SUPPLEMENTAL PURCHASE AGREEMENT
IN CONNECTION WITH PURCHASE OF FACILITIES
(AL II - 14 Operating Facilities)
1. PARTIES. This Supplemental Purchase Agreement in Connection with Purchase of
Facilities ("Agreement") is entered into as of March ____, 1999 by and among
Emeritus Corporation, a Washington corporation ("Emeritus"), and its affiliates
Emeritus Properties I, Inc., ESC G.P. I Inc. and ESC I, L.P. (collectively
"Emeritus Affiliates"), and AL Investors II LLC, a Delaware limited liability
company, and its permitted assigns ("AL Investors II"). Emeritus and Emeritus
Affiliates are sometimes collectively referred to herein as the "Emeritus
Entities." All capitalized terms not otherwise defined herein shall have the
meaning set forth in Exhibit A.
2. FACTS.
2.1 Acquisition of Facilities. AL Investors II contemplates entering into a
Purchase and Sale Agreement ("Purchase Agreement") with Meditrust Company LLC,
successor by merger to Meditrust Acquisition Corporation I (collectively
"Meditrust"), relating to the acquisition of fourteen (14) Facilities identified
on Exhibit A (collectively, the "Facilities"). Emeritus Affiliates currently
lease from Meditrust each of the Facilities ("Facility Leases") and own certain
personal property and leasehold improvements which AL Investors II desires to
purchase and the Emeritus Entities desire to sell pursuant to this Agreement.
Upon the Closing under the Purchase Agreement and this Agreement, each of the
Facility Leases will terminate or be amended and restated as determined by AL
Investors II and Emeritus except for certain indemnity provisions by the
Emeritus Entities which may survive the Closing in favor of Meditrust as
Meditrust may require. AL Investors II intends to create a Facility Entity for
the purpose of owning each Facility. The resulting pool of fourteen (14)
Facilities, will close simultaneously and be financed in part by a loan from the
Lending Group.
2.2 Consideration. In consideration of AL Investors II performing the due
diligence as contemplated under the Purchase Agreement, the mutual covenants
herein, and for other valuable consideration, the receipt and sufficiency of
which are hereby acknowledged, the Emeritus Entities agree to give and perform
the representations, warranties, covenants and agreements contained in this
Agreement. AL Investors II would not perform the due diligence on the Facilities
or contemplate entering into the Purchase Agreement without this Agreement.
3. RIGHT TO PURCHASE. Emeritus entered into a Letter of Intent dated as of
January 11, 1999 ("Letter of Intent") with Meditrust to purchase the Facilities.
Emeritus agrees and confirms that any right of Emeritus to purchase the
Facilities under the Letter of Intent is hereby assigned to AL Investors II.
Provided, however,
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the form of the Purchase Agreement shall be subject to the review and comment of
Emeritus, but the final form of the Purchase Agreement shall be determined in
the sole discretion of AL Investors II.
4. DUE DILIGENCE.
4.1 Investigations. Under the terms of the Purchase Agreement and under this
Agreement, AL Investors II has until the Closing Date (the "Due Diligence
Period") to undertake such due diligence on the Facilities as it deems necessary
in its sole discretion, including but not limited to the review of title reports
and financial information, the conducting of surveys, environmental assessments
and physical inspections, and the finalizing of financing commitments, and other
matters deemed necessary by AL Investors II. The Emeritus Entities shall provide
access to the Facilities and cooperate with AL Investors II and its designated
representatives in conducting its due diligence activities. If AL Investors II
in its sole discretion has not waived or satisfied this condition prior to
expiration of the Due Diligence Period, then AL Investors II may terminate this
Agreement by written notice to Emeritus and neither party shall have any
liability to the other except as expressly set forth in Section 18.
4.2 Documentation. Promptly upon request therefor, or as soon as practicable, if
it has not already done so, the Emeritus Entities shall provide to AL Investors
II or its designated representatives copies of the following in the possession
of the Emeritus Entities for each Facility:
(a) Residents. A current resident roll, occupancy report and copy of the
standard form Residency Agreement.
(b) Contracts and Leases. A listing of all Major Contracts and Major
Leases which shall be attached to this Agreement as Exhibit B prior to
expiration of the Due Diligence Period, and any correspondence with any Person
relating to outstanding disputes or claims relating to the Major Contracts and
Major Leases.
(c) Operating Statements. Operating statements, showing all of the income
and expenses related to owning and operating each Facility (with current
receivables aging) for the preceding three (3) full calendar years and the most
recent operating statement for the current year through December 31, 1998
reflecting operations on a year-to-date basis (collectively, the "Operating
Statements").
(d) Tax Statements and Utility Bills. All real and personal property tax
statements for the preceding three (3) full calendar years and utility bills for
the preceding calendar year.
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(e) Approvals. All Permits, including any zoning variances or special use
permits, if any, and any notices alleging any violations and zoning letters for
each Facility.
(f) Plans and Specifications. As-built plans and specifications which are
in the possession of the Emeritus Entities.
(g) Environmental Reports. Phase I environmental assessments and any prior
studies and reports relating to Hazardous Substances in or on a Facility and all
correspondence or claims from any Person alleging violations of Environmental
Laws which are in the possession of the Emeritus Entities.
(h) Structural and Engineering Reports. All structural, soils, or
engineering reports or surveys for any Facility which are in the possession of
the Emeritus Entities and a current property condition survey and seismic survey
performed by Consultants approved by AL Investors II.
(i) Insurance. Current property and liability insurance policies or a
summary thereof and any correspondence with the insurer related to circumstances
or conditions affecting the cost or continuation of any insurance.
(j) Maintenance or Incident Logs. Facility maintenance and incident logs
insofar as they relate to claims or notices alleging material defects in or
violations of Legal Requirements relating to the Facility including any related
correspondence with any Governmental Authorities.
(k) Title. Title commitments and UCC searches conducted by Title Company
for each Facility.
(l) Survey. Survey for each Facility in form specified by AL Investors II.
(m) Health Surveys. Local and/or state Department of Health survey for
most recent period.
(n) Other Matters. Any other document or matter reasonably requested by AL
Investors II.
The term "in the possession of the Emeritus Entities" as used above means in the
possession of Emeritus, at its main corporate office in Seattle, Washington,
after inquiry to the manager of each Facility for copies of pertinent documents
and other records.
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5. REPRESENTATIONS, WARRANTIES AND COVENANTS. Emeritus, jointly and severally,
with Emeritus Affiliates (and each of the Emeritus Affiliates severally with
respect to the Facility leased and operated by it), represent, warrant and
covenant with respect to all of the Facilities to each of AL Investors II and
the Facility Entities, as of the date of this Agreement, as follows:
5.1 Existence; Power; Qualification. Each of the Emeritus Entities is a
corporation or limited partnership respectively duly organized, validity
existing and in good standing under the laws of the State of Washington. Each of
the Emeritus Entities has all requisite corporate or limited partnership power
and authority to operate and lease each of the Facilities and to carry on its
business as now conducted and to enter into and carry out the terms of this
Agreement.
5.2 Valid and Binding. Each of the Emeritus Entities is duly authorized to make
and enter into this Agreement and to carry out the transactions contemplated
herein and is, or will be by Closing, duly authorized to make and enter into all
of the other documents to which it is or will be a party under this Agreement or
under the Purchase Agreement (the "Transaction Documents") and to carry out the
transactions contemplated therein. This Agreement has been duly executed and
delivered by each of the Emeritus Entities and is the legal, valid and binding
obligation of each of the Emeritus Entities enforceable in accordance with its
terms. The Transaction Documents to which each of the Emeritus Entities is or
will be a party have been, or will be by the Closing, duly executed and
delivered by each of the Emeritus Entities, and each is, or will be by Closing,
a legal, valid and binding obligation of the respective Emeritus Entity,
enforceable in accordance with its terms.
5.3 No Violation. The execution, delivery and performance of this Agreement and
the Transaction Documents and the consummation of the transaction thereby
contemplated shall not result in any breach of, or constitute a default under,
or result in the acceleration of, or constitute an event which, with the giving
of notice or the passage of time, or both, could result in default or
acceleration of any obligations of the Emeritus Entities under any Permit,
contract, mortgage, lien, lease, agreement, instrument, franchise, license,
arbitration award, judgement, decree, bank loan or credit agreement, trust
indenture or other instrument to which any of the Emeritus Entities is a party
or by which any of the Emeritus Entities may be bound or affected and do not
violate or contravene any Legal Requirements.
5.4 Consents and Approvals. As of Closing, no consent or approval or other
authorization of, or exemption by, or declaration or filing with, any Person and
no waiver of any right by any Person is required to authorize or permit, or is
otherwise required as a condition of the execution, delivery and performance of
the Emeritus Entities' obligations under this Agreement or the Transaction
Documents.
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5.5 FIRPTA Representation. None of the Emeritus Entities is a "foreign person"
as that term is defined in the Code.
