MANAGEMENT AGREEMENT
THIS MANAGEMENT AGREEMENT (this "Agreement") is made and
entered into as of December 27, 1996, by and between COMMUNITY CARE OF AMERICA,
INC., a Delaware corporation with offices at ▇▇▇▇ ▇. ▇▇▇▇▇▇▇▇▇ ▇▇▇▇▇, ▇▇▇▇▇▇, ▇▇
▇▇▇▇▇ ("Owner") and INTEGRATED HEALTH SERVICES, INC., a Delaware corporation
with offices at ▇▇▇▇▇ ▇▇▇ ▇▇▇ ▇▇▇▇▇▇▇▇▇, ▇▇▇▇▇▇ ▇▇▇▇▇, ▇▇ ▇▇▇▇▇ ("Manager").
WHEREAS, the Owner is a publicly-traded corporation that is,
directly and indirectly through its subsidiaries, engaged in the business of
owning, operating and managing skilled nursing facilities, hospitals and other
health care related facilities (the "Business"); and
WHEREAS, the Manager is a publicly-traded corporation engaged
in the ownership and operation of similar facilities and is experienced in
various phases of the management, operation and ownership thereof, including,
without limitation, the management of the financial and accounting functions
related thereto, and arranging and negotiation of contracts for the provision of
ancillary services for health care facilities; and
WHEREAS, the Owner desires to engage the Manager to manage the
financial, accounting and ancillary services contracting functions for Owner's
account during the term herein provided, and the Manager desires to accept such
engagement, upon the terms and subject to the conditions contained herein.
NOW, THEREFORE, in consideration of the premises and covenants
herein contained, and intending to be legally bound hereby, the parties agree as
follows:
ARTICLE I
EMPLOYMENT OF THE MANAGER
1.1 Employment. For and during the term of this Agreement, the
Owner hereby grants to the Manager the sole and exclusive right, and employs the
Manager to supervise, manage, and operate the financial, accounting, MIS,
reimbursement and ancillary services contracting functions (the "Applicable
Functions") in the name and for the account of the Owner upon the terms and
conditions hereinafter set forth.
1.2 Acceptance. The Manager accepts such employment and agrees
that it will (a) faithfully perform its duties and responsibilities hereunder,
(b) use its best efforts to supervise and direct the management of the
Applicable Functions in an efficient manner, and (c) consult with the Owner and
keep the Owner advised of all major policy matters relating to the management of
the Applicable Functions. The Manager shall report to the principal financial or
chief accounting officer of the Owner, whose approval shall be required prior to
the public issuance or filing with the Securities and Exchange Commission ("the
SEC") of any financial or accounting report.
ARTICLE II
TERM
The initial term of this Agreement shall commence on January 1, 1997, or
such earlier date as Manager and Owner shall agree (the "Commencement Date") and
shall extend until December 31, 2001 ("Term").
ARTICLE III
RIGHTS AND DUTIES OF THE MANAGER
During the term of this Agreement, and in the course of its
management of the Applicable Functions:
3.1 Employees. The Manager, on the Owner's behalf, shall hire,
promote, discharge, and supervise the work of all employees involved in
performing services related to the Applicable Functions below the Owner officer
level. All of such employees shall be employees of the Manager, except for such
employees of the Owner as the Owner and Manager shall mutually agree, provided,
however, that the compensation of any such employees of Owner, including fringe
benefits, with respect to such employees, shall be deducted from the amount of
the Management Fee. The term "fringe benefits" as used herein shall include but
not be limited to the employer's contribution of FICA, unemployment
compensation, and other employment taxes, retirement plan contributions,
▇▇▇▇▇▇▇'▇ compensation, group life, accident, and health insurance premium,
profit sharing contributions, disability, and other similar benefits paid or
payable by the Manager with respect to its own business or other businesses
managed by it, but shall in any event be consistent with the compensation
provided to other similarly situated employees of the Owner.
