EXECUTION COPY
EXHIBIT 2.4
AMENDED AND RESTATED
STOCK PURCHASE AGREEMENT
dated as of October 19, 2004
between
ALTERRA HEALTHCARE CORPORATION
"Seller"
and
PROVIDENT SENIOR LIVING TRUST
"Acquiror"
TABLE OF CONTENTS
Page
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ARTICLE I
DEFINITIONS
Section 1.01. Certain Defined Terms........................................................ 2
ARTICLE II
AGREEMENT TO PURCHASE THE SHARES; REAL PROPERTY MATTERS AND DUE DILIGENCE
Section 2.01. Agreement to Purchase the Shares............................................. 2
Section 2.02. First Closing; Second Closing. .............................................. 3
Section 2.03. Non-ALSF Purchase Price; ALSF Purchase Price................................. 3
Section 2.04. Adjustments and Apportionments............................................... 4
Section 2.05. Due Diligence Deposit; Purchase Price Deposit ............................... 5
Section 2.06. Transactions to be Effected; Closing and Other Deliveries.................... 6
Section 2.07. Payments and Computations.................................................... 7
Section 2.08. Property Due Diligence....................................................... 7
Section 2.09. Capital Expenditure Reserves................................................. 9
Section 2.10. New Title Policies; New Surveys.............................................. 10
Section 2.11. Real Property Matters to which Real Property May Be Subject.................. 11
Section 2.12. No Other Representations..................................................... 11
ARTICLE III
REPRESENTATIONS AND WARRANTIES OF SELLER
Section 3.01. Incorporation, Qualification and Authority of Selling Parties................ 11
Section 3.02. Incorporation, Qualification and Authority of the Companies.................. 12
Section 3.03. Capital Structure of the Companies; Ownership and Transfer of the Shares..... 12
Section 3.04. No Conflict.................................................................. 13
Section 3.05. Consents and Approvals....................................................... 13
Section 3.06. Financial Statements; Absence of Undisclosed Liabilities..................... 14
Section 3.07. Absence of Certain Changes................................................... 15
Section 3.08. Absence of Litigation........................................................ 15
Section 3.09. Compliance with Laws......................................................... 15
Section 3.10. Governmental Licenses and Permits............................................ 15
Section 3.11. Environmental Matters........................................................ 16
Section 3.12. Material Contracts........................................................... 16
Section 3.13. Employee Benefits; Employees................................................. 17
Section 3.14. Acquired Personal Property Assets............................................ 18
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Section 3.15. Real Property Assets......................................................... 18
Section 3.16. Ground Leased Assets......................................................... 19
Section 3.17. Insurance.................................................................... 19
Section 3.18. Acquired Real Property; Existing Mortgages................................... 20
Section 3.19. Taxes........................................................................ 20
Section 3.20. Brokers...................................................................... 22
Section 3.21. Excluded Assets; Excluded Liabilities........................................ 22
Section 3.22. Regulatory Filings........................................................... 22
Section 3.23. No Certificates of Need or Provider Agreements............................... 22
Section 3.24. Operator Matters............................................................. 23
Section 3.25. Books and Records............................................................ 25
Section 3.26. Information Supplied......................................................... 25
ARTICLE IV
REPRESENTATIONS AND WARRANTIES OF ACQUIROR
Section 4.01. Incorporation and Authority of Acquiror...................................... 25
Section 4.02. Qualification of Acquiror.................................................... 26
Section 4.03. No Conflict.................................................................. 26
Section 4.04. Consents and Approvals....................................................... 26
Section 4.05. Securities Matters........................................................... 27
Section 4.06. Financial Ability............................................................ 27
Section 4.07. Investigation................................................................ 27
Section 4.08. Brokers...................................................................... 27
Section 4.09. Information Supplied......................................................... 27
ARTICLE V
ADDITIONAL AGREEMENTS
Section 5.01. Conduct of Business Prior to Each Closing.................................... 28
Section 5.02. Access to Information........................................................ 30
Section 5.03. Books and Records............................................................ 31
Section 5.04. Confidentiality; Exclusivity................................................. 32
Section 5.05. Regulatory and Other Authorizations; Reasonable Efforts...................... 32
Section 5.06. Intercompany Obligations..................................................... 34
Section 5.07. Intercompany Arrangements.................................................... 34
Section 5.08. Excluded Assets; Excluded Liabilities........................................ 34
Section 5.09. Additional Real Property Assets.............................................. 34
Section 5.10. Existing Mortgage Lender Consents............................................ 34
Section 5.11. Private Placement............................................................ 35
Section 5.12. Registration Statement; Additional Financial Statements...................... 35
Section 5.13. Notice of Certain Events..................................................... 36
Section 5.14. Further Action............................................................... 36
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ARTICLE VI
CONDITIONS TO CLOSING AND RELATED MATTERS
Section 6.01. Conditions to Obligations of Seller.......................................... 36
Section 6.02. Conditions to Obligations of Acquiror........................................ 37
ARTICLE VII
TERMINATION, WAIVER AND DEFAULT
Section 7.01. Termination.................................................................. 40
Section 7.02. Notice of Termination........................................................ 40
Section 7.03. Effect of Termination........................................................ 40
Section 7.04. Extension; Waiver............................................................ 41
Section 7.05. Acquiror's Default........................................................... 41
Section 7.06. Seller's Default............................................................. 41
ARTICLE VIII
INDEMNIFICATION
Section 8.01. Indemnification by Seller.................................................... 42
Section 8.02. Indemnification by Acquiror.................................................. 43
Section 8.03. Notification of Third Party Claims........................................... 44
Section 8.04. Payment; Interest on Payment................................................. 46
Section 8.05. Exclusive Remedies........................................................... 46
Section 8.06. Additional Indemnification Provisions........................................ 47
Section 8.07. Mitigation of Losses......................................................... 48
Section 8.08. No Recourse to Controlling Persons of Seller................................. 48
ARTICLE IX
CASUALTY AND CONDEMNATION OF THE REAL PROPERTY
Section 9.01. Casualty..................................................................... 49
Section 9.02. Condemnation Pending Closing................................................. 50
ARTICLE X
GENERAL PROVISIONS
Section 10.01. Survival..................................................................... 51
Section 10.02. Expenses; Transaction Costs.................................................. 51
Section 10.03. Notices...................................................................... 52
Section 10.04. Public Announcements......................................................... 53
Section 10.05. Severability................................................................. 53
Section 10.06. Entire Agreement............................................................. 54
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Section 10.07. Assignment................................................................... 54
Section 10.08. No Third-Party Beneficiaries................................................. 54
Section 10.09. Amendment.................................................................... 54
Section 10.10. Disclosure Schedules......................................................... 54
Section 10.11. Governing Law; Submission to Jurisdiction; Waivers........................... 54
Section 10.12. Specific Performance......................................................... 55
Section 10.13. Rules of Construction........................................................ 55
Section 10.14. Counterparts................................................................. 56
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THIS AMENDED AND RESTATED STOCK PURCHASE AGREEMENT dated as of
October 19, 2004 (this "Agreement"), is made by and between ALTERRA HEALTHCARE
CORPORATION, a Delaware corporation ("Seller"), and PROVIDENT SENIOR LIVING
TRUST, a Maryland real estate investment trust ("Acquiror").
PRELIMINARY STATEMENTS
A. Seller owns 100 shares of common stock, par value $0.01 per share
(the "ALS Venture Shares"), of ALS Venture I, Inc., a Delaware corporation (the
"ALS Venture"), which ALS Venture Shares constitute all of the issued and
outstanding shares of capital stock of ALS Venture; ALS Venture owns those Real
Property Assets specified on Schedule 1-A;
B. Clare Bridge of Winston-Salem LLC ("Winston") owns that certain
parcel of real property identified as "Winston-Salem" on Schedule 1-A (the
"Winston-Salem Real Property Asset"); Winston will be merged with and into ALS
Venture prior to the First Closing;
C. Seller owns 100 shares of common stock, par value $0.01 per share
("ALS West Shares"), of ALS West, Inc., a Delaware corporation ("ALS West"),
which ALS West Shares constitute all of the issued and outstanding shares of
capital stock of ALS West; ALS West owns those Real Property Assets specified on
Schedule 1-B;
D. Seller owns 100 shares of common stock, par value $0.01 per share
("AHC Borrower Shares"), of AHC Borrower I, Inc., a Delaware corporation ("AHC
Borrower"), which AHC Borrower Shares constitute all of the issued and
outstanding shares of capital stock of AHC Borrower; AHC Borrower owns those
Real Property Assets specified on Schedule 1-C;
E. Seller owns 100 shares of common stock, par value $0.01 per share
(the "ALS Financing Shares," together with the ALS Venture Shares, ALS West
Shares and AHC Borrower Shares, collectively, the "Shares"), of ALS Financing
II, Inc., a Delaware corporation ("ALS Financing," together with ALS Venture,
Winston, ALS West and AHC Borrower, collectively, the "Companies" and
individually, each a "Company"), which ALS Financing Shares constitute all of
the issued and outstanding shares of capital stock of ALS Financing; ALS
Financing owns those Real Property Assets specified on Schedule 1-D
F. Seller owns that certain parcel of real property identified as
`Fond du Lac' on Schedule 1-E (the "FDL Real Property Asset", together with the
Winston-Salem Real Property Asset, the "Additional Real Property Assets"); prior
to the First Closing, AHC Borrower shall acquire the FDL Real Property Asset
from Seller;
G. Following the date of the Amended Stock Purchase Agreement (as
defined below), AHC Borrower acquired the fee title interest in that certain
parcel of real property asset known as "Lynnwood" (the "Lynnwood Real Property
Asset");
H. Seller is the direct or indirect holder of one hundred percent
(100%) of the beneficial ownership interest in Tenant Holding Company (as that
term is defined in Exhibit A);
I. On or prior to the First Closing Date (as that term is defined in
Exhibit A), (1) Seller shall cause the Companies to convey, assign, transfer and
deliver to Seller or an Affiliate (as that term is defined in Exhibit A) of
Seller (other than a Company) all the Excluded Assets (as that term is defined
in Exhibit A) and (2) Seller shall assume all the Excluded Liabilities (as that
term is defined in Exhibit A);
J. Seller and Acquiror entered into that certain Stock Purchase
Agreement dated as of June 18, 2004 (the "Original Stock Purchase Agreement"),
pursuant to which Seller agreed to sell, convey assign, transfer, and deliver to
Acquiror, free and clear of all Liens, and Acquiror agreed to purchase, acquire,
and accept from Seller, the Shares, including all Seller's right, title and
interest therein and thereto;
K. Concurrent with the execution of the Original Stock Purchase
Agreement, Seller and Acquiror entered into the Tax Matters Agreement (as that
term is defined in Exhibit A);
L. Seller and Acquiror amended the Original Stock Purchase Agreement
pursuant to that certain Amendment No. 1 to the Stock Purchase Agreement dated
as of August 2, 2004 (the Original Stock Purchase Agreement as so amended, the
"Amended Stock Purchase Agreement"); and
M. Seller and Acquiror desire to hereby amend and restate the
Amended Stock Purchase Agreement to provide for the acquisition of the Shares
pursuant to two closings as contemplated by Section 5.10(b) of the Amended Stock
Purchase Agreement.
NOW, THEREFORE, the parties to this Agreement agree as follows:
ARTICLE I
DEFINITIONS
Section 1.01. Certain Defined Terms. Capitalized terms used in this
Agreement have the meanings specified in Exhibit A, or elsewhere in this
Agreement.
ARTICLE II
AGREEMENT TO PURCHASE THE SHARES; REAL PROPERTY MATTERS AND DUE DILIGENCE
Section 2.01. Agreement to Purchase the Shares. On the terms and
subject to the conditions set forth in this Agreement, (i) at the First Closing,
Seller will sell, convey, assign, transfer and deliver to Acquiror, free and
clear of all Liens, and Acquiror will purchase, acquire and accept from Seller,
the ALS Venture Shares, the ALS West Shares and the AHC Borrower Shares
(collectively, the "Non-ALSF Shares"), including all Seller's right, title and
interest therein and thereto, and (ii) at the Second Closing, Seller will sell,
convey, assign, transfer and deliver to Acquiror, free and clear of all Liens,
and Acquiror will purchase, acquire and accept from Seller, the ALS Financing
Shares, including all Seller's right, title and interest therein and thereto
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Section 2.02. First Closing; Second Closing.
(a) The purchase and sale contemplated by this Agreement of the
Non-ALSF Shares will take place at a closing (the "First Closing") at 8:30 a.m.,
New York time, on the third Business Day following the date on which the last
unfulfilled or unwaived condition to the First Closing set forth in Article VI
(other than any such condition to be fulfilled at the First Closing) shall be
fulfilled or waived in accordance with the terms of this Agreement, at the
offices of Sidley Xxxxxx Xxxxx & Xxxx LLP, 000 Xxxxxxx Xxxxxx, Xxx Xxxx, Xxx
Xxxx 00000, or such other date or place as Seller or Acquiror may mutually agree
in writing (the date on which the First Closing shall occur is hereinafter
referred to as the "First Closing Date"), subject to the rights of the parties
to terminate this Agreement pursuant to Article VII.
(b) The purchase and sale contemplated by this Agreement of the ALS
Financing Shares will take place at a closing (the "Second Closing" and together
with the First Closing, collectively, the "Closings" and, individually, a
"Closing") at 10:00 a.m., New York time, on the third Business Day following the
date on which the last unfulfilled or unwaived condition to the Second Closing
set forth in Article VI (other than any such condition to be fulfilled at the
Second Closing) shall be fulfilled or waived in accordance with the terms of
this Agreement, at the offices of Sidley Xxxxxx Xxxxx & Xxxx LLP, 000 Xxxxxxx
Xxxxxx, Xxx Xxxx, Xxx Xxxx 00000, or such other date or place as Seller or
Acquiror may mutually agree in writing (the date on which the Second Closing
shall occur is hereinafter referred to as the "Second Closing Date" and together
with the First Closing Date, collectively, the "Closing Dates" and,
individually, a "Closing Date") , subject to the rights of the parties to
terminate this Agreement pursuant to Article VII.
Section 2.03. Non-ALSF Purchase Price; ALSF Purchase Price.
(a) The aggregate purchase price for the Non-ALSF Shares payable by
Acquiror to Seller shall be an amount in cash equal to the sum of (i)
$166,063,145 (the "Non-ALSF Base Purchase Price"), plus (ii) in accordance with
Section 10.02, Transaction Costs not exceeding the Maximum Capitalized Amount
(the resulting amount, the "Non-ALSF Purchase Price"), as further increased or
decreased in accordance with Sections 2.04(c), 2.09, 9.01 and 9.02 (the
"Non-ALSF Closing Adjustments"). The Non-ALSF Purchase Price, as adjusted, by
the Non-ALSF Closing Adjustments, is hereinafter referred to as the "Non-ALSF
Final Purchase Price".
(b) The aggregate purchase price for the ALS Financing Shares
payable by Acquiror to Seller shall be an amount in cash equal to the sum of (i)
$70,836,855 (the "ALSF Base Purchase Price"; and, together with the Non-ALSF
Base Purchase Price, the "Base Purchase Price"), plus (ii) in accordance with
Section 10.02, Transaction Costs not exceeding the Maximum Capitalized Amount,
minus (iii) the outstanding principal balance of the Assumed Mortgage Debt as of
the Second Closing Date (the resulting amount, the "ALSF Purchase Price"), as
further increased or decreased in accordance with Sections 2.04(c), 2.09, 9.01
and 9.02 (the "ALSF Closing Adjustments"). The ALSF Purchase Price, as adjusted,
by the ALSF Closing Adjustments, is hereinafter referred to as the "ALSF Final
Purchase Price". The sum of the Non-ALSF Final Purchase Price and the ALSF Final
Purchase Price is hereinafter referred to as the "Final Purchase Price".
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(c) Schedule 2.03 lists each of the Real Property Assets and sets
forth the portion of the Base Purchase Price that is allocable to each of the
Real Property Assets (each, an "Allocable Portion"); provided, that, Acquiror
will revise Schedule 2.03 to reflect adjustments, if any, to the Allocable
Portions of the Acquired Real Property Assets pursuant to Sections 2.09(d) and
10.02. The Allocable Portions shall be the basis upon which the initial Lease
Basis (as defined in the form of Property Lease) is determined for each of the
Acquired Real Property Assets; provided, that upon any decrease in the Non-ALSF
Purchase Price or the ALSF Purchase Price pursuant to Sections 9.01 or 9.02, the
Allocable Portion shall be adjusted by the Excluded Real Property Basis
Adjustment.
Section 2.04. Adjustments and Apportionments. (a) Seller and
Acquiror acknowledge and agree that, as of each Closing Date, certain costs and
expenses relating to the Acquired Real Property Assets being acquired by
Acquiror on such Closing Date, including real estate Taxes, water meter and
water charges, sewer rents, and debt service under the Assumed Mortgage Debt
(all such costs and expenses, collectively, "Real Property Expenses"), (x) may
have accrued during the period prior to such Closing Date (the "Pre-Closing
Period") but will not be due and payable by the Seller or a Company until after
such Closing Date (such accrued expenses, if any, that are unpaid as of each
Closing Date being hereinafter referred to as "Accrued Expenses") or (y) will
not accrue until the period on or after such Closing Date (each, a "Post-Closing
Period") but have been paid by the Seller or a Company during the Pre-Closing
Period (such unaccrued expenses, if any, that have been prepaid as the Closing
Date being hereinafter referred to as "Prepaid Expenses"). The expenses
described in this Section 2.04(a) shall be pro rated as of 12:01 am (New York
time) on each Closing Date and apportioned (on the basis of a 365-day year) to
(i) Seller with respect to the Pre-Closing Period and (ii) Acquiror with respect
to the Post-Closing Period (it being acknowledged and agreed by Seller and
Acquiror that each of the Net Tenants shall, pursuant to the terms of the
respective Property Leases, be responsible for all Real Property Expenses
relating to each of the Acquired Real Property Assets leased by such Net Tenant
with respect to the Post-Closing Period, other than debt service relating to the
Post-Closing Period under the Assumed Mortgage Debt, as set forth in the
respective Property Leases).
(b) Not later than ten (10) Business Days prior to each Closing
Date, Seller shall prepare and deliver to Acquiror a written statement setting
forth, as of the anticipated Closing Date, a reasonably detailed good faith
calculation of the apportionments contemplated by Section 2.04(a) for each of
the Acquired Real Property Assets. Acquiror shall have the right to review such
written statement and shall notify Seller of any objection thereto within three
(3) Business Days after the receipt thereof. Seller and Acquiror shall negotiate
in good faith to attempt to resolve any such objection made by Acquiror,
provided that if such parties are unable to agree upon a reasonably detailed
calculation of such apportionments at least five (5) Business Days prior to the
applicable Closing Date, such dispute shall be resolved by a nationally
recognized accounting firm reasonably acceptable to each of Seller and Acquiror.
If Acquiror does not notify Seller of any such objection within such three (3)
Business Day period, Acquiror shall be deemed to have agreed with the
apportionments specified in Seller's written statement. If, after the applicable
Closing, an error or omission in the calculation of the apportionments set forth
above is found by one of the parties, such error or omission shall be promptly
corrected and the party receiving the over-payment shall pay the amount of the
over-payment to the party
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entitled thereto. The foregoing obligation to correct apportionments shall
survive the applicable Closing for a period of one-hundred eighty (180) days.
(c) The Base Purchase Price shall be (i) reduced by the excess, if
any, of the aggregate amount of Accrued Expenses over the aggregate amount of
Prepaid Expenses and (ii) increased by the excess, if any, of the aggregate
amount of Prepaid Expenses over the aggregate amount of Accrued Expenses, as
such amounts are mutually agreed or finally resolved in accordance with Section
2.04(b), in each case, without duplication as to any amounts paid or payable by
the Net Tenants under the Property Leases.
(d) Acquiror shall purchase the Non-ALSF Shares subject to the
obligations set forth in Schedule 2.04(d) hereof (the "Specified Liabilities"),
which Specified Liabilities shall not be deemed Excluded Liabilities. At least
three (3) Business Days prior to the First Closing Date, Seller shall deliver to
Acquiror payoff statements or other evidence satisfactory to Acquiror as to the
amount of the Specified Liabilities at the First Closing (the aggregate amount
of such Specified Liabilities being hereinafter referred to as the "Pay-off
Amount"), provided, that for purposes of the last two sentences of Section 2.03,
neither the Final Purchase Price, the Allocable Portion nor the initial Lease
Basis (as defined in the form of Property Lease) shall be deemed reduced by any
adjustments to the cash portion of the Non-ALSF Purchase Price made pursuant to
this Section 2.04(d). Acquiror shall cause the applicable Company to pay the
Specified Liabilities at the First Closing.
Section 2.05. Due Diligence Deposit; Purchase Price Deposit.
(a) Prior to the execution of the Original Purchase Agreement,
Seller advanced to Acquiror a due diligence deposit in the amount of $125,000
(the "Due Diligence Deposit") to be used by Acquiror to pay any reasonable and
documented costs and expenses, including attorneys' fees and expenses, incurred
by Acquiror, its contractors and consultants in connection with Acquiror's due
diligence review of the Real Property Assets, the Seller and the Companies (the
"Due Diligence Review"). If the First Closing is not consummated for any reason
other than Seller's failure to perform its respective obligations hereunder,
then within ten (10) Business Days after the termination of this Agreement,
Acquiror shall repay to Seller the Due Diligence Deposit, less any Transaction
Costs incurred by Acquiror in connection with the Due Diligence Review. If
Seller fails to perform its respective obligations hereunder, then Acquiror
shall not be obligated to return to Seller any portion of the Due Diligence
Deposit. If the First Closing is consummated, then Seller shall be entitled to
set-off as of the First Closing Date the Due Diligence Deposit against the
Transaction Costs for which Seller is responsible under this Agreement that have
been incurred by Acquiror.
(b) Upon the consummation of the Private Placement, Acquiror shall
advance or cause to be advanced to Seller cash in an amount equal to $22,500,000
as a good faith, refundable deposit to be applied at the First Closing against
the Non-ALSF Purchase Price (the "Purchase Price Deposit"). If, prior to the
First Closing, Seller or its Affiliates sell or otherwise dispose of any
Acquiror Securities acquired by Seller on the date of the Amended Stock Purchase
Agreement (such shares so sold or disposed, "Disposed Securities"), then cash in
the amount of the gross proceeds of such sale or disposition (but not exceeding
the initial purchase price paid by Seller and its Affiliates for such Disposed
Securities) shall be remitted to Acquiror
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promptly after such sale or disposition and the Purchase Price Deposit shall be
reduced by a corresponding amount. If the transactions contemplated by this
Agreement are terminated for any reason prior to the First Closing, Seller shall
concurrently with such termination refund to Acquiror the balance of the
Purchase Price Deposit; provided, however, that Seller's obligation to refund
the balance of the Purchase Price Deposit may (at Seller's option) be satisfied
in full upon delivery to Acquiror of (x) any Acquiror Securities acquired by
Seller on the date of the Amended Stock Purchase Agreement which are then held
by Seller and its Affiliates and (y) cash equal to (A) the sum of (i) any gross
proceeds not remitted to Acquiror as provided above in respect of Disposed
Securities and (ii) the amount, if any, by which the aggregate initial purchase
price paid by Seller and its Affiliates for Disposed Securities exceeds the
aggregate gross proceeds received by Seller and its Affiliates for Disposed
Securities, less (B) dividends or distributions, if any, declared on the
Acquiror Securities delivered to Acquiror in accordance with clause (x) above,
and Acquiror shall have no other recourse against Seller with respect to its
obligation to refund the Purchase Price Deposit.