5.6 Emeritus' Documents. All copies of documents furnished or to be furnished to
AL Investors II by the Emeritus Entities or any of them in connection with this
Agreement are true and complete copies of the originals.
5.7 Nothing Omitted. No certificate, agreement, statement or other document
prepared or executed by any of the Emeritus Entities and furnished to or to be
furnished to AL Investors II or its attorneys in connection with the
transactions contemplated by this Agreement contains or will contain any untrue
statement of a material fact or omits or will omit to state a material fact
necessary in order to prevent all statements contained herein and therein from
being misleading.
5.8 Litigation. There is no material claim, litigation, or proceeding pending
against any of the Emeritus Entities or to the current actual knowledge of any
of them threatened against any of the Emeritus Entities, which relate to the
Facilities or the transactions contemplated by this Agreement except as set
forth on Exhibit C. All of the matters set forth on Exhibit C, and any other
such material claim, litigation or proceeding currently pending or threatened
shall be defended, settled or paid at the Emeritus Entities' sole expense. None
of the Emeritus Entities has filed (nor has any filing been made against any of
them) any proceeding in bankruptcy or insolvency in any jurisdiction. Neither
any of the Emeritus Entities nor any Facility is currently the subject of any
proceeding by any Governmental Authorities, and no notice of any violation has
been received from any Governmental Authorities that would, directly or
indirectly, or with the passage of time:
(a) Have a material adverse impact on the Facility Entities' ability to
accept and/or retain residents or result in the imposition of a fine in excess
of $500, a sanction, a lower rate certification or a lower reimbursement rate
for services rendered to eligible residents;
(b) Modify, limit or annul or result in the transfer, suspension, revocation
or imposition of probationary use of any of the Permits; or
(c) Affect the Facility Entities' continued participation in the Medicare or
Medicaid programs or any other Third-Party Payors' Programs (if applicable), or
any successor programs thereto, at current rate certifications.
5.9 Compliance. All Permits and other authorizations from Governmental
Authorities required to own and operate each Facility for its present
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use as an assisted living facility and with the number of beds (and with respect
to the Facility entitled Anderson Place as a nursing home with respect to 44
beds) indicated on Exhibit A have been obtained, are in full force and effect,
and are free from violation or claim of violation in all material respects of
any Legal Requirement, except as set forth on Exhibit D. Without limiting the
generality of the foregoing, Emeritus Entities are the lawful owner of all
Permits for each Facility, including, without limitation, the Certificate of
Need, if applicable, which (a) are in full force and effect, (b) constitute all
of the permits, licenses and certificates required for the use, operation and
occupancy thereof, (c) as of the Closing Date have not been pledged as
collateral for any loan or indebtedness other than the Mortgage, (d) are held
free from restrictions or any encumbrance which would materially adversely
affect the use or operation of the Facility, and (e) are not provisional,
probationary or restricted in any way. The Emeritus Entities as well as the
operation of each Facility are in compliance in all material respects with the
applicable provisions of assisted living facility (and where applicable, nursing
home) laws, rules, regulations and published interpretations to which the
Facility is subject. No waivers of any laws, rules, regulations, or requirements
(including, but not limited to, minimum foot requirements per bed) are required
for the Facility to operate at the current licensed unit and/or bed capacity.
Emeritus Entities have not granted to any third party the right to reduce the
number of licensed beds in any Facility or to apply for approval to transfer the
right to any and all of the licensed Facility beds to any other location. As of
Closing, all such Permits and other authorizations shall have been duly and
validly transferred to or reissued in the name of each Facility Entity or, if
not so transferred or reissued at Closing, shall be transferred or reissued by
the Emeritus Entities at their sole cost and expense within ninety (90) days
after Closing. Except as set forth on Exhibit D, each Facility and the operation
and use thereof complies in all material respects with all applicable Legal
Requirements and all covenants, easements and restrictions of record, affecting
the Facility (and, without limitation, the property on which each Facility is
located is zoned for the buildings and the uses conducted thereon, including but
not limited to parking requirements and none of the Emeritus Entities has
received any notice alleging any material non-compliance with respect to any
Facility). There are no unsatisfied requests or demands for repairs,
restorations or improvements to any Facility from any Person, including, but not
limited to, any Governmental Authorities pursuant to which the cost of repair,
restoration or improvement would exceed $10,000 in the aggregate for any
Facility except as set forth on Exhibit D.
5.10 No Prior Options, Sales or Assignments. None of the Emeritus Entities has
granted an option or obligated itself in any manner whatsoever to assign the
Facility Leases or their rights under the Facility Leases or to sell the
Facilities to any party other than AL Investors II.
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5.11 Condition of Improvements. The structural components, roofs, mechanical,
electrical, plumbing, elevator and HVAC systems of the improvements comprising
each Facility are in good working order and free from defects which would
materially impair the use of the Facility, ordinary wear and tear excepted,
except as set forth in the engineering reports prepared by Commercial Inspectors
LLC and delivered to AL Investors II in connection with this transaction.
Construction of each Facility has been completed and each Facility is stocked
with usual and customary Operating Equipment and Operating Supplies. Each
Facility is open for business and all work in connection with the initial
construction and development of each Facility, all capital improvements made or
contracted or committed prior to Closing, and all remodeling and refurbishment,
including, but not limited to, construction of kitchen facilities remodeling at
Facility entitled Oakbridge to the extent the Emeritus Entities are obligated to
construct or pay for such Facilities, has been completed and paid for in full by
the Emeritus Entities (or will be completed and paid for in full by Emeritus
Entities at their sole expense) and no Party has any Lien or right to assert a
Lien on account thereof.
5.12 Title. As of the Closing, title to each of the Facilities, including the
Land, Improvements and Personal Property, shall be subject to no lien, mortgage,
pledge, encroachment, zoning violation, or encumbrance, except for (a) the
Permitted Encumbrances which do not and will not materially interfere with the
current use or operation of any Facility, (b) the Mortgage, and (c) such liens,
mortgages, pledges and encumbrances arising by or through Meditrust without the
consent of or the actual current knowledge of the Emeritus Entities. All
Improvements situated on each Facility are situated wholly within the boundaries
of the Land except for minor and immaterial encroachments.
5.13 Special Assessments. The Emeritus Entities have not been notified of any
contemplated improvements to any Facility or the area closely surrounding any
Facility by any Governmental Authorities which is not disclosed by the public
records and shown in the title commitments for each Facility prepared by Title
Company which would result in the assessment of a special improvement or similar
lien in an amount exceeding $10,000 per year against any Facility.
5.14 Utilities; Access. All water, sewer, gas, electric, telephone, drainage and
other utility service lines or facilities serving each Facility or required by
Legal Requirements: (i) are located within the boundaries of the land on which
the Facility is located or within land dedicated to public use or within
recorded easements for same, (ii) are in good working order, and (iii) are
adequate to serve the present use of each Facility. Each Facility has direct
access to a publicly dedicated street or road or over a recorded easement for
such purpose to a publicly dedicated street or road.
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5.15 Existing Agreements. There are no contracts, agreements, understandings
(whether written or oral), or other liabilities of any type or kind relating to
any Facility which will be binding on AL II Holdings, AL Investors II or a
Facility Entity after Closing, except for the Permitted Exceptions, the
Contracts, the Permits, and the Leases transferred to each Facility Entity at
Closing and except as otherwise disclosed in writing to and approved in writing
by AL Investors II. There is no material default by any of the Emeritus Entities
or to the current actual knowledge of any of them by any other party under any
of the Permitted Exceptions, the Contracts, the Permits, or the Leases. There
are no Major Contracts or Major Leases which will be binding on AL Investors II
or any of the Facilities Entities after Closing except as set forth on Exhibit
B.
5.16 Environmental Compliance. Except as set forth in Exhibit E (which matters,
if any, shall be remediated by the Emeritus Entities at their sole expense):
(a) The Emeritus Entities have not at any time caused or permitted any
Hazardous Substances to be placed or used in any Facility.
(b) No Hazardous Substances exist or have existed on any Facility.
(c) No Facility now contains any underground storage tanks, and, to the
best of Emeritus Entities' knowledge after reasonable and diligent inquiry, no
Facilities have contained any underground storage tanks in the past. If there is
an underground storage tank located on any Facility, that tank complies with all
requirements of Environmental Laws.
(d) Emeritus Entities have complied with all Environmental Laws, including
all requirements for notification regarding releases of Hazardous Substances.
Without limiting the generality of the foregoing, the Emeritus Entities have
obtained any Permits required for the operation of the Facilities in accordance
with Environmental Laws now in effect and all such Permits are in full force and
effect. No event has occurred with respect to any Facility that constitutes, or
with the passing of time or the giving or notice would constitute, noncompliance
with the terms of any Permit.
