LONG-TERM CARE FACILITY
MANAGEMENT AGREEMENT
THIS LONG-TERM CARE FACILITY MANAGEMENT AGREEMENT (the "Agreement") is
made as of this 1st day of June, 1997, by and between Canton Health
Investors, LLC, a North Carolina limited liability company ("Owner"), and
Centennial HealthCare Management Corporation, a Georgia corporation
("Manager").
W I T N E S S E T H :
WHEREAS, Owner owns certain real and personal property comprising a certain
114-bed nursing center located in Canton, North Carolina (the "Facility");
WHEREAS, the parent corporation of Manager, Centennial HealthCare
Corporation ("CHC") and Owner have entered into that certain Loan Agreement
dated of even date herewith (the "Loan Agreement"), whereby CHC will loan
certain funds to Owner (the "CHC Loan"); 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
I.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.
I.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.
I.03 Management of Facility. During the term of this Agreement and subject
to the terms of this Agreement, Manager shall on behalf of Owner manage all
aspects of the operation of the Facility, including, but not limited to
staffing, accounting, billing, collections, setting of rates and charges and
general administration. In connection therewith, Manager (either directly or
through supervision of employees of the Facility) shall:
(a) Hire or lease on behalf of 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 reasonable discretion; provided, however, that leased
employees shall be subject to the direction and control of the lessor of such
leased employees. All employees shall be employees of or leased by 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
reports and 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 account of Owner.
(f) Administer, supervise and schedule all patient and other services
of the Facility, including the operation of food, ▇▇▇▇▇▇/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, any mortgagees of the Facility and such other persons
requested by Owner as insureds as provided in Section 5.01 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, including, without limitation,
agreements for the provision of therapy and rehabilitation services, and
medical supplies.
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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) Design, establish and maintain a suitable accounting system
using accounts and classifications consistent with those used in similar
facilities.
(o) Advise and assist Owner in designing an adequate and
appropriate public relations program.
I.04 Reports to Owner.
(a) Manager shall prepare and deliver 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. Manager shall also provide any
required assistance to the independent accountants for the Facility, who
shall be selected by Manager, in the preparation of audited annual financial
statements for the operation of the Facility. Such financial statements shall
be prepared at Owner's expense in accordance with generally accepted
accounting principles in the health care field consistently applied and
delivered to Manager and Owner within ninety (90) days after the end of each
fiscal year of the Facility. Manager shall prepare reports or provide
information to Owner required by any mortgagee of the Facility or any loan
documents of Owner, including the Loan Agreement and related documents.
(b) Manager shall submit to Owner for its approval (which approval
will not be unreasonably withheld) each twelve (12) months its budget for the
operation of the Facility setting out anticipated income, expenses and
capital expenditures during the succeeding twelve (12) month period. Manager
shall use its reasonable best efforts to operate the Facility in accordance
with the provisions of the budget for the Facility as submitted to 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 or Owner shall schedule periodic management meetings to
be attended by representatives of both Manager and Owner no less frequently
than quarterly and shall furnish to Owner quarterly written progress reports
concerning the operation of the Facility.
I.05 Bank Accounts.
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(a) Manager shall deposit in a bank account or accounts of Manager
or Manager's affiliate(s) (collectively referred to in this Section 1.05 as
Manager) established in Manager's name (the "Facility Depository Accounts")
all funds received from the operations of the Facility (the "Facility
Funds"). Manager shall segregate such Facility Funds in an account(s)
separate and apart from Manager's Operating Accounts (the "Segregated
Facility Accounts"). Manager shall disburse Facility Funds received from the
Facility's operations in the manner and order of priority described in
section 1.06 below. Manager shall also deposit and maintain the personal
funds of the Facility's residents into a separate trust account established
in Manager's name (the "Facility Trust Accounts"). Manager shall designate
the signatory or signatories required on all checks or other documents of
withdrawal for the Facility Depository, Operating, Segregated Facility, and
Facility Trust Accounts.
