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AMENDED AND RESTATED
AGREEMENT TO PROVIDE MANAGEMENT
SERVICES TO ASSISTED LIVING FACILITIES
This Agreement made as of the 31st day of December, 2001, by and between
Regent Assisted Living, Inc., an Oregon corporation (hereinafter referred to as
"Owner") and Emeritus Corporation, a Washington corporation (hereinafter
referred to as "Manager").
WHEREAS, as set forth more fully in Exhibit A, Owner either owns, leases or
manages under contract or in its capacity as the managing member of the owner or
lessee of, the assisted living facilities described in Exhibit A (the
"Facilities" and, where the context requires, individually, a "Facility") and
is, in each instance, authorized to engage a manager or submanager in connection
with its operation of the Facilities;
WHEREAS, Owner wants someone to manage the Facilities on its behalf;
WHEREAS, Manager is experienced and qualified in the field of assisted
living facilities management and has agreed to manage the Facilities on behalf
of Owner, 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. Responsibilities of Manager: Owner hereby engages Manager and
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Manager hereby accepts such engagement and agrees to provide management,
consulting and advisory services to Owner in connection with the operation of
the Facilities, upon the terms and conditions set forth in this Agreement. By
entering into this Agreement, Owner does not delegate to Manager any powers,
duties or responsibilities which it is prohibited by law from delegating. Owner
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
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implement such operational policies and procedures as may be necessary to ensure
the ongoing licensure of the Facilities and the establishment and maintenance of
operational standards appropriate for the nature of the Facilities.
(b) Charges: Manager shall establish the schedules of recommended
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charges, including any and all special charges for services rendered to the
residents at the Facilities.
(c) Information: Manager shall develop any informational material,
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mass media releases, and other related publicity materials, which are necessary
or appropriate for the operation of the Facilities.
(d) Regulatory Compliance: Subject to the force majeure and notice and
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cure right contained in the Agreement below, Manager shall maintain all
licenses, permits, qualifications and approvals from any applicable governmental
or regulatory authority for the operation of the Facilities and shall manage the
operation of the Facilities in full compliance with all applicable laws and
regulations; provided, however, Manager shall not be deemed to be in default of
its obligations under this Section I(d) in the event (i) of a violation of any
applicable law or regulation which occurs during the first thirty (30) days
after the Commencement Date (the "Protected Period"), (ii) 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 affected Facility or Facilities and which deficiency or
deficiencies are timely corrected in accordance with a plan of correction
approved by the applicable regulatory authority, (iii) Manager is duly
contesting the application of any law to the operation of a Facility or
Facilities and compliance therewith is stayed during the period that such
contest is pending or (iv) compliance with law requires the expenditure of funds
which require the approval of Owner and for which Owner refuses or fails to
provide such approval. In order to ensure Manager's compliance with its
obligations under this Section I(d) Owner shall provide Manager prior to the
Commencement Date with a copy of any agreements or orders to which Owner may be
a party in connection with the operation of the Facilities. Within 48 hours of
receipt, Manager shall provide Owner with copies by fax, overnight mail, email
or other comparable means of expedited transmission of any written notices of
non-compliance which it receives from any governmental authority having
jurisdiction over the Facilities in which such authorities threaten a loss or
licensure or Medicaid certification of, or the imposition of a ban on admissions
at or the imposition of civil or criminal penalties against, a Facility or
Owner. In addition, Owner 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 or other governmental action 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, a Facility or Owner and to
approve the election by Manager to contest the application of any law to the
operation of a Facility or Facilities.
(e) Capital Repairs, Replacements and Improvements: Manager shall make
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all capital repairs, replacements and improvements necessary for the efficient
and effective operation of the Facilities and their compliance with law unless
doing so involves an expenditure requiring Owner's approval in accordance with
the terms of this Agreement and Owner fails to provide such approval. The cost
of such capital repairs, replacements and improvements shall be within the
budgetary limits set forth in the annual capital budgets prepared by Manager
pursuant to Paragraph 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
limits provided such repairs, replacements and/or improvements are (a) of such
an emergency nature that Owner's prior notice and approval is not feasible in
order to adequately protect the Facilities and the health and safety of the
occupants or (b) the cost of such repairs, replacements and/or improvements
are within 10% of the budgetary limits set forth in the annual approved capital
budget then in effect for the affected Facility or Facilities prepared by
Manager pursuant to Paragraph I(L). Any other capital expenditures for
repairs, replacements or improvements that exceed such budgetary limits shall be
subject to the prior approval of the Owner, which approval shall not be
unreasonably withheld; provided, however, Owner shall not be deemed to have
unreasonably withheld its approval if (i) Owner 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 Facilities' on site 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
▇▇▇▇▇▇▇ like and lien free manner.
(f) Accounting:
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(i) Manager shall, at its expense, provide accounting support to
the Facilities. Owner acknowledges and agrees that such accounting support shall
not include the preparation of Owner's corporate financial statements or
securities filings, but only the individual financial statements for the
Facilities, in each case meeting the requirements of Section 1(G). Manager
shall not be required to reflect in the financial statements for the Facilities
any corporate accounting adjustments provided to Manager by Owner 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 conform to generally accepted
accounting principles ("GAAP") and shall not materially distort income or loss;
provided, however, Manager shall have no liability for errors in the financial
statements prepared during the term of this Agreement which arise from errors in
starting accounting balances provided by Owner to Manager pursuant to Section
I(f)(v).
(iii) In addition, as a cost of operating the Facilities, Manager shall
prepare or cause to be prepared all payroll tax returns, sales and use tax
returns, real and personal property tax returns, informational tax returns,
Forms 5500 and local or state gross receipts and/or business and occupation tax
returns and Manager shall cause to be paid all of the taxes reflected on such
returns as being due, which taxes shall be paid from the cash receipts of the
Facilities or the working capital provided by Owner under the terms of this
Agreement. All other tax returns, including Owner's local, state or federal
income tax returns and state corporate franchise tax returns and third party
payor cost reports, shall be prepared by Owner or its designee and the taxes and
other payments due thereunder shall be the sole responsibility of Owner.
(iv) Nothing herein shall preclude 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. Owner 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 Facilities or other third party charges in an effort to
effect cost savings for the Facilities, the fees and expenses of such third
parties shall be paid from the cash receipts of the Facilities or the working
capital provided by Owner under the terms of this Agreement.
(v) In order to enable Manager to provide the accounting support
services described in this Section, prior to the Commencement Date, Owner shall
provide to Manager the information and shall take the transition actions
described in Exhibit B hereto (the "Accounting Transition Services"), it being
understood and agreed that Manager will not be able to fully perform its
obligations under this Section I(f) unless and until Owner has fully complied
with its obligations with respect to the Accounting Transition Services.
