WAIVER, CONSENT AND AMENDMENT TO
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MANAGEMENT AGREEMENT
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This Waiver, Consent and Amendment to Management Agreement (this
"Agreement") is made this 1st day of May 2002 by and among Emeritus Management
LLC, a Washington limited liability company ("Emeritus Manager"), Emeritus
Corporation, a Washington Corporation ("Emeritus" together with Emeritus Manager
collectively referred to herein as "Manager"), the entities set forth in Exhibit
A attached hereto and made a part hereof by reference (the "Facility Entities"),
and AL Investors LLC, a Delaware limited liability company, for itself and as
sole managing member or sole managing member of the general partner of each of
the Facility Entities ("AL Investors"). AL Investors and the Facility Entity
which owns the Facility are sometimes collectively referred to herein as
"Owner."
Recitals
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A. Emeritus Manager, Emeritus, Emeritus Management I LP, a Washington
limited partnership, the Owners, ESC I, L.P., a Washington limited partnership
("ESC"), and Emeritus Properties I, Inc., a Washington corporation ("EPI")
entered into that certain Management Agreement with Option to Purchase, dated
December 30, 1998, as amended by First Amendment dated March 22, 2001 and by
Second Amendment dated January 1, 2002, pursuant to which, among other things,
Owners engaged the Manager to manage certain Facilities described therein (the
"Management Agreement"). Pursuant to the terms of the Management Agreement, ESC
and EPI have ceased to be Managers under the Management Agreement.
B. Pursuant to the Management Agreement, Manager is the manager of that
certain Facility commonly known as Laurel Place, 000 X. Xxxxxxx Xxxxxx, Xxx
Xxxxxxxxxx, XX 00000 (the "Facility").
C. Manager desires to enter into a Submanagement Agreement with JPH
Management, Inc., a California corporation ("JPH"), pursuant to which, among
other things, JPH would manage and operate the Facility and Manager would grant
JPH an option to purchase the Facility (the "Submanagement Agreement").
D. Manager further desires to enter into an Accounting and Consulting
Agreement with JPH pursuant to which JPH would provide certain accounting and
consulting services to the Facility pending commencement of the term of the
Submanagement Agreement (the "Accounting Agreement").
E. Subject to the terms of this Agreement, Owners have agreed to
consent to the execution of the Submanagement Agreement and the Accounting
Agreement and to the rights granted to JPH thereunder, and to consent and
acknowledge that JPH may be a designee of Emeritus pursuant to Section 13 of the
Management Agreement for purposes of taking title to the Facility as provided
herein.
NOW, THEREFORE, in consideration of Ten and No/100 Dollars, the agreements
contained herein, and other good and valuable consideration, the receipt and
sufficiency of which is hereby acknowledged, the parties hereby agree as
follows:
Article 1
Definitions and General Conditions
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1.1 Definitions. All capitalized terms not otherwise defined herein shall
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have the meaning given them in the Management Agreement.
1.2 Continued Liability. Nothing in this Agreement shall be construed to
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modify or waive the obligations or liability of the Manager under the Management
Agreement except as expressly set forth in this Agreement. Without
limiting the generality of the foregoing, Manager shall continue to be liable
for performing or causing to be performed all of the obligations and agreements
set forth in the Management Agreement with respect to the Facility except only
as expressly set forth herein notwithstanding that Manager has elected to
subcontract such management to JPH. The waivers, consents and amendments to the
Management Agreement contained herein shall be construed to apply only to the
Facility and shall not amend or alter Manager's obligations and responsibilities
with respect to the management and operation of the remaining Facilities.
Nothing in this Agreement shall modify or waive the liability of Emeritus under
the Emeritus Guaranty or the liability of Xxxx under the Put and Purchase
Agreement.
