LONG-TERM CARE FACILITY
MANAGEMENT AGREEMENT
THIS LONG-TERM CARE FACILITY MANAGEMENT AGREEMENT (the "Agreement") is made
as of this 1st day of June, 1997, by and between North Raleigh Health Investors,
LLC, a North Carolina limited liability company ("Lessee"), and Centennial
HealthCare Management Corporation, a Georgia corporation ("Manager").
W I T N E S S E T H :
WHEREAS, Lessee presently leases certain real and personal property
comprising a certain 114-bed nursing center located in Raleigh, North Carolina
(the "Facility") pursuant to that certain lease dated as of December 1, 1996
(the "Lease");
WHEREAS, the parent corporation of Manager, Centennial HealthCare
Corporation ("CHC") and Lessee have entered into that certain Loan Agreement
dated of even date herewith (the "Loan Agreement"), whereby CHC will loan
certain funds to Lessee (the "CHC Loan"); and
WHEREAS, Lessee and Manager desire for Manager to provide its experience,
skill and supervision to manage the Facility on behalf of Lessee under and
subject to the terms of this Agreement.
NOW, THEREFORE, in consideration of the premises and mutual promises and
covenants of the parties contained herein and for such other good and valuable
consideration, the receipt, adequacy and sufficiency of which are hereby
acknowledged, the parties hereby agree as follows:
ARTICLE I.
MANAGEMENT DUTIES AND OBLIGATIONS
l.01 Control Retained by Lessee. Lessee shall at all times exercise
overall control over the assets and operations of the Facility, subject to the
terms of this Agreement, and Manager shall perform the duties herein required to
be performed by it as the agent of Lessee and in accordance with the policies
and directives from time to time adopted by Lessee.
l.02 Changes in Method of Operation. Manager shall not make substantial
changes in the method of operating the Facility unless Manager first notifies
Lessee and Lessee has given its approval, which approval shall not be
unreasonably withheld.
l.03 Management of Facility. During the term of this Agreement and subject
to the terms of this Agreement, Manager shall on behalf of Lessee manage all
aspects of the operation of the Facility, including, but not limited to
staffing, accounting, billing, collections, setting of rates and charges and
general administration. In connection therewith, Manager (either directly or
through supervision of employees of the Facility) shall:
(a) Hire or lease on behalf of Lessee and retain (to the extent such
personnel are reasonably available in the community in which the Facility is
located) an adequate staff of nurses, technicians, nurse aides, office and other
employees, including a qualified administrator (the "Administrator") and shall
promote, direct, assign and discharge all such employees on behalf of Lessee at
Manager's reasonable discretion; provided, however, that leased employees shall
be subject to the direction and control of the lessor of such leased employees.
All employees shall be employees of or leased by Lessee and carried on the
payroll of the Facility and shall not be deemed employees or agents of Manager.
(b) Institute and amend, from time to time general salary scales,
personnel policies and appropriate employee benefits for all employees on behalf
of Lessee; provided, however, that leased employees shall be subject to the
general salary scales, personnel policies and employee benefit programs of the
lessor of such leased employees. Employee benefits may include pension and
profit sharing plans, insurance benefits, incentive plans for key employees and
holiday, vacation, personal leave and sick leave policies.
(c) Issue appropriate bills for services and materials furnished by
the Facility and use its reasonable best efforts to diligently collect accounts
receivable and monies owed to the Facility, design and maintain accounting,
billing, patient and collection records; and prepare and file insurance,
Medicare, Medicaid and any and all other necessary or desirable reports and
claims related to revenue production. Lessee hereby grants Manager the right to
enforce Lessee's rights as creditor under any contract or in connection with
rendering any services for purposes of collecting accounts receivable and monies
owed the Facility.
(d) Order, supervise and conduct a program of regular maintenance and
repair.
(e) Purchase food, beverage, medical, cleaning and other supplies,
equipment, furniture and furnishings for the account of Lessee.
(f) Administer, supervise and schedule all patient and other services
of the Facility, including the operation of food, xxxxxx/beautician and other
ancillary services.
(g) Provide for the orderly payment (to the extent funds are
available therefor) of accounts payable, employee payroll, amounts due on short
and long-term indebtedness, taxes, insurance premiums, and all other obligations
of the Facility.
(h) Institute standards and procedures for admitting patients, for
charging patients for services, and for collecting the charges from the patients
or third parties.
(i) Obtain and maintain insurance coverage for the Facility naming
Lessee, Manager and such other persons requested by Lessee as insureds as
provided in Section 5.01 hereof.
(j) Negotiate and enter into, in the name of and on behalf of Lessee,
such agreements, contracts and orders as Manager may deem necessary or
advisable, for the furnishing of services, concessions and supplies for the
operation and maintenance of the
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Facility, including, without limitation, agreements for the provision of
therapy and rehabilitation services, and medical supplies.
(k) After notice to Lessee, negotiate on behalf of Lessee (and in
conjunction with Lessee's counsel) with any labor union lawfully entitled to
represent employees of Lessee who work at the Facility, but any collective
bargaining agreement or labor contract must be submitted to Lessee for its
approval and execution.
(l) As provided in Section 1.08(a), assist in maintaining all
licenses and permits required for the operation of the Facility, its contracts
with third party payors and other similar governmental and nongovernmental
agencies and intermediaries.
(m) Make periodic evaluations of the performances of all departments
of the Facility.