3.2 Ancillary Services, Utilities, Etc. The Manager shall
enter into such contracts in the name of and at the expense of the Owner as may
be deemed necessary or advisable for the furnishing of all ancillary services,
including, without limitation, utilities, concessions, supplies and other
services as may be needed from time to time for the maintenance and operation of
the Business. Manager is authorized to contract for or provide ancillary
services,
including, but not limited to, rehabilitation and respiratory therapy services,
and mobile diagnostic services, through providers that are affiliates of the
Manager, provided that such services are rendered at levels of quality and
pricing that are competitive with those available in the community.
3.3 Deposit and Disbursement of Funds. The Manager shall
deposit in a banking institution which is a member of the FDIC in accounts in
the Manager's name as agent for Owner, all monies arising from the operation of
the Business or otherwise received by the Manager for and on behalf of the Owner
("Business Funds"), and shall disburse and pay the same from said accounts on
behalf and in the name of Owner in the following order of priority and, in each
case, such amounts and at such times as the same are required to be made in
connection with:
(a) Payment of Debt Service (as hereinafter defined)
and all costs and expenses arising out of the ownership, maintenance,
expansion, and operation of the Business, including, without
limitation, the reimbursable expenses of the Manager hereunder set
forth in Exhibit A hereto;
(b) Payment of the Manager's Management Fee (as
hereinafter defined) provided for in Article V, below (including any
accrued and unpaid Management Fees for prior periods);
(c) The balance of such funds, after provision for
such adequate working capital reserves on a monthly basis as shall be
determined by the Manager in its reasonable business
judgment, shall be invested by the Manager on behalf of the Owner or,
if directed by the Owner, shall be used to reduce existing debt of the
Owner (including, without limitation, any debt due to Manager or any of
its affiliates or subsidiaries), to make distributions to the Owner's
stockholders or to repurchase outstanding shares of its capital stock.
As used herein, "Debt Service" means scheduled payments of the
principal and interest with respect to:
(x) existing debt service payments; and
(y) any additional indebtedness incurred by the Owner
for the improvement, maintenance, or operation of the Business as
mutually agreed upon by Owner and Manager.
"Debt Service" includes payments made with respect to
any revolving credit line with the Manager or others, but does not
include any other amounts payable by reason of voluntary prepayments or
the acceleration of such indebtedness for any reason.
3.4 Statements. The Manager shall deliver or cause
to be delivered to the Owner statements as follows:
(a) Within thirty (30) days following the end of each
calendar month, a profit and loss statement and balance sheet statement
(both prepared on an accrual basis in accordance with GAAP) showing the
results of operation of the Business for such calendar month and the
year-to-date, and having annexed thereto a computation of the
Management Fee (as determined under Article VI hereof) for such
preceding month and the year-to-date;
(b) On or before ninety (90) days after the close of
each fiscal year during the term of this Agreement, the Manager will
also deliver or cause to be delivered to the Owner a balance sheet and
related statement of profit and loss certified by an independent public
accounting firm and prepared in accordance with GAAP showing the assets
employed in the operation of the Business and the liabilities incurred
in connection therewith as of the end of the fiscal year, and the
results of the operation of the Business during the preceding twelve
(12) months then ended, and having annexed thereto (i) a copy of all
Medicare and Medicaid cost reports prepared by the Manager with respect
to each facility constituting any part of the Business for such twelve
month period, and (ii) a computation of the Management Fee for such
twelve (12) month period; and
(c) all other financial and accounting reports and
statements that the Owner is required to prepare or file pursuant to
applicable law, including, without limitation, any required pursuant to
the Securities Exchange Act of 1934, as amended and the rules and
regulations promulgated thereunder (the "Exchange Act"). All of such
reports and statements shall be delivered to the Owner a reasonable
amount of time prior to the date on which such report or statement is
required to be reported, filed or disclosed in accordance with
applicable law.
3.5 Data Processing. The Manager shall, directly or through an
affiliate, provide the data processing required to maintain the financial,
payroll, and accounting records of the Business; except that the Manager agrees
that the Business
payroll will not be moved to Manager's central payroll administration until same
can be accomplished without a material disruption to Business cash flow.
