
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Each Sellers does hereby warrant and represent to Purchaser on behalf of
itself and not on behalf of any other Seller that:
(a) AUTHORITY. Such (a) Authority. Seller has full power and
authority to execute and deliver this Agreement and all related documents, and
to carry out the transactions contemplated herein. This Agreement is valid,
binding and enforceable against such Seller in accordance with its terms, except
as such enforceability may be limited by creditors' rights laws or general
principals of equity. The execution of this Agreement and the consummation of
the transactions contemplated herein do not result in a breach of the terms and
conditions of nor constitute a default under or violation of such Seller's
corporate formation documents or of any law, regulation, court order, mortgage,
note, bond, indenture, agreement, license or other instrument or obligation to
which such Seller is now a party or by which such Seller or any of the assets of
such Seller may be bound or affected.
(b) NECESSARY ACTION.(B) NECESSARY ACTION. Such Seller will make
all reasonable efforts, with all due diligence, to take all action and obtain
all consents prior to the Closing Date necessary for it to lawfully enter into
and carry out the terms of this Agreement, including, but not limited to,
providing any notice of the sale of the Facility owned by it to the residents of
the Facility or any governmental agency or authority, to the extent the same may
be required by law.
(c) (c) LITIGATION.Litigation. Except as otherwise described in
Exhibit G attached hereto, there are no claims, actions, suits, investigations
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or proceedings pending or, to the best of such Seller's knowledge, threatened by
or before any court, administrative agency or other governmental authority or
any arbitrator against or relating to such Seller or with respect to the
ownership or operation of the Facility owned by it. The transactions
contemplated herein have not been challenged by any governmental agency or any
other person, nor does such Seller know or have reasonable grounds to know, of
any basis for any such actions, suits or proceedings. For purposes hereof a
claim, action, suit, investigation or proceeding shall be deemed to be pending
if the same has been served upon such Seller or such Seller otherwise has actual
knowledge of the existence thereof.
(d) (d) COMPLIANCE WITH LAW.
COMPLIANCE WITH LAW. TO THE BEST OF SELLER'S KNOWLEDGE
(i) The Facility owned by such Seller and its operation and use
are now in compliance with all applicable municipal, county, state and federal
laws, regulations, statutes, ordinances, standards and orders and all
administrative rulings and with all municipal, health, building, land use and
zoning laws and regulations where the failure to comply therewith could have a
material adverse effect on the business, property, condition (financial or
otherwise) or operation of such Facility as a licensed Alzheimer Special Care
Center;
(ii) There are no outstanding deficiencies or work orders of any
authority having jurisdiction over the Facility owned by such Seller requiring
conformity to any applicable statute, regulation, ordinance or by-law pertaining
to Alzheimer Special Care Centers;
(iii) Such Seller is not aware of any claims, requirement or
demand of any licensing or certifying agency supervising or having authority
over the Facility owned by it or otherwise to rework or redesign it or to
provide additional furniture, fixtures, equipment or inventory so as to conform
to or comply with any exiting law, code or standard which has not been fully
satisfied prior to the date hereof or which will not be satisfied prior to the
Closing;
(iv) Such Seller has not received any notice from any governmental
body claiming a violation of any building, zoning, environmental or other laws
or ordinances; and
(v) Such Seller holds a valid and currently effective Certificate
of Occupancy with respect to the Facility owned by it permitting occupancy of
the number of beds/units set forth in Exhibit B hereto and such Seller has
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provided Purchaser with true and correct copy of such Certificate of Occupancy.
(e) STATUS OF SELLER.(E) STATUS OF SELLER. Such Seller is duly
formed, organized, validly existing and in good standing under the laws of the
State of its formation as set forth in the introductory paragraph of this
Agreement and is in good standing under the laws of the State in which the
Facility owned by it is located if other than the state of its formation.
(f) (f) THE FACILITIES.THE FACILITY. The Facility owned by such
Seller is an Alzheimer Special Care Facility known as, located at and containing
the number of beds/units described on Exhibit B.
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(g) (g) EMPLOYEES OF THE FACILITY; UNIONS.EMPLOYEES OF THE
FACILITY; UNIONS. None of the employees of the Facility owned by such Seller
are members of a labor union or subject to any collective bargaining agreement
nor, to the best of such Seller's knowledge, are any such employees engaged in
any union organizing activities. Such Seller is not a party to any labor
dispute or grievances.
(h) SURVEYS AND REPORTS.(H) SURVEYS AND REPORTS. Complete copies
of the most recent survey reports, any waivers of deficiencies, plans of
correction, and any other investigative reports issued with respect to the
Facility owned by such Seller have been provided by such Seller to Purchaser
prior to, or will be provided to Purchaser within ten (10) days following
execution of, this Agreement.
(i) HAZARDOUS MATERIALS. (I) HAZARDOUS MATERIALS. During the time
in which such Seller has owned the Real Property and the Facility owned by it,
such Seller has not used, generated, transported, treated, constructed,
deposited, stored, disposed, placed or located at, on, under or from such Real
Property or Facility any flammable explosives, radioactive materials, hazardous
or toxic substances, materials or wastes, pollutants or contaminants defined,
listed or regulated by any local, state or federal environmental laws other than
hazardous substances, materials and wastes which are used, stored and disposed
of by such Seller in the ordinary course of the business conducted at the
Facility in accordance with all applicable local, state and federal hazardous
substance laws.
(j) CONDEMNATION. (j) Condemnation. There is presently no pending
or, to the best of such Seller's knowledge, contemplated or threatened,
condemnation of the Facility owned by such Seller or any part thereof.
(K) OPERATING CONTRACTS. Set forth in Exhibit H is a true and correct list
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of all operating contracts and equipment leases to which such Seller is a party
in connection with its ownership and/or operation of the Facility owned by it
(collectively, the "Operating Contracts"). Such Seller has provided to
Purchaser prior to the Execution Date or will provide to Purchaser within five
(5) days after the Execution Date, true and correct copies of the Operating
Contracts to which it is a party. Each of the Operating Contracts to which such
Seller is a party is in full force and effect and none of the Operating
Contracts to which such Seller is a party has been modified or amended except as
set forth in Exhibit H. Such Seller has no notice or knowledge that it or
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the Facility owned by it is in default of any obligations under the Operating
Contracts to which such Seller is a party nor is such Seller aware of any
default or any action which, with the passage or time or the giving of notice or
both would constitute a default, under the Operating Contracts to which such
Seller is a party by any other party thereto.
(l) DISLOSURE. Such Seller has not failed to disclose to Purchaser any
material and adverse fact or condition known to such Seller regarding this
Agreement, the Sellers' Assets which are owned by it or the Transaction and no
representation or warranty by such Seller contained in this Agreement and no
statement contained in any certificate, list, exhibit, or other instrument
furnished or to be furnished to Purchaser pursuant hereto, or in connection with
the Transaction, contains or will contain any untrue statement of a material
fact, or omits or will omit to state any material facts which are necessary in
order to make the statements contained herein or therein not misleading. All
information to be disclosed by such Seller hereunder shall be true and correct
in all material respects, will not contain any misstatement of any material
fact, and shall not omit to state any material fact necessary to make such
information not misleading.
8. REPRESENTATIONS AND WARRANTIES OF PURCHASER 8.
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REPRESENTATIONS AND WARRANTIES OF PURCHASER
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Purchaser hereby warrants and represents to Sellers that:
(a) STATUS OF PURCHASER. (A) STATUS OF PURCHASER. Purchaser is
corporation, duly organized and validly existing and in good standing under the
laws of the State of Washington and is duly qualified to do business as a
foreign corporation and in good standing in each of the states in which the
Facilities are located.
(b) AUTHORITY. (B) AUTHORITY. Purchaser has full power and
authority to execute and to deliver this Agreement and all related documents,
and to carry out the transactions contemplated herein. This Agreement is valid,
binding and enforceable as against Purchaser in accordance with its terms except
as such enforceability may be limited by applicable creditors' rights laws and
general principles of equity. The execution of this Agreement and the
consummation of the transaction contemplated herein does not result in a breach
of the terms and conditions of nor constitute a default under or violation of
Purchaser's Articles of Incorporation or Bylaws or any law, regulations, court
order, mortgage, note, bond, indenture, agreement, license or other instrument
or obligation to which Purchaser is a party or by which Purchaser or any of the
assets of Purchaser may be bound or affected.
(c) LITIGATION. (C) LITIGATION. There is no litigation,
investigation or other proceeding pending or threatened against or relating to
Purchaser, its properties or business which is material to this Agreement, nor
does Purchaser know or have reasonable grounds to know of any basis for any such
action.
(d) NECESSARY ACTION. (D) NECESSARY ACTION. Purchaser will make
all reasonable efforts, with all due diligence, to take all action and obtain
all consents prior to Closing necessary for it to carry out the terms of this
Agreement.
9. BROKERS 9. BROKERS
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Each of the Sellers and Purchaser each represent, covenant, and warrant to
the other that each has employed no broker or finder in connection with the
transaction contemplated herein. Each Seller agrees to indemnify and hold
Purchaser harmless from and against all liability, claims, demands, damages or
costs of any kind, including attorneys' fees, arising from or connected with any
broker's commission or finder's fee or commission or charge claimed to be due
any person arising from such Seller's conduct with respect to this transaction.
