Exhibit 10.1
FORMATION AGREEMENT
THIS FORMATION AGREEMENT (this "Agreement") is made and entered into as of
the 7th day of May, 1997 by and among (i) BROOKDALE LIVING COMMUNITIES, INC., a
Delaware corporation (the "Corporation"), (ii) BROOKDALE HOLDINGS, INC., a
Delaware corporation ("Holdings"), (iii) XXXX X. XXXXXXX ("Xxxxxxx"), (iv) THE
PRIME GROUP, INC., an Illinois corporation ("PGI"), and (v) PRIME GROUP LIMITED
PARTNERSHIP, an Illinois limited partnership ("PGLP").
RECITALS:
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A. The Corporation is a recently organized corporation formed for the
purpose of, among other things, acquiring substantially all of the senior and
assisted living business and operations of the senior housing division of PGI
and its affiliates, including all ownership interests of PGI and PGLP in BLC
Property, Inc., a Delaware corporation ("Property"), River Oaks Partners, an
Illinois general partnership ("River Oaks") and The Ponds of Pembroke Limited
Partnership, an Illinois limited partnership ("Pembroke") (Property, River Oaks
and Pembroke being hereinafter referred to collectively as the "Contributed
Entities" and River Oaks and Pembroke being hereinafter referred to together as
the "Partnerships"), together with all other interests of PGI and PGLP in and to
each of the businesses and facilities operated and owned by the Contributed
Entities (all of such ownership interests in the Contributed Entities and all of
such other assets being together referred to herein as the "Contributed
Projects").
B. Holdings is a wholly owned subsidiary of the Corporation.
X. Xxxxxxx, PGI and PGLP (collectively, the "Transferors") desire to
convey all of their respective right, title and interest in and to the
Contributed Projects and the operations relating thereto to the Corporation in
connection with an initial public offering (the "Offering") of shares of the
Corporation's common stock, par value $0.01 per share (the "Common Stock").
X. Xxxxxxx desires to convey certain of his respective right, title and
interest in and to The Island on Lake Xxxxxx facility in Lago Vista, Texas ("The
Island Facility") to the Corporation in connection with the Offering of Common
Stock.
E. The Corporation has agreed with PGI to terminate the right, title and
interest in and to The Island Facility, conveyed to it by Xxxxxxx, and has
agreed to cause Xxxxxxx, as a condition of his employment by the Corporation, to
pay or reimburse PGI or its affiliate for three percent (3.0%) of any negative
cash flow incurred or realized by PGI or any affiliate of PGI by or from the
operation of The Island Facility.
F. PGI has entered into an agreement (the "Xxxxxx Agreement") with KILICO
Realty Corporation and Xxxxxx Investors Life Insurance Company (collectively,
the "Xxxxxx Transferors") pursuant to which the Xxxxxx Transferors have agreed
to convey certain interests in River Oaks and Pembroke to PGI or its designee or
assignee.
G. PGI previously assigned to PGLP, and PGLP has agreed to convey and
assign to the Corporation, the rights to receive certain partnership interests
as hereinafter described from the Xxxxxx Transferors, and the Corporation has
agreed to assume the obligation to pay the purchase price therefor as set forth
in the Xxxxxx Agreement.
H. PGI has entered into certain real estate purchase agreements with (i)
Hawthorn Lakes Associates dated as of September 16, 1996, (ii) Edina Park Plaza
Associates Limited Partnership dated as of September 16, 1996 and (iii) Park
Place General Partnership and Park Place II, L.L.C. dated as of February 20,
1997 (collectively, such purchase agreements are referred to herein as the
"Facility Acquisition Agreements" and the parties thereto other than PGI are
referred to herein as the "Facility Transferors") for the purchase of certain
senior and assisted living facilities owned by the Facility Transferors.
I. PGI has agreed to convey and assign to the Corporation or its designee
all of PGI's rights under the Facility Acquisition Agreements and the
Corporation has agreed to assume PGI's obligations under the Facility
Acquisition Agreements.
J. PGI has entered into certain real estate purchase agreement with (i)
certain trusts and the direct and indirect beneficiaries thereof with respect to
a development site located in Glen Ellyn, Illinois dated as of February 24,
1997, (ii) AC Properties, L.L.C. dated as of February 14, 1997 and (iii) VG
Office Partnership '95, Ltd. dated February 21, 1997, as amended (collectively,
such purchase agreements are referred to herein as the "Development Site
Acquisition Agreements" and the parties thereto other than PGI are referred to
herein as the "Development Site Transferors") for the purchase of certain
parcels of real estate owned by the Development Site Transferors.
K. PGI has agreed to convey and assign to the Corporation or its designee
all of PGI's rights under the Development Site Acquisition Agreements and the
Corporation has agreed to assume PGI's obligations under the Development Site
Acquisition Agreements.
L. The parties desire to enter into this Agreement to set forth their
understanding with respect to the manner in which the Corporation (or its
designee) will acquire interests in the Contributed Projects, the operations
relating thereto and the rights of PGI and PGLP in the Xxxxxx Agreement, the
Facility Acquisition Agreements and the Development Site Acquisition Agreements
in exchange for shares of Common Stock, cash and the assumption of certain
liabilities.
AGREEMENT:
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NOW, THEREFORE, in consideration of the premises and the mutual covenants
herein contained, the parties hereto hereby agree as follows:
1. TRANSFER OF CONTRIBUTED PROJECTS AND CERTAIN OTHER ASSETS. As part of a
single plan, on the Closing Date (as hereinafter defined) the Transferors
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will convey (x) the Contributed Projects together with (y) the rights of PGI in
the Xxxxxx Agreement, the Facility Acquisition Agreements and the Development
Site Acquisition Agreements, to the Corporation or its designee in connection
with the Corporation's initial public offering, in consideration for the
issuance by the Corporation of its Common Stock to the Transferors as provided
in Section 3, the assumption by the Corporation and Holdings of the liabilities
associated with the Contributed Projects referred to in Section 4 and the cash
payments referred to in Section 4, all in a transaction designed to meet the
requirements of section 351(a) of the Code.
(a) PGI shall transfer to Holdings a 1% general partnership interest
in River Oaks and a 1% general partnership interest in Pembroke.
(b) PGI shall transfer to the Corporation the following:
(i) A 49% general partnership interest in River Oaks.
(ii) A 24% general partnership interest in Pembroke.
(iii) All of its rights and interests in the Facility
Acquisition Agreements and the Development Site Acquisition Agreements.
(iv) All of its interests in all other assets and properties
of the senior housing division of PGI and its affiliates, as more fully
described in Exhibit A hereto.
(c) (i) PGLP shall transfer to the Corporation all of its
rights under the Xxxxxx Agreement, including its rights to purchase the
following partnership interests from the Xxxxxx Transferors pursuant to the
Xxxxxx Agreement:
and (1) A 50% general partnership interest in River Oaks;
(2) A 25% limited partnership interest and a 50%
general partnership interest in Pembroke; or
(ii) If PGLP's rights under the Xxxxxx Agreement are not
transferred to the Corporation pursuant to Section l(c)(i) above, all of its
right, title and interest in:
(1) A 50% general partnership interest in River Oaks
acquired pursuant to the Xxxxxx Agreement; and
(2) A 25% limited partnership interest and a 50%
general partnership interest in Pembroke acquired pursuant to the Xxxxxx
Agreement.
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(d) Xxxxxxx shall transfer to the Corporation all of his right, title
and interest in and to the Contributed Entities, the Contributed Projects and
the senior and assisted living business and operations of the senior housing
division of PGI and its affiliates held by Xxxxxxx pursuant to that certain
Employment and Equity Participation Agreement (the "Employment and Equity
Participation Agreement"), between Xxxxxxx and PGI (which agreement supersedes
that certain Compensation Agreement dated September 13, 1995 between Xxxxxxx and
PGI).
(e) In conjunction with the transfers described in clauses (a), (b),
(c) and (d) of this Section 1,
(i) Xxxxxxx shall transfer to the Corporation all of his
right, title and interest to The Island Facility pursuant to the Employment and
Equity Participation Agreement; and
(ii) The Corporation hereby terminates and waives any and
all right, title and interest to The Island Facility received pursuant to clause
(i) of this Section 1(e), and all agreements and arrangements representing such
interest shall have no further force or effect.
2. CERTAIN DISTRIBUTIONS. On or prior to the Closing Date, the Transferors
shall have the right to receive distributions from the Partnerships, net of all
advances to PGI by the Partnerships, provided, that at the time of the Closing
(as defined below), the Partnerships shall have unrestricted cash in the
aggregate amount of not less than $800,000 after giving effect to such
distributions. Within forty-five (45) days following the Closing Date, the
Corporation shall deliver to the Transferors an accounting prepared by its
independent accountants showing the actual computation of unrestricted cash of
the Corporation as of the Closing Date following the distribution described in
the first sentence of this Section 2, and, within ten days of receipt of such
accounting, either (a) the Transferors shall pay to the Corporation a sum equal
to the amount, if any, by which $800,000 exceeds the amount of unrestricted cash
shown on such accounting or (b) the Corporation shall pay, or cause one or more
of River Oaks or Pembroke to pay, to the Transferors an aggregate sum equal to
the amount, if any, by which the amount of unrestricted cash shown on such
accounting exceeds $800,000. In addition to any distributions made to PGI
pursuant to the first sentence of this Section 2, the Xxxxxxx Money (as defined
in the Xxxxxx Agreement) under the Xxxxxx Agreement shall be returned to PGLP
(or, if the Xxxxxxx Money is credited against the purchase price payable to the
Xxxxxx Transferors, the Corporation shall reimburse PGLP for such purchase
money) and PGI shall be entitled to reimbursement from the Corporation of all
sums delivered by PGI to the Facility Transferors under Facility Acquisition
Agreements and the Development Site Acquisition Agreements as a deposit,
prepayment or xxxxxxx money, all of which is set forth on Schedule 1 hereto.
3. ISSUANCE OF COMMON STOCK. In consideration of the transfer of the
assets provided for in Section 1, on the Closing Date, the Corporation shall
issue an aggregate of 1,703,043 shares of its Common Stock to PGI and PGLP
(100,000 shares of which PGI has agreed to grant to Xxxxxx X. Xxxxxxxx, Xx. an
option to purchase pursuant to the terms, and
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subject to the conditions, of that certain Stock Option and Deposit Agreement
dated as of the date hereof by and between Xxxxxx X. Xxxxxxxx, Xx. and PGI), and
296,957 shares of its Common Stock to Xxxxxxx. All such shares of Common Stock
shall be fully paid and nonassessable.
4. ASSUMPTION OF LIABILITIES; CERTAIN PAYMENTS.
(a) As partial consideration for the transfer of the assets by the
Transferors to the Corporation as provided for in Section 1, on the Closing Date
the Corporation and Holdings will enter into an Assignment and Assumption
Agreement substantially in the form of Exhibit A pursuant to which the
Corporation shall assume all of the outstanding liabilities of each Transferor
with respect to the assets being transferred (including the assets and
operations of River Oaks and Pembroke and the operations of the senior housing
division of PGI) and pursuant to which Holdings will assume certain liabilities
relating to the Partnerships, whether or not reflected on the books and records
of the Transferors or the entity whose ownership is being transferred, and
whether known or unknown, accrued or unaccrued, absolute, contingent or
otherwise.
(b) In addition, on the Closing Date, the Corporation will make cash
payments as described in Schedule 1 to this Agreement which payments shall be in
complete satisfaction of the recipients' obligations hereunder in respect of the
Transferors' right, title and interest in the Contributed Projects and each of
the Partnerships, including reimbursement to PGI of all costs and expenses
incurred by PGI in connection with the Offering and the transactions
contemplated thereby.
5. CLOSING DATE. The closing of the transactions contemplated by this
Agreement (the "Closing") shall occur on the day (the "Closing Date")
immediately following the day that all of the conditions precedent of the
Transferors and the Corporation under this Agreement have been met or waived by
the party entitled to the benefit thereof, but in any event no later than the
date of closing of the Offering.
6. REPRESENTATIONS AND WARRANTIES.
(a) Each of PGI and PGLP hereby represents and warrants to the
Corporation and Holdings as follows:
(i) It is a corporation or limited partnership duly organized and
validly existing under the laws of its jurisdiction of organization.
(ii) It has the full corporate or partnership power and authority
to execute and deliver this Agreement and to consummate the transactions
contemplated hereby.
(iii) This Agreement constitutes its valid and legally binding
obligation, enforceable against it in accordance with its terms.
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(iv) It owns the partnership interests and other assets to be
transferred by it to the Corporation pursuant to the terms of this Agreement
free and clear of all liens and encumbrances, other than restrictions contained
in the partnership agreement with respect to a particular Partnership.
(v) Each of the Partnerships is duly organized and validly
existing.
(vi) The Contributed Projects have been operated in the ordinary
course since December 31, 1996.
(b) Xxxxxxx hereby represents and warrants to the Corporation and
Holdings as follows:
(i) This Agreement constitutes his valid and legally binding
obligation, enforceable against him in accordance with its terms.
(ii) He owns the interests to be transferred by him to the
Corporation pursuant to the terms of this Agreement free and clear of all liens
and encumbrances.
(c) Except as specifically warranted in Sections 6(a) and 6(b), the
Transferors make no representations and warranties to the Corporation or
Holdings whatsoever regarding the Contributed Projects, the assets or properties
to be acquired under the Facility Acquisition Agreements and the Development
Site Acquisition Agreements, or the assets of the Contributed Entities,
including, but not limited to, the warranty of merchantability or fitness for a
particular use, which is specifically disclaimed. The Corporation acknowledges
that all of the assets to be conveyed by the Transferors to the Corporation (and
all of the assets of the Contributed Entities) will be conveyed "as is, where
is." Transferors make no representation or warranty with respect to any asset
which is the subject of any of the Facility Acquisition Agreements or the
Development Site Acquisition Agreements.
(d) Each of the Corporation and Holdings hereby represents, warrants
and covenants with and to the Transferors as follows:
(i) It is a corporation duly organized and validly existing under
the laws of the State of Delaware.
(ii) It has the full corporate power and authority to execute and
deliver this Agreement and to consummate the transactions contemplated hereby.
(iii) This Agreement constitutes its valid and legally binding
obligation, enforceable against it in accordance with its terms.
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(e) The Corporation hereby represents, warrants and covenants with and
to the Transferors as follows:
(i) The Common Stock to be issued by the Corporation to the
Transferors pursuant to the terms of this Agreement will be duly authorized,
fully paid and nonassessable.
(ii) The Corporation will not take any action which would cause
the transfers provided for in Section 1 not to qualify for tax-free treatment
under section 351 of the Code.
(iii) On the Closing Date, the Corporation will hire all of the
employees of the Transferors associated with the Contributed Projects and will
assume all liabilities and obligations to or with respect to such employees,
including any accrued but unpaid benefits, bonuses and vacation pay.
(f) All of the representations and warranties provided for in this
Section 6 shall survive the Closing Date and the delivery of the closing
documents on the Closing Date.
7. CONDITIONS PRECEDENT.
(a) The obligation of the Transferors to consummate the transactions
contemplated hereby is subject to the satisfaction of the following conditions
(any of which may be waived by the Transferors in writing):
(i) All the terms, covenants and conditions of this Agreement to
be complied with and performed by the Corporation and Holdings on or before the
Closing Date shall have been fully complied with and performed in all respects.
(ii) All the representations and warranties made by the
Corporation and Holdings herein shall be true and correct in all material
respects on and as of the Closing Date.
(iii) All consents required for the valid and effective transfer
of the assets to be transferred in accordance with Section 1 shall have been
obtained and the consent to the assumption by the Corporation of the debts to
be assumed by the Corporation and Holdings pursuant to Section 4 shall have been
obtained, except for any approvals and consents described in Schedule 2 to this
Agreement.
(iv) There shall be no pending or threatened litigation against
any of the parties hereto concerning or relating to the transactions
contemplated hereby.
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(v) The approval of all administrative agencies, if any, whose
approval of the transactions contemplated hereby is necessary or desirable shall
have been obtained.
(vi) Each of the transactions contemplated by the Xxxxxx
Agreement shall close at or prior to the time of Closing of the transactions
contemplated hereby.
(vii) PGI and the Corporation shall have entered into a Space
Sharing Agreement substantially in the form of Exhibit B attached hereto and
made a part hereof.
(viii) The Corporation, PGI and PGLP shall have entered into a
Registration Rights Agreement substantially in the form of Exhibit C attached
hereto and made a part hereof.
(ix) The Corporation, PGLP, Xxxxxxx X. Xxxxxxx and PGI shall have
entered into a Non-Compete Agreement substantially in the form of Exhibit D
attached hereto and made a part hereof.
(x) PGI, PGLP, Prime Group VI, L.P., an Illinois limited
partnership, and the Corporation shall have entered into a Voting Agreement
substantially in the form of Exhibit E attached hereto and made a part hereof.
(xi) The Corporation and The Island on Lake Xxxxxx, Ltd., an
affiliate of PGI, shall have entered into a Management Agreement substantially
in the form of Exhibit F attached hereto and made a part hereof.
(xii) PGI and Xxxxxxx shall have entered into an Indemnity
Agreement substantially in the form of Exhibit G attached hereto and made a part
hereof.
(b) The obligations of the Corporation and Holdings to consummate the
transactions contemplated hereby are subject to the satisfaction of the
following conditions (any of which may be waived by the Corporation and Holdings
in writing):
(i) All the terms covenants and conditions of this Agreement to
be complied with and performed by the Transferors on or before the Closing Date
shall have been fully complied with and performed in all respects.
(ii) All the representations and warranties made by the
Transferors herein shall be true and correct in all material respects on and as
of the Closing Date.
(iii) All required consents necessary for the valid and effective
transfer of the assets to be transferred to the Corporation in accordance with
the provisions of
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Section 1 shall have been obtained, except for any approvals and consents
described in Schedule 2 to this Agreement.
(iv) The Corporation shall have obtained title insurance (or
endorsed commitment) insuring that all real property owned by the Contributed
Entities, are vested in the respective entities free and clear of all mortgages,
liens and encumbrances except those reasonably acceptable to the Corporation.
(v) The conditions referred to in Sections 7(a)(iv) through
7(a)(xii) shall have been complied with or otherwise satisfied .
8. INDEMNIFICATION
(a) Each Transferor hereby agrees to indemnify the Corporation and
Holdings for, and to hold the Corporation and Holdings harmless from, the
following:
(i) Any and all liabilities, damages, losses, costs or
deficiencies resulting from any misrepresentation, breach of any warranty or
nonfulfillment of any agreement or covenant on the part of that Transferor,
whether contained in this Agreement or in any document furnished in connection
with the transactions contemplated hereby; and
(ii) Any and all actions, suits, proceedings, demands,
assessments, judgments, costs and expenses incident to the foregoing, including
reasonable attorney's fees.
(b) Each of the Corporation and Holdings hereby agrees to indemnify
each Transferor for, and to hold each Transferor harmless from, the following:
(i) Any and all indebtedness, lease, contract or other
liabilities and obligations assumed by the Corporation and Holdings in
accordance with the terms hereof;
(ii) Any and all liabilities, losses, costs, damages or
deficiencies resulting from any misrepresentations, breach of any warranty or
nonfulfillment of any agreement or covenant on the part of the Corporation or
Holdings, whether contained in this Agreement or in any document furnished in
connection with the transactions contemplated hereby;
(iii) Any and all liabilities, damages, losses, costs or
deficiencies resulting from any act or circumstance relating to any of the
assets transferred (including the assets and operations of the Contributed
Entities and operations of PGI's senior housing division) whenever occurring;
(iv) Any loss, claim, damage, or liability, including any loss,
claim, damage, or liability under the Securities Act of 1933, as amended, or any
applicable state
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securities laws, arising out of, or attributable to the Offering, except for
losses, claims, damages or liabilities arising from the inaccuracy of
information supplied in writing by PGI for inclusion in the prospectus relating
to the Offering; and
(v) Any and all actions, suits, proceedings, demands, assessments,
judgments, costs and expenses incident to any of the foregoing, including
reasonable attorneys' fees.
