EXHIBIT 10.23
INDEMNITY AGREEMENT
THIS INDEMNITY AGREEMENT ("Agreement") is made as of June 21, 1997 (the
"Closing Date") among (i) MARRIOTT SENIOR LIVING SERVICES, INC., a Delaware
corporation ("MSLS") and MARRIOTT INTERNATIONAL, INC., a Delaware corporation
("MII," and collectively with MSLS, "MI"), and (ii) HMC SENIOR COMMUNITIES,
INC., a Delaware corporation ("HMCSC") and HOST MARRIOTT CORPORATION, a Delaware
corporation ("Host Marriott," and collectively with HMCSC, "Host").
RECITALS
On the Closing Date, MSLS is selling to HMCSC all of the issued and
outstanding stock ("Stock") of Forum Group, Inc., an Indiana corporation (the
"Company"), pursuant to the Stock Purchase Agreement dated as of the Closing
Date between Host Marriott and MSLS (the "Purchase Agreement"). As a condition
to the sale and purchase of the Stock, MI and Host have each agreed to indemnify
the other as set forth in this Agreement.
NOW, THEREFORE, in consideration of the foregoing premises, of the mutual
covenants set forth in this Agreement, and of other good and valuable
consideration, the receipt and sufficiency of which are acknowledged, MI and
Host agree as follows:
I. INTERPRETATION
1.1 DEFINITIONS. As used in this Agreement, capitalized terms shall have the
meanings indicated in the Purchase Agreement, and the following capitalized
terms shall have the meanings indicated:
ACCRUED NOMURA FEE: the "Exit Fee" payable by the Company pursuant to
Section 3.01 of the Credit Agreement dated September 1, 1995 between Nomura
Asset Capital Corporation and the Company as in effect on the date of this
Agreement.
CDLP INVESTMENT AGREEMENT: the Investment Agreement dated as of May 17,
1995 between Forum Alpha Investments, Inc. and CDLP Partners, Ltd., as in effect
on the date of this Agreement.
CLAIMS: any and all claims, demands, suits, causes of action,
administrative or regulatory proceedings, governmental investigations,
arbitration proceedings or mediation proceedings which assert that a Liability
is or may be due and payable.
COLLECTIVE BARGAINING AGREEMENTS: collectively, (i) the Agreement between
Forum Group, Inc. d/b/a Xxxxx Manor South and Amalgamated Local Union 747 Health
Care Employees' Union, Effective August 1, 1995, and (ii) Agreement between
Forum Group, Inc. d/b/a Xxxxxxx Manor and Amalgamated Local Union 747 Health
Care Employees' Union, Effective August 1, 1995.
ENVIRONMENTAL LIABILITIES: all Liabilities in connection with the
Communities that result from, relate to, arise out of or are based upon any
Environmental Laws.
INDEMNIFIABLE CLAIM: as defined in Section 5.1.
INDEMNIFIED PARTY: as defined in Section 5.1.
INDEMNIFYING PARTY: as defined in Section 5.1.
LIABILITIES: any and all liabilities, indebtedness, obligations, losses,
damages, claims, assessments, fines, penalties, costs, fees and expenses of
every kind, nature or description, whether fixed or contingent, known or
unknown, suspected or unsuspected, or foreseen or unforeseen, and whether based
on contract, tort, statute or other legal or equitable theory of recovery,
including interest which may be imposed in connection therewith, court costs,
costs resulting from any judgments, orders, awards, decrees or equitable relief,
and reasonable fees and disbursements of counsel, consultants and expert
witnesses.
MAJORITY-OWNED SUBSIDIARY: any Subsidiary of the Company not wholly
owned, directly or indirectly, by the Company immediately after Closing. In the
event that subsequent to Closing, Host shall acquire, directly or indirectly,
all of the ownership of any Majority-Owned Subsidiary, then such Majority-Owned
Subsidiary shall cease to be a Majority-Owned Subsidiary for purposes of this
Agreement.
POST-CLOSING LIABILITIES: any and all Liabilities of the Company and/or
any Subsidiary which accrue, arise, are entered into or relate to periods,
events or circumstances on or after the Closing Date.
PRE-CLOSING LIABILITIES: any and all Liabilities of the Company and/or
any Subsidiary which accrue, arise, are entered into or relate to periods,
events or circumstances prior to the Closing Date.
1.2 INTEGRATION. This Agreement, the Purchase Agreement and the Tax
Agreement contain the final and entire understanding of the parties hereto with
respect to the subject matter of this Agreement, and supersede all prior
negotiations, commitments, agreements and understandings, both written and oral,
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among the parties or any of them with respect to the subject matter of this
Agreement.
