EX 10.21.3
AGREEMENT TO PROVIDE MANAGEMENT SERVICES
TO A LONG TERM CARE FACILITY
AGREEMENT TO PROVIDE MANAGEMENT
SERVICES TO A LONG TERM CARE FACILITY
This Agreement made this __ day of December, 1997,
between Sunrise Healthcare Corporation, a New Mexico
corporation (hereinafter referred to as "Manager"), and
Emeritus Corporation, a Washington corporation
(hereinafter referred to as "Emeritus").
WHEREAS, Emeritus is the lessee of a long term
care facility known as Heritage Health Center and
located at 000 Xxxxxxxx Xxxxx, Xxxxxxxxxxxxxx, Xxxxx
Xxxxxxxx (the "Facility") under the terms of that Lease
Agreement dated January 26,1996 between Health Care
Property Investors, Inc. ("HCPI"), as landlord and
Emeritus, as Tenant (the "Lease"); and
WHEREAS, Emeritus wants someone to manage the
Facility on its behalf;
WHEREAS, Manager is experienced and qualified in
the field of health care management;
WHEREAS, Emeritus has determined that Manager's
price is economical in light of the range of services
which it provides; and
WHEREAS, Manager is willing to operate the
Facility on Emeritus' behalf, pursuant to the terms and
conditions set forth herein.
NOW THEREFORE, in consideration of the foregoing
premises and the mutual covenants herein contained, IT
IS AGREED AS FOLLOWS:
I. MANAGEMENT AND CONSULTING RESPONSIBILITIES OF
MANAGER: Emeritus hereby engages Manager and Manager
hereby accepts such engagement and agrees to provide
management, consulting and advisory services to
Emeritus in connection with the operation of the
Facility, upon the terms and conditions set forth in
this Agreement. By entering into this Agreement,
Emeritus does not delegate to Manager any powers,
duties or responsibilities which it is prohibited by
law from delegating. Emeritus also retains such other
authority as shall not have been expressly delegated to
Manager pursuant to this Agreement. Subject to the
foregoing, Manager shall provide the following
services:
(a) OPERATIONAL POLICIES AND FORMS: Manager shall
implement operational policies and procedures and
develop such new policies and procedures as it deems
necessary to insure the establishment and maintenance
of operational standards appropriate for the nature of
the Facility.
(b) CHARGES: Manager shall establish the schedules
of recommended charges, including any and all special
charges for services rendered to the patients at the
Facility. Emeritus shall have the right to review the
charge schedules established by Manager.
(c) INFORMATION: Manager shall develop any
informational material, mass media releases, and other
related publicity materials, which it deems necessary
for the operation of the Facility.
(d) REGULATORY COMPLIANCE: Manager, with the
assistance of Emeritus if requested by Manager, shall
use its best efforts to maintain all licenses, permits,
qualifications and
approvals from any applicable governmental or
regulatory authority for the operation of the Facility
and to manage the operations of the Facility in full
compliance with all applicable laws and regulations,
including, but not limited to the laws and regulations
governing the licensure of nursing homes under North
Carolina law and the certification of nursing homes
under Medicare and Medicaid and local, state and
federal employment rules and regulations. The cost of
all such regulatory and legal compliance shall be
deemed to be a Facility operating expense and shall be
paid from the revenues of the Facility or from the
working capital provided by Emeritus pursuant to the
terms of this Agreement; provided, however, that if and
to the extent Emeritus is able to demonstrate that any
such regulatory and/or legal non-compliance is due to
the acts or omissions of Manager in performing its
obligations under this Agreement, Manager shall be
solely liable for any damages, losses, costs or
expenses which Emeritus incurs as a result thereof.
(e) EQUIPMENT AND IMPROVEMENTS: Manager shall
advise Emeritus as to equipment and improvements which
are needed to maintain or upgrade the quality of the
Facility and to replace obsolete or run-down equipment
or to correct any other survey deficiencies which may
be cited during the term of this Agreement. Emeritus
shall review and act upon Manager's recommendations as
expeditiously as possible. Manager shall not be liable
for any cost or liability which Emeritus may incur in
the event Emeritus disregards Manager's
recommendations. Manager shall make all necessary and
approved repairs, replacements and maintenance within
the budgetary limits set forth in the annual capital
budget prepared by Manager pursuant to Paragraph L and
in a workmanlike and lien free manner.