Section 2.06. Transactions to be Effected; Closing and Other
Deliveries. Upon the terms and subject to the conditions set forth in this
Agreement:
(a) (i) At the First Closing, Acquiror shall pay to Seller (x) a net
amount (the "Non-ALSF Closing Amount") equal to the Non-ALSF Final Purchase
Price, less the then current balance of the Purchase Price Deposit, less the
Pay-off Amount, and (y) the Amendment Costs (as such term is defined herein), by
wire transfer of immediately available funds to an account designated in writing
by Seller at least three (3) Business Days prior to the First Closing Date; and
(ii) at the Second Closing, Acquiror shall pay to Seller the ALSF Final Purchase
Price by wire transfer of immediately available funds to an account designated
in writing by Seller at least three (3) Business Days prior to the Second
Closing Date;
(b) (i) At the First Closing, Seller shall deliver to Acquiror (A)
one or more stock certificates evidencing the Non-ALSF Shares, duly endorsed in
blank or accompanied by powers duly executed in blank in proper form for
transfer and (B) written resignations of each of the directors and officers of
each of ALS Venture, ALS West and AHC Borrower, and (ii) at the Second Closing,
Seller shall deliver to Acquiror (A) one or more stock certificates evidencing
the ALS Financing Shares, duly endorsed in blank or accompanied by powers duly
executed in blank in proper form for transfer and (B) written resignations of
each of the directors and officers of each of ALS Financing;
(c) At each Closing, to further document the transactions
contemplated by this Agreement, each of Acquiror and the applicable Selling
Parties, as applicable, shall execute and deliver to each other each of the
following agreements to which it is a party: (i) the Property Leases; (ii) the
Agreement Regarding Leases; (iii) the Lease Guaranty; (iv) the Guaranty of
Agreement Regarding Leases; and (v) the Management Agreements (each of the
agreements referenced in clauses (i) through and including (v), together with
this Agreement and the Tax Matters Agreement, being hereinafter referred to
collectively as the "Transaction Agreements");
(d) Seller and Acquiror shall jointly prepare and deliver final
closing statements (the "Closing Statements") setting forth (i) the Non-ALSF
Final Purchase Price and the Non-ALSF Closing Amount, and including a reasonably
detailed calculation of each of (x)
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the components of the Non-ALSF Purchase Price (other than the Non-ALSF Base
Purchase Price), (y) the Non-ALSF Closing Adjustments, if any, all as determined
in accordance with the applicable provisions of this Agreement and (z) the
Specified Liabilities, and (ii) the ALSF Final Purchase Price, and including a
reasonably detailed calculation of each of (x) the components of the ALSF
Purchase Price (other than the ALSF Base Purchase Price), and (y) the ALSF
Closing Adjustments, if any, all as determined in accordance with the applicable
provisions of this Agreement; and
(e) At each Closing, Seller shall deliver, or shall cause to be
delivered, to Acquiror each of the following:
(i) each (A) New Title Policy (or endorsements (including
non-imputation endorsements) to the existing owner's policies), if any,
together with any customary title affidavits required by a title company
in order to issue any New Title Policy executed by Seller and the
applicable Company at such Closing and in form and substance acceptable to
the applicable title company, and (B) New Survey, if any, in each case,
required to be delivered pursuant to Section 2.10;
(ii) an affidavit, in accordance with the Foreign Investment
in Real Property Tax Act, confirming that Seller is a "United States
Person" within the meaning of Section 1445 of the Code;
(iii) copies of the Transfer Notices, together with evidence
of their delivery to, and acceptance by, the applicable governmental and
quasi-governmental authorities, if applicable; and
(iv) such other documents and instruments as may reasonably be
required by Acquiror or the applicable title company in order to
consummate the transactions contemplated by this Agreement and to
otherwise effect the agreements of the parties pursuant to this Agreement.
(f) In addition to the foregoing, at or prior to each Closing, (i)
Seller will deliver to Acquiror the certificate referred to in Section
6.02(a)(iii), and (ii) Acquiror will deliver to Seller the certificate referred
to in Section 6.01(a)(iii).
Section 2.07. Payments and Computations. All payments to be made by
either party under this Agreement will be paid by wire transfer of immediately
available funds to the account or accounts designated by the party receiving
such payment. All computations of interest with respect to any amounts due from
or to either party pursuant to this Agreement will be made on the basis of a
year of 365 days, in each case for the actual number of days (excluding the
first day, but including the last day) occurring in the period for which such
interest is payable.
Section 2.08. Property Due Diligence. (a) Promptly following the
execution of the Original Stock Purchase Agreement, Acquiror shall deliver to
Seller a due diligence document request and checklist (which may be supplemented
from time to time during the Review Period) identifying the materials requested
to be reviewed by Acquiror in connection with the Due Diligence Review. Not
later than fifteen (15) days after the date of the Original
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Stock Purchase Agreement, Seller shall cause the Companies to make available to
Acquiror, its attorneys, accountants and other professional and consultants,
copies of all books, records, documents, reports, analyses, assessments and
other written material relating to each of the Real Property Assets, including
all title insurance policies, surveys, engineering and environmental reports,
operating and capital statements, rent rolls and all other due diligence
materials reasonably requested by Acquiror in connection with the Due Diligence
Review.
(b) Acquiror shall have a period (the "Review Period") of sixty (60)
days from the date of the Original Stock Purchase Agreement (the expiration date
of such period being hereinafter referred to as the "Due Diligence Expiration
Date") to complete the Due Diligence Review (including obtaining and reviewing
title commitments or title bring-downs and engineering reports, environmental
reports and surveys relating to the Real Property Assets). If Acquiror, in its
reasonable discretion, determines that any material matter relating to any of
the Real Property Assets (including leases, historical and projected financial
statements and information, operating and capital statements, title, real estate
tax information, xxxxxxxx and collections, operating and real estate tax
pass-through escalation calculations, survey, engineering, fitness and quality,
physical condition, environmental condition, financial condition of one or more
of the tenants, value and profitability, current or potential uses, current or
future zoning or suitability for renovation or construction) is not acceptable
to Acquiror and that it does not wish to proceed with its acquisition of such
Real Property Asset, then Acquiror may, by written notice to Seller before 5:00
p.m. (New York time) on the Due Diligence Expiration Date (time being of the
essence), terminate the Original Stock Purchase Agreement in its entirety,
whereupon the Original Stock Purchase Agreement shall terminate and be of no
further force and effect as provided in Article VII. If Acquiror does not elect
to terminate the Original Stock Purchase Agreement prior to the time set forth
above, Acquiror's right to terminate the Original Stock Purchase Agreement
pursuant to this Section 2.08(b) shall expire and be of no further force and
effect.
(c) Seller shall use reasonable commercial efforts during the Review
Period to permit Acquiror and its Representatives, upon prior reasonable notice
to Seller, and during normal business hours, to access each of the Real Property
Assets for the purpose of inspecting the Real Property Assets. Seller agrees
that any environmental investigation undertaken by Acquiror may include invasive
sampling of soil, groundwater, or parts of buildings or structures, on any Real
Property Asset occupied by or otherwise affiliated with the Companies without
Seller's prior written consent; provided, however, that Acquiror shall give
Seller not less than twenty-four (24) hours' prior notice thereof (which notice
shall include the identity of the Representatives of Acquiror that will perform
such inspections and the proposed scope thereof) and Seller or its respective
Representatives shall have the right to be present during such inspections.
Acquiror shall use reasonable commercial efforts not to interfere in any
material respect with Seller's use or operation of the Real Property Assets
during such inspections. If Acquiror takes, or causes to be taken, any sample
from a Real Property Asset in connection with the foregoing, Acquiror shall,
upon the request of Seller, provide to Seller a portion of such sample to allow
Seller, if it so chooses, to perform its own testing. If Acquiror performs
environmental sampling, Acquiror shall have Acquiror's environmental consultant
carry and maintain in force, at its expense, at all times during the performance
of such sampling, general liability insurance in the minimum amount of $1
million combined single limit for injury to or death of one or more persons per
occurrence and for damage to property per occurrence.
8
Notwithstanding any provisions of this Agreement to the contrary, Acquiror shall
not, and shall cause its environmental consultant not to, contact or communicate
with any Governmental Authority regarding any Hazardous Materials on any Real
Property Asset, or the environmental condition of any Real Property Asset,
unless required by Law; provided, however, that such restriction shall not apply
following each Closing.
Section 2.09. Capital Expenditure Reserves. (a) The Base Purchase
Price was agreed upon between Seller and Acquiror on the assumption that none of
the Real Property Assets is in need of significant deferred maintenance
expenditures, and that the annual capital expenditure requirement of $400 per
unit, which will be set forth in and calculated pursuant to the Agreement
Regarding Leases, is sufficient to provide for anticipated future capital
expenditures to maintain each of the Real Property Assets in their current
condition. If, during the course of the Due Diligence Review in respect of any
Real Property Asset, Acquiror determines, pursuant to third party reports
received by Acquiror (each, an "Acquiror Cap Ex Report"), that the anticipated
costs to perform deferred maintenance and previously unidentified future capital
expenditures reasonably necessary to be performed during the twelve (12) month
period following each Closing Date will exceed the amount of the capital
expenditure requirement for such period as set forth in and calculated pursuant
to the form of Agreement Regarding Leases (the amount of such excess, with
reference to any Real Property Asset, being hereinafter referred to as the "Cap
Ex Reserve Shortfall"), then Acquiror shall provide to Seller not later than
five (5) Business Days after the Due Diligence Expiration Date a written
statement specifying the Cap Ex Reserve Shortfall, if any, for each of the Real
Property Assets, including copies of all Acquiror Cap Ex Reports supporting such
determination. Acquiror shall provide copies of each Acquiror Cap Ex Report as
promptly as practicable after such report shall have been received by Acquiror.
If Acquiror does not timely notify Seller of any Cap Ex Reserve Shortfall in
respect of a Real Property Asset as provided above, Acquiror shall be deemed to
have agreed that the amount of the Cap Ex Reserve Shortfall in respect of such
Real Property Asset is zero.
(b) For a period of ten (10) Business Days after the receipt of the
statement delivered by Acquiror in accordance with Section 2.09(a), Seller shall
have the right to review the statement and to obtain its own third party reports
relating to any specified Cap Ex Reserve Shortfall (each such report, a "Seller
Cap Ex Report"). Seller shall provide copies of each Seller Cap Ex Report as
promptly as practicable after such report shall have been received by Seller. If
Seller objects to any Cap Ex Reserve Shortfall specified in Acquiror's statement
in respect of any Real Property Asset and determines, pursuant to a Seller Cap
Ex Report, that the amount of such Cap Ex Reserve Shortfall is overstated by
more than five percent (5%), then Seller shall provide to Acquiror not later
than five (5) Business Days after the expiration of such review period a written
statement specifying the amount of such overstatement for each of the Real
Property Assets, including copies of all Seller Cap Ex Reports supporting such
determination. If Seller does not notify Acquiror in writing of any objection
within such review period, Seller shall be deemed to have agreed to the amount
of each Cap Ex Reserve Shortfall specified in Acquiror's statement.
(c) Seller and Acquiror shall negotiate in good faith to attempt to
resolve any such objection that is timely made by Seller, provided that if such
parties are unable to agree upon the amount of the Cap Ex Reserve Shortfall for
any Real Property Asset within ten (10)
9
Business Days after the date of the written statement sent by Seller specifying
an overstatement, Seller and Acquiror shall cause the preparers of the
applicable Acquiror Cap Ex Report and the applicable Seller Cap Ex Report to
select an independent third party to provide a capital expenditure report for
such Real Property Asset and the amount of the Cap Ex Reserve Shortfall
specified in such independent report shall be final and binding on Acquiror and
Seller for the purposes of this Section 2.09. The fees and expenses of any such
independent third party shall be a Transaction Cost.
(d) Upon Seller and Acquiror having agreed or deemed to have agreed
upon the amount of the Cap Ex Reserve Shortfall (or such amount having been
determined in accordance with Section 2.09(c)), Seller may, at its sole option:
(i) decrease the Base Purchase Price by the amount of the Cap Ex Reserve
Shortfall so agreed or determined; (ii) deposit into escrow (with a third party
mutually acceptable to Seller and Acquiror pursuant to escrow instructions in
form and substance reasonably acceptable to Seller and Acquiror) on each Closing
Date the amount of the Cap Ex Reserve Shortfall so agreed or determined for
disbursement to Acquiror (and its Affiliates) from time to time after the
applicable Closing Date to pay for the deferred maintenance and capital items
specifically identified in the applicable third party reports; or (iii) direct
Acquiror to perform (or to cause third parties to perform) the deferred
maintenance work and the capital items specifically identified in the applicable
third party reports, in which case the Allocable Portions of the applicable
Acquired Real Property Assets shall be increased in the aggregate by the
aggregate amount of the Cap Ex Reserve Shortfall so agreed or determined (such
increase to be allocated by Acquiror among the applicable Acquired Real Property
Assets in such manner as Acquiror shall reasonably determine).
Section 2.10. New Title Policies; New Surveys. During the Review
Period, Acquiror shall have the opportunity to review the existing owner's title
insurance policies and surveys of the Real Property Assets. If, upon such
review, Acquiror shall reasonably determine that the existing owner's title
insurance policy for any Real Property Asset is insufficient to protect the
interests of Acquiror with respect to such Real Property Asset and Acquiror
delivers notice thereof to Seller on or before the Due Diligence Expiration Date
specifying the applicable Real Property Asset and identifying the interests of
Acquiror that are not protected, Seller shall, at its option and at its sole
cost and expense, cause either (a) the title insurance company that issued the
existing owner's title insurance policy for the applicable Real Property Asset
to issue to Acquiror, on each Closing Date, relevant endorsements to such
existing title insurance policies in order to adequately protect the interests
of Acquiror, including a non-imputation endorsement, or (b) a title insurance
company reasonably selected by Seller to provide to Acquiror on the applicable
Closing Date an owner's title insurance policy (or in the case of a New
York-style closing, a marked title insurance commitment representing such title
insurance policy) covering title to the applicable Real Property Asset in an
amount approximating the fair market value thereof (in either case, a "New Title
Policy"). Similarly, if Acquiror shall reasonably determine that the existing
survey for any Real Property Asset is insufficient to protect the interests of
Acquiror with respect to such Real Property Asset and Acquiror delivers notice
thereof to Seller on or before the Due Diligence Expiration Date specifying the
applicable Real Property Asset and identifying the interests of Acquiror that
are not protected, Seller shall, at its sole cost and expense, deliver to
Acquiror, on or before each Closing Date, a survey of the applicable Real
Property Asset performed by a surveyor licensed in the state in which such asset
is located and certified to Acquiror as having been prepared in accordance with
1999 minimum standard details
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for a land survey jointly adopted by ALTA/ACSM (a "New Survey"). If Acquiror
shall fail to deliver any written notice to Seller contemplated by this Section
2.10 with respect to any Real Property Asset on or before the Due Diligence
Expiration Date, Acquiror shall be deemed to have waived its right to request a
New Title Policy or New Survey with respect to such Real Property Asset.
Section 2.11. Real Property Matters to which Real Property May Be
Subject. At the First Closing, the Companies shall each own good and valid
insurable fee title to the Acquired Real Property Assets, free and clear of any
and all Liens other than Permitted Liens. At the Second Closing, ALS Financing
shall own good and valid insurable fee title to the ALSF Assets, free and clear
of any and all Liens other than Permitted Liens
Section 2.12. No Other Representations. No representation, warranty
or covenant made by Seller in this Agreement or any document delivered pursuant
to this Agreement shall survive either Closing except as expressly provided in
this Agreement. Acquiror has not relied upon, and Seller is not liable or bound
in any manner by, any verbal or written statements, representations, real estate
brokers' "set-ups" or information pertaining to the Real Property Assets
furnished by any real estate broker, agent, employee, servant to other Persons
unless the same are expressly set forth in this Agreement.
ARTICLE III
REPRESENTATIONS AND WARRANTIES OF SELLER
Seller hereby represents and warrants to Acquiror as follows as of
each of (i) the date of the Original Stock Purchase Agreement, (ii) except with
respect to the Companies to be purchased by Acquiror at the Second Closing and
the Real Property Assets owned by such Companies, the First Closing Date, and
(iii) except with respect to the Companies purchased by Acquiror at the First
Closing, the Second Closing Date and the Real Property Assets owned by such
Companies:
Section 3.01. Incorporation, Qualification and Authority of Selling
Parties. Each of the Selling Parties is a corporation, limited partnership or
limited liability company, as the case may be, duly formed, validly existing and
in good standing under the Laws of the State of Delaware and has all requisite
power to operate its business as now conducted and is duly qualified as a
foreign corporation, limited partnership or limited liability company to do
business, and is in good standing, in each jurisdiction where the character of
its owned, operated or leased properties or the nature of its activities makes
such qualification necessary, except for failures to so qualify or be in good
standing that, individually or in the aggregate, do not have, and would not
reasonably be expected to have, a Material Adverse Effect. Each of the Selling
Parties has the requisite corporate, limited partnership or limited liability
company power, as the case may be, to enter into, and to consummate the
transactions contemplated by, and to carry out its obligations under, each of
the Transaction Agreements to which it is or will be a party. The execution and
delivery by each of the Selling Parties of each of the Transaction Agreements to
which it is or will be a party, and the consummation by each of the Selling
Parties of the transactions contemplated by, and the performance by each of the
Selling Parties of its obligations under, each of such Transaction Agreements
have been duly authorized by the
11
requisite corporate, limited partnership or limited liability company action, as
the case may be, on the part of such Selling Party and its shareholders,
partners or members, as applicable. This Agreement and the Tax Matters Agreement
have been, and at each Closing, each of the other Transaction Agreements to
which any of the Selling Parties is then a party will be, duly executed and
delivered by the applicable Selling Parties, and (assuming due authorization,
execution and delivery by Acquiror) this Agreement and the Tax Matters Agreement
constitute, and as of each Closing each of the other Transaction Agreements to
which each of the Selling Parties is then a party will constitute, the legal,
valid and binding obligations of the applicable Selling Party, enforceable
against it in accordance with their respective terms, subject to the effect of
any applicable bankruptcy, reorganization, insolvency, moratorium, fraudulent
conveyance or similar Laws relating to or affecting creditors' rights generally
and subject, as to enforceability, to the effect of general equitable principles
(regardless of whether such enforceability is considered in a proceeding in
equity or at law).
Section 3.02. Incorporation, Qualification and Authority of the
Companies. Each of the Companies is a corporation duly formed, validly existing
and in good standing under the Laws of its jurisdiction of incorporation,
formation or organization and has the requisite power and authority to operate
its business as now conducted. Each of the Companies is duly qualified as a
foreign corporation to do business and is in good standing in each jurisdiction
where the character of its owned, operated or leased properties or the nature of
its activities makes such qualification necessary, except for failures to so
qualify or be in good standing that, individually or in the aggregate, do not
have, and would not reasonably be expected to have, a Material Adverse Effect.
Each of the Companies is a special purpose entity formed to acquire, hold,
finance and lease its respective Real Property Assets, and, except for the
acquisition, holding, financing and leasing of such Real Property Assets, has
not conducted any other business.
Section 3.03. Capital Structure of the Companies; Ownership and
Transfer of the Shares. (a) Schedule 3.03(a) sets forth (i) all the authorized
Capital Stock of each of the Companies and (ii) the number of Equity Shares of
each class or series of Capital Stock of each of the Companies that are issued
and outstanding, together with the registered holder thereof. Except as set
forth in Schedule 3.03(a), there are no shares of Capital Stock or other Equity
Shares of any of the Companies issued and outstanding. All the outstanding
Equity Shares of each of the Companies have been duly authorized and validly
issued, are fully paid and nonassessable and were not issued in violation of any
preemptive or subscription rights. There are no options, calls, warrants or
convertible or exchangeable securities, or conversion, preemptive, subscription
or other rights, or agreements, arrangements or commitments, in any such case,
obligating or which may obligate any of the Companies to issue, sell, purchase,
return or redeem any of their respective Equity Shares or securities convertible
into or exchangeable for any of their respective Equity Shares, and there are no
Equity Shares of any of the Companies reserved for issuance for any purpose.
There are no capital appreciation rights, phantom stock plans, securities with
participation rights or features, or similar obligations and commitments of any
of the Companies. Seller directly and indirectly (through ownership of the
Companies) owns all the outstanding Equity Shares of the Companies, free and
clear of all Liens. Seller has the corporate power and authority to sell,
convey, assign, transfer, and deliver the Shares as provided in this Agreement,
and the sale, conveyance, assignment, transfer and delivery will convey to
Acquiror good and marketable title to such Shares, free and clear of any and all
Liens. Immediately following each Closing, Acquiror (and/or any one or more
assignees duly
12
designated by Acquiror pursuant to Section 10.07), will directly and indirectly
(through ownership of the Companies) own all the outstanding Equity Shares of
each of the Companies, free and clear of all Liens. Except for this Agreement,
there are no options, calls or warrants or other rights, agreements,
arrangements or commitments obligating (i) Seller to sell any of the Shares or
(ii) any of the Companies to sell any of the Equity Shares of such Company.
Except for this Agreement or as set forth in Schedule 3.03(a), there are no
voting trusts, stockholder agreements, proxies or other rights or agreements in
effect with respect to the voting, transfer or dividend rights of the Shares or
of the Equity Shares of any the Companies. None of the Companies has any
Subsidiaries.
(b) Immediately following the First Closing with respect to the
Non-ALSF Shares and the Second Closing with respect to the ALS Financing Shares,
neither Seller nor any of its Affiliates will have any claims with respect to
such Shares, respectively (except for any claims for indemnification under
Section 8.02 that may arise following such Closing), or to any interest,
dividends or other distributions in respect thereof.
Section 3.04. No Conflict. Provided that all consents, approvals,
authorizations and other actions described in Section 3.05 have been obtained or
taken, except as otherwise provided in this Article III and except as may result
from any facts or circumstances solely relating to Acquiror or its Affiliates
(as opposed to any other third party), the execution, delivery and performance
by Seller of, and the consummation by Seller of the transactions contemplated
by, this Agreement, the Tax Matters Agreement and the other Transaction
Agreements to which Seller will be a party do not and will not (a) violate or
conflict with the organizational documents of any of the Selling Parties or any
of the Companies, (b) conflict with or violate any Law or other Governmental
Order applicable to any of the Selling Parties or any of the Companies or by
which any of them or any of their respective properties or assets is bound or
affected, or (c) result in any breach of or loss of any contractual benefit
under, or constitute a default (or event which with the giving of notice or
lapse of time, or both, would become a default) under, or give to any Person any
rights of termination, amendment, acceleration or cancellation of, or result in
the creation of any Lien on the Shares or any of the assets or properties of any
of the Companies pursuant to, or, except for the consents listed on Schedule
3.04 (the "Seller Required Third Party Consents"), require any consent or
approval which has not been obtained with respect to, or the payment of any
penalty or liquidated damages under, any note, bond, loan or credit agreement,
mortgage, indenture, contract, agreement, lease, license, permit, franchise or
other material instrument to which any of the Selling Parties or any of the
Companies is a party or by which any of them or any of their respective
properties or assets is bound or affected, except, in the case of clause (c),
any such conflicts, violations, breaches, loss of contractual benefits,
defaults, rights or Liens that, individually or in the aggregate, do not have,
and would not reasonably be expected to have, a Material Adverse Effect.
Section 3.05. Consents and Approvals. Except as may result from any
facts or circumstances solely relating to Acquiror or its Affiliates (as opposed
to any other third party), the execution and delivery by Seller of this
Agreement and the Tax Matters Agreement do not, and the execution and delivery
by each of the Selling Parties at each Closing of the other Transaction
Agreements to which it will be a party will not, and the performance by it of,
and the consummation by it of the transactions contemplated by, this Agreement,
the Tax Matters Agreement and the other Transaction Agreements to which it is or
will be a party will not require
13
any consent, approval, license, permit, order, qualification, authorization of,
or registration or other action by, or any filing with or notification to, any
Governmental Authority, including under any Environmental Property Transfer Law
(each, a "Governmental Approval"), to be obtained or made by any of the Selling
Parties or any of the Companies that is material (other than those obtained
prior to the applicable Closing Date) or that, if any or all of which is not
obtained or made, could reasonably be expected to prevent or materially delay
the consummation by any of the Selling Parties of the transactions contemplated
by, or the performance by it of any of its respective obligations under, any of
the Transaction Agreements to which it is or will be a party (each such
Governmental Approval, a "Seller Required Governmental Approval").
Section 3.06. Financial Statements; Absence of Undisclosed
Liabilities. (a) Schedule 3.06(a) sets forth (i) the consolidated balance sheets
of Seller and its Subsidiaries as at each of December 31, 2003 and 2002, (ii)
the consolidated statements of operations, changes in stockholders' equity
(deficit) and statements of cash flows of Seller and its Subsidiaries for the
periods December 1, 2003 to December 31, 2003, January 1, 2003 to November 30,
2003, and the fiscal years ended December 31, 2002 and 2001 and (iii) the
unaudited consolidated balance sheet of Seller and its Subsidiaries as at March
31, 2004, and the unaudited consolidated statement of operations of Seller and
its Subsidiaries for the three-month period ended March 31, 2004, together with,
in the case of each of clauses (i), (ii) and (iii) above, the exhibits,
schedules and notes thereto (collectively, the "Financial Statements"). The
Financials Statements described in clauses (i) and (ii) above have been audited
by, and are accompanied with the report of, KPMG LLP. Each of the Financial
Statements is complete and correct in all material respects, has been prepared
in accordance with GAAP and in conformity with the practices consistently
applied by Seller and, except as disclosed in Schedule 3.06(a), without
modification of the accounting principles used in the preparation thereof
throughout the periods involved and presents fairly, in all material respects,
the financial position and results of operations of Seller as at the indicated
dates and for the periods indicated therein subject in the case of the unaudited
quarterly financial statements, to normal and customary year-end adjustments
that are not material in amount or significance.
