CAMLU RETIREMENT APARTMENTS
COEUR D'ALENE, IDAHO
AGREEMENT TO PROVIDE MANAGEMENT SERVICES
TO AN INDEPENDENT LIVING FACILITY
This Agreement made this 1st day of November, 1996 by and between
Emeritus Corporation, a Washington corporation (hereinafter referred to as
"Manager"), and Columbia House, LLC, a Washington limited liability
company (hereinafter referred to as "Lessee").
WHEREAS, Lessee is the lessee of property located at 000 Xxxx Xxxxxx
in Coeur d'Alene Idaho ("the Property") including an independent living
facility (the "Facility"), pursuant to the terms of that certain Commercial
Lease Agreement dated October 11, 1996 between Xxxxxx X. Xxxxxx and
Xxxxxx Xxxxxx, husband and wife, as Lessor, and Lessee, as lessee (the
"Facility Lease");
WHEREAS, Lessee wants someone to manage the Facility on its behalf
and to provide certain consulting and construction supervisory services;
WHEREAS, Manager is experienced and qualified in the field of
independent living facility development and management;
WHEREAS, Lessee has determined that Manager's price is economical
in light of the range of services which it provides; and
WHEREAS, Manager is willing to operate the Facility on Lessee's
behalf and provide consulting and, under certain circumstances,
construction supervision services, pursuant to the terms and conditions set
forth herein.
NOW THEREFORE, in consideration of the foregoing premises and the
mutual covenants herein contained, IT IS AGREED AS FOLLOWS:
I. MANAGEMENT AND CONSULTING RESPONSIBILITIES OF
MANAGER: Lessee hereby engages Manager and Manager hereby accepts
such engagement and agrees to provide management, consulting, advisory
and supervisory services to Lessee in connection with the operation of the
Facility, upon the terms and conditions set forth in this Agreement. By
entering into this Agreement, Lessee does not delegate to Manager any
powers, duties or responsibilities which it is prohibited by law from
delegating. Lessee 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
implement operational policies and procedures and develop such new
policies and procedures as it deems necessary to insure the establishment
and maintenance of operational standards appropriate for the nature of the
Facility.
B. CHARGES: Manager shall establish the schedules of
recommended charges, including any and all special charges for services
rendered to the patients at the Facility. Lessee shall have the right to review
the charge schedules established by Manager.
C. INFORMATION: Manager shall develop any informational
material, mass media releases, and other related publicity materials, which
it deems necessary for the operation of the Facility.
D. REGULATORY COMPLIANCE: Manager, with the assistance of
Lessee if requested by Manager, shall use its best efforts to maintain all
licenses, permits, qualifications and approvals from any applicable
governmental or regulatory authority for the operation of the Facility and to
manage the operations of the Facility in full compliance with all applicable
laws and regulations.
E. EQUIPMENT AND IMPROVEMENTS: Manager shall advise
Lessee as to equipment and improvements which are needed to maintain or
upgrade the quality of the Facility, to replace obsolete or run-down
equipment or to correct any other survey deficiencies which may be cited
during the term of this Agreement. Lessee shall review and act upon
Manager's recommendations as expeditiously as possible. Manager shall not
be liable for any cost or liability which Lessee may incur in the event
Lessee disregards Manager's recommendations. Manager shall make all
necessary and approved repairs, replacements and maintenance within the
budgetary limits set forth in the annual capital budget prepared by Manager
pursuant to Paragraph I.L. hereof and in a workmanlike and lien free
manner.
F. ACCOUNTING: Manager shall provide home office and
accounting support to the Facility. 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 and shall not
materially distort income or loss. In addition, if Lessee so elects by notice to
Manager, Manager shall prepare or cause to be prepared all tax returns
required in connection with operation of the Facility, including payroll tax
returns (but excluding Lessee's income tax returns), and Manager at
Lessee's sole cost and expense shall cause all local, state and federal taxes
to be timely paid or contested, as appropriate. If Lessee elects to have
Manager prepare such returns, the costs incurred by Manager in preparing
such returns shall not be included in Manager's management fee, but shall
be separately reimbursed by Lessee. The taxes shall be deemed to be
Facility operating expenses and shall be paid out of the revenues of the
Facility or the working capital provided by Lessee. 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.