(n) Design, establish and maintain a suitable accounting system using
accounts and classifications consistent with those used in similar facilities.
(o) Advise and assist Lessee in designing an adequate and appropriate
public relations program.
l.04 Reports to Lessee.
(a) Manager shall prepare and deliver to Lessee, within thirty (30)
days after the close of each calendar month, unaudited financial statements
covering the prior month and containing a balance sheet and statement of income
and expenses in reasonable detail. Manager shall also provide any required
assistance to the independent accountants for the Facility, who shall be
selected by Manager, in the preparation of audited annual financial statements
for the operation of the Facility. Such financial statements shall be prepared
at Lessee's expense in accordance with generally accepted accounting principles
in the health care field consistently applied and delivered to Manager and
Lessee within ninety (90) days after the end of each fiscal year of the
Facility. Manager shall prepare reports or provide information to Lessee
required by the Lease, any loan documents of the lessor, or the Loan Agreement
and related documents.
(b) Manager shall submit to Lessee for its approval (which approval
will not be unreasonably withheld) each twelve (12) months its budget for the
operation of the Facility setting out anticipated income, expenses and capital
expenditures during the succeeding twelve (12) month period. Manager shall use
its reasonable best efforts to operate the Facility in accordance with the
provisions of the budget for the Facility as submitted to Lessee. Such proposed
budget for the Facility shall be delivered to Lessee prior to the commencement
of the operational fiscal year of the Facility.
(c) Manager or Lessee shall schedule periodic management meetings to
be attended by representatives of both Manager and Lessee no less frequently
than quarterly and shall furnish to Lessee quarterly written progress reports
concerning the operation of the Facility.
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l.05 Bank Accounts.
(a) Manager shall deposit in a bank account or accounts of Manager or
Manager's affiliate(s) (collectively referred to in this Section 1.05 as
Manager) established in Manager's name (the "Facility Depository Accounts") all
funds received from the operations of the Facility (the "Facility Funds").
Manager shall segregate such Facility Funds in an account(s) separate and apart
from Manager's Operating Accounts (the "Segregated Facility Accounts"). Manager
shall disburse Facility Funds received from the Facility's operations in the
manner and order of priority described in section 1.06 below. Manager shall
also deposit and maintain the personal funds of the Facility's residents into a
separate trust account established in Manager's name (the "Facility Trust
Accounts"). Manager shall designate the signatory or signatories required on
all checks or other documents of withdrawal for the Facility Depository,
Operating, Segregated Facility, and Facility Trust Accounts.
l.06 Flow of Facility Funds.
(a) All revenues and cash of the Facility shall be disbursed by
Manager in the following order of priority and, in each case, in such amounts
and at such times as Manager deems is required to be made in connection with the
payment of:
(1) the Facility's Lease payments due from Lessee to
lessor;
(2) the costs and expenses of operating the Facility,
including the reimbursable expenses of Manager;
(3) all accrued and unpaid Management Fees (defined in
Section 4.01) to Manager;
THEN, after retention by Manager of an adequate working
capital reserve (in cash or available credit under the CHC
Loan) (such reserve to be determined by Manager in its
reasonable discretion and approved by Lessee in connection
with its approval of the operating budget for the Facility
(with such approval to be not unreasonably withheld or
delayed) and held in such subaccount of the Facility
Depository, Operating or Segregated Facility Accounts as
Manager shall determine);
(4) all accrued and unpaid interest on the CHC Loan; and
(5) any principal balance outstanding under the CHC Loan
whether or not any or all of such balance is then due and
payable.
(b) Manager agrees that to the extent the total of items described in
paragraphs 1, 2, 3 and 4 above (collectively the "Base Operating Costs") exceed
the Facility's collected net revenues (resulting in an "Operating Deficit"),
Manager shall, as soon
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as possible and not less than five (5) business days after notice from
Lessee, advance funds under the CHC Loan, if available, as may be necessary
to cover or offset such Operating Deficit.
1.07 Access to Books, Records and Documents. If it is ultimately
determined that Section 952 of the Omnibus Budget Reconciliation Act of 1980 and
final regulations promulgated thereunder apply to this Agreement:
(a) Until the expiration of four (4) years after the furnishing of
services pursuant to this Agreement, Manager shall, as provided in Section 952,
make available, upon written request, to the Secretary of Health and Human
Services, or upon request, to the Comptroller General of the United States, or
any of their duly authorized representatives, this Agreement, and all books,
documents and records of Manager that are necessary to verify the nature of this
Agreement for which payment may be made under the Medicare program; and
(b) If Manager carries out any of the duties of this Agreement
pursuant to a subcontract or subcontracts with an aggregate value or cost of
$10,000 or more over a twelve (12) month period with a related organization,
such subcontract or subcontracts shall contain a clause to the effect that,
until the expiration of four years after the furnishing of such services
pursuant to such subcontract or subcontracts, the related organization shall, as
provided in Section 952, make available, upon written request, to the Secretary
of Health and Human Services, or upon request, to the Comptroller General of the
Untied States, or any of their duly authorized representatives, the subcontract
or subcontracts, and all books, documents and records of such subcontractors for
which payment may be made under the Medicare program.
l.08 Licenses.