(g) Reports: Manager shall prepare and provide to Owner any reasonable
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operational information with respect to the Facilities which may from time to
time be specifically requested by Owner, including any information needed to
assist Owner in completing the tax returns for which it is responsible under
Section I(f),in complying with any reporting obligations imposed on Owner or
Owner's parent under its leases and loan agreements or as a publicly traded
company, in refinancing any of the debt secured by the Facilities and in
complying with the reporting obligations described in Exhibit C. In addition, by
no later than thirty (30) days after the end of each calendar month, Manager
shall provide Owner with an unaudited balance sheet of the Facilities, 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
Facilities showing the variance between the actual and budgeted operating
results of the Facilities for said month and in the form attached hereto as
Exhibit D 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 Owner or Owner's certified public accountant in the event Owner elects, or
is required, to have audited annual financial statements prepared. The financial
statements prepared by Manager shall be prepared in accordance with (i) GAAP,
consistently applied, (ii) this Agreement, and (iii) the procedures and
practices provided for in this Agreement.
(h) Bank Accounts:
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(i) With respect to each of the Facilities, Manager shall
establish and maintain a checking account for each of the Facilities in the name
set forth opposite the name of each of the Facilities in Exhibit E (each of
which accounts shall hereinafter be referred to as the "Depository Account") and
shall deposit therein all money received during the term of this Agreement in
the course of the operation of the applicable Facility including any money
received upon the collection of accounts receivable which are outstanding as of
the Commencement Date for goods sold or services rendered at the Facilities
prior to the Commencement Date and shall pay therefrom the expenses incurred in
the operation of the applicable Facility during the Term of, and in accordance
with the terms of, this Agreement.
(ii) During the Term hereof, withdrawals and payments from the
Depository Account for each Facility shall be made only on checks signed by a
person or persons designated by Manager but Manager shall have no ownership
interest in or other rights to the Depository Account other than the right to
make withdrawals therefrom and to make deposits thereto; and provided, further
that Owner shall be given notice as to the identity of said authorized
signatories.
(iii) Withdrawals from the Depository Account for each Facility
shall be made first to pay to Owner the management fee due with respect to such
Facility as set forth in Exhibit F (the "Regent Management Fees"), which Regent
Management Fees shall be deposited in an account established by Owner in
Seattle, Washington (the "Regent Account") and thereafter to pay the expenses of
operating such Facility, including payroll and related state and federal payroll
tax obligations (the "Daily Operating Expenses") and rent and debt service
payments to the lenders and landlords set forth in Exhibit G and in the amounts
set forth in Exhibit G as the same may be amended from time to time to reflect
changes in such rent and debt service payments or in the amounts otherwise
specified by Owner to Manager in writing from time to time (the "Property
Expenses"). Exhibit G shall also reflect when the rent or debt service payment
is due under the terms of the applicable lease or loan documents and any
available grace period. The Daily Operating Expenses and the Property Expenses
shall be paid by Manager in such order of priority as Manager deems appropriate
from time to time to the operation of such Facility, provided however, Daily
Operating Expenses and the Property Expenses shall be paid by no later than
their due date or, if applicable, before the expiration of any applicable grace
period in which payment may be made prior to the occurrence of a default under
the terms of the applicable lease, loan agreement, contract, agreement or
purchasing arrangement, unless resulting from the failure of Owner to provide
the Working Capital Funds (as defined in Section I(h)(v) below) or Management
Fee Funds (as defined in Section I(h)(v) below) as and when due in accordance
with Section I(h)(v) below. Manager shall make any rent and debt service
payments which are made by it by wire transfer in accordance with wiring
instructions provided by Owner to Manager.
(iv) Any excess funds in the Depository Account for a Facility,
after establishing the working capital reserves required by Section VIII(c),
shall be distributed by Manager to Owner.
(v) In the event (A) at any time Manager determines in the
exercise of its reasonable judgment that there are insufficient funds in the
Depository Account or in the Other Authorized Accounts (as hereinafter defined),
in the case of a Designated Facility (as hereinafter defined), to maintain the
minimum bank balance required by Section VIII(c) and pay all Daily Operating
Expenses and Property Expenses due and payable in the following thirty (30) day
period (the "Working Capital Funds") or (B) in the event there are at any time
insufficient funds available in the Regent Account to pay Manager's Base
Management Fee (as defined below) and, if applicable, Incentive Management Fee
(as defined below) (the "Management Fee Funds"), no less than three (3) days
prior to the date on which Manager determines that Working Capital Funds or
Management Fee Funds, as applicable, are required, Manager shall provide Owner
with a verbal demand therefor followed by a written confirmation of such demand,
which written confirmation shall specify in reasonable detail the amount needed
and the reason therefor and, Owner shall, within five (5) business days of its
receipt of such written demand by Manager, deposit in the applicable Depository
Account or the Regent Account, as applicable, the amount so demanded by Manager.
For purposes hereof, the Other Authorized Accounts shall be defined as those
accounts designated in writing by Owner to Manager from which Manager is
authorized to draw funds in order to meet the working capital needs of certain
other Facilities designated in writing by Owner to Manager (the "Designated
Facilities" or individually a "Designated Facility"), provided the designation
shall not be effective unless the same is accompanied by either (i) an opinion
of Owner's outside legal counsel confirming that it has reviewed all necessary
legal documents and determined that Owner is authorized to lend money from the
Other Authorized Accounts for the benefit of the Designated Facilities or (ii) a
certificate, in form and substance reasonably acceptable to Manager signed by
Owner's Representative to the effect that Owner is authorized to lend money from
the Other Authorized Accounts for the benefit of the Designated Facilities,
along with appropriate supporting documentation with respect to the statements
contained in such certificate, which documentation shall be in form and
substance acceptable to Manager in the exercise of its reasonable discretion.
Owner acknowledges and agrees that in no event will Manager have any obligation
to pay any Daily Operating Expenses or the Regent Management Fee other than from
funds available in the applicable Depository Account, including funds deposited
therein by Manager after withdrawing funds from the Other Authorized Accounts,
if applicable, or to provide its own funds to satisfy or support in any manner
the working capital needs of the Facilities or to pay its own Base Management
Fee or, if applicable, Incentive Management Fee, and that (i) such working
capital is to be provided solely from the cash receipt of the Facilities, if
applicable, withdrawals from the Other Authorized Accounts and the working
capital provided by Owner pursuant to this Section I(h) and (ii) such management
fees are to be paid from the funds deposited by Manager in payment of the Regent
Management Fees and by Owner pursuant to this Section I(h)(v), if applicable, in
the Regent Account.
