EXHIBIT 10.5
AGREEMENT TO PROVIDE MANAGEMENT SERVICES
This Agreement made as of this 30th day of September, 1999, by and
between Senior Care Management Group, LLC, a Delaware limited liability
company ("SCMG") (SCMG is sometimes hereinafter referred to as "Manager"), on
the one hand, and LTC Healthcare, Inc., a Nevada corporation ("LTI"), and its
subsidiaries LTC Healthcare of Venice, Inc., a Nevada corporation
("LTI-Venice"), LTC Healthcare of Crawfordville, Inc., a Nevada corporation
("LTI-Crawfordville"), LTC Healthcare of Olathe, Inc., a Nevada corporation
("LTI-Olathe"), LTC Healthcare of Tiptonville, Inc., a Nevada corporation
("LTI-Tiptonville"), LTC Healthcare of Xxxxxxx, Inc., a Nevada corporation
("LTI-Xxxxxxx"), LTC Healthcare of Jonesboro, Inc., a Nevada corporation
("LTI-Jonesboro"), LTC Healthcare of Richmond, Inc., a Nevada corporation
("LTI-Richmond"), LTC Healthcare of Tappahannock, Inc., a Nevada corporation
("LTI-Tappahannock"), and LTC Healthcare of Fayetteville, Inc., a Nevada
corporation ("LTI-Fayetteville") (LTI, LTI-Venice, LTI-Crawfordville,
LTI-Olathe, LTI-Tiptonville, LTI-Xxxxxxx, LTI-Jonesboro, LTI-Richmond,
LTI-Tappahannock and LTI-Fayetteville are sometimes hereinafter individually
and collectively referred to as "Tenant"), on the other hand.
WHEREAS, LTC Properties, Inc., a Maryland corporation, or its
designated subsidiary or affiliate ("LTC"), anticipates acquiring the fee simple
interest in and to certain parcels of real property, each improved with a
skilled nursing facility (individually, each a "Facility" and collectively, the
"Facilities"), as more particularly described on Exhibit "A" attached hereto and
incorporated herein, and entering into triple-net leases (each a "Lease") with
Tenant demising the Facilities;
WHEREAS, in such event, Tenant desires to retain a qualified party to
manage all of the Facilities on Tenant's behalf;
WHEREAS, Manager is experienced and qualified in the field of health
care management;
WHEREAS, Tenant has determined that Manager's fee is economical in
light of the range of services which it provides; and
WHEREAS, Manager is willing to operate all of the Facilities on
Tenant's behalf, pursuant to the terms and conditions set forth herein.
NOW, THEREFORE, in consideration of the foregoing premises and the
mutual covenants herein contained, IT IS AGREED AS FOLLOWS:
0. DELEGATION OF DUTIES AND OBLIGATIONS: Effective as of 11:59 p.m.
on September 30, 1999, LTI-Olathe, LTI-Crawfordville and LTI-Venice
(collectively, "Assignors") hereby assign and delegate to Manager all duties
and obligations of Assignors under those certain Interim Management
Agreements of even date herewith, each by and between one of Assignors and
Xxxxxxx X. Xxxxxx, Xx., the duly appointed Examiner of NewCare Health
Corporation, et al.,
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Case No. 99-44161-HJB, U.S. Bankruptcy Court, District of Massachusetts
(Western Division) (collectively, the "Interim Agreements"), and Manager
hereby accepts and assumes such assignments and each and every duty and
obligation of Assignors under, pursuant to and in accordance with the Interim
Agreements.
1. MANAGEMENT AND CONSULTING RESPONSIBILITIES OF MANAGER: Effective upon
Tenant's licensure with respect to each Facility, Tenant hereby engages Manager
and Manager hereby accepts such engagement and agrees to provide management,
consulting and advisory services to Tenant in connection with the operation of
the Facilities, upon the terms and conditions set forth in this Agreement. By
entering into this Agreement, Tenant grants to Manager a right to possession of
the Facilities but does not delegate to Manager any powers, duties or
responsibilities which it is prohibited by law from delegating but Tenant does
hereby grant to Manager the exclusive right to possession of the Facilities,
subject to Tenant's right to enter the Facilities from time to time to ensure
Manager's compliance with its obligations under this Agreement. Tenant also
retains such other authority as shall not have been expressly delegated to
Manager pursuant to this Agreement. Subject to the foregoing, Manager shall
provide the following services:
a. OPERATIONAL POLICIES AND FORMS: Manager shall develop and
implement such operational policies and procedures as may be necessary to ensure
the initial and ongoing licensure of the Facilities and for the efficient and
effective operation of the Facilities from and after the date of the issuance of
licenses to operate the Facilities (individually, each a "License" and
collectively, the "Licenses") and the Facilities from and after the commencement
of the operation thereof and shall from time to time during the term hereof
develop such new policies and procedures as shall be necessary to ensure the
establishment and maintenance of operations standards appropriate for the nature
of the Facilities.
b. CHARGES: In accordance with the annual budgets and projects
approved by Tenant pursuant to Section 1(l), Manager shall establish the
schedules of recommended charges, including any and all special charges for
services rendered to the residents at the Facilities. Tenant shall have the
right to approve the charge schedules established by Manager, which approval
shall not be unreasonably withheld.
c. INFORMATION: Manager shall develop any informational material,
mass media releases, and other related publicity materials, which are necessary
or appropriate in securing the Licenses and/or for the operation of the
Facilities.
