EXHIBIT 10.30
MANAGEMENT AGREEMENT
(Tri-State)
This MANAGEMENT AGREEMENT ("Agreement") is made and entered into effective
as of the 1st day of January, 1992, by and between INTERNATIONAL HEALTH CARE
PROPERTIES VII & VIII, L.P., a Georgia limited partnership ("Owner") and WELCARE
INTERNATIONAL MANAGEMENT CORPORATION, a Georgia corporation ("Manager").
W I T N E S S E T H :
WHEREAS, the Owner owns the Tri-State Convalescent Center in Clarkston,
Washington (the "Facility"); and;
WHEREAS, Owner desires to engage Manager as Owner's agent to manage and
operate the Facility, subject to the terms and provisions of this Agreement, and
Manager agrees to perform the services provided for herein.
NOW, THEREFORE, for and in consideration of the mutual covenants herein
contained and for other good and valuable consideration, the receipt and
sufficiency of which are hereby acknowledged, the parties hereto agree as
follows:
ARTICLE I
DEFINITIONS
When used in this Agreement, the following words or terms shall have the
following definitions:
1.1 "Expiration Date" means the date this Agreement terminates pursuant to
its terms.
1.2 "Fiscal Year" means a year, commencing January 1, and ending December
31, except that the first Fiscal Year shall be that period commencing on the
Commencement Date and ending on the next succeeding December 31 and the last
Fiscal Year shall be that period commencing on January 1 and ending on the
Expiration Date.
1.3 "Improvements" means the Facility and all other structural
improvements situated on the Land.
1.4 "Interest Rate" means the rate of interest equal to the lesser of (i)
the maximum rate of interest not prohibited by applicable law; or (ii) from time
to time that per annum rate of interest equal to two percent (2%) per annum more
than the rate of interest announced as the prime rate from time to time for the
same period by Trust Company Bank, Atlanta, Georgia (or any successor thereto by
purchase, merger, or other reorganization).
1.5 "Land" means the tract of land upon which the Facility is located.
1.6 "Facility" means the Tri-State Convalescent Center, which is located
on the Land.
1.7 "Budget" means a forecast of Project Income and Project Expenses,
including a budget for capital expenditures to be made relative to the Project
pursuant to this Agreement for the Fiscal Year to which such Budget relates.
1.8 "Operating Plan" means an operating plan setting forth in reasonable
detail the services presumed necessary or desirable during a given Fiscal Year
for the operation and maintenance of the Project as a Nursing Home including the
Basic Services (as defined in Section 4.1 hereof), schedules setting forth job
descriptions and standards, Salaries and Benefits which constitute Project
Operating Expenses, a marketing plan for the Project, and an insurance program
for the Project.
1.9 "Patients" means the patients of the Facility.
1.10 "Payments to Manager" means the Management Fees provided in Section
7.1 hereof.
1.11 "Project" means the Land and the Improvements.
1.12 "Project Expenses" means all expenses, costs, and charges of every
kind and nature incurred pursuant to an Approved Budget or any other provision
of this Agreement expressly permitting the incurrence of such expense, cost, or
charge as a Project Expense, or pursuant to any specific written instructions or
directives given by Owner to Manager pursuant to the provisions of this
Agreement, in connection with the operation and maintenance of the Project, for
or with respect to a Fiscal Year (including, without limitation, Project
Operating Expenses and those expenses, costs, and charges incurred in the
performance of Extraordinary Services (as defined in Section 4.2 hereof) and any
Emergency Services (as defined in Section 4.3 hereof).
1.13 "Project Income" means, with respect to a specific period of time,
the revenues actually received from all sources in connection with the operation
of the Project during such period of time. Project Income shall not include or
mean (i) interest or investment income of Owner, (ii) capital contributions of
Owner, (iii) insurance proceeds (however, business interruption insurance
proceeds shall be included in "Project Income"), (iv) tax refunds, (v)
condemnation proceeds or awards, or (vi) amounts collected from the Patients as
security deposits, if any, except to the extent those security deposits are
actually applied against the payments owed to the Facility.
1.14 "Project Operating Expenses" means all expenses, costs, and charges
(including capital outlays) incurred in connection with
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the operation and maintenance of the Project, for or with respect to a given
Fiscal Year, including, without limitation, the cost of operating the Management
Office (as hereinafter defined) of the administrator and all overhead directly
related to the operation of the Management Office.
1.15 "Salaries and Benefits" means salary, wages, bonuses, and other
direct compensation, group life, accident, disability, medical and health
insurance, pension plans, social security payments, payroll and other employee
taxes, worker's compensation payments, employer's contribution to F.I.C.A.,
unemployment compensation, and similar so-called fringe benefits.
When used in this Agreement, the words and terms for which definitions are
specified in the introductory paragraph of this Agreement and in the further
Articles of this Agreement shall have the definitions ascribed to such words and
terms.
ARTICLE II
RELATIONSHIP OF PARTIES
2.1 Grant of Authority. Owner shall at all times exercise overall control
over the assets and operations of the Project, but Owner hereby grants Manager,
as agent of Owner, the general authority to manage, direct, and supervise the
Project on behalf of Owner and to provide the services set forth in this
Agreement. Manager hereby accepts such appointment and, subject to the terms of
this Agreement, shall have the right and authority to perform the services and
take the actions described in this Agreement.
2.2 Relationship. All actions by Manager in performing its duties and
providing services pursuant to this Agreement shall be as Owner's agent and on
behalf of Owner. Owner agrees to indemnify, defend, and hold harmless Manager
from and against any loss, cost, expense, liability, or claim of any kind or
nature whatsoever arising from or in connection with Manager's performance of
its duties under this Agreement, except in instances in which such loss, cost,
expense, liability, or claims arise from or in connection with Manager's own
gross negligence or willful misconduct, or from or in connection with a material
breach by Manager of its obligations under this Agreement.
2.3 Other Activities. Manager may engage in or possess an interest in
other business ventures of every nature and description and in any vicinity
whatsoever, including, without limitation, the ownership, operation, management,
and development of nursing homes or other real property, and Owner shall have no
rights in or to such independent ventures or to any profits therefrom. Any such
activities may be undertaken with or without notice to or participation therein
by Owner, and Owner hereby waives any rights or claims that it may have against
Manager with respect to the income or profit therefrom or the effect of such
activity on the
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Project. Nothing contained herein shall obligate any agent, officer, director,
shareholder, or partner of Manager to devote all or any particular portion of
such party's time or efforts to the Project.