(vi) Owner acknowledges and agrees that in the course of its
operation of the Facilities Manager may incur common expenses benefiting all of
the facilities owned and/or operated by Manager, including the Facilities (the
"Common Expenses"). Such Common Expenses shall be included in the Daily
Operating Expenses of the Facilities and may be paid from the cash in the
applicable Depository Account(s) if (i) the same relate to the direct cost of
corporate, regional or divisional meetings or training sessions held by Manager
and in which the administrative personnel of the Facilities have participated
("Meeting and Training Common Expenses"), (ii) the same are included within the
approved annual capital or operating budgets ("Budgeted Common Expenses") or
(iii) the same are not Meeting and Training Common Expenses or Budgeted Common
Expenses (the "Other Common Expenses") but are approved by Owner, which approval
shall not be unreasonably withheld, after Manager has provided Owner with a
specification setting forth in reasonable detail the nature of such Other
Common Expenses.
(i) Personnel: All of the personnel of the Facilities, including the
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community directors, business managers and the Wellness Directors, if
applicable, shall be the employees of Owner and the salaries, bonuses,
commissions, state and federal payroll and social security tax obligations and
benefits paid to or on behalf of such employees shall be deemed to be included
in the Daily Operating Expenses of the Facilities and thus shall be paid from
the Facilities Depository Account, subject to the limitation set forth in
Section II with respect to the payment of Insurance Costs (as defined in Section
II). Notwithstanding the foregoing, Manager shall recruit, employ, train,
promote, direct, discipline, suspend and discharge the personnel of the
Facilities; establish salary levels, personnel policies and employee benefits;
and establish employee performance standards, all as needed during the term of
this Agreement to ensure the efficient operation of all departments within and
services offered by the Facilities.
(j) Supplies and Equipment: Manager shall purchase supplies and
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non-capital equipment needed to operate the Facilities. 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: Manager shall, with the assistance and at the
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direction of Owner and its legal counsel, take any and all appropriate steps to
protect and/or assist in litigating to a final decision in an appropriate court
or forum any such third party claim of violation, order, rule or regulation
affecting the Facilities and its operation or any claim, loss, violation or
cause of action relating to the Facilities. All of the costs incurred in any
litigation of third party claims respecting the Facilities, including the
reasonable legal fees and expenses of legal counsel retained to defend Owner
and/or Owner and Manager jointly and/or any landlord or lender, shall be
included in the Daily Operating Expenses and shall be reimbursed from the funds
in the Depository Account of the applicable Facility established pursuant to
Section 1(h) if previously paid by Owner or shall be paid from the funds in the
Depository Account of the applicable Facility if not previously paid by Owner.
Nothing herein shall be construed as precluding Owner from seeking to recover
from Manager the fees and expenses described in this Section I(k) to the extent
Manager is otherwise liable therefore under the default or indemnification
provisions of this Agreement.
(l) Budgets:
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(i) The Facilities shall be operated on a fiscal year of January 1 through
December 31, other than the Villa Serra facility which shall be operated on a
fiscal year of July 1 through June 30
(ii) Owner and Manager shall agree prior to the Commencement Date
(as hereinafter defined) on an initial operating budget and capital budget for
the period from the Commencement Date through December 31, 2002.
(iii) Prior to the start of each subsequent fiscal year, Manager
shall prepare and submit to Owner for its review and approval, which approval
shall not be unreasonably withheld, an annual operating budget, an annual
capital expenditure budget, an annual operating plan, an annual marketing plan
and an annual cash flow projection for each of the Facilities. The annual
operating budget and capital expenditure budget shall be prepared using the
format set forth in Exhibit H. In the event a budget for a Facility has not been
agreed upon by the beginning of the fiscal year for any reason whatsoever
including Owner's or Manager's unreasonable refusal to approve the same, Manager
sole remedy shall be that the operating results of the prior fiscal year for
such Facility plus 5% shall serve as the budget for the following fiscal year
for such Facility unless and until the new budget is agreed upon, it being
understood and agreed that the refusal by Owner or Manager to approve a budget
shall not be deemed to be an Event of Default hereunder.
(m) Collection of Accounts: Manager shall issue bills for goods and
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services furnished by the Facilities during the term of this Agreement and shall
attempt to collect the balances reflected on such bills, including, but not
limited to, enforcing the rights of Owner and the Facilities 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 with respect to any
Facility shall be included in the Daily Operating Expenses of such Facility and
shall be payable out of funds deposited in the Depository Account of such
Facility described in Section I(h). In addition, upon request by Owner, Manager
shall issue bills and collect accounts and monies owed for goods and services
furnished by the Facilities prior to the Commencement Date. Regardless of any
standard of performance set forth in this Agreement, Owner acknowledges and
agrees that there can be no assurances that Manager will be able to collect any
or all of the Facilities' accounts receivable.
(n) Contracts. Manager shall negotiate and enter into any and all
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contracts necessary from time to time in connection with the day to day
operation of the Facilities 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 Facilities, such as utility and tax ▇▇▇▇ review
services; provided that such contracts can be terminated on no more than 90 days
notice. Any contract which cannot be terminated on no more than 90 days notice
shall require the approval of Owner 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. All contracts shall be entered into in the name of Owner or the
Facilities.
(o) Manager's and Owner's Representative: Manager hereby appoints
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▇▇▇▇▇ ▇▇▇▇▇ (the "Manager's Representative") as the person employed by Manager
with whom Owner shall interact and upon whose decisions Owner shall be
authorized to rely, and Owner hereby appoints ▇▇▇▇ ▇▇▇▇▇ (the "Owner's
Representative") as the person employed by Owner 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 Owner designating the
replacement Manager's Representative and Owner shall have the right from time to
time during the term of this Agreement to replace the Owner's Representative
upon written notice to Manager designating the replacement Owner's
Representative. Nothing herein shall be construed as imposing any personal
liability on the Manager's Representative or Owner's Representative with respect
to the acts or omissions of Manager or Owner, respectively, under this
Agreement.
II. Insurance: Owner shall, at its sole cost and expense, arrange for
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and maintain all necessary and proper property insurance covering the
Facilities, the furniture, fixtures, and equipment situated thereon, and all
necessary and proper professional and commercial general liability insurance
for Owner's and Manager's protection. Manager shall, at its sole cost and
expense, maintain commercial general liability insurance for its operations.
