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EXHIBIT 10.61
DEVELOPMENT JOINT VENTURE AGREEMENT
By and Between
ALTERNATIVE LIVING SERVICES, INC.
and
HCR MANOR CARE, INC.
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TABLE OF CONTENTS
PAGE
ARTICLE 1 DEFINITIONS 1
ARTICLE 2 FORMATION AND ORGANIZATION OF DEVCO 6
2.1 Formation, Organization and Initial Capitalization of DEVCO 6
2.2 Purpose of DEVCO 7
2.3 Board of Managers of DEVCO 7
ARTICLE 3 ACQUISITION OF INITIAL PROJECTS 7
3.1 Agreement to Transfer Initial Projects 7
3.2 Designation of Acquiring Entity 8
3.3 Initial Closings 9
ARTICLE 4 ACQUISITION OF ADDITIONAL PROJECTS 9
4.1 Right of First Offer 9
4.2 Review of Proposed Projects 10
4.3 Closing of Acquisitions of Additional Projects 11
ARTICLE 5 DEVELOPMENT OF PROJECTS 11
5.1 Project Development 11
5.2 Project Financing 12
ARTICLE 6 MANAGEMENT OF FACILITIES; FACILITY BRANDING 12
6.1 Management 12
ARTICLE 7 ALTERNATIVE OWNERSHIP AND OPERATING STRUCTURES 12
7.1 Determination of Ownership and Operating Structures 12
7.2 Structural Guidelines 12
ARTICLE 8 TRANSFER RESTRICTIONS AND PURCHASE OPTIONS 13
8.1 Restrictions on Transferability of Interests 13
8.2 Facility Call Options 13
ARTICLE 9 REPRESENTATIONS AND WARRANTIES OF ALS 16
9.1 Organization 16
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9.2 Authorization; Enforceability 16
9.3 No Violation or Conflict 16
9.4 Brokers 16
9.5 Litigation 16
9.6 Governmental Approvals 16
9.7 Required Consent 17
9.8 Representations and Warranties True and Correct at Closing 17
ARTICLE 10 REPRESENTATIONS AND WARRANTIES OF HCR 17
10.1 Organization 17
10.2 Authorization; Enforceability 17
10.3 No Violation or Conflict 17
10.4 Brokers 17
10.5 Litigation 17
10.6 Governmental Approvals 18
10.7 Required Consent 18
10.8 Representations and Warranties True and Correct at Closing. 18
ARTICLE 11 INDEMNIFICATION 18
11.1 HCR's Indemnity 18
11.2 ALS's Indemnity 18
11.3 Provisions Regarding Indemnities 19
ARTICLE 12 MISCELLANEOUS 20
12.1 Entire Agreement; Amendment 20
12.2 Fees and Expense 20
12.3 Confidentiality 20
12.4 Further Assurances 21
12.5 No Liens 21
12.6 Public Statement 21
12.7 Applicable Law 21
12.8 Binding Effect; Assignment 21
12.9 Notices 21
12.10 Facsimile Signature; Counterparts 23
12.11 Headings 23
12.12 Construction 23
12.13 Severability 23
12.14 Knowledge 23
12.15 Survival of Representations and Warranties 23
12.16 Arbitration 23
12.17 Waiver of Compliance 24
12.18 Third Parties 24
12.19 Legal Fees 24
12.20 Time of Essence 24
12.21 Exhibits 24
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DEVELOPMENT JOINT VENTURE AGREEMENT
THIS DEVELOPMENT JOINT VENTURE AGREEMENT (the "Agreement") is made and
entered into as of the 31st day of December, 1998, by and between ALTERNATIVE
LIVING SERVICES, INC., a Delaware corporation ("ALS") and HCR MANOR CARE, INC.
a Delaware corporation ("HCR").
W I T N E S S E T H:
WHEREAS, subject to the terms and conditions hereof, the parties
desire to organize one or more corporations, limited liability companies,
limited partnerships or other entities for the purpose of jointly constructing,
developing, operating and owning a portfolio of assisted living and/or dementia
care facilities in selected markets located throughout the United States; and
WHEREAS, the parties are entering into this Agreement to set forth
their mutual agreements with respect to this joint venture;
NOW, THEREFORE, in consideration of the premises and of the promises
and agreements hereinafter set forth, the parties hereto, intending to be
legally bound, do hereby agree as follows:
ARTICLE 1
DEFINITIONS
In addition to the other definitions contained elsewhere herein, the
following definitions shall apply for purposes of this Agreement:
1.1 Acquiring Entity. "Acquiring Entity" means, with
respect to any Project, the DEVCO Entity that acquired such Project
pursuant to the provisions of Article 3 or Article 4 hereof or, with
respect to any Facility, the DEVCO Entity that acquired the Project
pursuant to the provisions of Article 3 or Article 4 hereof that,
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upon completion of such Project, resulted in such Facility.
1.2 Additional Closing. "Additional Closing" means the
closing of an Additional Project in accordance with Section 4.3
hereof.
1.3 Additional Contribution. "Additional Contribution"
means the Total Contribution less the sum of the (i) Initial
Contribution plus any (ii) ALS Initial Adjustments.
1.4 Additional Facility. "Additional Facility" means
those Facilities resulting from the completion of development and
construction of an Additional Project.
1.5 Additional Project. "Additional Project" means each
Project acquired by an Acquiring Entity pursuant to the provisions of
Article 4 hereof.
1.6 Affiliate. "Affiliate" shall have the meaning set
forth in Rule 12b-2 of the Securities Exchange Act of 1934, as
amended.
1.7 ALS Affiliate. "ALS Affiliate" means ALS or any
Affiliate of ALS, excluding any DEVCO Entity owned jointly by ALS and
HCR.
1.8 ALS Ancillary Agreement. "ALS Ancillary Agreement"
means any Ancillary Agreement to which any ALS Affiliate is a party.
1.9 ALS Initial Adjustments. "ALS Initial Adjustments"
shall have the meaning ascribed to it in Section 3.1 hereof.
1.10 ALS Remaining Contribution. "ALS Remaining
Contribution" shall have the meaning ascribed to it in Section 4.1
hereof.
1.11 ALS 2000 Contribution. "ALS 2000 Contribution" means
Thirty Percent (30%) of the Additional Contribution, plus any ALS
Initial Adjustments and ALS shortfall determined in accordance with
Section 3.1 hereof.
1.12 ALS 2001 Contribution. "ALS 2001 Contribution" shall
mean Thirty Percent (30%) of the Additional Contribution, plus the
amount of any ALS shortfall determined in accordance with the first
paragraph of Section 4.1 hereof.
1.13 Ancillary Agreements. "Ancillary Agreements" means
all of the agreements executed and delivered by ALS and HCR, or either
of them (or any of their respective Affiliates), pursuant to this
Agreement or in connection with the transactions contemplated by this
Agreement, including, without limitation,
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the Confidentiality Agreement between ALS and HCR dated November 27,
1998, the Operating Agreement (DEVCO), all Development Agreements,
Management Agreements and Project Purchase Agreements and the
governing documents of any Project Entity.
1.14 Confidential Information. "Confidential Information"
shall have the meaning given such term in Section 12.3.
1.15 Contributing Party. "Contributing Party" means with
respect to any Project (or Facility), the HCR Affiliate(s) or ALS
Affiliate(s) that was the Project Transferor of such Project (or of
the Project that, upon completion, resulted in such Facility).
1.16 Controlled Affiliate. "Controlled Affiliate" means
with respect to any Person, any Affiliate of such Person that is
controlled by such Person, directly or indirectly.
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1.17 DEVCO Entities. "DEVCO Entities" means DEVCO and the
Project Entities.
1.18 Developing Party. "Developing Party" means the HCR
Affiliate or ALS Affiliate, as the case may be, managing the
development and completion of construction of a Project pursuant to a
Development Agreement in accordance with Section 5.1 hereof.
1.19 Development Agreement. "Development Agreement" means
with respect to a Project the Development Agreement between the
Developing Party thereof and the Acquiring Entity thereof in
substantially the form of Exhibit A attached hereto and incorporated
herein by this reference, together with any changes to properly
reflect the identity of the parties thereto and location of the
Project.
