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Exhibit 10.33
MANAGEMENT AGREEMENT
THIS MANAGEMENT AGREEMENT (hereinafter "Agreement") is dated as of
March 22, 1994 by and between BRIM FIFTH AVENUE, INC., an Oregon corporation
("Brim"), and THC-SEATTLE, INC., a Washington corporation ("THC").
RECITALS
X. Xxxx is the owner and operator of that 80 bed acute care hospital
commonly known as Fifth Avenue Hospital and located at 00000 Xxxxx
Xxxxxx, X.X., Xxxxxxx, XX 00000 (the "Hospital").
B. By Asset Acquisition Agreement and Escrow Instructions of even date
herewith (the "Asset Agreement"), Brim has agreed to sell to THC and
THC has agreed to acquire from Brim substantially all of the assets
related to the operation of the Hospital subject to the satisfaction or
waiver of various conditions to closing set forth in the Asset
Agreement.
C. Pending closing of the transaction provided for in the Asset Agreement,
THC has assumed operational responsibility for the Hospital pursuant to
that Management and Transfer of Operations Agreement of even date
herewith between THC and Brim (the "Master Management Agreement").
All capitalized terms not defined in this Agreement shall have the
meanings given to them in the Asset Agreement or in the Master
Management Agreement.
D. Notwithstanding the foregoing, from and after the Commencement
Date, including the period after the closing of the transaction
provided for in the Asset Agreement THC has agreed to delegate to Brim
responsibility for the surgical program (the "Program"), the physician
clinic (the "Clinic"), the immediate care center (the "ICC") and the
central sterile supply (the "CSS") located at the Hospital and Brim
has agreed to assume responsibility therefor.
E. Section E.5 of the Master Management Agreement authorizes THC to
delegate certain of its rights and responsibilities thereunder to Brim.
F. THC and Brim have agreed to document the terms and conditions under
which said delegation of rights and responsibility will occur.
NOW, THEREFORE, in consideration of the mutual promises and covenants
contained herein, THC and Brim hereby agree as follows:
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AGREEMENT
A. MANAGEMENT
1. Term.
1.1. The initial term of this Agreement (the "Initial Term") shall
commence as of 12:01 AM on May 1, 1994 (the "Commencement Date") and
(unless terminated earlier as herein provided) shall terminate on (i)
April 30, 1997 or (ii) the date on which THC advises Brim it is unable
to secure the LTAC Designation as a result of a change after the
Commencement Date in the laws or rules governing the same as of the
Commencement Date (the "Termination Date").
1.2. Brim shall have the right to extend the term of this Agreement
beyond the Initial Term for successive three (3) year terms (each, a
"Renewal Term" and collectively, the "Renewal Terms") upon written
notice to THC delivered no less than sixty (60) days prior to the
expiration of the Initial Term or the applicable Renewal Term.
Hereinafter the Initial Term and the Renewal Terms will be collectively
referred to as the Term.
1.3. Except as otherwise provided below, in the event Brim fails to
exercise any renewal option provided for herein, THC shall have all
right, title and interest in and to the Program, the ICC, the CSS and
the Clinic from and after the last day of the Initial Term or the
applicable Renewal Term and Brim agrees that it will not, and will not
permit any person or entity controlling, controlled by or under common
control with it, either jointly or individually, directly or
indirectly, to own or to operate a podiatric surgical program within a
twenty five (25) mile radius of the Hospital for a period of five (5)
years after the termination of this Agreement as a result thereof (the
"Non-Competition Covenant").
1.4. THC and Brim specifically acknowledge and agree that the
Non-Competition Covenant provided for in Section A.1.3. shall be null
and void in the event Brim elects not to exercise its renewal options
subsequent to the sale by THC after the Closing Date of the Hospital
or the sale after the Closing Date of all or substantially all of the
stock or assets of THC or its parent corporation, Transitional
Hospitals Corporation.
1.5. This Agreement may be terminated for cause by THC upon sixty (60)
days' written notice, specifying in detail the events upon which the
termination is based, if such cause has not been remedied within such
sixty (60) days or substantial steps taken and diligently pursued
toward the remedying of such default within said sixty (60) day period
to the extent
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the default cannot be fully cured within said period. For purposes of this
Section A.1.5., "cause" shall mean a material breach by Brim of its
obligations under this Agreement or under the Asset Agreement.
