EXHIBIT 10.69
MASTER MANAGEMENT AGREEMENT
BETWEEN
LYRIC HEALTH CARE LLC
AND
IHS FACILITY MANAGEMENT, INC.
AS OF JANUARY 13, 1998
TABLE OF CONTENTS
PART I
MANAGEMENT TERMS AND CONDITIONS
ARTICLE I RETENTION OF MANAGER
ARTICLE II TERM
ARTICLE III RIGHTS AND DUTIES OF MANAGER
ARTICLE IV RIGHTS AND DUTIES OF OWNER
ARTICLE V COMPENSATION AND DISTRIBUTIONS
ARTICLE VI INTENTIONALLY OMITTED
ARTICLE VII INTENTIONALLY OMITTED
ARTICLE VIII TERMINATION RIGHTS
ARTICLE IX INDEMNIFICATION
ARTICLE X CONFIDENTIALITY; NON-SOLICITATION
ARTICLE XI CONDEMNATION
ARTICLE XII SUCCESSORS AND ASSIGNS
ARTICLE XIII MISCELLANEOUS PROVISIONS
PART II
OTHER TERMS AND CONDITIONS
ARTICLE I TERM
ARTICLE II REPRESENTATIONS AND WARRANTIES
ARTICLE III TERMINATION RIGHTS
ARTICLE IV INSURANCE
ARTICLE V MISCELLANEOUS PROVISIONS
-i-
MASTER MANAGEMENT AGREEMENT
THIS MASTER MANAGEMENT AGREEMENT (this "Agreement") is made and entered
into as of January 13, 1998, by and between LYRIC HEALTH CARE LLC, a Delaware
limited liability company, with offices at 8889 Pelican Bay Boulevard, Suite
500, Naples, Florida 34103 ("Lyric") and IHS FACILITY MANAGEMENT, INC., a
Delaware corporation, with offices at 10065 Red Run Boulevard, Owings Mills, MD
21117 ("Manager").
INTRODUCTORY STATEMENT
Lyric owns, indirectly, all of the shares of each of the corporations
listed on Schedule "1" attached hereto (each, an "Owner" and collectively, the
"Owners"). Each Owner operates the health care facility set forth opposite its
name on Schedule "1". (Each facility and the equipment, furnishings, and other
tangible personal property to be used in connection therewith shall be referred
to as a "Facility", and they shall be referred to collectively as the
"Facilities").
The Owners sublease their Facilities pursuant to Facility Subleases,
dated as of the date hereof, from Lyric Health Care Holdings, Inc., which in
turn leases all of the facilities from Omega Healthcare Investors, Inc.
("Lessor") under Master Lease, dated as of the date hereof (the "Master Lease").
Each of the subleases contains substantially the same provisions as the Master
Lease except for provisions concerning rent and other matters specific to the
Facility. In this Agreement "Lease" means the Master Lease and the sublease as
applicable to each Facility.
Each Owner has entered into a Facility Franchise Agreement with
Integrated Health Services Franchising Co., Inc. (each, a "Franchise Agreement")
for the use of certain "Proprietary Information" and the "IHS Systems" (as
defined therein) and the provision of certain services in order to facilitate
the operation of its Facility.
Manager is engaged in the operation of facilities similar to the
Facilities, and is experienced in various phases of the management, operation
and ownership thereof.
Lyric and Manager are entering into this agreement to set forth the
general terms by which all of the Facilities shall be managed. This agreement
also sets forth the responsibilities of Manager with respect to the Franchise
Agreements.
Simultaneously herewith, Manager shall enter into a Facility Management
Agreement with the Owner of each Facility. By entering into a Facility
Management Agreement, each Owner and Manager shall adopt the terms of Part I of
this agreement by reference (except as expressly provided therein) and agree
upon certain additional terms and conditions for the management of each
Facility.
NOW, THEREFORE, in consideration of the promises and covenants herein
contained and intending to be legally bound hereby, the parties agree as
follows:
-1-
PART I
MANAGEMENT TERMS AND CONDITIONS
Lyric and Manager hereby agree to the following terms and conditions
for the management of each Facility:
ARTICLE I
RETENTION OF MANAGER
1.1 RETENTION. For and during the term of this Agreement, Owner hereby
grants to Manager the sole and exclusive right, and employs Manager to
supervise, manage, and operate the Facility in the name and for the account of
Owner upon the terms and conditions hereinafter set forth.
1.2 ACCEPTANCE. Manager accepts such appointment and agrees that it
will (a) perform its duties and responsibilities hereunder in accordance with
this Agreement, (b) use commercially reasonable efforts to supervise and direct
the management and operation of the Facility in an efficient manner, and (c)
consult with Owner and keep Owner advised of all major policy matters relating
to the Facility. Subject to the foregoing and to the other provisions of this
Agreement, Manager, without the approval of Owner (unless such approval is
herein specifically required as to policies and manner of operation), shall have
the unrestricted control and sole discretion with regard to the operation and
management of the Facility for all customary purposes (including the exercise of
its rights and performance of its duties provided for in Article III hereof),
and the right to determine all policies affecting the appearance, maintenance,
standards of operation, quality of service, and any other matter affecting the
Facility or the operation thereof.
1.3 INDEPENDENT CONTRACTOR. It is expressly agreed by Owner and Manager
that Manager is at all times acting and performing under this Agreement as an
independent contractor, and that no act, commission or omission by either Owner
or Manager shall be construed to make or constitute the other its partner,
member, principal, agent, joint venturer or associate, except to the extent
specified herein.
1.4 OWNERSHIP. Owner shall be the owner and/or holder of all licenses,
permits and contracts obtained with respect to the Facility (subject to Section
3.7 hereof), and shall be the "provider" within the meaning of all third-party
contracts for the Facility. Specifically, and without limitation, Owner shall
own (a) the Medicare provider number, (b) the Medicare provider agreement with
Health Care Financing Administration (HCFA), and (c) the Medicare certification.
ARTICLE II
TERM
The initial term of this Agreement shall immediately commence upon the
date hereof (the "Commencement Date") and shall be for a period from the date
hereof to January 31, 2011 (the
-2-
"Term"), which is the same period as the Lease Term, as defined in the Lease.
This Agreement shall automatically renew for each extension or renewal term of
the Lease (the "Renewal Terms"), should Owner renew the Lease for one or more
such terms under the Lease; provided, however, Manager may decide not to renew
in any such case by giving notice to Owner not less than six (6) months prior to
the expiration of the initial term or any renewal term.
