EXHIBIT 10.40
LONG-TERM CARE FACILITY
MANAGEMENT AGREEMENT
THIS LONG-TERM CARE FACILITY MANAGEMENT AGREEMENT (the "Agreement") is
made as of the 31st day of January, 1997, by and between International
Health Care Properties 72, L.P., a Georgia limited partnership ("Owner"), and
Centennial HealthCare Management Corporation, a Georgia corporation ("Manager").
W I T N E S S E T H :
WHEREAS, Owner presently owns and/or as manages, as or for the certified
and licensed operation thereof, certain real and personal property (both
tangible and intangible) comprising a certain 144-bed nursing center located in
Oakland County, Novi, Michigan (the "Facility"); and
WHEREAS, Owner and Manager desire for Manager to provide its experience,
skill and supervision to manage the Facility on behalf of Owner under and
subject to the terms of this Agreement.
NOW, THEREFORE, in consideration of the premises and mutual promises and
covenants of the parties contained herein and for such other good and valuable
consideration, the receipt, adequacy and sufficiency of which are hereby
acknowledged, the parties hereby agree as follows:
ARTICLE I.
MANAGEMENT DUTIES AND OBLIGATIONS
1.01 Control Retained by Owner. Owner 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 Owner and in accordance with the policies and
directives from time to time adopted by Owner.
1.02 Changes in Method of Operation. Manager shall not make substantial
changes in the method of operating the Facility unless Manager first notifies
Owner and Owner has given its approval, which approval shall not be unreasonably
withheld. Notwithstanding the foregoing, however, Manager shall have the right
to add to, expand, or change the Facility or the services provided at the
Facility without approval by Manager, subject to the requirements of any
Mortgagees of the Facility or any regulatory agencies having jurisdiction over
such addition, expansion, or change. Owner shall join in any certificate of need
or other applications required to effect such addition, expansion or other
change.
1.03 Management of Facility. During the term of this Agreement and subject
to the terms and conditions of this Agreement, Manager shall on behalf of Owner
manage certain aspects of the operation of the Facility. Manager may perform
such services directly, through supervision of Employees of the Facility, or by
subcontracting such performance (including, without limitation, subcontracts
with affiliates or subsidiaries of Centennial HealthCare Corporation, Manager's
parent corporation), as Manager deems fit, and upon such terms and conditions as
Manager shall determine in its sole discretion.
(a) Hire or lease on behalf of Owner 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 Owner at
Manager's sole discretion; provided, however, that leased employees shall be
subject to the direction and control of the lessor of such leased employees. All
employees shall be employees of or leased by Owner 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 Owner; 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 claims related
to revenue production. Owner hereby grants Manager the right to enforce Owner'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 Facility.
(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
Owner, Manager and such other persons requested by Owner and Manager as insureds
as provided in Section 6.01 hereof.
(j) Negotiate and enter into, in the name of and on behalf of Owner,
such agreements, contracts and orders as Manager may deem necessary or
advisable, for the furnishing of services, concessions and supplies for the
operation and maintenance of the Facility.
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(k) After notice to Owner, negotiate on behalf of Owner (and in
conjunction with Owner's counsel) with any labor union lawfully entitled to
represent employees of Owner who work at the Facility, but any collective
bargaining agreement or labor contract must be submitted to Owner 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) Negotiate and arrange for the sale or refinancing of the
Facility to Manager or an affiliate of Manager or to a third party, provided any
sale of the Facility shall be for a purchase price equal to or greater than the
Option Price set forth in Section 3.03 of this Agreement.
1.04 Reports to Owner.
(a) Manager shall prepare and deliver to Owner or shall cause to be
prepared and delivered to Owner, 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.
(b) Manager shall submit to Owner or shall cause to be submitted to
Owner, for Owner's 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 Owner. Such proposed budget for the Facility shall be
delivered to Owner prior to the commencement of the operational fiscal year of
the Facility.