d. REGULATORY COMPLIANCE: Manager shall assist Tenant in securing
the initial licensure of the Facilities and shall thereafter maintain all
licenses, permits, qualifications and approvals from any applicable governmental
or regulatory authority for the operation of the Facilities, including but not
limited to maintaining the Licenses and quality assessment and assurance
committees as required for Medicare and Medicaid certification as skilled
nursing facilities. Accordingly, Manager shall manage the operations of the
Facilities in full compliance with all applicable laws and regulations as an
expense of the Facilities and shall promptly correct
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all deficiencies related to the operation of the Facilities issued by any
governmental or regulatory authority; provided, however, that in the event
that any such deficiencies require expenditures in excess of Fifty Thousand
Dollars ($50,000.00), then Manager shall be required to consult with, and
seek the approval of, Tenant prior to correcting any such deficiencies. In
addition to the foregoing, to the extent permitted by law, Manager agrees as
follows:
i. to represent the Facilities (A) in their day-to-day
dealings with regulatory and rate-setting authorities, creditors, patients,
patient families, representatives of the State Ombudsman, consumer
organizations, personnel, agents for collection and insurers and (B) in all
formal or informal proceedings before state and federal agencies engaged in
the regulation, payment rate-setting and licensing of skilled nursing or
assisted living facilities (as applicable); provided, however, that Tenant
retains the right, but not the obligation, to attend and participate in any
and all hearings, interviews and proceedings of any kind and nature
concerning the Facilities or their operations or concerning Manager which
might have an impact on the Facilities or their operations, including but not
limited to any violation of any statute or regulation that may result in the
impositions of penalties, fines, court or administrative orders or licensure
revocation; and
ii. to provide Tenant, within five (5) business days of
receipt, all correspondence, notices, rulings, written summaries of oral
communications, announcements or any other communication of any sort from any
regulatory agency, including public, quasi-public and private entities,
regarding the Facilities, their operations or related to matters which might
have a material impact on the operations of the Facilities, such as
announcements of the establishment of accreditation committees, new oversight
policies and other matters, or which may impact Manager's performance of its
obligations hereunder.
e. EQUIPMENT AND IMPROVEMENTS: From and after the issuance of
the Licenses and from and after the commencement of operations, Manager shall
make all necessary and approved repairs, replacements and maintenance within
the budgetary limits set forth in the annual capital budget prepared by
Manager pursuant to Paragraph 1(l), in a workmanlike and lien free manner and
in compliance with the requirements of any governmental or regulatory
authority.
f. ACCOUNTING: Manager shall, at its expense, provide home
office and accounting support to the Facilities. All accounting procedures
and systems utilized in providing said support shall be in accordance with
the operating capital and cash programs developed by Manager, and approved by
Tenant, which approval shall not unreasonably be withheld, which programs
shall conform to generally accepted accounting principles and shall not
materially distort income or loss. In addition, as a cost of operating the
Facilities, Manager shall prepare or cause to be prepared all tax returns,
including payroll tax returns and shall cause all local, state and federal
taxes to be timely paid or contested, as appropriate. The taxes and amounts
due with respect to any cost reports shall be deemed to be operating expenses
of the Facilities and shall be paid out of the revenues of the Facilities or
the working capital provided by Tenant. Nothing herein shall preclude
Manager from delegating to a third party a portion of the accounting and
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cost reporting duties provided for in this section; provided, that such
delegation shall not relieve Manager from ultimate liability for the timely
and complete performance of the obligations provided for herein or for the
expense thereof, to the extent such expense is to be borne hereunder by
Manager. Tenant shall sign any and all Medicare and Medicaid cost reports
which may be due in connection with operation of the Facilities.
Tenant shall have the right from time to time to have its
accountants or representatives audit the books and operations of the Facilities
and, in connection with such audits, to examine Manager's records with respect
thereto (including supporting data, income tax and sales tax returns), subject
to any prohibitions or limitations on disclosure of any such data under
applicable law or regulations, including without limitation, any duly enacted
"Patients' Xxxx of Rights" or similar legislation, including such limitations as
may be necessary to preserve the confidentiality of any Facility-patient
relationship and any physician-patient privilege. If any such audit discloses
an overstatement of Revenues (defined in Section 10, below) of the Facilities
and corresponding overpayment to Manager of the Management Fee (defined in
Section 10, below) and either Manager agrees with the result of such audit or
the matter is compromised, Manager shall pay to Tenant the amount of such
overpayment of the Management Fee within ten (10) days of Tenant's demand.
g. REPORTS: Manager shall prepare and provide to the Tenant any
reasonable operational information which may from time to time be specifically
requested by Tenant, including any information needed to assist Tenant in
completing its tax returns and cost reports and in complying with any reporting
obligations imposed by the terms of any debt documents to which the Facilities
may be subject. All cost reports which may be due in connection with the
operation of the Facilities shall be prepared by Manager, unless Tenant elects
otherwise, but all such cost reports shall be signed by Tenant in its capacity
as the Medicare or Medicaid certified provider, as required by law. In addition,
(i) within fifteen (15) business days after the end of each calendar month,
Manager shall provide Tenant with an unaudited balance sheet of the Facilities,
dated the last day of such month, and an unaudited statement of income and
expenses for such month relating to the operation of the Facilities and
(ii) within forty-five (45) days after the end of the fiscal year of the
Facilities, Manager shall provide Tenant with unaudited financial statements
including a balance sheet of the Facilities, dated the last day of said fiscal
year, and a statement of income and expense for the year then ended relating to
the operation of the Facilities. Such financial statements shall be prepared in
accordance with GAAP, consistently applied, this Agreement, and the procedures
and practices provided for in this Agreement and shall be certified to be
accurate by the Chief Financial Officer of Manager. All information relating to
the Facilities and their operations shall constitute part of the books and
records of the Facilities and shall be the sole and exclusive property of
Tenant.
