MANAGEMENT AGREEMENT
This Management Agreement (this "Agreement")
is made and entered into as of May 30, 1997,
between WILLARD HOLDINGS, INC., a Texas
corporation with offices at 5720 LBJ Freeway,
Suite 450, LB 16, Dallas, Texas 75240-6339
("Owner"), and EMERITUS CORPORATION, a Washington
corporation with offices at 3131 Elliott Avenue,
Suite 500, Seattle, Washington 98121 ("Manager").
WITNESSETH
WHEREAS, Owner is the owner of an 82-unit
assisted living facility being developed in
Cheyenne, Wyoming, together with the equipment,
furnishings, and other tangible personal property
that will be used in connection therewith (the
"Facility"); and
WHEREAS, Manager is engaged in the ownership
and operation of similar facilities and is
experienced in various phases of the management,
operation and ownership thereof; and
WHEREAS, Owner desires to engage Manager as
an independent contractor to manage the Facility
for Owner's account during the term herein
provided, and Manager desires to accept such
engagement, upon the terms and subject to the
conditions contained herein. .
NOW, THEREFORE, in consideration of the
mutual promises and covenants herein contained,
and intending to be legally bound hereby, the
parties agree that the foregoing recitals are true
and correct and constitute an integral part of
this Agreement, and the parties further agree as
follows:
ARTICLE 1.
ENGAGEMENT OF MANAGER
1.1 ENGAGEMENT. During the term of this
Agreement and subject to a plan of operation for
the Facility to be developed by Manager and
approved by Owner (the "Plan of Operation"), Owner
grants to Manager the sole and exclusive right,
and engages Manager to supervise, manage, and
operate the Facility in the name and for the
account of Owner upon the terms and conditions
hereinafter set forth. Owner is contracting herein
for an end result, and does not intend to provide
any day-to-day supervision of Manager. Manager
shall provide its own management systems, which
shall be considered proprietary material and will
remain the property of Manager. The Plan of
Operation shall include the program design (in
accordance with the regulations of the state where
the Facility is located (the "State")) and define
the capital expenditure and operating budgets for
the Facility, as agreed to by the parties. The
Plan of Operation shall be reviewed on a monthly
basis and, if necessary, revised, upon the mutual
agreement of the parties.
1.2 ACCEPTANCE. Subject to the Plan of
Operation, Manager accepts such engagement and
agrees that it will (a) faithfully and diligently
perform its duties and responsibilities hereunder;
(b) use its best skills, efforts and attention to
supervise and direct the management and operation
of the Facility in an efficient manner, as an
assisted living facility, in substantial
compliance with all applicable laws and in Owner's
best interest; and (c) consult with Owner and keep
Owner advised of all major policy matters relating
to the Facility. Subject to the foregoing and to
the other provisions of this Agreement, Manager,
without the approval of the Owner (unless such
approval is herein specifically required), shall
have the control and discretion with regard to the
operation and management of the Facility for all
customary purposes (including the exercise of its
rights and performance of its duties provided for
in Article 3 hereof, and the. right to determine
policies affecting the appearance, maintenance,
standards of operation, quality of service, and
other matters reasonably relating to Manager's
interest hereunder, which affect the Facility or
the operation thereof, and Owner shall not attempt
to assert management control over Facility or its
employees during the term of this Agreement.
ARTICLE 2.
TERM
The term of this Agreement shall be for a
period of two years commencing on the date that
the first resident occupies one of the units in
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the Facility (the "Commencement Date") and ending
on the earlier to occur of (i) a date two years
after the Commencement Date (ii) the occurrence of
the Commencement Date (as defined in the Lease
Agreement of even date herewith between Owner and
Manager with respect to the Facility), unless
terminated earlier pursuant to Article 8 or
Section 11.2 hereof. This Agreement shall be
automatically extended for additional terms of one
year each unless and until terminated pursuant to
the terms herein, or upon written notice by
Manager of its intent not to extend 90 days prior
to the end of the then term.
ARTICLE 3.
RIGHTS AND DUTIES OF THE MANAGER
During the term of this Agreement and in the
course of its management and operation of the
Facility, subject to the Plan of Operation:
3.1 EMPLOYEES. Manager shall hire, train,
promote, discharge, and supervise the work of the
Facility's executive director, department heads,
and all operating and service employees performing
services in and about the Facility. All of such
employees shall be employees of Owner, except the
executive director who shall be an employee of
Manager, and the aggregate compensation, including
fringe benefits with respect to such employees
(including the executive director) shall, within
the agreed Operating Budget, be charged to Owner
as an expense of the operation of the Facility.
Manager shall comply with all applicable laws
concerning employees, their compensation, and any
retirement or profit sharing plans, including
payroll deductions and tax reporting. The term
"fringe benefits" as used herein shall include but
not be limited to the employer's contribution of
FICA, unemployment compensation, and other
employment taxes, retirement plan contributions,
worker's compensation, group life, accident, and
health insurance premiums, profit sharing
contributions, disability, and other similar
benefits. All such employees shall be covered by
appropriate professional liability, workers'
compensation, unemployment and other liability
insurance, including errors and omission coverage,
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as approved by Manager and Owner. The cost of same
shall be charged to Owner as an additional expense
of the operation of the Facility. Manager shall
provide Owner with evidence of any such insurance
upon request
3.2 LABOR CONTRACTS. Manager, if requested by
Owner, will negotiate, on Owner's behalf, with any
labor union lawfully entitled to represent the
employees at the Facility, but any collective
bargaining agreement or labor contract resulting
therefrom must first be approved by Owner, who
shall be the only person authorized to execute the
same. All such negotiations conducted by Manager
shall be at Owner's expense and shall be subject
to approval by Owner, which approval shall not be
unreasonably withheld.
3.3 CONCESSIONAIRES, ETC. Manager shall
negotiate and consummate in the name of the Owner
contracts with concessionaires, licensees,
tenants, Residents and other intended users of the
Facility. Any fees and expenses incurred in
connection therewith shall, within the agreed
Operating Budget, be charge to Owner as an expense
of the operation of the Facility.
3.4 ANCILLARY SERVICES, UTILITIES, ETC.
Manager shall, within the agreed Operating Budget,
enter into such contracts in the name of and at
the expense of Owner as may be deemed necessary or
advisable for the furnishing of all ancillary
services, utilities, concessions, supplies and
other services as may be needed from time to time
for the maintenance and operation of the Facility.
Manager is authorized to contract for or to
provide ancillary services, including, but not
limited to, pharmacy (drug and IV), rehabilitation
and respiratory therapy services, and mobile
diagnostic services, through providers which may
be affiliates of Manager, provided that such
services are rendered at levels of quality and
pricing that are competitive with those provided
in the community.
