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EXHIBIT 99.7
MANAGEMENT SERVICES AGREEMENT
FOR
CERTAIN KARRINGTON HOMES
JANUARY 1, 1999
OWNER: KARRINGTON HEALTH, INC.
MANAGER: SUNRISE ASSISTED LIVING MANAGEMENT, INC.
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INDEX
SECTION: CAPTION: PAGE:
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ARTICLE I DEFINITIONS................................................................. 1
ARTICLE II APPOINTMENT OF MANAGER AND PRIMARY GOAL OF
AGREEMENT................................................................... 3
Section 2.01 Appointment of Manager...................................................... 4
Section 2.02 Goals....................................................................... 4
ARTICLE III MANAGEMENT FEES............................................................. 4
Section 3.01 Management Services Fees.................................................... 4
ARTICLE IV DUTIES AND RIGHTS OF MANAGER................................................ 4
Section 4.01 Authority of Manager; Right of Possession................................... 4
Section 4.02 Marketing Services.......................................................... 5
Section 4.03 Management Services......................................................... 5
Section 4.04 Manager's Home Office Employees............................................. 6
Section 4.05 Personnel Administration.................................................... 6
Section 4.06 Purchasing.................................................................. 6
Section 4.07 Leases...................................................................... 7
ARTICLE V REVENUE AND EXPENSES, CREDITS AND COLLECTIONS, AND
DEPOSITORIES FOR FUNDS...................................................... 7
Section 5.01 Revenue and Expenses........................................................ 7
Section 5.03 Credits and Collections..................................................... 7
Section 5.04 Depositories for Funds...................................................... 7
ARTICLE VI FINANCIAL RECORDS........................................................... 7
Section 6.01 Accounting and Financial Records............................................ 7
Section 6.02 Access...................................................................... 7
ARTICLE VII APPROVED BUDGET............................................................. 8
ARTICLE VIII INTENTIONALLY LEFT BLANK
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ARTICLE IX INTENTIONALLY LEFT BLANK
ARTICLE X INTENTIONALLY LEFT BLANK
ARTICLE XI INSURANCE....................................................................... 8
ARTICLE XII TERMINATION OF AGREEMENT........................................................ 8
Section 12.01 Termination..................................................................... 8
ARTICLE XIII DEFAULTS........................................................................ 9
Section 13.01 Default of Manager.............................................................. 9
Section 13.02 Default by Owner................................................................ 9
Section 13.03 Remedies of Owner............................................................... 9
Section 13.04 Remedies of Manager............................................................. 9
Section 13.05 No Waiver of Default............................................................ 10
ARTICLE XIV LEGAL ACTIONS, GOVERNING LAW, LIABILITY OF MANAGER
AND INDEMNITY .................................................................. 10
Section 14.01 Legal Actions................................................................... 10
Section 14.02 Legal Fees and Costs............................................................ 10
Section 14.03 Choice of Law and Venue......................................................... 10
Section 14.04 Liability of Manager............................................................ 11
Section 14.05 Indemnity....................................................................... 11
ARTICLE XV REGULATORY AND CONTRACTUAL REQUIREMENTS......................................... 12
Section 15.01 Regulatory and Contractual Requirements......................................... 12
Section 15.02 Equal Employment Opportunity.................................................... 12
Section 15.03 Equal Housing Opportunity....................................................... 13
ARTICLE XVI PROPRIETARY MARKS; INTELLECTUAL PROPERTY........................................ 13
Section 16.01 Proprietary Marks............................................................... 13
Section 16.02 Ownership of Proprietary Marks.................................................. 13
Section 16.03 Intellectual Property........................................................... 13
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Section 16.04 Breach of Covenant............................................................... 13
ARTICLE XVII MISCELLANEOUS PROVISIONS......................................................... 13
Section 17.01 Additional Assurances............................................................ 13
Section 17.02 Consents, Approval and Discretion................................................ 13
Section 17.03 No Brokerage..................................................................... 14
Section 17.04 Notices.......................................................................... 14
Section 17.05 Severability..................................................................... 14
Section 17.06 Gender and Number................................................................ 15
Section 17.07 Division and Headings............................................................ 15
Section 17.08 Confidentiality of Information................................................... 15
Section 17.09 Right to Perform................................................................. 15
Section 17.10 Assignment by Manager............................................................ 15
Section 17.11 Entire Agreement/Amendment....................................................... 15
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LIST OF EXHIBITS
Exhibit A Description of Real Property
Exhibit B Approved Budget
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MANAGEMENT SERVICES AGREEMENT
THIS MANAGEMENT SERVICES AGREEMENT (the "Agreement") is made as of this
1st day of January, 1999, between SUNRISE ASSISTED LIVING MANAGEMENT, INC., a
Virginia corporation ("Manager"), and KARRINGTON HEALTH, INC., an Ohio
corporation ("Owner").