(c) Any party seeking indemnification ("Indemnitee") pursuant to this
Section 8 shall promptly (within 20 days of service to the Indemnitee if a third
party has commenced actual litigation against the Indemnitee) give written
notice to the party from which indemnification is sought ("Indemnitor") after
the Indemnitee has knowledge of any claim against the Indemnitor as to which
recovery may be sought against the Indemnitee pursuant to this Section 8, or of
the commencement of any legal proceedings against the Indemnitee as to such
claim after the Indemnitee has knowledge of such proceedings, whichever shall
first occur, and shall permit the Indemnitor to assume the defense of any such
claim or any litigation resulting from such claim. Such notice shall specify in
reasonable detail the facts known to the Indemnitee giving rise to such
indemnification rights and, if possible, an estimate of the amount of liability
which could result therefrom. The right of the Indemnitee to indemnification
hereunder shall be deemed agreed to unless, within ten days after the receipt of
such notice, the Indemnitee is notified in writing by the Indemnitor that it
disputes the right to indemnification as set forth in such notice. Failure by
the Indemnitor to notify the Indemnitee of the Indemnitor's election to defend
such action within ten days after notice thereof shall have been given to the
Indemnitor, or failure to deliver notification to the Indemnitee by the
Indemnitor that the Indemnitee's right to indemnification is being disputed,
shall be deemed an acknowledgment by Indemnitor that Indemnitee is entitled to
indemnification hereunder and shall be deemed to be an election by Indemnitor to
defend such action. The Indemnitor shall not, in the defense of such claim or
any litigation resulting therefrom, consent to entry of any judgment (except
with the consent of the Indemnitee) or enter into any settlement (except with
the consent of the Indemnitee) which does not include as an unconditional term
thereof the giving by the claimant or the plaintiff to the Indemnitee of a full,
absolute and unconditional release from all liability in respect of such claim
or litigation.
(d) If the Indemnitor shall not assume the defense of any such claim
or litigation resulting therefrom, the Indemnitee may defend against such claim
or litigation in such manner as it may deem appropriate. The Indemnitee may
settle such claim or litigation on such terms as it may deem appropriate and the
Indemnitor shall promptly reimburse the Indemnitee for the amount of such
settlement, and all expenses, legal or otherwise, incurred by the Indemnitee in
connection with the defense against, or settlement of, such claim or litigation.
If no settlement of such claim or litigation is made, the Indemnitor shall
promptly reimburse the Indemnitee for the amount of any judgment rendered with
respect to such claim or in such litigation and of all expenses, legal or
otherwise, incurred by the Indemnitee in the defense against such claim or
litigation. Notwithstanding the foregoing, if the Indemnitor has disputed the
Indemnitee's right to indemnification in accordance with the provisions of
Section 8(c), the
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Indemnitor shall not be obligated to pay the Indemnitee the amount provided for
in this Section 8(d) until such dispute has been resolved and it has been
determined that the Indemnitor is required to make such indemnification payment.
(e) The right of any party to seek indemnification hereunder shall
expire as to any claim not made on or prior to the first anniversary of the
Closing whether or not the basis for any such claim was known on such date.
9. MISCELLANEOUS.
(a) Each of the parties hereto hereby covenants and agrees that
subsequent to the Closing Date they will, at any time, and from time to time,
upon the request and at the expense of the Corporation, do, acknowledge and
deliver, or cause to be done, executed, acknowledged and delivered, all such
further acts, deeds, assignments, transfers, conveyances, powers of attorney and
assurances as may reasonably be required to fully effectuate the transactions
contemplated by this Agreement. Each of the Transferors and Xxxxxxx hereby
constitutes and appoints the Corporation as its true and lawful attorney-in-
fact, with full power of substitution, to collect for the account of the
Corporation or Holdings, as applicable, any receivables and other items conveyed
to the Corporation or Holdings, as applicable, pursuant to the provisions of
Section 1, to endorse in the name of the Transferor, the Corporation or
Holdings, or any of them, any check received on account of any receivable, claim
or other item, to institute and prosecute in the name of a Transferor or
otherwise, any and all proceedings which the Corporation or Holdings may deem
proper in order to collect, assert or enforce any claim, right or title of any
kind in and to any of such transferred assets.
(b) All notices, requests, demands or other communications required or
permitted under this Agreement shall be in writing and be personally delivered
against a written receipt, delivered to a reputable messenger service (such as
FedEx, DHL Courier, United Parcel Service, etc.) for overnight delivery,
transmitted by confirmed telephonic facsimile (fax) or transmitted by mail,
registered, express or certified, return receipt requested, postage prepaid,
addressed as follows:
If to the Corporation or Holdings:
Brookdale Living Communities, Inc.
00 Xxxx Xxxxxx Xxxxx
Xxxxx 0000
Xxxxxxx, Xxxxxxxx 00000
Attn: President
Fax: (000) 000-0000
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With a copy to:
Winston & Xxxxxx
00 Xxxx Xxxxxx Xxxxx
Xxxxxxx, Xxxxxxxx 00000
Attn: Xxxxx X. Xxxxxx
Fax: (000) 000-0000
If to Xxxxxxx:
Xxxx X. Xxxxxxx
000 Xxxxxxxx Xxxx
Xxxxxxxxxx, Xxxxxxxx 00000
If to PGI or PGLP:
c/o The Prime Group, Inc.
00 Xxxx Xxxxxx Xxxxx
Xxxxx 0000
Xxxxxxx, Xxxxxxxx 00000
Attn: Xxxxxxx X. Xxxxxxx
Fax: (000) 000-0000
With a copy to:
The Prime Group, Inc.
00 Xxxx Xxxxxx Xxxxx
Xxxxx 0000
Xxxxxxx, Xxxxxxxx 00000
Attn: Xxxxxx X. Xxxxxx
Fax: (000) 000-0000
All notices, demands and requests shall be effective upon being properly
personally delivered, upon being delivered to a reputable messenger service,
upon transmission of a confirmed fax, or upon being deposited in the United
States mail in the manner provided in this Section 9. However, the time period
in which a response to any such notice, demand or request must be given shall
commence to run from the date of personal delivery, the date of delivery by a
reputable messenger service, the date on the confirmation of a fax, or the date
on the return receipt, as applicable. If any party refuses delivery, the notice,
demand or request shall be deemed received (i) one business day after personal
delivery of the notice, demand or request was attempted or the notice, demand or
request was delivered to a reputable messenger service or was transmitted by fax
or (ii) three business days after the notice, demand or request was deposited in
the United States mail.
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(c) This Agreement may be modified or amended from time to time only
by a written instrument executed by all of the parties hereto.
(d) Captions contained in this Agreement are inserted only as a matter
of convenience and reference, and in no way define, limit, extend or describe
the scope of this Agreement, or the intent of any provision hereof. All
references to Sections herein shall refer to Sections of this Agreement unless
the context clearly requires otherwise.
(e) This Agreement shall be binding upon, and inure to the benefit of,
the parties hereto and their respective successors and assigns.
(f) This Agreement shall be governed by, and construed in accordance
with, the internal laws of the State of Illinois without regard to its conflicts
of laws rules.
(g) This Agreement represents the entire agreement of the parties
hereto with respect to the subject matter hereof.
(h) This Agreement may be executed in counterparts which, taken
together, shall constitute one and the same instrument.
[signature page follows]
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IN WITNESS WHEREOF, the undersigned have executed this Agreement as of the
day and year first above written.
CORPORATION AND HOLDINGS:
BROOKDALE LIVING COMMUNITIES, INC.
By: /s/ Xxxx X. Xxxxxxx
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Xxxx X. Xxxxxxx,
President and Chief Executive Officer
BROOKDALE HOLDINGS, INC.
By: /s/ Xxxx X. Xxxxxxx
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Xxxx X. Xxxxxxx,
President
TRANSFERORS:
Xxxx X. Xxxxxxx
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XXXX X. XXXXXXX
THE PRIME GROUP, INC.
By: /s/ Xxxxxxx X. Xxxxxxx
----------------------------------------
Name: Xxxxxxx X. Xxxxxxx
--------------------------------------
Title: President
-------------------------------------
PRIME GROUP LIMITED PARTNERSHIP
By: /s/ Xxxxxxx X. Xxxxxxx
----------------------------------------
Xxxxxxx X. Xxxxxxx,
Managing General Partner
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SCHEDULE 1
TO
FORMATION AGREEMENT
CERTAIN PAYMENTS
Amounts Payable to PGI or PGLP pursuant to Section 2:
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Purchase Price for the interests in River Oaks
and Pembroke described in Section 1(c): $6,150,000
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XXXXXXX MONEY DEPOSITS:
Facility Acquisitions
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Edina Park Plaza 25,000
Hawthorn Lakes 25,000
Park Place 510,000
Development Site Acquisitions
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Austin 50,000
Southfield 10,000
Xxxx Ellyn 10,000
Amounts Payable to PGI pursuant to Section 4(b):
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CREDIT ENHANCEMENT
COMMITMENT FEE:
LaSalle/Bank One 477,990
OFFERING COSTS AND EXPENSES:
Costs and Expenses through 5/6/97 1,152,715
---------
TOTAL $8,410,705
==========
SCHEDULE 2
TO
FORMATION AGREEMENT
POST-CLOSING CONSENTS
None.
EXHIBIT A
TO
FORMATION AGREEMENT
FORM OF ASSIGNMENT AND ASSUMPTION AGREEMENT
ASSIGNMENT AND ASSUMPTION AGREEMENT
FOR TRANSFER OF CONTRIBUTED ASSETS
----------------------------------
FOR VALUABLE CONSIDERATION, the receipt and sufficiency of which are
hereby acknowledged, XXXX X. XXXXXXX, THE PRIME GROUP, INC., an Illinois
corporation, and PRIME GROUP LIMITED PARTNERSHIP, an Illinois limited
partnership (collectively, "Assignors") do hereby assign, transfer and convey to
BROOKDALE LIVING COMMUNITIES, INC., a Delaware corporation (the "Corporation"),
and BROOKDALE HOLDINGS, INC., a Delaware corporation ("Holdings" and, together
with the Corporation, "Assignees"), the assets (collectively, the "Contributed
Assets") described on Schedule A attached hereto and made a part hereof,
together with any and all right, title and interest in any property, both real
and personal, to which the Contributed Assets relate and any other rights,
privileges and benefits appertaining thereto; provided, that the only portion of
the Contributed Assets that is hereby assigned, transferred and conveyed to
Holdings shall be a one percent (1%) general partnership interest in River Oaks
(as defined in the Formation Agreement) and a one percent (1%) general
partnership interest in Pembroke (as defined in the Formation Agreement).
Assignees hereby (i) accept the assignment and transfer of the
Contributed Assets and expressly assume (but in the case of Holdings, only with
respect to the Contributed Assets consisting of the interests in the
Partnerships (as hereinafter defined) assigned, transferred and conveyed to
Holdings by Assignors) any and all duties, obligations and liabilities, whether
arising prior to or after the date hereof, with respect to the Contributed
Assets and the properties and assets owned by the Partnerships as further
described on Schedule A (collectively the "Assumed Obligations") and (ii) agree
to indemnify and hold harmless Assignors, and Assignors' respective partners,
directors, officers, employees and agents, and its and their respective heirs,
legal representatives, successors and assigns, from and against any liability,
demand, claim or action in relation to any and all duties, obligations and
liabilities so assumed (it being understood by the parties hereto that Holdings'
assumption of duties, obligations and liabilities is limited as set forth in
clause (i) of this sentence).
Assignors hereby certify that they have full power to make this
Assignment, that this Assignment is being made in compliance with applicable law
and agreements and that the Contributed Assets have not otherwise been conveyed,
sold, transferred, encumbered, pledged, hypothecated or assigned. Except as
expressly set forth herein, and except for warranties made by Assignors in that
certain Formation Agreement dated as of the date hereof (the "Formation
Agreement"), among Assignors and Assignees, this Assignment is made without
representation or warranty. All capitalized terms used in this Assignment and
any Exhibit or Schedule hereto without definition have the meanings assigned to
them in the Formation Agreement.
[signature page follows]
-1-
IN WITNESS WHEREOF, Assignors and Assignees have executed this
Assignment as of the 7th day of May, 1997.
ASSIGNORS:
----------------------------------------------
XXXX X. XXXXXXX
THE PRIME GROUP, INC., an Illinois corporation
By: ----------------------------------------
Name: ----------------------------------------
Its: ----------------------------------------
PRIME GROUP LIMITED PARTNERSHIP, an
Illinois limited partnership
By: ----------------------------------------
Xxxxxxx X. Xxxxxxx,
Managing General Partner
ASSIGNEES:
BROOKDALE LIVING COMMUNITIES, INC., a
Delaware corporation
By: -----------------------------------
Xxxx X. Xxxxxxx,
President and Chief Executive
Officer
BROOKDALE HOLDINGS, INC., a Delaware
corporation
By: -----------------------------------
Xxxx X. Xxxxxxx,
President
-2-
SCHEDULE A
TO ASSIGNMENT AND ASSUMPTION AGREEMENT
I. ASSUMED OBLIGATIONS
-------------------
X. Xxxxxx Agreement
----------------
The obligation to pay the purchase price under the Xxxxxx Agreement
(but only if Assignors hereby transfer their rights under the Xxxxxx
Agreement to the Corporation pursuant to Section l(c)(i) of the
Formation Agreement).
B. Facility Acquisition Agreements and Development Site Acquisition
Agreements
----------------------------------------------------------------
All obligations of Assignors under the Facility Acquisition Agreements
and the Development Site Acquisition Agreements.
C. Current Liabilities
-------------------
[to be supplied by PGI]
II. CONTRIBUTED ASSETS
------------------
All business assets of the Assignors which are used in connection with (i)
the ownership, operation and management of the Contributed Projects owned,
operated or managed prior to the date hereof and (ii) the senior and
assisted living business of PGI's senior housing division (the "Assigned
Business"), including, without limitation, the following:
A. Partnership Interests
---------------------
The interests in each of the Partnerships as specified in Section 1 of
the Formation Agreement.
B. Stock
-----
All of the outstanding capital stock of BLC Property, Inc., a Delaware
corporation.
X. Xxxxxx Agreement
----------------
All of the rights of PGLP under the Xxxxxx Agreement, including the
rights to purchase certain interests in River Oaks and Pembroke under
the Xxxxxx Agreement, as specified in Section 1 of the Formation
Agreement.
A-1
D. Facility Acquisition Agreements and the Development Site Acquisition
Agreements
All of the rights of PGI under the Facility Acquisition Agreements and the
Development Site Acquisition Agreements, including the rights of PGI to
purchase certain assets under the Facility Acquisition Agreements and the
Development Site Acquisition Agreements.
E. Machinery and Equipment
All machinery, equipment, office equipment, computers, supplies, tools and
other personal property, if any, owned or leased by Assignors and used or
held exclusively for use in connection with the Assigned Business
including, without limitation, all such items which are located at the
Assignors' offices at 00 Xxxx Xxxxxx Xxxxx, Xxxxx 0000, Xxxxxxx, Xxxxxxxx,
00000, and the items listed on Schedule 1 attached hereto;
F. Furniture and Fixtures
The furniture and fixtures, if any, owned by Assignors and used or held for
use exclusively in connection with the Assigned Business including, without
limitation, all such items which are located at the Assignors' offices at
00 Xxxx Xxxxxx Xxxxx, Xxxxx 0000, Xxxxxxx, Xxxxxxxx, 00000, and the items
listed on Schedule 1 attached hereto;
G. Contract Rights
All of Assignors' right, title and interest, if any, in and to all
contracts, agreements, commitments and leases, whether oral or written,
exclusively related to the Assigned Business, including without limitation,
office facilities, machinery, equipment, furniture and fixtures, and all
licenses (to the extent each is assignable) including, without limitation,
any items listed on Schedule 1 attached hereto;
H. Business Records
All business records necessary for the operation of the Assigned Business,
wherever located, including, without limitation, all rent rolls, customer
lists, sales records, customer files, account histories, sales literature,
promotion materials, personnel records, operating papers, contracts,
proprietary software, computer programs, software products, data bases and
data processing media and research and development records, unless any of
the foregoing shall be prohibited by the terms of applicable vender
licenses;
A-2
I. Trade Names and Intangibles
Those patents, service marks, copyrights, trademarks and trade names, and
applications therefor, if any, listed on Schedule 2 attached hereto, and
the goodwill associated therewith relating to the Assigned Business;
J. Prepaids
All of Assignors' prepaid expenses and deposits (if any);
K. Permits
To the extent transferable or assignable to Assignees by operation of law
or with the consent or approval of, or notice to, or filing with, the
appropriate governmental agency or entity, all approvals, authorizations,
consents, licenses and other permits, if any, of or from governmental
agencies or entities required for the operation of the Assigned Business
and held for use by Assignors exclusively in connection with the Assigned
Business;
L. Receivables
All of Assignors' accounts receivable and notes receivable (if any)
exclusively relating to the Assigned Business;
M. Other Assets
Except as specifically excluded on Schedule 3 attached hereto, all of
Assignors' other assets, properties, rights and claims, if any, which are
exclusively used or held for use or sale in connection with, or appertain
to, the Assigned Business, of every kind and description, wherever located,
tangible or intangible, vested or unvested, contingent or otherwise,
whether or not specifically enumerated or identified herein and whether or
not carried or reflected on the books of Assignors including, without
limitation, all such items which are located at the Assignors' offices at
00 Xxxx Xxxxxx Xxxxx, Xxxxx 0000, Xxxxxxx, Xxxxxxxx 00000.
N. Excluded Assets
Notwithstanding any provision of this Assignment and Assumption Agreement
for Transfer of Contributed Assets to the contrary, the Contributed Assets
and Obligations shall not include and Assignors shall not assign, but shall
retain, the assets listed on Schedule 3 attached hereto; if any.