2.4 Management Office. Owner shall provide, at Owner's expense, office
space for the management staff (the "Management Office") within the Facility in
a location designated for office space and not in an area located in the
basement or designated for mechanical rooms or storage. This space shall be of a
size, shall be configured, and shall be improved to a standard and quality
reasonably acceptable to Manager. In addition, there shall be within the
Facility a reasonable amount of additional space providing sufficient room for
storage of plans, additional files, and records. Owner may relocate the
Management Office and such additional space from time to time, subject to the
requirements of this Section 2.4
2.5 Manager's Liability. Owner acknowledges that Manager will enter into
subcontracts ("Subcontracts") with others ("Subcontractors") providing for the
performance of certain services to be provided under this Agreement, and that
Manager's remedies, in the event a Subcontractor fails to perform such services,
is negligent, engages in misconduct or defaults under the Subcontract (in any
such case "Subcontractor Default"), will be governed by the Subcontract and by
applicable law. Owner agrees, for the purposes of this Agreement, that if
Manager, as soon as reasonably practicable after the occurrence of a
Subcontractor Default, commences and thereafter pursues with all due diligence
Manager's remedies against such Subcontractor and, pending efforts by Manager to
enforce Manager's remedies against such Subcontractor, either performs itself
the services covered by the Subcontract or engages another Subcontractor for
such purpose, then Manager shall not be in default under the terms of this
Agreement by reason of such Subcontractor Default.
Notwithstanding any other provision of this Agreement, and unless such act
or omission constitutes gross negligence or willful misconduct by Manager, its
officers, employees, or agents (and for the purposes of this Section 2.5 the
term "employees or agents" of Manager shall not include Subcontractors), under
the terms of this Agreement, neither Manager nor its officers, directors,
shareholders, constituent partners, employees, or agents shall ever be liable
for any act or omission, negligent, tortious or otherwise, of a Subcontractor or
any agent or employee of a Subcontractor, or its subsidiaries or affiliates, for
any amount of damage, or any other monetary obligation whatsoever, which is in
excess of the amount of cash proceeds actually recovered under the policies of
liability insurance required to be maintained pursuant to the terms of Section
5.2 of this Agreement, and under no circumstances whatsoever shall Manager,
under any theory of action or recovery, ever be liable for or obliged to pay or
to satisfy any judgment for any damages or other monetary obligation whatsoever,
that is in excess of the amount of such cash proceeds.
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Notwithstanding any of the provisions of this Agreement, in no event shall Owner
make any claim against Manager, or its affiliates or subsidiaries, on account of
any alleged errors in judgment made in good faith in connection with the
operation of the Facility by Manager or the performance of any advisory or
technical services provided or arranged by Manager.
In the event of an act of gross negligence or willful misconduct by
Manager, its officers, employees, or agents under the terms of this Agreement,
then Owner shall have all recourses and remedies as may be available under the
terms of this Agreement and at law or in equity.
2.6 Exculpation of Owner for Subcontractor Defaults. Notwithstanding any
other provision of this Agreement, and unless such act or omission constitutes
gross negligence, willful misconduct, or a default by Owner, its officers,
employees, or agents (and for the purposes of this Section 2.6, the terms
"employees or agents" of Owner shall not include Subcontractors) under the terms
of this Agreement, neither Owner nor its officers, directors, shareholders,
constituent partners, employees, or agents shall ever be liable for any act or
omission, negligent, tortious or otherwise, of a Subcontractor or any agent or
employee of a Subcontractor or its subsidiaries or affiliates for any amount of
damages or any other monetary obligation whatsoever which is in excess of the
amount of cash proceeds actually recovered under the policies of liability
insurance required to be maintained by Owner pursuant to the terms of Section
5.1 of this Agreement, and under no circumstances whatsoever shall Owner, under
any theory of action or recovery, ever be liable for or obligated to pay or to
satisfy any judgment for any damages or other monetary obligation whatsoever,
that is in excess of the amount of such cash proceeds.
ARTICLE III
BUDGET
3.1 Approval of Budget. As soon as reasonable and practicable for Manager
prior to the end of each Fiscal Year, Manager shall prepare and deliver to
Owner, in a form reasonably satisfactory to owner, a proposed Budget for the
next Fiscal Year. When approved pursuant to this Article III, such Budget shall
be an "Approved Budget."
Owner shall give its approval or its disapproval of the proposed Budget
not later than thirty (30) days after receipt with respect to each Fiscal Year.
If Owner does not approve or disapprove the proposed Budget within such
thirty (30) day period, then Owner shall be deemed to have approved the Budget.
If Owner objects to all or any portion of the proposed Budget, Owner shall
furnish Manager with the reasons for its objections, and Owner and Manager shall
attempt to agree
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with respect to the items to which Owner objects, and if such agreement is not
reached before the beginning of the applicable Fiscal Year, and without
reference to whether more than one Fiscal Year shall lapse, then the Project
shall be operated under a Budget (which for purposes of this Agreement shall be
considered to be an Approved Budget) which is the same as the last Approved
Budget, and manager shall be authorized to incur expenses necessary for the
management and operation of the Project, including but not limited to:
(a) All costs of utilities, cleaning services, costs of routine
building and mechanical maintenance and repair (including elevator maintenance,
if applicable), ad valorem taxes and insurance coverages, costs of security
services, costs under service contracts, landscaping costs, and personnel costs;
(b) All other expenses in the last Approved Budget, plus five
percent (5%) above an amount equal to the sum of (i) the annualized level (the
"Base Level") of all such other expenses during the last three (3) months of the
preceding Fiscal Year for which there was an Approved Budget, plus (ii) five
percent (5%) of such Base Level for the second Fiscal Year during which the
Project is operated under such Budget not approved by Owner and an annually
compounded five percent (5%) of such Base Level for each subsequent Fiscal Year
during which the Project is operated under such Budget not approved by Owner.
3.2 Approved Budget. An Approved Budget shall constitute an authorization
for Manager to spend money to operate and manage the Project pursuant to such
Approved Budget, and Manager may do so without further approval. Owner
acknowledges that, notwithstanding Manager's experience in the management of
similar developments, the projections contained in the Budget submitted at the
commencement of each Fiscal Year are subject to and may be affected by changes
in financial, economic, and other conditions and circumstances beyond Manager's
control, and the Approved Budget shall be adjusted to take into account such
changes. Any variances in the results of actual operations from those
contemplated in the Approved Budget shall be set forth in a quarterly report
from Manager to Owner, such report to set forth the amount of the variance and
the reasons for such variance.