WHEREAS, Owner is the owner of certain real property on which are being
constructed the assisted living facilities described in Exhibit A, attached
hereto and made a part hereof (collectively, the "Facilities"); and
WHEREAS, Owner and Sunrise Assisted Living, Inc., the parent of Manager,
in anticipation of their pending merger, have determined it is in their mutual
best interest to prepare for the management transition that will occur as a
result of the merger, particularly in the areas of marketing and operations, by
entering into this Agreement; and
WHEREAS, Owner wishes to engage Manager to manage the Facilities and
Manager desires to perform such management duties as described herein with
regard to the Facilities.
NOW, THEREFORE, the parties hereto agree as follows:
ARTICLE I
DEFINITIONS
The following terms shall have the following meanings when used in the
Agreement:
1.01 Affiliate. The term "Affiliate" shall mean any one or more
individuals or entities which control, are controlled by, or are under common
control with the Manager.
1.02 Agreement. The terms "Agreement" and this "Agreement" shall mean
this Management Services Agreement between Owner and Manager, and any amendments
thereto as may be from time to time agreed to in writing by the parties.
1.03 Approved Budget. The term "Approved Budget" shall mean the budget
approved for the operation of the Facilities as set forth in Section 7.01
hereof.
1.04 Commencement of Management Services. The term "Commencement of
Management Services" shall mean that date when Owner requests such services to
begin which in no event shall be later than January 1, 1999.
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1.05 Facilities. The term "Facilities" shall mean the assisted living
facilities described in Exhibit A which are the subject of this Agreement.
1.06 Facility Expenses. The term "Facility Expenses" shall mean those
costs and expenses directly related to the operating costs of the Facilities,
which expenses and payment of expenses shall be administered by the Owner from
the Facilities' income derived as further set forth herein. Facility Expenses
shall not include debt service and property taxes.
1.07 GAAP. The term "GAAP" shall mean generally accepted accounting
principles, consistently applied.
1.08 Intellectual Property. The term "Intellectual Property" shall mean
(i) all computer software developed and owned by Manager or an Affiliate of
Manager; and (ii) all manuals, forms, instructions, policies, procedures and
directives issued by Manager to the employees at the Facility regarding the
procedures and techniques to be used in operation of the Facility.
1.09 Legal Requirements. The term "Legal Requirements" shall mean any
law, code, rule, ordinance, regulation or order of any governmental authority
having jurisdiction over the business or operation of the Facilities or the
matters which are the subject of this Agreement, including any resident care or
health care, building, zoning or use laws, ordinances regulations or orders,
environmental protection laws and fire department rules.
1.10 Management Services. The term "Management Services" shall mean the
services described in this Agreement, all as are authorized and approved by
Owner.
1.11 Mortgage. The term "Mortgage" shall mean any mortgage or deed of
trust recorded against the Facilities as security for a secured loan.
1.12 Proprietary Marks. The term "Proprietary Marks" shall mean all of
Manager's trademarks, trade names, symbols, logos, slogans, designs, insignia,
emblems, devices, service marks and distinctive designs of buildings and signs,
or combinations thereof, which may be used to identify the Facility. The term
"Proprietary Marks" shall also include all of Manager's trade names, trademarks,
symbols, logos, designs, etc., which are used in connection with the operation
of the Facility during the Term. The term "Proprietary Marks" shall include all
present and future Proprietary Marks, whether they are now or hereafter owned by
Manager or any of its Affiliates, and whether or not they are registered under
the laws of the United States or any other country.
1.13 Revenues. The term "Revenues" shall mean all monies received by
Owner from residents of the Facilities for occupancy fees and health care fees,
including any community fees, with the exception of any pass-through fees and
any escrow monies held for the residents by the Owner. Any community fees or
deposits which are refunded
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to a resident shall be credited against revenues during the month in which such
refunds are made. It shall also mean proceeds from rental interruption insurance
actually received and all applicable miscellaneous revenues, such as that from
vending machines.
1.14 State. The term "State" shall mean the States in which the
Facilities are located, as applicable, and any regulatory agencies within such
States with overview authority or other authority over the Facilities, unless
otherwise specifically indicated.
1.15 Term. The "Term" of this Agreement shall be the period beginning
when this Agreement is executed and ending one year after the date of this
Agreement.
1.16 Renewal. This Agreement shall automatically renew for one (1) year
periods unless either party shall give the other party written notice of
termination within sixty (60) days prior to the expiration of the initial Term
or any renewal terms.
ARTICLE II
APPOINTMENT OF MANAGER AND PRIMARY GOAL OF AGREEMENT
2.01 Appointment of Manager. Owner hereby appoints Manager and Manager
hereby accepts appointment, subject to the terms and conditions of this
Agreement, as the sole and exclusive Manager of the Facilities for the daily
operation and management of the Facilities. Except as otherwise provided herein,
Manager shall have responsibility and complete and full control and discretion
in the operation, direction, management and supervision of the Facility, subject
only to the limitations expressed herein, in accordance with the methods and
standards of operation that Manager has heretofore managed the Facility;
provided, however, that Manager shall use its best efforts to take into account
the methods and standards of operation that have heretofore been used by Owner
in its other assisted living facilities and which Owner may have previously
begun to implement in the Facilities. Manager accepts said appointment and
agrees to manage the Facilities during the Term of this Agreement in accordance
with the terms and conditions hereinafter set forth.
