18
AGREEMENT TO PROVIDE MANAGEMENT
SERVICES TO ASSISTED LIVING FACILITY
This Agreement made as of the 16th day of February, 2003, by and between
Royalton/Kent, LLC, a Washington limited liability company ("Licensee") and
Emeritus Corporation, a Washington corporation ("Manager").
WHEREAS, Licensee is the owner of the assisted living facility described in
Exhibit A (the "Facility"), commonly known as Royalton Court of Kent;
WHEREAS, Licensee wants someone to manage the Facility on its behalf;
WHEREAS, Manager is experienced and qualified in the field of assisted
living facility management and has agreed to manage the Facility on behalf of
Licensee pursuant to the terms and conditions set forth herein.
NOW, THEREFORE, in consideration of the foregoing premises and the mutual
covenants herein contained, IT IS AGREED AS FOLLOWS:
I. Management and Consulting Responsibilities of Manager. Licensee
----------------------------------------------------------
hereby engages Manager and Manager hereby accepts such engagement and agrees to
provide management, consulting, advisory and supervisory services to Licensee in
connection with the operation of the Facility upon the terms and conditions
set forth in this Agreement; provided, however, Licensee has and retains under
this Agreement the ultimate responsibility for the operational decisions of the
Facility. By entering into this Agreement, Licensee does not delegate to
Manager any powers, duties or responsibilities that it is prohibited by law from
delegating. Licensee also retains such other authority as shall not have been
expressly delegated to Manager pursuant to this Agreement. Subject to the
foregoing, Manager shall provide the following services:
A. Operational Policies and Forms. Manager shall develop and implement such
------------------------------
operational policies and procedures as may be appropriate for the effective
operation of the Facility, including but not limited to all policies and
procedures necessary to ensure the ongoing licensure of the Facility.
B. Charges. Manager shall establish schedules of recommended charges,
-------
including all special charges for services rendered to the residents at the
Facility. Licensee shall have the right to review the charge schedules
established by Manager and to consult with Manager with respect to such charges.
Residents of the Facility shall be provided with notice of any changes in
the schedules of charges in accordance with RCW Chapter 70.120, the Long Term
Care Residents Rights Act, and, if applicable, the terms of their admission
agreement, which shall be an agreement between the residents and Licensee, and
the policies and procedures of the Facility.
C. Information. Manager shall develop any informational material, mass
-----------
media releases, and other related publicity materials, which are necessary or
appropriate for the operation of the Facility, all of which Licensee shall have
the right to review and approve. If and to the extent any such materials
developed by Manager contain Manager's name or logo, the same shall clearly
reflect that Manager is the manager and shall not, directly or indirectly, give
the appearance that Manager is the licensee of the Facility. Further, when
Manager takes any action on behalf of Licensee, any communication or
correspondence must clearly indicate that it is acting as the agent of Licensee.
The cost of all such materials shall be deemed to be an expense of the
Facility and shall be payable from the Facility Checking Account (as defined
below).
D. Regulatory Compliance. Manager shall use commercially reasonable efforts
----------------------
to assist Licensee in maintaining all licenses, permits, qualifications and
approvals from any applicable governmental or regulatory authority that are
necessary for the operation of the Facility, it being understood and agreed that
under Washington law, Licensee is responsible for ensuring that all such
licenses are obtained and maintained and that the Facility is operated in
compliance with all applicable laws and regulations, including, but not limited
to, the laws and regulations governing the licensure of boarding homes and
local, state and federal employment rules and regulations. and shall manage the
operations of the Facility in compliance with all applicable laws and
regulations and in accordance with all licenses, permits, qualifications and
approvals. Manager shall not be deemed to be in default of its obligations
under this Section I(D) in the event (i) of the citation of any deficiency or
deficiencies which do not result in the threatened revocation of the licensure
or Medicaid certification of, or the imposition of a ban on admissions at, the
Facility and which deficiency or deficiencies are timely corrected in accordance
with a plan of correction approved by the applicable regulatory authority, (ii)
Manager is duly contesting the application of any law to the operation of the
Facility and compliance with such law is stayed during the period that such
contest is pending, or (iii) compliance with law requires the expenditure of
funds which require the approval of Licensee and for which Licensee refuses or
fails to provide such approval. Within 48 hours of receipt of a written notice
of non-compliance, Manager shall provide Licensee with copies by fax, overnight
mail, email or other comparable means of expedited transmission of any notices
of non-compliance which it receives from any governmental authority having
jurisdiction over the Facility in which such authorities threaten a loss of
licensure or Medicaid certification or the imposition of a ban on admissions at
the Facility. In addition, Licensee shall have the right to approve, which
approval shall not be unreasonably withheld, any plan of correction developed by
Manager with respect to any survey which threatens revocation of the licensure
or Medicaid certification of, or a ban on admissions at, or the imposition of
civil or criminal penalties against, the Facility and to approve the election by
Manager to contest the application of any law to the operation of the Facility.