(e) There are no actions, suits, claims or proceedings pending or, to the
best of Emeritus Entities' current actual knowledge , threatened that involve
any Facility and allege, arise out of, or relate to any violation of
Environmental Laws.
(f) Emeritus Entities has not received any complaint, order, notice of
violation or other communication from any Governmental Authority with
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regard to air emissions, water discharges, noise emissions or Hazardous
Substances, or any other environmental, health or safety matters affecting any
Facility which has not been remediated in accordance with Legal Requirements.
5.17 Reports. The Operating Statements and all financial information, schedules
and other documents containing factual information delivered to AL Investors II
and prepared by any of the Emeritus Entities in connection with this Agreement
or the Purchase Agreement are true and correct in all material respects.
5.18 Employees. All employees at the Facilities are the employees of the
Emeritus Affiliates and none of AL II Holdings, AL Investors II or any of the
Facility Entities shall have any liability or responsibility whatsoever after
the Closing for any matters related to such employees occurring prior to the
Closing. Emeritus Affiliates shall transfer or otherwise reassign at its expense
the employment of all employees to the Managers under the Management Agreement
effective as of Closing in accordance with all Legal Requirements and neither AL
Investors II nor any of the Facility Entities shall have any liability or
responsibility in connection therewith. There are no union contracts or
collective bargaining agreements with any of such employees of the Facilities.
5.19 Casualty; Condemnation. No Facility is subject to any Casualty or
Condemnation.
5.20 Loan Closing Certification. All statements, warranties, and representations
in the Initial Senior Loan documents and in the Initial Junior Loan documents
which relate to the condition, title, fitness, and compliance with Legal
Requirements and Environmental Laws of any or all of the Facilities are true and
correct.
5.21 Current Actual Knowledge. The representations and warranties herein which
are based upon the current actual knowledge of the Emeritus Entities are based
upon the current actual knowledge of the following employees of Emeritus:
Jennifer Valenta, Business Development and Legal Analyst; William Shorten,
Director of Real Estate Finance; Kelly Price, Vice President of Finance, Chief
Financial Officer and Secretary; and Daniel R. Baty, Chairman and Chief
Executive Officer, without any obligation to acquire any knowledge other than a
review of the files and records in their possession they would in the ordinary
course of their duties be responsible for having knowledge of.
5.22 Hart-Scott-Rodino Antitrust Improvements Act. The non-exempt assets within
the mean of 16 C.F.R. ss. 802.2 being acquired in connection with the Facilities
do not equal or exceed $15,000,000 in the aggregate.
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5.23 Indemnification. Each of the Emeritus Entities, jointly and severally,
agrees to indemnify, defend and hold each of AL II Holdings, AL Investors II,
their Affiliates and the Facility Entities harmless from and against any and all
loss, damage, liability or expense, including attorneys' fees and costs, AL II
Holdings, AL Investors II, its Affiliates or any of the Facility Entities may
suffer as a result of (a) any breach of or inaccuracy in the foregoing
representations, warranties, and covenants and (b) any claim by any Person for
personal injury or malpractice (including death) or damage to property arising
out of facts and circumstances occurring (or alleged to have occurred) at the
Facilities on or prior to the Closing.
5.24 General Provision. The liability of the Emeritus Entities and each of them
for breach of any of the warranties, representations and indemnities set forth
herein shall survive Closing, shall not be diminished by, nor shall any defense
to enforcement thereof arise by reason of, any investigation conducted by or
knowledge of AL II Holdings, AL Investors II, their Affiliates or the Facility
Entities or any remedy any of them may have against any other Person, and shall
be cumulative with any other remedies any of them may have against any of the
Emeritus Entities.
6. BUYER'S REPRESENTATIONS. AL Investors II represents and warrants to the
Emeritus Entities, as of the date of this Agreement, as follows:
(a) Status. AL Investors II is a limited liability company duly organized,
validly existing and in good standing under the laws of the State of Delaware
and each of the Facility Entities is, or will be prior to Closing, duly
organized, validly existing and in good standing in the state of Washington and
qualified to do business in the jurisdiction in which it owns or will own a
Facility.
(b) Authority. This Agreement and all documents to be executed by AL
Investors II or the Facility Entities at Closing have been duly authorized,
executed and delivered by AL Investors II and/or the Facility Entities and are
binding on and enforceable against AL Investors II and the Facility Entities in
accordance with their terms.
AL Investors II hereby agrees to defend, protect, indemnify and hold the
Emeritus Entities harmless from and against any and all loss, damage, liability
or expense, including attorneys' fees and costs, the Emeritus Entities may
suffer as a result of any breach of or any inaccuracy in the foregoing
representations and warranties.
7. [INTENTIONALLY DELETED]
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8. MANAGEMENT AGREEMENT WITH OPTION TO PURCHASE. Concurrently with and as a
condition to the Closing, Emeritus and Emeritus Management LLC and Emeritus
Management I LP, and other wholly owned Affiliates of Emeritus ("Managers"),
shall enter into a Management Agreement With Option To Purchase with AL
Investors II and each Facility Entity ("Management Agreement"), in the form to
be attached as Exhibit F to this Agreement. Emeritus shall unconditionally
guarantee the obligations of each of the Managers under the Management Agreement
pursuant to Guaranty of Management Agreement ("Guaranty Agreement") attached
hereto as Exhibit G.
9. EMPLOYEE MATTERS. The Emeritus Entities acknowledge and agree that they shall
be responsible for all costs, expenses and liabilities with respect to the
severance, transfer, hiring or any other matters relating to the transfer or
other reassignment of employees presently operating the Facilities to the
Managers. The Emeritus Entities shall jointly and severally indemnify and hold
each of AL II Holdings, AL Investors II, its Affiliates and the Facility
Entities harmless from any claims arising out of or relating to such employees,
and reassignment of employment to Managers, including but not limited to claims
arising from salaries, benefits and profit-sharing plans at any of the
Facilities or of the Emeritus Entities.
10. PUT AGREEMENT. Concurrently with and as a condition to the Closing, Emeritus
shall cause Daniel R. Baty to enter into the Put and Purchase Agreement ("Put
Agreement") attached hereto as Exhibit H.
11. FINANCING OF THE PURCHASE OF THE FACILITIES. AL Investors II has negotiated
the terms and conditions of the Initial Senior Loan and the Initial Junior Loan
which shall be subject to the approval of Emeritus, such approval not to be
unreasonably withheld. By execution hereof, Emeritus has approved the terms and
conditions of the Initial Senior Loan and Initial Junior Loan. The Lending Group
and/or AL Investors II may require a Capital Improvements Reserve Escrow
("Capital Reserve") to fund the correction of deficiencies in one or more of the
Facilities. Funding of the Capital Reserve of Closing shall be the sole
obligation of the Emeritus Entities.
12. OPERATIONS OF FACILITIES PENDING CLOSING. At all times prior to the Closing
or the sooner termination of this Agreement, the Emeritus Entities agree: (a) to
maintain, manage and operate the Facilities in accordance with the terms and
conditions of the Facility Leases; (b) to maintain the Facilities in their
current condition and state of repair and to rebuild, repair or restore any
damage or destruction to the Facilities by casualty or otherwise which may occur
prior to Closing; (c) to maintain the existing property, casualty and other
insurance required under the Facility Leases; (d) to perform all of its material
obligations under the Permits, Permitted Exceptions, Contracts and Leases and
not to amend, modify or terminate or permit the termination of any Permit,
Contract, Permitted Exceptions
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or Lease, except with respect to Contracts and Leases in the ordinary course of
business, without the prior written consent of AL Investors II, which shall not
unreasonably be withheld; (e) not to enter into any Major Lease or Major
Contract for a Facility, without the prior written consent of AL Investors II,
which shall not unreasonably be withheld; (f) not to amend, modify, terminate,
or exercise any option to purchase under any of the Facility Leases; (g) not to
mortgage, encumber or otherwise place or permit any encumbrance on its leasehold
estate under the Facility Leases; and (h) not to enter into any contracts or
agreements to sell or otherwise transfer its interest in any of the Facilities.
13. CONVEYANCE OF INTERESTS IN FACILITIES.
13.1 Closing Delivery by the Emeritus Entities. On or prior to the Closing, the
Emeritus Entities shall deposit with or cause to be deposited with Escrow
Holder, the following, each in form satisfactory to AL Investors II:
(a) A duly executed and acknowledged Quit Claim Deed to the respective
Facility Entity conveying any leasehold improvements or other Real Estate
interest owned by any of the Emeritus Entities in the Facilities ready for
recordation in the jurisdiction where the Facility is located;
(b) A duly executed Assignment of Leases, Permits and Contracts for the
Facilities ("Assignment") to the respective Facility Entity. In connection with
the Assignment, it shall be the sole responsibility of the Emeritus Entities to
obtain all necessary consents and approvals for the transfer of and vesting in
the respective Facility Entity for all Permits, Contracts and Leases at Closing
or within ninety (90) days thereafter;
(c) FIRPTA Affidavit;
(d) Bill of Sale for all Personal Property with respect to Facilities,
(including but not limited to the Tangible Personal Property as defined in the
Facility Leases) vesting title free and clear of all Liens, except for the
Permitted Exceptions, in the respective Facility Entity;
(e) Duly executed Management Agreement, Guaranty Agreement, and Put
Agreement;
(f) Such corporate or partnership resolutions regarding due authorization
and execution and such opinions of counsel regarding authorization and execution
of the documents and instruments to be executed and delivered by any of Emeritus
and the Emeritus Entities hereunder as AL Investors II may reasonably require.