1.6. This Agreement may be terminated by Brim for cause upon sixty (60)
days' written notice to THC, specifying in detail the events upon which the
termination is based, if such cause has not been remedied within such sixty
(60) days or substantial steps taken and diligently pursued toward the
remedying of such default within said sixty (60) day period to the extent
the default cannot be fully cured within said period. For purposes of this
Section A.1.6, "cause" shall mean a material interference by THC with the
operation by Brim of the Program, the Clinic, the CSS and the ICC;
provided, however, that THC shall not be deemed to have materially
interfered with Brim's operations by virtue of its implementation of such
policies and procedures as it may reasonably deem to be necessary in order
to effectively operate an LTAC program at the Hospital.
1.7. The termination of this Agreement by THC or by Brim for cause prior to
the Closing Date shall result in a termination of the Asset Agreement and,
(i) in the case of a termination by THC, THC shall have the right to demand
the return of the Deposit provided for therein as liquidated damages and to
pursue such remedies as may be available to it at law or in equity to
redress Brim's breach and (ii) in the case of a termination by Brim, Brim
shall have the right to pursue such remedies as may be available to it at
law or in equity and THC shall be required to leave the Deposit in escrow
pending resolution of any such action and a determination of any damages
suffered by Brim as a result thereof. The termination of this Agreement by
either party for cause after the Closing Date shall entitle the terminating
party to pursue such remedies as may be available to it at law or in equity
to seek compensation for any damages suffered as a result thereof.
1.8. Within ninety (90) days after either the termination of this Agreement
other than a termination by Brim for cause, (i) to the extent not earlier
provided, Brim will provide THC with a complete accounting and report of
its activities during the entire Term hereof and (ii) Brim will cooperate
with THC in an orderly transfer of the operations of the Program, the
Clinic, the ICC and the CSS to THC or to a successor manager designated by
THC.
1.9. A termination of this Agreement for any of the reasons provided for in
this Section A.1, shall not terminate the rights and obligations of each of
the parties hereunder to remit payments belonging to the other party in
accordance with Section A.4 hereof or to pay the expenses for which it is
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responsible under Sections A.3.2 or A.3.6.
2. Responsibilities of Brim. Throughout the Term, Brim shall be
responsible for the operation of the Program, the Clinic, the ICC and the CSS in
accordance with the terms of this Agreement. In furtherance thereof, THC
covenants and agrees that throughout the Term hereof it shall not unreasonably
interfere with Brim's operation thereof.
3. Covenants of Brim. In conjunction with the management of the Program
and the ICC, throughout the Term hereof Brim covenants and agrees as follows:
3.1. To operate the Program, the Clinic, the CSS and the ICC in a
manner that maintains in good standing and full force all applicable
state and federal licenses and provider agreements and preserves any
accreditation which may be granted to the Hospital during the Term by
the Joint Commission on Accreditation of Healthcare Organizations
("JCAHO").
3.2. To reimburse THC within forty five (45) days after receipt of a
written request therefor for any and all expenses incurred by THC on or
after Commencement Date in the operation of the Hospital which are
allocable to the operation of the Program, the Clinic, the CSS and the
ICC, including, without limitation, payroll (and all local, state and
federal taxes and assessments incidental thereto and all fringe
benefits payable in accordance with Brim's personnel policies),
insurance, utilities, the Surgical Inventory and Common Inventory (as
defined in Section A.9.3.) used by Brim, rent, equipment leases,
equipment expenditures, real and personal property taxes and
maintenance, but specifically excluding debt service payments;
provided, however, that said reimbursement request shall be in
sufficient detail and shall contain sufficient supporting documentation
to enable Brim to verify the accuracy of the expenses for which it is
being held accountable.
3.4. To maintain complete and accurate records of all transactions
relating to the operation of the Program, the CSS, the Clinic and the
ICC and to make such records available for inspection by THC or any of
its representatives at all reasonable times upon reasonable notice from
THC to Brim.
