EXHIBIT 10.28
AMENDED AND RESTATED MANAGEMENT AGREEMENT
THIS AMENDED AND RESTATED MANAGEMENT AGREEMENT (the "Agreement"), dated of
this 1st day of January, 1995, by and between WELCARE INTERNATIONAL MANAGEMENT
CORPORATION, a Georgia corporation ("Manager"), and MONTCLAIR MEDICAL INVESTORS,
LTD., d/b/a MONTCLAIR NURSING CENTER ("Owner").
W I T N E S S E T H:
WHEREAS, Manager is engaged in providing nursing home management and
technical services to nursing homes throughout the United States and desires to
provide such services to Owner by this Agreement; and
WHEREAS, Owner owns a 176-bed nursing home in Omaha, Nebraska (the
"Facility");
WHEREAS, Owner has investigated various alternative arrangements
respecting the management of the Facility and previously had a management
agreement (the "Original Management Agreement") with Life Care Centers of
America, Inc. ("Life Care"); and
WHEREAS, Manager has acquired the Original Management Agreement from Life
Care and Owner has concluded that the alternative of employing Manager is most
desirable considering both cost and quality of service; and
WHEREAS, Owner desires to employ Manager by this Agreement, to manage the
Facility; and
WHEREAS, it is the joint goal of Manager and Owner to:
(a) operate the Facility on a sound financial basis;
(b) provide high quality of services to residents of the Facility;
(c) establish an excellent public image for the Facility;
(d) establish high quality staffing of the Facility;
(e) institute sound financial accounting systems;
(f) institute internal controls through budgeting procedures;
(g) prevent loss of revenues through sound billing procedures;
(h) control the cash position of the Facility through sound collection
methods; and
(i) take such other steps as are necessary to provide high quality
health care to the residents of the Facility;
NOW THEREFORE, in consideration of their mutual covenants herein
contained, Owner does hereby employ Manager to perform the duties and to provide
the services hereinafter described and Manager does hereby accept such
employment on the terms and conditions hereinafter set out.
SECTION ONE: RETENTION OF AUTHORITY BY OWNER
1.1 Control Retained in Owner. Owner, acting through the duly
elected officers of its general partner, shall at all times exercise control
over the assets and operation of the Facility and Manager shall perform the
duties herein required to be performed by it as the agent of Owner and in
accordance with the reasonable policies and directives of Owner.
1.2 Methods of Operation. Manager shall make substantial changes in
the method of operating the Facility only after timely notification to, and with
the consent of Owner. Changes made to conform to governmental laws, regulations
and
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ordinances shall not be deemed "substantial" for the purposes of this agreement.
1.3 Reports. Manager shall cause to be presented to Owner monthly
reports on the financial condition of the Facility and steps being taken to
implement this Agreement, periodic written progress reports summarizing
Manager's management decisions and the results thereof, and such other reports
as Manager shall deem appropriate to keep Owner informed as to the status and
condition of the Facility.
1.4 General Management. Subject to the foregoing, Owner hereby
delegates to Manager the general authority to supervise and manage the
day-to-day operations of the Facility and to perform the specific duties
hereinafter set out.
SECTION TWO: MANAGEMENT OF THE Facility
2.1 Executive Operating Committee. To assure adequate liaison
between Owner and Manager, Owner and Manager shall meet as provided in this
Agreement.
2.2 Maintenance of Standards
2.21 Standard of Health Care. Manager shall endeavor to perform all
of the duties herein required of it in such manner as to assure that the
Facility meets as high a standard of health care as is consistent with the
policies adopted by Owner and the resources available to the Facility.
2.22 Quality Controls. Manager shall activate and maintain, on a
continuing basis, its Quality Assurance Program to provide objective
measurements of the quality of health care provided by the Facility and in
connection therewith shall
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utilize such techniques as patient questionnaires and interviews, physician
questionnaires and interviews, and survey inspections.
