MANAGEMENT AGREEMENT
AGREEMENT dated as of October 31, 1995, by and among TNS
NURSING HOMES, INC., a Delaware corporation (the "Manager") and
CONTINENTAL NORWOOD HOLDINGS, INC., a New Jersey corporation (the "Owner").
BACKGROUND
The Owner is the owner of a certain long-term care facility located in the
Borough of Xxxxxxx, Bergen County, New Jersey known as HERITAGE AT NORWOOD (the
"Facility").
desire that the Manager assume full operation and management of the Facility
pursuant to the terms and conditions set forth in this Agreement.
NOW, THEREFORE, in consideration of the premises and the mutual covenants
herein contained and intending to be legally bound hereby, the parties hereto
agree as follows:
1. Appointment.
The Owner hereby retains the Manager and the Manager accepts such retention
and agrees to make available services in accordance with the terms of this
Agreement.
2. Authority, Duties and Responsibilities.
(a) The Owner retains ultimate responsibility for the Facility.
(b) The Manager shall be responsible for the management and the day-to-day
operations of the Facility. responsibilities include the health care component
nursing, dietary, resident therapies) maintenance of building and grounds,
housekeeping, financial, marketing, purchasing and other services as set forth
in this Agreement.
(c) As specified in this Agreement, the Owner hereby authorizes, empowers
and directs the Manager, in conjunction with and on behalf of the Owner, to
perform and undertake all reasonable acts and duties which the Manager, in its
discretion, deems necessary and desirable to ensure the efficient and proper
operation of the Facility including, but not limited to, the acts and duties
expressed and contemplated by this Agreement.
(d) The Manager shall report only to a designee selected by the Board of
Directors of the Owner in regard to all matters pursuant to this Agreement and
shall not be required to report to any other person or entity.
(e) The Manager is acting under this Agreement as an independent contractor
and nothing herein contained, nor any acts by the Manager or the Owner, nor any
other circumstances shall be construed to establish the Manager as an agent of
the Owner, except to the extent specified by this Agreement.
2.1 Maintenance of Standards.
2.1-1 Standards of Health Care. The Manager shall assure that:
(a) the Facility complies with all accreditation standards and
requirements of the applicable State Department of Health requirements and all
applicable federal, state and local laws, rules and regulations, quality and
safety standards and all accredited standard requirements regarding compliance
with all of the foregoing laws shall be met; and
(b) all licenses, permits and certificates required for the operation
of the Facility are maintained in the name of and at the expense of the Facility
and Owner is the licensee on all such licenses.
2.2 Fiscal Matters.
2.2-1 Preparation of the Annual Budgets, Employee Compensation. The Manager
shall prepare annual operating and capital plans ("Plans") for the Facility
which shall set forth material operating objectives, anticipated revenues
(including proposed changes for services to the Facility's patients), expenses,
cash flow and capital expenditures. Such Plans will be submitted to the Owner at
least thirty (30) days prior to the commencement of each year. Such Plans shall
be in conformity with all of the terms and provisions of a certain Loan
Agreement of even date herewith between Owner and NOMURA ASSET CAPITAL
CORPORATION (hereinafter "NOMURA" or "Lender") (hereinafter "Loan Agreement"),
the terms and provisions of which are incorporated herein by reference.
2.2-2 Accounting Records. The Manager shall establish, supervise, direct
and maintain the operation of a suitable accounting system for the Facility
within the Facility and at such other locations as the Manager shall deem
appropriate and at the Facility's expense in a manner conforming to the
directives of the Owner, all applicable third party payors and any lender of
funds to the Facility. In addition to the foregoing, Manager shall maintain all
of such books and records and shall provide all financial reporting in
conformity with the Loan Agreement.
2.2-3 Deposit and Disbursement of Funds: Collection of Accounts. The
Manager, in the name of and as agent for the Facility, shall deposit in
Facility's bank account all receipts arising from the operation of the Facility
received by the Manager on behalf of the Facility, and shall ensure that
disbursements from such accounts are made on behalf of the Facility in such
amounts and at such times as may be required to conduct the business of the
Facility. Persons shall be selected from time to time by mutual agreement of the
Owner and the Manager to sign checks drawn on such bank accounts due the
Facility and shall initiate in the name of and at the expense of the Facility,
any and all legal actions or proceedings necessary to collect charges or other
income due the Facility. In addition to the foregoing, Manager shall conform to
all of the obligations of Owner under Section 2.12 of the Loan Agreement, and
the terms and provisions therein set forth are hereby incorporated by reference
as if set forth at length herein.
2.2-4 Legal Actions. The Manager shall initiate in the name of and at the
expense of the Facility, any and all legal actions or proceedings necessary, to
enforce any agreements between the Facility and third parties or otherwise, and
to seek appropriate relief and/or collect damages for breach or default by any
such third party.
2.2-5 Insurance. The Manager shall review periodically with an insurance
consultant selected by the Manager the insurance program of the Facility and
make such changes in such insurance program as required by the business of the
Facility. If the Owner uses Manager's insurance program, it will reimburse
Manager for the cost of its participation in said program. All insurance shall
be placed with such companies, on such conditions, in such amounts, and with
such beneficial interest appearing thereon as shall be acceptable to the Owner
and the Manager. The Manager shall investigate and furnish the Owner with full
reports as to all accidents, claims, and potential claims for damage relating to
the Facility and shall cooperate with the insurers in connection therewith. In
addition to the foregoing, Manager shall comply with all of the insurance
provisions set forth in the Loan Agreement and the Mortgage (as defined in the
Loan Agreement), which provisions shall be deemed to control in the event of a
conflict between this document and the Loan Agreement.