3.5 PURCHASES. Manager shall be solely
responsible to arrange for the purchases of food,
beverages, operating supplies, and other materials
and supplies in the name of and for the account,
and at the expense of Owner, within the agreed
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Operating Budget, as may be needed from time to
time for the maintenance and operation of the
Facility.
3.6 REPAIRS. At all times during the term of
this Agreement, Manager shall, within the agreed
Operating Budget, make or install or cause to be
installed at Owner's expense and in the name of
the Owner any proper repairs, replacements, and
improvements in and to the Facility and the
furnishings and equipment in order to keep and
maintain the same in good repair, working order
and condition, and outfitted and equipped for the
proper operation thereof in accordance with
industry standards comparable to those prevailing
in other similar facilities, and all applicable
state or local rules, regulations, or ordinances.
All maintenance and repair work undertaken by
Manager shall be done in a workmanlike manner,
leaving the Facility free of liens for labor and
material to the extent funds are provided by
Owner. Manager hereby grants to Owner the right to
inspect and access to the Facility at all
reasonable times; provided, however, that Owner
shall have no duty to conduct any inspection.
3.7 LICENSES AND PERMITS. Manager shall apply
for, and use its best efforts to obtain and
maintain in the name and at the expense of the
Owner, all licenses and permits required in
connection with the management and operation of
the Facility. Owner agrees to cooperate with
Manager in applying for, obtaining and maintaining
such licenses and permits.
3.8 INSURANCE. Manager shall apply for,
obtain and maintain on behalf of Owner, and at
Owner's expense, at all times during the term of
this Agreement, the following insurance in such
amounts and coverage as may be appropriate and
mutually agreed upon by Owner and Manager or as
may be required by any financing or lease
arrangements of Owner, whichever is greater:
(a) insurance on the Facility on a
replacement cost basis (including the equipment,
furnishings and other tangible personal property
used in connection therewith) against loss and
damage by fire and lightning with coverage
extended by means of an extended coverage
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endorsement to a fire insurance policy so as to
include loss or damage arising out of windstorm,
and hail, provided such insurance is reasonably
available, and sprinkler damage, if reasonably
available;
(b) insurance on the Facility against loss
or damage, including business interruption
insurance, for boilers and machinery, heating
apparatus, pressure vessels, and pressure pipes
installed in the Facility;
(c) commercial primary and excess general
liability, including automobile liability (
needed), products liability bonds, professional
and other liability, and property damage
insurance, insuring Owner and Manager against loss
or liability for damages or personal injury,
death, or property damage arising or resulting
from the management, maintenance, operation and/or
use of the Facility;
(d) such workers' compensation and other
similar insurance as may be required by law or as
may be required to insure Owner and Manager
against loss or the payment of damages for such
liabilities as may be imposed by law;
(e) unemployment Compensation insurance
through the appropriate state agencies; and
(f) fidelity and honesty insurance.
Forthwith after the effective date of this
Agreement, Manager shall submit to Owner for its
approval, which approval shall not be unreasonably
withheld, a proposal setting forth the kinds and
amounts of insurance which Manager intends to
obtain, in connection with the operation of the
Facility (including, without limitation, insurance
of the kinds and in the respective amounts
described in Paragraphs [a] through [f] of this
section) and Owner shall be deemed to have
approved the proposal unless Owner has disapproved
in writing within ten days of submission of the
proposal by Manager.
All insurance provided for under the
foregoing provisions of this Section shall be
effected by policies issued by insurance companies
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of good reputation, sound adequate financial
responsibility, and properly licensed and
qualified to do business in the State and which
are acceptable to any Secured Parties (hereinafter
defined).
All of the policies of insurance of the
character described in Paragraphs (a)-(b) of this
Section shall be carried in the names of Owner,
Manager, the secured parties, if any, under any
mortgage, deed of trust or security instrument
from time to time outstanding affecting the
Facility (the "Secured Parties"). Any losses
payable under such policies of insurance shall be
payable to Owner, Manager, and such Secured
Parties as their respective interests may appear.
Each of the policies of insurance referred to in
Paragraphs (c)-(f) of this Section shall insure
Owner and Manager. Owner, Manager and their
respective officers, partners, directors,
shareholders, managers and employees shall, to the
extent permissible, be named as additional
insureds under all such policies.
3.9 GOVERNMENTAL REGULATION.
(a) Manager shall perform its duties
hereunder to insure that the Facility and the
management thereof by Manager complies in all
material respects with all Federal, state and
local laws, rules, orders, determination,
regulations and ordinances affecting or issued in
connection with the Facility, or the management
thereof by Manager, including any laws and
regulations applicable to the Facility, and with
the prior written consent of Owner, Manager shall
make arrangements for any alterations or repairs
ordered or required thereby, if not included in
the Operating Budget.
(b) Manager shall immediately provide to
Owner, as and when received by, Manager, all
notices, reports or correspondence from
governmental agencies that assert deficiencies or
charges against Facility or that otherwise relate
to the suspension, revocation, or any other action
adverse to any approval, authorization,
certificate, determination, license or permit
required or necessary to own or operate the
Facility. Manager may appeal any action taken. by
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any governmental agency against the Facility:
provided, however, that Owner shall adequately
secure and protect Manager from loss, cost. damage
or expense by bond or other means reasonably
satisfactory to Manager in order to contest by
proper legal proceedings the validity of any such
statute, ordinance, law, regulation or order,
provided that any such contest shall not result in
the suspension of operations of the Facility and,
provided, further, that Owner shall have no
obligation to secure and protect Manager from any
loss, cost, damage or expense that arise directly
out of Manager's negligence, misconduct, or breach
of any of its obligations under this Agreement.
3.10 TAXES. Manager shall give notice to
Owner of all taxes, assessments, penalties, fines,
and charges of every kind imposed upon the
Facility by any governmental authority within five
days of receipt of notification other than in the
normal course of business, including interest and
penalties thereon, and shall cause such items to
be paid when due if funds are available, except
that Manager shall not cause such payment to be
made if (i) same is in good faith being contested
by the Owner at its sole expense and without cost
to Manager, (ii) enforcement thereof is stayed,
and (iii) Owner shall have given Manager written
notice of such contest and authorized the
nonpayment thereof not less than ten days prior to
the date on which such tax assessment, penalty or
charge is due and payable.