1.3 Conditions. Owners' consent, waivers, and agreements contained
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herein shall continue only so long as (i) the Submanagement Agreement between
Manager and JPH is in effect, (ii) all guaranteed returns and other fees due and
payable to Manager under the Submanagement Agreement, defined therein as
'Emeritus' Return" ("Emeritus Return"), have been paid in full in a timely
manner to Emeritus, (iii) the Facility is operated in accordance with the
standards set forth in the Management Agreement and (iv) Owner has not
terminated the Management Agreement with respect to the Facility pursuant to
Section 9.7 of the Management Agreement (collectively, the "Conditions"). In
the event of a failure of any of the Conditions which continues for thirty (30)
days after written notice to Manager, this Agreement may be rescinded at Owners'
option after such thirty (30) days prior written notice to Manager and Manager
shall then resume the management of the Facility in accordance with the terms of
the Management Agreement and JPH shall have no further rights under the
Submanagement Agreement, including, but not limited to, with respect to the
purchase of the Facility.
1.4 Consent of Lenders. This Agreement shall be subject to the consent of
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the lenders under the Mortgage as set forth at the end of this Agreement.
1.5 Subordination. This Agreement is and at all times shall continue to be
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absolutely and unconditionally subject and subordinate to the Management
Agreement, the Emeritus Guaranty, the Mortgage, the Put and Purchase Agreement,
and to any renewals, extensions, modifications or replacements thereof.
1.6 No Third Party Beneficiary. All the terms and conditions of this
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Agreement are agreements by and between Manager and Owners. No other person or
entity, including, without limitation, JPH is intended to be a third party
beneficiary hereunder. Manager hereby agrees to indemnify, defend and hold
Owners, the holders of the Senior Loan, and the holders of the Junior Loan
harmless from and against any and claims made against Owners, the holders of the
Senior Loan or the holders of the Junior Loan by JPH arising out of or related
to this Agreement or arising out of or related to the Submanagement Agreement,
except any such claims arising out of the gross negligence or willful misconduct
of any of the Owners.
Article 2
Consent and Waivers
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2.1 Consent to Transfer of Management. Owners hereby consent to the
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engaging of JPH to provide certain accounting and consulting services pending
commencement of the Submanagement Agreement and to the subcontracting of the
management and operation of the Facility by the Manager to JPH, including,
without limitation, Manager's obligations and responsibilities under Sections
3.3 and 3.4 of the Management Agreement, agree that Manager's entry into the
Accounting Agreement and the Submanagement Agreement with JPH with respect to
the Facility will not constitute a default under the Management Agreement, and,
so long as the Conditions remain satisfied, waive as to the Facility Manager's
obligations contained in Subsection 3.2.3 (regarding compliance with Annual
Plan), Subsection 3.2.4 (regarding Group Services requirements), Section 8.1
(regarding establishment of bank accounts) and Section 8.2 (regarding
expenditures).
2.2 Waiver of Approval. Owners hereby waive their right to approve the
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Annual Plan with respect to the Facility, provided that Manager shall assure
that the Annual Plan is:
(a) consistent with the standards set forth in the Management
Agreement;
(b) consistent with Manager's obligations to operate the Facility
in an efficient manner which is customary and commercially reasonable in the
industry for comparable facilities;
(c) in compliance with the terms of any Mortgage; and
(d) in compliance with all Legal Requirements and Insurance
Requirements.
2.3. Waiver/Modification of Insurance Requirements. As described more
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fully in Exhibit B, Owners hereby waive, and/or agree to modifications of,
certain of the insurance requirements set forth in Section 5.5 of the Management
Agreement.