2.23 Staff Specialists. In addition to the other managerial services
provided for herein, Manager shall make available to the Facility for
consultation and advice, its staff specialists in such fields as accounting,
auditing, budgeting, dietary services, environmental control, food management,
maintenance, nursing, personnel, pharmacy operations, public relations,
purchasing, quality assurance, systems and procedures and third party
reimbursement.
2.24 Government Regulations. Manager shall, at the Facility's
expense, cause all things to be done in and about the Facility necessary to
comply with the requirements of any statute, ordinance, law, rule, regulations
or order of any governmental or regulatory body having jurisdiction in the
premises, respecting the use of the Facility, maintenance, or operation thereof,
and with all orders and requirements of the local Board of Fire Underwriters or
any other body which may hereafter exercise similar functions.
2.26 Licenses and Permits. Manager shall apply for, obtain and
maintain, in the name of and at the expense of Owner, all licenses and permits
required in connection with the management and operation of the Facility.
2.27 Rights of Residents. Manager shall exercise reasonable care not
to release medical records of residents to unauthorized persons, and if the
Facility receives a subpoena the
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production of the medical records of a resident, Manager shall see that the
resident is promptly informed of that fact.
2.28 Resident Services. Prior to instituting any change in the scope
or level of services offered by the Facility, Manager shall inform and obtain
the approval of Owner.
2.3 Fiscal Matters
2.31 Preparation and Acceptance of Annual Budget. Manager shall
supervise preparation of an annual budget conforming to Medicare/Medicaid
regulations which sets out anticipated income, expenses and capital expenditures
and shall cause the budget to be presented to Owner 30 days prior to the
commencement of each fiscal year for its acceptance, rejection, or modification.
Upon acceptance of such budget, or any modification thereof, by Owner, duly
recorded in minutes of the executive operating committee such budget shall serve
as a guide for the financial operation of the Facility during the ensuing year.
2.32 Accounting Records. Manager shall establish, supervise, direct
and maintain the operation of a suitable Facility accounting system and shall
cause to be prepared and delivered to Owner financial statements as follows:
(a) On or before thirty (30) days after the close of each month, a
statement of income and expenses showing the results of the
operation of the Facility for the preceding month and of the
fiscal year to date.
(b) On or before one hundred twenty (120) days after the close of
each fiscal year, a balance sheet, related statement of income
showing the results of the operation of the Facility during
said fiscal year, and statement of changes in financial
position, and having annexed thereto a computation
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of the Management Fee and Management Incentive Fee for such
twelve month period.
2.33 Deposit and Disbursement of Funds. Manager in the Facility's
name and as agent for Owner, shall deposit in a Facility bank account all
receipts and monies arising from the operation of the Facility and shall
disburse and pay all costs and expenses of the Facility, inclusive of Management
Fees and other charges payable to Manager under this Agreement, from said
accounts on behalf and in the name of the Facility and Owner, in such amounts
and at such times as shall be appropriate or necessary. Manager shall specify
the identity of signatories to Facility bank accounts and the number of
signatures required for checks of various amounts.
2.34 Collection of Accounts. Manager shall supervise and direct the
collection of all accounts due the Facility and shall take all reasonable steps
necessary to minimize the amount of bad debts.
2.35 Legal Actions. Manager shall, with approval of Owner, institute
in the name and at the expenses of Owner, any and all legal actions or
proceedings necessary to collect charges, rent or other income due the Facility
or to oust or dispossess tenants or other persons unlawfully in possession under
any lease, license or concession agreement, and to collect damages for the
breach thereof or default thereunder by the tenant or licensee or
concessionaire.
2.36 Rates. Manager and Owner recognize the importance of
maintaining room and other rates which enable the Facility to pay its
obligations but minimize the cost of health care. From
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time to time, Manager will recommend to Owner, for approval, rate structures
which take into account the financial obligations of the Facility and the level
of rates at other comparable Facilitys nearby and the importance of providing
quality health care at minimal cost.