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(g) A certificate confirming that all of the warranties and
representations set forth in Section 5 are true and correct as of Closing.
(h) Termination agreement or if mutually agreed by AL Investors II and
Emeritus amendment and restatement of the Facility Leases.
(i) Licensing Indemnity Agreement between AL Investors II and Emeritus.
(j) Such other documents as AL Investors II may reasonably require to vest
in the respective Facility Entity all of the Emeritus Entities' right, title and
interest in each of the Facilities.
13.2 Closing Delivery by AL Investors II and the Facility Entities. On or prior
to the Closing, AL Investors II and the Facility Entities shall cause to be
delivered to the Emeritus Entities the following;
(a) The Purchase Price for the property interests described above are
allocated among the Facilities as set forth on Exhibit I. The Purchase Price set
forth on Exhibit I is the good faith allocation of the aggregate purchase price
among the Facilities agreed to by AL Investors II and the Emeritus Entities (it
being understood that the Facilities are being purchased as a group).
(b) An executed counterpart where required of the Assignment, the
Management Agreement, the Guaranty Agreement, and the Put Agreement.
(c) A certificate confirming that all of the warranties and
representations set forth in Section 6 are true and correct as of Closing.
(d) Such limited liability company resolutions regarding due authorization
and execution and such opinions of counsel regarding authorization and execution
of the documents and instruments to be executed by AL Investors II as Emeritus
Entities may reasonably require.
14. CONDITIONS PRECEDENT.
14.1 AL Investors II. AL Investors II's obligations under this Agreement are
expressly conditioned on, and subject to satisfaction of, the following
conditions precedent:
(a) Performance by Emeritus and the Emeritus Entities. The Emeritus
Entities shall each have timely performed all obligations required by this
Agreement to be performed by it.
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(b) Closing under Purchase Agreement. Simultaneous closing under the
Purchase Agreement.
(c) Representations and Warranties True. The representations and
warranties of the Emeritus Entities contained herein shall be true and correct
as of the Closing.
(d) No Material Adverse Change. At no time prior to the Closing shall
there be any material adverse change in the financial condition of any of the
Emeritus Entities or in the physical condition of one or more of the Facilities
due to Casualty or Condemnation.
(e) Purchase Agreement for Development Facilities. Simultaneous closing of
the facility entitled Loyalton of Phoenix under the Supplemental Purchase
Agreement in Connection with Purchase of Facilities (AL II - 5 Development
Facilities) between Emeritus and certain of its Affiliates and AL Investors
Development LLC.
(f) AL Investors II Financing. The lenders under the Initial Senior Loan
and Initial Junior Loan shall be ready, willing and able to close simultaneous
with the closing hereunder.
(g) Final Approval. Final approval of this transaction by each of the
members of AL II Holdings, the parent of AL Investors II.
The conditions set forth in Section 14.1 above are intended solely for the
benefit of AL Investors II. If any of the foregoing conditions are not satisfied
as of the Closing, AL Investors II shall have the right at its sole election
either to waive the condition in question and proceed with the purchase or, in
the alternative, to terminate this Agreement, whereupon this Agreement shall
terminate, and the parties shall have no further obligations hereunder except as
expressly provided herein.
14.2 Emeritus Entities. The obligations of the Emeritus Entities under this
Agreement are expressly conditioned on, and subject to satisfaction of, the
following conditions precedent:
(a) Performance by AL Investors II. AL Investors II and the Facility
Entities shall each have timely performed all obligations required by this
Agreement to be performed by it.
(b) Closing under Purchase Agreement. Simultaneous closing under the
Purchase Agreement.
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(c) Representations and Warranties True. The representations and
warranties of AL Investors II contained herein shall be true and correct as of
the Closing.
(d) Purchase Agreement for Development Facilities. Simultaneous closing of
the facility entitled Loyalton of Phoenix under the Supplemental Purchase
Agreement in Connection with Purchase of Facilities (AL II - 5 Development
Facilities) between Emeritus and certain of its Affiliates and AL Investors
Development LLC.
(e) Final Approval. Final approval of the board of Emeritus.
The conditions set forth in Section 14.2 above are intended solely for the
benefit of the Emeritus Entities. If any of the foregoing conditions are not
satisfied as of the Closing, the Emeritus Entities shall have the right at its
sole election either to waive the condition in question and proceed with the
purchase or, in the alternative, to terminate this Agreement, whereupon this
Agreement shall terminate, and the parties shall have no further obligations
hereunder except as expressly provided herein.
15. CLOSING COSTS. If this transaction closes, AL Investors II shall pay the
following closing costs with respect to Closing under this Agreement and the
Purchase Agreement, subject to the aggregate dollar limitation below:
(a) The premium for owner's and lender's title insurance for each Facility
and such additional title insurance as may be required by the Lending Group and
any search or additional title review charges to be paid to Title Company;
(b) All real estate excise taxes and other transfer taxes applicable to
the transfer of a Facility to the Facility Entities including any sales tax on
any Personal Property.
(c) The fees incurred by the Escrow Holder in connection with the Closing.
(d) All recording fees and expenses for recording of all documents and
instruments.
(e) All costs and expenses of AL Investors II, AL II Holdings, including
the Facility Entities' financing in connection with the Initial Senior Loan and
the Initial Junior Loan (except funding of any Capital Reserve which shall be
the sole obligation of Emeritus Entities).
-15-
(f) Costs and expenses of due diligence investigations, studies, surveys
and reports prepared for AL Investors II and the Lending Group and the formation
and qualification of the Facility Entities.
(g) AL Investors II's, AL II Holdings', and the Facility Entities'
attorneys and accounting fees, costs and expenses.
(h) All other normal and customary closing costs incurred by AL Investors
II, Al II Holdings, and the Facility Entities.
To the extent the aggregate of the foregoing exceeds $2,947,401, as outlined in
Exhibit I the balance of the closing costs shall be paid by the Emeritus
Entities.
16. CLOSING STATEMENTS. All income and expense arising out of the management and
operation of the Facilities, including, but not limited to real property taxes
and insurance, shall be prorated between the Emeritus Entities and AL Investors
II or each Facility Entity as of the Closing. Prepaid amounts or deposits under
Residency Agreements or security deposits under the Leases shall be credited to
AL Investors II and utility deposits or prepaid amounts under the Contracts
shall be credited to the Emeritus Entities. The prorations of income and expense
for each Facility shall be made on the basis of a written closing statement
submitted by the Emeritus Entities to AL Investors II prior to the Closing and
approved by AL Investors II. In the event any prorations or apportionments made
hereunder shall prove to be incorrect for any reason, then any party shall be
entitled to an adjustment to correct the same. Any item which cannot be prorated
because of the unavailability of information shall be tentatively prorated on
the basis of the best data then available and re-prorated between the parties
when the information is available. Any prepaid rents or other prepaid expenses,
escrow accounts or deposits under the Facility Leases returned by Meditrust to
AL Investors II or the Facility Entities, or credited against the purchase price
under the Purchase Agreement, shall be refunded to the Emeritus Entities.
Notwithstanding the foregoing, any adjustments or re-prorations shall be made,
if at all, within one hundred eighty (180) days after Closing.
17. DELIVERY OUTSIDE OF ESCROW. The Emeritus Entities shall deliver to AL
Investors II and the Facility Entities at Closing outside of the Closing escrow
the originals of the diligence materials referenced in Section 4.2 (except for
the originals of the Contracts, Leases and Permits to be held by Managers for
use in managing the Facilities), and such copies of all books and records used
in the operation, maintenance, and repair of the Facilities as AL Investors II
may direct.
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18. BREAK-UP EXPENSES.
18.1 Emeritus' Obligation. The Emeritus Entities acknowledge and agree that
Closing under the Purchase Agreement, or this Agreement may not occur due to a
variety of events or circumstances beyond the control of AL Investors II
including but not limited to:
(a) The refusal or failure of the Lending Group to provide financing for
the acquisition of the Facilities;
(b) The failure of Governmental Authorities or other Parties to approve
the transfer of Permits, Contracts or Leases to the Facility Entities for the
operation of the Facility prior to the Closing under the Purchase Agreement or
this Agreement;
(c) The failure to secure the consent or approval from Senior Housing
Partners I, L.P., a member of AL II Holdings, to proceed with the transaction
prior to expiration of the Due Diligence Period;
(d) Casualty or Condemnation of one or more Facilities prior to the
Closing under the Purchase Agreement;
(e) The failure of Meditrust to perform under the terms of the Purchase
Agreement or the failure of Meditrust to enter into a Purchase Agreement upon
terms and conditions acceptable to AL Investors II;
(f) Default by any of the Emeritus Entities hereunder or under any other
agreement in connection with this transaction.