(b) Except as set forth in the Financial Statements and except for
liabilities and obligations of a type required to be disclosed on a balance
sheet prepared in accordance with GAAP incurred in the ordinary course of
business consistent with past practice since the date of the Financial
Statements and not in violation of this Agreement or the Tax Matters Agreement,
and except as would not, individually or in the aggregate, reasonably be
expected to have a Material Adverse Effect, to the Knowledge of Seller, there
are no liabilities or obligations of any of Seller or the Companies of any
nature (whether accrued, absolute, contingent or otherwise), whether or not
required to be reflected on a financial statement prepared in accordance with
GAAP.
(c) Attached as Schedule 3.06(c) are unaudited operating statements
of the Real Property Assets for the three-month period ended March 31, 2004, and
the fiscal years ended December, 2003, 2002 and 2001 (collectively, the
"Operating Statements"), together with a certificate of the Chief Financial
Officer of Seller. The Operating Statements have been prepared in accordance
with GAAP and present fairly, in all material respects, the operating income
(loss), operating margin and income before taxes of the Real Property Assets for
the indicated periods.
14
Section 3.07. Absence of Certain Changes. Except as set forth in
Schedule 3.07, each of Seller and the Companies have conducted their respective
businesses in the ordinary course consistent with past practice, and there has
not occurred any event or events (a) that individually or in the aggregate, have
had, or would reasonably be expected to have, a Material Adverse Effect or (b)
since December 31, 2003, that had such event or events occurred after the date
of this Agreement, would have constituted a breach by Seller of clauses
(i)-(viii), (x) or (xi) of Section 5.01.
Section 3.08. Absence of Litigation. Except as set forth on Schedule
3.08 (the "Existing Litigation Matters"), there are no Actions pending or, to
the Knowledge of Seller, threatened against any of the Companies or the Real
Property Assets. None of the Existing Litigation Matters, individually or in the
aggregate, has had, or would reasonably be expected to have, a Material Adverse
Effect.
Section 3.09. Compliance with Laws. Excluding Environmental Laws and
Governmental Orders arising under Environmental Laws (which are covered in
Section 3.11) and Tax laws (which are covered in Section 3.19), none of the
Companies is in violation of any Laws or Governmental Orders applicable to it or
its assets, properties or businesses, except for violations that, individually
or in the aggregate, have not had, and would not reasonably be expected to have,
a Material Adverse Effect. Except as set forth in Schedule 3.09, none of the
Companies is a party to, or bound by, any Governmental Order that affects in any
material respect the ownership, use or operation of any of the Real Property
Assets.
Section 3.10. Governmental Licenses and Permits. (a) Excluding
Environmental Permits (which are covered in Section 3.11), each of the Companies
holds all material governmental qualifications, registrations, filings,
licenses, permits, orders, approvals or authorizations necessary to conduct its
respective business and to own or use its respective assets and properties, as
such businesses, assets and properties are conducted, owned and used on the date
of the Original Stock Purchase Agreement (collectively, the "Material Permits").
(b) All Material Permits are valid and in full force and effect in
all material respects. Except as set forth in Schedule 3.10(b) and excluding
Environmental Permits (which are covered in Section 3.11), none of the Companies
is in default or violation of any of the Material Permits in any material
respect. Except as set forth in Schedule 3.10(b), (i) no Material Permit of any
of the Companies has been revoked, suspended, non-renewed, terminated or
impaired in any material respect, (ii) none of the Companies currently is the
subject of any pending or, to the Knowledge of Seller, threatened Action seeking
the revocation, suspension, non-renewal, termination, modification or
impairment, in any material respect, of any Material Permit, and (iii) to the
Knowledge of Seller, there is no existing condition of any of the Companies, nor
has any of the Companies received any notice from any Governmental Authority of
any fact or condition, which, if left uncured, would result in the revocation,
limitation, suspension or non-renewal of any Material Permit, except where such
revocation, limitation, suspension or non-renewal, individually or in the
aggregate, would not reasonably be expected to have a material and adverse
effect on any Real Property Asset. Except as set forth in Schedule 3.10(b), none
of the Companies are operating under a Governmental Order or voluntary agreement
with any regulatory authorities of any jurisdiction in which it now holds a
Material Permit which restricts in any material respect its authority to do the
business authorized pursuant
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to such Material Permit or which would prohibit or materially delay the
consummation of the transactions contemplated hereby. Subject to obtaining the
consents set forth in Schedule 3.04, none of the Material Permits will be
subject to revocation, limitation, suspension, non-renewal, withdrawal,
termination or modification as a result of the consummation of the transactions
contemplated hereby, except where such revocation, limitation, suspension,
non-renewal, withdrawal, termination or modification, individually or in the
aggregate, would not reasonably be expected to have a material and adverse
effect on any Real Property Asset.
Section 3.11. Environmental Matters. (a) To the Knowledge of Seller,
all environmental reports obtained by any of the Companies within the past three
(3) years with respect to the Real Property Assets have been delivered or made
available to Acquiror; (b) none of the Real Property Assets or any of the
Companies is subject to a written notice, written request for information or
order from or agreement with a Governmental Authority or third party respecting
a Release or threatened Release or the violation of any Environmental Law; (c)
there has been no Release on, at or under any real property formerly owned,
leased or otherwise used by any of the Companies during the period that it was
owned, leased or otherwise used by any Company or, to the Knowledge of Seller,
the Real Property Assets, or arising out of the conduct by the Companies of
their respective businesses, that would reasonably be expected to result in the
imposition of any material liability to any of the Companies under the
Environmental Laws; (d) to the Knowledge of Seller, there has been no Release at
any parcels of real property other than any real property referred to in item
(c) that would reasonably be expected to have a material and adverse effect on
any Real Property Asset or any Company; (e) to the Knowledge of Seller, none of
the Real Property Assets is subject to any Lien in favor of any Governmental
Authority for (i) material liability under any Environmental Laws or (ii)
material costs incurred by a Governmental Authority in response to a Release or
threatened Release; (f) with respect to the Real Property Assets, or the
Companies, there are no material Actions pending or, to the Knowledge of Seller
threatened, arising under or relating to an Environmental Law or Hazardous
Materials or the making of any claim based on an Environmental Law for personal
injury, wrongful death or property damage; (g) except as set forth in Schedule
3.11, the Companies have operated and are operating their respective businesses
in compliance in all material respects with applicable Environmental Laws; and
(h) to the knowledge of Selling Parties, the Companies have obtained all
material Environmental Permits that are necessary in connection with the
operation of their respective businesses as conducted on the date of this
Agreement and, all such material Environmental Permits are in good standing and
the Companies are in compliance in all material respects with the terms and
conditions of such permits.
Section 3.12. Material Contracts. (a) Schedule 3.12(a) lists each of
the Material Contracts as in effect on the date of this Agreement and, where
applicable, the applicable Real Property Asset to which they relate and, in the
case of each Material Contract evidencing indebtedness for borrowed money or an
intercompany obligation (excluding, however, any such contracts evidencing
intercompany obligations being paid in full at the applicable Closing in
accordance with Sections 5.06 and 5.07), the name of the lender thereunder, the
maturity date thereof (and any extension terms thereunder) and the outstanding
principal amount thereof as of the date of the Original Stock Purchase
Agreement.
(b) Except as set forth in Schedule 3.12(b), each Material Contract
is a legal, valid and binding obligation of any Company, as applicable, and, to
the Knowledge of Seller,
16
each other party to such Material Contract, and is enforceable against the
Company, as applicable, and, to the Knowledge of Seller, each such other party,
in accordance with its terms (except in each case as may be limited by
applicable bankruptcy, insolvency, reorganization, moratorium or other similar
Laws now or hereafter in effect relating to or affecting creditors' rights
generally, including the effect of statutory and other Laws regarding fraudulent
conveyances and preferential transfers, and subject to the limitations imposed
by general equitable principles (whether or not such enforceability is
considered in a proceeding at law or in equity)), and none of the Companies or,
to the Knowledge of Seller, any other party to a Material Contract is in
material default or material breach or has failed to perform any material
obligation under a Material Contract, and, to the Knowledge of Seller, there
does not exist any event, condition or omission that would constitute such a
material breach or material default (whether by lapse of time or notice or
both), or give to the other party thereto any rights of termination, amendment,
acceleration or cancellation of, or result in the payment of any penalty or
liquidated damages under, a Material Contract.
Section 3.13. Employee Benefits; Employees. (a) Except as set forth
in Schedule 3.13(a), as of the applicable Closing Date, none of the Companies
nor any of their respective ERISA Affiliates has any (i) "employee benefit
plans", as defined in Section 3(3) of ERISA, or (ii) incentive, profit-sharing,
stock option, stock purchase, other equity-based, employment, consulting,
compensation, vacation or other leave, change in control, retention,
supplemental retirement, severance, health, medical, disability, life insurance,
deferred compensation and other employee compensation and benefit plans,
programs, policies, agreements, arrangements and practices, in each case
established or maintained by Seller or any of its ERISA Affiliates or to which
Seller or any of its ERISA Affiliates contributed or is obligated to contribute
thereunder, for the benefit of any of the current or former employees or
independent contractors of any of the Companies or of their respective ERISA
Affiliates (collectively, the "Benefit Plans").
(b) As of the applicable Closing Date, (i) none of the Companies has
any employees, (ii) none of the Companies will have any obligation or liability
with respect to any of the former employees or independent contractors of the
Companies and their respective ERISA Affiliates or (iii) each of the Companies
is not reasonably expected to incur any obligation or liability with respect to
any of the former employees or independent contractors of the Companies and
their respective ERISA Affiliates.
(c) None of the Companies nor any of their respective ERISA
Affiliates has sponsored, maintained, contributed to or been obligated to
contribute to any Benefit Plan subject to Section 412 of the Code, Section 302
of ERISA, or Title IV of ERISA within the five years prior to the applicable
Closing Date. None of the Companies has any obligation or liability with respect
to any Benefit Plan, and each of the Companies is not reasonably expected to
incur any obligation or liability with respect to any Benefit Plan.
(d) Each of the Companies and their ERISA Affiliates (i) is in
compliance in all material respects with all applicable Laws respecting
employment, employment practices, terms and conditions of employment and wages
and hours, and (ii) has withheld all amounts required by applicable Laws or by
agreement to be withheld from the wages, salaries and other payments to such
current and former employees and independent contractors.
17
(e) For purposes of this Agreement, "ERISA Affiliate" shall mean any
Person that would be treated as a single employer or under common control with
any of the Companies under Section 4001 of ERISA or Section 414 of the Code.
Section 3.14. Acquired Personal Property Assets. Schedule 3.14 sets
forth a true and complete list as at the date of the Original Stock Purchase
Agreement of all Acquired Personal Property Assets having a purchase price in
excess of $500 per item. Except as set forth in Schedule 3.14, each of the
Companies has (i) good (and, in the case of marketable securities, marketable)
title to each of the Acquired Personal Property Assets that it purports to own,
free and clear of all Liens other than Permitted Liens, and (ii) valid leasehold
interests in or valid rights under contract to use each of the Acquired Personal
Property Assets that it purports to lease or license. The acquisition by any
Company of all Acquired Personal Property Assets complied in all material
respects with all applicable Laws. Except as set forth in Schedule 3.14, the
Companies are in possession of the Acquired Personal Property Assets, and,
immediately after the applicable Closing, after giving effect to the
transactions and terminations contemplated by Sections 5.06, 5.07 and 5.08, such
Acquired Personal Property Assets will be substantially the same as the personal
property of the Companies existing on the date of the Original Stock Purchase
Agreement.
Section 3.15. Real Property Assets. Schedule 3.15 sets forth a true
and complete list and a brief description of each of the Real Property Assets
showing the name of the applicable facility and common address and record title
holder. Seller has provided or made available to Acquiror for each Real Property
Asset, the legal description of such Real Property Asset and a description of
the location thereof, improvements thereto and the uses being made thereof. Each
of the Companies owns good, marketable and insurable (at ordinary rates) title
in fee simple absolute to all of the Real Property Assets (other than the
Additional Real Property Assets and the Ground Leased Asset) and to all
buildings, structures and other improvements thereon, in each case subject only
to the Permitted Liens. At the First Closing, AHC Borrower shall own good,
marketable and insurable (at ordinary rates) title in fee simple absolute to the
FDL Real Property Asset and the Lynnwood Real Property Asset, and to all
buildings, structures and other improvements thereon, in each case subject only
to the Permitted Liens, and ALS Venture shall own good, marketable and insurable
(at ordinary rates) title in fee simple absolute to the Winston-Salem Real
Property Asset, and to all buildings, structures and other improvements thereon,
in each case subject only to the Permitted Liens. Except as set forth on
Schedule 3.15, each of the Companies has fulfilled and performed in all material
respects all of its respective obligations, and all obligations binding upon any
Real Property Asset, under each of the agreements or encumbrances to which any
Real Property Asset is subject, and none of the Companies is in breach or
default under, or in violation of or noncompliance with, in any material
respect, any such agreements or encumbrances, and no event has occurred and no
condition or state of facts exists which, with the passage of time or the giving
of notice or both, would constitute such a breach, default, violation or
noncompliance. Except as set forth on Schedule 3.15, the consummation of the
transactions contemplated by this Agreement or the Tax Matters Agreement will
not result in any breach or violation of, default under or noncompliance with,
or any forfeiture or impairment of any rights under, any agreement or
encumbrance to which any of the Real Property Assets is subject, or require any
consent, approval or act of, or the making of any filing with, any Person party
to or benefited by or possessing the power or authority to exercise rights or
remedies under or with respect to any such agreement or
18
encumbrance. Except as set forth on Schedule 3.15, all public utilities,
including water, sewer, gas, electric, telephone and drainage facilities, give
adequate service to the Real Property Assets, and each of the Real Property
Assets has unlimited access to and from publicly dedicated streets, the
responsibility for maintenance of which has been accepted by the appropriate
Governmental Authority. Complete and correct copies of any agreements or
instruments evidencing encumbrances, commitments for the issuance of title
insurance, title opinions, surveys and appraisals in Seller's or any of the
Companies' possession and any policies of title insurance currently in force and
in the possession of Seller or any of the Companies with respect to each such
parcel have heretofore been delivered to or made available to Acquiror. Subject
to Article IX, neither the whole nor any part of any Real Property Asset
including any Ground Leased Asset or any real property leased, used or occupied
by any of the Companies is subject to any pending suit for condemnation or other
taking by any public authority, and, to the Knowledge of Seller, no such
condemnation or other taking is threatened or contemplated. Subject to Article
IX, neither the whole nor any part of any Real Property Asset including any
Ground Leased Asset or any real property leased, used, owned or occupied by any
of the Companies is subject to any casualty or loss that has not been repaired
and restored (and for which all costs in connection therewith have been paid in
full).
Section 3.16. Ground Leased Assets. Schedule 3.16 sets forth a true
and complete list of each of the Real Property Assets that is a ground leased
property or partially ground leased property (each a "Ground Leased Asset"). No
default has occurred and is continuing under any ground lease or similar
agreement relating to any of the Ground Leased Assets. Schedule 3.16 also
contains a description of each of the ground leases and any amendments or
modifications thereto, under which (i) any of the Companies is lessee of, or
holds, uses or operates, any real property owned by any third Person or (ii) any
of the Companies is lessor of any of the owned Real Property Assets and the term
of such lease is greater than six months (other than leases to license holders
required for regulatory purposes). Except as set forth in Schedule 3.16, each
Company, as the case may be, has the right to quiet enjoyment of all the Ground
Leased Assets described in such Schedule for the full term of each such lease or
similar agreement (and any renewal option) relating thereto, and the leasehold
or other interest of the applicable Company in such leased real property is not
subject or subordinate to any agreement or Lien other than Permitted Liens.
Except as set forth on Schedule 3.16, except for residents agreements, leases
having a term of six months or less, and leases to license holders required for
regulatory purposes, in each case, entered into in the ordinary course of
business, and except for Permitted Liens, there are no agreements or other
documents governing or affecting the occupancy or tenancy of any of the Ground
Leased Assets by any of the Companies or of any of the Real Property Assets by
any Person other than the Companies. Complete and correct copies of any
instruments evidencing encumbrances, commitments for the issuance of title
insurance, title opinions, surveys and appraisals in Seller's or the Companies'
possession and any policies of title insurance currently in force and in the
possession of Seller or any of the Companies with respect to each such parcel of
Ground Leased Assets have heretofore been delivered or made available by Seller
to Acquiror.
Section 3.17. Insurance. Schedule 3.17 sets forth a true and
complete list as of the date of the Original Stock Purchase Agreement of all
current policies of property and liability insurance covering each of the
Companies. None of the insurance policies covering the Companies provides for
claims to be made on an occurrence or equivalent basis. Each of the
19
Companies is, and at all times has been, covered on an uninterrupted basis by
valid and effective insurance policies or binders which are in full force and
effect (and all premiums due and payable thereon have been paid in full on a
timely basis), and, except as set forth in Schedule 3.17, no written notice of
cancellation, termination, revocation or limitation or other indication that any
insurance policy is no longer in full force or effect or that the issuer of any
policy is not willing or able to perform its obligations thereunder has been
received by any of the Companies or Seller and, to the Knowledge of Seller, none
of the Companies, is in default of any provision thereof, except for such
defaults that, individually or in the aggregate, have not had, and would not
reasonably be expected to have, a Material Adverse Effect.
Section 3.18. Acquired Real Property; Existing Mortgages. As of the
applicable Closing Date, none of the Companies will own, beneficially or of
record, any real property other than the Acquired Real Property Assets. Schedule
3.18 contains a true, correct and complete statement of (i) the mortgages, deeds
of trust, deeds to secure debt or other liens securing payment of borrowed money
(collectively, the "Existing Mortgages") to which any of the Companies is a
party as mortgagor, trustor or obligor and (ii) as of the date of the Original
Purchase Agreement, the current principal balance of each of the Existing
Mortgages.
Section 3.19. Taxes. (a) (i) All income and other material Tax
Returns required to be filed by or on behalf of each of the Companies have been
duly and timely filed with the appropriate Tax Authority (after giving effect to
any valid extensions of time in which to make such filings); (ii) all such Tax
Returns are complete and accurate in all material respects as they relate to the
Companies; (iii) all amounts shown due on such Tax Returns and all income and
other material Taxes payable without the filing of a Tax Return, in both cases
insofar as they relate to the Companies or their assets, have been fully and
timely paid; (iv) none of the Companies is currently the beneficiary of any
extension of time within which to file any income or other material Tax Return;
(v) none of the Companies has waived or been requested to waive any statute of
limitations in respect of income or other material Taxes which waiver is
currently in effect; and (vi) none of the Companies has been a member of any
consolidated, combined or unitary group other than each such group of which it
is a member on the date of the Original Stock Purchase Agreement, and each of
the Companies currently files federal income Tax Returns on a consolidated basis
with the "affiliated group" (as defined in Section 1504 of the Code) of which
Seller is the common parent. Schedule 3.19(a) lists each material income Tax
Return filed with respect to the Companies for taxable years ended 2001, 2002
and 2003. True, correct and complete copies of each Tax Return listed on
Schedule 3.19(a), and each other material Tax Returns filed with respect to the
Companies for such taxable years have been delivered or made available to
Acquiror.
(b) Each of the Companies has complied in all material respects with
all applicable Laws relating to the withholding of Taxes and have duly and
timely withheld from employee salaries, wages and other compensation and have
paid over to the appropriate Tax Authority all material amounts required to be
so withheld and paid over.
(c) Except as set forth in Schedule 3.19(c), all deficiencies
asserted or assessments made in writing as a result of any examinations by any
Tax Authority of Tax Returns of or covering any of the Companies insofar as they
relate to the Companies, have been fully paid, and no other audits or
investigations by any Tax Authority relating to any Tax Returns
20
of or covering any of the Companies insofar as such Tax Returns relate to the
Companies, are in progress with respect to which (i) any of the Companies has
received written notice thereof from a Tax Authority or (ii) any of the
Companies, as applicable, or any of their respective officers or directors has
knowledge based upon personal contact with any agent of any such Tax Authority.
(d) None of the Companies is a party to any Tax sharing or similar
Tax agreements pursuant to which it will have any obligation to make any
payments after the applicable Closing Date.
(e) There are no Tax rulings, requests for rulings, or closing
agreements relating to any Company which could affect such Company's liability
for Taxes for any period after the applicable Closing Date.
(f) No Company is required to make any adjustment for any
Post-Closing Taxable Period pursuant to (i) Section 481(a) of the Code (or any
corresponding provision of Law) as a result of a change in accounting method or
(ii) a closing agreement under Section 7121 the Code (or any corresponding
provision of Law).
(g) No Company is a party to any agreement, contract, arrangement,
or plan that has resulted or would result, separately or in the aggregate, in
the payment of any "excess parachute payment" within the meaning of Section 280G
of the Code (or any corresponding provision of state, local, or foreign Tax
law).
(h) Seller is not a "foreign person" within the meaning of Section
1445 of the Code.
(i) There are no Liens for Taxes upon any assets of the Companies
except for Permitted Liens.
(j) Through each Closing Date and for the last six (6) taxable years
ending December 31, 2003, no written claim has been made by a Tax Authority in a
jurisdiction where any Company has never paid Taxes or filed Tax Returns
asserting that such Company, as the case may be, is or may be subject to Taxes
assessed by such jurisdiction.
(k) No Company has distributed stock of another Person, or has had
its stock distributed by another Person, in a transaction that was purported or
intended to be governed in whole or in part by Section 355 or 361 of the Code.
(l) Seller is eligible to make an election under Section 338(h)(10)
of the Code.
(m) Each Company Group that any Company may have formed part of has
filed all income and other Tax Returns that it was required to file for each
taxable period during which any Company formed part of such group. All such Tax
Returns are complete and accurate in all material respects. All Income and other
Taxes owed by any such Company Group (whether or not shown on any Tax Return)
have been paid for each taxable period during which any Company was a member of
such group. No Company Group has waived any statute of limitations in respect of
any income or other Taxes or agreed to any extension of time with
21
respect to an income or other Tax assessment or deficiency for any taxable
period during which any Company was a member of such Company Group.
(n) Neither the Seller nor any director or officer (or employee
responsible for Tax matters) of Seller, or any of the Companies expects any Tax
Authority to assess any additional income Taxes against any Company Group for
any taxable period during which any Company was a member of such Company Group.
There is no dispute or claim concerning any income Tax liability of any Company
Group for any taxable period during which any of the Companies was a member of
such Company Group either: (i) claimed or raised by any Tax Authority in
writing; or (ii) as to which the Seller or any director or officer (or employee
responsible for Tax matters) of the Seller or the Companies has knowledge based
upon personal contact with any agent of any such Tax Authority.
Section 3.20. Brokers. Neither Seller nor any of its Affiliates has
employed any broker or finder or incurred any liability for any investment
banking fees, brokerage fees, commissions or finders' fees in connection with
the transactions contemplated by the Transaction Agreements for which any of the
Companies, Acquiror or its Affiliates has or could have any liability.
Section 3.21. Excluded Assets; Excluded Liabilities. Prior to the
applicable Closing Date, (i) each of the applicable Companies will have sold,
transferred, assigned or otherwise distributed all of the Excluded Assets to
Seller or one of its wholly owned subsidiaries and (ii) Seller or one of its
wholly owned subsidiaries will have assumed all of the Excluded Liabilities.
Immediately prior to the applicable Closing, the only assets and liabilities of
the Companies will be the Acquired Real Property Assets (subject to any
Permitted Liens), the Acquired Personal Property Assets, the Assumed Mortgage
Debt, the Specified Liabilities and any Excluded Liabilities which Seller shall
have assumed pursuant to Section 5.08.
Section 3.22. Regulatory Filings. Seller has made available for
inspection by Acquiror (i) each annual statement filed with or submitted to any
regulatory authorities by any Company since January 1, 1999 and (ii) any reports
of examination (including, without limitation, financial, market conduct and
similar examinations) of any Company issued by any regulatory authority, in any
case, since January 1, 1999. Except as set forth in Schedule 3.22, all material
deficiencies or violations noted in the examination reports described in clause
(ii) above have been resolved to the material satisfaction of the regulatory
department that noted such deficiencies or violations. The Companies have each
filed all material reports, statements, documents, registrations, filings or
submissions required to be filed with any Governmental Authority since January
1, 1999. All such registrations, reports, statements, documents, filings and
submissions were in material compliance with applicable Laws when filed, and no
material deficiencies have been asserted by any such Governmental Authority or
other regulatory body with respect to such registrations, filings or submissions
that have not been or are not in the process of being satisfied. The
representations and warranties contained in this Section 3.22 shall not apply to
Taxes and Tax Returns, which are addressed in Section 3.19.