3.3 Expenditures for Capital Items. The Approved Budget shall constitute
an authorization for Manager to make the capital expenditures contemplated
thereby. If during any Fiscal Year Manager believes the purchase or installation
of new or replacement equipment or other capital items not contemplated by the
Approved Budget is or before the end of such Fiscal Year will be necessary or
desirable, Manager shall advise Owner thereof, but shall cause such items to be
purchased and installed only after obtaining the prior authorization of Owner.
3.4 Rates. Manager and Owner recognize the importance of maintaining room
and other rates which enable the Project to pay
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its obligations but minimize the cost of health care. From time to time, Manager
will recommend to Owner, for approval, rate structures which take into account
the financial obligations of the Project and the level of rates at other
comparable nursing homes nearby and the importance of providing quality health
care at minimal cost.
ARTICLE IV
SERVICES
4.1 Basic Services. As basic services (the "Basic Services"), Manager
shall:
(a) Patient Relations. Operate in compliance with the terms and
conditions of this Agreement and administer a patient relations program which
maintains a high visibility of management presence.
(b) Personnel. Provide a nursing home administrator licensed in the
state in which the Project is located for the day-to-day administration of the
Project. The administrator shall be an employee of and compensated by Manager,
However, Manager shall be reimbursed monthly by Owner for all Salaries and
Benefits of such administrator with such amounts, except for expenses which
shall be charged in arrears, being due and payable in advance on the first day
of each month. Notwithstanding the foregoing, however, if the Project is not
operated within the Budget for any continuous six month period, Owner shall have
the right to require Manager to remove the administrator and provide a new
administrator within sixty (60) days of receiving notice from the Owner. All
other employees shall be employees of the Facility and not employees of Manager.
All matters pertaining to the employment, supervision, compensation, promotion,
and discharge of such employees are the right and responsibility of Manager, and
Owner shall have no right to supervise or direct such employees. The Salaries
and Benefits of such employees and the number of such employees to be employed
on-site at the Project shall be part of the Budget (and thus subject to approval
by Owner), but each Approved Budget shall include and provide for sufficient
funds to enable Manager to pay competitive Salaries and Benefits so as to
attract and retain a sufficient number of capable employees to enable Manager to
operate and maintain the Project to the standard herein provided.
(c) Service Contracts. Enter into or renew, in the name of Owner,
contracts (collectively, and including Subcontracts as defined in Section 2.5
hereof, referred to as "Service Contracts") for electricity, gas, water,
telephone, cleaning, fuel oil, elevator maintenance, vermin extermination, trash
removal, linen service, and other services in the ordinary course of the
operation of the Project; purchase all supplies and equipment necessary to
maintain and so operate the Project; and credit to Owner any
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discounts, rebates, or commissions obtained for purchases or otherwise. Owner
shall not have the right to approve any new Service Contract with a term of less
than one (1) year, or any new Service Contract that provides for termination by
Owner (without the payment of premium or penalty) upon sixty (60) days' written
notice or less.
(d) Maintenance and Repair. Maintain or cause to be maintained the
Improvements and grounds of the Project, including, without limitation, interior
and exterior cleaning, painting and decorating, plumbing, carpentry, and other
normal maintenance and repair work.
(e) Collection. Use diligent efforts to request, demand, collect,
receive, and receipt for all charges due from Patients and otherwise due Owner
with respect to the Project.
(f) Project Expenses: Mortgage Loans. Pay all Project Expenses
(other than any payments required on mortgage loans, except as provided below)
on or before that date, after which interest or penalty will begin to accrue
thereon (the "Due Date"), provided, however, that Manager shall contest, if and
to the extent appropriate, the payment of any Project Expense (or portion
thereof) which Manager has reasonable grounds to believe (on the basis of the
facts and information actually known to Manager) should be contested. Reasonable
contest expenses shall be included as Project Expenses. Manager shall give Owner
reasonable notice, including advance notice if possible, of any such contest.
Additionally, at the request of Owner, Manager shall contest the amount or
validity of any claimed Project Expense. In any instance in which Manager has
contested any Project Expense in accordance with the provisions of this
Agreement, or has been requested by Owner to contest any Project Expense, then
any interest or penalty which accrues and may thereafter become payable with
respect to such Project Expense shall itself be a Project Expense.
If Owner shall so request, Manager shall pay the aggregate amounts
required to be paid pursuant to any mortgages of the Project, including amounts
due under any mortgages for interest, amortization of principal, and for
allocation to reserves or escrow funds. All notices from any mortgagee claiming
any default in any mortgage on the Project, and any other notice from any
mortgagee other than routine notice of payment due, shall be forthwith delivered
by Manager to Owner.
(g) Reports. As soon as reasonable and practicable each month,
render to Owner a statement of income and expenses showing the results of
operation of the Facility for the preceding month and of the Fiscal Year to
date. As soon as reasonable and practicable after the end of each Fiscal Year,
Manager shall deliver to Owner profit and loss statements showing Project
Income, Project Expenses, Payments to Manager, the results of operations for
that Fiscal Year, and (provided Manager has sufficient information) a balance
sheet of the Project as of the end of that
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Fiscal Year, prepared on an accrual basis in accordance with generally accepted
accounting principles consistently applied. All such monthly reports shall be in
the format normally utilized by Manager, Manager shall, upon reasonable notice
from Owner, prepare and submit to Owner such other reports, certificates, or
representations as Owner may reasonably request concerning such matters relating
to the Project as are within the scope of Manager's services provided for in
this Agreement. If any such additional reports or alternate report formats
requested by Owner shall require Manager to engage consultants or other
professionals to assist Manager in designing or preparing such report, or shall
require Manager's employees (other than on-site employees engaged in performing
Manager's services under this Agreement) to expend substantial amounts of
additional time designing or preparing such report, then Owner shall promptly
reimburse Manager for the reasonable actual cost to Manager of engaging such
consultants or other professionals or of such time expended by Manager's
employees.