2.02 Goals. It is the joint goal of Owner and Manager to:
a. Establish and maintain programs to promote the most effective
utilization of the Facilities' services;
b. Provide quality services to residents of the Facilities (the
"Residents") in a manner consistent with the form of resident
agreement to be used at the Facilities and the Approved Budget (as
hereinafter defined);
c. Maintain a public image of excellence for the Facilities;
d. Maintain quality staffing of the Facilities;
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e. Manage the Facilities on a sound financial basis;
f. Maintain a sound financial accounting system for the Facilities;
g. Maintain adequate internal fiscal controls through proper
budgeting, accounting procedures, and timely financial reporting;
h. Prevent loss of revenues from the Facilities and establish sound
cash flow through sound billing and collection procedures and
methods; and
i. Take such other steps as are necessary to provide high quality
care to the Residents.
ARTICLE III
MANAGEMENT FEES
3.01 Management Services Fees.
a. Pre-Opening Services Fee. Commencing as of the later to occur of
the date of this Agreement or the month which is eight (8) months prior to the
projected Opening Date of the respective Facility, Owner shall pay to Manager a
fee (the "Pre-Opening Services Fee") in the amount of Fourteen Thousand Dollars
($14,000.00) per month per applicable Facility as compensation for Manager
performing the Pre-Opening Services. The Pre-Opening Services Fee shall be paid
in full currently each month, but shall not in any event exceed the aggregate
sum of One Hundred Forty Thousand Dollars ($140,000.00) per Facility.
b. Management Fee. Upon opening of each Facility and as
compensation for the services to be rendered by Manager in accordance with the
terms of this Agreement, Owner shall pay to Manager on a monthly basis a
management fee (the "Management Fee") equal to seven percent (7%) of the
Revenues of such open Facility or such other amount as may be agreed to in
writing by the parties from time to time. Manager shall also receive from Owner
an additional monthly incidental expenses reimbursement which will pay for out
of pocket expenses, including travel by visiting Home Office Employees,
associated with running the Facilities.
The Management Fee will cover the cost of Manager's supervision and
general overall management of the Facilities, including Manager's overhead costs
and its Home Office Employees' salaries and fringe benefits, and such services
to be provided in accordance with this Agreement.
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ARTICLE IV
DUTIES AND RIGHTS OF MANAGER
4.01 Authority of Manager; Right of Possession. Facility management shall
be under the exclusive supervision and control of Manager, who, except as
otherwise specifically provided in this Agreement, shall be responsible for the
proper and efficient operation of the Facilities. Manager shall have discretion
and control over all matters relating to management and operation of the
Facilities, including, without limitation, the following: fees and charges for
providing accommodations, food services, care services, and related services to
residents and their guests; supervision of resident care; credit policies; food
and beverage services; environmental services; procurement of inventories,
supplies and services; promotion and publicity; employment policies; and,
generally, all activities necessary for the operation and management of the
Facilities. Owner shall remain responsible for the receipt, holding and
disbursement of funds and the maintenance of bank accounts pursuant to Article V
hereinbelow.
4.02 Marketing Services. Manager shall provide the following services
(the "Marketing Services"):
a. Prepare marketing plan and marketing strategy for the Facilities,
and a budget (the "Marketing Budget") for such plan and strategy.
b. Direct the marketing efforts for the Facilities.
c. Plan and implement community outreach, public relations and
special events programs.
4.03 Management Services. Manager shall use its best efforts to implement
all aspects of the operation of the Facilities in accordance with the terms of
this Agreement, and shall have responsibility and commensurate authority for all
such activities. In addition to any other duties set forth in this Agreement,
Manager shall:
a. Enter into all contracts, leases and agreements required in the
ordinary course of business for the supply, operation, maintenance
and service of the Facility (including but not limited to food
procurement, trash removal, pest control and elevator
maintenance). Manager shall obtain the written consent of Owner
before entering into any contract, lease or agreement in excess of
Fifty Thousand Dollars ($50,000.00) or one (1) year in duration,
except those specifically set forth in the Approved Budget.
b. Purchase such inventories, provisions, food, supplies and other
expendable items as are necessary to maintain the Facilities in a
proper manner.
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c. Recruit, hire and train all new employees to be employed at the
Facilities.
d. Provide care to Residents of the Facilities as provided for in the
resident agreement agreed to by Owner and Manager.
e. Set all resident fees and consult with Owner regarding the best
professional efforts to collect such fees.
f. Oversee all day-to-day operations.