h. BANK ACCOUNTS: On Tenant's behalf, Manager shall establish and
maintain a depository account in the name of Tenant at Fleet Bank or other
depository institution designated by Tenant and shall deposit therein all money
received during the term of this Agreement in the course of the operation of the
Facilities and/or from Tenant in satisfaction of its working capital obligation
as described more fully herein; provided, however, that during the
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term hereof, withdrawals and payments from this account shall be made only on
checks signed or wire transfer authorized by a person or persons designated
by Manager (the "Depository Account"). Manager shall have no right, title or
interest in and to the Depository Account, and Manager shall cause the funds
held in the Depository Account to be invested overnight for the benefit and
credit of Tenant. In addition, Manager shall establish and maintain a
payroll account in the name of Tenant (the "Payroll Account") and a
controlled disbursement account in the name of Tenant (the "Disbursement
Account"), both of which shall be zero balance accounts from which Manager
shall pay the payroll of the employees and the operating expenses of the
Facilities, respectively. Finally, Manager shall establish an administrative
account in the name of Tenant (the "Administrative Account"), which shall in
no event contain a balance in excess of Ten Thousand Dollars ($10,000.00) and
shall be used by the administrators of the Facilities to pay for necessary
emergency disbursements. Manager shall have no right, title or interest in
and to the Payroll Account, the Disbursement Account and/or the
Administrative Account. Tenant shall be given notice as to the identity of
the authorized signatories on the Depository Account, the Payroll Account,
the Disbursement Account and the Administrative Account. Tenant shall
further be permitted to designate an authorized signatory with respect to the
Depository Account, the Payroll Account, the Disbursement Account and the
Administrative Account in order to enable Tenant to withdraw funds therefrom
in accordance with the terms of this Agreement; provided, however, Manager
shall not be required to secure Tenant's signature on any checks drawn or
wire transfers authorized on the Depository Account, the Payroll Account, the
Disbursement Account and the Administrative Account in connection with
Manager's operation of the Facilities. All operating expenses incurred from
and after the Commencement Date (defined in Section 4, below) in connection
with the operation of the Facilities, including, but not limited to, payroll
and employee benefits and payment of Manager's Management Fee (defined in
Section 10, below), shall be paid by check drawn or wire transfer authorized
on the Depository Account. Withdrawals from the Depository Account shall be
made to make payments in the following order or priority:
i. Nondeferrable operating expenses of the Facilities, which
shall include, without limitation, the following:
(A) payroll of all employees of the Facilities;
(B) payroll-related expenses, employee benefits and
employment taxes;
ii. Debt service (principal and interest) on the Facilities,
including under the accounts receivable line of credit from
Tenant to Manager;
iii. One-half (1/2) of the Management Fee
iv. All other undisputed and nondeferrable operating expenses
and accrued liabilities of the Facilities which have been
posted or accounted for in Manager's accounting system;
v. Rent and other Lease-required payments to Tenant's landlord
under the Leases;
vi. Any Working Capital Advances (defined below) made by
Tenant, if any;
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vii. The remaining one-half (1/2) of the Management Fee; and
viii. Capital expenditures incurred in accordance with the annual
capital expenditure budget.
Manager and Tenant acknowledge that the cash flow of the Facilities may not be
sufficient to pay operating expenses of the Facilities incurred from and after
the Commencement Date. In the event the cash flow of the Facilities are at any
time insufficient to pay all of the operating expenses of the Facilities from
and after the Commencement Date, Tenant shall, within ten (10) days of its
receipt of a written request by Manager, deposit in the Depository Account the
amount Tenant determines is necessary for the continuing operation of the
Facilities (each a "Working Capital Advance"). Manager agrees that it shall not
make a request for a Working Capital Advance more frequently than one time per
month and that Manager shall not be entitled to request a Working Capital
Advance to pay the remaining one-half (1/2) of the Management Fee described in
item vii, above.
i. FACILITY PERSONNEL: On behalf of Tenant, Manager shall recruit,
train, promote, direct, discipline, suspend and discharge personnel of the
Facilities; establish salary levels, personnel policies and employee benefits;
and establish employee performance standards, all as needed during the term of
this Agreement to secure the initial licensure of the Facilities and to ensure
the efficient operation of all departments within and services offered by the
Facilities. All of the personnel of the Facilities, including an on-site
administrator, shall be the employees of the applicable Tenant and the salaries,
bonuses, commissions and benefits paid to such employees shall be deemed to be a
Facility operating expense. Manager shall use best efforts to assure compliance
with all applicable employment, wrongful discharge, anti-discrimination,
occupational safety and health and other similar laws and regulations affecting
the employment of all such personnel. In addition, Manager shall only negotiate
any collective bargaining agreement or other agreement with any labor union
lawfully entitled to represent all or any employees after consulting with and
upon the advice of Tenant.
j. SUPPLIES AND EQUIPMENT: Manager shall purchase supplies and
non-capital equipment needed to operate the Facilities. In purchasing said
supplies and equipment, if possible, Manager shall take advantage of any
national or group purchasing agreements to which Manager may be a party.
k. LEGAL PROCEEDINGS: Manager, through its legal counsel, shall
coordinate with Tenant's counsel on all legal matters and proceedings necessary
or proper in connection with the operation of the Facilities.
l. BUDGETS: On or before January 2, 2000 with respect to fiscal year
2000 and within thirty (30) days prior to the start of each subsequent fiscal
year, Manager shall prepare and submit to Tenant for its review and approval,
which approval shall not be unreasonably withheld, an annual operating budget,
an annual capital expenditure budget, and an annual summary of profit and loss
statement. These budgets and projections shall be prepared with adequate detail
to allow Tenant to comprehend fully the operating plans of Manager and should:
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i. provide a monthly breakdown of revenues, expenses and
profitability;
ii. be zero-based;
iii. be prepared on a line-item and departmental basis;
iv. contain a marketing plan which details targets, assumptions
and detailed descriptions of strategies and tasks to
executed the goals of the marketing plan; and
v. include narrative descriptions of assumptions used in
formulating the budget and forecast any potential need for
capital from Tenant.
