AGREEMENT TO PROVIDE MANAGEMENT
SERVICES TO ASSISTED LIVING FACILITY
This Agreement made as of the 1st day of May, 2002, by and between HB-ESC
II, LLC, a Washington limited liability company ("Licensee") and Emeritus
Corporation, a Washington corporation ("Manager").
WHEREAS, Licensee is the lessee of the assisted living facility described
in Exhibit A (the "Facility") pursuant to the terms of a Lease Agreement dated
as of February 21, 1997 between Health Care Property Investors, Inc.
("Landlord") and Integrated Living Communities of Lafayette, L.L.C. ("Tenant"),
which lease was assigned by Tenant to Licensee by Lease Assignment and
Assumption Agreement dated as of May 1, 2002 and which lease was concurrently
amended by Lease Amendment dated as of May 1, 2002 (collectively, the "Lease").
WHEREAS, Licensee wants someone to manage the Facility on its behalf;
WHEREAS, Manager is experienced and qualified in the field of assisted
living facility management and has agreed to manage the Facility on behalf of
Licensee pursuant to the terms and conditions set forth herein.
NOW, THEREFORE, in consideration of the foregoing premises and the mutual
covenants herein contained, IT IS AGREED AS FOLLOWS:
I. Management and Consulting Responsibilities of Manager: Licensee hereby
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engages Manager and Manager hereby accepts such engagement and agrees to provide
management, consulting, advisory and supervisory services to Licensee in
connection with the operation of the Facility upon the terms and conditions set
forth in this Agreement. By entering into this Agreement, Licensee does not
delegate to Manager any powers, duties or responsibilities that it is prohibited
by law from delegating. Licensee also retains such other authority as shall not
have been expressly delegated to Manager pursuant to this Agreement. Subject to
the foregoing, Manager shall provide the following services:
A. Operational Policies and Forms. Manager shall develop and implement such
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operational policies and procedures as may be appropriate for the effective
operation of the Facility, including but not limited to all policies and
procedures necessary to ensure the ongoing licensure of the Facility and
compliance with the terms of residency agreements.
B. Charges. Manager shall establish schedules of recommended charges,
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including all special charges for services rendered to the residents at the
Facility.
C. Information. Manager shall develop any informational material, mass
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media releases, and other related publicity materials, which are necessary or
appropriate for the operation of the Facility. The cost of all such materials
shall be commercially reasonable and be deemed to be an expense of the Facility
and shall be payable from the Facility Checking Account (as defined below).
D. Regulatory Compliance. Manager shall use commercially reasonable efforts
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to obtain and maintain all licenses, permits, qualifications and approvals from
any applicable governmental or regulatory authority that are necessary for the
operation of the Facility and shall manage the operations of the Facility in
compliance with all applicable laws and regulations and in accordance with all
licenses, permits, qualifications and approvals. In order to ensure Manager's
compliance with its obligations under this Section I(D) Licensee shall provide
Manager prior to the Commencement Date with a copy of any existing regulatory
agreements or orders to which Licensee is a party in connection with the
operation of the Facility; provided, however, Manager shall not be deemed to be
in default of its obligations under this Section I(D) in the event (i) of a
violation of any applicable law or regulation which occurs during the first
thirty (30) days after the Commencement Date (the "Protected Period"), (ii) of
the citation of any deficiency or deficiencies which do not result in the
threatened revocation of the licensure or Medicaid certification of, or the
imposition of a ban on admissions at, the Facility (which deficiency or
deficiencies Manager shall cause to be timely corrected in accordance with a
plan of correction approved by the applicable regulatory authority), (iii)
Manager is duly contesting the application of any law to the operation of the
Facility and compliance with such law is stayed during the period that such
contest is pending or (iv) compliance with law requires the expenditure of funds
which require the approval of Licensee and for which Licensee refuses or
fails to provide such approval. Within 48 hours of receipt thereof, Manager
shall provide Licensee with copies by fax, overnight mail, email or other
comparable means of expedited transmission of any written notice regarding the
licensure, occupancy or operation of the Facility which it receives from any
governmental authority having jurisdiction over the Facility. In addition,
Licensee shall have the right to approve, which approval shall not be
unreasonably withheld, any plan of correction developed by Manager with respect
to any survey which threatens revocation of the licensure or Medicaid
certification of, or a ban on admissions at or the imposition of civil or
criminal penalties against, the Facility and to approve the election by Manager
to contest the application of any law to the operation of the Facility.