4.04 Manager's Home Office Employees. As part of the provision of the
services provided by Manager, Manager shall from time to time make its employees
who are not working directly at the Facilities (the "Home Office Employees")
available to Owner for consultation and advice related to the Facilities. Home
Office Employees include Manager's home office staff and staff at other
facilities managed by Manager and its Affiliates with experience in areas such
as accounting, budgeting, finance, human resources, construction, development,
marketing, food service and purchasing. Owner may reasonably request such
services, but the decision to provide Home Office Employees shall be at the sole
discretion of Manager. The services of Home Office Employees shall be provided
at no additional charge to Owner. Owner will reimburse Manager for all
reasonable travel and related expenses of Home Office Employees visiting the
Facilities or traveling elsewhere on behalf of the Facilities.
4.05 Personnel Administration. As soon as reasonably possible after the
date of this Agreement , the current personnel at the Facilities shall be
transitioned from being employees of Owner to being employees of Manager (i.e.,
terminated by Owner and immediately rehired by Manager). All new Facility
employees shall be employees of Manager, and the salaries, costs and benefits of
all Facility employees will be the responsibility of Manager and would be
Facility Expenses. Manager shall invoice Owner on a monthly basis for the
salaries, costs and benefits of the Facility employees. Manager shall be
responsible for recruiting, hiring, training, promoting, assigning, supervising
and discharging the personnel of the Facilities, as well as the formulation,
implementation, modification and administration of wage scales, rates of
compensation, employee insurance, employee taxes, and personnel policies with
respect to the personnel of the Facilities.
4.06 Purchasing. Manager shall use, on behalf of the Facilities, such
purchasing systems and procedures developed by or otherwise available to Manager
for all items that are consistent with the Approved Budget. In furtherance
thereof, Manager shall utilize, to the extent that they offer competitive
prices, any national purchasing contracts that Manager may from time to time
have in effect with suppliers of equipment and supplies. Manager shall not enter
into any purchase or service contract not generally contained within the
Approved Budget, without the prior consent of Owner. Any
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purchase by Manager made pursuant to or otherwise ancillary to this Agreement
shall be made with Manager acting as agent for and at the expense of the
Facilities or Owner. Owner acknowledges that the Manager is not a merchant and
thus is not making any representations or warranties with respect to the goods
or services purchased by the Manager for use at the Facilities, implied or
otherwise. Manager shall fully disclose to Owner any material interest of
Manager and/or Affiliate in any vendor and Manager shall establish to Owner's
reasonable satisfaction that the purchase or contract was made after a
competitive selection process and at a fair market price.
4.07 Leases. Manager shall submit any forms of resident agreements,
leases or other occupancy agreements used in the leasing of the Facility for
Owner's approval before they are used by Manager. Manager shall act as agent for
Owner in executing resident agreements, leases and occupancy agreements, but
Manager shall not enter into such agreement or lease for a duration of more than
one year without the prior consent of Owner.
ARTICLE V
REVENUE AND EXPENSES, CREDITS AND COLLECTIONS, AND
DEPOSITORIES FOR FUNDS
5.01 Revenue and Expenses. Until April 1, 1999 or such other date as
agreed to by Owner and Manager, Owner shall be responsible for collecting all
Revenues and for paying Facility Expenses as agreed in the Approved Budget. All
fees due to Manager under this Agreement and any incidental expense
reimbursement will be deducted from the Revenues as Facility Expenses.
5.02 Credits and Collections. Manager shall assist Owner with its credit
and collection policies and procedures, including instituting reasonable steps
necessary to effectuate monthly billing by the Facilities, and the collection of
accounts and monies owed to the Facilities.
5.03 Depositories for Funds. Owner shall maintain accounts and
investments in banks, savings and loan associations, and/or other financial
institutions in Owner's name. Owner shall maintain such balances therein as
Owner shall deem appropriate, taking into account the cash flow operating needs
of the Facilities and the disbursement from such accounts of such amounts of
Facilities' funds as Owner shall from time to time reasonably determine to be
appropriate, as well as remaining in accordance with the Approved Budget and
taking into account Owner's desire to maintain as much of its funds in
interest-bearing accounts as is reasonably feasible. It is expressly understood
that it is Owner's responsibility to provide the funds needed to manage the
Facilities in a manner designed to meet the mutual goals of Owner and Manager
set forth in Section 2.02 above.
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ARTICLE VI
FINANCIAL RECORDS
6.01 Accounting and Financial Records. Until April 1, 1999 or such other
date as agreed to by Owner and Manager, Owner shall, at its own expense,
establish and administer accounting procedures, controls and systems for the
development, preparation and safekeeping of records and books of account
relating to the business and financial affairs of the Facilities, including
payroll, accounts receivable and accounts payable.
6.02 Access. Manager shall have the right at all reasonable times during
the usual business hours of the Facilities to audit, examine, and make copies of
books of account maintained by Owner with respect to the Facilities. Such right
may be exercised through any agent or employee designated by Manager or by an
independent public accountant designated by Manager.
