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Exibit 10.4
ADVISORY, ADMINISTRATIVE SERVICES
AND FACILITIES AGREEMENT
BETWEEN
NATIONAL HEALTH REALTY, INC.
AND
NATIONAL HEALTHCARE CORPORATION
THIS AGREEMENT is dated as of October 1, 1997, but it is effective
January 1, 1998, between NATIONAL HEALTH REALTY, INC., a Maryland corporation
and its divisions, subsidiaries and partnerships in which it serves as general
partner (collectively the "Corporation"), and NATIONAL HEALTHCARE CORPORATION, a
Delaware corporation (the "Advisor").
WHEREAS effective 11:59 p.m. central time on December 31, 1997,
pursuant to a plan to restructure National HealthCare L.P. ("NHC"), NHC will
convey to NHR/OP, L.P. (the "Operating Partnership") by special form deed or by
Capitalized Lease, subject to certain related NHC liabilities and obligations,
all of its right, title and interest in and to certain real property and
mortgage notes receivables (the "Conveyance"); and
WHEREAS immediately following the Conveyance, the Operating Partnership
will lease the real properties back to NHC pursuant to that certain Master
Operating Lease Agreement, dated October 1, 1997, but effective January 1, 1998
(the "Master Lease"); and
WHEREAS effective January 1, 1998 and as part of the overall plan to
capitalize the Corporation, NHC plans to distribute (the "Distribution") pro
rata to each holder of NHC's outstanding units, all of the shares of common
stock of the Corporation, par value $.01 (the "Shares"), except with respect to
Excess Stock, as defined in the Corporation's charter; and
WHEREAS the parties acknowledge that Advisor currently performs
functions similar to those described herein for National Health Investors, Inc.,
a qualified real estate investment trust, which shares are traded on the New
York Stock Exchange (hereinafter "NHI"); and
WHEREAS the Corporation intends to qualify as a real estate investment
trust as defined in the Internal Revenue Code of 1986, as amended, as the same
may be amended or modified from time to time; and
WHEREAS the Corporation desires to avail itself of the Advisor's
experience, sources of information, advice, and assistance and of certain
personnel and facilities available to the Advisor and to have the Advisor
undertake the duties and responsibilities hereinafter set forth, on behalf of
and subject to the supervision of the Board of Directors of the Corporation (the
"Directors"), as provided herein; and
WHEREAS the Advisor is willing to undertake to render such services,
subject to the supervision of the Directors, on the terms and conditions
hereinafter set forth; and
WHEREAS the relationships established by the Advisor and the
Corporation hereunder are independent of and unaffected by the relationships of
the parties established under the Master Lease;
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NOW, THEREFORE, in consideration of the premises and of the mutual
covenants herein contained, the Corporation and the Advisor agree as follows:
1. Duties of Advisor. The Corporation hereby engages the Advisor, and
the Advisor undertakes to use its best efforts (a) to present to the Corporation
a continuing and suitable investment program consistent with the investment
policies and objectives of the Corporation and investment opportunities of a
character consistent with such investment program as the Directors may adopt
from time to time, (b) to manage the day-to-day affairs and operations of the
Corporation and (c) to provide such administrative services and facilities as
are appropriate for such management. In performance of such undertakings,
subject to the supervision and approval of the Directors and upon their
direction, and consistent with the provisions of the Articles of Incorporation
and Bylaws of the Corporation and of any policies for the Corporation from time
to time established by the Directors after consultation with the Advisor, the
Advisor shall:
(i) make or have made for the Corporation such research reports,
economic and statistical data, evaluations, analyses, opinions and
recommendations as it may deem necessary or desirable or as the
Directors of the Corporation may request with respect to investment
opportunities available to the Corporation;
(ii) formulate a program for the investment of the Corporation's
assets;
(iii) select and evaluate potential projects and investments for
the Corporation;
(iv) make recommendations as to the nature, terms and amount
of involvement or participation in such project or investments and the
timing thereof;
(v) evaluate and make recommendations as to the sale or other
disposition of assets of the Corporation;
(vi) make such further recommendations as to the investments
of the Corporation as the Advisor may deem necessary or desirable;
(vii) investigate and make recommendations with respect to
selection of and relations with consultants, lenders and others
(including without limitation, tenants, property managers,
accountants, mortgage loan originators, correspondents and services,
architects, engineers and other technical advisers, attorneys, real
estate and mortgage loan bankers, brokers and dealers, corporate