(a) Manager, as agent for Lessee and on Lessee's behalf, shall apply
for and seek to obtain and maintain all necessary licenses, permits,
certifications, consents, and approvals from all governmental agencies which
have jurisdiction over the operation of the Facility. Manager agrees that its
management and operation of the Facility shall materially and substantially
comply with any representations made by the Facility lessor and/or Lessee in the
Certificate of Need application for the Facility, to the extent disclosed in
writing to Manager, as well as all conditions placed upon such Certificate of
Need and so disclosed in writing to Manager. Manager, by applying for such
licenses, permits, consents, and approvals, does not in any way guarantee the
approval of such applications and shall have no liability with respect to any
failure of the Facility to receive any such license, permit, consent or
approval.
(b) Neither Lessee nor Manager shall knowingly take any action or
fail to take any action which may (1) cause any governmental authority having
jurisdiction over the operation of the Facility to institute any proceeding for
the rescission or revocation of any necessary license, permit, consent or
approval, or (2) adversely affect Lessee's right to accept and obtain payments
under Medicare, Medicaid, or any other public or private third party medical
payment program.
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(c) Manager shall, with the written approval of Lessee, have the
right to contest by appropriate legal proceedings, diligently conducted in good
faith in the name of Lessee, the validity or application of any law, ordinance,
rule, ruling, regulation, order or requirement of any governmental agency having
jurisdiction over the operation of the Facility. Lessee, after having given its
written approval, shall pay attorneys' fees incurred with regard to the contest.
Counsel for any such contest shall be selected by Manager, with Lessee's
approval which shall not be unreasonably withheld. Manager shall have the
right, upon notice to Lessee but without the written consent of Lessee, to
process all third-party claims for the services of the Facility, including,
without limitation, the full right to contest to the exhaustion of all
applicable administrative proceedings or procedures, adjustment and denials by
governmental agencies or their fiscal intermediaries as third-party payors.
l.09 Administrator. Manager shall employ or lease for the Facility an
Administrator to serve as the chief executive officer of such Facility. The
Administrator shall be an employee of and shall be compensated by Lessee, in
accordance with the approved operating budget for the Facility or as otherwise
approved by Lessee, and Manager shall pay on Lessee's behalf out of the
Operating Accounts of the Facility, in advance, on or before the fifth (5th) day
of each month, all such compensation, including salary, fringe benefits, bonuses
and business expense reimbursements approved by Manager, to the Administrator.
The term "fringe benefits" shall include, without limitation, employer's
F.I.C.A. payments, unemployment compensation and other employment taxes,
bonuses, vacation, personal and sick leave benefits, workers' compensation,
group life, health and accident insurance premiums and disability and other
benefits.
1.10 Taxes. Any federal, state or local taxes, assessments or other
governmental charges properly imposed on the Facility are the obligations of
Lessee, not of Manager, but all such obligations shall be paid by Manager on
Lessee's behalf out of the Operating Accounts of the Facility. With Lessee's
prior written consent, Manager may contest the validity or amount of any such
tax or imposition on the Facility in the same manner as described in
Section 1.08(c) hereof.
1.11 Use of Manager's Personnel. An authorized representative of Manager
shall visit the Facility as often as Manager deems necessary. The time spent by
such authorized representative of Manager during such visits and all
out-of-pocket expenses arising from travel and lodging connected with such
visitations shall not be charged separately to Lessee.
1.12 Government Regulations. Manager agrees to operate and maintain the
Facility in substantial compliance with the requirements of any material
statute, ordinance, law, rule, regulation or order of any governmental or
regulatory body having jurisdiction over the Facility and to comply with all
orders and requirements of the local board of fire underwriters or any other
body which may exercise similar functions; provided, however, that Manager shall
not be required to expend its separate funds in order to comply with any such
statutes, ordinances, laws, rules, regulations or orders, and to the extent any
funds are so required, it shall fulfill its obligations hereunder by notifying
Lessee of the actions necessary in order to be in compliance therewith and
expending such funds of Lessee as Lessee may provide or as Manager may deem
available for such purpose.
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1.13 Quality Controls. Manager shall activate and maintain on a continuing
basis a "Quality Assurance Program" in order to provide objective measurements
of the quality of health care provided at the Facility and, in connection
therewith, shall utilize such techniques as patient questionnaires and
interviews, physician questionnaires and interviews, and inspections.
1.14 Staff Specialists. In addition to the other managerial services
provided for herein, Manager shall make available to the Facility, for
consultation and advice, when Manager deems necessary or appropriate,
specialists in such fields as accounting, auditing, budgeting, dietary services,
operations, environmental control, management, maintenance, nursing, personnel,
pharmacy operations, public relations, purchasing, quality assurance, systems
and procedures, and third-party reimbursement.
1.15 Performance of Services by Manager. In the performance of its
services hereunder, Manager shall exercise the same standards and degree of care
used by reasonable and prudent managers of nursing homes of similar size, nature
and character as the Facility. Notwithstanding anything herein to the contrary,
Manager shall not be deemed in violation of this Agreement if Manager is
prevented from performing any of its obligations hereunder for reasons beyond
its reasonable control including, without limitation, strikes, walkouts or other
employee disturbances, acts of God, or the action or promulgation of any
statute, rule, regulation or order by any federal, state, or local governmental
or judicial agency or official, nor shall it be deemed in default hereunder or
otherwise liable for any error of judgment or act or omission in the performance
of its services hereunder, which is made in reasonable good faith.
1.16 Additional Services. Lessee agrees that any specialized or additional
services recommended by Manager may be performed for a separate fee as agreed
upon by Lessee in advance of the performance of such service. If Manager
provides such service, such fee shall not be in excess of such amount as would
be charged by a third party, negotiating at arm's length, for the performance of
such service.