E. Capital Repairs, Replacements and Improvements: Manager shall make all
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capital repairs, replacements and improvements necessary for the efficient and
effective operation of the Facility and its compliance with law unless doing so
involves an expenditure requiring Licensee's approval in accordance with the
terms of this Agreement and Licensee fails to provide such approval. The cost
of such capital repairs, replacements and improvements shall be within the
line-by-line budgetary limit for each item as set forth in the then approved
annual capital budget prepared by Manager and approved by Licensee pursuant to
Section I(L); provided, however, Manager shall not be deemed to be in default of
its obligations under this Section I(E) in the event the cost of such
repairs, replacements and/or improvements exceeds the applicable budgetary limit
allocated on a line item basis for such repairs, replacements and/or
improvements in the applicable capital budget provided such repairs,
replacements and/or improvements are (a) of such an emergency nature that
Licensee's prior notice and approval is not feasible in order to adequately
protect the Facility and the health and safety of the occupants or (b) the cost
of such repairs, replacements and/or improvements are less than $10,000 in any
one instance but do not exceed in the aggregate $25,000 for any fiscal year. Any
other capital expenditures for repairs, replacements or improvements that exceed
such budgetary limits shall be subject to the prior approval of the Licensee,
which approval shall not be unreasonably withheld; provided, however, Licensee
shall not be deemed to have unreasonably withheld its approval if (i) Licensee
lacks the financial resources to cover the cost of such capital repair,
replacement or improvement or (ii) the cost of such capital repair, replacement
or improvement will exceed $25,000 individually or in the aggregate with other
unbudgeted capital repairs, replacements or improvements undertaken by Manager
in the same fiscal year. In performing the foregoing repairs, replacements and
improvements Manager shall use the Facility's on site maintenance personnel as
and where possible and shall otherwise contract with qualified third parties to
provide the necessary services and shall undertake the same or cause the same to
be undertaken in a workman like and lien free manner.
F. Accounting.
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i. Manager shall, at its expense, provide accounting support to the
Facility. Licensee acknowledges and agrees that such accounting support shall
not include the preparation of Licensee's financial statements or securities
filings. In addition, Manager shall reflect in the financial statement for the
Facility any accounting adjustments provided to Manager by Licensee, provided
that Manager shall have no liability or responsibility with respect to the
appropriateness of accounting adjustments provided to Manager by Licensee.
Manager shall not be required to reflect in the financial statements for the
Facility any corporate accounting adjustments provided to Manager by Licensee
until such time as Manager fully understands the rationale for such adjustment.
ii. All accounting procedures and systems utilized in providing said support
shall be in accordance with the operating capital and cash programs
developed by Manager, which programs shall conform to generally accepted
accounting principles ("GAAP") and shall not materially distort income or loss.
iii. In addition, Manager shall prepare timely and file or cause to be
prepared and filed timely all payroll tax returns, sales and use tax returns,
real and personal property tax returns and local or state gross receipts and/or
business and occupation tax returns at Manager's sole cost and expense and
Manager shall cause to be paid timely all of the taxes reflected on such returns
as being due, which taxes shall be Facility Expenses and shall be paid out
of the Facility Checking Account. In the event that Manager fails to timely file
required returns or reports or to timely pay taxes, Manager shall be solely
responsible for payment of any resulting penalties and/or interest and such
penalties and interest shall not be considered Facility Expenses, provided,
however, that Manager shall not be responsible for paying any resulting
penalties or interest if (i) Licensee receives the tax reports for such taxes
from the taxing authority and Licensee fails to furnish the tax reports to
Manager within a reasonable period of time prior to the date on which the tax
reports are due, or (ii) there are insufficient funds available in the Facility
Checking Account to pay the taxes when due and Licensee fails to comply with a
timely request by Manager to provide the necessary funds to pay the taxes when
due. All other tax returns, including Licensee's local, state or federal income
or informational tax returns and state corporate franchise tax returns shall be
prepared by Licensee or its designee and the taxes and other payments due
thereunder shall be the sole responsibility of Licensee.