Purchaser agrees to indemnify and hold each Seller harmless from and against all
liability, claims, demands, damages or costs of any kind, including attorneys'
fees, arising from or connected with any broker's commission or finder's fee or
commission or charge claimed to be due any person arising from Purchaser's
conduct with respect to this transaction.
10. SELLERS' COVENANTS 10. SELLER'S COVENANTS
------------------- --- -------------------
(a) PRE-CLOSING.(A) PRE-CLOSING. Between the date hereof and
Closing, except as contemplated by this Agreement or with the consent of
Purchaser, each of the Sellers does hereby covenant as follows on behalf of
itself and not on behalf of the other Sellers:
(i) Such Seller will operate the Facility owned by it in the
ordinary course of business and such Seller will not enter into any contract,
commitment or agreement affecting the Sellers' Assets owned by such Seller
except in the ordinary course of business and such Seller will advise Purchaser
of any contracts or commitments which it enters, whether in the ordinary course
of business or otherwise;
(ii) Such Seller will provide Purchaser and NHP and their agents
and employees with access to the Facility owned by it and to the books and
records of such Facility for the purpose of enabling Purchaser to conduct its
Due Diligence Review; provided, however, that such access and inspection shall
be with at least 24 hours prior notice and during normal business hours at such
time and in such manner as the parties shall reasonably agree upon, and such
Seller agrees to make available to Purchaser the regular, internally prepared
and un-audited monthly financial statements, including the income statement and
balance sheet, regarding the Facility owned by it as and when they customarily
become available to such Seller;
(iii) Such Seller will not take any action inconsistent with its
obligations under this Agreement or which could hinder or delay the consummation
of the transactions contemplated by this Agreement;
(iv) Such Seller will maintain in force the existing hazard and
liability insurance policies, or comparable coverage, for the Seller's Assets
owned by it;
(v) Such Seller will maintain the Seller's Assets owned by it in
substantially the same condition as they are in as of the Execution Date,
ordinary wear and tear excepted;
(v) Such Seller will promptly notify Purchaser of any changes
affecting the validity or accuracy of its representations and warranties of
which it becomes aware prior to the Closing Date;
(vi) Such Seller shall negotiate in good faith with Purchaser the terms
of one or more Subleases (the "Interim Subleases") under which the applicable
Sellers will continue to operate any of the Facilities which, as of the Closing
Date are not licensed in the name of Purchaser until such time as a license for
such Facility or Facilities is issued in the name of Purchaser (the "Licensure
Date");
(vii) Such Seller shall cause JEA to negotiate in good faith with Purchaser
with respect to the New Management Agreement;
(viii) In the case of the owner of the Quail Ridge Facility in Lubbock,
Texas, such Seller shall, upon request, cooperate in NHP's efforts to secure the
consent needed to assume the Existing Financing, it being understood and agreed
that such Seller's obligations with respect thereto shall be limited to the
cooperation obligation described herein and that such Seller has not assumed, in
any manner, responsibility for securing the consent of the lender to the
assumption of the Existing Financing.
(b) CLOSING. (b) Closing. At Closing, each of the Sellers agrees
that it will:
(i) Execute and deliver such endorsements, assignments and other
instruments of transfer and conveyance as shall be reasonable or necessary to
transfer and assign the Sellers' Assets to Purchaser as herein provided,
conveying title to the Real Property and the Facilities subject only to the
Permitted Exceptions (as hereinafter defined) and conveying to title to the
remainder of the Sellers' Assets free and clear of all liens and encumbrances;
(ii) Deliver to Purchaser a certificate dated as of the date of
Closing certifying in such detail as Purchaser may reasonably specify that such
Seller's representations and warranties contained in this Agreement or in any
certificate or document delivered in connection with this Agreement or the
transactions contemplated herein are true at and as of the date of Closing as
though such representations and warranties were then again made and that such
Seller shall have performed its obligations under this Agreement that are to be
performed prior to or at Closing;
(iii) Pay for any of the costs and expenses identified in
Paragraph 5 for which it is responsible;
(iv) Cause JEA to execute and deliver the New Management Agreement and
the Lodi Consulting Agreement; and
(v) Deliver the documents described in Section 4(a) to which such Seller is
a party.
(c) POST-CLOSING.(C) POST-CLOSING. After Closing, each of the
Sellers which conveyed a Facility or Facilities at Closing agrees that it will
take such actions and properly execute and deliver to Purchaser such further
instruments of assignment, conveyance and transfer as, in the reasonable opinion
of counsel for Purchaser, may be necessary to assure, complete and evidence the
full and effective transfer and conveyance of Sellers' Assets and the continued
licensing of the Facilities.
11. PURCHASER'S COVENANTS 11. PURCHASER'S COVENANTS
---------------------- --- ----------------------
(a) PRE-CLOSING.(A) PRE-CLOSING. Between the date hereof and
Closing, except as contemplated by this Agreement or with the consent of
Sellers, Purchaser agrees that:
(i) Purchaser will not take any action inconsistent with its
obligations under this Agreement or which could hinder or delay the consummation
of the transaction contemplated by this Agreement;
(ii) Purchaser will make all reasonable efforts, with all due
diligence, to obtain all consents, approvals and licenses necessary to permit
the consummation of the transaction contemplated by this Agreement and/or
necessary to permit Purchaser to own and operate the Facilities as of the
Closing Date; provided, however, Purchaser shall not be deemed to be in breach
of its obligations under this Section 11(a)(ii) in the event it is not licensed
by Closing to operate any or all of the Facilities;
(iii) Purchaser will proceed with all due diligence and at its
sole cost and expense to conduct such investigations with respect to Sellers'
Assets as it deems to be reasonably necessary in connection with its purchase
thereof, including, but not limited to, zoning investigations, soil studies,
environmental assessments, seismic assessments, wetlands reports, appraisals,
investigations of Sellers' and the Facilities' books and records and operations,
dry rot and termite inspections and structural inspections, provided no
investigations will be physically intrusive on the Real Property or the
Facilities unless Sellers consent thereto, which consents shall not be
unreasonably withheld (the "Due Diligence Review"); provided, however, that
Purchaser shall maintain the confidentiality of any documents or information
obtained by it from Sellers during the course of its Due Diligence Review and
shall return the same to Sellers in the event the transaction provided for
herein fails to close for any reason whatsoever. Furthermore, Purchaser shall
indemnify, defend and hold Sellers and the Sellers' Assets harmless of and from
any and all losses, liabilities, costs, expenses (including without limitation,
reasonable attorney's fees and costs of court at trial and on appeal), damages,
liens, claims (including, without limitation mechanics' or materialmans' liens
or claims of liens), actions and causes of action arising from or relating to
Purchaser (or Purchaser's agents, employees, or representatives) entering on the
Real Property and/or the Facilities to test, study, investigate or inspect the
same or any part thereof, whether pursuant to this paragraph or otherwise or
from a breach by Purchaser of its confidentiality obligations hereunder. The
foregoing indemnity shall expressly survive the Closing or the earlier
termination of this Agreement;
(iv) Within fifteen (15) days after the date of their delivery to
Purchaser, Purchaser will advise Sellers in writing which, if any of the
Operating Contracts it elects to assume as of the Closing Date (the "Assumed
Operating Contracts"); and
(v) Purchaser will negotiate in good faith with JEA the terms of a
Consulting Agreement with respect to the Lodi Facility under which Purchaser
and JEA will provide certain accounting and consulting services to the Lodi
Facility until Purchaser and JEA are licensed to lease and manage the Lodi
Facility in accordance with California law (the "Lodi Consulting Agreement") and
a Management Agreement under which JEA will provide certain management services
to the Facilities, including the Lodi Facility, from and after the later of the
Closing Date or the Licensure Date, the material terms of which are described
more fully in Exhibit I hereto (the "New Management Agreement");
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(vi) Purchaser will take such action as may be necessary to cause NHP
to proceed with all due diligence to secure such consents as may be reasonably
necessary for its assumption of the Existing Financing.
(b) CLOSING.(B) CLOSING. At Closing, Purchaser agrees that it
will:
(i) Pay or cause NHP to pay the portion of the Cash Balance
applicable to the Facility or Facilities included in the Closing;
(ii) Deliver to Sellers a Certificate dated as of the date of
Closing certifying in such detail as Sellers may reasonably specify the
fulfillment of the conditions set forth in Paragraph 13(b)(i);
(iii) Pay for any of the costs and expenses specified in Paragraph
5 for which it is responsible;
(iv) Deliver or caused to be delivered the documents described in
Section 4(b).
(c) POST-CLOSING. (C) POST-CLOSING. After Closing, Purchaser
agrees that it will take such actions and properly execute and deliver such
further instruments as Sellers may reasonably request to assure, complete and
evidence the transactions provided for in this Agreement.
12. MUTUAL COVENANTS 12. MUTUAL COVENANTS
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Following the execution of this Agreement, Purchaser and Sellers agree:
(a) If any event should occur, either within or without the knowledge
or control of Purchaser or Sellers which would prevent fulfillment of the
conditions to the obligations of any party hereto to consummate the transactions
contemplated by this Agreement, to use its or their reasonable efforts to cure
the same as expeditiously as possible.
