FIRST AMENDMENT TO
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MANAGEMENT AGREEMENT
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(▇▇ ▇▇ - 5 Development Facilities)
This First Amendment to Management Agreement (this "Amendment") is made
effective this 1st day of January, 2001 by and among Emeritus Management LLC, a
Washington limited liability company ("Emeritus Management"), Emeritus
Corporation, a Washington Corporation ("Emeritus), AL Investors Development LLC,
a Delaware limited liability company ("AL Investors Development"), for itself
and as sole managing member of each of the Facility Entities set forth on
Exhibit A to the Management Agreement (as amended and as hereinafter defined).
Recitals
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A. Emeritus Management, Emeritus Properties I Inc. ("EPI"), Emeritus
and AL Investors Development entered into that certain Management Agreement with
Option to Purchase (▇▇ ▇▇ - 5 Development Facilities), dated March 25, 1999,
pursuant to which, among other things, Emeritus Management and EPI were engaged
to manage certain Facilities described therein (the "▇▇ ▇▇ Development
Management Agreement"). EPI has ceased to be a manager under the ▇▇ ▇▇
Development Management Agreement.
B. Simultaneously with the execution of the ▇▇ ▇▇ Development
Management Agreement, Emeritus Management, Emeritus management I LP, AL
Investors II LLC, ESC I, L.P., a Washington limited partnership ("ESC"), ESC
G.P. I, Inc., a Washington corporation ("ESCGP"), and EPI entered into that
certain Management Agreement with Option to Purchase (▇▇ ▇▇ - 14 Operating
Facilities), dated March 26, 1999, which was thereafter segregated by Amendment
to Management Agreement (▇▇ ▇▇ - 14 Operating Facilities), dated March 27, 2000,
pursuant to which the Refinanced Facilities (as defined therein) were deleted,
and were included instead in that certain Management Agreement with Option to
Purchase (Teachers), dated March 27, 2000 (the "▇▇ ▇▇ Management Agreement
(Teachers)", and which was also thereafter amended by Second Amendment to
Management Agreement dated March 22, 2001 (as so segregated and amended, the "▇▇
▇▇ Management Agreement (GMAC)". ESC, ESCGP and EPI have ceased to be Managers
under the ▇▇ ▇▇ Management Agreement (GMAC).
C. The parties hereto or certain affiliates thereof also entered into
that certain Management Agreement with Option to Purchase (Emeritrust 25), dated
December 30, 1998, pursuant to which, among other things, AL Investors LLC, a
Delaware limited liability company, and the Facility Entities defined therein
engaged Manager to manage certain Facilities described therein (as amended as
described below, the "AL I Management Agreement").
E. GMAC Commercial Mortgage Corporation ("GMAC") is the lender under
the Senior Loan under both AL I Management Agreement and the ▇▇ ▇▇ Management
Agreement (GMAC). Guaranty Federal Bank, F.S.B., now known as Guaranty Bank, a
federal savings bank ("GFB") is the lender (or agent of multiple lenders) under
the Senior Loan as defined in the ▇▇ ▇▇ Development Management Agreement. The
Senior Loan as defined in the AL I Management Agreement is referred to herein as
the "AL I Senior Loan". The Senior Loan as defined in the ▇▇ ▇▇ Development
Management Agreement is referred to herein as the GFB Senior Loan.
F. GFB and AL Investors Development, on behalf of the Facility
Entities, have simultaneously herewith entered into an Omnibus Modification
Agreement, pursuant to which AL Investors Development is entitled to a 12 months
extension of the GFB Senior Loan, together with an additional 12 extension
option on the terms and conditions contained therein (the "Modification
Agreement").
G. As a condition to the execution of the Modification Agreement and
extension of the GFB Senior Loan, the parties have agreed to amend the ▇▇ ▇▇
Development Management Agreement as set forth herein.
NOW, THEREFORE, in consideration of Ten and No/100 Dollars, the agreements
contained herein, and other good and valuable consideration, the receipt and
sufficiency of which is hereby acknowledged, the parties hereby agree as
follows:
Definitions. All terms capitalized herein but not defined shall have the
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meanings given them in the ▇▇ ▇▇ Development Management Agreement.
Extension of Management Agreement. New Section 2.3 is hereby added to the
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▇▇ ▇▇ Development Management Agreement:
2.3 Extension of Term. The parties hereby agree to extend the ▇▇ ▇▇
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Development Management Agreement until December 31, 2002 (the "Extension
Period"), to make it co-extensive with the term of the GFB Senior Loan. Under
the Modification Agreement, AL Investors Development is also eligible for an
additional 12 month extension in accordance with the terms and conditions
contained in Section 2 thereof (the "Additional Extension Period"). If AL
Investors Development is entitled to exercise its extension rights for the
Additional Extension Period under the terms of the Modification Agreement, it
hereby agrees that it will do so.