All such liability insurance policies shall include coverage for liability to
each party's respective employees involved in the operation of the Facilities
and arising from any improper employment practices (except in the case of
Manager where Owner acknowledges no such coverage shall be provided by Manager)
and employee crime and theft coverage. All such policies of liability insurance
shall name the other party as, as well as any landlord or lender identified by
Owner to Manager in writing as additional insureds thereunder (except in the
case of Manager's directors and officers insurance and employee crime insurance
as to which Owner acknowledges Manager has advised it no such additional
insureds shall be named). In addition, each party shall provide all employee
health and worker's compensation insurance required for their respective
employees. Each party shall be responsible for all deductibles due with
respect to any insurance maintained by it and for any uninsured losses of any
nature whether arising from an failure by the party to maintain insurance or
from the loss not being covered under the terms of any policy of insurance
maintained by the party. All premiums, claims and deductibles related to the
Owner's insurance covered by this Section II (the "Insurance Costs") shall, at
Owner's request, be paid by Manager from the applicable Facility's Depository
Account provided (i) Owner has provided Manager in writing with reasonable
details concerning the amount to be paid and the purpose of such payment, (ii)
there are sufficient funds, whether in the form of cash receipts of the
Facilities or working capital funds deposited by Owner, in the Depository
Account to enable Manager to pay the same from the Depository Account, (iii) all
other Daily Operating Expenses and the Regent Management Fee which are then due
and payable have been paid from the Depository Account as of the time when Owner
requests payment of the premiums, deductibles and/or claims from the Depository
Account, (iv) Manager's Base Management Fee and, if applicable, Incentive
Management Fee which are then due and payable have been paid from the Regent
Account as of the time when Owner requests payment of the premiums, deductibles
and/or claims from the Depository Account and (v) Owner in not otherwise in
default of its obligations under this Agreement.
III. Proprietary Interest and Noncompetition:
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a. The systems, methods, procedures and controls employed by Manager and
Owner and any written materials, computer software or policies developed by
Manager and Owner to document the same are to remain the property of Manager and
Owner respectively and are not, at any time during or after the term of
this Agreement, to be utilized, distributed, copied or otherwise employed or
acquired, except as authorized by the respective owner thereof, provided,
however, that upon request of Owner, Manager shall negotiate in good faith the
terms and conditions upon which Owner may be permitted by Manager to use such
systems, methods, procedures, controls, materials, software or brochures
containing Manager's name or logo for a limited transitional period following
the termination of this Agreement, which terms and conditions shall be
satisfactory to both Manager and Owner in their respective discretion.
b. With respect to each of the Facilities, from the Commencement Date until
the earlier to occur of (i) the termination of this Agreement by Manager as a
result of the occurrence of an Owner Event of Default or (ii) the date on which
Owner, voluntarily or involuntarily, losses possession of such Facility or (iii)
three years after the expiration of the term of this Agreement as to such
Facility for any reason whatsoever other than the reasons set forth in clause
(ii), Manager shall not solicit, discuss, negotiate or enter into any agreement
or arrangement by which the Manager would obtain any substantial control of the
ownership or management of such Facility from any third party having an
interest in such Facility superior to the Owner's. The restrictions in the
preceding sentence shall be applicable, without limitation, to any purchase,
lease, license, franchise, partnership, joint venture or other means, direct or
indirect by which Manager or any entity or person controlling, controlled by or
under common control with Manager obtains substantial ownership or control of
one or more of the Facilities; provided, however, nothing herein shall be
construed to prohibit the acquisition by an entity under common control with
Manager of the Facility in Folsom, California and of one of the Facilities in
Scottsdale, Arizona.
IV. Term of Agreement and Termination Payments:
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(a) The Term of this Agreement shall commence on January 1, 2002 (the
"Commencement Date") provided as of that date, in the case of the Facilities
located in California, Manager has been added to the license to operate the
Facilities (the "Licensure Condition"). In the event the Licensure Condition
has not been satisfied as of the Commencement Date as to any or all of the
Facilities located in California, then as to the Facilities with respect to
which the Licensure Condition has not been satisfied, Manager and Owner shall
enter into an Accounting Services and Consulting Agreement in the form approved
by Manager and Owner and Manager shall provide the services reflected therein
until the Licensure Condition is satisfied as to such Facilities; provided,
however, if, as to any or all of the California Facilities, the Licensure
Condition has not been satisfied by June 30, 2002, then this Agreement shall be
null and void and of no further force and effect with respect to any of the
California Facilities for which the Licensure Condition has not been satisfied
and neither Owner nor Manager shall have any further rights hereunder with
respect to such California Facilities but such termination shall not affect
Owner's rights or Manager's obligations under the Accounting Services and
Consulting Agreement executed with respect to such California Facilities on the
Commencement Date.
(b) The Term of this Agreement shall terminate upon the first to
occur of the following:
(i) the occurrence of an Event of Default hereunder and the exercise by
Manager or Owner, as applicable, of its right to terminate this Agreement as a
result thereof; or
(ii) on written notice from Owner to Manager delivered within the last
ninety days of the third year of the term of this Agreement (the "Termination
Period") terminating this Agreement as of the end of the third (3rd) year of the
term of this Agreement (the "Termination Notice"); provided, however, if
the Termination Notice is not delivered by Owner within the Termination Period,
then this Agreement shall automatically renew for successive one year terms,
subject to Owner's right to terminate the same on no less than ninety (90) days
written notice to Manager; or
(iii) on no less than ninety (90) days written notice from either Owner or
Manager as to all, but not less than all, of the Facilities; or
(iv) with respect to one or more Facilities, by Owner or Manager on no less
than ninety (90) days prior written notice in the event that at any time during
the term of this Agreement Owner will no longer own or control such
Facilities whether resulting from a sale or other reasons, whether voluntary or
involuntary; or
(v) with respect to one of more of the Facilities, by Owner in the event it
is unable on or before February 28, 2002 to secure any consents of its lenders,
landlords or joint venture partners which may be required for it to enter into
this Agreement with Manager (the "Third Party Consents"); provided, however, in
the event of the termination of this Agreement by Owner pursuant to this Section
IV(b)(v), effective with the termination of this Agreement as to the
affected Facility, Owner and Manager shall enter into an Accounting Services
Agreement with respect to such Facility unless prohibited by such lender,
landlord or joint venture partner; and provided, further, that Owner shall be
solely responsible for any and all costs of securing such Third Party Consents,
including any consent fees or other consideration required by such landlords,
lenders or joint venture partners as a condition to granting their consent.
For the purposes of Sections IV, V, and VI of this Agreement, any
termination due to an Owner Event of Default or a Manager Event of Default or by
Owner pursuant to Section IV(b)(v) shall be a partial termination as if there
were a separate Agreement for each Facility if the Event of Default or failure
to secure the necessary Third Party Consent relates to less than all of the
Facilities. In such event, Owner's or Manager's required termination payments
shall only be with respect to the Facilities covered by the partial termination.