3.6 Books and Records. The Manager on behalf of the Owner
shall manage the keeping of full and accurate books of account and such other
records reflecting the results of operation of the Business as required by law.
3.7 Taxes. The Manager shall cause all taxes, assessments, and
charges of every kind imposed upon the Business by any governmental authority,
including interest and penalties thereon, to be paid when due if funds are
available, except that the Manager shall not cause such payment to be made if
(a) same is in good faith being contested by the Owner at its sole expense and
without cost to the Manager, (b) enforcement thereof is stayed, and (c) the
Owner shall have given the Manager written notice of such contest and stay and
authorized the non-payment thereof, not less than ten (10) days prior to the
date on which such tax assessment, or charge is due and payable. Interest or
penalty payments shall be reimbursed by the Manager to the Owner if imposed upon
the Owner by reason of negligence on the part of the Manager in making the
payment if funds are available therefor. Manager shall notify Owner of all
taxes, assessments or penalties assessed against the Business other than in the
normal course of business.
ARTICLE IV
RIGHTS AND DUTIES OF THE OWNER
During the term of this Agreement:
4.1 Right of Inspection. The books and records of the Business
shall be the property of Owner. The books and records of the Business shall not
be removed by the Manager without the consent of the Owner. The Owner
acknowledges that some books and records will be maintained at the Manager's
principal place of business.
4.2 Cooperation with Manager. The Owner will fully cooperate
with the Manager in connection with the management of the Applicable Functions
and will reimburse the Manager for all funds expended or costs and expenses
incurred to which the Manager is entitled to reimbursement as set forth in
Exhibit A of this Agreement.
4.3 Operating Capital. To any extent necessary after taking
into account Manager's loans under Article V, below, the Owner shall provide the
Manager with such amount of working capital as may be required from time to time
for the operation of the Business on a sound financial basis (including the
payment of all amounts owed to Manager including, but not limited to, the
payment of all management fees, reimbursable expenses and amounts due under the
Line of Credit). If additional working capital is required, the Manager shall
notify the Owner thereof in writing and the Owner shall provide the Manager with
such increase in working capital within fifteen (15) days thereafter. If the
Owner fails to provide such additional working capital, Manager may, but is not
obligated to, provide the same as a loan to the Owner.
ARTICLE V
COMPENSATION AND DISTRIBUTIONS
5.1 As full and exclusive compensation for all of the services
to be rendered by Manager during the Term of this Agreement, the Owner shall pay
to the Manager at its principal office, or at such other place as the Manager
may from time to time designate in writing, and at the times hereinafter
specified a monthly fee (the "Management Fee"). The aggregate amount of the
Management Fee for the period commencing with the effective date of this
Agreement and ending on December 31, 1997 shall be an amount equal to the lesser
of (a) two percent (2%) of Gross Revenues or (b) twice the amount of the total
direct and indirect costs of Owner for the Applicable Functions during the
period July 1, 1996 through December 31, 1996 ("Owner's Cost"). The monthly
payment of the Management Fee for such period shall be based on the percentage
of Gross Revenue specified in clause (a), with an adjustment being made to the
amount of Management Fee payable for the final month of such period if the
amount in clause (b) shall be less than clause (a). The Lender and Borrower may
by mutual agreement increase the percentages in clause (a) above to an amount
not greater than two and one half percent (2.5%) following completion of
Lender's due diligence review. The Management Fee for periods commencing January
1, 1998 and thereafter shall be an amount equal to the lesser of (a) two percent
(2%) of Gross Revenues or (b) a percentage of Gross Revenues determined by
dividing (x) an amount equal to Owner's Cost, by (y) an amount equal to the
Gross Revenues for the period July 1, 1996 through December 31, 1996. The Lender
and Borrower may by mutual agreement increase the percentages in clause (a)
above to an amount not greater than two and one half percent (2.5%) following
completion of Lender's due diligence review. At the completion of its review of
Owner's books and records, Managers will notify Owner of its calculation of
Owner's Cost.
