EXHIBIT 10.34
LONG TERM CARE FACILITY
MANAGEMENT AGREEMENT
(Xxxxxxxxxx of Xxxx)
THIS LONG TERM CARE FACILITY MANAGEMENT AGREEMENT (the "Agreement") made
as of the 25th day of March, 1996, effective as of March 25, 1996, by and
between NCHC, INC., a Louisiana corporation ("Lessee"), and WelCare
International Management Corporation, a Georgia corporation ("Manager").
W I T N E S S E T H :
WHEREAS, the Lessee presently leases certain real and personal property
comprising a certain 120 bed nursing center located in Xxxxxx County, North
Carolina (the "Facility") pursuant to that certain lease dated November 12, 1993
by and between Health Care Property Investors, Inc. ("HCPI") and Xxxxxxxxxx of
Xxxx, Inc. (as amended) and that certain Lease Assignment dated March 25, 1996
by and between Xxxxxxxxxx of King, Inc. and Lessee (collectively the "Lease");
and
WHEREAS, the parent corporation of Manager, WelCare International, Inc.
("WCI") has loaned to Lessee the sum of Three Million Six Hundred Forty Two
Thousand Eight Hundred Forty Six Dollars ($3,642,846.00) (the "WCI Loan") and in
connection therewith and with additional financing needs of Lessee, Manager and
Lessee desire to provide for additional advances by Manager to Lessee and to
provide for the repayment of all such sums, together with interest thereon, and
to secure certain additional rights for Manager with respect to the Facility;
and
WHEREAS, the Lessee and Manager also desire for Manager to provide its
experience, skill and supervision to manage the Facility on behalf of Lessee
under and subject to the terms of this Agreement.
NOW, THEREFORE, in consideration of the premises and mutual promises and
covenants of the parties contained herein and for such other good and valuable
consideration, the receipt, adequacy and sufficiency of which are hereby
acknowledged, the parties hereby agree as follows:
ARTICLE I
MANAGEMENT DUTIES AND OBLIGATIONS
1.01 Control Retained by Lessee. Lessee shall at all times exercise
overall control over the assets and operations of the Facility, subject to the
terms of this Agreement, and Manager shall perform the duties herein required to
be performed by it as the agent of Lessee and in accordance with the policies
and directives from time to time adopted by Lessee.
1.02 Changes in Method of Operation. Manager shall make substantial
changes in the method of operating the Facility only after timely notification
to Lessee of its intention to do so.
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1.03 Management of Facility. During the term of this Agreement, Manager
shall on behalf of Lessee manage all aspects of the operation of the Facility,
including, but not limited to staffing, accounting, billing, collections,
setting of rates and charges and general administration. In connection
therewith, Manager (either directly or through supervision of employees of the
Facility) shall:
(a) Hire or lease on behalf of Lessee and retain (to the extent such
personnel are reasonably available in the community in which the Facility is
located) an adequate staff of nurses, technicians, nurse aides, office and other
employees, including a qualified administrator (the "Administrator") and shall
promote, direct, assign and discharge all such employees on behalf of Lessee at
Manager's sole discretion; provided, however, that leased employees shall be
subject to the direction and control of the lessor of such leased employees. All
employees shall be employees of or leased by the Lessee and carried on the
payroll of the Facility and shall not be deemed employees or agents of Manager.
(b) Institute and amend, from time to time general salary scales,
personnel policies and appropriate employee benefits for all employees on behalf
of Lessee; provided, however, that leased employees shall be subject to the
general salary scales, personnel policies and employee benefit programs of the
lessor of such leased employees. Employee benefits may include pension and
profit sharing plans, insurance benefits, incentive plans for key employees and
holiday, vacation, personal leave and sick leave policies.
(c) Issue appropriate bills for services and materials furnished by
the Facility and use its reasonable best efforts to collect accounts receivable
and monies owed to the Facility, design and maintain accounting, billing,
patient and collection records; and prepare and file insurance, Medicare,
Medicaid and any and all other necessary or desirable reports and claims related
to revenue production. Lessee hereby grants Manager the right to enforce
Lessee's rights as creditor under any contract or in connection with rendering
any services for purposes of collecting accounts receivable and monies owed the
Facility.
(d) Order, supervise and conduct a program of regular maintenance
and repair.
(e) Purchase food, beverage, medical, cleaning and other supplies,
equipment, furniture and furnishings for the account of Lessee.
(f) Administer, supervise and schedule all patient and other
services of the Facility, including the operation of food, xxxxxx/beautician and
other ancillary services.
(g) Provide for the orderly payment (to the extent funds are
available therefor) of accounts payable, employee payroll, amounts due on short
and long-term indebtedness, taxes, insurance premiums, and all other obligations
of the Facility.
(h) Institute standards and procedures for admitting patients, for
charging patients for services, and for collecting the charges from the patients
or third parties.
