SUPPLEMENTAL PURCHASE AGREEMENT
IN CONNECTION WITH PURCHASE OF FACILITIES
(AL II - 5 Development 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., and such additional Affiliates as may be added by
amendment to this agreement (collectively, the "Emeritus Affiliates"), and AL
Investors Development LLC, a Delaware limited liability company, and its
permitted assigns ("AL Investors Development"). 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 Development 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 up to five (5) Facilities
identified on Exhibit A (collectively, the "Facilities"). Initially, only the
Facility entitled Loyalton of Phoenix is being acquired pursuant to the Purchase
Agreement and this Agreement. The other Facilities ("Remaining Development
Facilities") are currently under construction and leased by Meditrust to the
Emeritus Affiliates and may be acquired, subject to satisfaction of the
conditions herein, thirty (30) days after issuance of a certificate of occupancy
for each Remaining Development Facility. Meditrust and AL Investors Development
contemplate that upon issuance of a certificate of occupancy for each of the
Remaining Development Facilities, that Remaining Development Facility will be
made the subject of the Purchase Agreement (or a separate purchase agreement in
substantially the same form); such Remaining Development Facility (and the
Exhibits hereto applicable to such Remaining Development Facility) will likewise
be added by amendment to this Agreement at that time and such Remaining
Development Facility shall thereupon become a Facility as defined herein and
thereby made subject to the terms, conditions, warranties and representations of
this Agreement. This Agreement shall be fully effective as to the Facility
entitled Loyalton of Phoenix and such Remaining Development Facilities that may
be added by amendment to this Agreement, notwithstanding, that all Remaining
Development Facilities may not be acquired. The resulting pool of up to five (5)
Facilities, will each be owned by the respective Facility Entity. Except for the
obligation of the Emeritus Entities not to sell, transfer or assign their
interest in the Remaining Development Facilities to any person other than AL
Investors
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Development prior to the expiration of thirty (30) days after issuance of a
certificate of occupancy for such Remaining Development Facility, neither AL
Investors Development nor the Emeritus Entities shall have any obligation with
respect to a Remaining Development Facility until the addition of such Remaining
Development Facility to this Agreement.
2.2 Consideration. In consideration of AL Investors Development 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 Development would not perform the due diligence each
Facility 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
Development. Provided, however, 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
Development.
4. DUE DILIGENCE.
4.1 Investigations. Under the terms of the Purchase Agreement and under this
Agreement, AL Investors Development has until the Closing Date for such Facility
(the "Due Diligence Period") to undertake such due diligence on the Facility 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
Development. The Emeritus Entities shall provide access to the Facilities and
cooperate with AL Investors Development and its designated representatives in
conducting its due diligence activities. If AL Investors Development in its sole
discretion has not waived or satisfied this condition prior to expiration of the
Due Diligence Period, then AL Investors Development 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
Development or its designated representatives copies of the following in the
possession of the Emeritus Entities for each Facility:
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(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 for each Facility, 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 from the date it
opened for business (collectively, the "Operating Statements").
(d) Tax Statements and Utility Bills. All real and personal property tax
statements for the preceding calendar year and utility bills for the preceding
calendar year.
(e) Approvals. All Permits, including the certificate of occupancy and 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 and the architect's certificate of
substantial completion.
(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 Development.
(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.
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(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
Development.
(m) Health Surveys. Local and/or state Department of Health survey for
most recent period.
(n) The Emeritus Entities' Certified Cost for the Facility as described in
Section 7.
(o) Other Matters. Any other document or matter reasonably requested by AL
Investors Development.
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.
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 to each of AL Investors Development and the Facility Entities, with
respect to each Facility, as of the date of Closing of such Facility, 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
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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.
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 Development 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 Development 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
Facility 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
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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 the 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 the Facility for its present use as an
assisted living facility and with the number of 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 the Facility are in compliance
in all material respects with the applicable provisions of assisted living
facility 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 the 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
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and expense within ninety (90) days after Closing. Except as set forth on
Exhibit D, the 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 the Facility). There are no
unsatisfied requests or demands for repairs, restorations or improvements to the
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 Lease or their rights under the Facility Lease or to sell the Facility
to any party other than AL Investors Development.
5.11 Condition of Improvements. Construction of each Facility has been
completed, except for "punchlist items" as that term is used in the construction
industry, in a good and workmanlike manner, free from defects, in accordance
with all Legal Requirements, and free of Liens, except for the Mortgage. The
Facility is fully equipped, including but not limited to all Operating
Equipment, Operating Supplies and Personal Property necessary for operation of
the Facility in a good and efficient manner, and open for business or ready to
be opened for business upon issuance of the license therefor. All costs and
expenses of developing, construction and equipping the Facility, including,
without limitation, any Liens resulting therefrom and completion of all
"punchlist items", have been or will be paid in full by the Emeritus Entities.