(g) The failure of any condition precedent to AL Investors II's
obligations hereunder as set forth in Section 14.1; or
(h) Such other events or circumstances beyond the reasonable control of AL
Investors II and the Facility Entities.
In the event that Closing under the Purchase Agreement or this Agreement should
not occur as a result of any of the foregoing, and notwithstanding termination
or expiration of this Agreement, the Emeritus Entities shall pay to AL II
Holdings and AL Investors II all of their out-of-pocket costs and expenses
incurred in connection with the due diligence and the preparation of all
documentation relating to the purchase of the Facilities, including but not
limited to costs of all title insurance cancellation fees, preparation of
environmental reports, surveys, appraisals, structural engineering reports,
amounts owing to the Lenders under the Initial Senior Loan and Initial Junior
Loan for reimbursement of expenses, costs to
-17-
form AL II Holdings, AL Investors II and the Facility Entities, attorneys' fees
and costs of AL II Holdings, AL Investors II, and all other reasonable
out-of-pocket expenses incurred by AL II Holdings and AL Investors II in
connection with this transaction as set forth under Transaction Costs on Exhibit
I (collectively "Break-up Expenses"). AL Investors II shall provide to the
Emeritus Entities an itemization of its Break-up Expenses within forty-five (45)
days after termination of the purchase and sale of the Facilities as
contemplated by this Agreement. The Emeritus Entities shall make payment to AL
Investors II within ten (10) days after receipt of such itemization. The payment
of the Break-up Expenses shall be the sole remedy of AL Investors II and the
Facility Entities against the Emeritus Entities under this Agreement for failure
to close under this Agreement.
18.2 Post Closing Remedies. AL Investors II shall have all rights and remedies
at law or in equity for enforcement of any indemnities, warranties or
representations or other agreements set forth herein after Closing.
19. MISCELLANEOUS.
19.1 Entire Agreement. This Agreement, together with the Exhibits attached
hereto and all certificates and documents delivered in connection herewith,
contain the entire understanding of the parties with respect to the subject
matters hereof and supersedes all prior and other contemporaneous oral or
written understandings and agreements between the parties hereto.
19.2 Binding Effect; Assignment. This Agreement, shall be binding upon and inure
to the benefit of the parties hereto and their respective heirs, successors,
personal representatives and permitted assigns. Except as specifically provided
for herein, neither party may assign its rights hereunder without the prior
written consent of the other. Notwithstanding the foregoing, AL Investors II may
assign this Agreement in whole or part to any Facility Entity which holds or is
intended to hold title to any Facility and such Facility Entity's successors and
assigns.
19.3 Notices. Any notice, demand, offer or other writing required or permitted
pursuant to this Agreement shall be in writing, furnished in duplicate and shall
be transmitted by hand delivery, facsimile, certified mail, return receipt
requested, or Federal Express or another nationally recognized overnight courier
service, postage prepaid, as follows:
-18-
If to AL Investors II AL Investors II LLC
or any of its Affiliates: c/o Bruce D. Thorn
2250 McGilchrist Street SE, Suite 200
Salem, Oregon 97302
Facsimile: (503)375-7644
Telephone: (503)370-7071 ext. 7143
With a copy to: Foster Pepper & Shefelman PLLC
1111 Third Avenue, Suite 3400
Seattle, Washington 98101
Attn: Gary E. Fluhrer
Facsimile: (206)447-9700
Telephone: (206)447-4400
Prudential Real Estate Investors
8 Campus Drive
Parsippany, New Jersey 07054
Attn: Joan Hayden
Facsimile: (973)683-1788
Telephone: (973)683-1772
Senior Housing Partners I, L.P.
c/o Mr. Noah Levy
Prudential Real Estate Investors
Suite 1400, Two Ravinia Drive
Atlanta, Georgia 30346
Facsimile: (770)399-5363
Telephone: (770)395-8606
If to the Emeritus Entities: Emeritus Corporation
3131 Elliot Avenue, Suite 500
Seattle, Washington 98121-1031
Attn: Mr. Kelly Price
Facsimile: (206)301-4500
Telephone: (206)301-4507
With a copy to: Perkins Coie
1201 Third Avenue, Suite 4000
Seattle, Washington 98101
Attn: Mike Stansbury
Facsimile: (206)583-8500
Telephone: (206)583-8888
-19-
Any party shall have the right to change the place to which such notice shall be
given or add additional parties to receive notices by similar notice sent in
like manner to all other parties hereto. Any notice, if sent by overnight
courier service, shall be deemed delivered on the earlier of the date of actual
delivery or the next business day and if delivered by hand delivery or facsimile
shall be deemed delivered on the date of the actual delivery and if sent by
mail, shall be deemed delivered on the earlier of the third day following
deposit with the U.S. Postal Service or actual delivery.
19.4 Captions. The captions of this Agreement are for convenience and reference
only, and in no way define, describe, extend or limit the scope or intent of
this Agreement or the intent of any provisions hereof.
19.5 Joint Effort. The preparation of this Agreement has been the joint effort
of the parties, and the resulting document shall not be construed more severely
against one of the parties than the other.
19.6 Counterparts. This Agreement may be executed in counterparts and each
executed copy shall be deemed an original which shall be binding upon all
parties hereto.
19.7 Partial Invalidity. The invalidity of one or more of the phrases,
sentences, clauses, sections or articles contained in this Agreement shall not
affect the remaining portions so long as the material purposes of this Agreement
can be determined and effectuated.
19.8 No Offer. Neither the negotiations to date nor the preparation of this
Agreement shall be deemed an offer by any party to the other. No such contract
shall be deemed binding on any party until each party has executed and delivered
this Agreement.
19.9 Amendments. This Agreement may not be amended in any respect whatsoever
except by a further agreement, in writing, fully executed by each of the
parties.
19.10 Schedules and Exhibits. All Schedules and Exhibits referred to in this
Agreement shall be incorporated into this Agreement by such reference and shall
be deemed a part of this Agreement as if fully set forth in this Agreement.
19.11 Governing Law and Attorneys' Fees. This Agreement including the validity
thereof and the rights and obligations of the parties hereunder shall be
governed by and construed in accordance with the laws of the State of Washington
without regard to its principals of conflicts of laws. AL Investors II may
enforce any or all of the provisions of this Agreement directly against the
Emeritus Entities
-20-
or any of them in the State of Washington or at its option may enforce this
Agreement on behalf of any Facility Entity in the state in which such Facility
Entity owns a Facility. In the event either party brings an action or any other
proceeding against the other party to enforce or interpret any of the terms,
covenants or conditions hereof, the party prevailing in any such action or
proceeding shall be paid all costs and reasonable attorneys' fees by the other
party in such amounts as shall be set by the court, at trial and on appeal.
19.12 Third Parties. Nothing in this Agreement, whether express or implied, is
intended to confer any rights or remedies under or by reason of this Agreement
on any person other than to the Facility Entities, which are intended third
party beneficiaries.
19.13 Rules of Construction. References in this Agreement to "herein," "hereof"
and "hereunder" shall be deemed to refer to this Agreement and shall not be
limited to the particular text in which such words appear. The use of any gender
shall include all genders, and the singular number shall include the plural and
vice versa as the context may require.
19.14 Survival. The warranties, representations and indemnities in this
Agreement shall survive Closing and the delivery of the Transaction Documents
and other documents hereunder.
19.15 Joint and Several. The obligation of each of Emeritus and the Emeritus
Affiliates shall be joint and several.
19.16 No Broker. AL Investors II represents to Emeritus Entities and the
Emeritus Entities represent to AL Investors II, that no agent, finder or broker
has acted for it or was the producing and effective cause of this Agreement or
the transactions contemplated herein, and that no commissions or finder's fees
are due by it to any third parties. AL Investors II agrees to indemnify and hold
Emeritus Entities harmless, and the Emeritus Entities agree to indemnify and
hold AL Investors II harmless, with respect to any and all expenses,
obligations, and liabilities resulting from the claims or causes of action
relating to any claims made by any person retained or used by it for any agent's
broker's or finder's fees or commissions relating to the transactions
contemplated herein.
-21-
IN WITNESS WHEREOF, the parties hereto have hereunto set their hands and seals
as of the date first above appearing.
