AGREEMENT TO PROVIDE ACCOUNTING
AND CONSULTING SERVICES TO CALIFORNIA
ASSISTED LIVING FACILITY
This Agreement made as of the 15th day of February, 2002, by and between
RAL, Inc., an Oregon corporation (hereinafter referred to as "Owner") and
Emeritus Corporation, a Washington corporation (hereinafter referred to as
"Emeritus").
WHEREAS, Owner leases from Sacramento County Assisted, LLC (the "LLC")
the assisted living facility commonly known as Willow Creek Assisted Living and
located in Folsom, California (the "Facility");
WHEREAS, Emeritus has agreed to manage the Facility on behalf of the LLC at
such time as it is licensed to operate the Facility;
WHEREAS, pending issuance of a license to Emeritus to operate the Facility,
Owner is interested in engaging Emeritus to provide certain accounting,
reporting and consulting services to Owner with respect to the Facility; and
WHEREAS, Owner and Emeritus are interested in documenting the terms and
conditions under which such services will be provided.
NOW, THEREFORE, in consideration of the foregoing premises and the mutual
covenants herein contained, IT IS AGREED AS FOLLOWS:
I. Accounting Services:
--------------------
(i) Emeritus shall, at its expense, provide accounting support to the
Facility. Owner acknowledges and agrees that such accounting support shall not
include the preparation of Owner's corporate financial statements or securities
filings, but only the individual financial statements for the Facility, in each
case meeting the requirements of Section II. Emeritus shall not be required to
reflect in the financial statements for the Facility any corporate accounting
adjustments provided to Emeritus by Owner until such time as Emeritus 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 Emeritus, which programs shall conform to generally accepted
accounting principles ("GAAP") and shall not materially distort income or loss;
provided, however, Emeritus shall have no liability for errors in the financial
statements prepared during the term of this Agreement which arise from errors in
starting accounting balances provided by Owner to Emeritus pursuant to
Section I(v).
(iii) In addition, as a cost of operating the Facility, Emeritus shall
prepare or cause to be prepared all payroll tax returns, sales and use tax
returns, real and personal property tax returns, informational tax returns,
Forms 5500 and local or state gross receipts and/or business and occupation tax
returns and Emeritus shall cause to be paid all of the taxes reflected on such
returns as being due, which taxes shall be paid from the cash receipts of the
Facility or the working capital provided under the terms of this Agreement by
the LLC on behalf of Owner pursuant to the terms of the Working Capital
Agreement of even date herewith between Owner and the LLC (the "Working Capital
Agreement"). All other tax returns, including Owner's local, state or federal
income tax returns and state corporate franchise tax returns and third party
payor cost reports, shall be prepared by Owner or its designee and the taxes and
other payments due thereunder shall be the sole responsibility of Owner.
(iv) Nothing herein shall preclude Emeritus from delegating to a third
party a portion of the accounting duties provided for in this section; provided,
that such delegation shall not relieve Emeritus from ultimate liability for the
timely and complete performance of the obligations provided for herein or for
the expense thereof, to the extent such expense is to be borne hereunder by
Emeritus. Owner acknowledges and agrees that in the event Emeritus retains one
or more 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 paid from the cash receipts of the Facility or the working
capital provided by the LLC on behalf of Owner under the terms of this Agreement
and the Working Capital Agreement.
(v) In order to enable Emeritus to provide the accounting support
services described in this Section, prior to the Commencement Date, Owner has
provided to Emeritus the information and has taken the transition actions
described in Exhibit A hereto (the "Accounting Transition Services").
II. Reports: Emeritus shall prepare and provide to Owner any
-------
reasonable operational information with respect to the Facility which may from
time to time be specifically requested by Owner, including any information
needed to assist Owner in completing the tax returns for which it is responsible
under Section I , in complying with any reporting obligations imposed on Owner
under its lease or on Owner's parent as a publicly traded company and in
complying with the reporting obligations described in Exhibit B. In addition, by
no later than thirty (30) days after the end of each calendar month, Emeritus
shall provide Owner 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 the variance between the actual and budgeted operating results
of the Facility for said month and in the form attached hereto as Exhibit C and
with a census report for the month indicating the number of units occupied and
the number of units vacant. Upon request Emeritus shall cooperate with Owner
or Owner's certified public accountant in the event Owner elects, or is
required, to have audited annual financial statements prepared. The financial
statements prepared by Emeritus shall be prepared in accordance with (i) GAAP,
consistently applied, (ii) this Agreement, and (iii) the procedures and
practices provided for in this Agreement.
