FOURTH AMENDMENT TO MANAGEMENT AGREEMENT
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WITH OPTION TO PURCHASE
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(AL 1- Emeritrust 25 Facilities)
This Fourth Amendment to Management Agreement with Option to Purchase (this
"Amendment") is effective as of the 2nd day of January, 2004 by and among
Emeritus Management LLC, a Washington limited liability company ("Emeritus
Management"), Emeritus Management I LP, a Washington limited partnership ("Texas
Manager;" together with Emeritus Management referred to herein as "Manager"),
Emeritus Corporation, a Washington Corporation ("Emeritus), AL Investors LLC, a
Delaware limited liability company ("AL Investors"), for itself and as sole
managing member or sole managing member of the general partner of each of the
Facility Entities set forth on Exhibit A to the Management Agreement (as
hereinafter defined).
Recitals
A. Emeritus Management, Texas Manager, Emeritus, AL Investors, ESC I, L.P.,
a Washington limited partnership ("ESC"), and Emeritus Properties I, Inc., a
Washington corporation ("EPI") entered into that certain Management Agreement
with Option to Purchase (Emeritrust 25) dated December 30, 1998, pursuant to
which, among other things, AL Investors and the Facility Entities engaged
Manager to manage certain Facilities described therein (as subsequently amended,
the "Management Agreement"). Pursuant to the terms of the Management Agreement,
ESC and EPI have ceased to be Managers under the Management Agreement. The
Management Agreement has been previously amended by (1) First Amendment to
Management Agreement with Option to Purchase, dated March 22, 2001 (the "First
Amendment"), (2) Second Amendment to Management Agreement with Option to
Purchase dated January 1, 2002 (the "Second Amendment"), (3) Waiver, Consent and
Amendment to Management Agreement dated May 1, 2002 ("laurel Place Waiver") (4)
Third Amendment to Management Agreement dated as of June 30, 2003 and (5)
Termination of Memorandum of Management Agreement With Option to Purchase dated
,2003
("Park Place Waiver"). Pursuant to the laurel Place Waiver. the Facility known
as laurel Place was sold and has been deleted from the Management Agreement.
Pursuant to the Park Place Waiver, the Facility known as Park Place has been
sold and deleted from the Management Agreement.
B. The parties now desire to amend the Management Agreement to provide for
an extension of its Term beyond January 2, 2004 as provided in the Third
Amendment.
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:
1. Defined Terms. All terms capitalized herein but not defined
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shall have the meanings given them in the Management Agreement.
2. Term.Section 2.3 is deleted in its entirety and replaced with the
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following:
The Term of the Management Agreement is hereby extended to November 30, 2005,
subject to sooner termination as provided herein. Notwithstanding anything to
the contrary herein, either Manager or Owners may terminate this
Agreement without cause upon ninety (90) days prior written notice to the other
as more particularly provided in Section 9.1 and 9.2.
3. Indemnity.The third to last sentence of Section 6.1 is deleted and
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replaced with the following:
All costs and expenses of Manager pursuant to this indemnity shall be an
Operating Expense so long as (a) Manager was not in breach of this Agreement,
and (b) was not negligent.
The second to last sentence of Section 6.1 is deleted.
4. Management Fees. Section 7.1 and 7.2 are deleted and replaced with the
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7.1 Base Management Fee. Manager shall be entitled to pay itself from the
Agency Account on the 4th day of each month a management fee of 3% of the Total
Revenues from all Facilities in the aggregate subject to this Agreement ("Base
Management Fee").
7.2 Reimbursement of Loan Extension Closing Costs; Additional Management
Fee. Any Operating Profit in excess of the Base Management Fee (Le., 3% of Total
Revenues) from and after January 2,2004 shall be paid 50% to Manager and 50% to
Owners until Manager has received an additional management fee of 4% of Total
Revenues from all. Facilities in the aggregate subject to this Agreement (the
"Additional Management Fee"). If there is insufficient Operating Profit after
payment of the Base Management Fee during any month to pay the Additional
Management Fee, the Additional Management Fee shall not accrue and shall be
written off. All accruals of the Base Management Fee or Additional Management
Fee for all periods prior to January 2, 2004 are terminated and written off.
Section 7.3 is deleted. All references to reimbursement of Loan Extension
Closing Costs or Pooled Expenses are deleted and Owner acknowledges such amounts
have been paid.