(c) Manager shall schedule periodic management meetings to be
attended by representatives of both Manager and Owner no less frequently than
semi-annually and shall furnish to Owner quarterly written progress reports
concerning the operation of the Facility.
1.05 Bank Accounts.
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 may at its option "sweep" these accounts as often as it deems
appropriate, and in its discretion either (i) consolidate and commingle the
Facility Funds with funds from other facilities owned, operated or managed by
Manager into Manager's primary concentration/operating account(s) in
NationsBank, Atlanta, Georgia or such other place and with such financial
institutions as Manager may determine (the "Operating Accounts"), or (ii)
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(a) below. Manager shall also deposit and
maintain the personal
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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.
1.06 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 loan payments, including accrued and
unpaid interest and principal amortization, due from
Owner to Capstone Capital Corporation ("Capstone")
pursuant to that certain Loan Agreement dated as of
January 31, 1997 by and between Capstone and Owner (the
"Capstone Loan") or such other lender as may provide
mortgage financing encumbering the Facility from time to
time;
(2) the costs and expenses of operating the Facility,
including the reimbursable expenses of Manager;
(3) such reserves for capital replacements or other purposes
as shall be required by any lender to Owner or as
Manager shall deem appropriate in its sole discretion;
(4) all accrued and unpaid Fixed Management Fees (defined in
Section 5.01) to Manager;
THEN, after retention by Manager of an adequate working
capital reserve (in cash or available credit under a working
capital loan or line of credit obtained to the operating needs
of the Facility (the "Working Capital Loan") (such reserve to
be determined by Manager in its discretion and held in such
subaccount of the Facility Depository, Operating or Segregated
Facility Accounts as Manager shall determine);
(5) all accrued and unpaid interest on the Working Capital
Loan; and
(6) any principal balance outstanding under the Working
Capital 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
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collected net revenues (resulting in an "Operating Deficit"), Manager shall, as
soon as possible and not less than five (5) business days after notice from
Owner, advance funds under the Working Capital 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
United States, or any of their duly authorized representatives, the subcontract
or subcontracts, and all books, documents and records of such subcontractors for
which payment may be made under the Medicare program.
1.08 Licenses.
(a) Manager, as agent for Owner and on Owner'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 Owner in the Certificate of Need
application for the Facility with the Michigan Agency for Health Care
Administration, 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 Owner 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 Owner's right to accept and obtain payments
under Medicare, Medicaid, or any other public or private third party medical
payment program.
(c) Manager shall, with the written approval of Owner, have the
right to contest or cause to be contested by appropriate legal proceedings,
diligently conducted in
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good faith in the name of Owner, 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. Owner, 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 Owner's approval which shall not be unreasonably withheld. Manager
shall have the right, upon notice to Owner but without the written consent of
Owner, to process all third-party claims for the services of the Facility,
including, without limitation, the full right to contest to the exhaustion of
all applicable administrative proceedings or procedures, adjustment and denials
by governmental agencies or their fiscal intermediaries as third-party payors.
1.09 Administrator. Manager shall employ or lease for the Facility an
Administrator to serve as the chief executive officer of such Facility. The
Administrator shall be an employee of and shall be compensated by Owner and
Manager shall pay on Owner's behalf out of the Operating Accounts of the
Facility, in advance, on or before the fifth (5th) day of each month, all
compensation, including salary, fringe benefits, bonuses and business expense
reimbursements approved by Manager, to the Administrator. The term "fringe
benefits" shall include, without limitation, employer's F.I.C.A. payments,
unemployment compensation and other employment taxes, bonuses, vacation,
personal and sick leave benefits, workers' compensation, group life, health and
accident insurance premiums and disability and other benefits.
1.10 Taxes. Any federal, state or local taxes, assessments or other
governmental charges properly imposed on the Facility are the obligations of
Owner, not of Manager, but all such obligations shall be paid by Manager on
Owner's behalf out of the Facility Funds. With Owner's prior written consent,
Manager may contest the validity or amount of any such tax or imposition on the
Facility.