A-3
SCHEDULE 1
TO ASSIGNMENT AND ASSUMPTION AGREEMENT
FIXED ASSET SCHEDULE
--------------------
[Attached]
SCHEDULE 1
----------
FIXED ASSET SCHEDULE
Furniture Inventory
Currently in use by Senior Housing Division
Tisch
-----
1 left return wooden desk
1 2-drawer metal file cabinet, 42" wide
1 xxxx cloth desk chair
Iuppenlatz
----------
1 Xxxxxxx Senator Executive Desk w/open credenza
1 6-shelf wooden bookcase
1 red leather tufted desk chair
2 guest chairs, burgandy/xxxx cloth
Xxxxx
-----
1 Xxxxxxx Senator table desk w/middle drawer
2 2-drawer wooden file cabinets
1 3-drawer metal file cabinet, 36" wide
1 4-shelf wooden bookcase
1 xxxx cloth desk chair
1 guest chair, xxxxx cloth
Xxxxxxxx
--------
1 Xxxxxxx Senator Executive Desk w/open credenza
2 6-shelf wooden bookcases
1 dotted burgandy cloth desk chair
2 matching guest chairs
Xxxxxxxx
--------
1 Xxxxxxx Senator Executive Desk w/open credenza
1 burgandy cloth swivel desk chair
1 5-drawer metal file cabinet, 36" wide
2 guest chairs, blue & burgandy w/wood
Kosteroski
----------
1 Xxxxxxx Senator Executive Desk w/right return
1 5-drawer metal file cabinet, 30" wide
1 3-drawer metal file cabinet, 36" wide
1 xxxx cloth desk chair
Xxxxxx
------
1 xxxx xxxxxxx pedestal desk w/matching 2-drawer 15" file cabinet
2 3-drawer metal file cabinets, 30" and 36" wide
1 5-drawer metal file cabinet, 36" wide
1 3-drawer metal file cabinet w/top enclosed storage shelf, 42"
1 black cloth desk chair
Suenkens
--------
1 Xxxxxxx Affinity left return desk
1 xxxx cloth desk chair
1 5-drawer metal file cabinet, 36"
Xxxxxx
------
1 wooden left return desk w/gold trim
1 xxxx desk chair
1 credenza
1 5-drawer metal file cabinet, 36"
2 guest chairs, chrome w/burgandy cloth
Wolf
----
1 Xxxxxxx Senator Executive Right Unit desk
1 black cloth desk chair
1 guest chair, xxxxx cloth
1 3-shelf wooden bookcase
1 5-drawer metal file cabinet, 36"
1 2-drawer metal file cabinet, 30"
1 guest chair w/arms, blue & burgandy print
Xxxxxxx
-------
1 Xxxxxxx Senator table desk w/middle drawer
1 2 drawer wooden file cabinet
1 grey cloth desk chair
Xxxxxx
------
1 wooden desk w/right return
1 6-shelf wooden bookcase
1 3-shelf wooden bookcase
1 5-drawer metal file cabinet, 36"
1 black cloth desk chair
1 guest chair, beige cloth
Xxxxxx
------
1 Xxxxxxx Senator right return desk
2 2-drawer wooden file cabinets
1 black leather desk chair
2 guest chairs, wood w/burgandy, pink cloth
Xxxxxxx
-------
1 Xxxxxxx Senator left return desk
1 Xxxxxxx Senator enclosed double bookshelf unit
1 Xxxxxxx Senator open credenza w/shelf unit
1 Xxxxxxx Senator round pedestal table w/glass top
1 red leather tufted desk chair
3 red leather barrel guest chairs
Xxxx
----
1 wooden desk
1 5-drawer metal file cabinet, 36"
1 black leather desk chair
2 guest chairs, wood w/xxxx, yellow cloth
1 wooden side table
Getty
-----
1 Xxxxxxx Affinity left return desk
1 National credenza w/attached shelf unit
1 5-drawer metal file cabinet, 36"
1 xxxx cloth desk chair
Page 3 of 4
Xxxxxxx
-------
1 Xxxxxxx Affinity left return desk w/credenza
1 6-shelf wooden bookcase
1 2-drawer metal file cabinet, 36"
1 black cloth desk chair
2 guest chairs, xxxxx/xxxx cloth
Xxxxxxx
-------
1 built-in station
2 2-drawer metal file cabinets, 30"
1 black cloth desk chair
Xxxxxx
------
1 built-in station
1 2-drawer metal file cabinet, 30"
1 xxxx cloth desk chair
X'Xxxxxxx
---------
1 left return white laminate desk
1 grey cloth desk chair
1 3-shelf metal bookcase
File space in common areas:
3 4-drawer, 36"
4 5-drawer, 36"
Page 4 of 4
Senior Housing System Capabilities
----------------------------------
Location: Corporate Office
Individual Preparing Report: Xxxxx X. Xxxxxxxxxxx
Title: Manager of Computer Operations
(The Prime Group, Inc.)
Telephone Number: (000) 000-0000
Date Prepared: 5/6/97 10:03 AM
1:\Data\Sh_Eq2.Wb2
NIC Computer/Machine Printer Current $ Value
------------------ ------------------------------------------------------ -------- ----------------------
Drive Drive Com-
Name Description Processor RAM C: D: NIC puter Printer
------------------------------------------ ------------------------------------------------------ --------- ---------------------
1 Xxxxxxx, Xxxxxx HP ISA GW P5-75 586/75 16 540MB 4XCD-ROM HP LJ III 50 1,000 650
------------------------------------------ ------------------------------------------------------ --------- ---------------------
2 Xxxxxxxxxx, Xxxx EP210 AST Ascentia J30 586/100 16 800MB n/a n/a 75 2,000 n/a
------------------------------------------ ------------------------------------------------------ --------- ---------------------
3 Xxxxxxxxxx, Xxx HP ISA GW P5-100 586/100 16 852MB 4XCD-ROM HP LJ4 50 1,500 1,100
------------------------------------------ ------------------------------------------------------ --------- ---------------------
4 Xxxxxx, Xxxxxxxx HP ISA GW P5-133 586/133 16 2.1GB 8XCD-ROM n/a 50 1,700 n/a
------------------------------------------ ------------------------------------------------------ --------- ---------------------
6 Xxxxx, Xxx 3Com Etherlink III GW Solo 2100 586/133 24 1.3GB 6-12XCD-ROM n/a 130 3,970 n/a
------------------------------------------ ------------------------------------------------------ --------- ---------------------
7 Xxxxxx, Xxxx 0x00 Xxxxxxxxx PCI GW P5-133 586/133 16 2.1GB 8XCD-ROM HP LJ4 100 1,700 1,100
------------------------------------------ ------------------------------------------------------ --------- ---------------------
8 Xxxx, Xxxxxx 3c59 Etherlink PCI GW P5-133 586/133 16 1.6GB 8XCD-ROM HP LJ4 100 1,700 1,100
------------------------------------------ ------------------------------------------------------ --------- ---------------------
8 Xxxxxx, Xxx 0x00 Xxxxxxxxx PCI GW P5-133 586/133 16 1.6GB 8XCD-ROM HP LJ4 100 1,700 1,100
------------------------------------------ ------------------------------------------------------ --------- ---------------------
9 Xxxxxxx, Xxxxx HP ISA CPQ Lte 386/25 4 120MB n/a n/a 50 350 n/a
------------------------------------------ ------------------------------------------------------ --------- ---------------------
10 Xxxxxxx, Xxxx HP ISA CPQ Lte/Lite 25c 486/25 8 120MB n/a n/a 50 650 n/a
------------------------------------------ ------------------------------------------------------ --------- ---------------------
11 Xxxxxxxx, Xxxxxx n/a n/a n/a n/a n/a n/a n/a n/a n/a n/a
------------------------------------------ ------------------------------------------------------ --------- ---------------------
12 Xxxxxxxx, Xxxx n/a n/a n/a n/a n/a n/a n/a n/a n/a n/a
------------------------------------------ ------------------------------------------------------ --------- ---------------------
13 Xxxxxx, Xxxxxxxx n/a NEC Versa 4000C 586/100 24 800MB 6XCD-ROM HP LJ III n/a 3,500 650
------------------------------------------ ------------------------------------------------------ --------- ---------------------
14 Xxxxxxxx, Xxxxxxx Compaq ISA CPQ 486/50 12 540MB n/a HP XX XX 75 2,000 500
------------------------------------------ ------------------------------------------------------ --------- ---------------------
15 - Shared - EP210 AST Ascentia J30 586/100 16 800MB n/a n/a 75 2,000 n/a
------------------------------------------ ------------------------------------------------------ --------- ---------------------
16 Haidu, Jouska EP210 AST Ascentia J30 586/100 16 800MB n/a n/a 75 2,000 n/a
------------------------------------------ ------------------------------------------------------ --------- ---------------------
17 Hantch, Xxxxx n/a GTW Solo-133 586/133 24 1.3GB 8XCD-ROM n/a n/a 4,100 n/a
------------------------------------------ ------------------------------------------------------ --------- ---------------------
18 Xxxxxxx, Xxxxx n/a Not Branded 586/100 16 1.6GB n/a n/a 50 1,000 n/a
------------------------------------------ ------------------------------------------------------ --------- ---------------------
19 Xxxxxxxx, Xxxx n/a Not Branded 586/100 16 1.6GB n/a n/a 50 1,000 n/a
------------------------------------------ ------------------------------------------------------ --------- ---------------------
20 X'Xxxxxxx, Xxxxxxx HP ISA GW P5-166 586/166 32 2.5GB 12XCD-ROM n/a 50 2,100 n/a
------------------------------------------ ------------------------------------------------------ --------- ---------------------
21 Xxxxxx, Xxx HP ISA GW P5-100 586/100 16 852MB 4XCD-ROM n/a 50 1,500 n/a
------------------------------------------ ------------------------------------------------------ --------- ---------------------
------------------------------------------ ------------------------------------------------------ --------- ---------------------
22 Server #1 HP EISA CPQ -SystemPro 386/33 32 3GB n/a n/a 100 1,750 n/a
------------------------------------------ ------------------------------------------------------ --------- ---------------------
23 Server #3 HP EISA CPQ -SystemPro LT 386/33 12 650MB n/a n/a 100 500 n/a
------------------------------------------ ------------------------------------------------------ --------- ---------------------
24 ADP DB Manager HP ISA CPQ Deskpro 386/25 8 120MB n/a n/a 50 250 n/a
------------------------------------------ ------------------------------------------------------ --------- ---------------------
------------------------------------------ ------------------------------------------------------ --------- ---------------------
25 Xxxxxxx, Xxxxxx n/a Epson Stylus Pro n/a n/a n/a n/a EP-Pro n/a n/a 350
------------------------------------------ ------------------------------------------------------ --------- ---------------------
26 Xxxxxxx, Xxxxxx n/a Panafax XX-000 x/x x/x x/x x/x x/x x/x 1,900 n/a
------------------------------------------ ------------------------------------------------------ --------- ---------------------
The operating system for all the desktops is MS-DOS v6.22 and WFW v3.11. 1,430 39,870 6,550
The operating system for Server #1 is Novell v3.11 (100 User). 39,870
The operating system for Server #3 is Novell v3.11 (20 User). 1,430
--------
Total $ Value 47,850
========
SCHEDULE 2
TO ASSIGNMENT AND ASSUMPTION AGREEMENT
TRADE NAMES AND INTANGIBLES
---------------------------
"Personally Yours"
SCHEDULE 3
TO ASSIGNMENT AND ASSUMPTION AGREEMENT
EXCLUDED ASSETS
---------------
Any assets held by any of the Assignors that are not exclusively used by the
Senior and Assisted Living Division of The Prime Group, Inc. and certain of its
affiliates.
EXHIBIT B
TO
FORMATION AGREEMENT
FORM OF SPACE SHARING AGREEMENT
The Prime Group, Inc.
00 Xxxx Xxxxxx Xxxxx
Xxxxx 0000
Xxxxxxx, Xxxxxxxx 00000
May 7, 1997
Xx. Xxxx X. Xxxxxxx
Brookdale Living Communities, Inc.
00 Xxxx Xxxxxx Xxxxx
Xxxxx 0000
Xxxxxxx, Xxxxxxxx 00000
Re: Space Sharing Agreement
Dear Xxxx:
This letter agreement shall set forth the terms upon which the undersigned
("PGI") agrees to provide to Brookdale Living Communities, Inc. ("Brookdale")
the use of certain space and facilities located within PGI's leased premises
("Premises") on the 39th floor of the building known as 00 Xxxx Xxxxxx Xxxxx
following the completion of the initial public offering of stock in Brookdale
(the "Offering").
The space and facilities which Brookdale will be permitted to use are
those portions of the Premises and facilities therein which are being used on
the date hereof by persons who are, or after the Offering will become, officers
or employees of Brookdale. If Brookdale uses more space and facilities than
contemplated by the immediately preceding sentence, the rent payable by
Brookdale pursuant to this agreement shall be adjusted appropriately. Such use
shall conform with the nature and extent of the existing use of the space and
facilities which are the subject hereof.
The term of this agreement shall commence on the date of the Offering and
shall end on the last day of the fourth (4th) full calendar month thereafter;
provided, however, that Brookdale shall have the right to extend the term of
this agreement in increments of two (2) months or more for a total of up to
twelve (12) additional months so long as (i) Brookdale has given PGI written
notice of any such extension not later than the last day of the month preceding
the date on which the term (as previously extended, if applicable) would
otherwise expire and (ii) Brookdale is not in default of any obligation under
this agreement as of the date of any such notice or the commencement of the
applicable extension.
Brookdale shall pay as monthly rent for the space and facilities described
herein an amount equal to the sum of (i) Eight Thousand Eight Hundred and no/100
Dollars ($8,800.00) plus (ii) a
Xx. Xxxx X. Xxxxxxx
May 7, 1997
Page 2
fair and equitable percentage of the taxes and operating expenses for the
Premises. Such rent shall be paid monthly, in advance, on the first day of the
term and on the first day of each calendar month thereafter, except that if the
first day of the term shall be a day other than the first day of a calendar
month, rent for such month shall be prorated based on the number of days in such
month.
In addition, Brookdale shall be responsible for the incremental cost to PGI
of any utilities and services used by Brookdale during the term of this
agreement, as reasonably determined by PGI, including, without limitation, the
cost of copying and facsimile equipment. All amounts owing to PGI under this
paragraph shall be paid by Brookdale within ten (10) days after receipt of an
invoice therefor.
Brookdale acknowledges that it has received and reviewed a copy of the
lease dated March 14, 1992, as amended on April 15, 1992, with respect to the
Premises and agrees that Brookdale's use of the space and facilities described
herein shall be subject to the terms and provisions of such lease and that
Brookdale shall comply with all of the terms and provisions of such lease to the
extent such terms and provisions relate to or affect Brookdale's use of the
space and facilities described herein.
Sincerely,
THE PRIME GROUP, INC.
By:
Name:
Title:
ACCEPTED AND AGREED TO BY:
BROOKDALE LIVING COMMUNITIES, INC.
By:
Name:
Title:
Dated:
LANDLORD'S CONSENT
------------------
The undersigned, being the landlord of the building known as 00 Xxxx Xxxxxx
Xxxxx, Xxxxxxx, Xxxxxxxx, does hereby consent to the foregoing letter agreement
between The Prime Group, Inc. and Brookdale Living Communities, Inc.
77 WEST XXXXXX LIMITED PARTNERSHIP
By: The Prime Group, Inc., managing
general partner
By:
Name:
Title:
Dated: May 7, 1997
EXHIBIT C
TO
FORMATION AGREEMENT
FORM OF REGISTRATION RIGHTS AGREEMENT
REGISTRATION RIGHTS AGREEMENT
-----------------------------
This REGISTRATION RIGHTS AGREEMENT (this "Agreement"), dated as of May 7,
1997, is made and entered into by and among BROOKDALE LIVING COMMUNITIES, INC.,
a Delaware corporation (the "Corporation"), THE PRIME GROUP, INC., an Illinois
corporation ("Prime"), PRIME GROUP LIMITED PARTNERSHIP, an Illinois limited
partnership ("PGLP") and PRIME GROUP VI, L.P., an Illinois limited partnership
("PG-VI, L.P."). Prime, PGLP and PG-VI, L.P. are sometimes referred to herein
individually as a "Holder" and collectively as the "Holders."
RECITALS
--------
WHEREAS, the Corporation has filed a Registration Statement on Form
S-1 with the Securities and Exchange Commission (the "Commission") in connection
with the IPO (as hereinafter defined);
WHEREAS, pursuant to the terms of that certain Formation Agreement
dated as of the date hereof, the Corporation has issued an aggregate of
1,703,043 shares (the "Formation Shares") of its Common Stock (as hereinafter
defined) to the Holders;
WHEREAS, PG-VI, L.P. has purchased 2,500,000 of the 4,500,000 shares
of Common Stock issued and sold in the Offering (such 2,500,000 shares, together
with the Formation Shares, are referred to herein as the "Common Shares"); and
WHEREAS, the Corporation and the Holders deem it desirable to enter
into this Agreement in connection with the Holders' acquisition of the Common
Shares.
AGREEMENTS
----------
NOW, THEREFORE, in consideration of the recitals and the mutual promises
and covenants herein contained and other good and valuable consideration, the
receipt and sufficiency of which are hereby acknowledged, the parties hereto
hereby agree as follows:
1. Definitions.
-----------
(a) Previously Defined Terms. Each capitalized term defined in the
first paragraph and Recitals hereof shall have the meaning set forth above
whenever used herein, unless otherwise expressly provided or unless the context
clearly requires otherwise.
(b) Additional Definitions. In addition to the terms defined in the
first paragraph and Recitals hereof, whenever used herein, the following terms
shall have the meanings set forth below unless otherwise expressly provided or
unless the context clearly requires otherwise:
"Affiliate" means, with respect to any Holder, any other Person that
(i) directly or indirectly, through one or more intermediaries, controls, or is
controlled by, or is under common control with, such Holder including, without
limitation, any subsidiary of such Holder or (ii) holds an equity interest (such
as a stock interest or a partnership interest) in such Holder or in a Person
described in clause (i) hereof. With respect to any other specified person
herein, "Affiliate" shall mean any other person that, directly or indirectly,
through one or more intermediaries, controls, or is controlled by, or under
common control with, such specified person.
"Common Stock" means the Common Stock, par value $0.01 per share, of
the Corporation.
"Demand Registrations" has the meaning given to such term in Section
2(a)(iii).
"IPO" means the Corporation's initial underwritten public offering of
shares of Common Stock consummated pursuant to a registration statement declared
effective under the Securities Act.
"Long-Form Demand Registration" has the meaning given to such term in
Section 2(a)(iii).
"Long-Form Registration" has the meaning given to such term in Section
2(a)(i).
"Person" means a natural person, a partnership, a corporation, an
association, a joint stock company, a trust, a joint venture, an unincorporated
organization or a governmental entity or any department, agency or political
subdivision thereof.
"Piggyback Registration" has the meaning given to such term in Section
3(a).
"Registrable Shares" means (i) the Common Shares; (ii) any shares of
Common Stock issued as, or where issued directly or indirectly upon the
conversion or exercise of or with respect to other securities issued as, a
dividend or other distribution with respect to or in exchange or in replacement
of the Common Shares; and (iii) any shares of Common Stock then issuable
directly or indirectly upon the conversion or exercise of or with respect to
other securities which were issued as a dividend or other distribution with
respect to or in exchange or in replacement of the Common Shares; provided,
however, that Registrable Shares shall
-2-
not include any shares of Common Stock the sale of which has been registered
under the Securities Act pursuant to this Agreement or sold to the public
pursuant to Rule 144 promulgated by the Commission under the Securities Act
(except any sale, distribution or other disposition by any Holder to any other
Holder or an Affiliate of such Holder or an Affiliate of such other Holder). For
purposes of this Agreement, a Person will be deemed to be a Holder of
Registrable Shares whenever such Person holds a security exercisable for or
convertible into such Registrable Shares, whether or not such exercise or
conversion has actually been effected.
"Registration Expenses" has the meaning given to such term in Section
6(a).
"Securities Act" means the Securities Act of 1933, as amended.
"Securities Exchange Act" means the Securities Exchange Act of 1934,
as amended.
"Short-Form Demand Registration" has the meaning given to such term in
Section 2(a)(iii).
"Short-Form Registration" has the meaning in Section 2(a)(ii).
2. Demand Registrations.
(a) Requests for Registration. (i) Subject to the terms and
conditions of this Agreement, one or more Holders of outstanding Registrable
Shares at any time may request registration under the Securities Act of all or
part of its or their Registrable Shares on Form S-1 or any similar long-form
registration statement (a "Long-Form Registration") by delivering a written
request to the Corporation to that effect; provided, however, that, in the case
of any such Long-Form Registration, the Holders requesting the Long Form
Registration must be requesting registration of not less than five percent (5%)
of the total Registrable Shares then outstanding; provided, further, that if a
Short-Form Registration (as hereinafter defined) is available for the requested
registration, then at the election of the Corporation such registration shall be
effected on a Short-Form Registration.