I.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 mortgage payments due from Owner to any
mortgagee of the Facility;
(2) the costs and expenses of operating the Facility,
including the reimbursable expenses of Manager;
(3) all accrued and unpaid Management Fees (defined in
Section 4.01) to Manager;
THEN, after retention by Manager of an adequate working
capital reserve (in cash or available credit under the CHC
Loan) (such reserve to be determined by Manager in its
reasonable discretion and approved by Owner in connection
with its approval of the operating budget for the Facility
(with such approval to be not unreasonably withheld or
delayed) and held in such subaccount of the Facility
Depository, Operating or Segregated Facility Accounts as
Manager shall determine);
(4) all accrued and unpaid interest on the CHC Loan; and
(5) any principal balance outstanding under the CHC Loan
whether or not any or all of such balance is then due and
payable.
(b) Manager agrees that to the extent the total of items described in
paragraphs 1, 2, 3 and 4 above (collectively the "Base Operating Costs") exceed
the Facility's collected net revenues (resulting in an "Operating Deficit"),
Manager shall, as soon as possible and not less than five (5) business days
after notice from Owner, advance funds
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under the CHC Loan, if available, as may
be necessary to cover or offset such Operating Deficit.
I.07 Access to Books, Records and Documents. If it is ultimately
determined that Section 952 of the Omnibus Budget Reconciliation Act of 1980
and final regulations promulgated thereunder apply to this Agreement:
(a) Until the expiration of four (4) years after the furnishing of
services pursuant to this Agreement, Manager shall, as provided in Section
952, make available, upon written request, to the Secretary of Health and
Human Services, or upon request, to the Comptroller General of the United
States, or any of their duly authorized representatives, this Agreement, and
all books, documents and records of Manager that are necessary to verify the
nature of this Agreement for which payment may be made under the Medicare
program; and
(b) If Manager carries out any of the duties of this Agreement
pursuant to a subcontract or subcontracts with an aggregate value or cost of
$10,000 or more over a twelve (12) month period with a related organization,
such subcontract or subcontracts shall contain a clause to the effect that,
until the expiration of four years after the furnishing of such services
pursuant to such subcontract or subcontracts, the related organization shall,
as provided in Section 952, make available, upon written request, to the
Secretary of Health and Human Services, or upon request, to the Comptroller
General of the Untied States, or any of their duly authorized
representatives, the subcontract or subcontracts, and all books, documents
and records of such subcontractors for which payment may be made under the
Medicare program.
I.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 the Owner in the
Certificate of Need application for the Facility, to the extent disclosed in
writing to Manager, as well as all conditions placed upon such Certificate of
Need and so disclosed in writing to Manager. Manager, by applying for such
licenses, permits, consents, and approvals, does not in any way guarantee the
approval of such applications and shall have no liability with respect to any
failure of the Facility to receive any such license, permit, consent or
approval.
(b) Neither 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 by appropriate legal proceedings, diligently conducted in
good faith in the name of
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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.
I.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, in
accordance with the approved operating budget for the Facility or as
otherwise approved 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 such compensation, including salary, fringe
benefits, bonuses and business expense reimbursements approved by Manager, to
the Administrator. The term "fringe benefits" shall include, without
limitation, employer's F.I.C.A. payments, unemployment compensation and other
employment taxes, bonuses, vacation, personal and sick leave benefits,
workers' compensation, group life, health and accident insurance premiums and
disability and other benefits.
I.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 Operating Accounts of the Facility. With Owner's
prior written consent, Manager may contest the validity or amount of any such
tax or imposition on the Facility in the same manner as described in Section
1.08(c) hereof.
I.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.
I.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.
I.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
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as patient questionnaires
and interviews, physician questionnaires and interviews, and inspections.
I.14 Staff Specialists. In addition to the other managerial services
provided for herein, Manager shall make available to the Facility, for
consultation and advice, when Manager deems necessary or appropriate,
specialists in such fields as accounting, auditing, budgeting, dietary
services, operations, environmental control, management, maintenance,
nursing, personnel, pharmacy operations, public relations, purchasing,
quality assurance, systems and procedures, and third-party reimbursement.
I.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.
I.16 Additional Services. Owner agrees that any specialized or
additional services recommended by Manager may be performed for a separate
fee as agreed upon by Owner in advance of the performance of such service.
If Manager provides such service, such fee shall not be in excess of such
amount as would be charged by a third party, negotiating at arm's length, for
the performance of such service.