3.11 DEPOSIT AND DISBURSEMENT OF FUNDS. Upon
the implementation of this Agreement, Owner shall
initiate an operating reserve fund in a financial
institution and available to Manager as Owner's
agent hereunder in an amount to be agreed upon by
the parties. Such reserve fund shall be used by
Manager to meet the financial payments noted below
until sufficient revenues are generated by
operation of the Facility to reasonably meet those
financial obligations on a monthly basis. Manager
shall promptly deposit in a banking institution
acceptable to Owner, which is a member of the
FDIC, in accounts in Manager's name as agent for
Owner, all Gross Revenues, as defined below, and
moneys and Facility income arising from the
operation of the Facility, or otherwise received
by Manager for and on behalf of Owner ("Facility
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Funds"), which funds shall be Owner's funds. No
amounts deposited which Facility Funds shall in
any event be co-mingled with any other funds of
Manager. Manager shall pay from the reserve amount
and/or, once sufficient Facility Funds arc
generated and received to meet the monthly
operating expenses of the Facility, Manager shall
pay from Facility Funds on behalf of and in the
name Of Owner, and in time following order of
priority, and in each case, in such amounts and at
such times as are required to be made in
connection with:
(a) all costs and expenses arising out of the
ownership, maintenance, and operation of the
Facility, excluding the reimbursable expenses of
Manager hereunder pursuant to Exhibit A attached
hereto;
(b) payment of Facility Debt Service;
(c) Manager's Base Management Fee provided
for in Article 5, below (excluding any accrued and
unpaid Base Management Fees for prior periods);
and
(d) the balance of the Facility Funds shall
be disbursed to Owner within five days.
It is expressly acknowledged that financial
responsibility for payment of the costs and
expenses noted above is that of the Owner. If the
available Facility Funds previously deposited by
Manager, or the reserve. amounts previously placed
in the accounts by Owner are insufficient in any
month to pay all of the amounts described in
Paragraphs (a) - (c), Owner shall promptly, upon
the request of Manager, advance to Manager, or pay
into those accounts described above, for use by
Manager on Owner's behalf, any additional amounts
necessary and sufficient to allow Manager to pay
all amounts due hereunder. Manager shall not be
required to advance any sums on Owner's behalf to
meet any financial obligations of Owner pursuant
to the management of Facility. Owner's failure to
promptly advance funds, or to deposit any reserve
amounts where required hereunder and where written
demand has been made by Manager, shall be
considered a breach by Owner of this Agreement.
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As used herein, "Facility Debt Service"
means scheduled payments of the principal and
interest with respect to:
(i) the indebtedness identified on Exhibit B
attached hereto, and
(ii) any additional indebtedness
incurred by Owner for the improvement,
maintenance, or operation of the
Facility.
"Facility Debt Service" does not include any
amounts payable by reason of involuntary
prepayments or the acceleration of such
indebtedness for any reason.
3.12 STATEMENTS. Manager shall deliver or
cause to be delivered to Owner statements as
follows:
(a) On or about the 30th day after the end of
each calendar month (except for the final month of
the fiscal year as noted in 3.12(b) below), a
profit and loss statement and balance sheet
statement (both prepared on an accrual basis)
showing the results of the operation of the
Facility for the preceding calendar month and the
year to date, and having annexed thereto a
computation of the management fee (as determined
under Article 5 hereof for such preceding month
and the year to date.
(b) On or before 45 days after the close of
each fiscal year during the term of this
Agreement, Manager will also deliver or cause to
be delivered to Owner a balance sheet and related
statement of pro it and loss showing the assets
employed in the operation of the Facility and the
liabilities incurred in connection therewith as of
the end of the fiscal year, and the results of the
operations of the Facility during the preceding 12
months then ended, and having annexed thereto (i)
a copy of the Medicare and Medicaid cost report,
if any, prepared by Manager with respect to the
Facility for such twelve-month period, and (ii) a
computation of the management fee for any such 12-
month period and payments made according to
Section 3.11. All costs and expenses incurred in
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connection with the preparation of any statements,
schedules, computation, and other reports required
under this Section 3.12(b) shall be borne by
Owner.
(c) Within 30 days of filing, copies of the
10-Q and 10-K of Manager filed with the United
States Securities and Exchange Commission.
(d) Within 45 days after the end of each
quarter, each of the following, certified by the
chief financial officer of Manager to be true and
correct:
(i) unaudited financial statements of
the Manager prepared in accordance with
generally accepted accounting principles
consistently applied, which statements
shall. include a balance sheet and statement
of income and expenses for the quarter then
ended;
(ii) if requested by Owner, within 15
days of the end of each calendar month, an
aged accounts receivable report of the
Facility in sufficient detail to show
amounts due from each class of patient-mix
(i.e., private, Medicare (if any), Medicaid
(if any) and V.A.) by the account age
classifications of 30 days, 60 days, 90
days, 120 days, and over 120 days;
(iii) within 45 days after the end of
each calendar quarter, the quarterly
financial statement and census data for the
Facility, properly completed and certified
by Manager to be true and correct;
(iv) within ten days of filing or
receipt all cost reports required by any
regulatory or licensing agency and any
amendments thereto filed with respect to the
Facility and all responses and statements of
deficiencies (with plans of correction
attached thereto, if required, within the
period prescribed by law);
(v) within ten days of receipt, copies
of all licensure and certification survey
reports and statements of deficiencies (with
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plans of correction attached thereto, if
required, within the period prescribed by
law);
(vi) within ten days of receipt, a copy
of the Medicaid rate calculation worksheet
(or the equivalent thereof, if any, issued by
the applicable Medicaid agency for the
Facility;
(vii) upon Owner's request, evidence of
payment of any applicable provider bed taxes
or similar taxes.
3.13 COMPLAINTS; INVESTIGATIONS; LEGAL
ACTIONS. Manager shall receive, consider, and
handle any complaints of residents, guests or
users of any of the services of the Facility.
Using reasonable judgment, Manager shall notify
Owner of all material written complaints regarding
the quality of resident care or operation of the
Facility received by Manger. Manager shall comply
with the procedures and policies for reporting of
adverse resident occurrences at the Facility to
the insurance company or to such other persons as
Owner may designate. Manager shall promptly notify
Owner of any pending, threatened or initiated
investigation, by any governmental or
administrative agency, regarding any aspect of
operation of the Facility. Manager shall promptly
notify Owner if it is served with process in any
legal action regarding any aspect of its operation
of the Facility. Manager shall institute, in its
own 'name or in the name of the Owner, at the
expense of the Owner, appropriate legal actions or
proceedings to collect charges, rent, or other
sums due the Facility or to lawfully oust or
dispossess Residents or other persons in
possession under (or lawfully cancel, modify or
terminate) any lease, license, or concession
agreement for the breach thereof or default
thereunder by the Resident, licensee or
concessionaire.
Unless otherwise directed by Owner, Manager
shall take, at Owner's expense, appropriate legal
steps with respect to any alleged violation, or
adverse order, rule, or regulation affecting the
Facility. Any counsel to be engaged under this or
the next preceding paragraph of this Section shall
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be approved by Owner, which approval shall not be
unreasonably withheld. Manager shall promptly
notify Owner of all such actions.