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G. REPORTS: Manager shall prepare and provide to the Lessee any
reasonable operational information which may from time to time be
specifically requested by Lessee, including any information needed to assist
Lessee in completing its tax returns and in complying with any reporting
obligations imposed by the owner or any mortgagees of the Facility. In
addition, (i) within thirty (30) days after the end of each calendar month,
Manager shall provide Lessee with an unaudited balance sheet of the
Facility, dated the last day of such month, and an unaudited statement
of income and expenses for such month relating to the operation of the
Facility and (ii) within ninety (90) days after the end of the fiscal year of
the Facility, Manger shall provide Lessee with unaudited financial
statements including a balance sheet of the Facility, dated the last day of
said fiscal year, and a statement of income and expense for the year then
ended relating to the operation of the Facility.
H. BANK ACCOUNTS: Manager shall open a new checking account
in the name of the Facility and shall deposit therein all money received
during the term of this Agreement in the course of the operation of the
Facility; provided, however, that during the term hereof, withdrawals
and payments from this account shall be made only on checks signed by a
person or persons designated by Manager. Lessee shall be given notice as to
the identity of said authorized signatories. All expenses incurred in the
operation of the Facility in accordance with the terms of the Budgets
submitted to Lessee under Paragraph I.L. hereof, including, but not limited
to, Facility mortgage or lease payments, payroll and employee benefits and
payment of Manager's fees, shall be paid by check drawn on this account.
Withdrawals from this account shall be made first to pay Manager's fees
and thereafter to pay Facility expenses in such order of priority as Manager
deems appropriate to the operation of the Facility. In the event the revenues
generated by the Facility are at any time insufficient to pay all of the
expenses associated with its operation, including, but not limited to,
Manager's fees, Lessee shall, within five (5) days of its receipt of a written
demand by Manager, deposit in the Facility bank account sufficient funds to
satisfy the then working capital needs of the Facility.
I. PERSONNEL: Manager shall recruit, employ, train, promote,
direct, discipline, suspend and discharge Facility personnel; 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 Facility. All of the Facility personnel shall be the employees of
Manager and all salaries, benefits, payroll taxes and other costs related to
the Facility personnel shall not be included in Manager's management fee
but shall be Facility operating expenses and paid out of the revenues of the
Facility or the working capital provided by Lessee.
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J. SUPPLIES AND EQUIPMENT: Manager shall purchase supplies
and non-capital equipment needed to operate the Facility within the
budgetary limits set forth in the annual operating budget prepared by
Manager pursuant to Paragraph I.L hereof. In purchasing said supplies and
equipment, if possible, Manager shall take advantage of any national or
group purchasing agreements to which Manager may be a party.
K. LEGAL PROCEEDINGS: Manager shall, through its legal
counsel, coordinate all legal matters and proceedings with Lessee's counsel.
L. BUDGETS: The Facility shall be operated on a fiscal year of
January I through December 31. Within forty-five (45) days prior to the
start of each fiscal year, Manager shall prepare and submit to Lessee for its
review and approval, which approval shall not be unreasonably withheld,
an annual operating budget, an annual capital expenditure budget, and an
annual cash flow projection. In the event a budget has not been agreed
upon by the beginning of the fiscal year beginning in fiscal year 1997, the
budget in effect for the prior fiscal year shall continue in effect
until the new budget is agreed upon. Thereafter, any expenditures made
during the year pursuant to said budgets and/or any expenditures on an
item-by-item basis exceeding by no more than 10% the amounts set forth
therein for the applicable expense item (the "Budget Threshold") may be
made without Lessee's prior approval. Any unbudgeted expenditures and/or
any expenditures in excess of the Budget Threshold shall be subject to
Lessee's prior approval, which approval shall not be unreasonably withheld.
M. COLLECTION OF ACCOUNTS: Manager shall issue bills and
collect accounts and monies owed for goods and services furnished by the
Facility, including, but not limited to, enforcing the rights of Lessee and the
Facility as creditor under any contract or in connection with the rendering
of any services; provided, however, that any expenses incurred by Manager
in so doing shall be treated as Facility operating expenses, which shall be
payable out of Facility funds deposited in the bank account described in
Section I.H. hereof.