1.3 DOCUMENTARY CONVENTIONS. This Agreement shall be governed by the
Documentary Conventions.
II. INDEMNIFICATION BY MI
2.1 INDEMNIFICATION. Subject to the exclusions set forth in Section 2.2 and
the other terms of this Agreement, MI shall indemnify Host and its Affiliates
(including the Company and each Subsidiary), and their respective officers,
directors, members, and partners, against, and hold Host and its Affiliates
(including the Company and each Subsidiary), and their respective officers,
directors, members, and partners, harmless from, the following:
2.1.1 All Pre-Closing Liabilities, including such Liabilities as may
result from, relate to or arise out of the pending Claims described on Exhibit
A;
2.1.2 All Liabilities for repayment, refunding or reimbursement to any
Resident of all or any portion of any Lifecare Payment received prior to the
Closing Date in respect of Base Lifecare Contracts, together with such interest
thereon as may be required by law or by the terms of the applicable Lifecare
Contract, provided that prior to seeking indemnification under this Section
2.1.2, all Lifecare Reserves relating to the applicable Base Lifecare Contract
that may at such time be used to repay, refund or reimburse any Resident for a
Lifecare Payment are so used;
2.1.3 All Liabilities that result from, relate to or arise out of the
creation, maintenance and disbursement of any Lifecare Reserve held or required
to be held with respect to any Base Lifecare Contract, except to the extent such
Liabilities result from the negligence or willful misconduct after the Closing
Date of the Company or any of its Subsidiaries or Affiliates (it being
understood that all Lifecare Reserves held or required to be held with respect
to any Base Lifecare Contracts after the Closing Date are to be held, maintained
and disbursed by MSLS pursuant to management or operating agreements to the
extent permitted by applicable law);
2.1.4 The Liability to pay the Accrued Nomura Fee;
2.1.5 All Liabilities that result from, relate to, arise out of or under,
or are based upon (i) any Plan, or any contract or agreement listed on Exhibit
C-10 to the Purchase Agreement, whether accruing before or after the Closing
Date, except to the extent such Liability is treated as an "Operating Expense"
under a New Operating Agreement (whether such New Operating Agreement is
executed on the
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Closing Date or attached as an exhibit to any Transition Agreement), taking into
account the provisions of Sections 6.9.4 and 6.9.5 of the Purchase Agreement,
(ii) the employment or hiring practices of the Company or any of its
Subsidiaries prior to the Closing Date, or (iii) the employment or termination
of employment of any person by the Company or any Affiliate of the Company
(including each Subsidiary) prior to the Closing Date (including any workers'
compensation taxes or premiums);
2.1.6 All Liabilities, whether accrued before or after the Closing Date,
relating to or arising out of any Excluded Asset, Excluded Community, or
Excluded Subsidiary;
2.1.7 All Liabilities that result from the inaccuracy of any
representation or warranty in any material respect made by MSLS in the Purchase
Agreement;
2.1.8 The failure of MSLS to perform any covenant of MSLS in the Purchase
Agreement;
2.1.9 All Liabilities that result from, relate to, arise out of or under,
or are based upon any Collective Bargaining Agreement, whether accruing before
or after the Closing Date, except for Liabilities accruing from and after the
Closing Date which constitute "Operating Expenses" under any New Operating
Agreement (whether such New Operating Agreement is executed on the Closing Date
or attached as an exhibit to any Transition Agreement), taking into account the
provisions of Section 6.9.4 and 6.9.5 of the Purchase Agreement;
2.1.10 All Pre-Closing Liabilities of the Company as manager under the
FRP Management Agreement, the FRC-I Management Agreement, and the FFI Management
Agreement, and all Post-Closing Liabilities of the Company as manager under the
FRP Management Agreement, the FRC-I Management Agreement, and the FFI Management
Agreement arising from the fact that the Company may remain obligated as a party
under such Management Agreements;
2.1.11 All Liabilities which arise under the CDLP Investment Agreement
from or in connection with the acquisition of any senior living facility, except
for Liabilities indemnifiable by Host pursuant to Section 3.1.2; and
2.1.12 All costs and expenses relating to the defense of any Claims which
assert Liabilities described in this Section 2.1, including the reasonable fees
and disbursements of counsel.