I.17 Obligations under CHC Loan. Manager acknowledges the existence and
terms of the CHC Loan and all documents related thereto. Manager agrees to
perform or cause to be performed, on Owner's behalf, for so long as the
Agreement remains in full force and effect, all covenants therein relating to
the manner of operation of the Facility. Manager assumes no liability or
responsibility for repayment of the CHC Loan or for any other monetary
obligation of Owner (including, without limitation, obligations to pay
mortgage payments), or for the financial performance of the Facility.
I.18 Maintenance of Facility. Manager agrees to maintain the Facility in
a good and serviceable condition, ordinary wear and tear and damage by fire
or other casualty or resulting from condemnation excepted, to the extent
sufficient revenues of the Facility are available for such purpose.
I.19 Civil Money Damages. Manager agrees that if any civil money
penalties are imposed by HCFA or the State of North Carolina as a result of
the nursing care and/or treatment provided to residents of the Facility by
employees of the Facility, Manager will reimburse Owner for the amount of the
civil money penalty imposed; provided, however, that following termination of
this Agreement, Manager must be notified immediately upon notice of the civil
money penalty and/or any Statement of Deficiencies issued by HCFA or the
State of North Carolina for a period during which Manager served under this
Agreement. Manager
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reserves the right to appeal or waive appeal of any civil
money penalty imposed by HCFA or the State of North Carolina. Manager
further reserves the right to retain counsel to represent the Facility in any
appeal or settlement proceedings.
ARTICLE II.
TERM AND TERMINATION
II.01 Term. The term of this Agreement shall commence as of the date
hereof (the "Effective Date"), and shall continue until the earlier of the
following dates: (i) the date which falls on the fifth (5th) anniversary
thereof, or (ii) the date on which Manager ceases to furnish management
services to the Facility and this Agreement is terminated for whatever reason.
II.02 Termination.
(a) Manager has the option to terminate this Agreement, without
damage or penalty, upon ten (10) business days prior written notice to 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 under Article VI hereof, Manager shall have the right to rebuild,
restore or otherwise rearrange the Facility and recommence operations thereof,
and thereupon Manager shall continue to manage the Facility under the same
terms, conditions, and fees as provided herein.
(b) If an Event of Default (as hereinafter defined) by either party
shall occur and be continuing, the other party may terminate this Agreement by
giving written notice of such termination pursuant to Section 3.02 hereunder.
(c) Manager shall have the option to terminate this Agreement
without damage or penalty upon ten (10) days prior written notice to Owner
following the sale, transfer, assignment, or other disposition, in whole or
in part, by Owner of its interest in the
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Facility. In the event Owner is a
corporation, limited liability company, or partnership, any dissolution,
merger, consolidation or other transfer of a substantial portion of the stock
or underlying ownership interests (as the case may be) of Owner shall
constitute an assignment of the Facility for all purposes of this Section
2.02(c). The term "substantial portion" means the ownership of stock or
underlying ownership interests (as the case may be) possessing, and of the
right of exercise, at least fifty percent (50%) of the total combined voting
power of such corporation, limited liability company, or partnership,
provided, however, that this prohibition on stock transfer shall not apply to
a "publicly traded corporation," which term is hereby defined for all
purposes under this Agreement as a corporation whose shares of stock have
been registered pursuant to the Securities Act of 1933, as amended.
(d) Notwithstanding the foregoing, commencing on the Effective Date
and continuing until the date which falls on the third (3rd) anniversary
thereof (the "First Refusal Period"), for so long as (i) the CHC Loan remains
outstanding and unpaid or (ii) this Agreement remains in full force and
effect, no sale, transfer, assignment or other disposition, in whole or in
part, by Owner of its interest in the Facility shall be permitted without
Manager's prior written consent, which consent may be granted or withheld in
Manager's sole and absolute discretion unless Owner shall have afforded to
Manager a right of first refusal to purchase Owner's interest in the Facility
on the same terms and conditions, including purchase price, acceptable to
Owner pursuant to the terms of a bona fide third party offer. Manager shall
be furnished with (i) written notice of the terms of such third party offer,
and (ii) a period of not less than fifteen (15) business days within which to
exercise such right of first refusal. Upon exercise, Owner and Manager shall
close Manager's acquisition of the Facility within the greater of (i) thirty
(30) days thereafter or (ii) the time period, if any, specified in the terms
of such third party offer. The parties acknowledge and agree that any
purported sale, transfer, assignment or other disposition by Owner in
violation of this section shall, at Manager's option, be null, void and of no
force or effect, and that equitable remedies, including the remedy of
specific performance (to compel rescission of any such sale, transfer,
assignment or other disposition) and injunctive relief (to prevent or
restrain such prohibited actions) shall be available to Manager, in addition
to its rights and remedies at law and under this Agreement.