N. CONSTRUCTION SUPERVISION. Lessee and Manager may
agree that Manager shall act as construction supervisor with respect to any
construction work for the Facility or on the Property after the
Commencement Date (as hereinafter defined), in which event Manager will
supervise, oversee and administer each and every aspect of any such
improvements and construction work. "Construction work" is defined as
any construction, reconstruction or alteration of any improvements
constituting part of the Property, but does not include usual maintenance
and repairs made to the Property. Without limitation of the foregoing, if
Lessee and Manager agree that Manager shall act as construction
supervisor, and subject to Lessee's approval in each instance, Manager will
(a) negotiate contracts for architectural, design, engineering and
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construction services, (b) secure any and all necessary approvals, (c)
oversee the administration of construction contracts, and (d) act as project
manager with respect to the construction work.
II. INSURANCE: Upon request, Manager, at Lessee's sole cost and
expense, shall arrange for and maintain all necessary and proper hazard
insurance covering the Facility, the furniture, fixtures, and equipment
situated thereon, and all necessary and proper malpractice and public
liability insurance for Lessee's protection and for the protection of Lessee's
officers, agents and employees. Until such a request is made and/or in the
event Manager is unable to secure insurance coverage for the Facility for
any reason whatsoever, Lessee shall be responsible for obtaining and
maintaining said insurance. In addition, Manager shall provide employee
health and worker's compensation insurance for its employees at the
Facility in accordance with Manager's policies therefor, and the costs
thereof shall be Facility operating expenses. Manager shall arrange for and
maintain all necessary and proper malpractice and public liability insurance
for the protection of itself, its officers, agents and employees. Any
insurance provided by Lessee pursuant to this paragraph shall comply with
the requirements of any applicable lease of or mortgage or deed of trust
encumbering the Facility, and any insurance provided by Manager pursuant
to this paragraph shall comply with such requirements provided that Lessee
shall have provided Manager with a copy of such lease, mortgage or deed
of trust.
III. PROPRIETARY INTEREST: The systems, methods, procedures and
controls employed by Manger and any written materials or brochures
developed by Manager to document the same are to remain the property of
Manger and are not, at any time during or after the term of this Agreement,
to be utilized, distributed, copied or otherwise employed or acquired by
Lessee, except, as authorized by Manager.
IV. TERM OF AGREEMENT: The Term of this Agreement shall be the
period commencing on November 1,1996 (the "Commencement Date") and
ending on October 31,1999, and the Term automatically shall be extended
for successive two year terms thereafter unless terminated prior to
such date (as the same may be extended) upon the occurrence of any of the
following events:
(a) either party giving the other party notice of termination not later than
thirty (30) days prior to the end of the initial term or any extended term, in
which event the Term will end on the last day of the initial term or then
current extended term, as applicable;
(b) due to the fact that 50% or more of the Facility is damaged or
destroyed or taken by condemnation proceedings or otherwise, whether or
not Lessee elects to rebuild or repair;
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(c) upon the occurrence of an Event of Default (as defined in Section V);
(d) at the option of either Lessee or Manager in the event of termination
or Lessee's assignment of the Facility Lease; provided, however, that said
option must be exercised in writing within ten ( 10) days after Lessee
accepts a bona fide offer for the purchase of Lessee' s interest in the
Facility (the "Offer"), in the case of a termination by Lessee, or within ten
(10) days after Lessee provides Manager with a copy of the Offer, in the
case of a termination by Manager, or each party shall be deemed to have
waived its right to so terminate this Agreement; or
(e) at any time by Manager or Lessee with or without cause on no less
than thirty (30) days prior written notice to the other party.
V. DEFAULT: Either party may terminate this Agreement, as specified
in this Section in the event of a default by the other party that is an "Event
of Default" as provided below.
(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 thirty (30) days after notice thereof shall have been
given to Manager by Lessee, which notice shall specify the event or events
constituting the default; or
(ii) If Manager shall apply for or consent to the appointment of a
receiver; trustee or liquidator of Manager 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 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 or a creditor,
adjudicating Manger, a bankrupt or insolvent or approving a petition
seeking reorganization of manger or appointing a receiver, trustee or
liquidator of Manager or of all or a substantial part of
its assets.