E. Capital Repairs, Replacements and Improvements. Recognizing
-------------------------------------------------
that Licensee is ultimately responsible for compliance with and meeting all
applicable state boarding home licensing requirements, Manager shall make all
capital repairs, replacements and improvements necessary for the efficient and
effective operation of the Facility and its compliance with law unless doing so
involves an expenditure requiring Licensee's approval in accordance with the
terms of this Agreement and Licensee fails to provide such approval. The cost
of such capital repairs, replacements and improvements shall be within the
budgetary limit set forth in the then approved annual capital budget prepared by
Manager and approved by Licensee pursuant to Section I(L); provided, however,
Manager shall not be deemed to be in default of its obligations under this
Section I(E) in the event the cost of such repairs, replacements and/or
improvements exceeds the applicable budgetary limit on a line item basis for
such repairs, replacements and/or improvements in the applicable capital budget
provided such repairs, replacements and/or improvements are (a) of such an
emergency nature that Licensee's prior notice and approval is not feasible in
order to adequately protect the Facility and the health and safety of the
occupants or (b) the cost of such repairs, replacements and/or improvements are
less than $10,000. Any other capital expenditures for repairs, replacements or
improvements that exceed such budgetary limits shall be subject to the prior
approval of the Licensee, which approval shall not be unreasonably withheld;
provided, however, Licensee shall not be deemed to have unreasonably withheld
its approval if (i) Licensee lacks the financial resources to cover the cost of
such capital repair, replacement or improvement or (ii) the cost of such capital
repair, replacement or improvement will exceed $25,000 individually or in the
aggregate with other unbudgeted capital repairs, replacements or improvements
undertaken by Manager in the same fiscal year. In performing the foregoing
repairs, replacements and improvements Manager shall use the Facility's onsite
maintenance personnel as and where possible and shall otherwise contract with
qualified third parties to provide the necessary services and shall undertake
the same or cause the same to be undertaken in a workmanlike and lien free
manner.
F. Accounting.
----------
i. Manager shall, at its expense, provide accounting support to
the Facility. Licensee acknowledges and agrees that such accounting support
shall not include the preparation of Licensee's financial statements or
securities filings. In addition, Manager shall reflect in the financial
statement for the Facility any accounting adjustments provided to Manager by
Licensee, provided that Manager shall have no liability or responsibility with
respect to the appropriateness of accounting adjustments provided to Manager by
Licensee. Manager shall not be required to reflect in the financial statements
for the Facility any corporate accounting adjustments provided to Manager by
Licensee until such time as Manager fully understands the rationale for such
adjustment.
ii. All accounting procedures and systems utilized in providing
said support shall be in accordance with the operating capital and cash programs
developed by Manager, which programs shall, unless otherwise agreed by the
parties, conform to generally accepted accounting principles ("GAAP") and shall
not materially distort income or loss.
iii. In addition, Manager shall prepare or cause to be
prepared all payroll tax returns, sales and use tax returns, real and personal
property tax returns and local or state gross receipts and/or business and
occupation tax returns at Manager's sole cost and expense and Manager shall
cause to be paid all of the taxes reflected on such returns as being due, which
taxes shall be Facility Expenses and shall be paid out of the Facility Checking
Account. In the event that Manager fails to timely file required returns or
reports or to timely pay taxes, Manager shall be solely responsible for payment
of any resulting penalties or interest and such penalties and interest shall not
be considered Facility Expenses, provided, however, that Manager shall not be
responsible for paying any resulting penalties or interest if (i) Licensee
receives the tax reports for such taxes from the taxing authority and Licensee
fails to furnish the tax reports to Manager within a reasonable period of time
prior to the date on which the tax reports are due, or (ii) there are
insufficient funds available in the Facility Checking Account to pay the taxes
when due and Licensee fails to comply with a timely request by Manager to
provide the necessary funds to pay the taxes when due. All other tax returns,
including Licensee's local, state or federal income or informational tax returns
and state corporate franchise tax returns shall be prepared by Licensee or its
designee and the taxes and other payments due thereunder shall be the sole
responsibility of Licensee.
iv. Nothing herein shall preclude Manager from delegating to a third
party a portion of the accounting duties provided for in this Section; provided,
that such delegation shall not relieve Manager from ultimate liability for the
timely and complete performance of the obligations provided for herein or for
the expense thereof, to the extent such expense is to be borne hereunder by
Manager. Licensee acknowledges and agrees that in the event Manager retains one
or more third parties to review the real and/or personal property tax returns or
utility bills of the Facility or other third party charges in an effort to
effect cost savings for the Facility, the fees and expenses of such third
parties shall be Facility Expenses and shall be paid out of the Facility
Checking Account.