(b) To cooperate fully with each other in preparing, filing,
prosecuting, and taking any other actions which are or may be reasonable and
necessary to obtain the consent of any governmental instrumentality or any third
party or to accomplish the transactions contemplated by this Agreement.
(c) To effect in a timely fashion all pro-rations contemplated in this
Agreement.
13. CONDITIONS PRECEDENT TO CLOSING 13. CONDITIONS PRECEDENT TO
------------------------------- --- -----------------------
CLOSING
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(a) PURCHASER'S CONDITIONS.(A) PURCHASER'S CONDITIONS. Purchaser'
obligation to purchase the Sellers' Assets is subject to the following
conditions, any one or all of which may be waived by Purchaser at or prior to
Closing:
(i) TITLE AND SURVEY REVIEW. (i) Title and Survey Review.
(A) As soon as practicable after the Execution Date (the "Title
Delivery Date"), Purchaser shall obtain (i) title reports or commitments (the
"Title Commitments") for extended coverage title insurance policies with respect
to the Real Property issued by the Title Company, along with legible copies of
all of the exception documents referenced therein and (ii) a litigation,
bankruptcy, judgment and security interest search in the names of the Sellers
and the Facilities (the "Litigation and Lien Search").
(B) Within five (5) business days after the Execution Date (the
"Survey Delivery Date"), Purchaser shall order ALTA surveys with respect to any
of the Real Property not covered by the Existing Surveys (the "New Surveys"),
which shall be prepared by surveyors acceptable to Purchaser (the "Surveyors")
and shall request that the surveys with respect to the Facilities other than the
Facilities located in Lodi, California, Lubbock, Texas and El Paso, Texas (the
"Existing Surveys") be updated (if the same are dated more than ninety (90) days
prior to the Execution Date), and recertified to Purchaser, NHP and the Title
Company (the "Recertified Surveys" and together with the New Surveys, the
"Surveys"), with, each in case, the intent of the parties being that at Closing
Purchaser will receive ALTA Surveys which are sufficient to cause the Title
Company to issue the Title Policies (as defined below) without the survey
exception or, in the case of the portion of the Real Property located in Texas,
with the survey exception limited to shortages in area (the "Surveys"). The New
Surveys shall be certified to the Purchaser, Sellers, the Title Company and NHP
and, upon completion thereof, Purchaser shall cause the New Surveys and the
Recertified Surveys to be delivered by the Surveyors to Purchaser, Sellers, the
Title Company and NHP.
(C) Within five (5) business days after Purchaser' receipt of the last
of the Title Commitment (including legible copies of all of the exception
documents referenced therein), the results of the Litigation and Lien Search and
the Survey with respect to a Facility, Purchaser shall advise the applicable
Seller in writing on a Facility by Facility basis of its objections, if any, to
the matters reflected therein (a "Title and Survey Objection Letter").
(D) Within three (3) business days, in the case of any of the
Facilities which are subject to an anticipated March 31, 2004 Closing and within
five (5) business days, in the case of any of the Facilities which are subject
to an anticipated Closing subsequent to March 31, 2004, after the applicable
Seller's receipt of the Title and Survey Objection Letter related to the
Facility owned by it, such Seller shall specify by written notice delivered to
Purchaser which of the objections described therein it will correct at or prior
to the Closing Date and which of such objections it refuses to correct at or
prior to the Closing Date (the "Seller Title and Survey Response Notice"). If
any Seller fails to deliver a Seller Title and Survey Response Notice within
said three (3) or five (5) business day period, as applicable, such Sellers
shall be deemed to have agreed to correct all of the matters to which Purchaser
objected in the applicable Title and Survey Objection Letter. If a Seller
refuses to correct some or all of the matters objected to in the applicable
Title and Survey Objection Letter, Purchaser shall have three (3) business days,
in the case of any of the Facilities which are subject to an anticipated March
31, 2004 Closing and within five (5) business days, in the case of any of the
Facilities which are subject to an anticipated Closing subsequent to March 31,
2004, after receipt of a Seller Title and Survey Response Notice in which to
advise the applicable Seller of its decision to close, notwithstanding the
defects which such Seller has refused to correct, or of its election to
terminate this Agreement either in its entirety or solely as to the affected
Facility(ies). In the event Purchaser elects to terminate this Agreement as a
result of the existence of title, survey or defects which a Seller refuses to
correct by Closing, neither party shall have any further rights or obligations
hereunder or with respect to the affected Facility or Facilities, as applicable.
(E) Any matter reflected on the Title Commitments or in the
results of the Litigation and Lien Search or on the Surveys and not objected to
by Purchaser or as to which Purchaser waives its objections in accordance with
the terms hereof, shall be deemed accepted by Purchaser and shall for purposes
hereof be deemed to be the "Permitted Exceptions."
4.02.Title Insurance.4.02.Title Insurance. (F) At Closing, Sellers shall
cause the Title Company to issue one or more extended coverage title
insurance policies to Purchaser or NHP insuring Purchaser's or NHP's title to
the Real Property as of the Closing Date subject to no exceptions other than the
Permitted Exceptions in an aggregate amount equal to the Purchase Price (unless
a higher amount of title insurance has been specified by Purchaser and the
additional premium attributable to such higher amount has been deposited by
Purchaser with the Escrow Agent at or prior to Closing) (the "Owner's Title
Policies").
4.03.Survey.4.03.Survey. (G) At Closing, the Surveyors shall issue
------------------------
to Purchaser the Surveys of the Real Property revised to reflect any objections
included in the Title and Survey Objection Letters, if and to the extent Sellers
have agreed to correct the same in accordance with the terms hereof and
certified in the manner specified herein.
(ii) ASBESTOS AND ENVIRONMENTAL REPORT. As soon as practicable after
the execution of this Agreement, Purchaser shall obtain from duly licensed
environmental inspection companies reports with respect to the Facilities
indicating (A) the presence (or absence) of asbestos in each of the Facilities,
the level thereof, whether it is friable or non-friable, if it is friable the
recommended steps to correct the problem and the anticipated cost thereof and
(B) the results of a Phase I Assessment of the Real Property and the Facilities
(the "Asbestos and Environmental Reports"). Within three (3) business days, in
the case of any of the Facilities which are subject to an anticipated March 31,
2004 Closing and within five (5) business days, in the case of any of the
Facilities which are subject to an anticipated Closing subsequent to March 31,
2004, after Purchaser's receipt of the Asbestos and Environmental Reports (the
"Environmental Review Period") Purchaser shall approve or disapprove each of the
Asbestos and Environmental Reports in Purchaser's sole and absolute discretion.
Should Purchaser disapprove the Asbestos and Environmental Reports, it shall
notify the applicable Seller in writing of such disapproval and the reasons
therefor at or prior to the expiration of the Environmental Review Period (the
"Environmental Notice"). If any Seller advises Purchaser within three (3)
business days, in the case of any of the Facilities which are subject to an
anticipated March 31, 2004 Closing and within five (5) business days, in the
case of any of the Facilities which are subject to an anticipated Closing
subsequent to March 31, 2004, after their receipt of Purchaser's Environmental
Notice that such Seller is unwilling or unable to remedy all such objections
prior to the Closing Date, Purchaser shall have two (2) business days thereafter
in which to advise the applicable Seller in writing of its election either to
waive the matters to which it has objected and which Sellers are unwilling or
unable to remedy or to terminate this Agreement either in its entirety or solely
as to the affected Facility(ies).
(iii) DUE DILIGENCE REVIEW. Purchaser shall be satisfied with the
results of the Due Diligence Review; provided, however, if Purchaser is not
satisfied with the results of its Due Diligence Review, Purchaser shall have the
right to terminate this Agreement either in its entirety or solely as to the
affected Facility(ies).
( (iv) REGULATORY APPROVAL; LICENSING.IV) REGULATORY APPROVAL;
LICENSING. Either (i) the approval of the transaction by the appropriate
regulatory and licensing authorities and agencies of the states where each of
the Facilities is located, including receipt by Purchaser of all consents,
approvals, licenses and certificates as may be necessary for Purchaser lawfully
to own and operate the Facilities or (ii) the execution and delivery by the
applicable Seller of the Interim Sublease with respect to any Facility for which
Purchaser does not hold a license in its own name as of the Closing Date.
(v) DAMAGE AND CONDEMNATION. (V) DAMAGE AND CONDEMNATION.
Prior to the Closing Date, the risk of physical loss to the Sellers' Assets
shall be borne by Sellers. Accordingly, it shall be a condition to Purchaser's
obligation hereunder that prior to the Closing Date, no material portion of any
of the Facilities nor any material portion of any of the Sellers' Assets shall
have been damaged or destroyed by fire or other casualty, or shall have been
taken or condemned by any public or quasi-public authority under the power of
eminent domain, in any such case to an extent which causes the affected
Facility(ies) to lose use of any of its licensed beds/units or to become
impracticable to operate as of the Closing Date or the postponement thereof, if
applicable. If the Sellers' Assets shall have been so damaged or destroyed and
Purchaser waives this condition, the applicable Seller shall assign to Purchaser
all of its rights to any insurance proceeds in the connection therewith and
the Purchase Price shall be reduced by any deductible which Purchaser shall be
required to pay in connection with such damage or destruction or by any
uninsured costs of repair or reconstruction. If the Sellers' Assets shall be so
taken or condemned prior to Closing, and if Purchaser waive this condition,
Sellers shall pay or assign to Purchaser all Sellers' right to the proceeds of
any condemnation award in connection thereof and the Purchase Price shall be
reduced by Purchaser' reasonable estimate of the amount by which the cost to
repair the portion of the Sellers' Assets affected by such taking exceeds such
condemnation award. Purchaser may, however, in lieu of closing, elect to
exercise its rights under Paragraph 15(a) (iii) with respect to the affected
Facility or Facilities if a material portion of the Seller's Assets is damaged,
destroyed or taken prior to the Closing Date but such election shall not affect
Purchaser obligation to Purchaser to purchase, or the Sellers' obligation to
sell, the remainder of the Sellers' Assets in accordance with the terms of this
Agreement.