(h) Records. Maintain, at the address for Manager provided for in
Section 10.2 of this Agreement, or such other place or places as Owner may
approve in advance, a system of office records, books, and accounts, including,
without limitation, copies of all reports filed pursuant to subsection (g)
above, and any additional information or records reasonably required by Owner
for the preparation of federal, state, and local tax returns, all in a manner
reasonably satisfactory to owner. Owner and others designated by Owner,
including Owner's auditors and accountants, shall have, upon reasonable notice
to Manager, during normal business hours, access to and the right to audit and
make copies of such records, accounts, and books, and all vouchers, files and
all other material pertaining to the Project and this Agreement, all of which
Manager shall keep safe and available to Owner and others designated by owner,
and all of which shall be owned by Owner.
(i) Legal Proceedings. Institute and prosecute in the name and at
the expense of Owner such actions and proceedings necessary to effect the
purposes, perform the services, and take the actions contemplated by this
Agreement, including without limitation, to evict Patients in default; to
recover possession of rooms occupied by such Patients; to ▇▇▇ for and recover
charges and other damages due from Patients and other persons obligated to Owner
or Manager in connection with the Project; to settle, compromise, and release
any such actions or suits or reinstate such Patients; and to sign and serve in
the name of Owner notices and other communications relating to any of the
foregoing matters. Manager shall not incur legal fees and expenses exceeding
Five Thousand Dollars ($5,000.00) in prosecuting or defending any action,
proceeding, or suit on behalf of Owner in connection with the Project without
first securing written permission from Owner, Manager shall keep Owner advised
of all actions filed against Owner or all actions filed by Owner that are beyond
the scope of ordinary business operations, Owner shall be responsible for
reasonable expenses incurred in defending Manager for actions brought against
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Manager based upon Manager's performance of its duties in connection with
operation of the Project.
(j) Process Insurance Claims. If requested by Owner, process all
claims under any insurance coverages pertaining to the Project in an expeditious
manner, so as to minimize delay in receipt by the Project of the proceeds of
such insurance.
(k) Maintenance of Licenses. Assist in obtaining and maintaining all
licenses and certifications required for operation of the Project, such as
contracts with fiscal intermediaries and agencies and eligibility for
participation in medical reimbursement programs. All licenses and permits shall
be obtained in the name and at the expense of the Owner unless otherwise
stipulated pursuant to applicable regulations or unless otherwise agreed between
Owner and Manager.
(l) Reimbursement Schedule. Develop price and reimbursement
schedules satisfactory to Owner; obtain approval of appropriate price schedules
by government agencies and appropriate reimbursement schedules from third-party
paying agencies; provide all statistical, financial, and other data necessary to
obtain reimbursement from the appropriate agencies; and effect final settlement
of all claims for reimbursement.
4.2 Extraordinary Services. Whenever Manager determines that a service or
services not included in the Basic Services required to be rendered pursuant to
the Agreement (and not constituting an emergency) is necessary or desirable for
the efficient, economic, and profitable operation of the Facility (collectively,
the "Extraordinary Services"), Manager shall advise Owner of the need and cost
therefore and make recommendations related thereto. Manager shall then perform
the Extraordinary Services in accordance with the directions of Owner as to the
performance thereof and the amount to be expended therefore. The Extraordinary
Services shall be as follows:
(a) Major Repairs. Performance and supervision of all major repairs,
replacements, and alterations to the Facility not covered by the Budget.
(b) Compliance with Legal Requirements. Ensuring compliance with any
and all orders or requirements affecting the Project by any federal, state,
county, municipal, or other governmental authority or agency having jurisdiction
thereover, and order of the Board of Fire Underwriters or any similar bodies.
Manager, however, shall not take any such action as long as Owner is contesting
or has notified Manager of its intention to contest (or has otherwise directed
Manager to take no action), and promptly institutes proceedings contesting any
such order or requirement, except that if failure to comply promptly with any
such order or requirement would or might expose Manager to civil or criminal
liability, Manager shall cause the same to be complied with.
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(c) Tax Abatement and Eminent Domain. Rendering of advice and
assistance to owner in the negotiation or prosecution of all claims for the
abatement of property and other taxes affecting the Facility and for awards for
taking by eminent domain affecting the Facility.
(d) General. Performance of any other services, acts, items, or
matters relating to or affecting the Facility which are or may be desirable or
necessary for the efficient, economic, and profitable operation thereof and
which are not included within the services required by this Agreement.
4.3 Emergency Services. "Emergency Services" are defined as any and all
emergency repairs or services immediately necessary for the preservation and
safety of the Facility or to avoid the suspension of any substantial and
important service to the Facility or danger to life or property. Emergency
Services may be performed by Manager in its discretion, without owner's prior
approval of the performance or amount to be expended therefore; provided,
however, that Manager shall, if at all possible, attempt to consult Owner by
telephone before performing any Emergency Services. Thereafter, as soon as
practicable, Manager shall notify Owner in writing of the details and expenses
thereof.
4.4 Expense of Owner. All services performed by Manager under this
Agreement shall be at the expense of Owner. Notwithstanding any other provision
of this Agreement, Manager shall not be obligated to make any advance to or for
the account of Owner or to pay any sums, except out of funds held in any account
maintained under Article VI, nor shall Manager be obligated to incur any
liability or obligation for the account of Owner without assurance that the
necessary funds for the discharge thereof are or shall be available, nor shall
Manager be responsible for the failure of the Facility to be managed, operated,
or maintained to the standard required by this Agreement as a result of Owner's
failure to provide funds for the Facility.