Section 3.23. No Certificates of Need or Provider Agreements. Except
as set forth in Schedule 3.23, no Certificates of Need (hereinafter defined) or
Provider Agreements (hereinafter defined) are used or required in connection
with the ownership, operation and
22
maintenance of any of the Real Property Assets. For purposes of this Agreement,
the term "Provider Agreements" shall mean any provider agreements held by or
issued to Seller or any Real Property Asset under which the applicable Real
Property Asset is eligible to receive payment under Title XIX ("Medicaid") or
any other governmental or quasi-governmental third party payor programs or any
private or quasi-private healthcare reimbursement or private payor programs
(including so-called "HMO" and "PPO" programs) ("Third Party Payor Programs") as
well as any other agreement, arrangement, program or understanding with any
federal, state or local governmental agency or organization or private
organization pursuant to which the applicable Real Property Asset qualifies for
payment or reimbursement for medical or therapeutic care or other goods or
services rendered or supplied to any resident. For purposes of this Agreement,
the term "Certificate of Need" shall mean a certificate of need or similar
permit or approval (not including conventional building permits or health care
licenses) from a Governmental Authority related to the construction and/or
operation of any Real Property Asset for the use of a specified number of beds
in a nursing facility, assisted living facility and/or rehabilitation hospital,
or alteration of the applicable Real Property Asset or modification of services
provided at the applicable Real Property Asset.
Section 3.24. Operator Matters.
(a) Except as set forth in Schedule 3.24(a), Seller and each Company
have been issued and are in good standing with respect to any and all material
permits, licenses, regulatory approvals, approvals, accreditations and
comparable authorizations (collectively, "Operator Licenses") from all
applicable Governmental Authorities (including, but not limited to any Health
Department (hereinafter defined)) that are necessary for the use, operation and
maintenance of each of the Real Property Assets and the conduct of Seller's or
any Company's business therein. Except as set forth in Schedule 3.24(a), neither
Seller, any Company nor any Real Property Asset is the subject of any
proceeding, examination or to Knowledge of Seller, investigation, by any Health
Department or other Governmental Authority concerning an actual or alleged
material violation of any laws, ordinances, rules or regulations or any Operator
Licenses. The Operator Licenses (i) have not been and will not be, transferred
to any location other than the applicable Real Property Asset; and (ii) except
as set forth in Schedule 3.24(a), are not and will not be pledged as collateral
for any loan or indebtedness that will not be released at the applicable Closing
or assumed by Acquiror. As used herein, "Health Departments" shall mean
departments of health and/or any Governmental Authorities of the state where the
applicable Real Property Asset is located which have jurisdiction over the
licensing, ownership and/or operations of the applicable parcel of Real Property
Asset as a Living Facility.
(b) No Litigation Relating to Licensing Matters. Seller, the
Companies and, to Knowledge of Seller, Manager are not involved in any
litigation, proceeding, or investigation (by or with any Person, resident,
Health Department or Governmental Authority) which, if determined or resolved
adversely, would have a material adverse impact on the conduct by Seller or the
Companies of their respective businesses or the applicable Real Property Asset.
(c) Operator Reporting. Seller has made available to Acquiror copies
of all of the census information concerning the number of licensed beds and/or
units occupied by bona fide residents, rents rolls, monthly financial statements
and other reports, materials and information concerning Seller's business
operations and compliance with Laws, Operator
23
Licenses and Material Permits for each of the Real Property Assets (the
"Operator Reports") for the periods set forth therein which are true and correct
in all material respects. All materials reports, documents and notices, required
to be filed, maintained or furnished by Seller or the Companies to any
Governmental Authority with respect to each of the Real Property Assets have
been so filed, maintained or furnished. There are no defects or deficiencies to
or with respect to any Real Property Asset cited in any survey or inspection
report provided, submitted or made by or to any Governmental Authority under any
Law that remains uncured, except defects and deficiencies being cured in the
ordinary course of business in accordance with permissible procedures of such
Governmental Authority and except as set forth in Schedule 3.24(c).
(d) No Violations. Except as set forth in Schedule 3.24(d), to the
Knowledge of Seller, neither Seller, any of the Companies nor any Real Property
Asset is the subject of any proceeding by any Governmental Authority, and no
notice of any violation has been issued, or, to the Knowledge of Seller, will be
issued, by a Governmental Authority that would, directly or indirectly, or with
the passage of time:
(i) impact Acquiror's (or its designees) ability to accept
and/or retain residents at any Real Property Asset;
(ii) have a material and adverse effect on Seller's, any of
the Companies' or Manager's ability to accept and/or retain residents or
operate any Real Property Asset or result in the imposition of a material
fine or for services rendered to eligible residents; or
(iii) modify, materially limit or annul or result in the
transfer, suspension, or revocation or imposition of probationary use of
the Operator Licenses.
(e) No Facility Violations. Except as set forth in Schedule 3.24(e),
no statement of material charges or deficiencies has been made or material
penalty enforcement action has been undertaken against any Real Property Asset
or Seller, any of the Companies or against any officer or director of Seller or
any of the Companies by any Governmental Authority since January 1, 2003 which
remains uncured or which is not in the process of being cured.
(f) No Recoupment Efforts. Except as set forth in Schedule 3.24(f),
none of Seller, any of the Companies or Manager is a participant in any
governmental program whereby any Governmental Authority may have the right to
recover funds by reason of the advance of governmental funds.
(g) Admissions Hold. There is no suspension, ban or material
limitation upon the admission of residents to any Real Property Asset (i) by any
Governmental Authority having jurisdiction over the licensure or certification
of such Real Property Asset or (ii) pursuant to any applicable Law.
(h) Substantial Compliance; No Adverse Regulatory Actions. Except as
set forth in Schedule 3.24(h), no Governmental Authority with jurisdiction over
any Real Property Asset has: (i) made a determination that any Real Property
Asset is not in compliance in all material respects with any applicable
regulatory requirements that have not been cured; or (ii) taken adverse
regulatory action with respect to any Real Property Asset that is material in
24
significance and has not been cured, including the imposition of any civil money
penalties in excess of $50,000 that have not been paid.
Section 3.25. Books and Records. Seller has delivered or made
available to Acquiror copies of each of the following: (i) copies of the books
and records of each of the Companies; (ii) all Material Contracts, material
licenses, and material permits (including any operator licenses) related to the
Companies or the Real Property Assets, together with copies of all material
correspondence related to the Companies or the Real Property Assets; (iii) an
updated list of security deposits, if any, held by either Seller or any of the
Companies; (iv) all plans and specifications related to all Improvements located
at the Real Property Assets, to the extent in Seller's possession or reasonable
control or otherwise available to Seller; (v) copies of currently valid
certificates of occupancy (or comparable permits or licenses) with respect to
Improvements located at each of the Real Property Assets; and (vi) copies of
currently valid material permits and material licenses relating to the operation
of each of the Real Property Assets as senior independent and/or assisted living
facilities. At the applicable Closing, keys to all locks located on the Acquired
Real Property Assets shall be in the possession of one of the Companies or the
Manager.
Section 3.26. Information Supplied. None of the information supplied
by Seller specifically for inclusion in the Offering Memorandum, as set forth in
Schedule 3.26, contains, as of the date of the Original Stock Purchase
Agreement, any untrue statement of a material fact or omits to state any
material fact required to be stated therein or necessary to make the statements
therein not misleading. None of the information supplied or to be supplied by
Seller specifically for inclusion in the Registration Statement will contain, at
the time the Registration Statement becomes effective under the Securities Act,
any untrue statement of a material fact or omit to state any material fact
required to be stated therein or necessary to make the statements therein not
misleading.
ARTICLE IV
REPRESENTATIONS AND WARRANTIES OF ACQUIROR
Acquiror hereby represents and warrants to Seller as follows as of
each of (i) the date of the Original Stock Purchase Agreement, (ii) the First
Closing Date, and (iii) the Second Closing Date:
Section 4.01. Incorporation and Authority of Acquiror. Acquiror is a
real estate investment trust duly formed, validly existing and in good standing
under the Laws of the State of Maryland and has all requisite trust power to
enter into, and to consummate the transactions contemplated by, and to carry out
its obligations under, each of the Transaction Agreements to which Acquiror is
or will be a party. The execution and delivery by Acquiror of each of the
Transaction Agreements to which Acquiror is or will be a party, and the
consummation by Acquiror of the transactions contemplated by, and the
performance by Acquiror of its obligations under, each of such Transaction
Agreements have been duly authorized by all requisite action on the part of
Acquiror and its shareholders. This Agreement and the Tax Matters Agreement have
been, and at each Closing each of the Transaction Agreements to which Acquiror
is then a party will be, duly executed and delivered by Acquiror, and (assuming
due authorization, execution
25
and delivery by Seller) this Agreement and the Tax Matters Agreement constitute,
and as of the Closing each of the other Transaction Agreements to which Acquiror
is then a party will constitute, the legal, valid and binding obligations of
Acquiror enforceable against Acquiror in accordance with their respective terms,
subject to the effect of any applicable bankruptcy, reorganization, insolvency,
moratorium, fraudulent conveyance or similar Laws relating to or affecting
creditors' rights generally and subject, as to enforceability, to the effect of
general equitable principles (regardless of whether such enforceability is
considered in a proceeding in equity or at law).
Section 4.02. Qualification of Acquiror. Acquiror has all requisite
power and authority to operate its business as now conducted and is duly
qualified to do business and, to the extent legally applicable, is in good
standing in each jurisdiction where the character of its owned, operated or
leased properties or the nature of its activities makes such qualification
necessary, except for such failures as would not materially impair or delay the
ability of Acquiror to consummate the transactions contemplated by, or perform
its material obligations under, the Transaction Agreements to which Acquiror is
or will be a party.
Section 4.03. No Conflict. Provided that all consents, approvals,
authorizations and other actions described in Section 4.04 have been obtained or
taken, except as otherwise provided in this Article IV and except as may result
from any facts or circumstances relating to Seller or the Companies (as opposed
to any other third party), the execution, delivery and performance by Acquiror
of, and the consummation by Acquiror of the transactions contemplated by, this
Agreement, the Tax Matters Agreement and each of the other Transaction
Agreements to which Acquiror will be a party, do not and will not (a) violate or
conflict with the organizational documents of Acquiror, (b) conflict with or
violate any Law or other Governmental Order applicable to Acquiror or (c) result
in any breach of, or constitute a default (or event which with the giving of
notice or lapse of time, or both, would become a default) under, or give to any
Person any rights of termination, amendment, acceleration or cancellation of, or
result in the creation of any Lien on any of the assets or properties of
Acquiror pursuant to, any note, bond, loan or credit agreement, mortgage,
indenture, contract, agreement, lease, license, permit, franchise or other
material instrument to which Acquiror or any of its Affiliates is a party or by
which any of them or any of their respective assets or properties is bound or
affected, except, in the case of clause (c), any such conflicts, violations,
breaches, loss of contractual benefits, defaults, rights or Liens as would not
materially impair or delay the ability of Acquiror to consummate the
transactions contemplated by, or perform its material obligations under, any of
the Transaction Agreements to which Acquiror is or will be a party.
Section 4.04. Consents and Approvals. Except as set forth in
Schedule 4.04, or as may result from any facts or circumstances solely relating
to Seller or its Affiliates (as opposed to any other third party), the execution
and delivery by Acquiror of this Agreement and the Tax Matters Agreement do not,
and the execution and delivery by Acquiror at each Closing of the other
Transaction Agreements to which Acquiror will be a party will not, and the
performance by Acquiror of, and the consummation by Acquiror of the transactions
contemplated by, each of the Transaction Agreements to which Acquiror is or will
be a party will not, require any Governmental Approval, except where the failure
to obtain such Governmental Approval, could reasonably be expected to prevent or
materially delay Acquiror from
26
consummating the transactions contemplated by or performing any of its material
obligations under any of the Transaction Agreements to which Acquiror is or will
be a party.
Section 4.05. Securities Matters. The Shares are being acquired by
Acquiror for its own account and without a view to the public distribution or
sale of the Shares or any interest in them. Acquiror has sufficient knowledge
and experience in financial and business matters so as to be capable of
evaluating the merits and risks of its investment in the Shares, and Acquiror is
capable of bearing the economic risks of such investment, including a complete
loss of its investment in the Shares.
Section 4.06. Financial Ability. Acquiror intends to finance the
Final Purchase Price, in part, by issuing stock in Acquiror pursuant to a
private placement transaction (the "Private Placement") and, in part, by
obtaining third party financing pursuant to one or more credit facilities (the
"Debt Financing"). Subject to receipt of proceeds of at least $530,000,000 upon
the consummation of the Private Placement and the Debt Financing, Acquiror will
have, at each Closing, the financial ability to consummate the transactions
contemplated by this Agreement.
Section 4.07. Investigation. Acquiror acknowledges and agrees that
it has made its own inquiry and investigation into, and, based thereon, has
formed an independent judgment concerning, the Real Property Assets, the
Companies and their respective businesses. Acquiror further acknowledges and
agrees that the only representations, warranties, covenants and agreements made
by Seller are the representations, warranties, covenants, and agreements
expressly set forth in this Agreement and the Tax Matters Agreement and Seller
makes and has made no other express or implied representation or warranty with
respect to the Real Property Assets (including with respect to title, physical
condition, environmental condition, fitness and quality, income and expenses of
operation, value and profitability, current or potential uses, current or future
zoning or suitability for renovation or construction), the Companies or their
respective businesses or otherwise or with respect to any other information
provided by Seller or any of its Affiliates or Representatives. Acquiror has not
relied upon any other representations or other information made or supplied by
or on behalf of Seller or by any Affiliate or Representative of Seller. No
officer of Acquiror has actual knowledge that the representations and warranties
of Seller set forth in Article III are inaccurate or have been breached except
for inaccuracies and breaches relating to matters that, individually or in the
aggregate, have not had, or would not be reasonably expected to have, a Material
Adverse Effect.
Section 4.08. Brokers. Neither Acquiror nor any of its Affiliates
has employed any broker or finder or incurred any liability for any investment
banking fees, brokerage fees, commissions or finders' fees in connection with
the transactions contemplated by this Agreement and the Tax Matters Agreement
for which Seller or any of its Affiliates has or could have any liability.
Section 4.09. Information Supplied. None of the information supplied
or to be supplied by or on behalf of Acquiror specifically for inclusion in the
Offering Memorandum or the Registration Statement will contain, at any time the
Offering Memorandum is distributed to prospective investors or the Registration
Statement becomes effective under the Securities Act, as applicable, any untrue
statement of a material fact or omit to state any material fact required to
27
be stated therein or necessary to make the statements therein not misleading,
except that no representation or warranty is made by Acquiror with respect to
the information supplied by Seller specifically for inclusion in the Offering
Memorandum as set forth in Schedule 3.26. The Offering Memorandum and the
Registration Statement will comply as to form in all material respects with the
requirements of the Securities Act and the Exchange Act, and the rules and
regulations thereunder ("Applicable Securities Rules").
ARTICLE V
ADDITIONAL AGREEMENTS
Section 5.01. Conduct of Business Prior to Each Closing. Except as
otherwise contemplated by or necessary to effectuate the transactions
contemplated by this Agreement (including the matters expressly contemplated by
Section 5.08), from the date of this Agreement through the First Closing and,
with respect to ALS Financing, through the Second Closing, unless Acquiror
otherwise consents in advance (and the consent of Acquiror to any request for
any such consent shall not be unreasonably withheld or delayed, it being agreed
that if Acquiror fails to respond to Seller's written request for consent for a
period of ten (10) Business Days after Acquiror's receipt thereof, then such
requested consent shall be deemed given), Seller will cause the Companies to:
(a) conduct their businesses in the ordinary course consistent with past
practice; (b) use reasonable commercial efforts to preserve intact their
business organizations, to keep available the services of consultants and agents
of their businesses and to maintain the current significant business
relationships and goodwill with customers, suppliers and service providers of
the Companies; (c) maintain replacement cost casualty insurance; and (d) not
take any of the following actions:
(i) repurchase, redeem, repay or otherwise acquire any
outstanding Equity Shares or other securities of any of the Companies;
(ii) transfer, issue, sell or dispose of any Equity Shares or
other securities of any of the Companies or grant options, warrants, calls
or other rights to purchase or otherwise acquire Equity Shares or other
securities of any of the Companies;
(iii) effect any recapitalization, reclassification, stock
split or like change in the capitalization of any of the Companies;
(iv) amend the certificate of incorporation or by-laws (or
other comparable organizational documents) of any of the Companies;
(v) make any material change in the policies, practices or
principles of any of the Companies in effect on the date of the Original
Stock Purchase Agreement with respect to accounting, preparation and
filing of Tax Returns (other than any change required by applicable Laws
or GAAP);
(vi) sell, lease, exchange, or otherwise dispose of any
property or assets (other than transactions occurring in the ordinary
course of business consistent with past practices), for which the
aggregate consideration paid or payable in any individual transaction is
in excess of $100,000 or in the aggregate in excess of $250,000;
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(vii) incur any financial indebtedness for borrowed money from
third party lending sources (other than current trade accounts payable
incurred in respect of property or services purchased in the ordinary
course of business consistent with past practices) or assume, grant,
guarantee or endorse, or otherwise as an accommodation become responsible
for, the obligations of any Person, or make any loans or advances (other
than, in each case, in the ordinary course of business consistent with
past practices, which will otherwise be repaid prior to the applicable
Closing or which constitutes an Excluded Liability);
(viii) except in the ordinary course of business and
consistent with past practice, enter into or amend (in any material
respect) or, other than pursuant to its current terms, terminate, renew or
extend any Material Contract relating to an Acquired Personal Property
Asset or an Acquired Real Property Asset;
(ix) enter into any new line of business or introduce any new
product or service that is unrelated to the operation of senior living
facilities;
(x) enter into, amend or, other than pursuant to its current
terms, terminate, renew or extend any contract, agreement, lease, license,
commitment, instrument, arrangement, relationship or understanding with
any Affiliate of any of the Companies including any stockholder, member,
director or officer of any of the Companies (or any of their respective
family members or Affiliates);
(xi) settle or compromise any Action or threatened Action,
except in each case for claims under policies and certificates of
insurance within applicable policy limits and claims not in excess of
$1,000,000 so long as any such claims will not adversely affect any of the
Acquired Real Property Assets and Acquired Personal Property Assets;
(xii) pay, discharge or satisfy any liabilities or
obligations, other than payment, discharge or satisfaction, in the
ordinary course of business consistent with past practice or in accordance
with their terms, of liabilities or obligations that (A) are reflected on
the Financial Statements, (B) are identified in amounts that are
reasonably determinable prior the applicable Closing, and for which Seller
is responsible under the Transaction Agreements or (C) were incurred since
the date of the Financial Statements in the ordinary course of business
consistent with past practice;
(xiii) enter into any agreement relating to the ownership and
operation of the Acquired Real Property Assets, unless such agreement
shall be fully cancelable or terminable without penalty prior to the
applicable Closing Date;
(xiv) allow any Acquired Real Property Asset or any material
Acquired Personal Property Asset to become subject to any Lien other than
a Permitted Lien;
(xv) directly or indirectly offer to sell, or solicit any
offers to purchase or negotiate for the sale or disposal of any Acquired
Real Property Asset or any material Acquired Personal Property Asset with
any Person other than Acquiror;
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(xvi) create any severance obligation for Acquiror or any of
the Companies with respect to any employee, except for obligations that
are Excluded Liabilities;
(xvii) enter into any lease or other binding agreement, or
amend, modify, extend or terminate any existing lease or other binding
agreement, with respect to the Acquired Real Property Assets, other than
leases and other agreements with residential tenants of the Acquired Real
Property Assets that are entered, amended, modified, extended or
terminated in the ordinary course of business consistent with past
practice;
(xviii) enter into any agreement, or amend, modify, extend or
terminate any existing agreement, relating to the construction,
demolition, or alteration of any of the Acquired Real Property Assets,
other than capital repairs (a) required by Law or any Governmental
Authority, (b) identified in the third party reports referenced in Section
2.09 not in excess of $100,000 with respect to each Real Property Asset or
in the aggregate in excess of $1,000,000, or (c) as otherwise set forth in
the capital budget of the Seller for the fiscal year ended 2004 with
respect to the Acquired Real Property Assets; or
(xix) announce or enter into any legally binding commitment
with respect to any of the foregoing.
Section 5.02. Access to Information. (a) From the date of this
Agreement until (x) with respect to the Companies other than ALS Financing, the
First Closing Date and (y) with respect to ALS Financing, the Second Closing
Date, upon reasonable prior written notice, and except as determined in good
faith to be appropriate to ensure compliance with any applicable Laws and
subject to any applicable privileges (including the attorney-client privilege),
contractual confidentiality obligations and privacy rights of residents, Seller
shall, and shall cause each of the Companies and each such Person's respective
Representatives to: (i) afford the Representatives of Acquiror reasonable access
to the offices, properties, books and records of the Companies; (ii) furnish to
the Representatives of Acquiror such additional financial and operating data and
other information regarding the Companies' businesses conducted by them as
Acquiror may from time to time reasonably request; and (iii) afford the
Representatives of Acquiror and its Affiliates reasonable access to the
employees of Seller and their Affiliates in respect of the Companies (and the
businesses conducted by the Companies) and use their reasonable commercial
efforts (without any requirement of Seller and the Companies or any of their
respective Representatives to incur any expense to a third party) to make
available to the Representatives of Acquiror and its Affiliates the employees of
third party outsourcing companies who provide services to, and are located on
the premises of, the Companies, in each case, whose assistance and expertise is
necessary to assist Acquiror in connection with Acquiror's preparation to
integrate the Companies and their businesses and personnel into Acquiror's
organization following the applicable Closing; provided, however, that such
investigation shall be on a basis and follow procedures that the parties shall
mutually agree, and shall not unreasonably interfere with any of the businesses
or operations of Seller, the Companies or any of their respective Affiliates;
and provided, further, that the auditors and accountants of Seller, the
Companies or any of their respective Affiliates shall not be obligated to make
any work papers available to any Person unless and until such Person has signed
a
30
customary agreement relating to such access to work papers in form and
substance reasonably acceptable to such auditors or accountants. If so
reasonably requested by Seller or any of the Companies, Acquiror shall enter
into a customary joint defense agreement with any one or more of Seller and the
Companies with respect to any information to be provided to Acquiror pursuant to
this Section 5.02(a).
(b) In addition to the provisions of Section 5.03, from and after
(x) with respect to the Companies other than ALS Financing, the First Closing
Date and (y) with respect to ALS Financing, the Second Closing Date, in
connection with any reasonable business purpose, including the preparation of
Tax Returns and the determination of any matter relating to the rights or
obligations of Seller or its respective Affiliates under this Agreement, upon
reasonable prior written notice, and except as determined in good faith to be
appropriate to ensure compliance with any applicable Laws (including any rights
of any current or former employee of any of the Companies with respect to
privacy or confidentiality of such employee's personnel, medical and other
records and information) and subject to any applicable privileges (including the
attorney-client privilege), privacy rights of residents, contractual
confidentiality obligations and privacy rights of residents, Acquiror shall, and
shall cause the Companies and their respective Affiliates and Representatives
to: (i) afford the Representatives of Seller and its Affiliates reasonable
access, during normal business hours, to the offices, properties, books and
records of the Companies and the businesses conducted by them; (ii) furnish to
Seller and its respective Affiliates and Representatives such additional
financial and other information regarding the Companies and the businesses
conducted by them as Seller or its respective Representatives may from time to
time reasonably request; and (iii) make available to the Representatives of
Seller and its Affiliates the employees of Acquiror and its Affiliates in
respect of the Companies and the businesses conducted by them whose assistance,
expertise, testimony, notes and recollections or presence is necessary to assist
Seller or any of the respective Affiliates in connection with Seller's inquiries
for any of the purposes referred to above, including, at Seller's sole cost and
expense, reimbursement to Acquiror or such Affiliates; provided, that the
requesting party will reimburse Acquiror for the reasonable value of the time
and any out - of - pocket expenses of such Persons who appear as witnesses in
hearings or trials at the request of Seller; provided, however, that such
investigation shall be on a basis and follow procedures that the parties shall
mutually agree, and that such investigation shall not unreasonably interfere
with the business or operations of Acquiror or any of its Affiliates; provided,
further, that the auditors and accountants of Acquiror or its Affiliates shall
not be obligated to make any work papers available to any Person unless and
until such Person has signed a customary agreement relating to such access to
work papers in form and substance reasonably acceptable to such auditors or
accountants. If so reasonably requested by Acquiror, Seller or the applicable
Affiliate thereof shall enter into a customary joint defense agreement with
Acquiror and its Affiliates (including the Companies) with respect to any
information to be provided to Seller pursuant to this Section 5.02(b).