2.2-6 Rates. The parties recognize the importance of maintaining room and
other rates to pay obligations while containing health care costs. The Manager
will institute appropriate rate changes which take into account the financial
obligations of the facility while providing quality health care at a reasonable
cost. Notwithstanding the foregoing, during the period that the loan is
outstanding, Lender's written consent, as set forth in the Loan Agreement, must
be obtained prior to decreasing any rate.
2.3 Contracts and Purchases.
2.3-1 Operating Supplies; Prices. The Manager shall, in the name of and for
the account of the Facility, cause the purchases of the food, beverages,
equipment, operating supplies and other material and supplies which may be
needed for the maintenance
3. Compensation of Manager; Expenses.
3.1 As Manager's compensation for the services to be provided hereunder, Manager
shall receive the following compensation: A fee equal to five percent 5% of the
Facility's gross revenues, calculated and payable quarterly based upon the prior
quarter, such payment to be made by the thirtieth day following the end of such
quarter. If any part of the fee required to be paid under this Section remains
unpaid for a period of 30 days, it shall accrue interest until paid at the rate
of one percent 1% over the prime rate published from time to time in the Wall
Street Journal.
3.2 In addition to the compensation and subject to the limitations set forth
herein, the Manager shall be reimbursed for all reasonable incremental and
direct expenses incurred by the Manager in connection with the performance of
its service hereunder, including, without limitation, legal expenses, auditing
fees, extraordinary travel expenses, expenses for consultants, experts and
professionals and the like. Such expenses shall be reimbursed within thirty (30)
days after submission of the Manager's written request for reimbursement
accompanied by reasonable documentation.
4. Term. The term of this Agreement shall be one hundred eighty one (181) months
which shall commence as of the date hereof, and shall be automatically renewed
for successive five (5) year terms unless written notice not to renew is
delivered by either party six (6) months prior to the end of any term. The
foregoing provisions shall be subject to the rules and regulations of the
Department of Health.
5. Termination.
5.1 Termination by Owner. The Owner may terminate this Agreement at any time
upon delivery of written notice ("Termination Notice") if any of the following
shall occur:
(a) The Manager shall default in the performance of any material term,
condition or representation of this Agreement and such default, shall continue
for a period of thirty (30) days after written notice to the Manager stating the
specific default. If the default by the Manager is a monetary default, there
shall be no notice required and no grace period.
(b) The Manager shall apply for or consent to the appointment of a
receiver, trustee or liquidator of the Manager or of all or a substantial part
of its assets, file a voluntary petition in bankruptcy, or admit in writing its
inability to pay its debts as they become due, make a general assignment for the
benefit of creditors, file a petition or an answer seeking reorganization or
arrangement with creditors or to take advantage of any insolvency laws; or
(c) Proceedings in bankruptcy, or for the reorganization of the Manager, or
for the readjustment of any of its debts under the Bankruptcy Code, as amended,
or any part thereof, or under any other laws, whether state or federal for the
relief of debtors, now or hereafter existing, shall be commenced against the
Manager, or an appointment of a receiver or trustee for the Manager or any
proceedings shall be instituted for the dissolution or liquidation of the
Manager or of all or a substantial part of its assets, provided, however, that
the foregoing actions are not withdrawn or dismissed within ninety (90) days; or
(d) If the Manager performs any unethical or illegal actions with respect
to its management of the Facility; or
(e) Any federal, state, or local law, rule or regulation is enacted or
adopted which would prohibit the relationship established between the parties
hereunder or any material provision herein is determined by a court of competent
jurisdiction to be unenforceable.
The termination will be effective thirty (30) days after the Termination
Notice is given or such longer time as may be required by the New Jersey
Department of Health Regulation.
5.2 Conditions to Termination by Owner.
(a) In the event that the Owner elects to terminate this Agreement pursuant
to paragraph 5.1, the following conditions must be satisfied:
(1) All sums owing by the Owner to the Manager shall have been
repaid in full prior to the termination dated.
(2) Nothing in this Agreement shall be interpreted to require
Manager to abandon the Facility and its residents until a suitable and approved
successor Manager is retained.
5.3 Termination by NOMURA. This Agreement may be terminated by NOMURA or the
Owner upon thirty (30) days prior written notice to the Manager:
(a) Upon the occurrence and continuance of an Event of Default.
(b) If the Manager commits any act which would permit termination by the
owner under this Management Agreement or,
(c) In the event that the Adjusted Net Operating Income for all Facilities,
as defined in the Loan Agreement, calculated (as of the end of any Interest
Accrual Period), computed on the basis of the prior twelve (12) months, is less
than 80% of the Base NOI for all Facilities.
