THIRD AMENDMENT TO
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MANAGEMENT AGREEMENT
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(AL II - 14 Operating Facilities)
(GMAC)
This Third Amendment to Management Agreement (this "Amendment") is made
effective this 1st day of January, 2002 by and among Emeritus Management LLC, a
Washington limited liability company ("Emeritus Management"), Emeritus
Management I LP, a Washington limited partnership ("Texas Manager"), Emeritus
Corporation, a Washington Corporation ("Emeritus), AL Investors II LLC, a
Delaware limited liability company ("AL Investors II"), for itself and as sole
managing member or sole managing member of the general partner of each of the
Facility Entities set forth on Exhibit A to the AL II Management Agreement
(GMAC) (as amended and as hereinafter defined) which own a Facility other than a
Refinanced Facility.
Recitals
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A. Emeritus Management, Texas Manager, Emeritus, AL Investors II, ESC
I, L.P., a Washington limited partnership ("ESC"), ESC G.P. I, Inc., a
Washington corporation ("ESCGP"), and Emeritus Properties I, Inc., a Washington
corporation ("EPI") entered into that certain Management Agreement with Option
to Purchase (AL II - 14 Operating Facilities), dated March 26, 1999, which was
thereafter segregated by Amendment to Management Agreement (AL II - 14 Operating
Facilities), dated March 27, 2000 (the "First Amendment"), pursuant to which the
Refinanced Facilities (as defined therein) were deleted, and were included
instead in that certain Management Agreement with Option to Purchase (Teachers),
dated March 27, 2000 (the "AL II Management Agreement (Teachers)", and which was
also thereafter amended by Second Amendment to Management Agreement dated March
22, 2001 (the "Second Amendment;" as so segregated and amended, the "AL II
Management Agreement (GMAC)". ESC, ESCGP and EPI have ceased to be Managers
under the AL II Management Agreement (GMAC).
B. Simultaneously with the initial execution of the AL II Management
Agreement (GMAC), EPI, Emeritus, and AL Investors Development LLC, a Delaware
limited liability company (for itself and on behalf of certain Facility Entities
defined therein), entered into that certain Management Agreement with Option to
Purchase (AL II - 5 Development Facilities), dated March 25, 1999, pursuant to
which, among other things, Manager was engaged to manage certain Facilities
described therein (the "AL II Development Management Agreement").
C. The parties hereto or certain affiliates thereof also entered into
that certain Management Agreement with Option to Purchase (Emeritrust 25), dated
December 30, 1998, pursuant to which, among other things, AL Investors LLC, a
Delaware limited liability company, and the Facility Entities defined therein
engaged Manager to manage certain Facilities described therein (as amended as
described below, the "AL I Management Agreement").
D. GMAC Commercial Mortgage Corporation ("GMAC") is the lender under
the Senior Loan under both the AL I Management Agreement and the AL II
Management Agreement (GMAC). The Senior Loan as defined in the AL I Management
Agreement is referred to herein as the "AL I Senior Loan".
E. Owner may elect to refinance one or more of the Facilities with
lenders originating loans insured by the Federal Housing Administration, an
organization unit of the United States Department of Housing and Urban
Development, or other similar lenders, which may be locked to repayment at the
time the Purchase Option is exercised (each a "New Loan").
F. As a condition to an extension of the Junior Loan and the Senior
Loan, and in anticipation of one or more New Loans, the parties have agreed to
amend the AL II Management Agreement (GMAC) as set forth herein.
NOW, THEREFORE, in consideration of Ten and No/100 Dollars, the agreements
contained herein, and other good and valuable consideration, the receipt and
sufficiency of which is hereby acknowledged, the parties hereby agree as
follows:
Definitions. All terms capitalized herein but not defined shall have the
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meanings given them in the AL II Management Agreement (GMAC).
Extension of Management Agreement. New Section 2.3 is hereby added to the
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AL II Management Agreement (GMAC):
2.3 Additional Extension Term. The parties hereby agree to extend
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the AL II Management Agreement (GMAC) until June 30, 2003 (the "Extension
Period"); provided, however, that if the AL I Management Agreement is not
extended for the Second Extension Period as provided therein, either Manager or
AL Investors II shall have the right to terminate this AL II Management
Agreement (GMAC) upon 60 days written notice, upon which the Extension Period
shall be deemed to terminate on the date of such termination of this AL II
Management Agreement (GMAC). All of the terms and provisions of the AL II
Management Agreement (GMAC) shall continue to be applicable throughout the
Extension Period. Notwithstanding the foregoing, the parties agree that this
Section 2.3 shall not impair Owners' extension rights under Section 2.2 of the
AL II Management Agreement (GMAC).