Article 3
Amendments to Management Agreement
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3.1. Financial Calculations. Pursuant to the Accounting Agreement and
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the Submanagement Agreement, JPH will retain all revenues and pay all expenses
related to the Facility, other than the allocable debt service paid to the
holder of the Senior Loan or paid or payable to the holder of the Junior Loan
for which Emeritus shall remain responsible (the "Facility Debt Service"), and
will pay the Emeritus Return as defined herein on a monthly basis to Emeritus
which shall be used by Emeritus to fulfill its obligations hereunder and under
the Accounting Agreement and the Submanagement Agreement with respect to the
payment of the Facility Debt Service. It is the intent of the parties hereto
that during the term of this Agreement the amount of the Emeritus Return paid by
JPH will be substituted under the Management Agreement in the calculation of
Operating Profit and Operating Deficit with respect to the Facility as follows:
(a) "Total Revenues" shall exclude all revenue from the Facility
other than the Emeritus Return or any other guaranteed return or other net
income paid to Manager in connection with the operation of the Facility; and
(b) "Operating Expenses" and "Fixed Operating Expenses" shall
exclude any expenses attributable to the Facility during the term of this
Agreement other than the Facility Debt Service.
Article 4
Option to Purchase the Facility
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It is the intention of the parties to this Agreement that if JPH elects to
purchase the Facility pursuant to the terms of the Submanagement Agreement,
Manager if then entitled to do so may exercise the option set forth below to
purchase the Facility from Owners separate and apart from the remaining
Facilities. In such event, Manager will then be able to cause the Owner of the
Facility to transfer the Facility to JPH as the designee of Manager under
Section 13 of the Management Agreement. It is further intended that the option
set forth below shall not replace the Purchase Option, but is only intended to
provide an option to purchase the Facility, whether or not Manager exercises the
Purchase Option. Manager's option to purchase the Facility pursuant to this
Article 4 shall be governed by the provisions of Section 13 of the Management
Agreement, which is hereby incorporated by reference, except as otherwise set
forth below.
4.1 Definitions. For purposes of this Article 4, "Meditrust Facilities"
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and the "Facilities" as used in Section 13 shall be deemed to refer to the
Facility, "Emeritus" shall be deemed to refer to the Manager, and the "Purchase
Option" shall be deemed to refer to the "Laurel Option" (as defined below).
4.2 Conditions to Option. Manager shall have an option to purchase the
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Facility on the same terms and conditions as contained in Section 13.1 of the
Management Agreement, except that:
4.2.1 Manager shall have the right to purchase the Facility separate and
apart from any purchase of the Meditrust Facilities (the "Laurel Option").
4.2.2 The Facility may be partially released from the lien of the Senior
Loan if the holder of the Senior Loan consents to such release. Manager and
Owner understand that JPH shall not have the right to assume the Senior Loan or
any part thereof.
4.3 Exercise of Laurel Option; Deposit. The Laurel Option may be exercised
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under the same terms and conditions as contained in Section 13.2 of the
Management Agreement, except that (a) Manager shall be required to provide the
Purchase Option Notice on or before March 31, 2003 instead of 180 days prior to
the Purchase Option Expiration Date, and (b) the Deposit shall be the sum of
$100,000, which will be applied against the Laurel Purchase Price (as defined
below) at closing.
4.4 Xxxxxxx Money Credit. The Deposit required under Section 13.2 of the
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Management Agreement for any future exercise of the Purchase Option with respect
to the remaining Facilities shall not be reduced or affected by the
transaction provided for herein.
4.5 Purchase Price. The Purchase Price for the acquisition of the Facility
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shall be paid in accordance with Section 13.4 and Section 13.5 of the Management
Agreement, except that the Purchase Price as defined in Section 13.4 shall
be the aggregate amount defined as the "Purchase Price" in Exhibit C of the Put
and Purchase Agreement as if the Facility was a Put Facility under the Put and
Purchase Agreement (the "Laurel Purchase Price"). To the extent (i) the Laurel
Purchase Price is greater than the amount paid to Manager by JPH for the
purchase of the Facility and (ii) Manager has exercised the Purchase Option with
respect to the remaining Facilities at the time that the Laurel Option is
exercised or at any time prior to the Purchase Option Expiration Date, it shall
be the sole responsibility of Manager to pay any remaining balance of the Laurel
Purchase Price it being understood and agreed that in the event Manager does not
exercise the Purchase Option with respect to the remaining Facilities then Owner
shall accept the Laurel Purchase Price as payment in full for the Facility.