ARTICLE III
RIGHTS AND DUTIES OF MANAGER
During the Term of this Agreement, and in the course of its management
and operation of the Facility:
3.1 EMPLOYEES. Manager, on Owner's behalf, shall hire, promote,
discharge, and supervise the work of the Facility's Administrator, Assistant
Administrator, Department Heads, and all operating and service employees
performing services in and about the Facility. All of such employees shall be
employees of Owner, except for the Administrator and the Director of Nursing,
who shall be employees of Manager, and the aggregate compensation, including
fringe benefits, with respect to such employees, including the Administrator and
the Director of Nursing, shall be charged to Owner as an expense of the
operation of the Facility. 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, workman's compensation, group life, accident, and health
insurance premium, profit sharing contributions, disability, and other similar
benefits paid or payable by Manager with respect to other facilities which may
be managed by Manager. All such employees of Manager shall be covered by
appropriate malpractice and/or errors and omissions insurance as approved by
Manager and Owner. The cost of same shall be charged to Owner as an expense of
the operation of said Facility. Manager shall be responsible, also, for
coordinating health insurance coverages, benefits, and permits (including COBRA
matters) for the employees of each Facility.
3.2 LABOR CONTRACTS. Manager, if requested by Owner, will negotiate, on
Owner's behalf and at Owner's expense, with any labor union lawfully entitled to
represent the employees at the Facility, but any collective bargaining agreement
or labor contract resulting therefrom must first be approved by Owner who shall
be the only person authorized to execute the same. Owner agrees that all fees
and costs of outside professionals in conducting and concluding such
negotiations shall be paid by Owner out of Facility Funds.
3.3 CONCESSIONAIRES, ETC. Manager shall negotiate and consummate in the
name and at the expense of Owner, contracts or arrangements with
concessionaires, licensees, tenants, and other intended users of the Facility.
Any fees and expenses incurred in connection therewith shall be charged to Owner
as an expense of the operation of the Facility.
3.4 ANCILLARY SERVICES, UTILITIES ETC. Manager shall enter into such
contracts in the name of and at the expense of Owner as may be deemed necessary
or advisable for the furnishing of all ancillary services, utilities,
concessions, supplies and other services as may be needed from
-3-
time to time for the maintenance and operation of the Facility. Manager is
authorized to contract for or provide ancillary services, including, but not
limited to, pharmacy (drug and I.V.), rehabilitation and respiratory therapy
services, and mobile diagnostic services, through providers which are affiliates
of Manager, provided that such services are rendered at levels of quality and
pricing that are competitive with those available in the community.
3.5 PURCHASES. Manager shall supervise the purchasing by Facility staff
of food, beverages, operating supplies, and other materials and supplies, in the
name of and for the account and at the expense of Owner, as may be needed from
time to time for the maintenance and operation of the Facility. However, Manager
shall participate in any master purchasing program specified by Owner.
3.6 REPAIRS. Manager shall make or install or cause to be installed at
Owner's expense and in the name of Owner any proper repairs, replacements,
additions, and improvements in and to the Facility and the furnishings and
equipment in order to keep and maintain the same in good repair, working order
and condition, and outfitted and equipped for the proper operation thereof in
accordance with (a) industry standards comparable to those prevailing in other
similar facilities, (b) all applicable state or local rules, regulations, or
ordinances, and (c) the terms and conditions of the Lease.
3.7 LICENSES AND PERMITS. Manager shall apply for and use commercially
reasonable efforts to obtain and maintain in the name and at the expense of
Owner, all licenses and permits required in connection with the management and
operation of the Facility. If Manager is required by law to obtain any license
or permit in its name, Manager agrees to use commercially reasonable efforts to
obtain and maintain such license or permit in its name, at Owner's expense.
Owner agrees to cooperate with Manager in applying for, obtaining, and
maintaining such licenses and permits.
3.8 GOVERNMENTAL REGULATION.
(A) Manager shall use commercially reasonable efforts to take
such action as shall be reasonably necessary to insure that the
Facility and the management thereof by Manager complies with all
federal, state and local laws, regulations and ordinances applicable to
the Facility or the management thereof by Manager, including the
particular laws and regulations applicable to health care facilities.
(B) Manager shall promptly provide to Owner as and when
received by Manager, all notices, reports or correspondence from
governmental agencies that assert deficiencies or charges against the
Facility or that otherwise relate to the suspension, revocation, or any
other action adverse to any approval, authorization, certificate,
determination, license or permit required or necessary to own or
operate the Facility. Manager may appeal any action taken by any
governmental agency against the Facility; provided, however, that Owner
shall adequately secure and protect Manager from loss, cost, damage or
expense by bond or other means satisfactory to Manager in order to
contest by proper legal proceedings the validity of any such statute,
ordinance, law,
-4-
regulation or order, provided that such contest shall not result in the
suspension of operations of the Facility; and provided, further, that
Owner shall have no obligation to secure and protect Manager from any
loss, cost, damage or expense that arises directly out of Manager's
material breach of any of its covenants under this Agreement.
3.9 TAXES. Manager shall cause all taxes, assessments, and charges of
every kind imposed upon the Facility by any governmental authority, including
interest and penalties thereon (collectively, "Taxes"), to be paid when due from
Facility Funds (as defined in Section 3.10 below), subject to the terms of the
Lease, and in accordance with the Budget (as defined in Section 3.17 hereof) and
in the order of priority set forth in Section 3.10 below. Manager shall not
cause such Taxes to be paid if (a) such Taxes are in good faith being contested
by Owner at its sole expense and without cost to Manager, (b) enforcement for
nonpayment of such Taxes is stayed, and (c) Owner shall have given 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 Taxes are due and
payable. Interest or penalty payments shall be reimbursed by Manager to Owner if
imposed upon Owner by reason of the gross negligence on the part of Manager in
making the payment if funds are available therefor. Manager shall notify Owner
of all Taxes assessed against the Facility other than in the normal course of
business.
3.10 DEPOSIT AND DISBURSEMENT OF FUNDS. Manager shall deposit in a
banking institution which is a member of the FDIC in accounts in Manager's name,
as agent for Owner, all monies arising from the operation of the Facility or
otherwise received by Manager for and on behalf of Owner (the "Facility Funds"),
and shall disburse and pay the same from said accounts on behalf and in the name
of Owner pursuant to the Budget, in the following order of priority, as and when
required to be made in connection with:
(A) Payment of all costs and expenses arising out of the
administration, maintenance and operation of the Facility, including,
without limitation, Taxes, reimbursable expenses of Manager, and all
accrued and unpaid interest on any unpaid balances thereon, as set
forth in Section 3.16;
(B) Payment of the Facility Rent or debt service on a first
mortgage (if any) on the Facility;
(C) Payment of the monthly installment to the capital expense
reserve for the Facility described in the Budget;
(D) Payment of interest due on the working capital line of
credit for the Facility;
(E) Payment of the letter of credit fee (for the security
deposit under the Lease), if required;
(F) Payment of all administrative and operating costs of
Lyric;
-5-
(G) Payment of the "Annual Continuing Fee" due under the
Franchise Agreement;
(H) Payment of Manager's Base Management Fee provided for in
Article V hereof (including any accrued and unpaid Base Management
Fees, plus all accrued and unpaid interest thereon, for prior periods);
(I) Payment of subordinated mortgage debt (if any) with
respect to the Facility;
(J) Payment of the monthly installments to any supplemental
capital expense and working capital escrows and reserves described in
the Budget;
(K) Payment of Manager's Incentive Management Fee provided for
in Article V hereof (including any accrued and unpaid Incentive
Management Fees, plus all accrued and unpaid interest thereon, for
prior periods); and
(L) The balance of such funds shall be distributed to Owner at
Owner's request.