ARTICLE V
INSURANCE
5.1 Owner's Insurance. If requested by Owner, Manager will obtain in
Owner's name and at Owner's expense and keep in force (or Owner will obtain and
keep in force) during the term of this Agreement:
(a) Comprehensive general liability insurance, with broad form
comprehensive endorsement, protecting and indemnifying Owner against claims for
injury to or death of persons or damage to or destruction of property occurring
upon, in, or about the Project and the adjoining streets (other than streets
dedicated to and accepted for maintenance by the public); such insurance to
afford immediate protection to the limit of not less than $1,000,000 for
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injury to or death of persons and $500,000 for damage to or destruction of
property, with overlying umbrella liability insurance coverage of not less than
$3,000,000 as to both injury to or death of persons and damage to or destruction
of property; such insurance to be issued on an 'occurrence basis' and to be
endorsed specifically to include within its scope of coverage all liabilities
and indemnities for which Owner is obligated and liable under the terms of this
Agreement; and with respect to such umbrella liability insurance, coverage shall
not provide for a self-insured retention in excess of $25,000;
(b) Worker's compensation insurance with statutory and employee's
liability insurance;
(c) Auto liability insurance covering motor vehicles owned or hired
by Owner, protecting and indemnifying Owner against claims for the injury to or
death of persons or damage to or destruction of property; such insurance to
afford immediate protection to the limit of not less than $250,000 for injury or
death of each person; $500,000 for injury to or death of persons for each
occurrence; and $100,000 for damage to or destruction of property;
(d) Professional liability insurance against claims for bodily
injury or death or otherwise arising out of the operations of the Facility, such
insurance to afford minimum protection of not less than $500,000 with respect to
bodily injury or death to any one person;
(e) Business interruption insurance in an amount sufficient to cover
the estimated Management Fees payable hereunder and all other fixed expenses of
the Facility for a period of not less than six months; and
(f) Such other coverages, in such amounts as shall be set forth in
the insurance plan portion of the Operating Plan. Such insurance shall be
written by companies selected by Owner which are nationally recognized and
legally qualified to issue such insurance in the state or states in which the
Project is located and shall name Owner as insured and Manager as an additional
named insured.
5.2 Manager's Insurance. Manager shall obtain, at Manager's expense, and
keep in force during the term of this Agreement:
(a) Property damage insurance covering, and in an amount
substantially equal to, the value of Manager's furniture, trade fixtures, and
other property maintained in the Management Office;
(b) Comprehensive general liability insurance, with broad form
comprehensive endorsement, protecting and indemnifying Manager against claims
for injury to or death of persons or damage to or destruction of property
occurring upon, in, or about the Project and the adjoining streets (other than
streets dedicated to
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and accepted for maintenance by the public); such insurance to afford immediate
protection to the limit of not less than $1,000,000 for injury to or death of
persons and $300,000 for damage to or destruction of property, with overlying
umbrella liability insurance coverage of not less than $3,000,000 as to both
injury to or death of persons and damage to or destruction of property; such
insurance to be issued on an 'occurrence basis, and with respect to the umbrella
liability insurance, coverage shall not provide for a self-insured retention in
excess of $25,000;
(c) Employee's fidelity insurance in the amount of $50,000 to
protect Owner against misapplication of rents and other funds derived from
operation of the Project by Manager and Manager's employees (which for purposes
of this Section 5.2, do not include employees of the Facility);
(d) Auto liability insurance covering motor vehicles owned or hired
by Manager, protecting and indemnifying Manager against claims for the injury to
or death of persons or damage to or destruction of property; such insurance to
afford immediate protection to the limit of not less than $250,000 for injury or
death of each person; $500,000 for injury to or death of persons for each
occurrence; and $100,000 for damage to or destruction of property; and
(e) Worker's compensation insurance with statutory and employee's
liability coverage for Manager's employees (which for purposes of this Section
5.2, do not include employees of the Facility).
On the condition that the comprehensive general liability insurance
maintained by Manager under this Section 5.2 shall (i) be issued by a nationally
recognized insurer, and (ii) have the limits set forth in Section 5.2 above,
Manager shall be deemed to have satisfied its obligation to maintain such
general comprehensive liability insurance for all purposes of this Agreement.
Such insurance shall be written by companies selected by Manager, which
are nationally recognized and legally qualified to issue such insurance in the
state or states in which the Project is located, and shall name Manager as the
insured and Owner as additional named insured.
5.3 Policies. Manager shall attempt to insure that each policy referred to
in Sections 5.1 and 5.2 above shall:
(a) Provide that it will not be cancelled, amended, or reduced
except after not less than ten (10) days' written notice to Owner and Manager;
(b) Provide that such insurance shall not be invalidated by any act
or negligence of Owner or Manager or any person or entity having an interest in
the Project, nor by any foreclosure or
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other proceedings or notices thereof relating to the Project, nor by any change
in title to or ownership of the Project; and
(c) Include a waiver of all rights of subrogation against Manager
and Owner, their officers, directors and shareholders, constituent partners,
employees, and agents.
Owner, with respect to the coverages required under Section 5.1, shall
deliver to Manager, and Manager, with respect to the coverages required under
Section 5.2, shall deliver to Owner, certificates of insurance evidencing the
existence of all insurance required to be maintained by Owner and Manager,
respectively, under Sections 5.1 and 5.2, such delivery to be made:
(a) Within ten (10) days after the execution and delivery of this
Agreement; and
(b) At least ten (10) days prior to the expiration date of any such
insurance policy.
5.4 Cooperation. Manager and Owner each shall furnish whatever information
is reasonably requested by the other for the purpose of establishing insurance
coverages.
5.5 Subcontractor's Insurance. Pursuant to the program of insurance for
the Project, Manager shall require that each Subcontractor maintain insurance at
the Subcontractor's expense, with such coverages and in such minimum amounts as
are called for by said program except that Manager may on behalf of itself and
Owner, in its sole discretion, waive any of the above requirements. Manager
shall obtain and keep on file a certificate of insurance which shows that the
Subcontractor is so insured, if required.
ARTICLE VI
BANK ACCOUNTS
6.1 Operating Account. Manager is authorized for and on behalf of Owner to
establish an operating account for the Project at a banking institution of its
choosing, provided it is located in the area in which the Project is located, to
deposit all Project Income therein, and to pay all Project Expenses therefrom.
Manager shall designate the authorized signatories on such account.
6.2 Owner's Obligation to Provide Funds. If at any time cash in the
operating account shall not be sufficient to pay expenses and the accrued
Payments to Manager, Manager shall not be obligated to pay such expenses from
its own account. Manager shall notify Owner as soon as practicable upon first
projection or awareness of a cash shortage or impending cash shortage, and Owner
shall determine payment priority. After Manager has paid, to the extent of cash
available in the operating account, all expenses based upon the ordered
priorities set by Owner, Manager shall submit to Owner
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a statement of all remaining unpaid expenses and accrued Payments to Manager.
Within five (5) business days after receiving such statement, Owner shall
provide sufficient monies to pay any unpaid expenses and all accrued Payments to
Manager. Such funds shall be provided to Manager within twenty-four (24) hours
of Owner's receipt of such statement and by wire transfer of funds if more than
$1,000 is due. If Owner has insufficient monies available to pay unpaid expenses
and/or accrued Payments to Manager, no obligation shall arise on the part of any
general partner of Owner to advance or otherwise provide such monies to Owner or
Manager.