(i) Obtain and maintain insurance coverage for the Facility naming
Lessee, Manager and such other persons requested by Lessee as insureds as
provided in Section 4.01 hereof.
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(j) Negotiate and enter into, in the name of and on behalf of
Lessee, such agreements, contracts and orders as Manager may deem necessary or
advisable, for the furnishing of services, concessions and supplies for the
operation and maintenance of the Facility.
(k) Negotiate on behalf of Lessee (and in conjunction with Lessee's
counsel) with any labor union lawfully entitled to represent employees of Lessee
who work at the Facility, but any collective bargaining agreement or labor
contract must be submitted to Lessee for its approval and execution.
(1) Assist in maintaining all licenses and permits required for the
operation of the Facility, its contracts with third party payors and other
similar governmental and non-governmental agencies and intermediaries.
(m) Make periodic evaluations of the performances of all departments
of the Facility.
(n) Design, establish and maintain a suitable accounting system
using accounts and classifications consistent with those used in similar
facilities.
(o) Advise and assist Lessee in designing an adequate and
appropriate public relations program.
1.04 Executive Operating Committee. To assure adequate liaison between
Lessee and Manager, Manager shall create an Executive Operating Committee which
shall consist of (1) a member of the Manager's Staff, (2) the Administrator of
the nursing home, and (3) a representative of Lessee to be selected by Lessee.
The Executive Operating Committee shall meet at least quarterly, keep minutes of
its proceedings, and shall have the following duties:
(a) To maintain appropriate medical, ethical and professional
standards within the nursing home.
(b) To see that residents admitted to the nursing home receive the
appropriate patient care.
(c) To see that federal, state and local regulations are met.
(d) To act in an advisory capacity in the overall operation of the
nursing home.
1.05 Reports to Lessee.
(a) Manager shall prepare and deliver to Lessee, within forty-five
(45) days after the close of each calendar month, unaudited financial statements
covering the prior month and containing a balance sheet and statement of income
and expenses in reasonable detail. Manager shall also provide any required
assistance to the independent accountants for the Facility, who shall be
selected by Manager, in the preparation of audited annual financial statements
for the operation of the Facility. Such financial statements shall be prepared
at Lessee's expense in accordance with generally accepted accounting principles
in the health care field consistently applied and delivered to Manager and
Lessee within ninety (90) days
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after the end of each fiscal year of the Facility. Manager shall prepare reports
or provide information to Lessee required by the Lease, any loan documents of
HCPI or any loan documents evidencing or securing the WCI Loan.
(b) Manager shall submit to Lessee each twelve (12) months its
budget for the operation of the Facility setting out anticipated income,
expenses and capital expenditures during the succeeding twelve (12) month
period. Manager shall use its best efforts to operate the Facility in accordance
with the provisions of the budget for the Facility as submitted to Lessee. Such
proposed budget for the Facility shall be delivered to Lessee prior to the
commencement of the operational fiscal year of the Facility.
(c) Manager shall schedule periodic management meetings to be
attended by representatives of both Manager and Lessee no less frequently than
semi-annually and shall furnish to Lessee quarterly written progress reports
concerning the operation of the Facility.
1.06 Bank Accounts and Working Capital.
(a) Manager shall deposit on Lessee's behalf in a bank account or
accounts of the Manager or the Facility established in Manager's name (the
"Operating Accounts") all funds received from the operations of the Facility and
such funds shall be disbursed from the Operating Accounts to and by Manager in
the manner and order of priority described in subsection (b) below. The
Operating Accounts shall be segregated from Manager's other depository and
concentration accounts maintained with NationsBank in Atlanta, Georgia, or such
other banking institution as Manager shall choose. Manager shall specify the
signatory or signatories required on all checks or other documents of withdrawal
for the Operating Accounts. Manager shall also deposit the personal funds of the
Facility residents into a separate trust account established in Manager's name
(the "Trust Account"). Manager shall designate those employees of the Facility
with signature authority for all checks or other documents of withdrawal for the
Trust Account. Manager shall specify the required signatory or signatories with
Lessee' s written approval (such approval not to be unreasonably withheld).
(b) All funds deposited in the Facility Depository Accounts shall be
disbursed in the following order of priority and, in each case, in such amounts
and at such times as required to be made in connection with the payment of:
(i) the Facility's Lease payments;
(ii) the costs and expenses of operating the Facility;
(iii) all accrued and unpaid interest on the WCI Loan;
(iv) the Management Fee payable under Section 3.01 hereof;
(v) principal and all accrued but unpaid interest on
Advances made by Manager pursuant to Section 6.11 of
this Agreement or otherwise;
(vi) funding of reasonable reserves for ordinary and
necessary operating expenses, including, without
limitation, taxes, insurance, working capital needs and
Lease payments, such
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reserves to be held in such subaccounts of the Operating
Accounts as Manager shall in its discretion deem
necessary or desirable;
(vii) such payments and prepayments of principal on the WCI
Loan as Manager shall in its discretion deem necessary
or desirable from funds available;
(viii) funding of a capital improvements reserve; and
(ix) any balance shall be paid to or held on behalf of
Lessee.