(ii) Subject to the terms and conditions of this Agreement, one or
more Holders of any of the then outstanding Registrable Shares at any time may
request registration under the Securities Act of all or part of its or their
Registrable Shares on Form S-2 or S-3 or any similar short-form registration
statement (a "Short-Form Registration"), if available, by delivering a written
request to the Corporation to that effect.
-3-
(iii) If the Holders initiating a registration pursuant to Section
2(a) intend to distribute the Registrable Shares by means of any underwriting,
they shall so advise the Corporation in their written notice. Within ten (10)
days after receipt of any such written request, the Corporation will give
written notice of such request to all holders of all registrable securities of
the Corporation (including all other Holders of Registrable Shares), if any, and
will include, subject to the terms of Section 2(d), in any such registration
that constitutes a Demand Registration (as hereinafter defined) all registrable
securities with respect to which the Corporation has received written requests
for inclusion therein within fifteen (15) days after the Corporation's notice
has been given. Any Long-Form Registration and Short-Form Registration
requested pursuant to this Section 2(a), other than a registration in which the
Corporation sells any of its securities in a primary offering, are referred to
herein, respectively, as a "Long-Form Demand Registration" and a "Short-Form
Demand Registration". All Long-Form Demand Registrations and Short-Form Demand
Registrations shall collectively be referred to herein as "Demand
Registrations". The Corporation may elect to include its securities in a primary
offering in any registration requested pursuant to this Section 2(a), and such
registrations requested pursuant to this Section 2(a) in which the Corporation
sells any of its securities in a primary offering shall not be deemed to be
Demand Registrations and shall instead be considered Piggyback Registrations and
will be governed by Section 3.
(b) Long-Form Demand Registrations. The Holders of Registrable Shares
may request (i) up to three (3) Long-Form Demand Registrations pursuant to
Section 2(a)(i) during the first five (5) years following the date of the IPO
and (ii) until the Holders own in the aggregate less than ten percent (10%) of
the outstanding Common Stock, up to one (1) Long-Form Demand Registration each
year after the fifth anniversary of the date of the IPO, and the Corporation
will pay all Registration Expenses of the Corporation and the Holders of
Registrable Shares incurred in connection with each such registration; provided,
that in each case the number of Long-Form Demand Registrations otherwise
permitted by this Section 2(b) during a given period shall be reduced by the
number of Short-Form Demand Registrations effected during the corresponding
period pursuant to Section 2(c), if any. A registration will not count as a
Long-Form Demand Registration under this Section 2(b) until it has become
effective; provided that in any event the Corporation will pay the Registration
Expenses of the Corporation and the Holders of Registrable Shares incurred in
connection with any such registration initiated as a Long-Form Demand
Registration. Notwithstanding the immediately preceding sentence, a registration
which does not become effective after the Corporation has filed a registration
statement with respect thereto solely by reason of the refusal to proceed of the
Holders of Registrable Shares shall be deemed to have been effected by such
Holders and shall count as a Long-Form Demand Registration under this Section
2(b), unless the
-4-
Holders of Registrable Shares making such demand shall have elected to pay the
Registration Expenses of the Corporation and of the Holders of Registrable
Shares incurred in connection therewith.
(c) Short-Form Demand Registrations. The Holders of Registrable Shares
may request (i) up to three (3) Short-Form Demand Registrations pursuant to
Section 2(a)(ii) during the first five (5) years following the date of the IPO
and (ii) until the Holders own in the aggregate less than ten percent (10%) of
the outstanding Common Stock, up to one (1) Short-Form Demand Registration each
year after the fifth anniversary of the date of the IPO, and the Corporation
will pay all Registration Expenses of the Corporation and the Holders of
Registrable Shares incurred in connection with each such registration; provided,
that in each case the number of Short-Form Demand Registrations otherwise
permitted by this Section 2(c) during a given period shall be reduced by the
number of Long-Form Demand Registrations effected during the corresponding
period pursuant to Section 2(b), if any. A registration will not count as a
Short-Form Demand Registration under this Section 2(c) until it has become
effective; provided that in any event the Corporation will pay the Registration
Expenses of the Corporation and the Holders of Registrable Shares incurred in
connection with any such registration initiated as a Short-Form Demand
Registration. Notwithstanding the immediately preceding sentence, a registration
which does not become effective after the Corporation has filed a registration
statement with respect thereto solely by reason of the refusal to proceed of the
Holders of Registrable Shares shall be deemed to have been effected by such
Holders and shall count as a Short-Form Demand Registration for which the
Corporation paid Registration Expenses under this Section 2(c), unless the
Holders of Registrable Shares making such demand shall have elected to pay the
Registration Expenses of the Corporation and of the Holders of Registrable
Shares incurred in connection therewith.
(d) Priority on Demand Registrations. If a Demand Registration is an
underwritten public offering and the managing underwriter(s) advise the
Corporation that in their opinion the number of Registrable Shares and other
securities (if any) requested to be included exceeds the number of Registrable
Shares and other securities which can be sold in such offering without having a
material adverse effect on the offering, the Corporation will include in such
registration (A) first, the number of Registrable Shares requested to be
included therein, which in the opinion of such underwriter(s) can be sold
without having a material adverse effect on the offering, allocated pro rata
among the Holders of such Registrable Shares on the basis of the number of
Registrable Shares owned by such Holders which such Holders have elected to
include in such registration, and (B) second, such other securities requested to
be included in such registration, if any, which in the opinion of such
underwriter(s) can be sold (after taking into account the Registrable Shares to
be sold pursuant to
-5-
clause (A) above) without having a material adverse effect on the offering.
(e) Restrictions on Registrations. (i) The Corporation may postpone
for a reasonable period, not to exceed sixty (60) days, the filing or the
effectiveness of a registration statement for a Demand Registration if the
Corporation has been advised by legal counsel that such filing would require
disclosure of a material non-public fact or non-public information that the
Corporation determines reasonably and in good faith would have a material
adverse effect on the negotiation or completion of any significant transaction
that is being contemplated by the Corporation or any of its subsidiaries at the
time such right to delay is exercised. In addition, the Corporation shall not be
required to effect any registration in accordance with the terms of this
Agreement (other than on Form S-3 or any successor form relating to "shelf"
offerings) within one hundred twenty (120) days after the effective date of any
other registration statement of the Corporation for the IPO or a primary
offering (or combined primary and secondary offering) of its securities (other
than a registration statement on Form S-8, or any successor form).
(ii) No Holder of Registrable Shares may make a request for a Demand
Registration until after the effective date of the IPO; provided, that in any
event no Registrable Shares may be sold by either Holder prior to the expiration
of the applicable lock-up agreements described in the prospectus relating to the
IPO.
3. Piggyback Registrations.
(a) Right to Piggyback. Whenever (i) the Corporation intends to sell
its securities in a primary offering pursuant to a registration statement filed
with the Commission or whenever the securities of the Corporation then issued
and outstanding are to be registered under the Securities Act (in either case,
other than pursuant to a registration statement on Form S-8 or Form S-4, or any
successor forms) and (ii) the registration form to be used may also be used for
the registration of Registrable Shares (a "Piggyback Registration"), the
Corporation will give prompt written notice (in any event within ten (10)
business days after its receipt of notice of any exercise of demand registration
rights by holders of the Corporation's securities other than the Registrable
Shares) to all holders of registrable securities (including all Holders of
Registrable Shares) of its intention to effect such a registration and will
include in such registration, subject to the terms of paragraphs (b) and (c) of
this Section 3, all registrable securities with respect to which the Corporation
has received written requests for inclusion therein within thirty (30) days
after the Corporation's notice has been given. The Corporation shall have the
right to postpone or withdraw any Piggyback Registration without obligation or
liability to any holder of
-6-
registrable securities (including any Holder of Registrable Shares).
(b) Priority on Primary Registrations. If a Piggyback Registration is
an underwritten primary registration on behalf of the Corporation, and the
managing underwriter(s) advise the Corporation that in their opinion the number
of securities requested to be included in such registration exceeds the number
which can be sold in such offering without having a material adverse effect on
the offering, the Corporation will include in such registration (A) first, the
securities the Corporation proposes to sell, (B) second, the Registrable Shares
requested to be included therein which in the opinion of such underwriter(s)
(after taking into account the securities to be sold pursuant to clause (A)
above) can be sold without having a material adverse effect on the offering,
allocated pro rata among the Holders of such Registrable Shares on the basis of
the number of Registrable Shares owned by such Holders which such Holders have
elected to include in such registration, and (C) third, other securities
requested to be included in such registration, if any, which in the opinion of
such underwriter(s) can be sold (after taking into account the securities to be
sold pursuant to clauses (A) and (B) above) without having a material adverse
effect on the offering.
(c) Priority on Secondary Registrations. (i) If a Piggyback
Registration is not an underwritten primary registration on behalf of the
Corporation and is an underwritten secondary registration on behalf of existing
holders of the Corporation's securities, and the managing underwriter(s) advise
the Corporation that in their opinion the number of securities requested to be
included in such registration exceeds the number which can be sold in such
offering without having a material adverse effect on the offering, the
Corporation will include in such registration (A) first, the securities
requested to be included therein by the holders requesting such registration
which in the opinion of such underwriter(s) can be sold without having a
material adverse effect on the offering, (B) second, the Registrable Shares
requested to be included therein which in the opinion of such underwriter(s) can
be sold (after taking into account the securities to be sold pursuant to clause
(A) above) without having a material adverse effect on the offering, allocated
pro rata among the Holders of Registrable Shares on the basis of the number of
Registrable Shares owned by such Holders which such Holders have elected to
include in such registration, and (C) third, other securities requested to be
included in such registration, if any, which in the opinion of such
underwriter(s) can be sold (after taking into account the securities to be sold
pursuant to clauses (A) and (B) above) without having a material adverse effect
on the offering.
(d) Other Registrations. If the Corporation has previously filed a
registration statement with respect to an underwritten registration of
Registrable Shares pursuant to Section
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2 or a registration statement which is not an underwritten primary registration
on behalf of the Corporation and which is an underwritten secondary registration
on behalf of holders of the Corporation's securities pursuant to this Section 3,
and if such previous registration has not been withdrawn or abandoned, the
Corporation will not be required to file or cause to be effected any other
registration of any of its equity securities or securities convertible or
exchangeable into or exercisable for its equity securities under the Securities
Act (except on Form S-8, or any successor form), whether on its own behalf or at
the request of any holder or holders of such securities, until a period of one
hundred eighty (180) days has elapsed from the effective date of such previous
registration, unless the lead underwriter managing such previous registered
public offering otherwise agrees.
4. Holdback Agreements.
(a) Each of the Holders of Registrable Shares agrees not to effect any
public sale or distribution of equity securities of the Corporation, including
any public sale pursuant to Rule 144 under the Securities Act, or any securities
convertible into or exchangeable or exercisable for such securities, during the
period (i) commencing on the effective date of the IPO and ending one hundred
eighty (180) days after the effective date of the IPO, unless the underwriter(s)
managing the IPO otherwise agree or (ii) commencing seven (7) days prior to and
ending one hundred twenty (120) days after the effective date of any
underwritten Demand Registration or underwritten Piggyback Registration in which
such Holder sells Registrable Shares (except as part of such underwritten
registration), unless the lead underwriter managing such previous registered
public offering otherwise agrees.
(b) The Corporation agrees to use its best efforts to cause each
holder of at least 1% (on a fully-diluted basis) of its equity securities, or
any securities convertible into or exchangeable or exercisable for such
securities, purchased from the Corporation at any time after the date of this
Agreement (other than in a registered public offering), if any, to agree not to
effect any public sale or distribution of any such securities during the period
commencing seven days (7) prior to and ending one hundred eighty (180) days
after the effective date of any underwritten Demand Registration or any
underwritten Piggyback Registration (except as part of such underwritten
registration, if otherwise permitted), unless the lead underwriter managing the
previous offering otherwise agrees.
5. Registration Procedures. Whenever the Holders of Registrable Shares
have requested that any Registrable Shares be registered pursuant to the terms
of this Agreement, the Corporation will use its best efforts to effect the
registration of such Registrable Shares under the Securities Act in accordance
with the
-8-
intended method of disposition thereof, and pursuant thereto the Corporation
will as expeditiously as possible:
(a) prepare and file with the Commission a registration statement with
respect to such Registrable Shares and use its best efforts to cause such
registration statement to become and remain effective for such period as may be
reasonably necessary to effect the sale of such securities, not to exceed twelve
(12) months;
(b) prepare and file with the Commission such amendments and
supplements to such registration statement and the prospectus used in connection
therewith as may be necessary to keep such registration statement effective for
such period as may be reasonably necessary to effect the sale of such
securities, not to exceed twelve (12) months, and otherwise as may be necessary
to comply with the provisions of the Securities Act with respect to the
disposition of all securities covered by such registration statement during such
period in accordance with the intended methods of disposition by the sellers
thereof as set forth in such registration statement;
(c) furnish to each seller of such Registrable Shares and the
underwriters of the securities being registered such number of copies of such
registration statement, each amendment and supplement thereto, the prospectus
included in such registration statement (including each preliminary prospectus)
and such other documents as such seller or underwriters may reasonably request
in order to facilitate the disposition of the Registrable Shares owned by such
seller or the sale of such securities by such underwriters;
(d) use its best efforts to register or qualify such Registrable
Shares under such other securities or blue sky laws of such jurisdictions as any
seller reasonably requests and do any and all other acts and things which may be
reasonably necessary or advisable to enable such seller to consummate the
disposition in such jurisdictions of the Registrable Shares owned by such seller
(provided that the Corporation will not be required to (i) qualify generally to
do business in any jurisdiction where it would not otherwise be required to
qualify but for this subparagraph, (ii) subject itself to taxation in any such
jurisdiction or (iii) consent to general service of process in any such
jurisdiction);
(e) use its best efforts to cause all such Registrable Shares to be
listed on each securities exchange in which similar securities issued by the
Corporation are then listed;
(f) provide a transfer agent and registrar for all such Registrable
Shares not later than the closing date of the sale of such shares;
(g) enter into such customary agreements (including underwriting
agreements in customary form and substance) and take
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all such other reasonable and customary actions as the Holders of at least a
majority of the Registrable Shares being sold or the underwriters, if any,
reasonably request in order to expedite or facilitate the disposition of such
Registrable Shares;
(h) make available for reasonable inspection during business hours by
the seller of such Registrable Shares, any managing underwriter participating in
any disposition pursuant to such registration statement, and any attorney,
accountant or other agent retained by any such seller or underwriter, to the
extent permitted by law, all financial and other records, pertinent corporate
documents and properties of the Corporation, and cause the Corporation's
officers, directors, employees and independent accountants to supply all
information reasonably requested by any such seller, underwriter, attorney,
accountant or agent in connection with such registration statement;
(i) notify each seller of such Registrable Shares, promptly after it
shall receive notice thereof, of the time when such registration statement has
become effective or a supplement to any prospectus forming a part of such
registration statement has been filed;
(j) notify each seller of such Registrable Shares of any request by
the Commission for the amendment or supplement of such registration statement or
prospectus or for additional information;
(k) prepare and file with the Commission, promptly upon the request of
any seller of such Registrable Shares, any amendments or supplements to such
registration statement or prospectus which is required under the Securities Act
or the rules and regulations thereunder in connection with the distribution of
Registrable Shares by such seller;
(l) prepare and promptly file with the Commission and promptly notify
each seller of such Registrable Shares of the filing of such amendment or
supplement to such registration statement or prospectus as may be necessary to
correct any statements or omissions if, at the time when a prospectus relating
to such securities is required to be delivered under the Securities Act, any
event shall have occurred, or facts became known, in either case as the result
of which any such prospectus of any other prospectus as then in effect would
include an untrue statement of a material fact or omit to state any material
fact necessary to make the statements therein, in the light of the circumstances
in which they were made, not misleading;
(m) advise each seller of such Registrable Shares, promptly after it
shall receive notice or obtain knowledge thereof, of the issuance of any stop
order by the Commission suspending the effectiveness of such registration
statement or the initiation or threatening of any proceeding for such purpose
and promptly use all
-10-
reasonable efforts to prevent the issuance of any stop order or to obtain its
withdrawal if such stop order shall be issued;
(n) at least twenty-four (24) hours prior to the filing of any
registration statement or prospectus or any amendment or supplement to such
registration statement or prospectus, furnish a copy thereof to each seller of
such Registrable Shares and refrain from filing any such registration statement,
prospectus, amendment or supplement to which counsel selected by the Holders of
at least a majority of the Registrable Shares being registered shall have
reasonably objected on the grounds that such amendment or supplement does not
comply in all material respects with the requirements of the Securities Act or
the rules and regulations thereunder, unless, in the case of an amendment or
supplement, in the opinion of counsel for the Corporation the filing of such
amendment or supplement is reasonably necessary to protect the Corporation from
any liabilities under any applicable federal or state law and such filing will
not violate applicable laws; and
(o) at the request of any seller of such Registrable Shares in
connection with an underwritten offering, furnish on the date or dates provided
for in the underwriting agreement, a signed counterpart, addressed to such
seller, of: (i) an opinion of counsel, and (ii) a letter or letters from the
independent certified public accountants of the Corporation, in each case
covering such matters as are customarily covered in opinions of issuer's counsel
and in accountants' letters delivered to underwriters in underwritten public
offerings and such other matters as any such seller may reasonably request.
6. Registration Expenses.
(a) In all circumstances in which the Corporation is obligated to pay
Registration Expenses pursuant to this Agreement, all expenses of the
Corporation incident to the Corporation's performance of or compliance with this
Agreement, including, without limitation, all registration and filing fees, fees
and expenses of compliance with securities or blue sky laws, printing expenses,
messenger and delivery expenses, the expenses and fees for listing the
securities to be registered on each securities exchange or other market on which
any shares of Common Stock are then listed, expenses in connection with the
preparation of the registration statement (preliminary or final) or any other
offering document, fees and expenses incurred in the preparation of any
underwriting agreement, expenses incurred to secure any required review by the
National Association of Securities Dealers, Inc., and fees and disbursements of
counsel for the Corporation and its experts and independent certified public
accountants, underwriters (excluding discounts and commissions attributable to
the Registrable Shares included in such registration) and other Persons retained
by the Corporation (all such expenses collectively being herein called
"Registration Expenses"), will be borne by the
-11-
Corporation. In addition, the Corporation will pay its internal expenses
incident to the Corporation's performance of or compliance with this Agreement
(including, without limitation, all salaries and expenses of its officers and
employees performing legal or accounting duties), the expense of any annual
audit or quarterly review and the expense of any liability insurance obtained by
the Corporation.
(b) In all circumstances in which the Corporation is obligated to pay
Registration Expenses of Holders of Registrable Shares pursuant to this
Agreement, the Corporation will reimburse the Holders of Registrable Shares
covered by such registration for the reasonable costs and expenses incurred by
such Holders in connection with such registration, including, without
limitation, the reasonable fees and disbursements of one counsel chosen by the
Holders of a majority of the Registrable Shares requested to be registered in
such registration, but excluding discounts and commissions attributable to the
Registrable Shares included in such registration.
7. Indemnification.
(a) The Corporation agrees to indemnify, to the fullest extent
permitted by law, each seller of Registrable Shares, its directors, officers and
employees and each Person who controls such seller (within the meaning of the
Securities Act or the Securities Exchange Act) against all losses, claims,
damages, liabilities and expenses (including, without limitation, reasonable
attorneys' fees except as limited by Section 7(c)) resulting from any untrue or
alleged untrue statement of a material fact contained in any registration
statement, any final prospectus contained therein or any amendment thereof or
supplement thereto or any omission or alleged omission of a material fact
required to be stated therein or necessary to make the statements thereto not
misleading, except insofar as the same are caused by or contained in any
information furnished in writing to the Corporation by such seller expressly for
use therein or by such seller's failure to deliver a copy of the registration
statement or final prospectus or any amendments or supplements thereto after the
Corporation has furnished such seller with a sufficient number of copies of the
same. The reimbursements required by this Section 7(a) will be made by periodic
payments during the course of the investigation or defense, as and when bills
are received or expenses incurred.