If Owner disagrees with Manager's calculation of Owner's Cost, the parties agree
that KPMG Peat Marwick shall recompute Owner's Cost for purposes of this
Agreement using generally accepted accounting principals, which recomputation
shall be final and binding on the parties hereto. All fees incurred by KPMG Peat
Marwick shall be borne by the Owner. The Management Fee shall be payable five
days after delivery to Owner of the monthly financial statement referred to in
Section 3.4(a) (each such date being hereinafter referred to as a "Payment
Date") and shall be calculated based upon the Business's Gross Revenues during
the preceding month as set forth in such financial statements.
5.2 For the purposes of determining the Management Fees,
"Gross Revenues" for any period shall be determined on the basis of all revenues
of any kind derived directly or indirectly from the Business during such period
(including rental or other payment from concessionaires, licensees, tenants, and
other users of the Business) as determined in accordance with generally accepted
accounting principles consistently applied, excluding, however:
(a) federal, state, and municipal excise, sales, and use
taxes collected directly from patients as a part of the sales
prices of any goods or services;
(b) proceeds of any life or casualty insurance policies,
condemnation or eminent domain;
(c) gains or losses arising from the sale or other
disposition of capital assets;
(d) any reversal or accrual of any contingency or tax
reserve;
(e) interest earned on sinking funds, Special Security
Accounts, bonds funds, etc. originally and specifically formed as
a requirement of any bond issue utilized to finance any part of
the Business;
(f) patient trust accounts;
(g) tax refunds;
(h) uncollectible accounts receivable, in the reasonable
judgment of Manager and in accordance with industry standards;
(i) miscellaneous revenues arising from dividends,
discounts, or refunds related to items previously expensed; and
bequests, gifts, or similar donations.
The proceeds of business interruption insurance or proceeds as
a result of Medicare and Medicaid audits shall be included in Gross Revenues of
the Business. However, funds required to be repaid as a result of Medicare and
Medicaid audits shall be deducted from Gross Revenues of the Business.
5.3 Notwithstanding the foregoing, the Management Fee
(including any amount carried over pursuant to the succeeding sentence hereof)
shall be payable on each Payment Date only to the extent that the Business Funds
(as defined in Section 3.3) shall be sufficient as of such date; provided that
the Manager shall be entitled to cause a draw-down under any revolving credit
facility of the Owner to make payment of
any Management Fee then payable or accrued from prior periods. Any portion of
the Management Fee not paid due to the foregoing shall be carried over and be
payable on the immediately succeeding Payment Date; provided, however, that
Owner shall pay Manager interest on such unpaid portion of the Management Fee at
the rate specified in the Subordinated Note of even date herewith made by Owner
in favor of IHS Financial Holdings, Inc.
ARTICLE VI
REPRESENTATIONS AND WARRANTIES OF OWNER
The Owner represents and warrants to the Manager as follows:
6.1 Organization and Standing of the Owner. The
Owner is a corporation duly organized, validly existing and in
good standing under the laws of the State of Delaware. Copies
of the Articles of Incorporation and By-Laws of the Owner, and
all amendments thereof to date, have been, if requested,
delivered to Manager and are complete and correct. The Owner
and its subsidiaries have the power and authority to own the
property and assets now owned by them and to conduct the
business presently being conducted by them.
6.2 Absence of Conflicting Agreements. Neither the execution
or delivery of this Agreement, including all Schedules and Exhibits hereto, or
any of the other instruments and documents required or contemplated hereby and
thereby ("Transaction Documents") by the Owner, nor the performance by the Owner
of the transactions contemplated hereby and thereby, conflicts with, or
constitutes a breach of or a default or
requires the consent of any third party under (i) the Articles of Incorporation
or By-Laws of the Owner (or any of its subsidiaries); or (ii) to the best of its
knowledge after due inquiry, any applicable law, rule, judgment, order, writ,
injunction, or decree of any court, currently in effect; or (iii) to the best of
its knowledge after due inquiry, any applicable rule or regulation of any
administrative agency or other governmental authority currently in effect; or
(iv) any agreement, indenture, contract or instrument to which the Owner (or any
of its subsidiaries) is now a party or by which the assets of the Owner (or any
of its subsidiaries) are bound.