1.07 Access to Books, Records and Documents. If it is ultimately
determined that Section 952 of the Omnibus Budget Reconciliation Act of 1980 and
final regulations promulgated thereunder apply to this Agreement:
(a) Until the expiration of four years after the furnishing of
services pursuant to this Agreement, Manager shall, as provided in Section 952,
make available, upon written request, to the Secretary of Health and Human
Services, or upon request, to the Comptroller General of the United States, or
any of their duly authorized representatives, this Agreement, and all books,
documents and records of Manager that are necessary to verify the nature of this
Agreement for which payment may be made under the Medicare program; and
(b) If Manager carries out any of the duties of this Agreement
pursuant to a subcontract or subcontracts with an aggregate value or cost of
$10,000 or more over a twelve (12) month period with a related organization,
such subcontract or subcontracts shall contain a clause to the effect that,
until the expiration of four years after the furnishing of such services
pursuant to such subcontract or subcontracts, the related organization shall, as
provided in Section 952, make available, upon written request, to the Secretary
of Health and Human Services, or upon request, to the Comptroller General of the
Untied States, or any of their duly authorized representatives, the subcontract
or subcontracts, and all books, documents and records of such subcontractors for
which payment may be made under the Medicare program.
1.08 Licenses.
(a) Manager shall, on behalf of Lessee, use its reasonable best
efforts to apply for, obtain and maintain all necessary licenses, permits,
consents, and approvals from all governmental agencies which have jurisdiction
over the operation of the Facility.
(b) Neither Lessee not Manager shall knowingly take any action or
fail to take any action which may (1) cause any governmental authority having
jurisdiction over the operation of the Facility to institute any proceeding for
the rescission or revocation of any necessary license, permit, consent or
approval, or (2) adversely affect Lessee's right to accept and obtain payments
under Medicare, Medicaid, or any other public or private third party medical
payment program.
(c) Manager shall, with the written approval of Lessee, have the
right to contest by appropriate legal proceedings, diligently conducted in good
faith in the name of Lessee, the validity or application of any law, ordinance,
rule, ruling, regulation, order or
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requirement of any governmental agency having jurisdiction over the operation of
the Facility. Lessee, after having given its written approval, shall pay
attorneys' fees incurred with regard to the contest. Counsel for any such
contest shall be selected by Manager. Manager shall have the right, without the
written consent of the Lessee, to process all third-party claims for the
services of the Facility, including, without limitation, the full right to
contest to the exhaustion of all applicable administrative proceedings or
procedures, adjustment and denials by governmental agencies or their fiscal
intermediaries as third-party payors.
1.09 Administrator. Manager shall employ or lease for the Facility an
Administrator to serve as the chief executive officer of such Facility. The
Administrator shall be an employee of and shall be compensated by Lessee and
Manager shall pay on Lessee's behalf out of the Operating Accounts of the
Facility, in advance, on or before the fifth (5th) day of each month, all
compensation, including salary, fringe benefits, bonuses and business expense
reimbursements approved by Manager, to the Administrator. The term "fringe
benefits" shall include, without limitation, employer's F.I.C.A. payments,
unemployment compensation and other employment taxes, bonuses, vacation,
personal and sick leave benefits, workers' compensation, group life, health and
accident insurance premiums and disability and other benefits.
1.10 Taxes. Any federal, state or local taxes, assessments or other
governmental charges properly imposed on the Facility are the obligations of the
Lessee, not of Manager, but all such obligations shall be paid by Manager on
Lessee's behalf out of the Operating Accounts of the Facility. With the Lessee's
prior written consent, Manager may contest the validity or amount of any such
tax or imposition on the Facility in the same manner as described in Section
1.08(c) hereof.
1.11 Use of Manager's Personnel. An authorized representative of Manager
shall visit the Facility as often as Manager deems necessary. The time spent by
such authorized representative of Manager during such visits and all
out-of-pocket expenses arising from travel and lodging connected with such
visitations shall not be charged separately to Lessee.
1.12 Government Regulations. Manager agrees to operate and maintain the
Facility in substantial compliance with the requirements of any material
statute, ordinance, law, rule, regulation or order of any governmental or
regulatory body having jurisdiction over the Facility and to comply with all
orders and requirements of the local board of fire underwriters or any other
body which may exercise similar functions; provided, however, that Manager shall
not be required to expend its separate funds in order to comply with any such
statutes, ordinances, laws, rules, regulations or orders, and to the extent any
funds are so required, it shall fulfill its obligations hereunder by notifying
Lessee of the actions necessary in order to be in compliance therewith and
expending such funds of Lessee as Manager may deem available for such purpose.