fiduciaries, escrow agents, depositories, custodians, agents for
collection, insurers, insurance agents, banks, builders and
developers, and persons acting in any other capacity), in connection
with the Corporation's properties;
(viii) provide office and clerical facilities adequate for the
Corporation's operations and affairs;
(ix) act, or obtain for the Corporation the services of others to
act, as may be required to provide accounting, auditing, custodial,
transfer agent, registrar and other similar services, to disburse and
collect the funds of the Corporation, to pay the debts and fulfill the
obligations of the Corporation, to handle the prosecution and
settlement of any claims of the Corporation, to oversee, handle,
prepare and distribute or cause to be distributed all
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communications with the existing and future holders of the
Corporation's securities, including the holders of the Corporation's
Shares and Debentures, and, in connection with the foregoing, to
investigate, select and conduct relations with custodians, transfer
agents, registrars, proxy solicitors, attorneys, accountants,
auditors, brokers and investors, and others as necessary in connection
with the Corporation's operations;
(x) advise the Corporation concerning developments in the
healthcare and real estate investment trust industries appropriate or
useful to the Corporation's existing and potential future business and
investments;
(xi) make recommendations to the Directors as to appropriate
distributions by the Corporation to its stockholders; and
(xii) maintain or cause to be maintained records of activities
reasonably requested by the Corporation.
The foregoing duties of Advisor will also be rendered, for no
additional fee, to entities directly or indirectly controlled by the
Corporation, including but not limited to Operating Partnership and its
subsidiaries.
2. Restriction on Investment Activities. The parties expressly
understand and agree that for that period of time equal to the lesser of i) the
term of this agreement, or ii) Advisor being actively engaged as the Investment
Advisor for NHI, Corporation and Operating Partnership (and entities controlled
by either or both of them) will not (without the prior written approval of NHI)
transact business with any party, person, company, or firm other than Advisor.
It is the intent of this restriction that Corporation will not be actively or
passively engaged in the pursuit of additional investment opportunities, but
rather will focus upon its capacities as Landlord and Noteholder of those
certain assets conveyed to it in the Conveyance by Advisor.
3. Delegation. With the consent of the Directors from time to time, the
Advisor may delegate to or use the services of any third party, including any
Affiliate of the Advisor, in performing its duties hereunder provided that such
third party is subject to the supervision of the Advisor. The services to be
provided to the Corporation by the Advisor shall, at the direction of the
Directors, be provided to any subsidiaries of the Corporation.
4. No Partnership or Joint Venture. The Corporation and the Advisor are
not partners or joint venturers with each other and nothing herein shall be
construed so as to make them such partners or joint venturers or impose any
liability as such on either of them.
5. Records. At all times, the Advisor shall keep proper books of
account and records relating to services performed hereunder, which books of
account and records shall be accessible for inspection by the Corporation at any
time during ordinary business hours. Annually, and more frequently as reasonably
requested by the Directors, the Advisor shall report to the Directors its
estimated costs in providing the services for the Corporation hereunder (by
category of services to the extent practicable) and provide the Directors with
such information as is reasonably obtainable by the Advisor concerning the cost
to other real estate investment trusts specializing in healthcare facility
investments of administrative and advisory services comparable to those that are
the subject matter of this Agreement in order that the Directors may evaluate
the performance of the Advisor and the efficiency of the arrangements provided
for in this Agreement.
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6. Qualification as a Real Estate Investment Trust. Anything else in
this Agreement to the contrary notwithstanding, the Advisor shall refrain from
any action which, in its sole judgment made in good faith or in the judgment of
the Directors of which the Advisor has written notice, would adversely affect
the status of the Corporation as a real estate investment trust as defined and
limited in Sections 856-860 of the Internal Revenue Code of 1986, as amended,
which would violate any law, rule, regulation or statement of policy or any
governmental body or agency having jurisdiction over the Corporation or over its
securities, or which would otherwise not be permitted by the Corporation's
Articles of Incorporation and Bylaws.