6.3 Right to Collect Payments to Manager. To the extent funds are
available in the operating account, Manager shall be entitled to and is hereby
authorized to disburse to itself the accrued Payments to Manager, but not more
than once each calendar month. To the extent funds are not available in the
operating account to pay same, Owner agrees to pay Manager, within five (5)
business days after demand therefor, but not more than once each calendar month,
such sums as are necessary to discharge its liability to Manager therefore. Any
accrued Payments to Manager remaining unpaid after such five (5) day period
shall bear interest at the Interest Rate from the date due until paid. If
Manager collects payments due hereunder by an attorney-at-law, Owner hereby
agrees to pay all costs of collection, including reasonable attorneys' fee.
ARTICLE VII
MANAGEMENT FEE AND ADDITIONAL PAYMENTS
7.1 Amount of Management Fees. During the term of this Agreement, Owner
shall pay Manager in the manner provided below, management fees equal to six
percent (6.0%) of the Project Income during the year concerned ("Management
Fees").
7.2 Monthly Payments of Management Fees. The Management Fees shall be due
in advance on the first day of each month and be paid no later than the tenth
day of each month and shall be calculated by multiplying the number of patient
days in the preceding month, times the Project Income of the Project per patient
day for the Fiscal Year to date as shown on the most recent previously monthly
statement provided under Section 4.1(g) hereof, times six percent (6.0%).
7.3 Adjustment. Owner may request, not more than four times in any one
year period, an adjustment of the Management Fees for such period. After such a
request by Owner, within fifteen days after the preparation of the year-to-date
financial statements for the month in which the request was made, manager shall
pay to Owner or Owner shall pay to Manager such amount as is necessary to make
the amount of Management Fees paid with respect to such period covered by the
request equal to the amount of Management Fees shown to be due on the
year-to-date financial statements for such period.
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ARTICLE VIII
TERM
8.1 Term. This Agreement shall commence as of the date hereof and shall
thereafter continue for twenty (20) years and unless otherwise terminated
pursuant to the terms herein, shall be renewable for two (2) successive
additional terms of ten (10) years each at the option of Manager by Manager
giving written notice to Owner not later than three months prior to the end of
the original or extended term. All of the provisions of this Agreement shall
apply during the extended term(s).
8.2 Termination by Owner. This Agreement shall be terminated upon the
sale, foreclosure or other disposition of the Project (or any facility that is a
part of the Project), without cause or penalty upon sixty (60) days' prior
written notice by Owner to Manager. No termination by Owner permitted hereunder
shall affect or prejudice Manager's right to receive Payments to Manager from
Owner which accrue hereunder prior to the date of such termination or are
otherwise payable hereunder.
8.3 Termination Upon Events of Default. The following shall
constitute Events of Default:
(a) The filing of a voluntary petition in bankruptcy or insolvency
or a petition for reorganization under any bankruptcy law by either Owner or
Manager;
(b) The consent to an involuntary petition in bankruptcy or the
failure by either Owner or Manager to vacate within ninety (90) days from the
date of entry thereof any order approving an involuntary petition;
(c) The entering of an order, judgment, or decree by any court of
competent jurisdiction, on the application of a creditor, adjudicating either
Owner or Manager a bankrupt or insolvent or approving a petition seeking
reorganization or appointment of a receiver, trustee, or liquidator of all or a
substantial part of such party's assets, which order, judgment, or decree shall
continue unstayed and in effect for a period of one hundred twenty (120)
consecutive days;
(d) The failure or refusal of Owner to provide funds necessary to
pay Project Expenses, as and when provided for in this Agreement, and the
Payments to Manager, as and when provided for in this Agreement; provided,
however, that Manager shall have first delivered the notices relating to Owner's
obligation to provide such funds for payment of Project Expenses or Payments to
Manager as required by this Agreement; provided, further, that, as to Project
Expenses, Owner's failure to pay such expenses is of such materiality as to make
it reasonably impractical for Manager to fulfill its obligations hereunder
(which impracticality shall be
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presumed if the Project Expenses for which Owner has failed to advance funds
exceed, in the aggregate, $1,000.00), and the continuance of any such failure
for a period of five (5) days after written notice from Manager of the amounts
required and the purposes thereof;
(e) The failure or refusal of Manager to deposit, for collection, in
the Operating Account all Project Income within ten (10) business days of
receipt thereof by Manager;
(f) The failure of Owner or Manager to perform, keep, or fulfill any
of the covenants, undertakings, obligations, or conditions set forth in this
Agreement and the continuance of any such failure for a period of thirty (30)
days after written notice of said failure; provided, however, that if such
failure constitutes an Event of Default under subsections (b) or (e) above,
neither Owner or Manager shall be entitled to notice;
(g) Suspension of the license for the operation of the Project and
such suspension lasts more than one hundred twenty (120) days or is finally
revoked or terminated;
(h) The default by Owner under the Note or the Loan Documents; or
(i) The termination of this Agreement by Owner without the Lender's
prior written consent.
If any party hereto desires to terminate this Agreement as a result of any
such Event of Default by any other party hereto, a non-defaulting party shall
first deliver to the defaulting party notice (a "Final Notice") of its intention
to terminate this Agreement. After the expiration of a period of fifteen (15)
days from the date of such Final Notice, this Agreement shall terminate. If,
however, upon receipt of such Final Notice, the defaulting party shall cure the
default within said fifteen (15) day period (or, if the default is other than as
referred to in subsections (d), (e), (g) and (h) above, such longer period as is
reasonably necessary to remedy such default; provided, however, that the
defaulting party shall commence curative efforts as soon as reasonably
practicable and pursue such remedy with all diligence until such default is
cured), then this Agreement shall not terminate by reason of such Final Notice.
Notwithstanding the provisions of this paragraph, in no event shall any party be
obligated to deliver more than two (2) such Final Notices with regard to Events
of Default listed herein to any other party hereto within any consecutive twelve
(12) month period or one (1) Final Notice with regard to an Event of Default
substantially similar in nature to an Event of Default occurring within the
previous twelve (12) months, and upon the third (or second, as applicable) such
Event of Default by the other party hereto within such twelve (12) month period,
and after the notice provided above for such third (or second, as applicable)
Event of Default shall have been given and the curative period applicable
thereto shall have lapsed, then
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the non-defaulting party may terminate this Agreement without giving another
Final Notice.