3.14 MANAGEMENT SERVICE. Manager shall use
its best efforts to manage and operate the
Facility with a maximum of efficiency in a manner
to achieve optimal financial performance
productivity of personnel and in a quality manner
for the residents of the Facility commensurate
with standards for comparable facilities in the
State, provided that this is done in a manner
consistent with good business practices.
3.15 DATA PROCESSING. Manager shall, directly
or through an affiliate or subcontractor (the cost
of which shall, within the agreed Operating
Budget, be borne by Owner), provide the data
processing required to maintain the financial,
payroll, and accounting records of the Facility.
3.16 INDEMNIFICATION. Manager shall at all
times indemnify and hold harmless Owner, its
agents, representatives, partners, joint
venturers, officers, directors, and shareholders,
from and against any and all claims, losses,
liabilities, actions, proceedings, and expenses
(including reasonable attorneys' fees and costs)
arising out of Manager's management or operation
of the Facility; provided that the foregoing
indemnity will not include Owner's willful acts or
negligence. The provisions of this Section 3.16
shall survive the termination or expiration of
this Agreement.
3.17 BOOKS AND RECORDS. Manager, on behalf of
Owner, shall supervise and direct the keeping of
full and accurate books of account and such other
records reflecting the results of operation of the
Facility in accordance with sound business and
accounting practices and as required by law.
3.18 OTHER DUTIES. Manager shall not take any
action or inaction that would constitute a default
under any note, loan agreement, mortgage, trust
deed, lease or other agreement executed by Owner
relating to the Facility. Owner shall deliver to
Manager a copy of each such agreement prior to
execution thereof.
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3.19 Security Deposits. If required by state
law, Manager shall collect and disburse resident
security deposits in accordance with the
applicable rental agreements and all other
applicable state and federal laws and regulations.
Such deposits, if any, shall be deposited in a
separate FDIC insured trust account (maintained in
compliance with applicable law) held in the name
of Owner. The balance of such account shall at all
times equal or exceed the liability therefor to
all residents.
3.20 OPERATING BUDGET. Subject to the Plan of
Operation, Manager shall, 60 days prior to the
Commencement Date prepare a pro forma budget, and
about January 1 of each year thereafter, prepare
an operating budget for that year, based on the
immediately prior year's operating experience (the
"Operating Budget"). The Operating Budget shall
include, but not be limited to estimated revenues
and operating expenses for the ensuing year. If
Owner objects to the Operating Budget submitted by
Manager, Owner shall provide Manager with written
notice of such objection, stating the reasons for
such objections, within 30 days after receipt. If
Manager disagrees with Owner's objections, Manager
shall notify Owner of such disagreement within ten
days after Manager's receipt of Owner's
objections. If the parties cannot resolve any
dispute within ten days thereafter, then the
matter may be submitted to arbitration pursuant to
Article 10 hereof and the parties shall use the
Operating Budget for the previous period pending
the resolution of such arbitration proceeding. At
the same time as the Operating Budget is submitted
to Owner, Manager shall submit, for Owner's
approval, a narrative report of Manager's major
management goals and intended actions for the
succeeding fiscal year so as to enable Owner to
evaluate Manager's intended conduct of the affairs
of the Facility during that period. Once the
budget is mutually agreed to by the parties,
Manager shall use its best efforts to manage and
operate the Facility within the budget. However,
Manager is not guaranteeing that Facility shall
make a profit at any time or that anticipated
financial projections can be met under this
Agreement. AII expenses shall be charged to the
proper budget account and no expense may be
classified (or reclassified) for the purpose of
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avoiding an excess in the annual budgeted amount
of any accounting category. The parties agree to
confer from time to time with regard to the budget
and to adjust the budget as is reasonably
necessary for the operation of the Facility. Owner
understands and agrees that there may be
emergencies that arise from time to time which
might require immediate expenditures by Manager to
assure the continuous operation of the Facility
which are not in the budget. Owner may specify the
format of the budget from time to time.
Manager shall, in addition, provide to Owner
a capital improvements budget (the "Capital
Expenditures Budget") covering all anticipated
capital improvements and expenditures. The Capital
Expenditures Budget is subject to Owner's approval
and the same procedures set forth above with
respect to the Operating Budget. Notwithstanding
anything contained herein to the contrary. Manager
shall not incur any expense or capital expenditure
in excess of $5,000 for any single item or $10,000
in any fiscal year above the approved budget
without Owner's specific written authorization;
provided, however, Manager shall have the
authority to incur such expenses and capital
expenditures without Owner's prior approval if
such expense or capital expenditure is immediately
necessary for: (i) the health or safety of the
residents of the Facility, or (ii) to comply with
any applicable law, rule or regulation governing
the operation of the Facility ("Emergency
Expenditures"). Manager shall promptly provide
Owner with written notice describing the cost and
reason for any such Emergency Expenditure. Owner
shall promptly review Manager's request for
authorization of expenses and capital expenditures
in excess of the aforesaid limits which are not
Emergency Expenditures.
3.21 FEES AND CHARGES. Subject to approval of
Owner, Manager shall establish, maintain, revise
and administer the overall charge structure of the
Facility, including, without limitation, monthly
fees, rentals, or charges of any kind, charges for
ancillary services, any and all items sold at the
Facility and any other services provided at the
Facility. Manager shall be responsible for the
timely billing and collection from residents or
third party payors of the amounts due and payable
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from residents for the services provided by the
Facility. Manager shall be responsible for making
timely and complete rate filings as required by
law, and all posting or filing of notices, charges
and fees required by law.
3.22 RESIDENT-MANAGEMENT RELATIONS. Manager
will encourage and assist residents of the
Facility in forming and maintaining representative
organizations to promote their common interests
and will maintain good-faith communication with
such organizations so that problems affecting the
Facility and its residents may be avoided or
solved on the basis of mutual self interest.
3.23 CONSTRUCTION OF IMPROVEMENTS TO EXISTING
FACILITY. Except as otherwise provided herein,
Manager shall not make or cause to be made any
alterations, additions, replacements or
improvements on, in, about or to the Facility
without the prior written consent of Owner. The
entire cost of construction of any such new
improvements to the existing facility and all
expenses connected therewith, shall be borne and
paid by Owner exclusively. Prior to the
commencement of any such alterations, additions,
replacements or improvements, Manager shall submit
to and obtain Owner's written approval of the
plans and specifications thereof. Manager agrees
that such plans and specifications shall require
the contractor to post an adequate performance
bond.
Manager agrees to make and construct a11
such repairs, improvements and installations in
accordance with all laws, rules and regulations of
applicable governing bodies and agencies, to
diligently complete such construction once the
same has commenced. All improvements constructed
by Manager upon the Facility shall, upon
termination of this Agreement, belong to Owner.