iv. Nothing herein shall preclude Manager from delegating to a third party a
portion of the accounting duties provided for in this Section; provided,
that such delegation shall not relieve Manager from ultimate liability for the
timely and complete performance of the obligations provided for herein or for
the expense thereof, it being understood that Manager shall bear the expense of
such third party to whom Manager delegates any such accounting duties that are
the obligation of Manager under this Section. Licensee acknowledges and agrees
that in the event Manager retains one or more qualified third parties to review
the real and/or personal property tax returns or utility bills of the Facility
or other third party charges in an effort to effect cost savings for the
Facility, the fees and expenses of such third parties shall be Facility Expenses
and shall be paid out of the Facility Checking Account.
G. Reports. Manager shall prepare and provide to Licensee any reasonable
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operational information with respect to the Facility which may from time to time
be specifically requested by Licensee, including any information needed to
assist Licensee in completing the tax returns for which it is responsible under
Section I(F) and in complying with the reporting requirements described in
Exhibit B. In addition, within thirty (30) days after the end of each calendar
month, Manager shall provide Licensee with an unaudited balance sheet of the
Facility, dated the last day of such month, and an unaudited statement of income
and expenses for such month and for the fiscal year to date relating to the
operation of the Facility showing trends, the variance between the actual and
budgeted operating results of the Facility for said month and with a rent roll
and census report for the month indicating the number of units occupied and the
number of units vacant. Such monthly reports shall also show summary and
itemization of accounts receivable for the Facility and report of collection
action(s) taken and status of any collection action(s). Furthermore, Manager
shall prepare and provide to Licensee such other reports and information as
Licensee shall reasonably request. Upon request, Manager shall cooperate with
Licensee or Licensee's certified public accountant in the event Licensee elects,
or is required, to have audited annual financial statements prepared. The
financial statements prepared by Manager shall be prepared in accordance with
GAAP, consistently applied, this Agreement, and the procedures and practices
provided for in this Agreement.
H. Bank Accounts. Manager shall open a new checking account in the name of
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Licensee (the "Facility Checking Account") and shall deposit in the Facility
Checking Account all money received during the term of this Agreement in the
course of the operation of the Facility; provided, however, that during the term
hereof, withdrawals and payments from the Facility Checking Account shall
be made only on checks signed by a person or persons authorized by Manager. The
Facility Checking Account will be an interest-bearing account if an
interest-bearing account is available. Licensee shall be given notice as to the
identity of said authorized signatories. Withdrawals from the Facility Checking
Account shall be made first to pay the Management Fee (as that term is defined
in Section VII, below), and, thereafter, to pay Facility Expenses in such order
of priority as Manager deems appropriate to the commercially reasonable
operation of the Facility; provided, however, if a lender providing financing
for the facility requires the Management Fee to be subordinated to debt service
payments then Manager will not pay the Management Fe unless and until such debt
service has been paid; and provided, further, that the Management Fee shall be
subordinated on a current basis to any payments due to the Landlord under the
terms of the Lease. In the event the cash receipts of the Facility are at any
time insufficient to pay all of the Facility Expenses, Licensee shall, within
five (5) days of Licensee's receipt of a written demand by Manager (accompanied
by a statement and information as to the basis for the demand), deposit in the
Facility Checking Account sufficient funds to satisfy the then working capital
needs of the Facility. Licensee acknowledges and agrees that Manager shall only
be required to pay the Facility Expenses if and to the extent there are funds
available for the payment thereof in the Facility Checking Account.