(vi) NO DEFAULTS. (VI) NO DEFAULTS. Sellers shall not be in
default under any mortgage, contract, lease or other agreement affecting or
relating to the Sellers' Assets including, but not limited to, the documents
evidencing or securing the Existing Financing. provided, however, if such a
default exists, Purchaser shall have the right to terminate this Agreement
either in its entirety or solely as to the affected Facility(ies)
(vii) SELLERS' PERFORMANCE. (VII) SELLER'S PERFORMANCE. Each
Seller shall have performed all of its obligations under this Agreement
that are to be performed prior to or at Closing to the extent the same have not
been waived by Purchaser in accordance with the terms hereof; provided, however,
if Seller has not performed its obligations under this Agreement, Purchaser
shall have the right to terminate this Agreement either in its entirety or
solely as to the affected Facility(ies).
(viii) SELLERS' REPRESENTATIONS AND WARRANTIES. (VIII) SELLER'S
REPRESENTATIONS AND WARRANTIES. Sellers' representations and warranties
contained in this Agreement or in any certificate or document delivered in
connection with this Agreement or the transactions contemplated herein shall be
true in all material respects at and as of the date of Closing as though such
representations and warranties were then again made; provided, however, if
Seller's representations and warranties are not materially true at Closing,
Purchaser shall have the right to terminate this Agreement either in its
entirety or solely as to the affected Facility(ies).
(ix) NO MATERIAL ADVERSE CHANGE. There shall be no material
adverse change in the financial or physical condition or results of operations
of each of the Facilities; provided, however, if there occurs a material adverse
change which affects less than all of the Facilities, then Purchaser shall have
the right either to terminate this Agreement in its entirety and solely as to
the affected Facility(ies).
(x) THE EXISTING FINANCING. In the case of the Quail Ridge Facility,
NHP shall have secured the consent of the lender to the assumption of the
Existing Financing.
(xi) BOARD APPROVAL. Purchaser shall have secured the approval of the
Transaction by its Board of Directors.
For the avoidance of doubt, in the event that as of the Closing, any of the
foregoing conditions to Closing have been satisfied as to some, but not all, of
the Facilities, Purchaser shall have the right to either (A) waive the
condition(s) which has not been satisfied and proceed with the Closing or (B)
terminate this Agreement in its entirety or (C) terminate this Agreement solely
as to the Facilities with respect to which the condition(s) to Closing has not
been satisfied.
(b) SELLERS' CONDITIONS.(b) Seller's Conditions. Sellers' obligation to
sell Sellers' Assets hereunder is subject to the fulfillment of each of the
following conditions, any one or all of which may be waived by Seller in
writing:
(i) PURCHASER'S REPRESENTATIONS AND WARRANTIES. (i)
Purchaser's Representations and Warranties. Purchaser's representations and
warranties contained in this Agreement or in any certificate or document
delivered in connection with this Agreement or the transactions contem-plated
herein shall be true in all material respects at and as of the date of Closing
as though such representations and warranties were then again made; provided,
however, if Purchaser's representations and warranties are not materially true
at Closing, Seller shall have the right to terminate this Agreement either in
its entirety or solely as to the affected Facility(ies).
(ii) PURCHASER'S PERFORMANCE. (ii) Purchaser's Performance.
Purchaser shall have performed its obligations under this Agreement that are to
be performed prior to or at Closing to the extent the same have not been waived
by Seller in accordance with the terms hereof; provided, however, if Purchaser
has not performed its obligations hereunder at Closing, Purchaser shall have the
right to terminate this Agreement either in its entirety or solely as to
the affected Facility(ies).
For the avoidance of doubt, in the event that as of the Closing, any of the
foregoing conditions to Closing have been satisfied as to some, but not all, of
the Facilities, Seller shall have the right to either (A) waive the condition(s)
which has not been satisfied and proceed with the Closing or (B) terminate this
Agreement in its entirety or (C) terminate this Agreement solely as to the
Facilities with respect to which the condition(s) to Closing has not been
satisfied; provided, however, if, as a result of the exercise by Seller of its
rights under clause (C), the aggregate number of Facilities which Seller
proposes to convey to Purchaser at Closing is less than five (5), Purchaser
shall have the option of terminating this Agreement in its entirety.
14. INDEMNIFICATION
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(a) BY SELLERS. Each (A) BY SELLER. Seller shall indemnify, defend and
hold harmless Purchaser from and against any and all costs, losses,
damages, liabilities and obligations arising from or related to:
(i) The ownership and/or operation by such Seller of the portion of the
Sellers' Assets owned by it which exist as of the Closing Date;
(ii) Any misrepresentation, breach of warranty or non-fulfillment of
any agreement or covenant on the part of such Seller under this Agreement or
from any misrepresentation in or omission from any certificate furnished or to
be furnished by such Seller to Purchaser hereunder;
(iii) Any litigation, investigations or other proceedings pending or
threatened against or relating to the Facility owned by such Seller or the
business being conducted thereon or against or relating to such Seller, its
properties or business, including but not limited to any such litigation,
investigations or other proceedings which may be disclosed to Purchaser in this
Agreement, or any exhibit attached to this Agreement, or otherwise; and
(iv) Any and all actions, suits, proceedings, demands, assessments,
judgments, costs and legal and other expenses, including, but not limited to,
reasonable attorney's fees, incident to any of the foregoing;
For purposes of this Paragraph 14, an obligation shall be deemed to "exist" as
of the Closing if it relates to events which occurred prior to the Closing even
if it is not asserted until after the Closing.
By their signatures set forth below, ABI, which is which is directly or
indirectly a member of each of the Sellers other than El Paso Care Group, Ltd
and Lodi Care Group LLC (the "JCI Sellers") and JCI, which is directly or
indirectly a member or general partner (in the case of the JCI Seller which is a
limited partnership) of the JCI Sellers, and each of which is currently
anticipated to be a party designated by Seller pursuant to Exhibit D to receive
---------
a portion of the Additional Purchase Price due hereunder and accordingly will
derive a benefit from the transaction provided for herein, does hereby
absolutely and unconditionally guarantee, on several, but not joint, basis based
on its interest in the Additional Purchase Price, the payment of the indemnity
obligations of Sellers under this Section 14(a) and each does hereby further
agree that Purchaser shall have the right to enforce the guarantee obligations
of Sellers directly against Guarantors (or any successor in interest to either
or both of the Guarantors), subject to the limitation on each Guarantor's
liability as set forth herein, without first seeking to recover the same from
Sellers.
Purchaser acknowledges and agrees that its recourse under this Section 14(a)
whether against Sellers or Guarantors or such other person(s) or entity(ies)
hereafter designated by Sellers or Guarantors pursuant to Exhibit D to receive
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the Additional Purchase Price payments from Purchaser shall be subject to the
limitation that the amounts due to Purchaser (i) shall be payable solely by
means of an offset by Purchaser against the Additional Purchase Price due to the
applicable Guarantor and (ii) shall in no event exceed the amount of the
Additional Purchase Price due to the applicable Guarantor or so much thereof as
may be due and owing at the time Purchaser exercises its offset rights.
In furtherance and not in limitation of the foregoing, any and all
references in this Section 14(a) to Guarantors shall be deemed to be references
to Guarantors or the persons or entities then entitled to receive the Additional
Purchase Price payments pursuant to Exhibit D.
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(b) BY PURCHASER. (B) BY PURCHASER. Purchaser shall indemnify, defend
and hold Sellers harmless from and against any and all costs, losses, damages,
liabilities and obligations arising from or related to:
(i) Except as otherwise provided in this Agreement or in the New
Management Agreement, the ownership and operation of the Sellers' Assets from
and after the Closing including, but not limited to, any costs, losses, damages,
liabilities and obligations which may be imposed on the applicable Sellers or
any affiliate or guarantor thereof under the Vehicle Leases and/or under the
Existing Financing in the event Purchaser, in the case of the Vehicle Leases, or
Purchaser or NHP, in the case of the Existing Financing, is unable to secure a
release of Sellers or their affiliates, including any guarantors thereof, from
liability thereunder from and after the Closing, it being understood and agreed
that Purchaser shall have no obligation to indemnify Sellers or any affiliate of
Sellers or any guarantor of the Vehicles Leases or the Existing Financing with
respect to costs, losses, damages, liabilities and obligations arising from or
related to the acts or omissions of JEA under the New Management Agreement;
(ii) Any misrepresentation, breach of warranty or non-fulfillment of
any agreement on the part of Purchaser under this Agreement or from any
misrepresentation in or omission from any certificate furnished or to be
furnished by Purchaser to Sellers hereunder; and
(iii) Any and all actions, suits, proceedings, demands, assessments,
judgments, costs and legal and other expenses, including, but not limited to,
reasonable attorney's fees, incident to any of the foregoing.