2.37 Insurance. The establishment and maintenance of insurance
coverage of the Facility and its operations, against all hazards, shall be the
responsibility of Owner, but Manager shall, at Owner's request, arrange for the
design and installation of an appropriate insurance program for the Facility.
Manager shall incur no liability for the omission or inadequacy of any insurance
coverage. Upon the request of Owner, Manager shall furnish evidence of a
fidelity bond in the amount of $50,000 insuring Owner against defalcation by any
Manager employees in the handling of Owner funds hereunder. Manager shall also
furnish evidence of professional liability insurance coverage in an amount not
less than $1,000,000.
2.38 Working Capital. Owner shall provide working capital for the
Facility in an amount of not less than $100,000. Manager shall render such
counsel to the Owner as Manager in its discretion shall deem appropriate to
assist Owner in securing working capital loans for the Facility.
2.4 Contracts and Purchases
2.41 Food and Supplies. Manager shall purchase such food, beverages,
equipment, operating supplies and other materials and supplies in the name of
Owner and for the account
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of the Facility as may be needed from time to time for the maintenance of the
Facility.
2.42 Prices. In order to minimize the cost of supplies and services
to the Facility, Manager shall offer to Owner participation in such of Manager
national purchasing contracts as may be appropriate.
2.43 Certain Agreements. Manager shall, in the name of and for the
account of Owner, negotiate and enter into such term agreements as it may deem
necessary or advisable, for the furnishing of services, concessions and supplies
for the maintenance and operation of the Facility. Manager will obtain the
approval of Owner prior to entering into any such agreement involving an initial
expenditure of more than $5,000 by the Facility.
2.44 Repairs and Renewals. Manager shall, with approval of Owner, in
the name of and for the account of Owner, negotiate, contract for and supervise
such repair and renewal of the physical property and equipment of the Facility
as shall be necessary to keep and maintain the same in good working order and
condition. Manager will obtain the approval of Owner prior to commencing any
repair or renewal involving more than $5,000.00.
2.45 Capital Improvements. Manager shall, in the name of and for the
account of Owner, negotiate and contract for and supervise the installation of
all capital improvements related to the operation of the Facility at its present
site, including the leasing of equipment, for which provision is made in the
budget. In the event Owner desires to undertake a major expansion of the
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Facility in the future, Manager will make a presentation to Owner concerning an
appropriate development agreement relating thereto.
2.5 Employees.
2.51 General. Except as hereinafter specifically provided, Manager
shall assist Owner in the hiring or leasing of employees for the Facility or
making recommendations for recruiting, hiring, training, promoting, assigning
and discharging all operating and service personnel necessary for the proper
operation and maintenance of the Facility. All such employees shall be employees
of the Facility and Owner or employees leased to the Facility and Owner and
shall not be employees of Manager.
2.52 Employee Benefits. Manager shall assist Owner in establishing
appropriate employee benefits for the employees at the cost of the Facility and
Owner.
2.53 Special Employees. Manager or the lessor of the leased
employees shall provide the Facility with a qualified, licensed administrator
acceptable to Owner (the "Administrator"). At the option of Manager, the
Administrator may be an employee of and compensated by Manager or its affiliate,
but Manager or its affiliate shall be reimbursed monthly by Owner, for all
compensation inclusive of salary, fringe benefits, bonus and approved
reimbursable business expenses paid to the Administrator, such amount, except
for expenses which shall be charged in arrears, being due and payable in advance
on the 5th day of each month. Fringe benefits shall include the employer's
contribution to F.I.C.A., unemployment compensation, and other
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employment taxes, bonuses, xxxxxxx'x compensation, group life and accident and
health insurance premiums, disability coverage, and other benefits.
2.6 Management Plans and Reports
2.61 Public Relations Plan. Manager shall have direct responsibility
for maintaining satisfactory public relations between the facility and the
community. And all costs incurred for items relating to the public relations
plan shall be expenses of the Facility.