(f) ACCOUNTING: Manager shall provide home office
and accounting support to the Facility, which shall
include the preparation of any Medicare or Medicaid
cost reports due for the cost reporting periods covered
by the term of this Agreement; provided, however, that
to the extent any such cost reporting periods include
periods prior to the commencement of the term of this
Agreement, Emeritus shall provide or cause to be
provided to Manager any and all documentation which
Manager may deem to be reasonably necessary to prepare
such cost reports; and provided, further that to the
extent any costs reports are required to be filed after
the expiration or sooner termination of the term of
this Agreement which include, in part, the period
covered by the term of this Agreement, Manager shall,
upon request, provide Emeritus or any successor manager
with any information which it may have which is
reasonably necessary for the preparation of such cost
reports. All accounting procedures and systems utilized
in providing said support shall be in accordance with
the operating capital and cash programs developed by
Manager, which programs shall conform to generally
accepted accounting principles and shall not materially
distort income or loss. In addition, at Emeritus' sole
cost and expense, Manager shall prepare or cause to be
prepared all payroll tax returns which may be due
during the term of this Agreement. Emeritus shall
prepare or cause to be prepared all other local, state
and federal tax returns, subject to Manager's
obligation, upon request of Emeritus, to pay any taxes
which are due thereunder from the funds in the
Facility's bank account, except to the extent the same
are being duly contested by Emeritus or, at Emeritus's
request and at Emeritus' sole cost and expense, by
Manager. The costs incurred by Manager in preparing the
payroll tax returns shall not be included in Manager's
management fee, but shall be separately reimbursed by
Emeritus; the costs incurred by Manager in preparing
the Medicare and Medicaid cost reports and any other
financial information required by the terms of this
Agreement shall be included in Manager's management
fee. The taxes and any reimbursement obligations due to
Medicare and/or Medicaid shall be deemed to be Facility
operating expenses and shall be paid out of the
revenues of the Facility or the working capital
provided by Emeritus.
(g) REPORTS: Manager shall prepare and provide to
Emeritus any reasonable operational information which
may from time to time be specifically requested by
Emeritus, including any information needed to assist
Emeritus in completing its tax returns and in complying
with any reporting obligations imposed by any landlords
or mortgagees. In addition, (i) within twenty (20) days
after the end of each calendar month, Manager shall
provide Emeritus with an
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unaudited balance sheet of the Facility, dated the last
day of such month, and an unaudited statement of income
and expenses for such month relating to the operation
of the Facility and a "mini" Medicare cost report and
(ii) within forty five (45) days after the end of the
fiscal year of the Facility, Manager shall provide
Emeritus with unaudited financial statements including
a balance sheet of the Facility, dated the last day of
said fiscal year, and a statement of income and expense
for the year then ended relating to the operation of
the Facility. Upon request Manager shall provide
Emeritus with any and all supporting documentation
which it may reasonably request with respect to the
information contained in the financial statements
prepared by Manager and delivered to Emeritus pursuant
hereto.
(h) BANK ACCOUNTS: Manager shall maintain the
existing checking account previously established by
Emeritus in the name of the Facility and shall deposit
therein all money received during the term of this
Agreement in the course of the operation of the
Facility; provided, however, that during the term
hereof, withdrawals and payments from this account
shall be made only on checks signed by a person or
persons designated by Manager. Emeritus shall be given
notice as to the identity of said authorized
signatories. All expenses incurred in the operation of
the Facility in accordance with the terms of the
Budgets submitted to Emeritus under Paragraph I(1),
including, but not limited to, Facility mortgage or
lease payments, payroll and employee benefits and
payment of Manager's management fee, shall be paid by
check drawn on this account. Withdrawals from this
account shall be made first to pay Manager's management
fee and thereafter to pay Facility expenses in such
order of priority as Manager deems appropriate to the
operation of the Facility. In the event the revenues
generated by the Facility are at any time insufficient
to pay all of the expenses associated with its
operation, including, but not limited to, Manager's
management fee, Emeritus shall, within five (5) days of
its receipt of a written demand by Manager, deposit in
the Facility bank account sufficient funds to satisfy
the then working capital needs of the Facility. The
amounts so advanced shall be deemed to be loans by
Emeritus to the Facility and shall be repaid by Manager
from future Facility revenues in accordance with the
provisions of Section IX hereof
(i) PERSONNEL: Manager shall recruit, employ,
train, promote, direct, discipline, suspend and
discharge Facility personnel; establish salary levels,
personnel policies and employee benefits; and establish
employee performance standards, all as needed during
the term of this Agreement to ensure the efficient
operation of all departments within and services
offered by the Facility. All of the Facility personnel,
other than the Facility Administrator who shall be an
employee of Manager, shall be the employees of
Emeritus. Notwithstanding the foregoing, the salary and
benefits of the Administrator shall be deemed to be an
operating expense of the Facility and shall be paid
from the bank account described in Paragraph I(h).
Manager shall provide Emeritus with a workers
compensation loss run within twenty (20) days after the
end of each month, along with the monthly financial
statements provided pursuant to Paragraph I(f) and with
copies of any and all equal employment opportunity
claims which may be filed during the term of this
Agreement within five (5) business days after Manager's
receipt thereof, whether such claims related to the
period prior to or during the term of this Agreement.
Emeritus shall be responsible for the defense of any
and all such EEOC claims but Manager shall cooperate in
such defense and shall provide Emeritus with any and
all documents necessary for such defense which Emeritus
may reasonably request and which are in Manager's
possession or under Manager's control.
(j) SUPPLIES AND EQUIPMENT: Manager shall purchase
supplies and non-capital equipment needed to operate
the Facility within the budgetary limits set forth in
the annual operating budget prepared by Manager
pursuant to Paragraph I(1). In purchasing said supplies
and equipment, if possible, Manager shall take
advantage of any national or group purchasing
agreements to which Manager or Emeritus (if and to the
extent Emeritus gives Manager notice of such
agreements) may be a party.
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(k) LEGAL PROCEEDINGS: Manager shall, through its
legal counsel, coordinate all legal matters and
proceedings with Emeritus' counsel.