5.4 Termination by the Manager. Manager may terminate this Agreement at any time
upon delivery of written notice ("Termination Notice") if any of the following
shall occur:
(a) The Owner shall default in the performance of any material term,
condition or representation of this Agreement and such default shall continue
for a period of forty-five (45) days after written notice to the Owner from the
Manager stating the specific default; or
(b) The Owner shall apply for or consent to the appointment of a receiver,
trustee or liquidator of the Owner or of all or a substantial part of its
assets, file a voluntary petition in bankruptcy, or admit in writing its
inability to pay its debt as they become due, make a general assignment for the
benefit of creditors, file a petition or an answer seeking reorganization or
arrangement with creditors or to take advantage of any insolvency law; or
(c) Proceedings in bankruptcy, or for the reorganization of the Owner, or
for the readjustment of any of its debts under the Bankruptcy Code, as amended,
or any part thereof, or under any other laws, whether state or federal for the
relief of debtors, now or hereafter existing, shall be commenced against the
Owner, or any appointment of a receiver or trustee for the Owner or any
proceedings shall be instituted for the dissolution or liquidation of the Owner
or of all or a substantial part of its assets; provided, however, that the
foregoing actions are not withdrawn or dismissed within ninety (90) days; or
(d) Any federal, state, or local law, rule or regulation is enacted or
adopted which would prohibit the relationship established between the parties
hereunder or any material provision herein is determined by a court of competent
jurisdiction to be unenforceable.
The termination will be effective ninety (90) days after the Termination
Notice is given. Manager shall be entitled to all compensation through the
effective date of such Termination.
5.5 Conditions to Termination. Upon termination of this Agreement, the Owner and
Manager shall account to each other with respect to all matters outstanding as
of the date of termination. All property of the Owner in possession of the
Manager, including without limitation, books and records shall be delivered to
the Owner upon termination of this Agreement. The Owner and Manager shall each
have the right to set-off amounts owed by the other against amounts owed to the
other. The Manager does hereby agree that any setoff rights that the Manager has
against the Owner are subordinate to NOMURA's pursuant to the Managers Consent
and Subordination Agreement.
6. Protection of Facility. Notwithstanding any provision herein to the contrary,
the Owner shall have the right to take reasonable measures to protect the
Facility and itself from any damage that might occur as a result of the
Manager's failure to comply with the terms and conditions of this Agreement.
7. Indemnification. The Owner hereby indemnifies and holds harmless the Manager
from any and all loss, liability or expense (including reasonable attorneys'
fees) relating to or arising out of any claims, injuries or damages to persons
or property in connection with the operation of the Facility not caused by the
Manager's gross negligence, willful acts or a failure of Manager to discharge
its obligations hereunder. The Manager shall indemnify and hold harmless the
Owner from any and all loss, liability or expenses (including reasonable
attorneys' fees) caused by Manager's breach of any terms or conditions under
this Agreement or by Manager's gross negligence or willful failure in the
performance of its duties hereunder. Notwithstanding any other provision of this
Agreement, the obligations of the Owner and the Manager under this section shall
survive termination of the Agreement. Any indemnification by Owner to the
Manager is fully subordinate to all obligations of the Owner to Nomura under the
loan documents.
8. Representations and Warranties of the Owner. The Owner represents and
warrants to the Manager as follows:
8.1 The Owner is a duly formed and validly existing corporation under the laws
of New Jersey. The Owner does not engage in any business activity other than the
ownership and operation of the Facility.
8.2 All corporate actions necessary to approve this Agreement have been taken by
the Owner, and this Agreement constitutes a valid and binding obligation of the
Owner binding in accordance with its terms.
8.3 The Owner will cause to be delivered to the Manager prior to the effective
date of this Agreement such evidence as shall be deemed necessary or appropriate
by Manager's counsel to evidence ownership of the Facility, the due
organization, formation and valid existence of the Owner and the due
authorization and delivery of this Agreement including, without limitation,
certified copies of articles of incorporation and amendments and certified
copies of corporate resolutions and an incumbency certificate.
8.4 The Owner will not incur any additional debt, accelerate the payment of
principal on any debt or make any capital expenditure with respect to the
Facility without the consent of the Manager which shall not be unreasonably
withheld.
9. Representations and Warranties of the Manager. The Manager represents and
warrants to the Owner as follows:
9.1 Organization. Manager (i) is a duly organized and validly existing
corporation in good standing under the laws of the State of its formation, (ii)
has the requisite corporate power and authority to carry on its business as now
being conducted, and (iii) has the requisite corporate power to execute and
deliver, and perform its obligations under the Loan Documents.
9.2 Authorization. The execution and delivery by Manager of the Loan Documents,
Manager's performance of its obligations thereunder and the creation of the
security interests and Liens provided for in the Loan Documents (i) have been
duly authorized by all requisite corporate action on the part of Manager, (ii)
will not violate any provision of any Legal Requirements, any order of any court
or other Governmental Authority, the articles of incorporation or by-laws of
Manager or any indenture or material agreement or other instrument to which
Manager is a party or by which Manager is bound, (iii) will not be in conflict
with, result in a breach of, or constitute (with due notice or lapse of time or
both) a default under, or result in the creation or imposition of any Lien of
any nature whatsoever upon any of the property or assets of Manager pursuant to,
any such indenture or material agreement or instrument and (iv) have been duly
executed and delivered by Manager. Other than those obtained or filed on or
prior to the Closing Date, Manager is not required to obtain any consent,
approval or authorization from, or to file any declaration or statement with,
any Governmental Authority or other agency in connection with or as a condition
to the execution, delivery or performance of the Loan Documents.