G. Reports. Manager shall prepare and provide to Licensee any
-------
reasonable operational information with respect to the Facility which may from
time to time be specifically requested by Licensee, including any information
needed to assist Licensee in completing the tax returns for which it is
responsible under Section I(F) and in complying with the reporting requirements
described in Exhibit B. In addition, within thirty (30) days after the end of
each calendar month, Manager shall provide Licensee with an unaudited balance
sheet of the Facility, dated the last day of such month, and an unaudited
statement of income and expenses for such month and for the fiscal year-to-date
relating to the operation of the Facility showing the variance between the
actual and budgeted operating results of the Facility for said month and with a
census report for the month indicating the number of units occupied and the
number of units vacant. Upon request, Manager shall cooperate with Licensee or
Licensee's certified public accountant in the event Licensee elects, or is
required, to have audited annual financial statements prepared. The financial
statements prepared by Manager for the Facility shall, unless agreed otherwise
by the parties, be prepared in accordance with GAAP, consistently applied, this
Agreement, and the procedures and practices provided for in this Agreement.
H. Bank Accounts. Manager shall open a new checking account in the
--------------
name of Licensee (the "Facility Checking Account") and shall deposit in the
Facility Checking Account all money received during the term of this Agreement
in the course of the operation of the Facility; provided, however, that during
the term hereof, withdrawals and payments from the Facility Checking Account
shall be made only on checks signed by a person or persons authorized by
Manager. The Facility Checking Account will be an interest-bearing account if
an interest-bearing account is available. Licensee shall be given notice as to
the identity of said authorized signatories. Withdrawals from the Facility
Checking Account shall be made first to pay the Management Fee (as that term is
defined in Section VIII below), and, thereafter, to pay all costs and expenses
associated with the ownership or operation of the Facility (each a "Facility
Expense" and any two or more the "Facility Expenses") including, without
limitation, any principal and interest payments due in connection with any loan
secured by a mortgage on the Facility, payroll, insurance, supplies, services
and taxes (but excluding Manager's corporate and regional overhead and all
federal, state and local income taxes assessed against Licensee), all in such
order of priority as Manager deems appropriate to the commercially reasonable
operation of the Facility; provided, however, if a lender providing financing
for the facility requires the Management Fee to be subordinated to debt service
payments then Manager will not pay the Management Fee unless and until such debt
service has been paid. Facility Expenses shall also include a pro rata portion
of any expenses incurred by Manager for the benefit of the Facility, as well as
any other facilities operated by Manager (the "Other Benefited Facilities"),
provided the method used to calculate the portion of such expenses which are
allocated to the Facility is consistent with the method used by Manager to
allocate such costs to the Other Benefited Facilities. Regardless of the
priority of payments set forth in this Section I(H), Licensee shall be required
to ensure that all expenses related to the care of the residents of the Facility
are paid, it being understood and agreed that any limitation on resources or
insufficiency of funds of the Licensee or the Facility shall not excuse
Licensee, as the licensed operator of the Facility, from fulfilling its
obligation to ensure that the Facility meets all applicable state licensing
requirements. In the event the cash receipts of the Facility are at any time
insufficient to pay all of the Facility Expenses, Licensee shall, within five
(5) days of Licensee's receipt of written demand by Manager, deposit in the
Facility Checking Account sufficient funds to satisfy the then working capital
needs of the Facility. Licensee acknowledges and agrees that Manager shall only
be required to pay the Facility Expenses if and to the extent there are funds
available for the payment thereof in the Facility Checking Account.
I. Personnel. All of the onsite personnel of the Facility,
----------
including the community director, business manager and the wellness director, if
applicable, shall be the employees of Manager but the salaries, bonuses,
commissions, state and federal payroll and social security tax obligations and
benefits paid to or on behalf of such on-site employees shall be deemed to be
included in the Facility Expenses and thus shall be paid from the Facility
Checking Account. All matters pertaining to the employment, supervision,
compensation, promotion and discharge of such employees are the responsibility
of Manager, which is in all respects the employer of such employees. Manager
shall fully comply with all federal, state, county, municipal and other
governmental laws, ordinances, regulations and orders having to do with
anti-discrimination, workmen's compensation, employer's liability insurance,
social security, unemployment insurance, hours of labor, wages, working
conditions, immigration and all other employer-employee related subjects
(including without limitation, tax withholding and information reporting
requirements) and shall not do any act, nor knowingly permit any act to be done
that would constitute a violation of any or all of such laws, ordinances,
regulations or orders. Manager shall indemnify and hold Licensee harmless from
and against any and all claims, penalties, liabilities and expenses of
whatsoever kind and nature which may be asserted by any governmental body or by
any person claiming to be aggrieved by reason of any act or failure to act by
Manager in accordance with or in violation of any said laws, ordinances,
regulations or orders, so long as such act or failure to act is not caused or
directed by Licensee. All personnel responsible for providing services pursuant
to the terms of this Agreement shall be direct employees of Manager and Manager
shall, for purposes of such employment relationship, be acting as an independent
contractor and not as an agent or employee of Licensee. Unbudgeted costs and
expenses of employees or consultants that are not onsite Facility personnel
shall be treated as Facility Expenses only if approved in writing in advance by
the Licensee, which approval shall not be unreasonably withheld.