In the event Manager elects not to exercise its right of first refusal
under this section and there shall occur a sale, transfer, assignment or
other disposition of Owner's interest in the Facility during the First
Refusal Period, this Agreement shall continue in full force and effect and
shall bind the purchaser (without releasing or otherwise affecting Owner's
primary liability for its obligations hereunder, which shall thereupon be
deemed joint and several with the liability of such purchaser); provided,
however, that in the event of such sale, transfer, assignment or other
disposition of Owner's interest pursuant to the foregoing, Owner shall have
the right and option to terminate this Agreement upon payment and delivery to
Manager of the following, said termination to become effective upon Manager's
receipt of the last of the following:
(1) a termination fee equal to forty percent (40%) of the Facility's
"Average Monthly Fee" multiplied by the number of months remaining in
the Term, calculated from the date of such termination. "Average
Monthly Fee" for the Facility shall mean the average of the monthly
Management Fees payable to
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Manager under Article IV of this Agreement
for each of the twelve (12) full calendar months prior to such
termination;
(2) all amounts outstanding under the CHC Loan;
(3) all amounts due under Article IV of this Agreement;
(4) any other amounts due Manager under the provisions of this Agreement
or any other agreements between Owner and Manager or Manager's
affiliates; and
(5) evidence, satisfactory to Manager, that amounts have been escrowed by
Owner sufficient to pay all pending liabilities of Manager arising
during the term of this Agreement.
ARTICLE III.
DEFAULT AND REMEDIES
III.01 Events of Default. The following shall constitute events of
default ("Events of Default" and each individually an "Event of Default") under
this Agreement:
(a) If 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 written 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 written 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 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 written notice thereof shall have been given
to Manager, (ii) to perform its obligations under this Agreement in any
material respect, and such failure shall continue for a period of thirty (30)
days after written notice thereof shall have been given by 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, 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
(i) loses its Medicaid
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>or Medicare certification, (ii) loses its license to
operate as a nursing home, or (iii) is closed, and such event continues
unstayed and in effect for a period of fourteen (14) consecutive days;
(e) If, due to Manager's failure to maintain the Facility in
material compliance with applicable laws, regulations or rules, patient
admissions are suspended, and such event continues unstayed and in effect for
the later of ninety (90) days or the date on which occupancy decreases more
than ten percent (10%) from the occupancy level at the date of such
suspension;
(f) If either Owner or Manager shall (i) be adjudicated bankrupt;
(ii) admit in writing its inability to pay its debts generally as they become
due; (iii) become insolvent in that its total assets are in the aggregate
worth less than all of its liabilities or it is unable to pay its debts
generally as they become due; (iv) make a general assignment for the benefit
of creditors; (v) file a petition, or admit (by answer, default or otherwise)
the material allegations of any petition filed against it, in bankruptcy
under the federal bankruptcy laws (as in effect on the date of this Agreement
or as they may be amended from time to time), or under any other law for the
relief of debtors, or for the discharge, arrangement or compromise of its
debts; or (vi) consent to the appointment of a receiver, conservator, trustee
or liquidator of all or part of its assets; or
(g) If a petition shall have been filed against 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.
(h) Receipt of a notice of default or occurrence of any event or
condition which with the passage of time or giving of notice or both would
constitute an event of default under the Loan Agreement and the documents
related thereto (the "Loan Documents"). No grace or cure periods or notice
provisions which may otherwise be available to Owner shall apply to this
provision. Without limiting the foregoing, upon the receipt of such notice
of default, Manager shall immediately thereupon have the right, without
incurring any liability whatsoever, to discontinue its performance of duties
under this Agreement, including, without limitation, its obligation to cause
the disbursement of any funds under Section 1.06 hereof.
III.02 Remedies Upon Default. If an Event of Default by either party
shall occur and be continuing, the other party may, in addition to any other
remedy available to it in law or equity on account of such event of default,
terminate this Agreement by giving written notice of such termination, and
neither party shall have any further obligations whatever under this
Agreement; provided, however, that as a condition to the effectiveness of
Owner's termination of this Agreement, Owner shall pay to Manager all
payments due under Article IV, and shall pay to CHC all amounts outstanding
under the CHC Loan.