Notwithstanding any other provisions of this Agreement, but without
otherwise affecting Manager's rights or remedies hereunder, Owner agrees that,
in the event Owner breaches this Agreement, by wrongfully terminating or
wrongfully purporting to terminate, in whole or in part, Manager's position as
Manager hereunder, Manager shall be entitled to the remedy of specific
performance in addition to an action for damages.
8.4 Effect of Termination. Upon termination of this Agreement,
Manager shall forthwith:
(a) Surrender and deliver up to Owner any and all Project Income and
security deposits on hand or in the operating account less the Payments to
Manager due Manager through the termination date, as provided in this Agreement;
(b) Deliver to Owner as received any monies due Owner under this
Agreement but received by Manager after such termination;
(c) Deliver to Owner, or its designee, all materials, supplies,
keys, contracts and documents, plans, specifications, promotional materials, and
such other accountings, papers, and records pertaining to this Agreement;
(d) At Owner's request, assign to Owner (without recourse to or
warranty by Manager) executed contracts relating to the operation and
maintenance of the Project;
(e) Deliver to Owner a final accounting of the Project prepared in
accordance with the provisions of Section 4.1(g) up to and including the date of
termination;
(f) Cease the performance of all services required to be performed
by Manager under this Agreement; and
(g) Cooperate reasonably with Owner to accomplish an orderly
transfer of the operation and management of the Project to the party designated
by Owner.
Upon termination of this Agreement for any reason, any right of Manager to
receive Payments to Manager which accrue under the terms of this Agreement,
prior to such termination, but which are payable after the date of such
termination, shall survive such termination and continue in force and effect,
and Owner shall be obligated to make such Payments to Manager in the amounts and
at the times provided for in this Agreement, subject to offset by the amount of
any debt of Manager to Owner or claims of Owner against Manager if such claims
are evidenced by or provided under any final judgments held by Owner against
Manager.
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8.5 Payment Upon Termination. Upon termination of this Agreement for any
reason other than the sale, foreclosure or other disposition of the Project,
Owner shall pay to Manager a termination fee equal to twelve months Management
Fees based on the Management Fees for the twelve months prior to the termination
date, in addition to any other amounts owed to Manager pursuant to the terms of
this Agreement.
ARTICLE IX
CASUALTY: CONDEMNATION
9.1 Total or Substantial Destruction. If the Project or any portion
thereof shall be damaged or destroyed at any time or times during the term of
this Agreement by fire, casualty, or any other cause which renders the Project
totally or substantially inoperative for its intended purpose, and Owner does
not notify Manager within three (3) months following the occurrence of such
damage or destruction that Owner intends to rebuild or replace the same to
substantially its former condition prior to such damage or destruction, this
Agreement shall terminate as of the date of the damage or destruction, with each
party's rights accruing through such date. If Owner notifies Manager within
three (3) months following the occurrence of such damage or destruction that
Owner intends to rebuild or replace the Project and does rebuild or replace the
Project within a reasonable time, this Agreement shall continue in full force
and effect except that the term hereof shall be extended for the period of time
equal to that period during which the Project is inoperative.
For purposes of this Agreement, total destruction or damage "which renders
the Project totally or substantially inoperative for its intended purpose" shall
mean damage or destruction which, according to an engineer selected by Owner and
Manager (each party agreeing to cooperate reasonably in such selection), could
not reasonably be expected to be repaired or restored within twelve (12) months
after the occurrence of such damage or destruction, so that at such time the
Project will be restored substantially to the condition in which it existed
prior to such damage or destruction, with services and amenities substantially
equivalent to those which existed prior to such damage or destruction.
9.2 Partial Damage or Destruction. If the Project is damaged or partially
destroyed in such a manner as to not totally or substantially render the Project
inoperative for its intended purpose,(as defined in Section 9.1 above), this
Agreement shall remain in force and effect as to that portion of the Project not
so damaged or destroyed, with an appropriate abatement in the services to be
performed by Manager as to such damaged or destroyed portion, except that if
Owner does not notify Manager within three (3) months following the occurrence
of such damage or destruction that Owner intends to repair or replace the
portion of the Project which was damaged or destroyed, Manager shall have the
option, upon
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thirty (30) days' notice to Owner, to terminate this Agreement, such termination
to be effective upon the expiration of said thirty (30) day period, and
thereafter Manager will have no claim against Owner (except as provided in
Section 8.4 hereof) arising from such failure to rebuild and such termination.
9.3 Condemnation. If the whole or substantially all of the Project shall
be condemned or taken in any manner for any public or quasi-public use under any
statute or by right of eminent domain, then this Agreement shall terminate as of
the date of vesting of title thereto in the condemning authority, with each
party's rights accruing through such date. If a part of the Project is so taken
or condemned, and if such taking shall substantially affect the Project or if
such taking shall be of a substantial part of the Project, Manager shall have
the right, by delivery of notice to Owner within sixty (60) days after such
taking, to terminate this Agreement as of the date of the vesting of title
thereto in the condemning authority, with each party's rights accruing through
such date. If Manager shall not so elect, this Agreement shall be and remain
unaffected by such taking, except that, effective as of the date of such taking,
appropriate abatement shall be made in the services to be performed by Manager
as to such taken area of the Project.
For purposes of this Agreement, the condemnation or taking of the "whole
or substantially all of the Project" shall mean the condemnation or taking (or
conveyance in lieu thereof) of a material portion of the Project, such that the
Project ceases to be a first-class nursing home, or ceases to have adequate
available parking or access, or ceases to have services and amenities
substantially similar to those which existed immediately prior to such
condemnation or taking (or conveyance in lieu thereof).
ARTICLE X
MISCELLANEOUS
10.1 Delegation: Assignment.
(a) Manager shall have the right to delegate its responsibilities
under this Agreement to employees or agents of Manager or to engage
Subcontractors for performance of all or any part of the services to be provided
hereunder; provided, however, that Manager shall at all times supervise the
performance of Manager's duties and obligations hereunder. Additionally, Manager
shall have the right, without obtaining owner's consent, to assign this
Agreement to an affiliate of Manager. Otherwise Manager shall not, without
Owner's prior approval (which may be given or denied in Owner's sole
discretion), assign any of its rights, other than its right to receive the
Payments to Manager (which Manager may freely transfer or encumber) or its
obligations under this Agreement, whether by operation of law or otherwise.