9.3 Single-Purpose Entity.
(i) Manager at all times since its formation has been, and will continue to
be, a duly formed corporation. and existing
(ii) Manager at all times since its formation has complied, and will
continue to comply, with the provisions of its articles of incorporation, and
the laws of the formation relating to corporations.
(iii) All customary formalities regarding the State of its corporate
existence of Manager have been observed at all times since its formation and
will continue to be observed.
(iv) Manager has been at all times since its formation and will continue to
be adequately capitalized in light of the nature of its business.
9.4 Litigation. There are no actions, suits or proceedings at law or in equity
by or before any Governmental Authority or other agency now pending and served
or, to the knowledge of Manager, threatened against Manager or the Facility,
which actions, suits or proceedings, if determined against Manager or the
Facility, might result in a Material Adverse Effect.
9.5 Agreements. Manager is not a party to any agreement or instrument or subject
to any restriction which is reasonably likely to have a Material Adverse Effect.
Manager is not in default in any material respect in the performance, observance
or fulfillment of any of the obligations, covenants or conditions contained in
any agreement or instrument to which it is a party or by which Manager or the
Facility is bound.
9.6 No Bankruptcy Filing. Manager is not contemplating either the filing of a
petition by it under any state or federal bankruptcy or insolvency laws or the
liquidation of all or a major portion of Manager's assets or property, and
Manager has no knowledge of any Person contemplating the filing of any such
petition against it.
9.7 Full and Accurate Disclosure. No statement of fact made by or on behalf of
Manager in the Loan Documents or in any other document or certificate delivered
to Lender contains any untrue statement of a material fact or omits to state any
material fact necessary to make statements contained herein or therein not
misleading. There is no fact presently known to Manager which has not been
disclosed to Lender which adversely affects, nor as far as Manager can foresee,
might adversely affect the business, operations or condition (financial or
otherwise) of Manager.
9.8 Compliance. Manager, the Facility and Manager's use thereof and operations
thereat comply in all material respects with all applicable Legal Requirements,
including without limitation, building and zoning ordinances and codes. Manager
is not in default or violation of any order, writ, injunction, decree or demand
of any Governmental Authority, the violation of which is reasonably likely to
have a Material Adverse Effect.
9.9 Other Debt and Obligations. Manager has no material financial obligation
under any indenture, mortgage, deed of trust, loan agreement or other agreement
or instrument to which Manager is a party incurred in the ordinary course of
business relating to the ownership and operation of the Facility or by which
Manager or the Facility is bound, other than unsecured trade payables incurred
in the ordinary course of business relating to the ownership and operation of
the Facility which are paid within sixty (60) days of the date incurred, except
for outstanding trade payables existing as of the Closing Date which do not
require payment within sixty (60) days, and other than obligations under the
Related Mortgage and the other Loan Documents. Manager has not borrowed or
received other debt financing that has not been heretofore repaid in full and
Manager has no known material contingent liabilities.
9.10 ERISA. Each Plan, and, to the knowledge of Manager, each Multiemployer
Plan, is in compliance in all material respects with, and has been administered
in all material respects in compliance with, its terms and the applicable
provisions of ERISA, the Code and any other federal or state law, and no event
or condition has occurred and is continuing as to which Manager would be under
an obligation to furnish a report to Lender.
9.11 Solvency. Manager (i) has not entered into this Loan Agreement or any Loan
Document with the actual intent to hinder, delay, or defraud any creditor, and
(ii) has received reasonably equivalent value in exchange for its obligations
under the Loan Documents. Giving effect to the transactions contemplated hereby,
the fair saleable value of Manager's assets exceeds and will, immediately
following the execution and delivery of this Agreement, exceed Manager's total
liabilities, including, without limitation, subordinated, unliquidated or
disputed liabilities or Contingent Obligations. The fair saleable value of
Manager's assets is and will, immediately following the execution and delivery
of this Agreement, be greater than Manager's probable liabilities, including the
maximum amount of its Contingent Obligations or its debts as such debts become
absolute and matured. Manager's assets do not and, immediately following the
execution and delivery of this Agreement, will not, constitute unreasonably
small capital to carry out its business as conducted or as proposed to be
conducted. Manager does not intend to, and does not believe that it will, incur
debts and liabilities (including, without limitation, Contingent Obligations and
other commitments) beyond its ability to pay such debts as they mature (taking
into account the timing and amounts to be payable on or in respect of
obligations of Manager).
9.12 Not Foreign Person. Manager is not a "foreign person" within the meaning of
Section 1445(f)(3) of the Code.
9.13 Enforceability. The Loan Documents are the legal, valid and binding
obligation of Manager, enforceable against Manager in accordance with their
terms, subject to bankruptcy, insolvency and other limitations on creditors'
rights generally and to equitable principles and the other matters described in
the opinions delivered pursuant to Section 3.1 of the Loan Agreement.