5. ▇▇▇▇▇▇▇▇▇▇▇▇.▇▇ be consistent with the revisions to Section 7.2 above,
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Section 8.2 is deleted and replaced with the following:
8.2 Expenditures. In accordance with the Annual Plan, except as
otherwise approved by Owners, Managers as agent for the Facility Entities are
hereby authorized and directed to pay from the Agency Account for each Facility
in the following order of priority such amounts and at such times as are
required to pay the following expenditures:
(a) The Operating Expenses;
(b) The Fixed Operating Expenses (excluding Capital Expenditures), except for
such items as Owner has elected to pay directly.
(c) The cost of Capital Improvements approved by Owner;
(d) The Base Management Fee and the Additional Management Fee;
(e) Any remaining Cash Available for Distribution shall be paid to Owner.
Any amounts due Owner shall be paid over to Owners as directed by Owners
within twenty (20) days after the end of each calendar month during the term of
this Agreement. Funds in the Agency Account shall not be utilized for any other
purpose.
6. Deficit Contributions. Section 8.3 is deleted in its entirety and replaced
with the following:
a. Deficit Contributions. All Operating Deficits during the Term
remaining after Owner has funded the full amount of the Owner's Deficit
Contribution, i.e., $4,500,000, (which Owners and Manager acknowledge has been
previously funded) shall be funded absolutely and unconditionally by ▇▇▇▇▇▇ ▇.
▇▇▇▇ ("▇▇▇▇") into the Agency Account or otherwise as directed by Owners as and
when necessary to pay, but in any event no later than ten (10) days after
written notice from Owners, all Operating Deficits during any calendar month
during the Term and by his execution hereof ▇▇▇▇ agrees to do so. Neither
Owners, Manager or Emeritus shall have any obligations to fund Operating
Deficits or to reimburse ▇▇▇▇ for any Operating Deficit payments or
contributions. All references in the Agreement to any obligation of Emeritus to
fund Operating Deficits, e.g., Section 1.4, are hereby deleted.
7. Termination. Section 9.1 is deleted and replaced with the following:
9.1 Managers. The Managers may terminate this Agreement, with respect to
all (but not less than all) of the Facilities by reason of any of the following
("Event of Default"): (i) the Owner breaches or fails to perform a material term
of this Agreement, which breach or failure is not cured within thirty (30) days
after written notice of said breach is provided to Owner, or (ii) ▇▇▇▇ fails to
fund Operating Deficits in accordance with Section 8.3. In addition to the
foregoing right to terminate for Owners' or ▇▇▇▇'▇ default, Manager, upon ninety
(90) days prior written notice, may terminate this Agreement at any time at its
sale election. With respect to an Event of Default under (ii) the sale remedy of
Managers, notwithstanding anything to the contrary herein, shall be to terminate
this Agreement.
Section 9.2 is deleted and replaced with the following:
9.2 Owner. The Owner may terminate this Agreement with respect to any one
or all of the Facilities by reason of any of the following (each an "Event of
Default"): (i) ▇▇▇▇ fails to fund any Operating Deficit under Section 8.3 within
fifteen (15) days after written notice from Owner that payment has not been paid
when due; (ii) Managers or any of them or Emeritus breaches or fails to perform
a material term of this Agreement as to any or all Facilities, which breach or
failure is not cured within thirty (30) days after written notice of said breach
is provided to the Managers; (iii) ▇▇▇▇▇▇ ▇▇▇▇ fails to comply with the
liquidity and reporting requirements of the Initial Senior Loan (which is not
cured
within any applicable cure period set forth therein); or (iv) either Manager or
Emeritus suffers a Bankruptcy Event. In addition to the foregoing rights to
terminate for Manager's or ▇▇▇▇'▇ default, Owners may. upon ninety (90) days
prior written notice, terminate this Agreement at any time at its sole election.
The last sentence of Section 9.4 is deleted, and Sections 9.8, 9.9 and 9.10 are
deleted.
8. Emeritus Option to Purchase.Section 13 and all references to any option
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that Managers or Emeritus may have to purchase the Facilities are deleted.
9. Emeritus Right of First Refusal.Section 14 and all references to any
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rights of first refusal that Managers or Emeritus may have to purchase the
Facilities are deleted.
10. Exhibits. Exhibit A is hereby revised as follows:
a. Senior Loan - the definition of Senior Loan is deleted and replaced with the
following:
Senior Loan: any indebtedness incurred by Owners which is secured by any
mortgage, deed of trust and related security instruments against a Facility.