(b) In connection with any registration statement in which a seller of
Registrable Shares is participating, each such seller will furnish to the
Corporation in writing such information as the Corporation reasonably requests
for use in connection with any such registration statement or prospectus and, to
the fullest extent permitted by law, will indemnify the Corporation, its
directors, officers and employees, each underwriter (if any) and each Person who
controls the Corporation or such underwriter
-12-
(within the meaning of the Securities Act or the Securities Exchange Act)
against all losses, claims, damages, liabilities and expenses (including,
without limitation, reasonable attorneys' fees except as limited by Section
7(c)) resulting from any untrue statement of a material fact contained in the
registration statement, final prospectus contained therein or any amendment
thereof or supplement thereto or any omission of a material fact required to be
stated therein or necessary to make the statements therein not misleading, but
only to the extent that such untrue statement or omission is contained in any
information or affidavit so furnished in writing by such seller expressly for
use therein; provided that the obligation to indemnify will be several, not
joint and several, among such sellers of Registrable Shares, and the liability
of each such seller of Registrable Shares will be in proportion to, and provided
further that such liability will be limited to, the net amount received by such
seller from the sale of Registrable Shares pursuant to such registration
statement.
(c) Any Person entitled to indemnification hereunder will (i) give
prompt written notice to the indemnifying party of any claim with respect to
which it seeks indemnification and (ii) unless in such indemnified party's
reasonable judgment a conflict of interest between such indemnified and
indemnifying parties may exist with respect to such claim, permit such
indemnifying party to assume the defense of such claim with counsel reasonably
satisfactory to the indemnified party. If such defense is assumed, the
indemnifying party will not be subject to any liability for any settlement made
by the indemnified party without the indemnifying party's consent (which consent
will not be unreasonably withheld). The indemnified party will not settle any
claim or liability without first providing the indemnifying party with a
reasonable opportunity to assume the defense. An indemnifying party who is not
entitled to, or elects not to, assume the defense of a claim will not be
obligated to pay the fees and expenses of more than one counsel for all parties
indemnified by such indemnifying party with respect to such claim, unless in the
reasonable judgment of any indemnified party a conflict of interest may exist
between such indemnified party and any other of such indemnified parties with
respect to such claim.
(d) The indemnification provided for under this Agreement will remain
in full force and effect regardless of any investigation made by or on behalf of
the indemnified party or any officer, director or controlling Person of such
indemnified party and will survive the transfer of securities.
(e) If the indemnification provided for in this Section 7 is
unavailable or insufficient to hold harmless an indemnified party in respect of
any losses, claims, damages, liabilities or expenses referred to herein, then
the indemnifying party shall contribute to the amount paid or payable by such
indemnified party as a result of such losses, claims, damages, liabilities or
-13-
expenses in such proportion as is appropriate to reflect the relative fault of
the indemnifying party on the one hand, and the indemnified party on the other,
in connection with the statement or omission which resulted in such losses,
claims, damages, liabilities or expenses as well as any other relevant equitable
considerations, including the failure to give the notice required hereunder. The
relative fault of the indemnifying party and the indemnified party shall be
determined by reference to, among other things, whether the untrue or alleged
untrue statement of a material fact relates to information supplied by the
indemnifying party or the indemnified party and the parties' relative intent,
knowledge, access to information and opportunity to correct or prevent such
statement or omission. The Corporation and the Holders agree that it would not
be just and equitable if contributions pursuant to this Section 7(e) were
determined by pro rata allocation or by any other method of allocation which did
not take account of the equitable considerations referred to herein. The amount
paid or payable to an indemnified party as a result of the losses, claims,
damages, liabilities or expenses referred to above shall be deemed to include
any legal or other expenses reasonably incurred in connection with investigating
or defending the same. Notwithstanding the foregoing, in no event shall the
amount contributed by any Holder exceed the aggregate net offering proceeds
received by any such Holder from the sale of its Registrable Shares. No person
guilty of fraudulent misrepresentations (within the meaning of Section 11(f) of
the Securities Act) shall be entitled to contribution from any person who is not
guilty of such fraudulent misrepresentation.
8. Current Public Information. At all times after the Corporation has
filed a registration statement with the Commission pursuant to the requirements
of either the Securities Act or the Securities Exchange Act, the Corporation
will use its best efforts to file in a timely manner all reports and other
documents required to be filed by it under the Securities Act and the Securities
Exchange Act and the rules and regulations promulgated by the Commission
thereunder and will use its best efforts to take such further action as any
Holder or Holders of Registrable Shares may reasonably request, all to the
extent required to enable such holders to sell Registrable Shares pursuant to
(i) Rule 144 under the Securities Act (as such rule may be amended from time to
time) or any similar rule or regulation hereafter promulgated by the Commission
or (ii) a registration statement on Form S-2 or S-3 or any similar registration
form hereafter adopted by the Commission. Upon request, the Corporation shall
deliver to any Holder of Registrable Shares a written statement as to whether it
has complied with such requirements.
9. Participation in Underwritten Registrations. No Person may participate
in any registration hereunder which is underwritten unless such Person (a)
agrees to sell such Person's securities on the basis provided in any
underwriting arrangements approved by the
-14-
Person or Persons entitled hereunder to approve such arrangements and (b)
completes and executes all questionnaires, powers of attorney, indemnities,
underwriting agreements and other documents required under the terms of such
underwriting arrangements. Subject to the immediately succeeding sentence, the
Holders of a majority of the Registrable Shares requested to be registered will
have the right to select the managing underwriter(s) to administer any Demand
Registration which managing underwriter(s) shall be reasonably acceptable to the
Corporation. Notwithstanding the foregoing, the Corporation will have the right
to select the managing underwriter(s) to administer any offering which is
covered by a Piggyback Registration; provided, however, that in any such case
the managing underwriters shall be nationally or regionally recognized
underwriter(s).
10. Implementation and Protection of Registration Rights. The Corporation
will at all times in good faith assist in carrying out all of the provisions of
this Agreement and in the taking of all such action as may be reasonably
necessary or appropriate in order to protect the registration rights pursuant to
this Agreement of the Holders of Registrable Shares.
11. Remedies. Any Person having rights under any provision of this
Agreement will be entitled to enforce such rights specifically, to recover
damages caused by reason of any breach of any provision of this Agreement and to
exercise all other rights granted by law.
12. Amendments and Waivers. Except as otherwise expressly provided herein,
the provisions of this Agreement may be amended or waived at any time only by
the written agreement of the Corporation and the Holders of all of the then
outstanding Registrable Shares. Any waiver, permit, consent or approval of any
kind or character on the part of any such Holders of any provision or condition
of this Agreement must be made in writing and shall be effective only to the
extent specifically set forth in writing.
13. Successors and Assigns. Except as otherwise expressly provided herein,
the provisions of this Agreement shall be binding upon and inure to the benefit
of the respective successors, assigns, heirs, executors and administrators of
the parties hereto, whether so expressed or not. In addition and whether or not
any express assignment has been made, the provisions of this Agreement which are
for the benefit of Holders of Registrable Shares are also for the benefit of,
and enforceable by, any subsequent holder of Registrable Shares who consent in
writing to be bound by this Agreement, and such Person shall be considered a
"Holder" hereunder.
14. Other Registration Rights. Except for the registration rights granted
hereunder, the Corporation will not grant to any Persons the right to request
the Corporation to register any equity
-15-
securities of the Corporation, or any securities convertible or exchangeable
into or exercisable for such securities, without the written consent of the
Holders of a majority of the then outstanding Registrable Shares, and except for
registrations pursuant to registration rights granted to the Holders of
Registrable Shares hereunder or granted to other Persons pursuant to this
Section 14 or primary registrations of securities by the Corporation or
registrations of securities being resold by affiliates in a Rule 145 transaction
pursuant to registration rights granted to such affiliates that are subordinate
to the registration rights of the Registrable hereunder, the Corporation shall
not register any equity securities of the Corporation, or any securities
convertible or exchangeable into or exercisable for such securities, without the
written consent of the Holders of a majority of the then outstanding Registrable
Shares. The Corporation will not include in any Demand Registration any
securities which are not Registrable Shares without the written consent of the
Holders of a majority of the then outstanding Registrable Shares requesting such
registration. Notwithstanding the foregoing, the Corporation may grant and
register securities pursuant to (a) subordinate piggyback registration rights
not inconsistent with the registration rights granted hereunder to other Persons
and (b) demand registration rights which are subordinate to the rights of the
Holders with respect to Demand Registrations hereunder.
15. Final Agreement. This Agreement constitutes the final agreement of the
parties concerning the matters referred to herein, and supersedes all prior
agreements and understandings.
16. Severability. Whenever possible, each provision of this Agreement will
be interpreted in such manner as to be effective and valid under applicable law,
but if any provision of this Agreement is held to be prohibited by or invalid
under applicable law, such provision will be ineffective only to the extent of
such prohibition or invalidity, without invalidating the remainder of this
Agreement.
17. Descriptive Headings. The descriptive headings of this Agreement are
inserted for convenience of reference only and do not constitute a part of and
shall not be utilized in interpreting this Agreement.
18. Notices. Any notices required or permitted to be sent hereunder shall
be delivered personally or mailed, certified mail, return receipt requested, or
delivered by overnight courier service guaranteeing next business day delivery,
to the following addresses, or such other addresses as shall be given by notice
delivered hereunder, in each case with applicable postage or delivery charges
prepaid, and shall be deemed to have been given upon delivery, if delivered
personally, three business days after
-16-
mailing, if mailed, or one business day after delivery to the courier, if
delivery by overnight courier service:
If to the Holders, to:
c/o The Prime Group, Inc.
00 Xxxx Xxxxxx Xxxxx
Xxxxx 0000
Xxxxxxx, Xxxxxxxx 00000
Attn: Xxxxxxx X. Xxxxxxx
With a copy (which shall not constitute notice) to:
The Prime Group, Inc.
00 Xxxx Xxxxxx Xxxxx
Xxxxx 0000
Xxxxxxx, Xxxxxxxx 00000
Attn: Xxxxxx X. Xxxxxx
If to the Corporation, to:
Brookdale Living Communities, Inc.
00 Xxxx Xxxxxx Xxxxx
Xxxxx 0000
Xxxxxxx, Xxxxxxxx 00000
Attn: President
With a copy (which shall not constitute notice) to:
Winston & Xxxxxx
00 Xxxx Xxxxxx Xxxxx
Xxxxxxx, Xxxxxxxx 00000
Attn: Xxxxx X. Xxxxxx
19. Governing Law. All questions concerning the construction, validity and
interpretation of, and the performance of the obligations imposed by, this
Agreement shall be governed by and construed in accordance with the laws of the
State of [Delaware] (excluding the choice of law provisions thereof).
20. Counterparts. This Agreement may be executed in any number of
counterparts, each of which when so executed and delivered shall be deemed an
original, and such counterparts together shall constitute one instrument.
21. Termination of Rights. The registration rights provided by this
Agreement shall terminate on the earlier of (a) first date after the date of the
IPO on which the aggregate number of Registrable Shares then owned by the
Holders constitutes less than ten percent (10%) of the outstanding Common Stock,
and (b) with regard to each Holder of Registrable Shares, at such time as such
Holder shall have an unlimited right to sell all of its Registrable
-17-
Shares in the public market without restriction on volume or otherwise.
[signature page follows]
-18-
IN WITNESS WHEREOF, the parties hereto have caused this Registration Rights
Agreement to be executed and delivered in their names and on their behalf as of
the date first set forth above.
THE CORPORATION:
BROOKDALE LIVING COMMUNITIES, INC.,
a Delaware corporation
By:
------------------------------------------
Name:
----------------------------------------
Its:
-----------------------------------------
THE HOLDERS:
THE PRIME GROUP, INC.,
an Illinois corporation
By:
------------------------------------------
Name:
----------------------------------------
Its:
-----------------------------------------
PRIME GROUP LIMITED PARTNERSHIP,
an Illinois limited partnership
By:
------------------------------------------
Xxxxxxx X. Xxxxxxx
Managing General Partner
PRIME GROUP VI, L.P.
By: PGLP, Inc.,
its Managing General Partner
By:
------------------------------------
Name:
----------------------------------
Its:
-----------------------------------
S-1
EXHIBIT D
TO
FORMATION AGREEMENT
FORM OF NON-COMPETE AGREEMENT
NON-COMPETE AGREEMENT
---------------------
This NON-COMPETE AGREEMENT (this "Agreement"), dated as of May 7,
1997, is made and entered into by and among BROOKDALE LIVING COMMUNITIES, INC.,
a Delaware corporation (the "Company"), THE PRIME GROUP, INC., an Illinois
corporation ("TPG"), PRIME GROUP LIMITED PARTNERSHIP, an Illinois limited
partnership (together with TPG, the "TPG Group"), and XXXXXXX X. XXXXXXX, an
individual ("Xxxxxxx").
RECITALS
--------
WHEREAS, the Company, through its subsidiaries and affiliates, is
engaged primarily in the business of the management, operation, acquisition and
development of senior and assisted living facilities and the provision of senior
and assisted living services at such facilities;
WHEREAS, on the date hereof the Company is entering into a series of
related transactions (the "Formation") pursuant to which it will acquire, among
other things, substantially all of the operations of the senior housing division
of TPG and the ownership interests of the TPG Group and its affiliates in a
portfolio of two senior and assisted living facilities located in Illinois;
WHEREAS, Xxxxxxx and the TPG Group, directly or through one or more
affiliates, will continue to engage in certain real estate-related activities
after the Formation, including, without limitation, the continued ownership of
the senior and assisted living facility known as The Island on Lake Xxxxxx
located in Lago Vista, Texas (the "Island"); and
WHEREAS, as a condition to the consummation of the transactions
described above, and in an effort to eliminate potential conflicts of interest
that may arise in the future as a result of the continuing activities of Xxxxxxx
and the TPG Group, the parties hereto desire, subject to certain conditions and
exceptions set forth herein, to enter into certain agreements restricting the
activities of Xxxxxxx and the TPG Group for a period expiring on the earlier of
(i) four (4) years from the effective date of the Company's initial public
offering of its Common Stock, $0.01 par value per share (the "IPO"), or (ii) one
(1) year from the date of a merger or sale of all or substantially all of the
stock or assets of the Company.
AGREEMENTS
----------
NOW, THEREFORE, in consideration of the recitals and the mutual
promises and covenants herein contained and other good and valuable
consideration, the receipt and sufficiency of which are hereby acknowledged, the
parties hereto hereby agree as follows:
1. Definitions.
-----------
(a) Previously Defined Terms. Each capitalized term defined in the
first paragraph and Recitals hereof shall have the meaning set forth above
whenever used herein, unless otherwise expressly provided or unless the context
clearly requires otherwise.
(b) Additional Definitions. In addition to the terms defined in the
first paragraph and Recitals hereof, whenever used herein, the following terms
shall have the meanings set forth below unless otherwise expressly provided or
unless the context clearly requires otherwise:
"Affiliate" means (i) any entity in which Xxxxxxx and the TPG Group
(either individually or collectively) own or control, directly or indirectly,
fifty percent (50%) or more of the outstanding equity interests, (ii) any entity
with respect to which Xxxxxxx and the TPG Group (either individually or
collectively) have the right or power, directly or indirectly, to cause such
entity to (x) develop or acquire an interest in any facilities of the type
included within the Primary Business of the Company or (y) manage or operate any
such facilities, in either case without the consent or approval of a third party
equity owner, and (iii) any entity with respect to which Xxxxxxx and the TPG
Group (either individually or collectively) have the right or power, directly or
indirectly, to withhold consent or approval of (x) the development of, or an
acquisition by such entity of an interest in, any facilities of the type
included within the Primary Business of the Company or (y) the engagement by
such entity in the management or operation of any such facilities, in either
case where such consent or approval is required as a condition to consummation
of such acquisition or the engagement in such activity.
"Primary Business of the Company" means the ownership, management,
operation, acquisition and development of senior and assisted living and semi-
acute care facilities.
2. Prohibitions.
------------
(a) Subject to subsections 2(b) and 2(c) below, from and after the
date hereof and during the term of this Agreement, neither Xxxxxxx, the TPG
Group nor any Affiliate will develop any facility or acquire any facility or any
direct or indirect interest
-2-
therein, or manage or operate any such facility, that is of the type included
within the Primary Business of the Company; provided, that the foregoing shall
not prohibit any of Xxxxxxx, the TPG Group or any Affiliate from providing any
mortgage financing, from acting as lessor in any sale-leaseback transaction or
from providing any other subordinated debt with respect to any facilities of the
type included within the Primary Business of the Company. It is expressly
acknowledged and agreed that, subject to subsections 2(b) and 2(c) below, the
prohibitions set forth in this subsection 2(a) shall apply only to any interest
in, or the development, management or operation of, any facility of the type
included within the Primary Business of the Company located anywhere within the
continental United States of America.
(b) Excluded from the restrictions set forth in subsection 2(a) are
the following properties and interests: (i) any interest in the Company; (ii)
the Island and any interest therein; (iii) any activity which a majority of the
independent members of the board of directors of the Company determines not to
be competitive with any facility which the Company owns or plans to acquire or
develop; (iv) less than 5% of any class of securities listed on a national
securities exchange or traded over-the-counter on the National Association of
Securities Dealers Automated Quotation System Market; and (v) subject to the
proviso at the end of this clause (v), any facilities acquired after the date of
this Agreement that are similar to those acquired, developed, managed or owned
by the Company, but only to the extent such facilities are acquired in
connection with the acquisition of a group of properties; provided, that in the
event of any such acquisition permitted by this clause (v), the Company shall
have the right and opportunity to purchase such similar facilities from Xxxxxxx,
the TPG Group or any Affiliate, as applicable, at a price equal to the fair
market value (as determined (i) by an independent appraiser acceptable to both
Xxxxxxx, TPG or such Affiliate, on the one hand, and the Company, on the other
hand or (ii) by any other means mutually acceptable to Xxxxxxx, TPG or such
Affiliate, on the one hand, and the Company, on the other hand) of such similar
facilities.
3. Term. This Agreement shall be in effect from and after the date
hereof and shall continue in effect for a period expiring on the earlier of (i)
four (4) years from the closing date of the IPO or (ii) one (1) year from the
date of a merger of the Company or the sale of all or substantially all of the
stock or assets of the Company.
4. Reasonable Limit. The parties hereto have attempted to set forth
certain restrictions only to the extent necessary to protect the interests of
the Company. Each of Xxxxxxx and the TPG Group expressly acknowledges that the
restrictive covenant contained in subsection 2(a) above along with the
exceptions thereto contained in subsections 2(b) and 2(c) above, constitutes
-3-
a reasonable restriction. If, however, the scope or enforceability of the
restrictive covenant contained in this Agreement is disputed at any time, a
court or other trier of fact may modify and enforce the covenant to the extent
that it believes is reasonable under the circumstances existing at the time.
5. Breach of Agreement.
-------------------
(a) A party aggrieved shall notify the other party in writing of any
conflicts, disputes or claims of breach arising under this Agreement. Within ten
(10) business days after such notice is sent, the parties shall meet, shall
develop, as fully as possible, the facts relating to the conflict, dispute or
alleged breach, and shall attempt to resolve the same, it being understood and
agreed that any such resolution shall be subject to the consent and approval of
a majority of the Company's independent directors. If resolution of the dispute
is not made to the satisfaction of the aggrieved party within thirty (30) days
after the notice is sent, the aggrieved party may pursue its legal and equitable
remedies.