1.20 Disclosing Party. "Disclosing Party" shall have the
meaning given such term in Section 12.3.
1.21 Existing ALS Commitments. "Existing ALS Commitments"
mean those exclusive development rights which ALS has granted or
contractually committed to others in the states of New York,
Connecticut, Rhode Island, Massachusetts, Delaware, Pennsylvania, New
Jersey and Michigan described on Schedule 1 hereto.
1.22 Facility or Facilities. "Facility" or "Facilities"
means the land and any improvements constituting (or intended to
constitute upon the completion of such improvements) an assisted
living or dementia care facility or facilities owned or to be owned by
a DEVCO Entity.
1.23 Facility Call Option. "Facility Call Option" shall
have the meaning given such term in Section 8.2(a).
1.24 Facility Option Period. "Facility Option Period"
shall have the meaning given such term in Section 8.2(a).
1.25 Facility Stabilization. "Facility Stabilization"
means, with respect to a Facility, the achievement by such Facility,
for a period of at least 30 consecutive days, of an average occupancy
rate equal to or in excess of the occupancy rate designated in the
"Development Budget and Facility Pro Forma" prepared pursuant to the
applicable Development Agreement as the "Stabilized Occupancy" for
such Facility.
1.26 HCR Affiliate. "HCR Affiliate" means HCR or any
Affiliate of HCR, excluding any DEVCO Entity owned jointly by ALS and
HCR.
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1.27 HCR Ancillary Agreement. "HCR Ancillary Agreement"
means any Ancillary Agreement to which any HCR Affiliate is a party.
1.28 HCR Remaining Contribution. "HCR Remaining
Contribution" shall have the meaning ascribed to it in Section 4.1
hereof.
1.29 HCR 2000 Contribution. "HCR 2000 Contribution" means
Twenty Percent (20%) of the Additional Contribution, plus any HCR
shortfall determined in accordance with Section 3.1 hereof.
1.30 HCR 2001 Contribution. "HCR 2001 Contribution" means
Twenty Percent (20%) of the Additional Contribution, plus the amount
of any HCR shortfall as determined in accordance with the first
paragraph of Section 4.1 hereof.
1.31 Initial Closings. "Initial Closings" means the
closings of the acquisitions by Acquiring Entities of the Initial
Projects in the manner contemplated by Section 3.3 hereof.
1.32 Initial Contribution. "Initial Contribution" shall
mean the aggregate of the estimated Project Costs of the Initial
Projects.
1.33 Initial Facility. "Initial Facility" means,
collectively, those Facilities resulting from the completion of
development and construction of an Initial Project acquired by an
Acquiring Entity in accordance herewith.
1.34 Initial Projects. "Initial Projects" means the
Projects within the Target Market acquired by DEVCO Entities pursuant
to Section 3.1 hereof.
1.35 Management Agreement. "Management Agreement" means
with respect to a Facility the Assisted Living Consultant and
Management Services Agreement in substantially the form attached
hereto as Exhibit B and incorporated herein by this reference,
together with any changes to properly reflect the identity of the
Acquiring Entity of the Facility and location of the Facility being
managed.
1.36 Offering Party. "Offering Party" means the Party
delivering to DEVCO a Proposal with respect to a Proposed Project
pursuant to Section 3.1 or Section 4.1 hereof.
1.37 Operating Agreement (DEVCO). "Operating Agreement
(DEVCO)" means the Operating Agreement of DEVCO, LLC, in substantially
the form attached hereto as Exhibit C and incorporated herein by this
reference.
1.38 Parties. "Parties" means, collectively, HCR and ALS,
and "Party"
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means either HCR or ALS.
1.39 Percentage Interest. "Percentage Interest" means
with respect to DEVCO, the ownership interest of ALS or HCR therein,
which shall initially be a fifty percent (50%) interest for ALS and a
fifty percent (50%) interest for HCR.
1.40 Person. "Person" means a natural person,
corporation, trust, partnership, limited liability company,
governmental entity (or agency, branch or department thereof) or any
other legal entity.
1.41 Project. "Project" means all contract and property
rights, together with all studies, analyses, market research, permits,
qualifications, files and filings, drawings, plans and other work
product developed or owned by a Project Transferor with respect to the
development, construction, operation and ownership of a Facility (or
prospective Facility hereunder), including, without limitation, plans,
specifications, analyses, approvals, permits and licenses, purchase
contracts and rights, development or construction contracts and title
to real and personal property, as the case may be.
1.42 Project Cost. "Project Cost" means those items that
would normally be capitalized as a component of the cost of a Facility
plus related preopening and start-up operating expenses and losses.
Project Cost shall also include, but not be limited to, all costs
incurred related to the development, construction and leasing up of a
Facility, including direct costs (including applicable costs of
employee benefits) associated with conducting market research,
development and construction management services, professional fees
paid to third parties, amounts paid under construction contracts
(including those costs relating to the general conditions of a
construction project), the imputed cost of construction period
interest, fees and expenses related to debt financing for the
construction and development of the Facility, contingency reserves
plus the development fee to be paid to the Developing Party pursuant
to the terms of the Development Agreement.
1.43 Project Entity. "Project Entity" means DEVCO or any
general or limited partnership, limited liability company or other
entity formed by DEVCO to acquire, develop and construct a Project and
own and operate the resulting Facility as contemplated by Article 7
hereof.
1.44 Project Information. "Project Information" shall
have the meaning ascribed to it in Section 3.1 hereof.
1.45 Project Purchase Agreement. "Project Purchase
Agreement" means with respect to a Project an Agreement for Purchase
and Sale in substantially the form of the Agreement for Purchase and
Sale attached hereto as Exhibit D and incorporated
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herein by this reference, together with changes to properly reflect a
description of such Project and the names of the Project Transferee
and Acquiring Party thereof.
1.46 Project Transferor. "Project Transferor" means, with
respect to any Project, the HCR Affiliate(s) or ALS Affiliate(s) that
has commenced the development effort with respect to any Project and
which holds all right, title and interest in and to the Project.
1.47 Proposal. "Proposal" means a written notice from an
Offering Party delivered to DEVCO pursuant to Section 3.1 or Section
4.1 hereof in respect of a Proposed Project containing reasonably
detailed information regarding the proposed location, the acquisition
cost for real property and the proposed design and service model.
1.48 Proposal Period. "Proposal Period" shall mean the
1999 Proposal Period, 2000 Proposal Period or the 2001 Proposal Period
(each as defined in Section 4.1).
1.49 Proposed Project. "Proposed Project" means, with
respect to either Party, an assisted living or dementia care residence
that such Party or its Controlled Affiliates intend to develop within
the Target Market for which (i) such Party has obtained control of the
real property on which the Facility is to be constructed (whether by
ownership, contract to purchase or option to purchase); (ii) such
Party reasonably expects construction of the Facility to be commenced
(a) in 1999 or 2000 with respect to Proposals required to be made
pursuant to Section 3.1 hereof; or (b) during the period commencing
after the end of the applicable Proposal Period and ending on December
31 of the calendar year following the year in which the Proposal with
respect thereto is required to be made pursuant to Section 4.1 hereof,
and (iii) no Proposal with respect thereto has previously been made to
DEVCO. Proposed Project shall not include any Project for which a
third party has the contractual right to participate in the
construction, development, ownership or financing, if such contract
rights are inconsistent with such Project being an Additional Project
pursuant to the terms hereof.
1.50 Receiving Party. "Receiving Party" shall have the
meaning given such term in Section 12.3.
1.51 Target Market. "Target Market" means the geographic
area falling within a fifty-mile radius surrounding each assisted
living, dementia care or long-term care facility operated by HCR, ALS
or their respective Controlled Affiliates as of the date of such
determination located anywhere in the States of Connecticut, Delaware,
Florida, Illinois, Indiana, Kentucky, Maryland, Michigan, New Jersey,
New York, Ohio, Pennsylvania, Texas, Virginia and Wisconsin.
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1.52 Total Contribution. "Total Contribution" shall mean
Five Hundred Million Dollars ($500,000,000).