Notwithstanding anything in this Section to the contrary, the ultimate control
over the administrator, including his/her appointment, and over personnel
matters relating to the operation of the Facility and the care provided to the
residents of the Facility and responsibility for the staffing levels, and
training of the personnel at, the Facility shall remain with Licensee.
J. Supplies and Equipment. Manager shall purchase supplies and non-capital
-----------------------
equipment needed to operate the Facility within the budgetary limits set forth
in the annual operating budget. In purchasing said supplies and equipment, if
possible without Manager incurring personal liability for the cost of such
supplies and equipment, Manager shall take advantage of any national or group
purchasing agreements to which Manager may be a party.
K. Legal Proceedings. Unless otherwise directed by the Licensee,
------------------
Manager shall, through its legal counsel, coordinate all legal matters and
proceedings with Licensee's counsel and shall take any and all appropriate steps
to protect and/or litigate to a final decision in an appropriate court or forum
any violation, order, rule or regulation affecting the Facility and its
operations or any claim, loss, violation or cause of action relating to the
Facility, it being understood and agreed that under Washington law any
administrative appeals of licensing or contract action/enforcement imposed by
the Washington Department of Social and Health Services ("DSHS") may only be
filed by Licensee or by Manager if it is expressly authorized to do so by
Licensee. Manager shall promptly notify Licensee in writing of any written
demand letters received by Manager which threaten litigation related to the
Facility or any legal or administrative proceedings that are filed involving the
Facility. All of the costs incurred in such litigation shall be deemed Facility
Expenses and shall be reimbursed from the funds in the Facility Checking Account
if previously paid by Licensee or shall be paid from the funds in the Facility
Checking Account if not previously paid by Licensee. Nothing herein shall be
construed as precluding Licensee from seeking to recover from Manager the fees
and expenses described in this Section I(K) to the extent Manager is otherwise
liable therefor under the default or indemnification provisions of this
Agreement.
L. Budgets. The Facility shall be operated on a fiscal year of January
-------
1 through December 31. Licensee and Manager shall agree before the Commencement
Date (as hereinafter defined) on a preliminary initial operating budget for the
period from the Commencement Date through December 31, 2003 and shall agree
within sixty (60) days after the Commencement Date on a detailed operating and
capital budget for the period from the date of such approved budgets through
December 31, 2003. On or before December 31st of each calendar year, Manager
shall prepare and submit to Licensee for its review and approval, which approval
shall not be unreasonably withheld, an annual operating budget, an annual
capital expenditure budget, and an annual cash flow projection for the Facility.
The annual operating budget and capital expenditure budget shall be prepared
using the format set forth in Exhibit C. In the event a budget has not been
agreed upon by the beginning of the fiscal year, the operating results of the
prior fiscal year shall serve as the budget for the following fiscal year unless
and until the new budget is agreed upon.
M. Collection of Accounts. Manager shall issue bills and collect
-----------------------
accounts and monies owed for goods and services furnished by the Facility during
the term of this Agreement, including, but not limited to, enforcing the rights
of Licensee and the Facility as creditor under any contract or in connection
with the rendering of any services; provided, however, that any expenses
incurred by Manager in so doing shall be Facility Expenses and payable out of
the Facility Checking Account. In addition, upon request by Licensee, Manager
shall issue bills and collect accounts and monies owed for goods and services
furnished by the Facility prior to the Commencement Date; provided, however,
regardless of any standard of performance set forth in this Agreement, Licensee
acknowledges and agrees that there can be no assurances that Manager will be
able to collect any or all of such accounts receivable.
N. Contracts. Manager shall negotiate and enter into any and all
---------
contracts necessary from time to time in connection with the day to day
operation of the Facility including, but not limited to, contracts for water,
electricity, natural gas, telephone, sewer, cleaning, trash removal, pest
control and extermination, cable, elevator and boiler maintenance, pharmacy
services, therapy services and other appropriate ancillary services and
contracts for the provision of various services which are designed to identify
potential cost savings to the Facility, such as utility and tax ▇▇▇▇ review
services; provided that such contracts can be terminated on no more than ninety
(90) days' notice. Any contract which cannot be terminated on no more than
ninety (90) days' notice shall require the approval of Licensee before the same
may be executed by Manager, which approval shall not be unreasonably withheld.
Manager shall have the right to contract with entities which are owned by or
under common ownership with Manager provided the terms of any such contracts are
no less favorable than the terms then offered by unrelated third parties for the
same or similar goods or services.
O. Manager's and Licensee's Representative. Manager hereby
------------------------------------------
appoints ▇▇▇▇▇ ▇▇▇▇▇ (the "Manager's Representative") as the person employed by
Manager with whom Licensee shall interact and upon whose decisions Licensee
shall be authorized to rely, and Licensee hereby appoints ▇▇▇▇▇ ▇▇▇▇▇ (the
"Licensee's Representative") as the person employed by Licensee with whom
Manager shall interact and upon whose decisions Manager shall be authorized to
rely, with respect to the performance by Manager of its duties hereunder.
