BUY OUT AGREEMENT
THIS AGREEMENT is made and entered into effective as of March 28, 2002 by
and between Emeritus Corporation ("Emeritus") and Fairfield Assisted Living, LLC
("FAL").
RECITALS
A. Emeritus is currently the sole member of Fairfield Retirement
Center, LLC (the "LLC").
B. The LLC is the owner of the assisted living facility known as
NorthBay Retirement Center in Fairfield, California (the "Facility").
C. The Company previously granted FAL a 75% interest in Emeritus'
economic interest in the LLC and a 75% interest in Emeritus' economic interest
in a $2,500,000 Promissory Note payable by the LLC to Emeritus (the "Note") (the
"Economic Interests");
D. Emeritus currently has the right to acquire the Economic Interests
from FAL for a purchase price equal to FAL's investment (which is currently
$2,100,000) plus a 9% return on that investment (the "Repurchase Price").
E. FAL has the right to sell the Economic Interests with the consent of
the Company.
F. Emeritus has advanced $487,734 on behalf of FAL to meet the working
capital needs of the LLC (the "Emeritus Working Capital Advances").
G. The Company and FAL are interested in restructuring the LLC in order
to clean up the capital structure of the LLC and thus eliminate the complexity
of the foregoing economic interest arrangement.
H. Emeritus has executed a Commitment Letter, dated March 5, 2002 with
Health Care REIT, Inc. ("HCR") pursuant to which Emeritus has agreed to cause
the LLC to sell the Facility to HCR and HCR has agreed to lease the Facility
back to Emeritus which, in turn, would sublease the Facility to the LLC (the
"Sale/Leaseback Transaction").
I. Emeritus and FAL are interested in documenting their rights with respect
to the terms and conditions of, and proceeds from, the Sale/Leaseback
Transaction.
NOW, THEREFORE, in consideration of the foregoing premises and the mutual
covenants of the parties set forth herein, IT IS HEREBY AGREED AS FOLLOWS:
1. Authorization. Emeritus shall be and hereby is authorized to proceed with
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the consummation of the Sale/Leaseback Transaction. Provided the Sale/Leaseback
Transaction (i) results in net proceeds to FAL of Two Million Nine Hundred Fifty
Thousand and no/100 Dollars ($2,950,000.00) (the "Required Net Proceeds") and
(ii) does not require the execution of any guarantees by FAL or any principal of
FAL (the "Conditions"), then Emeritus shall be and hereby is authorized to
consummate the Sale/Leaseback Transaction on such additional terms and
conditions as it deems to be appropriate and FAL shall accept the Required Net
Proceeds as payment in full for any interest which it may now have or be
entitled to acquire in the LLC. In furtherance and not in limitation of the
foregoing, FAL acknowledges and agrees that in the event the Conditions are met,
FAL shall and does hereby waive and release any right which it may have to
participate in the future ownership or operation of the Facility, including any
future ownership of the LLC, and agrees that the Facility may be leased back to
Emeritus and subleased by Emeritus to the LLC as part of the Sale/Leaseback
Transaction. FAL agrees to execute any and all documents, which may be required
to evidence its consent to, or to facilitate the consummation of, the
Sale/Leaseback Transaction.
2. Rights Pending Completion of Sale Transaction. Emeritus and FAL acknowledge
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and agree that no interest has been accruing on the Note or on the cash invested
or advanced as of January 1, 2002 by Emeritus and FAL to the Company and that no
interest shall accrued pending consummation of the Sale/Leaseback Transaction or
execution of the New Operating Agreement (as defined in Section 3 hereof). In
addition, Emeritus has agreed and continues to agree not to seek collection of
the development fees or consulting fees, which are due and owing to it as the
successor in interest by assignment to BW and NorthBay and agrees that such fees
shall be waived in full in the event of the closing of the Sale/Leaseback
Transaction or the execution of the New Operating Agreement.
3. Rights in the Event of the Failure of the Sale Transaction. In the event the
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Sale Transaction has not been closed by May 1, 2002, then within thirty (30)
days thereafter Emeritus and FAL shall enter into an Amended and Restated
Operating Agreement with respect to the LLC which shall reflect their respective
ownership interests therein, to wit, 54.7% for FAL and 45.3% for Emeritus, shall
be on terms and conditions acceptable to Emeritus and FAL and shall otherwise
govern the day to day management of the affairs of the LLC (the "New Operating
Agreement").
4. Entirety. This Agreement represents the entire and final agreement of
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the parties hereto with respect to the subject matter hereof and supersedes all
prior negotiation, discussions or writings with respect thereto. This Agreement
may not be amended or modified except by written instrument signed by the
parties hereto.
5. Counterparts. This Agreement may be executed in counterparts, each of
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which shall be deemed to be an original, but all of which taken together shall
constitute but one and the same instrument.
6. Attorneys Fees. In the event of a dispute among the parties hereto
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with respect to the interpretation or enforcement of the terms hereof, the
prevailing party shall be entitled to collect from the other its costs and fees,
including its costs and fees on appeal.
7. Construction. Each of the parties acknowledges and agrees that it has
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participated in the drafting and negotiation of this Agreement. Accordingly, in
the event of a dispute among the parties hereto 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.
8. Governing Law. This Agreement shall be governed by and construed in
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accordance with the laws of the State of Washington.
IN WITNESS WHEREOF, the parties hereby execute this Agreement as of the day
and year first set forth above.
EMERITUS CORPORATION
By: /s/ Xxxxxxx X. Xxxxxxxxxx
Xxxxxxx X. Xxxxxxxxxx
Its: Chief Financial Officer__
FAIRFIELD ASSISTED LIVING, LLC
By: /s/ Xxxxxx X. Baty________
Xxxxxx X. Xxxx
Its: General Partner___________