ARTICLE IV.
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MANAGEMENT FEE
IV.01 Management Fee. Commencing upon the Effective Date until the
end of the term hereof, Owner shall pay to Manager a monthly management fee
equal to six and one-half percent (6.5%) of the Facility's "Gross Revenues,"
as determined on an accrual basis (the "Management Fee"). "Gross Revenues"
shall mean, for the Facility, total revenues of such Facility, including,
without limitation, all ancillary fees, charges, rentals and other revenue
derived in any way from the operation of such Facility, on an accrual basis,
after deduction of allowances for contractual adjustments as they relate to
third-party payors and before deduction of any and all expenses.
IV.02 Payment of Management Fee. If there is not sufficient cash
from the operation of the Facility to pay the Management Fee when due, the
Management Fee shall be paid with an advance under the CHC Loan.
IV.03 Adjustment. Within fifteen (15) days after the delivery of the
annual financial statements of the Facility, 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 Management Fees shown to be due by
the annual financial statements.
ARTICLE V.
INSURANCE
V.01 Insurance/Indemnity. During the term of this Agreement, Manager
shall at all times keep the Facility insured with the kinds and amounts of
insurance described below, which, at a minimum, shall be modified as
necessary to satisfy all requirements of any Facility mortgagee. This
insurance shall be written by companies authorized to do insurance business
in the State of North Carolina. The policies will name 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 5.05 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 5.02);
(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;
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(c) Claims for personal injury or property damage under a policy of
general public liability insurance with amounts not less than One Million
Dollars ($1,000,000.00) per occurrence in respect of bodily injury, One
Million Dollars ($1,000,000.00) aggregate per occurrence, and Three Hundred
Thousand Dollars ($300,000.00) for property damage;
(d) Claims arising out of malpractice in an amount not less than
One Million Dollars ($1,000,000.00) for each person and for each occurrence;
(e) Such other hazards and in such amounts as may be customary for
comparable properties in the area and is available from insurance companies
authorized to do business in the State of North Carolina.
(f) Loss of rental under a rental value insurance policy covering a
risk of loss during the first six (6) months of reconstruction resulting from
the occurrence of any of the hazards described in subsections (a) and (b) of
this Section 5.01 in an amount sufficient to prevent Owner from becoming a
co-insurer; and
(g) Workers' compensation.
V.02 Replacement Cost. The term "full replacement value" of
improvements as used herein, shall mean the actual replacement cost thereof
from time to time, less exclusions provided in the normal fire insurance
policy.
V.03 Additional Insurance. In addition to the insurance described
above, Manager shall maintain such additional insurance as may be reasonably
required from time to time by any mortgagee of the Facility.
V.04 Waiver of Subrogation. Any provision in this Agreement to the
contrary notwithstanding, each party, to the extent it is permitted to do so
by the terms and provisions of any of the above policies, hereby waives any
and all rights it may have against the other, its agents, or employees, for
any loss or damage from risks ordinarily insured against under such policies,
but only to the extent that such loss or damage is in fact covered by such
insurance and is collectible by the insured party. Each party further
covenants and agrees that it will, upon request of the other, request each
such insurance company to attach to such policy or policies issued by it a
waiver of subrogation with respect to the other party, its agents or
employees.
V.05 Insurance Proceeds. All proceeds payable by reason of any
casualty loss or damage to all or any part of the Facility and insured under
any policy of insurance required by Section 5.01 above of this Agreement
shall be paid to Owner and held by Owner in trust (subject to the provisions
of Section 5.06 below and the rights of the holders of the Facility
mortgages) and shall be made available for reconstruction or repair, as the
case may be, of any damage to or destruction of the Facility, and shall be
paid out by 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. All
salvage resulting from any such loss covered by insurance shall belong to
Owner.
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V.06 Damage or Destruction. If, during the term of this Agreement,
the Facility is totally or partially destroyed from a risk covered by the
insurance described in Section 5.01 above, 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 5.01
Manager shall have the right, but not the obligation, to pay the difference
between the amount of insurance proceeds and such cost of restoration.
V.07 Restoration of Manager's Property. If Owner is required to
restore the Facility as provided in Section 5.06, 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.