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. Upon Closing under
this Agreement, all of the Emeritus Entities' right, title and interest in each
Facility, except for title to the vans and buses, shall have been conveyed to
the Facility Entity.
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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 the 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. The 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.
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 Development
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 Development. 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 Development 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 the 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.
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(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 Facility 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 the 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
the 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 regard to
air emissions, water discharges, noise emissions or Hazardous Substances, or any
other environmental, health or safety matters affecting the 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
Development 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 Facility are the employees of the Emeritus
Affiliates and none of AL II Holdings, AL Investors Development 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 Development 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 Facility.
5.19 Casualty; Condemnation. The Facility is not 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
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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
pursuant to the Purchase Agreement and this Agreement and in connection with
acquisition of the fourteen (14) operating Facilities by AL Investors II LLC and
its Affiliates pursuant to (a) that certain Purchase and Sale Agreement with
Meditrust Company LLC and (b) that certain Supplemental Purchase Agreement In
Connection With Purchase of Facilities with Emeritus and its Affiliates dated on
or about March 29, 1999, do not equal or exceed $15,000,000 in the aggregate.
5.23 Indemnification. Each of the Emeritus Entities, jointly and severally,
agrees to indemnify, defend and hold each of AL II Holdings, AL Investors
Development, 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 Development, 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 Development, 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.
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6. BUYER'S REPRESENTATIONS. AL Investors Development represents and warrants to
the Emeritus Entities, with respect to each Facility, as of the date of Closing
of such Facility, as follows:
(a) Status. AL Investors Development 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 Development or the Facility Entities at Closing have been duly
authorized, executed and delivered by AL Investors Development and/or the
Facility Entities and are binding on and enforceable against AL Investors
Development and the Facility Entities in accordance with their terms.
AL Investors Development 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. COST CERTIFICATION; PURCHASE PRICE. The Emeritus Entities shall certify the
actual aggregate cost incurred (whether or not then paid) in developing,
constructing, and equipping the Facility in compliance with the warranties,
representations, and terms of this Agreement ("Certified Cost"). Such Certified
Cost shall be in the general form of Exhibit I for such Facility, together with
such additional certifications as may be required by AL Investors Development
and the holder of the Senior Loan or the holder of the Junior Loan. With respect
to the Facility entitled Loyalton of Phoenix, the amounts shown on Exhibit I
constitute the Cost Certification for such Facility To the extent the Certified
Cost for the Facility, exclusive of any lease-up reserve, exceeds the Total
Project Cost as shown on Exhibit I, exclusive of line item entitled Lease-Up
Reserve, the Emeritus Entities shall pay such excess at their sole cost and
expense. Subject to the foregoing limitation, the purchase price for a Facility
paid to the Emeritus Entities ("Purchase Price") shall be the Certified Cost
less the amount paid to Meditrust pursuant to the Purchase Agreement for such
Facility. In no event shall the Purchase Price paid by AL Investors Development
for a Facility, including all closing costs pursuant to Section 15 of this
Agreement and the purchase price pursuant to the Purchase Agreement, exceed the
Total Project Cost shown on Exhibit I, less the Lease-Up Reserve. To the extent
the Certified Cost including all closing costs pursuant to Section 15 is less
than the Total Project Cost, exclusive of the line item entitled Lease-Up
Reserve, the benefit shall accrue to AL Investors Development. Within one
hundred twenty (120) days after Closing, Emeritus Entities shall provide a
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reconciliation of all Facility costs actually paid or incurred with the
Certified Cost, and remit any overpayment to the respective Facility Entity.
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 Development 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 and agree to fund all operating deficits of the Facilities
exceeding the amounts set forth in the Management Agreement pursuant to Guaranty
of Management Agreement and Shortfall Funding Agreement ("Guaranty Agreement")
attached hereto as Exhibit G. Upon Closing of a Facility, such Facility shall be
made subject to the Management Agreement and the Guaranty Agreement ratified and
affirmed.
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 a Facility to the Managers.
The Emeritus Entities shall jointly and severally indemnify and hold each of AL
II Holdings, AL Investors Development, 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 Facility 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. At closing of each subsequent
Facility, the Put and Purchase Agreement shall be ratified and affirmed.