I. Personnel. All of the on-site personnel of the Facility, including the
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community director, business manager and the "wellness director", if applicable,
shall be the employees of Manager but the salaries, bonuses, commissions,
state and federal payroll and social security tax obligations and benefits paid
to or on behalf of such on-site employees shall be deemed to be included in the
Facility Expenses and thus shall be paid from the Facility Checking Account. All
matters pertaining to the employment, supervision, compensation, promotion and
discharge of such employees are the responsibility of Manager, which is in all
respects the employer of such employees. Manager shall fully comply with all
federal, state, county, municipal and other governmental laws, ordinances,
regulations and orders having to do with anti-discrimination, workmen's
compensation, employer's liability insurance, social security, unemployment
insurance, hours of labor, wages, working conditions, immigration and all other
employer-employee related subjects (including without limitation, tax
withholding and information reporting requirements) and shall not do any act,
nor knowingly permit any act to be done that would constitute a violation of any
or all of such laws, ordinances, regulations or orders. Manager shall indemnify
and hold Licensee harmless from and against any and all claims, penalties,
liabilities and expenses of whatsoever kind and nature which may be asserted by
any governmental body or by any person claiming to be aggrieved by reason of any
act or failure to act by Manager in accordance with or in violation of any said
laws, ordinances, regulations or orders, so long as such act or failure to act
is not caused or directed by Licensee. All personnel responsible for providing
services pursuant to the terms of this Agreement shall be direct employees of
Manager and Manager shall, for purposes of such employment relationship, be
acting as an independent contractor and not as an agent or employee of Licensee.
Unbudgeted costs and expenses of employees or consultants that are not on-site
Facility personnel shall be treated as Facility Expenses only if approved in
writing in advance by the Licensee, which approval shall not be unreasonably
withheld. If Licensee terminates this Agreement, Licensee shall have the right
(but not the obligation) to offer to hire any one or more of the on-site
employees of Manager.
J. Supplies and Equipment: Manager shall purchase supplies and non-capital
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equipment needed to operate the Facility within the budgetary limits set forth
in the annual operating budget. In purchasing said supplies and equipment, if
possible without Manager incurring personal liability for the cost of such
supplies and equipment, Manager shall take advantage of any national or group
purchasing agreements to which Manager may be a party.
K. Legal Proceedings. Unless otherwise directed by the Licensee, Manager
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shall, through its legal counsel (whose identity and rates shall be subject to
Licensee's approval), coordinate all legal matters and proceedings with
Licensee's counsel and, subject to the direction and/or approval of Licensee,
shall take any and all appropriate steps to protect and/or litigate to a final
decision in an appropriate court or forum any violation, order, rule or
regulation affecting the Facility and its operations or any claim, loss,
violation or cause of action relating to the Facility. Manager shall not settle
any litigation without the prior approval of Licensee. Manager shall promptly
notify Licensee in writing of any written demand letters received by Manager
which threaten litigation related to the Facility or any legal or administrative
proceedings that are filed involving the Facility. All of the costs
reasonably incurred in such litigation shall be deemed Facility Expenses and
shall be reimbursed to Licensee from the funds in the Facility Checking Account
if previously paid by Licensee or shall be paid from the funds in the Facility
Checking Account if not previously paid by Licensee. Nothing herein shall be
construed as precluding Licensee from seeking to recover from Manager the fees
and expenses described in this Section I(K) to the extent Manager is otherwise
liable therefore under the default or indemnification provisions of this
Agreement; however, it is understood that no expenses shall be paid from the
Facility Checking Account for any litigation commenced by the Manager against
the Licensee.
L. Budgets: The Facility shall be operated on a fiscal year of January 1
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through December 31. Licensee and Manager shall agree before the Commencement
Date (as hereinafter defined) on a preliminary initial operating budget for the
period from the Commencement Date through December 31, 2002 and shall agree
within sixty (60) days after the Commencement Date on a detailed operating and
capital budget for the period from the date of such approved budgets through
December 31, 2002. On or before December 31 of each calendar year, Manager shall
prepare and submit to Licensee for its review and approval, which approval
shall not be unreasonably withheld, an annual operating budget, an annual
capital expenditure budget, and an annual cash flow projection for the Facility.
The annual operating budget and capital expenditure budget shall be prepared
using the format set forth in Exhibit C. In the event a budget has not been
agreed upon by the beginning of the fiscal year, the operating results of the
prior fiscal year shall serve as the budget for the following fiscal year unless
and until the new budget is agreed upon.