All of the terms and provisions of the ▇▇ ▇▇ Development Management
Agreement (as modified by this Amendment) shall continue to be applicable
throughout the Extension Term, including, without limitation, the right to
exercise the Purchase Option. If AL Investors Development exercises its
extension rights for the Additional Extension Period and the AL I Senior Loan
has been extended for the Second Extension Period as provided therein, then
Manager shall be deemed to have automatically extended this ▇▇ ▇▇ Development
Management Agreement to make it co-terminous with the Additional Extension
Period, whereupon all of the terms and provisions of the ▇▇ ▇▇ Development
Management Agreement (as modified by this Amendment) shall continue to be
applicable throughout the Additional Extension Period, including, without
limitation, the right to exercise the Purchase Option. Notwithstanding the
foregoing, the parties agree that this Section 2.3 shall not impair Owners
extension rights under Section 2.2 of the ▇▇ ▇▇ Development Management
Agreement.
Costs and Expenses. AL Investors Development shall pay for all closing
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costs related to the GFB loan extensions, including, without limitation, all
costs and fees incurred by the Senior Lender, title insurance fees, and UCC
search costs. In addition, AL Investors Development shall pay the monthly
principal paydown of $115,000 with respect to the Hagerstown Note (the "Paydown
Amount"), as more particularly set forth in Section 1(C) of the Omnibus
Agreement entered into with GFB on or about the date hereof. For purposes of
calculating Operating Deficits in connection with Section 8.3 of the Management
Agreement, the Paydown Amount shall be deemed part of the Excluded Expenses,
such that it shall not be taken into account as part of Operating Expenses.
Purchase Option.
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4.1 Exercise of Option. The first sentence of Section 13.2 of the
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▇▇ ▇▇ Development Management Agreement is hereby deleted and replaced in its
entirety with the following:
The Purchase Option shall permit Emeritus to purchase the Facilities (a) at any
time prior to the end of the Extension Period, and (b) if the ▇▇ ▇▇ Development
Management Agreement is extended pursuant to the Additional Extension Period, at
any time prior to the end of the Additional Extension Period (as applicable, the
"Purchase Option Expiration Date") provided the written notice of the exercise
of the option is given by Emeritus to the Owners (a "Purchase Option Notice") on
or before 15 days prior to the applicable Purchase Option Expiration Date
4.2 Place and Time of Closing. Section 13.6 is hereby deleted and
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replaced in its entirety with the following:
13.6. Place and Time of Closing. If the Purchase Option is
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exercised, the closing shall occur and the Deed for each Facility shall be
delivered to Title Company (the "Closing") pursuant to escrow closing
arrangements reasonably satisfactory to Owners and Manager at 12:00 o'clock noon
(P.S.T.) no later than the applicable Purchase Option Expiration Date (the "Time
of Closing"). It is agreed that time is of the essence of this Purchase Option.
Notwithstanding the foregoing, Owner shall not unreasonably withhold its consent
to Manager's request for a 30-day extension of such Closing Date provided that
Manager deposits the equity funds required to close the Purchase Option into
escrow and provides Owner with reasonable evidence of financing prior to the
applicable Purchase Option Expiration Date, and reimburses Owner for any
additional costs incurred by such extension.
3.3 Conditions to Exercise. In addition to the conditions
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precedent to the exercise of the Purchase Option contemplated in Section 13.1 of
the Management Agreement it shall be a condition precedent to the exercise of
the Purchase Option (which condition Owners may waive, in their sole discretion
at any time) (i) that the "Purchase Option" under each of the ▇▇ ▇▇ Management
Agreement (GMAC), the ▇▇ ▇▇ Management Agreement (Teachers), and the AL I
Management Agreement shall have been simultaneously exercised, and (ii)
effective from and after September 15, 2002, the Second Extension Period under
the terms of the AL I Senior Loan shall have been exercised.
3.4 Cross Default of Purchase Options. The parties hereby
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acknowledge that the following amendment was made as part of the First Amendment
to the ▇▇ ▇▇ Management Agreement (GMAC): Section 13.9 of the ▇▇ ▇▇ Development
Management Agreement is hereby amended by adding at the end of the sentence
which begins "If Emeritus delivers the Purchase Option Notice and fails to
timely consummate the purchase of the Facilities in accordance with the terms
hereof for any reason other than the Facility Entities' default and refusal to
deliver the Deed " the following: "and (d) the Purchase Option under the ▇▇ ▇▇
Management Agreement (GMAC) and the ▇▇ ▇▇ Management Agreement (Teachers) shall
be deemed terminated and Emeritus shall thereafter have no further right to
purchase the Facilities".