III. Bank Accounts:
--------------
(i) With respect to the Facility, Emeritus has established and shall
maintain a checking account for the Facility in the name of Owner (the
"Depository Account") and shall deposit therein all money received during the
term of this Agreement in the course of the operation of the Facility including
any money received upon the collection of accounts receivable which are
outstanding as of the Commencement Date for goods sold or services rendered at
the Facility prior to the Commencement Date and shall pay therefrom the expenses
incurred in the operation of the Facility during the Term of, and in accordance
with the terms of, this Agreement.
(ii) During the Term hereof, withdrawals and payments from the
Depository Account shall be made only on checks signed by a person or persons
designated by Emeritus but Emeritus shall have no ownership interest in or other
rights to the Depository Account other than the right to make withdrawals
therefrom and to make deposits thereto; and provided, further that Owner shall
be given notice as to the identity of said authorized signatories.
(iii) Withdrawals from the Depository Account shall be made first to
pay the expenses of operating the Facility, including payroll and related state
and federal payroll tax obligations (the "Daily Operating Expenses") and rent
payments due to the LLC (the "Property Expenses"). The Daily Operating Expenses
and the Property Expenses shall be paid by Emeritus in such order of priority as
Emeritus deems appropriate from time to time to the operation of the Facility,
provided however, Daily Operating Expenses and the Property Expenses shall be
paid by no later than their due date or, if applicable, before the expiration of
any applicable grace period in which payment may be made prior to the occurrence
of a default under the terms of the applicable lease, loan agreement, contract,
agreement or purchasing arrangement, unless resulting from the failure of Owner
or the LLC on behalf of Owner to provide the Working Capital Funds (as defined
in Section III(v) below) as and when due in accordance with Section II(v) below.
Upon request, Emeritus shall make any rent payments which are made by it by wire
transfer in accordance with wiring instructions provided by Owner to Emeritus.
(iv) Any excess funds in the Depository Account for a Facility, after
establishing the working capital reserves required by Section II(vii), shall be
distributed by Emeritus to the LLC in accordance with the terms of Section 1(b)
of the Working Capital Agreement.
(v) In the event at any time Emeritus determines in the exercise of its
reasonable judgment that there are insufficient funds in the Depository Account
to maintain the minimum bank balance required by Section II(vii) and to pay all
Daily Operating Expenses and Property Expenses due and payable in the following
thirty (30) day period (the "Working Capital Funds"), no less than three (3)
days prior to the date on which Emeritus determines that Working Capital Funds
are required, Emeritus shall provide Owner and the LLC with a verbal demand
therefor followed by a written confirmation of such demand, which written
confirmation shall specify in reasonable detail the amount needed and the reason
therefor and, Owner shall, within five (5) business days of its receipt of
such written demand by Emeritus, cause the LLC on behalf of Owner to deposit in
the applicable Depository Account the amount so demanded by Emeritus; provided,
however, Owner shall not be in default hereunder in the event the LLC fails to
provide the Working Capital Funds after a demand therefor by Emeritus or Owner,
it being understood and agreed that in such instance Emeritus' sole recourse
shall be to the LLC and that Owner does hereby assign to Emeritus its rights
under the Working Capital Agreement to enforce the obligations of the LLC
thereunder. Owner acknowledges and agrees that (i) in no event will Emeritus
have any obligation to pay any Daily Operating Expenses or Property Expenses
other than from funds available in the applicable Depository Account or to
provide its own funds to satisfy or support in any manner the working capital
needs of the Facility or to pay its own Service Fee and (ii) such working
capital is to be provided solely from the cash receipt of the Facility and the
working capital provided by the LLC on behalf of the Owner pursuant to this
Section III(v) and the Working Capital Agreement and Emeritus acknowledges and
agrees that Owner shall not be in default of its obligations under this Section
III(v) in the event the LLC fails or refuses, whether with or without cause, to
provide the Working Capital Funds.