ARTICLE VII
APPROVED BUDGET
7.01 Manager shall prepare in advance and deliver to Owner for Owner's
approval, a capital expenditure and operations budget for the Facilities' fiscal
year (in which each proposed expenditure will be designated either as required
or desirable) and set forth an estimate of operating revenues and expenses,
together with an explanation of anticipated changes to resident charges, payroll
rates and positions, non-wage cost increases, and all other factors differing
from the current fiscal year. The budget, as proposed, shall be considered by
Owner and, in consultation between Owner and Manager, the budget for the ensuing
fiscal year will be prepared by the Manager with the final contents of the
budget to be determined mutually by Manager and Owner (the "Approved Budget").
If there is a delay in the finalization of a new budget, or if Owner shall fail
to approve the newly proposed budget, Manager shall continue to provide
Management Services under the expired Approved Budget until a new budget is
approved, or until the termination notice given above becomes effective.
ARTICLE VIII
Intentionally Left Blank
ARTICLE IX
Intentionally Left Blank
ARTICLE X
Intentionally Left Blank
ARTICLE XI
INSURANCE
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11.01 Manager shall obtain and carry professional liability insurance in
its name for its operation of the Facilities. Owner shall maintain its current
policies of insurance for the Facilities. Owner shall consult with Manager prior
to renewing any of its current policies of insurance or securing new insurance
coverage.
ARTICLE XII
TERMINATION OF AGREEMENT
12.01 Termination. This Agreement shall automatically terminate at the
end of the Term, unless renewed, as provided in Section 1.16 hereof. Manager may
terminate, subject to the provisions of Section 13.04 and the notice and cure
provisions set forth in Section 13.02, if Owner defaults under any material
provision of this Agreement, subject to the notice and cure provisions set forth
in Section 13.02. Owner may sooner terminate this Agreement if Manager defaults
under any material provision of this Agreement, subject to the notice and cure
provisions set forth in Section 13.01. Owner may terminate this Agreement as the
result of the institution of bankruptcy proceedings against Manager. Either
party may terminate this Agreement without notice in the event the pending
merger between Owner and Sunrise Assisted Living, Inc. is not consummated by
April 1, 1999. Such termination must be elected no later than May 1, 1999.
If any of these events occur, Manager shall be compensated for its
services only through the date of termination.
ARTICLE XIII
DEFAULTS
13.01 Default by Manager. Manager shall be deemed to be in default under
this Agreement in the event Manager shall fail to keep, observe or perform any
material covenant, agreement, term or provision of this Agreement to be kept,
observed or performed by Manager, and such default shall continue (i) for a
period of ten (10) days after Manager receives written notice from Owner
specifying the default in case of monetary defaults or (ii) for a period of
thirty (30) days after Manager receives written notice from Owner in the case of
non-monetary defaults; provided, however, that if such non-monetary default
cannot be cured within such thirty (30) day period, then Manager shall be
entitled to such additional time as shall be reasonable, provided Manager is
capable of curing same, has proceeded to commence cure of such default within
said period, and thereafter diligently prosecutes the cure to completion.
13.02 Default by Owner. Owner shall be deemed to be in default hereunder
in the event Owner shall fail to keep, observe or perform any material covenant,
agreement, term or provision of this Agreement to be kept, observed or performed
by Owner and such default shall continue (i) for a period of ten (10) days after
written notice thereof by Manager to Owner in case of monetary defaults or (ii)
for a period of thirty (30) days after written notice thereof by Manager to
Owner in the case of non-monetary time defaults; provided, however, if such
default cannot be cured within such thirty (30) day
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period, then Owner shall be entitled to such additional time as shall be
reasonable, provided that Owner is capable of curing same, has proceeding to
commence cure of such default within said period, and thereafter diligently
prosecutes the cure to completion.
13.03 Remedies of Owner. Upon the occurrence of an event of default by
Manager as specified in Section 13.01 of this Agreement and expiration of any
applicable cure period provided by this Agreement, Owner shall be entitled to
terminate this Agreement, to remove Manager from the day-to-day management of
the Facilities and replace Manager with a substitute Manager and otherwise to
exercise all of its rights at law or in equity.
13.04 Remedies of Manager. Upon the occurrence of an event of default by
Owner as specified in Section 13.02 of this Agreement and the expiration of any
applicable cure period provided by this Agreement, Manager shall be entitled to
terminate this Agreement and to exercise all of its rights at law or in equity.
