EX-10.71.01
ASSET PURCHASE
AGREEMENT
THIS ASSET PURCHASE AGREEMENT (the “
Agreement ”) is made as of June 9, 2008 (“
Effective Date ”) by EMERITUS CORPORATION, a
Washington corporation (“ Buyer ”), and
HEALTH CARE REIT, INC ., a Delaware corporation (“
HCN ”), together with the affiliates of HCN listed on
Schedule 1 hereto (individually and collectively with HCN, “
Seller ”).
Seller owns the land, improvements and certain
personal property located at the facilities listed on Schedule 2-A
hereto (the “ Tranche 1 Facilities ”) and at the
facilities listed on Schedule 2-B hereto (the “ Tranche 2
Facilities ”).
Buyer leases 18 of the 19 Tranche 1 Facilities
and certain other facilities from Seller pursuant to an Amended and
Restated Master Lease Agreement dated as of September 30, 2003, as
amended, and the Tranche 1 Facility located in Auburn,
Massachusetts pursuant to a Lease Agreement dated as of February
26, 1996, as amended. The two leases that relate to the
19 Tranche 1 Facilities are collectively referred to herein as the
“ Master Lease 1. ” Buyer leases the
Tranche 2 Facilities and certain other facilities from Seller
pursuant to a Master Lease Agreement dated as of September 30,
2004, as amended (the “ Master Lease 2 ”)
except, however, that the Tranche 2 Facilities located in
Louisville, Kentucky and Ontario, Oregon are leased under a Lease
Agreement dated as of February 26, 1996, as amended (the “
Louisville Lease ”) and the Master Lease 1,
respectively. All references hereinafter to the
Master Lease 2 shall also mean and include the Louisville
Lease except where noted otherwise. The Tranche 1
Facilities and Tranche 2 Facilities are each individually referred
to herein as a “Facility” and collectively referred to
herein as the “Facilities.” The Master Lease
1 and Master Lease 2 are each individually referred to herein as a
“Master Lease” and collectively referred to herein as
the “Master Leases.” The Master Leases and
all agreements, instruments and documents executed by Buyer in
connection with either Master Lease are collectively referred to
herein as the “Master Lease
Documents.”
Based solely upon the representations and
warranties of Buyer as set forth in each Master Lease, Buyer is the
licensed operator of each Facility, either directly or through
certain of its wholly-owned subsidiaries and
subtenants. Buyer desires to purchase the Facilities
from Seller on the terms and conditions set forth in this Agreement
(the “ Acquisition ”).
NOW, THEREFORE, in consideration of the foregoing
recitals and the mutual agreements, representations and warranties
contained herein, Seller and Buyer agree as follows:
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ARTICLE
1:
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SALE AND PURCHASE OF
ASSETS
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1.1
Acquisition Assets
. Subject to the terms
and conditions of this Agreement, Buyer shall purchase from Seller,
and Seller shall sell, transfer and convey to Buyer, the following
assets that relate to the Facilities (the “ Assets
”): [i] the real property, as legally described in
Exhibit A attached hereto, and the improvements and fixtures
located thereon, together with all rights, easements and privileges
appurtenant thereto (the “ Real Property ”);
[ii] the furniture, equipment and other personal property located
at the Facilities to the extent owned by Seller (the “
Personal
Property ”); and
[iii] all of Seller's right, title and interest (if any) in and to
all intangible property now or on the applicable Closing Date (as
hereinafter defined) owned or held in connection with the Real
Property or the Personal Property, including, without limitation,
governmental approvals and development rights, directly related to
the Real Property (the “ Intangible Property
”).
1.2 Excluded
Assets . Notwithstanding anything to the contrary in
this Agreement, the Assets do not include any rents, issues or
accounts arising from or payable due to Seller’s interest in
the Facilities or Seller’s interest as “
Landlord ” under either Master
Lease.
1.3 No Assumption
of Liabilities . Except as expressly provided
herein, Buyer shall not assume any liabilities, obligations or
debts of Seller, including without limitation, the obligations of
Seller, as Landlord, under either Master Lease; provided, however,
that the indemnification obligations of Buyer under Section 5 of
each Master Lease and Sections 4.6.1 and 8.1 of each of the leases
that relate to the Auburn and Louisville properties, shall survive
each Closing (as hereinafter defined) for the time periods defined
in each such Master Lease and leases.