(vi) Owner acknowledges and agrees that in the course of providing the
consulting services described in this Agreement Emeritus may incur common
expenses benefiting all of the facilities owned and/or operated by Emeritus,
including the Facility (the "Common Expenses"). Such Common Expenses shall be
included in the Daily Operating Expenses of the Facility and may be paid from
the cash in the Depository Account if (i) the same relate to the direct cost of
corporate, regional or divisional meetings or training sessions held by Emeritus
and in which the administrative personnel of the Facility have participated
("Meeting and Training Common Expenses"), (ii) the same are included within the
approved annual capital or operating budgets ("Budgeted Common Expenses") or
(iii) the same are not Meeting and Training Common Expenses or Budgeted Common
Expenses (the "Other Common Expenses") but are approved by the LLC, which
approval shall not be unreasonably withheld, after Emeritus has provided Owner
and the LLC with a specification setting forth in reasonable detail the nature
of such Other Common Expenses.
(vii) During the Term hereof, Owner and Emeritus shall attempt to agree
on the necessary minimum cash balance to be maintained in the Depository Account
for the Facility but if they are unable to so agree such minimum cash balance
shall upon demand of Emeritus be required to be equal to $30,000 and Owner shall
upon demand in accordance with Section III(v) cause the LLC to provide Emeritus
with any working capital which may be needed to enable Emeritus to maintain such
minimum cash balances; provided, however, Owner shall not be in default
hereunder in the event the LLC fails to provide such working capital after a
demand therefor by Emeritus or Owner, it being understood and agreed that in
such instance Emeritus' sole recourse shall be to the LLC and that Owner does
hereby assign to Emeritus its rights under the Working Capital Agreement to
enforce the obligations of the LLC thereunder.
IV. Consulting Services. During the term of this Agreement, Emeritus shall
-------------------
provide consulting services to the Facility on the following terms and
conditions:
(i) Supervise the day to day operation and management of the Facility. In
furtherance of the foregoing, utilizing the resources provided or made available
by Owner in accordance with the terms of this Agreement, Emeritus shall be
responsible for the supervision and management of the operation of the Facility,
in accordance with applicable laws and regulations, including the supervision of
employees, hiring and discharge of employees in consultation with Owner,
billings and collection, and regulatory compliance, including compliance with
the State Agreements (as hereinafter defined). In furtherance and not in
limitation of the foregoing, prior to the Commencement Date, Emeritus has
designated an individual currently in its employ who has been hired/engaged by
Owner to act as the training officer required by the terms of Paragraph 6(O) of
the 2000 Order (as defined below) (the "Training Officer").
(ii) Employ and lease to Owner such individuals as may be deemed necessary
by Emeritus for the operation the Facility in accordance with all applicable
legal requirements; provided, however, in no event shall the community director
be an employee of Emeritus but instead he or she is and shall remain throughout
the term of this Agreement an employee of Owner. In consideration for the
leasing of such employees by Emeritus to Owner, all of the wages and benefits
due from Emeritus to such leased employees shall be included in the Daily
Operating Expenses of the Facility and shall be paid either to the employees or
to Emeritus, if previously paid by Emeritus to the employees, from the funds in
the Depository Account.
(iii) Emeritus, as agent for the Owner and at the sole cost and expense
of the LLC on behalf of Owner under the terms of the Working Capital Agreement,
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. Emeritus 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
For all such insurance as deemed necessary above, it is agreed and
understood that Emeritus shall continuously maintain the same at the sole cost
and expense of the LLC on behalf of Owner under the terms of the Working Capital
Agreement, and that all premiums, deductibles and uninsured losses with respect
to such policies shall be deemed to be included in the Daily Operating Expenses.
Emeritus shall provide Owner with evidence of all insurance, naming Owner and
the LLC as an additional insured on policies B, C, D, and E above, and subject
to the requirements of the LLC, loss payee as respect the property policies.