9.14 Investment Company Act: Public Utility Holding Company Act. Manager is not
(i) an "investment company" or a company "controlled" by an "investment
company," within the meaning of the Investment Company Act of 1940, as amended,
(ii) a "holding company" or a "subsidiary company" of a "holding company" or an
"affiliate" of either a "holding company" or a "subsidiary company" within the
meaning of the Public Utility Holding Company Act of 1935, as amended, or (iii)
subject to any other federal or state law or regulation which purports to
restrict or regulate its ability to borrow money.
9.15 No Defaults. No Default or Event of Default exists under or with respect to
any Loan Document.
9.16 Labor Matters. Manager is not a party to any collective bargaining
agreements.
9.17 Financial Information. All historical financial data concerning Manager and
the Facility that has been delivered by Manager to Lender is true, complete and
correct in all material respects. Since the delivery of such data, except as
otherwise disclosed in writing to Lender, there has been no material adverse
change in the financial position of Manager, the Facility, or in the results of
operations of Manager. Manager has not incurred any obligation or liability,
contingent or otherwise, not reflected in such financial data which might
materially adversely affect its business operations or the Facility.
9.18 Other Debt. Except for unsecured trade payables incurred in the ordinary
course of business relating to the operation of the Facility which are paid
within sixty (60) days of the date incurred, except for outstanding trade
payables existing as of the Closing Date which do not require payment within
sixty (60) days. Manager has not borrowed or received other debt financing
whether unsecured or secured by the Facility or any part thereof.
9.19 Enforceability. The Loan Documents executed by Manager in connection with
the Loan, including, without limitation, any Related Collateral Security
Instrument, contain the legal, valid and binding obligations of Manager,
enforceable against Manager in accordance with their terms, subject to
bankruptcy, insolvency and other limitations on creditors' rights generally and
to equitable principles and the other matters described in the opinions
delivered pursuant to Section 3.1(a)(B) of the Loan Agreement. Manager has not
asserted any right of rescission, setoff, counterclaim or defense with respect
thereto.
9.20 Use of Facilities. The Facility is used exclusively as a nursing home and
uses ancillary thereto.
9.21 Certificate of Occupancy. Manager has obtained (in its own name, or in
Manager's name), all Permits necessary to use and operate the Facility for the
use described in Section 4.1(d)(AB) of the Loan Agreement. The use being made of
the Facility is in conformity in all material respects with the certificate of
occupancy and/or Permits for such Facility and any other restrictions, covenants
or conditions affecting such Facility.
9.22 Nursing Home Representation.
(i) Compliance with Laws. Manager and the Facility comply with all
applicable federal, state and local laws, regulations, quality and safety
standards, accreditation standards and requirements of the applicable state
Department of Health (each a "DOH") and all other Governmental Authorities
including, without limitation, those relating to the quality and adequacy of
medical care, distribution of pharmaceuticals, rate setting, equipment,
personnel, operating policies, additions to facilities and services and fee
splitting.
(ii) Licenses. All governmental licenses, permits, regulatory agreements or
other approvals or agreements necessary or desirable for the use and operation
of the Facility as intended are held by the Manager and are in full force and
effect, including, without limitation a valid certificate of need ("CON") or
similaran issued by the DO for the certificate, license, or approval requisite
number of beds, and approved provider status in any approved provider payment
program (collectively, the "Licenses").
(iii) Ownership of Licenses. The Licenses, including without limitation,
the CON:
(a) may not be, and have not been, transferred to any location other
than the Facility;
(b) have not been pledged as collateral security for any other loan
or indebtedness; and
(c) are held free from restrictions or known conflicts which would
materially impair the use or operation of the Facility as intended, and are not
provisional, probationary or restricted in any way.
(iv) Medicare and Medicaid Compliance. The Facility is in compliance with
all requirements for participation in Medicare and Medicaid, including without
limitation, the Medicare and Medicaid Patient and Program Protection Act of
1987. Such Facility is in conformance in all material respects with all
insurance, reimbursement and cost reporting requirements, and has a current
provider agreement which is in full force and effect under Medicare and
Medicaid.
(v) Third Party Payors. There is no threatened or Pending revocation,
suspension, termination, probation, restriction, limitation, or non-renewal
affecting Manager or the Facility or any participation or provider agreement
with any third party (including Medicare, Medicaid, Blue Cross and/or Blue
Shield, and any other private commercial insurance managed care and employee
assistance program) (such programs, the "Third Party Payors' Programs") to which
Manager presently is subject. All Medicaid, Medicare, and private insurance cost
reports and financial reports submitted by Manager are and will be materially
accurate and complete and have not been and will not be misleading in any
material respects. No cost reports for the Facility remain "open" or unsettled,
except as otherwise disclosed.
(vi) Governmental Proceedings and Notices. Neither Manager nor the Facility
is currently the subject of any proceeding by any Governmental Authority, and no
notice of any violation has been received from a Governmental Authority that
would, directly or indirectly, or with the passage of time:
(a) have a Material Adverse Effect on Manager's ability to accept
and/or retain patients or result in the imposition of a fine, a sanction, a
lower rate certification or a lower reimbursement rate for services rendered to
eligible patients;
(b) modify, limit or annul or result in the transfer, suspension,
revocation or imposition of probationary use of Manager's Licenses; or
(c) affect Manager's continued participation in the Medicaid or
Medicare programs or any other of the Third Party Payors' Programs, or any
successor programs thereto, at current rate certifications.