1.13 Quality Controls. Manager shall activate and maintain on a continuing
basis a "Quality Assurance Program" in order to provide objective measurements
of the quality of health care provided at the Facility and, in connection
therewith, shall utilize such techniques as patient questionnaires and
interviews, physician questionnaires and interviews, and inspections.
1.14 Staff Specialists. In addition to the other managerial services
provided for herein, Manager shall make available to the Facility, for
consultation and advice, when
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necessary, specialists in such fields as accounting, auditing, budgeting,
dietary services, environmental control, management, maintenance, nursing,
personnel, pharmacy operations, public relations, purchasing, quality assurance,
systems and procedures, and third-party reimbursement.
1.15 Performance of Services by Manager. In the performance of its
services hereunder, Manager shall exercise the same standards and degree of care
used by reasonable and prudent managers of nursing homes of similar size, nature
and character as the Facility. Notwithstanding anything herein to the contrary,
Manager shall not be deemed in violation of this Agreement if Manager is
prevented from performing any of its obligations hereunder for any reason beyond
its reasonable control including, without limitation, strikes, walkouts or other
employee disturbances, acts of God, or the action or promulgation of any
statute, rule, regulation or order by any federal, state, or local governmental
or judicial agency or official, nor shall it be deemed in default hereunder or
otherwise liable for any error of judgment or act or omission in the performance
of its services hereunder, which is made in reasonable good faith, except for
its wilful default or gross negligence.
1.16 Extraordinary Services. Lessee agrees that any extraordinary or
specialized service recommended by Manager may be performed for a separate fee
as agreed upon by Manager in advance of the performance of such service. If
Manager provides such service, such fee shall not be in excess of such amount as
would be charged by a third party, negotiating at arm's length, for the
performance of such service.
1.17 Obligations under WCI Loan. Manager acknowledges the existence and
terms of that certain promissory note of even date herewith executed and
delivered by Lessee in the sum of $3,642,846.00 relating to the WCI Loan, as
more particularly described in Article V. Manager agrees to perform or cause to
be performed, on Lessee's behalf, for so long as the Management Agreement
remains in full force and effect, all covenants therein relating to the
operation of the Facility.
1.18 Maintenance of Facility. Manager agrees to maintain the Facility in a
good and serviceable condition, ordinary wear and tear and damage by fire or
other casualty or resulting from condemnation excepted, to the extent sufficient
revenues of the Facility are available for such purpose.
ARTICLE II
TERM AND TERMINATION
2.01 Term. The term of this Agreement shall commence on the date of this
Agreement and, unless sooner terminated as provided herein, shall end upon
termination of the Lease.
2.02 Option to Extend Term. If Lessee exercises its option to extend under
the Lease, Manager shall have the option to extend the term of this Agreement
for a term equal to the Lease extension by giving written notice to Lessee of
Manager's exercise of such right and option not later than three (3) months
prior to the end of the original term hereof or the term hereof as previously
extended. Each and all of the provisions of this Agreement shall apply during
the extended term(s) of this Agreement.
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2.03 Termination for Cause.
(a) If either party shall apply for or consent to the appointment of
a receiver, trustee or liquidator of such party of all or a substantial part of
its assets, file a voluntary petition in bankruptcy, make a general assignment
for the benefit of creditors, file a petition or an answer seeking
reorganization or arrangement with creditors or take advantage of any insolvency
law, or if an order, judgment or decree shall be entered by any court of
competent jurisdiction, on the application of a creditor, adjudicating such
party bankrupt or insolvent or approving a petition seeking reorganization of
such party or appointing a receiver, trustee or liquidator for such party or all
or a substantial part of its assets, and such order, judgment or decree shall
continue unstayed and in effect for any period of one hundred and twenty (120)
consecutive days, then, in case of any such event, the term of this Agreement
shall expire, at the other party's option, upon five (5) days written notice.
(b) If Lessee shall fail to keep, observe or perform any material
covenant, agreement, term or provision of this Agreement to be kept, observed,
or performed by Lessee, and such default shall continue for a period of thirty
(30) days, (or ten (10) days in the case of a failure to pay any amounts due
Manager under this Agreement) after notice thereof by Manager to Lessee, then,
in case of any such event and upon the expiration of any period of grace
applicable thereto, the term of this Agreement shall expire, at the option of
the Manager, upon five (5) days written notice to the Lessee. Such termination
shall be without prejudice to (i) Manager's right to receive management fees
under Article III hereof through the end of the month in which such termination
becomes effective together with any and all other sums loaned or advanced to
Lessee or on Lessee's behalf by Manager under this Agreement or otherwise; (ii)
the right of WCI to receive repayment of any and all Advances to Lessee pursuant
to Section 6.11 hereof; and (iii) the rights of Manager in, to and under the
Assignment of Certificates of Deposit by and among WCI, Manager, Lessee,
Xxxxxxxxxx Health Care, Inc. ("EHC"), and certain subsidiaries of EHC.