11. FINANCING OF THE PURCHASE OF THE FACILITIES. AL Investors Development 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 Development 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
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agree: (a) to maintain, manage and operate the Facility in accordance with the
terms and conditions of the respective Facility Lease; (b) to maintain the
Facility in its 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 Lease; (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 or Lease, except with
respect to Contracts and Leases in the ordinary course of business, without the
prior written consent of AL Investors Development, 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 Development, which
shall not unreasonably be withheld; (f) not to amend, modify, terminate, or
exercise any option to purchase under any of the Facility Lease; (g) not to
mortgage, encumber or otherwise place or permit any encumbrance on its leasehold
estate under the Facility Lease; and (h) not to enter into any contracts or
agreements to sell or otherwise transfer its interest in any Facility.
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
for each Facility, the following, each in form satisfactory to AL Investors
Development:
(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 Facility 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;
- -13-
(e) Duly executed Management Agreement, Guaranty Agreement, and Put
Agreement or ratification thereof;
(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 Development may reasonably
require.
(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
Development and Emeritus amendment and restatement of the Facility Leases.
(i) Duly executed Licensing Indemnity Agreement between AL Investors
Development and Emeritus or ratification thereof.
(j) Such other documents as AL Investors Development 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 Development and the Facility Entities. On
or prior to the Closing, AL Investors Development and the Facility Entities
shall cause to be delivered the following:
(a) The Purchase Price under the Purchase Agreement.
(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 Development as
Emeritus Entities may reasonably require.
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14. CONDITIONS PRECEDENT.
14.1 AL Investors Development. AL Investors Development's obligations under this
Agreement are expressly conditioned on, and subject to satisfaction of, the
following conditions precedent for each Facility:
(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.
(b) Closing under Purchase Agreement. Simultaneous closing under the
Purchase Agreement as may be amended.
(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 the Facility due to Casualty
or Condemnation.
(e) AL Investors Development Financing. The lenders under the Initial
Senior Loan (or any substitute therefor) and Initial Junior Loan shall be ready,
willing and able to close simultaneous with the closing hereunder.
(f) Final Approval. Final approval of this transaction by each of the
members of AL II Holdings, the parent of AL Investors Development.
The conditions set forth in Section 14.1 above are intended solely for the
benefit of AL Investors Development. If any of the foregoing conditions are not
satisfied as of the Closing for a Facility, AL Investors Development 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 for each Facility:
(a) Performance by AL Investors Development. AL Investors Development and
the Facility Entities shall each have timely performed all obligations required
by this Agreement to be performed by it.
- -15-
(b) Closing under Purchase Agreement. Simultaneous closing under the
Purchase Agreement as may be amended.
(c) Representations and Warranties True. The representations and
warranties of AL Investors Development contained herein shall be true and
correct as of the Closing.
(d) 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 for a Facility, 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 Development shall
pay the following closing costs with respect to Closing under this Agreement and
the Purchase Agreement for each Facility, 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 Development, 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).
- -16-
(f) Costs and expenses of due diligence investigations, studies, surveys
and reports prepared for AL Investors Development and the Lending Group and the
formation and qualification of the Facility Entities.
(g) AL Investors Development'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
Development, Al II Holdings, and the Facility Entities up to the amounts listed
on Exhibit I.
To the extent the aggregate of the foregoing for a Facility exceeds the line
item entitled Other Transaction Fees for the Facility on Exhibit I, exceeds the
balance of the closing costs for such Facility shall be paid by the Emeritus
Entities.
16. CLOSING STATEMENTS. All income and expense arising out of the management and
operation of the Facility, including, but not limited to real property taxes and
insurance, shall be prorated between the Emeritus Entities and AL Investors
Development 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 Development 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 Development
prior to the Closing and approved by AL Investors Development. 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 Development 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 Development 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 Development 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 as to any Facility, or this Agreement as to
any Facility may not occur due to a variety of events or circumstances beyond
the control of AL Investors Development including but not limited to:
(a) The refusal or failure of the Lending Group to provide financing for
the acquisition of a Facility;
(b) The failure of Governmental Authorities or other Parties to approve
the transfer of Permits, Contracts or Leases to the Facility Entity 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 the Facility 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 or
amendment thereto upon terms and conditions acceptable to AL Investors
Development;
(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 Development's
obligations hereunder as set forth in Section 14.1; or
(h) Such other events or circumstances beyond the reasonable control of AL
Investors Development 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 as to such Facility, the Emeritus Entities shall
pay to AL II Holdings and AL Investors Development 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 Facility,
including
- -18-
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 form AL II Holdings, AL Investors
Development and the Facility Entities, attorneys' fees and costs of AL II
Holdings, AL Investors Development, and all other reasonable out-of-pocket
expenses incurred by AL II Holdings and AL Investors Development in connection
with this transaction as categorized on Exhibit I is the line item "Other
Transaction Fees" (collectively "Break-up Expenses"). AL Investors Development
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 Development within ten (10) days after receipt of such
itemization. The payment of the Break-up Expenses shall be the sole remedy of AL
Investors Development 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 Development 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
Development 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:
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If to AL Investors Development AL Investors Development 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
- -20-
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 Development
may enforce any or all of the provisions of this Agreement directly against the
Emeritus
- -21-
Entities 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 Development represents to Emeritus Entities and
the Emeritus Entities represent to AL Investors Development, 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 Development
agrees to indemnify and hold Emeritus Entities harmless, and the Emeritus
Entities agree to indemnify and hold AL Investors Development 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.