6.3 Consents. No authorization, consent, approval, license,
exemption by, filing or registration with any court or governmental department,
commission, board, bureau, agency or instrumentality, domestic or foreign, is or
will be necessary in connection with the execution, delivery and performance of
this Agreement by the Owner.
6.4 Financial Statements.
(a) The audited consolidated balance sheets of the
Business as of December 31, 1995, and the related statements of
operations and cash flow for the year then ended, filed with the SEC,
present fairly in all material respects the financial condition and
results of operations of the Business at and for the periods therein
specified and were prepared in accordance with GAAP.
(b) The unaudited consolidated balance sheets and the
related statements of operations of the Business as of September 30,
1996, and cash flow for the 9-month period then
ended, filed with the SEC, present fairly in all material respects the
financial condition and results of operations of the Business at and
for the periods therein specified and were prepared in accordance with
GAAP.
6.5 Material Changes. Since September 30, 1996, except as set
forth in reports filed by the Owner with the SEC, there has not been any
material adverse change in the condition (financial or otherwise) of the assets,
properties or operations of the Owner on a consolidated basis, whether or not
covered by insurance, and during such period of time the Owner has and from the
date of this Agreement through the Commencement Date, will have, conducted the
Business only in the ordinary and normal course, and made no distributions to
any shareholders of the Owner other than wages paid and expenses reimbursed in
the ordinary and normal course of business.
6.6 Legal Proceedings. Other than as may be set forth in
reports filed by the Owner with the SEC, there are no claims, actions, suits or
proceedings or arbitrations, either administrative or judicial, pending, or, to
the knowledge of Owner, overtly threatened against or affecting the Owner, its
subsidiaries or affiliates, of a nature required to be disclosed in reports
filed with the SEC, or affecting Owner's ability to consummate the transactions
contemplated herein.
6.7 Tax Returns. The Owner have filed all Federal, state,
county and local income, excise, property, employment-related and other tax
returns and abandoned property reports (if any) to date that are due and
required to be filed by it, and there are no claims, liens, or judgments for
taxes due
from the Owner, and to the knowledge of the Owner, no basis for any such claim,
lien, or judgment exists.
ARTICLE VII
REPRESENTATIONS AND WARRANTIES OF MANAGER
The Manager represents and warrants to the Owner as follows:
7.1 Organization and Standing of the Manager. The
Manager is a corporation duly organized, validly existing and
in good standing under the laws of the State of Delaware.
Copies of the Articles of Incorporation and By-Laws of the
Manager, and all amendments thereof to date, have been, if
requested, delivered to the Owner and are complete and
correct. The Manager has the power and authority to own the
property and assets now owned by it and to conduct the
business presently being conducted by it.
ARTICLE VIII
TERMINATION RIGHTS
This Agreement may be terminated and, except as to liabilities
or claims of either party hereto which shall have theretofore accrued or arisen,
the obligations of the parties hereto with respect to this Agreement may be
terminated, upon the happening of any of the following events:
8.1 Termination by the Owner: If at any time or from time to
time during the term of this Agreement any of the following events shall occur
and not be remedied within the applicable period of time herein specified,
namely:
(a) The Manager shall apply for or consent to the
appointment of a receiver, trustee, or liquidator of the Manager
of all or a substantial part of its assets, file a voluntary
petition in bankruptcy, make a general assignment for the benefit
of creditors, file a petition or an answer seeking reorganization
or arrangement with creditors or take advantage of any insolvency
law, or if an order, judgment or decree shall be entered by any
court of competent jurisdiction, on the application of a
creditor, adjudicating the Manager as bankrupt or insolvent or
approving a petition seeking reorganization of the Manager or
appointing a receiver, trustee, or liquidator of the Manager or
of all or substantial part of its assets, and such order,
judgment or decree shall continue unstayed and in effect for any
period of ninety (90) consecutive days;
(b) The Manager shall fail to keep, observe, or perform any
material covenant, agreement, term or provision of this Agreement
to be kept, observed, or performed by the Manager, and such
default shall continue for a period of sixty (60) days after
written notice thereof by the Owner to the Manager; or
(c) There shall occur a "Fundamental Event" of the Owner;
then in case of any such event and upon the expiration of the period of grace
applicable thereto, the term of this Agreement shall expire, at the Owner's
option and upon ten (10) days written notice to the Manager; provided, however,
that, upon termination, pursuant to Section 8.1(c), Owner shall pay Manager a
termination fee equal to the Management Fee for the
six months immediately preceding the date notice of termination is given. For
purposes of Section 8.1(c) a "Fundamental Event" shall have the meaning
attributed to it in the Subordinated Note of even date herewith made by Owner in
favor of IHS Financial Holdings, Inc.