4.6 Closing. If the Laurel Option is exercised pursuant to this Agreement,
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the closing shall occur in accordance with Section 13.6 of the Management
Agreement, except that the closing shall occur at 12:00 noon (P.S.T.) on the
business day specified in the Purchase Option Notice, but not earlier than 45
days after the delivery of the Purchase Option Notice or later than the Purchase
Option Expiration Date.
4.7 Incorporation of Terms. The conveyance and condition of the Facility at
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closing shall be governed by Section 13.3, Section 13.7 and Section 13.8 of
the Management Agreement.
4.8 Manager's Default. A default under this Article 4 shall be governed by
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Section 13.9 of the Management Agreement; provided, however, that (i) if such
default is not due to the acts or omissions of JPH, JPH shall be entitled to a
return of the Deposit, (ii) regardless of such default or the entity responsible
therefor, the Right of First Refusal shall not be deemed terminated and
shall remain in full force and effect and (iii) Owner shall have no right to
terminate the Management Agreement as a result of such default.
4.9 Subsequent Exercise of Purchase Option. In the event that Emeritus
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elects to exercise the Purchase Option with respect to the Meditrust Facilities
prior to the closing of the purchase and sale of the Facility pursuant to this
Agreement, the Facility shall be automatically deemed to be included as part of
the Meditrust Facilities unless and until the occurrence of the closing of the
purchase and sale of the Facility pursuant to this Agreement. Thereafter, the
Facility shall be automatically excluded from the Management Agreement,
including, without limitation, the definitions of "Facilities", "Meditrust
Facilities" and "Emeritus Facilities", as applicable. It is the intent of this
Section 4.9 that if Emeritus elects to purchase the Meditrust Facilities, it
shall unconditionally and automatically be required to simultaneously purchase
the Facility unless it has previously closed the purchase and sale of the
Facility.
4.10 Release from Financing. As set forth in Section 4.2.2 above, Owner and
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Manager acknowledge that the Facility is subject to and encumbered by the
Senior Loan. It shall be a condition precedent to the exercise of Laurel Option
and the closing contemplated thereunder that (i) Manager and Owner confirm that
all requirements for the partial release of the Facility under the Senior Loan
are met or will be met as of the closing, including, without limitation,
compliance with all financial covenants and conditions included in Section 5.1.6
of the Loan Agreement relating to the Senior Loan, and (ii) the holder of the
Junior Loan consents to the partial release of the Facility from the Senior
Loan.
4.11 Transfer of Title. The Manager shall have the right to close the
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purchase of the Facility in its own name or in the name of JPH as its designee;
provided, however, that any such designation shall not release Manager from any
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of its obligations or liabilities hereunder.
Article 5
Miscellaneous
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5.1 No Other Amendments. The parties acknowledge and agree that except as
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expressly set forth in this Agreement, nothing contained herein shall be
construed to modify, substitute, amend or affect the terms, conditions or
definitions contained in the documents executed in connection with the Initial
Junior Loan.
5.2 Notices. All notices to be given by either party to this Agreement to
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the other party hereto shall be in writing, and shall be sent to the parties at
the addresses and in the manner set forth in the Management Agreement, except
that copies of notices to the Managers or Emeritus shall also be sent to The
Xxxxxxxxx Group PLLC, 0000 Xxxxxx Xxxxxx, Xxxxx, Xxxxxxx, Xxxxxxxxxx 00000,
Attn: Xxxxx X. Xxxxxxxxx, Esq.
5.3 No Partnership or Joint Venture. This Agreement shall not be construed
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to be or create a partnership or joint venture between Owner and Manager.