ARTICLE 2
FORMATION AND ORGANIZATION OF DEVCO
2.1 Formation, Organization and Initial Capitalization of DEVCO.
On or before January 31, 1999, ALS and HCR shall form, organize and initially
capitalize DEVCO by (i) filing a certificate of formation with the Secretary of
State of the State of Delaware with respect to DEVCO, (ii) each executing the
Operating Agreement (DEVCO), and (iii) each designating their respective
designees to the Board of Managers (hereinafter defined) and making their
respective initial capital contribution to DEVCO as contemplated by Section 7.1
of the Operating Agreement (DEVCO).
2.2 Purpose of DEVCO. The purpose of DEVCO is to provide the
Parties a jointly-owned platform through which the Parties may jointly develop,
construct, own and operate Facilities, either directly through DEVCO or through
one or more Project Entities designated by DEVCO, in various locations located
within the Target Market.
2.3 Board of Managers of DEVCO. Upon the formation and
organization of DEVCO, DEVCO shall be managed by a Board of Managers (the
"Board of Managers") to be comprised of 6 members, 3 of whom shall be
designated by HCR and 3 of whom shall be designated by ALS. Members of the
Board of Managers shall not be entitled to any compensation or remuneration by
DEVCO except to the extent specifically provided in the Operating Agreement
(DEVCO).
ARTICLE 3
ACQUISITION OF INITIAL PROJECTS
3.1 Agreement to Transfer Initial Projects. During January of
1999, each of HCR and ALS shall provide DEVCO with a Proposal with respect to,
and an opportunity to review, all Proposed Projects of such Party and its
Controlled Affiliates at such time. Such Party (the "Offering Party") shall
provide DEVCO with access to all such information as DEVCO may reasonably
request relating to such Proposed Projects (including, but not limited to, to
the extent available, the projected Project Costs, feasibility studies, revenue
and expense projections and preliminary assessments of zoning and regulatory
approvals necessary to construct and operate such Project) and any other
information known to the Offering Party which the Offering Party reasonably
believes is necessary to enable DEVCO to make an informed decision with respect
thereto (all such information being referred to herein as "Project
Information"). The Proposed Projects submitted by ALS and HCR, respectively,
shall have aggregate estimated Project Costs of at least approximately One
Hundred Twenty-Five Million Dollars ($125,000,000) per Party. DEVCO shall have
until
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February 28, 1999 (the "Initial Period") in which to identify Proposed Projects
which shall become Initial Projects pursuant to this Agreement; provided,
however, that the aggregate estimated Project Cost for Initial Projects
selected by DEVCO from Proposed Projects offered in January of 1999 shall not
exceed (i) One Hundred Twenty-Five Million Dollars ($125,000,000) with respect
to Proposed Projects offered by ALS and (ii) One Hundred Twenty-Five Million
Dollars ($125,000,000) with respect to Proposed Projects offered by HCR. If,
after taking into account the Proposed Projects accepted by DEVCO, the
aggregate estimated Project Costs to be contributed by one party exceeds the
aggregate estimated Project Costs of the Proposed Projects to be contributed by
the other Party by more than Ten Million Dollars ($10,000,000), then the
Parties shall agree to either add additional Proposed Projects or to remove
Proposed Projects to reduce the difference to the extent economically feasible.
Subject to the terms and conditions hereof, each of HCR and ALS hereby agree to
cause each of their respective Controlled Affiliates who are Project
Transferors with respect to any of the Proposed Projects (i) to enter into a
Project Purchase Agreement with the Acquiring Entity designated by DEVCO with
respect to such Initial Project promptly following DEVCO's request with respect
thereto and (ii) to transfer, convey and assign such Initial Project to such
Acquiring Entity pursuant to the terms of such Project Purchase Agreement at
the Initial Closing. In the event that the Initial Closing with respect to any
Initial Project proposed by ALS does not occur on or before March 31, 1999, ALS
shall have the right to substitute such Initial Project with another Project.
If ALS elects to make any substitutions, ALS shall notify HCR of each Initial
Project that it elects to substitute (each a "Removed Project") and shall
provide HCR with a Proposal for another Project (each a "Substitute Project")
to replace the Removed Project. HCR shall have the right to reject a Substitute
Project within fifteen (15) days after receipt of the Proposal relating
thereto. If any Substitute Project is rejected then ALS shall be entitled to
withdraw the Removed Project as an Initial Project and ALS's 2000 Contribution
shall be increased by an amount equal to the estimated Project Cost of the
Removed Project (each an "ALS Initial Adjustment"). If a Substitute Project is
not rejected (i) the Acquiring Entity designated by DEVCO shall promptly enter
into a Project Purchase Agreement with the Project Transferor of the Substitute
Project and (ii) the Project Transferor shall transfer, convey and assign such
Substitute Project to such Acquiring Entity pursuant to the terms of such
Project Purchase Agreement. If DEVCO selects an Initial Project (including any
Substitute Project) from HCR or ALS pursuant to the provisions hereof and
within 180 days thereafter DEVCO determines that such Initial Project is not
feasible, then the HCR 2000 Contribution or the ALS 2000 Contribution, as
applicable, shall be increased by the estimated Project Cost attributable to
such Initial Project. The purchase consideration payable to each Project
Transferor pursuant to any Project Purchase Agreement shall be, in each case,
in an amount equal to such Project Transferor's Project Costs incurred through
the date of transfer with respect to such Project as certified by the Project
Transferor and shall be subject to approval, not to be unreasonably withheld,
of (i) HCR with respect to Initial Projects to be transferred from Project
Transferors who are ALS Affiliates and (ii) ALS with respect to Initial
Projects to be transferred from Project Transferors who are HCR Affiliates. Any
Proposed Project not accepted by DEVCO within the time periods provided herein,
shall be deemed rejected
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and DEVCO shall have no further rights hereunder with respect to such Proposed
Project and, among other things, the Offering Party and its respective
Affiliates shall be entitled to construct, develop, own, operate and/or sell
such Proposed Project in such manner as it may determine in its sole discretion
without any restriction hereunder; provided, however, that if all permits
necessary to complete construction of the Proposed Project have not been issued
within 12 months after the end of the DEVCO review period with respect to such
Proposed Project, then such Proposed Project shall again be subject to the
terms hereof.
3.2 Designation of Acquiring Entity. The determination of DEVCO
with respect to which Proposed Projects shall become Initial Projects shall be
made by the Board of Managers; provided, however, that, in the event a Proposed
Project is not approved as an Initial Project by a majority of the members of
the Board of Managers, but such Proposed Project is approved as an Initial
Project by the unanimous approval of each of the Members of the Board of
Managers designated by the Party not affiliated with the Offering Party, then
such Proposed Project shall be deemed approved as Initial Project. DEVCO shall
give written notice to the Offering Party during the Initial Period (or in the
case of any Substitute Project within fifteen (15) days after receipt of the
Proposal relating thereto) which notice shall designate the Proposed Projects
selected by DEVCO to be Initial Projects. Prior to the Initial Closings, and in
any event on or before March 15, 1999, DEVCO shall notify the Parties of its
determination with respect to each of the Initial Projects of the specific
DEVCO Entity that is to be the Acquiring Entity of such Initial Project, such
determination to be made based upon the Board of Managers assessment of the
appropriate ownership and operating structure for each such Initial Project in
accordance with the guidelines set forth in Article 7 hereof.
3.3 Initial Closings. The Parties hereby agree, subject to the
terms and conditions hereof, to cause all of the Initial Projects to be
transferred by their respective Project Transferors thereof to the applicable
Acquiring Entity or Entities thereof at one or more closings to be held at such
times, places and locations agreed to by the parties, but no later than June
30, 1999; provided, however, that no such closing shall occur unless prior to
such time the aggregate consideration paid to HCR at closings held pursuant to
the Agreement of Purchase and Sale (Operating Residences) or the Agreement of
Purchase of and Sale (Construction Residences), each such agreement dated as of
the date of this Agreement and each by and between HCR, ALS and certain
wholly-owned subsidiaries of HCR, shall have exceeded One Hundred Million
Dollars ($100,000,000). To the extent that any Initial Project is acquired by a
Project Entity, the purchase consideration payable to the applicable Project
Transferor shall be paid in the form of a promissory note of such Project
Entity on such terms (including interest rate) as shall be agreed to by the
parties hereto and payable (together with all accrued interest thereof) upon
the first to occur of (i) the 6 month anniversary of such promissory note or
(ii) the date upon which such Project Entity receives the proceeds from any
construction or permanent financing of the applicable Project, whether in the
form of a construction or permanent loan or in the form of a sale/leaseback
transaction, such note, if requested by the Project Transferor, to be secured
by a mortgage or deed of trust
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on the real property comprising such Project.