(1) BUDGETS: The Facility shall be operated on a
fiscal year of January 1 through December 31. Within
forty-five (45) days prior to the start of each fiscal
year, Manager shall prepare and submit to Emeritus for
its review and approval, which approval shall not be
unreasonably withheld, an annual operating budget, an
annual capital expenditure budget, and an annual cash
flow projection. The capital budget shall in
substantially the form attached hereto as Exhibit A. In
the event a budget has not been agreed upon by the
beginning of the fiscal year, the budget in effect for
the prior fiscal year shall continue in effect until
the new budget is agreed upon. Thereafter, any
expenditures made during the year pursuant to said
budgets and/or any expenditures on an item-by-item
basis exceeding by no more than 10% the amounts set
forth therein for the applicable expense item (the
"Budget Threshold") may be made without Emeritus' prior
approval. Any unbudgeted expenditures and/or any
expenditures in excess of the Budget Threshold shall be
subject to Emeritus' prior approval, which approval
shall not be unreasonably withheld.
(m) COLLECTION OF ACCOUNTS: Manager shall issue
bills and collect accounts and monies owed for goods
and services furnished by the Facility, including, but
not limited to, enforcing the rights of Emeritus and
the Facility as creditor under any contract or in
connection with the rendering of any services;
provided, however, that any expenses incurred by
Manager in so doing shall be treated as Facility
operating expenses, which shall be payable out of
Facility funds deposited in the bank account described
in Section I(h).
II. INSURANCE: Upon request, Manager, at Emeritus'
sole cost and expense, shall arrange for and maintain
all necessary and proper hazard insurance covering the
Facility, the furniture, fixtures, and equipment
situated thereon, and all necessary and proper
malpractice and public liability insurance for
Emeritus' protection and for the protection of
Emeritus' officers, agents and employees. Until such a
request is made and/or in the event Manager is unable
to secure insurance coverage for the Facility for any
reason whatsoever, Emeritus shall be responsible for
obtaining and maintaining said insurance. In addition,
Emeritus shall provide all employee health and worker's
compensation insurance for its employees, which
insurance shall be administered by Manager. Manager
shall arrange for and maintain all necessary and proper
malpractice and public liability insurance for the
protection of itself, its officers, agents and
employees. Any insurance provided pursuant to this
paragraph shall comply with the requirements of the
Lease or any applicable Facility mortgage.
III. PROPERTY INTEREST: The systems, methods,
procedures and controls employed by Manager and any
written materials or brochures developed by Manager to
document the same are to remain the property of Manager
and are not, at any time during or after the term of
this Agreement, to be utilized, distributed, copied or
otherwise employed or acquired by Emeritus, except as
authorized by Manager.
IV. TERM OF AGREEMENT: The Term of this Agreement
shall commence at 12 : 01 AM on January 1,1998 and
shall terminate at midnight on December 31,1998, unless
sooner terminated (i) due to the fact that 50"% or more
of the Facility is damaged or destroyed or taken by
condemnation proceedings or otherwise and Emeritus to
the extent permitted by the Lease or mortgage documents
does not elect to rebuild or repair, (ii) upon the
occurrence of an Event of Default or (iii) upon the
assignment of the Lease to Manager pursuant to the
terms of the First of First Refusal Agreement of even
date herewith between Emeritus and Manager.
V. DEFAULT: Either party may terminate this
Agreement, as specified in this Section V,
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in the event of a default ("Event of Default") by the
other party.
(a) With respect to Manager, it shall be an "Event
of Default" hereunder:
(i) If Manager shall fail to keep, observe or
perform any material agreement, term or provision of
this Agreement, and such default shall continue for a
period of thirty (30) days after notice thereof shall
have been given to Manager by Emeritus, which notice
shall specify the event or events constituting the
default; or
(ii) If written notice is received by Emeritus,
Manager of the Facility, or proceedings are commenced,
which threaten to revoke, rescind, termination or not
renew the licensure or certification of the Facility
(whether or not a period is granted prior to the
effective date thereof in which corrective action may
be undertaken or the same are stayed pending appeal)
(the "Negative Regulatory Proceedings") and Emeritus is
not satisfied, in its sole and absolute discretion,
that Manager has the resources (financial and
otherwise) necessary to undertake the corrective action
required to successfully terminate such Negative
Regulatory Proceedings, it being understood and agreed
that in such event (A) Emeritus shall have the right,
without further notice to Manager and without giving
Manager any further opportunity to cure such breach, to
terminate this Agreement effective upon such date as
may be specified by written notice to Manager and (B)
Manager shall be solely responsible for any damages,
losses, costs or expenses incurred or suffered by
Emeritus or any successor manager as a result of such
Negative Regulatory Proceedings if and to the extent
Emeritus can demonstrate that such damages, losses,
costs or expenses are attributable to the acts or
omissions of Manager in performing its obligations
under this Agreement prior to the date on which this
Agreement is terminated; provided, however, that in no
event shall such damages, losses, costs or expenses for
which Emeritus can seek recovery from Manager include
any additional management or other fees or compensation
which Emeritus may be required to pay to a successor
operator of the Facility for any other costs incurred
in transitioning operational responsibility for the
Facility from Manager to such successor operator; or
(ii) If Manager shall apply for or consent to the
appointment of a receiver, trustee or liquidator of
Manager of all or a substantial part of its assets,
file a voluntary petition in bankruptcy, or admit in
writing its inability to pay its debts as they become
due, make a general assignment for the benefit of
creditors, file a petition or an answer seeking
reorganization or arrangement with creditors or taking
advantage of any insolvency law, or if an order
judgment or decree shall be entered by a court of
competent jurisdiction, on the application of a
creditor, adjudicating Manager, a bankrupt or insolvent
or approving a petition seeking reorganization of
Manager, or appointing a receiver, trustee or
liquidator of Manager, of all or a substantial part of
its assets; or
(iii) If any of the representations, warranties or
covenants of Manager set forth in this Agreement shall
be untrue in any material respect and Emeritus suffers
or incurs any damages as a result thereof.