Manager is acting as an independent contractor to the Facility.
5.4 Modification and Changes. This Agreement shall not be modified or
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amended except by written agreement signed by both parties.
5.5 Understandings and Agreements. This Agreement, together with the
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Management Agreement, constitutes all of the understandings and agreements
between the parties with respect to the submanagement of the Facility and the
option to purchase the Facility.
5.6 Headings. The headings contained herein are for convenience of
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reference only and are not intended to define, limit or describe the scope or
intent of any provision of this Agreement.
5.7 Waivers. No failure to enforce or insist upon the strict performance of
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any covenant, agreement, term or condition of this Agreement shall
constitute a waiver of any such breach or any subsequent breach of such
covenant, agreement, term or condition. No covenant, agreement, term or
condition of this Agreement and no breach thereof shall be waived, altered or
modified except by written instrument.
5.8 Applicable Law. This Agreement shall be construed and interpreted and
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be governed by the laws of the State of Washington.
5.9 Exculpation. The liability of Owner hereunder shall be limited to its
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interest in the Facility.
5.10 No Modification. Manager shall not modify or amend the Submanagement
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Agreement with Owner's prior written consent.
IN WITNESS WHEREOF, the parties have executed and delivered this Agreement
as of the date and year first above written.
MANAGER
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Emeritus Management LLC,
a Washington limited liability company
By: Emeritus Corporation,
a Washington corporation
By: /s/ Xxxxxxx X. Xxxxxxxxxx
Name Xxxxxxx X. Xxxxxxxxxx
Title VP of Finance
OWNER
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AL INVESTORS LLC, a Delaware limited liability company, for itself and as sole
managing member on behalf of each of the Owners, or in the case where the Owner
is a limited partnership, as sole managing member on behalf of the general
partner thereof
By: /s/ Xxxxxx X. Xxxxxxx
Name Xxxxxx X. Xxxxxxx
Title Manager
The undersigned has executed this Agreement for the sole purpose of consenting
to the described transaction and ratifying the Guaranty and Shortfall Funding
Agreement, as well as confirming and agreeing that this Agreement does not
alter, modify, amend or waive any terms contained in the Guaranty and Shortfall
Funding Agreement.
Emeritus Corporation,
a Washington corporation
By: /s/ Xxxxxxx X. Xxxxxxxxxx
Name Xxxxxxx X. Xxxxxxxxxx
Title VP of Finance
The undersigned has executed this Agreement for the sole purpose of consenting
to the described transaction and ratifying the Put and Purchase Agreement, as
well as confirming and agreeing that this Agreement does not alter, modify,
amend or waive any terms contained in the Put and Purchase Agreement.
/s/ Xxxxxx X. Xxxx
Xxxxxx X. Xxxx
The undersigned lenders in connection with the Senior Loan and the Junior Loan
have executed this Agreement for the sole purpose of consenting to the
Submanagement Agreement and to the consents, waivers and modifications contained
herein. The undersigned further acknowledge and agree that, notwithstanding
anything to the contrary set forth in the Senior Loan, by their signatures set
forth below they hereby consent to the sale of the Facility pursuant to the
Laurel Option and agree to the release of the liens on the Facility in favor of
Senior Lender, whether or not there is then outstanding a default by the
Borrower under the Senior Loan, provided that the release payment due pursuant
to the terms of the Senior Loan is paid to the Senior Lender at the closing of
the purchase and sale of the Facility.
GMAC Commercial Mortgage Corporation, a California corporation
By: /s/ Xxxx X. Lautner
Name Xxxx X. Lautner
Title Senior Vice President
Senior Housing Partners I, L.P.,
a Delaware limited partnership
By: /s/ Xxxx X. Xxxx
Name Xxxx X. Xxxx
Title Vice President
EXHIBIT A
LIST OF AL ENTITIES
EXHIBIT B
INSURANCE WAIVERS/MODIFICATIONS