ARTICLE 4
ACQUISITION OF ADDITIONAL PROJECTS
4.1 Right of First Offer. During May and November of 1999, each
of HCR and ALS shall provide DEVCO a Proposal with respect to, and an
opportunity to review, all Proposed Projects of such Party and its Controlled
Affiliates at such time(s). Such Party (the "Offering Party") shall provide
DEVCO with access to all Project Information relating to such Proposed Project.
DEVCO shall have 30 days after it has received such Proposal (the "1999
Proposal Period") in which to identify Proposed Projects which shall become
Additional Projects pursuant to this Agreement; provided, however, that the
aggregate estimated Project Cost for Additional Projects selected by DEVCO from
Proposed Projects offered in May and November of 1999 shall not exceed (i) the
ALS 2000 Contribution with respect to Proposed Projects offered by ALS and (ii)
the HCR 2000 Contribution with respect to Proposed Projects offered by HCR. If
DEVCO selects an Additional Project from HCR or ALS in 1999 and within 180 days
thereafter DEVCO determines that such Additional Project is not feasible, then
the HCR 2001 Contribution or the ALS 2001 Contribution, as applicable, shall be
increased by the estimated Project Cost attributable to such Additional
Project. If in 1999 either HCR or ALS fail to offer to DEVCO Proposed Projects
(other than the Initial Projects) with an aggregate total Project Cost equal to
or greater than the HCR 2000 Contribution or the ALS 2000 Contribution,
respectively, then the amount of any such deficiency shall be added to the HCR
2001 Contribution or the ALS 2001 Contribution, as the case may be.
During May and November of 2000, each of HCR and ALS shall provide
DEVCO with a Proposal with respect to, and an opportunity to review, all
Proposed Projects of such Party and its Controlled Affiliates at such time(s).
Such Offering Party shall provide DEVCO with access to all Project Information
relating to the Proposed Projects. DEVCO shall have 30 days after it has
received such Proposal (the "2000 Proposal Period") in which to identify
Proposed Projects which shall become Additional Projects pursuant to this
Agreement; provided, however, that the aggregate estimated Project Cost for
Additional Projects selected by DEVCO from Proposed Projects offered in May and
November of 2000 shall not exceed (i) the ALS 2001 Contribution with respect to
Proposed Projects offered by ALS and (ii) the HCR 2001 Contribution with
respect to Proposed Projects offered by HCR. If in 2000 either HCR or ALS fail
to offer to DEVCO Proposed Projects with an aggregate total Project Cost equal
to or greater than the HCR 2001 Contribution or the ALS 2001 Contribution,
respectively, then the amount of any such deficiency shall become the "HCR
Remaining Contribution" or the "ALS Remaining Contribution", as the case may
be. If DEVCO selects an Additional Project from HCR or ALS in 2000 and within
180 days thereafter DEVCO determines that such Additional Project is not
feasible, then the HCR Remaining Contribution or the ALS Remaining
Contribution, as applicable, shall be
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increased by the estimated Project Cost attributable to such Additional
Project, unless the estimated Project Costs attributable to Additional Projects
selected by DEVCO prior to January 1, 2001 (exclusive of any such Additional
Project deemed not feasible) equal or exceed the ALS 2001 Contribution or the
HCR 2001 Contribution, as applicable.
If, after December 31, 2000 there is any ALS Remaining Contribution or
any HCR Remaining Contribution then ALS, HCR or both, as applicable, shall
during May of 2001, provide DEVCO with a Proposal with respect to, and an
opportunity to review, all Proposed Projects of such Party and its Controlled
Affiliates at such time. Such Offering Party shall provide DEVCO with access to
all applicable Project Information. DEVCO shall have 30 days after it has
received such Proposal (the "2001 Proposal Period") in which to identify
Proposed Projects which shall become Additional Projects pursuant to this
Agreement; provided, however, that the aggregate estimated Project Cost for
Additional Projects selected by DEVCO from Proposed Projects offered in May of
2001 shall not exceed (i) the ALS Remaining Contribution with respect to
Proposed Projects offered by ALS and (ii) the HCR Remaining Contribution with
respect to Proposed Projects offered by HCR.
4.2 Review of Proposed Projects. The determination of DEVCO with
respect to which Proposed Projects shall become Additional Projects shall be
made by the Board of Managers; provided, however, that, in the event a Proposed
Project is not approved as an Additional Project by a majority of the members
of the Board of Managers, but such Proposed Project is approved as an
Additional Project by the unanimous approval of each of the members of the
Board of Managers designated by the Party not affiliated with the Offering
Party, then such Proposed Project shall be deemed approved as an Additional
Project. DEVCO shall give written notice to the Offering Party during the
applicable Proposal Period which notice shall designate the Proposed Projects
selected by DEVCO to be Additional Projects and which notice shall further
designate whether, with respect to each Additional Project, DEVCO or a Project
Entity shall be the Acquiring Party and each such Acquiring Party and the
Offering Party shall promptly (in any event within 30 days after such notice is
given by DEVCO) enter into a Project Purchase Agreement with respect to such
Additional Project. Any Proposed Project not accepted by DEVCO within the
Proposal Period with respect to such Proposed Project, shall be deemed rejected
and DEVCO shall have no further rights hereunder with respect to such Proposed
Project and, among other things, the Offering Party and its respective
Affiliates shall be entitled to construct, develop, own, operate and/or sell
such Proposed Project in such manner as it may determine in its sole discretion
without any restriction hereunder; provided, however, that if all permits
necessary to complete construction of the Proposed Project have not been issued
within 12 months after the end of the Proposal Period, then such Proposed
Project shall again be subject to the terms hereof.
4.3 Closing of Acquisitions of Additional Projects. The Parties
hereby agree, subject to the terms and conditions hereof, to cause all of the
Additional Projects to be transferred by the respective Project Transferors
thereof to the respective Acquiring Entity or
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Entities thereof at closings to be held at such locations as the Parties shall
agree. The Additional Closing with respect to any Additional Project shall be
scheduled within 60 days following DEVCO's election pursuant to Section 4
hereof to accept such Additional Project. The DEVCO Entity shall be responsible
for all closing costs. The purchase consideration for each Additional Project
payable to the applicable Project Transferor, which purchase consideration
shall be such Project Cost incurred by the Project Transferor through the date
of the transfer, shall be paid in the form of a promissory note of such Project
Entity, on such terms (including interest rate) as shall be agreed to by the
parties, together with all accrued interest thereof) upon the first to occur of
(i) the 6 month anniversary of such promissory note or (ii) the date upon which
such Project Entity receives the proceeds from any construction or permanent
financing of the applicable Project, whether in the form of a construction or
permanent loan or in the form of a sale/leaseback transaction such note, if
requested by the Project Transferor, to be secured by a mortgage or deed of
trust on the real property comprising such Project.
ARTICLE 5
DEVELOPMENT OF PROJECTS
5.1 Project Development. At the applicable Initial Closing with
respect to any Initial Projects and at the applicable Additional Closing with
respect to any Additional Projects, the applicable Acquiring Entity will enter
into a Development Agreement with the applicable Contributing Party for the
Project acquired by such Acquiring Party from such Contributing Party in
accordance with Articles 3 or 4 hereof. Notwithstanding the foregoing, the
Parties intend for each of the HCR Affiliates and the ALS Affiliates,
respectively, to have a substantially equal opportunity to serve as the
Developing Party with respect to the development of Projects hereunder (on a
development fee opportunity basis). Accordingly, if during any calendar year
the aggregate development fees paid to one Party and its Affiliates
(collectively, the "Advantaged Party") exceeds the aggregate development fees
paid to the other Party and its Affiliates (collectively, the "Disadvantaged
Party") by an amount in excess of One Million Dollars ($1,000,000) (the amount
of such shortfall, the "Development Shortfall"), then in the following calendar
year the opportunity pursuant to this Section 5.1 to serve as Developer shall
first be allocated to the Disadvantaged Party, and shall not be allocated on
the basis of the Contributing Party, until such time as such Development
Shortfall is substantially eliminated, on a pro forma basis.
