EXHIBIT 10.118
FIRST AMENDED AND RESTATED
MANAGEMENT AND MARKETING AGREEMENT
THIS FIRST AMENDED AND RESTATED MANAGEMENT AND MARKETING AGREEMENT (the
"Agreement") is entered into on December 20, 2002 (the "Effective Date"), by and
between LIBERTYVILLE SL L.L.C. (formerly LCOR/JV Libertyville SL L.L.C.)
("Owner"), a limited liability company organized under the laws of the State of
Delaware, and CAPITAL SENIOR LIVING, INC. ("Capital"), a corporation organized
under the laws of the State of Texas.
RECITALS
A. Owner is the owner of that certain parcel of real property containing
approximately 10.86 acres and located in Libertyville, Lake County, Illinois, as
more particularly described on Exhibit "A" attached hereto and by this reference
made a part hereof (the "Property"), upon which Owner constructed a senior
living facility containing approximately 200 senior living units (which together
with any and all other improvements ancillary or incidental thereto is herein
sometimes referred to as the "Improvements," and the Property together with the
Improvements are herein sometimes referred to as the "Facility".
B. Owner determined that the hiring of an experienced management,
marketing and leasing company to provide day-to-day management, marketing and
leasing of the Facility is necessary for the operation of the Facility.
C. Capital represented that it is experienced in the management, marketing
and leasing of similar facilities, is knowledgeable as to the marketing,
leasing, opening and operational aspects of senior living facilities and that
the owners and the employees of Capital are qualified management, leasing and
marketing professionals with significant senior living facility experience.
D. Based upon Capital's experience and representations set forth above,
Owner determined that the hiring of Capital was consistent with Owner's desire
to provide quality care to the residents at the Facility.
E. Capital accepted such employment to manage the day-to-day operations,
marketing and leasing of the Facility on the terms and conditions set forth in
the Management and Marketing Agreement dated as of December 10, 1997 ("Original
Agreement"), originally between LCOR Incorporated and Capital and subsequently
assigned to Owner.
F. As of December 20, 2002, an Affiliate of Capital has acquired all the
membership interests in the Owner previously owned by an affiliate of LCOR,
which Affiliate of LCOR is withdrawing as a member of Owner, pursuant to the
Assignment and Assumption Agreement dated as of December 20, 2002 ("Assignment
and Assumption Agreement"), among LCOR, Capital and other parties.
G. An Affiliate of Capital is becoming a member of Owner (in addition to
Owner's other member, PAMI Senior Living Inc.) pursuant to the Fourth Amended
and Restated Limited Liability Company Operating Agreement dated as of December
20, 2002 ("LLC Agreement").
H. On March 1, 2002, Owner gave notice to Capital of termination of the
Original Agreement.
I. Owner desires to reinstate Capital as manager of the Facility as of May
31, 2002, and to amend certain portions of the Original Agreement pursuant to
the terms and conditions set forth below.
J. In consideration of the mutual covenants and agreements set forth
herein, and for other good and valuable considerations, the receipt and
sufficiency of which are hereby acknowledged, and intending to be legally bound,
the parties hereto agree as follows:
I. REINSTATEMENT OF ENGAGEMENT; RESTATEMENT OF AGREEMENT; PAMI AUTHORITY TO ACT
FOR OWNER
A. REINSTATEMENT OF ENGAGEMENT. Owner hereby reinstates Capital as manager
and supervisor of the Facility as of May 31, 2002, with the objective of
providing quality care and services to residents of the Facility and reinstates
the engagement of Capital to carry out the general duties with respect to the
Facility under the general supervision and direction of Owner, with the
responsibilities and upon the terms and conditions set forth in this Agreement,
and Capital accepts such engagement.
B. RESTATEMENT OF AGREEMENT. Owner and Capital hereby amend and restate
the Original Agreement in its entirety as set forth herein. This Agreement
amends, restates and replaces the Original Agreement and sets forth the ongoing
rights and obligations of Owner and Capital and certain matters related thereto.
C. PAMI AUTHORITY TO ACT FOR OWNER.
(1) DUAL ROLES: Owner and Capital recognize that Capital is Manager
under this Agreement and that Capital's Affiliate also is one of the two
Managing Members of Owner.
(2) APPROVAL OF AMENDMENTS: Any amendment or modification of or
waiver of any provision or right arising under this Agreement must be approved
by PAMI acting alone on behalf of Owner prior to such amendment, modification or
waiver thereof being effective or binding upon Owner.
(3) ACTION UNDER AGREEMENT: Any approval, consent, decision, waiver,
notice of default or termination, or other action by Owner or requiring Owner's
approval under this Agreement must be approved by PAMI acting alone on behalf of
Owner. PAMI in its sole and absolute discretion, may on behalf of Owner or in
its own name implement, enforce or take any termination or other enforcement
action that arises under this Agreement, without the participation, consent,
approval or signature of Capital as member of Owner.
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(4) REPLACEMENT: If Capital is removed as the Regular Managing
Member of Owner pursuant to Section 5.1(d) of the LLC Agreement, PAMI acting
alone on behalf of Owner shall have the sole right and authority to act on
behalf of the Company without the participation, consent, approval or signature
of Capital as member of Owner (a) to terminate this Agreement with Capital (with
no termination or any other type or form of penalty, fee or other compensation
being paid to Capital) upon written notice to Capital and (b) to replace it with
an agreement with another person who is not an Affiliate of any member of Owner.
(5) ENFORCEMENT: PAMI, in its own name or through or on behalf of
Owner and at the expense of Owner, shall have the sole right and authority to
enforce the provisions of this Agreement against Capital by all appropriate
methods, including the commencement of legal or other proceedings against
Capital, without the participation, consent, approval or signature of Capital as
member of Owner.
II. SCOPE OF SERVICES
With regard to the Facility, Capital shall diligently perform its duties
set forth herein in a careful and prudent manner and shall devote sufficient
time and effort to such management, marketing and leasing services as necessary
to so perform its duties.
A. BACKGROUND. This Agreement is founded on the following assumptions:
(1) OWNER RESPONSIBILITIES:
Owner retains primary responsibility to:
(a) Establish the policies of the Facility and to plan for
its short-range and long-range goals, including, but not
limited to, the level and quality of services to be
provided to residents;
(b) Review and evaluate the performance of Capital in
carrying out the established policies and in attaining
the goals established by Owner and the performance by
Capital of its obligations under this Agreement;
(c) Annually review and approve both operating and capital
budgets; and
(d) Annually review the policies and goals which have been
established by Owner.
(2) CAPITAL RESPONSIBILITIES:
Capital assumes primary responsibility to:
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(a) Implement the policies approved by Owner, including, but
not limited to, the level and quality of services to be
provided to residents;
(b) Supervise the day-to-day management, marketing and
leasing of the Facility, including all resident
activities;
(c) Provide to Owner full, timely and accurate information
as to past operations; and
(d) Provide to Owner projections and recommendations
relating to the future operations of the Facility.