(vii) Physical Plant Standards. The Facility and the use thereof complies
in all material respects with all applicable local, state and federal building
codes, fire codes, health care, nursing facility and other similar regulatory
requirements (the "Physical Plant Standards") and no waivers of Physical Plant
Standards exist at such Facility.
(viii) Past Violations. The Facility has not received a "Level A" (or
equivalent) violation, and no statement of charges or deficiencies has been made
or penalty enforcement action has been undertaken against such Facility or
against Manager or against any partner, member, officer, director or stockholder
of Manager by any Governmental Authority during the last three calendar years,
and there have been no violations over the past three years which have
threatened such Facility's or Manager's certification for participation in
Medicare or Medicaid or the other Third Party Payors' Programs.
(ix) Audits. There are no current, pending or outstanding Medicaid,
Medicare or Third Party Payors' Programs reimbursement audits or appeals pending
at the Facility, and there are no years that are subject to audits.
(x) Recoupment. There are no current or pending Medicaid or Medicare or
Third Party Payors' Programs recoupment efforts at the Facility. The Manager is
not a participant in any federal program whereby any Governmental Authority may
have the right to recover funds by reason of the advance of federal funds,
including, without limitation, those authorized under the HillBurton Act (42
U.S.C. 291, et seq.).
(xi) Pledges of Receivables. Manager has not pledged its receivables as
collateral security for any other loan or
in debt so a:
(xii) Patient Care Agreements. There are no patient or resident care
agreements with patients or residents or with any other persons which deviate in
any material adverse respect from the standard form customarily used at the
Facility.
(xiii) Patient Records. All patient or resident records at the Facility,
including patient or resident trust fund accounts, are true and correct in all
material respects.
(xiv) Management and Operating Agreements. Any existing Management
Agreement with respect to the Facility is in full force and effect and is not in
default by any party thereto. In the event any Management Agreement is
terminated or in the event of foreclosure or other acquisition of such Facility
by the Lender, neither the Manager, the Lender, nor any subsequent operator or
any subsequent purchaser must obtain a CON prior to applying for and receiving a
license to operate such Facility or prior to receiving Medicare or Medicaid
payments.
9.23 Conduct of Business. Manager does not conduct its siness "also known as,"
"doing business as`' or under any other name other than TNS Nursing Homes Inc.
9.24 Requirements; Insurance. Manager shall do or cause to be done all things
necessary to preserve, renew and keep in full force and effect its corporate
existence, rights, licenses, Permits and franchises necessary for the conduct of
its business and shall comply in all material respects with all Legal
Requirements and Insurance Requirements applicable to it and the Facility.
Manager shall notify Lender promptly of any written notice or order that the
Manager receives from any Governmental Authority with respect to the Manager's
compliance with such Legal Requirements relating to the Facility and promptly
take any and all actions necessary to bring its operations at the Facility into
compliance with such Legal Requirements (and shall fully comply with the
requirements of such Legal Requirements that at any time are applicable to its
operations at such Facility) provided, that the Manager at its expense may,
after prior notice to the Lender, contest by appropriate legal, administrative
or other proceedings conducted in good faith and with due diligence, the
validity or application, in whole or in part, of any such Legal Requirements as
long as (i) neither the applicable Collateral nor any part thereof or any
interest therein, will be sold, forfeited or lost if the Manager pays the amount
or satisfies the condition being contested, and the Manager would have the
opportunity to do so, in the event of the Manager's failure to prevail in the
contest, (ii) Lender would not, by virtue of such permitted contest, be exposed
to any risk of any civil liability for which the Manager has not furnished
additional security as provided in clause (iii) below, or to any risk of
criminal liability, and neither the applicable Collateral nor any interest
therein would be subject to the imposition of any Lien provided in clause (iii)
below as a result of the failure to comply with such Legal Requirement or of
such proceeding and (iii) the Manager shall have furnished to the Lender
additional security in respect of the claim being contested or the loss or
damage that may result from the Manager's failure to prevail in such contest in
such amount as may be reasonably requested by the Lender but in no event less
than 125% of the amount of such claim. Manager shall at all times maintain,
preserve and protect all franchises and trade names and preserve all the
remainder of its property necessary for the continued conduct of its business
and keep the Facility in good repair, working order and condition, except for
reasonable wear and use, and from time to time make, or cause to be made, all
necessary repairs, renewals, replacements, betterments and improvements thereto,
all as more fully provided in the Related Mortgage. Manager shall keep the
Facility insured at all times, by financially sound and reputable insurers, to
such extent and against such risks, and maintain liability and such other
insurance, as is more fully provided herein and in the Related Mortgage.
9.25 Impositions and Other Claims. Manager shall cause to be paid and discharged
all Impositions, as well as all lawful claims for labor, materials and supplies
or otherwise, which could become a Lien, all as more fully provided in, and
subject to any rights to contest contained in, the Related Mortgage.
9.26 Litigation. Manager shall give prompt written notice to Lender of any
litigation or governmental proceedings pending or threatened against Manager
which is reasonably likely to have a Material Adverse Effect.
9.27 Copies of Notices. Manager shall immediately transmit to Lender copies of
any citations, orders, notices or other written communications received from any
Person or any Governmental Authority and any notices, reports or other written
communications submitted to any Governmental Authority with respect to the
matters described in Section 5.1(F) of the Loan Agreement.