(c) In the event of the termination of this Agreement prior to the
end of the third year of this Agreement, the following payments shall be due and
owing from Manager or Owner, as applicable:
(i) In the event of the termination of this Agreement by Owner as a result
of the occurrence of a Manager Event of Default, Manager shall pay to Owner an
amount equal to one month's base management fee concurrently with the
termination of this Agreement.
(ii) In the event of the termination of this Agreement during the first
year either by Manager as a result of the occurrence of an Owner Event of
Default of the Term or by Owner pursuant to Section IV(b)(iii) other than with
respect to the ▇▇▇▇▇ Facilities (as hereinafter defined), Owner shall pay to
Manager an amount equal to the sum of (A) the difference between the aggregate
Base Management Fee due during the first year of the Term and the Base
Management Fee actually paid to Manager to the date of such termination and (B)
the difference between the Annualized Incentive Management Fee (as hereinafter
defined) and the Incentive Management Fee actually paid to the date of
termination. For purposes hereof, the Annualized Incentive Management Fee shall
mean the Incentive Management Fee paid to the date of termination divided by the
number of months for which the payment has been made and multiplied by twelve.
For purposes hereof, the ▇▇▇▇▇ Facilities shall mean the Facilities located in
Eugene, Oregon, Santa Cruz, California, Scottsdale, Arizona (Desert Flower),
Portland, Oregon and Redmond, Washington.
(iii) In the event of the termination of this Agreement at any time after
the first year of the Term either by Manager as a result of the occurrence of an
Owner Event of Default or by Owner pursuant to Section IV(b)(iii), Owner shall
pay to Manager an amount equal to the sum of (A) then applicable Base Management
Fee multiplied by three and (B) the Annualized Incentive Management Fee for the
year in which the termination occurs, divided by twelve and multiplied by three.
(iv) In the event of the termination of this Agreement by Manager pursuant
to Section IV(b)(iii) no payment shall be due from Manager to Owner upon
termination and in the event of the termination of this Agreement by Owner
pursuant to Section IV(b)(v) no payment shall be due from Owner to Manager upon
termination.
(v) Examples of the calculation of the termination fees due pursuant to this
Section IV(c) are set forth in Exhibit I.
(d) In the event of the termination of this Agreement by Owner or
Manager in accordance with the terms hereof, (A) no such termination shall be
effective until all amounts due and owing from one party to the other in
accordance with the terms of this Agreement, including the monetary damages
specifically provided for in Sections VI(a) and (b), but specifically excluding
any other damages alleged to have been suffered by a party as a result of the
termination of this Agreement after the occurrence of an Event of Default, have
been paid in full and (B) Manager shall cooperate with Owner or its designee, at
no cost to Manager and without the assumption of any further liability by
Manager other than the liability imposed on Manager under this Agreement, in an
orderly transition of operational responsibility for the affected Facility or
Facilities to Owner or its designee subject to the limitation set forth in this
Section IV with respect to Owner's obligation to remove Manager from any
affected Facility's license before such termination and transfer are effective.
(e) Notwithstanding the foregoing, in the event that Manager is named
on the license to operate the affected Facility or Facilities at the time of the
termination of this Agreement with respect thereto, then this Agreement shall
remain in effect as to such Facility or Facilities until such time as Owner is
able to provide Manager with evidence that Manager has been removed from the
license(s).
V. Default: Either party may terminate this Agreement, as specified in
-------
this Section V, in the event of a default ("Event of Default") by the other
party.
(a) With respect to Manager, it shall be an "Event of Default"
hereunder:
(i) If Manager shall fail to keep, observe or perform any
material agreement, term or provision of this Agreement, and such default shall
continue for a period of forty five (45) days (subject to the force majeure
provisions below) after notice thereof shall have been given to Manager by
Owner, which notice shall specify in detail the event or events constituting the
default;
(ii) If Manager shall (A) apply for or consent to the
appointment of a receiver, trustee or liquidator of Manager of all or a
substantial part of its assets, (B) file a voluntary petition in bankruptcy, or
admit in writing its inability to pay its debts as they become due, (C) make a
general assignment for the benefit of creditors, or (D) file a petition or an
answer seeking reorganization or arrangement with creditors or taking advantage
of any insolvency law, or if an order judgment or decree shall be entered by a
court of competent jurisdiction, on the application of a creditor, adjudicating
Manager, a bankrupt or insolvent or approving a petition seeking reorganization
of Manager, or appointing a receiver, trustee or liquidator of Manager, of all
or a substantial part of its assets;
(iii) If, at anytime after the Protected Period, (A) proceedings are
commenced which threaten to revoke, rescind, terminate or not renew the
licensure or certification of the Facilities and Manager is unable to develop a
plan of correction with respect thereto which is acceptable to the applicable
state or federal authorities within the applicable cure period provided by such
authorities or (B) a ban on admissions lasting more than ninety (90) days is
imposed against the Facilities; or
(iv) If at the end of any year, the actual "Net Operating
Income/Loss Before Property" less "Property Insurance" and "Liability Insurance"
for any Facility as reflected on the financial statements of the Facilities
prepared by Manager is more than ten percent (10%) less than the amount for "Net
Operating Income/Loss Before Property" less "Property Insurance" and "Liability
Insurance" as reflected in the annual approved operating budget for such
Facility the same shall be an Event of Default but only with respect to the
affected Facility .