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 Owner.
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
Owner of the actions necessary in order to be in compliance therewith and
expending such funds of Owner as Owner may provide or as Manager may deem
available for such purpose.
1.13 Quality Controls. Manager shall activate and maintain on a continuing
basis a "Quality Assurance Program" in order to provide objective measurements
of the quality of health care provided at the Facility and, in connection
therewith, shall utilize such techniques as patient questionnaires and
interviews, physician questionnaires and interviews, and inspections.
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1.14 Staff Specialists. In addition to the other managerial services
provided for herein, Manager shall provide or cause to be provided to the
Facility, for consultation and advice, staffing services to include, 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. Owner agrees that any specialized or additional
services recommended by Manager, including, without limitation, services
described in Section 1.12, 1.13, and 1.14 of this Agreement may be performed for
a separate fee. Such services may be performed directly by Manager, by employees
of the Facility under the supervision of Manager or by subcontractors
(including, without limitation, subcontracts with affiliates or subsidiaries of
Centennial HealthCare Corporation, Manager's parent corporation), as Manager
deems fit, and upon such terms and conditions as Manager shall determine in its
sole discretion. If Manager provides such service directly, 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. Examples of such services
include, without limitation, (a) the preparation of annual financial reports and
tax returns; (b) the preparation of Medicare and Medicaid cost reports; (c)
costs incurred in the maintenance of lending relationships with Owner's
mortgagee and working capital lender; and (d) any other expenses of Manager in
performing services for the benefit of Owner not expressly covered in this
Agreement.
1.17 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.
1.18 Civil Money Damages. Manager agrees that if any civil money penalties
are imposed by HCFA or the State of Michigan as a result of the nursing care
and/or treatment provided to residents of the Facility by employees of the
Facility, Manager will reimburse Owner for the amount of the civil money penalty
imposed; provided, however, that 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 Michigan. Manager reserves the right to appeal or waive
appeal of any civil money penalty imposed by HCFA or the State of Michigan.
Manager further reserves the right to retain counsel to represent the Facility
in any appeal or settlement proceedings.
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ARTICLE II.
TERM AND TERMINATION
2.01 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 twentieth (20th) anniversary thereof (the
"Initial Period"), or (ii) the date on which Manager ceases to furnish
management services to the Facility and this Agreement is terminated for
whatever reason; provided however, that Manager shall have the option to extend
the term of this Agreement for two (2) consecutive additional periods of ten
(10) years each beyond the Initial Period (the "Second Period" and "Third
Period," respectively, and together with the Initial Period the "Term") upon
Manager's written notice to Owner and payment to Owner of an extension fee of
Five Hundred Dollars ($500.00) at the time Manager exercises such option, or
upon demand made thereafter by Owner.
2.02 Optional Termination by Manager.
(a) Manager has the option to terminate this Agreement, without
damage or penalty, upon ten (10) days prior written notice to Owner, 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 hereunder, Manager shall have the right, but not the obligation 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.
ARTICLE III.
OPTION
3.01 Option to Purchase. Manager shall have the option to purchase the
Facility from Owner subject to the terms and conditions herein (the "Option").
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3.02 Exercise of Option. Manager may exercise the Option at any time
during the Term of this Agreement, or within 180 days after any valid
termination of this Agreement. Manager may exercise the Option by providing
Owner ten (10) days prior written notice of Manager's intention to purchase the
Facility.
3.03 Option Price. If Manager exercises the Option, the purchase price to
be paid by Manager to Owner for the Facility shall be the greater of:
(a) Five times the annual net operating income of the Facility; or
(b) The sum of:
(1) the outstanding principal balance of any and all loans
encumbering the Facility, including, without limitation,
the Capstone Loan and the Working Capital Loan, or any
renewals, replacements, consolidations, or other
extensions of secured credit in respect of the Facility;
and
(2) any prepayment penalties associated with the repayment
of the Capstone Loan and/or the Working Capital Loan;
REDUCED BY the sum of any credits or reserves deposited with
lenders in respect of the Facility.