9.28 Access to Facilities. Manager shall permit agents, representatives and
employees of Lender to inspect the Facility or any part thereof at such
reasonable times as may be requested by Lender upon advance notice, subject,
however, to the rights of the tenants, occupants and guests of such Facility.
9.29 Notice of Default. Manager shall promptly advise Lender of any material
adverse change in Manager's condition, financial or otherwise, or of the
occurrence of any Event of Default, or of the occurrence of any Default.
9.30 Cooperate in Legal Proceedings. Except with respect to any claim, Manager
shall cooperate fully with Lender with respect to any proceedings before any
Governmental Authority which may in any way affect the rights of Lender
hereunder or any rights obtained by Lender under any of the Loan Documents and,
in connection therewith, not prohibit Lender, at its election, from
participating in any such proceedings.
9.31 Insurance Benefits. Manager shall cooperate with Lender in obtaining for
Lender the benefits of any Insurance Proceeds lawfully or equitably payable to
Lender in connection with the Facility, and Lender shall be reimbursed for any
expenses incurred in connection therewith (including attorneys' fees and
disbursements and the payment by Manager of the expense of an Appraisal on
behalf of Lender in case of a fire or other casualty affecting such Facility or
any part thereof, but excluding internal overhead, administrative and similar
costs of Lender) out of such Insurance Proceeds, all as more specifically
provided in the Related Mortgage.
9.32 Conduct of Business. Manager shall cause the operation of the Facility to
be conducted at all times in a manner consistent with at least the level of
operation of the Facility as of the Closing Date, including, without limitation,
the following: (i) to maintain or cause to be maintained the standard of
operations at the Facility at all times at a level necessary to insure a level
of quality for such nursing home Facility consistent with similar nursing home
facilities in the same competitive market;
(ii) to operate or cause to be operated the Facility in a prudent manner in
compliance in all material respects with applicable Legal Requirements and
Insurance Requirements relating thereto and cause all licenses, Permits, and any
other agreements necessary for the continued use and operation of such Facility
to remain in effect; and
(iii) to maintain or cause to be maintained sufficient Inventory and
Equipment of types and quantities at the Facility to enable Manager to operate
the Facility.
9.33 Nursing Home Covenants. Manager shall:
(1) operate the in full compliance with the laws and requirements referred
to in Section 4.1(d)(AG)(i) of the Loan Agreement;
(2) operate the Facility or cause the Facility to be operated in a manner
such that the Licenses shall remain in full force and effect; and
(3) comply with all requirements for participation in Medicare and
Medicaid, and shall keep in full force and effect a current provider agreement
under Medicare and Medicaid.
9.34 Trade Indebtedness. Manager will pay its trade payables within sixty (60)
days of the date incurred, except for outstanding trade payables existing as of
the Closing Date which do not require payment within sixty (60) days, unless
Manager is in good faith contesting Manager's obligation to pay such trade
payables in a manner satisfactory to Lender (which may include Lender's
requirement that Manager post security with respect to the contested trade
payable).
9.35 Assignment of Licenses and Permits. Assign or transfer any of its interest
in any Permits pertaining to the Facility, or assign, transfer or remove or
permit any other Person to assign, transfer or remove any records pertaining to
the Facility without Lender's prior written consent, which consent may be
granted or refused in Lender's sole discretion.
9.36 Nursing Home Negative Covenants: Manager shall not:
(1) transfer the Licenses to any location other than the Facility nor shall
Manager pledge the Licenses as collateral security for any other loan or
indebtedness;
(2) rescind, withdraw, revoke, amend, modify, supplement, or otherwise
alter the nature, tenor or scope of the Licenses for the Facility;
(3) amend or otherwise change the Facility's authorized bed capacity and/or
the number of beds approved by the DOH;
(4) replace or transfer all or any part of the Facility's beds to another
site or location;
(5) jeopardize in any manner Manager's participation with any Third-Party
Payors' Programs to which Manager is subject as of the Closing Date;
(6) pledge its receivables as collateral security for any other loan or
indebtedness;
(7) enter into any patient or resident care agreements with patients or
residents or with any other persons which deviate in any material adverse
respect in the standard form customarily used at the Facility; or
(8) other than in the normal course of business, change the terms of any
of the Third Party Payors' Programs or its normal billing payment or
reimbursement policies and procedures with respect thereto (including without
limitation the amount and timing of finance charges, fees and write-offs).
10. Federal Government Access. To the extent required by Section 1861(v) (1) (I)
of the Federal Social Security Act:
(a) Until the expiration of four (4) years after the furnishing of services
pursuant to this Agreement, the Manager shall make available, upon written
request to the Secretary of Health and Human Services, or upon request to the
Comptroller General, or any of their duly authorized representatives, this
Agreement, and books, documents and records of the Manager that are necessary to
certify the nature and extent of the cost claimed to Medicare with respect to
the services provided under this Agreement.