The parties hereby acknowledge that the foregoing extension is intended to
cause the AL II Management Agreement (GMAC) to be co-terminous with the AL I
Management Agreement and the extension of the AL I Senior Loan, as well as the
anticipated extension of the Senior Loan (as defined in this AL II Management
Agreement (GMAC)). The Senior Loan with respect to the AL II Collateral
Properties (as defined in the Second Amendment) has been automatically extended
in connection with the AL I Loan Restructure. Owner is currently negotiating
with the lender under the Senior Loan ("GMAC") for an extension with respect to
the 5 Facilities that were not included as AL II Collateral Properties (the
"Non-Additional Collateral Properties"), such that the Senior Loan with respect
to all of the Facilities would be co-terminous with the AL I Senior Loan, on the
terms set forth in that certain term sheet signed by GMAC on ________, 2001.
GMAC has notified Owners that it requires 90 days to implement the requested
extension, and has agreed to grant Owner an interim extension for such 90 day
period (the "Interim Extension"). If for any reason the extension as contained
in the term sheet does not occur and the Senior Loan matures after the Interim
Extension, the parties agree that AL Investors II shall have the right to
terminate this AL II Management Agreement (GMAC) as to the Non-Additional
Collateral Properties only. Neither of the foregoing termination rights shall
have the effect of terminating the AL I Management Agreement, the AL II
Management Agreement (Teachers), or the AL II Development Management Agreement.
1. Costs and Expenses. AL Investors II shall pay for all closing costs
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related to the loan extensions, including, without limitation, all costs and
fees incurred by the Senior Lender, title insurance fees, and UCC search costs.
2. Purchase Option.
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3.1 Exercise of Option. The first sentence of Section 13.2 of the AL
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II Management Agreement (GMAC) (as amended by the Second Amendment) is hereby
deleted and replaced in its entirety with the following:
The Purchase Option shall permit Emeritus to purchase the Facilities at any time
during the Extension Period, provided that written notice of the exercise of the
option is given by Emeritus to the Owners (the "Purchase Option Notice") at
least 15 days prior to the expiration or sooner termination of the Extension
Period.
3.2 Place and Time of Closing. Section 13.6 (as replaced by the
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Second Amendment) is hereby amended to replace all references to "December 31,
2001" with "the end of the Extension Period".
3.3 Option Facilities. The parties anticipate that the AL II
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Collateral Properties will be released as additional collateral for the AL I
Senior Loan, and upon such release agreement that paragraph 3 of the Second
Amendment will no longer be applicable.
3.4 Conditions to Exercise. In addition to the conditions
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precedent to the exercise of the Purchase Option contemplated in Section 13.1 of
the AL II Management Agreement (GMAC) and paragraph 6 of the First Amendment
(which required a simultaneous exercise of the "Purchase Option" under the AL II
Management Agreement (Teachers)), it shall be a condition precedent to the
exercise of the Purchase Option (which condition Owners may waive, in their sole
discretion at any time) (i) that the "Purchase Option" under the AL II
Development Management Agreement and the AL I Management Agreement shall have
been simultaneously exercised, and (ii) effective from and after December 31,
2002, the term of the AL II Development Management Agreement shall have been
extended to December 31, 2003.
3.5 Cross Default of Purchase Options. Section 13.9 of the AL II
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Management Agreement (GMAC) is hereby amended by adding the following at the
end: "If Emeritus elects to exercise its purchase options under the AL II
Development Management Agreement, the AL II Management Agreement (Teachers), and
the AL I Management Agreement, and thereafter fails to timely consummate the
purchase of the facilities subject to the exercised purchase options in
accordance with the terms thereof for any reason other than a default by the
owners and failure to deliver the applicable deeds for each of the facilities,
the Purchase Option under this AL II Management Agreement (GMAC) shall be deemed
terminated and Emeritus shall thereafter have no further right to purchase the
Facilities".
The foregoing terms in the AL II Management Agreement (Teachers), together
with the guaranty thereof, shall be deemed amended as set forth above.