M. Collection of Accounts: Manager shall issue bills and collect accounts
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and monies owed for goods and services furnished by the Facility during the term
of this Agreement, including, but not limited to, enforcing the rights of
Licensee and the Facility as creditor under any contract or in connection with
the rendering of any services; provided, however, that any expenses reasonably
incurred by Manager in so doing shall be Facility Expenses and payable out of
the Facility Checking Account. In addition, upon request by Licensee, Manager
shall issue bills and collect accounts and monies owed for goods and services
furnished by the Facility prior to the Commencement Date; provided, however,
regardless of any standard of performance set forth in this Agreement, Licensee
acknowledges and agrees that there can be no assurances that Manager will be
able to collect any or all of such accounts receivable.
N. Contracts. Manager shall negotiate and enter into any and all contracts
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necessary from time to time in connection with the day to day operation of the
Facility including, but not limited to, contracts for water, electricity,
natural gas, telephone, sewer, cleaning, trash removal, pest control and
extermination, cable, elevator and boiler maintenance, pharmacy services,
therapy services and other appropriate ancillary services and contracts for the
provision of various services which are designed to identify potential cost
savings to the Facility, such as utility and tax bill review services; provided
that such contracts can be terminated by the Licensee on no more than 90 days'
notice. Any contract which cannot be terminated on no more than 90 days' notice
shall require the approval of Licensee before the same may be executed by
Manager, which approval shall not be unreasonably withheld. Manager shall have
the right to contract with entities which are owned by or under common ownership
with Manager provided the terms of any such contracts are no less favorable than
the terms then offered by unrelated third parties for the same or similar goods
or services.
O. Compliance With the Lease. Manager shall operate the Facility in
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compliance with the requirements of the Lease and shall use its commercially
reasonable efforts to assist Owner in complying with its obligations under the
Lease.
P. Manager's and Licensee's Representative. Manager hereby appoints Frank
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Ruffo (the "Manager's Representative") as the person employed by Manager with
whom Licensee shall interact and upon whose decisions Licensee shall be
authorized to rely, and Licensee hereby appoints Ruth Verhoff (the "Licensee's
Representative") as the person employed by Licensee with whom Manager shall
interact and upon whose decisions Manager shall be authorized to rely, with
respect to the performance by Manager of its duties hereunder. Manager shall
have the right from time to time during the term of this Agreement to replace
the Manager's Representative upon written notice to Licensee designating the
replacement Manager's Representative and Licensee shall have the right from time
to time during the term of this Agreement to replace the Licensee's
Representative upon written notice to Manager designating the replacement
Licensee's Representative. Nothing herein shall be construed as imposing any
personal liability on the Manager's Representative or Licensee's Representative
with respect to the acts or omissions of Manager or Licensee, respectively,
under this Agreement.
II. Insurance. Manager, as agent for the Licensee and at the sole cost and
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expense of Licensee, shall obtain and keep in force adequate insurance as
outlined below:
A. All Risk, or other broad form coverage property insurance,
insuring full replacement value. Such insurance shall also include, but not be
limited to, business interruption and extra expense coverage, for a period of
not less than six months. Manager shall also maintain flood hazard coverage at
an amount equal to full replacement cost of the Facility.
B. Commercial general liability insurance, against any third party
claims for bodily injury or property damage. Such insurance shall also include
coverage for contractual liability as respects this Agreement. Limits of such
coverage should not be less than $1,000,000 per occurrence, with a minimum of
$2,000,000 per location aggregate.
C. Professional Liability Insurance with limits of such coverage
that are not less than $1,000,000 per occurrence, with a minimum of $2,000,000
per location aggregate.
D. Business Auto Liability for third party bodily injury or
property damage for facility vehicles including owned, hired and non-owned auto
liability for $1,000,000 combined single limit. Coverage shall be extended to
cover physical damage to facility vehicles.
E. Umbrella/Excess Commercial General Liability and Professional Services
Liability in the amount of $10,000,000 per occurrence.
F. Workers' Compensation coverage with statutory limits and
Employers' Liability insurance coverage with minimum limits of $1,000,000 per
occurrence.
G. Crime insurance to cover employee dishonesty, theft of money and
security loss in limits of not less than $1,000,000
H. Such other or different insurance as Licensee may, from time to
time, advise Manager is required by the terms of the Lease provided the same is
available on commercially reasonable terms.