III. RESPONSIBILITIES OF CAPITAL
All matters prepared, created or developed by Capital for Owner and all
analysis, evaluations and recommendations made by Capital for Owner shall be
subject to the final review and approval by Owner (in Owner's sole and absolute
discretion unless otherwise expressly provided herein). Capital agrees that it
shall: (i) perform its duties and responsibilities hereunder in compliance with
all applicable laws; (ii) supervise and direct the management, marketing,
leasing and operation of the Facility in a careful and prudent manner; and (iii)
consult with Owner and keep Owner fully advised of all major policy and business
matters relating to the Facility. Without limiting the generality of the
foregoing, Capital shall have the following specific responsibilities and duties
(subject to applicable budget constraints):
A. POLICIES. Capital shall propose, subject to the approval of Owner,
written policies and procedures governing, and goals with regard to, the
day-to-day operations and overall management, marketing and leasing of the
Facility and shall evaluate such policies and goals on an ongoing basis.
B. MANAGEMENT DUTIES. Capital shall provide management, marketing and
leasing services, install operating procedures and oversee day-to-day
operations, all subject to and in accordance with the budgets approved by Owner
and policies approved by Owner.
C. MARKETING DUTIES. Pursuant to the Original Agreement, Capital prepared
and Owner approved a detailed and comprehensive marketing plan for the Facility
during the lease-up phase ("Marketing Plan"). Prior to the Effective Date, Owner
and Capital modified the Marketing Plan to incorporate all changes requested and
approved by each of them. Capital agrees to implement, manage, coordinate and
supervise the Marketing Plan. Capital shall be responsible for generating
monthly statistical census analysis reports and delivering the same to Owner. At
Owner's expense (unless otherwise expressly provided herein), Capital shall be
responsible for the continued development, implementation and coordination of
advertising and promotional materials, internal and external public relation
programs, sales and staff development programs, and resident satisfaction
programs. Capital shall be responsible for annually updating the Marketing Plan
(to be approved by Owner in its reasonable discretion) based upon the Facility's
yearly census program. A proposed draft of such updated annual
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Marketing Plan shall be delivered to Owner on or before November 15 of each
calendar year (for the next calendar year), and Owner and Capital shall endeavor
to agree upon such Marketing Plan on or before December 15 of such previous
calendar year. Capital shall establish and periodically review the residency
agreement approved by Owner and if required, recommend changes thereof, all of
which changes must be approved by Owner in its reasonable discretion.
D. MARKETING REPORTS. Capital shall, on a weekly and monthly basis,
provide leasing and occupancy reports with respect to the Facility to Owner, and
shall provide annually the results of the annual resident satisfaction survey
with respect to the Facility.
E. EMPLOYEES. All Facility-based employees and non-Facility based
employees who are directly responsible for the Facility, including
administrative employees, shall be employees of Capital. Capital shall have sole
authority over Facility-based employees and non-Facility-based employees who are
directly responsible for the Facility and all matters pertaining thereto and
shall be responsible for all actions and omissions of such employees. All costs
of hiring, equipping and providing the services of Facility-based employees and
non-Facility based employees who are directly responsible for the Facility,
including, but not limited to, compensation, health insurance, employer
liability insurance, payroll taxes, bonding, worker's compensation insurance,
vacations and all other employee benefits shall be treated as an expense of
Capital to be fully reimbursed from the Facility operations if sufficient to
reimburse such expenses; if it is not sufficient, such expenses shall be
reimbursed by Owner (provided, however, any non-Facility-based employees to be
reimbursed from the Facility operations or by Owner must be specifically
referenced by title, description and compensation level in the applicable Budget
approved by Owner). Capital shall recruit, evaluate, select and hire qualified
personnel who shall be responsible for the functional operation and marketing of
the Facility. Capital shall establish necessary and desirable personnel policies
and procedures, staff training and orientation programs, wage structures and
staff schedules. Capital shall have authority to hire, discipline, promote and
discharge employees who participate in the day-to-day operation and
administration of the Facility. Both Capital and Owner must approve the hiring
and/or firing of the Executive Director, which approval shall not be
unreasonably withheld or delayed. Capital shall (i) maintain or cause to be
maintained payroll records and prepare bi-monthly payrolls, withholding taxes
and Social Security taxes; (ii) prepare and submit all required state and
federal tax or benefit returns required with respect to employees, including,
without limitation, the returns required by FICA, FUTA and all applicable
unemployment compensation laws; (iii) maintain in force all required levels of
workers' compensation insurance; and (iv) prepare and submit to Owner any
certificates of payroll expenses as may be reasonably requested. Capital shall
provide Owner with monthly operating reports of all hiring and firings at the
Facility for each calendar month. The cost of non-Facility-based employees who
are not directly responsible for the Facility (e.g. corporate office personnel
of Capital in Dallas) shall not be reimbursed to Capital.
F. OPERATING PROCEDURES. Capital developed, installed and has maintained
operating procedures, systems and controls, all of which were initially approved
by Owner while LCOR's Affiliate was a member and which are ratified and
confirmed by Owner now that Capital's Affiliate is a member of Owner.
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G. FACILITY EXPANSION. Capital shall continue to make recommendations
regarding construction, remodeling or expansion of the Facility, all of which
must be approved by Owner in Owner's sole discretion.
H. BUDGETS. Capital shall continue to prepare and submit for approval by
Owner by November 15 of each calendar year, a detailed written capital and
operating budget for the Facility for the next calendar year, showing projected
expenditures and projected revenues for each such budget period (broken down by
month). Cash flow projections shall accompany each operating budget. All budgets
proposed by Capital shall be subject to Owner's approval in Owner's sole
discretion. Owner and Capital shall endeavor to agree upon such budgets on or
before December 15 of each calendar year. If Capital shall fail to prepare and
submit by December 15 of any calendar year any budget requiring Owner's
approval, Owner may establish the applicable budget in its sole and absolute
discretion and without any requirement of any approval from or consultation with
Capital. Any such budget proposed by Capital and approved by Owner or
established by Owner as aforesaid is herein referred to individually and
collectively as a "Budget". Until such time as the Budget for the Facility for
any calendar year has been approved or established by Owner, neither Capital nor
any of its officers or agents shall have any authority or power to enter into
any contract or lease on behalf of the Facility or the Owner, or expend Facility
or Owner funds, other than to the extent specifically approved by Owner or as
set forth below. No amendment, modification, alteration, change, etc. of any
Budget will be effective until the same has been approved by Owner. If at the
beginning of any calendar year, the Budget or any item or portion thereof has
not been approved by Owner, then:
(1) Any items or portions of the Budget and amounts of expenses
provided therein which shall have been so approved by Owner
shall become operative immediately and Capital shall be
entitled to expend funds in accordance with those operative
portions;
(2) Capital shall be entitled to expend, in respect of noncapital,
recurring expenses in any fiscal quarter of the then current
calendar year, an amount equal to the lesser of actual
expenses incurred by the Facility or the budgeted amount for
the corresponding fiscal quarter of the immediately preceding
calendar year, as set forth on the immediately preceding
calendar year Budget; provided, however, that if any contract
approved by Owner provides for an automatic increase in cost
thereunder after the beginning of the then current calendar
year, then Capital shall be entitled to expend on behalf of
the Facility and Owner the amount of such increase; and
(3) Subject to the provisions of Section III.O. hereof, Capital
shall be entitled to expend the Facility funds on behalf of
Owner in respect of compensation payable hereunder,
reimbursements hereunder in accordance with the provisions of
subsection (2) hereof, real estate taxes and assessments,
emergency repairs or other immediately necessary expenditures,
utility charges, additions or modifications to comply with
applicable laws or insurance, insurance premiums for insurance
policies approved by Owner, any final orders, judgments or
other proceedings and
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all costs or expenses related thereto, regardless of whether
the Budget has been approved or whether such expenditures
exceed the amounts provided for in the prior Budget; provided,
however, that with respect to expenditures for non-emergency
situations, no such expenditure may exceed the sum of $25,000
in each instance without Owners' written approval not to be
unreasonably withheld or delayed and, with respect to
expenditures for emergency situations, each such expenditure
must be fully documented afterwards in writing to Owner.