3.5. To comply with all applicable federal, state and local government
laws, rules and regulations with respect to the operation and
maintenance of the Program, the CSS, the Clinic and the ICC and the
performance by Brim under this Agreement.
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3.6 In consideration for the right to operate the Program, the ICC, the
CSS and the Clinic, to pay to THC the following amounts (the "License
Fee"):
3.6.1. From and after the Closing Date, an amount equal to $10.80 per
annum per square foot of space in the Hospital occupied by Brim in
connection with the operation of the Program as described more fully
in Exhibit A (the "Space"), which shall be due and payable by no
later than the 10th day of each month;
3.6.2. In the event THC finances the remodeling project described in
Exhibit B (the "Renovations"), Brim shall pay to THC an amount equal
to 40% of the "Annual Net Profits" of the Program in excess of
$100,000. For purposes hereof, the term "Annual Net Profits" shall be
defined as (a) all revenues earned by Brim in connection with the
operation of the Program and the ICC less (b) all expenses incurred
by Brim in connection with the operation of the Program and the ICC
(calculated on an accrual basis) during each calendar year or portion
thereof occurring during the Term hereof. The amount, if any, due to
THC shall be payable by Brim within ninety (90) days after the end of
each calendar year, with the first such payment to be made by no
later than April 1, 1995, and shall be accompanied by a detailed
income statement prepared by Brim and certified as to accuracy by
Brim's independent auditors or Chief Financial Officer.
3.6.3 Throughout the Term hereof, an amount equal to 50% of the
amounts charged by THC to the patients served by Brim in the Program
and the ICC for services provided by THC, including, but not limited
to, laboratory, radiology and respiratory therapy services, which
payment shall be due within forty five (45) days after Brim's receipt
of a written request for payment thereof, which request shall be in
sufficient detail and shall contain sufficient supporting
documentation to enable Brim to verify the accuracy of the amounts
reflected therein.
3.7. Any payments due from Brim to THC hereunder which are not paid when
due shall bear interest from the date due until the date paid at the lower
of 1% per month or the highest rate then permitted by law.
3.8. To provide THC with access to the Program and the CSS for patients
served by the LTAC program; provided, however, that in consideration
therefor, THC shall deposit into the account designated by Brim pursuant to
Section A.4.2, 50% of all charges for services rendered by the Program and
in the CSS to such patients.
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3.9. Upon request of, THC to request a change in the cost reporting
year for the Hospital from one which ends on December 31 to one
which ends on October 31 of each year.
4. Billing for and Collection of Revenues.
4.1. Brim shall have all right, title and interest in and to the
revenues pertaining to the operation of the Program, the ICC, the
Clinic and the CSS for the period from and after the Commencement
Date.
4.2. In accordance with the provisions of the Master Management
Agreement, THC shall xxxx for and collect such revenues on Brim's
behalf and, promptly upon the receipt thereof, deposit the same in an
account designated by Brim. Prior to the Closing Date, all such
revenues shall be billed and collected under Brim's Medicare,
Medicaid, VA or other third party payor provider numbers; from and
after the Closing Date, all such revenues shall be billed and
collected under THC's Medicare, Medicaid, VA or other third party
payor provider numbers.
4.3. Brim shall reimburse THC within forty five (45) days after its
receipt of a written request therefor, for all out of pocket costs
incurred by THC in billing for and collecting such revenues, which
costs shall include a pro rata portion of any salary and benefits
payable to administrative personnel responsible for said xxxxxxxx and
collections. Said request shall be in sufficient detail and contain
sufficient supporting documentation to enable Brim to verify the
accuracy of the amounts requested therein.
4.4. Any payments due from Brim to THC hereunder which are not paid
when due shall bear interest from the date due until the date paid at
the lower of 1% per month or the highest rate then permitted by law.
4.5. From and after the Closing Date, THC shall assume responsibility
for the preparation and filing of all Medicare, Medicaid, VA and
other third party payor cost reports and xxxxxxxx for the period
prior to the Closing Date; provided, however, that no such cost
reports shall be filed without the prior review and approval of Brim;
and provided, further, that Brim shall provide THC with such
financial information as it may reasonably require in order to ensure
the timely and accurate completion and filing thereof.