(b) With respect to Emeritus, it shall be an Event
of Default hereunder:
(i) If Emeritus shall fail to make or cause to be
made any payment to Manager required to be made
hereunder (other than its working capital obligation,
which default is subject to the provisions of Paragraph
V(b)(ii)), and such failure shall continue for a period
of thirty (30) days; or
(ii) If Emeritus shall fail to keep, observe or
perform any material agreement, term or
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provision of this Agreement and such default shall
continue for a period of thirty (30) days after notice,
which notice shall specify an event or events
constituting the default thereof by Manager to
Emeritus; provided, however, that in the case of
Emeritus' failure to provide necessary working capital
upon demand by Manager, it shall be deemed to be an
Event of Default hereunder if the same is not paid
within ten (10) days of Manager's initial demand
therefor without any further notice from Manager being
required; or
(iii) If Emeritus shall fail to make payments, or
keep any covenants, owing to any third party which are
beyond the control of Manager to make or keep, and
which would cause Emeritus to lose possession of the
Facility or any personal property which would be
required to operate the Facility in the normal course;
or
(iv) If Emeritus shall be dissolved or shall apply
for or consent to the appointment of a receiver,
trustee or liquidator of Emeritus or of all or a
substantial part of its assets, file a voluntary
petition in bankruptcy, or admit in writing its
inability to pay its debts as they become due, make a
general assignment for the benefit or creditors, file a
petition or an answer seeking reorganization or
arrangement with creditors or taking advantage of any
insolvency law, or if an order, judgment or decree
shall be entered by a court of competent jurisdiction,
on the application of a creditor, adjudicating Emeritus
a bankrupt or insolvent or approving a petition seeking
reorganization of Emeritus or appointing a receiver,
trustee or liquidator of Emeritus of all or a
substantial part of its assets; or
(v) If any of the representations, warranties or
covenants of Emeritus set forth in this Agreement shall
be untrue in any material respect and Manager suffers
or incurs any damages as a result thereof.
VI. REMEDIES UPON DEFAULT:
(a) If any Event of Default by Emeritus shall
occur, Manager may, in addition to any other remedy
available to it in law or equity on account of such
Event of Default, forthwith terminate this Agreement,
and neither party shall have any further obligations
whatsoever under this Agreement, but Manager shall
immediately be entitled to receive payment of all
amounts theretofore unpaid but earned to the date of
termination.
(b) If any Event of Default by Manager shall
occur, Emeritus may, in addition to any other remedy
available to it in law or equity on account of such
Event of Default, forthwith terminate this Agreement,
and neither party shall have any further obligation
whatsoever under this Agreement; provided, however,
that Manager shall immediately be entitled to receive
payment of all amounts theretofore unpaid but earned to
date of termination, subject to Emeritus' right to
receive payment of damages from Manager.
VII. EMERITUS' INSPECTION: During the term hereof,
each of Emeritus and HCPI and their agents and
representatives shall have the right, upon request and
at reasonable times, to inspect the Facility and to
inspect and/or audit all books and records pertaining
to the operation thereof.
VIII. FACILITY OPERATIONS:
(a) NO GUARANTEE OF PROFITABILITY: Manager does
not guarantee that operation of the Facility will be
profitable, but Manager shall use its best efforts to
operate the Facility in as cost efficient and
profitable a manner as possible.
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(b) STANDARD OF PERFORMANCE: In performing its
obligations under this Agreement and, if applicable, in
transitioning operational responsibility for the
Facility back to Emeritus or to a successor manager
designated by Emeritus at the expiration or sooner
termination of the term of this Agreement, Manager
shall use its best efforts and act in good faith and
with professionalism in accordance with acceptable and
prevailing standards of health care and the policies
adopted by, and resources available to, the Facility.
(c) FORCE MAJEURE: Manager will not be deemed to
be in violation of this Management Agreement if it is
prevented from performing any of its obligations
hereunder for any reason beyond its control; including,
without limitation, strikes, shortages, war, acts of
God, lack of Emeritus' financial resources, or any
statute, regulation or rule of federal, state or local
government or agency thereof.