ARTICLE IV.
DEFAULT AND REMEDIES
4.01 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 Owner 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 Owner, and such failure shall continue for as
much as thirty (30) days after notice thereof shall have been given to Owner,
(ii) perform its obligations under this Agreement in any material respect, and
such default shall continue for a period of thirty (30) days after notice
thereof shall have been given by Manager to Owner, or (iii) make payments, or
keep any covenants owing to any third party and which would cause Owner to lose
possession of the Facility's buildings, equipment or properties;
(b) If Manager fails (i) to make or cause to be made any payment to
or on behalf of Owner required to be made by Manager, and such failure shall
continue for as much as thirty (30) days after 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 notice thereof shall have been given by Owner to Manager, or (iii) to
make payments, or keep any covenants owing to any third party and which would
cause Owner 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,
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termination or revocation shall continue unstayed and in effect for a period of
fourteen (14) consecutive days;
(d) If, due to Manager's failure to maintain the Facility in
material compliance with applicable laws, regulations or rules, the Facility (1)
loses its Medicaid or Medicare certification, (2) loses its license to operate
as a nursing home, or (3) 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 Owner or Manager shall (1) be adjudicated bankrupt;
(2) admit in writing its inability to pay its debts generally as they become
due; (3) 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; (4) make a general assignment for the benefit of creditors; (5)
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 (6) 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 Owner 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
Owner's or Manager's assets, and such petition or order is not dismissed or
stayed within sixty (60) consecutive days after entry thereof.
4.02 Remedies Upon Default. If any 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, forthwith
terminate this Agreement by giving written notice of such termination, and
neither party shall have any further obligations whatever under this Agreement,
except Manager shall retain the Option for 180 days after termination of this
Agreement.
ARTICLE V
MANAGEMENT FEE
5.01 Management Fee. Commencing from the effective date of this Agreement
and continuing until the end of the Term hereof, Owner shall pay to Manager a
monthly fee of seven percent (7.0%) of the "Gross Revenues" generated by the
Facility, 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
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deduction of allowances for contractual adjustments as they relate to
third-party payors and before deduction of any and all expenses.
5.02 Payment of Management Fee. On or before the tenth (10th) day of each
month during the Term hereof, Owner shall pay Manager an estimated Management
Fee based on the estimated Gross Revenues of the Facility during the current
month. The Management Fee due hereunder shall be paid from the Facility Funds.
If there is insufficient 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 Working Capital Loan.
5.03 Fees for Additional Services. Any additional fees charged to Owner
pursuant to Section 1.16 hereof shall be paid by Owner to Manager from time to
time at Manager's sole discretion.
5.04 Adjustment. Within fifteen (15) days after the delivery of the annual
financial statements of the Facility, Owner shall pay to Manager or Manager
shall credit Owner 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 the Management Fees shown to be due by the annual
financial statements.
ARTICLE VI
INSURANCE
6.01 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 any Facility mortgagee. This insurance shall be written by
companies authorized to do insurance business in the State of Michigan. The
policies will name Owner as additional insured, and name any mortgagee of the
Facility by way of standard form of mortgagee's loss payee endorsement. Losses
shall be payable to Owner, in trust, as provided in Section 6.05 below. Any loss
adjustment shall require the written consent of Owner, Manager and each
mortgagee. Evidence of insurance shall be deposited with Owner 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
Owner 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 6.02);
(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 Owner 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 and
No/100 Dollars ($1,000,000.00) per occurrence in respect of bodily injury, One
Million and No/100 Dollars
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($1,000,000.00) aggregate per occurrence, and Three Hundred Thousand and No/100
Dollars ($300,000.00) for property damage;
(d) Claims arising out of malpractice in an amount not less than One
Million and No/100 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 Michigan; and
(f) Workers' compensation.
6.02 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.
6.03 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.