Section 5.03. Books and Records. Subject to Section 5.04(a), Seller
and its Affiliates shall have the right to retain copies of all books and
records of each of the Companies and its respective businesses relating to
periods ending on or prior to the Closing Date on which such Company was
purchased by Acquiror, subject to compliance with all applicable privacy Laws
relating to information (including employment and medical records) regarding
current or former employees of any of the Companies. Acquiror agrees that, with
respect to all original
31
books and records of each of the Companies existing as of the Closing Date on
which such Company was purchased by Acquiror, it will (and will cause each of
the Companies to) (a) comply in all material respects with all applicable Laws
relating to the preservation and retention of records and (b) apply preservation
and retention policies to such books and records that are no less stringent than
those generally applied by Acquiror in respect of its other books and records.
Following each Closing, Seller shall promptly deliver to Acquiror all original
books and records of the Companies in the possession of Seller or any of its
Affiliates (other than such book and records in the possession of the Acquired
Companies).
Section 5.04. Confidentiality; Exclusivity.
(a) From the applicable Closing Date until December 31, 2005, Seller
and its Affiliates, on the one hand, and Acquiror and its Affiliates (including
the Acquired Companies), on the other hand, shall, and shall cause their
respective Representatives to maintain in confidence and not use to the
detriment of the other party (including for the purposes of competing with the
other party or its Affiliates), any written, oral or other information relating
to and obtained from the other party or its Affiliates, except that the
foregoing requirements of this Section 5.04(a) shall not apply to a party to the
extent that (i) any such information is or becomes generally available to the
public other than (A) in the case of Acquiror, as a result of disclosure by
Seller, its Affiliates or any of its respective Representatives and (B) in the
case of Seller, as a result of disclosure by Acquiror or any of the Acquired
Companies (after the applicable Closing Date) or any of their respective
Affiliates, or any of their respective Representatives, (ii) any such
information is required by applicable Law, Governmental Order or a Governmental
Authority to be disclosed after prior notice that has been given to Acquiror or
Seller, as applicable, (iii) any such information is to be disclosed in
connection with any Action, or (iv) any such information was or becomes
available to such party on a non-confidential basis and from a source (other
than a party to this Agreement or any Affiliate or Representative of such party)
that is not bound by a confidentiality agreement. Seller and Acquiror shall
instruct its Affiliates and Representatives having access to such information of
such obligation of confidentiality.
(b) Acquiror and Seller agree to deal with one another on an
exclusive basis during the term of this Agreement with respect to the
transactions contemplated herein, and Seller shall not solicit or entertain
offers for, or enter into any discussions relating to, any similar transactions
with respect to the sale of the Companies or any of the Acquired Real Property
Assets.
Section 5.05. Regulatory and Other Authorizations; Reasonable
Efforts. (a) Subject to the terms and conditions of this Section 5.05, Seller
and Acquiror agree to use their reasonable best efforts to take, or cause to be
taken, all actions and to do, or to cause to be done, all things necessary,
proper, advisable or appropriate to consummate and make effective the
transactions contemplated by the Transaction Agreements as soon as practicable,
including to cooperate in good faith to facilitate each Closing and to refrain
from taking any action that could reasonably be expected to cause a condition to
either Closing to not be satisfied or otherwise materially impair, delay or
impede either Closing. In furtherance of the foregoing, (a) promptly following
the date of the Original Stock Purchase Agreement, Seller shall prepare and
deliver to Acquiror a written list of all Seller Required Governmental Approvals
to be obtained or made in
32
connection with the Transaction Agreements and (b) Seller and Acquiror shall
promptly make all filings and notifications with, and shall use their reasonable
best efforts to promptly obtain all authorizations, consents, orders and
approvals of, all Governmental Authorities that may be or become necessary for
their respective execution and delivery of, and the performance of their
respective obligations pursuant to, and the consummation of the transactions
contemplated by, this Agreement and comply at the earliest practicable date with
a request for information, documents or other materials by any such Governmental
Authorities to obtain such authorizations, consents, orders and approvals;
provided, however, that in no event shall Acquiror or any of its Affiliates be
required to agree to (i) the divestiture of any business or entity or (ii) any
requirement imposed by a Governmental Authority that would reasonably be
expected to have a (A) Material Adverse Effect taken as a whole, or (B) material
and adverse effect on the aggregate economic value and business benefits that
would reasonably be expected to be obtained by Acquiror and its Affiliates from
the transactions contemplated by this Agreement. The parties will cooperate with
the reasonable requests of each other in promptly seeking to obtain all such
authorizations, consents, orders and approvals (including by making available,
upon reasonable notice, appropriate Representatives of the Companies for
participation in meetings with Governmental Authorities).
(b) Prior to each Closing, each of Seller and Acquiror shall
promptly notify one another of any communication it receives from any
Governmental Authority relating to the matters that are the subject of this
Agreement applicable to such Closing and permit the other party to review in
advance any proposed material written communication by such party to any
Governmental Authority and shall provide each other with copies of all
correspondence, filings or communications between such party or any of its
Representatives, on the one hand, and any Governmental Authority or members of
its staff, on the other hand; provided, however, that Acquiror or Seller, as
applicable, may redact from such correspondence, filings and communications any
confidential competitive information of Acquiror, Seller or their respective
Affiliates, as the case may be. Prior to each Closing, neither Seller nor
Acquiror shall agree to participate in any meeting with any Governmental
Authority in respect of any such filings, investigation or other inquiry with
respect to such Closing unless it consults with the other party in advance.
(c) Seller and Acquiror shall use their reasonable best efforts to
obtain any other consents and approvals (including from any ground lessors and
from the holders of the Existing Mortgages, and to make any other notifications
that may be required in connection with the transactions contemplated by this
Agreement; provided, however, that, except for Transaction Costs, none of
Seller, the Companies or Acquiror shall be required to compensate any third
party, commence or participate in litigation or offer or grant any accommodation
(financial or otherwise) to any third party to obtain any such consent or
approval; provided, further, that Seller shall not be required to incur (i)
Transaction Costs (excluding any additional costs ("Additional Insurance Costs")
of complying with insurance requirements required by an Existing Mortgage Lender
in order to obtain each of the written consents and approvals of the Existing
Mortgage Lenders in Schedule 5.10(a) in form and substance satisfactory to
Seller in its reasonable commercial discretion (the "ASLF Consent") in excess of
$1,000,000 or (ii) Transaction Costs (including Additional Insurance Costs) in
excess of $2,000,000 (the "ALSF Cap") to obtain the ALSF Consent.
33
Section 5.06. Intercompany Obligations. Seller shall, and shall
cause its Affiliates to, take such action and make such payments as may be
necessary so that, prior to or concurrently with each Closing Date, the Company
or Companies being acquired by Acquiror on such Closing Date, on the one hand,
and Seller and its Affiliates, on the other, shall settle, discharge, offset,
pay or repay in full all intercompany loans, notes and advances (regardless of
their maturity) and all intercompany receivables and payables (including amounts
relating to intercompany Tax sharing agreements, whether written or oral), for
the amount due, including any accrued and unpaid interest, but excluding any
penalty, termination or similar amounts; provided, however, that if each such
item is not paid in full in cash, the method of discharge must be reasonably
satisfactory to Acquiror.
Section 5.07. Intercompany Arrangements. Except as otherwise agreed
in writing by Seller and Acquiror or as expressly provided in the Transaction
Agreements, Seller shall, and shall cause its Affiliates to, take such actions
as may be necessary to terminate prior to or concurrently with each Closing
Date, without any penalty to or premium payable by the Company or Companies
being acquired by Acquiror on such Closing Date, all contracts, agreements,
leases, licenses, commitments and other instruments, arrangements, relationships
and understandings between the Company or Companies being acquired by Acquiror
on such Closing Date, on the one hand, and Seller and its Affiliates, on the
other.
Section 5.08. Excluded Assets; Excluded Liabilities. Prior to each
Closing, (i) Seller will cause the Company or Companies to be acquired by
Acquiror on such Closing Date, as applicable, to transfer, convey assign or
otherwise distribute to Seller or one of its wholly owned subsidiaries all of
such Company's right, title and interest in and to all the Excluded Assets, and
(ii) Seller shall, or shall cause, one of its wholly owned subsidiaries to
assume all the Excluded Liabilities. The distribution of the Excluded Assets and
the assumption of the Excluded Liabilities shall be effected pursuant to written
instruments of transfer and assumption, as applicable, reasonably satisfactory
to Acquiror, and may include a transfer or assumption of some or all of such
Excluded Assets or Excluded Liabilities, as applicable, to a direct or indirect
Subsidiary of a Company followed by a distribution of the Capital Stock of such
Subsidiary.
Section 5.09. Additional Real Property Assets. Prior to the First
Closing, (i) Seller shall cause Winston to be merged with and into ALS Venture
and (ii) Seller shall transfer the FDL Real Property Asset to AHC Borrower, in
each case, pursuant to written instruments of merger, assignment and transfer,
as applicable, in form and substance reasonably satisfactory to Acquiror.
Section 5.10. Existing Mortgage Lender Consents. (a) The purchase
and sale of the ALS Financing Shares and the assumption of the debt outstanding
under the Existing Mortgages may require certain consents and agreements of the
Existing Mortgage Lenders set forth in Schedule 5.10(a). Seller and Acquiror
shall use their reasonable best efforts in accordance with Section 5.05(c) to
secure all such consents and agreements. Seller or Acquiror will promptly notify
the other if it reasonably believes that, notwithstanding the parties'
reasonable best efforts pursuant to Section 5.05(c), it will be unable to obtain
one or more of the consents of the Existing Mortgage Lenders prior to the
Extended Outside Date or that the ALSF Costs are reasonably likely to exceed the
ALSF Cap.
34
(b) If any consent of an Existing Mortgage Lender in respect of any
Real Property Assets owned by ALS Financing ("ALSF Assets") shall not have been
obtained by the Extended Outside Date or if the ALSF Costs exceed the ALSF Cap,
then Acquiror shall elect, by written notice to Seller, to terminate this
Agreement as it relates to the ALSF Assets, in which event this Agreement shall
be of no further force or effect as provided in Article VII in respect of the
ALSF Assets.
(c) Notwithstanding anything to the contrary contained in the form
of Property Leases or the Agreement Regarding Leases, the parties hereto agree
that they will use their reasonable best efforts in accordance with Section
5.05(c) to obtain consents and agreements, as applicable, from the Existing
Mortgage Lenders to the effect that (i) each Property Lease shall be
cross-defaulted with the other Property Leases under the Agreement Regarding
Leases, but to the extent such lenders do not agree to the same, the same shall
not be a condition to either Closing, and only the leases appurtenant to the
properties where such consent is obtained shall be cross-defaulted, and (ii)
such Existing Mortgage Lenders agree to recognize the tenants under each
Property Lease and shall not disturb the leasehold interest of the applicable
tenant if an Event of Default (as such term is defined in a Property Lease) has
not occurred and is not continuing under such Property Lease, and the same shall
be a condition to the Second Closing pursuant to Section 6.01(h).
Section 5.11. Private Placement. Acquiror completed its preparation
of an appropriate offering memorandum (together with any amendment thereof or
supplement thereto, the "Offering Memorandum") in connection with the Private
Placement. Acquiror consummated the Private Placement on August 3, 2004.
Section 5.12. Registration Statement; Additional Financial
Statements. (a) Acquiror expects to file with the Securities and Exchange
Commission (the "SEC") a registration statement covering shares of common stock
of Acquiror pursuant to various agreements with the initial purchasers of such
shares sold in the Private Placement (together with any amendment thereof or
supplement thereto, the "Registration Statement"). Acquiror shall provide Seller
and its counsel with a reasonable opportunity to review and comment on the
Registration Statement, each response to any correspondence from the SEC or the
staff of the SEC (or any other Governmental Authority) relating thereto, and all
other documentation prepared in connection with the listing of the shares
covered thereby on any securities exchange, but only to the extent statements
included therein are based on information supplied by Seller specifically for
inclusion or incorporation by reference therein. If requested by Seller,
Acquiror shall include in the Registration Statement, a notice to the effect
that Seller does not accept and shall not have any responsibility or liability
for the content of the Registration Statement (except as to information supplied
by Seller specifically for inclusion or incorporation by reference therein).
(b) If Acquiror (i) shall be obligated to provide financial
statements of any of the Companies, including as part of the presentation of any
required pro forma financial statements, for any period in any filing to be made
pursuant to Applicable Securities Rules (including the Registration Statement)
or (ii) shall be advised by the underwriters or initial purchasers in connection
with any offering of its securities, including the Private Placement, that such
financial statements are advisable in order to assure a successful marketing of
such offering, then Seller shall use its reasonable commercial efforts to engage
Seller's accountants, KPMG
35
LLP, so long as they are independent for purposes of the Securities Act, or
another nationally recognized accounting firm reasonably acceptable to Acquiror,
to conduct an audit of, or if no audit is required, to perform the procedures
specified by the American Institute of Certified Public Accountants for a review
of interim financial information as described in Statement of Auditing Standards
No. 71, Interim Financial Information, with respect to, such required or
advisable financial statements and, to the extent required by the SEC or deemed
advisable by the underwriters or initial purchasers, the comparable period in
the prior year and shall use reasonable commercial efforts to facilitate any
such audit or review. Seller will also reasonably cooperate with Acquiror, in
connection with any such audit or review and shall use reasonable commercial
efforts to cause any accounting firm referred to above to provide such
reasonable cooperation as well. All costs incurred by Seller pursuant to this
Section 5.12(b) (including any audit or review by KPMG LLP and consultants)
shall be paid by Acquiror.
Section 5.13. Notice of Certain Events. Seller or Acquiror shall
promptly notify the other of any of the following events: (a) the occurrence or
non-occurrence of any event which would be likely to cause (i) any
representation or warranty of such party contained in this Agreement to be
untrue or inaccurate in any material respect (including if such party receives a
notice of violation relating to any Hazardous Material, becomes aware that it is
not in compliance with all Environmental Laws in all material respects, receives
written notice from any tenant that such party is in default under any lease or
becomes aware of any material default by a tenant under any lease) or (ii) any
covenant, condition or agreement of such party contained in this Agreement not
to be complied with or satisfied (including if such party reasonably believes
that it will be unable to obtain one or more of the consents of the Existing
Mortgage Lenders prior to the Extended Outside Date); and (b) any failure of
such party to comply with or satisfy any covenant, condition or agreement to be
complied with or satisfied by it hereunder; provided, that the delivery of any
notice pursuant to this Section 5.13 shall not limit or otherwise affect the
remedies available to the party receiving such notice. In addition, Seller will
promptly inform Acquiror of the happening of any event which would render any
information supplied by Seller specifically for inclusion in the Offering
Memorandum or in any Registration Statement incorrect in any material respect or
would require the amendment of the Offering Memorandum or any such Registration
Statement.
Section 5.14. Further Action. From and after the First Closing Date,
Seller and Acquiror shall execute and deliver, or shall cause to be executed and
delivered, such documents and other papers and shall take, or shall cause to be
taken, such further actions as may be reasonably required to carry out the
provisions of this Agreement and give effect to the transactions contemplated by
this Agreement, including the transfer of the Excluded Assets and assumption of
the Excluded Liabilities.
ARTICLE VI
CONDITIONS TO CLOSING AND RELATED MATTERS
Section 6.01. Conditions to Obligations of Seller. The obligation of
Seller to consummate the transactions contemplated by this Agreement at each of
the First Closing and the Second Closing shall be subject to the fulfillment or
waiver by Seller, at or prior to each such Closing, of each of the following
conditions:
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(a) Representations and Warranties; Covenants. (i) The
representations and warranties of Acquiror contained in this Agreement are true
and correct (without giving effect to any limitations as to materiality) as of
such Closing as if made on the applicable Closing Date (other than
representations and warranties made as of another date, which representations
and warranties were true and correct as of such date), except to the extent that
any breaches of such representations and warranties, individually or in the
aggregate, have not had, or would not reasonably be expected to have, a Material
Adverse Effect; (ii) the covenants contained in this Agreement to be complied
with by Acquiror on or before such Closing have been complied with in all
material respects; and (iii) Seller has received a certificate dated the
applicable Closing Date of Acquiror with respect to such Closing to such effect
signed by a duly authorized senior executive officer of Acquiror.
(b) Approvals of Governmental Authorities. Each of the Seller
Required Governmental Approvals and the Governmental Approvals set forth in
Schedule 4.04 applicable to such Closing has been received or deemed received
and is in full force and effect.
(c) Consents of Existing Mortgage Lenders. With respect to the
Second Closing only, (i) subject to Section 5.10, the ALSF Consent, in form and
substance satisfactory to Seller in its reasonable commercial discretion, has
been received or deemed received and is in full force and effect; provided,
however, that the ALSF Consent shall not be considered satisfactory by Seller
unless (A) it includes recognition, in form and substance satisfactory to Seller
in its reasonable commercial discretion, that each Existing Mortgage Lender
shall not disturb the leasehold interest of each tenant under a Property Lease
relating to the ALSF Assets if an Event of Default (as such term is defined in
the form Property Lease) has not occurred and (B) the Additional Insurance Costs
shall not exceed $1,000,000; and (ii) payment by Acquiror from its own funds of
the Transaction Costs required to obtain the ALSF Consent ("ALSF Costs") to the
extent the aggregate of such costs exceed the ALSF Cap, provided, that Acquiror
shall not be responsible for any such Transaction Costs incurred without its
prior written consent.
(d) No Governmental Order or Proceeding. As of such Closing, there
is no Governmental Order in existence that prohibits or restrains the
consummation of the transactions contemplated by this Agreement and no suit,
action or proceeding or investigation by any Governmental Authority has been
commenced (and be pending) seeking to prohibit or restrain the consummation of
the transactions contemplated by this Agreement.
(e) Other Documents. The Acquiror has executed and delivered to the
Seller each of the Transaction Agreements applicable to such Closing to which it
is a party.
(f) Proceeds from Debt Financing. The Debt Financing has been
consummated and has resulted in net proceeds to Acquiror of at least
$135,000,000.
(g) Consummation of the Brookdale Agreement. The Closing (as defined
in the Brookdale Agreement) shall have occurred.
Section 6.02. Conditions to Obligations of Acquiror. The obligation
of Acquiror to consummate the transactions contemplated by this Agreement at
each of the First Closing and
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the Second Closing shall be subject to the fulfillment or waiver by Acquiror, at
or prior to each such Closing, of each of the following conditions:
(a) Representations and Warranties; Covenants. (i) The
representations and warranties of Seller contained in this Agreement are true
and correct (without giving effect to any limitations as to materiality) as of
such Closing as if made on the applicable Closing Date (other than
representations and warranties made as of another date, which representations
and warranties were true and correct as of such date), except to the extent that
any breaches of such representations and warranties, individually or in the
aggregate, have not had, or would not reasonably be expected to have, a Material
Adverse Effect; (ii) the covenants contained in this Agreement to be complied
with by Seller on or before such Closing have been complied with in all material
respects; and (iii) Acquiror has received a certificate dated the applicable
Closing Date of Seller with respect to such Closing to such effect signed by a
duly authorized senior executive officer of Seller.
(b) Approvals of Governmental Authorities. Each of the Seller
Required Governmental Approvals and the Governmental Approvals set forth in
Schedule 4.04 applicable to such Closing has been received or deemed received,
is in full force and effect, and, subject to Section 5.05(a), do not contain any
restrictions or limitations not reasonably acceptable to Acquiror.
(c) Consents of Existing Mortgage Lenders. With respect to the
Second Closing only, subject to Section 5.10, each of the written consents and
approvals of the Existing Mortgage Lenders in Schedule 5.10(a) has been received
or deemed received, is in full force and effect, and is in form and substance
reasonably satisfactory to Acquiror.
(d) Approvals of Ground Lessors. Each of the written consents and
approvals of the ground lessors under each Ground Leased Asset, if any, subject
to such Closing has been received or deemed received, is in full force and
effect, and, subject to Section 5.05(c), is in form and substance reasonably
satisfactory to Acquiror.
(e) No Governmental Order or Proceeding. As of such Closing, there
is no Governmental Order in existence that prohibits or restrains the
consummation of the transactions contemplated by this Agreement and no suit,
action or proceeding or investigation by any Governmental Authority has been
commenced (and be pending) seeking to prohibit or restrain the consummation of
the transactions contemplated by this Agreement.
(f) No Material Adverse Effect. There has not occurred any event or
events that, individually or in the aggregate, have had or would reasonably be
expected to have a Material Adverse Effect.
(g) No Excluded Assets or Excluded Liabilities. Each of the
Companies has sold, transferred and assigned all of the Excluded Assets, if any,
and Seller has assumed the Excluded Liabilities, and the only assets and
liabilities of the Companies immediately prior to the applicable Closing are,
subject to any Permitted Liens, the Acquired Real Property Assets, the Acquired
Personal Property Assets, the Assumed Mortgage Debt, the Specified Liabilities
and any Excluded Liabilities which Seller shall have assumed as provided in
Section 5.08.
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(h) Proceeds from Additional Financing. The Debt Financing has been
consummated and has resulted in net proceeds to Acquiror of at least
$135,000,000.
(i) Other Documents. Each of the Seller and the Selling Parties has
executed and delivered to the Acquiror each of the Transaction Agreements
applicable to such Closing to which Seller or such Selling Party is a party,
including as follows:
(i) Property Leases. Each of the Property Owners and the Net
Tenants has executed and delivered a Property Lease with respect to each
of the Acquired Real Property Assets.
(ii) Agreement Regarding Leases. Each of the Tenant Holding
Company and the Property Owners Holding Company has executed and delivered
the Agreement Regarding Leases.
(iii) Guaranty Agreements. The Tenant Holding Company has
executed and delivered a Lease Guaranty with respect to each of the
Property Leases, and the Seller has executed and delivered the Guaranty of
Agreement Regarding Leases.
(iv) Management Agreement. Each of the Manager and the Net
Tenants has executed and delivered a Management Agreement containing
termination provisions reasonably satisfactory to Acquiror with respect to
each of the Acquired Real Property Assets.
(v) Other Deliveries. Each of the documents and other
deliveries contemplated by Section 2.06(e).
(j) Organizational Documents of Tenant Holding Company and Each Net
Tenant. Each of the Tenant Holding Company and the Net Tenants has been formed,
and Acquiror has reasonably approved the organizational documents of each of
such entities.
(k) Transfer of Additional Real Property Assets. AHC Borrower shall
own good, marketable and insurable (at ordinary rates) title in fee simple
absolute to the FDL Real Property Asset, and to all buildings, structures and
other improvements thereon, in each case subject only to the Permitted Liens,
and ALS Venture shall own good, marketable and insurable (at ordinary rates)
title in fee simple absolute to the Winston-Salem Real Property Asset, and to
all buildings, structures and other improvements thereon, in each case subject
only to the Permitted Liens. AHC Borrower shall own good, marketable and
insurable (at ordinary rates) title in fee simple absolute to the Lynnwood Real
Property Asset, and to all buildings, structures and other improvements thereon,
in each case subject only to the Permitted Liens.
(l) Consummation of the Brookdale Agreement. The Closing (as defined
in the Brookdale Agreement) shall have occurred.
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ARTICLE VII
TERMINATION, WAIVER AND DEFAULT
Section 7.01. Termination. This Agreement may be terminated prior to
the Second Closing:
(a) by the mutual written consent of Seller and Acquiror;
(b) by either Seller or Acquiror if each of the Closings shall not
have occurred on or before December 15, 2004 (the "Extended Outside Date");
provided, that the right to terminate this Agreement under this Section 7.01(b)
shall not be available to any party whose failure to take any action required to
fulfill any of such party's obligations under this Agreement shall have been the
cause of, or shall have resulted in, the failure of the First Closing or the
Second Closing, as applicable, to occur prior to such date;
(c) by either Seller or Acquiror in the event of the issuance of a
final, non-appealable Governmental Order restraining or prohibiting the
consummation of the transactions contemplated by this Agreement;
(d) by Acquiror in accordance with Section 2.08(b), 5.10(b), 7.06 or
8.01(b)(i);
(e) by Seller in accordance with Section 7.05, or if the Private
Placement shall not have been consummated on or before August 15, 2004; or
(f) by either Seller or Acquiror in the event the Stock Purchase
Agreement, dated as of June 18, 2004, as amended, among Fortress Brookdale
Acquisition LLC, Acquiror and BLC Senior Holdings, Inc. (the "Brookdale
Agreement"), is terminated in accordance with its terms.