(d) CONTRACTS WITH AFFILIATES AND OTHERS FOR
ANCILLARY SERVICES. Emeritus acknowledges and agrees
that the residents of the Facility require certain
ancillary services such as physical, occupational.
speech and respiratory therapy, medical supplies and
pharmaceutical goods and services (collectively, the
"Ancillary Services") and that certain of Manager's
affiliates are in the business of providing Ancillary
Services to long term care facilities. Emeritus hereby
authorizes Manager, in the course of its operation of
the Facility, to contact on Emeritus' behalf and in
Emeritus' name with such affiliates or with any other
party for the provision of Ancillary Services provided,
however, that any such contact shall provide that it is
terminable on no more than thirty (30) days notice
without penalty or premium. Emeritus represents that it
is, as of the date hereof, a party to the contracts for
the provision of Ancillary Services at the Facility
which are described in Exhibit B, and that from and
after the date hereof and throughout the term of this
Agreement, it shall not enter into any other contracts
for the provision of Ancillary Services at the
Facility. Manager shall ensure that the execution of
such Ancillary Services agreements does not constitute
or create a default under any pre-existing contracts
which relate to such services entered into by Emeritus
with other third party provides; provided, however,
that with respect to contracts for the provision of
pharmaceutical services, respiratory therapy services
and medical supplies, Manager shall not be in breach of
this Paragraph VIII(d), in the event it enters into
contracts (which otherwise comply with the terms of
this Paragraph VIII(d)) for such Ancillary Services at
any time on or after February 1, 1998 even if the
execution of such contracts would give rise to a breach
under any existing agreements for such services to
which Emeritus or the Facility may be a party; and
provided, further, that in the event of any such
breath, Emeritus shall indemnify, defend and hold
harmless Manager from and against any and all losses,
costs, damages and expenses, including, but not limited
to, reasonable attorneys fees, which Manager may incur
as a result thereof. Manager shall further ensure, in
the case of any contract for Ancillary Services with an
affiliate of Manager that the costs charged do not
exceed those which would be charged to Emeritus by an
unrelated third party in an arms length transaction.
IX. WITHDRAWAL OF FUNDS BY EMERITUS; MINIMUM BANK
BALANCE:
(a) Emeritus may withdraw the then accumulated
operating cash surplus (as determined by Manager) from
the Facility bank account subject to the limitations
set forth in clause (b) below and to the right of
Manager to restrict withdrawal by Emeritus of any
Facility funds in accordance with the provisions of
subparagraph B, below.
(b) At all times Manager shall maintain a minimum
cash balance in the checking account established for
the Facility equal to the sum of
(i) All current and unpaid invoices (both those
received and those pending), any mortgage
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or lease payments, note or installment payments,
payrolls, rents, expenses, management fees and other
charges incident To the operation of the Facility which
will become due and payable within the ensuing forty-
five (45) days; plus
(ii) An amount not to exceed $50,000 deemed
necessary by Manager to be adequate for unanticipated
contingencies.
X. MANAGEMENT FEE:
(a) INITIAL FEE. During the Term of This Agreement
Manager shall be entitled to a monthly management fee
equal to five percent (5%) of the gross revenues
generated each month by the Facility. For purposes
hereof, "gross revenues" shall mean all revenues
generated by the Facility, including revenues from
routine patient care and ancillary services, but shall
specifically exclude the proceeds from the sale of any
Facility equipment and any insurance and condemnation
proceeds.
(b) PRORATION OF FEE. If the services of Manager
commence or terminate (for any reason, including those
set forth in Paragraph V) other than on the first day
of the month, the fee shall be prorated in proportion
to the number of days for which services are actually
rendered.
(c) PAYMENT OF FEE. The Management fee provided
for herein shall be disbursed by Manager to itself out
of the Facility bank account on a priority basis prior
to the payment of any other Facility expenses and to
the repayment of any working capital loans made by
Emeritus pursuant to the terms hereof.
(d) ADJUSTMENT OF FEE.
(i) In conjunction with the delivery of the annual
financial statements required under Paragraph 1(f),
Manager shall deliver to Emeritus a review prepared by
Manager's independent certified public accountants of
the outstanding "patient" (as compared to "settlement")
accounts receivable of the Facility for the immediately
preceding year, along with a statement of the amount of
the "specific" (as compared to "general") bad debt
reserve recommended by such accountants to be
established with respect thereto (the "Reserve
Amount"). Any costs and expenses of such accountants'
review shall be borne an operating expense of the
Facility.
(ii) In the event the accountant recommends a
range of specific bad debt reserves, for purposes
hereof, the Reserve Amount shall be the minimum
specific bad debt reserve recommended by the
accountant. In the event the Reserve Amount, plus any
write offs for bad debts occurring during the preceding
year, exceeds 3% of the gross revenues of the
applicable year end (the "Bad Debt Threshold"), such
excess shall hereinafter be referred to as the Excess
Reserve Amount.
(iii) Manager shall remit to Emeritus,
concurrently with the delivery of such accounts
receivable review, an amount equal to the lesser of (i)
five percent (5%) of the Excess Reserve Amount and (ii)
the difference between the management fees paid to
Manager during the applicable year and the management
fees which would have been paid to Manager during the
applicable year had the fee been calculated at the rate
of 4% of gross revenues, it being understood and agreed
that in no event shall the fee paid to Manager after
taking into consideration the adjustment provided for
in this Paragraph X(d), be less than 4% of the Facility
gross revenues.