1.4 Close in
Tranches . The sale of the Assets shall
be closed in two separate tranches (each a “ Tranche
”) with the Tranche 1 Facilities closed in “ Tranche
1 ” as designated on Schedule 2-A and with the Tranche 2
Facilities closed in “ Tranche 2 ” as designated
on Schedule 2-B (each a “ Closing
”). Concurrently with each Closing, Buyer and
Seller shall amend the Master Lease 1 and, if and when applicable,
the Master Lease 2, to delete the sold Facilities and adjust the
Investment Amount (as defined therein) and corresponding
provisions. Within 20 days of the Effective Date, Seller
shall provide Buyer with an initial draft of the form amendment to
the Master Leases to be executed in connection with each
Closing.
1.5 Section 1031
Transaction . Seller or Buyer, or both of them, may
close either Tranche 1 or Tranche 2 or both as part of a like-kind
exchange of properties under Section 1031 of the Internal Revenue
Code of 1986, as amended, and applicable rules and
regulations. The exchanging party shall bear all costs
of the exchange. The other party shall cooperate with
the exchanging party and do all things reasonably required and
requested by the exchanging party (provided that such actions do
not increase the other party’s obligations or liabilities
under this Agreement) to effect and facilitate such an
exchange. The exchanging party shall and does hereby
indemnify, defend and hold the other party harmless for and from
all liabilities arising as a result of the exchange that would not
have arisen had the exchanging party not closed Tranche 1, Tranche
2, or both as part of a like-kind exchange. Anything in
this Section 1.5 to the contrary notwithstanding: [i] no
party makes any representation or warranty to the other as to the
effectiveness or tax impact of any proposed exchange; [ii] in no
event shall any party be required to take title to any exchange or
replacement property; [iii] in no event shall completion of any
such exchange be a cause or excuse for any delay in either Closing;
and [iv] no party shall be required to incur any costs or expenses
or incur any additional liabilities or obligations in order to
accommodate any exchange requested by the other party or any
exchange intermediary or facilitator.
1.6 Condition of
Assets . EXCEPT AS EXPRESSLY PROVIDED IN ANY
REPRESENTATION AND WARRANTY CONTAINED HEREIN OR IN ANY CONVEYANCE
DOCUMENT EXECUTED AND DELIVERED AT A CLOSING, THE ASSETS ARE SOLD
IN “AS IS, WHERE IS” CONDITION WITH NO WARRANTIES
WHATSOEVER, EITHER EXPRESS OR IMPLIED, WHETHER OF THE SUITABILITY
THEREOF, THE DESIGN OR CONDITION THEREOF, THE MERCHANTABILITY
THEREOF, THE FITNESS THEREOF FOR A PARTICULAR PURPOSE, THE PHYSICAL
CONDITION THEREOF, THE QUALITY OF WORKMANSHIP THEREOF, THE
CONFORMITY THEREOF TO FEDERAL, STATE OR LOCAL GOVERNMENTAL
REQUIREMENTS, THE OWNERSHIP, NON-INFRINGEMENT OR RIGHT TO USE ANY
NAMES, DESIGNS OR MARKS ASSOCIATED WITH ANY FACILITY (INCLUDING,
WITHOUT LIMITATION, THE NAMES SET FORTH IN SCHEDULE 2-A AND
SCHEDULE 2-B HERETO), OR WITH REGARD TO BUYER’S TENANCY,
OPERATION OR LICENSURE OF THE FACILITIES OR ANY RIGHTS WITH RESPECT
THERETO.
2.1 Purchase
Price . The “ Tranche 1 Purchase Price
” and the allocated purchase price for each Tranche 1
Facility is set forth on Schedule 2-A and the “ Tranche 2
Purchase Price ” and the allocated purchase price for
each Tranche 2 Facility is set forth on Schedule
2-B. The total of the Tranche 1 Purchase Price and
the Tranche 2 Purchase Price is $299,819,368.00 (the “
Purchase Price ”). All cash payments shall
be payable in immediately available funds by wire transfer to an
account designated by Seller.
2.2 Earnest
Money . Within one business day after the Effective
Date, Buyer shall deliver an earnest money deposit in an amount
equal to one percent (1%) of the Purchase Price (the “
Earnest Money ”) to the Title Company (as hereinafter
defined) for deposit into an escrow account and which shall be held
pursuant to an escrow agreement in the form attached hereto as
Exhibit B, to be executed by Buyer, Seller and the Title Company in
connection with the deposit of the Earnest Money. The
Earnest Money, together with all interest earned thereon is
referred to herein as the “ Deposit
.” The Title Company shall hold the Deposit in an
interest-bearing account.