Manager acknowledges and agrees that no such budget shall include expenses
related to Manager's corporate or regional overhead costs, it being understood
and agreed that such costs shall not be deemed to be permitted operating
expenses which may be paid from revenues of the Facilities. In the event a
budget has not been agreed upon by the beginning of the fiscal year, the budget
in effect for the prior fiscal year shall continue in effect until the new
budget is agreed upon. Thereafter, Manager shall use best efforts to ensure
that any operating expenditures in total made during any given month, quarter or
year (as applicable) shall not exceed the operating expenditures reflected on
the approved operating budget, and as soon as Manager becomes aware that any
such total operating expenditures exceed the approved operating budget by more
than five percent (5%), then Manager shall notify Tenant in writing of such
budget variance within five (5) days. Any unbudgeted operating expenditures
shall be subject to Tenant's prior written approval. Manager shall not be
entitled to vary capital budgets without Tenant's prior written approval. Each
Facility shall be operated on a fiscal year of January 1 through December 31.
m. COLLECTION OF ACCOUNTS: Manager shall issue bills and use
diligence and best business practices to collect accounts and monies owed for
goods and services furnished by the Facilities, including, but not limited to,
enforcing the rights of Tenant and the Facilities as creditor under any contract
or in connection with the rendering of any services; provided, however, that any
expenses incurred by Manager in so doing shall be treated as operating expenses
of the Facilities, which shall be payable out of funds deposited in the
Depository Account described in Section 1(h).
n. POSSESSION. Tenant and Manager acknowledge and agree that during
the term of this Agreement, Manager has the exclusive right to possession of the
Facilities, subject to Tenant's right to enter into the Facilities from time to
time to ensure Manager's compliance with the terms of this Agreement.
o. SERVICE CONTRACTS. Manager shall negotiate and enter into
service contracts which are necessary or desirable in the ordinary course of
business in operating the Facilities, including, without limitation, contracts
for provisions of electricity, gas, water, telephone and other utility services,
cleaning services, security services, vermin extermination, trash removal,
elevator and boiler maintenance, air conditioning maintenance, master television
service, laundry and dry cleaning, entertainment satellite systems and other
services which
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Manager deems advisable; provided, however, that (i) all such contracts shall
provide that they are terminable on no more than thirty (30) days notice
without penalty or premium, (ii) Manager shall be required to ensure that all
such contracts are on commercially reasonable terms, (iii) no such contracts
shall be entered into if doing so would be inconsistent with the
reimbursement principles, if and to the extent applicable to the operation of
the Facilities, under the Medicare prospective payment system and (iv)
Manager shall provide Tenant with copies of any and all such service
contracts substantially concurrently with their execution.
p. LENDER REQUIREMENTS. Manager agrees to perform any
obligations under any mortgage or other debt instrument encumbering the
Facilities which are applicable to the operation and management of the
Facilities and to pay, as and when due, all payments due under any present or
future loans on the Facilities. Further, Manager confirms that this Agreement
and all of Manager's rights hereunder are, and shall be, completely
subordinate to the lien of any present or future loan encumbering the
Facilities and agrees to execute and notarize a subordination,
non-disturbance and attornment agreement on the lender's form within ten (10)
days after delivery to Manager of such form confirming such subordination of
Manager's interest.
q. PATIENT TRUST ACCOUNT. Manager shall establish and maintain
records and procedures to account for all patient funds deposited with the
Facilities. A "Patient Trust Account" shall be established in accordance with
the terms hereof and all disbursements therefrom and records and procedures
relating thereto shall conform with the requirements of third party
reimbursement, licensure and all other applicable requirements and the terms
hereof.
r. TENANT'S PRIOR WRITTEN APPROVAL. Manager shall not do any of the
following without first obtaining Tenant's prior written approval:
i. Borrow money (excluding the accounts receivable line of
credit from Tenant to Manager), guaranty the debts of any third person, or
mortgage, pledge, grant a security interest in or otherwise encumber all or any
part of the Facilities; provided, however, that Manager shall be entitled to
encumber the Facilities with mechanics' liens, materialmen's liens or laborers'
liens necessary in connection with the performance of Manager's obligations
under this Agreement, so long as any such liens are discharged in a timely
manner in accordance with applicable state law;
ii. Enter into any lease or other financing agreement for the
use of any item of furniture, fixtures and equipment or other property in an
amount which would require monthly payments, in the aggregate, in excess of One
Thousand Five Hundred Dollars ($1,500.00) per Facility;
iii. Enter into any agreement, lease, license or concession
agreement for space at the Facilities;
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iv. Incur any liabilities or obligations to third parties which
are unrelated to the operation, maintenance and security of the Facilities or to
the performance of Manager's responsibilities under this Agreement;
v. Except for any Excluded Transaction (defined below) and
subject to the provisions of this Agreement regarding contracts with
affiliates of Manager, Manager shall not, without the written consent of
Tenant, enter into any contract or other arrangement (or series of related
contracts or arrangements) if the expenditures thereunder would, or are
reasonably anticipated to, exceed Twenty-Five Thousand Dollars ($25,000.00)
in the aggregate, or if the term of such contract has a term in excess of one
(1) year. For purposes hereof, the term "Excluded Transaction" shall mean (A)
any contracts subject to competitive bidding in which the lowest bid is
accepted; and (B) contracts or expenditures required in cases of emergency or
casualty, which expenditures are required to protect life and safety, or in
order to comply with legal requirements, in an amount not to exceed
Twenty-Five Thousand Dollars ($25,000.00) in any twelve (12) month period;
vi. Institute or defend any legal or equitable proceedings with
respect to the Facilities, including the selection of counsel, other than
routine collection litigation and similar matters involving ordinary day-to-day
operations of the Facilities involving amounts in controversy of less than Ten
Thousand Dollars ($10,000.00);
vii. Employ any professional firm (other than legal counsel and
accountants) for more than Ten Thousand Dollars ($10,000.00) in the aggregate
except as set forth in the annual operation budget, or enter into any
arrangement for the employment of any attorney or accountant (other than legal
counsel retained to collect accounts receivable);
viii. Prosecute or settle any tax claims or appeals;
ix. Purchase goods, supplies and services from Manager or any
affiliate of Manager, or enter into any other transaction with an affiliate of
Manager, unless prior to the consummation of such transaction all of the prices
and other terms thereof and the identity of the vendor and its relationship to
Manager shall have been disclosed to and approved by Tenant, which may be
withheld in Tenant's sole and absolute discretion, it being agreed that any such
proposed transaction shall be submitted to independent third parties for
competitive bidding, and Manager shall promptly provide the results of such
bidding to Tenant;
x. Acquire on behalf of Tenant any land or any interest
therein;
xi. Acquire any capital assets of the Facilities or any
interest therein;
xii. Consent to any condemnation or participate in any
condemnation proceeding relating to the Facilities or any portion thereof;
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xiii. Sell, transfer or otherwise dispose of all or any portion
of the Facilities;
xiv. Perform any alterations to the Facilities or any portion
thereof, except as is necessary in connection with the performance of Manager's
obligations under this Agreement; or
xv. Take any other action which, under the terms of this
Agreement, is prohibited or requires the approval of Tenant.