To the extent practicable and available, Manager shall distribute to Owner an
amount sufficient to pay the income tax liability of Owner's members from time
to time. In this Agreement, the term "Facility Rent" means the scheduled
payments of Rent, as defined in the Lease, and all other applicable costs for
the maintenance or operation of the Facility and other payments required of
Owner under the Lease.
3.11 STATEMENTS. Manager shall prepare and deliver (or cause to be
prepared and delivered) to Lyric's Managing Director all monthly, quarterly and
annual financial statements and Compliance Reports (as defined in Lyric's
Operating Agreement) and other reports, in the same form, and within the same
periods, as Lyric prepares or receives under Article 12 of Lyric's Operating
Agreement.
3.12 LEGAL ACTIONS. Manager shall institute, in its own name or in the
name of Owner, but in any event at the expense of Owner, any and all legal
actions or proceedings to collect charges, rent, or other sums due the Facility
or to lawfully oust or dispossess tenants or other persons in possession under,
or lawfully cancel, modify, or terminate any lease, license, or concession
agreement for the breach thereof or default thereunder by the tenant, licensee,
or concessionaire. Unless otherwise directed by Owner, Manager may take, at
Owner's expense, appropriate steps to protect and/or litigate to final judgment
in any appropriate court any violation or order affecting the Facility. Any
counsel to be engaged under this or the next preceding paragraph of this Section
shall be approved by Owner, which approval shall not be unreasonably withheld.
Manager shall promptly notify Owner and Lessor of all legal actions.
3.13 MANAGEMENT SERVICES. Without limitation, Manager shall provide the
Facility with all of the customary management services and techniques which it
employs in operating other facilities which it manages which may be applicable
to and beneficial to the Facility.
-6-
3.14 DATA PROCESSING. Manager shall, directly or through an affiliate,
provide the data processing required to maintain the financial, payroll, and
accounting records of the Facility; except that Manager agrees that the Facility
payroll will not be moved to Manager's central payroll administration until same
can be accomplished without a material disruption to Facility cash flow.
3.15 BOOKS AND RECORDS. Manager on behalf of Owner shall supervise and
direct the keeping of full and accurate books of account and such other records
reflecting the results of operation of the Facility as required by law.
3.16 PAYMENT OF EXPENSES.
(A) OWNER EXPENDITURES. All expenditures and advances of every
kind required or permitted of Manager under this Agreement are for Owner's
account ("Owner Expenditures"), except for Manager's Staff Services (described
below). Manager is authorized to pay all Owner Expenditures from Facility Funds.
Owner shall pay directly (or reimburse Manager promptly if Manager advances
funds for) any Owner Expenditures not paid from Facility Funds. Manager's "Staff
Services" -- not reimbursable by Owner -- means only salaries and benefits of
Manager's officers and home office staff, as well as Manager's home office
overhead not specifically allocable to the Facility.
(B) REIMBURSEMENT OF ADVANCES. Manager may from time to time
(but shall not be obligated to) advance or incur expenses in respect of the
operation or maintenance of the Facility, including, without limitation, the
items listed on Exhibit A hereto. Such expenses shall be immediately
reimbursable to Manager out of Facility Funds in the priority set forth in
Section 3.10 hereof. Any such expenses advanced from Manager and not reimbursed
within thirty (30) days shall bear interest from the date advanced until paid in
full at a rate per annum equal to the prime rate of Citibank, N.A., as then in
effect, plus two percent (2%).
3.17 BUDGETS. Manager shall be responsible for the following budgetary
items:
(A) PREPARING BUDGETS. Manager at its sole cost shall prepare
and submit to Owner for Owner's review and approval a yearly operating budget
and a yearly capital budget in a form reasonably acceptable to Owner. Manager
shall present such budgets on a cash basis also. Manager shall submit the
proposed budgets to Owner no later than November 15 of the preceding year. Owner
will consider the proposed budgets and then consult with Manager in order to
finalize an approved budget on or before December 15 of the preceding year. (The
budgets for 1998 shall be presented within 60 days after the date of this
Agreement unless Owner and Manager agree otherwise.) Such budgets shall:
(i) set forth on a month to month basis all
anticipated income, operating expenses, working capital and other
necessary reserves and capital expenditures for such calendar year in
connection with the operation of the Facility;
-7-
(ii) contain all of the items referenced in the
approved budget for 1998; and
(iii) include all supporting schedules requested by
Owner.
The operating budget and the capital budget, as approved by
Owner, shall be referred to herein as the "Operating Budget" and the "Capital
Budget," respectively, and shall be referred to collectively as the "Budget."
(B) REVISED BUDGET/UNFORESEEN INCREASES. If Owner or Manager
believes that it is necessary to revise the Budget after it has been approved,
Manager shall prepare and deliver to Owner a revised budget. Any proposed
changes to the Budget shall be addressed in the revised budget and Manager shall
explain such changes. Manager shall not implement the revised budget without
Owner's approval, which may be granted or withheld in Owner's sole discretion.
If Owner approves the revised budget, the terms of such revised budget, as
approved, shall amend the Budget accordingly. During each calendar year, Manager
shall promptly inform Owner of any major increases in costs and expenses that
were not foreseen during the Budget preparation period and thus were not
reflected in the Budget.
(C) OWNER'S APPROVAL REQUIRED. If Owner shall not have
approved any proposed budgets, the Operating Budget then in effect shall
continue until an Operating Budget is agreed upon; provided, however, that
during any interim period Manager may reasonably exceed the Operating Budget for
the previous fiscal year for taxes, utility charges, costs under existing
agreements which (by the terms of such agreements) automatically increase at the
beginning of the new year, and other items not within Manager's reasonable
control. There will be no Capital Budget for any year until a Capital Budget for
such year is approved by Owner.
3.18 COMPLIANCE WITH FRANCHISE AGREEMENT. Manager shall use
commercially reasonable best efforts to cause Owner to comply with Owner's
obligations as the "Franchisee" under the Franchise Agreement to the extent that
such obligations are capable of (and appropriate for) performance by Manager on
Owner's behalf, subject to the terms and conditions of this Agreement, and are
not personal to Owner.