Such evidence of insurance shall give Owner at least thirty (30) days prior
notice of cancellation or any material change to policies.
Emeritus shall also assist Owner to procure such other insurance coverages
as may be required by the LLC for the Facility. Emeritus shall, at its sole cost
and expense, maintain commercial general liability insurance for its operations.
Emeritus agrees to furnish Owner and the LLC with evidence of such insurance or
with duplicate copies of such policies.
(iv) Emeritus shall have no authority to commit the expenditure of the
Facility's funds or the funds of Owner or the LLC during the term of this
Agreement unless it has secured the prior written consent of the LLC's
Representative and the LLC's Representative shall have no obligation to approve
any non-routine expenditures of the Facility's funds or the LLC's funds during
the term of this Agreement.
(v) For purposes hereof, the State Agreement shall be defined as that
Stipulation, Waiver and Order dated May 25, 2000 entered in Case No.
7099344003-C (the "2000 Order"), a true and correct copy of which is attached
hereto as Exhibit D.
V. Emeritus' and Owner's and the LLC Representative: Emeritus hereby
------------------------------------------------
appoints Frank Ruffo (the "Emeritus' Representative") as the person employed by
Emeritus with whom Owner shall interact and upon whose decisions Owner shall be
authorized to rely, and Owner hereby appoints Walt Bowen (the "Owner's
Representative") as the person employed by Owner with whom Emeritus shall
interact and upon whose decisions Emeritus shall be authorized to rely, with
respect to the performance by Emeritus of its duties hereunder. Emeritus and
Owner acknowledge and agree that they have been advised by the LLC that the LLC
has appointed Ruth Verhoff (the "LLC Representative") as the person employed by
the LLC with whom Owner and Emeritus shall interact and upon whose decisions
Owner and Emeritus shall be authorized to rely. Emeritus shall have the right
from time to time during the term of this Agreement to replace the Emeritus'
Representative upon written notice to Owner designating the replacement
Emeritus' Representative and Owner shall have the right from time to time during
the term of this Agreement to replace the Owner's Representative upon written
notice to Emeritus designating the replacement Owner's Representative. Nothing
herein shall be construed as imposing any personal liability on the Emeritus'
Representative or Owner's Representative with respect to the acts or omissions
of Emeritus or Owner, respectively, under this Agreement.
VI. Term of Agreement and Termination Payments:
-----------------------------------------------
(i) The Term of this Agreement shall commence on the date on which the LLC
acquires title to the Facility (the "Commencement Date"). On the Commencement
Date, Emeritus and Regent shall sign this Agreement and insert the Commencement
Date in the space provided below:
Commencement Date: __________________, 2002
(ii) The Term of this Agreement shall terminate upon the first to occur
of the following:
(A) the occurrence of an Event of Default hereunder and the exercise by
Emeritus or Owner, as applicable, of its right to terminate this Agreement as a
result thereof; or
(B) on receipt by Emeritus of licensure approval from the State of
California, in which case Emeritus shall commence management of the Facility in
accordance with the terms of the Agreement to Provide Management Services
between the LLC and Emeritus of even date herewith; or
(C) termination of the Lease between Owner and the LLC in accordance with
the terms thereof.
(iii) In the event of the termination of this Agreement by Owner or
Emeritus in accordance with the terms of clauses (A) or (C) above, (A) no such
termination shall be effective until all amounts due and owing from one party to
the other in accordance with the terms of this Agreement, including the monetary
damages specifically provided for in Sections VII(a) and (b), but specifically
excluding any other damages alleged to have been suffered by a party as a result
of the termination of this Agreement after the occurrence of an Event of
Default, have been paid in full and (B) Emeritus shall cooperate with Owner or
its designee, at no cost to Emeritus and without the assumption of any further
liability by Emeritus other than the liability imposed on Emeritus under this
Agreement, in an orderly transition of accounting responsibility for the
Facility to Owner or its designee.
VII. Default: Either party may terminate this Agreement, as specified
-------
in this Section V, in the event of a default ("Event of Default") by the other
party.