Except as expressly provided in this Agreement to the contrary, no assignment
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or delegation of responsibilities by Manager shall relieve Manager of any of its
duties or responsibilities under this Agreement.
(b) For the term hereof, this Agreement and the rights and
obligations of Owner hereunder shall constitute a covenant running with the
title to the Project for so long as Owner holds title to the Project, and this
Agreement shall remain in full force and effect between Owner and Manager, and
Manager's successors and permitted assigns, in accordance with all of its terms
and provisions.
Notwithstanding the provisions of this paragraph, upon a sale, conveyance,
transfer, or other disposition of the Facility by Owner to any person, the
rights and obligations of Owner hereunder shall not constitute a covenant
running with the title to the Project and thus shall not be an obligation if any
such unaffiliated purchaser terminates or refuses to honor this Agreement. If
such termination or refusal is not as a result of an Event of Default hereunder
by Manager, then such termination or refusal to honor this Agreement shall
constitute and be deemed to be an Event of Default hereunder by Owner (following
any notice and curative period herein provided) and a wrongful termination of
this Agreement by owner for purposes of this Agreement, but Manager's remedies
under this Agreement shall be an action for damages against Owner and all other
parties who may have expressly assumed Owner's rights, duties, and obligations
hereunder, if any.
(c) If any person or entity other than owner succeeds or attempts to
succeed to title of the Nursing Home, Manager shall have the option to terminate
this Agreement upon ten (10) days' notice to the then Owner of the Facility. If
Manager does not so terminate within ninety (90) days following actual notice to
manager of the transfer of title to the Facility from Owner, this Agreement
shall remain in full force and effect.
10.2 Notices.
(a) All notices, directives, or demands required or contemplated by
this Agreement shall be in writing and shall be delivered by hand, transmitted
by cable, telegram or telecopy (receipt confirmed), sent by registered or
certified mail, return receipt requested, postage prepaid, or by overnight
courier service (and overnight courier shall be used when the circumstances
merit expedient delivery), addressed, in the case of Owner, to ▇▇▇▇ ▇▇▇▇▇▇▇
▇▇▇▇▇▇▇, ▇▇▇▇▇ ▇▇▇, ▇▇▇▇▇▇▇, ▇▇▇▇▇▇▇ ▇▇▇▇▇, Attention: ▇▇▇▇ ▇. ▇▇▇▇▇, and
addressed, in the case of Manager, to ▇▇▇▇ ▇▇▇▇▇▇▇ ▇▇▇▇▇▇▇, ▇▇▇▇▇ ▇▇▇, ▇▇▇▇▇▇▇,
▇▇▇▇▇▇▇ ▇▇▇▇▇, Attention: J. ▇▇▇▇▇▇▇ ▇▇▇▇▇, or to such other address or
addresses as shall, from time to time, be designated by notice by any party to
the other parties. Notices given in compliance with the foregoing provisions by
registered or certified mail shall be effective on the date shown on the return
receipt thereon as the date of delivery or attempted delivery, notices sent by
overnight courier shall be effective on the date shown on the courier's receipt
therefor as the date of
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delivery, and notices delivered by hand, transmitted by cable, telegram or
telecopy (receipt confirmed) shall be effective when so delivered or sent.
(b) Upon notification from Owner or any person or entity designated
as Owner's agent hereunder for all purposes (which agent must be an affiliate of
Owner), Manager agrees to forward all information, reports, and notices provided
for hereunder to be delivered to Owner or such designated agent, and Owner or
such agent shall be Owner's agent for all purposes under this Agreement until
Owner shall designate to Manager a replacement agent for Owner hereunder or
shall deliver notice of termination of such agency.
10.3 Entire Agreement. This Agreement shall constitute the entire
agreement between the parties hereto and shall supersede all other prior
agreements, written or oral, between the parties hereto and relating to the
Project. No modification hereof shall be effective unless made by supplemental
agreement in writing executed by the parties hereto.
10.4 Nature of Contract. Neither the relationships between Owner and
Manager nor anything contained in this Agreement shall be deemed to constitute a
partnership, joint venture, or any other similar relationship, and Manager shall
at all times be deemed an independent contractor for purposes of this Agreement.
10.5 Governing Law. This Agreement is made pursuant to, and shall be
governed by and construed and enforced in accordance with, the laws applicable
to contracts made and to be performed in the state of Georgia.
10.6 No Waiver: Cumulative Remedies. The failure of Owner or Manager to
seek redress for violation or to insist upon the strict performance of any
covenant, agreement, provision, or condition of this Agreement shall not
constitute a waiver of the terms of such covenant, agreement, provision, or
condition, and Owner and Manager shall have all remedies provided herein and by
applicable law with respect to any subsequent act which would have originally
constituted a violation.
10.7 Maintenance of Existence. Manager agrees to maintain its existence as
a Georgia corporation qualified to do business in New Mexico and, during the
time that it serves as manager under the terms of this Agreement, will not
dissolve, liquidate, sell, lease, transfer or otherwise dispose of all or
substantially all of its assets (in a single transaction or a series of
transactions).
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IN WITNESS WHEREOF, the parties have executed this Agreement as of the
date first above written.
OWNER: INTERNATIONAL HEALTH CARE
PROPERTIES VII & VIII, L.P.
By: /s/ ▇▇▇▇ ▇. ▇▇▇▇▇
-------------------------------------
▇▇▇▇ ▇. ▇▇▇▇▇, General Partner
MANAGER: WELCARE INTERNATIONAL MANAGEMENT
CORPORATION
By: /s/ J. ▇▇▇▇▇▇▇ ▇▇▇▇▇
-------------------------------------
J. ▇▇▇▇▇▇▇ ▇▇▇▇▇, President
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SCHEDULE 10.30
CHMC has entered into an agreement substantially identical to Exhibit
10.30 as follows:
1. Management Agreement dated August 1, 1991 with International Health
Care Properties VI, L.P. ("IHCP") for Albuquerque, New Mexico facility. A
material detail in which this agreement differs from Exhibit 10.30 is that the
management fees under this agreement are subordinated to the monthly payments by
IHCP to SouthTrust Bank of Alabama pursuant to the Promissory Note dated August
22, 1991 in the original principal amount of $2,403,178.12.
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