(b) In the event of breach of this Agreement, each of Xxxxxxx and the
TPG Group acknowledges that the remedy at law would be inadequate and that, in
addition to monetary damages, the Company shall be entitled, after compliance
with the dispute mechanism described in subsection 5(a) above, to seek an
injunctive order restraining such breach.
6. Transferability. The parties hereto agree that this Agreement shall
inure to the benefit of the Company, and its successors and assigns and shall be
transferable and assignable by the Company in connection with the sale or other
transfer of an equity interest in the Company of greater than 50% to an entity
that is not an Affiliate. Upon any such transfer or assignment, and subject to
Section 3, this Agreement shall remain in full force and effect between Xxxxxxx
and the TPG Group, on one hand, and such transferees, assignees or successors in
interest, on the other hand. This Agreement shall be binding upon the successors
and assigns of all or substantially all of the business of the TPG Group.
7. Waiver. The waiver by any party to this Agreement of a breach by
any party or any provision of this Agreement shall not operate or be construed
as a waiver of any subsequent breach by any other party. No waiver of any
provision of this Agreement shall be effective, unless in writing and signed by
the party waiving its rights, and then such waiver or consent shall be effective
only in the specific instance and for the specific purpose for which given,
provided further that no waiver by the Company shall be effective unless
accompanied by a certificate of an executive officer of the Company certifying
that a majority of the independent directors of the Company have consented to
and approved such waiver.
-4-
8. Notices. Any notices required or permitted to be sent hereunder shall
be delivered personally or mailed, certified mail, return receipt requested, or
delivered by overnight courier service guaranteeing next business day delivery,
to the following addresses, or such other addresses as shall be given by notice
delivered hereunder, in each case with applicable postage or delivery charges
prepaid, and shall be deemed to have been given upon delivery, if delivered
personally, three business days after mailing, if mailed, or one business day
after delivery to the courier, if delivery by overnight courier service:
If to the Company, to:
Brookdale Living Communities, Inc.
00 Xxxx Xxxxxx Xxxxx
Xxxxx 0000
Xxxxxxx, Xxxxxxxx 00000
Attn: President
With a copy to:
Winston & Xxxxxx
00 Xxxx Xxxxxx Xxxxx
Xxxxxxx, Xxxxxxxx 00000
Attn: Xxxxx X. Xxxxxx
If to the TPG Group or any member thereof, to:
c/o The Prime Group, Inc.
00 Xxxx Xxxxxx Xxxxx
00xx Xxxxx
Xxxxxxx, Xxxxxxxx 00000
Attn: Xxxxxxx X. Xxxxxxx
With a copy to:
The Prime Group, Inc.
00 Xxxx Xxxxxx Xxxxx
Xxxxx 0000
Xxxxxxx, Xxxxxxxx 00000
Attn: Xxxxxx X. Xxxxxx
If to Xxxxxxx X. Xxxxxxx, to:
c/o The Prime Group, Inc.
00 Xxxx Xxxxxx Xxxxx
00xx Xxxxx
Xxxxxxx, Xxxxxxxx 00000
Attn: Xxxxxxx X. Xxxxxxx
-5-
9. Final Agreement. This Agreement constitutes the final agreement
of the parties concerning the matters referred to herein, and supersedes all
prior agreements and understandings.
10. Severability. Whenever possible, each provision of this
Agreement will be interpreted in such manner as to be effective and valid under
applicable law, but if any provision of this Agreement is held to be prohibited
by or invalid under applicable law, such provision will be ineffective only to
the extent of such prohibition or invalidity, without invalidating the remainder
of this Agreement.
11. Descriptive Headings. The descriptive headings of this Agreement
are inserted for convenience of reference only and do not constitute a part of
and shall not be utilized in interpreting this Agreement.
12. Governing Law. All questions concerning the construction,
validity and interpretation of, and the performance of the obligations imposed
by, this Agreement shall be governed by and construed in accordance with the
laws of the State of Illinois (excluding the choice of law provisions thereof).
[signature page follows]
-6-
IN WITNESS WHEREOF, the parties hereto have caused this Non-Compete
Agreement to be duly executed and delivered on their behalf as of the date first
above written.
THE COMPANY:
BROOKDALE LIVING COMMUNITIES, INC.,
a Delaware corporation
By:________________________________
Name:______________________________
Its:_______________________________
XXXXXXX AND THE TPG GROUP:
___________________________________
Xxxxxxx X. Xxxxxxx
THE PRIME GROUP, INC.,
an Illinois corporation
By:________________________________
Name:______________________________
Its:_______________________________
PRIME GROUP LIMITED PARTNERSHIP,
an Illinois limited partnership
By:________________________________
Xxxxxxx X. Xxxxxxx,
Managing General Partner
-7-
EXHIBIT E
TO
FORMATION AGREEMENT
FORM OF VOTING AGREEMENT
VOTING AGREEMENT
----------------
This VOTING AGREEMENT (this "Agreement"), dated as of May 7, 1997, is made
and entered into by and among BROOKDALE LIVING COMMUNITIES, INC., a Delaware
corporation (the "Company"), THE PRIME GROUP, INC., an Illinois corporation
("Prime"), PRIME GROUP LIMITED PARTNERSHIP, an Illinois limited partnership
("PGLP"), and PRIME GROUP VI, L.P., an Illinois limited partnership ("PG-VI,
L.P.") (together with Prime and PGLP, the "TPG Group").
RECITALS
--------
WHEREAS, the Company has filed with the Securities and Exchange Commission
a Form S-1 Registration Statement in connection with the Company's proposed
initial public offering (the "Offering") of its Common Stock, $0.01 par value
per share (the "Common Stock");
WHEREAS, PG-VI, L.P. has purchased 2,500,000 of the 4,500,000 shares of
Common Stock issued and sold in the Offering, representing approximately 38.5%
of the outstanding Common Stock after giving effect to the Offering;
WHEREAS, pursuant to the terms of that certain Formation Agreement dated as
of May 7, 1997, the Company has issued an aggregate of 1,703,043 shares of its
Common Stock to Prime and PGLP, representing approximately 26.2% of the
outstanding Common Stock after giving effect to the Offering; and
WHEREAS, in connection with the Offering, the Company and the TPG Group
have agreed to enter into this Agreement.
AGREEMENTS
----------
NOW, THEREFORE, in consideration of the recitals and the mutual promises
and covenants herein contained and other good and valuable consideration, the
receipt and sufficiency of which are hereby acknowledged, the parties hereto
hereby agree as follows:
1. Agreement to Vote Shares of Common Stock. The TPG Group agrees that,
from and after the completion of the Offering and until this Agreement
terminates pursuant to Section 2 hereof, it will vote all of the TPG Group's
shares of Common Stock at any meeting at which directors of the Company are
elected in favor of that number of independent directors who are not affiliates
of the TPG Group or employees of the TPG Group (any such directors, "Independent
Directors") so that, if such directors were elected,
there would be at least four (4) Independent Directors who are members of the
Board of Directors of the Company. The parties hereto acknowledge and agree that
the agreement contained in the immediately preceding sentence is not, and shall
not be construed as, a guarantee by the TPG Group, or any member thereof, that
any of the Independent Directors for which the TPG Group votes in favor of will
be elected as a member of the Board of Directors of the Company or that there
will be at least four (4) Independent Directors who are members of the Board of
Directors of the Company.
2. Term. This Agreement will automatically terminate upon the earlier of
(i) three (3) years from the closing date of the Offering or (ii) the date the
TPG Group owns less than ten percent (10%) of the then outstanding Common Stock.
3. Notices. Any notices required or permitted to be sent hereunder shall
be delivered personally or mailed, certified mail, return receipt requested, or
delivered by overnight courier service guaranteeing next business day delivery,
to the following addresses, or such other addresses as shall be given by notice
delivered hereunder, in each case with applicable postage or delivery charges
prepaid, and shall be deemed to have been given upon delivery, if delivered
personally, three business days after mailing, if mailed, or one business day
after delivery to the courier, if delivery by overnight courier service:
If to the Company, to:
Brookdale Living Communities, Inc.
00 Xxxx Xxxxxx Xxxxx
Xxxxx 0000
Xxxxxxx, Xxxxxxxx 00000
Attn: President
With a copy to:
Winston & Xxxxxx
00 Xxxx Xxxxxx Xxxxx
Xxxxxxx, Xxxxxxxx 00000
Attn: Xxxxx X. Xxxxxx
If to the TPG Group or any member thereof, to:
c/o The Prime Group, Inc.
00 Xxxx Xxxxxx Xxxxx
00xx Xxxxx
Xxxxxxx, Xxxxxxxx 00000
Attn: Xxxxxxx X. Xxxxxxx
-2-
With a copy to:
The Prime Group, Inc.
00 Xxxx Xxxxxx Xxxxx
Xxxxx 0000
Xxxxxxx, Xxxxxxxx 00000
Attn: Xxxxxx X. Xxxxxx
4. Final Agreement. This Agreement constitutes the final agreement of the
parties concerning the matters referred to herein, and supersedes all prior
agreements and understandings.
5. Severability. Whenever possible, each provision of this Agreement will
be interpreted in such manner as to be effective and valid under applicable law,
but if any provision of this Agreement is held to be prohibited by or invalid
under applicable law, such provision will be ineffective only to the extent of
such prohibition or invalidity, without invalidating the remainder of this
Agreement.
6. Descriptive Headings. The descriptive headings of this Agreement are
inserted for convenience of reference only and do not constitute a part of and
shall not be utilized in interpreting this Agreement.
7. Governing Law. All questions concerning the construction, validity and
interpretation of, and the performance of the obligations imposed by, this
Agreement shall be governed by and construed in accordance with the laws of the
State of Delaware (excluding the choice of law provisions thereof).
8. Amendments. The provisions of this Agreement may be amended or waived
at any time only by the written agreement of the parties hereto.
9. Successors and Assigns. The provisions of this Agreement shall be
binding upon and inure to the benefit of the respective successors and assigns
of the parties hereto, whether so expressed or not, including, without
limitation, any person or entity to whom any member of the TPG Group assigns any
of the Common Stock held by it.
[signature page follows]
-3-
IN WITNESS WHEREOF, the parties hereto have caused this Voting Agreement to
be duly executed and delivered on their behalf as of the date first above
written.
THE COMPANY:
BROOKDALE LIVING COMMUNITIES, INC.,
a Delaware corporation
By:
-------------------------------
Name:
-----------------------------
Title:
----------------------------
THE TPG GROUP:
THE PRIME GROUP, INC.,
an Illinois corporation
By:
-------------------------------
Name:
-----------------------------
Title:
----------------------------
PRIME GROUP LIMITED PARTNERSHIP,
an Illinois limited partnership
By:
-------------------------------
Xxxxxxx X. Xxxxxxx,
Managing General Partner
PRIME GROUP VI, L.P.
By: PGLP, Inc.,
its Managing General Partner
By:
---------------------------
Name:
-------------------------
Title:
------------------------
S-1
EXHIBIT F
TO
FORMATION AGREEMENT
FORM OF MANAGEMENT AGREEMENT
MANAGEMENT AGREEMENT
--------------------
This MANAGEMENT AGREEMENT (this "Agreement"), dated as of May 7, 1997, is
made and entered into by and between THE ISLAND ON LAKE XXXXXX, LTD., a Texas
limited partnership ("Owner"), and BROOKDALE LIVING COMMUNITIES OF TEXAS, INC.,
a Delaware corporation ("Manager").
RECITALS
--------
WHEREAS, Owner owns the senior and assisted living facility identified on
Schedule A hereto (the "Facility");
WHEREAS, Manager is experienced and qualified in the business of owning and
operating senior and assisted living facilities such as the Facility, and Owner
desires to engage Manager to operate the Facility; and
WHEREAS, Manager is willing to operate the Facility on the terms and
subject to the conditions set forth in this Agreement.
AGREEMENTS
----------
NOW, THEREFORE, in consideration of the recitals and the mutual promises
and covenants herein contained and for other good and valuable consideration,
the receipt and sufficiency of which are hereby acknowledged, the parties hereto
hereby agree as follows:
1. Responsibilities of Manager.
---------------------------
(a) Owner hereby engages Manager to operate the Facility, and Manager
hereby accepts such engagement and, subject to the conditions set forth in this
Agreement, agrees to operate the Facility, at Owner's expense, so as to provide
all services required by applicable law and regulations and by the terms set
forth in this Agreement. During the term of this Agreement, Manager shall have
full authority to operate and manage the Facility as a senior and assisted
living facility in accordance with applicable law and regulations and the terms
and conditions hereof, and shall have full and complete control and reign over,
and use of, the entire Facility, including its common areas. Without limiting
the generality of the foregoing, Manager shall have full authority and
responsibility as follows:
(i) Operational Policies and Forms. Subject to the applicable
Annual Budget (as defined in Section 1(a)(xii)), Manager shall establish and
implement such operational policies and procedures, and develop such new
policies and procedures, as Manager may deem necessary to cause or to ensure the
establishment
and maintenance of operational standards appropriate for the nature of the
Facility.
(ii) Charges. Manager shall establish the schedules of charges for
residents of the Facility, including appropriate charges for any and all special
services rendered for residents at the Facility.
(iii) Information. Manager shall develop any informational material,
mass media releases, and other related publicity materials, that it deems
necessary for the operation of the Facility.
(iv) Regulatory Compliance. Manager shall use its reasonable best
efforts to maintain all licenses, permits, qualifications and approvals from any
applicable governmental or regulatory authority required for the operation of
the Facility, to operate the Facility in compliance with all applicable laws and
regulations, and to comply with such laws and regulations in performing
Manager's obligations under this Agreement. In addition, Manager shall supervise
and coordinate the preparation and filing of (and, where required to do so under
applicable law or regulations, file) all reports or other information required
by all state or other governmental agencies having jurisdiction over the
Facility (including, but not limited to, the Capital Health Facilities
Development Corporation of Xxxxxx County, Texas (the "Issuer")) and shall
deliver copies of all such reports and information to Owner simultaneously with
such filings. Manager shall cooperate with governmental inspection and
enforcement activities.
(v) Equipment and Improvements. Subject to the applicable Annual
Budget, Manager shall, on behalf of Owner, acquire or effect the acquisition of
equipment and improvements which are needed to maintain or upgrade the quality
of the Facility or its services, to replace obsolete or run-down equipment, or
to correct any other deficiencies which may be identified by Manager during the
term of this Agreement, and shall make, or engage third part1es to make, all
such repairs, replacements and maintenance and shall cause to be acquired all
necessary equipment, including replacement equipment.
(vi) Accounting. Manager shall supervise and coordinate accounting
support to, and prepare and maintain records for, the Facility, including the
following:
A. a monthly balance sheet and statement of operations for the
Facility, to be submitted to Owner within thirty (30) days after the end of each
calendar month;
B. resident billing records;
-2-
C. accounts receivable and collection records;
D. accounts payable records;
E. all payroll functions, including preparation of payroll checks,
establishment of depository accounts for withholding taxes, payment of such
taxes (at Owner's sole expense), filing of payroll reports and the issuance of
W-2 forms to all employees;
F. a complete general ledger for the purposes of recording and summarizing
all transactions for the Facility; and
G. the preparation and filing of all necessary reports as required by any
and all governmental authorities having jurisdiction over the Facility or the
operation thereof (including, but not limited to, the Issuer) and the
simultaneous provision of copies thereof to Owner. Manager shall file, on its
own behalf or on behalf of Owner, all such reports as are required to be filed
by Manager or Owner.
All accounting procedures and systems utilized in providing said support shall
be in accordance with the operating capital and cash programs developed by
Manager and approved by Owner, which programs shall conform to generally
accepted accounting principles and shall not materially distort income or loss.
Subject to the applicable Annual Budget, nothing herein shall preclude Manager
from engaging a third party to assist it in the performance of the accounting
duties provided for herein.
(vii) Reports. Manager shall supervise and coordinate the preparation of
any reasonable operational information which may from time to time be
specifically requested by Owner, including any information and reports needed to
assist Owner in completing its tax returns and in complying with any reporting
obligations imposed by any mortgagees or lessors of the Facility. In addition,
(i) within thirty (30) days after the end of each calendar month, Manager shall
supervise and coordinate the preparation and the delivery to Owner of an
unaudited balance sheet of the Facility, dated as of the last day of such month,
and unaudited statements of income and expenses and cash flow for such month
relating to the operation of the Facility and (ii) within ninety (90) days after
the end of the fiscal year of the Facility, Manager shall supervise and
coordinate the preparation and the delivery to Owner of audited financial
statements, including a balance sheet of the Facility dated as of the last day
of said fiscal year and statements of income and expense and changes in
financial position and an unaudited statement of cash flow for the fiscal year
then ended relating to the operation of the Facility. In addition, Manager shall
supervise and coordinate the preparation and the delivery to Owner of monthly
occupancy reports and related information with respect to the Facility. All
originals of the
-3-
books, forms and records generated by Manager in connection with the operation
of the Facility shall be Manager's property; provided, that Manager shall
provide Owner with copies of any of such books, forms and records reasonably
requested by Owner.
(viii) Bank Accounts. Manager shall establish an account or accounts and
shall deposit therein all money received by Manager on Owner's behalf from the
operation of the Facility. Withdrawals and payments from this account shall be
made only on checks signed by one or more person or persons designated by
Manager. Manager shall give Owner written notice as to the identity of such
authorized signatories on such account. Subject to paragraph (2) of Section
1(a)(xii), all expenses incurred in the operation of the Facility in accordance
with the terms of the Annual Budgets, including, but not limited to, Facility
mortgage or lease payments, payroll and employee benefits and payment of Fees,
shall be paid by check drawn on this account. Monthly payments shall be made out
of this account first to pay any debt service or rent due with respect to the
Facility, next to pay the operating expenses of the Facility in such order of
priority as Manager deems appropriate to the operation of the Facility (other
than the Fees), and, thereafter, to pay the Fees. Any Fees which are not paid
when due as a result of an insufficiency of revenues from the Facility to cover
the same shall accrue and shall be due and payable promptly by Owner.
(ix) Personnel. Manager shall have full power and authority to recruit,
hire, train, promote, direct, discipline and fire all Facility personnel,
including the Executive Director of the Facility; establish salary levels,
personnel policies and employee benefits; and establish employee performance
standards, all as Manager determines to be necessary or desirable during the
term of this Agreement to ensure the efficient and satisfactory operation of all
departments within, and all services offered by, the Facility. All of the
foregoing obligations shall be undertaken in accordance with the Annual Budgets
and applicable law and regulations. All of the Facility personnel shall be the
employees of Manager, unless otherwise agreed by Owner and Manager, and all
salary, bonuses, fringe benefits, payroll taxes and related expenses payable to
or in respect of the Facility's on-site personnel holding the position of
Executive Director of the Facility and positions subordinate thereto shall be
expenses of the Facility. Manager agrees to employ as of the date of this
Agreement all individuals who are working at the Facility as of the date of this
Agreement and assume all liabilities and obligations to or with respect to such
individuals and indemnify, defend and hold harmless Owner and its affiliates
against any and all claims made by such individuals in respect of their
respective employment at the Facility.
(x) Supplies and Equipment. Manager shall purchase, on behalf of Owner,
supplies and non-capital equipment
-4-
needed to operate the Facility within the budgetary limits set forth in the
Annual Budqets.