2.04 Optional Termination.
(a) Manager has the option to terminate this Agreement, without
damage or penalty, upon ten (10) days prior written notice to Lessee, upon the
occurrence of either of the following events:
(i) The Facility or any material portion thereof is damaged
or destroyed to the extent that in the written opinion of an independent
architect or engineer reasonably acceptable to both parties (x) it is not
practicable or desirable to rebuild, repair or restore the Facility within
a period of six (6) months to its condition immediately preceding such
damage, or (y) the conducting of normal operations of the Facility would
be prevented for a period of six (6) months or more; or
(ii) Title to or the temporary use of all or substantially all
the Facility is taken under the exercise of the power of eminent domain by
any governmental authority or person, firm or corporation acting under
governmental authority which in the opinion of an independent architect or
engineer reasonably acceptable to both parties prevents or is likely to
prevent the conducting of normal operations at the Facility for a period
of at least six (6) months.
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Provided, however, that in either of such events, Manager shall have the
right to rebuild, restore or otherwise rearrange the Facility and recommence
operations thereof, and thereupon Manager shall continue to manage the Facility
under the same terms, conditions, and fees as provided herein.
(b) Manager shall have the option to terminate this Agreement
without damage or penalty upon ten (10) days prior written notice to the Lessee
following the sale, transfer, assignment, or other disposition, in whole or in
part, by the Lessee of its interest in the Facility. In the event Lessee is a
corporation, any dissolution, merger, consolidation or other transfer of a
substantial portion of the stock of Lessee shall constitute an assignment of the
Facility for all purposes of this Section 2.05(b). The term "substantial
portion" means the ownership of stock possessing, and of the right of exercise,
at least fifty percent (50%) of the total combined voting power of all classes
of stock of such corporation, issued, outstanding and entitled to vote for the
election of directors whether such ownership is direct ownership, or indirect
ownership through ownership of stock possessing, and of the right to exercise,
at least fifty percent (50%) of the total combined voting power of all classes
of stock of another corporation or corporations; provided, however, that this
prohibition on stock transfer shall not apply to a "publicly traded
corporation," which term is hereby defined for all purposes under this Agreement
as a corporation whose shares of stock have been registered pursuant to the
Securities Act of 1933, as amended, the Securities Exchange Act of 1934, as
amended, or the state securities laws pursuant to an exemption from the
aforementioned statutes.
Notwithstanding the foregoing, for so long as (i) the WCI Loan remains
outstanding and unpaid or (ii) this Agreement remains in force or effect, no
sale, transfer, assignment or other disposition, in whole or in part, by Lessee
of its interest in the Facility shall be permitted without Manager's written
consent, which consent may be granted or withheld in Manager's sole and absolute
discretion. The parties acknowledge and agree that any purported sale, transfer,
assignment or other disposition by Lessee in violation of this Section 2.04(b)
shall, at Manager's option, be null, void and of no force or effect, and that
equitable remedies, including the remedy of specific performance (to compel
rescission of any such sale, transfer, assignment or other disposition) and
injunctive relief (to prevent or restrain such prohibited actions) shall be
available to Manager, in addition to its rights and remedies at law and under
this Agreement.
ARTICLE III
MANAGEMENT FEE
3.01 Management Fee. Effective as of the date of this Agreement and for
the remainder of the term hereof, Manager shall receive from Lessee, and Lessee
shall pay to Manager, each month during the term hereof, as the amount due for
services, a management fee equal to six and one-half percent (6.5%) of the Gross
Revenues of the Facility. "Gross Revenues" shall mean, for the Facility, total
revenues of such Facility, including, without limitation, all ancillary fees,
charges, rentals and other revenue derived in any way from the operation of such
Facility, on an accrual basis, after deduction of allowances for contractual
adjustments as they relate to third-party payors and before deduction of any and
all expenses.
3.02 Payment of Management Fees. On or before the tenth (10th) day of each
month during the term hereof, Lessee shall be obligated to pay Manager an
estimated management
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fee, calculated in accordance with Section 3.01 hereof, based on the estimated
Gross Revenues of the Facility during the current month. All management fees due
hereunder shall be withdrawn from the Operating Accounts and paid to Manager.
Any late payments of management fees not made after three (3) days written
notice to Lessee shall bear interest equal to the Advance Rate (as defined in
Section 6.11 hereof) from their original due date until fully paid.
3.03 Adjustment. Within fifteen (15) days after the delivery of the annual
financial statements of the Facility, Lessee shall pay to Manager or Manager
shall credit Lessee such amount as is necessary to make the amount of the
management fees paid with respect to the year to which the financial statements
relate equal to the amount of management fees shown to be due by the annual
audit.
ARTICLE IV
COVENANTS OF LESSEE
4.01 Insurance. Manager shall provide and maintain, on behalf of Lessee
and at Lessee's expense, throughout the term of this Agreement, insurance with
responsible companies naming Lessee and Manager (as their respective interests
may appear) as insureds as required in the Lease.