Section 7.02. Notice of Termination. Any party desiring to terminate
this Agreement pursuant to Section 7.01 shall give written notice of such
termination to the other party or parties, as the case may be, to this
Agreement.
Section 7.03. Effect of Termination.
(a) If this Agreement is terminated prior to the First Closing as
provided in Section 7.01, except as set forth in Section 5.04 and this Article
VII, this Agreement shall forthwith become void and there shall be no liability
on the part of any party to this Agreement; provided, however, that nothing in
this Agreement shall relieve any party hereto from liability for any willful
breach of the representations and warranties contained in this Agreement or any
failure to perform their respective obligations under this Agreement.
(b) If this Agreement is terminated after the First Closing as
provided in Section 7.01, except as set forth in Section 5.04 and this Article
VII, this Agreement shall forthwith become void with respect to the ALS
Financing Shares and there shall be no liability on the part of any party to
this Agreement with respect to the ALS Financing Shares; provided,
40
however, that nothing in this Agreement shall relieve any party hereto from
liability under this Agreement in respect of the Non-ALSF Shares or for any
willful breach of the representations and warranties contained in this Agreement
or any failure to perform their respective obligations under this Agreement with
respect to the ALS Financing Shares.
Section 7.04. Extension; Waiver. Each party hereto may (a) extend
the time for the performance of any of the obligations or other acts of the
other party (it being understood that time is "of the essence" with respect to
the Extended Outside Date), (b) waive any inaccuracies in the representations
and warranties of the other party contained in this Agreement or in any
certificate, instrument, schedule or other document delivered pursuant to this
Agreement or (c) waive compliance with any of the agreements or conditions
contained in this Agreement for the benefit of such party. Any such extension or
waiver shall be valid only if set forth in an instrument in writing signed by
the party granting such extension or waiver.
Section 7.05. Acquiror's Default. If Acquiror fails to purchase the
Non-ALSF Shares on the First Closing Date or the ASL Financing Shares on the
Second Closing Date, and Seller has performed or is ready, willing and able to
convey such Shares hereunder, in each case in accordance with the terms hereof,
then Seller shall have the right to treat this Agreement as having been breached
by Acquiror, in which event Seller's sole and exclusive remedies on account of
such breach shall be (i) the right to terminate this Agreement by written notice
to Acquiror or Acquiror's attorney and to be reimbursed for all reasonable and
documented out-of-pocket costs and expenses incurred by Seller and its
Affiliates (including the Companies) or (ii) the right to xxx Acquiror for
damages and/or specific performance of this Agreement. Upon such termination
prior to the First Closing, Acquiror shall forfeit all rights and claims
pursuant to this Agreement with respect to the Shares. Upon such termination on
or following the First Closing, Acquiror shall forfeit all rights and claims
pursuant to this Agreement with respect to the ALS Financing Shares. In the
event of such termination, Acquiror shall (i) immediately return to Seller or
destroy all due diligence materials, reports and studies delivered to Acquiror
by Seller with respect to any Companies or Real Property Assets not acquired by
Acquiror pursuant to this Agreement (without Acquiror retaining copies thereof)
and copies of any reports or studies conducted by or at the direction of
Acquiror and in its possession and (ii) if such termination occurs prior to the
First Closing Date, promptly pay to Seller the Due Diligence Deposit, less any
Transaction Costs incurred by Acquiror in connection with the Due Diligence
Review.
Section 7.06. Seller's Default. If Seller fails to convey the
Non-ALSF Shares on the First Closing Date or the ASL Financing Shares on the
Second Closing Date and Acquiror is ready, willing and able to purchase such
Shares hereunder, in each case in accordance with the terms hereof, then
Acquiror shall have the right to treat this Agreement as having been breached by
Seller, in which event, Acquiror's sole and exclusive remedies on account of
such breach shall be (i) the right to terminate this Agreement by written notice
to Seller or Seller's attorney and to be reimbursed for all reasonable and
documented out-of-pocket costs and expenses incurred by Acquiror and its
Affiliates or (ii) the right to xxx Seller for damages and/or specific
performance of this Agreement.
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ARTICLE VIII
INDEMNIFICATION
Section 8.01. Indemnification by Seller. (a) Subject to the Tax
Matters Agreement, and Sections 8.01(b), 8.03, 8.04, 8.06, 8.07 and 10.01,
Seller shall indemnify, defend and hold harmless Acquiror and its Affiliates
(including, without limitation, each of the Companies) and Representatives
(collectively, the "Acquiror Indemnified Parties") against, and reimburse each
Acquiror Indemnified Party for, all Losses that such Acquiror Indemnified Party
may at any time suffer or incur, or become subject to, as a result of or in
connection with:
(i) any inaccuracy or breach of any representation or warranty
made by Seller in this Agreement or in the certificate referred to in
Section 6.02(a)(iii) (other than any inaccuracy of any representation or
warranty made by Seller in Section 3.19, which is covered by the Tax
Matters Agreement);
(ii) any failure by Seller to perform or comply with any of
its covenants or agreements contained in this Agreement;
(iii) any Environmental Claim relating to Acquired Real
Property Assets or the Acquired Personal Property Assets arising out of
actions, omissions, events or facts occurring on or prior to the
applicable Closing Date or to the treatment, storage, recycling or Release
at any property to which Hazardous Material was transported from any
Acquired Real Property Asset on or prior to applicable Closing Date,
including the matters described in Schedule 3.11;
(iv) any Third Party Claim arising out of actions, omissions,
events or facts occurring on or prior to applicable Closing Date relating
to the assets (including the Acquired Personal Property Assets),
properties (including the Acquired Real Property Assets) or business of
Seller and its Affiliates (including the Companies), including the Actions
and matters described in Schedules 3.08 and 3.24(e);
(v) any Excluded Assets and any Excluded Liabilities; and
(vi) any fees and expenses payable to attorneys, consultants
or accountants retained or hired by or on behalf of Seller, the Companies
and their respective Affiliates and Representatives in connection with the
transactions contemplated by the Transaction Agreements.
(b) Notwithstanding any other provision to the contrary, Seller
shall not be required to indemnify, defend or hold harmless any Acquiror
Indemnified Party against, or reimburse any Acquiror Indemnified Party for:
(i) any Losses pursuant to Section 8.01(a)(i) (other than
Losses arising solely as a result of or in connection with the inaccuracy
or breach of any representation or warranty made by Seller in Sections
3.01, 3.02, 3.03 or 3.21, as to which this Section 8.01(b) shall not
apply) with respect to any claim for inaccuracy or breach of
representation if (1) any officer of Acquiror obtained actual knowledge on
or before the
42
date of the Original Stock Purchase Agreement that such representation was
not true and correct or (2) any officer of Acquiror obtained actual
knowledge (whether during due diligence, by notice from Seller, or
otherwise) that such representation was not true and correct after the
date of the Original Stock Purchase Agreement but before the applicable
Closing Date, unless on or before the applicable Closing Date (x) Acquiror
shall have notified Seller in writing, providing reasonable detail, of
such inaccuracy or breach and (y) Seller shall have agreed prior to the
applicable Closing that Acquiror shall not be obligated to close the
transactions contemplated by this Agreement (it being understood that if
Acquiror thereafter elects not to so close, this Agreement shall
automatically terminate and no party hereto shall have the right to xxx
any other party hereto or any Releasee for damages and/or specific
performance of this Agreement); provided, that Seller shall have the
burden of proof with respect to clauses (1) and (2) above; or
(ii) any Losses pursuant to Section 8.01(a)(i) and (iv) with
respect to any claim (or series of related claims arising from the same
underlying facts, events or circumstances), (A) unless such claim (or
series of related claims arising from the same underlying facts, events or
circumstances) involves Losses in excess of $25,000 and (B) until the
aggregate amount of all Losses of the Acquiror Indemnified Parties exceeds
$650,000, after which Seller shall be liable for all Losses of the
Acquiror Indemnified Parties, including such $650,000; provided, however,
that this clause (ii) shall not apply to any Third Party Claim relating to
or arising out of the operation of the senior living business conducted by
Seller and its Affiliates and including, prior to the applicable Closing
Date, by the Companies (the "Seller Operations").
(c) The cumulative aggregate indemnification obligation of Seller
under Sections 8.01(a)(i), 8.01(a)(iii) and 8.01(a)(iv) shall in no event exceed
$25,000,000 in the aggregate; provided, however, that the foregoing limitation
shall not apply to any Third Party Claim relating to or arising out of the
Seller Operations.
(d) For purposes of this Article VIII and for purposes of
determining whether Acquiror Indemnified Parties are entitled to indemnification
from Seller pursuant to Sections 8.01(a)(i) and 8.01(b) hereof, any breach of or
inaccuracy in any representation or warranty (other than any representation or
warranty contained in Sections 3.06, 3.07 and 3.18 and the first sentence of
Section 3.14, as to which this Section 8.01(d) shall not apply) of Seller shall
be determined without regard to any materiality qualifications set forth in such
representation or warranty, and all references to the terms "material,"
"materially," "materiality," "Material Adverse Effect" or any similar terms
shall be ignored for purposes of determining whether such representation or
warranty was true and correct when made or deemed made.
Section 8.02. Indemnification by Acquiror. (a) Subject to Sections
8.02(b), 8.03, 8.04, 8.06, 8.07 and 10.01, Acquiror shall indemnify, defend and
hold harmless Seller and their respective Affiliates (but not any of the
Companies) and Representatives (collectively, the "Seller Indemnified Parties")
against, and reimburse each Seller Indemnified Party for, all Losses that such
Seller Indemnified Party may at any time suffer or incur, or become subject to,
as a result of or in connection with:
43
(i) any inaccuracy of any representation or warranty made by
Acquiror in this Agreement or in the certificate referred to in Section
6.01(a)(iii);
(ii) any failure by Acquiror to perform or comply with any of
its covenants or agreements contained in this Agreement; and
(iii) any Third Party Claim to the extent relating to or
arising out of any injury or death of any person or any property damage
inflicted by any Representatives of Acquiror during any entry on or
inspection of the Real Property Assets, including any invasive testing,
performed by or on behalf of Acquiror pursuant to Section 2.08(c), but
excluding any claims arising from (i) property damage arising from
discovery of an existing condition during such inspection or testing and
(ii) the presence of groundwater monitoring xxxxx, which at Seller's
option, Acquiror will either cause to be filled and abandoned in
accordance with applicable Law or left intact and functional.
(b) Notwithstanding any other provision to the contrary, Acquiror
shall not be required to indemnify, defend or hold harmless any Seller
Indemnified Party against, or reimburse any Seller Indemnified Party for, any
Losses pursuant to Section 8.02(a)(i) (other than Losses arising out of,
resulting from, relating to or in connection with the inaccuracy or breach of
any representation or warranty made by Seller in Section 4.01, 4.02, or 4.08, as
to which this Section 8.02(b) shall not apply) (i) with respect to any claim (or
series of related claims arising from the same underlying facts, events or
circumstances), unless such claim (or series of related claims arising from the
same underlying facts, events or circumstances) involves Losses in excess of
$25,000 and (ii) until the aggregate amount of all Losses of the Seller
Indemnified Parties exceeds $650,000, after which Acquiror shall be liable for
all Losses of the Seller Indemnified Parties, including such $650,000. The
cumulative aggregate indemnification obligation of the Acquiror under Sections
8.02(a)(i) and 8.02(a)(iii) shall in no event exceed $25,000,000 in the
aggregate.
(c) For purposes of this Article VIII and for purposes of
determining whether Seller Indemnified Parties are entitled to indemnification
from Acquiror pursuant to Sections 8.02(a)(i) and 8.02(b), any breach of or
inaccuracy in any representation or warranty (other than any representation or
warranty contained in the last sentence of Section 4.07 as to which this Section
8.02(c) shall not apply) of Acquiror shall be determined without regard to any
materiality qualifications set forth in such representation or warranty, and all
references to the terms "material," "materially," "materiality," or any similar
terms shall be ignored for purposes of determining whether such representation
or warranty was true and correct when made or deemed made.
Section 8.03. Notification of Third Party Claims. (a) A Person that
may be entitled to be indemnified under this Agreement (the "Indemnified
Party"), shall promptly notify the party or parties liable for such
indemnification (the "Indemnifying Party") in writing of any pending or
threatened claim or demand by a third party that the Indemnified Party has
determined has given or could reasonably give rise to a right of indemnification
under this Agreement (including a pending or threatened claim or demand asserted
by a third party against the Indemnified Party, such claim being a "Third Party
Claim"), describing in reasonable detail the facts and circumstances with
respect to the subject matter of such claim or demand; provided,
44
however, that the failure to provide such notice shall not release the
Indemnifying Party from any of its obligations under this Article VIII except to
the extent the Indemnifying Party is actually prejudiced by such failure, it
being understood that (i) notices for claims in respect of an inaccuracy or
breach of a representation or warranty must be delivered prior to the expiration
of any applicable survival period specified in Section 10.01 for such
representation or warranty and (ii) notices for claims in respect of a breach or
failure to perform any covenant or agreement must be delivered prior to the date
that is six months after the last day of the effective period of such covenant
or agreement; provided, further, that if, prior to such applicable date, a party
hereto shall have notified the other party hereto in writing of a claim for
indemnification under this Article VIII (whether or not formal legal action
shall have been commenced based upon such claim), such claim shall continue to
be subject to indemnification in accordance with this Article VIII
notwithstanding the passing of such applicable date.
(b) Upon receipt of a notice of a claim for indemnity from an
Indemnified Party pursuant to Section 8.03(a), and subject to Section 8.03(e),
the Indemnifying Party may, by notice to the Indemnified Party delivered within
ten (10) Business Days of the receipt of notice of such claim, assume the
defense and control of any Third Party Claim but shall allow the Indemnified
Party a reasonable opportunity to participate in the defense of such Third Party
Claim with its own counsel and at its own expense. The Indemnified Party may
take any actions reasonably necessary to defend such Third Party Claim prior to
the time that it receives a notice from the Indemnifying Party as contemplated
by the preceding sentence. The Indemnifying Party shall select counsel,
contractors and consultants of recognized standing and competence. To the extent
the principal remedy sought in any Third Party Claim is equitable relief, the
Indemnifying Party shall consult with the Indemnified Party as to the selection
of counsel to defend such Third Party Claim. Seller or Acquiror, as the case may
be, shall, and shall cause each of its Affiliates and Representatives to,
cooperate in good faith with the Indemnifying Party in the defense of any Third
Party Claim. The Indemnifying Party shall not be authorized to consent to a
settlement of, or the entry of any judgment arising from, any Third Party Claim,
without the consent of any Indemnified Party, provided that the Indemnified
Party shall not withhold its consent if such settlement or judgment involves
solely the payment of money without any finding or admission of any violation of
Law or admission of any wrongdoing and the Indemnifying Party shall (i) pay or
cause to be paid all amounts arising out of such settlement or judgment
concurrently with the effectiveness of such settlement and (ii) obtain, as a
condition of any settlement or judgment, a complete and unconditional release of
each relevant Indemnified Party from any and all liability in respect of such
Third Party Claim.
(c) If any Indemnifying Party receives a notice of a claim for
indemnity from an Indemnified Party pursuant to Section 8.03(a) that does not
involve a Third Party Claim, the Indemnifying Party shall notify the Indemnified
Party within thirty (30) days following its receipt of such notice, whether the
Indemnifying Party disputes its liability to the Indemnified Party under this
Article VIII. If the Indemnifying Party does not so notify the Indemnified Party
that it disputes such liability, the claim specified by the Indemnified Party in
such notice shall be conclusively deemed to be a liability of the Indemnifying
Party under this Article VIII, and the Indemnifying Party shall pay, subject to
the limitations set forth in Section 8.01(b), if applicable, the amount of such
liability to the Indemnified Party on demand or, in the case of any notice in
which the amount of the claim (or any portion of the claim) is estimated, on
such later date when the amount of such claim (or such portion of such claim)
becomes finally determined. If the
45
Indemnifying Party has timely disputed its liability with respect to such claim
as provided above, the Indemnifying Party and the Indemnified Party shall
resolve such dispute in accordance with Section 10.11.
(d) If an Indemnified Party determines in good faith that it is
reasonably likely that a Third Party Claim would materially adversely affect it
other than as a result of monetary damages for which it would be entitled to
indemnification under this Agreement (including with respect to remediation of
any environmental matters), the Indemnified Party may, by notice to the
Indemnifying Party, assume the exclusive right to defend, compromise or settle
such Third Party Claim with its own counsel and at its own expense, provided,
however, that the Indemnifying Party will not be bound by any determination of a
Third Party Claim so defended or any compromise or settlement effected without
its written consent.
(e) Notwithstanding the foregoing, no Indemnifying Party shall have
any liability under this Article VIII for any Losses arising out of or relating
to any Third Party Claim that is settled or compromised by an Indemnified Party
without the consent of such Indemnifying Party (which consent shall not be
unreasonably withheld or delayed).
Section 8.04. Payment; Interest on Payment. In the event an Action
for indemnification under this Article VIII shall have been finally determined,
the amount of such final determination shall be paid to the Indemnified Party,
on demand in immediately available funds. An Action and the liability for and
amount of Losses, shall be deemed to be "finally determined" for purposes of
this Article VIII when the parties to such Action have so determined by mutual
agreement or, if disputed, when a final non-appealable Governmental Order with
respect thereto shall have been entered. Any amounts not paid when due pursuant
to this Article VIII shall bear interest from the date thereof until the date
paid at a rate equal to the rate publicly announced from time to time by
Citibank, N.A. as its prime or base rate. Nothing in this Section 8.04 shall
operate to bar an Indemnified Party from seeking and (where appropriate)
obtaining interest on any claim to the extent ordered by a court adjudicating
any Action brought by the Indemnified Party against an Indemnifying Party.
Section 8.05. Exclusive Remedies. Each of Seller and Acquiror
acknowledges and agrees that, (a) prior to the First Closing or the Second
Closing, as applicable, other than in the case of actual fraud by the other, the
sole and exclusive remedy of such party for any inaccuracy of any representation
or warranty contained in this Agreement to be made at such Closing shall be
refusal to close the purchase and sale of Shares to be acquired at such Closing
and (b) following the First Closing or the Second Closing, as applicable, other
than in the case of actual fraud by the other or any of its respective
Affiliates or Representatives, the indemnification provisions of this Article
VIII and, with respect to Taxes, the Tax Matters Agreement, shall be the sole
and exclusive remedies for any inaccuracy of the representations or warranties
contained in this Agreement to be made at such Closing and for any failure to
perform or comply with any covenants or agreements that, by their terms, were to
have been performed or complied with prior to such Closing. Notwithstanding
anything in this Agreement to the contrary, no Indemnifying Party shall have any
liability under this Agreement for Losses related to Taxes, which Losses shall
be governed exclusively by the Tax Matters Agreement.
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Section 8.06. Additional Indemnification Provisions. (a) Seller and
Acquiror agree, for themselves and on behalf of their respective Affiliates and
Representatives, that, with respect to each indemnification obligation in this
Agreement, (i) all Losses shall be net of any Eligible Insurance Proceeds (as
set forth in subsection (e) below) and (ii) in no event shall the Indemnifying
Party have liability to the Indemnified Party for any punitive, incidental,
special, indirect or consequential damages, except to the extent that the
Indemnified Party pays punitive, incidental, special, indirect or consequential
damages to a third party in respect of a Third Party Claim.
(b) Any amount payable by an Indemnifying Party pursuant to this
Article VIII shall be paid promptly and payment shall not be delayed pending any
determination of Eligible Insurance Proceeds or Retained Insurance Proceeds. In
any case where an Indemnified Party recovers from a third Person, any amount in
respect of any Loss for which such Indemnified Party has actually been
reimbursed by an Indemnifying Party pursuant to this Article VIII (other than
Retained Insurance Proceeds), such Indemnified Party shall promptly pay over to
the Indemnifying Party the amount so recovered (after deducting therefrom the
amount of expenses incurred by it in procuring such recovery), but not in excess
of the sum of (i) any amount previously paid by the Indemnifying Party to or on
behalf of the Indemnified Party in respect of such Loss and (ii) any amount
expended by the Indemnifying Party in pursuing or defending any claim arising
out of such matter.
(c) Seller and Acquiror shall treat any indemnification payment made
under this Agreement as an adjustment to the Final Purchase Price.
(d) All payments required to be made by an Indemnifying Party under
this Article VIII to any Indemnified Party shall be without set-off,
counterclaim or deduction of any kind.
(e) If any portion of Losses to be reimbursed by the Indemnifying
Party may be covered, in whole or in part, by third-party insurance coverage
(each, an "Insurance Policy"), the Indemnified Party shall promptly give notice
thereof to the Indemnifying Party (a "Notice of Insurance"). If the Indemnifying
Party so requests within 30 days after receipt of a Notice of Insurance, the
Indemnified Party shall use its commercially reasonable efforts to collect the
maximum amount of insurance proceeds thereunder, in which event (i) all such
proceeds actually received, net of costs reasonably incurred by the Indemnified
Party in seeking such collection, shall be considered "Eligible Insurance
Proceeds" and (ii) the Indemnifying Party shall reimburse the Indemnified Party
for all reasonable costs incurred in connection with such collection and the
amount of any prospective or retroactive increase in premiums actually paid by
the Indemnified Party under the Insurance Policy (as such increased premiums are
incurred) directly related to the payment of Eligible Insurance Proceeds for
such Loss for three years following the next renewal of such Insurance Policy.
If the Indemnifying Party does not request that the Indemnified Party seek
coverage of any portion of such Loss under the Insurance Policy within 30 days
after receipt of a Notice of Insurance, (i) any proceeds that the Indemnified
Party may receive thereunder shall be considered "Retained Insurance Proceeds"
and (ii) the Indemnifying Party shall have no liability for any premium
increases thereunder relating to the collection of such Retained Insurance
Proceeds.
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(f) If the indemnification provided for in Subsections 8.01(a)(i)
and 8.02(a)(i) with respect to Losses relating to any inaccuracy of any
representation or warranty contained in Sections 3.26 and 4.09 is unavailable or
insufficient to hold harmless an Indemnified Party, then each Indemnifying Party
shall contribute to the amount paid or payable by such Indemnified Party as a
result of such Losses (i) in such proportion as is appropriate to reflect the
relative benefits received by the Acquiror Indemnified Parties, on the one hand,
and the Seller Indemnified Parties, on the other hand, from the sale of the
shares of common stock of Acquiror in the Private Placement and the use of the
proceeds of the Private Placement or (ii) if the allocation provided by clause
(i) above is not permitted by applicable Law, in such proportion as is
appropriate to reflect not only the relative benefits referred to in clause (i)
above but also the relative fault of Acquiror Indemnified Parties, on the one
hand, and the Seller Indemnified Parties, on the other hand, in connection with
the statements or omissions which resulted in such Losses as well as any other
relevant equitable considerations. The relative fault shall be determined by
reference to, among other things, whether the untrue statement of a material
fact or the omission to state a material fact relates to information supplied by
the Companies, Seller or Acquiror and the parties' relative intent, knowledge,
access to information and opportunity to correct or prevent such untrue
statement or omission.
(g) Notwithstanding anything to the contrary in this Article VIII,
to the extent that the Indemnified Party or an Affiliate realizes an actual Tax
benefit as a result of the event giving rise to the indemnity payment hereunder
(such as, by way of example but not limitation, a Tax savings resulting from the
payment of an indemnified amount that is deductible by the Indemnified Party, in
a case in which the indemnity payment itself does not give rise to gross income
for Tax purposes), the Indemnified Party shall promptly rebate to the
Indemnifying Party the amount of such Tax benefit.
Section 8.07. Mitigation of Losses. Each of the parties agrees to
take all reasonable steps to mitigate their respective Losses upon and after
becoming aware of any event or condition which would reasonably be expected to
give rise to any Losses that are indemnifiable hereunder. The Indemnifying Party
shall not be liable for Losses hereunder to the extent that such Losses resulted
solely from the Indemnified Party's failure to mitigate its Losses in accordance
with the preceding sentence.