8.2 Termination by the Manager: If at any time or from time to
time during the term of this Agreement any of the following events shall occur
and not be remedied within the applicable period of time herein specified,
namely:
(a) The Owner shall fail to keep, observe, or perform
any material covenants, agreement, term or provision of this Agreement
to be kept, observed, or performed by the Owner and such default shall
continue for a period of sixty (60) days after written notice thereof
by the Manager to the Owner, except for Owner's duty to provide for
adequate working capital under Section 4.3 hereof, which shall continue
uncured for a period of thirty (30) days after written notice thereof;
(b) The Owner (or any of its principal subsidiaries)
shall apply for or consent to the appointment of a receiver, trustee,
or liquidator (or any principal subsidiary of the Owner) 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 of creditors, file a petition
or any answer seeking reorganization or arrangement with creditors or
to take 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 the Owner (or any principal
subsidiary of the Owner) bankrupt or appointing a receiver, trustee, or
liquidator with respect to all or substantial part of the
assets of the Owner (or any principal subsidiary of the Owner), and
such order, judgment or decree shall continue unstayed and in effect
for any period of ninety (90) consecutive days;
(c) Business Funds shall be insufficient for the
payment of the management fees to the Manager pursuant to Article V
hereof for a period of at least six (6) consecutive months;
then in case of any such event and upon the expiration of the period of grace
applicable thereto, the term of this Agreement shall expire, at the Manager's
option and upon ten (10) days written notice to the Owner.
8.3 Material Adverse Change. Manager shall be entitled to
terminate this Agreement forthwith upon notice to the Owner in the event that
(a) there shall have occurred since the date hereof any material adverse change
in the financial or operating condition of the Business or its prospects, or (b)
any representation or warranty of the Owner herein shall have ceased to be true
and correct in any material respect.
8.4 Surviving Rights Upon Termination. If either party
exercises its option to terminate pursuant to this Article VIII, each party
shall forthwith account for and pay to the other all sums due and owing pursuant
to the terms of this Agreement. All other rights and obligations of the parties
under this Agreement shall terminate (except as set forth in Article IX hereof).
ARTICLE IX
INDEMNIFICATION
9.1 Indemnification of Owner by Manager. Manager shall at all
times indemnify and hold harmless the Owner, its officers, directors, employees,
and shareholders, from and against any and all claims, losses, liabilities,
actions, proceedings, and expenses (including reasonable attorneys fees) arising
out of any breach by the Manager of its obligations under this Agreement. The
provisions of this Section 9.1 shall survive the termination or expiration of
this Agreement.
9.2 Indemnification of Manager by Owner. The Owner shall at
all times indemnify and hold harmless the Manager, its officers, directors,
employees, and shareholders, from and against any and all claims, losses,
liabilities, actions, proceedings, and expenses (including reasonable attorneys
fees) (i) arising out of any breach of the obligations, representations and
warranties made by Owner in this Agreement and (ii) asserted by customers,
vendors or shareholders of Owner based upon the entry by Manager into this
Agreement and not related to the performance by Manager of the Applicable
Functions, including but not limited to medical malpractice claims. The
provisions of this Section 9.2 shall survive the termination or expiration of
this Agreement.