2.62 Management Reports and Meetings. Manager shall render periodic
management reports to and hold periodic meetings with Owner. These services
shall include:
A. Reports
1) Weekly
a) Census and statistical report
b) Cash position report
2) Monthly
a) Administrator's report to management
b) Regional Manager's report on facility
c) Financial statements
3) Quarterly
a) Management evaluation
4) Annually
a) Audited financial statements
b) Certified Medicaid cost report
B. Meetings
1) Weekly
Manager's staff and Administrator
2) Monthly
Administrator and Facility staff
Administrator and Owner
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3) Quarterly
a) Manager's staff and Owner
b) Manager's staff and administrative group
SECTION THREE: MANAGEMENT FEE AND ADDITIONAL PAYMENTS
3.1 Amount. During each year of this Agreement, Owner shall pay to
Manager in the manner provided below, Management Fees equal to 6.5% of the "Net
Revenue" derived from the operation of the Facility during the year concerned.
The term "Net Revenue" shall mean the gross revenue from operations, less
contractual adjustments determined on an accrual basis, in accordance with
generally accepted accounting principles as applied to the Facility industry.
In addition, Owner shall pay to Manager as Management Incentive Fees, an
amount equal to 20% of the cash flow from the Facility's operations in excess of
$153,092 ($350,000 as provided in the offering memorandum relating to Owner's
partnership interests less increased debt service due to refinancing).
3.2 Monthly Payments. The Management Fee shall be due in advance on the
first day, and be paid no later than the tenth day, of each month, and shall be
calculated by multiplying the number of patient days in the preceding month,
times the Net Revenue of the Facility per patient day for the fiscal year to
date as shown on the most recent previous monthly statement of income and
expense provided under Section 2.32 (a) hereof, times 6.5%.
The Management Incentive Fee shall be due in advance on the first day, and
be paid no later than the tenth day of each month, and shall be estimated based
on the prior year's cash flow, or
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the annualized, actual current cash flow if such annualized, actual current cash
flow differs substantially from such prior year's cash flow.
3.3 Annual Adjustment. Within fifteen (15) days after delivery of the
audited annual financial statements of the Facility, Owner shall pay to Manager
or Manager shall pay to Owner such amount as is necessary to make the amount of
said fees paid with respect to the year equal to the amount of Management Fees
and Management Incentive Fees shown to be due by the annual audit provided in
Section 2.32(b) hereof.
SECTION FOUR: MISCELLANEOUS
4.1 Term. The term of this Agreement shall commence on January 1, 1995,
and, unless sooner terminated in accordance with the provisions of paragraph 4.2
below, shall extend for 6 years thereafter, and shall be renewable for 2
successive additional 5 year terms, at the option of Manager. Unless Manager
shall give to Owner, at least ninety (90) days prior to the expiration of the
preceding term, notice of its election not to renew this Agreement for an
additional term, this Agreement shall be deemed to be automatically renewed.
4.2 Termination for Cause. Either party may terminate this Agreement at
any time for "cause" as hereinafter defined upon delivery of written notice to
the other party.
(i) Owner shall have "cause" for termination:
(1) If Manager shall apply for or consent to the
appointment of a receiver, trustee or liquidator of
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
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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 if an
order, judgment or decree shall be entered by a court of
competent jurisdiction, on the application of a
creditor, adjudicating Manager a bankrupt or insolvent
or approving a petition seeking reorganization of
Manager or appointing a receiver, trustee or liquidator
of Manager of all or a substantial part of its assets;
or
(2) If Manager shall default in the performance of any
material covenant, agreement, term or provision of this
Agreement to be kept, observed or performed by Manager
and such default shall continue for a period of 60 days
after written notice to Manager from Owner stating the
specific default;
(ii) Manager shall have "cause" for termination:
(1) If the license of the Facility is at any time suspended,
terminated or revoked.
(2) If Owner shall fail to make any payment to Manager or to
any affiliate of Manager pursuant to any agreement
between Owner and such affiliate and does not make such
payment within 10 days after receiving written notice
from Manager of such failure.