5. Employees. In accordance with the terms of the Asset Agreement, prior
to the Closing Date all of the employees of the Hospital shall be Brim's
employees and on the Closing Date Brim shall terminate all such employees and
THC shall rehire such employees effective as of the Closing Date. Throughout
the Term
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hereof, Brim shall have full authority and legal and financial responsibility
with respect to the compensation, supervision and disciplining, including, but
not limited to, the termination, of the employees associated with the Program,
the CSS, the Clinic and the ICC and THC shall have no such authority or
responsibility.
6. Closure of the ICC. Nothing herein shall be construed as precluding Brim from
closing the ICC at anytime during the Term hereof; provided, however, that in
the event Brim advises THC of its intention to close the ICC, THC shall have the
right to prevent such closure by assuming financial and operational
responsibility therefor. THC shall have a right to instruct Brim to close the
ICC at anytime during the Term. Brim shall comply with said instruction within
no more than sixty (60) days after its receipt thereof, provided that such
closure does not result in any increase in the amounts charged to Brim for lab
and radiology pursuant to Section A.3.6.3. In the event of the closure of the
ICC or the transfer of operational and financial responsibility therefor to THC,
any and all references to the ICC set forth in this Agreement shall be deemed to
be inapplicable to the rights and obligations of Brim hereunder. Nothing herein
shall be construed as precluding THC from increasing the amounts charged to Brim
for lab and radiology services for reasons unrelated to the closure of the ICC.
7. Closure of the Clinic. Nothing herein shall be construed as precluding Brim
from closing any portion of the Clinic at anytime during the Term hereof, in
which case the provisions of this Agreement applicable to the Clinic shall only
apply to the extent that the same is operational.
8. Budgets.
8.1. Throughout the Term hereof, on or before January 1 of each year,
Brim shall provide to THC an operating budget. THC acknowledges and
agrees that Brim is solely responsible for all costs and expenses
reflected therein and accordingly that the same shall be provided for
informational purposes only and shall not be subject to the review and
approval of THC.
8.2. Brim acknowledges and agrees that from and after the Closing Date,
unless otherwise agreed by Brim and THC, any and all capital
expenditures relating to the operation of the Program or the ICC shall,
subject to the provisions of Section A.8.3, be the responsibility of
THC. Accordingly, Brim agrees that on or before January 1 of each year
during the Term hereof it shall submit to THC for its approval a
capital expenditure budget and, once the same has been approved by
Owner, it shall not incur any capital expenditures other than as
provided therein or as approved by THC on Brim's written request
therefor, which approval shall not be unreasonably withheld or delayed
and which approval may not be withheld if Brim demonstrates to the
reasonable satisfaction of THC that
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Such expenditures are required for the continued licensure,
certification or accreditation of the Hospital.
8.3. Unless THC and Brim agree otherwise, any capital expenditures
incurred by Brim prior to the Closing Date, shall be the
responsibility of Brim but may be financed through lease or other
financing arrangements, in which case any such contracts shall be
included within the Assumed Contracts assigned to and assumed by THC
on the Closing Date under the terms of the Asset Agreement and any
payments by THC with respect to such leases or other financing
arrangements after the Closing Date shall be subject to reimbursement
by Brim pursuant to Section A.3.2.
8.4. Any capital expenditures incurred by THC on behalf of Brim after
the Closing Date shall either serve to increase the monthly payments
due from Brim to THC under the terms of Section A.3.6 hereof by the
amount thereof multiplied by 9.333% and divided first by the number
of square feet in the Space and then by 12 or shall be included in
the expenses billed to Brim under Section A.3.2 hereof, in the event
of capital expenditures financed by THC under a lease or other
financing arrangement. Brim and THC shall agree prior to the
incurrence of the capital expenditure how the same will be paid by
Brim under the terms hereof.
9. Non-Competition Provisions. During the Term hereof, Brim agrees to be
bound by the Non-Competition provisions of the Asset Agreement as though fully
set forth herein.
10. Covenants of THC. From and after the Closing Date, THC shall:
10.1. Fully cooperate in Brim's efforts to ensure that the physicians
associated with the Surgical Program are able to secure and/or maintain
their staff privileges at the Hospital, subject to their compliance
with applicable requirements of the Medical Staff Bylaws.