2.2 EXCLUSIONS. The following Liabilities shall be excluded from the
indemnification obligation described in Section 2.1:
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2.2.1 Current Liabilities to the extent such Current Liabilities are set
forth on the Final Closing Accounting;
2.2.2 The principal amount of the Existing Financing to the extent such
principal amount is set forth in Section 4.20 of the Purchase Agreement, all
interest and other charges accruing on such principal from and after the Closing
Date (but expressly excluding the Accrued Nomura Fee), and all other Liabilities
in respect of the Existing Financing or under the Existing Financing Documents
accruing on or after the Closing Date (but expressly excluding the Accrued
Nomura Fee);
2.2.3 All Liabilities for the return of Deposits to the extent such
Deposits are set forth on the Final Closing Accounting;
2.2.4 All Liabilities for or in connection with Taxes (which shall be
governed by the Tax Agreement);
2.2.5 Liability for amounts payable in respect of any Lease, Equipment
Lease, Commercial Lease, Residence Agreement (other than as specifically set
forth in Section 2.1.2 or 2.1.3), Contract, Medicaid/Medicare Contract, and any
Restrictive Agreement, which accrue from and after the Closing Date and which do
not arise as a result of any breach or default on the part of MI, the Company or
any Subsidiary prior to the Closing Date;
2.2.6 Liability for amounts payable by the owner in respect of the FRP
Management Agreement, the FRC-I Management Agreement, and the FFI Management
Agreement, which accrue from and after the Closing Date and which do not arise
as a result of any breach or default on the part of MI, the Company or any
Subsidiary prior to the Closing Date;
2.2.7 Liability for the payment of deferred management fees by FRP to the
Company in respect of the FRP Management Agreement for periods prior to
January 1, 1994;
2.2.8 Liability for repayment, refunding or reimbursement to any Resident
of all or any portion of any Lifecare Payments received prior to the Closing
Date in respect of Excess Lifecare Contracts, to the extent such Lifecare
Payments are set forth on the Final Closing Accounting;
2.2.9 All Liabilities indemnifiable by Host pursuant to Section 3.1; and
2.2.10 All Environmental Liabilities, which shall be governed exclusively
by Article IV.
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2.3 ACKNOWLEDGEMENT OF "AS IS" PURCHASE. HOST ACKNOWLEDGES THAT EXCEPT FOR
THE REPRESENTATIONS, WARRANTIES AND COVENANTS EXPRESSLY SET FORTH IN THE
PURCHASE AGREEMENT AND THE OTHER TRANSACTION DOCUMENTS, (I) HOST IS ACCEPTING
THE LAND, IMPROVEMENTS, PERSONAL PROPERTY, AND ANY PERSONAL PROPERTY SUBJECT TO
ANY EQUIPMENT LEASE, IN ITS "AS IS, WHERE IS" CONDITION AS OF THE CLOSING DATE,
AND (II) MI IS MAKING NO REPRESENTATIONS OR WARRANTIES CONCERNING, AND SHALL
HAVE NO LIABILITY TO HOST WITH RESPECT TO, THE USE OR CONDITION OF THE LAND,
IMPROVEMENTS, PERSONAL PROPERTY, OR PERSONAL PROPERTY SUBJECT TO ANY EQUIPMENT
LEASE, INCLUDING ANY IMPLIED WARRANTY OF MERCHANTABILITY AND ANY IMPLIED
WARRANTY OF FITNESS FOR A PARTICULAR PURPOSE.
III. INDEMNIFICATION BY HOST
3.1 INDEMNIFICATION. Subject to the terms of this Agreement, Host shall
indemnify MI and its Affiliates, and their respective officers, directors,
members, and partners, against, and hold MI and its Affiliates, and their
respective officers, directors, members, and partners, harmless from, the
following:
3.1.1 All Post-Closing Liabilities, other than any Liabilities set forth
in Section 2.1;
3.1.2 All Post-Closing Liabilities which arise under the CDLP Investment
Agreement from or in connection with the acquisition, on or after the Closing
Date, of any senior living facility by the Company or any Person in which the
Company, directly or indirectly, owns an interest;
3.1.3 All Liabilities for repayment, refunding or reimbursement to any
Resident of all or any portion of any Lifecare Payment received prior to the
Closing Date in respect of Excess Lifecare Contracts to the extent such Lifecare
Payments are set forth on the Final Closing Accounting, together with such
interest thereon as may be required by law or by the terms of the applicable
Lifecare Contract, except to the extent such Liabilities result from the
negligence or willful misconduct after the Closing Date of MSLS or any of its
Subsidiaries or Affiliates (it being understood that all Lifecare Reserves held
or required to be held with respect to any Excess Lifecare Contracts after the
Closing Date are to be held, maintained and disbursed by MSLS pursuant to
management or operating agreements to the extent permitted by law);
3.1.4 The inaccuracy of any representation or warranty in any material
respect made by Host Marriott in the Purchase Agreement;
3.1.5 The failure of Host Marriott to perform any covenant in the
Purchase Agreement;
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3.1.6 All Liabilities arising out of any negligent act or omission or
willful misconduct on the part of Host and its Affiliates, and their agents and
representatives, during their entry onto the Communities prior to the Closing
Date in connection with the due diligence investigation performed for the
acquisition of the Company pursuant to the Purchase Agreement;
3.1.7 All Liabilities which are expressly excluded from MI's
indemnification obligations pursuant to Section 2.2, other than Liabilities for
or in connection with Taxes (which shall be governed by the Tax Agreement) and
Environmental Liabilities (which shall be governed by Article IV); and
3.1.8 All costs and expenses relating to the defense of any Claims which
assert Liabilities described in this Section 3.1, including the reasonable fees
and disbursements of counsel.