I. PURCHASING. Capital shall purchase for the account of Owner all
necessary foodstuffs, supplies, materials, appliances, tools and equipment
necessary for the operation of the Facility as provided in the Budget and shall
use its reasonable efforts to utilize for the benefit of the Facility any
discount buying programs which may be available. Capital shall arrange contracts
on behalf of Owner for electricity, gas, telephone, cable television and any
other utility or service necessary for the operation of the Facility. Capital
shall, on behalf of Owner, contract for and supervise the making of any
necessary repairs, alterations and improvements to the Facility; provided that
in the case of any unbudgeted capital expenditure, alteration or improvement,
the cost of which exceeds five thousand dollars ($5,000), Capital shall obtain
the prior written approval of Owner; and provided further, that no such prior
written approval shall be required if the expenditure is made under
circumstances reasonably requiring emergency action (so long as Capital attempts
to notify Owner on a concurrent basis).
J. BOOKKEEPING. Capital shall establish and maintain a record and
bookkeeping system for the operation and conduct of the business of the Facility
in accordance with generally accepted accounting principles and practices,
consistently applied. Books and records at the Facility shall be maintained by
an employee of Capital under the direct supervision of Capital. Full books of
account with entries of all receipts and expenditures related to the operation
of the Facility shall be maintained at the Facility and shall at all times
during normal business hours be open for inspection by representatives of Owner.
K. FINANCIAL CONTROLS. Capital shall continue to implement the existing
system of financial controls for the Facility and shall cause such system to be
operated in the manner approved by Owner.
L. ACCOUNTING SYSTEMS AND SOFTWARE. Capital shall provide to Owner, during
the term of this Agreement, such on-site accounting systems and software as
approved by Owner, which shall include complete accounting, bookkeeping and
record keeping services for the Facility, specifically including, but not
limited to, resident xxxxxxxx, accounts payable, accounts receivable, general
ledger and inventory records and maintain demographic information on the
residents. Acquisition of software, software maintenance and update charges will
be budgeted expenses of the Facility. Payroll processing may be delegated to a
third party, the cost of which will be the responsibility of the Facility and
the Owner.
M. FINANCIAL REPORTS. Capital shall furnish to Owner the following
financial reports:
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(1) As soon as reasonably possible, but not later than thirty (30)
days after the close of each calendar month, a balance sheet
as of the end of the month and a related statement of income
and expense for the month and for the year to date, together
with a comparison to the Budget and a detailed statement of
receipts, disbursements, accounts payable and aged accounts
receivable as of the end of such monthly period, and all other
information reasonably required by Owner, all of which shall
be certified to by the party responsible for such statements
as being, to the best of its knowledge, true and correct;
(2) As soon as reasonably possible, but not later than sixty (60)
days after the close of each calendar year, a year-end
compilation report, including a balance sheet as of the end of
such calendar year and a related statement of income and
expense for the calendar year, together with a comparison to
the Budget and a detailed statement of receipts,
disbursements, accounts payable and aged accounts receivable
as of the end of such calendar year, and all other information
reasonably required by Owner, all of which shall be certified
to by both the party responsible for such statements and the
Executive Director as being, to the best of its knowledge,
true and correct, and all of which shall be certified, at
Owner's cost, in the customary manner by the nationally
recognized public accounting firm regularly utilized by Owner
(which firm shall provide such balance sheet, statement of
income and expense, statement of cash flow and other
information in draft form to the Owner for review prior to
finalization and certification thereof);
(3) As soon as reasonably possible, a report of events not in the
ordinary course of business or milestone events, including but
not limited to those which may require approval of Owner; and
(4) Such other and further reports or calculations as may be
required under any financing terms in accordance with the
deadlines required of any such financing.
The computer service charges incurred in connection with the preparation
of the foregoing financial reports shall be an expense of the Facility and the
Owner. All decisions as to accounting principles and practices shall be subject
to the approval of Owner in its sole and absolute discretion.
N. LEGAL AND OTHER PROFESSIONAL COUNSEL. Capital may, if already
authorized by Owner in the Budget or otherwise with the prior approval of Owner
if outside of the ordinary course of business, at Facility's expense, secure and
retain such engineering, legal, accounting and other specialized technical and
professional services necessary to advise or represent either the Facility or
Owner in connection with any matter involving or arising out of the ownership
and operation of the Facility or the conduct of affairs of the Facility.
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O. RENTAL COLLECTIONS AND DISBURSEMENTS. Capital shall supervise the
Facility bookkeeping personnel who shall prepare and submit bills and collect
for the account of Owner any and all monies owing to Owner from residents.
Capital shall provide Owner with a monthly report of receivables outstanding for
more than thirty (30) days and a summary of collection actions for such
receivables, if any. Capital shall collect the revenues from the residents and,
on behalf of Owner, deposit all such funds in a residential depository account
in the name of Owner at a FDIC insured bank approved by Owner. The style of the
account shall be in the name of the Facility or Owner, as Owner shall direct,
with designated representatives from Owner being the only parties authorized to
draw from said account. On an as needed basis, Owner shall transfer funds from
the above stated account into an Operating Expense Account in the name of the
Facility. The Operating Expense Account shall be in a FDIC insured bank approved
by Owner. The style of the account shall be in the name of the Facility with
designated representatives from Owner and Capital being the only parties
authorized to draw from said account, as approved by Owner. Capital shall hold
such funds in trust for Owner and shall pay out of such Operating Expense
Account all operating expenses (including Capital's Base Management Fee and
Incentive Management Fee and any other sums due to Capital from Owner), and all
other sums properly payable pursuant to any of the provisions of this Agreement,
provided that all sums so paid are in accordance with the then-applicable
Budget. Capital shall hold, remit or expend the balance of such funds, if any,
as Owner may direct. These funds shall not be co-mingled with funds from any
other projects and/or facilities owned, managed and/or operated by Capital.
Capital shall render the services called for by this subparagraph O in the
utmost good faith and Capital acknowledges that with respect to its handling of
cash, it is acting in a fiduciary capacity with respect to Owner and owes Owner
the highest duty of care. Notwithstanding the foregoing, Owner retains the right
to make any and all payments with regard to real estate taxes and assessments
and any and all payments with regard to debt service on the Facility's or
Owner's financings.
P. ADMINISTRATIVE. Capital shall continue to implement and supervise
procedures to provide written review of all operational areas, which shall be
reviewed in regularly scheduled semi-annual meetings and at other meetings as
may be deemed necessary or desirable by Owner (copies of all such reviews and
reports to be promptly provided to Owner). Capital shall advise and assist Owner
regarding any licenses and/or other governmental approvals which are issued in
the name of Owner and which are necessary for the occupancy and operation of the
Facility and for Capital's management of the Facility; and Capital shall obtain
and maintain in full force and effect any licenses and governmental approvals
issued in the name of Capital or any of its employees and which are necessary
for Capital and its employees to perform their representative duties and
obligations under this Agreement. All such licensure and governmental approvals
shall be an expense of the Facility.