(iv) With respect to the settlement receivables
which are excluded from the calculation of
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the Reserve Amount pursuant to Paragraph X(d), Manager
and Emeritus agree that at such time as payment is made
by the appropriate third party payor with respect to
such settlement receivables, the following provisions
shall apply:
(A) to the extent the amount paid is equal to
the amount of the settlement receivable, no adjustment
shall be made to the management fee previously paid to
Manager;
(B) to the extent the amount paid is less
than the amount of the settlement receivable and the
difference between the amount of the settlement
receivable and the amount paid, when aggregated with
the Reserve Amount for the year to which such
settlement receivables relate, is equal to or less than
the Bad Debt Threshold, no adjustment shall be made to
the management fee previously paid to Manager;
(C) to the extent the amount paid is less
than the amount of the settlement receivable and the
difference between the amount of the settlement
receivable and the amount paid, when aggregated with
the Reserve Amount for the year to which such
settlement receivables relate, exceeds the Bad Debt
Threshold, Emeritus shall so advise Manager in writing,
which notice shall include such supporting
documentation as may be reasonably requested by
Manager, and the management fee paid in such year shall
be subject to adjustment in the manner set forth in
Paragraph X(d), in which case Manager shall remit to
Emeritus on demand the amount of such adjustment;
(D) to the extent the amount paid is more
than the amount of the settlement receivable, an amount
equal to 5% of the excess shall be paid to Manager as
an additional management fee.
(v) The provisions of this Paragraph X(d) shall
survive the expiration or earlier termination of the
term of this Management Agreement.
XI. ASSIGNMENT: This Agreement shall not be
assigned by Manager without the prior written consent
of the other party, which consent shall not be
unreasonably withheld. In the event of the transfer or
assignment by Emeritus of its leasehold rights in the
Facility to any person or entity other than Manager,
such transfer or assignment shall not require the
consent of Manager but such transfer of assignment
shall be subject to the rights of Manager under this
Agreement.
XII. NOTICES: All notices required or permitted
hereunder shall be given in writing by hand delivery,
by registered or certified mail, postage prepaid, by
overnight delivery or by. facsimile transmission (with
receipt confirmed with the recipient). Notice shall be
delivered or mailed to the parties at the following
addresses or at such other places as either party shall
designate in writing.
To Manager:
Sunrise Healthcare
Corporation
000 Xxx Xxxx, XX
Xxxxxxxxxxx, XX 00000
Attn: Xxxxxx Xxxxxxxx
Phone: 000-000-0000
Fax: 000-000-0000
To Emeritus:
Emeritus Corporation
000 X Xxxxxxx Xxxxxx,
Xxxxx 000
Xxxxxxx, XX 00000
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Attn: Xxxx Xxxxx
Phone: 000-000-0000
Fax: 000-000-0000
XIII. RELATIONSHIP OF THE PARTIES: The
relationship of the parties shall be that of principal
and independent contractor and all acts performed by
Manager during the term hereof as Manager of the
Facility shall be deemed to be performed in its
capacity as an independent contractor. Nothing
contained in this Agreement is intended to or shall be
construed to give rise to or create a partnership or
joint venture or lease between Emeritus, its successors
and assigns on the one hand, and Manager, its
successors and assigns on the other hand. Manager will
not be liable in the performance of its duties for any
loss incurred by or damage to Emeritus, unless such
loss or damage results from the negligence or willful
misconduct of Manager. Manager shall indemnify, defend
and hold harmless Emeritus from any loss or damage
resulting from the acts or omissions of Manager's
officers, agents or employees in connection with the
operation of the Facility by Manager. Emeritus shall
indemnify, defend and hold Manager harmless from any
loss incurred by or damage to Manager where such loss
or damage result from the negligence or willful
misconduct of Emeritus in performing its obligations
under the Agreement and from any and all damages,
losses, costs and expenses which Manager may incur in
the event of any litigation related to the termination
of the Management Agreement with the Current Manager
(as defined below).
XIV. ENTIRE AGREEMENT: This Agreement contains the
entire agreement between the parties and shall be
binding upon and inure to the benefit of their
successors and assigns, and shall be construed in
accordance with the laws of the State of North
Carolina. This Agreement may not be modified or amended
except by written instrument signed by both of the
parties hereto.
XV. CAPTIONS: The captions used herein are for
convenience of reference only and shall not be
construed in any manner to limit or modify any of the
terms hereof.
XVI. ATTORNEY'S FEES: In the event either party
brings an action to enforce this Agreement, the
prevailing party in such action shall be entitled to
recover from the other all costs incurred in connection
therewith, including reasonable attorney's fees.
XVII. SEVERABILITY: In the event one or more of
the provisions contained in this Agreement is deemed to
be invalid, illegal or unenforceable in any respect
under applicable law, the validity, legality and
enforceability of the remaining provisions hereof shall
not in any way be impaired thereby.
XVIII. CUMULATIVE; NO WAIVER: A right or remedy
herein conferred upon or reserved to either of the
parties hereto is intended to be exclusive of any other
right or remedy, and each and every right and remedy
shall be cumulative and in addition to any other right
or remedy given hereunder, or now or hereafter legally
existing upon the occurrence of an Event of Default
hereunder. The failure of either party hereto to insist
at any time upon the strict observance or performance
of any of the provisions of this Agreement or to
exercise any right or remedy as provided in this
Agreement shall not impair any such right or remedy or
be construed as a waiver or relinquishment thereof with
respect to subsequent defaults. Every right and remedy
given by this Agreement to the parties hereof may be
exercised from time to time and as often as may be
deemed expedient by the parties thereto, as the case
may be.