(b) With respect to Owner, it shall be an Event of Default
hereunder:
(i) If Owner shall fail to make or cause to be made any
payment to Manager required to be made hereunder (other than its working capital
obligation which is addressed in clause (iii)) and such failure shall continue
for a period of thirty (30) days after notice, which notice shall specify the
payment or payments which Owner has failed to make;
(ii) If Owner shall fail to keep, observe or perform any
material agreement, term or provision of this Agreement and such default shall
continue for a period of forty five (45) days after notice (subject to the force
majeure provisions below), which notice shall specify in detail the event or
events constituting the default thereof by Manager to Owner;
(iii) If Owner shall fail to provide necessary working
capital upon demand by Manager with respect to the payment of the Daily
Operating Expenses or the Base Management Fee or, if applicable, Incentive
Management Fee due to Manager within the time provided in Section I(h), and such
failure continues uncured for five (5) business days after Manager gives Owner
notice of such failure;
(iv) If Owner shall fail to make payments, or keep any
covenants, owing to any third party which are beyond the control of Manager to
make or keep (which for purposes hereof shall include any covenants by which
Owner may be bound as of the Commencement Date (the "Pre-Existing Covenants") or
to which Owner may agree to be bound after the Commencement Date without the
prior approval of Manager (the "Unapproved Covenants")), and which would cause
Owner to lose possession of the Facilities or any personal property required to
operate the Facilities in the normal course; provided that Manager shall give
Owner prompt notice of any such payment and failure to pay of which Manager has
knowledge;
(v) If Owner shall be dissolved or shall apply for or consent
to the appointment of a receiver, trustee or liquidator of Owner or of all or a
substantial part of its assets, file a voluntary petition in bankruptcy, or
admit in writing its inability to pay its debts as they become due, make a
general assignment for the benefit of creditors, file a petition or an answer
seeking reorganization of arrangement with creditors or taking advantage of any
insolvency law, or if an order, judgment or decree shall be entered by a court
of competent jurisdiction, on the application of a creditor, adjudicating Owner
a bankrupt or insolvent or approving a petition seeking reorganization of Owner
or appointing a receiver, trustee or liquidator of Owner of all or a substantial
part of its assets; or
(vi) If Owner or any of its principal officers is convicted
or a crime that materially affects the operation or regulation of the
Facilities.
VI. Remedies and Obligations Upon Default:
-----------------------------------------
(a) If any Event of Default by Owner shall occur, Manager may, in
addition to any other remedy available to it in law or equity on account of such
Event of Default, forthwith terminate this Agreement, and neither party shall
have any further obligations whatsoever under this Agreement except for
Manager's right to receive damages from Owner in the amount specified in Section
IV and except any settlement and payment obligations and other obligations that
by their nature survive termination of this Agreement.
(b) If any Event of Default by Manager shall occur, Owner may, in
addition to any other remedy available to it in law or equity on account of such
Event of Default, forthwith terminate this Agreement and the exclusive right to
possession of the Facilities granted to Manager hereunder, and neither party
shall have any further obligation whatsoever under this Agreement; except for
Owner's right to receive payment of liquidated damages from Manager in an amount
specified in Section IV.
VII. Owner's Inspection: During the term hereof, Owner may enter and
-------------------
inspect the Facilities at any time provided Owner coordinates such inspections
with the on site administrative personnel at the Facilities in order to minimize
any disruption of Manager's day to day operations of the Facilities and to
ensure that such inspections do not violate resident rights to privacy under
state or federal resident rights laws. During such inspections, Owner may
inspect and/or audit all books and records pertaining to the operation of the
Facilities. In addition, Owner shall have the right to conduct telephonic or
personal interviews with the Community Directors and/or with any of Manager's
regional personnel involved in the operation of the Facilities with respect to
any matters related to the operation thereof subject to the same duty to
minimize the disruption to Manager's operations resulting from such interviews.
In no event will Owner have the right as part of such inspections or otherwise
to provide directions to the employees of the Facilities, it being understood
and agreed that all such directions shall come from Manager for so long as this
Agreement is in effect and in the event of any disputes between Owner and
Manager with respect to the management of the Facilities the same shall be
resolved directly between Owner and Manager.
VIII. Operations of the Facilities:
-------------------------------
(a) Standard of Performance: In performing its obligations under
------------------------
this Agreement, Manager shall manage the Facilities as licensed assisted living
facilities 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
Facilities; provided, however, that regardless of the standard of performance
imposed by this Section VIII(a), Manager shall have no liability in the event
the operation of the Facilities fail to comply with the Pre-Existing Covenants
or the Unapproved Covenants.
(b) Force Majeure: Neither party will 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, (but
excluding lack of the party's own financial resources), or any statute,
regulation or rule of federal, state or local government or agency thereof or,
in the case of Manager, unreasonable interference by Owner with Manager's
performance of its duties hereunder or in the case of Owner, unreasonable
interference by Manager with Owner's performance of its duties hereunder.
(c) Minimum Bank Balances: During the Term hereof, Owner and
----------------------
Manager shall attempt to agree on the necessary minimum cash balance to be
maintained in the Depository Account for each Facility but if they are unable to
so agree such minimum cash balance shall upon demand of Manager be required to
be equal to the amount reflected in Exhibit K opposite the name of such Facility
and Owner shall upon demand in accordance with Section I(h) provide Manager with
any working capital which may be needed to enable Manager to maintain such
minimum cash balances. In addition, during the Term hereof, Owner shall at all
times maintain a minimum balance in the Regent Account of $80,000.
IX. Management Fee:
---------------
(a) In consideration for the provision of the services contemplated in
this Agreement, Manager shall receive a management fee of $8,000 per month per
Facility for each of the Facilities other than the West Covina and Merced
Facilities as to which the fee shall be $2,000 per month per Facility until
Owner is licensed to operate the West Covina Facility, which is currently
anticipated to be on or about March 1, 2002, at which time the fee shall be
increased to $8,000 per month for the West Covina Facility and until Owner is
licensed to operate the Merced Facility, which is currently anticipated to be on
or about March 1, 2002, at which time the fee shall be increased to $8,000 per
month for the Merced Facility (the "Base Management Fee") payable in advance on
the first day of each month during the term of this Agreement except for the
month of January 2002, one third of which shall be paid on the earlier to occur
of the first day of February, March and April of 2002 or the date of the
termination of this Agreement. The Base Management Fee payable with respect to
all of the Facilities shall be increased by 5% on the second anniversary of the
Commencement Date.
(b) In addition, to the Base Management Fee, with respect to certain of the
Facilities identified in Section IX(c)(i) below (the "Incentive Fee Facilities")
Manager shall be entitled to receive an additional fee (the "Incentive
Management Fee) equal to the Applicable Percentage of the Excess Cash Flow of
the Incentive Fee Facilities. The Incentive Management Fee shall be due and
payable quarterly in arrears.
(c) For purposes of calculating the Incentive Management Fee, the following
definitions shall apply:
(i) Applicable Percentage shall mean ten (10%) for the Eugene, OR, Santa
Cruz, CA, Scottsdale, AZ, Portland, OR, Boise, ID (West Wind), Boise, ID (Willow
Park), Modesto, CA, West Covina and Merced Facilities. Applicable
Percentage shall mean two and one half (2.5%) percent for the ▇▇▇▇▇▇▇, CA, San
Antonio, TX and Clovis, CA Facilities.
(ii) Applicable Period shall mean a three month period with the first
Applicable Period being the three month period commencing on the Commencement
Date and ending on the last day of the third month thereafter.
(iii) Quarterly Cash Flow shall mean the Cash Flow of each of the
Incentive Fee Facilities for the Applicable Period.