1.17 Obligations under CHC Loan. Manager acknowledges the existence and
terms of the CHC Loan and all documents related thereto. Manager agrees to
perform or cause to be performed, on Lessee's behalf, for so long as the
Agreement remains in full force and effect, all covenants therein relating to
the manner of operation of the Facility. Manager assumes no liability or
responsibility for repayment of the CHC Loan or for any other monetary
obligation of Lessee (including, without limitation, obligations to pay rent
under the Lease), or for the financial performance of the Facility.
1.18 Maintenance of Facility. Manager agrees to maintain the Facility in a
good and serviceable condition, ordinary wear and tear and damage by fire or
other casualty or resulting from condemnation excepted, to the extent sufficient
revenues of the Facility are available for such purpose.
1.19 Civil Money Damages. Manager agrees that if any civil money penalties
are imposed by HCFA or the State of North Carolina as a result of the nursing
care and/or treatment provided to residents of the Facility by employees of the
Facility, Manager will reimburse Lessee for the amount of the civil money
penalty imposed; provided, however, that
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following termination of this Agreement Manager must be notified immediately
upon notice of the civil money penalty and/or any Statement of Deficiencies
issued by HCFA or the State of North Carolina for a period during which
Manager served under this Agreement. Manager reserves the right to appeal or
waive appeal of any civil money penalty imposed by HCFA or the State of North
Carolina. Manager further reserves the right to retain counsel to represent
the Facility in any appeal or settlement proceedings.
ARTICLE II.
TERM AND TERMINATION
II.01 Term. The term of this Agreement shall commence as of the date
hereof (the "Effective Date"), and shall continue until the earlier of the
following dates: (i) the date which falls on the fifth (5th) anniversary
thereof, or (ii) the date on which Manager ceases to furnish management services
to the Facility and this Agreement is terminated for whatever reason.
II.02 Termination.
(a) Manager has the option to terminate this Agreement, without
damage or penalty, upon ten (10) business days prior written notice to Lessee,
upon the occurrence of either of the following events:
(i) The Facility or any material portion thereof is damaged
or destroyed to the extent that in the written opinion of an
independent architect or engineer reasonably acceptable to both
parties (x) it is not practicable or desirable to rebuild, repair or
restore the Facility within a period of nine (9) months to its
condition immediately preceding such damage, or (y) the conducting of
normal operations of the Facility would be prevented for a period of
nine (9) months or more; or
(ii) Title to or the temporary use of all or substantially
all the Facility is taken under the exercise of the power of eminent
domain by any governmental authority or person, firm or corporation
acting under governmental authority which in the opinion of an
independent architect or engineer reasonably acceptable to both
parties prevents or is likely to prevent the conducting of normal
operations at the Facility for a period of at least nine (9) months.
Provided, however, that in either of such events, in addition to the rights of
Manager under Article VI hereof, Manager shall have the right to rebuild,
restore or otherwise rearrange the Facility and recommence operations thereof,
and thereupon Manager shall continue to manage the Facility under the same
terms, conditions, and fees as provided herein.
(b) If an Event of Default (as hereinafter defined) by either party
shall occur and be continuing, the other party may terminate this Agreement by
giving written notice of such termination pursuant to Section 3.02 hereunder.
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(c) Manager shall have the option to terminate this Agreement without
damage or penalty upon ten (10) days prior written notice to Lessee following
the sale, transfer, assignment, or other disposition, in whole or in part, by
Lessee of its interest in the Facility. In the event Lessee is a corporation,
limited liability company, or partnership, any dissolution, merger,
consolidation or other transfer of a substantial portion of the stock or
underlying ownership interests (as the case may be) of Lessee shall constitute
an assignment of the Facility for all purposes of this Section 2.02(c). The
term "substantial portion" means the ownership of stock or underlying ownership
interests (as the case may be) possessing, and of the right of exercise, at
least fifty percent (50%) of the total combined voting power of such
corporation, limited liability company, or partnership, provided, however, that
this prohibition on stock transfer shall not apply to a "publicly traded
corporation," which term is hereby defined for all purposes under this Agreement
as a corporation whose shares of stock have been registered pursuant to the
Securities Act of 1933, as amended.
(d) Notwithstanding the foregoing, commencing on the Effective Date
and continuing until the date which falls on the third (3rd) anniversary thereof
(the "First Refusal Period"), for so long as (i) the CHC Loan remains
outstanding and unpaid or (ii) this Agreement remains in full force and effect,
no sale, transfer, assignment or other disposition, in whole or in part, by
Lessee of its interest in the Facility shall be permitted without Manager's
prior written consent, which consent may be granted or withheld in Manager's
sole and absolute discretion unless Lessee shall have afforded to Manager a
right of first refusal to purchase Lessee's interest in the Facility on the same
terms and conditions, including purchase price, acceptable to Lessee pursuant to
the terms of a bona fide third party offer. Manager shall be furnished with (i)
written notice of the terms of such third party offer, and (ii) a period of not
less than fifteen (15) business days within which to exercise such right of
first refusal. Upon exercise, Lessee and Manager shall close Manager's
acquisition of the Facility within the greater of (i) thirty (30) days
thereafter or (ii) the time period, if any, specified in the terms of such third
party offer. The parties acknowledge and agree that any purported sale,
transfer, assignment or other disposition by Lessee in violation of this section
shall, at Manager's option, be null, void and of no force or effect, and that
equitable remedies, including the remedy of specific performance (to compel
rescission of any such sale, transfer, assignment or other disposition) and
injunctive relief (to prevent or restrain such prohibited actions) shall be
available to Manager, in addition to its rights and remedies at law and under
this Agreement.