7. Bank Accounts. The Advisor, at the expense of the Corporation, may
establish and maintain one or more bank accounts in its own name, and may
collect and deposit into any such account or accounts, and disburse from any
such account or accounts, any money on behalf of the Corporation, under such
terms and conditions as the Directors may approve, provided that no funds in any
such account shall be commingled with funds of the Advisor; and the Advisor
shall from time to time render appropriate accounting of such collections and
payments to the Directors and to the auditors of the Corporation.
8. Bond. The Advisor, if and to the extent that the Directors require,
shall maintain a fidelity bond with a responsible surety company in such amount
as may be required by the Directors from time to time, covering all directors,
officers, employees and agents of the Advisor handling funds of the Corporation
and any investment documents or records pertaining to investments of the
Corporation. Such bond shall inure to the benefit of the Corporation in respect
of losses of any such property from acts of such Directors, officers, employees
and agents through theft, embezzlement, fraud, negligence, error or omission or
otherwise. The premium for said bond shall be an expense of the Corporation.
9. Information Furnished Advisor. The Directors shall at all times keep
the Advisor fully informed with regard to the investment policy of the
Corporation, the capitalization policy of the Corporation and generally their
then current intentions as to the future of the properties and other investments
of the Corporation. In particular, the Directors shall notify the Advisor
promptly of their intention to sell or otherwise dispose of any of the
Corporation's investments or to make any new investment. The Corporation shall
furnish the Advisor with a certified copy of all financial statements, a signed
copy of each report prepared by independent certified public accountants and
such other information with regard to the Corporation's affairs as the Advisor
may from time to time reasonably request.
10. Consultation and Advice. In addition to the services described
above, the Advisor shall consult with the Directors, and shall, at the request
of the Directors or the officers of the Corporation, furnish advice and
recommendations with respect to other aspects of the business and affairs of the
Corporation. In general, the Advisor shall inform the Directors of any factors
which come to its attention which would influence the policies of the
Corporation, except to the extent that giving such information would involve a
breach of fiduciary duty.
11. Compensation to Advisor. The Corporation shall pay the Advisor for
its services hereunder the greater of i) two percent (2%) of Corporation's
consolidated gross revenues calculated according to generally accepted
accounting principles, or ii) the actual expenses incurred by Advisor as
outlined in Paragraph 12 herein. Advisor's compensation shall be payable in
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monthly installments on the last day of each month, adjusted annually upon
completion of audit.
12. Expenses of the Advisor. Except as provided in Section 13 and
without regard to the amount of compensation received hereunder by the Advisor,
the Advisor shall pay all expenses in performing its obligations hereunder,
including and in addition to the following expenses:
(a) the cost of any accounting, statistical or bookkeeping
equipment necessary for the maintenance of the books and records of
the Corporation;
(b) employment expenses of the officers and directors and
personnel of the Advisor and all expenses, including travel expenses,
of the Advisor, incidental to the investigation and acquisition of
properties for the Corporation prior to the time the Directors
definitively decide to acquire the property or to have the Advisor
continue with the acquisition process, whether the property is
acquired or not, and after the Directors definitively decide to
dispose of a property;
(c) advertising and promotional expenses incurred in seeking and
disposing of investments for the Corporation;
(d) rent, telephone, utilities, office furniture and furnishings
and other office expenses incurred by or allocable to the Advisor for
its own benefit and account regardless of whether incurred or used in
connection with rendering the services to the Corporation provided for
in this Agreement;
(e) all costs and expenses which the Advisor is obligated to pay
to the Corporation or others under any lease of property by the
Advisor from the Corporation; and
(f) all miscellaneous administrative and other expenses of the
Advisor, whether or not relating to the performance by the Advisor of
its functions hereunder.