(iii) Base Cash Flow shall mean the Cash Flow of each of the Incentive
Fee Facilities during December, 2001 multiplied by three.
(iv) Deficit Cash Flow shall mean the amount by which the Quarterly
Cash Flow is less than the Base Cash Flow.
(v) Deficit Payment shall mean an amount equal to the Deficit Cash Flow
multiplied by the Applicable Percentage.
(vi) Excess Cash Flow shall mean the amount by which the Quarterly Cash
Flow exceeds the Base Cash Flow.
(vi) Cash Flow (A) prior to the Commencement Date shall mean the amount
reflected on the Owner's financial statements under the caption "Net Income From
Rental Operations" after adding back the amount reflected on the Owner's
financial statements under the caption "Insurance" and any non-recurring one
time charges and/or credits reflected in the Owner's December, 2001 financial
statements and (B) after the Commencement Date shall mean the amount reflected
on Manager's financial statements under the caption "Net Operating Income/Loss
Before Property" after adding back the amount reflected on the Manager's
financial statements under the captions "Property Insurance" and "Liability
Insurance."
(d) Within thirty (30) days after the end Applicable Period, Manager
shall submit to Owner a calculation of the Incentive Management Fee due for the
Applicable Period with respect to each of the Incentive Fee Facilities (the
"Incentive Management Fee Calculation"). If the Incentive Management Fee
Calculation shows with respect to any of the Incentive Fee Facilities that there
was Excess Cash Flow during the Applicable Period, then the Incentive Management
Fee due with respect to such Incentive Fee Facilities shall be paid by Manager
to itself from the funds in the Regent Account or from the funds deposited
therein by Owner pursuant to Section I(h) if the funds in the Regent Account are
not sufficient to enable the Incentive Management Fee to be paid when due. If
the Incentive Management Fee Calculation shows that there was not Excess Cash
Flow during the Applicable Period with respect to any of the Incentive Fee
Facilities, then no Incentive Management Fee shall be due and payable by Owner
to Manager for Applicable Period with respect to such Incentive Fee Facilities.
If the Incentive Management Fee Calculation shows Deficit Cash Flow during the
Applicable Period with respect to any of the Incentive Fee Facilities, then a
Deficit Payment shall be due from Manager to Owner with respect to the affected
Incentive Fee Facility or Facilities but in no event shall the aggregate Deficit
Payments from Manager to Owner with respect to any Incentive Fee Facility in any
calendar year of the Term exceed the aggregate Incentive Management Fee payments
paid to Manager during such year for such Incentive Fee Facility
(e) If the services of Manager commence or terminate (for any reason,
including those set forth in Paragraph V) other than on the first day of the
month, the revenues upon which the fee is calculated shall be prorated in
proportion to the number of days for which services are actually rendered.
(f) The Base Management Fee and the Incentive Management Fee provided
for herein shall be disbursed by Manager to itself out of the Regent Account in
accordance with the provisions of I(H).
(g) Any amounts due from Owner to Manager or Manager to Owner pursuant to
this Section IX which are not paid when due shall bear interest at the annual
rate equal to the Prime Rate as set forth in the Money Rates Section of The Wall
Street Journal (as the same may change from time to time) plus 5% from the
date due to the date paid in full.
(h) Examples of the calculation of the Incentive Management Fee due to
Manager and Deficit Payments due from Manager are set forth in Exhibit J.
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
Owner.
XI. Notices: All notices required or permitted hereunder shall be
-------
given in writing by hand delivery, by registered or certified mail, postage
prepaid, by overnight delivery or by facsimile transmission (with receipt
confirmed with the recipient). Notice shall be delivered or mailed to the
parties at the following addresses or at such other places as either party shall
designate in writing. All notices shall be deemed duly given when delivery is
received or refused by a party if delivered by hand, three (3) business days
after being deposited in the mails if sent by registered or certified mail, on
the next business day if sent by overnight delivery and on confirmed receipt, if
sent by facsimile transmission.
To Manager: Emeritus Corporation
▇▇▇▇ ▇▇▇▇▇▇▇ ▇▇▇▇▇▇
▇▇▇▇▇ ▇▇▇
▇▇▇▇▇▇▇, ▇▇ ▇▇▇▇▇
Facsimile: ▇▇▇-▇▇▇-▇▇▇▇
Attn: ▇▇▇▇▇▇▇ ▇. ▇▇▇▇▇▇▇▇▇▇, Vice President-Finance
To Owner: Regent Assisted Living, Inc.
Bank of America Building
▇▇▇ ▇▇ ▇▇▇▇▇▇▇▇
▇▇▇▇▇ ▇▇▇
▇▇▇▇▇▇▇▇, ▇▇ ▇▇▇▇▇
Facsimile: ▇▇▇-▇▇▇-▇▇▇▇
Attn: ▇▇▇▇ ▇▇▇▇▇, President
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 Facilities shall be deemed to
be performed in its capacity as an independent contractor. Nothing contained in
this Agreement is intended to or shall be construed to give rise to or create a
partnership or joint venture or lease between Owner, its successors and assigns
on the one hand, and 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 Facilities as the
agent of Owner, such as credit applications for supplies, banking resolutions
for the Depository Account, utility deposit forms, etc.
XIII. Indemnification: Manager shall indemnify, defend and hold
---------------
harmless Owner from any loss incurred by or damage to Owner where such loss or
damage results from the negligence or willful misconduct of Manager in
performing its obligations under this Agreement or from a breach of this
Agreement by Manager; provided, however, Owner specifically acknowledges and
agrees that nothing in this Section XIII shall be construed as imposing any
liability on Manager for any insurance deductibles for which Owner shall be
solely responsible under Section II hereof. Owner shall indemnify, defend and
hold Manager harmless from any loss incurred by or damage to Manager where such
loss or damage results from the negligence or willful misconduct of Owner in
performing its obligations under the Agreement, from a breach of this Agreement
by Owner, from Owner's lack of authority to enter into this Agreement or in the
event any lease, loan, limited liability company operating agreement or other
document or instrument to which Owner (or, in the case of third party management
agreements, Owner's principal) may be a party prohibits Manager from fulfilling
any of the obligations imposed on Manager or from exercising any of the rights
granted to Manager hereunder.
XIV. Entire Agreement: This Agreement contains the entire agreement
-----------------
between the parties relating to the operation of the Facilities and shall be
binding upon and inure to the benefit of their successors and assigns. This
Agreement may not be modified or amended except by written instrument signed by
both of the parties hereto.
XV. Captions: The captions used herein are for convenience of
--------
reference only and shall not be construed in any manner to limit or modify any
of the terms hereof.