3.19 COMPLIANCE PROGRAM. Manager shall implement and monitor a
compliance program designed to identify and eradicate fraud and abuse relating
to the Facility and its operation. Such program will include, among other
things, advertising the toll free "fraud and abuse" telephone line operated by
Integrated Health Services Franchising Co., Inc.
-8-
ARTICLE IV
RIGHTS AND DUTIES OF OWNER
During the term of this Agreement:
4.1 RIGHT OF INSPECTION. Owner (and Lessor, subject to and in
accordance with the Lease) shall have the right to enter upon any part of the
Facility upon reasonable advance notice to Manager for the purpose of examining
or inspecting same or examining or making extracts of books and records of the
Facility, but the same shall be done with as little disruption to the business
of the Facility as possible. However, the books and records of the Facility
shall not be removed from the Facility without the express written consent of
Manager. Owner acknowledges that some books and records will be maintained at
Manager's principal place of business.
Owner shall direct all inquiries regarding operations, procedures,
policies, employee relations, patient care, and all other matters concerning the
Facility to the Senior Vice President of Manager's Managed Division or other
officer of Manager as it may from time to time designate in a written notice to
Owner.
4.2 COOPERATION WITH MANAGER. Owner will fully cooperate with Manager
in operating and supervising the operations of the Facility and will reimburse
Manager for all funds expended or costs and expenses incurred to which Manager
is entitled to reimbursement hereunder.
4.3 OPERATING CAPITAL. Owner shall provide Manager with such amount of
working capital as may be required from time to time for the operation of the
Facility on a sound financial basis (including the payment of management fees
and reimbursable expenses owed to Manager). If additional working capital is
required, Manager shall notify Owner thereof in writing and Owner shall provide
Manager with such increase in working capital within fifteen (15) days
thereafter. If Owner fails to provide such additional working capital, Manager
may, but is not obligated to, provide the same as a loan to Owner in accordance
with Section 3.16.
4.4 CAPITAL IMPROVEMENTS. Owner shall provide Manager with such amount
of funds as may be required from time to time to make all necessary capital
improvements to the Facility in order to maintain and continue standards of
operation of the Facility as a nursing home. If additional capital improvement
funds are required, Manager shall notify Owner thereof in writing and Owner
shall provide Manager with such additional capital improvement funds within
fifteen (15) days thereafter. If Owner fails to provide such additional capital
improvement funds, Manager may, but is not obligated to, provide the same as a
loan to Owner in accordance with Section 3.16.
-9-
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, Owner shall pay to
Manager at its principal office, or at such other place as Manager may from time
to time designate in writing, and at the times hereinafter specified:
(A) A monthly fee (the "Base Management Fee") equal to (i)
three percent (3%) of Gross Revenues derived for each calendar year of
the Term, or (ii) if Gross Revenues for any calendar year exceed $350
million, then four percent (4%) of Gross Revenues for such calendar
year of the Term. The Base Management Fee shall be payable five (5)
days after delivery to Owner of the monthly financial statements
referred to in Section 3.11 (each such date being hereinafter referred
to as a "Payment Date") and shall be calculated based upon the
Facility's Gross Revenues during the preceding month as set forth in
such financial statements; and
(B) An annual fee (the "Incentive Management Fee") equal to
seventy percent (70%) of the Net Cash Flow for each calendar year
during the Term of this Agreement. The Incentive Management Fee shall
be: (1) calculated and earned on an annual basis; and (2) paid to
Manager on an estimated basis in advance in equal monthly installments
on each Payment Date. The estimated Incentive Management Fee for each
year (other than the first year) shall be equal to the actual Incentive
Management Fee paid to Manager for the previous year. For the first
year, the estimated Incentive Management Fee shall be determined
promptly after the date hereof by Manager and Owner. Promptly after the
annual audited financial statements have been delivered to Owner's
Managing Director, Manager shall give notice to Owner stating whether
the installments of the Incentive Management Fee paid to Manager for
such year were greater or less than the actual Incentive Management Fee
earned. If there is a deficiency, Owner shall pay such amount to
Manager within 15 days after such notice; and if there is an
overpayment, the amount of such overpayment shall be offset against
installments of the Incentive Management Fee next becoming due to
Manager. Manager shall be entitled to a pro-rata portion of the
Incentive Management Fee for any partial calendar year during the Term.
If and to the extent that Owner experiences bad debts or poor
collections exceeding the amounts reserved for in its Budget, and as a
result Owner is unable to pay all or any part of the monthly
installment of the Incentive Management Fee for a particular month, the
unpaid portion of such installment shall accrue and be payable (with
interest as calculated pursuant to Section 5.3) as soon as cash flow
permits but in no event later than at the end of the current year. The
foregoing sentence shall not apply for more than one year.
The formula for calculating the Net Cash Flow for the Facility
shall be as follows:
From: Gross Revenues for the Facility (calculated according to
GAAP)
-10-
Subtract: All amounts described in Sections 3.10(a), (b), (c),
(d), (e), (f), (g), (h), (i), and (j) hereof
5.2 For the purposes of determining such management fees, "Gross
Revenues" means, for any period, all revenues and income of any kind derived
directly or indirectly by Owner during such period, including rental or other
payment from concessionaires, licensees, tenants, and other users of all
Facilities covered by this Agreement, and from the sale of products and/or the
furnishing of services (including all revenues or receipts derived from or
associated with the Proprietary Materials (as defined in the Franchise
Agreement)), but excluding therefrom all bequests, gifts, or similar donations,
whether on a cash basis or on credit, paid or unpaid, collected or uncollected,
as determined in accordance with GAAP, 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 insurance policies;
(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 (if any) utilized to finance the Facility; and
(F) bad debt expense.
The proceeds of business interruption insurance or proceeds as a result
of Medicare and Medicaid audits shall be included in Gross Revenues. However,
funds required to be repaid as a result of Medicare and Medicaid audits shall be
deducted from Gross Revenues.
5.3 Notwithstanding the foregoing, the Base Management Fee and the
Incentive 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 Facility Funds (as defined in Section 3.10) shall be sufficient
as of such date. In the event that any portion of the Base Management Fee and
the Incentive Management Fee is not paid due to the insufficiency of Facility
Funds, interest shall accrue on such unpaid amount at a rate per annum equal to
the prime rate of Citibank, N.A. then in effect, plus two percent (2%), and such
total amount shall be carried over and be payable on the immediately succeeding
Payment Date. When Facility Funds become available to pay past due Base
Management Fees and Incentive Management Fees, the fees shall be deemed to be
paid in the order in which they were earned. Any and all accrued and unpaid Base
Management Fees and Incentive Management Fees shall become immediately and fully
payable by Owner upon the expiration or any termination of this Agreement,
regardless of the availability of Facility Funds.