(xi) Legal Proceedings. Manager shall, through legal counsel
designated by Manager and reasonably satisfactory to Owner, direct all legal
matters and proceedings that are within the scope of Manager's authority
pursuant to this Agreement, including without limitation, instituting any
necessary legal actions or proceedings to collect obligations owing to the
Facility, canceling or terminating any contract or agreement relating to the
Facility for breach thereof or default thereunder, and otherwise enforce the
obligations of the residents, sponsors, licensees, customers and any other users
of the Facility. Without limiting the generality of the foregoing, Manager is
authorized (without the prior written consent of Owner) to settle, in the name
and on behalf of Owner and on such terms and conditions as Manager may deem to
be in the best interests of the Facility, any and all claims or demands arising
out of, or in connection with, the operation of the Facility, whether or not
legal action has been instituted, provided that such settlement does not exceed
the amount for each such individual claim or demand as set forth in the most
recently approved Annual Budget. All such amounts paid in respect of any such
settlements shall be expenses of the Facility. Manager will give notice promptly
to Owner of all demands and claims and all settlements and legal actions, but
the failure to give such notice shall not affect the preceding provisions of
this paragraph.
(xii) Annual Budgets.
(A) Preparation and Submission. Owner and Manager acknowledge
that they have agreed upon the budget for the Facility through December 31,
1997. At least ninety (90) days prior to January 1, 1998 and each subsequent
calendar year that commences during the term of this Agreement, Manager shall
submit to Owner a proposed annual budget for the Facility projecting the
revenues available and funds required during such fiscal year in order to
operate the Facility and to make capital improvements necessary or desirable in
order to keep the Facility's physical plant in good condition and repair. The
proposed annual budget shall be based upon data and information then available
to Manager and shall include, without limitation, estimated salaries and fringe
benefits for all personnel groups, projected staffing patterns for the Facility,
estimates of required capital expenditures and purchases of equipment, supplies,
inventory, food and similar items, and an estimate of the level of rates and
charges to residents of the Facility sufficient to generate revenue necessary to
operate the Facility and make the capital improvements projected in such budget.
The proposed annual budget shall be an estimate of revenues and costs, and Owner
and Manager acknowledge that (1) projected revenue may not be actually received
and (2) projected costs may be exceeded by actual expenses and capital
expenditures incurred in connection with the operation and maintenance of the
-5-
Facility. By submitting such a projected budget, Manager will not be deemed to
be providing a guarantee or warranty as to the projected revenue, expenses or
capital expenditures of the Facility.
(B) Adoption. The Facility budget for the period ending December
31, l997 referred to in the immediately preceding paragraph and each annual
budget as finally established in accordance with this subparagraph (B)
(including as it may thereafter be revised from time to time during a calendar
year pursuant to the written agreement of Owner and Manager), as the same may be
modified by Owner and Manager, shall constitute an "Annual Budget" for all
purposes under this Agreement. Owner shall, within fifteen (15) days following
receipt from Manager of a proposed annual budget proposal, notify Manager of
either (1) Owner's approval of such proposed annual budget or (2) those items of
which Owner approves and those items of which Owner disapproves. In the event
that Owner does not either approve or disapprove of, in total or in part, such
proposed annual budget in writing within such 15-day period, then such proposed
annual budget shall be deemed approved by Owner and shall be the Annual Budget
for such calendar year. If Owner disapproves of the proposed annual budget
either in total or in part within such 15-day period, then Owner and Manager
shall have thirty (30) days from the date of Owner's disapproval notice to
formulate a mutually agreeable Annual Budget. If the parties are unable to reach
an agreement within said thirty (30) day period, then the Annual Budget for the
immediately preceding calendar year, including any such prior Annual Budget
determined in accordance with this sentence, increased by the greater of 5% and
the percentage increase in the Consumer Price Index -- Urban Wage Earners (or,
if such index is no longer published, such other index as is determined by
Manager in good faith to be comparable) during the 12-month period ended on
November 3Oth of such preceding year, shall constitute the Annual Budget pending
the final adoption of an Annual Budget; provided, however, that the budgeted
items for the categories of heat, light, power, insurance and real estate taxes
shall be deemed increased as required to reflect actual expenses for the
succeeding calendar year).
(C) Efforts to Operate within Annual Budget. Manager agrees to
use its reasonable best efforts to operate the Facility in accordance with the
Annual Budgets. Subject to the foregoing limitation, Owner shall be responsible
on a periodic basis, as and when needed, for all expenses and capital
expenditures incurred in connection with the operation and maintenance of the
Facility, including, without limitation, Fees and cost overruns which exceed the
projections in the then current Annual Budget; provided, however, that (except
as provided in the next sentence) Owner shall not be responsible for cost
overruns which exceed the relevant amount provided for in such Annual Budget by
more than 10%, if the incurrence of such overruns was subject to
-6-
or within the reasonable control of Manager. Notwithstanding anything in this
Agreement, if Manager determines in good faith that the incurrence of any
expenditure is required in order to comply with applicable law or regulations,
then, with Owner's prior approval, which shall not be unreasonably withheld,
Manager shall be entitled to make such expenditures, and all such expenditures
shall be deemed, for all purposes of this Agreement, to be in accordance with
the then current Annual Budget.
(xiii) Collection of Accounts. Manager shall issue bills and
collect accounts and monies owed for goods and services furnished by the
Facility, including, but not limited to, enforcing the rights of Owner and the
Facility as creditor under any contract or in connection with the rendering of
any services. Any actions taken by Manager to collect said accounts receivable
shall be in accordance with the applicable laws, rules and regulations
governing the collection of accounts receivable and in accordance with the
applicable Annual Budget.
(xiv) Contracts. Subject to Owner's prior approval, Manager shall
negotiate, enter into, secure, cancel and/or terminate such agreements and
contracts which Manager may deem necessary or advisable for the operation of the
Facility, including, without limitation, the furnishing of concessions,
supplies, utilities, extermination, refuse removal and other services. Where
lawful and provided Owner has approved, said agreements and contracts will be
entered into in the name of and on behalf of Owner.
(b) Exclusive Representative. It is understood and agreed that
Manager shall be the exclusive representative of Owner for purposes of
communicating and dealing directly with the regulatory authorities, governmental
agencies, employees, independent contractors, suppliers, residents, sponsors,
licensees, customers and guests of the Facility. Any communications from Owner
to such persons or entities or authorities shall be directed through Manager
unless Owner determines that direct communications between Owner and one or more
such persons or entities is appropriate. Owner currently maintains and will
continue to maintain contact relationships with certain of the above-mentioned
persons and entities.
2. Insurance. Manager shall arrange for and maintain all necessary and
proper hazard insurance covering the Facility, including the furniture,
fixtures and equipment situated thereon, all necessary and proper malpractice
and public liability insurance for Manager's and Owner's protection and for
the protection of Manager's and Owner's directors, officers, partners, agents
and the Facility's personnel. Manager shall also arrange for and maintain
all employee health and worker's compensation insurance for the Facility's
personnel. Any insurance provided pursuant to this paragraph shall comply with
the requirements of any applicable
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Facility mortgage or lease and, with the exception of the insurance maintained
by Manager for its own protection, shall be an expense of the Facility.
3. Proprietary Interest. The systems, methods, procedures and controls
employed by Manager and any written materials or brochures developed by Manager
to document the same are to remain the property of Manager provided, Manager
shall provide Owner with a copy or copies of such materials and brochures.
4. Term of Agreement; Effect of Termination. Unless this Agreement is
sooner terminated as hereinafter provided in Section 5 or in this Section 4 or
as otherwise agreed in writing, the initial term of this Agreement shall
commence on the date hereof and shall end on April 30, 1999, with successive
automatic renewal periods of one (1) year each thereafter, unless either party
notifies the other in writing, within sixty (60) days prior to the expiration of
the then current term, of such party's intention not to exercise the then
upcoming automatic renewal period. This Agreement may be terminated (i) by Owner
(a) upon sixty (60) days' prior written notice to Manager given at any time
after the last day of the 24th month of the term of this Agreement or (b) at any
time after the date hereof for Cause (as hereinafter defined), or (ii) by
Manager upon sixty (60) days' prior written notice to Owner given at any time
after the date hereof; provided, however, that in the event of a termination by
Manager pursuant to clause (ii) above, Manager shall cooperate with and assist
Owner in engaging a qualified replacement manager for the Facility. Upon any
termination of this Agreement pursuant to the immediately preceding sentence,
the parties hereto shall have no further obligations or liabilities other than
the right of Manager to receive Fees through the date of termination and
Manager's obligation to cooperate with Owner to facilitate a smooth transition
to a qualified replacement manager for the Facility, except that, upon the
expiration or earlier termination of this Agreement for any reason, the parties
shall cooperate (at Owner's expense) to minimize the impact of the change on the
residents of the Facility, and during any such period for which Manager provides
services or assists in the operation of the Facility in connection therewith it
shall be entitled to receive an appropriate fee therefor.
For purposes of this Agreement, "Cause" shall mean (i) fraud,
misappropriation or embezzlement by Manager involving Owner's property or other
wrongful acts by Manager that materially impair the goodwill or business of
Owner or the Facility or that cause material damage to Owner's property,
goodwill or business or (ii) continued failure by Manager to substantially
perform its duties and obligations owing to Owner under this Agreement, after a
written demand for performance by Manager is delivered to Manager by Owner that
specifically identifies the manner in which Owner believes Manager has not
substantially performed its duties and
-8-
after Manager has been given at least thirty (30) days in which to cure such
performance deficiencies.
5. Events of Default and Remedies.
(a) Defaults. Each of the following shall constitute an Event of
Default hereunder:
(i) if Owner shall fail to pay or allow payment of any installment of
the Fees due to Manager in accordance with Section 8 hereof for a period of
thirty (30) days after written notice of such default from Manager;
(ii) if either Owner, on the one hand, or Manager, on the other, fails
to perform in any material respect any term, provision, or covenant of this
Agreement (other than as set forth in Section 5(a) (i)) and (A) such failure
continues for thirty (30) days after written notice from the other party
specifying such failure to perform (unless such failure cannot reasonably be
cured within such 30-day period, in which event, the defaulting party shall have
an additional period, not to exceed an additional thirty (30) days, in which to
cure the default) or (B) the defaulting party fails to endeavor vigorously,
diligently and continuously to cure such default as promptly as is practicable;
or
(iii) if either Owner, on the one hand, or Manager, on the other, is
dissolved or liquidated, applies for or consents to the appointment of a
receiver, trustee or liquidator of all or a substantial part of its assets,
files a voluntary petition in bankruptcy or is the subject of an involuntary
bankruptcy filing, makes a general assignment for the benefit of creditors, or
files a petition or an answer seeking reorganization or arrangement with
creditors or to take advantage of any insolvency law, or if an order, judgment
or decree shall be entered by any court of competent jurisdiction, on the
application of a creditor, adjudicating Owner or Manager bankrupt or insolvent
or approving a petition seeking reorganization of Owner or Manager or appointing
a receiver, trustee or liquidator for such party of all or a substantial part of
its assets, and such order, judgment or decree shall continue unstayed and in
effect for any period of sixty (60) consecutive days.
(b) Remedies. At any time after the occurrence and during the
continuance of an Event of Default, the party who has not committed or suffered
the Event of Default may, at its option, terminate this Agreement by giving
written notice to the other party and, except as provided in this Agreement,
shall be entitled to exercise all rights and remedies available under applicable
law; provided, however, that Owner may cause the effective date of any
termination by Manager to be deferred for up to ninety (90) days to afford Owner
the opportunity to engage a replacement manager of the
-9-
Facility and to facilitate a smooth transition to such replacement manager.
6. Facility Operations.
(a) No Guarantee of Profitability. Manager does not guarantee that
operation of the Facility will be profitable, but Manager shall use its best
efforts to operate the Facility in as cost effective and profitable a manner as
reasonably possible consistent with maintaining operations in accordance with
the senior and assisted living industry's then prevailing standards in the
geographic area in which the Facility is located.
(b) Standard of Performance; Acting within Budget. In performing its
obligations under this Agreement, Manager shall use its reasonable best efforts
and act in good faith and with professionalism in accordance with the Annual
Budgets and the prevailing standards of the senior and assisted living industry
in the geographic area in which the Facility is located.
(c) Force Majeure. The parties will not be deemed to be in violation
of this Agreement if they are prevented from performing any of their respective
obligations hereunder for any reason beyond their control, including, without
limitation, strikes, shortages, war, acts of God, or any applicable statute,
regulation or rule of federal, state or local government or agency thereof
having jurisdiction over the Facility or the operations thereof.
7. Withdrawal of Funds by Manager. Owner and Manager acknowledge and
agree that the efficient operation of the Facility requires that Manager have
ready access to the funds required therefor. Accordingly, unless otherwise
agreed by Owner and Manager, Owner agrees not to withdraw any funds from the
Facility's bank account(s) reasonably believed by Manager to be required for the
proper operation of the Facility or maintenance of appropriate reserves with
respect thereto as set forth in the most recently approved Annual Budget.
8. Fees. During the term of this Agreement, Manager shall be entitled to
receive management fees (the "Fees") equal to five percent (5%) of the gross
revenues of the Facility during each month or portion thereof occurring during
such term. Fees shall be paid on a monthly basis simultaneously with the
delivery by Manager to Owner of the monthly statements provided for in Section
1(a)(vii).
9. Assignment. This Agreement shall not be assigned (including by
operation of law, whether by merger or consolidation (excluding a merger
effected solely for the purpose of changing Owner's jurisdiction of
incorporation that does not affect the stock ownership of Owner in any material
respect) or otherwise) by
-10-
Owner, on the one hand, or by Manager, on the other, without the prior written
consent of the other party; provided, however, that to the extent permitted by
applicable law and regulations, and subject to the receipt of all required
licenses, permits, approvals and authorizations of applicable governmental
agencies, this Agreement may be assigned by Manager to one or more corporations
or other legal entities all the shares (and, in the case of legal entities
other than corporations, all the equity ownership and voting control) of which
are owned by Manager or by Brookdale Living Communities, Inc. (the owner of
all of the outstanding stock of Manager).
10. Notices. Any notices required or permitted to be sent hereunder
shall be delivered personally or mailed, certified mail, return receipt
requested, or delivered by overnight courier service to the following addresses,
or such other addresses as shall be given by notice delivered hereunder, and
shall be deemed to have been given upon delivery, if delivered personally, three
(3) business days after mailing, if mailed, or one business day after delivery
to the courier, if delivery by overnight courier service:
If to Owner, to:
The Island on Lake Xxxxxx, Ltd.
c/o The Prime Group, Inc.
00 Xxxx Xxxxxx Xxxxx
Xxxxx 0000
Xxxxxxx, Xxxxxxxx 00000
Attn: Xxxxxxx X. Xxxxxxx
With a copy to:
The Prime Group, Inc.
00 Xxxx Xxxxxx Xxxxx
Xxxxx 0000
Xxxxxxx, Xxxxxxxx 00000
Attn: Xxxxxx X. Xxxxxx
If to Manager, to:
Brookdale Living Communities, Inc.
00 Xxxx Xxxxxx Xxxxx
Xxxxx 0000
Xxxxxxx, Xxxxxxxx 00000
Attn: President
11
With a copy to:
Winston & Xxxxxx
00 Xxxx Xxxxxx Xxxxx
Xxxxxxx, Xxxxxxxx 00000
Attn: Xxxxx X. Xxxxxx
11. Relationship of the Parties. The relationship of Manager to Owner in
connection with this Agreement shall be that of an independent contractor, and
all acts performed by Manager during the term hereof shall be deemed to be
performed in Manager's capacity as an independent contractor. Nothing contained
in this Agreement is intended to or shall be construed to give rise to or create
a partnership or joint venture or lease between Owner, its successors and
assigns, on the one hand, and Manager, its successors and assigns, on the other
hand.
12. Entire Agreement. This Agreement and any documents executed in
connection herewith contain the entire agreement among the parties and shall
be binding upon their respective successors and assigns, and shall be construed
in accordance with the laws of the State of Texas. This Agreement may not be
modified or amended except by written instrument signed by the parties hereto.
13. Contract Modifications for Certain Legal Events. In the event any
state or federal laws or regulations, whether now existing or enacted or
promulgated after the effective date of this Agreement, are interpreted by
judicial decision, a regulatory agency or legal counsel of both parties in such
a manner as to indicate that the structure of this Agreement may be in violation
of such laws or regulations, Owner and Manager agree to cooperate in
restructuring their relationship and this Agreement to eliminate such violation
or to reduce the risk thereof to the extent such restructuring can be
accomplished upon commercially reasonable terms; provided, that any such
restructuring shall, to the maximum extent possible, preserve the underlying
economic and financial arrangements between Owner and Manager. The parties
agree that such amendment may require either or both parties to obtain
appropriate regulatory licenses and approvals.
14. Captions. The captions used herein are for convenience of reference
only and shall not be construed in any manner to limit or modify any of the
terms hereof.
15. Severability. In the event one or more of the provisions contained in
this Agreement is deemed to be invalid, illegal or unenforceable in any respect
under applicable law, the validity, legality and enforceability of the remaining
provisions hereof shall not in any way be impaired thereby.
-12-
16. Remedies Cumulative; No Waiver. No right or remedy herein conferred
upon or reserved to any of the parties hereto is intended to be exclusive of any
other right or remedy, and each and every right and remedy shall be cumulative
and in addition to any other right or remedy given hereunder, or now or
hereafter legally existing upon the occurrence of an Event of Default hereunder.
The failure of any party hereto to insist at any time upon the strict observance
or performance of any of the provisions of this Agreement or to exercise any
right or remedy as provided in this Agreement shall not impair any such right or
remedy or be construed as a waiver or relinquishment thereof with respect to
subsequent defaults. Every right and remedy given by this Agreement to the
respective parties hereto may be exercised from time to time and as often as may
be deemed expedient by such parties. To the extent either party hereto incurs
legal fees and expenses in connection with such party's enforcement of any of
its rights hereunder as a result of a breach of this Agreement by the other
party hereto (the "Breaching Party"), then, to the extent it is determined,
either by the admission of the Breaching Party or by a court having competent
jurisdiction over such dispute, that the Breaching Party had committed the
alleged breach of this Agreement, then the Breaching Party shall pay all such
reasonable attorneys' fees and expenses incurred by the other party in
connection with such enforcement.
17. Counterparts. This Agreement may be executed in any number of
counterparts, each of which shall be an original, and each such counterpart
shall together constitute but one and the same Agreement.
[signature page follows]
-13-
IN WITNESS WHEREOF, the parties hereto have caused this Management
Agreement to be executed and delivered in their names and on their behalf as of
the date first set forth above.
OWNER:
THE ISLAND ON LAKE XXXXXX, LTD., a
Texas limited partnership
By: The Lake Xxxxxx Island, Ltd.,
a Texas limited partnership,
its General Partner
By: The Prime Group, Inc., an
Illinois corporation, its
General Partner
By:
------------------------------------
Name:
-----------------------------------
Title:
---------------------------------
MANAGER:
BROOKDALE LIVING COMMUNITIES OF
TEXAS, INC., a Delaware corporation
By:
-------------------------------------
Name:
-----------------------------------
Title:
----------------------------------
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SCHEDULE A
DESCRIPTION OF FACILITY
The real property and improvements commonly known as The Island and Lake Xxxxxx
located at 0000 Xxxxxxxx Xxxxx, Xxxx Xxxxx, Xxxxx.
-15-
EXHIBIT G
TO
FORMATION AGREEMENT
FORM OF INDEMNITY AGREEMENT
INDEMNIFICATION AGREEMENT
This INDEMNIFICATION AGREEMENT (this "Agreement"), dated as of May 7, 1997,
is made and entered into by and between Brookdale Living Communities, Inc., a
Delaware corporation (the "Company"), and Xxxxxxx X. Xxxxxxx ("Indemnitee"), an
individual who is a director and/or officer of the Company.