Manager shall have the right from time to time during the term of this Agreement
to replace the Manager's Representative upon written notice to Licensee
designating the replacement Manager's Representative and Licensee shall have the
right from time to time during the term of this Agreement to replace the
Licensee's Representative upon written notice to Manager designating the
replacement Licensee's Representative. Nothing herein shall be construed as
imposing any personal liability on the Manager's Representative or Licensee's
Representative with respect to the acts or omissions of Manager or Licensee,
respectively, under this Agreement.
II. Insurance. Manager shall arrange for and maintain all necessary
---------
and proper hazard insurance covering the Facility, the furniture, fixtures, and
equipment situated thereon, and including coverage for business interruption and
extra expense for an indemnity period of not less than twelve (12) months.
Boiler and Machinery coverage specifically for pressure valve equipment shall be
included in the foregoing policy or in a separate policy covering those
exposures. If and to the extent Licensee agrees to participate in Manager's
Self Insurance Fund Program, Manager shall arrange for all necessary and proper
malpractice and public liability insurance for Manager's and Licensee's
protection and for the protection of Manager's and Licensee's officers, agents
and employees. In the event Licensee does not elect to participate on Manager's
Self Insurance Fund Program, then Licensee shall be required to secure all
necessary malpractice and public liability insurance for the protection of
Licensee and Manager. Whether provided by Licensee or Manager or both, the cost
of all insurance premiums and any deductible or retention amounts shall be the
sole responsibility of Licensee and shall be deemed to be Facility Expenses
payable from the funds in the Facility Checking Account. Any insurance coverage
arranged for by Manager shall be consistent with the coverage provided by
Manager to other assisted living facilities which are owned or leased by
Manager, it being understood and agreed that Manager shall have no obligation to
secure any special or different coverages for the Facility than it secures for
its own owned or leased facilities. In addition, Manager shall provide employee
health and workers' compensation and/or applicable occupational injury and
illness insurance or program for all of Manager's employees at the Facility in
accordance with Manager's policies therefor. The costs thereof, including any
applicable deductibles or retention amounts should losses occur or any amounts
due as the result of the occurrence of a workers' compensation audit during or
after the Term of this Agreement, shall not be included in the Management Fee,
but shall be separately reimbursed as a Facility Expense payable from the funds
in the Facility Checking Account or by Licensee to the extent that the same are
due and payable after the termination of this Agreement. Licensee shall be
listed as an additional insured under all general or professional liability
policies provided by Manager pursuant to this Section II and shall be provided
with a certificate of insurance confirming the same and Manager shall be listed
as an additional insured under all policies provided by Licensee pursuant to
this Section II and shall be provided with a certificate of insurance confirming
the same. Upon the termination of this Agreement, Licensee shall, at its sole
cost and expense, procure a tail insurance policy in an amount equal to the
amount of professional liability insurance coverage in effect immediately prior
to the termination of this Agreement and providing coverage for a period of no
less than three (3) years or such other period as may be agreed upon by Licensee
and Manager and naming Licensee as the named insured and insuring against claims
which may be made after the termination of this Agreement related to acts or
omissions which occurred prior to the termination of this Agreement. Licensee
shall provide Manager with a certificate evidencing such tail insurance
coverage, and including Manger as an Additional Insured under such policy. The
obligations of Licensee under this Section II shall survive termination of this
Agreement.
The insurance to be secured by Licensee or Manager, as applicable, under
this Section II shall include, at a minimum, the following:
i. Workers' Compensation or other applicable occupational injury and illness
insurance or program in statutory limits for the state where the Facility
is located, or a minimum of $500,000 if no statutory limits are prescribed;
ii. Professional Liability and Commercial General Liability covering bodily
injury and property damage - $1,000,000 per occurrence and a $3,000,000 general
aggregate in primary limits (with respect to all of the facilities operated by
Manager and covered by such policy);
iii. Commercial Auto Liability for Facility vehicles including hired and
non-owned auto coverage - minimum of $1,000,000 combined single primary limit;
Crime Insurance to cover employee dishonesty, forgery/alteration, theft of
money and security coverage, with minimum limits of $50,000.
The certificate shall contain an endorsement that Licensee will be given at
least thirty (30) days prior written notice of cancellation or any material
change in the policy. Licensee shall be named as an additional insured/loss
payee, as applicable, on the policies described above.
III. Proprietary Interest. The systems, methods, procedures and
----------------------
controls employed by Manager and any written materials, computer software or
policies developed by Manager to document the same are to remain the property of
Manager and are not, at any time during or after the term of this Agreement, to
be utilized, distributed, copied or otherwise employed or acquired by Licensee,
except as authorized by Manager; provided, however, that upon request of
Licensee, Manager shall negotiate in good faith the terms and conditions upon
which Licensee may be permitted by Manager to use such systems, methods,
policies, procedures, controls, written materials, software or brochures for a
limited transitional period following the termination of this Agreement, which
terms and conditions shall be satisfactory to both Manager and Licensee in their
respective discretion.