Manager shall save and hold Owner harmless and the
Facility harmless from any and all liability of
any kind on account of such work or improvement
while this Agreement remains in effect. Owner
shall have the right at any time to post the
Facility with such notices as may be required to
protect Owner's interest in the Facility from
mechanics' liens or other liens of a similar
nature. The failure to disapprove Manager's plans
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and specifications within 60 days after receipt
thereof by Owner shall be automatically deemed
disapproval thereof.
3.24 USE OF THE FACILITY'S PROPERTY. Manager
shall not utilize any hazardous materials on the
Facility s property except in accordance with
applicable legal requirements and will not permit
any contamination which may require remediation
under applicable Hazardous Materials Law (as
defined herein). Manager shall not dispose of any
hazardous materials or substance within the sewage
system of the Facility's property, and that it
shall handle all red ba wastes in accordance with
applicable Hazardous Materials Laws. Hazardous
Materials Law shall mean any law, regulation, or
ordinance relating to environmental conditions,
medical waste or industrial hygiene, including the
Resource Conservation Recovery Act of 1976
("RCRA"), the Comprehensive Environmental Response
Compensation Liability Act of 1980 ("CERCLA"), as
amended by the Superfund Amendments and
Reauthorization Act of 1986 ("SARA"), the
Hazardous Materials Transportation Act, the
Federal Water Pollution Control Act, the Clean Air
Act, the Clean Water Act, the Toxic Substance
Control Act, the Safe Drinking Water Act, the
Atomic Energy Act and all similar federal, state
and local environmental statutes and ordinances,
whether heretofore or hereafter enacted or
effected and all regulations, orders, or decrees
hereto fore or hereafter promulgated thereunder.
3.25 ACCESS TO BOOKS, RECORDS AND DOCUMENTS.
In the event the Facility participates in the
Medicare/Medicaid programs, for purposes of
Section 1861(v)(1)(n of the Social Security Act,
as amended, and any written regulation thereto, if
the value or cost of services rendered by Manager
to Owner is $10,000 or more over a 12-month
period, including without limitation services
rendered pursuant to this Agreement, Manager
agrees as follows:
(a) Until the expiration of four years after
the furnishing of such services, Manager shall,
upon written request, make available to the
Secretary of the Department of Health and Human
Services (the "Secretary"), the Secretary's duly
17
authorized representative, the Comptroller
General; or the Comptroller General's duly
authorized representatives, such books, documents,
and records as may be necessary to certify the
nature and extent of costs of such services; and
(b) If any such services are performed by way
of subcontract with another organization and the
value or cost of such subcontracted services is
$10,000 or more over a 12-month period, such
subcontract shall contain and Manager shall
enforce a clause to the same effect as subsection
(a) immediately above.
The availability of Manager's books, documents and
records shall be subject at all times to all
applicable legal requirements, including without
limitation such criteria and procedures for
seeking and obtaining access as may be promulgated
by the Secretary by regulation.
ARTICLE 4.
RIGHTS AND DUTIES OF OWNER
During the term of this Agreement:
4.1 RIGHT OF INSPECTION. Owner (or its
representative) shall have the right to enter upon
any part of the Facility during regular business
hours upon reasonable advance notice to Manager
for the purpose of examining or inspecting same or
examining or making copies or extracts of books
and records of the Facility, but this shall be
done with as little disruption to the business of
the Facility as is practicable. However, the books
and records of the Facility shall not be removed
from the Facility without the expressed written
consent of Manager. Owner acknowledges that some
books and records will be maintained at Manager's
principal place of business, but that such books
and records shall be available for inspection by
Owner or its representative. The parties will
agree in writing as to which books and records
must be kept at the Facility.
Owner shall direct all inquiries regarding
operations, procedures, policies, employee
relations, patient care, and all other matters
concerning the Facility to the Manager's
18
divisional director of operations or other officer
of Manager as it may from time to time designate
in a written notice to Owner. Notwithstanding the
foregoing, Owner shall retain the right to contact
the executive director regarding matters pertinent
to the Facility.
4.2 COOPERATION WITH MANAGER. Subject to the
provisions of Article 5 below, Owner shall
cooperate with Manager in operating and
supervising the Facility and shall reimburse
Manager for all funds reasonably expended or costs
and expenses reasonably incurred to which Manager
is entitled to reimbursement pursuant to Exhibit A
of this Agreement and all out of pocket expenses
paid or incurred by Manager for the operation of
the Facility, including reasonable and necessary
traveling expenses of executives of Manager, and
all reasonable costs and expenses of any business
promotion or personnel training program of the
Facility, as reflected in the Operating Budget.
4.3 CAPITAL IMPROVEMENTS. Subject to the
Capital Expenditures Budget, Owner shall provide
Manager by depositing into the reserve account or
Facility Funds such amount of funds as may be
required from time to time to make all necessary
capital improvements to the Facility, in order to
maintain and continue standards of operation of
the Facility as a retirement community and
assisted living care center. If Manager in its
professional judgment determines that additional
capital improvement funds are required, Manager
shall notify Owner thereof in writing for Owner's
consent which shall not be unreasonably withheld.
Upon such consent, Owner shall provide Manager
with such increase in capital improvement funds,
by depositing the funds in the reserve account or
Facility Funds within 30 days thereafter.
4.4 INDEMNIFICATION. Owner shall at all times
indemnify and hold harmless Manager, its agents,
representatives, partners, joint venturers,
officers, directors, and shareholders, from and
against any and all claims, losses, liabilities,
actions, proceedings, and expenses (including
reasonable attorneys' fees and costs) arising out
of Owner's operation of the Facility prior to the
Commencement Date and Owner's ownership of the
Facility. Such claims, losses, liabilities,
19
actions, proceedings and expenses are considered
the responsibility of Owner absent documentation
of responsibility for such claims by Manager. The
provisions of this Section 4.4 shall survive the
termination or expiration of this Agreement.
ARTICLE 5.
COMPENSATION AND DISTRIBUTIONS
5.1 MANAGEMENT FEES. As full compensation for
all of the services to be rendered by Manager
during the term of this Agreement (but not
including reimbursement for costs or expenses
incurred by Manager on behalf of Owner or the
Facility hereunder),Owner shall pay to Manager at
its principal office, or at such other place as
Manager may from time to time designate in
writing, and at the times herein after specified,
a management fee equal to five percent of Gross
Revenues (as defined below) derived from the
operation of the Facility on a monthly basis
determined on the accrual method of accounting.
Such management fee (the "Base Management Fee")
shall be payable from Facility Funds monthly upon
delivery to Owner of the monthly financial
statement referred to in Section 3.12 (each such
date being hereinafter referred to as a "Payment
Date") and shall be calculated based upon the
Facility's Gross Revenues during the preceding
month as set forth in such financial statements.