RECITALS
WHEREAS, Section 6 of the Amended and Restated By-laws of the Company (the
"By-laws"), in part, provides that the Company, subject to the limitations set
forth therein, shall indemnify and hold harmless each person who was or is a
party or is threatened to be made a party to or is involved in any threatened,
pending or completed action, suit or proceeding, whether civil, criminal,
administrative, or investigative and whether by or in the right of the Company
or otherwise, by reason of the fact that he or she is or was an officer or
director of the Company or is or was serving at the request of the Company as an
officer, director, employee, partner (limited or general) or agent of another
corporation or of a partnership, joint venture, limited liability company,
trust, or other enterprise; and
WHEREAS, in recognition of Indemnitee's need for protection against
personal liability in order to enhance Indemnitee's continued service to the
Company and Indemnitee's reliance on the provisions of Section 6 of the By-laws
requiring indemnification under certain circumstances, and in part to provide
Indemnitee with specific contractual assurance that indemnification protection
will be available and to implement such By-law provisions, the Company wishes to
provide in this Agreement for the indemnification of, and the advancement of
expenses to, Indemnitee to the fullest extent permitted by law.
AGREEMENTS
NOW, THEREFORE, in consideration of the recitals and the mutual promises
and covenants contained herein and other good and valuable consideration, the
receipt and sufficiency of which are hereby acknowledged, the parties hereto
hereby agree as follows:
1. Right to Indemnification. The Company shall, to the fullest extent
permitted by applicable law in effect from time to time, but subject to the
limitations set forth in this Agreement, indemnify and hold harmless Indemnitee
in the event that Indemnitee was or is a party to or is involved or becomes
involved in any manner (including, without limitation, as a party, intervenor or
a witness) or is threatened to be made so involved in any threatened, pending or
completed investigation, claim, action, suit or proceeding, whether civil,
criminal, administrative or investigative (including without limitation, any
action, suit or proceeding by or in the right of the Company to procure a
judgment in its favor) (a "Proceeding"), by reason of the fact that
Indemnitee, or a person of whom Indemnitee is the legal representative, is or
was a director and/or officer of the Company, or is or was serving at the
request of the Company as an officer, director, employee, partner (limited or
general) or agent of another corporation or of a partnership, joint venture,
limited liability company, trust or other enterprise (including, without
limitation, service with respect to an employee benefit plan), against all
expenses, liabilities and losses (including attorneys' fees, judgments, fines,
taxes, penalties and amounts paid or to be paid in settlement) reasonably
incurred by Indemnitee in connection with such Proceeding. Such indemnification
shall be a contract right and shall include the right to receive payment in
advance of any expenses incurred by Indemnitee in connection with such
Proceeding, consistent with the provisions of applicable law in effect from time
to time.
2. Indemnification; Not Exclusive Right. The right of indemnification
provided in this Agreement shall not be exclusive of and shall be in addition
to, and not in lieu of, any other rights to which Indemnitee may otherwise be
entitled under applicable law, the By-laws, or otherwise. Nothing in this
Agreement shall diminish or otherwise restrict Indemnitee's right to
indemnification under applicable law, the By-laws or otherwise. The provisions
of this Agreement shall inure to the benefit of the heirs, executors,
administrators and other legal representatives of Indemnitee and shall be
applicable to Proceedings commenced or continuing after the adoption of this
Agreement, whether arising from acts or omissions occurring before or after its
execution and delivery.
3. Advancement of Expenses; Procedures; Presumptions and Effect of Certain
Proceedings; Remedies. In furtherance, but not in limitation of the foregoing
provisions, the following procedures, presumptions and remedies shall apply with
respect to the advancement of expenses and the right to indemnification under
this Agreement:
(a) Advancement of Expenses. All reasonable expenses incurred by or on
behalf of Indemnitee in the defense of or other involvement in or otherwise in
connection with any Proceeding shall be advanced to Indemnitee by the Company
within twenty (20) days after the receipt by the Company of a statement or
statements from Indemnitee requesting such advance or advances from time to
time, whether prior to or after final disposition of such Proceeding. Such
statement or statements shall reasonably evidence the expenses incurred by
Indemnitee and, if required by law in effect at the time of such advance, shall
include or be accompanied by an undertaking by or on behalf of Indemnitee to
repay the amounts advanced if it should ultimately be determined that Indemnitee
is not entitled to be indemnified against such expenses pursuant to this
Agreement.
-2-
(b) Procedure for Determination of Entitlement to Indemnification.
(i) To obtain indemnification under this Agreement, Indemnitee shall
submit to the Secretary of the Company a written request, including such
documentation and information as is reasonably available to Indemnitee and
reasonably necessary to determine whether and to what extent Indemnitee is
entitled to indemnification (the "Supporting Documentation"). The determination
of Indemnitee's entitlement to indemnification shall be made not later than
sixty (60) days after receipt by the Company of the written request for
indemnification together with the Supporting Documentation. The Secretary of the
Company shall, promptly upon receipt of such a request for indemnification,
advise the Board of Directors of the Company (the "Board of Directors") in
writing that Indemnitee has requested indemnification pursuant to this
Agreement.
(ii) Indemnitee's entitlement to indemnification under this Agreement
shall be determined in one of the following ways: (A) by a majority vote of the
Disinterested Directors (as hereinafter defined), even though less than a quorum
of the Board of Directors; (B) by a written opinion of Independent Counsel (as
hereinafter defined) if (1) a Change of Control (as hereinafter defined) shall
have occurred and Indemnitee so requests or (2) there are no Disinterested
Directors, or a majority of Disinterested Directors, even though less than a
quorum, so directs; (C) by the stockholders of the Company (but only if a
majority of the Disinterested Directors, even though less than a quorum,
presents the issue of entitlement to indemnification to the stockholders for
their determination); or (D) as provided in Section 3(c).
(iii) In the event the determination of entitlement to indemnification
is to be made by Independent Counsel pursuant to Section 3(b)(ii), a majority of
the Disinterested Directors, or in the absence of any Disinterested Directors, a
majority of the Board of Directors, shall select the Independent Counsel, but
only an Independent Counsel to which Indemnitee does not reasonably object;
provided, however, that if a Change of Control shall have occurred, Indemnitee
shall select such Independent Counsel, but only an Independent Counsel to which
the Board of Directors does not reasonably object.
(c) Presumptions and Effect of Certain Proceedings. Except as otherwise
expressly provided in this Agreement, Indemnitee shall be presumed to be
entitled to indemnification under this Agreement upon submission of a request
for indemnification together with the Supporting Documentation in accordance
with Section 3(b)(i), and thereafter the Company shall have the burden of proof
to overcome that presumption in reaching a contrary determination. In any
event, if the person or persons
-3-
empowered under Section 3(b) to determine entitlement to indemnification shall
not have been appointed or shall not have made a determination within sixty (60)
days after receipt by the Company of the request therefor together with the
Supporting Documentation, Indemnitee shall be deemed to be entitled to
indemnification and shall be entitled to such indemnification unless (A)
Indemnitee misrepresented or failed to disclose a material fact in making the
request for indemnification or in the Supporting Documentation or (B) such
indemnification is prohibited by law. The termination of any Proceeding
described in Section 1, or of any claim, issue or matter herein, by judgment,
order, settlement or conviction, or upon a plea of nolo contendere or its
equivalent, shall not, of itself, adversely affect the right of Indemnitee to
indemnification or create a presumption that Indemnitee did not act in good
faith and in a manner which Indemnitee reasonably believed to be in or not
opposed to the best interests of the Company or, with respect to any criminal
Proceeding, that Indemnitee had reasonable cause to believe that his or her
conduct was unlawful.
(d) Remedies of Indemnitee.
(i) In the event that a determination is made pursuant to Section
3(b) that Indemnitee is not entitled to indemnification under this Agreement,
Indemnitee shall be entitled to seek an adjudication of his or her entitlement
to such indemnification either at Indemnitee's sole option, in (x) an
appropriate court of the State of Delaware or any other court of competent
jurisdiction or (y) an arbitration to be conducted by a single arbitrator
pursuant to the rules of the American Arbitration Association; it being
understood that any such judicial proceeding or arbitration shall be de novo and
Indemnitee shall not be prejudiced by reason of such adverse determination; and
in any such judicial proceeding or arbitration the Company shall have the burden
of proving that Indemnitee is not entitled to indemnification under this
Agreement.
(ii) If a determination shall have been made or deemed to have been
made, pursuant to Section 3(b) or (c), that Indemnitee is entitled to
indemnification, the Company shall be obligated to pay the amounts constituting
such indemnification within ten (10) business days after such determination has
been made or deemed to have been made and shall be conclusively bound by such
determination unless (A) Indemnitee misrepresented or failed to disclose a
material fact in making the request for indemnification or in the Supporting
Documentation or (B) such indemnification is prohibited by law. In the event
that advancement of expenses is not timely made pursuant to Section 3(a) or
payment of indemnification is not made within ten (10) business days after a
determination of entitlement to indemnification has been made or deemed to have
been made pursuant to Section 3(b) or (c), Indemnitee shall be entitled to seek
judicial enforcement of
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the Company's obligation to pay to Indemnitee such advancement of expenses or
indemnification. Notwithstanding the foregoing, the Company may bring an
action, in an appropriate court in the State of Delaware or any other court of
competent jurisdiction, contesting the right of Indemnitee to receive
indemnification hereunder due to the occurrence of an event described in
subclause (A) or (B) of this clause (ii) (a "Disqualifying Event"); provided,
however, that in any such action the Company shall have the burden of proving
the occurrence of such Disqualifying Event.
(iii) The Company shall be precluded from asserting in any judicial
proceeding or arbitration commenced pursuant to this Section 3(d) that the
procedures and presumptions of this Agreement are not valid, binding and
enforceable and shall stipulate in any such court or before any such arbitrator
that the Company is bound by all the provisions of this Agreement.
(iv) In the event that Indemnitee, pursuant to this Section 3(d), seeks a
judicial adjudication of or an award in arbitration to enforce his or her rights
under, or to recover damages for breach of, this Agreement, Indemnitee shall be
entitled to recover from the Company, and shall be indemnified by the Company
against, any expenses actually and reasonably incurred by Indemnitee if
Indemnitee prevails in such judicial adjudication or arbitration. If it shall
be determined in such judicial adjudication or arbitration that Indemnitee is
entitled to receive part but not all of the indemnification or advancement of
expenses sought, all such expenses incurred by Indemnitee in connection with
such judicial adjudication or arbitration shall be paid.
(e) Definitions. For the purposes of this Section 3:
(i) "Change in Control" means a change in control of the Company of a
nature that would be required to be reported in response to Item 6(e) of
Schedule 14A of Regulation 14A promulgated under the Securities Exchange Act of
1934, as amended (the "Act"), whether or not the Company is then subject to such
reporting requirement; provided, that without limitation, such a change in
control shall be deemed to have occurred if (A) any "Person" (as such term is
used in Sections 13(d) and 14(d) of the Act) (other than The Prime Group, Inc.,
an Illinois corporation) becomes after the date hereof the "beneficial owner"
(as defined in Rule 13d-3 under the Act), directly or indirectly, of securities
of the Company representing more than fifty percent (50%) of the combined voting
power of the Company's then outstanding securities without the prior approval of
at least two-thirds of the members of the Board of Directors in office
immediately prior to such acquisition; (B) the Company is a party to a merger,
consolidation, sale of assets or other reorganization, or a proxy contest, as a
consequence of which members of the Board of Directors in office immediately
prior to such transaction or event constitute less than a majority of the Board
of Directors thereafter or (C) during any
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period of two (2) consecutive years, individuals who at the beginning of such
period constituted the Board of Directors (including for this purpose any new
director whose election or nomination for election by the Company's stockholders
was approved by a vote of at least a majority of the directors then still in
office who were directors at the beginning of such period) cease for any reason
to constitute at least a majority of the Board of Directors.
(ii) "Disinterested Director" means a director of the Company who is
not or was not a party to the Proceeding in respect of which indemnification is
sought by Indemnitee.
(iii) "Independent Counsel" means a law firm or a member of a law firm
that neither presently is, nor in the past five (5) years has been, retained to
represent (A) the Company or Indemnitee in any matter material to either such
party or (B) any other party to the Proceeding giving rise to a claim for
indemnification under this Agreement. Notwithstanding the foregoing, the term
"Independent Counsel" shall not include any person who, under the applicable
standards of professional conduct then prevailing under the law of the State of
Delaware, would have a conflict of interest in representing either the Company
or Indemnitee in an action to determine Indemnitee's rights under this
Agreement.
4. Notification and Defense of Claim. Promptly after receipt of notice of
the commencement of any action, suit or proceeding, Indemnitee will, if a claim
for indemnification in respect thereof is to be made against the Company under
this Agreement, notify the Company of the commencement thereof, but the omission
so to notify the Company will not relieve the Company from any liability that
the Company may have to Indemnitee under this Agreement unless the Company is
materially prejudiced thereby. With respect to any such action, suit or
proceeding as to which Indemnitee notifies the Company of the commencement
thereof:
(a) the Company will be entitled to participate therein at its own
expense; and
(b) except as otherwise provided below, the Company jointly with any other
indemnifying party similarly notified will be entitled to assume the defense
thereof, with counsel reasonably satisfactory to Indemnitee. After notice from
the Company to Indemnitee of the Company's election so to assume the defense
thereof, the Company will not be liable to Indemnitee under this Agreement for
any legal or other expenses subsequently incurred by Indemnitee in connection
with the defense thereof other than reasonable costs of investigation or as
otherwise provided below. Indemnitee shall have the right to employ Indemnitee's
own counsel in such action, suit or proceeding, but the fees and disbursements
of such counsel incurred after notice from the Company of the
-6-
Company's assumption of the defense thereof shall be at the expense of
Indemnitee unless (i) the employment by counsel by Indemnitee has been
authorized by the Company, (ii) Indemnitee shall have reasonably concluded that
there may be a conflict of interest between the Company and Indemnitee in the
conduct of the defense of such action, (iii) such action, suit or proceeding
seeks penalties or other relief against Indemnitee with respect to which the
Company could not provide monetary indemnification to Indemnitee (such as
injunctive relief or incarceration) or (iv) the Company shall not in fact have
employed counsel to assume the defense of such action, in each of which cases
the fees and disbursements of counsel shall be at the expense of the Company.
The Company shall not be entitled to assume the defense of an any action, suit
or proceeding brought by or on behalf of the Company, or as to which Indemnitee
shall have reached the conclusion specified in clause (ii) above, or which
involves penalties or other relief against Indemnitee of the type referred to in
clause (iii) above. It is acknowledged that a director or former director shall
be entitled under circumstances specified in the By-laws to expenses of separate
legal counsel, up to the amount specified therein.
(c) The Company shall not be liable to indemnify Indemnitee under this
Agreement for any amounts paid in settlement of any action or claim effected
without the Company's written consent. The Company shall not settle any action
or claim in any manner that would impose any penalty or limitation on Indemnitee
without Indemnitee's written consent. Neither the Company nor Indemnitee will
unreasonably withhold consent to any proposed settlement.
5. Severability. If any provision or provisions of this Agreement shall
be held to be invalid, illegal or unenforceable for any reason whatsoever: (a)
the validity, legality and enforceability of the remaining provisions of this
Agreement (including, without limitation, all portions of any paragraph of this
Agreement containing any such provision held to be invalid, illegal or
unenforceable, that are not themselves invalid, illegal or unenforceable) shall
not in any way be affected or impaired thereby and (b) to the fullest extent
possible, the provisions of this Agreement (including, without limitation, all
portions of any paragraph of this Agreement containing any such provision held
to be invalid, legal or unenforceable, that are not themselves invalid, illegal
or unenforceable) shall be construed so as to give effect to the intent
manifested by the provision held invalid, illegal or unenforceable.
6. Company's Right to Indemnification. Nothing in this Agreement shall
diminish, limit or otherwise restrict or modify in any way the Company's right
to indemnification or contribution from an Indemnitee or an Indemnitee's
obligation to indemnify or hold harmless the Company under any agreement,
instrument, commitment or understanding now or hereafter in effect.
-7-
7. Cancellation. The Company may cancel the provisions of this Agreement
prospectively only upon thirty (30) days' prior written notice to Indemnitee, in
order to afford Indemnitee an opportunity to resign as an officer and/or
director of the Company rather than continue to serve absent indemnification
provided under this Agreement; it being understood that "prospectively only"
shall mean that the Agreement shall remain in full force and effect for all acts
or omissions that occur, and all Proceedings which are based on acts or
omissions which have or allegedly have occurred, through the effective date of
any such cancellation.
8. Amendments and Waiver. No amendment, modification or discharge or this
Agreement, and no waiver hereunder, shall be valid or binding unless set forth
in writing and duly executed by both of the parties hereto. Neither the waiver
by any of the parties hereto of a breach of or a default under any of the
provisions of this Agreement, nor the failure of any of the parties, on one or
more occasions, to enforce any of the provisions of this Agreement or to
exercise any right or privilege hereunder shall thereafter be construed as a
waiver of any subsequent breach or default of a similar nature, or as a waiver
of any of such provisions, rights or privileges hereunder. No delay or failure
on the part of any party in exercising any right, power or privilege under this
Agreement or under any other instrument given in connection with or pursuant to
this Agreement shall impair any such right, power or privilege or be construed
as a waiver of any default or any acquiescence therein. No single or partial
exercise of any such right, power or privilege shall preclude the further
exercise of such right, power or privilege, or the exercise of any other right,
power or privilege.
9. Subrogation. In the event of payment under this Agreement, the Company
shall be subrogated to the extent of such payment to all of the rights of
recovery of Indemnitee, who shall execute all papers required and shall do
everything that may be necessary to secure such rights, including the execution
and delivery of such documents necessary to enable the Company effectively to
bring suit to enforce such rights.
10. No Duplication of Payment. The Company shall not be liable under this
Agreement to make any payment in connection with any claim made against
Indemnitee to the extent Indemnitee has otherwise actually received payment
(under any insurance policy, By-law provision or otherwise) of the amounts
otherwise indemnifiable hereunder.
11. Notices. Any notices required or permitted to be sent hereunder shall
be delivered personally or mailed, certified mail, return receipt requested, or
delivered by overnight courier service guaranteeing next business day delivery,
to the following addresses, or such other addresses as shall be given by notice
delivered hereunder, in each case with applicable postage or
-8-
delivery charges prepaid, and shall be deemed to have been given upon delivery,
if delivered personally, three business days after mailing, if mailed, or one
business day after delivery to the courier, if delivery by overnight courier
service:
If to the Company, to:
Brookdale Living Communities, Inc.
00 Xxxx Xxxxxx Xxxxx
Xxxxx 0000
Xxxxxxx, Xxxxxxxx 00000
Attn: President
With a copy to:
Winston & Xxxxxx
00 Xxxx Xxxxxx Xxxxx
Xxxxxxx, Xxxxxxxx 00000
Attn: Xxxxx X. Xxxxxx
If to Indemnitee, to:
Xxxxxxx X. Xxxxxxx
c/o The Prime Group, Inc.
00 Xxxx Xxxxxx Xxxxx
Xxxxx 0000
Xxxxxxx, Xxxxxxxx 00000
12. Governing Law; Headings. This Agreement shall be governed by and
construed and enforced in accordance with the laws of the State of Delaware
applicable to contracts made and to be performed in such state without giving
effect to the principles of conflicts of laws. The section and other headings
contained in this Agreement are for reference purposes only and shall not affect
in any way the meaning of interpretation of this Agreement.
[signature page follows]
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IN WITNESS WHEREOF, the parties hereto have caused this Indemnification
Agreement to be duly executed and delivered on their behalf as of the date first
written above.
THE COMPANY:
BROOKDALE LIVING COMMUNITIES,
INC., a Delaware corporation
By:
--------------------------
Name:
------------------------
Title:
-----------------------
INDEMNITEE:
By:
--------------------------
Name:
------------------------
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