3.2 EXCLUSIONS. The following Liabilities shall be excluded from the
indemnification obligation described in Section 3.1:
3.2.1 Any Liability which results from, relates to or arises out of the
inaccuracy of any representation or warranty made by MSLS in any material
respect in the Purchase Agreement or any Transaction Document executed pursuant
to the Purchase Agreement;
3.2.2 All Liabilities indemnifiable by MI pursuant to Section 2.1; and
3.2.3 All Environmental Liabilities, which shall be governed exclusively
by Article IV.
IV. ENVIRONMENTAL MATTERS
4.1 ALLOCATION OF ENVIRONMENTAL LIABILITIES. It is the intent of the parties
that all Environmental Liabilities shall be allocated between MI and Host in the
same manner as such Environmental Liabilities would have been allocated under
applicable Environmental Laws (i) had MI (rather than the Company, its
Subsidiaries or Affiliates) owned title to the Communities and the related
assets prior to the Closing Date during the period in which the Company, its
Subsidiaries and/or Affiliates owned title to such Communities and assets, and
(ii) had Host directly acquired title to such Communities and assets on the
Closing Date (rather than acquiring the Stock of the Company) and continued to
own such Communities and assets during the period commencing on the Closing Date
and continuing until their transfer or other disposition to a Person which is
not an Affiliate of Host. Therefore, the following shall apply:
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4.1.1 MI shall pay and/or reimburse Host for (and shall indemnify Host
and its Affiliates, and their respective officers, directors, members, and
partners, against, and hold Host and its Affiliates, and their respective
officers, directors, members, and partners, harmless from) all Environmental
Liabilities that would, under applicable Environmental Laws, be the
responsibility of MI had MI (rather than the Company, its Subsidiaries or
Affiliates) owned title to the Communities and the related assets during the
period prior to the Closing Date in which the Company, its Subsidiaries and/or
Affiliates owned title to the Communities and the related assets, and had Host
directly acquired title to the Communities and related assets on the Closing
Date; and
4.1.2 Host shall pay and/or reimburse MI for (and shall indemnify MI and
its Affiliates, and their respective officers, directors, members, and partners,
against, and hold MI and its Affiliates, and their respective officers,
directors, members, and partners, harmless from) all Environmental Liabilities
that would, under applicable Environmental Laws, be the responsibility of Host
during the period commencing on the Closing Date and continuing until the
transfer or other disposition of each Community or asset to a Person which is
not an Affiliate of Host, had Host acquired title to the Communities and related
assets on the Closing Date (rather than acquiring the Stock of the Company).
4.2 NO THIRD PARTY RIGHTS. The allocation of Environmental Liabilities set
forth in Section 4.1 shall be solely as between Host and MI, and their
respective Affiliates, officers, directors, members, and partners, and shall not
be for the benefit of, or be enforceable by, any other Person.
4.3 PROCEDURES. The parties will cooperate with and assist each other in
addressing any matters relating to Environmental Liabilities so that the total
exposure of the parties for Environmental Liabilities is, to the extent
possible, minimized.
V. INDEMNIFICATION PROCEDURES
5.1 NOTICE. In the event that Host, the Company or any Subsidiary on the one
hand, or MI on the other hand (as applicable, an "Indemnifying Party"), is
liable under Article II, III or IV to indemnify or hold harmless any other
Person (as applicable, an "Indemnified Party") for a Liability, or a Claim by a
third party subject to indemnification under Article II, III or IV is asserted
against the Indemnified Party (an "Indemnifiable Claim"), the Indemnified Party
shall promptly notify the Indemnifying Party of such Liability or Claim, and, in
the case of an Indemnifiable Claim, such notice shall be given within thirty
(30) days after the Indemnified Party's receipt of a written assertion of
liability from the third party. Such notice shall describe the facts and
circumstances giving rise to such Liability or Claim, and the type and amount of
Liability incurred or threatened, to
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the extent known by the Indemnified Party. Any failure by the Indemnified Party
to so notify the Indemnifying Party shall not foreclose the indemnification
obligations of the Indemnifying Party unless and only to the extent the
Indemnifying Party incurs out-of-pocket expenses (in addition to any out-of-
pocket expenses which it otherwise would have incurred had notice been given
promptly) or otherwise has been materially prejudiced by such failure. The
Indemnified Party shall cooperate fully in the investigation of such Liability
or Claim by the Indemnifying Party, and shall make available such books and
records as may be necessary in connection therewith.