(a) With respect to Emeritus, it shall be an "Event of Default"
hereunder:
(i) If Emeritus shall fail to keep, observe or perform any material
agreement, term or provision of this Agreement, and such default shall continue
for a period of forty five (45) days (subject to the force majeure provisions
below) after notice thereof shall have been given to Emeritus by Owner, which
notice shall specify in detail the event or events constituting the default; or
(ii) If Emeritus shall (A) apply for or consent to the appointment of a
receiver, trustee or liquidator of Emeritus of all or a substantial part of its
assets, (B) file a voluntary petition in bankruptcy, or admit in writing its
inability to pay its debts as they become due, (C) make a general assignment for
the benefit of creditors, or (D) file a petition or an answer seeking
reorganization or arrangement with creditors or taking advantage of any
insolvency law, or if an order judgment or decree shall be entered by a court of
competent jurisdiction, on the application of a creditor, adjudicating Emeritus,
a bankrupt or insolvent or approving a petition seeking reorganization of
Emeritus, or appointing a receiver, trustee or liquidator of Emeritus, of all or
a substantial part of its assets.
(b) With respect to Owner, it shall be an Event of Default
hereunder:
(i) If Owner shall fail to make or cause to be made any payment to
Emeritus required to be made hereunder (other than its working capital
obligation which is addressed in clause (iii)) and such failure shall continue
for a period of thirty (30) days after notice, which notice shall specify the
payment or payments which Owner has failed to make;
(ii) If Owner shall fail to keep, observe or perform any material
agreement, term or provision of this Agreement and such default shall continue
for a period of forty five (45) days after notice (subject to the force majeure
provisions below), which notice shall specify in detail the event or events
constituting the default thereof by Emeritus to Owner;
(iii) If Owner shall fail to cause the LLC to provide necessary working
capital upon demand by Emeritus with respect to the payment of the Daily
Operating Expenses or the Property Expenses due to Emeritus within the time
provided in Section III(v), and such failure continues uncured for five (5)
business days after Emeritus gives Owner notice of such failure; provided,
however, Owner shall not be in default hereunder in the event the LLC fails to
provide such working capital after a demand therefor by Emeritus or Owner, it
being understood and agreed that in such instance Emeritus' sole recourse shall
be to the LLC and that Owner does hereby assign to Emeritus its rights under the
Working Capital Agreement to enforce the obligations of the LLC thereunder.
(iv) If Owner shall be dissolved or shall apply for or consent to the
appointment of a receiver, trustee or liquidator of Owner or of all or a
substantial part of its assets, file a voluntary petition in bankruptcy, or
admit in writing its inability to pay its debts as they become due, make a
general assignment for the benefit of creditors, file a petition or an answer
seeking reorganization of arrangement with creditors or taking advantage of any
insolvency law, or if an order, judgment or decree shall be entered by a court
of competent jurisdiction, on the application of a creditor, adjudicating Owner
a bankrupt or insolvent or approving a petition seeking reorganization of Owner
or appointing a receiver, trustee or liquidator of Owner of all or a substantial
part of its assets; or
(v) If Owner or any of its principal officers is convicted or a crime
that materially affects the operation or regulation of the Facility.
VIII. Remedies and Obligations Upon Default:
-----------------------------------------
(i) If any Event of Default by Owner shall occur, Emeritus may, in
addition to any other remedy available to it in law or equity on account of such
Event of Default, forthwith terminate this Agreement, and neither party shall
have any further obligations whatsoever under this Agreement except for
Emeritus' right to receive damages from Owner in the amount specified in Section
IV and except any settlement and payment obligations and other obligations that
by their nature survive termination of this Agreement.
(ii) If any Event of Default by Emeritus shall occur, Owner may, in
addition to any other remedy available to it in law or equity on account of such
Event of Default, forthwith terminate this Agreement and the exclusive right to
possession of the Facility granted to Emeritus hereunder, and neither party
shall have any further obligation whatsoever under this Agreement; except for
Owner's right to receive payment of liquidated damages from Emeritus in an
amount specified in Section IV.