AL INVESTORS II LLC, a Delaware limited
liability company
By /s/ Norman L. Brenden
Name: Norman L. Brenden
Its: Manager
EMERITUS CORPORATION, a Washington
corporation
By /s/ Daniel R. Baty
Name Daniel R. Baty
Its Chairman
EMERITUS PROPERTIES I, INC., a Washington
corporation
By /s/ Daniel R. Baty
Name Daniel R. Baty
Its Chairman
ESC I, L.P., a Washington limited
partnership
By: ESC G.P. I, INC., a Washington
corporation
By /s/ Daniel R. Baty
Name Daniel R. Baty
Its Chairman
ESC G.P. I, a Washington corporation
By /s/ Daniel R. Baty
Name Daniel R. Baty
Its Chairman
-22-
LIST OF EXHIBITS
- ----------------
Exhibit A Certain Defined Terms
Exhibit B Major Contracts and Major Leases
Exhibit C Litigation, Claims and/or Proceedings
Exhibit D Claims for Repairs, Restorations and/or Improvements
Exhibit E Environmental Compliance
Exhibit F Management Agreement
Exhibit G Guaranty Agreement
Exhibit H Put Agreement
Exhibit I Purchase Price Allocation
-23-
EXHIBIT A
TO SUPPLEMENTAL PURCHASE AGREEMENT
IN CONNECTION WITH PURCHASE OF FACILITIES
(AL II - 14 Operating Facilities)
Certain Defined Terms
For all purposes of this Agreement, except as otherwise expressly provided or
unless the context otherwise requires, capitalized terms in the Agreement have
the meanings assigned as set forth below and include the plural as well as the
singular.
AL II Holdings: AL II Holdings LLC, a Delaware limited liability company, which
is the sole member of AL Investors II.
Accreditation Body: Any person, including any Person having or claiming
jurisdiction over the accreditation, certification, evaluation or operation of a
Facility.
Affiliate: With respect to any Person (i) any other Person which, directly or
indirectly, controls or is controlled by or is under common control with such
Person, (ii) any other Person that owns, beneficially, directly or indirectly,
five percent (5%) or more of the outstanding capital stock, shares or equity
interests of such Person or (iii) any officer, director, employee, general
partner or trustee of such Person, or any other Person controlling, controlled
by, or under common control with, such Person (excluding trustees and Persons
serving in a fiduciary or similar capacity who are not otherwise an Affiliate of
such Person). For the purposes of this definition, "control" (including the
correlative meanings of the terms "controlled by" and "under common control
with"), as used with respect to any Person, shall mean the possession, directly
or indirectly, of the power to direct or cause the direction of the management
and policies of such Person, through the ownership of voting securities,
partnership interests or other equity interests.
Approved Equipment Leases: Leases for any of the Furnishings and Equipment which
have been approved by AL Investors II in writing.
Award: All compensation, sums or anything of value awarded, paid or received on
a total or partial Condemnation.
Business Day: Any day which is not a Saturday or Sunday or a public holiday
under the laws of the United States of America or the State of Washington.
A-1
Casualty: The damage or destruction by act of god or otherwise of any portion of
any Facility which would cost more than $50,000 to repair or restore.
Closing or Closing Date: The date upon which the purchase and sale of the
fourteen (14) operating Facilities being purchased from Meditrust closes as
defined in the Purchase Agreement.
Code: The Internal Revenue Code of 1986, as amended.
Condemnation: With respect to any Facility or any interest therein or right
accruing thereto or use thereof (i) the exercise of the power of condemnation,
whether by legal proceedings or otherwise, by a Condemnor or (ii) a voluntary
sale or transfer to any Condemnor under threat of condemnation.
Condemnor: Any public or quasi-public authority, or private corporation or
individual, having the power of condemnation.
Consultants: Collectively, the architects, engineers, inspectors, surveyors and
other consultants that have been engaged from time to time prior to Closing by
the Emeritus Entities or AL Investors II to perform services for any of them in
connection with a Facility or this Agreement.
Contracts: Collectively, all Provider Agreements, Residency Agreements, Ordinary
Contracts and Major Contracts.
Date of Taking: The date the Condemnor has the right to possession of the
property being condemned.
Environmental Laws: Environmental Laws means all federal, state, and local laws,
ordinances and regulations and standards, rules, policies and other governmental
requirements, administrative rulings, and court judgments and decrees in effect
now or in the future and including all amendments, that relate to Hazardous
Materials and apply to any Facility. Hazardous Materials Laws include, but are
not limited to, the Comprehensive Environmental Response, Compensation and
Liability Act, 42 U.S.C. Section 9601, et seq., the Resource Conservation and
Recovery Act, 42 U.S.C. Section 6901, et seq., the Toxic Substance Control Act,
15 U.S.C. Section 2601, et seq., the Clean Water Act, 33 U.S.C. Section 1251, et
seq., and the Hazardous Materials Transportation Act, 49 U.S.C.
Section 1801, and their state analogs.
Escrow Holder: First American Title Insurance Company.
A-2
Facility: Each of the assisted living facilities including the Land,
Improvements and Personal Property associated therewith, located in the city and
state as set forth below:
Facility City State Units Beds Facility LLC and LP Name
Colonial Park
Club Sarasota FL 90 110 AL Investors II
Sarasota LLC
Park Club of
Fort Myers Fort Myers FL 90 100 AL Investors II Fort
Myers LLC
Park Club of
Oakbridge Lakeland FL 77 94 AL Investors II
Lakeland LLC
Park Club of
Brandon Brandon FL 89 110 AL Investors II
Brandon LLC
Highland Hills Pocatello ID 49 57 AL Investors II
Pocatello LLC
Ridge Wind Chubbuck ID 110 96 AL Investors II
Chubbuck LLC
Lakewood Inn Coeur d'Alene ID 73 109 AL Investors II Coeur
D'Alene
The Pines of
Tewksbury Tewksbury MA 49 50 AL Investors II
Tewksbury LLC
Meadowbrook Ontario OR 53 82 AL Investors II
Ontario LLC
Anderson Place Anderson SC 127 84 AL Investors II
Anderson LLC
Elmbrook Estates Lubbock TX 79 100 Lubbock AL Investors
II LP
Fairhaven Estates
Bellingham WA 98 110 AL Investors II
Bellingham LLC
Hearthstone Moses Lake WA 50 100 AL Investors II Moses
Lake LLC
Evergreen Lodge
Federal Way WA 84 92 AL Investors II
Federal Way LLC
The legal description of each of the above Facilities is set forth in the
Purchase Agreement.
Facility Entity: Each of the Facility LLC's or LP's which owns or will own at
Closing a Facility as set forth opposite the name of each Facility above.
Facility Lease: Each of the leases by which a Facility has been leased by any of
the Emeritus Entities from Meditrust.
Furnishings and Equipment: All furniture, furnishings, beds, televisions,
equipment, food service equipment, apparatus, computers and other personal
property used in (or if the context so dictates, required in connection with),
the operation of each Facility, other than Operating Equipment, Operating
Supplies and fixtures attached to and forming part of the Improvements.
Governmental Authorities: Collectively, all agencies, authorities, bodies,
boards, commissions, courts, instrumentalities, legislatures, and offices of any
nature whatsoever of any government, quasi-government unit or political
subdivision, whether with a federal, state, county, district, municipal, city or
otherwise and whether now or hereinafter in existence which exercises
jurisdiction over any Facility.
Hazardous Substances: "Hazardous Substances" shall mean petroleum and petroleum
products and compounds containing them, including gasoline, diesel fuel and oil;
explosives; flammable materials, radioactive materials; polychlorinated
biphenyls ("PCBs") and compounds containing them; lead and lead-based paint;
A-3
asbestos or asbestos-containing materials in any form that is or could become
friable; underground storage tanks, whether empty or containing any substance;
any substance the presence of which on any Facility is prohibited by any
federal, state or local authority; any substance that requires special handling;
and any other material, or substance now or in the future defined as a
"hazardous substance," "hazardous material," hazardous waste," "toxic
substance," "toxic pollutant," "contaminant," or "Pollutant" within the meaning
of any Environmental Law. Provided, however, Hazardous Substances shall not
include the safe and lawful use and storage of quantities of (i) pre-packaged
supplies, medical waste, cleaning materials and petroleum products customarily
used in the operation and maintenance of comparable Facilities, (ii) cleaning
materials, personal grooming items and other items sold in pre-packaged
containers for consumer use and used by occupants of any Facility; and (iii)
petroleum products used in the operation and maintenance of motor vehicles from
time to time located on the Facilities' parking areas, so long as all of the
foregoing are used, stored, handled, transported and disposed of in compliance
with Environmental Laws.
Improvements: The buildings, structures (surface and sub-surface) and other
improvements now or hereafter located on the Land.