Q. PLANT AND MAINTENANCE. Capital shall give attention to preventive
maintenance and the services of regular Facility maintenance employees shall be
used. Capital shall make recommendations to Owner regarding the entering into of
contracts with qualified independent maintenance contractors for the maintenance
and repair of systems and equipment and for extraordinary repairs beyond the
capability of regular Facility maintenance employees.
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IV. OWNER'S RESPONSIBILITIES
A. POLICIES. Owner shall establish the policies of the Facility including,
but not limited to, the level and quality of services to be provided to
residents.
B. GOALS. Owner shall establish the short and long range goals of the
Facility.
C. BUDGETS. Owner shall review and approve budgets for the operation of
the Facility.
D. CAPITAL'S PERFORMANCE. Owner shall review and evaluate the performance
of Capital in carrying out the policies for the Facility and the performance by
Capital of its obligations under this Agreement.
E. LEGAL COUNSEL. Owner may retain legal and other professional services
to perform all necessary legal and other professional services relating to
Owner's ownership of the Facility.
F. AUDITS. Owner, at its discretion, may engage certified public
accountants to perform annual audits of the Facility as well as prepare any
other reports required for federal or state regulatory agencies which require
licensure and/or certification. Owner, at its discretion, may also engage such
other professionals, experts or consultants to perform procedural and compliance
audits with regard to the Facility and this Agreement. All financial records
pertaining to the Facility will be open for inspection and review by Owner's
representatives. All labor and expense associated with any such audits or
reviews shall be borne by Owner not from revenues of the Facility.
G. DIRECTIVES. In order to assure proper coordination, Owner shall issue
any directions concerning the operations of the Facility only through the
President or any Vice President of Capital.
H. CHANGE OF RESIDENCY AGREEMENT. Owner shall not change the standard form
Residency Agreement without consulting with Capital unless required to do so to
comply with any applicable law or regulation.
I. DECISIONS. Owner shall examine documents submitted by Capital and
render decisions pertaining thereto promptly to avoid unreasonable delay.
J. FURNISHING INFORMATION. Owner agrees at its expense to install and
maintain a computer terminal compatible with the mainframe computer currently in
use by Capital and to transmit data to the Capital mainframe computer via
telephone lines. Owner shall, within fourteen (14) days of issuance, furnish to
Capital a copy of any and all Facility-related reports, including the annual
audit but excluding federal income tax returns, reports to lenders and parties,
if any, owning interests in Owner.
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V. INSURANCE
A. Capital shall maintain, in full force and effect, at the Facility's and
Owner's expense, the following insurance protecting Owner and Capital and their
respective officers and employees:
(1) Employee's fidelity insurance, in such amount as approved by
Owner.
(2) Employment practices liability insurance, in such amount as
approved by Owner.
(3) Workers compensation in accordance with applicable laws, and
employers liability insurance, in such amount as approved by
Owner.
(4) Professional liability insurance, in such amount as approved
by Owner.
(5) Comprehensive general public liability insurance and overlying
umbrella liability coverage against loss or liability for
damages for personal injury or death occurring on, in or about
the Facility, in such amount as approved by Owner.
(6) Insurance for vehicles owned or hired by Capital and used in
connection with the Facility, in such amount as approved by
Owner.
(7) Property insurance protecting Owner and Capital and their
respective officers and employees for loss or damage by fire
and other perils insurable under the broad form of extended
coverage insurance available in the area where the Facility is
located, and improvements, and contents thereof, constituting
all or any portion of the Facility.
(8) All other insurance as may be requested by Owner or as may be
customary or standard in the industry, including but not
limited to, all other insurance required by law or required by
any lender or investor.
B. Capital and Owner shall each furnish to the other whatever information
is requested by the other for the purpose of establishing the placement of
insurance coverages and to aid and cooperate in every reasonable way with
respect to such insurance and any loss thereunder. All insurance required to be
carried hereunder shall be evidenced by valid and enforceable policies, issued
by financially sound and responsible insurance carriers authorized or permitted
to do business in the state in which the Facility is located, and having a Best
Policy Rating of not less than A-VII, unless a higher Best Policy Rating is
required by Owner's lenders, in which event the higher rating will be required
hereunder. Capital and Owner shall provide each other with appropriate
certificates evidencing the insurance coverage required by these provisions,
prior to the commencement of any activity or operation which would give rise to
a loss to be covered by such insurance. Each certificate shall state that at
least thirty (30) days notice shall be given to Owner and Capital prior to the
amendment, termination or cancellation of any policy evidenced thereby.
Replacement certificates shall be sent as policies are renewed, replaced or
modified. Capital shall promptly investigate and make a full, timely and written
report to any insurance company providing coverage, with a copy to Owner, of all
accidents,
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claims or damage relating to the ownership, operation and maintenance of the
Facility, any damage or destruction to the Facility and the estimated cost of
repair thereof, and shall prepare any and all further reports required by such
insurance company in connection therewith. Capital shall have no right to
settle, compromise or otherwise dispose of any claims, demands or liabilities,
whether or not covered by insurance, exceeding $5,000, without the prior written
consent of Owner. Owner and Capital shall meet periodically to discuss changes
in circumstances that may arise which impact the types and amounts of coverages
of insurance required hereunder and shall amend the provisions of this Agreement
accordingly.
VI. NONCOMPETES; RIGHT OF FIRST OFFER
A. CAPITAL'S NONCOMPETE. During the term of this Agreement and, only in
those circumstances listed below, continuing thereafter for the period indicated
below, Capital (on its own behalf and on behalf of its Affiliates) agrees not to
acquire, own, develop, complete the development of, or manage any senior living
facility providing the same level of services as the Facility (a "Competing
Facility") within a five (5) mile radius of the Facility. The noncompete
provided in the preceding sentence shall apply for a period of five (5) years
after the termination of this Agreement if such termination was for cause as
provided in subsections VII.C.(1)(a), (b), (c), (f), or (g) and for a period of
two (2) years after the termination of this Agreement if such termination was
for cause as provided in subsection VII.C. (1) (k) and (l); otherwise, the
noncompete provisions of this Section VI.A. shall apply only during the term of
this Agreement. The noncompete provisions set forth in this subsection VI.A.
shall not apply in the event that Capital or an Affiliate enters into a
Portfolio Transaction, in which case Capital may acquire, own, develop or
complete the development of or manage, as applicable, any Competing Facility
connected with a Portfolio Transaction and located within such radius. For
purposes of this subsection, "Portfolio Transaction" shall mean a single
transaction or series of related transactions in which Capital or its Affiliate
acquires the ownership of, leasehold interest in, or management of or
development rights in at least five senior living facilities. With respect to
any Competing Facility acquired or managed by Capital or its Affiliates in a
Portfolio Transaction and which is within such five (5) mile radius, Capital
agrees that Capital will not operate such Competing Facility in a manner
substantially more favorable than Capital operates the Facility, taking into
account the existing operation of the Competing Facility at such time that it is
acquired or first managed by Capital or its Affiliates.