15. TERMINATION15. TERMINATION
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(a) GROUNDS FOR TERMINATION. (a) Grounds for Termination. This Agreement
may be terminated in whole or solely with respect to the affected Facility
or Facilities at the option of the terminating party and the transaction
contemplated herein abandoned in whole or solely with respect to the affected
Facility or Facilities, at the option of the terminating party, at any time
prior to Closing:
(i) By mutual written agreement of the parties;
(ii) By Sellers, if any of the conditions set forth in Paragraph
13(b) shall have become incapable of fulfillment prior to the Closing Date or
such earlier date as may be specifi-cally provided for the performance thereof
(as the same may be extended) through no fault of Sellers and the same shall not
have been waived by Sellers;
(iii) By Purchaser, if any of the conditions set forth in Paragraph
13(a) shall have become incapable of fulfillment prior to the Closing Date or
such earlier date as may be specifi-cally provided for the performance thereof
(as the same may be extended) through no fault of Purchaser and the same shall
not have been waived by Purchaser;
(iv) By either Sellers or Purchaser in the event of a material breach
by the other party of its obligations hereunder;
(v) By either Sellers or Purchaser if the Closing has not occurred by
the Closing Date specified in Paragraph 3 as the same may be extended in
accordance with the terms thereof; and
(vi) By Purchaser upon Purchaser' receipt of written notification of any
fact which would materially change any of the representations or warranties of
Sellers herein.
Provided, however, in the event either party elects to terminate this
Agreement as to less than all of the Facilities, the non terminating party shall
have the right, on written notice to the terminating party, to terminate this
Agreement in its entirety if, as a result thereof, the number of Facilities
remaining to be conveyed to Purchaser is less than five(5).
(b) SELLERS' REMEDIES UPON TERMINATION.(b) Seller's Remedies Upon
Termination. In the event of the termination of this Agreement by Sellers under
Paragraphs 15(a) (ii) or (iv) or under Paragraph 15(a)(v) in the event the
Closing has failed to occur as a result of a material breach by Purchaser of its
obligations hereunder, Purchaser and Sellers acknowledge and agree as follows:
PURCHASER SHALL PAY TO SELLERS AS SELLERS' SOLE AND EXCLUSIVE REMEDY AN AMOUNT
NOT TO EXCEED SEVENTY FIVE THOUSAND AND NO/100 DOLLARS ($75,000.00) AS
LIQUIDATED DAMAGES, THE PARTIES ACKNOWLEDGING AND AGREEING THAT THE AMOUNT OF
DAMAGES WHICH SELLERS MAY INCUR AS A RESULT OF SUCH TERMINATION MAY BE DIFFICULT
TO ASCERTAIN AND THAT THE AMOUNT PROVIDED FOR HEREIN IS A REASONABLE AND FAIR
ESTIMATE THEREOF, AFTER WHICH THE PARTIES SHALL HAVE NO FURTHER RIGHTS OR
OBLIGATIONS HEREUNDER. THE LIQUIDATED DAMAGES PROVIDED FOR HEREIN ASSUMES THAT
SELLERS HAVE AGREED TO SELL AND PURCHASERS HAVE AGREED TO PURCHASE NINE
FACILITIES FOR A TOTAL LIQUIDATED DAMAGES AMOUNT PER FACILITY OF EIGHT THOUSAND
THREE HUNDRED THIRTY THREE AND 33/100 DOLLARS ($8,333.33). ACCORDINGLY, THE
ACTUAL AMOUNT DUE FROM PURCAHER TO SELL SHALL BE EIGHT THOUSAND THREE HUNDRED
THIRTY THREE AND 33/100 DOLLARS ($8,333.33) PER FACILITY WHICH IS NOT PURCHASED
BY PURCHASER OR NHP AS A RESULT OF A DEFAULT BY PURCHASER HEREUNDER.
_____________________ __________________
Sellers' Initials Purchaser's Initials
(c) PURCHASER'S REMEDIES UPON TERMINATION.(c) Purchaser's Remedies Upon
Termination. In the event Purchaser has the right to terminate this Agreement by
Purchaser under Paragraphs 15(a) (iii) or (iv) or under Paragraph 15(a) (v)
in the event the Closing has failed to occur as of a material breach by Sellers
of their obligations hereunder, Purchaser shall have the right either to (i)
waive the condition or covenant or breach at issue and proceed with the
transaction on the terms contemplated herein or (ii) seek specific performance
of Sellers' obligations hereunder or (iii) terminate this Agreement and seek to
recover from Sellers the damages suffered by Purchaser as a result of such
breach.
(d) EXPENSES. (D) EXPENSES. In the event the transaction contemplated
hereby is not closed for any reason other than a breach by Purchaser or Sellers,
Sellers and Purchaser shall share on a 50-50 basis all escrow cancellation
fees and title charges. In the event the transaction contemplated hereby is not
closed as a result of a breach by Purchaser, Purchaser shall pay all escrow
cancellation fees and title charges and in the event the transaction
contemplated hereby is not closed as a result of a breach by Sellers, Sellers
shall pay all escrow cancellation fees and title charges,
(e) NO WAIVER. (e) No Waiver. Nothing contained in this Paragraph 15
shall constitute a waiver of or a restriction on any of Purchaser' rights or
remedies in the event of a breach by Sellers of its obligations under this
Agreement.
16. NOTICES16. NOTICES
---------- -------
Any notice, request or other communication to be given by any party hereunder
shall be in writing and shall be sent by registered or certified mail, postage
prepaid, by overnight courier guaranteeing overnight delivery or by facsimile
transmission, to the following address:
To Sellers
or Guarantors: 6060 North Central Expressway
Suite 560
Dallas, Texas 75206
Attn: Craig Spaulding
Telephone: (214) 800-2855
Facsimile: (214) 800-2857
with a copy to: Shannon, Gracey, Ratliff & Miller, LLP
500 North Akard
Suite 2575
Dallas, TX 75201
Attn: Sam Stollenwerck
Telephone: (214) 245-3060
Facsimile: (214) 245-3097
To Purchaser: Emeritus Corporation
3131 Elliott Ave, Suite 500
Seattle, WA 98121
Attn: Bill Shorten
Tel: (206) 298-2909
Fax: (206) 301-4500
with a copy to: The Nathanson Group PLLC
1520 Fourth Avenue, 6th Floor
Seattle, WA 98101
Attn: Randi S. Nathanson
Tel: (206) 623-6239
Fax: (206) 623-1738
Notice shall be deemed upon actual receipt or refusal of receipt thereof
regardless of the method of delivery used.
17. SOLE AGREEMENT17. SOLE AGREEMENT
------------------ ---------------
This Agreement may not be amended or modified in any respect whatsoever except
by instrument in writing signed by the parties hereto. This Agreement
constitutes the entire agreement between the parties hereto and supersedes all
prior negotiations, discussions, writings and agreements between them.
18. ASSIGNMENT18. SUCCESSORS
------------- ----------
The terms of this Agreement shall be binding upon and inure to the benefit
of and be enforceable by and against the heirs and successors of the parties
hereto, including, but not limited to, any party, including Guarantors or any
Seller's Designee or Sub-Designee (as those terms are defined in Exhibit D),
---------
designated to receive all or any portion of the Additional Purchase Price
payments from Purchaser. Further, the parties acknowledge and agree that it is
specifically understood and agreed that at or prior to Closing Purchaser may
assign certain of it rights and obligations hereunder to NHP and/or to
Purchaser's affiliate, ESC IV, L.P. ("ESC") and that such assignment shall be
permitted without the further consent of Sellers. Sellers acknowledge and agree
that notwithstanding that NHP may be the ultimate purchaser of certain of
Seller's Assets, NHP shall not be liable for the obligations of Purchaser under
this Agreement, including the obligation to pay the Additional Purchase Price,
except to the extent NHP specifically assumes for the benefit of Purchaser, but
not Sellers, such obligations under the terms of a Nomination Agreement between
Purchaser and NHP.
19. CAPTIONS19. CAPTIONS
----------- --------
The captions of this agreement are for convenience of reference only and shall
not define or limit any of the terms or provisions hereof.
20. SURVIVAL20. SURVIVAL
----------- --------
All covenants, indemnities, warranties and representations of Purchaser and
Seller herein shall survive the Closing and shall continue in effect for a
period of two (2) years after the Closing Date, after which they shall terminate
and be of no further force or effect except with respect to claims made by one
party against the other during such two (2) year period, in which case the
applicable covenants, indemnities, warranties or representations shall survive
until the full and final resolution of such claims.
21. GOVERNING LAW21. GOVERNING LAW
----------------- --------------
This Agreement shall be governed by and construed in accordance with the laws of
the State of Washington.
22. SEVERABILITY22. SEVERABILITY
--------------- ------------
Should any one or more of the provisions of this Agreement be determined to be
invalid, unlawful or unenforceable in any respect, the validity, legality or
enforceability of the remaining provisions hereof shall not in any way be
affected or impaired thereby.