Termination Upon Default. A new Section 9.8 is hereby added to the AL II
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Management Agreement (GMAC) as follows:
9.8 Termination by Lender. If required by the holder of a New Loan,
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upon an event of default under any New Loan the lender thereunder shall have the
right to terminate this Agreement as to the Facility securing the New Loan upon
30 days prior written notice to Emeritus and to AL Investors II.
Conveyances Subject to New Loan. It is expressly understood and agreed
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that Section 10.3.1 of the Management Agreement shall not be applicable to any
New Loan, and that Emeritus or its designee taking title to a Facility pursuant
to the Purchase Option shall be required to assume any New Loan not then subject
to prepayment, and shall pay all costs and fees associated with such loan
assumption. In addition, it shall be Emeritus' responsibility to cause all
conditions and requirements relating to the assumption of the New Loan to be
satisfied in full as of Closing. Emeritus shall receive a credit against the
Purchase Price for the assumed balance and any accrued interest due on any
assumed New Loan.
3. Segregation of Management Agreement. If required by any lender under a
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New Loan, Al Investors II, for itself and the applicable Facility Entity, and
Manager agree to segregate the AL II Management Agreement (GMAC) to cause the
Facility refinanced under the New Loan to be subject to a separate management
agreement on substantially the same terms and conditions of the existing AL II
Management Agreement (GMAC).
Notices. All notices to be given by either party to this Agreement to the
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other party hereto shall be in writing, and shall be sent to the parties at the
addresses and in the manner set forth in the Management Agreement.
Ratification. The Management Agreement, as amended by this Agreement, is
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hereby ratified and confirmed.
Understandings and Agreements. This Amendment, together with the
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Management Agreement, constitutes all of the understandings and agreements
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between the parties with respect to the management of the Facilities.
Headings. The headings contained herein are for convenience of reference
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only and are not intended to define, limit or describe the scope or intent of
any provision of this Agreement.
Applicable Law. This Agreement shall be construed and interpreted and be
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governed by the laws of the State of Washington.
IN WITNESS WHEREOF, the parties have executed and delivered this Agreement
as of the date and year first above written.
EMERITUS MANAGEMENT
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EMERITUS MANAGEMENT LLC,
a Washington limited liability company
By: Emeritus Corporation,
a Washington corporation
By: /s/ Raymond R. Brandstrom
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Name Raymond R. Brandstrom
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Title Vice President of Finance
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EMERITUS MANAGEMENT I LP
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EMERITUS MANAGEMENT I LP,
a Washington limited partnership
By: EM I, LLC, a Washington limited liability company
By: Emeritus Corporation, a
Washington corporation
By: /s/ Raymond R. Brandstrom
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Name Raymond R. Brandstrom
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Title Vice President of Finance
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EMERITUS
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EMERITUS CORPORATION, a Washington
corporation
By: /s/ Raymond R. Brandstrom
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Name Raymond R. Brandstrom
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Title Vice President of Finance
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AL INVESTORS II
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AL INVESTORS II LLC, a Delaware limited liability company, for itself and as
sole managing member on behalf of each of the Owners, or in the case where the
Owner is a limited partnership, as sole managing member on behalf of the general
partner thereof
By: /s/ Norman L. Brendan
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Name Norman L. Brendan
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Title Manager
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The undersigned lenders in connection with the Senior Loan and the Junior Loan
have executed this Agreement for the sole purpose of consenting to the foregoing
Amendment.
GMAC Commercial Mortgage Corporation, a California corporation
By:
Name
Title
Senior Housing Partners I, L.P.,
a Delaware limited partnership
By: /s/ Noah R. Levy
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Name Noah R. Levy
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Title Vice President
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The undersigned has executed this Agreement for the sole purpose of (i)
acknowledging and consenting to the foregoing Amendment, (ii) ratifying that
certain Guaranty of Management Agreement (AL II - 14 Operating Facilities) dated
March 26, 1999, given by Emeritus in favor of AL Investors II and the Facility
Entities, as amended by Amendment and Ratification of Guaranty of Management
Agreement dated March 27, 2000, and by Second Amendment and Ratification of
Guaranty of Management Agreement dated March 22, 2001 (the "Guaranty"), and
(iii) confirming and agreeing that foregoing Amendment does not alter, modify,
amend or waive any terms contained in the Guaranty.
Emeritus Corporation,
a Washington corporation
By:/s/ Raymond R. Brandstrom
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Name Raymond R. Brandstrom
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Title Vice President of Finance
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