XIX. AUTHORIZATION FOR AGREEMENT: The execution
and performance of this Agreement by Emeritus and
Manager have been duly authorized by all necessary
laws, resolutions or corporate action, and this
Agreement constitutes the valid and enforceable
obligations of
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Emeritus and Manager in accordance with its terms.
XX. ACCESS OF THE GOVERNMENT TO BOOKS AND RECORDS:
In the event the services provided hereunder have a 12-
month cost or value of $10,000 or more (or such other
amount as may hereafter be established by law):
(a) Until the expiration of four years after the
furnishing of services pursuant to this Agreement,
Manager shall make available upon written request to
the Secretary of the United States Department 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 books,
documents and records that are necessary to certify the
nature and extent of such costs.
(b) If Manager or its affiliates carries out any
of the duties of this Agreement through a subcontract,
with a related organization, such subcontract shall
contain a clause to the effect that until the
expiration of four years after the furnishing of such
services pursuant to such subcontract, the related
organization shall make available, upon written request
to the Secretary of the United States Department 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,
and books, documents and records of such organization
that are necessary to certify the nature and extent of
such costs.
(c) The parties agree that any applicable attorney-
client or other legal privileges shall not be deemed
waived by virtue of this Agreement.
XXI. COUNTERPARTS: This Agreement may be executed
in any number of counterparts, each of which shall be
an original, and each such counterpart shall together
constitute but one and the same Agreement.
XXII. THIRD PARTY BENEFICIARY. Nothing in this
Agreement express or implied is intended to and shall
not be construed to confer upon or create in any
person, other than the parties hereto, any rights or
remedies under or by reason of this Agreement,
including without limitation, any right to enforce this
Agreement.
XXIII. CONSTRUCTION. Each of Emeritus and Manager
acknowledges and agrees that it has participated in the
drafting and negotiation of this Agreement and
accordingly that in the event of any dispute between
Emeritus and Manager with respect to the interpretation
or enforcement of the terms hereof, no provision shall
be construed so as to favor or disfavor either party
hereto. In addition, each of Emeritus and Manager
acknowledges and agrees that it has been represented by
the same counsel in the drafting and negotiation of
this Agreement and that it has each knowingly and
voluntarily consented thereto and accordingly neither
shall raise such fact as a defense to the enforcement
of any obligation imposed by it under this Agreement or
as a factor in the interpretation or any provision of
this Agreement.
XXIV. REPRESENTATIONS, WARRANTIES AND COVENANTS OF
EMERITUS. As a material inducement to Manager to enter
into this Agreement, Emeritus does hereby represent,
warrant and covenant as follows to Manager in
connection with this Agreement and the Facility:
(a) Emeritus is the due and lawful lessee of the
Facility under the terms of the Lease, a true and
correct copy of which is attached hereto as Exhibit C;
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(b) The Lease is in full force and effect as of
the date hereof and has not been amended or modified
except as set forth in Exhibit C;
(c) Neither Emeritus nor HCPI is in default in any
of its obligations under the Lease nor is Emeritus
aware of any event which, with the giving of notice or
the passage of time or both, would constitute an Event
of Default under the Lease;
(d) The Facility is a skilled nursing facility
with 134 licensed and operational beds and is certified
to participate in the Medicare and Medicaid Programs.
As of the date hereof, there is no action pending or
threatened to revoke or suspend the Facility's license
or to terminate or to not renew the participation of
the Facility in the Medicare and/or Medicaid Programs
nor are there any outstanding deficiencies which are
not the subject of a Plan of Correction which has been
approved by the applicable governmental authority. A
true and correct copy of the Facility's license and of
its most recent licensure and certification survey(s)
are attached hereto as Exhibit D;
(e) Set forth in Exhibit E is a true and accurate
description of all litigation currently pending or
threatened with respect to the Facility. Emeritus shall
be and remain solely responsible for the resolution of
all such litigation, subject to any indemnity rights
which Emeritus may have against the Current Manager (as
defined below) but Manager shall cooperate, upon
request, in Emeritus' efforts to defend the same,
including, but not limited to, providing copies of
Facility records and access to the Facility to
Emeritus' counsel or any other party designated by
Emeritus. Any litigation filed after the Commencement
Date, whether the same relates to the period prior to
or after the Commencement Date, shall also be and
remain the sole responsibility of Emeritus subject,
however, in the case of any litigation which relates to
the period after the Commencement Date to any indemnity
rights which Emeritus may have against Manager under
the terms of this Agreement;
(f) The Facility includes all personal property
and inventory necessary for its lawful operation in
accordance with applicable state and federal laws;
(g) A true and correct copy of the financial
statements of the Facility dated as of October 31,1997
have been provided to Manager, including a true and
correct census report as of October 31,1997, which
accurately identifies each of the residents of the
Facility, the daily rate paid by said residents and the
date to which said rate has been paid, the payor status
of said resident, i. e. , private, Medicare, Medicaid
or other (the "Facility Financials"). Since the date of
the Facility Financials there has not been any material
adverse change in the financial condition (including,
but not limited to, the working capital), business,
assets, liabilities or results of operations of any or
all of the Facility, whether in the ordinary course of
business or otherwise;
(h) There are no union contracts in effect between
Emeritus, on the one hand, and the employees of the