Section 13.9 of the ▇▇ ▇▇ Development Management Agreement is hereby
further amended by adding the following at the end: "If Emeritus elects to
exercise its purchase options under the ▇▇ ▇▇ Management Agreement (GMAC), the
▇▇ ▇▇ Management Agreement (Teachers), and the AL I Management Agreement, and
thereafter fails to timely consummate the purchase of the facilities subject to
the exercised purchase options in accordance with the terms thereof for any
reason other than a default by the owners and failure to deliver the applicable
deeds for each of the facilities, the Purchase Option under this ▇▇ ▇▇
Development Management Agreement shall be deemed terminated and Emeritus shall
thereafter have no further right to purchase the Facilities".
Notices. All notices to be given by either party to this Agreement to the
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other party hereto shall be in writing, and shall be sent to the parties at the
addresses and in the manner set forth in the ▇▇ ▇▇ Development Management
Agreement.
Ratification. The ▇▇ ▇▇ Development Management Agreement, as amended by
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this Agreement, is hereby ratified and confirmed.
Understandings and Agreements. This Amendment, together with the ▇▇ ▇▇
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Development Management Agreement, constitutes all of the understandings and
agreements between the parties with respect to the management of the Facilities.
Headings. The headings contained herein are for convenience of reference
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only and are not intended to define, limit or describe the scope or intent of
any provision of this Agreement.
Applicable Law. This Agreement shall be construed and interpreted and be
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governed by the laws of the State of Washington.
IN WITNESS WHEREOF, the parties have executed and delivered this Agreement
as of the date and year first above written.
EMERITUS MANAGEMENT
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EMERITUS MANAGEMENT LLC,
a Washington limited liability company
By: Emeritus Corporation,
a Washington corporation
By: /s/ ▇▇▇▇▇▇▇ ▇. ▇▇▇▇▇▇▇▇▇▇
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Name ▇▇▇▇▇▇▇ ▇. ▇▇▇▇▇▇▇▇▇▇
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Title Vice President of Finance
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EMERITUS
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EMERITUS CORPORATION, a Washington
corporation
By: /s/ ▇▇▇▇▇▇▇ ▇. ▇▇▇▇▇▇▇▇▇▇
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Name ▇▇▇▇▇▇▇ ▇. ▇▇▇▇▇▇▇▇▇▇
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Title Vice President of Finance
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AL INVESTORS DEVELOPMENT
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AL INVESTORS DEVELOPMENT LLC, a Delaware limited liability company, for itself
and as sole managing member on behalf of each of the Owners, or in the case
where the Owner is a limited partnership, as sole managing member on behalf of
the general partner thereof
By: /s/ ▇▇▇▇▇▇ ▇. ▇▇▇▇▇▇▇
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Name ▇▇▇▇▇▇ ▇. Brendan
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Title Manager
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The undersigned lenders in connection with the GFB Senior Loan and the Junior
Loan have executed this Agreement for the sole purpose of consenting to the
foregoing Amendment.
Guaranty Bank, a federal savings bank (formerly known as Guaranty
Federal Bank, F.S.B.), Agent and Lender
By:
Name
Title
Senior Housing Partners I, L.P.,
a Delaware limited partnership
By: /s/ ▇▇▇▇ ▇. ▇▇▇▇
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Name ▇▇▇▇ ▇. ▇▇▇▇
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Title Vice President
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The undersigned has executed this Agreement for the sole purpose of (i)
acknowledging and consenting to the foregoing Amendment, (ii) ratifying that
certain Guaranty of Management Agreement and Shortfall Funding Agreement (▇▇ ▇▇
- 5 Development Facilities) dated March 25, 1999, given by Emeritus in favor or
AL Investors Development and the respective Facility Entities (the "Guaranty"),
(iii) confirming and agreeing that foregoing Amendment does not alter, modify,
amend or waive any terms contained in the Guaranty, and (iv) acknowledging that
the Guaranty has been assigned to Guaranty Bank under the GFB Senior Loan
documents, and Guaranty Bank has the right to enforce the Borrower's obligations
under the GFB Senior Loan in accordance with the GFB Senior Loan loan documents.
Emeritus Corporation,
a Washington corporation
By:/s/ ▇▇▇▇▇▇▇ ▇. ▇▇▇▇▇▇▇▇▇▇
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Name ▇▇▇▇▇▇▇ ▇. ▇▇▇▇▇▇▇▇▇▇
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Title Vice President of Finance
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