IX. Accounting and Consulting Fee:
--------------------------------
(i) In consideration for the provision of the services contemplated in
this Agreement and the provision of the Training Officer, Emeritus shall receive
a fee equal to 5% of the gross revenues of the Facility (the "Services Fee").
For purposes hereof, the gross revenues of the Facility shall be defined as 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.
(ii) If the services of Emeritus commence or terminate (for any reason,
including those set forth in Paragraph V) 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.
(iii) The Services Fee provided for herein shall be disbursed by
Emeritus to itself out of the Depository Account in accordance with the
provisions of Section III.
(iv) Any amounts due from Owner to Emeritus or Emeritus to Owner
pursuant to this Section IX which are not paid when due shall bear interest at
the annual rate equal to the Prime Rate as set forth in the Money Rates Section
of The Wall Street Journal (as the same may change from time to time) plus 5%
from the date due to the date paid in full.
X. Assignment: This Agreement shall not be assigned by either party
----------
without the prior written consent of the other party; provided, however,
Emeritus shall have the right to assign this Agreement to an entity which is
owned or controlled by Emeritus or its principal shareholder, Daniel R. Baty,
without the prior written consent of Owner.
XI. Notices: All notices required or permitted hereunder shall be
-------
given in 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 Emeritus: Emeritus Corporation
3131 Elliott Avenue
Suite 500
Seattle, WA 98121
Facsimile: 206-301-4500
Attn: Raymond R. Brandstrom, Vice President
- -Finance
To Owner: RAL, Inc.
Bank of America Building
121 SW Morrison
Suite 100
Portland, OR 97201
Facsimile: 503-274-4685
Attn: Walt Bowen, President
XII. Relationship of the Parties: The relationship of the parties
------------------------------
shall be that of principal and independent contractor and all acts performed by
Emeritus during the term hereof with respect to 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 Owner, its successors and assigns
on the one hand, and Emeritus, its successors and assigns on the other hand.
Notwithstanding the foregoing, Emeritus shall be authorized to execute certain
documents in the course of the day to day operation of the Facility as the agent
of Owner, such as credit applications for supplies, banking resolutions for the
Depository Account, utility deposit forms, etc.
XIII. Indemnification: Emeritus shall indemnify, defend and hold
---------------
harmless Owner and/or the LLC from any loss incurred by or damage to Owner or
the LLC where such loss or damage results from (A) the negligence or willful
misconduct of Emeritus in performing its obligations under this Agreement, (B) a
breach of this Agreement by Emeritus or (C) 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 Emeritus in accordance with or in violation of any
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), so long as such act or
failure to act is not caused or directed by Owner or the LLC; provided, however,
Owner specifically acknowledges and agrees that nothing in this Section XIII
shall be construed as imposing any liability on Emeritus for any insurance
deductibles for which the LLC on behalf of Owner shall be solely responsible.
Owner shall indemnify, defend and hold Emeritus harmless from any loss incurred
by or damage to Emeritus where such loss or damage results from the negligence
or willful misconduct of Owner in performing its obligations under the Agreement
or from a breach of this Agreement by Owner.
XIV. Entire Agreement: This Agreement contains the entire agreement
-----------------
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.
XV Captions: The captions used herein are for convenience of reference
--------
only and shall not be construed in any manner to limit or modify any of the
terms hereof.