(g) fees and expenses paid to independent contractors,
appraisers, consultants, attorneys, managers and other agents retained
by or on behalf of the Corporation and expenses directly connected
with the acquisition, financing, refinancing, disposition and
ownership of real estate interests or of other property (including
insurance premiums, legal services, brokerage and sales commissions,
maintenance, repair and improvement of property);
(h) insurance as required by the Directors (including Directors'
liability insurance);
(i) expenses connected with payments of dividends or
distributions in cash or any other form made or caused to be made by
the Directors to shareholders of the Corporation and expenses
connected with payments of interest to holders of the Corporation's
Debentures;
(j) all expenses connected with communications to holders of
securities of the Corporation and the other bookkeeping and clerical
work necessary in maintaining relations with holders of securities,
including the cost of printing and mailing certificates for securities
and proxy solicitation materials and reports to holders of the
Corporation's
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securities;
(k) transfer agent's, registrar's, dividend disbursing agent's,
dividend reinvestment plan agent's and indenture trustee's fees and
charges;
(l) legal and auditing fees and expenses of the Corporation; and
(m) legal, auditing, accounting, underwriting, brokerage,
listing, registration and other fees and printing, engraving and other
expenses and taxes incurred in connection with the organization of the
Corporation but any such expenses incurred after January 1, 1998 for
the issuance, distribution, transfer, registration and listing of the
Corporation's securities shall remain the Corporation's obligation.
13. Expenses of the Corporation. The Corporation shall pay the
following expenses of the Corporation (except to the extent that the Advisor is
responsible for any such expenses as tenant of any property leased from the
Corporation):
(a) dividends
(b) the cost of money borrowed by the Corporation, including
interest on debentures;
(c) taxes on income and taxes and assessments on real property
and all other taxes applicable to the Corporation, including without
limitation, franchise and excise fees;
(d) except as provided in Section 12 hereof, all ordinary and
necessary expenses incurred with respect to and allocable to the
prudent operation and business of the Corporation, including without
limitation, any fees, salaries and other employment costs, taxes and
expenses paid to Directors, officers and employees of the Corporation
who are not also employees of the Advisor;
14. Other Activities of the Advisor. Nothing herein contained shall
prevent the Advisor or any of its officers, directors or employees or any of its
affiliates from engaging in other business activities related to real estate
investments, from undertaking investments permitted of them by the Corporation's
Bylaws or from acting as advisor to any other person or entity even though
having investment policies similar to the Corporation, and the Advisor and its
officers, directors or employees and any of its Affiliates shall be free from
any obligation to present to the Corporation any particular investment
opportunity which comes to the Advisor or such persons, regardless of whether
such opportunity is within the Corporation's investment policies; provided,
however, that when the Advisor has the ability to present a particular
investment opportunity which is suitable for purchase by the Corporation and any
other entities as to which the Advisor has advisory responsibility, the Advisor
will review the investment portfolio of each entity and will decide which entity
will acquire a particular property on the basis of such factors as it deems
appropriate including, among others, cash-flow, the effect of the acquisition on
diversification of the portfolio of each, the estimated income tax effects of
the purchase, the amount of funds available and the length of time such funds
have been available for investment. In the event a particular property is
equally appropriate for investment by more than one entity, the Advisor will
offer the investment to the entity whose funds have been available for the
longest period of time.
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15. Term; Termination of Agreement. This Agreement shall continue in
force from the date hereof through December 31, 2003 and thereafter from year to
year unless earlier terminated as herein provided; provided, however, that
either party may terminate this Agreement at any time on or after January 1,
2000, specified in a written notice of termination given to the other party at
least ninety days prior to the effective date of such termination; and provided,
further, that the Corporation may terminate this Agreement at any time during
the continuation of any event described in Section 18 hereof or otherwise for
cause. Upon the termination of this Agreement for any reason the Advisor shall
cooperate with the Corporation to provide an orderly management transition.
16. Amendments. This Agreement shall not be changed, modified,
terminated or discharged in whole or in part except by an instrument in writing
signed by both parties hereto, or their respective successors or assigns, or
otherwise as provided herein.
17. Assignment. This Agreement shall not be assigned or otherwise
transferred by the Advisor without the prior written consent of a majority of
the Directors including a majority of the Directors not affiliated with the
Advisor. This Agreement shall not be assigned by the Corporation without the
consent of the Advisor, except in the case of assignment by the Corporation to a
corporation, association, trust or other organization which is a successor to
the Corporation. Such successor shall be bound hereunder and by the terms of
said assignment in the same manner as the Corporation is bound hereunder.