5.2 ELECTION OF INDEMNIFYING PARTY TO DEFEND. Within thirty (30) days after
receipt of notice of a Claim pursuant to Section 5.1 (or within such lesser
period of time as may be required under the circumstances), the Indemnifying
Party may elect to defend, contest or otherwise protect the Indemnified Party
against the Claim at its own cost and expense. Such election shall be by
written notice to the Indemnified Party given within such thirty (30) day (or
lesser) period, and shall be accompanied by the Indemnifying Party's
acknowledgment, in form and substance reasonably satisfactory to the Indemnified
Party, that it shall indemnify the Indemnified Party for the Liability asserted
by such Claim in the event such Liability is incurred. In the event the
Indemnifying Party so elects to defend such Claim, the Indemnified Party may,
but shall not be obligated to, participate at its own cost and expense (not
subject to indemnification) in the defense of such Claim by counsel of its own
choosing, but the Indemnifying Party shall be entitled to control the defense
unless the Indemnified Party has relieved the Indemnifying Party from liability
with respect to the particular Liability. The Indemnified Party shall cooperate
and provide such assistance as the Indemnifying Party may reasonably request in
connection with the Claim, provided that the Indemnifying Party reimburses the
Indemnified Party for all reasonable out-of-pocket costs incurred in connection
with such cooperation and assistance. In connection with its defense of any
Claim, the Indemnifying Party shall have the right to settle and compromise such
Claim, provided that the Indemnified Party is released from Liability in
connection with the Claim so settled or compromised.
5.3 RIGHT OF INDEMNIFIED PARTY TO DEFEND. In the event the Indemnifying
Party does not elect to defend such Claim, or fails to defend, contest or
otherwise protect against any such Claim, the Indemnified Party may, but shall
not be obligated to, defend, contest or otherwise protect against the same, and
make any compromise or settlement thereof, and the Indemnifying Party shall be
bound by the results obtained by the Indemnified Party. The Indemnified Party
shall have the right to recover from the Indemnifying Party all reasonable costs
and expenses incurred by it in connection with such defense or contest,
including reasonable attorneys' fees, disbursements and all amounts paid as a
result of such Claim or the compromise or settlement of such Claim.
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5.4 EXCEPTIONS TO DEFENSE. Notwithstanding Section 5.2, the Indemnifying
Party shall not have the right to undertake the defense or contest of any Claim
on behalf of the Indemnified Party if, in the reasonable judgment of the
Indemnified Party, upon advice of counsel, the course of action proposed by the
Indemnifying Party (i) does not have a substantial basis, (ii) may subject the
Indemnified Party to criminal liabilities, penalties or similar sanctions, or
(iii) has a reasonable likelihood of resulting in the imposition of liens or
other charges against the assets of the Indemnified Party, other than potential
liens resulting solely from a possible adverse judgment, or liens which the
Indemnifying Party has bonded off or otherwise released pending completion of
litigation. In such event, the Indemnified Party may assume the exclusive right
to defend, compromise or settle such Claim, but the Indemnifying Party shall not
be bound by any compromise or settlement made without its consent (which consent
shall not be unreasonably withheld).
5.5 PAYMENT OF LIABILITY. Within thirty (30) days of receipt of notice of a
Liability pursuant to Section 5.1, or the imposition of a Liability as a result
of the adjudication of a Claim pursuant to Section 5.2 or 5.3, the Indemnifying
Party shall (i) pay such Liability, or (ii) in the event the Indemnified Party
has previously paid such Liability, reimburse the Indemnified Party for payment
of such Liability together with interest on such amount at the Interest Rate
from the date of payment by the Indemnified Party through the date of receipt of
reimbursement by the Indemnified Party.