XVI. Arbitration: In the event of any dispute among the parties
-----------
regarding the Facility or this Agreement, the parties agree to submit the same
to resolution before an arbitrator, in the case of disputes alleged to involve
less than $250,000, and before a panel of three arbitrators, in the case of
disputes alleged to involve $250,000 or more, selected by mutual agreement of
the parties or, if the parties are unable to agree on an arbitrator or panel of
arbitrators within a period of twenty (20) days, selected by a court of
competent jurisdiction. Such arbitration shall be held in accordance with the
rules of the American Arbitration Association and the decision of the arbitrator
shall be final and binding on the parties and may be enforced by a court of
competent jurisdiction. The party requesting arbitration shall do so by giving
notice to that effect to the other party, specifying in reasonable detail in
said notice the nature of the dispute; provided, however, in the event that
notwithstanding the terms hereof, a party commences legal proceedings, rather
than arbitration proceedings, before a court of competent jurisdiction, the
other party shall be deemed to have forfeited its right to have such dispute
determined by binding arbitration in accordance with this Section XVI unless
within thirty (30) days after being served with the first pleading in such legal
proceedings, it files a motion to dismiss such legal proceedings and serves on
the other party notice of its intent to submit such dispute to arbitration. Any
party who fails to submit to binding arbitration following a lawful demand by
the other party shall bear all costs and expenses, including reasonable
attorneys fees (including those incurred in any trial, bankruptcy proceeding,
appeal or review) incurred by the other party in obtaining a stay of any pending
judicial proceeding concerning a dispute which by the terms of this Agreement
has been properly submitted to mandatory arbitration and/or in compelling
arbitration of any dispute. All disputes under this Section XVI shall be
determined in the City of Portland, Oregon, if the arbitration is initiated by
Owner and in the City of Seattle, Washington, if the arbitration is initiated by
Emeritus, by a single arbitrator. All arbitrators shall be a licensed attorneys
having at least ten (10) years experience, with at least five (5) years
experience with assisted living facility sale, lease or management transactions.
The award in such arbitration may be enforced on the application of either party
by the order of judgment of a court of competent jurisdiction. The prevailing
party shall be entitled to recover the reasonable fees and expenses of its
attorneys and experts. The arbitrator(s) shall resolve all disputes in
accordance with the substantive law of the state of Oregon. The arbitrator(s)
shall have no authority or jurisdiction to award any damages or any other
remedies beyond those which could have been awarded in a court of law if the
parties had litigated the claims instead of arbitrating them. The parties shall
not assert any claim for punitive damages. The Federal Arbitration Act, Title 9
of the United States Code, is applicable to this transaction and shall be
controlling in any judicial proceedings and in the arbitration itself as to
issues of arbitrability and procedure. Nothing herein shall preclude a party
from curing either their own or the other party's alleged default which is, or
could be, the subject of an arbitration proceeding under this Section XVI or
from seeking equitable relief which the arbitrator or panel of arbitrators is
not empowered to award, such as an injunction, receivership, attachment or
garnishment.
XVII. Severability: In the event one or more of the provisions
------------
contained in this Agreement is deemed to be invalid, illegal or unenforceable in
any respect under applicable law, the validity, legality and enforceability of
the remaining provisions hereof shall not in any way be impaired thereby.
XVIII. Cumulative; No Waiver: No right or remedy herein conferred upon
---------------------
or 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.
XIX. Authorization for Agreement: The execution and performance of
-----------------------------
this Agreement by Owner and Emeritus have been duly authorized by all necessary
laws, resolutions or corporate action, and this Agreement constitutes the valid
and enforceable obligations of Owner and Emeritus in accordance with its terms.
XX. Counterparts: This Agreement may be executed in any number of
------------
counterparts, each of which shall be an original, and each such counterpart
shall together constitute but one and the same Agreement.
XXI. Confidentiality: Throughout the Term of this Agreement and for a
----------------
period of one (1) year after the expiration or earlier termination of this
Agreement, each of Emeritus and Owner 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.
XXII. Construction: Each of the parties acknowledges and agrees that it
-------------
has 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.
XXIII. Third Party Beneficiary: The LLC is an intended third party
--------------------------
beneficiary of this Agreement.
IN WITNESS WHEREOF, the parties have hereto caused this Agreement to
be duly executed, as of the day and year first above written.
RAL, INC.
By: /s/ Walt Bowen
Walt Bowen
Its: _____________________________________
EMERITUS CORPORATION
By: /s/ Raymond R. Brandstrom
Raymond R. Brandstrom
Its: _____________________________________
EXHIBIT A
ACCOUNTING TRANSITION SERVICES
EXHIBIT B
ADDITIONAL FACILITY SPECIFIC REPORTING OBLIGATIONS
EXHIBIT C
FORM OF FINANCIAL STATEMENTS
EXHIBIT D
2000 ORDER