9.3 Control of Defense of Indemnifiable Claims. A party
seeking indemnification under this Article IX shall give the other party prompt
written notice of the claim for which it seeks indemnification. Failure of the
party seeking indemnification to give such prompt notice shall not relieve the
other party of its indemnification obligation, provided
that such indemnification obligation shall be reduced by any damages suffered by
such other party resulting from a failure to give prompt notice hereunder. The
party receiving the aforementioned notice shall provide the defense of such
claim, including, without limitation, retention and payment of attorneys.
9.4 Period of Limitation. Any claim for indemnification
herewith must be asserted within twelve (12) months following discovery of the
indemnifiable event, except that no such limitation shall apply to any claim
based upon (a) any liability of the Owner to the Medicare and Medicaid programs,
or to any other third party payor, for excess reimbursement received by the
Owner prior to the Commencement Date, or (b) any breach of Owner's
representations and warranties pertaining to litigation or tax matters.
ARTICLE X
ARBITRATION
If any controversy should arise between the parties in
performance, interpretation, or application of this Agreement which involves any
matter, either party may serve upon the other a written notice stating that such
party desires to have the controversy reviewed by an arbitrator. If the parties
cannot agree within fifteen (15) days from the service of such notice upon the
selection of such arbitrator, an arbitrator shall be selected or designated by
the American Arbitration Association upon written request of either party
hereto. Arbitration of such controversy, disagreement, or dispute shall be
conducted in accordance with the Commercial Arbitration Rules then in force of
the American Arbitration
Association and the decision and award of the arbitrator so selected shall be
binding upon the Owner and Manager. The arbitration will be held in New York,
New York.
As a condition precedent to the appointment of any arbitrator
both parties shall be required to make a good faith effort to resolve the
controversy which effort shall continue for a period of thirty (30) days prior
to any demand for arbitration. The cost of any such arbitration shall be shared
equally by the parties. Each party shall pay its own costs incurred as a result
of its participation in any such arbitration.
If the issue to be arbitrated is Manager's alleged breach of
this Agreement and as a result thereof, Owner has the right to terminate this
Agreement, Manager shall continue to manage the Applicable Functions hereunder
pending the outcome of such arbitration.
The Arbitrator shall have no authority to award punitive
damages or any other damages in excess of the prevailing party's actual damages,
and may not make any ruling, finding or award that does not conform to the terms
and conditions of this Agreement.
ARTICLE XI
SUCCESSORS AND ASSIGNS
11.1 Assignments by the Manager. The Manager, without the
consent of the Owner, shall have the right to assign this Agreement to a wholly
or majority owned subsidiary provided that the Manager shall not thereby be
released from its obligations hereunder.
In the event that all or substantially all the assets of the
Manager or its capital stock shall during the term of this Agreement be acquired
by another corporation (hereinafter referred to as the "Acquiring Corporation")
as a result of a merger, consolidation, reorganization, or other transaction,
the Acquiring Corporation assumes all of the obligations of the Manager then
accrued hereunder, if any, and Manager shall be relieved of all such obligations
(and such Acquiring Corporation shall be relieved of liability hereunder if it
subsequently is involved in such an acquisition).
Except as otherwise permitted herein, the Manager shall have
no right to assign this Agreement.
11.2 Sale, Assignment, or Sub-Lease by the Owner. Any sale,
sub-lease, or assignment with respect to the Business, other than to the
Manager, shall be expressly subject to the terms and provisions of this
Agreement and shall not relieve the Owner of its liability or obligations
hereunder, and Owner shall cause any purchaser, assignee, or sub-lessee to
deliver to the Manager written acknowledgment of its agreement to perform
hereunder including the payment of the management fee described herein.
The Owner may not at any time, without the prior written
consent of the Manager, incur any additional debt that is secured by the lien of
one or more deeds of trust, mortgages, or other security instruments.