(3) If Owner shall default in the performance of any
material covenant, agreement, term or provision of this
Agreement to be kept, observed or performed by Owner and
such default shall continue for a period of 60 days
after written notice to Owner from Manager stating the
specific default; or
(4) If the Facility or any portion thereof shall be damaged
or destroyed by fire or other casualty and if Owner
fails to commence to repair, restore, rebuild or replace
any such damage or destruction within 60 days after such
fire or other casualty, or shall fail to complete such
work within a reasonable period of time;
(5) If Owner shall apply for or consent to the appointment
of a receiver, trustee or liquidator of Owner or the
Facility or of all
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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 come 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 if an order, judgment or decree shall be entered by
any court of competent jurisdiction, on the application
of a creditor, adjudicating Owner or the Facility a
bankrupt or insolvent or approving a petition seeking
reorganization of Owner or the Facility or appointing a
receiver, trustee or liquidator of Owner or the Facility
or of all or a substantial part of the assets of Owner
or the Facility.
4.4 Status of Employees After Termination. For the one year period
commencing with the date of the termination or expiration of the term hereof
pursuant to Section 4.2, Owner shall not employ or engage, directly or
indirectly, any employee of Facility or its affiliates, including, but not
limited to the Facility Administrator, without the approval of Manager, provided
Owner may re-employ persons who were employed by Owner on the date hereof.
4.5 Notices. Any notice or other communication by either
party to the other shall be in writing and shall be delivered
personally or mailed, postage prepaid, via registered or
certified mail, to the addresses shown below:
TO: Owner TO: Manager
Montclair Medical Investors, Ltd. WelCare International
Management Corporation
0000 Xxxxxxx Xxxxxxx, Xxxxx 000 0000 Xxxxxxx Xxxxxxx,
Xxxxx 000
Xxxxxxx, Xxxxxxx 00000 Xxxxxxx, Xxxxxxx 00000
or to such other address, as either party may designate in
writing hereunder.
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4.6 Modification and Changes. This Agreement cannot be changed or modified
except by instrument in writing executed by both parties.
4.7 Assignment by Manager. Manager shall have the right to assign this
Agreement to an affiliate or a wholly or majority owned subsidiary.
4.8 Headings. The headings contained herein are for convenience of
reference only and are not intended to define, limit or describe the scope or
intent of any provision of this Agreement.
4.9 Governing Law. This Agreement shall be deemed to have been made and
shall be construed and interpreted in accordance with the laws of the State of
Georgia.
4.95 Access to Books and Records. This provision shall only apply if:
(1) this Agreement and the services furnished pursuant to it are
within the terms of Section 952 of the Omnibus Reconciliation Act of 1980,
as defined in implementing regulations issued by the Department of Health
and Human Services (HHS), and (2) the value or cost of this Agreement
equals $10,000 or more over a twelve month period.
If the above conditions are met, Manager, agrees that, until the
expiration of four years after the furnishing of services pursuant to this
Agreement, it shall, upon written request, make available to the Secretary
of HHS or the Secretary's duly authorized representatives, or upon request
to the Comptroller General or the Comptroller General's duly authorized
representatives, this Agreement and such books, documents and records that
are necessary to certify the nature and extent of costs under this
Agreement. The availability of Manager's books, documents and records
shall be subject at all times to such criteria and procedures for seeking
or obtaining access as may be promulgated by the Secretary of HHS in
regulations, and other applicable laws. Manager's disclosure under this
paragraph shall not be construed as a waiver of any other legal rights to
which Manager may be entitled under law or regulations.
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IN WITNESS WHEREOF, the parties hereto have executed and delivered this
Agreement, as of January 1, 1995.
OWNER: MONTCLAIR MEDICAL INVESTORS, LTD.
By: WelCare Consolidated Resources
Corporation of America, Its
General Partner
By: /s/ Xxxx X. Xxxx
---------------------------------
MANAGER: WELCARE INTERNATIONAL MANAGEMENT
CORPORATION
By: /s/ Xxxx X. Xxxxx, Xx.
---------------------------------
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