2. INSURANCE: Tenant, as a cost of operating the Facilities, shall
arrange for and maintain all necessary and proper hazard insurance covering the
Facilities, the furniture, fixtures, and equipment situated thereon, and all
necessary and proper malpractice and public liability insurance for Tenant's
protection and for the protection of Tenant's officers, agents and employees.
All such policies of insurance shall also name Manager as additional insured and
the holder of any debt secured by the Facilities as additional insured and loss
payee thereunder. In addition, Tenant, as a cost of operating the Facilities,
shall provide all employee health and worker's compensation insurance for
Tenant's employees and all other personnel working at the Facilities. Any
insurance provided pursuant to this paragraph shall comply with the requirements
of any debt documents to which the Facilities may be subject. All insurance
shall be in form, with companies, with limits and coverages as Tenant shall
determine, and Tenant may maintain an umbrella policy for all such insurance in
amounts as Tenant deems appropriate. In the event of any casualty or
condemnation of any Facility, Tenant shall have the sole right to determine the
disposition of any insurance or condemnation proceeds, including but not limited
to the right to decide whether any such Facility shall be rebuilt in the same
manner or type as the original Facility. Each party shall give prompt notice to
the others of any third party claims made, or third party legal proceedings
commenced, against any one of them and shall cooperate fully with each other,
each's counsel and with any insurance carrier to the end that all such claims
will be properly investigated, defended and adjusted.
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3. TAXES AND RENT: Manager agrees as follows:
a. Manager shall cause to be paid as an expense of the Facilities
when due: (i) all taxes, assessments, levies, fees, water and sewer rents and
charges, and all other governmental charges, general and special, ordinary and
extraordinary, which are, at any time prior to or during the term hereof,
imposed or levied upon or assessed against (A) the Facilities, (B) any Rent (as
defined in any Lease for a Facility), Additional Rent (as defined in any Lease
for a Facility) under the Lease or other sum payable under the Lease or (C) the
Lease or the leasehold estate thereby created, or which arise in respect of the
operation, possession or use of the Facilities; (ii) all gross receipts or
similar taxes imposed or levied upon, assessed against or measured by any Rent
(as defined in a Lease), Additional Rent (as defined in a Lease) or other sum
payable under a Lease; (iii) all sales, use or similar taxes and all
withholdings and payroll taxes, at any time levied, assessed or payable on
account of the acquisition, leasing, use or operation of the Facilities; and
(iv) all charges for utilities serving the Facilities. If any such tax or
assessment may legally be paid in installments, Manager may pay such tax or
assessment in installments.
b. Manager shall deliver to Tenant a copy of any assessment, tax
notice or tax xxxx received by Manager and shall pay the same as and when due;
provided, Manager shall not cause such payment to be made if (i) same is in good
faith being contested by Tenant at its sole expense and without cost to Manager,
(ii) enforcement thereof is stayed, and (iii) Tenant shall have given Manager
written notice of such contest and stay and authorized the non-payment thereof,
not less than ten (10) days prior to the date on which such tax assessment, or
charge is due and payable.
4. TERM OF AGREEMENT: With respect to each Facility, the Term of this
Agreement shall commence effective as of the issuance of a License to Tenant to
operate said Facility (with respect to each Facility, a "Commencement Date"),
and with respect to all Facilities, the term of this Agreement shall terminate
upon the first to occur of (i) the occurrence of an Event of Default hereunder
and the exercise by Manager or Tenant of its right to terminate this Agreement
as a result thereof; (ii) the termination without cause of this Agreement by
Tenant or Manager on no less than ninety (90) days written notice to the other
party specifying the effective date of such termination; or (iii) midnight on
September 30, 2004; provided, however, that in the event that LTC or Tenant
sells its interest in any of the Facilities to an unaffiliated third party, then
LTC or Tenant (as applicable) shall provide reasonable prior written notice to
Manager of the closing date of such sale, and this Agreement shall terminate as
to each such Facility immediately upon the consummation of such sale. In the
event of the termination of this Agreement the following provisions shall apply:
a. Concurrently with a termination of this Agreement that does not
result from Manager having committed an Event of Default hereunder, Tenant shall
pay to Manager any management fees then due and owing.
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b. Upon termination of this Agreement, Manager shall cooperate with
any party designated by Tenant to effect a smooth transition of operational
responsibility for the Facilities from Manager to said third party, including
but not limited to turning over to Tenant, or its designee, all files and
records relating to the operation of the Facilities.
c. Manager agrees not to solicit any of Tenant's employees for a
period of three (3) years following any termination of this Agreement.