13.05 No Waiver of Default. The failure of Owner or Manager to seek
remedy for any violation of, or to insist upon the strict performance of, any
term or condition of this Agreement shall not prevent a subsequent act by Owner
or Manager which would have originally constituted a violation of this Agreement
by Owner or Manager, from having all the force and effect of an original
violation. Owner or Manager may waive any breach or threatened breach by Owner
or Manager or any term or condition herein contained. The failure by Owner or
Manager to insist upon the strict performance of any one of the terms or
conditions of this Agreement or to exercise any right, remedy or election herein
contained or permitted by law shall not constitute or be construed as a waiver
or relinquishment for the future of such term, condition, right, remedy or
election, but the same shall continue and remain in full force and effect. All
rights and remedies that Owner or Manager may have at law, in equity or
otherwise for any breach of any term or condition of this Agreement, shall be
distinct, separate and cumulative rights and remedies and no one of them,
whether or not exercised by Owner or Manager, shall be deemed to be in exclusion
of any right or remedy of Owner or Manager.
ARTICLE XIV
LEGAL ACTIONS, GOVERNING LAW,
LIABILITY OF MANAGER AND INDEMNITY
14.01 Legal Actions. Legal counsel for Manager and Owner shall cooperate
in the defense or prosecution of any action affecting the Facilities. Manager
shall not institute any legal action affecting the Facilities without Owner's
consent. Owner shall immediately forward all legal notices to Manager which
relate to the Facilities. Manager shall advise and assist Owner in instituting
or defending, as the case may be, in the name of the Facility, Owner and/or
Manager, but in any event as a Facility Expense, all actions arising out of the
operation of the Facilities and not attributable to the gross negligence or
willful misconduct of Manager, and any and all legal actions or proceedings to
collect charges, third party payments, rents, or other incomes for Manager,
Owner or the
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Facilities, or to lawfully evict or dispossess residents of the Facilities, or
to lawfully cancel, modify, or terminate any lease, license, or concession
agreement in the event of breach or default thereof, or to defend any action
brought against Owner. Manager shall assist Owner to take the acts necessary to
protest or litigate to a final decision in any appropriate court or forum, as a
Facility Expense, any violation, order, rule, or regulation affecting the
Facilities.
14.02 Legal Fees and Costs. In the event either party elects to incur
legal expenses to enforce or interpret any provision of this Agreement against
the other party to this Agreement, the prevailing party shall be entitled to
recover such legal expenses, including without limitation, reasonable attorney's
fees, costs and necessary disbursements, in addition to any other relief to
which such party shall be entitled.
14.03 Choice of Law and Venue. Whereas Manager's principal place of
business is in the Commonwealth of Virginia, and the Facilities are located in
various states, the parties agree that this Agreement shall be governed by and
construed in accordance with the laws of Virginia, which shall be the exclusive
courts of jurisdiction and venue for any litigation, special proceeding or other
proceeding between the parties that may be brought, or arise out of, or in
connection with, or by reason of this Agreement.
14.04 Liability of Manager.
a. Standard of Care. Manager agrees to use its best efforts to
exercise, with respect to all services provided by Manager under
or pursuant to this Agreement, a high and qualified standard of
care, skill, and diligence such as is at least comparable to that
at other assisted living facilities owned by other parties and
managed by Manager and Affiliates, and as is reasonably necessary
for the maintenance of any license or permit required for the
Facilities.
b. Other Persons. Manager shall not be responsible for the acts or
omissions of any of Owner's other contractors or any
subcontractor, or any employees of Owner, or any persons
representing Owner performing any services for or in connection
with the Facilities, or any Managers or other persons engaged by
Owner with respect thereto, unless and only to the extent Manager
is supervising, or should be supervising the same, and Manager
shall be responsible only for the performance of Manager's
obligations hereunder in accordance with the terms hereof.
c. Non-Recourse. In the event that Manager makes any claim against
the Facilities and Owner, Manager's recourse shall be
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limited to the provisions of this Agreement. Manager shall have no
recourse to directors, officers, employees, and shareholders of
the Owner.
d. Notwithstanding any other provisions of this Agreement, the
maximum liability of Manager to Owner for any breach of
this Agreement or for any claims arising hereunder shall be
limited to the amount of insurance carried by Manager
pursuant to Article XIX hereinabove and the amount of the
Management Fee paid as of the date of such breach or claim.
14.05 Indemnity. Manager will defend, indemnify and hold Owner harmless
from and against any claims, losses, expenses, costs, suits, actions,
proceedings, demands or liabilities that are asserted against, or sustained or
incurred by Owner because of Manager's breach of this Agreement or because of
legal actions or regulatory violations arising from Manager's gross negligence,
fraud, or willful misconduct. Further, Manager will defend, at its own expense,
any actions brought directly against Manager as a result of gross negligence in
managing and/or operating the Facilities. The scope of the foregoing indemnities
includes any and all costs and expenses properly incurred in connection with any
proceedings to defend any indemnified claim, or to enforce the indemnity, or
both, provided, however, that Manager's liability under that indemnity shall be
limited as set forth in Section 14.04 (d). Owner will defend, indemnify, and
hold Manager harmless, from and against any and all claims, expenses, losses,
costs, suits, actions, proceedings, demands, or liabilities that are asserted
against, or sustained or incurred by Manager in the proper performance of
Manager's duties under this Agreement or otherwise within the scope of the
agency established by the parties to this Agreement. Recovery upon an indemnity
contained in this Agreement is shall be reduced dollar-for-dollar by any
applicable insurance collected by either Owner or Manager.