(b) With respect to Lessee, it shall be an Event of Default hereunder:
(i) If Lessee shall fail to make or cause to be made any payment to
Manager required to be made hereunder (other than its working capital
obligation), and such failure shall continue for a period of thirty (30) days;
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(ii) If Lessee 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 thirty (30) days after notice, which notice shall
specify an event or events constituting the default thereof by Manager
to Lessee; provided, however, that in the case of Lessee's failure to provide
necessary working capital upon demand by Manager, it shall be deemed to
be an Event of Default hereunder if the same is not paid within ten ( 10)
days of Manager's initial demand therefor without any further notice from
Manager being required;
(iii) If Lessee 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, and which would cause Lessee to lose possession of the Facility or
any personal property which would be required to operate the Facility in the
normal course; or
(iv) If Lessee shall be dissolved or shall apply for or consent to the
appointment of a receiver, trustee or liquidator of Lessee 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 or creditors, 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 Lessee a bankrupt or insolvent or approving a petition seeking
reorganization of Lessee or appointing a receiver, trustee or liquidator of
Lessee or of all or a substantial part of its assets.
VI. REMEDIES UPON DEFAULT:
(a) If any Event of Default by Lessee 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,
but Manager shall immediately be entitled to receive payment of all
amounts theretofore unpaid but earned to the date of termination.
(b) If any Event of Default by Manger shall occur, Lessee 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 obligation whatsoever under this Agreement;
provided, however, that Manger shall immediately be entitled to receive
payment of all amounts theretofore unpaid but earned to date of
termination, subject to Lessee's right to receive payment of damages from
Manager.
VII. LESSEE'S INSPECTION: During the term hereof, Lessee shall
have the right, upon request and at reasonable times, to inspect the Facility
and to inspect and/or audit all books and records pertaining to the operation
thereof.
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VIII. FACILITY OPERATIONS :
A. NO GUARANTEE OF PROFITABILITY: Manager does not
guarantee that operation of the Facility will be profitable, but Manager shall
use its commercially reasonable, diligent good faith efforts to operate the
Facility in as cost efficient and profitable a manner as possible.
B. STANDARD OF PERFORMANCE: In performing its obligations
under this Agreement, Manager shall use its commercially reasonable,
diligent efforts and act in good faith and with professionalism in accordance
with acceptable and prevailing standards of health care and the policies
adopted by, and resources available to, the Facility.
C. FORCE MAJEURE: Manager will not be deemed to be in
violation of this Management Agreement if it is prevented from performing
any of its obligations hereunder for any reason beyond its control,
including, without limitation, strikes, shortages, war, acts of God, Lessee's
failure to perform its obligations hereunder, or any statute, regulation or
rule of federal, state or local government or agency thereof.
IX. WITHDRAWAL OF FUNDS BY LESSEE; MINIMUM BANK
BALANCE:
A. From time to time Lessee may withdraw the then accumulated
operating cash surplus (as determined by Manager) from the Facility bank
account subject to the right of Manager to restrict withdrawal by Lessee of
any Facility funds in accordance with the provisions of subparagraph B,
below.
B. At a11 times Manager shall maintain a minimum cash balance in
the checking account established for the Facility equal to the sum of:
(i) All current and unpaid invoices (both those received and
those pending), any mortgage or lease payments, note or installment payments,
payrolls, rents, expenses management fees and other charges incident to the
operation of the Facility which will become due and payable within the
ensuing forty-five (45) days; plus
(ii) An amount deemed necessary by Manger to be adequate for
unanticipated contingencies, which amount initially shall be $5,000 and
which amount shall be adjusted as reasonable determined by Manager.
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X. MANAGEMENT FEES:
A. PRE-COMMENCEMENT SERVICES FEE. Manager shall be
reimbursed for all of Manager's out of pocket expenses incurred in
connection with pre-commencement services rendered by Manager with
respect to the Facility, and in addition Manager shall receive a fee in the
amount of $2,000.00 with respect to such pre-commencement services.