ARTICLE XII
MISCELLANEOUS PROVISIONS
12.1 Notices. Any notice or other communication by either
party to the other shall be in writing and shall be given and be deemed to have
been duly given, upon the date delivered if delivered personally or upon the
date received if mailed postage pre-paid, registered, or certified mail,
addressed as follows:
To the Owner: Community Care of America, Inc.
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President
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With a copy to: J. ▇▇▇▇▇ ▇▇▇▇▇▇
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To the Manager: Integrated Health Services, Inc.
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With a copy to: IHS Financial Holdings, Inc.
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or to such other address, and to the attention of such other person or officer
as either party may designate in writing by notice.
12.2 No Partnership or Joint Venture. Nothing contained in the
Agreement shall constitute or be construed to be or create a partnership or
joint venture between the Owner, its successors, or assigns on the one part and
the Manager, its successors, or assigns on the other part. Notwithstanding the
foregoing, the parties hereby agree that they shall each have a duty to act in
good faith and to deal fairly with the other party hereto.
12.3 Modifications and Changes. This Agreement cannot be
changed or modified except by another agreement in writing signed by the party
sought to be charged therewith or by its duly authorized agent.
12.4 Understanding and Agreements. This Agreement
constitutes the entire understanding and agreements of
whatsoever nature or kind existing between the parties with respect to the
Manager's management of the Business.
12.5 Headings. The article and paragraph headings contained
herein are for convenience of reference only and are not intended to define,
limit, or describe the scope of intent of any provision of this Agreement.
12.6 Approval or Consent. Whenever under any provisions of
this Agreement, the approval or consent of either party is required, the
decision thereon shall be promptly given and such approval or consent shall not
be unreasonably withheld. It is further understood and agreed that whenever
under any provisions of this Agreement the approval or consent of the Owner is
required, such approval or consent is given by the person or any one of the
persons, as the case may be, designated in a notification signed by or on behalf
of the Owner. For all purposes under this Agreement, the Manager shall determine
solely from the latest such notification received by it the person or persons
authorized to give such approval or consent. The Manager shall rely exclusively
and conclusively on the designation set forth in such notification,
notwithstanding any notice of knowledge to the contrary.
12.7 Governing Law. This Agreement shall be deemed to have
been made and shall be construed and interpreted in accordance with the laws of
the State of Maryland.
12.8 Enforceability. Should any provision of this Agreement be
unenforceable as between the parties, such unenforceability shall not affect the
enforceability of the other provisions of this Agreement.
12.9 Counterparts. This Agreement may be executed in two or
more counterparts, each of which shall be deemed an original, but all of which
together shall constitute one and the same instrument.
12.10 Construction. The parties have participated jointly in
the negotiation and drafting of this Agreement. In the event an ambiguity or
question of intent or interpretation arises, this Agreement shall be construed
as if drafted jointly by the parties and no presumption or burden of proof shall
arise favoring or disfavoring any party by virtue of the authorship of any of
the provisions of this Agreement. If any party has breached any representation,
warranty, or covenant contained herein in any respect, the fact that there
exists another representation, warranty, or covenant relating to the same
subject matter (regardless of the relative levels of specificity) which the
party has not breached shall not detract from or mitigate the fact that the
party is in breach of the first representation, warranty, or covenant.
IN WITNESS WHEREOF, the parties hereto have executed and
delivered this Management Agreement effective as of the day and year first above
written.
Owner: Manager:
COMMUNITY CARE OF AMERICA, INC. INTEGRATED HEALTH
SERVICES, INC.
By: ____________________ By: _________________
Title: ____________________ Title:A _________________
Attest: ____________________ Attest: _________________
Title: ____________________ Title: _________________
EXHIBIT A
The following is a list of items and travel expenses not included in the IHS
management fee. These facility-specific expenses are passed directly to the
Owner incurred.
a) Computer hardware and software purchased for Owner.
b) Owner specific legal and accounting fees.
c) Owner specific fees associated with union organization
attempts, elections, etc.
d) Other owner specific expenses, including travel and
other out-of-pocket costs.