5.2 Project Financing. The Developing Party shall arrange the
placement of debt financing for the Acquiring Entity with respect to each
Project to be developed by such Developing Party. Upon the funding of such
financing, the Acquiring Entity shall pay to such Developing Party a placement
fee equal to one percent (1%) of the total amount of the debt placed by such
Developing Party and the Developing Party will be solely responsible for the
fees of any outside brokers up to such one percent (1%) amount. If a guaranty
shall be required, ALS and HCR will jointly and severally guarantee all such
debt, and if either or both of the Parties are called on as guarantors to pay
such obligations pursuant to their
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guaranties, then (subject to Section 8.2(d) hereof) the Parties shall make
payments on such obligations in proportion to their Percentage Interests, so
that at all times neither Party has paid more than its proportionate share of
such obligations based on its Percentage Interest. Any failure by a Party to
pay its proportionate share of such obligations shall entitle the other Party
to indemnification pursuant to Article 11 hereof. All debt and equity financing
for each Project shall be subject to approval by DEVCO.
ARTICLE 6
MANAGEMENT OF FACILITIES; FACILITY BRANDING
6.1 Management. At the Initial Closing with respect to all
Initial Projects and at the applicable Additional Closing with respect to all
Additional Projects, the applicable Acquiring Entity shall enter into a
Management Agreement with ALS, in the form attached hereto as Exhibit B,
pursuant to which ALS shall provide management services with respect to such
Project (and the resulting Facility). During the term of any Management
Agreement, the applicable Facility shall operate under the trade names and
service marks of ALS, based upon the applicable building and service type, in
the manner contemplated by such Management Agreement.
ARTICLE 7
ALTERNATIVE OWNERSHIP AND OPERATING STRUCTURES
7.1 Determination of Ownership and Operating Structures. Prior to
the acquisition of any Project by any Acquiring Entity in accordance herewith,
the Board of Managers, shall determine the optimal ownership and operating
structure with respect to the development, construction, ownership and
operation of such Project (and the resulting Facility).
7.2 Structural Guidelines. Subject to further discussion and
agreement by and among the Parties and subject in each case to DEVCO approval,
it is currently anticipated that in the design of ownership and/or operating
structures for Projects, the following features will be implemented:
(i) Project Entities will generally be conduit entities
managed or controlled by DEVCO;
(ii) DEVCO will generally have an equity ownership
interest in each Project Entity and other investors ("Project
Investors") will acquire the remaining equity ownership interest in
each Project Entity in consideration of an equity contribution payable
in cash to the Project Entity;
(iii) Project Entity will either own a fee interest in a
Project (and the resulting Facility) or will lease a Project (and the
resulting Facility) from DEVCO;
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(iv) Pursuant to the governing documents of each Project
Entity, (a) losses will generally be allocated disproportionately to
Project Investors and (b) DEVCO will generally have a call option
pursuant to which DEVCO may acquire, under certain terms and
conditions, the equity interest held by the Project Investors in such
Project Entity.
ARTICLE 8
TRANSFER RESTRICTIONS AND PURCHASE OPTIONS
8.1 Restrictions on Transferability of Interests. Neither ALS nor
HCR shall transfer its ownership interest in DEVCO except to the other Party or
to one of the transferring party's wholly-owned Affiliates. For purposes of
this Section 8.1, a "transfer" means any disposition of an interest or any
interest therein, including, without limitation, any sale, gift, assignment,
pledge or encumbrance, whether such disposition occurs voluntarily, by
operation of law or otherwise; provided, however, that transfer shall not
include a merger, consolidation or other business combination of a Party with
or into another Person or the sale or disposition of all or substantially all
of the assets of a Party (in one or a series of transactions).
8.2 Facility Call Options.
(a) As to each Facility, DEVCO hereby grants to the
Contributing Party thereof the right to purchase all of DEVCO's
ownership interest in such Facility at the fair market value
(determined as set forth below) pursuant to the terms and conditions
set forth herein (the "Facility Call Option"). The Facility Call
Option shall be first exercisable with respect to a Facility upon the
last to occur of (i) the date upon which such Facility achieves
Facility Stabilization and (ii) the date upon which DEVCO acquires,
directly or indirectly, ownership of 100% of the equity interests in
the Project Entity owning such Facility, and shall be exercisable at
any time during the six (6) months thereafter (the "Facility Option
Period"). As to each Facility, DEVCO shall provide the applicable
Contributing Party notice of the commencement of the applicable
Facility Option Period. The Facility Call Option shall be exercised by
written notice from such Contributing Party to DEVCO during the
Facility Option Period. If a Contributing Party (i) does not exercise
its Facility Call Option with respect to a Facility within the
Facility Option Period relating thereto or (ii) irrevocably notifies
DEVCO and the Parties in writing that it elects not to exercise such
Facility Call Option with respect to such Facility, then the Party
that is not an Affiliate of such Contributing Party (the
"Non-Contributing Party") shall thereafter have the right to exercise
such Facility Call Option with respect to such Facility as if it were
the Contributing Party, provided that such option shall expire on the
date (the "Option Expiration Date") which is the last to occur of (i)
ninety (90) days after the Non-Contributing Party first has the right
to exercise such option or (ii) the end of the Facility Option Period.
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(b) The purchase price to be paid by the Party
exercising the Facility Call Option shall be the fair market value of
DEVCO's ownership interest in each Facility which shall be based upon
the fair market value of such Facility (including all of its assets
and assumed liabilities), determined as of the end of the calendar
month preceding the date on which a Facility Call Option is exercised.
For the purpose of determining fair market value, whether by agreement
of the parties or by appraisal as hereafter provided, (i) the terms of
any debt to be assumed by the Exercising Party shall be taken into
account, (ii) if ALS is the Exercising Party, fair market value shall
be determined as if the management fees to be paid to ALS pursuant to
the applicable Management Agreement were five percent (5%) and (iii)
if HCR is the Exercising Party, the fair market value shall take into
account the management fees to be paid to ALS pursuant to the
applicable Management Agreement. The fair market value of a Facility
shall be as agreed upon by the Parties and, if the Parties are unable
to promptly agree upon such value, such value shall be the fair market
value of such Facility as established by an appraiser designated by
the Parties. If the Parties are unable to agree upon an appraiser,
then each Party will designate an appraiser and the two appraisers
will each determine a fair market value. If the fair market value
amounts determined by the two appraisers are equal to or within 5% of
their average, then the fair market value shall be equal to such
average. Otherwise, the two appraisers will mutually select and
appoint a third appraiser to determine the fair market value of the
Facility; provided, however, that if three appraisals are obtained,
then the fair market value of the Facility shall not be greater than
the higher of the fair market values determined by the first two
appraisals or be less than the lesser of the fair market values
determined by the first two appraisals. Each party will bear equally
the fees and expenses of the appraiser jointly agreed upon or
selected, but each party will be solely responsible for the fees and
expenses of any appraiser selected solely by such Party. Each
appraiser selected hereunder shall be a reputable appraisal firm which
has substantial experience in appraising commercial real estate and
long term care and/or assisted living facilities and each appraisal
shall be in MAI form. All appraisers shall have complete access to the
relevant books and records of the Facility they are appraising during
the conduct of their appraisals.
(c) If a Contributing Party exercises its Facility Call
Option, then it shall pay the purchase price for DEVCO's ownership
interest in the Facility in respect of which such option is exercised
in cash.