5.2 GROSS REVENUES. For the purposes of
determining such management fees, Gross Revenues
for any period shall be determined on the basis of
all revenues and income of any kind derived,
directly or indirectly, from the operation of the
Facility during such period (including rental or
other payment from concessionaires, licensees,
Residents, and other users of the Facility, but
excluding therefrom all bequests, gifts, or
similar donations) whether on a cash basis or on
credit, as determined in accordance with generally
accepted accounting principles consistently
applied, excluding, however:
(a) federal, state, and municipal excise,
sales, and use taxes collected directly from
residents as a part of the sales prices of any
goods and services;
20
(b) proceeds of any life insurance policies;
(c) gains arising from the sale or other
disposition of capital assets;
(d) any reversal of any contingency or tax
reserve;
(e) interest earned on sinking funds, Social
Security Accounts, bonds funds, etc. originally
and specifically formed as a requirement of any
bond issue utilized to finance the Facility; and
(f)any refunds, contractual adjustments,
income set-offs or bad debt expense.
The proceeds of business interruption
insurance or proceeds received as a result of
Medicare and Medicaid audits shall be included in
Gross Revenues from the Facility. However, funds
required to be repaid as a result of Medicare and
Medicaid audits shall be deducted from Gross
Revenues of the facility.
ARTICLE 6.
REPRESENTATIONS AND WARRANTIES OF OWNER
Owner and shareholders of Owner represent and
warrant to Manager as follows:
6.1 ORGANIZATION AND STANDING OF OWNER. Owner
is a corporation duly organized, validly existing
and in good standing under the laws of the State
of Texas and is qualified to do business in each
other jurisdiction where such qualification is
necessary. Copies of the Articles of Incorporation
and By-Laws of Owner, and all amendments thereof
to date, have been, if requested, delivered to
Manager and are complete and correct. The Owner
has the power and authority to own the property
and assets now owned by it and to conduct the
business currently being conducted by it.
6.2 ABSENCE OF CONFLICTING AGREEMENTS.
Neither the execution or delivery of this
Agreement, including all Schedules and Exhibits
hereto, or any of the other instruments and
documents required or
21
contemplated hereby and thereby ("Transaction
Documents") by Owner, nor the performance by Owner
of the transactions contemplated hereby and
thereby, conflicts with, or constitutes a breach
of or a default or requires the consent of any
third party under (i) the Articles of
Incorporation of By-Laws of Owner, or (ii) to the
best of its knowledge after due inquiry, any
applicable law, rule, judgment, order, writ,
injunction, or decree of any court, currently in
effect: or (iii) to the best of its knowledge
after due inquiry, any applicable rule or
regulation of any administrative agency or other
governmental authority currently in effect; or
(iv) any agreement, indenture, contract or
instrument to which Owner is now a party or by
which the assets of Owner are bound.
6.3 CONSENTS. Except as set forth in Schedule
6.3, no authorization, consent, approval, license,
exemption by, filing or registration with any
court or governmental department, commission,
board, bureau, agency or instrumentality, domestic
or foreign, is or will be necessary in connection
with the execution, delivery and performance of
this Agreement by the Owner.
6.4 LEGAL PROCEEDINGS. Other than as set
forth on Schedule 6.4, there are no claims,
actions, suits or proceedings or arbitrations,
either administrative or judicial, pending or, to
the knowledge of Owner, overtly threatened against
or affecting Owner, its affiliates or
shareholders, or their ability to consummate the
transactions contemplated herein, at law or in
equity or otherwise, before or by any court or
governmental agency or body, domestic or foreign,
or before an arbitrator of any kind.
6.5 ABSENCE OF CERTAIN EVENTS. Except as set
forth on Schedule 6.5, Owner has not:
(a) sold, assigned or transferred any of its
assets or properties, except in the ordinary
course of business;
(b) mortgaged, pledged or subjected to any
lien, pledge, mortgage, security interest,
conditional sales contract or other encumbrance of
any nature whatsoever, the Facility's assets;
22
(c) made or suffered any amendment or
termination of any material contract, commitment,
instrument or agreement other than in the ordinary
course of business;
(d) failed to pay or discharge when due any
liabilities, the failure to pay or discharge which
has caused or will cause any actual material
damage or give rise to the risk of a material loss
to Owner;
(e) changed any of the accounting principles
followed by them or the methods of applying such
principles;
(f) entered into any material transaction
other than in the ordinary course of business; or
(g) received any notice of any adverse
determination made by any licensing authority or
reimbursement source which may reasonably be
expected to have a material adverse effect on the
revenues or operations of the Facility. Owner
shall report to Manager, within five business days
after receipt thereof, any written notices that
Owner or the Facility is not in compliance in any
material respect with any of the. foregoing.
6.6 COMPLIANCE WITH LAWS. Except for notices
of non-compliance as to which Owner has taken
corrective action acceptable to the applicable
governmental agency, and as set forth in Schedule
6.6, Owner has not within the period of twelve
months preceding the date of this Agreement,
received any written notice that it fails to
comply in any material respect with any applicable
federal, state, local or other governmental laws
or ordinances, or any applicable order, rule or
regulation of any Federal, state, local or other
governmental agency having jurisdiction over Owner
("Governmental Requirements"). Owner shall report
to Manager, within five business days after
receipt thereof, any written notices that Owner is
not in compliance in any material respect with any
of the foregoing.
23
ARTICLE 7.
REPRESENTATIONS AND WARRANTIES OF MANAGER
Manager represents and warrants to Owner as
follows:
7.1 ORGANIZATION AND STANDING OF MANAGER.
Manager is a corporation duly organized, validly
existing and in good standing under the laws of
the State of Washington. Copies of the Articles of
Incorporation and By-Laws of Manager, and all
amendments thereof to date, have been, if
requested, delivered to Owner and are complete and
correct. Manager has the power and authority to
own the property and assets now owned by it and to
conduct the business currently being conducted by
it.
7.2 ABSENCE OF CONFLICTING AGREEMENTS.
Neither the execution or delivery of this
Agreement, including all Schedules and Exhibits
hereto, or any of the other instruments and
documents required or contemplated hereby and
thereby by Manager, nor the performance by Manager
of the transactions contemplated hereby and
thereby, conflicts with, or constitutes a breach
of or a default or requires the consent of any
third party under (i) the Articles of
Incorporation or By-Laws of Manager, or (ii) to
the best of its knowledge after due inquiry, any
applicable law, rule, judgment, order, writ,
injunction, or decree of any court, currently in
effect; or (iii) to the best of its knowledge
after due inquiry, any applicable rule or
regulation of any administrative agency or other
governmental authority currently in effect; or
(iv) any agreement, indenture, contract or
instrument to which Manager is now a party or by
which the assets of Manager are bound.