In the event Manager elects not to exercise its right of first refusal
under this section and there shall occur a sale, transfer, assignment or other
disposition of Lessee's interest in the Facility during the First Refusal
Period, this Agreement shall continue in full force and effect and shall bind
the purchaser (without releasing or otherwise affecting Lessee's primary
liability for its obligations hereunder, which shall thereupon be deemed joint
and several with the liability of such purchaser); provided, however, that in
the event of such sale, transfer, assignment or other disposition of Lessee's
interest pursuant to the foregoing, Lessee shall have the right and option to
terminate this Agreement upon payment and delivery to Manager of the following,
said termination to become effective upon Manager's receipt of the last of the
following:
(1) a termination fee equal to forty percent (40%) of the Facility's
"Average Monthly Fee" multiplied by the number of months remaining in
the Term,
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calculated from the date of such termination. "Average Monthly Fee"
for the Facility shall mean the average of the monthly Management
Fees payable to Manager under Article IV of this Agreement for each
of the twelve (12) full calendar months prior to such termination;
(2) all amounts outstanding under the CHC Loan;
(3) all amounts due under Article IV of this Agreement;
(4) any other amounts due Manager under the provisions of this Agreement
or any other agreements between Lessee and Manager or Manager's
affiliates; and
(5) evidence, satisfactory to Manager, that amounts have been escrowed by
Lessee sufficient to pay all pending liabilities of Manager arising
during the term of this Agreement.
ARTICLE III.
DEFAULT AND REMEDIES
III.01 Events of Default. The following shall constitute events of
default ("Events of Default" and each individually an "Event of Default") under
this Agreement:
(a) If Lessee fails to do any of the following and the responsibility
and means (including any and all necessary funds) to pay or perform same has not
been delegated to Manager hereunder: (i) make or cause to be made any payment to
Manager required to be made by Lessee, and such failure shall continue for as
much as thirty (30) days after written notice thereof shall have been given to
Lessee, (ii) perform its obligations under this Agreement in any material
respect, and such default shall continue for a period of thirty (30) days after
written notice thereof shall have been given by Manager to Lessee, or (iii) make
payments, or keep any covenants owing to any third party and which would cause
Lessee to lose possession of the Facility's buildings, equipment or properties;
(b) If Manager fails (i) to make any payment to or on behalf of
Lessee required to be made by Manager, and such failure shall continue for as
much as thirty (30) days after written notice thereof shall have been given to
Manager, (ii) to perform its obligations under this Agreement in any material
respect, and such failure shall continue for a period of thirty (30) days after
written notice thereof shall have been given by Lessee to Manager, or (iii) to
make payments, or keep any covenants owing to any third party and which would
cause Lessee to lose possession of the Facility's buildings, equipment or
properties;
(c) If, through no fault of Manager, the licenses required for the
operation of Facility are at any time suspended, terminated, or revoked, and
such suspension, termination or revocation shall continue unstayed and in effect
for a period of fourteen (14) consecutive days;
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(d) If, due to Manager's failure to maintain the Facility in material
compliance with applicable laws, regulations or rules, the Facility (i) loses
its Medicaid or Medicare certification, (ii) loses its license to operate as a
nursing home, or (iii) is closed, and such event continues unstayed and in
effect for a period of fourteen (14) consecutive days;
(e) If, due to Manager's failure to maintain the Facility in material
compliance with applicable laws, regulations or rules, patient admissions are
suspended, and such event continues unstayed and in effect for the later of
ninety (90) days or the date on which occupancy decreases more than ten percent
(10%) from the occupancy level at the date of such suspension;
(f) If either Lessee or Manager shall (i) be adjudicated bankrupt;
(ii) admit in writing its inability to pay its debts generally as they become
due; (iii) become insolvent in that its total assets are in the aggregate worth
less than all of its liabilities or it is unable to pay its debts generally as
they become due; (iv) make a general assignment for the benefit of creditors;
(v) file a petition, or admit (by answer, default or otherwise) the material
allegations of any petition filed against it, in bankruptcy under the federal
bankruptcy laws (as in effect on the date of this Agreement or as they may be
amended from time to time), or under any other law for the relief of debtors, or
for the discharge, arrangement or compromise of its debts; or (vi) consent to
the appointment of a receiver, conservator, trustee or liquidator of all or part
of its assets; or
(g) If a petition shall have been filed against Lessee or Manager in
proceedings under the federal bankruptcy laws (as in effect on the date of this
Agreement, or as they may be amended from time to time), or under any other laws
for the relief of debtors, or for the discharge, arrangement or compromise of
its debts, or an order shall be entered by any court of competent jurisdiction
appointing a receiver, conservator, trustee or liquidator of all or part of
Lessee's or Manager's assets, and such petition or order is not dismissed or
stayed within sixty (60) consecutive days after entry thereof.