V.08 Manager's Blanket Policy. Notwithstanding anything to the
contrary contained in this Article V, Manager's obligation to carry the
insurance provided for herein may be brought within the coverage of a
so-called blanket policy, carried and maintained by Manager; provided,
however, that the coverage afforded 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 VI.
COVENANTS OF OWNER
VI.01 Licensing; Changes and Services. Subject to the terms of this
Agreement, Owner shall take or cause to be taken any and all actions
necessary to be taken by it as the overall supervisor of the assets and
operations of the Facility in order to maintain all required licenses,
permits for the operation of the Facility and the Facility's eligibility to
participate in all public or private third-party medical payment programs,
including providing sufficient funds to bring the Facility in compliance with
all applicable fire safety codes and other laws, regulations and orders, and
to correct all structural, maintenance, procedural and staffing deficiencies
as shown on the surveys and reports of governmental agencies having
jurisdiction over the Facility. 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.
VI.02 Transfer of Interest in Facility. Owner acknowledges and
agrees that upon the transfer, lease, assignment, sale or other disposition
or conveyance of all or any part of its interest in and to the Facility, this
Agreement shall remain in full force and effect unless otherwise terminated
as provided in Section 2.02(c). Subject to the foregoing, Owner covenants
and agrees that in the event that it sells, assigns or otherwise transfers
its interest in and to the Facility at any time while this Agreement is in
effect, it will require the transferee to assume the obligations of Owner
hereunder. The provisions of this Section 6.02 are in addition to, and do not
modify or abridge, the prohibitions against sale, transfer,
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assignment or other disposition of the Facility, as set forth in Section 2.02
(c) and elsewhere in this Agreement.
VI.03 Damage or Destruction. If the Facility or any portions thereof
shall be damaged or destroyed by fire or other casualty, 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 VII.
MISCELLANEOUS COVENANTS
VII.01 Binding Agreement. The terms, covenants, conditions,
provisions and agreements herein contained shall be binding upon and inure to
the benefit of the parties hereto, their successors and assigns.
VII.02 Relationship of Parties. Nothing contained in this Agreement
shall constitute or be construed to be or to create a partnership, joint
venture or lease between Owner and Manager with respect to the Facility.
VII.03 Notices. All notices, demands and requests contemplated
hereunder by either party to the other shall be in writing, and shall be
delivered by hand, transmitted by cable, telegram or telecopy (receipt
confirmed), or mailed, postage prepaid, registered, or certified mail return
receipt requested:
(a) to Owner, by addressing the same to:
Canton Health Investors, LLC
c/o ▇▇▇▇▇▇▇ ▇. ▇▇▇▇▇▇▇▇
▇▇ ▇▇▇▇▇ ▇▇▇▇▇▇, ▇.▇.
▇▇▇▇▇▇▇, ▇▇▇▇▇ ▇▇▇▇▇▇▇▇ ▇▇▇▇▇
(b) to Manager, by addressing the same to:
Centennial HealthCare Management Corporation
▇▇▇ ▇▇▇▇▇▇▇▇▇ ▇▇▇▇▇▇ ▇▇▇▇▇▇▇
▇▇▇▇▇ ▇▇▇
▇▇▇▇▇▇▇, ▇▇▇▇▇▇▇ ▇▇▇▇▇
Attn: ▇▇▇▇ ▇. ▇▇▇▇, Executive Vice President
or to such other address or to such other person as may be designated by
notice given from time to time during the term of this Agreement by one party
to the other. Any notice hereunder shall be deemed given five (5) business
days after mailing, if given by mailing in the manner provided above, or on
the date delivered or transmitted if given by hand, cable, telegraph or
telecopy (receipt confirmed).
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VII.04 Entire Agreement; Amendments. This Agreement contains the
entire agreement between the parties hereto, and no prior oral or written,
and no contemporaneous oral representations or agreements between the
parties with respect to the subject matter of this Agreement shall be of any
force and effect. Any additions, amendments or modifications to this
Agreement shall be of no force and effect unless in writing and signed by
both Owner and Manager.
VII.05 Governing Law. All the terms and provisions hereof and the
rights and obligations of the parties hereto shall be governed by, and
construed and enforced in accordance with, the laws of the State of Georgia
(without regard to its rules of conflicts of laws).