(d) At the closing of any Facility Call Option, which
shall occur not later than the date which is 30 days after the
exercise of the Facility Call Option,
(i) DEVCO shall deliver to the party exercising the
Facility Call Option (the "Exercising Party"), at
the Exercising Party's election, either an
instrument evidencing the transfer of (x) the
Facility being purchased
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and sold or (y) DEVCO's interest in the entity which
owns the Facility, in each case free and clear of
all security interests, liens and restrictions
(other than restrictions imposed by this Agreement
and the Ancillary Agreements and debt to be
expressly assumed by the Exercising Party), together
with such other documents as such Exercising Party
may reasonably request in connection therewith; and
(ii) The Exercising Party shall deliver to DEVCO cash
constituting the purchase price for the Facility,
together with such other documents as DEVCO may
reasonably request.
At the time of the exercise of a Facility Call Option, if either Party
has guaranteed any financing of the Facility subject to such option,
then the Party whose Affiliate is exercising such option shall obtain
a release of the other Party's guaranty as a condition precedent to
its right to close on the Facility which is the subject of the
Facility Call Option.
(e) Notwithstanding any provision contained in this
Section 8.2 to the contrary:
(i) if a Facility Call Option is exercised pursuant to
this Section, then such purchase may be made by an
Affiliate of the Exercising Party, but no such
assignment to such Affiliate shall relieve such
Exercising Party from any obligations hereunder; and
(ii) all closing costs, including any real estate
transfer fee which arises in connection with any
purchase and sale hereunder shall be borne by the
Exercising Party.
(f) If a Facility Call Option with respect to a Facility
is not exercised by the Option Expiration Date, then DEVCO shall
promptly offer (in such commercially reasonable manner as it shall
determine) to sell its interest in such Facility on commercially
reasonable terms and otherwise in compliance with the Operating
Agreement (DEVCO). The proceeds of such sale (after payment of all
costs, debts or other liabilities relating to such Facility or the
sale thereof) shall be distributed by DEVCO to the Parties; provided,
however, that if the purchaser of the Facility takes subject to the
Management Agreement, HCR's share of the sale proceeds, or its
obligation to contribute to any shortfall arising out of the repayment
of indebtedness, shall be increased or reduced, respectively, by an
amount equal to HCR's Percentage Interest (as a fraction of one) times
the product obtained by multiplying two (2%) percent of the previous
years' revenues generated by such Facility by the number of years
remaining in the term of the Management Agreement which product shall
be discounted to present value at seven percent (7%).
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ARTICLE 9
REPRESENTATIONS AND WARRANTIES OF ALS
ALS hereby represents and warrants to HCR that:
9.1 Organization. ALS is a corporation validly existing and in
good standing under the laws of the State of Delaware and has full corporate
power and authority to conduct its business as presently conducted and to
become an owner of DEVCO.
9.2 Authorization; Enforceability. The execution, delivery and
performance by ALS and the ALS Affiliates of this Agreement and the ALS
Ancillary Agreements to which they are a party are within the corporate power
of ALS and the ALS Affiliates and have been duly authorized by all necessary
corporate action. This Agreement, and the ALS Ancillary Agreements when
executed and delivered by ALS or the applicable ALS Affiliates, will be the
valid and binding obligations of ALS or the applicable ALS Affiliates,
enforceable against ALS or such ALS Affiliates in accordance with the
respective terms of such agreements.
9.3 No Violation or Conflict. The execution, delivery and
performance of this Agreement and the ALS Ancillary Agreements by ALS will not
conflict with or violate any law, judgment, order, decree or regulation, the
Restated Certificate of Incorporation or Restated Bylaws of ALS, each as
amended, or any contract or agreement to which ALS is a party or by which ALS
is bound; provided, however, that while the Existing ALS Commitments as
described in Schedule 1 will impact upon performance herein, such commitments
do not per se conflict with the terms of this Agreement.
9.4 Brokers. Neither ALS nor any ALS Affiliate has incurred any
brokers', finders' or any similar fee in connection with the transactions
contemplated by this Agreement or the ALS Ancillary Agreements.
9.5 Litigation. There is no litigation, arbitration, proceeding,
governmental investigation, citation or action of any kind pending or, to the
knowledge of ALS, proposed or threatened, against ALS or any ALS Affiliate
which could have a material adverse effect on the transactions contemplated
hereby or by the ALS Ancillary Agreements. There is no action, suit or
proceeding against ALS by any person or entity which questions the validity,
legality or propriety of the transactions contemplated by this Agreement or the
ALS Ancillary Agreements.
9.6 Governmental Approvals. No permission, approval,
determination, consent or waiver by, or any declaration, filing or registration
with, any governmental or regulatory authority is required on the part of ALS
or the ALS Affiliates in connection with its
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execution and delivery of this Agreement and the ALS Ancillary Agreements and
the consummation by ALS or the ALS Affiliates of the transactions contemplated
in this Agreement and the ALS Ancillary Agreements, except requirements under
the Xxxx-Xxxxx-Xxxxxx Act, if any.
9.7 Required Consent. There are no approvals or consents which
ALS or the ALS Affiliates are required to obtain from any third parties to
enter into this Agreement or the ALS Ancillary Agreements which have not been
obtained.
9.8 Representations and Warranties True and Correct at Closing.
Except as specifically disclosed by ALS to HCR in writing prior to or at the
Initial Closings with respect to matters arising after the date of this
Agreement, the representations and warranties of ALS set forth in this Article
9 will be true and correct in all material respects as of the Initial Closings.
ARTICLE 10
REPRESENTATIONS AND WARRANTIES OF HCR
HCR hereby represents and warrants to ALS that:
10.1 Organization. HCR is a corporation validly existing and in
good standing under the laws of the State of Delaware and has full corporate
power and authority to conduct its business as presently conducted and to
become an owner of DEVCO.
10.2 Authorization; Enforceability. The execution, delivery and
performance by HCR and the HCR Affiliates of this Agreement and the HCR
Ancillary Agreements to which they are a party are within the corporate power
of HCR and the HCR Affiliates and have been duly authorized by all necessary
corporate action. This Agreement, and the HCR Ancillary Agreements when
executed and delivered by HCR, will be the valid and binding obligations of HCR
or the applicable HCR Affiliates, enforceable against HCR or the applicable HCR
Affiliates in accordance with the respective terms of such agreements.
10.3 No Violation or Conflict. The execution, delivery and
performance of this Agreement and the HCR Ancillary Agreements by HCR will not
conflict with or violate any law, judgment, order, decree or regulation, the
Certificate of Incorporation or Bylaws of HCR, each as may have been amended,
or any contract or agreement to which HCR is a party or by which HCR is bound.
10.4 Brokers. Neither HCR nor any HCR Affiliate has incurred any
brokers', finders' or any similar fee in connection with the transactions
contemplated by this Agreement or the HCR Ancillary Agreements.
10.5 Litigation. There is no litigation, arbitration, proceeding,
governmental
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investigation, citation or action of any kind pending or, to the knowledge of
HCR, proposed or threatened, against HCR or any HCR Affiliate which could have
a material adverse effect on the transactions contemplated hereby or by the HCR
Ancillary Agreements. There is no action, suit or proceeding against HCR or any
HCR Affiliate by any Person which questions the validity, legality or propriety
of the transactions contemplated by this Agreement or the HCR Ancillary
Agreements.
10.6 Governmental Approvals. No permission, approval,
determination, consent or waiver by, or any declaration, filing or registration
with, any governmental or regulatory authority is required on the part of HCR
or any HCR Affiliate in connection with its execution and delivery of this
Agreement and the HCR Ancillary Agreements and the consummation by HCR or the
HCR Affiliates of the transactions contemplated in this Agreement and the HCR
Ancillary Agreements, except requirements under the Xxxx-Xxxxx-Xxxxxx Act, if
any.
10.7 Required Consent. There are no approvals or consents which
HCR is required to obtain from any third parties to enter into this Agreement
or the HCR Ancillary Agreements which have not been obtained.
10.8 Representations and Warranties True and Correct at Closing.
Except as specifically disclosed by HCR to ALS in writing prior to or at the
Initial Closings with respect to matters arising after the date of this
Agreement, the representations and warranties of HCR set forth in this Article
10 will be true and correct in all material respects as of the Initial
Closings.