XVI. Arbitration: In the event of any dispute among the parties
-----------
regarding the Facilities or this Agreement, the parties agree to submit the same
to resolution before an arbitrator, in the case of disputes alleged to involve
less than $250,000, and before a panel of three arbitrators, in the case of
disputes alleged to involve $250,000 or more, selected by mutual agreement of
the parties or, if the parties are unable to agree on an arbitrator or panel of
arbitrators within a period of twenty (20) days, selected by a court of
competent jurisdiction. Such arbitration shall be held in accordance with the
rules of the American Arbitration Association and the decision of the arbitrator
shall be final and binding on the parties and may be enforced by a court of
competent jurisdictionThe party requesting arbitration shall do so by giving
notice to that effect to the other party, specifying in reasonable detail in
said notice the nature of the dispute; provided, however, in the event that
notwithstanding the terms hereof, a party commences legal proceedings, rather
than arbitration proceedings, before a court of competent jurisdiction, the
other party shall be deemed to have forfeited its right to have such dispute
determined by binding arbitration in accordance with this Section XVI unless
within thirty (30) days after being served with the first pleading in such legal
proceedings, it files a motion to dismiss such legal proceedings and serves on
the other party notice of its intent to submit such dispute to arbitration. Any
party who fails to submit to binding arbitration following a lawful demand by
the other party shall bear all costs and expenses, including reasonable
attorneys fees (including those incurred in any trial, bankruptcy proceeding,
appeal or review) incurred by the other party in obtaining a stay of any pending
judicial proceeding concerning a dispute which by the terms of this Agreement
has been properly submitted to mandatory arbitration and/or in compelling
arbitration of any dispute. All disputes under this Section XVI shall be
determined in the City of Portland, Oregon, if the arbitration is initiated by
Owner and in the City of Seattle, Washington, if the arbitration is initiated by
Manager, by a single arbitrator. All arbitrators shall be a licensed attorneys
having at least ten (10) years experience, with at least five (5) years
experience with assisted living facility sale, lease or management transactions.
The award in such arbitration may be enforced on the application of either party
by the order of judgment of a court of competent jurisdiction. The prevailing
party shall be entitled to recover the reasonable fees and expenses of its
attorneys and experts. The arbitrator(s) shall resolve all disputes in
accordance with the substantive law of the state of Oregon. The arbitrator(s)
shall have no authority or jurisdiction to award any damages or any other
remedies beyond those which could have been awarded in a court of law if the
parties had litigated the claims instead of arbitrating them. The parties shall
not assert any claim for punitive damages . The Federal Arbitration Act, Title
9 of the United States Code, is applicable to this transaction and shall be
controlling in any judicial proceedings and in the arbitration itself as to
issues of arbitrability and procedure. Nothing herein shall preclude a party
from curing either their own or the other party's alleged default which is, or
could be, the subject of an arbitration proceeding under this Section XVI or
from seeking equitable relief which the arbitrator or panel of arbitrators is
not empowered to award, such as an injunction, receivership, attachment or
garnishment.
XVII. Severability: In the event one or more of the provisions
------------
contained in this Agreement is deemed to be invalid, illegal or unenforceable in
any respect under applicable law, the validity, legality and enforceability of
the remaining provisions hereof shall not in any way be impaired thereby.
XVIII. Cumulative; No Waiver: No right or remedy herein conferred upon
---------------------
or reserved to either of the parties hereto is intended to be exclusive of any
other right or remedy, and each and every right and remedy shall be cumulative
and in addition to any other right or remedy given hereunder, or now or
hereafter legally existing upon the occurrence of an Event of Default hereunder.
The failure of either party hereto to insist at any time upon the strict
observance or performance of any of the provisions of this Agreement or to
exercise any right or remedy as provided in this Agreement shall not impair any
such right or remedy or be construed as a waiver or relinquishment thereof with
respect to subsequent defaults. Every right and remedy given by this Agreement
to the parties hereof may be exercised from time to time and as often as may be
deemed expedient by the parties thereto, as the case may be.
XIX. Authorization for Agreement: The execution and performance of
-----------------------------
this Agreement by Owner and Manager have been duly authorized by all necessary
laws, resolutions or corporate action, and this Agreement constitutes the valid
and enforceable obligations of Owner and Manager in accordance with its terms.
XX. Counterparts: This Agreement may be executed in any number of
------------
counterparts, each of which shall be an original, and each such counterpart
shall together constitute but one and the same Agreement.
XXI. Confidentiality: Throughout the Term of this Agreement and for a
----------------
period of one (1) year after the expiration or earlier termination of this
Agreement, each of Manager and Owner agrees to maintain the confidentiality of
any proprietary information concerning the other or the Facilities to which they
may gain access during the term of this Agreement and shall only disclose the
same with the consent of the other party or as required by an order of a court
of competent jurisdiction.
XXII. Construction: Each of the parties acknowledges and agrees that it
-------------
has participated in the drafting and negotiation of this Agreement.
Accordingly, in the event of a dispute with respect to the interpretation or
enforcement of the terms hereof, no provision shall be construed so as to favor
or disfavor either party hereto.
IN WITNESS WHEREOF, the parties have hereto caused this Agreement to
be duly executed, as of the day and year first above written.
REGENT ASSISTED LIVING, INC.
By: /s/ ▇▇▇▇ ▇▇▇▇▇
▇▇▇▇ ▇▇▇▇▇
Its: _____________________________________
EMERITUS CORPORATION
By: /s/ ▇▇▇▇▇▇▇ ▇. ▇▇▇▇▇▇▇▇▇▇
▇▇▇▇▇▇▇ ▇. ▇▇▇▇▇▇▇▇▇▇
Its: _____________________________________
EXHIBIT A
DESCRIPTION OF THE FACILITIES, INCLUDING
WHETHER OWNED, LEASED OR MANAGED BY REGENT
EXHIBIT B
ACCOUNTING TRANSITION SERVICES
EXHIBIT C
ADDITIONAL SPECIFIC REPORTING OBLIGATIONS BY FACILITY
EXHIBIT D
FORM OF FINANCIAL STATEMENTS
EXHIBIT E
FACILITY BANK ACCOUNT INFORMATION
EXHIBIT F
REGENT MANAGEMENT FEES BY FACILITY
EXHIBIT G
RENT AND DEBT SERVICE PAYMENTS BY FACILITY
EXHIBIT H
FORM OF BUDGET
EXHIBIT I
TERMINATION FEE CALCULATION EXAMPLES
EXHIBIT J
INCENTIVE MANAGEMENT FEE AND DEFICIT PAYMENT
CALCULATION EXAMPLES
EXHIBIT K
MINIMUM BANK BALANCES