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IN WITNESS WHEREOF, the parties hereto have hereunto set their hands and seals
as of the date first above appearing.
AL INVESTORS DEVELOPMENT 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 By /s/ Daniel R. Baty
Name Daniel R. Baty
Its Chairman
- -23-
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
- -24-
EXHIBIT A
TO SUPPLEMENTAL PURCHASE AGREEMENT
IN CONNECTION WITH PURCHASE OF FACILITIES
(AL II - 5 Development 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 Development.
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 Development 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
Facility entitled Loyalton of Phoenix is being purchased from Meditrust closes
as defined in the Purchase Agreement and the date thirty (30) days after
issuance of a certificate of occupancy as to each of the other Facilities or
such other closing date as may be specified in the purchase agreement with
Meditrust for such Facility.
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 Development 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 which is subject to this
Agreement, including the Land, Improvements and Personal Property associated
therewith, located in the city and state as set forth below:
Development
Facility City State Units Beds Facility LLC and LP
Name
Loyalton of
Flagstaff Flagstaff AZ 61 61 AL Investors
Development Flagstaff
LLC
Loyalton of
Phoenix Phoenix AZ 100 101 AL Investors
Development Phoenix
LLC
Loyalton of
Hagerstown Hagerstown MD 101 101 AL Investors
Development
Hagerstown LLC
Loyalton of
Lakewood Lakewood NY 83 83 AL Investors
Development Lakewood
LLC
Loyalton of
Staunton Staunton VA 101 101 AL Investors
Development Staunton
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;
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
A-3
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 Development and/or the
membership interests of AL Investors Development 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 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
A-4
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: Guaranty Federal Bank, F.S.B. in a debt facility to AL Investors
Development secured by the Facilities in the maximum aggregate original
principal balance of approximately $10,700,000 with respect to Facilities
entitled Loyalton of Phoenix and Loyalton of Flagstaff.
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 Development.
Medicaid: The medical assistance program established by Title XIX of the Social
Security Act (42 US Css.ss.1396 et seq.) and any statute succeeding thereto.
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.
A-5
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, 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
A-6
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
Development 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 Development.
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 Master Loan Agreement
between AL II Holdings, AL Investors Development (and the Facility Entities) and
Guaranty Federal Bank, F.S.B. on behalf of the Lenders (as defined therein)
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 - 5 Development Facilities)
Major Contracts and Major Leases
None
B-1
EXHIBIT C
TO SUPPLEMENTAL PURCHASE AGREEMENT
IN CONNECTION WITH PURCHASE OF FACILITIES
(AL II - 5 Development Facilities)
Litigation, Claims and/or Proceedings
None
C-1
EXHIBIT D
TO SUPPLEMENTAL PURCHASE AGREEMENT
IN CONNECTION WITH PURCHASE OF FACILITIES
(AL II - 5 Development Facilities)
Claims for Repairs, Restorations and/or Improvements
None
D-1
EXHIBIT E
TO SUPPLEMENTAL PURCHASE AGREEMENT
IN CONNECTION WITH PURCHASE OF FACILITIES
(AL II - 5 Development Facilities)
Environmental Compliance
None
E-1
EXHIBIT F
TO SUPPLEMENTAL PURCHASE AGREEMENT
IN CONNECTION WITH PURCHASE OF FACILITIES
(AL II - 5 Development Facilities)
Management Agreement
See attached Management Agreement
F-1
EXHIBIT G
TO SUPPLEMENTAL PURCHASE AGREEMENT
IN CONNECTION WITH PURCHASE OF FACILITIES
(AL II - 5 Development Facilities)
Guaranty Agreement
See attached Guaranty Agreement
G-1
EXHIBIT H
TO SUPPLEMENTAL PURCHASE AGREEMENT
IN CONNECTION WITH PURCHASE OF FACILITIES
(AL II - 5 Development Facilities)
Put Agreement
See attached Put Agreement
H-1
EXHIBIT I
TO SUPPLEMENTAL PURCHASE AGREEMENT
IN CONNECTION WITH PURCHASE OF FACILITIES
(AL II - 5 Development Facilities)
Purchase Price Allocation
I-1