23. COUNTERPARTS23. COUNTERPARTS
--------------- ------------
This Agreement may be executed in any number of counterparts, each of which
shall be an original; but such counterparts shall together constitute but one
and the same instrument. Facsimile signatures shall be deemed to be originals.
24. CONFIDENTIALITY24. CONFIDENTIALITY
------------------ ---------------
In the event the transaction contemplated by this Agreement fails to close for
any reason, Purchaser and Sellers agree to keep confidential any proprietary
information disclosed to them by the other party during the course of this
transaction.
25. 25. EMPLOYEE BENEFITS
------------------
At Closing, Sellers shall terminate all of the employees of each of the
Facilities and shall pay to them any wages and benefits, i.e., vacation days and
wellness days, which are due as of the Closing Date under applicable State law.
Purchaser agrees to extend an offer of employment to each of the employees of
the Facilities on reasonable comparable terms and conditions to the current
terms of their employment as disclosed to Purchaser by Sellers. Purchaser
acknowledges and agrees that Sellers are relying on Purchaser' agreement as set
forth in this Paragraph 25 in not giving notice to the employees of the
Facilities of the transaction provided for herein under the provisions of the
WARN Act.
26. RESIDENT SECURITY DEPOSITS
----------------------------
(a) At Closing, Sellers shall provide Purchaser with an accounting of
all resident security deposits being held by Sellers as of the Closing Date (the
"Resident Deposits"). Such accounting shall set forth the names of the
residents or prospective residents for whom such funds are held, the amounts
held on behalf of each resident or prospective resident and the Sellers'
warranty that the accounting is true, correct and complete.
(b) On the Closing Date, Sellers shall transfer the Resident Deposits
to the bank accounts designated by the Purchaser and Purchaser shall in writing
acknowledge to Sellers receipt of and expressly assume all Sellers' financial
and custodial obligations with respect thereto, it being the intent and purpose
of this provision that, at Closing, Sellers will be relieved of all fiduciary
and custodial obligations, and that Purchaser will assume all such obligations
and be directly accountable to the residents and prospective residents of the
Facilities, with respect thereto.
(c) Notwithstanding the foregoing, Sellers will indemnify and hold
Purchaser harmless from all liabilities, claims and demands in the event the
amount of the Resident Deposits transferred to the Purchaser's bank accounts as
provided in Paragraph 26(b) did not repre-sent the full amount of such Resident
Deposits then or thereafter shown to have been delivered to Sellers by the
current residents or prospective residents of the Facilities.
27. ACCOUNTS RECEIVABLE
--------------------
(a) Within ten days prior to the Closing Date, Sellers shall provide
Purchaser with a detailed listing of Sellers' accounts receivable which are
anticipated to be outstanding on the Closing Date.
(b) From and after the Closing Date, Purchaser shall assume responsibility
for the billing for and collection of payments on account of services rendered
or goods sold by it on and after the Closing Date and Sellers shall retain all
right, title and interest in and to and all responsibility for the collection of
its accounts receivable for services rendered or goods sold prior to the Closing
Date.
(c) Any payments received by Purchaser after the Closing Date from
residents with balances due for the period prior to and after the Closing Date,
shall be remitted by Purchaser to Sellers first to reduce any pre-Closing Date
balances, with the excess, if any, retained by Purchaser to reduce any
post-Closing Date balances due.
(d) Sellers shall have the right during normal business hours and on
reasonable notice to Purchaser to inspect Purchaser' books and records with
respect to the accounts receivable received by it after the Closing Date from
residents with balances due as of the Closing Date.
28. CONSTRUCTION29. CONSTRUCTION
--------------- ------------
Each party acknowledges and agrees that it has participated in the drafting and
the negotiation of this Agreement and has been represented by counsel during the
course thereof. Accordingly, in the event of a dispute with respect to the
interpretation or enforcement of the terms hereof, no provision shall be
construed so as to favor or disfavor either party hereto.
29. ATTORNEYS' FEES30. ATTORNEYS' FEES
------------------- ----------------
In the event of litigation or other proceedings involving the parties to this
Agreement to enforce any provision of this Agreement, to enforce any remedy
available upon default under this Agreement, or seeking a declaration of the
rights of either party under this Agreement, the prevailing party shall be
entitled to recover from the other such reasonable attorneys' fees and costs as
may be actually incurred, including its costs and fees on appeal.
30. WAIVER OF JURY TRIAL31. WAIVER OF JURY TRIAL
-------------------------- -----------------------
EACH OF THE PARTIES HEREBY KNOWINGLY, VOLUNTARILY AND INTENTIONALLY WAIVES, TO
THE FULLEST EXTENT PERMITTED BY LAW, ANY RIGHT TO TRIAL BY JURY IN ANY LEGAL
ACTION BROUGHT ON OR WITH RESPECT TO THIS AGREEMENT, INCLUDING TO ENFORCE OR
DEFEND ANY RIGHTS HEREUNDER AND AGREES THAT ANY SUCH ACTION SHALL BE TRIED
BEFORE A COURT AND NOT BEFORE A JURY.
31. CALCULATION OF TIME PERIODS 32. Calculation of Time Periods
------------------------------
Unless otherwise specified, in computing any period of time described
herein, the day of the act or event on which the designated period of time
begins to run shall not be included and the last day of the period so computed
shall be included, unless such last day is a Saturday, Sunday or legal holiday,
in which event the period shall run until the next day which is not a Saturday,
Sunday or a legal holiday.
32. EXPENSES33. EXPENSES
----------- --------
Except as otherwise specifically provided herein, each party shall bear its own
costs and expenses (including legal fees and expenses) incurred in connection
with this Agreement and the transactions contemplated hereby.
33. THIRD PARTY BENEFICIARY34. THIRD PARTY BENEFICIARY
---------------------------- -------------------------
Nothing in this Agreement express or implied is intended to and shall not be
construed to confer upon or create in any person (other than the parties hereto,
ESC and NHP in the event Purchaser assigns some or all of its rights hereunder
to ESC and NHP, respectively) any rights or remedies under or by reason of this
Agreement, including without limitation, any right to enforce this Agreement.
34. EXHIBITS. In the event any of the exhibits hereto are not complete
--------
or are missing as of the Execution Date, the parties agree to negotiate in good
faith to agree upon and attach hereto or complete, as applicable, such exhibits
prior to Closing.
IN WITNESS WHEREOF, the parties hereby execute this Agreement as of the day and
year first written above.
SELLERS: LODI CARE GROUP, L.L.C.,
A Washington limited liability company
By: /s/ Craig W. Spaulding
Craig W. Spaulding, Manager
AURORA BAY/COLUMBUS, L.L.C.,
a Georgia limited liability company
By: /s/ Craig W. Spaulding
Craig W. Spaulding, Manager
AURORA BAY/HATTIESBURG, L.L.C,
a Mississippi limited liability company
By: /s/ Craig W. Spaulding
Craig W. Spaulding, Manager
SPRING CREEK GROUP, LTD.,
a Texas limited partnership
By: Aurora Bay/Spring Creek, L.L.C., a
Washington limited liability company
Its: General Partner
By: /s/ Craig W. Spaulding
Craig W. Spaulding, Manager
BEDFORD CARE GROUP, LTD.,
a Texas limited partnership
By: Aurora Bay/Bedford, L.L.C., a
Washington limited liability company
Its: General Partner
By: /s/ Craig W. Spaulding
Craig W. Spaulding, Manager
TYLER GROUP, LTD.,
a Texas limited partnership
By: Aurora Bay/Tyler, L.L.C., a Washington
Limited liability company
Its: General Partner
By: /s/ Craig W. Spaulding
Craig W. Spaulding, Manager
WHITE ROCK CARE GROUP, LTD.,
a Texas limited partnership
By: Aurora Bay/White Rock, L.L.C., a
Washington limited liability company
Its: General Partner
By: /s/ Craig W. Spaulding
Craig W. Spaulding, Manager
EL PASO CARE GROUP, LTD.,
a Texas limited liability company
By: El Paso JCI LLC, a Texas limited
liability company
Its: General Partner
By: /s/ Craig W. Spaulding
Craig W. Spaulding, Manger
LUBBOCK GROUP, LTD.,
a Texas limited partnership
By: Aurora Bay I, L.L.C., a Washington
limited liability company
Its: General Partner
By: /s/ Craig W. Spaulding
Craig W. Spaulding, Manger
GUARANTORS: AURORA BAY INVESMENTS, LLC, a Washington limited
liability company
By: /s/ Craig W. Spaulding
Craig W. Spaulding, Manager
JCI, LLC, a Washington limited liability company
By: /s/ Craig W. Spaulding
Craig W. Spaulding, Manager
PURCHASER : EMERITUS CORPORATION,
a Washington corporation
By: /s/ William M. Shorten
William M. Shorten
Its: Director of Real Estate Finance
EXHIBIT A
LEGAL DESCRIPTION
SEE ATTACHED
EXHIBIT B
FACILITY LIST
Facility Address City ST Zip Units
- --------
Creekside 2000 West Spring Creek Parkway Plano TX
75023 30
Heritage Hills 3607 Weems Road Columbus GA 31909
30
Oak Hollow 2016 L Don Dodson Parkway Bedford TX 76095
30
Pine Meadow 107 Fox Chase Hattiesburg MS 39401
30
Pinehurst 5403 Plantation Drive Tyler TX 75703
30
Stonebridge 9271 White Rock Trail Dallas TX 75238
30
Austin Gardens 2150 W Kettleman Lane Lodi CA
95242 30
Desert Springs 5901 Bandolero Drive El Paso TX
79912 30
Quail Ridge 5204 Elgin Avenue Lubbock TX 79413
30
HERITAGE HILLS ALZHEIMER SPECIAL CARE CENTER
OAK HOLLOW ALZHEIMER SPECIAL CARE CENTER
PINE MEADOW ALZHEIMER SPECIAL CARE CENTER
PINEHURST ALZHEIMER SPECIAL CARE CENTER
DESERT SPRINGS ALZHEIMER SPECIAL CARE CENTER
QUAIL RIDGE ALZHEIMER SPECIAL CARE CENTER
EXHIBIT C
VEHICLES BY FACILITY
SEE ATTACHED
EXHIBIT D
THE ADDITIONAL PURCHASE PRICE
CALCULATION AND PAYMENT
1. ADDITIONAL PURCHASE PRICE CALCULATION. Within thirty (30) days after the
Additional Purchase Price Payment Date, Purchaser shall deliver to Sellers a
reasonably detailed calculation (the "Purchaser Additional Purchase Price
Calculation") reflecting (i) the Starting NOI (as hereinafter defined), (ii) the
Ending NOI (as hereinafter defined), (iii) the NOI Improvement (as
hereinafter defined) and (iv) the amount of the Additional Purchase Price.