10.2. Cause one representative of Brim to be appointed to the Board
of the Hospital.
10.3. Within ten (10) days after the Commencement Date to purchase from
Brim all of the consumable inventory located at the Hospital as of the
close of business on the day prior to the Commencement Date (the
"Consummables") as determined pursuant to a joint inventory conducted
by Brim and THC (the "Inventory"). The Inventory shall be divided into
three categories: (i) the inventory which will be used solely by Brim
after the Commencement Date (the "Surgical Inventory"), the inventory
which will be used solely by THC after the Commencement Date (the
"Non-Surgical Inventory"), and the inventory which will be used by
both Brim and THC after the
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Commencement Date (the "Common Inventory"). The purchase price for
the Consummables shall be equal to Brim's cost thereof as reflected
on Brim's books and records. On the Closing Date, THC shall receive
a credit against the Balance to be paid by THC for an amount equal
to 100% of the purchase price paid by THC for the Non-Surgical
Inventory and 50% of the purchase price paid by THC for the Common
Inventory.
B. INDEMNIFICATION
1. By Brim. Brim hereby agrees to indemnify, defend and hold harmless, THC,
its employees, agents, and affiliates from all claims, demands, liabilities,
suits, costs and expenses (including reasonable attorneys' fees) (the
"Liabilities") arising out of either a material breach by Brim of its
obligations hereunder or Brim's operation of the Program, the ICC, the Clinic
and/or the CSS from and after the Commencement Date, including, but not
limited to, any actions affecting the licensure, certification or JCAHO
accreditation of the Program or the ICC during the Term hereof; provided,
however, that Brim shall have no liability hereunder in the event said
Liabilities relate to THC's performance of, or failure to perform, its
obligations under the Master Management Agreement. For purposes of this
Agreement, the term "affiliates" shall mean any parent, sister or subsidiary
corporation of Brim or any director, officer, agent or shareholder of any such
corporation.
2. By THC. THC agrees to indemnify, defend and hold harmless Brim, its
employees, agents and affiliates, from all claims, demands, liabilities,
suits, costs and expenses (including reasonable attorneys' fees) arising out
of a material breach by THC of its obligations hereunder. For purposes of this
Agreement, the term "affiliates" shall mean any parent, sister or subsidiary
corporation of THC or any director, officer, agent or shareholder of any such
corporation.
C. REPRESENTATIONS AND WARRANTIES
1. By Brim. Brim hereby represents and warrants as follows:
1.1. Brim has, or as of the Commencement Date will have, all necessary
corporate power and authority to operate the Hospital and to carry on
its business as it is now being conducted, to enter into this Agreement
and to execute all documents and instruments referred to herein or
contemplated hereby and all necessary action has been taken to
authorize the individual executing this Agreement to do so. This
Agreement has been duly and validly executed and delivered by Brim and
is enforceable against Brim in accordance with its terms, except as
such enforceability may be limited by applicable bankruptcy,
insolvency, reorganization, moratorium or other similar laws,
regulations and authorities affecting
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the rights of creditors generally and by general principles of
equity, and does not require the consent or approval by any
governmental authority.
1.2. The foregoing representations and warranties of Brim
hereunder shall be true, complete and correct in all material
respects as of the Commencement Date with the same force and effect
as though such representations and warranties were made on such
date, and all such representations and warranties shall survive the
Commencement Date for the period of one (1) year; provided, however,
that if THC notifies Brim in writing of a claim prior to the
expiration of such one (1) year period such representations or
warranties shall survive until the resolution of such claim.
2. By THC. THC hereby represents and warrants as follows:
2.1. THC has, or as of the Commencement Date will have, all corporate
necessary power and authority to enter into this Agreement and to
execute all documents and instruments referred to herein or
contemplated hereby and all necessary action has been taken to
authorize the individual executing this Agreement to do so. This
Agreement has been duly and validly executed and delivered by THC and
is enforceable against THC and its affiliates in accordance with its
terms, except as such enforceability may be limited by applicable
bankruptcy, insolvency, reorganization, moratorium or other similar
laws, regulations and authorities affecting the rights of creditors
generally and by general principles of equity.