(h) Receipt of a notice of default or occurrence of any event or
condition which with the passage of time or giving of notice or both would
constitute an event of default under the Loan Agreement and the documents
related thereto (the "Loan Documents"). No grace or cure periods or notice
provisions which may otherwise be available to Lessee shall apply to this
provision. Without limiting the foregoing, upon the receipt of such notice of
default, Manager shall immediately thereupon have the right, without incurring
any liability whatsoever, to discontinue its performance of duties under this
Agreement, including, without limitation, its obligation to cause the
disbursement of any funds under Section 1.06 hereof.
III.02 Remedies Upon Default. If an Event of Default by either party
shall occur and be continuing, the other party may, in addition to any other
remedy available to it in law or equity on account of such event of default,
terminate this Agreement by giving written notice of such termination, and
neither party shall have any further obligations whatever under this Agreement;
provided, however, that as a condition to the effectiveness of Lessee's
termination of this Agreement, Lessee shall pay to Manager all payments due
under Article IV, and shall pay to CHC all amounts outstanding under the CHC
Loan.
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ARTICLE IV.
MANAGEMENT FEE
IV.01 Management Fee. Commencing upon the Effective Date until the end
of the term hereof, Lessee shall pay to Manager a monthly management fee equal
to six and one-half percent (6.5%) of the Facility's "Gross Revenues," as
determined on an accrual basis (the "Management Fee"). "Gross Revenues" shall
mean, for the Facility, total revenues of such Facility, including, without
limitation, all ancillary fees, charges, rentals and other revenue derived in
any way from the operation of such Facility, on an accrual basis, after
deduction of allowances for contractual adjustments as they relate to
third-party payors and before deduction of any and all expenses.
IV.02 Payment of Management Fee. If there is not sufficient cash from
the operation of the Facility to pay the Management Fee when due, the Management
Fee shall be paid with an advance under the CHC Loan.
IV.03 Adjustment. Within fifteen (15) days after the delivery of the
annual financial statements of the Facility, Lessee shall pay to Manager or
Manager shall credit Lessee such amount as is necessary to make the amount of
the Management Fees paid with respect to the year to which the financial
statements relate equal to the amount of Management Fees shown to be due by the
annual financial statements.
ARTICLE V.
INSURANCE
V.01 Insurance/Indemnity. During the term of this Agreement, Manager shall
at all times keep the Facility insured with the kinds and amounts of insurance
described below, which, at a minimum, shall be modified as necessary to satisfy
all requirements of the Facility lessor or any Facility mortgagee. This
insurance shall be written by companies authorized to do insurance business in
the State of North Carolina. The policies will name Lessee and the Facility
lessor as additional insureds, and name any mortgagee of the Facility by way of
standard form of mortgagee's loss payee endorsement. Losses shall be payable to
Lessee, in trust, as provided in Section 5.05 below. Any loss adjustment shall
require the written consent of Lessee, Manager, the Facility lessor, and each
mortgagee. Evidence of insurance shall be deposited with Lessee and, if
requested, with any mortgagee(s). The policies on the Facility shall insure
against the following risks:
(a) Loss or damage by fire and such other risks as may be included in
the broadest form of extended coverage insurance from time to time available,
including but not limited to loss or damage from leakage of any sprinkler system
now or hereafter installed in the Facility, in amounts sufficient to prevent
Lessee or Manager from becoming a co-insurer within the terms of the applicable
policies and in any event in an amount not less than one hundred percent (100%)
of the then full replacement value thereof (as defined below in Section 5.02);
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(b) Loss or damage by explosion of steam boilers, pressure vessels or
similar apparatus, now or hereafter installed in the Facility, in such limits
with respect to any one accident as may be reasonably agreed by Lessee and
Manager from time to time;
(c) Claims for personal injury or property damage under a policy of
general public liability insurance with amounts not less than One Million
Dollars ($1,000,000.00) per occurrence in respect of bodily injury, One Million
Dollars ($1,000,000.00) aggregate per occurrence, and Three Hundred Thousand
Dollars ($300,000.00) for property damage;
(d) Claims arising out of malpractice in an amount not less than One
Million Dollars ($1,000,000.00) for each person and for each occurrence;
(e) Such other hazards and in such amounts as may be customary for
comparable properties in the area and is available from insurance companies
authorized to do business in the State of North Carolina.
(f) Loss of rental under a rental value insurance policy covering a
risk of loss during the first six (6) months of reconstruction resulting from
the occurrence of any of the hazards described in subsections (a) and (b) of
this Section 5.01 in an amount sufficient to prevent Lessee from becoming a
co-insurer; and
(g) Workers' compensation.
V.02 Replacement Cost. The term "full replacement value" of improvements
as used herein, shall mean the actual replacement cost thereof from time to
time, less exclusions provided in the normal fire insurance policy.
V.03 Additional Insurance. In addition to the insurance described above,
Manager shall maintain such additional insurance as may be reasonably required
from time to time by any mortgagee of the Facility.
V.04 Waiver of Subrogation. Any provision in this Agreement to the
contrary notwithstanding, each party, to the extent it is permitted to do so by
the terms and provisions of any of the above policies, hereby waives any and all
rights it may have against the other, its agents, or employees, for any loss or
damage from risks ordinarily insured against under such policies, but only to
the extent that such loss or damage is in fact covered by such insurance and is
collectible by the insured party. Each party further covenants and agrees that
it will, upon request of the other, request each such insurance company to
attach to such policy or policies issued by it a waiver of subrogation with
respect to the other party, its agents or employees.