For purposes hereof, the Additional Purchase Price shall be equal to the sum of
(A) the lesser of (i) the Additional Purchase Price Cap and (ii) the amount
resulting from first multiplying the NOI Improvement by 50% and then dividing
the resulting amount by 11% minus (B) the Excess Claims Amount.
For purposes hereof, the following definitions shall apply:
(a) "Starting NOI" shall be defined as Five Million One Hundred Thirty Seven
Thousand Six Hundred Eleven and no/100 Dollars ($5,137,611);
(b) "Ending NOI" shall be defined as the amount determined by taking (A) the
aggregate amounts for the twelve (12) months ending on the Additional Purchase
Price Payment Date, set forth in the Purchaser's financial statements under the
caption "Net Operating Income/Loss" plus (A) the aggregate amounts for the
twelve (12) months ending on the Additional Purchase Price Payment Date, set
forth in Purchaser's financial statements under the captions "Property
Insurance" and "Casualty Insurance" less (A) Seven Hundred Sixty Eight Thousand
Seven Hundred Seventy Five and no/100 Dollars ($768,775.00); and
(c) "NOI Improvement" shall be defined as the positive difference between
the Starting NOI and the Ending NOI.
(d) "Excess Claims Amount" shall be defined as the difference between (i)
the aggregate amount paid with respect to the Facilities for professional and
general liability and property insurance claims during the period from the
Initial Closing Date to the Additional Purchase Price Payment Date and (ii) Two
Million Two Hundred Forty Thousand and no/100 Dollars ($2,240,000).
2. ADDITIONAL PURCHASE PRICE DISPUTE RESOLUTION AND PAYMENT METHODOLOGY.
(a) Sellers shall have thirty (30) days after their receipt of the Purchaser
Additional Purchase Price Calculation (the "Review Period") to either agree
with, or dispute, the amount of the Additional Purchase Price as reflected
therein. In the event Sellers do not dispute the Purchaser Additional Purchase
Price Calculation within the Review Period, then the Purchaser Additional
Purchase Price Payment Calculation shall be final and binding on the parties and
within five (5) business days thereafter Purchaser shall deliver the Note (as
hereinafter defined) to Sellers.
(b) In the event Sellers do dispute the Purchaser Additional Purchase Price
Calculation within the Review Period, they shall do so by delivering to
Purchaser a written objection prior to the end of the Review Period setting
forth in reasonable detail the basis of their objections (the "Objection
Notice"). Purchaser and Sellers shall negotiate in good faith for a period of
ten (10) days after Purchaser's receipt of the Objection Notice (the "Resolution
Period") in an effort to resolve the objections of Sellers and to agree upon the
amount of the Additional Purchase Price.
(c) In the event Purchaser and Sellers are able to agree on the amount of
the Additional Purchase Price, including any needed amendments to the Purchaser
Additional Purchase Price Calculation, within the Resolution Period, then within
five (5) business days after the earlier to occur of (i) the end of the
Resolution Period or (ii) the date on which Sellers and Purchaser agree on the
amount of the Additional Purchase Price, Purchaser shall deliver the Note to
Sellers or their designees in the amount set forth in the Purchaser Additional
Purchase Price Calculation as modified, if applicable, during the Resolution
Period.
(d) In the event Sellers and Purchaser are unable to agree on the amount of
the Additional Purchase Price during the Resolution Period, then within five (5)
business days after the earlier to occur of (i) the end of the Resolution Period
or (ii) the date on which Sellers and Purchaser agree that they are unable to
agree on the amount of the Additional Purchase Price, Purchaser shall deliver
the Note to Sellers in the amount set forth in the Purchaser Additional Purchase
Price Calculation and Sellers or their designees and Purchaser shall have a
period of thirty (30) days after the end of the Resolution Period (the
"Selection Period") in which to agree upon a certified public accountant or firm
of accountants then having no relationship with Sellers and Purchaser or any of
the principals or affiliates thereof (the "Accountant") to which they shall
submit the matters reflected in the Objection Notice for binding resolution. In
the event Sellers and Purchaser are unable to agree upon an Accountant within
the Selection Period, then they shall ask a court sitting in King County,
Washington (the "Court") to select an Accountant on their behalf who meets the
criteria of this Agreement and they shall be bound by such determination. The
date on which the Objection Notice is submitted to the Accountant by Sellers and
Purchaser or the Court, as applicable, shall hereinafter be referred to as the
Submission Date. Sellers and Purchaser or the Court, as applicable, shall
instruct the Accountant to issue its determination with respect to the
resolution of the matters set forth in the Objection Notice within thirty (30)
days after the Submission Date.
(e) In the event the Accountant determines that the amount due from
Purchaser exceeds the amount set forth in the Note delivered pursuant to this
Exhibit D, then within five (5) business days after the receipt by Sellers and
Purchaser of the written determination of the Accountant, Purchaser shall issue
a replacement Note to Sellers and Sellers shall return to Purchaser the Note
previously delivered to it marked "CANCELLED" and from and after the date on
which Purchaser issues the replacement Note its payment obligations to Sellers
shall be as set forth in the replacement Note.
(f) Sellers, on the one hand, and Purchaser, on the other hand, shall share
the fees and expenses of the Accountant on a 50-50 basis unless (i) the
Accountant determines that any errors in the Purchaser Additional Purchase Price
Calculation affected the amount of the Additional Purchase Price by five percent
(5%) or less, in which case the fees and expenses of the Accountant shall be
paid solely by Sellers or (ii) any errors in the Purchaser Additional Purchase
Price Calculation affected the amount of the Additional Purchase Price by more
than five percent (5%), in which case the fees and expenses of the Accountant
shall be paid solely by Purchaser.
(g) For purposes hereof, the Note shall be defined as a Promissory Note duly
executed by Purchaser in the face amount of the Additional Purchase Price, which
Note shall provide for interest to accrue on the outstanding principal balance
thereof at the rate of 8% pr annum, with monthly principal and interest payments
due thereunder calculated using an amortization period of five years from the
initial delivery of the Note (the "Original Delivery Date") and with the entire
outstanding principal balance and any accrued and unpaid interest thereon being
due and payable in full on the third anniversary of the Original Delivery Date.
The Note shall be in the form attached hereto as Schedule I.
(h) In no event shall Purchaser be required to pay, or shall the Accountant
have any authority to require Purchaser to pay, an amount for the Additional
Purchase Price in excess of the Additional Purchase Price Cap.
(i) Sellers shall have the right on written notice to Purchaser (a
"Delegation Notice") to delegate their rights and obligations under this Exhibit
D, including their right to receive the Note and the payments due thereunder to
one or more of their members or managers (a "Designee") and, in such event, any
and all references in this Exhibit D to the Sellers shall be deemed to be
references to the Sellers' designee(s). Sellers' designee(s) shall have the
further right, on written notice to Purchaser to delegate its or their rights
and obligations under this Exhibit D, including its or their right to receive
the Note and the payments due thereunder to one or more of its members or
managers (a "Sub-Designee") and in such even any and all reference in this
Exhibit D to the Sellers shall be deemed to be references to such
Sub-Designee(s). Any Delegation Notice to Purchaser shall indicate the name of
each Designee or Sub-Designee and the amount of the Additional Purchase Price
being allocated to such Designee or Sub-Designee.
SCHEDULE I TO EXHIBIT D
PROMISSORY NOTE
$__________________ ______, 2007
Emeritus Corporation, a Washington Corporation, with a principal place of
business at 3131 Elliott Ave, Suite 500, Seattle, Washington 98121 ("Maker"),
hereby promises to pay to the order of
______________________________________________________, with a principal address
of ____________________________ ("Holder"), in lawful money of the United States
of America, the principal sum of _________________________, with interest due
hereunder on the unpaid principal balance, on the terms and conditions set forth
herein.