5.6 EXCEPTION FOR DE MINIMIS CLAIMS.
5.6.1 Notwithstanding anything to the contrary in the Purchase Agreement
or this Agreement (other than Section 5.6.2), (i) MI shall not be required to
indemnify or hold harmless any Indemnified Party for any Liability or Claim if
(a) such Liability (or the potential Liability in the case of a Claim) is in the
amount of $50,000 or less and (b) such Liability (or the potential Liability in
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the case of a Claim), together with all other Liabilities for which MI is not
responsible as a result of this Section 5.6, is less than $250,000 in the
aggregate, and (ii) Host shall not be required to indemnify or hold harmless any
Indemnified Party for any Liability or Claim if such Liability (or the potential
Liability in the case of a Claim), together with all other Liabilities for which
Host is not responsible as a result of this Section 5.6, is less than $100,000
in the aggregate. Notwithstanding the foregoing, if a Claim is asserted in
excess of the foregoing thresholds, and the Indemnifying Party defends such
Claim, but the ultimate Liability (including all defense costs) in connection
with such Claim equals or is less than such thresholds, such Claim will be
treated as a Liability covered by clause (i)(a) or (b) (in the case of MI) or
clause (ii) (in the case of Host), as applicable, and the Indemnified Party
shall, subject to the other terms of this Agreement, reimburse the Indemnifying
Party for all Liabilities incurred in connection therewith.
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5.6.2 The limitation set forth in Section 5.6.1 shall not apply to the
indemnification obligation of MI with respect to the following: pending Claims
described on Exhibit A, Sections 2.1.2, 2.1.3, 2.1.4, 2.1.6, and 2.1.8, and any
Plan or contract or agreement described on Exhibit C-10 to the Purchase
Agreement and referenced in Section 2.1.5. The limitation set forth in Section
5.6.1 shall not apply to the indemnification obligation of Host with respect to
the following: Section 3.1.1 (but only to the extent that the Liabilities
described in Section 3.1.1 constitute "Operating Expenses" under any New
Operating Agreement (whether such Operating Agreement is executed on the Closing
Date or attached as an exhibit to any Transition Agreement)), 3.1.3, 3.1.5,
3.1.6 and 3.1.7.
5.7 LIMITATION ON DAMAGES. Notwithstanding anything to the contrary in the
Purchase Agreement or this Agreement, neither MI nor Host, nor their respective
Affiliates, shall, in connection with any Indemnifiable Claim pursuant to this
Agreement, seek or be liable for (i) any punitive damages, or (ii) consequential
damages (including damages for lost profits, loss of business reputation and
opportunity) in excess of twenty-five percent (25%) of actual damages incurred
with respect to such Indemnifiable Claim. The foregoing limitation shall not
apply to the extent that such punitive damages, or consequential damages
(including damages for lost profits, loss of business reputation or
opportunity), are awarded to a third party with respect to a matter which is an
Indemnifiable Claim.
5.8 EXCLUSIVE REMEDY. The covenants set forth in this Agreement shall
constitute the sole and exclusive remedy for any claims made by any of the
parties to this Agreement or their Affiliates based on, related to or arising
with respect to the Purchase Agreement. In no event shall a breach of such a
representation or warranty be used as evidence of or deemed to constitute bad
faith, misconduct or fraud, except to the extent that any party or its
Affiliates or any of their respective directors, employees or officers directly
and actively engaged in the Transaction had actual knowledge of information
which was materially inconsistent with any of the representations or warranties
set forth in the Purchase Agreement and willfully and knowingly failed to
disclose such information. Nothing set forth in this Section 5.8 shall limit
the right of any party to seek or obtain specific performance or other
injunctive relief with respect to covenants contained in the Purchase Agreement.
5.9 MITIGATION.
5.9.1 The Indemnified Party shall take all reasonable steps to mitigate
all Liabilities and Claims, including availing itself as reasonably directed by
the Indemnifying Party of any defenses, limitations, rights of contribution,
claims against third parties and other rights at law (it being understood that
any out-of-pocket costs paid to third parties in connection with such mitigation
shall constitute Liabilities), and shall provide such evidence and documentation
of the nature and extent of any Liability as may be reasonably requested by the
Indemnifying Party.
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5.9.2 Each party shall act in a commercially reasonable manner in
addressing any Liabilities that may provide the basis for an Indemnifiable Claim
(that is, each party shall respond to such Liability in the same manner that it
would respond to such Liability in the absence of the indemnification provided
for in this Agreement). Any Liabilities subject to indemnification under this
Agreement shall be reduced by the dollar amount of any insurance proceeds
actually received by the Indemnified Party with respect to such Liabilities.
5.10 LIMITATION FOR MAJORITY-OWNED SUBSIDIARIES. In the event any Majority-
Owned Subsidiary or any Subsidiary of any Majority-Owned Subsidiary incurs any
Liability which would be the basis for an Indemnifiable Claim under this
Agreement, the indemnification obligation of MI under this Agreement shall
extend only to Host and those of its Affiliates which are not Majority-Owned
Subsidiaries (as opposed to extending to such Majority-Owned Subsidiary). The
calculation of the amount of such Liability shall be determined by multiplying
the total amount of such Liability by the percentage of ownership interests in
the Majority-Owned Subsidiary owned, directly or indirectly, by Host as of the
date that the indemnification payment is due under this Agreement.