V.05 Insurance Proceeds. All proceeds payable by reason of any casualty
loss or damage to all or any part of the Facility and insured under any policy
of insurance required by Section 5.01 above of this Agreement shall be paid to
Lessee and held by Lessee in trust (subject to the provisions of Section 5.06
below and the rights of the holders of the Facility mortgages) and shall be made
available for reconstruction or repair, as the case may be, of any damage to or
destruction of the Facility, and shall be paid out by Lessee from time to time
for the reasonable costs of such work. Any excess proceeds of insurance
remaining
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after the completion of the restoration or reconstruction of the Facility
shall be returned, as applicable, to the insurer or Manager as their
interests may appear. All salvage resulting from any such loss covered by
insurance shall belong to Lessee.
V.06 Damage or Destruction. If, during the term of this Agreement, the
Facility is totally or partially destroyed from a risk covered by the insurance
described in Section 5.01 above, Lessee shall, as soon as practicable, and, if
permitted under the Lease, restore the Facility to substantially the same
condition as existed immediately before the destruction. Upon the commencement
of such work, Lessee shall proceed with due diligence to complete such work
within a reasonable period of time. If the costs of the restoration exceed the
amount of proceeds received by Lessee from the insurance required under Section
5.01 Manager shall have the right but not the obligation to pay the difference
between the amount of insurance proceeds and such cost of restoration.
V.07 Restoration of Manager's Property. If Lessee is required to restore
the Facility as provided in Section 5.06, Lessee shall not be required to
restore alterations made by Manager, or Manager's improvements, trade fixtures
or personal property, such excluded items being the sole responsibility of
Manager to restore. Lessee shall, however, be required to restore the
Facility's tangible personal property owned by Lessee.
V.08 Manager's Blanket Policy. Notwithstanding anything to the contrary
contained in this Article V, Manager's obligation to carry the insurance
provided for herein may be brought within the coverage of a so-called blanket
policy, carried and maintained by Manager; provided, however, that the coverage
afforded Lessee will not be reduced or diminished or otherwise be different from
that which would exist under a separate policy meeting all other requirements of
this Agreement.
ARTICLE VI.
COVENANTS OF LESSEE
VI.01 Licensing; Changes and Services. Subject to the terms of the
Lease and this Agreement, Lessee shall take or cause to be taken any and all
actions necessary to be taken by it as the overall supervisor of the assets and
operations of the Facility in order to maintain all required licenses, permits
for the operation of the Facility and the Facility's eligibility to participate
in all public or private third-party medical payment programs, including
providing sufficient funds to bring the Facility in compliance with all
applicable fire safety codes and other laws, regulations and orders, and to
correct all structural, maintenance, procedural and staffing deficiencies as
shown on the surveys and reports of governmental agencies having jurisdiction
over the Facility. Lessee agrees that it will not, through the exercise of its
overall supervisory powers, substantially change the services rendered by the
Facility during the term hereof without the prior written approval of Manager.
VI.02 Transfer of Leasehold. Subject to the requirements of the Lease,
Lessee further acknowledges and agrees that upon the transfer, lease,
assignment, sale or other disposition or conveyance of all or any part of its
leasehold interest in and to the Facility, this Agreement shall remain in full
force and effect unless otherwise terminated as provided in Section 2.02(c).
Subject to the foregoing and to the requirements of the Lease, Lessee
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covenants and agrees that in the event that it sells, assigns or otherwise
transfers its leasehold interest in and to the Facility at any time while
this Agreement is in effect, it will require the transferee to assume the
obligations of Lessee hereunder. The provisions of this Section 6.02 are in
addition to, and do not modify or abridge, the prohibitions against sale,
transfer, assignment or other disposition of the Facility, as set forth in
Section 2.02(c) and elsewhere in this Agreement.
VI.03 Damage or Destruction. If the Facility or any portions thereof
shall be damaged or destroyed by fire or other casualty, Lessee shall commence
to repair, restore, rebuild or replace any such damage or destruction within
sixty (60) days after such fire or other casualty and shall proceed with due
diligence to complete such work within a reasonable period of time.
ARTICLE VII.
MISCELLANEOUS COVENANTS
VII.01 Binding Agreement. The terms, covenants, conditions, provisions
and agreements herein contained shall be binding upon and inure to the benefit
of the parties hereto, their successors and assigns.
VII.02 Relationship of Parties. Nothing contained in this Agreement
shall constitute or be construed to be or to create a partnership, joint venture
or lease between Lessee and Manager with respect to the Facility.
VII.03 Notices. All notices, demands and requests contemplated
hereunder by either party to the other shall be in writing, and shall be
delivered by hand, transmitted by cable, telegram or telecopy (receipt
confirmed), or mailed, postage prepaid, registered, or certified mail return
receipt requested:
(a) to Lessee, by addressing the same to:
North Raleigh Health Investors, LLC
c/o Xxxxxxx X. Xxxxxxxx
00 Xxxxx Xxxxxx, X.X.
Xxxxxxx, Xxxxx Xxxxxxxx 00000
(b) to Manager, by addressing the same to:
Centennial HealthCare Management Corporation
000 Xxxxxxxxx Xxxxxx Xxxxxxx
Xxxxx 000
Xxxxxxx, Xxxxxxx 00000
Attn: Xxxx X. Xxxx, Executive Vice President
or to such other address or to such other person as may be designated by notice
given from time to time during the term of this Agreement by one party to the
other. Any notice hereunder shall be deemed given five (5) business days after
mailing, if given by mailing in
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the manner provided above, or on the date delivered or transmitted if given
by hand, cable, telegraph or telecopy (receipt confirmed).