-11-
5.4 (A) In order to secure performance and payment of all obligations
and liabilities of Owner to Manager under this Agreement, whether now existing
or hereafter arising, including, without limiting the generality of the
foregoing, the payment of all Base Management Fees, Incentive Management Fees,
and reimbursable expenses of Manager (collectively, the "Obligations"), Owner
hereby grants to Manager a security interest in all of the assets of the
Facility, including, but not limited to, the following described property
(collectively, the "Collateral"):
(I) Owner's leasehold interest in the Facility and
any and all rights that Owner now has or may hereafter acquire to
purchase the Facility;
(II) all accounts receivable now owned or hereafter
acquired by Owner in connection with the Facility;
(III) all equipment, furniture, and fixtures now
owned or hereafter acquired by Owner and located at or used in
connection with the Facility;
(IV) all contract rights now owned or hereafter
acquired by Owner in connection with the operation of the Facility;
(V) all inventory, supplies, goods, merchandise, work
in progress, finished goods, and other personal property other than
accounts receivable now owned or hereafter acquired by Owner and
located at or used in connection with the Facility;
(VI) all licenses, permits and other intangible
assets; and
(VII) any and all proceeds of any of the foregoing.
(B) Manager shall have, in any jurisdiction where enforcement
of this Agreement is sought, in addition to any and all other rights
and remedies it may have under this Agreement, or at law, in equity, by
statute or otherwise, all the rights and remedies of a secured creditor
under the Uniform Commercial Code, including, but not limited to, the
right to any deficiency remaining after disposition of the Collateral.
(C) This security interest is (and shall at all times be)
subordinate to: (i) any security interests granted (or to be granted)
in connection with the working capital line of credit for the Facility,
(ii) any security interests granted (or to be granted) to Lessor under
the Lease, and (iii) any mortgages of the Facility.
-12-
ARTICLE VI
INTENTIONALLY OMITTED
ARTICLE VII
INTENTIONALLY OMITTED
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 OWNER. If at any time or from time to time during
the Term any of the following events shall occur and not be remedied within the
applicable period of time herein specified, namely:
(A) Manager shall apply for or consent to the appointment of a
receiver, trustee, or liquidator of Manager of all or a substantial
part of its assets, file a voluntary petition in bankruptcy, 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 Manager as bankrupt or
insolvent or approving a petition seeking reorganization of Manager or
appointing a receiver, trustee, or liquidator of 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; or
(B) Manager shall materially fail to keep, observe, or perform
any covenant, agreement, term or provision of this Agreement to be
kept, observed, or performed by Manager, and such default shall
continue for a period of sixty (60) days after written notice thereof
by Owner to Manager; or
(C) Manager shall, in the performance of its services
hereunder, engage in self-dealing, commit fraud, or act (or fail to
act) in a manner which constitutes willful misconduct or gross
negligence and shall not cure or correct such matter within sixty (60)
days after written notice thereof by Owner to Manager;
-13-
then in case of any such event and upon the expiration of the period of grace
(if any) applicable thereto, the Term of this Agreement shall expire, at Owner's
option and upon ten (10) days written notice to Manager.
8.2 TERMINATION BY MANAGER. If at any time or from time to time during
the Term any of the following events shall occur and not be remedied within the
applicable period of time herein specified, namely:
(A) Owner shall fail to keep, observe, or perform any
covenant, agreement, term or provision of this Agreement to be kept,
observed, or performed by Owner (except for a payment default described
in Section 8.2(b) below) and such default shall continue for a period
of sixty (60) days after written notice thereof by Owner to Manager;
(B) Owner shall fail to make any payment required hereunder
and such default shall continue for a period of sixty (60) days after
written notice from Owner to Manager;
(C) The Facility or any portion thereof shall be damaged or
destroyed by fire or other casualty and (i) Owner shall fail to
undertake to repair, restore, rebuild, or replace any such damage or
destruction within forty-five (45) days after such fire or other
casualty, or shall fail to complete such work diligently, and (ii)
Owner shall fail to permit Manager to undertake to repair, restore,
rebuild, or replace, at Owner's expense, any such damage or destruction
within forty-five (45) days after such fire or other casualty;
(D) Owner shall apply for or consent to the appointment of a
receiver, trustee, or liquidator of 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 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 Owner bankrupt or appointing a
receiver, trustee, or liquidator of Owner with respect to all or
substantial part of the assets of Owner, and such order, judgment or
decree shall continue unstayed and in effect for any period of ninety
(90) consecutive days;
(E) Any license for the Facility or the Lease is at any time
suspended, terminated, or revoked and such suspension, termination, or
revocation shall continue unstayed and in effect for a period of thirty
(30) consecutive days; or
(F) Facility Funds shall be insufficient for the payment of
the Base Management Fees to Manager pursuant to Article V hereof for a
period of at least two consecutive fiscal quarters (other than as a
result of the mismanagement or other act or omission of Manager);
-14-
then in case of any such event and upon the expiration of the period of grace
(if any) applicable thereto, the term of this Agreement shall expire, at
Manager's option and upon ten (10) days written notice to Owner and Lessor.
8.3 MATERIAL ADVERSE CHANGE. Manager shall be entitled to terminate
this Agreement in the event that any material adverse change occurs in the
financial or operating condition of the Facility, its business or prospects.
Such termination shall become effective three (3) months after Manager delivers
a termination notice to Owner and Lessor; however, if Owner and Manager agree
that Owner should sell the Facility, Manager shall continue to manage the
Facility for a period not to exceed six (6) months after delivery of the
termination notice to facilitate the sale of the Facility. Notwithstanding the
preceding sentence, Manager shall have no right to terminate this Agreement
pursuant to this Section 8.3 if the material adverse change in the Facility is
due to the mismanagement or other act or omission of Manager.
8.4 SURVIVING RIGHTS UPON TERMINATION. If either party exercises its
option to terminate pursuant to this Article VIII, each party shall account for
and pay to the other all sums due and owing pursuant to the terms of this
Agreement within thirty (30) days after the effective date of termination.
Without limiting the generality of the foregoing, within thirty (30) days after
the effective date of termination of this Agreement, Owner shall be obligated to
pay to Manager all accrued and unpaid Base Management Fees, a pro-rata portion
of the Incentive Management Fees, and reimbursable expenses of Manager, together
with all accrued and unpaid interest thereon, notwithstanding that available
Facility Funds may not be sufficient for such purposes. All other rights and
obligations of the parties under this Agreement shall terminate (except as set
forth in Article IX hereof), except that Manager's security interest in the
Collateral shall not terminate until Manager has been paid in full.