B. RIGHT OF FIRST OFFER.
(1) Owner may at any time solicit offers for the purchase of the
Facility directly or through any of its Members, but may
accept such offers only as provided herein. In the event that
Owner or any Member of Owner desires to sell the Facility upon
terms, which Owner or such Member of Owner is willing to
accept ("Proposed Offer"), Owner or such Member of Owner shall
deliver to Capital the terms of such Proposed Offer, including
the purchase price and other major economic terms and
conditions of such Proposed Offer. The terms of such Proposed
Offer delivered to Capital shall include a good faith
statement prepared by Owner or such Member of Owner setting
forth the encumbrances and other title exceptions, if any,
12
to which the Facility will remain subject upon conveyance
("Permitted Exceptions"), shall be at a price stated in U.S.
Dollars only and shall include usual and customary due
diligence review provisions. At any time within the Response
Period (as defined below), Capital shall have the right,
exercisable by delivery of written notice ("Election Notice")
to Owner or such Member of Owner, to either:
(a) Authorize Owner or such Member of Owner to attempt to
sell the Facility which is the subject of a Proposed
Offer in accordance with the Proposed Offer; or
(b) Agree to purchase the Facility which is the subject of
the Proposed Offer for a purchase price equal to the sum
of all cash and the fair market value of all other
property (as set forth in the Proposed Offer) which
Owner would have received had the Facility been sold
pursuant to the Proposed Offer, and subject to the other
terms and conditions of the Proposed Offer, such
election to be made by delivering to Owner and such
Member of Owner the Election Notice which shall
affirmatively state that Capital is exercising such
option. Within five (5) business days after delivery to
Owner and such Member of Owner of an Election Notice,
Capital shall establish an escrow account with a title
company, bank, trust company or other escrow holder into
which Capital shall deposit xxxxxxx money in an amount
equal to 5% of the cash purchase price.
(c) As used herein, the term "Response Period" shall mean
the thirty (30) day period commencing on the first day
after Capital shall have received a copy of the Proposed
Offer. If during the Response Period, Capital neither
(i) authorizes Owner to accept the Proposed Offer nor
(ii) agrees to purchase the Facility by delivering the
Election Notice, then Capital shall be deemed to have
authorized and to have approved the sale of the Facility
which is the subject of the Proposed Offer to any third
party which is not an Affiliate of Owner, pursuant to
terms no less favorable to Owner than those set forth in
the Proposed Offer. In the event Capital authorizes or
is deemed to have authorized the sale of the Facility
pursuant to terms no less favorable to Owner than those
set forth in the Proposed Offer and Owner thereafter
obtains or finalizes a bona fide offer for the purchase
of the Facility which is the subject of such Proposed
Offer from any third party which is not an Affiliate of
Owner for a purchase price and upon other major economic
terms no less favorable to Owner than those set forth in
the Proposed Offer, Owner may consummate the sale of the
Facility to such third party offeree on terms no less
favorable than those set forth in the Proposed Offer,
without the requirement of any consent or approval of
Capital provided such sale must be
13
consummated within one hundred eighty (180) days after
the date on which Capital authorized or was deemed to
have authorized such sale. The failure of such sale to
occur within the one hundred eighty (180) day period
referred to in the immediately preceding sentence shall
require Owner or any Member of Owner to deliver to
Capital another Proposed Offer in accordance with the
terms of this Section VI.B.
(2) If Capital delivers an Election Notice, Capital shall have an
additional thirty (30) days following such delivery within
which to obtain a commitment for financing to purchase the
Facility or to waive such condition. Capital shall notify
Owner whether it has obtained a commitment for financing to
purchase the Facility or waived such condition within such
thirty (30) day period. If Capital fails to notify Owner of
its having obtained a commitment for financing or waived such
condition within such thirty (30) day period, Capital shall be
deemed not to have obtained the requisite financing, in which
case Owner may consummate the sale of such portion of the
Facility as provided in subsection (1) of this Section VI.B.
(3) If Capital timely delivers an Election Notice and notifies
Owner that Capital has obtained a commitment for the requisite
financing to purchase the Facility or waived such condition,
the closing of the sale to Capital shall take place within
ninety (90) days thereafter on materially the same terms and
conditions as set forth in the Proposed Offer.
(4) If Owner is required to convey the Facility to Capital
pursuant to the foregoing provisions, Owner shall convey the
Facility to Capital by a special warranty deed, subject to
only the Permitted Exceptions. Transfer taxes, title insurance
premiums, escrow fees and all other closing costs, including
ad valorem and real property taxes, in connection with such
conveyance shall be allocated between and paid by the
purchaser and seller in the usual and customary manner for the
locality in which the Facility is located. The closing of such
sale shall be held at such place as Owner shall elect and
which is reasonably satisfactory to Capital. At such place and
at the time set forth above, Capital shall tender the cash
portion of the purchase price by certified or cashiers check,
or wire transfer of immediately available federal funds.
(5) The provisions of this Section VI.B. shall continue to apply
during the full stated Term even though the Agreement is
earlier terminated if such termination entitles Capital to
receive severance compensation pursuant to Section VII.B.
C. ADDITIONAL SERVICES. Capital shall be prohibited from independently
providing any additional services to residents of the Facility without the prior
written consent of Owner. Owner shall have the right to introduce additional or
substitute services at the Facility, provided
14
that Capital shall have the right to incorporate those services under the terms
of this Agreement and to manage such services (the revenues of which would be
included in Gross Revenue for purposes of the Base Management Fee and the
revenues and expenses of which would be included in the Net Cash Flow of the
Facility and would thereby be included in Capital's Incentive Management Fee).
VII. TERM AND TERMINATION OF THIS AGREEMENT
A. INITIAL TERM AND EXTENDED TERM. This Agreement was effective on
December 10, 1997. The term of this Agreement shall continue until December 31,
2010 (the "Initial Term"). Capital shall have the option to extend the term of
this Agreement for one additional five (5) year period on the same terms and
conditions as herein provided (the "Extended Term"), except that the
compensation payable hereunder during the Extended Term shall be a market rate
as agreed to by Owner and Capital or, if no agreement is reached within 30 days
of exercise of the option, as established by arbitration as provided herein. The
option to extend must be exercised by notice to Owner by Capital at least nine
(9) months prior to the end of the Initial Term. The Initial Term or the
Extended Term, as applicable at the time in question, may sometimes be referred
to herein as the "Term".
X. XXXXXXXXX COMPENSATION. If Owner terminates the Agreement prior to the
expiration of the Term for any reason other than those provided in Section
VII.C.(1) below, or if Capital terminates this Agreement during the Term for any
reason provided in Section VII.C.(2) below, severance compensation in an amount
equal to the then-current monthly Base Management Fee times the number of months
remaining in the Term, discounted to net present value at the Prime Rate (as set
forth in The Wall Street Journal), shall be paid to Capital upon the effective
date of termination. Any such termination shall be effective upon the expiration
of the ninety (90) day period following the giving of the notice or on such
later date as may be specified in the notice.
If Owner terminates the Agreement prior to the expiration of the Term for
any reason provided in Section VII.C.(1) below or if Capital terminates the
Agreement for reasons other than those provided in Section VII.C.(2), Capital
shall not be entitled to any severance compensation.
C. TERMINATION FOR CAUSE.
(1) This Agreement may be terminated by Owner for cause for the
following reasons:
(a) In the event of material breach by Capital of a material term
hereof, which breach is not cured within forty-five (45) days
after notice by Owner to Capital.