5. DEFAULT: Either party may terminate this Agreement, as specified in
this Section 5, in the event of a default ("Event of Default") by the other
party.
a. With respect to Manager, it shall be an "Event of Default"
hereunder:
1) If Manager shall fail to pay any monetary obligation
arising out of or incurred in connection with this Agreement when such
payment is due and payable, which failure shall continue for a period
of ten (10) days after the due date; or
2) If Manager shall fail to keep, observe or perform any
non-monetary agreement, term or provision of this Agreement, and such
default shall continue for a period of thirty (30) days after notice
thereof shall have been given to Manager by Tenant, which notice shall
specify in detail the event or events constituting the default;
provided, however, in the event such failure cannot be cured within
such thirty (30) day period but Manager commences the cure within such
thirty (30) day period and diligently prosecutes the same to
completion, Manager shall have an additional thirty (30) days or such
additional time as is reasonably necessary in which to complete such
cure; or
3) If any Facility's license or Medicare or Medicaid
certification is suspended, revoked, rescinded, terminated or not
renewed and such action is not stayed pending the appeal thereof; or
4) If Manager assigns or attempts to assign this Management
Agreement in violation of the requirements of Section 11 hereof.
b. With respect to Tenant, it shall be an Event of Default
hereunder:
1) If Tenant shall fail to make or cause to be made any
payment to Manager required to be made hereunder (other than its
working capital obligation which is addressed in clause (2), below)
and such failure shall continue for a period of ten (10) days after
notice which notice shall specify the payment or payments which Tenant
has failed to make; or
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2) If Tenant shall fail to keep, observe or perform any
agreement, term or provision of this Agreement and such default shall
continue for a period of thirty (30) days after notice, which notice
shall specify in detail the event or events constituting the default
thereof by Manager to Tenant; provided, however, in the event such
failure cannot be cured within such thirty (30) day period but Manager
commences the cure within such thirty (30) day period and diligently
prosecutes the same to completion, Manager shall have an additional
sixty (60) days or such additional time as is reasonably necessary in
which to complete such cure; provided, further, that in the case of
Tenant's failure to provide necessary working capital upon demand by
Manager, it shall be deemed to be an Event of Default hereunder if the
same is not paid within the time provided in Section 1(h), and such
failure continues uncured for ten (10) days after Manager gives Tenant
written notice of such failure.
6. REMEDIES UPON DEFAULT:
a. If any Event of Default by Tenant shall occur, Manager may, in
addition to any other remedy available to it in law or equity on account of such
Event of Default, forthwith terminate this Agreement, and neither party shall
have any further obligations whatsoever under this Agreement except for
Manager's right to receive the payments due from Tenant pursuant to Section 4
hereof, if and to the extent due in accordance with the terms thereof, and
damages from Tenant and except any settlement and payment obligations and other
obligations that by their nature survive termination of this Agreement.
b. If any Event of Default by Manager shall occur, Tenant may, in
addition to any other remedy available to it in law or equity on account of such
Event of Default, forthwith terminate this Agreement and the exclusive right to
possession of the Facilities granted to Manager hereunder, and neither party
shall have any further obligation whatsoever under this Agreement; except for
Tenant's right to receive payment of damages from Manager and except for
settlement and payment obligations and other obligations that by their nature
survive termination of this Agreement.
7. TENANT'S INSPECTION: During the term hereof, Tenant, or its
designated agents or representatives, shall have the right, upon request and at
reasonable times, to inspect and to permit the holder of any debt secured by the
Facilities to inspect the Facilities and to inspect and/or audit all books and
records pertaining to the operation thereof and shall have the right to conduct
and to permit the holder of any debt secured by the Facilities to conduct
telephonic or personal interviews with the Administrator of the Facilities
and/or with any of Manager's regional personnel involved in the operation of the
Facilities with respect to any matters related to the operation thereof.
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8. FACILITY OPERATIONS:
a. NO GUARANTEE OF PROFITABILITY: Manager does not guarantee that
operation of the Facilities will be profitable, but Manager shall use its best
efforts to operate the Facilities in as cost efficient and profitable a manner
as possible.
b. STANDARD OF PERFORMANCE: In performing its obligations under
this Agreement, Manager shall use its best efforts and act in good faith and
with professionalism in accordance with acceptable and prevailing standards of
health care and the policies adopted by, and resources available to, the
Facilities.
c. FORCE MAJEURE: Manager will not be deemed to be in violation of
this Agreement if it is prevented from performing any of its obligations
hereunder for any reason beyond its control, including, without limitation,
strikes, shortages, war or acts of God.
9. WITHDRAWAL OF FUNDS BY TENANT; MINIMUM BANK BALANCE:
a. Tenant may withdraw the then accumulated operating cash surplus
from the Depository Account pursuant to Tenant's written instructions with
concurrent notice thereof to Manager.
10. MANAGEMENT FEE: Manager shall receive a monthly fee equal to five
percent (5%) of the Revenues (defined below) generated each month by the
Facilities, as more particularly set forth in Section 1(h), above ("Management
Fee"). The first (1st) one-half of the Management Fee shall be payable in
advance on the first (1st) day of each month based upon the previous month's
Revenues, and the second (2nd) one-half of the Management Fee shall be payable
during each month in accordance with Section 1(h), above, to the extent that
adequate Revenues are generated each month by the Facilities. No later than
thirty (30) days following any fiscal year of the Facilities, Tenant shall have
the right to reconcile the monthly Management Fees paid to Manager for such
fiscal year with the annual Revenues generated by the Facilities, and Tenant
shall have the right to offset any overpayment of Management Fees against future
Management Fees owing to Manager or to recover any such overpayments directly
from Manager. For purposes hereof, "Revenues" shall mean "Gross Revenues" less
contractual adjustments, and "Gross Revenues" shall mean all revenues generated
by the Facilities, directly or indirectly from residents of the Facilities,
including without limitation fees and other amounts received directly from
residents, amounts received from concessionaires, subcontractors, agencies,
etc., but shall specifically exclude the proceeds from the sale of the
Facilities or any portion thereof including any Facility equipment, any interest
or investment income of Tenant, capital contributions by Tenant, tax refunds not
relating to the current year (not accounted for in prior years), any insurance
and condemnation proceeds, extraordinary gains or losses unrelated to the
operations of the Facilities and any and all pass through amounts for which
Manager is merely acting as the collection agent.