8.5 DISPUTE RESOLUTION.
(A) In the event of any dispute or controversy arising under
or in connection with this Agreement, the parties shall attempt to
resolve such dispute or controversy by mediation as provided in this
Section 8.5(a) prior to exercising any rights under the remaining
provisions of Section 8.5. Either party may commence mediation by
notice to the other party (the "Mediation Notice"), which notice shall
name a proposed Mediator (as defined below) to resolve the dispute. The
party receiving the Mediation Notice, within seven days after receipt,
shall send the other party notice accepting the proposed Mediator (the
"Acceptance Notice") or proposing an alternate Mediator (the "Alternate
Notice"). Within seven (7) days after receipt of an Alternate Notice,
the receiving party shall deliver notice accepting or rejecting the
alternate Mediator. Within five (5) days after the Mediator has been
selected the dispute shall be submitted to him or her by both parties,
and the Mediator shall decide the dispute within fourteen (14) days
thereafter. The decision of the Mediator shall not be binding upon the
parties, and after the Mediator issues a decision either party may
submit the dispute to arbitration, as provided in Sections 8.5(b) and
(c). If the parties fail to agree upon a Mediator within twenty (20)
days after receipt of the Mediation Notice, the dispute may be resolved
as provided in Sections 8.5(b) and (c). "Mediator" means an individual
-15-
with experience relevant to the matter in dispute who is not employed
by or affiliated with either party and who does not have (and is not an
officer, employee or director of an entity which has) significant
business contacts with either party. Each party shall pay fifty percent
of the costs of the Mediator.
(B) Subject to Section 8.5(a), any dispute between Owner and
Manager regarding a financial, tax, or accounting issue shall be
resolved exclusively through arbitration conducted by a principal of
KPMG Peat Marwick (the "Financial Arbitrator"). Either party may
commence arbitration hereunder by notice to the other party and to the
Financial Arbitrator, who shall decide the dispute. Each party shall
pay fifty percent of the costs of the Financial Arbitrator. The
Financial Arbitrator shall conduct the arbitration in any manner he or
she elects; however, the Financial Arbitrator shall issue a final
decision with respect to such dispute within thirty (30) days after the
dispute is referred to him or her. The decision of such Financial
Arbitrator shall be final and binding upon the parties and shall not be
subject to appeal. Judgment upon the award rendered by the Financial
Arbitrator may be entered in any court having in personam and subject
matter jurisdiction over the parties.
(C) Subject to Sections 8.5(a) and (b), any dispute or
controversy arising under or in connection with this Agreement shall be
settled exclusively by arbitration, conducted before a panel of three
arbitrators, in accordance with the rules of the American Arbitration
Association ("AAA") then in effect, and judgment may be entered on the
arbitrators' award in any court having in personam and subject matter
jurisdiction over the parties. Each party shall pay fifty percent of
the costs of the AAA and the arbitrators. Each party shall select one
arbitrator, and the two so designated shall select a third arbitrator.
If either party shall fail to designate an arbitrator within seven (7)
days after arbitration is requested, or if the two arbitrators shall
fail to select a third arbitrator within fourteen (14) days after
arbitration is requested, then an arbitrator shall be selected by the
AAA upon application of either party. In considering any issue under
this Agreement, the arbitrators shall construe and interpret this
Agreement strictly in accordance with the specific terms and provisions
hereof and in accordance with the judicial decisions, statutes, and
other indicia of the law of the state of Maryland.
ARTICLE IX
INDEMNIFICATION
9.1 INDEMNIFICATION OF OWNER BY MANAGER. Manager shall indemnify and
hold Owner and its members, officers, directors, shareholders, employees and
affiliates harmless from any and all claims, losses, judgments, damages,
expenses and liabilities whatsoever, (including reasonable attorneys' fees),
incurred by any of them, arising out of Manager's material breach of this
Agreement or any third party claims which are caused in whole or in part by any
grossly negligent act, willful omission, fraud or self-dealing of Manager in
connection with the
-16-
performance of its duties under this Agreement. However, Manager's obligation to
indemnify Owner shall not extend to any Medicare cost disallowances, or any
Medicare, Medicaid, or other governmental fines or penalties. Manager's
obligations under this Section 9.1 shall survive termination of this Agreement.
9.2 INDEMNIFICATION OF MANAGER BY OWNER. Owner shall indemnify and hold
Manager and Manager's officers, directors, shareholders, employees and
affiliates harmless from any and all claims, losses, judgments, damages,
expenses and liabilities whatsoever (including reasonable attorneys' fees)
incurred by any of them in connection with, by reason of, or arising out of: (i)
Manager's performance of services, or undertaking of responsibilities under this
Agreement; (ii) Manager's status as manager of the Facility; (iii) any default
by Owner in keeping Owner's obligations under this Agreement; (iv) any damage to
property, or injury or death to persons, occurring in or with respect to the
Facility; and/or (v) any other claim asserted against any of them in connection
with the Facility or any matter relating thereto, excluding, however, any
matters covered by Manager's indemnity under Section 9.1.
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 LIMITATION OF EXPENDITURE OBLIGATION. Notwithstanding anything to
the contrary in this Agreement, Manager shall have no obligation whatsoever to
make any advance to or for the account of Owner, or to pay any amount
contemplated for, or required of, Manager under this Agreement, or to incur any
expenditure obligation--whether ordinary or capital--except to the extent that
funds are available for such purpose (in Manager's reasonable judgment), either
from working capital or capital funds provided by Owner or otherwise from the
Facility Funds. Moreover, if Manager so requests, from time to time, Owner shall
sign, as principal, any contract or agreement which Manager is authorized or
required to execute pursuant to this Agreement to evidence that Manager is
acting solely as Owner's agent and not as principal.
ARTICLE X
CONFIDENTIALITY; NON-SOLICITATION
10.1 NON-DISCLOSURE OF CONFIDENTIAL INFORMATION. Owner acknowledges
that Manager's business involves the development and use of Confidential
Information (defined below) and that Manager will make available such
Confidential Information to Owner and the Facility in connection with Manager's
duties under this Agreement. Manager acknowledges that Owner and the Facility's
business involves the development and use of Confidential Information and that
-17-
Owner and the Facility will make available such Confidential Information to
Manager in connection with Manager's duties under this Agreement (subject to
Owner's obligations as Franchisee under the Franchise Agreement). Except as
Owner and Manager may disclose in fulfillment of their duties and
responsibilities under this Agreement (subject to Owner's obligations as
Franchisee under the Franchise Agreement) or as may be required to be disclosed
by Owner, the Facility and Manager by law, the parties and their respective
officers, directors, employees or agents shall not, at any time during or after
the term of this Agreement, divulge, furnish or make accessible Confidential
Information to any person or entity for any purpose whatsoever. "Confidential
Information" means any confidential or proprietary information, including,
without limitation, manuals, forms, policies and procedures, computer programs,
system documentation and related software, patient records and patient
information, and any other information of any kind with respect to the finances,
business plans or business operations of the parties.