Junior Loan: Any indebtedness incurred by Owners which is secured by a mortgage,
pledge, and related security instruments against, among other things, the
membership interests of AL II Holdings in AL Investors II and/or the membership
interests of AL Investors II in the Facility Entities. Initially, the Junior
Loan is evidenced by that certain Loan Agreement among AL II Holdings, AL
Investors II, AL Investors Development, the Facility Entities, and their
Affiliates and Senior Housing Partners I, L.P. dated on or about the same date
hereof ("Initial Junior Loan").
Land: The parcel or parcels of land on which each of the Facilities is situated,
together with all rights of ingress and egress thereto and parking associated
therewith as legally described in the Purchase Agreement.
Leases: Collectively, the Ordinary Leases and Major Leases.
Legal Requirements: Collectively, all statutes, ordinances, by-laws, codes,
rules, regulations, restrictions, orders, judgments, decrees and injunctions
(including, without limitation, all applicable building, health code, zoning,
subdivision, and other land use and assisted living licensing statutes,
ordinances, by-laws, codes, rules and regulations), whether now or hereafter
enacted, promulgated or issued by any Governmental Authority, Accreditation Body
or Third Party Payor affecting a Facility Entity or any Facility or the
ownership, construction, development, maintenance, management, repair, use,
occupancy, possession or operation thereof or the operation of any programs or
services in connection with
A-4
the Facility, including, without limitation, any of the foregoing which may (i)
require repairs, modifications or alterations in or to the Facility, (ii) in any
way affect (adversely or otherwise) the use and enjoyment of the Facility or
(iii) require the assessment, monitoring, clean-up, containment, removal,
remediation or other treatment of any Hazardous Substances on, under or from the
Facility. Without limiting the foregoing, the term "Legal Requirements" includes
all Environmental Laws and shall also include all Permits and Contracts issued
or entered into by any Governmental Authority, any Accreditation Body and/or any
Third Party Payor and all Permitted Encumbrances.
Lending Group: GMAC Commercial Mortgage in a debt facility to AL Investors II
secured by the Facilities in the maximum aggregate original principal balance of
$68,000,000.
Lien: With respect to any real or personal property, any mortgage, mechanics' or
materialmen's lien, pledge, collateral assignment, hypothecation, charge,
security interest, title retention agreement, levy, execution, seizure,
attachment, garnishment or other encumbrance of any kind in respect of such
property which secures or is intended to secure the payment of money, whether or
not inchoate, vested or perfected.
Major Contracts: Any contract for the purchase of goods or services or any other
agreement which requires payments in excess of $50,000 per year for any Facility
or has a noncancellable term in excess of one year or in which the provider of
the goods or services is an Emeritus Entity or an Affiliate of any of them.
Major Lease. Any Lease which has a noncancellable term in excess of one year or
a rental payment in excess of $10,000 per year or pursuant to which an Emeritus
Entity or an Affiliate of any of them is the tenant.
Managed Care Plans: All health maintenance organizations, preferred provider
organizations, individual practice associations, competitive medical plans, and
similar arrangements.
Managers: Any Person who has entered into a Management Agreement with a Facility
Entity, which initially shall mean Emeritus Management LLC and Emeritus
Management I LP. or any other entity approved by AL Investors II.
Medicaid: The medical assistance program established by Title XIX of the Social
Security Act (42 US C ss.ss. 1396 et seq.) and any statute succeeding thereto.
A-5
Medicare: The health insurance program for the aged and disabled established by
Title XVIII of the Social Security Act (42 USC ss.ss. 1395 et seq.) and any
statute succeeding thereto.
Meditrust: Meditrust Acquisition Corporation I and Meditrust Company LLC.
Mortgage: collectively, the terms and conditions of the Senior Loan and the
Junior Loan.
Operating Equipment. All dishes, glassware, bed coverings, towels, silverware,
uniforms and similar items used in, or held in storage for use in (or if the
context so dictates, required in connection with) the operation of the
Facilities.
Operating Supplies. All consumable items used in, or held in storage for use in
(or if the context so dictates, required in connection with), the operation of
the Facilities, including food, medical supplies, fuel, soap, cleaning
materials, and other similar consumable items.
Ordinary Contracts: All agreements and contracts to purchase goods and services
(excluding Major Contracts) to the extent such other agreements and contracts
have been entered into by the Emeritus Entities in the ordinary course of
business of construction, owning, operating or managing the Facilities, contract
rights (including without limitation, warranties provided in construction
contracts, subcontracts, and architects' contracts), right to proceeds or
payment on account of any Award or Casualty, warranties and representations,
franchises, and records and books of account benefiting, relating to or
affecting the Facility or the operation of any programs or services in
conjunction with the Facility and all renewals, replacement and substitutions
therefor entered into by the Emeritus Entities with any Governmental Authority,
Accreditation Body or Third Party Payor or entered into by any of the Emeritus
Entities with any third Person, excluding, however, any agreements pursuant to
which money has been or will be borrowed or advanced, the Facility Leases, the
Leases, any agreements with or obligations relating to employees of a Facility,
and any agreement creating or permitting any Lien, or other encumbrance on title
(except for the Permitted Exceptions), and any Major Contract.
Ordinary Leases: Collectively, all subleases, licenses, use agreements,
equipment leases, concession agreements, tenancy at will agreements and other
occupancy agreements (but excluding any Residency Agreement, Facility Lease or
Major Lease), whether oral or in writing, entered into by any of the Emeritus
Entities and encumbering or affecting a Facility.
Permits: Collectively, all permits, licenses, approvals, qualifications, rights,
variances, permissive uses, accreditation, certificates, certifications,
consents,
A-6
agreements, contracts, contract rights, franchises, interim licenses, permits
and other authorizations of every nature whatsoever required by, or issued
under, applicable Legal Requirements relating or affecting a Facility or the
construction, development, maintenance, management, use or operation thereof, or
the operation of any programs or services in conjunction with the Facility and
all renewals, replacements and substitutions therefor, now or hereafter required
or issued by any Governmental Authority, Accreditation Body or Third Party
Payor, or maintained or used by any of the Emeritus Entities, or entered into by
any of the Emeritus Entities with any third Person with respect to a Facility.
Permitted Exceptions: The exceptions to title approved by AL Investors II
pursuant to the Purchase Agreement, including the Approved Equipment Leases.
Person: Any individual, corporation, general partnership, limited partnership,
joint venture, stock company or association, company, bank, trust, trust
company, land trust, business trust, unincorporated organization, unincorporated
association, Governmental Authority or other entity of any kind or nature.
Personal Property: All machinery, equipment, furniture, furnishings, vans,
buses, vehicles, movable walls or partitions, computers or trade fixtures,
goods, inventory, supplies, the name of the Facility, and other personal or
intangible property located on or in or used in connection with a Facility
including, but not limited to, all Operating Equipment, Furnishings and
Equipment and Operating Supplies. Notwithstanding the foregoing, title to vans
or buses shall remain in Emeritus or Managers under the Management Agreement and
be held in trust by them for the benefit of the respective Facility Entity.
Prime Rate: The variable rate of interest per annum from time to time set forth
in the Wallstreet Journal as the prime rate of interest and in the event that
the Wallstreet Journal no longer publishes a prime rate of interest, then the
Prime Rate shall be deemed to be the variable rate of interest per annum which
is the prime rate of interest or base rate of interest from time to time
announced by any major bank or other financial institution reasonably selected
by AL Investors II.
Provider Agreements: All participation, provider and reimbursement agreements or
arrangements, if any, in effect for the benefit of the Emeritus Entities or
Meditrust in connection with the operation of the Facility relating to any right
of payment or other claim arising out of or in connection with participation in
any Third Party Payor Program.
Real Estate: Collectively, (i) the Land, (ii) the Improvements, and (iii) all
rights, rights-of-way, easements, mineral rights, privileges, options, leases,
licenses, and appurtenances in any manner belonging to, or pertaining to, the
Land and the Improvements.
A-7
Residency Agreement: All contracts, agreements and consents executed by or on
behalf of any resident or other Person seeking services at the Facility,
including, without limitation, assignments of benefits and guarantees.
Senior Loan: any indebtedness incurred by Owners which is secured by any
mortgage, deed of trust and related security instruments against a Facility.
Initially, the Senior Loan is evidenced by that certain Loan Agreement between
AL Investors II (and the Facility Entities) and GMAC Commercial Mortgage
Corporation dated on or about the same date hereof ("Initial Senior Loan").
Third Party Payor Programs: Collectively, all third party payor programs in
which the Emeritus Entities presently or in the future may participate,
including without limitation, Medicare, Medicaid, Blue Cross and/or Blue Shield,
Managed Care Plans, other private insurance plans and employee assistance
programs.
Third Party Payors: Collectively, Medicare, Medicaid, Blue Cross and/or Blue
Shield, private insurers and any other Person which presently or in the future
maintains Third Party Payor Programs.
Title Company: First American Title Insurance Company.