1. Interest.
---------
1.1 Base Interest. The outstanding principal balance hereof shall bear
-------------
interest from the date hereof to the date repaid at an annual rate of eight
percent (8%) interest per annum (the "Base Interest").
1.2 Late Charge. Any principal or interest not paid within ten (10)
-------------
days after the date due shall be subject to a late charge of five percent (5%)
(the "Late Charge").
2. Payments.
--------
2.1 Payment of Principal and Interest. Principal and interest shall be
---------------------------------
due and payable in monthly installments commencing on ____________, 2007. The
principal and interest payments shall be calculated using a five (5) year
amortization period and each such payment shall be in the amount, and shall be
applied toward principal and interest in the manner, reflected in the
amortization schedule attached hereto as Exhibit A. The entire outstanding
principal balance and any accrued and unpaid interest shall be due and payable
in full on ______, 2010 (the "Maturity Date").
2.2 Application of Payments. Unless applicable law provides otherwise,
-----------------------
all payments received by Holder under Paragraph 2.1 shall be applied as follows:
first, to any amounts advanced by Holder under the terms of the Note together
with any accrued interest thereon; second, to accrued interest; and third, to
the unpaid principal balance.
2.3 Prepayment. Maker shall have the right at anytime during the term
----------
of this Note to prepay the outstanding principal balance hereof or any accrued
and unpaid interest thereon in whole or in part without penalty or premium.
3. Default. The following shall constitute an Event of Default
-------
hereunder:
3.1 The failure of Maker to pay any monthly installment of interest
within ten (10) days after such payment is due;
3.2 The failure of Maker to pay the outstanding principal balance
hereof and any accrued but unpaid interest on the Maturity Date; or
3.3 If Maker shall be dissolved or shall apply for or consent to the
appointment of a receiver, trustee or liquidator of it or of all or a
substantial part of its assets, file a voluntary petition in bankruptcy, or
admit in writing its inability to pay its or his debts as they become due, make
a general assignment for the benefit of creditors, file a petition or an answer
seeking reorganization or arrangement with creditors or taking advantage of any
insolvency law, or if an order, judgment or decree shall be entered by a court
of competent jurisdiction, on the application of a creditor, adjudicating Maker
bankrupt or insolvent or approving a petition seeking reorganization of Maker or
of all or a substantial part of its assets and such order, judgment or decrees
shall not be dismissed, discharged or stayed within thirty (30) days.
Such Event of Default shall entitle Holder to exercise any or all of the
following rights and remedies: (i) declare the entire outstanding principal
balance hereof and any accrued and unpaid interest thereon to be immediately due
and payable and/or (ii) exercise any other rights and remedies as may be
available to Holder at law or in equity hereunder.
4. Nonwaiver. Failure to exercise any right the Holder may have or be
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entitled to in the event of any default hereunder shall not constitute a waiver
of such right or any other right in the event of any subsequent default. No
single or partial exercise of any power hereunder or under any agreement
securing any obligations hereunder shall preclude other or further exercises
thereof or the exercising of any power. Holder shall at all times have the
right to proceed against Maker and any guarantor hereof and any collateral given
for the obligations of either of the foregoing in any such order and in such
manner as Holder may deem fit, without waiving any rights under this Note or
with respect to any guarantee hereof, and with respect to any security given for
any of the foregoing.
5. Waivers. Maker hereby waives presentment for payment, protest and
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demand, notice of protest, demand, dishonor and nonpayment of this Note, and
consent that Holder may extend the time of payment or otherwise modify the terms
of payment of any part or the whole of the debt evidenced by this Note,
including releasing any makers, endorsers, guarantors or sureties or any
collateral given to secure the payment hereof or any part thereof, by written
agreement between Holder and Maker, and such consent shall not alter or diminish
the liability of any person or the enforceability of this Note and it being
understood and agreed that the respective liability of Maker shall be
unconditional and shall not be in any manner affected by any indulgence,
extension of time, renewal, waiver or modification granted or consented to by
Holder.
In any action or proceeding to recover any sum herein provided for on the
terms herein set forth, no defense of adequacy of security or that resort must
first be had to security or to any other person shall be asserted.
6. Collection Costs. Upon the occurrence of an Event of Default
-----------------
hereunder, Maker agrees to pay all costs, including reasonable attorneys' fees,
incurred by the Holder hereof in any suit, action or appeal therefrom in which
the Holder hereof is the prevailing party, or without suit, in connection with
collection hereof, including any costs incurred by any attorney engaged to
represent Holder in any bankruptcy, reorganization, receivership or other
proceedings affecting creditors rights and involving a claim under this Note, to
represent Holder in any other proceedings whatsoever in connection with this
Note, including post judgment proceedings to enforce any judgment related hereto
or in connection with seeking an out of court work out or settlement of any of
the foregoing. This provision is separate and several and shall survive the
merger of this provision into any judgment.
7. Maximum Interest. Neither this Note nor any instrument securing
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payment thereof or otherwise relating to the debt evidenced hereby shall require
the payment or permit the collection of interest in excess of the maximum
permitted by applicable law. If this Note or any other instrument does so
provide, the provisions of this paragraph shall govern, and neither Maker nor
any endorsers of this Note nor their respective heirs, personal representatives,
successors or assigns shall be obligated to pay the amount of interest or
interest at a rate in excess of the amount or the interest rate permitted by
applicable law.
8. Business Purpose. This Note is given as a promissory note in
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connection with the purchase of real property for commercial purposes located in
the counties listed on the attached Exhibit A, and is not for personal,
residential or agricultural purposes.
9. Notice. All notices, requests and demands hereunder shall be given
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in writing to the respective parties at the addresses first set forth above. Any
demand or notice to be made or given under the terms hereof or any instrument
now or hereafter securing this Note by the Holder hereof to Maker shall be
effective when delivered in writing by registered mail, return receipt
requested, by facsimile transmission (with receipt confirmed by the recipient),
by overnight courier or by hand delivery to the parties at their addresses set
forth above. Notice shall be deemed to be received upon the actual confirmed
receipt thereof (or upon the refusal of delivery).
10. Modification. This Note may not be amended or modified except by
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written instrument signed by the parties hereto.
11. Governing Law/Venue. This Note shall be governed by and construed
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in accordance with the laws of the State of Washington. Maker acknowledges and
agrees that any suit seeking to enforce or collect any of the obligations of
Maker hereunder may be brought in any state or federal court in King County,
Washington and that Maker will not assert as a defense to any such action that
the court lacks personal jurisdiction over Maker or that the forum is not
convenient for Maker.
12. Assignment. Maker may not assign its rights or obligations
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hereunder without the prior written consent of Holder, which shall not be
unreasonably withheld. Holder may assign its rights hereunder upon notice to,
but without the consent of, Maker.
13. Construction. Each party acknowledges and agrees that it has
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participated in the drafting and the negotiation of this Agreement and has been
represented by counsel of its choice during the course thereof. Accordingly, in
the event of a dispute with respect to the interpretation or enforcement of the
terms hereof, including any provision to impose penalties, costs and/or fees
upon the occurrence of an Event of Default hereunder, no provision shall be
construed so as to favor or disfavor either party hereto.
14. Termination of Note. This Note may not be terminated orally, but
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only by a discharge in writing and signed by the party who is the owner and
holder of this Note at the time enforcement of any discharge is sought.
ORAL AGREEMENTS OR ORAL COMMITMENTS TO LOAN MONEY, EXTEND CREDIT, OR TO FORBEAR
FROM ENFORCING REPAYMENT OF A DEBT ARE NOT ENFORCEABLE UNDER WASHINGTON LAW.
IN WITNESS WHEREOF, the undersigned does hereby execute this Note as of the
day and year first set forth above.
MAKER: EMERITUS CORPORATION,
a Washington corporation
By: _______________________
Its: _______________________
EXHIBIT E
SELLER DUE DILIGENCE COSTS
SEE ATTACHED
EXHIBIT F
REPAIR COSTS
SEE ATTACHED
EXHIBIT G
LITIGATION BY FACIILITY
NONE
EXHIBIT H
OPERATING CONTRACTS BY FACILITY
SEE ATTACHED
EXHIBIT I
MATERIAL TERMS OF NEW MANAGEMENT AGREEMENT
TERM: Three Years from the Closing Date unless earlier terminated upon the
occurrence of an event of default thereunder.
MANAGEMENT FEE: 5% of gross revenues of the Facilities, subject to
reduction on a dollar for dollar basis if the net operating income of the
Facilities is not sufficient to cover any lease payments due to NHP, the 5%
management fee and a $250 per unit per month capital expenditure reserve but in
no event shall the management fee be less than 4% of the gross revenues of the
Alzheimer Facilities.
TERMINATION FEE: Upon termination of the Management Agreement, JEA will be
paid a termination fee in an amount equal to $100,000 per year for a period of
ten (10) years after the termination of the Management Agreement.
BACK OFFICE SUPPORT: Purchaser shall provide certain back office support to
the Facilities, including, but not limited to, insurance and risk management and
personnel services.
NON-COMPETE: Neither JEA nor the principals of JEA shall, directly or
indirectly, compete with the Facilities in the operation of Alzheimer facilities
for a period commencing on the Closing Date and ending on the date on which the
final Termination Fee payment has been made by the Purchaser.