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a. PRORATION OF FEE. If the services of Manager commence or
terminate other than on the first day of the month, the revenues upon which the
fee is calculated shall be prorated in proportion to the number of days for
which services are actually rendered.
b. PAYMENT OF FEE. The Management Fee provided for herein shall be
disbursed by Manager to itself out of the Depository Account in accordance with
the provisions of this Agreement.
11. ASSIGNMENT: Except as otherwise provided herein, this Agreement shall
not be assigned by either party without the prior written consent of the other
party, provided that, subject to the limitations of the applicable state laws
with respect to the licensure of the Facilities, Tenant may assign this
Agreement to a subsidiary or parent corporation without the consent of, but upon
written notice to, Manager; and provided, further, that Tenant may assign this
Agreement to an entity which is owned or controlled by, or under common control
with, Tenant in connection with the financing of the Facilities or for any other
reason deemed necessary or appropriate by Tenant without the consent of, but
upon written notice to, Manager. Any assignment of this Agreement by Manager in
violation of the terms of this Section 11 shall be null and void and of no force
or effect and shall result in the automatic termination of this Agreement
effective upon the purported effective date of such assignment; provided,
however, that SCMG may add designated affiliates of SCMG as parties to this
Agreement upon the written consent of Tenant, not to be unreasonably withheld,
so long as SCMG remains primarily liable for all of Manager's obligations
hereunder.
12. NOTICES: All notices required or permitted hereunder shall be given
in writing by hand delivery, by registered or certified mail, postage prepaid,
by overnight delivery or by facsimile transmission (with receipt confirmed with
the recipient). Notice shall be delivered or mailed to the parties at the
following addresses or at such other places as either party shall designate in
writing. All notices shall be deemed duly given when delivery is received or
refused by party.
To Manager: Senior Care Management Group, LLC
00 Xxxxx Xxxxxx Xxxxxx, Xxxxx 000
Xxxxxxxxxx, XX 00000
Phone: (000) 000-0000
Fax: (000) 000-0000
Attn: Xxxx X. Xxxxxxx, Esq.
To Tenant: LTC Healthcare, Inc.
000 Xxxxxxxxx Xxxxx, Xxxxx 0000
Xxxxxx, XX 00000
Phone: (000) 000-0000
Fax: (000) 000-0000
Attn: Xxxx X. Xxxxxx, Esq.
15
13. RELATIONSHIP OF THE PARTIES: The relationship of the parties shall be
that of principal and independent contractor and all acts performed by Manager
during the term hereof as Manager of the Facilities shall be deemed to be
performed in its capacity as an independent contractor. Nothing contained in
this Agreement is intended to or shall be construed to give rise to or create a
partnership or joint venture or lease between Tenant, its successors and assigns
on the one hand, and Manager, its successors and assigns on the other hand.
14. INDEMNIFICATION: Manager shall indemnify, defend and hold harmless
Tenant from any loss incurred by or damage to Tenant where such loss or damage
results from the negligence or willful misconduct of Manager in performing its
obligations under this Agreement or from a breach of this Agreement by Manager.
Tenant shall indemnify, defend and hold Manager harmless from any loss incurred
by or damage to Manager where such loss or damage results from the negligence or
willful misconduct of Tenant in performing its obligations under the Agreement
or from a breach of this Agreement by Tenant. The rights and obligations of the
parties under this Section 14 shall survive the expiration of the term or other
termination of this Agreement.
15. WAIVER OF SUBROGATION: Manager and Tenant each hereby waive any rights
of recovery against the other, or against the officers, employees, agents and
representatives of the other, for loss or damages to such waiving party's
property or the property of others under its control, where and to the extent
that such loss or damage is insured against under any insurance policy in force
at the time of such loss or damage. Upon obtaining the policies of insurance
required hereunder, Manager and Tenant shall give notice to the insurance
carriers that the foregoing mutual waiver of subrogation is contained in this
Agreement.
16. PATIENT RECORDS: Manager and Tenant shall preserve the confidentiality
of the records of all patients of the Facilities as required by all applicable
federal and state statutes, regulations, and rules of accrediting organizations
for skilled nursing or assisted living facilities, and use the information in
such records solely for the limited purposes necessary to perform their
respective obligations hereunder.
17. ENTIRE AGREEMENT: This Agreement contains the entire agreement
between the parties relating to the operation of the Facilities and shall be
binding upon and inure to the benefit of their successors and assigns. This
Agreement may not be modified or amended except by written instrument signed by
both of the parties hereto.
18. CAPTIONS: The captions used herein are for convenience of reference
only and shall not be construed in any manner to limit or modify any of the
terms hereof.
19. ATTORNEY'S FEES: In the event either party brings an action to
enforce this Agreement, the prevailing party in such action shall be entitled to
recover from the other all costs incurred in connection therewith, including
reasonable attorney's fees.
16
20. SEVERABILITY: In the event one or more of the provisions contained in
this Agreement is deemed to be invalid, illegal or unenforceable in any respect
under applicable law, the validity, legality and enforceability of the remaining
provisions hereof shall not in any way be impaired thereby.
21. CUMULATIVE; NO WAIVER: No right or remedy herein conferred upon or
reserved to either of the parties hereto is intended to be exclusive of any
other right or remedy, and each and every right and remedy shall be cumulative
and in addition to any other right or remedy given hereunder, or now or
hereafter legally existing upon the occurrence of an Event of Default hereunder.