ARTICLE XV
REGULATORY AND CONTRACTUAL REQUIREMENTS
15.01 Regulatory and Contractual Requirements. Manager shall use its best
efforts to cause all things to be done in and about the Facilities reasonably
necessary to comply with the requirements of any applicable constitution,
statute, ordinance, law, rule, regulation, or order of any governmental or
quasi-governmental regulatory body or agency, or board of fire underwriters
respecting the use of the Facilities or the construction, maintenance, or
operation thereof. Manager shall use its best efforts to assist Owner in
obtaining and maintaining all Federal, State and county permits and licenses
needed for the operation of licensed assisted living facilities providing
personal care services. Owner agrees upon request by Manager to sign promptly
and without charge applications for licenses, permits or other instruments
necessary for operation of the Facilities and to provide such information and
perform such acts relative to the ownership of the Facilities as are required by
law, regulation or governmental practice in order for obtaining and/or
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maintaining any license, permit, instrument, certificate, certification or
approval with respect to the proper operation of the Facilities.
The parties understand and agree that certain deficiencies or situations
of non-compliance with various Legal Requirements (such as building codes, OSHA,
ADA, health care regulations and the like) are likely to occur from time to time
in the normal course of business operations. Such occurrences will not
constitute a breach or default of Manager hereunder, provided that, (i) they are
not materially beyond the general experience of similar Facilities operations
located in the State in terms of scope, seriousness, or frequency, and (ii)
Manager takes all reasonable actions in a timely manner to cure such
deficiencies or situations of non-compliance. The costs (including any fines for
non-compliance) of curing such deficiencies or circumstances of non-compliance
shall constitute Operating Expenses unless incurred by reason of Manager's
willful failure, gross negligence or default hereunder.
15.02 Equal Employment Opportunity. Without limitation of any provision
set forth herein, Owner and Manager expressly agree to abide by any and all
applicable Federal and/or State equal employment opportunity statutes, rules and
regulations, including, without limitation, Title II of the Civil Rights Act of
1964, the Equal Pay Act of 1963, the National Labor Relations Act, the Fair
Labor Standard Act, the Rehabilitation Act of 1983, and the Occupational Safety
and Health Act of 1970, all as may be from time to time modified or amended.
15.03 Equal Housing Opportunity. Without limitation of any provision set
forth herein, Owner and Manager expressly agree to abide by any and all
applicable Federal and/or State equal housing opportunity statutes, rules and
regulations, all as may be from time to time modified or amended.
ARTICLE XVI
PROPRIETARY MARKS; INTELLECTUAL PROPERTY
16.01 Proprietary Marks. During the Term of this Agreement, the Facility,
upon agreement between Owner and Manager, may be known as a Sunrise Facility,
with such additional identification as may be necessary and agreed to by Owner
and Manager to provide local identification.
16.02 Ownership of Proprietary Marks. The Proprietary Marks shall in all
events remain the exclusive property of Manager, and nothing contained herein
shall confer on Owner the right to use the Proprietary Marks. Upon termination,
any use of or right to use the Proprietary Marks by Owner shall cease forthwith
and Owner shall promptly remove from the Facility any signs or similar items
that contain the Proprietary Marks. If Owner has not removed such signs or
similar items promptly upon termination, Manager shall have the right to remain
at the Facility as long as is necessary for Owner to do so. The right to use
such Proprietary Marks belongs exclusively to Manager, and the
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use thereof inures to the benefit of Manager whether or not the same are
registered and regardless of the source of the same.
16.03 Intellectual Property. All Intellectual Property shall at all times
be proprietary to Manager or its Affiliates, and shall be the exclusive property
of Manager or its Affiliates. During the Term of this Agreement, Manager shall
be entitled to take all reasonable steps to ensure that the Intellectual
Property remains confidential. Upon termination, all Intellectual Property shall
be removed from the Facility by Manager, without compensation to Owner.
16.04 Breach of Covenant. Manager and/or its Affiliates shall be
entitled, in case of any breach of the covenants of Article XVI by Owner or
others claiming through it, to injunctive relief and to any other right or
remedy available at law. Article XVI shall survive termination.
ARTICLE XVII
MISCELLANEOUS PROVISIONS
17.01 Additional Assurances. The provisions of this Agreement shall be
self-operative and shall not require further agreement by the parties except as
may be herein specifically provided to the contrary; provided, however, at the
request of either party, the party requested shall execute such additional
instruments and take such additional acts as the requesting party may deem
necessary to effectuate this Agreement.
17.02 Consents, Approval and Discretion. Except as expressly provided
herein to the contrary, whenever this Agreement requires any consent or approval
to be given by either party or either party must or may exercise discretion, the
parties agree that such consent or approval shall not be unreasonably withheld
or delayed and such discretion shall be reasonably exercised, in good faith.