Unavoidable Delays: Delays due to strikes, lockouts, inability to procure
materials, power failure, acts of God, governmental restrictions, enemy action,
civil commotion, fire, unavoidable casualty or other causes beyond the control
of the party responsible for performing an obligation hereunder, provided that
lack of funds shall not be deemed a cause beyond the control of either party
hereto.
A-8
EXHIBIT B
TO SUPPLEMENTAL PURCHASE AGREEMENT
IN CONNECTION WITH PURCHASE OF FACILITIES
(AL II - 14 Operating Facilities)
Major Contracts and Major Leases
1. Park Club of Brandon
None
2. Park Club of Fort Myers
Ground Maintenance Agreement between Earth Lovers Landscape and Lawn and The
Park Club of Fort Myers, $900/month)
Gas Service Agreement, dated July 3, 1995, between Ferrellgas and The Park Club
(5 year term then year to year, $900/month, either party may terminate upon 30
days written notice).
Equipment Rental Agreement, dated February 1998, between Mellon First United
Leasing and Integrated Health Services at Sarasota, Inc. (3 year term,
$207/month, Agreement not executed by Mellon First United Leasing).
Equipment Maintenance Agreement, dated November 18, 1997, between Pitney Bowes
Credit Corporation and The Park Club of Fort Myers (63 month term,
$368/quarter).
Production and Warranty Contract, dated June 15, 1998, between The Message on
Hold Network and The Park Club of Fort Myers (36 month term, $69/month).
Commercial Lease Agreement, dated February 6, 1997, between Associates Leasing,
Inc. and Emeritus - Park Club of Fort Myers (36 month term, $349.80/month,
Lessee has right to purchase equipment for $1.00 30 days prior to end of term,
Agreement not executed by Associates Leasing, Inc.).
Pest Prevention Service Agreement, dated January 11, 1999, between Steritech
Group, Inc. and The Park Club of Fort Myers (one year term, then year to year,
$150/month, either party may terminate upon 30 days written notice).
B-1
3. Park Club of Oakbridge
Fire Alarm Testing and Inspection Service Agreement, dated September 8, 1995,
between Security Engineers Systems, Inc. and Emeritus Corporation (one year
term, then year to year, $900/year plus labor costs, either party may terminate
upon 30 days written notice).
Pharmacy Service Agreement, dated July 19, 1996, between First Priority Pharmacy
and Park Club of Oakbridge (one year term, then year to year, either party may
terminate upon 30 days written notice).
4. Colonial Park Club
Pharmacy Provider Agreement, dated October 1, 1997, between Olson Liggett Drug
and Colonial Park Club (one year term, then year to year, either party may
terminate upon 30 days written notice for breach).
5. Ridge Wind
None
6. Lakewood Inn tbka Loyalton of Coeur d' Alene
Landscape Maintenance Agreement, dated February 5, 1998, between Artistic
Landscape and Lakewood Inn (one year, $1018.84/month)
Elevator Maintenance Agreement, dated May 4, 1998, between Thyssen Elevator
Corporation and The Lakewood Inn (one year, then year to year, $280/month,
either party may terminate upon 30 days written notice).
7. Highland Hills
None
8. Fairhaven Estates
MDU Service Agreement, dated May 28, 1998, between TCI Cablevision of Washington
and Fairhaven Estates (5 year term with 5 year renewal terms, $656.78/month,
either party may terminate upon 6 months written notice).
Monitoring Contract, dated October 23, 1998, between D-Tech, Inc. and Fairhaven
Estates (5 year term then year to year, $25/month, either party may terminate
upon 30 days written notice).
B-2
9. Evergreen Lodge
Elevator Maintenance Agreement, dated April 1, 1996, between Sound Elevator
Company and Emeritus Properties I, Inc. (3 years with 3 year renewal terms,
$179.74/month, either party may terminate upon 90 days written notice).
Central Station Protective Signaling Service Agreement, dated September 10,
1996, between Edwards Company and Emeritus Corporation (3 years then year to
year, $30/month, either party may terminate upon 60 days written notice).
10. Hearthstone
Consultant Agreement, dated December 1, 1997, between Pharmacy Corporation of
America and Hearthstone Inn (one year term, then year to year, $40/hour as
needed, either party may terminate upon 60 days written notice).
Pharmaceutical Service Agreement, dated December 1, 1997, between Pharmacy
Corporation of America and Hearthstone Inn (one year term, then year to year,
either party may terminate upon 60 days written notice).
11. Pines at Tewksbury
Contract for Alarm and Detection Equipment, dated January 1, 1999, between
Grinnell Fire Protection Systems and Pines at Tewksbury (one year term then year
to year, $1,400/year, either party may terminate upon 30 days written notice,
Agreement not executed by Pines at Tewksbury).
12. Meadowbrook
None
13. Anderson Place
Agreement for Services, dated December 1997, between Dr. Harry Geisberg and
Anderson Place ($900/month, either party may terminate upon 60 days written
notice).
Agreement for Commercial Garbage Service, dated November 11, 1998, between
Carolina Container Company and Anderson Place (2 year term, $255.65/month).
Service Agreement for Podiatry Care, dated April 1, 1997, between Diversified
Health Services and Anderson Place Health Care (one year term then year to year,
either party may terminate upon 30 days written notice).
B-3
Consultant Pharmacist Retainer Agreement, dated November 1, 1998, between
Network HealthCare and Summer House (one year term then year to year, $50/hour,
either party may terminate upon 60 days written notice).
Nursing Home Vendor Pharmacy Agreement, dated November 1, 1998, between Network
HealthCare and Anderson Place Health Care Center (one year term then year to
year, either party may terminate upon 30 days written notice).
14. Elmbrook Estates
Waste Collection Agreement, dated June 13, 1997 between Browning Ferris Inc. and
Elmbrook Estates (3 year term with 3 year renewal terms, $295.37/month, either
party may terminate upon 60 days prior written notice).
B-4
EXHIBIT C
TO SUPPLEMENTAL PURCHASE AGREEMENT
IN CONNECTION WITH PURCHASE OF FACILITIES
(AL II - 14 Operating Facilities)
Litigation, Claims and/or Proceedings
1. Highland Hills (Pocatello, Idaho)
Claimant: Hazel Gregg
Nature of Claim: Age Discrimination
2. Ridgewind (Chubbuck, Idaho)
Claimant: Audra Hess
Nature of Claim: Wrongful Termination
C-1
EXHIBIT D
TO SUPPLEMENTAL PURCHASE AGREEMENT
IN CONNECTION WITH PURCHASE OF FACILITIES
(AL II - 14 Operating Facilities)
Claims for Repairs, Restorations and/or Improvements
None
Exceptions to Compliance With Legal Requirements
Community Issue
Hearthstone Inn Elevators do not conform to current ADA
requirements
Meadowbrook The public restrooms are not in compliance
with current ADA guidelines
Meadowbrook Parking does not meet current zoning
requirements; eight (8) additional stalls
are required to be in compliance
Evergreen Lodge Door hardware does not conform to current
ADA requirements
Fairhaven Estates Door hardware does not conform to current
ADA requirements
The Park Club of
Fort Meyers The public men's rest room does not conform
to current ADA requirements
Emeritus Entities shall remedy all of the above exceptions within a reasonable
time at their sole cost and expense.
D-1
EXHIBIT E
TO SUPPLEMENTAL PURCHASE AGREEMENT
IN CONNECTION WITH PURCHASE OF FACILITIES
(AL II - 14 Operating Facilities)
Environmental Compliance
Community (Location) Issue Status Resolution
Meadowbrook O&M Program Completed Comply with O&M
program
Evergreen Lodge O&M Program Completed Comply with O&M
program
Colonial Park Club Storage Drums Contact Test and dispose
local firm to
properly test and dispose
Park Club of Prior Underground Removed in
Oakbridge Storage Tank 1999 by IHS
(1,000 gallon propane Propane tank use
for kitchen
appliances was
removed when
kitchen
converted to
natural gas.
Confirm removal
in accordance
with all Legal
Requirements.
E-1
EXHIBIT F
TO SUPPLEMENTAL PURCHASE AGREEMENT
IN CONNECTION WITH PURCHASE OF FACILITIES
(AL II - 14 Operating Facilities)
Management Agreement
See attached Management Agreement
F-1
EXHIBIT G
TO SUPPLEMENTAL PURCHASE AGREEMENT
IN CONNECTION WITH PURCHASE OF FACILITIES
(AL II - 14 Operating Facilities)
Guaranty Agreement
See attached Guaranty Agreement
G-1
EXHIBIT H
TO SUPPLEMENTAL PURCHASE AGREEMENT
IN CONNECTION WITH PURCHASE OF FACILITIES
(AL II - 14 Operating Facilities)
Put Agreement
See attached Put Agreement
H-1
EXHIBIT I
TO SUPPLEMENTAL PURCHASE AGREEMENT
IN CONNECTION WITH PURCHASE OF FACILITIES
(AL II - 14 Operating Facilities)
Purchase Price Allocation
I-1