5.11 NO SET-OFFS. Amounts payable by the Indemnifying Party to the
Indemnified Party under this Agreement shall be paid without set-off,
counterclaim or deduction. Without limiting the generality of the foregoing, MI
waives any right to set-off against amounts payable under this Agreement any
amounts which may be payable by Host under the Guaranty or any Expansion
Guaranty.
5.12 PENDING CLAIMS. Host and MI acknowledge that as of the Closing Date,
the Claims set forth on Exhibit A have been threatened, asserted and/or are
pending. MI shall undertake, or continue to undertake, the defense of such
Claims in accordance with this Article V, and shall indemnify Host, the Company
and each Subsidiary against any Liability in respect of such Claims in
accordance with Article II and the other provisions of this Agreement.
5.13 ATTORNEYS' FEES AND COSTS. In the event of a default by any party in
making any payments under this Agreement, the non-defaulting party shall have
the right to recover reasonable attorneys' fees and court costs incurred in
connection with such default.
5.14 SURVIVAL. All indemnification provided for in this Agreement shall
survive Closing and, except as set forth in the next sentence, shall continue
without limitation (other than applicable statutes of repose). The
indemnification set forth in Sections 2.1.7 and 3.1.4 shall terminate on the
second anniversary of the Closing Date (except for Liabilities as to which the
Indemnified Party has previously notified the Indemnifying Party pursuant to
Section 5.1) with respect to all of the representations and warranties set forth
in the Purchase Agreement, other than the
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following sections of the Purchase Agreement (which shall be governed by the
first sentence of this Section 5.14): 4.1, 4.2, 4.3 (first sentence, and second
sentence only with respect to the agreements referenced therein have not been
provided to Host prior to the Closing Date), 4.5, 4.6, 4.7, 4.8, 4.9, 4.29
(survival limited to five years from the Closing Date), 4.31, 4.32, and 4.33.
Expiration of the indemnification provisions referenced in the foregoing
sentence shall not affect the continuing validity of any other indemnification
provision in this Agreement.
5.15 STRADDLING LIABILITIES. The parties acknowledge that certain
Liabilities of the Company and/or any Subsidiary may arise from ongoing conduct
or practices at one or more of the Communities that occur both prior to and
after Closing, including conduct and practices that may violate Legal
Requirements or be the basis of Claims by third parties. Host and MI shall
allocate such Liabilities as follows: (i) Liabilities attributable to such
ongoing conduct and practices prior to Closing shall be treated for all purposes
as Pre-Closing Liabilities and (ii) Liabilities attributable to such ongoing
conduct and practices from and after Closing will be evaluated under the New
Operating Agreement for the applicable Community (for example, they may be
treated as "Operating Expenses" thereunder or as matters that are indemnifiable
by the "Operator" thereunder). Notwithstanding any other provision herein,
nothing in this Agreement shall enlarge, diminish or alter any payment
obligation expressly set forth in the Purchase Agreement, whether or not such
payment obligation arises before, at or after the Closing. Without limiting the
generality of the foregoing, no such payment obligation shall constitute a "Pre-
Closing Liability" or a "Post-Closing Liability" hereunder.
VI. MISCELLANEOUS
6.1 JURISDICTION. Any suit, action or proceeding under or in connection with
this Agreement or the Transaction shall be brought in any federal or state court
of competent jurisdiction located in the State of Maryland. By execution of
this Agreement, each party consents to the exclusive jurisdiction of such
courts, and waives any right to challenge the jurisdiction of such courts or the
appropriateness of venue in such courts. EACH PARTY HEREBY WAIVES ANY RIGHT TO
TRIAL BY JURY IN CONNECTION WITH ANY SUIT, ACTION OR PROCEEDING UNDER OR IN
CONNECTION WITH THIS AGREEMENT.
6.2 NOTICES. Any notice required or permitted to be given under this
Agreement shall be in writing and shall be hand-delivered, delivered by
nationally recognized overnight courier, mailed by certified or registered mail,
postage prepaid, return receipt requested, or telecopied with confirmation of
receipt, to the addresses set forth below, or to such other addresses of which
either party shall notify the other party in accordance with this Section 6.2,
and shall be deemed given as of the time of such mailing or delivery, as
applicable:
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If to MI: Marriott Senior Living Services, Inc.
00000 Xxxxxxxx Xxxx
Xxxxxxxx, Xxxxxxxx 00000
Attention: Chief Financial Officer
Telecopy: 301/380-6540
With a copy to: Marriott International Law Department
00000 Xxxxxxxx Xxxx
Xxxxxxxx, Xxxxxxxx 00000
Attention: General Counsel
Telecopy: 301/380-6727
And a copy to: O'Melveny & Xxxxx LLP
000 00xx Xxxxxx, X.X.