7.3 CONSENTS. Except as set forth in Schedule
7.3, no authorization, consent, approval, license,
exemption by, filing or registration with any
court or governmental department, commission,
board, bureau, agency or instrumentality, domestic
or foreign, is or will be necessary in connection
with the execution, delivery and performance of
this Agreement by the Manager.
24
7.4 LEGAL PROCEEDINGS. Other than as set
forth on Schedule 7.4, there are no claims,
actions, suits or proceedings or arbitrations,
either administrative or judicial, pending or, to
the knowledge of Manager, overtly threatened
against or affecting Manager, its affiliates or
shareholders, or their ability to consummate the
transactions contemplated herein, at law or in
equity or otherwise, before or by any court or
governmental agency or body, domestic or foreign,
or before an arbitrator of any kind.
7.5 COMPLIANCE WITH LAWS. Except for notices
of non-compliance as to which Manager has taken
corrective action acceptable to the applicable
governmental agency. and as set forth in Schedule
7.5, Manager has not within the period of 12
months preceding the date of this Agreement,
received any written notice that it fails to
comply in any material respect with any applicable
federal, state, local or other governmental laws
or ordinances, or any applicable order, rule or
regulation of any Federal, state, local or other
governmental agency having jurisdiction over
Manager. Manager shall report to Owner, within
five business days after receipt thereof, any
written notices that Manager is not in compliance
in any material respect with any of the foregoing.
ARTICLE 8.
TERMINATION RIGHTS
This Agreement may be terminated and, except
as to liabilities or claims of either party hereto
which have accrued prior to the effective date of
termination, the obligations of the parties with
respect to this Agreement may be terminated only
upon the occurrence of any of the following
events:
8.1 TERMINATION BY OWNER. If at any time or
from time to time during the term of this
Agreement any of the following events shall occur
and not be remedied within the applicable period
of time herein specified, namely:
(a) Manager applies for or consents to the
appointment of a receiver, trustee, or liquidator
of Manager of all or a substantial part of its
25
assets, files a voluntary petition in bankruptcy
or is the subject of an involuntary bankruptcy
proceeding, makes a general assignment with
creditors or takes advantage of any insolvency
law, or if an order, judgment or decree is entered
by any court of competent jurisdiction, on the
application of a creditor, adjudicating Manager as
bankrupt or insolvent or approving a petition
seeking reorganization of Manager or appointing a
receiver, trustee, or liquidation of Manager or of
all or a substantial part of its assets, and such
order, judgment or decree continues unstayed and
in effect for any period of 90 consecutive days;
(b) Manager shall fail to keep, observe, or
perform any material covenant, agreement, term or
provision of this Agreement to be kept, observed,
or performed by Manager; or Manager's failure to
substantially comply with state and local
regulations concerning the development and
operating of similar facilities, and such material
default or failure to substantially comply with
state and local regulations shall continue
unabated for a period of 60 days after written
notice thereof by Owner to Manager;
(c) The license or licenses required for the
operation of the Facility are at any time
suspended, terminated, or revoked beyond the
applicable appeal period for any reason due to
acts of commission or omission of Manager; or
(d) The Facility or any portion thereof is
damaged or destroyed by fire or other casualty and
(i) Owner fails to undertake to repair, restore,
rebuild, or replace any such damage or destruction
within 60 days after such fire or other casualty,
or fails to complete such work diligently, and
(ii) Owner fails to permit Manager to undertake to
repair, restore, rebuild, or replace any such
damage or destruction within 60 days after such
fire or casualty; then in case of any such event
and upon the expiration of the period of grace
applicable thereto, except for an event under
Sections 8.1(c) or 8.1(d) there being no grace
period, this Agreement shall terminate at Owner's
option and upon ten days written notice to
Manager; provided, however, that if an event under
Sections 8.1(c) or 8.1(d) occurs, this Agreement
26
shall terminate immediately upon notice to
Manager.
8.2 TERMINATION BY MANAGER. If at any time
or from time to time during the term of this
Agreement any of the following events shall occur
and not be timely cured:
(a) Owner fails to keep, observe, or perform
any material covenant, agreement, term or
provision of this Agreement to be kept, observed,
or performed by Owner, and such default continues
for a period of 60 days after written notice
thereof by Manager to Owner;
(b) The Facility or any portion thereof is
damaged or destroyed by fire or other casualty and
(i) Owner fails to undertake to repair, restore,
rebuilt, or replace any such damage or destruction
within 60 days after such fire or other casualty,
or fails to complete such work diligently, and
(ii) Owner fails to permit Manager to undertake to
repair, restore, rebuilt, or replace any such
damage or destruction within 60 days after such
ire or casualty;
(c) Owner applies for or consents to the
appointment of a receiver, trustee, or liquidator
of Owner or of all or a substantial part of its
assets, files a voluntary petition in bankruptcy
or admits in writing its inability to pay its
debts as they become due, makes a general
assignment for the benefit of creditors, files a
petition or any answer seeking reorganization or
arrangement with creditors or to take advantage of
any insolvency law, or if an order, judgment or
decree is entered by a court of competent
jurisdiction, on the application of a creditor,
adjudicating Owner bankrupt or appointing a
receiver, trustee, or liquidator of Owner or with
respect to all or a substantial part of the assets
of Owner, and such order, judgment or decree
continues unstayed and in effect for any period of
90 consecutive days;
(d) Any license, lease or sub-lease necessary
for the operation of the Facility is suspended,
terminated, or revoked and such suspension,
termination, or revocation continues unstayed and
in effect for a period of 60 consecutive days; or
27
then in case of any such event and upon the
expiration of the period of grace applicable
thereto, this Agreement shall terminate at
Manager's option and upon ten days written notice
to Owner.
8.3 SURVIVING RIGHTS UPON TERMINATION. If
either party exercises its option to terminate
pursuant to this Article 8, each party shall
forthwith, but in no event later than ten days
after the termination date of this Agreement,
account for and pay to the other all sums due and
owing pursuant to the terms of this Agreement. All
other rights and obligations of the parties under
this Agreement shall terminate, except the
obligations of the parties for damages caused by a
breach of this Agreement, a duty of a party
required under applicable law or regulation, or
the indemnification provisions contained in this
Agreement or as expressly stated herein.
ARTICLE 9.
CONDEMNATION
If the whole of the Facility is taken or
condemned in any eminent domain, condemnation,
compulsory acquisition, or like proceeding, by a
competent authority for any public or quasi-public
use or purpose, or if a portion thereof is taken
or condemned so as to make the balance of the
Facility unsuitable for its primary intended use,
then this Agreement shall terminate on the date on
which the Owner is required to surrender
possession of the Facility. Manager shall continue
to supervise and direct the management of the
Facility until such time as Owner is required to
surrender possession of the Facility by reason of
such taking or condemnation.