For all such insurance as deemed necessary above, it is agreed and understood
that Manager shall continuously maintain the same at the sole cost and expense
of Licensee, and that all premiums, deductibles and uninsured losses with
respect to such policies shall be deemed to be Facility Expenses. Manager shall
provide Licensee with evidence of all insurance, naming Licensee as an
additional insured on policies B, C, D, and E above, and subject to the
requirements of a lender or Landlord, such lender and Landlord as loss payee as
respect the property policies. Such evidence of insurance shall give the
Licensee at least thirty (30) days prior notice of cancellation or any material
change to policies.
Manager shall also assist Licensee to procure such other insurance coverages as
may be required by a lender for the Facility. Manager shall, at its sole cost
and expense, maintain commercial general liability insurance for its operations.
Manager agrees to furnish Licensee with evidence of such insurance or with
duplicate copies of such policies.
III. Proprietary Interest. The systems, methods, procedures and controls
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employed by Manager and any written materials, computer software or policies
developed by Manager to document the same are to remain the property of Manager
and are not, at any time during or after the term of this Agreement, to be
utilized, distributed, copied or otherwise employed or acquired by Licensee,
except as authorized by Manager, provided, however, that upon request of
Licensee Manager shall negotiate in good faith the terms and conditions upon
which Licensee may be permitted by Manager to use, without payment, such
systems, methods, procedures, controls, materials, software or brochures for a
limited transitional period following the termination of this Agreement, which
terms and conditions shall be satisfactory to both Manager and Licensee in their
respective discretion. However, in the event of a termination of this
Agreement, for a period of thirty (30) days after such termination Licensee
shall be permitted to use systems, methods, software as may be reasonably
necessary for Licensee to generate records and reports with data from the Term
(as defined below) of this Agreement.
IV. Term of Agreement; Termination by Either Party. The term of this
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Agreement (the "Term") shall commence on the date on which Licensee acquires
leasehold title to the Facility (the "Commencement Date"). This Agreement may
be terminated by either Licensee or Manager, with or without cause, at any time
upon giving (i) at least ninety (90) days' written notice to the other party if
the notice to terminate ("Termination Notice") is being delivered within the
first twelve month period following the Commencement Date; (ii); at least sixty
(60) days' written notice to the other party if the Termination Notice is being
delivered within the second twelve month period following the Commencement Date
and (iii) at least thirty (30) days' written notice to the other party if the
Termination Notice is being delivered more than twenty-four months following the
Commencement Date. This Agreement shall also terminate in the event that
the Facility is sold by Licensee during the period of this Agreement; or upon
the destruction of or substantial damage to the Facility by any cause, or the
taking of all or a substantial portion of the Facility by eminent domain, in
either case making it impossible or impractical to continue operation of the
Facility. Within thirty (30) days after the termination of this Agreement,
Manager shall deliver to Licensee any balance of moneys due Licensee or of
deposits, or both, which were held by Manager with respect to the Facility,
including, without limitation, the balance of the Facility Checking Account, as
well as a final accounting reflecting the balance of income and expenses with
respect to the Facility as of the date of termination or withdrawal, and all
records, contracts, leases, receipts for deposits, and other papers or documents
which pertain to the Facility. If there shall be additional sums due and
payable to Manager, Licensee shall promptly pay such sums to Manager as part of
the final reconciliation process.
V. Licensee's Inspection: During the term of this Agreement, Licensee shall
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have the right, upon not less than twenty-four (24) hours prior notice to
Manager and at reasonable times during normal business hours, to inspect the
Facility and to inspect and/or audit all books and records pertaining to the
operation thereof.
VI. Operation of the Facility:
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A. Standard of Performance: In performing its obligations under this
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Agreement, Manager shall manage the Facility as a licensed assisted living
facility (i) to the standard and in the same manner as management services are
provided by other qualified and licensed third party professional health care
facility managers of facilities comparable to the Facility, and (ii) in
accordance with the terms of this Agreement, including, but not limited to, the
limitations set forth herein on operating and capital expenditures, and the
policies adopted by, and resources available to, the Facility.
B. Force Majeure: Manager will not be deemed to be in violation of this
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Management Agreement if it is prevented from performing any of its obligations
hereunder for any reason beyond its control, including, without limitation,
strikes, shortages, acts of terrorism, war, acts of God, lack of Licensee's
financial resources, unreasonable interference by Licensee with Manager's
performance of its duties hereunder, or any statute, regulation or rule of
federal, state or local government or agency thereof.