VII.06 Captions and Headings. The captions and headings throughout
this Agreement are for convenience and reference only and do not constitute a
part hereof.
VII.07 Disclaimer of Employment of Facility Employees. No person
employed in the operation of the Facility will be an employee of Manager, and
Manager will have no liability for payment of their wages, fringe benefits,
payroll taxes and other expenses of employment.
VII.08 Costs and Expenses; Indemnity. Unless otherwise expressly
provided herein, all fees, costs and expenses arising out of, relating to or
incurred in the operation of the Facility, including, without limitation, the
fees, costs, and expenses of Manager and outside consultants and
professionals, shall be the sole responsibility of Owner and shall be payable
as operating expenses of the Facility. Manager, by reason of the execution
of this Agreement or the performance of its services hereunder, shall not be
liable for or deemed to have assumed any liability for such fees, costs and
expenses, or any other liability or debt of Owner whatsoever, arising out of
or relating to the Facility or incurred at its operation, except the salary
of Manager's employees and the expenses and costs incurred at its central
administrative offices in performance of its obligations hereunder. Owner
agrees to indemnify and hold Manager, CHC and their officers, directors,
agents and employees harmless from and against all losses, claims, damages or
other liabilities, including the costs and expenses incurred in connection
therewith, arising out of or relating to the ownership of the Facility
(except those resulting from the wilful misconduct or negligence of Manager
or CHC), including, without limitation, any liability asserted against
Manager or CHC or any of their officers, directors, employees or agents by
reason of any action taken by any of the foregoing while performing the
duties of Manager hereunder on behalf of Owner.
VII.09 Responsibility for Misconduct of Employees and Other Persons.
Manager will have no liability whatsoever for damages suffered on account of
the dishonesty, misconduct or negligence of any employee of or employee
leased by the Facility or any officer, director, partner, shareholder,
employee or agent of Owner. 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 this Agreement.
7.10 Advances by Manager. Manager shall have the right, but not the
obligation, to acquire for the benefit of Owner, under the CHC Loan, any and
all sums required to maintain all necessary licenses and permits and to
otherwise keep the Facility operating as a fully
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insured nursing home in good
condition and repair. All such sums advanced under the CHC Loan to Owner
shall be repaid by Owner in accordance with the terms of the Loan Agreement
and the Loan Documents, and Manager shall have the right at any time and from
time to time to instruct the signatories of the Operating Accounts to
withdraw and pay such amounts as are necessary to repay such advances.
7.11 Definition of Affiliate. For purposes of this Agreement, the term
"Affiliate" shall mean any person or entity which Manager or Owner or their
respective shareholders or individual partners, directly or indirectly,
through one or more intermediaries, controls, is in common control with, or
is controlled by.
7.12 Authorization of Agreement. Manager and 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 the formation
documents and operating agreement of 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.
7.13 Severability. If any one or more of the provisions of this
Agreement are held invalid or unenforceable, the validity and enforceability
of all other provisions of this Agreement shall remain in full force and
effect, unless enforcing the remainder of the provisions would not satisfy
the original intentions of the parties.
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IN WITNESS WHEREOF, the parties hereto have executed, sealed and
delivered this Agreement through their duly authorized representatives, as of
the day and year first above written.
OWNER:
CANTON HEALTH INVESTORS, LLC
By:/s/ ▇▇▇▇▇▇▇ ▇. ▇▇▇▇▇▇▇▇
Name: ▇▇▇▇▇▇▇ ▇. ▇▇▇▇▇▇▇▇
Its:
MANAGER:
CENTENNIAL HEALTHCARE MANAGEMENT CORPORATION
By:/s/ ▇▇▇▇▇▇▇ ▇. ▇▇▇▇▇▇▇
Name: ▇▇▇▇▇▇▇ ▇. ▇▇▇▇▇▇▇
Its:Executive Vice President
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SCHEDULE 10.50
CHMC has entered into agreements substantially identical to Exhibit 10.50
as follows:
1. Long-Term Care Facility Management Agreement dated June 1, 1997 with
Quality Link-▇▇▇▇▇▇, L.P. for Windsor, North Carolina facility.
2. Long-Term Care Facility Management Agreement dated June 1, 1997 with
Colonial Health Investors, LLC for Asheville, North Carolina facility.
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