Section 8.08. No Recourse to Controlling Persons of Seller. Each of
Acquiror and its respective existing and future Affiliates (collectively, the
"Releasing Parties") does hereby absolutely release and discharge, effective as
of each Closing, each of (i) FEBC-ALT Investors LLC, Emeritus Corporation, NW
Select LLC, their respective existing and future Affiliates (other than Seller
and its Subsidiaries) and their respective existing and future officers and
directors and (ii) the existing and future officers and directors of Seller and
its Subsidiaries (collectively, the "Releasees") from any and all Losses which
any of the Releasing Parties ever had or now has or have or hereafter can, shall
or may have, for, upon or by reason of any matter, cause or thing whatsoever to
the extent arising from, in connection with, related to or as a result of (a)
the matters addressed in this Agreement with respect to such Closing and the
other Transaction Agreements applicable to such Closing, (b) the Private
Placement and (c) any action or inaction of any of the Releasees relating to or
associated with the foregoing, in each case, relating to any period from the
beginning of the world to the end of time, regardless of when brought; provided,
however, such release and discharge shall not release or discharge (i) any
48
Releasee from any Losses to the extent arising from, in connection with, related
to or as a result of any fraud, gross negligence or willful misconduct by or on
behalf such Releasee and (ii) the Selling Parties and their respective
successors and assigns from any of their respective obligations under the
Transaction Agreements, including the obligations of Seller under this Article
VIII.
ARTICLE IX
CASUALTY AND CONDEMNATION OF THE REAL PROPERTY
Section 9.01. Casualty. (a) If, on or prior to the Closing with
respect to a Real Property Asset, all or a "material part" (as defined below) of
such Real Property Asset shall be damaged or destroyed by fire or other casualty
(a "casualty event"), then, in any such event, Acquiror may, at its option,
either (i) elect to exclude such Real Property Asset from the transactions
contemplated by this Agreement, whereupon such Real Property Asset shall be
deemed to be an Excluded Real Property Asset, the Non-ALSF Purchase Price and
the ALSF Purchase Price, as applicable, shall be reduced by the amount of net
insurance proceeds actually received, or the amount of insurance proceeds Seller
and Acquiror reasonably estimate should be received with respect to such
Excluded Real Property Asset and Seller and Acquiror shall be released of all
obligations and liabilities of whatsoever nature in connection with such
Excluded Real Property Asset (other than Seller's obligations to cause such
asset to be transferred or distributed in accordance with Section 5.08 and
Seller's indemnification obligations hereunder in respect of Excluded Assets),
or (ii) proceed to close the transactions contemplated by this Agreement, in
which event all of the provisions of Subsections 9.01(b)(i) and 9.01(b)(ii)
below shall apply. If a Real Property Asset is elected to be treated as an
Excluded Real Property Asset pursuant to clause (i) of this Section 9.01(a),
then Seller shall use all reasonable commercial efforts to cause such Excluded
Real Property Asset to be transferred from the applicable Company prior to the
applicable Closing Date. If Acquiror shall fail to make an election pursuant to
this Section 9.01(a) prior to the earlier of (A) thirty (30) days after
Acquiror's receipt of written notice of the applicable casualty event from
Seller and (B) the applicable Closing Date, then Acquiror shall be deemed to
have made an election pursuant to clause (ii) of this Section 9.01(a).
(b) If, on or prior to the Closing with respect to a Real Property
Asset, less than a material part of such Real Property Asset shall be damaged or
destroyed by a casualty event, Acquiror shall nevertheless consummate the
transactions contemplated herein pursuant to all the terms and conditions of
this Agreement (without any adjustment to the Non-ALSF Purchase Price and the
ALSF Purchase Price, as applicable, except as otherwise set forth herein) with
respect to such damaged Real Property Asset, subject to the following: (i)
Seller shall not (x) adjust and settle any insurance claims with respect to such
damaged Real Property Asset, or (y) enter into any construction or other
contract for the repair or restoration of such damaged Real Property Asset, in
each case, without Acquiror's prior written consent (except no such consent
shall be necessary to repair or restore any emergency or hazardous condition at
such damaged Real Property Asset), which consent shall not be unreasonably
withheld or delayed, and (ii) at the applicable Closing, Seller shall (1) pay
over to Acquiror the amount of any insurance proceeds, to the extent collected
by Seller in connection with such casualty event, less the amount of the actual
and reasonable unreimbursed expenses incurred by Seller in connection
49
with collecting such proceeds and making any repairs to the applicable Real
Property Asset occasioned by such casualty event pursuant to any contract
(provided that such contract was reasonably approved by Acquiror as required by
this Section) and (2) assign to Acquiror in form reasonably satisfactory to
Acquiror all of Seller's right, title and interest in and to any insurance
proceeds that are uncollected at the time of the applicable Closing and that may
be paid in respect of such casualty event. Seller shall reasonably cooperate
with Acquiror in the collection of such proceeds, which obligation shall survive
the applicable Closing. To the extent that insurance proceeds are paid over to
Acquiror with respect to any damage to an Acquired Real Property Asset pursuant
to clause (ii) of this Section 9.01(b), Acquiror shall use reasonable commercial
efforts to cause such damage to be repaired; provided, however, that the
foregoing shall not require Acquiror to expend any funds in excess of such
insurance proceeds actually received by Acquiror in respect of such damage
pursuant to clause (ii) of this Section 9.01(b).
For the purpose of this Section, the phrase a "material part" of a
Real Property Asset shall mean a portion of such Real Property Asset the cost of
repair or restoration of such portion is estimated by a reputable contractor
selected by Seller and reasonably satisfactory to Acquiror, to be in excess of
five percent (5%) of the Allocable Portion relating to such Real Property Asset.
(c) If, prior to a Closing with respect to a Real Property Asset,
such Real Property Asset or any portion thereof shall be damaged or destroyed by
a casualty event, Seller shall promptly give Acquiror written notice of such
event, including information in reasonable detail regarding the extent of the
damage to such Real Property Asset or portion thereof.
Section 9.02. Condemnation Pending Closing. If, prior to a Closing
with respect to a Real Property Asset, condemnation or eminent domain
proceedings shall be commenced by any competent public authority against such
Real Property Asset or any portion thereof, Seller shall promptly give Acquiror
written notice thereof. After notice of the commencement of any such proceedings
(from Seller or otherwise) and in the event that the taking of such Real
Property Asset pursuant to such proceedings would constitute a "Material Taking"
(hereinafter defined), Acquiror shall have the right (i) to accept title to such
Real Property Asset subject to such proceedings, whereupon any award payable to
Seller shall be paid to Acquiror and Seller shall deliver to Acquiror at the
applicable Closing all assignments and other documents reasonably requested by
Acquiror to vest such award in Acquiror, or (ii) elect to exclude such Real
Property Asset from the transactions contemplated by this Agreement, whereupon
such Real Property Asset shall be deemed to be an Excluded Real Property Asset,
the Non-ALSF Purchase Price and the ALSF Purchase Price, as applicable, shall be
reduced by the amount of net condemnation awards actually received, or the
amount of condemnation awards Seller and Acquiror reasonably estimate should be
received with respect to such Excluded Real Property Asset and Seller and
Acquiror shall be released of all obligations and liabilities of whatsoever
nature in connection with such Excluded Real Property Asset (other than Seller's
obligations to cause such asset to be transferred or distributed in accordance
with Section 5.08 and Seller's indemnification obligations hereunder in respect
of Excluded Assets). For the purposes of Section 9.01(a), a taking shall be
deemed to be a "Material Taking" with respect to any Real Property Asset if such
taking materially and adversely affects access to such Real Property Asset, or
leaves a remaining balance of such Real Property Asset which may not be
economically operated for the purpose for which the Real Property Asset was
operated prior to
50
such taking, or if in the reasonable estimation of an appraiser selected by
Seller, subject to Acquiror's reasonable approval, the taking would result in a
claim for condemnation proceeds equal to or in excess of five percent (5%) of
the Allocable Portion of the Non-ALSF Purchase Price and the ALSF Purchase
Price, as applicable. If a Real Property Asset is elected to be treated as an
Excluded Real Property Asset pursuant to clause (ii) of Section 9.01(a), then
Seller shall use all reasonable commercial efforts to cause such Excluded Real
Property Asset to be transferred from the Company prior to the applicable
Closing Date. If Acquiror shall fail to make an election pursuant to this
Section 9.02 prior to the earlier of (A) thirty (30) days after Acquiror's
receipt of written notice of the applicable proceedings from Seller and (B) the
applicable Closing Date or if a taking of any Real Property Asset in any
proceedings would not constitute a Material Taking, then Acquiror shall be
deemed to have made an election pursuant to clause (i) of this Section 9.02.
ARTICLE X
GENERAL PROVISIONS
Section 10.01. Survival. Notwithstanding the First Closing or the
ALSF Closing hereunder, (x) the representations and warranties of Seller and
Acquiror contained in or made pursuant to this Agreement or in any certificate
furnished pursuant to this Agreement shall survive in full force and effect
until the date that is eighteen (18) months after the applicable Closing Date on
which such representations and warranties were made, at which time such
representations and warranties shall terminate and expire (and no claims shall
be made for indemnification under Sections 8.01 or 8.02 after such termination
and expiration); provided, however, that (i) the representations and warranties
made in the sixth sentence of Section 3.03 shall survive the applicable Closing
indefinitely, (ii) the representations and warranties made in Sections 3.01,
3.02, 3.03 (other than the sixth sentence of Section 3.03), 3.13, 3.19, 3.20,
4.01 and 4.02 shall survive until the expiration of the applicable statute of
limitations and (y) the covenants and agreements of Seller and Acquiror
contained in or made pursuant to this Agreement shall survive for the period
provided in such covenants and agreements, if any, or until fully performed.
Section 10.02. Expenses; Transaction Costs. Except as may be
otherwise specified in this Agreement (including the $1,000,000 limitations on
certain Transaction Costs as provided in Section 5.05(c)), all Transaction Costs
shall be paid by Seller, except that all cost and expenses incurred by the
Companies and payable to a third party (x) in connection with obtaining any
third-party consent or approval required to be obtained as a condition to any
party's obligations under this Agreement or (y) consisting of legal, accounting,
consulting, actuarial or other professional fees or disbursements, shall be
reimbursed by Seller to the Companies, as applicable, prior to the applicable
Closing. No later than three (3) Business Days prior to the applicable Closing
Date, Seller shall prepare and deliver to Acquiror a written notice setting
forth the amount of Transaction Costs to be included in the Non-ALSF Purchase
Price and the ALSF Purchase Price, as applicable, pursuant to Section 2.03,
which amount shall increase the Allocable Portions, and be added to the Lease
Basis (as defined in the form of Property Leases) under the Property Leases in
the manner and amounts designated by Acquiror; provided, however, that the
aggregate amount to be included in the Non-ALSF Purchase Price and the ALSF
Purchase Price, and added to the Allocable Portions and Lease Basis under this
51
Section 10.02 shall in no event exceed $6,325,000 (the "Maximum Capitalized
Amount"). Notwithstanding anything in this Agreement to the contrary, all
out-of-pocket costs and expenses incurred by Seller and any of the Companies
relating to Amendment No.1 (the "Amendment Costs") shall be paid by Acquiror in
immediately available funds to the Seller at each Closing. No Amendment Costs
are deemed to be included in the Non-ALSF Purchase Price, the ALSF Purchase
Price or the Final Purchase Price.
Section 10.03. Notices. All notices, requests, claims, demands and
other communications required or permitted under this Agreement shall be in
writing and shall be given or made (and shall be deemed to have been duly given
or made upon receipt) by delivery in person, by overnight courier service, by
facsimile with receipt confirmed (followed by delivery of an original via
overnight courier service) or by registered or certified mail (postage prepaid,
return receipt requested) to the respective parties at the following addresses
(or at such other address for a party as shall be specified in a notice given in
accordance with this Section 10.03):
(i) if to Seller:
Alterra HealthCare Corporation
c/o Fortress Investment Group LLC
1251 Avenue of the Xxxxxxxx, 00xx Xxxxx
Xxx Xxxx, Xxx Xxxx 00000
Attention: Xx. Xxxxxx X. Xxxxxxx
Facsimile: (000) 000-0000
with a copy to:
Alterra Healthcare Corporation
0000 X. Xxxxxxxxxx Xxxxxx, Xxxxx 0000
Xxxxxxxxx, XX 00000
Attention: Xx. Xxxx X. Xxxxxxxxx
Facsimile: (000) 000-0000
and
Xxxxxxx Xxxx Slate Xxxxxxx & Xxxx LLP
Xxxx Xxxxx Xxxxxx
Xxx Xxxx, Xxx Xxxx 00000
Attention: Xxxxxx X. Coco, Esq.
Facsimile: (000) 000-0000
and
Xxxxxx & Xxxxxx LLP
000 Xxxxxxxxx Xxxxxx
0000 Xxxxxxxxxxxxx Xxxxx
Xxxxxxx, XX 00000
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Attention: Xxxx X. Xxxx, Esq.
Facsimile: (000) 000-0000
(ii) if to Acquiror:
Provident Senior Living Trust
000 Xxxxxxx Xxxx Xxxx, Xxxxx 0000
Xxxxxxxxx, XX 00000
Attention: Xxxxxx X. Xxxxxxxx, Xx.
Xxxx X. Xxxxx
Facsimile: (000) 000-0000
with a copy to:
Sidley Xxxxxx Xxxxx & Xxxx LLP
000 Xxxxxxx Xxxxxx
Xxx Xxxx, Xxx Xxxx 00000
Attention: Xxxxxx X. Xxxxx, Esq.
Facsimile: (000) 000-0000
Section 10.04. Public Announcements. Except as may be required by
Law or Applicable Securities Rules, neither of the parties to this Agreement,
nor any of their respective Affiliates or Representatives, shall make any public
announcements in respect of this Agreement or the transactions contemplated by
this Agreement without the prior consent of the other parties, and prior to any
announcement the parties shall cooperate as to the timing and contents of any
such announcement. Prior to each Closing, neither of the parties to this
Agreement, nor any of their respective Affiliates or Representatives, shall make
any disclosure concerning plans or intentions relating to the customers, agents
or employees of, or other Persons with significant business relationships with,
the Companies without first obtaining the prior written approval of the other
party, which approval will not be unreasonably withheld. Notwithstanding the
foregoing, Seller acknowledges that Acquiror is a newly-formed real estate
investment trust which is in the process of preparing to implement the Private
Placement and, subject to Sections 5.04(a), 5.11 and 5.12, may disclose the
transactions contemplated hereunder in offering materials or governmental
filings in connection with any securities offerings or as required under
Applicable Securities Rules ("REIT Disclosure"), and any such REIT Disclosure
shall be permitted to be made by Acquiror and its Representatives regardless of
the provisions of this Section 10.04.
Section 10.05. Severability. If any term or other provision of this
Agreement is invalid, illegal or incapable of being enforced under any Law or as
a matter of public policy, all other conditions and provisions of this Agreement
shall nevertheless remain in full force and effect so long as the economic or
legal substance of the transactions contemplated by this Agreement is not
affected in any manner materially adverse to any party. Upon such determination
that any term or other provision is invalid, illegal or incapable of being
enforced, the parties to this Agreement shall negotiate in good faith to modify
this Agreement so as to effect the original intent of the parties as closely as
possible in a mutually acceptable manner in
53
order that the transactions contemplated by this Agreement be consummated as
originally contemplated to the greatest extent possible.
Section 10.06. Entire Agreement. Except as otherwise expressly
provided in the this Agreement, or as otherwise expressly agreed in writing by
the parties, this Agreement constitutes the entire agreement of Seller and
Acquiror and supersedes all prior agreements and undertakings, both written and
oral, between or on behalf of Seller and/or its Affiliates, on the one hand, and
Acquiror and/or its Affiliates, on the other hand, with respect to the subject
matter of this Agreement.
Section 10.07. Assignment. This Agreement shall not be assigned by
any party hereto, except that Acquiror may assign any or all of its rights (but
not its obligations) hereunder to one or more Affiliates of Acquiror designated
in a written notice delivered by Acquiror to Seller at least three (3) Business
Days prior to the applicable Closing; provided, however, that no such assignment
by Acquiror shall (x) release Acquiror from any liability or obligation under
this Agreement or (y) be permissible if it could reasonably be expected to
delay, hinder or jeopardize the consummation of any transactions contemplated by
this Agreement. This Agreement shall be binding upon, shall inure to the benefit
of, and shall be enforceable by Seller and Acquiror and their permitted
successors and assigns.
Section 10.08. No Third-Party Beneficiaries. Except as provided in
Article VIII with respect to Seller Indemnified Parties, Acquiror Indemnified
Parties and the Releasees, this Agreement is for the sole benefit of the parties
to this Agreement and their successors and permitted assigns and nothing in this
Agreement, express or implied, is intended to or shall confer upon any other
Person any legal or equitable right, benefit or remedy of any nature whatsoever
under or by reason of this Agreement.
Section 10.09. Amendment. No provision of this Agreement may be
amended, waived or modified except by a written instrument signed by all the
parties to such agreement.
Section 10.10. Disclosure Schedules. Any disclosure with respect to
a Schedule shall be deemed to be disclosed for other Sections of this Agreement
to the extent that such disclosure sets forth facts in sufficient detail so that
the relevance of such disclosure would be reasonably apparent to a reader of
such disclosure; provided, however, that no representation or warranty contained
in this Agreement shall be deemed to be modified or qualified by any disclosure
set forth in the Schedules, if, by its terms, such representation or
qualification is incapable of being modified or qualified by any disclosure set
forth in the Schedules. No reference to or disclosure of any item or other
matter in any Section or Schedule of this Agreement shall be construed as an
admission or indication that such item or other matter is material or that such
item or other matter is required to be referred to or disclosed in this
Agreement.
Section 10.11. Governing Law; Submission to Jurisdiction; Waivers.
THIS AGREEMENT AND EACH OTHER TRANSACTION AGREEMENT SHALL BE GOVERNED BY, AND
CONSTRUED AND INTERPRETED IN ACCORDANCE WITH, THE LAWS OF THE STATE OF NEW YORK
WITHOUT GIVING EFFECT TO ANY CONFLICTS OF LAW PRINCIPLES OF SUCH STATE THAT
MIGHT REFER THE
54
GOVERNANCE, CONSTRUCTION OR INTERPRETATION OF SUCH AGREEMENTS TO THE LAWS OF
ANOTHER JURISDICTION. EACH OF SELLER AND ACQUIROR AGREES IRREVOCABLY AND
UNCONDITIONALLY TO:
(a) submit for itself and its property in any Action relating to
this Agreement, or for recognition and enforcement of any judgment in respect
thereof, to the exclusive jurisdiction of the Courts of the State of New York
sitting in the County of New York, the court of the United States of America for
the Southern District of New York, and appellate courts having jurisdiction of
appeals from any of the foregoing, and agrees that all claims in respect of any
such Action shall be heard and determined in such New York State court or, to
the extent permitted by Law, in such federal court;
(b) consent that any such Action may and shall be brought in such
courts and waives any objection that it may now or hereafter have to the venue
or jurisdiction of any such Action in any such court or that such Action was
brought in an inconvenient court and agrees not to plead or claim the same;
(c) WAIVE ALL RIGHT TO TRIAL BY JURY IN ANY ACTION (WHETHER BASED ON
CONTRACT, TORT, OR OTHERWISE) ARISING OUT OF OR RELATING TO ANY OF THIS
AGREEMENT, OR ITS PERFORMANCE UNDER OR THE ENFORCEMENT OF THIS AGREEMENT;
(d) agree that service of process in any such Action may be effected
by mailing a copy of such process by registered or certified mail (or any
substantially similar form of mail), postage prepaid, to such party at its
address as provided in Section 10.03; and
(e) agree that nothing in this Agreement shall affect the right to
effect service of process in any other manner permitted by the Laws of the State
of New York.
Section 10.12. Specific Performance. Seller acknowledges that, in
view of the uniqueness of the transactions contemplated by this Agreement,
Acquiror would not have an adequate remedy at law for money damages in the event
that transactions contemplated by this Agreement shall not have been performed
in accordance with its terms, and therefore agree that Acquiror shall be
entitled to specific performance of the terms hereof and any other similar
equitable remedy to which Acquiror may be entitled.
Section 10.13. Rules of Construction. Interpretation of this
Agreement shall be governed by the following rules of construction: (a) words in
the singular shall be held to include the plural and vice versa, and words of
one gender shall be held to include the other gender as the context requires;
(b) references to the terms Article, Section, paragraph, Exhibit and Schedule
are references to the Articles, Sections, paragraphs, Exhibits and Schedules to
this Agreement unless otherwise specified; (c) references to "$" shall mean U.S.
dollars; (d) the word "including" and words of similar import when used in this
Agreement shall mean "including without limitation," unless otherwise specified;
(e) the word "or" shall not be exclusive; (f) references to "insurance policy"
shall include all related riders and amendments; (g) provisions shall apply,
when appropriate, to successive events and transactions; (h) the headings
contained in this Agreement are for reference purposes only and shall not affect
in any way the meaning or
55
interpretation of this Agreement; and (i) this Agreement shall be construed
without regard to any presumption or rule requiring construction or
interpretation against the party drafting or causing any instrument to be
drafted.
Section 10.14. Counterparts. This Agreement may be executed in one
or more counterparts, and by the different parties to each such agreement in
separate counterparts, each of which when executed shall be deemed to be an
original but all of which taken together shall constitute one and the same
agreement. Delivery of an executed counterpart of a signature page to this
Agreement by facsimile shall be as effective as delivery of a manually executed
counterpart of this Agreement.
[SIGNATURE PAGE FOLLOWS]
56
IN WITNESS WHEREOF, Seller and Acquiror have caused this Agreement
to be executed on the date first written above by their respective duly
authorized officers.
ALTERRA HEALTHCARE CORPORATION,
a Delaware corporation
By: /s/ Xxxxxxx X. Xxxxx
_____________________________________
Name: Xxxxxxx X. Xxxxx
Title: VP
PROVIDENT SENIOR LIVING TRUST,
a Maryland real estate investment trust
By: /s/ Xxxx X. Xxxxx
_____________________________________
Name: Xxxx X. Xxxxx
Title: Senior Vice President
TABLE OF EXHIBITS
Exhibit A Definitions
Exhibit B Form of Property Lease
Exhibit C Form of Agreement Regarding Leases
Exhibit D Form of Lease Guaranty
Exhibit E Form of Guaranty of Agreement Regarding Leases
i
TABLE OF SCHEDULES
Schedule 1-A ALS Venture Real Property Assets; Winston-Salem Real Property Asset
Schedule 1-B ALS West Real Property Assets
Schedule 1-C AHC Borrower Real Property Assets
Schedule 1-D ALS Financing Real Property Assets
Schedule 1-E Lynnwood Real Property Assets; FDL Real Property Assets
Schedule 2.03 Real Property Assets; Allocable Portion
Schedule 2.04(d) Specified Liabilities
Schedule 3.03(a) Authorized Capital Stock of Companies
Schedule 3.04 Seller Required Third Party Consents
Schedule 3.06(a) Financial Statements
Schedule 3.06(c) Operating Statements
Schedule 3.07 Absence of Certain Changes
Schedule 3.08 Existing Litigation Matters
Schedule 3.09 Governmental Orders
Schedule 3.10(b) Material Permits
Schedule 3.11 Environmental Matters
Schedule 3.12(a) Material Contracts
Schedule 3.12(b) Exceptions to Material Contracts
Schedule 3.13(a) Employee Benefits
Schedule 3.14 Acquired Personal Property Assets
Schedule 3.15 Real Property Assets
Schedule 3.16 Ground Leased Assets
Schedule 3.17 Insurance
i
Schedule 3.18 Existing Mortgages
Schedule 3.19(a) Tax Returns
Schedule 3.19(c) Tax Audits
Schedule 3.22 Regulatory Filings
Schedule 3.23 Certificates of Need or Provider Agreements
Schedule 3.24(a) Operator Licenses
Schedule 3.24(c) Operator Reports
Schedule 3.24(d) Violations
Schedule 3.24(e) Facility Violations
Schedule 3.24(f) Recoupment
Schedule 3.24(h) Real Property Asset Regulation
Schedule 3.26 Offering Memorandum
Schedule 4.04 Consents and Approvals
Schedule 5.10(a) Existing Mortgage Lender Consents
ii
EXHIBIT A
DEFINITIONS
"Accrued Expenses" shall have the meaning set forth in Section
2.04(a).
"Acquired Companies" means the Companies acquired by Acquiror
pursuant to this Agreement at the Closings.
"Acquired Personal Property Assets" means all property and assets,
other than real property and fixtures appurtenant thereto, located on the Real
Property Assets beneficially owned by each of the Acquired Companies and used in
the conduct of their respective businesses, other than Excluded Items (as
defined in the form of Property Lease)
"Acquired Real Property Assets" means the Real Property Assets,
other than any Excluded Real Property Assets.
"Acquiror" shall have the meaning set forth in the introductory
paragraph.
"Acquiror Securities" means 1,500,000 common shares of beneficial
interest of Acquiror.
"Acquiror Cap Ex Report" shall have the meaning set forth in Section
2.09(a).