2.3 Due Diligence
Period . Due to Buyer’s existing tenancy and
operation of the Facilities, Buyer has determined that it will
complete all of Buyer’s due diligence with respect to the
Facilities within 30 days after the Effective Date (“ Due
Diligence Period ”). At any time during the
Due Diligence Period, Buyer shall, in its sole discretion, be
entitled to deliver a written notice to Seller in accordance with
the terms of this Agreement, stating that Buyer has elected to
terminate this Agreement. If Buyer terminates this
Agreement in accordance with the terms hereof within the Due
Diligence Period, the Title Company will pay the Deposit as
follows: [i] to Seller, the reasonable amount of outside
counsel’s legal fees incurred by Seller in connection with
the Acquisition, as mutually instructed in writing by Buyer and
Seller, and [ii] to Buyer, the balance of the
Deposit.
2.4 Deposit at
Closing; Failure to Close; Remedies . [i] In the
event that each Tranche shall close as provided herein, the Deposit
shall be applied to the Tranche 2 Purchase Price at the Tranche 2
Closing. [ii] In the event that Buyer has not terminated
this Agreement within the Due Diligence Period pursuant to Section
2.3, and either Tranche shall fail to close as provided herein due
to Buyer's default under this Agreement, then, as liquidated
damages, the Deposit shall be retained by Seller and Buyer shall
pay Seller the reasonable amount of out-of-pocket costs incurred by
Seller in connection with the Acquisition. The retention
of the Deposit and receipt of such out-of-pocket costs as
liquidated damages shall be Seller’s sole and exclusive
remedy for such failure to close, at law or in equity; provided,
however, such retention of the Deposit by Seller and its receipt of
such out-of-pocket costs shall not limit, release or otherwise
affect Buyer’s indemnity obligations under this Agreement and
under the Master Lease Documents. [iii] In the event
that Buyer has not terminated this Agreement within the Due
Diligence Period pursuant to Section 2.3, and either Tranche shall
fail to close as provided herein due to Seller’s default
under this Agreement, then as liquidated damages, the Deposit shall
be returned to Buyer and Seller shall pay Buyer the reasonable
amount of out-of-pocket costs incurred by Buyer in connection with
the Acquisition. The return of the Deposit and receipt
of such out-of-pocket costs as liquidated damages shall be
Buyer’s sole and exclusive remedy for such failure to close,
at law or equity. [iv] In the event that Buyer has not
terminated this Agreement within the due diligence period pursuant
to Section 2.3, if either Closing does not occur for any reason
other than Buyer's or Seller’s default under this Agreement,
then the Deposit shall be retained by Seller after payment to Buyer
of its reasonable out-of-pocket costs incurred in connection with
the Acquisition.
2.5 INTENTIONALLY
OMITTED
2.6 Liquidated Damages . The parties hereto
acknowledge that the actual damages sustained by Seller and Buyer
if the transactions contemplated hereby shall fail to close are
difficult to ascertain, and the parties hereby further agree that
the liquidated damages amount s set forth in Section 2.4 are
reasonable estimate s of the amount of damages, including
consequential damages, which Seller and Buyer would suffer by the
other’s failure to close under this Agreement, gauged by the
circumstances existing at the time this Agreement is executed, and
such amounts are not intended as a penalty.
2.7 Financing of
Acquisition . Buyer intends to finance the
Acquisition of each Tranche through one or more loans from third
party lenders (individually and collectively, the “
Acquisition Loan ”). Buyer will borrow not
less than 70% of the Purchase Price pursuant to the Acquisition
Loan. The balance of the Purchase Price for each Tranche
(the “ Balance ”) will be paid as
follows: [i] 40% of the Balance will be paid in cash by
Buyer, and [ii] 60% of the Balance will be obtained pursuant to a
single loan (the “ Seller Loan ”) to be made by
HCN or an affiliate thereof (“ Lender ”) to
Emeritus Corporation, irrespective of any assignment of Buyer of
its rights under this Agreement. Notwithstanding the
foregoing, the maximum Seller Loan amount will be $50,000,000.00
and Buyer will increase its cash investment as necessary to cover
any shortfalls. Buyer may draw up to the entire Seller
Loan amount to fund the Tranche 1 Purchase Price; provided,
however, that Buyer shall have given reasonable assurance to Seller
that Buyer has the cash assets and other resources necessary to pay
the Balance of the Tranche 2 Purchase Price in cash. The
proceeds of the Seller Loan shall be applied solely to the payment
of the Purchase Price.