Xxxxxxxxxx, X.X. 00000
Attention: Xxxxx X. Xxxxxxxxxxx
Telecopy: 202/383-5414
If to Host: Host Marriott Corporation
Asset Management Department 908
00000 Xxxxxxxx Xxxx
Xxxxxxxx, Xxxxxxxx 00000-0000
Attention: Director, Senior Living Facilities
Telecopy: 301/380-6338
with a copy to: Host Marriott Corporation
Law Department 923
00000 Xxxxxxxx Xxxx
Xxxxxxxx, Xxxxxxxx 00000-0000
Attention: General Counsel
Telecopy: 301/380-6332
with a copy to: Xxxxxx & Xxxxxx
000 Xxxxxxx Xxxxxx, X.X.
Xxxxxxxxxx, X.X. 00000
Attention: Xxxxxxx X. Xxxxxxx
Telecopy: 202/942-5999
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6.3 ASSIGNMENT. Neither Host nor MI shall, without the prior written consent
of the other party, assign its rights or delegate its obligations under this
Agreement. Notwithstanding the foregoing, (i) Host and MI may each assign their
rights under this Agreement to any Person which is its Affiliate, so long as
such Person remains its Affiliate, (ii) Host may assign its rights under this
Agreement to any transferee of or successor to all or substantially all of the
senior living communities owned, directly or indirectly, by Host, and (iii) MSLS
may assign its rights under this Agreement to any transferee of or successor to
all or substantially all of the senior living business conducted by MSLS.
6.4 BINDING EFFECT. This Agreement shall be binding upon, and shall inure to
the benefit of, Host, MI and their respective successors and permitted assigns.
The Affiliates of Host and MI, the Company and the Subsidiaries (other than the
Majority-Owned Subsidiaries) are intended as third party beneficiaries of this
Agreement, and shall have the right to enforce this Agreement to the same extent
as a party to this Agreement. The obligations of MI on the one hand, and Host
on the other hand, shall be the joint and several obligations of all Persons
comprising MI and Host, respectively.
6.5 RELATIONSHIP TO MANAGEMENT AGREEMENT. Host and MI acknowledge that on
the Closing Date, the Company and its Subsidiaries will be continuing Existing
Management Agreements (together with certain Transition Agreements) and/or
executing New Operating Agreements with respect to the Communities. In the
event that any such Existing Management Agreement (together with the applicable
Transition Agreement) or New Operating Agreement provides that Host, the Company
or any Subsidiary, as owner, is required to pay any Liability or defend any
Claim as to which Host, the Company or any Subsidiary is indemnified under this
Agreement, such provision shall not affect the rights or obligations of the
parties under this Agreement.
6.6 LIABILITIES ARISING FROM CLOSING. Any Liability which arises from or as
a result of the consummation of Closing shall not constitute a Pre-Closing
Liability or a Post-Closing Liability. Nothing set forth in the foregoing
sentence shall relieve any party from liability for a breach of or default under
any representation, warranty or covenant in any Transaction Document.
[signatures on following page]
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IN WITNESS WHEREOF, MI and Host have executed this Agreement as of the Closing
Date.
MARRIOTT SENIOR LIVING SERVICES, INC., a
Delaware corporation
By: /s/
-------------------------------------
Its: President
-------------------------------------
MARRIOTT INTERNATIONAL, INC., a
Delaware corporation
By: /s/
-------------------------------------
Its: Vice-President
-------------------------------------
HMC SENIOR COMMUNITIES, INC., a
Delaware corporation
By: /s/ Xxxxxx Xxxxxxxxx
-------------------------------------
Its:
-------------------------------------
HOST MARRIOTT CORPORATION, a
Delaware corporation
By: /s/ Xxxxxx Xxxxxxxxx
-------------------------------------
Its: Vice-President
-------------------------------------
LIST OF EXHIBITS
Exhibit A: List of Certain Pending Claims
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EXHIBIT A
LIST OF CERTAIN PENDING CLAIMS
1. Xxxxxxx X. Xxxxx in his capacity as Trustee of the Xxxxxxx X. Xxxxx
-------------------------------------------------------------------
Revocable Trust v. Forum Group, Inc. and Forum Retirement, Inc., Case No. IP
---------------------------------------------------------------
95-778-C-D/F, United States District Court, Southern District of Indiana,
Indianapolis Division.
2. Threatened action by limited partner(s) of Greenville Retirement
Community, L.P. against Forum Group, Inc. and/or Marriott Senior Living
Services, Inc. as general partner.