VII.04 Entire Agreement; Amendments. This Agreement contains the entire
agreement between the parties hereto, and no prior oral or written, and no
contemporaneous oral representations or agreements between the parties with
respect to the subject matter of this Agreement shall be of any force and
effect. Any additions, amendments or modifications to this Agreement shall be
of no force and effect unless in writing and signed by both Lessee and Manager.
VII.05 Governing Law. All the terms and provisions hereof and the
rights and obligations of the parties hereto shall be governed by, and construed
and enforced in accordance with, the laws of the State of Georgia (without
regard to its rules of conflicts of laws).
VII.06 Captions and Headings. The captions and headings throughout this
Agreement are for convenience and reference only and do not constitute a part
hereof.
VII.07 Disclaimer of Employment of Facility Employees. No person
employed in the operation of the Facility will be an employee of Manager, and
Manager will have no liability for payment of their wages, fringe benefits,
payroll taxes and other expenses of employment.
VII.08 Costs and Expenses; Indemnity. Unless otherwise expressly
provided herein, all fees, costs and expenses arising out of, relating to or
incurred in the operation of the Facility, including, without limitation, the
fees, costs, and expenses of Manager and outside consultants and professionals,
shall be the sole responsibility of Lessee and shall be payable as operating
expenses of the Facility. Manager, by reason of the execution of this Agreement
or the performance of its services hereunder, shall not be liable for or deemed
to have assumed any liability for such fees, costs and expenses, or any other
liability or debt of Lessee whatsoever, arising out of or relating to the
Facility or incurred at its operation, except the salary of Manager's employees
and the expenses and costs incurred at its central administrative offices in
performance of its obligations hereunder. Lessee agrees to indemnify and hold
Manager, CHC and their officers, directors, agents and employees harmless from
and against all losses, claims, damages or other liabilities, including the
costs and expenses incurred in connection therewith, arising out of or relating
to the ownership of the Facility (except those resulting from the wilful
misconduct or negligence of Manager or CHC), including, without limitation, any
liability asserted against Manager or CHC or any of their officers, directors,
employees or agents by reason of any action taken by any of the foregoing while
performing the duties of Manager hereunder on behalf of Lessee.
VII.09 Responsibility for Misconduct of Employees and Other Persons.
Manager will have no liability whatsoever for damages suffered on account of the
dishonesty, misconduct or negligence of any employee of or employee leased by
the Facility or any officer, director, partner, shareholder, employee or agent
of Lessee. Manager shall be liable to the Facility in connection with damage or
loss directly sustained by Lessee by reason of the dishonesty, wilful misconduct
and gross negligence of Manager's employees in the operation of the Facility
during the term of this Agreement.
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7.10 Advances by Manager. Manager shall have the right, but not the
obligation, to acquire for the benefit of Lessee, under the CHC Loan, any and
all sums required to maintain all necessary licenses and permits and to
otherwise keep the Facility operating as a fully insured nursing home in good
condition and repair. All such sums advanced under the CHC Loan to Lessee shall
be repaid by Lessee in accordance with the terms of the Loan Agreement and the
Loan Documents, and Manager shall have the right at any time and from time to
time to instruct the signatories of the Operating Accounts to withdraw and pay
such amounts as are necessary to repay such advances.
7.11 Definition of Affiliate. For purposes of this Agreement, the term
"Affiliate" shall mean any person or entity which Manager or Lessee or their
respective shareholders or individual partners, directly or indirectly, through
one or more intermediaries, controls, is in common control with, or is
controlled by.
7.12 Authorization of Agreement. Manager and Lessee represent and warrant,
each to the other with respect to itself, that the execution and delivery of
this Agreement has been duly authorized by all respective action, will not
presently or with the passage of time, the giving of notice, or both result in a
default under or violate or conflict with (i) the provisions of the articles of
incorporation and bylaws of Manager or the formation documents and operating
agreement of Lessee, or (ii) any other material agreement, mortgage, loan
agreement or other contract or instrument by which either party is bound or to
which any of its property or assets are subject, or (iii) any existing law,
regulation, court order or consent decree by which either party is bound or to
which any of its property or assets are subject.
7.13 Severability. If any one or more of the provisions of this Agreement
are held invalid or unenforceable, the validity and enforceability of all other
provisions of this Agreement shall remain in full force and effect, unless
enforcing the remainder of the provisions would not satisfy the original
intentions of the parties.
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IN WITNESS WHEREOF, the parties hereto have executed, sealed and delivered
this Agreement through their duly authorized representatives, as of the day and
year first above written.
LESSEE:
NORTH RALEIGH HEALTH INVESTORS, LLC
By:/s/ Xxxxxxx X. Xxxxxxxx
Name: Xxxxxxx X. Xxxxxxxx
Its:
MANAGER:
CENTENNIAL HEALTHCARE MANAGEMENT CORPORATION
By:/s/ Xxxxxxx X. Xxxxxxx
Name: Xxxxxxx X. Xxxxxxx
Its:Executive Vice President
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SCHEDULE 10.51
CHMC has entered into an agreement substantially identical to Exhibit 10.51
as follows:
1. Long-Term Care Facility Management Agreement dated June 1, 1997 with
Rockingham Health Investors, LLC for Rockingham, North Carolina facility.
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