4.02 Licensing; Changes and Services. Subject to the terms of the Lease,
Lessee agrees to take or cause to be taken any and all actions necessary to be
taken by it as the overall supervisor of the assets and operations of the
Facility in order to maintain all required licenses, permits for the operation
of the Facility and the Facility's eligibility to participate in all public or
private third-party medical payment programs, including providing sufficient
funds to bring the Facility in compliance with all applicable fire safety codes
and other laws, regulations and orders, and to correct all structural,
maintenance, procedural and staffing deficiencies as shown on the surveys and
reports of governmental agencies having jurisdiction over the Facility. Lessee
agrees that it will not, through the exercise of its overall supervisory powers,
substantially change the services rendered by the Facility during the term
hereof without the prior written approval of Manager.
Nothing contained in this Section 4.02 shall affect the duties and
obligations of Manager with regard to the applying for, obtaining and
maintaining all necessary governmental licenses, permits, consents and approvals
set forth in Section 1.08 hereof.
4.03 Transfer of Leasehold. Subject to the requirements of the Lease,
Lessee further acknowledges and agrees that upon the transfer, lease,
assignment, sale or other disposition or conveyance of all or any part of its
leasehold interest in and to the Facility, this Agreement shall remain in full
force and effect unless otherwise terminated as provided in Section 2.04(b).
Subject to the requirements of the Lease, Lessee covenants and agrees that in
the event that it sells, assigns or otherwise transfers its leasehold interest
in and to the Facility at any time while this Agreement is in effect, it will
require the transferee to assume the obligations of the Lessee hereunder. The
provisions of this Section 4.03 are in addition to, and do not modify or
abridge, the prohibitions against sale, transfer, assignment or other
disposition of the Facility, as set forth in Section 2.04(b).
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4.04 Damage or Destruction. If the Facility or any portions thereof shall
be damaged or destroyed by fire or other casualty, Lessee shall commence to
repair, restore, rebuild or replace any such damage or destruction within sixty
(60) days after such fire or other casualty and shall proceed with due diligence
to complete such work within a reasonable period of time.
ARTICLE V
LOAN FROM WCI
In addition to the agreements set forth herein between Lessee and Manager
relating to management of the Facility, WCI, the parent corporation of Manager,
has provided Lessee with the WCI Loan in the principal sum of $3,642,846.00
evidenced by a promissory note of even date herewith from Lessee payable to the
order of Lessee, and secured by, among other documents and instruments, (a) a
pledge agreement for 100% of the outstanding corporate stock of Lessee; (b) a
security agreement for all of the accounts receivable, intangibles and other
personal property in which Lessee has an interest of any kind; (c) an assignment
of the collateral (or substituted collateral) now or hereafter provided to
secure the reimbursement obligations of Lessee or Manager to such bank or
financial institution (the "Issuer") as shall have issued letters of credit in
favor of Health Care Property Investors, Inc., as beneficiary (which letters of
credit presently aggregate $1,150,000.00) to secure the obligations of Lessee
under the Lease, (d) a leasehold deed of trust and (e) an assignment of rents
and leases. This Management Agreement is a material inducement to the making of
the WCI Loan, and accordingly, is coupled with an interest, is irrevocable by
Lessee and non-cancellable by Lessee unless expressly provided in this Agreement
to the contrary, and then only upon the occurrence of such circumstances as may
be described herein.
ARTICLE VI
MISCELLANEOUS COVENANTS
6.01 Assignment. Lessee shall not assign its rights and/or obligations
under this Agreement without the prior written consent of Manager or pursuant to
the provisions of the Lease. Manager shall not assign its rights and/or
obligations under this Agreement, except to an affiliate of Manager, without
prior written consent of Lessee.
6.02 Binding Agreement. The terms, covenants, conditions, provisions and
agreements herein contained shall be binding upon and inure to the benefit of
the parties hereto, their successors and assigns.
6.03 Relationship of Parties. Nothing contained in this Agreement shall
constitute or be construed to be or to create a partnership, joint venture or
lease between Lessee and Manager with respect to the Facility.
6.04 Notices. All notices, demands and requests contemplated hereunder by
either party to the other shall be in writing, and shall be delivered by hand,
transmitted by cable, telegram or telecopy (receipt confirmed), or mailed,
postage prepaid, registered, or certified mail return receipt requested:
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(a) to Lessee, by addressing the same to:
NCHC, Inc.