ARTICLE 11
INDEMNIFICATION
11.1 HCR's Indemnity. HCR hereby agrees to indemnify ALS, DEVCO
and all Project Entities, and each of them, and hold them harmless from and
against any and all losses, damages, costs, expenses, liabilities, obligations
and claims of any kind (including, without limitation, reasonable attorneys'
fees and other reasonable legal costs and expenses) which any of them may at
any time suffer or incur, or become subject to, as a result of or in connection
with:
(a) any material breach or material inaccuracy of any of
the representations and warranties made by HCR or any HCR Affiliate in
this Agreement or in any HCR Ancillary Agreement;
(b) any material failure by HCR or any HCR Affiliate to
carry out, perform, satisfy or discharge any of its covenants,
agreements, undertakings, liabilities or obligations under this
Agreement or under any and all HCR Ancillary Agreement;
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(c) any payments by ALS with respect to any obligations
of DEVCO which have been jointly guaranteed by ALS and HCR, to the
extent such payments exceed ALS's proportionate share of such
obligations, based on its Percentage Interest; or
(d) any suit, action or other proceeding brought by any
Person against ALS, any ALS Affiliate, DEVCO or any Project Entity
arising out of, or in any way related to, any of the matters referred
to in Section 11.1(a), 11.1(b) or 11.1(c) hereof,
11.2 ALS's Indemnity. ALS hereby agrees to indemnify HCR, DEVCO
and all Project Entities, and each of them, for and hold them harmless from and
against any and all losses, damages, costs, expenses, liabilities, obligations
and claims of any kind (including reasonable attorneys' fees and other
reasonable legal costs and expenses) which either of them may at any time
suffer or incur, or become subject to, as a result of or in connection with:
(a) any material breach or material inaccuracy of any of
the representations and warranties made by ALS or any ALS Affiliate in
this Agreement or in any and all ALS Ancillary Agreements;
(b) any material failure by ALS or any ALS Affiliate to
carry out, perform, satisfy or discharge any of its covenants,
agreements, undertakings, liabilities or obligations under this
Agreement or under any and all ALS Ancillary Agreements;
(c) any payments by HCR with respect to any obligations
of DEVCO which have been jointly guaranteed by HCR and ALS, to the
extent such payments exceed HCR's proportionate share of such
obligations, based on its Percentage Interest; or
(d) any suit, action or other proceeding brought by any
Person against HCR, any HCR Affiliate, DEVCO or any Project Entity
arising out of, or in any way related to, any of the matters referred
to in Section 11.2(a), 11.2(b) or 11.2(c) hereof.
11.3 Provisions Regarding Indemnities.
(a) The obligations of HCR and ALS under Section 11.1
and 11.2, respectively, shall survive for the statute of limitations
period applicable to such rights of indemnification. Delivery of any
written demand for indemnification by an indemnified party shall toll
the survival period for the subject of the particular demand and, once
notice is given, the indemnified party may pursue the particular claim
to its conclusion to the extent permitted by applicable law.
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(b) The indemnified party shall promptly notify the
indemnifying party in writing and in reasonable detail of any claim,
demand, action or proceeding for which indemnification will be sought
under Section 11.1 or Section 11.2 of this Agreement, and if such
claim, demand, action or proceeding is a third party claim, demand,
action or proceeding, the indemnifying party will have the right, at
its expense, to assume the defense thereof using counsel reasonably
acceptable to the indemnified party. The indemnified party shall have
the right to participate, at its own expense, with respect to any such
third party claim, demand, action or proceeding. In connection with
any such third party claim, demand, action or proceeding, the parties
shall cooperate with each other and provide each other with access to
relevant books and records in their possession. No such third party
claim, demand, action or proceeding shall be settled without the prior
written consent of the indemnified party, such consent not to be
unreasonably withheld or delayed.
ARTICLE 12
MISCELLANEOUS
12.1 Entire Agreement; Amendment. This Agreement and the other
agreements and documents executed in connection herewith, constitute the entire
agreement between the parties pertaining to the subject matter of this
Agreement, and supersede all prior agreements, promises, covenants,
arrangements, communications, representations or warranties, whether oral or
written, by any officer, employee or representative of any party hereto. No
amendment, supplement, modification or waiver of this Agreement shall be
binding unless executed in writing by the party to be bound thereby. No waiver
of any of the provisions of this Agreement shall be deemed or shall constitute
a waiver of any other provision of this Agreement, whether or not similar, nor
shall such waiver constitute a continuing waiver unless otherwise expressly
provided.
12.2 Fees and Expense. Whether or not the transactions
contemplated by this Agreement are consummated, and except as expressly
provided herein or in any Ancillary Agreement, each of the parties hereto shall
pay the fees and expenses of such party's counsel, accountants, brokers,
consultants, investment bankers and other experts incident to the negotiation
and preparation of this Agreement and the consummation of the transactions
contemplated by this Agreement.
12.3 Confidentiality. Except to the extent permitted by this
Section 12.3 hereof, the parties hereto will at all times hold and cause their
consultants and advisors to hold in confidence the information contained in
this Agreement. In addition, each party (the "Receiving Party") who receives
any Confidential Information concerning the other party (the "Disclosing
Party") will at all times hold and cause its advisors and representatives to
hold in strict confidence such Confidential Information which shall have been
or will be furnished by the Disclosing Party to the Receiving Party or its
employees, advisors and representatives in connection with the transactions
contemplated by this Agreement and/or
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any Ancillary Agreements. All such Confidential Information shall be disclosed
by a Receiving Party only to its employees, advisors, agents, officers,
directors and representatives engaged in the evaluation of such information. If
the transactions contemplated by this Agreement are not consummated, regardless
of the reason therefor, then such confidence will be maintained by the
Receiving Party. The provisions of this Section 12.3 shall not apply to the
extent that such Confidential Information (a) was previously known to the
Receiving Party prior to disclosure by the Disclosing Party, (b) is in the
public domain through no fault of the Receiving Party, (c) is lawfully acquired
by the Receiving Party from a third party under no obligation of confidence to
the Disclosing Party, or (d) is required by any law or by any governmental or
judicial body to be disclosed; provided that upon receiving notice of a
required disclosure under this clause (d), the Receiving Party will promptly so
notify the Disclosing Party in writing. Such Confidential Information may be
used in connection with the business of DEVCO or any DEVCO Entity, but shall
otherwise not be used to the detriment of the Disclosing Party in any manner
and all Confidential Information provided by the Disclosing Party to the
Receiving Party, including all copies and extracts thereof, will be returned to
the Disclosing Party immediately upon such party's written request.
In addition to the above, for purposes of this Section 12.3 the term
"Confidential Information" shall mean any data or information that is
designated as "confidential" by the Disclosing Party, is of value to the
Disclosing Party and is not generally known to competitors of the Disclosing
Party or to the public, and whose confidentiality is maintained. Confidential
Information shall include, but not be limited to, written lists of the
Disclosing Party's current or potential residents or other customers, the
identity of various suppliers, non-public information concerning the Disclosing
Party's executives and employees and its financial affairs, business plans,
services, research, development, purchasing, accounting, engineering and
marketing.
12.4 Further Assurances. Following the Closing, each party will
execute such further documents and perform such further acts as may be
reasonably necessary to consummate the transactions contemplated by this
Agreement and the Ancillary Agreements and in accordance with the terms of this
Agreement and the Ancillary Agreements, to aid the more efficient execution of
the transactions contemplated hereby and thereby.
12.5 No Liens. ALS and HCR, and each one individually, hereby
agrees to keep its ownership interest in DEVCO and any DEVCO Entity free and
clear from any and all security interests, liens, restrictive covenants or
other encumbrances in favor of any and all third parties.
12.6 Public Statement. Each party to this Agreement will consult
with the other party prior to issuing any press release or making any other
public statement with respect to the transactions contemplated in this
Agreement, and will not issue any such release or make any such statement
without the approval of the other party (in its sole discretion), except such
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disclosure as is required or otherwise reasonably appropriate pursuant to any
state or federal securities law or the rules and regulations of any relevant
securities exchange or quotation system upon which ALS's or HCR's securities
are then listed or traded.
12.7 Applicable Law. All questions concerning the construction,
validity and interpretation of this Agreement, and the performance of the
obligations imposed by this Agreement, shall be governed by the law of the
State of Delaware, without giving effect to principles of conflicts of laws.