10.2 NON-USE AND RETURN OF MATERIALS. Effective upon a termination of
this Agreement for any reason whatsoever, the parties and their respective
officers, directors, employees or agents shall not use any Confidential
Information for any purpose whatsoever, including, but not limited to, use in
connection with the operation and management of Facility.
10.3 NON-SOLICITATION. Owner and Manager agree that, for the entire
term of this Agreement and for twelve (12) months after the date that this
Agreement is terminated, (a) Owner shall not entice or induce, directly or
indirectly, any employee to leave the employ of Manager to work with or for
Owner, or to work with any person or entity with whom Owner becomes affiliated
to provide health care services, and (b) Manager shall not entice or induce,
directly or indirectly, any employee to leave the employ of Owner to work with
or for Manager, or to work with any other person or entity with whom Manager is
or becomes affiliated.
10.4 REMEDIES. The parties agree that an aggrieved party who is the
beneficiary of any restriction contained herein may not be adequately
compensated for damages for a breach of the covenants contained in this Article
X, and such aggrieved party shall be entitled to injunctive relief and specific
performance in addition to all other remedies. If a court of competent
jurisdiction shall finally determine that the restraints provided for in this
Article X are too broad as to the activity, geographic area or time covered,
said activity, geographic area or time covered will be reduced to whatever
extent the court deems necessary, and such covenant shall be enforced as to such
reduced activity, geographic area or time period.
ARTICLE XI
CONDEMNATION
If the whole of the Facility shall be taken or condemned in any eminent
domain, condemnation, compulsory acquisition, or like proceeding by a competent
authority for any public or quasi-public use or purpose or if such portion
thereof shall be taken or condemned as to make it unsuitable for its primary
intended use, then the Term shall cease and terminate on the date on which Owner
shall be required to surrender possession of the Facility. Manager shall
continue to
-18-
supervise and direct the management of the Facility until such time as Owner
shall be required to surrender possession of the Facility as a consequence of
such taking or condemnation.
If only a part of the Facility shall be taken or condemned and the
taking or condemnation of such part does not make it unsuitable for its primary
intended use, this Agreement shall not terminate.
ARTICLE XII
SUCCESSORS AND ASSIGNS
12.1 ASSIGNMENTS BY MANAGER. Manager, without the consent of Owner or
Lessor, shall have the right to assign this Agreement to a wholly or majority
owned subsidiary of Manager or Integrated Health Services, Inc., provided, that
Manager shall not thereby be released from its obligations hereunder. In the
event that all or substantially all the assets of 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 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, Manager
shall have no right to assign this Agreement.
12.2 SALE, ASSIGNMENT OR SUBLEASE BY OWNER; RELATED MATTERS. Any sale,
sublease, or assignment with respect to the Facility, other than to Manager,
shall be expressly subject to the terms and provisions of this Agreement and
shall not relieve Owner of its liability or obligations hereunder, and Owner
shall cause any purchaser, assignee, or sublessee to deliver to Manager written
acknowledgment of its agreement to perform hereunder including the payment of
the management fees described herein. Owner shall not sublease all or any
portion of the Facility without the prior written consent of Manager, which may
be granted or withheld in Manager's sole and absolute discretion. Except with
respect to matters involving the Lease and Lessor, Owner may not at any time,
without the prior written consent of Manager, incur any additional debt or
subject its interest in the Facility or any part thereof to the lien of one or
more deeds of trust, mortgages, or other security instruments. In the event that
such consent is given, such additional debt or security interest shall be
subordinate to Manager's rights and security interest granted pursuant to this
Agreement.
ARTICLE XIII
MISCELLANEOUS PROVISIONS
13.1 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 Owner, its
-19-
successors, or assigns on the one part and 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.
13.2 MODIFICATIONS AND CHANGES. This Agreement cannot be changed or
modified except by another agreement in writing signed by Owner and Manager.
13.3 UNDERSTANDING AND AGREEMENTS. This Agreement and the Facilities
Management Agreements constitute the entire understanding and agreement of
whatsoever nature or kind existing between the parties with respect to Manager's
management of the Facility.
13.4 HEADINGS, ETC. 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. The Exhibits
and Schedules attached hereto form part of this Agreement.
13.5 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, unless this Agreement expressly provides that a decision
shall be made in a party's sole discretion. It is further understood and agreed
that whenever under any provisions of this Agreement the approval or consent of
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 Owner. For all purposes under this Agreement, Manager shall determine
solely from the latest such notification received by it the person or persons
authorized to give such approval or consent. Manager shall rely exclusively and
conclusively on the designation set forth in such notification, notwithstanding
any notice of knowledge to the contrary.
13.6 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.
13.7 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.
13.8 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.
-20-
PART II
OTHER TERMS AND CONDITIONS
ARTICLE I
TERM
The initial term of this Agreement shall immediately commence upon the
date hereof and shall terminate on the date of expiration or termination of the
last Lease to terminate or expire. This Agreement shall automatically renew for
each extension or renewal term of any Lease, should any Owner renew its Lease.
ARTICLE II
REPRESENTATIONS AND WARRANTIES
2.1 ORGANIZATION AND STANDING OF LYRIC. Lyric represents and warrants
to Manager that Lyric is a limited liability company duly organized, validly
existing and in good standing under the laws of the State of Delaware. Copies of
the Certificate of Formation and Operating Agreement of Lyric, and all
amendments thereof to date, have been, if requested, delivered to Manager and
are complete and correct in all material respects. Lyric 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.
2.2 ABSENCE OF CONFLICTING AGREEMENTS. Lyric represents and warrants to
Manager that neither the execution or delivery of this Agreement, including all
Exhibits and Schedules hereto, or any of the other instruments and documents
required or contemplated hereby and thereby (the "Transaction Documents") by
Lyric, nor the performance by Lyric 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 Certificate of Formation or the
Operating Agreement of Lyric; 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 Lyric is now a party or by which the
assets of Lyric are bound.
2.3 ORGANIZATION AND STANDING OF MANAGER. Manager represents and
warrants to Lyric that 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 Manager, and all amendments thereof to
date, have been, if requested, delivered to Lyric and are complete and correct
in all material respects. 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.
-21-
2.4 ABSENCE OF CONFLICTING AGREEMENTS. Manager represents and warrants
to Lyric that neither the execution or delivery of this Agreement, including all
Exhibits and Schedules hereto, or any of the Transaction Documents by Manager,
nor the performance by Manager 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 ByLaws of
Manager, 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 Manager is now a party or by which the assets of Manager are
bound.