(b) In the event that a petition in bankruptcy is filed by Capital
or its permitted assignee, or in the event Capital or its
permitted assignee makes an assignment for the benefit of
creditors or takes advantage
15
of an insolvency act, or in the event that a petition in
bankruptcy is filed against Capital and is not dismissed
within ninety (90) days of filing, by notice to Capital or
such assignee.
(c) In the event that (i) Capital's or any permitted assignee's
corporate existence is dissolved and the duties under this
Agreement are not assumed by Capital or an Affiliate of
Capital, or (ii) Capital or any permitted assignee ceases to
do business for any reason, and the duties under this
Agreement are not assumed by Capital or Capital's Affiliate,
by notice to Capital or such assignee.
(d) In the event the Facility is sold or otherwise transferred to
any third party which is not an Affiliate of Owner, provided
that Section VI. B. has been complied with.
(e) In the event the Facility is foreclosed upon by any lender or
the Facility is conveyed to such lender by deed in lieu of
foreclosure;
(f) In the event Capital and/or Facility shall cease to have all
required licenses and permits necessary for the operation of
the Facility, which cessation is not cured within sixty (60)
days after notice by Owner; provided, however, that if such
failure to have all required licenses and permits results in
the closing of the Facility, the closure shall constitute
cause for Owner to terminate this Agreement and Capital shall
not have a right to cure such failure after such closure.
(g) In the event Capital has taken any action or failed to take
any action which amounts to or constitutes fraud, bad faith or
wilful misconduct.
(h) There is substantial damage or destruction to the Facility and
Owner elects not to rebuild or restore the Facility or there
is a taking by condemnation, or similar proceeding, of a
substantial portion of the Facility; provided, however, if
this Agreement shall so terminate and thereafter Owner
commences operations on the Property of a senior living
facility, Capital shall have the option to re-commence
providing services at such Property pursuant to the terms
hereof.
(i) If (i) Capital has been given the opportunity to purchase the
Facility under the right of first offer provisions set forth
in Section VI.B hereof, has declined that opportunity and has
(or is deemed to have) authorized Owner to attempt to sell the
Facility pursuant to that Section, (ii) PAMI Senior Living
Inc. ("PAMI"), a Member of Owner, has received a bona fide
written offer or letter of intent to purchase the Facility
("Offer") from a third party not
16
Affiliated with Owner or any Member of Owner and a copy of
such Offer has been delivered to Capital Senior Living
Properties 4, Inc. ("Capital 4"), a Member of Owner and an
Affiliate of Capital, (iii) PAMI proposes the sale of the
Facility for approval as a Major Decision pursuant to Section
5.2(d)(iv) of the LLC Agreement of Owner, (iv) Capital 4 does
not vote in favor of the Major Decision proposed by PAMI to
sell the Facility pursuant to the Offer for any reason, (v)
PAMI initiates the buy-sell procedures described in Section
5.5(b) of the LLC Agreement of Owner, (vi) Capital 4 does not
purchase the Membership Interests of PAMI in Owner under
Section 5.5(b) of the LLC Agreement of Owner for any reason
and (vii) PAMI has purchased the membership interests in Owner
held by Capital 4 pursuant to Section 5.5(b) of the LLC
Agreement of Owner.
(j) [Intentionally Deleted.]
(k) Subject to the expiration of the next succeeding semi-annual
period set forth in the proviso at the end of this subsection
(k), the net operating income of Owner (or other comparable
term used in the Budget) determined in accordance with
generally accepted accounting principles for two (2) or more
consecutive fiscal semi-annual periods beginning on January 1,
2004, has been less than 85% of the net operating income (or
such comparable term) projected for those semi-annual periods
in the applicable Annual Business Plan and related operating
budget; provided, however, that if net operating income of the
Company during the semi-annual period following such two (2)
consecutive semi-annual periods during which the Company
failed to achieve such net income targets is more than 85% of
such projected net operating income, then this Agreement shall
not be subject to termination under this subparagraph (k)
unless and until the Company fails to achieve such net
operating income in future semi-annual periods. Real estate
taxes and insurance premiums shall be excluded from all
calculations pursuant to this subsection.
(l) Capital Senior Living Properties 4, Inc., an affiliate of
Capital, fails for any reason to make its pro rata share of
additional Member Loans to Owner as required by Section 3.6(b)
of the LLC Agreement of Owner.
(2) This Agreement may be terminated for cause by Capital in the event
that Capital fails to receive reimbursement of reimbursable expenses
or any compensation due Capital pursuant to the terms of this
Agreement, and such failure continues for a period of thirty (30)
days after Capital's written notice thereof to Owner, provided,
however, that this Agreement shall not be so terminated if Owner
pays Capital all such expenses and
17
compensation then due and payable on or before the expiration of
said thirty (30) day period.
(3) No termination of this Agreement shall affect any obligation owing
by either party hereto to the other which accrued prior to the
effective date of such termination.
D. COVENANTS SURVIVING TERMINATION. The termination of this Agreement
shall not terminate the right of Owner or Capital to indemnification relating to
events occurring during the term of this Agreement under Section X.K. and to
protection of its property rights under Section X.B.
VIII. COMPENSATION
A. BASE MANAGEMENT FEE. Commencing on the day upon which the Certificate
of Occupancy for the Facility is issued, as compensation for the services to be
rendered by Capital during the Term, Owner shall pay to Capital, at the times
hereinafter specified, a monthly management fee ("Base Management Fee") equal to
the greater of (1) $15,000.00 or (2) five percent (5%) of Gross Revenues (as
defined in Section VIII.B.) generated from the Facility during such month. The
monthly Base Management Fee shall be paid monthly in arrears based upon a
written submission of a monthly statement for the Facility from Capital for each
calendar month during the Term hereof and shall be due and payable on or before
the tenth (10th) day of each calendar month following the calendar month in
which such Base Management Fee was earned. If the first month and/or the last
month during the Term hereof is less than a full calendar month, the Base
Management Fee shall be prorated for such partial calendar month based upon the
number of days during such calendar month included in the Term compared to the
total number of days in such calendar month.
B. INCENTIVE MANAGEMENT FEE. In addition to the Base Management Fee stated
above, as additional compensation for the services to be rendered by Capital
during the Term, Capital shall be paid a fee (the "Incentive Management Fee")
equal to 25% of the amount, if any, by which Actual Net Cash Flow for any annual
or shorter period during the Term ending on December 31 of any year or ending at
the end of the Term exceeds Budgeted Net Cash Flow for such period. The
Incentive Management Fee for any period shall be earned even if the Actual Net
Cash Flow is negative so long as the negative amount of the Actual Net Cash Flow
is less than the negative amount of the Budgeted Net Cash Flow.