2.2. The foregoing representations and warranties of THC hereunder
shall be true, complete and correct in all material respects as of
the date hereof and as of the Commencement Date with the same force
and effect as though such representation or warranty made on such
date, and all representations and warranties shall survive the
Commencement Date for a period of one (1) year; provided, however,
that if Brim notifies THC in writing of a claim prior to the
expiration of such one (1) year period such representations or
warranties shall survive until the resolution of such claim.
E. GENERAL PROVISIONS
1. Further Assurances. Each of the parties hereto agrees to execute and deliver
any and all further agreements, documents or instruments reasonably necessary to
effectuate this Agreement and the transactions referred to herein or
contemplated hereby or reasonably requested by the other party to perfect or
evidence their rights hereunder.
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2. Notices. All notices to be given by either party to this Agreement to the
other party hereto shall be in writing, and shall be given and received in the
manner and at the addresses provided for in the Asset Agreement.
3. Payment of Expenses. Each party hereto shall bear its own legal, accounting
and other expenses incurred in connection with the preparation and negotiation
of this Agreement and the consummation of the transaction contemplated hereby,
whether or not the transaction is consummated.
4. Entire Agreement; Amendment; Waiver. This Agreement, together with the Asset
Agreement and the Master Management Agreement referred to herein, constitutes
the entire understanding between the parties with respect to the subject matter
hereof, superseding all negotiations, prior discussions and preliminary
agreements. In the event of any conflict between the terms of this Agreement and
any of the terms of the Asset Agreement, the terms of this Agreement will
control. This Agreement may not be modified or amended except in writing signed
by the parties hereto. No waiver of any term, provision or condition of this
Agreement in any one or more instances, shall be deemed to be or be construed as
a further or continuing waiver of any such term, provision or condition of this
Agreement. No failure to act shall be construed as a waiver of any term,
provision, condition or rights granted hereunder.
5. Assignment/Successors. Neither this Agreement nor the rights, duties or
obligations arising hereunder shall be assignable or delegable by either party
hereto without the prior written consent of the other party, which consent shall
not be unreasonably withheld or delayed; provided, however, that in the event
that after the Closing Date THC receives a bona fide written offer from an
unrelated third party to acquire the Hospital (the "Offer") , THC shall provide
Brim with a written copy thereof and Brim shall have thirty (30) days after the
receipt thereof to advise THC of its intention to purchase the Hospital on the
same terms and conditions as set forth in the Offer. In the event Brim fails to
exercise its right of first refusal within said thirty day period, then THC
shall be free to sell the Hospital pursuant to the terms of the Offer; provided,
however, that in the event closing fails to occur in accordance with the terms
of the Offer, then THC shall thereafter be required to re-offer the Hospital to
Brim in accordance with the term of the Offer or any subsequent Offer which THC
may receive. Subject to the limitations on assignment set forth herein, this
Agreement shall be binding upon and shall inure to the benefit of the parties
hereto and their successors and permitted assigns.
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6. Joint Venture; Third Party Beneficiaries. Nothing contained herein shall be
construed as forming a joint venture or partnership between the parties hereto
with respect to the subject matter hereof. The parties hereto do not intend that
any third party shall have any rights under this Agreement. Brim is an
independent contractor and is not to be considered a principal with respect to
ownership of any portion of or interest in the Hospital. Brim shall act in good
faith in the performance of its obligations hereunder and shall meet the
standards of care established by THC in the operation of the Hospital and by
Brim in the operation of its business.
7. Captions. The section headings contained herein are for convenience only and
shall not be considered or referred to in resolving questions of interpretation.
8. Counterparts. This Agreement may be executed in one or more counterparts and
all such counterparts taken together shall constitute a single original
Agreement.
9. Governing Law. This Agreement shall be governed in accordance with the laws
of the state of Washington.
IN WITNESS WHEREOF, the parties hereby execute this Agreement as of the day
and year first above written.
BRIM FIFTH AVENUE, INC.
By: /s/ Xxxx Xxxxxx
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Its: President
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THC-SEATTLE, INC.
By: /s/ Xxx Xxxxxxxx
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Its: President
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