VII. Withdrawal of Funds by Licensee; Minimum Bank Balance.
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A. Withdrawal by Licensee. From time to time, Licensee may withdraw the
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then-accumulated operating cash surplus (as determined by Manager) from the
Facility Checking Account.
B. Minimum Cash Balance. Licensee shall fund the Facility Checking Account
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with an initial amount equal to $25,000.00 and thereafter Licensee shall provide
the working capital required by Section I(H) of this Agreement
VIII. Management Fee: In consideration for the provision of the services
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contemplated in this Agreement, Manager shall receive a management fee
("Management Fee") equal to the five percent (5%) of the gross revenues
generated for the prior month by the Facility. The Management Fee shall be
payable on or before the 10th day of each month. For purposes of this
Agreement, "gross revenues" mean all revenues generated by the operation of the
Facility, but shall not include proceeds from the sale of Facility equipment or
the Facility, any insurance or condemnation proceeds or any other proceeds from
a capital event. If the services of Manager commence or terminate, other than
on the first day of the month, the revenues upon which the fee is calculated
shall be prorated in proportion to the number of days for which services are
actually rendered. The Management Fee provided for herein shall be disbursed by
Manager to itself out of the Facility Checking Account as provided in this
Agreement.
IX. Assignment: Except as otherwise provided in Section I.F. with regard to
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the delegation of certain duties, this Agreement shall not be assigned by
either party without the prior written consent of the other party.
X. Notices: All notices required or permitted hereunder shall be given in
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writing by hand delivery, by registered or certified mail, postage prepaid, by
overnight delivery or by facsimile transmission (with receipt confirmed with the
recipient). Notice shall be delivered or mailed to the parties at the
following addresses or at such other places as either party shall designate in
writing. All notices shall be deemed duly given when delivery is received or
refused by a party if delivered by hand, three (3) business days after being
deposited in the mails if sent by registered or certified mail, on the next
business day if sent by overnight delivery and on confirmed receipt, if sent by
facsimile transmission.
To Manager: Emeritus Corporation
3131 Elliott Avenue
Suite 500
Seattle, WA 98121
Facsimile: 206-301-4500
Attn: Frank Ruffo
To Licensee: HB-ESC I, LLC
2025 First Avenue
Suite 890
Seattle, WA 98121
Facsimile: 206-728-9327
Attn: Ruth Verhoff
XI. Relationship of the Parties: The relationship of the parties shall be
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that of principal and independent contractor and all acts performed by Manager
during the term hereof as Manager of the Facility shall be deemed to be
performed in its 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 Licensee, its successors and
assigns on the one hand, and Manager, its successors and assigns on the other
hand. Notwithstanding the foregoing, Manager shall be authorized to execute
certain documents in the course of the day to day operation of the Facility as
the agent of Licensee, such as credit applications for supplies, banking
resolutions for the Facility Checking Account, utility deposit forms, etc.