IV. Term of Agreement; Termination by Either Party. The Term of
------------------------------------------------
this Agreement shall commence on the date first written above (the "Commencement
Date") and shall continue until terminated as provided herein. If either party
is in default of its obligations hereunder and does not cure such default within
ten (10) days after written notice thereof from the other party, or if such
default is not subject to being cured within such ten (10) day period, then be
diligently pursuing a cure thereof, the non-defaulting party may terminate this
Agreement by providing written notice of termination effective as of the date
specified in such notice. This Agreement shall also terminate in the event of
the destruction of or substantial damage to the Facility by any cause, or the
taking of all or a substantial portion of the Facility by eminent domain, in
either case making it impossible or impractical to continue operation of the
Facility. This Agreement may also be terminated by Manager or Licensee for any
reason after 90 days written notice. Within forty five (45) days after the
termination of this Agreement, Manager shall deliver to Licensee any balance of
moneys due Licensee or of deposits, or both, which were held by Manager with
respect to the Facility, as well as a final accounting reflecting the balance of
income and expenses with respect to the Facility as of the date of termination
or withdrawal, and all records, contracts, leases, receipts for deposits, and
other papers or documents which pertain to the Facility. If there shall be
additional sums due and payable to Manager, Licensee shall promptly pay such
sums to Manager as part of the final reconciliation process. In the event of
the termination of this Agreement for any reason, Licensee shall continue to be
responsible for the care of the residents of the Facility until the earlier to
occur of (i) the transfer of the affected Facility to a new licensee or (ii) the
transfer of the residents to another facility or facilities licensed under
applicable state law or (iii) management responsibility for the Facility is
assumed by a manager operating under a management agreement which has been
approved by DSHS. Manager shall, upon request, cooperate in a smooth transition
of operational responsibility for the Facility to Licensee or to a manager
designated by Licensee and operating under a management agreement which has been
approved by DSHS. Licensee and Manager shall use good faith efforts to provide
DSHS at Residential care Services (Attn: ▇▇▇ ▇▇▇▇▇▇), ▇.▇. ▇▇▇ ▇▇▇▇▇, ▇▇▇▇▇▇▇,
▇▇ ▇▇▇▇▇-▇▇▇▇ (the "DSHS Address") with copies of any Termination Notices, but
neither Licensee nor Manager shall be in default of its obligations hereunder
should it fail to do so.
V. Licensee's Inspection. Manager acknowledges and agrees that during
---------------------
the term of this Agreement, Licensee is ultimately responsible for the care
provided to the residents of the Facility and for the compliance of the Facility
with applicable law. Accordingly, during the term hereof, Licensee may enter
and inspect the Facility at any time provided Licensee coordinates such
inspections with the onsite administrative personnel at the Facility in order to
minimize any disruption of Manager's day to day operations of the Facility and
to ensure that such inspections do not violate resident rights to privacy under
state or federal resident rights laws. In addition, Licensee shall have the
right to inspect and/or audit all books and records pertaining to the operation
of the Facility.
VI. Operation of the Facility.
----------------------------
A. Standard of Performance. In performing its obligations under this
-------------------------
Agreement, Manager shall manage the Facility as an Assisted Living Facility (a
Boarding Home under Washington law) in accordance with the terms of this
Agreement, including, but not limited to, the limitations set forth herein on
operating and capital expenditures, and the policies adopted by, and resources
available to, the Facility; provided, however, that nothing in this Agreement
shall relieve Licensee as the licensed operator of the Facility from its
ultimate responsibility under State law for the care provided at the Facility.
B. Force Majeure. Manager will not be deemed to be in violation of this
---------------
Management Agreement if it is prevented from performing any of its obligations
hereunder for any reason beyond its control, including, without limitation,
strikes, shortages, acts of terrorism, war, acts of God, lack of Licensee's
financial resources, unreasonable interference by Licensee with Manager's
performance of its duties hereunder, or any statute, regulation or rule of
federal, state or local government or agency thereof.
C. Facility Records. All of the records of the Facility shall be and
-----------------
remain the property of Licensee and Manager shall at all times maintain the
confidentiality of all resident records, including, without limitation, all
medical records and shall only disclose the same as required by law and/or as
authorized by the resident to whom such record relates; provided, however, that
Manager's failure to maintain the confidentiality of resident records in
accordance with the requirements of this Section shall not relieve Licensee of
liability should any such resident records be improperly disclosed in whole or
in part.
D. Notice to Residents. Within a reasonable period of time after the
---------------------
Commencement Date, Manager shall provide written notice to all of the residents
of the Facility that it has assumed management responsibility for the Facility
and confirming the address at which they can reach Licensee should they elect to
do so for any reason.
VII. Withdrawal of Funds by Licensee; Minimum Bank Balance.
------------------------------------------------------------
A. Withdrawal by Licensee. From time to time, Licensee may withdraw
------------------------
the then-accumulated operating cash surplus (as determined by Manager) from the
Facility Checking Account subject to the right of Manager to restrict withdrawal
by Licensee of any Facility funds in accordance with the provisions of Section
I(H) of this Agreement.