Facility, on the other hand. To the best of Emeritus'
knowledge, none of its employees who are not currently
members of a labor union are actively seeking the
formation of a labor union at the Facility. Except as
set forth in Exhibit E, Emeritus is not a party to any
labor dispute at the Facility, it being agreed that a
claim for wrongful termination shall not be deemed to
be a labor dispute but that an unfair labor practice
and/or an EEOC charge shall be deemed to be a labor
dispute;
(i) Emeritus has not made any contributions,
payments or gifts to or for the private use of any
governmental official, employee or agent where either
the payment or the purpose of such contribution,
payment or gift is illegal under the laws of the United
States or the jurisdiction in which made or given or
received any payments or other forms of remuneration in
connection with the referral of patients which would
violate the Medicare/Medicaid Anti-kickback Law,
Section
12
1128(b) of the Social Security Act, 42 USC Section
1320a-7b(b) or any analogous state statute;
(j) The Facility is currently subject to a
Management Agreement in favor of Diversified Health
Services, Inc. (the "Current Manager"), which shall be
terminated on or prior to the Commencement Date and as
to which Emeritus shall retain full responsibility for
any costs or expenses owing under such Management
Agreement. Emeritus shall provide Manager with evidence
of the termination of the Management Agreement with the
Current Manager as of the Commencement Date. Emeritus
shall take such action as may be necessary to cause the
Current Manager of the Facility to cooperate with
Manager at no cost to Manager in a smooth transition of
operational responsibility for the Facility as of the
Commencement Date. If requested by Manager, Emeritus
shall cause the Current Manager to enter into a
Transfer of Operations Agreement with Manager in form
and substance acceptable to Manager;
(k) Emeritus is a duly organized, validly existing
Washington corporation and is in good standing under
the laws thereof and is duly qualified to do business
as a foreign corporation in the State of North Carolina
and is in good standing under the laws thereof. Subject
to obtaining the consent of HCPI under the Lease,
Emeritus has full corporate power and authority to
enter into this Agreement and to carry out the
transaction provided for herein and the same do not
conflict with Emeritus' Articles of Incorporation or
Bylaws or any agreement, note, document, contract or
instrument to which Emeritus is a party or by which its
assets may be bound or affected, including, but not
limited to the Management Agreement in effect with the
Current Manager. This Management Agreement is the valid
and binding obligation of Emeritus enforceable in
accordance with the terms hereof, except as such
enforceability may be limited by applicable creditors
rights laws and general principles of equity;
(1) The person executing this Agreement on behalf
of Emeritus is duly authorized to do so and holds the
position set forth below his/her name;
(m) Emeritus shall proceed with all due diligence
and at its sole cost and expense to secure the consent
of HCPI to this Management Agreement and shall provide
Manager on or prior to the Commencement Date with
evidence of the issuance thereof;
(n) Emeritus is not a party to any litigation
which would interfere with the consummation of the
transaction contemplated by this Agreement.
(o) No representation or warranty by or on behalf
of Emeritus contained in this Agreement or in the
exhibits hereto and no statement contained in any
certificate, list, exhibit, or other instrument
furnished or to be furnished to Manager pursuant hereto
contains or will contain any untrue statement of a
material fact, or omits or will omit to state any
material facts which are necessary in order to make the
statements contained herein or therein, in light of the
circumstances under which they were made, not
misleading.
XXV. REPRESENTATIONS, WARRANTIES AND COVENANTS OF
MANAGER. As a material inducement to Emeritus to enter
into this Agreement, Manager does hereby represent,
warrant and covenant as follows to Emeritus in
connection with this Agreement and the Facility:
(a) Manager is a duly organized, validly existing
New Mexico corporation and is in good standing under
the laws thereof and is duly qualified to do business
as a foreign corporation in the State of North Carolina
and is in good standing under the laws thereof. Manager
has full corporate power and authority to enter into
this Agreement and to carry out the transaction
provided for herein and the same do not conflict with
Manager's Articles of Incorporation or Bylaws or any
14
agreement, note, document, contract or instrument to
which Manager is a party or by which its assets may be
bound or affected. This Management Agreement is the
valid and binding obligation of Manager enforceable in
accordance with the terms hereof, except as such
enforceability may be limited by applicable creditors
rights laws and general principles of equity;
(b) The person executing this Agreement on behalf
of Manager is duly authorized to do so and holds the
position set forth below his/her name.
(c) Manager shall provide Emeritus with such
information as it may reasonably request in connection
with securing the consent of HCPI to this Management
Agreement (d) Manager is not a party to any litigation
which would interfere with the- consummation of the
transaction contemplated by this Agreement.
(e) No representation or warranty by or on behalf
of Manager contained in this Agreement or in the
exhibits hereto and no statement contained in any
certificate, list, exhibit, or other instrument
furnished or to be furnished to Emeritus pursuant
hereto contains or will contain any untrue statement of
a material fact, or omits or will omit to state any
material facts which are necessary in order to make the
statements contained herein or therein, in light of the
circumstances under which they were made, not
misleading.
IN WITNESS WHEREOF, the parties have hereto caused
this Agreement to be duly executed, as of the day and
year first above written.
EMERITUS : EMERITUS CORPORATION
By: /s/ Xxxx X. Xxxxx
-------------------------
Its: Vice President
Operations
MANAGER: SUNRISE HEALTHCARE
CORPORATION
By: /s/
------------------------
--------
Its: V.P.
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