2.8 Seller Loan
Terms . The terms of the Seller Loan are set forth
in the Term Sheet for Sale of Facilities and Seller Loan issued by
HCN and accepted by Buyer dated as of March 25, 2008 (“
Term Sheet ”), which Term Sheet is attached hereto as
Exhibit C. Notwithstanding the terms of the Seller Loan
set forth in the Term Sheet, the Seller Loan shall not be secured
by a pledge of equity interest of any subsidiary of Emeritus
Corporation to whom Emeritus Corporation assigns its rights under
this Agreement, or to whom Emeritus Corporation nominates to take
title to the Facilities. In lieu of taking a pledge of
an interest in any subsidiary of Emeritus Corporation, Emeritus
Corporation shall provide Lender with a leasehold mortgage of its
interest in Master Lease 2 and a contingent leasehold interest in
Master Lease 1 to secure Emeritus Corporation's obligations under
the Seller Loan. Within 20 days of the Effective Date,
Seller shall cause Lender to deliver to Buyer the proposed
documents (the “Loan Documents”), all of which are to
be executed and delivered at the Tranche 1 Closing to evidence and
secure the Seller Loan, including any leasehold or contingent
leasehold mortgages, which Loan Documents shall comply with the
terms for the Seller Loan set forth in the Term Sheet, as modified
by this Section 2.8.
2.9 No
Prorations . Buyer and Seller acknowledge and agree
that each Master Lease is absolutely net to Seller, as Landlord,
and that Buyer, as tenant thereunder, is solely responsible for all
Impositions (as defined therein), real estate and personal property
taxes, insurance premiums, utility charges, licensure expenses and
all other expenses incurred in connection with the operation,
maintenance and use of the Facilities. Accordingly,
Buyer shall be solely responsible for all such amounts whether
accruing prior to or after the respective Closing Date and there
shall be no prorations on account thereof between Buyer and Seller
hereunder, except that Buyer shall be entitled to a credit against
the Purchase Price for any rent or other charges paid to Seller and
which are applicable to any period after the applicable Closing
Date.
3.1 Closing
Deadlines . Subject to Section 8.4, the Closing
on Tranche 1 must occur no later than June 30, 2008 (“
Tranche 1 Closing Deadline ”). The Closing
on Tranche 2 must occur no earlier than October 1, 2008 and no
later than October 31, 2008 (“ Tranche 2 Closing
Deadline ,” and with the Tranche 1 Closing Deadline, each
a “ Closing Deadline
”). Notwithstanding the foregoing, Buyer shall
have [i] an initial option to extend the Tranche 2 Closing Deadline
until December 1, 2008, and [ii] a second option to extend the
Tranche 2 Closing Deadline until December 31,
2008. Buyer may exercise either such option by
delivering notice thereof to Seller on or before the then
applicable Tranche 2 Confirmation Deadline (as hereinafter
defined), in which event the Tranche 2 Confirmation Deadline shall
be extended to October 31, 2008, with respect to the initial such
option above, and to November 30, 2008, with respect to the second
such option above. For each such option exercised by
Buyer, $100,000 of the Deposit, which might otherwise be payable,
returnable or refundable to Buyer under Section 2.3, 2.4[iv], 8.4
or 8.5 or any other section of this Agreement, shall, except as
provided in Section 2.4[iii], become non-refundable, but shall be
applied to the Tranche 2 Purchase Price at the Tranche 2
Closing. Buyer’s right to purchase the Tranche 1
Facilities and Tranche 2 Facilities shall terminate on the Tranche
1 Closing Deadline if the Closing on Tranche 1 has not occurred by
such date. Buyer’s right to purchase the Tranche 2
Facilities shall terminate on the Tranche 2 Closing Deadline (as
such deadline may be extended by Buyer as described above) if the
Closing on Tranche 2 has not occurred by such
date.
3.2 Escrow
Closing . Each Closing shall be held on such date as
the parties may agree upon in writing (each a “ Closing
Date ”) but in each case no later than the respective
Closing Deadline. All documents necessary for each
Closing, including, but not limited to, those documents
specifically described in this Agreement, shall be placed in escrow
on or before the applicable Closing Date with the Title Company or
at such other time or place or in such other manner as the parties
may agree. Seller shall deliver possession of the
respective Assets to Buyer on the respective Closing
Date. Each Closing shall be deemed to be effective as of
12:01 a.m. on the respective Closing Date.
3.3 Legal Fees
. Except as provided herein, each of Seller and Buyer
shall pay its own legal fees and expenses incurred by it in
negotiating and preparing this Agreement and in closing and
carrying out the transactions contemplated
herein.
3.4 Closing
Costs .
(a) Seller shall pay
the costs for real property transfer taxes, conveyance fees, deed
stamps (if applicable) and title insurance premiums for an
owner’s policy (except for the co