18. Default, Bankruptcy, Etc. At the option solely of the Corporation
upon vote of a majority of its Directors, this Agreement shall be and become
terminated immediately upon written notice of termination from the Corporation
to the Advisor if any of the following events shall occur:
(a) If the Advisor shall violate any provision of this Agreement,
and after notice of such violation shall not cure such default within
thirty days; or
(b) If the Advisor shall be adjudged bankrupt or insolvent by a
court of competent jurisdiction, or an order shall be made by a court
of competent jurisdiction for the appointment of a receiver,
liquidator or trustee of the Advisor or of all or substantially all of
its property by reason of the foregoing, or approving any petition
filed against the Advisor for its reorganization, and such
adjudication or order shall remain in force or unstayed for a period
of thirty days; or
(c) If the Advisor shall institute proceedings for voluntary
bankruptcy or file a petition seeking reorganization under the Federal
bankruptcy laws, or for relief under any law for the relief of
debtors, or shall consent to the appointment of a receiver of itself
or of all or substantially all its property, or shall make a general
assignment for the benefit of creditors, or shall admit in writing its
inability to pay its debts generally, as they become due.
The Advisor agrees that if any event specified in subsections (b) and
(c) of this Section 18 shall occur, it will give written notice thereof to the
Directors within seven days after the occurrence of such event.
19. Action Upon Termination. From and after the effective date of
termination of this
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Agreement, pursuant to Sections 15, 17 or 18 hereof, the Advisor, except as
provided in Section 11, shall not be entitled to compensation for further
services hereunder but shall be paid all compensation accruing to the date of
termination, including compensation the payment of which may have been deferred
as a result of the condition to payment set forth in Section 11(b) hereof. The
Advisor shall forthwith upon such termination:
(a) pay over to the Corporation all moneys collected and held
for the account of the Corporation pursuant to this Agreement, after
deducting any accrued compensation and reimbursement for its expenses
to which it is then entitled;
(b) deliver to the Directors a full accounting, including a
statement showing all payments collected by it and a statement of all
moneys held by it, covering the period following the date of the last
accounting furnished to the Directors;
(c) deliver to the Directors all property and documents of the
Corporation then in the custody of the Advisor in its capacity as
such; and
(d) cooperate with the Directors to provide an orderly management
transition.
20. Miscellaneous. The Advisor assumes no responsibility under this
Agreement other than to render the services called for hereunder in good faith,
and shall not be responsible for any action of the Directors in following or
declining to follow any advice or recommendations of the Advisor. Neither the
Advisor nor its partners nor any shareholders, directors, officers or employees
of any of its partners shall be liable to the Corporation, the Directors, the
holders of securities of the Corporation or to any successor or assign of the
Corporation for any act taken in good faith and in a manner reasonably believed
by the Advisor or the person acting on behalf of the Advisor to be in the best
interests of the Corporation, or for any other act except an act constituting
bad faith, willful misfeasance, gross negligence or reckless disregard of its
duties.
21. Notices. Any notice, report or other communication required or
permitted to be given hereunder shall be in writing unless some other method of
giving such notice, report or other communication is accepted by the party to
whom it is given, and shall be given by being delivered at the following
addresses of the parties hereto:
The Corporation:
W. Andrew Adams
National Health Realty, Inc.
100 Vine Street, Suite 1400
Murfreesboro, TN 37130
with a copy to:
William B. King
Goodwin, Procter & Hoar
Exchange Place, 24th Floor
Boston, MA 02109-2881
The Advisor:
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Richard F. LaRoche, Jr.
National HealthCare Corporation
100 Vine Street
City Center, Suite 1400
Murfreesboro, Tennessee 37130
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with a copy to:
Mr. Ernie Hyne
Harwell, Howard, Hyne, Manner & Gabbert
1800 First American Center
315 Deaderick Street
Nashville, TN 37238
Either party may at any time give notice in writing to the other party
of a change of its address for the purpose of this Section 21.
22. Headings. The section headings hereof have been inserted for
convenience of reference only and shall not be construed to affect the meaning,
construction or effect of this Agreement.
23. Governing Law. The provisions of this Agreement shall be construed
and interpreted in accordance with the laws of the State of Maryland as at the
time in effect.
IN WITNESS WHEREOF, the Corporation and the Advisor, each by a duly
authorized officer have signed and delivered this Agreement under their
respective corporate seals all as of the day and year first above written.
NATIONAL HEALTH REALTY, INC.
By
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Its
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NATIONAL HEALTHCARE CORPORATION
By
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Its
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