Such reimbursement and fee shall be paid to Manager at the same time as
the first management fee payment as provided herein.
B. MANAGEMENT FEE. Throughout the term of this Agreement,
Manager shall receive a monthly fee equal to six percent (6%) of the gross
revenues generated each month by the Facility, payable on or before the
10th day of each month with respect to the gross revenues for the
prior month. For purposes hereof, "gross revenues" shall mean all revenues
generated by the Facility, but shall specifically exclude the proceeds from
the sale of any Facility equipment and any insurance and condemnation
proceeds. If the services of Manager commence or terminate (for any
reason, including those set forth in Paragraph V hereof other than on the
first day of the month, the fee shall be prorated in proportion to the number
of days for which services are actually rendered.
C. CONSTRUCTION SUPERVISION FEE. For its services
performed pursuant to Paragraph I.N. above, Manager shall receive a
construction supervision fee equal to five percent (5%) times the total
amount of construction costs approved by Lessee, payable concurrently
with the applicable payments to the contractor(s).
D. PAYMENT OF FEES. The Manager's fee provided for herein
shall be disbursed by Manager to itself out of the Facility bank account on a
priority basis prior to the payment of any other Facility expenses and prior
to the repayment of any working capital loans made by Lessee
pursuant to the terms hereof.
XI. ASSIGNMENT: Except as otherwise provided in Section I.F.
hereof, this Agreement shall not be assigned by either party without the
prior written consent of the other party, which consent shall not be
unreasonably withheld.
XII. 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.
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To Manager: Emeritus Corporation
0000 Xxxxxxx Xxxxxx
Xxxxx 000
Xxxxxxx, XX 00000
Phone: 000-000-0000
Fax: 000-000-0000
Attn: Xxxx Xxxxx
To Lessee: Columbia House, LLC
0000 Xxxxxxx Xxxxxx
Xxxxxxx, XX 00000
Phone: 000-000-0000
Fax: 000-000-0000
Attn: Xxxx Xxxxxxxxxx
XIII. RELATIONSHIP OF THE PARTIES: The relationship of the
parties shall be that of Lessee and independent contractor and all acts
performed by Manager during the term hereof as Manager of the
Facility shall be deemed to be performed in its capacity as an independent
contractor. Nothing contained in this Agreement is intended to or shall be
construed to give rise to or create a partnership or joint venture or lease
between Lessee, its successors and assigns on the one hand, and Manager,
its successors and assigns on the other hand.
XIV. INDEMNIFICATION: Manager shall indemnify, defend and hold
Lessee harmless form any loss incurred by or damage to Lessee where such
loss or damage results form the negligence or willful misconduct of
Manager in performing its obligations under this Agreement. Lessee shall
indemnify, defend and hold Manager harmless from any loss incurred by or
damage to Manager where such loss or damage result from the negligence
or willful misconduct of Lessee in performing its obligations under the
Agreement.
XV. ENTIRE AGREEMENT: This Agreement contains the entire
agreement between the parties and shall be binding upon and inure to the
benefit of their successors and assigns, and shall be construed in accordance
with the laws of the State of Washington. This Agreement may not be
modified or amended except by written instrument signed by both of the
parties hereto.
XVI. 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.
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XVII. ATTORNEY'S FEES: In the event either party brings an action to
enforce this Agreement, the prevailing party in such action shall be entitled
to recover from the other all costs incurred in connection therewith,
including reasonable attorney's fees.
XVIII. 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.
XIX. CUMULATIVE; NO WAIVER: A 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.
XX. AUTHORIZATION FOR AGREEMENT: The execution and
performance of this Agreement by Lessee and Manager have been duly
authorized by all necessary laws, resolutions or corporate action, and this
Agreement constitutes the valid and enforceable obligations of Lessee and
Manager in accordance with its terms.
XXI. 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.
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IN WITNESS WHEREOF, the parties have hereto caused this
Agreement to be duly executed, as of the day and year first above written.
COLUMBIA HOUSE, LLC
By: /s/ Xxxxxxx X. Xxxxxxxxxx
---------------------------------
Its :
EMERITUS CORPORATION
By: /s/ Xxxxxxx X. Xxxxxxxxxx
------------------------------------
Its: President
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