17.03 No Brokerage. Each party represents to the other that it has not
engaged a broker in connection with this transaction, and agrees to defend,
indemnify, and hold the other party harmless from any claim made by a broker
through the indemnifying party.
17.04 Notices. All notices, demands, consents, approvals, and requests
given by either party to the other hereunder shall be in writing and shall be
sent by hand, by overnight courier, or by registered or certified mail, postage
prepaid, to the parties at the following addresses:
Owner: Karrington Health, Inc.
919 Old Henderson Rd.
Columbus, Ohio 43220
Attn: Pete A. Klisares, President
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Copy to: Stephen Lewis, Esquire
Karrington Health, Inc.
919 Old Henderson Rd.
Columbus, Ohio 43220
Manager: Sunrise Assisted Living Management, Inc.
9401 Lee Highway, Suite 300
Fairfax, Virginia 22031
Attn: Ms. Tiffany Tomasso
Copy to: Thomas B. Newell, Esquire
Sunrise Assisted Living, Inc.
9401 Lee Highway, Suite 300
Fairfax, Virginia 22031
or to such other address and to the attention of such other person as either
party may from time to time designate in writing. Notices shall be effective
upon receipt. Refusal to accept delivery shall constitute receipt.
17.05 Severability. If any term or provision of this Agreement or the
application thereof to any person or circumstance is held to be invalid or
unenforceable for any reason, the remainder of this Agreement, or the
application of such term or provision to persons or circumstances other than
those as to which it is held invalid or unenforceable, shall not be affected
thereby, and each term and provision of this Agreement shall be valid and be
enforced to the fullest extent permitted by law.
17.06 Gender and Number. Whenever the context of this Agreement requires,
the gender of all words herein shall include the masculine, feminine, and
neuter, and the number of all words herein shall include the singular and
plural.
17.07 Division and Headings. The divisions of this Agreement into
sections and subsections and the use of captions and headings in connection
therewith are solely for convenience and shall have no legal effect whatsoever
in construing the provisions of this Agreement.
17.08 Confidentiality of Information. Manager and Owner agree to keep
confidential and not to use or to disclose to others, except as expressly
consented to in writing by the other party or required by law, any and all of
their respective secrets or confidential technology, proprietary information,
customer lists, or trade secrets, or any matter or items ascertained through
their association with each other. Manager and Owner further agree that should
Manager leave the active service of Owner, Manager will return to Owner any
Facility information of any kind pertaining to Residents of the Facilities,
business, sales, financial condition or products and Owner will return to
Manager any and all of Manager's confidential information obtained by Owner. All
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funds related to and accounts opened on behalf of the Facilities also will be
returned to Owner.
17.09 Right to Perform. In the event that Owner or Manager shall fail to
perform any duty or fulfill any obligation hereunder to the material detriment
of the other, Owner or Manager, in addition to any rights or remedies available
to it under law, shall have the right, but not the obligation to perform any
such duty or fulfill any such obligation, but in no way obligating the party
beyond any termination period allowable hereunder.
17.10 Assignment by Manager. Manager shall have the right to assign this
Agreement to an affiliate or subsidiary of Manager.
17.11 Entire Agreement/Amendment. With respect to the subject matter
hereof, this Agreement supersedes all previous contracts and constitutes the
entire Agreement between the parties, and no party shall be entitled to benefits
other than those specified herein. As between the parties, no oral statements or
prior written material not specifically incorporated herein shall be of any
force and effect. The parties specifically acknowledge that in entering into and
executing this Agreement, the parties rely solely upon the representations and
agreements contained in this Agreement and no others. All prior representations
or agreements not expressly incorporated herein, whether written or verbal, are
superseded, and no changes in or additions to this Agreement shall be recognized
unless and until made in writing and signed by both parties hereto. This
Agreement may be executed in two or more counterparts, each of which shall be
deemed an original and all of which together shall constitute but one and the
same instrument.
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IN WITNESS WHEREOF, the parties hereto have caused this Agreement to be
executed under seal by their duly authorized offices, all as of the day and year
first above written.
WITNESS/ATTEST: OWNER:
Karrington Health, Inc.
/s/ Amy S.Maxwell By: /s/ Pete A. Klisares
- ----------------- ---------------------------------------
Name: Pete A. Klisares
-------------------------------------
Title: President
------------------------------------
WITNESS/ATTEST: MANAGER:
Sunrise Assisted Living Management, Inc.,
a Virginia corporation
/s/ Susan L. Timoner By: /s/ Tiffany Tomasso
- -------------------- ---------------------------------------
Name: Tiffany Tomasso
-------------------------------------
Title: Executive VP of Operations
------------------------------------
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EXHIBIT A
TO
MANAGEMENT SERVICES AGREEMENT
Farmington Hills, Michigan
Edina, Minnesota
Eastover, North Carolina
Hamilton, Ohio
Tiffin, Ohio
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