6.04 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.
6.05 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 6.01 above of this Agreement shall be paid to
Owner and held by Owner in trust (subject to the provisions of Section 6.06
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 Owner from time to time
for the reasonable costs of such work. Any excess proceeds of insurance
remaining 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.
6.06 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 6.01 above, Owner shall, as soon as practicable, restore
the Facility to substantially the same condition as existed immediately before
the destruction. Upon the commencement of such work, Owner 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 Owner from
the insurance required under Section 6.01 Manager shall have the right but not
the obligation to pay the difference between the amount of insurance proceeds
and such cost of restoration.
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6.07 Restoration of Manager's Property. If Owner is required to restore
the Facility as provided in Section 6.06, Owner 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. Owner shall, however, be required to restore the Facility's tangible
personal property owned by Owner.
6.08 Manager's Blanket Policy. Notwithstanding anything to the contrary
contained in this Article VI, 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 Owner 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 VII.
COVENANTS OF OWNER
7.01 Licensing; Changes and Services. Subject to the terms of this
Agreement, Owner agrees to take or cause to be taken any and all actions
necessary to be taken by it as the overall supervisor of the assets and
operations of the Facility in order to maintain all required licenses, permits
for the operation of the Facility and the Facility's eligibility to participate
in all public or private third-party medical payment programs, including
providing sufficient funds to bring the Facility in compliance with all
applicable fire safety codes and other laws, regulations and orders, and to
correct all structural, maintenance, procedural and staffing deficiencies as
shown on the surveys and reports of governmental agencies having jurisdiction
over the Facility. Owner 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.
7.02 Damage or Destruction. If the Facility or any portions thereof shall
be damaged or destroyed by fire or other casualty, Owner 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 VIII.
MISCELLANEOUS COVENANTS
8.01 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.
8.02 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 Owner and Manager with respect to the Facility.
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8.03 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 Owner, by addressing the same to:
International Health Care Properties 72, L.P.
000 XXX Xxxxx
Xxxxx 000
Xxxxxxxxx, Xxxxxxxxx 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) days after mailing,
if given by mailing in the manner provided above, or on the date delivered or
transmitted if given by hand, cable, telegraph or telecopy (receipt confirmed).
8.04 Entire Agreement; Amendments. The Agreement contains the entire
agreement between the parties hereto, and no prior oral or written, and no
contemporaneous oral representations or agreements between the parties with
respect to the subject matter of this Agreement shall be of any force and
effect. Any additions, amendments or modifications to this Agreement shall be of
no force and effect unless in writing and signed by both Owner and Manager.
8.05 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).
8.06 Captions and Headings. The captions and headings throughout this
Agreement are for convenience and reference only and do not constitute a part
hereof.
8.07 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.
8.08 Responsibility for Misconduct of Employees and Other Persons. Manager
shall be liable to the Facility in connection with damage or loss directly
sustained by Owner by reason of the dishonesty, wilful misconduct and gross
negligence of Manager's employees in the operation of the Facility during the
term of the Agreement.
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8.09 Authorization of Agreement. Manager and Owner 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 Owner, 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.
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.
OWNER:
INTERNATIONAL HEALTH CARE PROPERTIES 72,
L.P.
By: International Health Care
Associates 72, Inc., as General Partner
By: /s/ Xxxx X. Xxxxx
------------------------------------
Name: Xxxx X. Xxxxx
Its: Executive Vice President
MANAGER:
CENTENNIAL HEALTHCARE MANAGEMENT
CORPORATION
By: /s/ Xxxxxxx X. Xxxxxxx
------------------------------------
Name: Xxxxxxx X. Xxxxxxx
Its: Executive Vice President
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SCHEDULE 10.40
CHMC has entered into an agreement with International Health Care
Properties 72, L.P. substantially identical to Exhibit 10.40 as follows:
1. Long Term Care Facility Management Agreement dated January 31, 1997 for
Farmington Hills, Michigan facility.
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