12.8 Binding Effect; Assignment. This Agreement and all of the
provisions hereof shall be binding upon and inure to the benefit of the Parties
and their respective successors and assigns, but neither this Agreement nor any
of the rights, interests or obligations hereunder shall be assigned or
delegated by any of the Parties without the prior written consent of the other
Party, whether by operation of law or otherwise.
12.9 Notices. All notices, consents, approvals and other
communications which may be or are required to be given by either Seller or
Purchaser under this Agreement shall be properly given if made in writing and
sent by (a) hand delivery, or (b) certified mail, return receipt requested, or
(c) nationally recognized overnight delivery service for next business day
delivery (such as Express Mail, Federal Express or Airborne Express), or (d)
facsimile or telecopier, provided a confirming copy thereof is thereafter also
sent via the methods described in (a)-(c), above, with all postage and delivery
charges paid by the sender and addressed to Purchaser or Seller, as applicable,
as follows. Such notices delivered (a) by hand shall be deemed received upon
actual delivery, (b) by overnight delivery service shall be deemed received on
the business day following the date of deposit with such overnight service, (c)
by mail shall be deemed received upon the earlier of actual receipt or two (2)
business days after mailing, and (d) by facsimile or telecopier shall be deemed
received upon the date the sender receives verbal or electronic confirmation of
such transmission, without regard to when the confirming copy is sent or
delivered. Said notice addresses are as follows:
IF TO SELLER:
HCR Manor Care, Inc.
Xxx Xxxxxxx, 00xx Xxxxx
Xxxxxx, Xxxx 00000-0000
Attn: R. Xxxxxxx Xxxxxx, Esq.
Telecopier: 000-000-0000
Telephone: 000-000-0000
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with a copy to:
Xxxx Xxxxx Xxxx & XxXxxx LLP
0000 X Xx., X.X.
Xxxx Xxxxx, Xxxxx 0000
Xxxxxxxxxx, XX 00000
Attn: Xxxxxx X. Xxxx, Esq.
Telecopier: (000) 000-0000
Telephone: (000) 000-0000
IF TO PURCHASER:
Alternative Living Services, Inc.
000 X. Xxxxxxxxxx Xxxx, Xxxxx 000
Xxxxxxxxxx, Xxxxxxxxx 00000
Attn: Xxxxxxx X. Xxxxx
Telecopier: (000) 000-0000
Telephone: (000) 000-0000
with a copy to:
Xxxxxx & Xxxxxx LLP
2700 International Tower
Peachtree Center
000 Xxxxxxxxx Xxxxxx, X.X.
Xxxxxxx, Xxxxxxx 00000
Attention: Xxxx X. Xxxx, Esq.
Telecopier: (000) 000-0000
Telephone: (000) 000-0000
Either party may change its address for notices hereunder upon not less than
five (5) days notice to the other, and either party's counsel may give notice
on behalf of their respective clients. Inability to give notices due to
incorrect address or due to failure of a party to give notice of a change of
address, refusal to accept notices, and inability to transmit notices due to
mechanical or other difficulties on the recipient's end (including without
limitation a malfunctioning facsimile machine) shall be deemed to be effective
notice hereunder.
12.10 Facsimile Signature; Counterparts. This Agreement may be
executed by facsimile and in several counterparts, each of which shall be
deemed an original, but such counterparts shall together constitute one and the
same Agreement.
12.11 Headings. The Article and Section headings in this Agreement
are inserted for convenience of reference only and shall not constitute a part
hereof.
12.12 Construction. Common nouns and pronouns shall be deemed to
refer to the masculine, feminine, neuter, singular and plural, as the identity
of the person may in the
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context require. References to Sections herein include all subsections which
are subsidiary to the Section referred to. No provision of this Agreement shall
be construed in favor of or against any Party hereto by reason of the extent to
which any such Party or its counsel participated in the drafting thereof.
12.13 Severability. If any provision, clause or part of this
Agreement, or the application thereof under certain circumstances, is held
invalid, then the remainder of this Agreement, or the application of such
provision, clause or part under other circumstances, shall not be affected
thereby unless such invalidity materially impairs the ability of either party
or both parties to consummate the transactions contemplated by this Agreement
or materially deprives either party of the benefits afforded hereby or by any
of the Ancillary Agreements.
12.14 Knowledge. Any representation, warranty, covenant or
statement which is made to the knowledge of any Party shall require that such
Party make reasonable investigation and inquiry with respect thereto to
ascertain the correctness and validity thereof.
12.15 Survival of Representations and Warranties. All
representations and warranties of the parties contained in this Agreement or
made pursuant to this Agreement shall survive the Closing Date and the
consummation of the transactions contemplated by this Agreement.
12.16 Arbitration. The parties hereto agree that any and all
controversies or claims arising out of or relating to this Agreement, any of
the ALS Ancillary Agreements or HCR Ancillary Agreements or the breach of any
of the foregoing, shall be settled by arbitration pursuant to the Federal
Arbitration Act, 9 U.S.C. SS. 1 et seq., in accordance with the Commercial
Arbitration Rules of the American Arbitration Association applicable in
Illinois. The parties hereto further agree that the arbitrators in any such
arbitration shall not be authorized to award any punitive damages in connection
with any controversy or a claim settled by arbitration hereunder. The decision
of the arbitrator in any such arbitration shall be final and binding upon the
parties and judgment upon the award may be entered in any court having
jurisdiction thereof. Any arbitration shall take place in such place as is
agreed on by the parties hereto, or, if they cannot agree, in Chicago,
Illinois, and the expenses of the arbitrators shall be borne by the losing
party. The arbitration shall be conducted before a panel of three (3)
arbitrators, one selected by HCR, one selected by ALS, and one selected by
mutual agreement of the arbitrators selected by HCR and ALS. To the extent that
one or more of the provisions of this Section 12.16 shall be declared invalid,
void or unenforceable, the remainder of the provisions of this Section 12.16
shall remain in full force and effect. All notices in connection with the
arbitration shall be made in the manner set forth in Section 12.9 hereof.
Notwithstanding the foregoing, the provisions of Section 12.16 shall not apply
to any breach of Section 12.13.
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12.17 Waiver of Compliance. Any failure of ALS or HCR to comply
with any obligation, covenant, agreement or condition contained herein may be
expressly waived in writing by HCR or ALS, respectively; provided, however,
that such waiver or failure to insist upon strict compliance with such
obligation, covenant, agreement or condition shall not operate as a waiver of,
or estoppel with respect to, any subsequent or other failure by the other
party.
12.18 Third Parties. Except as specifically set forth or referred
to herein, nothing herein expressed or implied is intended or shall be
construed to confer upon or give to any Person other than the parties hereto
and their successors or assigns, any rights or remedies under or by reason of
this Agreement.
12.19 Legal Fees. If any action at law or in equity is necessary to
enforce or interpret the terms of this Agreement, the prevailing party shall be
entitled to reasonable attorneys' fees, costs and disbursements incurred in
connection therewith in addition to any other relief to which such party may be
entitled.
12.20 Time of Essence. Time is of the essence with respect to this
Agreement.
12.21 Exhibits. To the extent that the terms of any of the Exhibits
hereto conflict with the terms of this Agreement, the terms of this Agreement
shall control. To the extent the Parties determine that it is necessary or
advisable to include any of the terms of this Agreement in any of the Exhibits,
such Exhibit shall be revised to incorporate such terms.
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IN WITNESS WHEREOF, the Parties have caused this Agreement to be duly
executed as of the day and year first written above.
HCR MANOR CARE, INC.
By: /s/R. Xxxxxxx Xxxxxx
--------------------------------------
Its: Vice President
--------------------------------------
ALTERNATIVE LIVING SERVICES, INC.
By: Xxxxxx X. Xxxxxx
--------------------------------------
Its: Senior Vice President
--------------------------------------
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LIST OF EXHIBITS AND SCHEDULES
EXHIBIT DESCRIPTION
------- -----------
A Development Agreement
B Management Agreement
C Operating Agreement (DEVCO)
D Project Purchase Agreement
SCHEDULE
--------
1 Description of Existing ALS Commitments