XII. Indemnification. Manager shall indemnify, defend and hold harmless
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Licensee and its Licensees, directors, officers and employees from any and all
third party claims, demands, causes of action, losses, damages, fines,
penalties, liabilities, costs and expenses, including reasonable attorneys' fees
and court costs sustained or incurred by or asserted against any one or
more of them by reason of or arising out of Uncovered Manager Actions. As used
in this Section XII, "Uncovered Manager Actions" means (a) Manager's breach of
the duties and obligations required to be performed by Manager pursuant to this
Agreement, (b) acts by Manager outside the scope of Manager's authority under
this Agreement, or (c) the negligence or willful misconduct of Manager or its
agents or employees. Licensee agrees to indemnify, defend and hold harmless
Manager and its shareholders, directors, officers and employees from any and all
third party claims, demands, causes of action, losses, damages, fines,
penalties, liabilities, costs and expenses, including attorneys' fees and court
costs (except to the extent covered by insurance carried by Manager or required
to be carried by Manager pursuant to this Agreement) sustained or incurred by or
asserted against any one or more of them relating to the Facility that results
from the negligence or willful misconduct of Licensee in performing its
obligations under the Agreement or from a breach of this Agreement by the
Licensee. THE INDEMNITIES BY LICENSEE AND MANAGER IN THIS SECTION XII
SPECIFICALLY APPLY TO NEGLIGENCE AND EVENTS FOR WHICH THERE IS STRICT LIABILITY
BY THE INDEMNIFIED PERSONS, TO THE EXTENT THE RESULTING CLAIM, DEMAND CAUSE OF
ACTION, LOSS, DAMAGE, FINE PENALTY, LIABILITY, COST OR EXPENSE IS WITHIN THE
SCOPE OF THE INDEMNITY. Notwithstanding any other provision of this Agreement to
the contrary, each party's obligation to indemnify, defend and hold harmless the
other party shall survive the termination of the Term and this Agreement
XIII. Entire Agreement: This Agreement contains the entire agreement
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between the parties relating to the operation of the Facility and shall be
binding upon and inure to the benefit of their successors and assigns. This
Agreement may not be modified or amended except by written instrument signed by
both of the parties hereto. Furthermore, this Agreement may be amended to
accommodate the requirements of a lender for the Facility and the Manager shall
execute such documents as such lender may reasonably require in connection with
its lending in connection with the Facility; provided, however, it shall not be
reasonable for Licensee's lender to require (i) Manager to reduce the Management
Fee set forth in Section VIII, (ii) Licensee or Manager to limit their
termination rights as set forth in Section IV or (iii) a material limitation of
the rights granted to Licensee or Manager or a material increase in the
obligations imposed on Manager hereunder.
XIV. Captions: The captions used herein are for convenience of reference
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only and shall not be construed in any manner to limit or modify any of the
terms hereof.
XV. Attorney's Fees: In the event either party brings an action to enforce
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this Agreement, the prevailing party in such action shall be entitled to recover
from the other all costs incurred in connection therewith, including
reasonable attorney's fees.
XVI. Severability: In the event one or more of the provisions contained in
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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.
XVII. Cumulative; No Waiver: No right or remedy herein conferred upon or
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reserved to either 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 either 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 parties hereof may be exercised from time to time and as often as may be
deemed expedient by the parties thereto, as the case may be.
XVIII. Authorization for Agreement: The execution and performance of this
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Agreement by Licensee and Manager have been duly authorized by all necessary
laws, resolutions or corporate action, and this Agreement constitutes the valid
and enforceable obligations of Licensee and Manager in accordance with its terms
except as such enforceability may be limited by creditors rights laws and
general principles of equity.
XIX. Counterparts: This Amendment may be executed in any number of
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counterparts and by different parties hereto in separate counterparts, each of
which when so executed shall be deemed to be an original and all of which when
taken together shall constitute one and the same amendment. Delivery of any
executed counterpart of a signature page to this Amendment by facsimile shall be
effective as delivery of an executed original counterpart of this
Amendment.
XX. Confidentiality: Throughout the Term of this Agreement and for a
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period of one (1) year after the expiration or earlier termination of this
Agreement, each of Manager and Licensee agrees to maintain the confidentiality
of any proprietary information concerning the other or the Facility to which
they may gain access during the term of this Agreement and shall only disclose
the same with the consent of the other party or as required by an order of a
court of competent jurisdiction.
XXI. Construction: Each of the parties acknowledges and agrees that it has
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participated in the drafting and negotiation of this Agreement. Accordingly, in
the event of a dispute with respect to the interpretation or enforcement of
the terms hereof, no provision shall be construed so as to favor or disfavor
either party hereto.
IN WITNESS WHEREOF, the parties have hereto caused this Agreement to
be duly executed, as of the day and year first above written.
HB-ESC II, LLC
By: /s/ Daniel R. Baty_________________________
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Daniel R. Baty
Its: Manager
EMERITUS CORPORATION
By: /s/ Daniel R. Baty_________________________
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Daniel R. Baty
Its: Chief Executive Officer____________
EXHIBIT A
DESCRIPTION OF FACILITY
Kingsley Place at Lafayette
215 West Farrel Road
Lafayette, LA 70508
96 assisted living units
EXHIBIT B
REPORTING REQUIREMENTS
EXHIBIT C
FORM OF BUDGET