B. Minimum Cash Balance. Licensee shall fund the Facility Checking
----------------------
Account with an initial amount equal to $25,000.00 and thereafter Licensee shall
provide the working capital required by Section I(H) of this Agreement
VIII. Fees.
-----
A. Management Fee. In consideration for the provision of the
---------------
services contemplated in this Agreement, Manager shall receive a management fee
("Management Fee") equal to the greater of (i) Six percent (6%) of the gross
revenues generated for the prior month by the Facility, or ii) $7,000 per month.
The Management Fee shall be payable on or before the 10th day of each month.
For purposes of this Agreement, "gross revenues" mean all revenues generated by
the operation of the Facility, but shall not include proceeds from the sale of
Facility equipment or the Facility, any insurance (except business interruption
insurance) or condemnation proceeds, or any other proceeds from a capital event.
If the services of Manager commence or terminate, other than on the first day of
the month, the revenues upon which the fee is calculated shall be prorated in
proportion to the number of days for which services are actually rendered. The
Management Fee provided for herein shall be disbursed by Manager to itself out
of the Facility Checking Account as provided in this Agreement.
B. Mobilization Fee. [RESERVED]
------------------
IX. [intentionally left blank]
X. Assignment. Except as otherwise provided in Section I(F), this Agreement
----------
shall not be assigned by either party without the prior written consent of the
other party; provided, however, Manager shall have the right to assign this
Agreement to an entity which is owned or controlled by Manager or its principal
shareholder, ▇▇▇▇▇▇ ▇. ▇▇▇▇, without the prior written consent of Licensee, and
Licensee shall have the right to assign this Agreement to any entity that is
owned or controlled by Licensee or its members (an "Affiliate") or owned or
controlled by an Affiliate of the Licensee or its members; provided, however, no
assignment of this Agreement shall be effective unless the assignee, in the case
of an assignment by Licensee, has first been duly licensed by DSHS, or unless
the Management Agreement between Licensee and the assignee, in the case of an
assignment by Manager, has been approved by DSHS.
XI. Notices. All notices required or permitted hereunder shall be
-------
given in writing by hand delivery, by registered or certified mail, postage
prepaid, by overnight delivery or by facsimile transmission (with receipt
confirmed with the recipient). Notice shall be delivered or mailed to the
parties at the following addresses or at such other places as either party shall
designate in writing. The parties agree to use their good faith efforts to give
notice of any change of address to DSHS at the DSHS Address but neither shall be
in default of its obligations hereunder should it fail to do so. All notices
shall be deemed duly given when delivery is received or refused by a party if
delivered by hand, three (3) business days after being deposited in the mails if
sent by registered or certified mail, on the next business day if sent by
overnight delivery and on confirmed receipt, if sent by facsimile transmission.
To Manager: Emeritus Corporation
▇▇▇▇ ▇▇▇▇▇▇▇ ▇▇▇▇▇▇
▇▇▇▇▇ ▇▇▇
▇▇▇▇▇▇▇, ▇▇ ▇▇▇▇▇
Facsimile: ▇▇▇-▇▇▇-▇▇▇▇
Attn: ▇▇▇▇▇ ▇▇▇▇▇
To Licensee: Royalton/Kent, LLC
▇.▇. ▇▇▇ ▇▇▇
▇▇▇▇▇▇▇▇, ▇▇ ▇▇▇▇▇
Facsimile: (▇▇▇) ▇▇▇-▇▇▇▇
Attn: ▇▇▇▇▇ ▇▇▇▇▇
XII. Relationship of the Parties. The relationship of the parties
------------------------------
shall be that of principal and independent contractor and all acts performed by
Manager during the term hereof as Manager of the Facility shall be deemed to be
performed in its capacity as an independent contractor. Nothing contained in
this Agreement is intended to or shall be construed to give rise to or create a
partnership or joint venture or lease between Licensee, its successors and
assigns on the one hand, and Manager, its successors and assigns on the other
hand. Notwithstanding the foregoing, Manager shall be authorized to execute
certain documents in the course of the day to day operation of the Facility as
the agent of Licensee, such as credit applications for supplies, banking
resolutions for the Facility Checking Account, utility deposit forms, etc.