0000 X. Xxxxxxxx Xxxxxxxxx
Xxxxx 000
Xxxxxxxx, Xxxxxxxxx 00000
Attn: Xxxxxxxx X. Xxxxx
(b) to Manager, by addressing the same to:
WelCare International Management Corporation
0000 Xxxxxxx Xxxxxxx
Xxxxx 000
Xxxxxxx, Xxxxxxx 00000
Attn: Mr. J. Xxxxxxx Xxxxx, President
or to such other address or to such other person as may be designated by notice
given from time to time during the term of this Agreement by one party to the
other. Any notice hereunder shall be deemed given five (5) days after mailing,
if given by mailing in the manner provided above, or on the date delivered or
transmitted if given by hand, cable, telegraph or telecopy (receipt confirmed).
6.05 Entire Agreement; Amendments. The Agreement contains the entire
agreement between the parties hereto, and no prior oral or written, and no
contemporaneous oral representations or agreements between the parties with
respect to the subject matter of this Agreement shall be of any force and
effect. Any additions, amendments or modifications to this Agreement shall be of
no force and effect unless in writing and signed by both Lessee and Manager.
6.06 Governing Law. This Agreement has been executed and delivered in the
State of Georgia, and all the terms and provisions hereof and the rights and
obligations of the parties hereto shall be governed by, and construed and
enforced in accordance with, the laws of the State of Georgia (without regard to
its rules of conflicts of laws).
6.07 Captions and Headings. The captions and headings throughout this
Agreement are for convenience and reference only and do not constitute a part
hereof.
6.08 Disclaimer of Employment of Facility Employees. No person employed in
the operation of the Facility will be an employee of Manager, and Manager will
have no liability for payment of their wages, fringe benefits, payroll taxes and
other expenses of employment.
6.09 Costs and Expenses; Indemnity. All fees, costs and expenses arising
out of, relating to or incurred in the operation of the Facility, including,
without limitation, the fees, costs, and expenses of Manager and outside
consultants and professionals, shall be the sole responsibility of Lessee and
shall be payable as operating expenses of the Facility. Manager, by reason of
the execution of this Agreement or the performance of its services hereunder,
shall not be liable for or deemed to have assumed any liability for such fees,
costs and expenses, or any other liability or debt of Lessee whatsoever, arising
out of or relating to the Facility or incurred at its operation, except the
salary of Manager's employees and the expenses and costs incurred at its central
administrative offices in performance of its
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obligations hereunder. Lessee agrees to indemnify and hold Manager and its
officers, directors, agents and employees harmless from and against all losses,
claims, damages or other liabilities, including the costs and expenses incurred
in connection therewith, arising out of or relating to the ownership of the
Facility (except those resulting from the wilful misconduct or gross negligence
of Manager), including, without limitation, any liability asserted against
Manager or any of its officers, directors, employees or agents by reason of any
action taken by any of the foregoing while performing the duties of Manager
hereunder on behalf of Lessee.
6.10 Responsibility for Misconduct of Employees and Other Persons. Manager
will have no liability whatsoever for damages suffered on account of the
dishonesty, misconduct or negligence of any employee of or employee leased by
the Facility or any officer, director, partner, stockholder, employee or agent
of Lessee. Manager shall be liable to the Facility in connection with damage or
loss directly sustained by Lessee by reason of the dishonesty, wilful misconduct
and gross negligence of Manager's employees in the operation of the Facility
during the term of the Agreement.
6.11 Advances by Manager. Manager shall have the right, but not the
obligation, to advance to Lessee any and all sums required to maintain all
necessary licenses and permits and to otherwise keep the Facility operating as a
fully insured nursing home in good condition and repair. All such sums advanced
by Manager to Lessee shall be repaid by Lessee, with interest commencing on the
date such sums were advanced at a rate equal to the announced prime rate of
interest of NationsBank of Georgia, N.A., Atlanta, Georgia, plus two percent
(2%) per annum ("Advance Rate"), immediately upon written notice thereof to
Lessee, and Manager shall have the right at any time and from time to time to
instruct the signatories of the Operating Accounts to withdraw and pay to
Manager amounts necessary in order to repay such advances.
6.12 Definition of Affiliate. For purposes of this Agreement, the term
"affiliate" shall mean any person or entity which Manager or Lessee or their
respective stockholders or individual partners, directly or indirectly, through
one or more intermediaries, controls, is in common control with, or is
controlled by.
6.13 Authorization of Agreement. Manager and Lessee represent and warrant,
each to the other with respect to itself, that the execution and delivery of
this Agreement has been duly authorized by all respective action, will not
presently or with the passage of time, the giving of notice, or both result in a
default under or violate or conflict with (i) the provisions of the articles of
incorporation and bylaws of Manager or Lessee, or (ii) any other material
agreement, mortgage, loan agreement or other contract or instrument by which
either party is bound or to which any of its property or assets are subject, or
(iii) any existing law, regulation, court order or consent decree by which
either party is bound or to which any of its property or assets are subject.
6.14 Liability. The obligations and duties of Lessee under this Agreement
are solely the obligations and duties of Lessee, a corporation, and not of any
of its officers, directors, employees, affiliates, attorneys or shareholders.