For purposes of this Section VIII.B., "Net Cash Flow" shall mean, for any
period for which such sum is being computed, the excess of (a) Gross Revenues
for the Facility during such period over (b) Operating Expenses for the Facility
during such period. "Gross Revenues" shall mean and refer, for any period for
which such Gross Revenues are being determined, the sum of the total gross
revenues of the Facility from operations received during such period, including
all receipts from (i) rent of units at the Facility, (ii) rent or business
interruption insurance, if any, (iii) revenue of the Facility for or on account
of any and all goods provided and services rendered or activities during such
period, (iv) reimbursements of expenses paid by the Facility which are to be
borne by others, (v) deposits in the event of forfeiture thereof to the Facility
and (vi) other
18
revenues and receipts realized by the Facility from operations and customarily
included in Net Cash Flow; but shall not include advance rentals paid (until
such time as they are earned), insurance loss proceeds (except for any proceeds
from any business or rental interruption insurance), proceeds or funds from the
sale or disposition of all or any part of the Facility or any other capital
transaction, capital contributions made by any partner, shareholder or member,
as the case may be, of Owner, loans obtain by Owner or proceeds from capital
transactions, including financings or refinancing. "Operating Expenses" shall
mean, for any period for which such Operating Expenses are being determined, the
sum of the total gross expenditures of the Facility for operations during such
period, including (A) all cash operating expenses (including the Base Management
Fee, any Incentive Management Fee, all commissions and other fees, expenses and
allowances paid to Capital), (B) any other expenditures of the Facility which
are not treated as capital expenditures under generally accepted accounting
practices, and (C) real estate taxes, personal property taxes and sales taxes;
provided however, that Operating Expenses shall not include any payments or
expenditures to the extent the sources or funds used for such payments or
expenditures are not included in Gross Revenues.
As used herein, "Actual Net Cash Flow" shall mean the actual Net Cash Flow
for the period in question. As used herein, "Budgeted Net Cash Flow" shall mean
the Net Cash Flow for the period in question based on the Budget for such
period. Owner agrees that it will not adopt the Budget for any period in
question for the purpose of reducing or eliminating the Incentive Management Fee
for such period.
C. CERTAIN EXPENSES. To the extent set forth in the annual Budget, the
Facility shall reimburse Capital for the cost of reasonable transportation,
lodging and meal expense for non-Facility-based employees of Capital when
traveling in connection with the performance of the services being performed
pursuant to this Agreement, together with any reasonable long distance telephone
expenses, copying, mailing or express shipments and other miscellaneous out of
pocket expenses that relate to the marketing and management of the Facility. To
the extent set forth in the annual Budget, reasonable relocation, education,
professional memberships and licensing expenses of the Facility-based
administrative employees shall also be an expense of the Facility
IX. [INTENTIONALLY DELETED]
X. MISCELLANEOUS
A. INSURANCE-SUBROGATION. No indemnity shall be paid to the other party
under this Agreement where the claim, damage, liability, loss or expense
incurred was insured against. Any insurance policies obtained by the parties
pursuant to this Agreement shall contain provisions or have the effect of
waiving any right of subrogation by the insurer of one party against the other
party or its insurer.
B. PROPERTY OF CAPITAL OR OWNER. Trade names, marketing material, ideas,
documents, forms, and development material and records, developed specifically
for and related to Owner or the Facility shall be the property of Owner. Trade
names, ideas, documents, forms
19
and development material and records, not directly related to the Facility and
supplied by Capital shall be considered proprietary and shall remain the
property of Capital. Owner may use such materials and information which are the
property of Capital in the operation and management of the Facility, as may be
recommended by Capital, but may not use such materials or information after
termination of this Agreement for the development of new projects for itself or
others without the written consent of Capital.
C. STATUS OF PARTIES. It is expressly understood and agreed that Capital,
acting in its capacity as Manager under this Agreement, shall act as an
independent contractor in the performance of this Agreement. No provision hereof
shall be deemed or construed to create a partnership or a joint venture between
Owner and Capital, acting in its capacity as Manager under this Agreement, with
respect to the Facility or otherwise. Capital shall not be the agent of Owner in
connection with the operation of the Facility or otherwise when acting in its
capacity as Manager under this Agreement. Notwithstanding the foregoing, Capital
shall be authorized to execute occupancy agreements as "Agent of Owner",
provided such occupancy agreements are within the lease guidelines approved by
Owner in the Marketing Plan.
D. ADDITIONAL ACTION. In order to carry out the intent and spirit of this
Agreement, Owner and Capital shall do all acts and things reasonably necessary
to effectuate the transaction contemplated by this Agreement, including the
execution of other agreements.
E. ENTIRE AGREEMENT. Except for the Assignment and Assumption Agreement
and the Consent to Assignment of even date herewith, including exhibits thereto,
this Agreement sets forth the entire Agreement between Capital and Owner with
respect to the subject matter of this Agreement. Any change or modification of
this Agreement must be in writing and signed by Owner and Capital.
F. BINDING EFFECT. Subject to the provisions of paragraph X.G, this
Agreement shall be binding upon and shall inure to the benefit of the parties
hereto, their successors and assigns.
G. ASSIGNMENT, ETC. Capital shall not, without Owner's prior written
approval (which approval may be granted or withheld by Owner in its sole and
absolute discretion), assign any of its rights or obligations under this
Agreement; provided, however, Capital may, without Owner's approval, assign this
Agreement to an Affiliate of Capital.
Owner shall not, without Capital's prior written approval (which approval
may be granted or withheld by Capital in its sole and absolute discretion),
assign any of its rights or obligations under this Agreement; provided, however,
Owner may, without Capital's approval, assign this Agreement to an Affiliate of
Owner.
H. GOVERNING LAW. This Agreement, its interpretation, validity and
performance shall be governed by the laws of the State of New York.
I. LIMITATIONS ON HIRING OF EMPLOYEES. Without the prior written consent
of Capital, for a period of three years following termination of this Agreement
by Owner for any reason other than for cause as set forth in Section VII.C.(1)
hereof, Owner and its Affiliates will not employ or engage any person who was
the Executive Director or the Marketing Director of
20
the Facility or any non-Facility employee of Capital at any time during the
twelve (12) months prior to termination of this Agreement.
J. CONDITIONS BEYOND CONTROL OF PARTIES. Neither party shall be held
liable for failure to comply with any of the terms of this Agreement when such
failure has been caused solely by fire, labor dispute, strike, war,
insurrection, government restrictions, force majeure, or act of God beyond the
control and without fault on the part of the party involved, provided such party
uses due diligence to remedy such default. Lack of funds shall not be deemed to
excuse the performance by Owner or Capital of its obligations under this
Agreement.
K. INDEMNIFICATION. To the fullest extent provided by law, in any
threatened, pending or completed action, suit or proceeding, whether civil,
criminal, administrative, investigative or otherwise, Owner agrees to hold
Capital and Capital's Affiliates and representatives ("Capital Indemnitees"),
harmless from and against and shall indemnify each Capital Indemnitee for any
loss, damage, judgment or amounts paid in settlement, liability, cost or
expenses (including reasonable fees and disbursements of counsel) arising out of
or incident to the ownership and operation of the Facility or to Capital's
performance of or failure to perform its duties under this Agreement, unless the
act or failure to act which gives rise to the indemnity claim is attributable,
in whole or in part, to Capital's fraud, bad faith or wilful misconduct.
To the fullest extent provided by law, in any threatened, pending or
contemplated action, suit or proceeding, whether civil, criminal,
administrative, investigative or otherwise, Capital agrees to hold Owner and
Owner's Affiliates and representatives ("Owner Indemnitees") harmless from and
against and shall indemnify each Owner Indemnitee from any loss, damage,
judgment or amounts paid in settlement, liability, cost or expenses (including
reasonable fees and disbursements of counsel) arising out of or incident to
Capital's fraud, bad faith or wilful misconduct.