XIII. Indemnification. Manager shall indemnify, defend and hold
---------------
harmless Licensee and its owners, directors, officers and employees from any and
all third party claims, demands, causes of action, losses, damages, fines,
penalties, liabilities, costs and expenses, including reasonable attorneys' fees
and court costs sustained or incurred by or asserted against any one or more of
them by reason of or arising out of Uncovered Manager Actions. As used in this
Section XIII, "Uncovered Manager Actions" means (a) Manager's breach of the
duties and obligations required to be performed by Manager pursuant to this
Agreement, (b) acts by Manager outside the scope of Manager's authority under
this Agreement, or (c) the negligence or willful misconduct of Manager or its
agents or employees. Licensee agrees to indemnify, defend and hold harmless
Manager and its owners, directors, officers and employees from any and all third
party claims, demands, causes of action, losses, damages, fines, penalties,
liabilities, costs and expenses, including attorneys' fees and court costs
(except to the extent covered by insurance carried by Manager or required to be
carried by Manager pursuant to this Agreement) sustained or incurred by or
asserted against any one or more of them relating to the Facility that results
from the negligence or willful misconduct of Licensee in performing its
obligations under this Agreement or from a breach of this Agreement by the
Licensee. THE INDEMNITIES BY LICENSEE AND MANAGER IN THIS SECTION XIII
SPECIFICALLY APPLY TO NEGLIGENCE AND EVENTS FOR WHICH THERE IS STRICT LIABILITY
BY THE INDEMNIFIED PERSONS, TO THE EXTENT THE RESULTING CLAIM, DEMAND CAUSE OF
ACTION, LOSS, DAMAGE, FINE, PENALTY, LIABILITY, COST OR EXPENSE IS WITHIN THE
SCOPE OF THE INDEMNITY. Notwithstanding any other provision of this Agreement to
the contrary, each party's obligation to indemnify, defend and hold harmless the
other party shall survive the termination of this Agreement.
XIV. Entire Agreement. This Agreement contains the entire agreement
-----------------
between the parties relating to the operation of the Facility and shall be
binding upon and inure to the benefit of their successors and assigns. This
Agreement may not be modified or amended except by written instrument signed by
both of the parties hereto. Licensee and Manager shall use good faith efforts
to provide DSHS at the DSHS Address with copies of any written changes,
modifications or amendments to this Agreement but neither Licensee nor Manager
shall be in default of its obligations hereunder should it fail to do so.
XV. Captions. The captions used herein are for convenience of
--------
reference only and shall not be construed in any manner to limit or modify any
of the terms hereof.
XVI. Attorney's Fees. In the event either party brings an action to
----------------
enforce this Agreement, the prevailing party in such action shall be entitled to
recover from the other all costs incurred in connection therewith, including
reasonable attorneys' fees.
XVII. Severability. In the event one or more of the provisions
------------
contained in this Agreement is deemed to be invalid, illegal or unenforceable in
any respect under applicable law, the validity, legality and enforceability of
the remaining provisions hereof shall not in any way be impaired thereby.
XVIII. Cumulative; No Waiver. No right or remedy herein conferred upon
---------------------
or reserved to either of the parties hereto is intended to be exclusive of any
other right or remedy, and each and every right and remedy shall be cumulative
and in addition to any other right or remedy given hereunder. The failure of
either party hereto to insist at any time upon the strict observance or
performance of any of the provisions of this Agreement or to exercise any right
or remedy as provided in this Agreement shall not impair any such right or
remedy or be construed as a waiver or relinquishment thereof with respect to
subsequent defaults. Every right and remedy given by this Agreement to the
parties hereof may be exercised from time to time and as often as may be deemed
expedient by the parties thereto, as the case may be.
XIX. Authorization for Agreement. The execution and performance of
-----------------------------
this Agreement by Licensee and Manager have been duly authorized by all
necessary laws, resolutions or corporate action, and this Agreement constitutes
the valid and enforceable obligations of Licensee and Manager in accordance with
its terms, except as such enforceability may be limited by creditor's rights
laws and general principles of equity.
XX. Counterparts. This Agreement may be executed in any number of
------------
counterparts and by different parties hereto in separate counterparts, each of
which when so executed shall be deemed to be an original and all of which when
taken together shall constitute one and the same agreement. Delivery of any
executed counterpart of a signature page to this Agreement by facsimile shall be
effective as delivery of an executed original counterpart of this Agreement.
XXI. Confidentiality. Throughout the Term of this Agreement and for a
----------------
period of one (1) year after the termination of this Agreement, Manager and
Licensee each agree to maintain the confidentiality of any proprietary
information concerning the other or the Facility to which they may gain access
during the term of this Agreement and shall only disclose the same with the
written consent of the other party or as required by an order of a court of
competent jurisdiction.
XXII. Construction. Each of the parties acknowledges and agrees that
-------------
it has participated in the drafting and negotiation of this Agreement.
Accordingly, in the event of a dispute with respect to the interpretation or
enforcement of the terms hereof, no provision shall be construed so as to favor
or disfavor either party hereto.
IN WITNESS WHEREOF, the parties have hereto caused this Agreement to
be duly executed, as of the day and year first above written.
ROYALTON/KENT, LLC, LICENSEE
By: /s/ ▇▇▇▇▇ ▇▇▇▇▇
▇▇▇▇▇ ▇▇▇▇▇
Its: Managing Director
EMERITUS CORPORATION, MANAGER
By: /s/ ▇▇▇▇▇▇▇ ▇. ▇▇▇▇▇▇▇▇▇▇
▇▇▇▇▇▇▇ ▇. ▇▇▇▇▇▇▇▇▇▇
Its: Vice President of Finance
EXHIBIT A
DESCRIPTION OF FACILITY
EXHIBIT B
REPORTING REQUIREMENTS
EXHIBIT C
FORM OF BUDGET