(b) If the Manager carries out any of the duties of this Agreement through
a subcontract, with a value or cost of Ten Thousand Dollars ($10,000) or more
over a twelve (12) month period, with a related organization, until the
expiration of four (4) years after the furnishing of such services pursuant to
such subcontract, the Manager shall cause the related organization to make
available, upon written request to the Secretary of Health and Human Services,
or upon request to the Comptroller General, or any of their duly authorized
representatives, the subcontract and books, documents and records of such
related organization that are necessary to verify the nature and extent of the
costs claimed to Medicare with respect to the services provided under this
Agreement.
11. Conflict with Loan Documents.
In the event this Management Agreement conflicts with the Loan Documents or
with the Managers Consent And Subordination Agreement, then the other applicable
loan documents shall control.
12. Term.
The provisions of this Agreement referring to NOMURA shall be binding upon
the parties to this Agreement for as long as Owner remains liable to NOMURA or
any of its assigns or successors.
13. Compliance with Loan Agreement.
Notwithstanding anything contained herein to the contrary, Manager shall
perform its obligations under the Management Agreement and the other Additional
Collateral (as defined in the Manager's Consent and Subordination Agreement (as
defined in the Loan Agreement)) in a manner which causes Owner to comply with
the Loan Agreement and the other Loan Documents (as defined in the Loan
Agreement).
13.1 Manager shall take all reasonable steps to assist Owner in complying with
the covenants set forth in the definition of Single Purpose Entity in the Loan
Agreement. In addition, Manager: (i) will not fail to correct any known
misunderstanding regarding the separate identity of Owner, (ii) will maintain
its accounts, books and records separate from Owner, (iii) will maintain its
books, records, resolutions and agreements as official records, (iv) will not
commingle its funds or assets with those of Owner, (v) will hold its assets in
its own name, (vi) will conduct its business in its name, (vii) will maintain
its financial statements, accounting records and other entity documents separate
from Owner, (viii) will observe all partnership, corporate or limited liability
company formalities as applicable, (ix) will maintain an arms-length
relationship with Owner, (x) will not assume or guarantee or become obligated
for the debts of Owner or hold out its credit as being available to satisfy the
obligations of Owner except for liabilities permitted by this Agreement, (xi)
will allocate fairly and reasonably any shared expenses, including but not
limited to, overhead for shared office space and use separate stationary,
invoices and checks, (xii) will not pledge its assets for the benefit of Owner,
(xii) will hold itself out and identify itself as a separate and distinct entity
under its own name and not as a division or part of Owner, (xiii) will not
identify its partners, members or shareholders, or any affiliates of any of them
as a division or part of it, (xiv) will not enter into or be a party to, any
transaction with Owner except in the ordinary course of its business and on
terms which are intrinsically fair and are no less favorable to it than would be
obtained in a comparable arms-length transaction with an unrelated third party.
14. Notices.
Any notice or other communication by either party to the other shall be in
writing and shall be deemed to have been given if either delivered personally or
by reputable overnight courier against receipt or mailed, postage prepaid,
registered or certified mail, addressed as follows:
To the Owner:
With a copy to: Xxxxxxxx Geishals, Esq.
c/o
000 Xxxxxx Xxxxxx
Xxxxxxxxx Xxxxxx, XX 00000
To the Manager: TNS Nursing Homes, Inc.
000 Xxxxxx Xxxxxx
Xxxxxxxxx Xxxxxx, XX 00000
With a copy to: Xxxxxxxx Xxxxxxxx, Esq.
c/o TNS Nursing Homes, Inc.
000 Xxxxxx Xxxxxx
Xxxxxxxxx Xxxxxx, XX 00000
Inc.
or to such other address, and to the attention of such other person or officer,
as any party may designate in writing.
15. Delay Waiver. Etc.
Except as specifically provided herein, no delay or omission by any party
in exercising any right upon any default by the other will impair any such right
or be construed as a waiver of any such default or any acquiescence of it. No
waiver of any default will affect any later default or impair any rights with
respect thereto. No single, partial or full exercise or any right will preclude
other or full exercise thereof.
16. Entire Agreement; Parties Bound.
This Agreement and the exhibits hereto contain the entire agreement between
the parties concerning the Facility, are subject to change only by a written
statement referring to this Agreement and signed by the parties, and will bind
and inure to the benefit of the parties hereto.
17. Assignment.
This Agreement, including the duties and obligations hereunder, may not be
assigned by any party without the prior written consent of the other parry.
18. Governing Law.
This Agreement shall be deemed to have been made and shall be construed and
interpreted in accordance with the laws of New Jersey.
19. Arbitration.
Any dispute or controversy between the parties relating to or arising out
of this Agreement or any amendment or Modification hereof, shall be determined
by arbitration in Bergen County, New Jersey pursuant to the rules then applying
of the American Arbitration Association. The arbitration award shall be final
and binding upon the parties and judgment may be entered thereon in the Superior
Court of the State of New Jersey, County of Bergen or in any other court of
competent jurisdiction. The service of any notice, process, motion or other
document in connection with an arbitration award hereunder may be effectuated by
either personal service upon a party or by certified mail duly addressed to him
or the executors, administrators, personal representatives, next of kin,
successors or assigns or a party at the address or addressed of such party or
parties.
IN WITNESS WHEREOF, and intending to be legally bound, the parties have
executed this Agreement on the date first above written.
TNS NURSING HOMES, INC.
By: /s/
CONTINENTAL XXXXXXX HOLDINGS, INC., a Delaware corporation.
BY: /s/