L. ARBITRATION. In the event of any dispute, claim or controversy of any
kind between the parties, concerning this Agreement or the termination of this
Agreement, the matter shall be submitted to binding arbitration in accordance
with the commercial arbitration rules of the American Arbitration Association.
The parties jointly shall agree on an arbitrator. If the parties are unable to
agree, in good faith, on the selection of an arbitrator within 30 days, either
party may request appointment of an arbitrator chosen by the American
Arbitration Association who shall be the selected arbitrator. Such arbitrator
shall be limited in his decision to a choice between the final position as
requested by each party. Said arbitration shall be held in New York City or such
other place as is mutually agreeable. The arbitration decision shall be final
and binding on both parties unless the arbitration is fraudulent or so grossly
erroneous as to necessarily imply bad faith. Costs of arbitration are to be
shared by both parties equally, provided, that the arbitrator may choose to
award the fees, costs and expenses f arbitration against the losing party if the
arbitrator determines that the final position urged by the losing party was not
reasonable.
M. CONSENTS AND APPROVALS. To be effective, consents and approvals of
Owner shall be in writing and signed by PAMI.
21
N. NO WAIVER. The failure of either party to seek redress for breach, or
to insist upon the strict performance of any covenant, agreement, provision or
condition of this Agreement, shall not constitute a waiver thereof, and such
party shall have all remedies provided for herein and by applicable law with
respect to any subsequent act which would have originally constituted a breach.
O. CAPTIONS. The captions of this Agreement are inserted only for the
purpose of convenient reference and do not define, limit or prescribe the scope
or intent of this Agreement or any specific provision or any part hereof.
P. EXTENSION NOT A WAIVER. No delay or omission in the exercise of any
power, remedy or right herein provided or otherwise available to any party to
this Agreement shall impair or affect the right of such person thereafter to
exercise the same. Any extension of time or other indulgence granted to any
party to this Agreement hereunder shall not otherwise alter or affect any power,
remedy or right of any other party to this Agreement, or the obligations of the
person to whom such extension or indulgence is granted.
Q. COUNTERPARTS. This Agreement may be executed in multiple counterparts,
each of which shall be an original, but all of which together shall constitute
but one and the same instrument.
R. PUBLICITY. Neither Owner nor Capital nor any of their respective
advisors, employees or agents shall issue any press release or otherwise
publicize or disclose the terms of this Agreement or the proposed terms of any
acquisition, development or disposition of the Facility or any portion thereof,
without the express written consent of the other party to this Agreement, which
consent shall not be unreasonably withheld, or except as such disclosure may be
made in the course of normal reporting practices to the disclosing party's
shareholders, to prospective lenders to or investors in disclosing party or as
otherwise required by law (it being specifically understood and agreed that
anything set forth in a registration statement or any other document filed
pursuant to the securities laws will be deemed required by law). A disclosing
party will provide the other party with a copy of such disclosures either before
or after such disclosure is made.
S. CONFIDENTIALITY
(1) The terms of this Agreement, the identity of any person with
whom Owner or Capital may be holding discussions with respect
to any investment, acquisition, disposition or other
transaction, and all other business, financial or other
information relating directly to the Facility or the conduct
of the business and affairs of Owner or Capital or the
relative or absolute rights or interests of Owner or Capital
(collectively, the "Confidential Information") that has not
been publicly disclosed pursuant to authorization by Owner or
Capital, as applicable, is confidential and proprietary
information of Owner or Capital, as applicable, the disclosure
of which would cause irreparable harm to Owner or Capital, as
applicable. Accordingly, each of Owner and Capital represents
that it has not and agrees that it shall not and will direct
its members, shareholders, partners,
22
directors, officers, agents, advisors and Affiliates, as
applicable, not to, disclose to any person any Confidential
Information or confirm any statement made by any third person
regarding Confidential Information until Owner or Capital, as
applicable, has publicly disclosed the Confidential
Information and has notified the other party that it has done
so; provided, however, that Owner or Capital, as applicable,
(or their Affiliates) may disclose such Confidential
Information to prospective lenders and investors of either
Owner or Capital and if necessary for it to perform any of its
duties or obligations hereunder or if required by law (it
being specifically understood and agreed that anything set
forth in a registration statement or any other document filed
pursuant to the securities laws shall be deemed required by
law). A disclosing party will provide the other party with a
copy of such disclosure either before or after such disclosure
is made.
(2) Subject to the provisions of Section X.S.(1) above, each of
Owner and Capital agrees not to disclose any Confidential
Information to any person (other than a person agreeing to
maintain all Confidential Information in strict confidence or
a judge, magistrate or referee in any action, suit or
proceeding relating to or arising out of this Agreement or
otherwise), and to keep confidential all documents (including,
without limitation, responses to discovery requests)
containing any Confidential Information. Each of Owner and
Capital hereby consents in advance to any motion for any
protective order brought by the other party to this Agreement
and represented as being intended by the movant to implement
the purposes of this Section X.S. If Owner or Capital, as the
case may be, receives a request to disclose any Confidential
Information under the terms of a valid and effective order
issued by a court or governmental agency and the order was not
sought by or on behalf of or consented to by the party
receiving the request, then the party receiving the request
may disclose the Confidential Information to the extent
required, if the party receiving the request as promptly as
practicable (i) notifies the other party to this Agreement of
the existence, terms and circumstances of the order, and (ii)
if disclosure of the Confidential Information is required,
reasonably cooperates with the other party in any attempts by
the other party to obtain a protective order or other reliable
assurance that confidential treatment will be accorded to the
portion of the disclosed Confidential Information that such
other party designates. The cost (including, without
limitation, attorneys' fees and expenses) of obtaining a
protective order covering Confidential Information designated
by the party requesting the protective order will be borne by
such party.
(3) The covenants contained in this Section X.S. shall survive the
termination of the Agreement for a period of four (4) years.
23
XI. AFFILIATE DEFINED
As used in this Agreement, the term "Affiliate" and comparable terms shall
mean, with regard to any person or entity ("Person") (1) any partner in or
shareholder, member or beneficiary of such Person, (2) any partner in or
shareholder, member or beneficiary of any Person described in clause (1) above,
(3) any Person which controls, is controlled by or is under common control with
(a) such Person or (b) any person described in clause (1) or (2) above, or (4)
any member of the Immediate Family of any such Person or any person described in
clauses (1), (2) or (3) above. As used herein, the term "Immediate Family" shall
mean the spouse and, lineal descendants, and trusts established for the benefit
of any of them. As used herein, the term "control", "controlled by" and "under
common control with" shall include (without limitation) the ownership of fifty
percent (50%) or more of the beneficial interest of the Person referred to.
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IN WITNESS WHEREOF, the parties hereto have executed this Agreement by
their duly authorized officers or representatives as of the day and year first
above written.
CAPITAL:
CAPITAL SENIOR LIVING, INC.
By:____________________________________
Name:
Title:
OWNER:
LIBERTYVILLE SL L.L.C.
(formerly LCOR/JV Libertyville SL L.L.C.)
By: PAMI Senior Living Inc.,
its Managing Member
By:____________________________________
Name:
Title:
25
EXHIBIT "A"
to Management and Marketing Agreement
PROPERTY DESCRIPTION
A-1