ARTICLE III
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:
3.1 TERMINATION BY LYRIC. 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) Manager shall apply for or consent to the appointment of a
receiver, trustee, or liquidator of Manager of all or a substantial
part of its assets, file a voluntary petition in bankruptcy, 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 Manager as bankrupt or
insolvent or approving a petition seeking reorganization of Manager or
appointing a receiver, trustee, or liquidator of 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; or
(B) all of the Facility Management Agreements are terminated;
then in case of any such event and upon the expiration of the period of grace
(if any) applicable thereto, the term of this Agreement shall expire, at Lyric's
option and upon ten (10) days written notice to Manager.
-22-
3.2 TERMINATION BY 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) Lyric shall apply for or consent to the appointment of a
receiver, trustee, or liquidator of Lyric 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 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 Lyric bankrupt or appointing a
receiver, trustee, or liquidator of Lyric with respect to all or
substantial part of the assets of Lyric, and such order, judgment or
decree shall continue unstayed and in effect for any period of ninety
(90) consecutive days; or
(B) all of the Facility Management Agreements are terminated;
then in case of any such event and upon the expiration of the period of grace
(if any) applicable thereto, the term of this Agreement shall expire, at
Manager's option and upon ten (10) days written notice to Lyric.
3.3 NO SURVIVING RIGHTS UPON TERMINATION. Upon termination of this
Agreement all rights and obligations of Lyric and Manager in this Agreement
shall terminate.
ARTICLE IV
INSURANCE
4.1 POLICIES. Subject to Section 4.4 of this Part II, Lyric shall apply
for, obtain and maintain on behalf of the Owners and at its own expense at all
times during the Term, all insurance required to be maintained by the Owners
under the Leases, or if the Leases are not in effect, such insurance as Owners
shall direct Lyric to maintain.
4.2 INSURANCE COMPANIES. All insurance provided for under the foregoing
provisions of this Section shall be effected by policies issued by insurance
companies with at least an "A-VI" rating from A.M. Best and Company of good
reputation, of sound adequate financial responsibility, and properly licensed
and qualified to do business.
4.3 INSURED PARTIES. Each of the polices of insurance required by Part
II, Section 4.1 shall insure each Owner and their respective members, officers,
partners, directors, shareholders, managers and employees, as well as each
Lessor and mortgage lender. Manager, its officers, partners, directors,
shareholders, managers and employees shall, to the extent permissible, be named
as additional insured under all such policies of insurance.
-23-
4.4 MASTER POLICY. Notwithstanding the other provisions of Part II,
Article 4, Manager is authorized and directed to obtain a master policy of
insurance naming the parties described in Part II, Section 4.3 as additional or
named insureds (as specified therein), in the amounts and for the coverages
required by Part II, Section 4.1, which policy may be obtained by Integrated
Health Services, Inc. or its affiliates and which may be a policy of a so-called
"captive" insurance company.
ARTICLE V
MISCELLANEOUS PROVISIONS
5.1 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 (including by commercial
express service) or upon the date received if mailed postage pre-paid,
registered, express, or certified mail, addressed as follows:
To Lyric: LYRIC HEALTH CARE LLC
8889 Pelican Bay Boulevard
Suite 500
Naples, Florida 34103
Attention: Eleanor C. Harding
Marshall A. Elkins, Esq.
To Manager: IHS FACILITY MANAGEMENT, INC.
10065 Red Run Boulevard
Owings Mills, MD 21117
Attention: Eleanor C. Harding
Marshall A. Elkins, Esq.
With a copy to: INTEGRATED HEALTH SERVICES, INC.
10065 Red Run Boulevard
Owings Mills, MD 21117
Attention: Eleanor C. Harding
Marshall A. Elkins, Esq.
or to such other address, and to the attention of such other person or officer
as either party may designate in writing by notice.
5.2 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 Lyric, its successors, or assigns on the one part and 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.
-24-
5.3 MODIFICATIONS AND CHANGES. This Agreement cannot be changed or
modified except by another agreement in writing signed by Lyric and Manager.
5.4 UNDERSTANDING AND AGREEMENTS. This Agreement and the Master
Management Agreement constitute the entire understanding and agreement of
whatsoever nature or kind existing between the parties with respect to Manager's
management of the Facility.
5.5 HEADINGS, ETC. 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. The Exhibits
and Schedules attached hereto form part of this Agreement.
5.6 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, unless this Agreement expressly provides that a decision
shall be made in a party's sole discretion. It is further understood and agreed
that whenever under any provisions of this Agreement the approval or consent of
Lyric 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 Lyric. For all purposes under this Agreement, Manager shall determine
solely from the latest such notification received by it the person or persons
authorized to give such approval or consent. Manager shall rely exclusively and
conclusively on the designation set forth in such notification, notwithstanding
any notice of knowledge to the contrary.
5.7 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.
5.8 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.
5.9 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.
SIGNATURE PAGE FOLLOWS
-25-
IN WITNESS WHEREOF, the parties hereto have executed and delivered this
Master Management Agreement as of the day and year first above written.
LYRIC: MANAGER:
LYRIC HEALTH CARE LLC IHS FACILITY MANAGEMENT, INC.
By: Integrated Health Services, Inc.
Its: Managing Director
By: By:
---------------------------- --------------------------
Name: Daniel J. Booth Name: Daniel J. Booth
---------------------------- ------------------------
Title: Senior Vice President Title: Senior Vice President
---------------------------- -----------------------
S-1
EXHIBIT A
EXAMPLES OF REIMBURSABLE EXPENSES
The following is a list of expenses not included in the Base Management Fee or
Incentive Management Fee. These Facility-specific expenses are passed directly
to the Facility in connection with which the expense was incurred.
o Administrator wages, benefits and related travel expenses. (This
includes an annual administrator conference).
o Computer hardware and software purchased for the Facility.
o Facility-specific legal and accounting fees.
o Facility-specific fees associated with union organization attempts,
elections, etc.
o Payroll processing fee.
o Outside consultants used for Medicare or Medicaid cost reports and
Medicare exception requests.
o Travel costs for Facility personnel training.
o Other travel costs of Manager specifically allocable to the Facility.
Ex. A-1
SCHEDULE 1
CURRENT OWNERS AND FACILITIES
OWNER FACILITY
Gainesville Health Care Center, Inc. Integrated Health Services at Gainesville
Rest Haven Nursing Center (Chestnut Integrated Health Services of Chestnut
Hill), Inc. Hill
Claremont Integrated Health, Inc. Integrated Health Services of New
Hampshire at Claremont
Rikad Properties, Inc. Integrated Health Services of St.
Petersburg
Integrated Management - Governor's Governor's Park Nursing and
Park, Inc. Rehabilitation Center
Sch. 1-1