The failure of either party hereto to insist at any time upon the strict
observance or performance of any of the provisions of this Agreement or to
exercise any right or remedy as provided in this Agreement shall not impair any
such right or remedy or be construed as a waiver or relinquishment thereof with
respect to subsequent defaults. Every right and remedy given by this Agreement
to the parties hereof may be exercised from time to time and as often as may be
deemed expedient by the parties thereto, as the case may be.
22. GOVERNING LAW; VENUE: This Agreement shall be construed and
enforced in accordance with, and the performance of its terms shall be governed
by, the laws of the State of Delaware, without giving effect to conflict of laws
principles. Any legal proceeding with respect to this Agreement shall be
conducted in the state or federal courts located in California.
23. AUTHORIZATION FOR AGREEMENT: The execution and performance of this
Agreement by Tenant and Manager have been duly authorized by all necessary laws,
resolutions or corporate action, and this Agreement constitutes the valid and
enforceable obligations of Tenant and Manager in accordance with its terms.
24. COUNTERPARTS: This Agreement may be executed in any number of
counterparts, each of which shall be an original, and each such counterpart
shall together constitute but one and the same Agreement.
25. CONDITIONS PRECEDENT: It shall be express conditions precedent to
Tenant's obligations hereunder with respect to each Facility that LTC acquires
said Facility and leases said Facility to Tenant and that Tenant is issued a
License to operate each such Facility.
[SIGNATURES ON FOLLOWING PAGE]
17
IN WITNESS WHEREOF, the parties have hereto caused this Agreement
to be duly executed, as of the day an year first above written.
MANAGER:
SENIOR CARE MANAGEMENT GROUP, LLC,
a Delaware limited liability company
By: /s/ Xxxxxx X. Xxxxxx as attorney in fact
Xxxxx X. Xxxxxx, as Trustee of
The Xxxxxxxx Xxx Xxxxxx Revocable Trust,
Its Managing Member
TENANT:
LTC HEALTHCARE, INC.,
a Nevada corporation
By: /s/ Xxxx X. Xxxxxx
Its: Senior Vice President and General Counsel
LTC HEALTHCARE OF VENICE, INC.,
a Nevada corporation
By: /s/ Xxxx X. Xxxxxx
Its: Secretary
LTC HEALTHCARE OF CRAWFORDVILLE, INC.,
a Nevada corporation
By: /s/ Xxxx X. Xxxxxx
Its: Secretary
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LTC HEALTHCARE OF OLATHE, INC.,
a Nevada corporation
By: /s/ Xxxx X. Xxxxxx
Its: Secretary
LTC HEALTHCARE OF TIPTONVILLE, INC.,
a Nevada corporation
By: /s/ Xxxx X. Xxxxxx
Its: Secretary
LTC HEALTHCARE OF XXXXXXX, INC.,
a Nevada corporation
By: /s/ Xxxx X. Xxxxxx
Its: Secretary
LTC HEALTHCARE OF JONESBORO, INC.,
a Nevada corporation
By: /s/ Xxxx X. Xxxxxx
Its: Secretary
LTC HEALTHCARE OF RICHMOND, INC.,
a Nevada corporation
By: /s/ Xxxx X. Xxxxxx
Its: Secretary
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LTC HEALTHCARE OF TAPPAHANNOCK, INC.,
a Nevada corporation
By: /s/ Xxxx X. Xxxxxx
Its: Secretary
LTC HEALTHCARE OF FAYETTEVILLE, INC.,
a Nevada corporation
By: /s/ Xxxx X. Xxxxxx
Its: Secretary
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EXHIBIT "A"
FACILITIES TO BE MANAGED BY LENOX HEALTHCARE, INC.
-----------------------------------------------------------------------------------------------
TENANT MANAGER FACILITY NAME LOCATION FACILITY #
TYPE BEDS
-----------------------------------------------------------------------------------------------
LTC Lenox Venice Nursing & Venice, FL SNF 120
Healthcare of Healthcare, Inc. Rehabilitation Center
Venice, Inc.
-----------------------------------------------------------------------------------------------
LTC Lenox Wakulla Manor Crawfordville, SNF 120
Healthcare of Healthcare, Inc. FL
Crawfordville,
Inc.
-----------------------------------------------------------------------------------------------
LTC Lenox Great Plains Nursing & Olathe, KS SNF 104
Healthcare of Healthcare, Inc. Rehabilitation Center
Olathe, Inc. of Olathe
-----------------------------------------------------------------------------------------------
LTC Lenox Tiptonville Nursing & Tiptonville, SNF 120
Healthcare of Healthcare, Inc. Rehabilitation Center TN
Tiptonville,
Inc.
-----------------------------------------------------------------------------------------------
LTC Xxxxx Xxxxxxx Nursing & Roberta, GA SNF 100
Healthcare of Healthcare, Inc. Rehabilitation Center
Xxxxxxx, Inc.
-----------------------------------------------------------------------------------------------
LTC Lenox Jonesboro Nursing & Jonesboro, GA SNF 116
Healthcare of Healthcare, Inc. Rehabilitation Center
Jonesboro, Inc.
-----------------------------------------------------------------------------------------------
LTC Lenox West Hampton Health & Richmond, VA SNF 195
Healthcare of Healthcare, Inc. Rehabilitation Center
Richmond, Inc.
-----------------------------------------------------------------------------------------------
LTC Lenox Tappahannock Health & Tappahannock, SNF 128
Healthcare of Healthcare, Inc. Rehabilitation Center VA
Tappahannock,
Inc.
-----------------------------------------------------------------------------------------------
LTC Lenox Fayetteville Nursing & Fayetteville, SNF 100
Healthcare of Healthcare, Inc. Rehabilitation Center NC
Fayetteville,
Inc.
-----------------------------------------------------------------------------------------------
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