Manager shall look solely to Lessee for performance of the obligations evidenced
by this Management Agreement and Manager shall not assert any claim, action,
right of action or cause of action against the officers, directors, employees,
affiliates, attorneys or shareholders of Lessee for the performance of the
obligations of Lessee under this Agreement, whether such claims, actions, rights
of action or
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causes of action are now existing or hereafter arising, accrued or unaccrued,
under any legal or other right or theory, including by a piercing of the
corporate veil of Lessee. Nothing herein shall affect any obligations of
Xxxxxxxxxx Health Care, Inc. ("EHC") or any subsidiaries or affiliates of EHC
for breach of any warranties, representations or covenants contained in that
certain Leasehold Purchase and Sale Agreement dated as of December 21, 1995, as
amended and modified of even date herewith pursuant to that certain Agreement
Regarding Assignment, Loan and Management Agreements.
ARTICLE VII
OPTION TO PURCHASE
Pursuant to the Lease HCPI has granted to Lessee a right of first refusal
and an option to purchase from HCPI the Facility, related tangible and
intangible personal property and all of HCPI's right, title and interest in and
to the license to operate the Facility. Such right of first refusal and option
to purchase are collectively hereinafter referred to as the "Lease Option."
The following grant to Manager of certain rights and options in respect of
the Lease Option shall be so construed as not to apply unless Lessee shall have
a right to exercise the Lease Option. In the event Lessee receives notice of its
right to exercise the Lease Option, Lessee shall provide Manager with a copy of
such notice and shall, if permitted to do so under the terms of the Lease or if
Manager so requests, exercise such option or right of first refusal and
thereafter assign or convey its right, title and interest in, to and under the
Lease Option to Manager. If not permitted under the terms of the Lease Option to
assign or convey the Lease Option to Manager, whether before or after exercise
thereof, then at Manager's request, Lessee shall proceed to acquire the Facility
on Manager's behalf, pursuant to the terms of the Lease Option, and upon
completion of such acquisition, Lessee shall convey the facility to Manager upon
the identical terms and conditions, including purchase price, by which Lessee
acquired the Facility.
Subject to applicable limitations on the right of Lessee to exercise the
Lease Option as may appear in the Lease, Lessee hereby grants unto Manager, its
nominees, assigns, successors or representatives, the exclusive and irrevocable
right and option to acquire, pursuant to the identical terms and conditions
(including purchase price) set forth in the Lease Option for Lessee's purchase
of the Facility, all of HCPI's right, title and interest, now or hereafter owned
or possessed by HCPI, or acquired by Lessee pursuant to the Lease Option, in and
to (i) the real estate on which the Facility is located, together with all
buildings, structures and improvements now or hereafter located thereon,
including without limitation, the Facility, and all rights, tenements,
hereditaments and appurtenances thereunto belonging or in any wise appertaining
thereto, all right, title and interest of HCPI in and to any and all appurtenant
easements and any and all roads, streets, lanes and highways, whether public or
private, adjacent to or adjoining the Facility, and the reversion or reversions,
remainder or remainders, rents, issues or profits thereof, and all tangible
personal property now or hereafter owned by HCPI and now or hereafter located on
or at the Facility or actually or constructively attached thereto or to the
buildings, structures or improvements thereon, and all right, title and interest
of HCPI in and to all licenses required to operate the Facility (to the extent
such licenses can be conveyed or transferred under applicable law), all as more
particularly described in the Lease Option; (ii) the personal property of HCPI
of any nature whatsoever, tangible or intangible, wherever situated, now or
hereafter owned by HCPI and now or
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hereafter located on or about the Premises and/or used in connection with the
operation of the Facility (collectively, the "HCPI Assets").
IN WITNESS WHEREOF, the parties hereto have executed, sealed and delivered
this Agreement through their duly authorized representatives, as of the day and
year first above written.
NCHC, INC.
By: /s/ Xxxxxxxx X. Xxxx
--------------------------------------
Xxxxxxxx X. Xxxx, Xx. Vice President
WELCARE INTERNATIONAL MANAGEMENT
CORPORATION
By: /s/ Xxxx X. Xxxx
--------------------------------------
Xxxx X. Xxxx, Vice President
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SCHEDULE 10.34
CHMC has entered into agreements with NCHC, Inc. substantially identical
to Exhibit 10.34 as follows:
1. Long Term Care Facility Management Agreement dated March 25, 1996 for
Xxxxxxxx County, North Carolina facility.
2. Long Term Care Facility Management Agreement dated March 25, 1996 for
Buncombe County, North Carolina facility.
3. Long Term Care Facility Management Agreement dated July 18, 1996 for
Buncombe County, North Carolina facility. A material detail in which this
agreement differs from Exhibit 10.34 is that the amount of the "WCI Loan" to
NCHC referenced therein is $4,546,926.00 and is evidenced by the Amended and
Restated Promissory Note from NCHC dated as of March 25, 1996.
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