"Acquiror Indemnified Parties" shall have the meaning set forth in
Section 8.01(a).
"Action" means any civil, criminal or administrative action, suit,
demand, claim, arbitration, hearing, litigation, dispute or other proceeding or
investigation by or before any Governmental Authority or arbitrator.
"Additional Insurance Costs" shall have the meaning set forth in
Section 5.05(c).
"Additional Real Property Assets" means those parcels of real
property, together with the improvements thereon, listed on Schedule 1-E.
"Affiliate" means, with respect to any specified Person, any other
Person that, at the time of determination, directly or indirectly through one or
more intermediaries, Controls, is Controlled by or is under common Control with
such specified Person; provided, however, that for the purposes of this
Agreement, Seller shall not be deemed an Affiliate of Acquiror nor, after the
Closing, of any of the Companies.
"Agreement" means this Amended and Restated Stock Purchase
Agreement, dated as of the date first set forth above, by and between Seller and
Acquiror, including the Schedules and the Exhibits, and all amendments to such
agreement made in accordance with Section 10.09.
i
"Agreement Regarding Leases" means the Agreement Regarding Leases
between the Tenant Holding Company, Manager and Acquiror, substantially in the
form of Exhibit C.
"AHC Borrower" shall have the meaning set forth in the recitals
hereof.
"AHC Borrower Shares" shall have the meaning set forth in the
recitals hereof.
"Allocable Portion" shall have the meaning set forth in Section
2.03.
"ALS Financing" shall have the meaning set forth in the recitals
hereof.
"ALS Financing Shares" shall have the meaning set forth in the
recitals hereof.
"ALS Venture" shall have the meaning set forth in the recitals
hereof.
"ALS Venture Shares" shall have the meaning set forth in the
recitals hereof.
"ALS West" shall have the meaning set forth in the recitals hereof.
"ALS West Shares" shall have the meaning set forth in the recitals
hereof.
"ALSF Assets" shall have the meaning set forth in Section 5.10(b).
"ALSF Base Purchase Price" shall have the meaning set forth in
Section 2.03(b).
"ALSF Cap" shall have the meaning set forth in Section 5.05(c).
"ALSF Closing Adjustments" shall have the meaning set forth in
Section 2.03(b).
"ALSF Consent" shall have the meaning set forth in Section 5.05(c).
"ALSF Costs" shall have the meaning set forth in Section 6.01(c).
"ALSF Final Purchase Price" shall have the meaning set forth in
Section 2.03(b).
"ALSF Purchase Price" shall have the meaning set forth in Section
2.03(b).
"Amended Stock Purchase Agreement" shall have the meaning set forth
in the recitals hereof.
"Amendment Costs" has the meaning specified in Section 10.02.
"Applicable Securities Rules" shall have the meaning set forth in
Section 4.09.
"Assumed Mortgage Debt" means the Existing Mortgages listed on
Schedule 3.18 relating to the Acquired Real Property Assets.
"Base Purchase Price" shall have the meaning set forth in Section
2.03(b).
ii
"Benefit Plans" shall have the meaning set forth in Section 3.13(a).
"Brookdale Agreement" has the meaning specified in Section 7.01(f).
"Business Day" means any day that is not a Saturday, a Sunday or
other day on which commercial banks in the City of New York, New York are
required or authorized by Law to be closed.
"Cap Ex Reserve Shortfall" shall have the meaning set forth in
Section 2.09(a).
"Capital Stock" means capital stock of or other type of ownership
interest in, as applicable, a Person, whether preferred, common or otherwise and
whether or not carrying any voting rights.
"casualty event" shall have the meaning set forth in Section
9.01(a).
"Certificate of Need" shall have the meaning set forth in Section
3.23.
"Closing" and "Closings" shall have the meanings set forth in
Section 2.02(b).
"Closing Date" and "Closing Dates" shall have the meaning set forth
in Section 2.02(b).
"Closing Statement" shall have the meaning set forth in Section
2.06(d).
"Code" means the United States Internal Revenue Code of 1986, as
amended.
"Companies" or "Company" shall have the meaning set forth in the
recitals hereof.
"Company Group" shall mean any "affiliated group" (as defined in
Section 1504(a) of the Code without regard to the limitations contained in
Section 1504(b) of the Code) that, any time on or before the Closing Date,
includes or has included any of the Companies or any predecessor of or successor
to any Company (or another such predecessor or successor), or any other group of
corporations that, at any time on or before the Closing Date, files or has filed
Tax Returns on a combined, consolidated or unitary basis with any of the
Companies or any predecessor of or successor to the Companies (or another such
predecessor or successor).
"Control" means, as to any Person, the power to direct or cause the
direction of the management and policies of such Person, whether through the
ownership of voting securities, by contract or otherwise. The terms "Controlled
by", "under common Control with" and "Controlling" shall have correlative
meanings.
"Debt Financing" has the meaning specified in Section 4.06.
"Disposed Securities" has the meaning specified in Section 2.05(b).
"Due Diligence Deposit" shall have the meaning set forth in Section
2.05.
iii
"Due Diligence Expiration Date" shall have the meaning set forth in
Section 2.08(b).
"Due Diligence Review" shall have the meaning set forth in Section
2.05.
"Eligible Insurance Proceeds" shall have the meaning set forth in
Section 8.06(e).
"Environmental Claim" means any Action or Governmental Order,
including any Third Party Claim, or any Action required pursuant to any
Environmental Law, arising (i) pursuant to, or in connection with, any actual or
alleged requirement or violation of any Environmental Law, (ii) in connection
with any Hazardous Material or actual or alleged activity associated with any
Hazardous Material, (iii) from any abatement, removal, cleanup, corrective or
other response action in connection with any Hazardous Material, Environmental
Law or other directive of any Governmental Authority, or (iv) from any actual or
alleged damage, loss, injury, threat or harm to the environment.
"Environmental Law" means any Law relating to pollution or
protection of the indoor or outdoor environment, including a Release or the use,
handling, transportation, treatment or storage of Hazardous Materials.
"Environmental Permit" means any permit, approval, identification
number, license or other authorization required under or issued pursuant to any
Environmental Law.
"Environmental Property Transfer Law" means any Law that requires
any notification or disclosure to any Person of environmental conditions in
connection with the sale of stock, or the transfer, sale, lease or closure of
any property or the transfer of any ownership interest in any Person which owns
property.
"Equity Shares" means shares of or other ownership interests in
Capital Stock.
"ERISA" means the Employee Retirement Income Security Act of 1974,
as amended.
"ERISA Affiliate" shall have the meaning set forth in Section
3.13(e).
"Exchange Act" means the Securities Exchange Act of 1934, as
amended, and the rules and regulations of the SEC thereunder.
"Excluded Assets" means all of the assets and properties of the
Companies other than the Acquired Real Property Assets and the Acquired Personal
Property Assets.
"Excluded Liabilities" means all of the liabilities and obligations
of the Companies of a type required to be reflected or reserved on a balance
sheet prepared in accordance with GAAP, other than the Assumed Mortgage Debt in
respect of each Acquired Real Property Asset and. with respect to the Acquired
Personal Property Assets and the Acquired Real Property Assets, the Permitted
Liens, but shall not include any Specified Liabilities.
iv
"Excluded Real Property Assets " means any Real Property Assets
excluded from the transactions contemplated herein in accordance with Section
5.10(b) and Article IX.
"Excluded Real Property Basis Adjustment" means, with respect to any
Excluded Real Property Assets that are excluded pursuant to Article IX, the
product of (i) the quotient of (x) the amount of any net insurance proceeds or
net condemnation awards actually received, or the amount of insurance proceeds
or condemnation awards Seller and Acquiror reasonably estimate should be
received and not used or to be made available for the purposes of restoration,
divided by (y) the Allocable Portion before giving effect to any adjustment,
multiplied by (ii) the Allocable Portion before giving effect to any adjustment.
"Existing Litigation Matters" shall have the meaning set forth in
Section 3.08.
"Existing Mortgages" shall have the meaning set forth in Section
3.18.
"Existing Mortgage Lenders" shall mean the holders from time to time
of the Existing Mortgages.
"Extended Outside Date" shall have the meaning set forth in Section
7.01(b).
"FDL Real Property Asset" shall have the meaning set forth in the
recitals hereof.
"Final Purchase Price" shall have the meaning set forth in Section
2.03(b).
"Financial Statements" shall have the meaning set forth in Section
3.06(a).
"First Closing" shall have the meaning set forth in Section 2.02(a).
"First Closing Date" shall have the meaning set forth in Section
2.02(a).
"GAAP" means generally accepted accounting principles consistently
applied in the United States.
"Governmental Approval" shall have the meaning set forth in Section
3.05.
"Governmental Authority" means any United States federal, state or
local or any supra-national or non-U.S. government, political subdivision,
governmental, regulatory or administrative authority, instrumentality, agency,
body or commission, self-regulatory organization or any court, tribunal, or
judicial or arbitral body.
"Governmental Order" means any order, writ, judgment, injunction,
decree, stipulation, determination or award entered by or with any Governmental
Authority.
"Ground Leased Asset" shall have the meaning set forth in Section
3.16.
"Guaranty of Agreement Regarding Leases" shall mean that certain
Guaranty of Agreement Regarding Leases by Seller in favor of Property Owners
Holding Company with respect to Tenant Holding Company's obligations under the
Agreement Regarding Leases, and is substantially in the form of Exhibit E.
v
"Hazardous Materials" means any substance that (i) is or will
foreseeably be regulated by or defined by any Environmental Law, including any
substance which is defined as a "hazardous waste", "hazardous material",
"hazardous substance", "extremely hazardous waste", "restricted hazardous
waste", "contaminant", "toxic waste" or "toxic substance" under any provision of
Environmental Law, and including petroleum, petroleum products, asbestos,
asbestos-containing material, radioactive materials and polychlorinated
biphenyls or (ii) is any indoor air contaminant the exposure to which could
reasonably be expected to result in injury to humans.
"Health Departments" shall have the meaning set forth in Section
3.24(a).
"Improvement" shall mean all the buildings, structures and
improvements of every nature whatsoever now or hereafter located at the real
property described on Schedule 2.03, including, but not limited to, all gas and
electric fixtures, radiators, heaters, docks and docking facilities, engines and
machinery, boilers, ranges, elevators and motors, plumbing, heating and air
conditioning fixtures, carpeting and other floor coverings, water heaters and
cleaning apparatus which are or shall be attached to the land.
"Indemnified Party" shall have the meaning set forth in Section
8.03(a).
"Indemnifying Party" shall have the meaning set forth in Section
8.03(a).
"Insurance Policy" shall have the meaning set forth in Section
8.06(e).
"IRS" means the Internal Revenue Service.
"Knowledge of Seller" means the actual knowledge of the officers of
Seller with respect to the Real Property Assets and each of the Companies.
"Law" means any U.S. federal, state, local or non-U.S. statute, law,
ordinance, regulation, rule, code, order or other requirement or rule of law.
"Lease Guaranty" shall mean each of the guaranty agreements by
Tenant Holding Company in favor of the applicable Property Owner with respect to
the applicable Net Tenant's obligations under a Property Lease, and is
substantially in the form of Exhibit D.
"Lien" means any mortgage, pledge, lien, lease, easement,
encumbrance, claim, right of first offer or refusal, charge, option, agreement
or security interest of any kind or nature.
"Living Facility" shall mean the independent and/or assisted living
facility being operated or proposed to be operated on the property leased
pursuant to the Property Leases.
"Losses" means, without duplication, all losses, damages, costs,
expenses, liabilities, obligations and claims of any kind (including any Action
brought by any Governmental Authority or Person), including reasonable
attorneys' fees and costs of investigation.
vi
"Lynnwood Real Property Asset" shall have the meaning set forth in
the recitals hereof.
"Management Agreement" shall mean that the Management Agreement
between the Manager and a Net Tenant with respect to an Acquired Real Property
Asset.
"Manager" shall mean Seller.
"Material Adverse Effect" means a material adverse effect (a) on the
ability of any of the Selling Parties to perform their respective obligations
under the Transaction Agreements to which it is or will be a party or (b) on the
assets, liabilities or businesses of the Companies, taken as a whole, but shall
not include any adverse effect to the extent attributable to (i) the
announcement of the transactions contemplated by this Agreement, (ii) any
adverse change in general economic conditions affecting the industry in which
the Companies participate or the U.S. economy as a whole, or (iii) any adverse
change in regulatory conditions in the industry in which the Companies
participate.
"Material Contract" means any written or, to the Knowledge of
Seller, oral contract, agreement, lease, license, instrument or other legally
binding and enforceable commitment to which the Companies is a party or is
otherwise subject which requires an annual payment in excess of $15,000.
"Material Permits" shall have the meaning set forth in Section
3.10(a).
"Material Taking" shall have the meaning set forth in Section 9.02.
"Maximum Capitalized Amount" shall have the meaning set forth in
Section 10.02.
"Medicaid" shall have the meaning set forth in Section 3.23.
"Net Tenants" shall mean each of the Delaware limited liability
companies that is 100% owned by Tenant Holding Company and is the lessee under a
Property Lease.
"New Survey" shall have the meaning set forth in Section 2.10.
"New Title Policy" shall have the meaning set forth in Section 2.10.
"Non-ALSF Shares" shall have the meaning set forth in Section 2.01.
"Non-ALSF Base Purchase Price" shall have the meaning set forth in
Section 2.03(a).
"Non-ALSF Closing Adjustments" shall have the meaning set forth in
Section 2.03(a).
"Non-ALSF Closing Amount" shall have the meaning set forth in
Section 2.06(a).
vii
"Non-ALSF Final Purchase Price" shall have the meaning set forth in
Section 2.03(a).
"Non-ALSF Purchase Price" shall have the meaning set forth in
Section 2.03(a).
"Notice of Insurance" shall have the meaning set forth in Section
8.06(e).
"Offering Memorandum" shall have the meaning set forth in Section
5.11.
"Operator Licenses" shall have the meaning set forth in Section
3.24(a).
"Operator Reports" shall have the meaning set forth in Section
3.24(c).
"Operating Statements" shall have the meaning set forth in Section
3.06(c).
"Original Stock Purchase Agreement" shall have the meaning set forth
in the recitals hereof.
"Pay-off Amount" shall have the meaning set forth in Section
2.04(d).
"Permitted Liens" means the following Liens: (a) Liens for Taxes,
assessments or other governmental charges or levies that are not yet due or
payable or that are being contested in good faith by appropriate proceedings;
(b) statutory Liens of landlords and Liens of carriers, warehousemen, mechanics,
materialmen, repairmen and other Liens imposed by Law and on a basis consistent
with past practice for amounts not yet due or that are being contested in good
faith by appropriate proceedings; (c) Liens incurred or deposits made in the
ordinary course of business and on a basis consistent with past practice in
connection with workers' compensation, unemployment insurance or other types of
social security; (d) zoning, building, land use and other similar restrictions
imposed by Law or imposed by a Governmental Authority; (e) defects of title,
easements, rights-of-way, restrictions and other similar charges or encumbrances
not materially detracting from the value of the asset subject to the Lien or
materially interfering with the ordinary conduct of business; (f) any set of
facts an accurate up-to-date survey would show; provided, however, such facts do
not materially interfere with the present use, enjoyment and occupation of the
Real Property Asset; (g) with respect to ALSF Financing, the Assumed Mortgage
Debt; (h) any matters shown on the existing owner's title insurance policies and
surveys delivered to Acquiror pursuant to Section 2.08(a) (unless such matters
are not shown on any New Title Policies and New Surveys delivered pursuant to
Section 2.10) but not mortgages, deeds of trusts and other similar documents
evidencing debt unrelated to the Assumed Mortgage Debt; (i) Real Property
Expenses accrued or unaccrued, fixed or not fixed, becoming due and payable
after the Closing Date to the extent reflected in a final statement of
apportionment prepared and delivered in accordance with Section 2.04; (j) the
Property Leases, and (k) with respect to the Acquired Personal Property Assets,
the Liens disclosed in Schedule 3.14.
"Person" means any natural person, general or limited partnership,
corporation, limited liability company, limited liability partnership, firm,
association or organization or other legal entity.
viii
"Post-Closing Period" shall have the meaning set forth in Section
2.04(a).
"Post-Closing Taxable Period" means a taxable period, excluding a
partial taxable period, that, to the extent it relates to the Companies, begins
after the Closing Date.
"Pre-Closing Period" shall have the meaning set forth in Section
2.04(a).
"Pre-Closing Taxable Period" means a taxable period, excluding a
partial taxable period, that, to the extent it relates to the Companies, ends on
or before the Closing Date.
"Prepaid Expenses" shall have the meaning set forth in Section
2.04(a).
"Private Placement" shall have the meaning set forth in Section
4.06.
"Property Lease" shall mean each lease between a Property Owner, as
lessor, and a Net Tenant, as lessee, which lease demises a Real Property Asset,
and is substantially in the form of Exhibit B.
"Property Owners" shall mean the indirect subsidiaries of Acquiror
that following the Closing will own the applicable Acquired Real Property Assets
and are the lessors under the Property Leases.
"Property Owners Holding Company" shall mean the Delaware limited
liability company that owns 100% of the equity of each of the Property Owners.
"Provider Agreements" shall have the meaning set forth in Section
3.23.
"Purchase Price Deposit" has the meaning specified in Section
2.05(b).
"Real Property Assets" means those parcels of real property,
together with the improvements thereon, listed on Schedule 2.03, including the
Additional Real Property Assets.
"Real Property Expenses" shall have the meaning set forth in Section
2.04(a).
"Registration Statement" shall have the meaning set forth in Section
5.12(a).
"REIT Disclosure" shall have the meaning set forth in Section 10.04.
"Release" means the presence, release, spill, emission, leaking,
emitting, pumping, injection, deposit, disposal, discharge, dispersal, leaching
or migration of Hazardous Materials in or into the indoor or outdoor
environment, including the movement of Hazardous Materials through or in the
air, soil, surface water or groundwater.
"Releasees" shall have the meaning set forth in Section 8.08.
"Releasing Parties" shall have the meaning set forth in Section
8.08.
"Representative" of a Person means the directors, officers,
stockholders, partners, members, employees, trustees, counsel, controlling
persons (if any), representatives and agents
ix
of such Person, and each of the heirs, executors, successors and permitted
assigns of any of the foregoing.
"Retained Insurance Proceeds" shall have the meaning set forth in
Section 8.06(e).
"Review Period" shall have the meaning set forth in Section 2.08(b).
"SEC" shall have the meaning set forth in Section 5.12(a).
"Second Closing" shall have the meaning set forth in Section
2.02(b).
"Second Closing Date" shall have the meaning set forth in Section
2.02(b).
"Securities Act" means the Securities Act of 1933, as amended.
"Seller" shall have the meaning set forth in the introductory
paragraph hereof.
"Seller Cap Ex Report" shall have the meaning set forth in Section
2.09(b).
"Seller Indemnified Parties" shall have the meaning set forth in
Section 8.02(a).
"Seller Operations" shall have the meaning set forth in Section
8.01(b).
"Seller Required Governmental Approval" shall have the meaning set
forth in Section 3.05.
"Seller Required Third Party Consents" shall have the meaning set
forth in Section 3.04.
"Selling Parties" shall mean, collectively, Seller, Tenant Holding
Company, Manager and the Net Tenants, and each of their respective Affiliates
that is or at the Closing will be a party to any Transaction Agreement.
"Shares" shall have the meaning set forth in the recitals hereof.
"Specified Liabilities" shall have the meaning set forth in Section
2.04(d).
"Subsidiary" of any Person means any corporation, general or limited
partnership, joint venture, limited liability company, limited liability
partnership or other Person that is a legal entity, trust or estate of which (or
in which) (a) the issued and outstanding capital stock having ordinary voting
power to elect a majority of the board of directors (or a majority of another
body performing similar functions) of such corporation or other Person
(irrespective of whether at the time capital stock of any other class or classes
of such corporation or other Person shall or might have voting power upon the
occurrence of any contingency), (b) more than 50% of the interest in the capital
or profits of such partnership, joint venture or limited liability company or
(c) more than 50% of the beneficial interest in such trust or estate, is at the
time of determination directly or indirectly owned or Controlled by such Person.
x
"Tax" or "Taxes" means (i) any federal, state, local or foreign net
income, gross income, gross receipts, windfall profit, severance, property,
production, sales, use, license, excise, franchise, employment, payroll,
withholding, alternative or add-on minimum, ad valorem, value-added, transfer
(including real estate transfer taxes), stamp, or environmental tax (including
taxes under Code Section 59A), or any other tax, custom, duty, governmental fee
or other like assessment or charge of any kind whatsoever, together with any
interest or penalty, addition to tax or additional amount imposed by any
Governmental Authority; and (ii) any liability of any Company for the payment of
amounts with respect to payments of a type described in clause (i) as a result
of being a member of an affiliated, consolidated, combined or unitary group, or
as a result of any obligation of any Company under any Tax sharing arrangement
or Tax indemnity arrangement.
"Tax Authority" means any Governmental Authority having jurisdiction
over the assessment, determination, collection or imposition of any Tax.
"Tax Matters Agreement" shall mean that certain Tax Matters
Agreement, dated as of the date of the Original Stock Purchase Agreement, by and
among Seller and Acquiror, as may be amended, supplemented or modified by Seller
and Acquiror in accordance with its terms after the date of the Original Stock
Purchase Agreement.
"Tax Returns" means all returns and reports (including elections,
declarations, disclosures, schedules, estimates and information returns)
required to be supplied to a Tax Authority relating to Taxes.
"Tenant Holding Company" shall mean the Delaware limited liability
company that is 100% owned by Seller and as of the Closing will be a party to
the Agreement Regarding Leases.
"Third Party Claim" shall have the meaning set forth in Section
8.03(a).
"Third Party Payor Programs" shall have the meaning set forth in
Section 3.23.
"Transaction Agreements" shall have the meaning set forth in Section
2.06(c).
"Transaction Costs" means all reasonable and documented
out-of-pocket costs and expenses incurred by Seller, Acquiror and the Companies
in connection with the negotiation and documentation of the Transaction
Agreements, the purchase and sale of the Shares, the investigation and of the
Real Property Assets, including any title insurance premiums, surveys costs,
transfer, documentary, sales, use, stamp, registration or similar Taxes,
recording costs, engineering reports, environmental assessments, fees and
disbursements of counsel, accountants, contractors and consultants and any
financing costs incurred with respect to existing indebtedness, or assumption or
consent fees paid to Existing Mortgage Lenders, but excluding any costs or
expenses relating to (A) the organization of Acquiror and any so-called
operating partnership being formed by Acquiror, (B) any post-Closing
reorganization of the Companies, including any change in the ownership
structure, type of entity or the manner in which their assets are held, (C) any
financing transactions undertaken by Acquiror unrelated to the assumption of the
Existing Mortgages, and (D) the raising of capital by Acquiror, including any
xi
costs relating to the Private Placement, the Offering Memorandum and any
Registration Statement.
"Transfer Notices" shall mean all notices required to be given to
any Governmental Authority in connection with the transactions contemplated by
this Agreement.
"Winston-Salem Real Property Asset" shall have the meaning set forth
in the recitals hereof.
"Winston" shall have the meaning set forth in the recitals hereof.
xii
Schedule 1-A
ALS Venture I
-----------------------
Alliance OH
Beaver Creek OH
Blaine MN
Colorado Springs CO
Evansville IN
Inver Grove Hhts MN
Lacrosse I WI
Lacrosse II WI
Xxxxxx IN
Oro Valley I AZ
Pueblo CO
Xxxxxxx Xxxxx (Ct. Vil.) NY
Summerfield (Sum. Vil.) NY
Tallahassee FL
Tempe AZ
Twin Falls ID
Winston-Salem* NC
------------
* Property owned as of the date of the Original Stock Purchase Agreement by
Winston, which will be merged into ALS Venture prior to the Closing.
Schedule 1-B
ALS West Inc.
-----------------------
Austintown OH
Columbus (West.) OH
Eden Prairie MN
Mesa AZ
North Oaks MN
Pensacola FL
Peoria AZ
Plymouth MN
Portage IN
Puyallup WA
Richmond IN
Salem OH
Tucson (Speedway) AZ
Schedule 1-C
AHC Borrower Inc.
-----------------
Kenosha III WI
Leawood KS
Topeka KS
W Melbourne FL
Winterhaven I FL
Winterhaven II FL
Lynnwood WA
Schedule 1-D
ALS Financing II
------------------
Cary NC
Kenmore (Buffalo) NY
Niskayuna NY
Niskayuna (Albany) NY
Northville MI
Perinton NY
Utica MI
Westampton NJ
Williamsville NY
Schedule 1-E
Additional Real Property Assets
-------------------------------
Fond du Lac WI