Initially the Senior Loan is evidenced by that certain Loan Agreement between AL
Investors (and the Facility Entities) and GMAC Commercial Mortgage Corporation
dated on or about December 30, 1998, as amended by the First, Second and Third
Amendments to Loan Agreement, including, without limitation, all interest
increases and modifications contained therein (the "Initial Senior Loan"). The
Senior Loan includes any refinance, modification, or extension of the Initial
Senior Loan. It is expressly agreed that the Senior Loan includes the entirety
of Tranches A and C as set forth in the Senior Loan Amendment.
b. Deemed Senior Loan - the definition of Deemed Senior Loan is deleted.
c. Fixed Operating Expenses - the definition of Fixed Operating Expenses is
deleted in its entirety and replaced with the following:
Fixed Operating Expenses: for any period, all fixed costs and expenses of
owning, and operating the Facilities in the aggregate except where the Agreement
expressly provides that Fixed Operating Expenses shall be determined for each
Facility to the extent such costs and expenses are not included in Operating
Expenses, including but not limited to (a) all amounts to be paid into the
Reserve Account and the cost of Capital Improvements approved by Owners not
funded from the Reserve Account; (b) the debt service on account of the then
Senior Loan; provided, however, that solely for purposes of calculating the
Additional Management Fee under Section 7.2, the Senior Loan shall be deemed to
be the amount of $131,388,750 and the debt service shall be interest only at the
then interest rate of the Senior Loan; (c) the real and personal property ad
valorem taxes and assessments; (d) the Base Management Fee and the Additional
Management Fee; and (e) all costs and expenses of all property and casualty
insurance on or in respect of the Facilities provided for herein and the amount
of all self-insured losses or deductibles. Fixed Operating Expenses shall not
include the Excluded Expenses.
d. Facilities - Laurel Park and Park Place are deleted.
11. Guaranty of Management Agreement and Shortfall Funding Agreement.That
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certain Guaranty of Management Agreement and Shortfall Funding Agreement dated
December 30, 1998 and executed by Emeritus Corporation ("Guaranty") is amended
as follows:
Section 1.2 of the Guaranty and all references to Operating Deficits or any
obligation of Emeritus to fund Operating Deficits are hereby deleted. The
Guaranteed Obligations as referenced in Section 1.1 are limited to Manager's
obligations under the Management Agreement, as amended, and do not include any
obligation to fund Operating Deficits.
12. Ratification.The Management Agreement, as amended by this Agreement, is
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hereby ratified and confirmed.
13. Understandings and Agreements.This Amendment, together with the
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Management Agreement, constitutes all of the understandings and agreements
between the parties with respect to the management of the Facilities.
14. Headines.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.
15. 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
EMERITUS MANAGEMENT LLC, a Washington limited liability company
By: Emeritus Corporation,
a Washington corporation
By: /s/ ▇▇▇▇▇▇▇ ▇. ▇▇▇▇▇▇▇
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Name: ▇▇▇▇▇▇▇ ▇. ▇▇▇▇▇▇▇
Title: Director of Real Estate Finance
EMERITUS MANAGEMENT I LP
EMERITUS MANAGEMENT I LP, a Washington limited partnership
By: EMI, LLC, a Washington limited liability company
By: Emeritus Corporation, a Washington corporation
By: /s/ ▇▇▇▇▇▇▇ ▇. ▇▇▇▇▇▇▇
Name: ▇▇▇▇▇▇▇ ▇. ▇▇▇▇▇▇▇
Title: Director of Real Estate Finance
EMERITUS
EMERITUS CORPORATION, a Washington corporation
By: /s/ ▇▇▇▇▇▇▇ ▇. ▇▇▇▇▇▇▇
Name: ▇▇▇▇▇▇▇ ▇. ▇▇▇▇▇▇▇
Title: Director of Real Estate Finance
AL INVESTORS
AL INVESTORS 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: ▇. ▇▇▇▇▇
Title: Authorized Representative
/s/ ▇▇▇▇▇▇ ▇. ▇▇▇▇
▇▇▇▇▇▇ ▇. ▇▇▇▇ for purposes of unconditionally agreeing to fund Operating
Deficits as provided in Section 8.3
The undersigned lenders in connection with the Senior Loan and the Junior Loan
have executed this Agreement for the sole purpose of consenting to the foregoing
Amendment.
GMAC Commercial Mortgage Corporation, a California corporation
By:
Name Title
Senior Housing Partners I, LPa Delaware limited partnership
By:
Name Title