If only a part of the Facility is taken or
condemned and the taking or condemnation of such
part does not make the balance unsuitable for its
primary intended use, this Agreement shall not
terminate.
In the event that the parties are unable,
within a period of 30 days after controversy
arising between them, to agree upon the
apportionment of any award or are otherwise in
28
dispute as to any matter arising under this
Article, any such dispute shall be resolved by
arbitration in accordance with the provisions of
Article 11 below, and the costs thereof or
incurred therein shall be borne or apportioned and
paid as determined by said arbitration.
ARTICLE 10.
ARBITRATION
If any controversy should arise between the
parties relating to this Agreement, involving any
matter, either party may serve upon the other a
written notice stating that such party desires to
have the controversy determined by a single
arbitrator. If the parties cannot agree within 15
days from the service of such notice as to the
selection of such arbitrator, an arbitrator shall
be selected or designated by the American
Arbitration Association upon written request of
either party hereto. Arbitration of such
controversy, disagreement, or dispute shall be
conducted in accordance with the rules then in
force of the American Arbitration Association, and
the decision and award of the arbitrator so
selected shall be binding upon Owner and Manager.
The arbitration will be held in the city and state
where the Facility is located. Notwithstanding the
foregoing, if a dispute arises between the parties
to this Agreement that also involves or is related
to a third party or parties not bound to
arbitration under this Agreement, then, unless
both parties to this Agreement agree to proceed in
arbitration, that dispute or any other related
disputes shall not be subject to this arbitration
provision.
Both parties, however, shall make a good
faith effort to resolve any controversy, which
effort shall continue for a period of 30 days
prior to any demand for arbitration. Unless
otherwise specified in the decision of the
arbitrators, the prevailing party shall be
reimbursed by the non-prevailing party for any
reasonable out-of pocket expenses (including
travel expenses and reasonable attorney's fees and
expenses) incurred as a result of its
participation in any such arbitration and the non-
29
prevailing party will pay all other costs
associated with such proceedings.
If the issue to be arbitrated is Manager's
alleged breach of this Agreement, and as a result
thereof Owner has the right to terminate this
Agreement, Manager shall continue to manage the
Facility hereunder pending the outcome of such
arbitration, provided Manager posts bond for any
money damages in dispute.
ARTICLE 11.
SUCCESSORS AND ASSIGNS
11.1 ASSIGNMENTS BY MANAGER. Manager.
without the consent of Owner, shall have the right
to assign this Agreement to a wholly or majority
owned subsidiary, provided that Manager shall not
hereby be released from its obligations hereunder
and no event of default then exists under Section
8.1 hereof.
Except as otherwise permitted herein,
Manager shall have no right to assign this
Agreement.
11.2 SALE, ASSIGNMENT, OR SUBLEASE BY OWNER.
Any sale, sub-lease, or assignment by Owner with
respect to the Facility, other than to Manager or
one of its affiliates, shall be expressly subject
to the terms and provisions of this Agreement and
shall not relieve Owner of its liability or
obligations hereunder. Owner shall cause any
purchaser, assignee, or sublessee to deliver to
Manager written acknowledgment of its agreement to
perform hereunder including the payment of the
management fee described herein.
ARTICLE 12.
MISCELLANEOUS PROVISIONS
12.1 NOTICES. Any notice or other
communication by either party to the other shall
be in writing and shall be deemed to have been
duly given upon the date delivered if delivered
personally, or upon the date received if mailed
30
postage prepaid, registered, or certified mail,
addressed as follows:
Owner: WILLARD HOLDINGS, INC.
5720 LBJ Freeway
Suite 450 LB 16
Dallas, Texas 75240-6339
Manager: EMERITUS CORPORATION
3131 Elliott Avenue
Suite 500
Seattle, Washington 98121
or to such other address, and to the attention of
such other person or officer as either party may
designate in writing by notice.
12.2 NO PARTNERSHIP OR JOINT VENTURE. Nothing
contained in the Agreement shall constitute or be
construed to be or create a partnership or joint
venture between Owner, its successors, or assigns
on the one part and Manager, its successors, or
assigns on the other part.
12.3 MODIFICATIONS AND CHANGES. This
Agreement cannot be changed or modified except by
written agreement of the parties.
12.4 UNDERSTANDING AND AGREEMENTS. This
Agreement constitutes the entire understanding and
agreement between the parties with respect to
Manager's operation and management of the
Facility, and supersede any and all understandings
or agreements, whether written or oral, concerning
any matters described herein. No subsequent
agreements or understandings between the parties
concerning any matter herein can after the terms
of this Agreement except by written agreement of
the parties.
12.5 HEADINGS. The article and paragraph
headings contained herein are for convenience of
reference only and are not intended to define,
limit, or describe the scope of intent of any
provision of this Agreement.
12.6 APPROVAL OR CONSENT. Whenever under any
provisions of this Agreement, the approval or
disapproval of either party is required, notice of
such approval or disapproval shall be promptly
31
given and any requested approval shall not be
unreasonably withheld. Whenever, under any
provision of this Agreement, the approval or
disapproval of Owner is required, such approval or
disapproval may be given by the person or any one
of the persons, as the case may be, designated in
a notification signed by or on behalf of Owner.
For all purposes under this Agreement, Manager may
rely upon the latest such notification received by
it, notwithstanding any knowledge to the contrary.
12.7 GOVERNING. This Agreement shall be
deemed to have been made and shall be construed
and interpreted in accordance with the laws of the
State.
12.8 SEVERABILITY. If any provision of this
Agreement is held to be unenforceable or invalid
for any reason, it shall be adjusted rather than
voided, if possible, in order to achieve the
intent of the parties to the extent possible. In
any event, all other provisions of this Agreement
shall be deemed valid and enforceable to the
fullest extent.
12.9 COUNTERPARTS. This Agreement may be
executed in two or more counterparts, each of
which shall be deemed an original, but all of
which shall constitute one and the same
instrument:
12.10 THIRD-PARTY RIGHTS. Nothing expressed
or referred to in this Agreement will be construed
to give any person other than the parties to this
Agreement and the Lender any legal or equitable
rights or remedy or claim under or with respect to
this Agreement or any. provision of this
Agreement. The Agreement and all of its provisions
and conditions are for the sole and exclusive
benefit of the parties to this Agreement and the
Lender and their successors and assigns. Lender is
an intended third-party beneficiary of this
Agreement.
IN WITNESS WHEREOF, the parties hereto have
executed and delivered this Agreement effective as
of the day and year first above written.
32
OWNER
WILLARD HOLDINGS, INC.
By: /s/ Craig Spaulding
---------------------
Craig Spaulding,
President
MANAGER
EMERITUS CORPORATION
By: /s/ Kelly J. Price
---------------------
Kelly J. Price