EX-10.6 RESTATED ADVISORY, ADMINISTRATIVE SERVICES AND FACILITIES AGREEMENT

EX-10.6 5 g00077exv10w6.txt EX-10.6 RESTATED ADVISORY, ADMINISTRATIVE SERVICES AND FACILITIES AGREEMENT EXHIBIT 10.6 RESTATED ADVISORY, ADMINISTRATIVE SERVICES AND FACILITIES AGREEMENT BETWEEN NATIONAL HEALTH REALTY, INC. AND TENNESSEE HEALTHCARE ADVISORS, LLC THIS RESTATED AGREEMENT is entered into on this 1st day of August, 2005, but is effective as of December 29, 2004, between NATIONAL HEALTH REALTY, INC., a Maryland corporation and its divisions, subsidiaries and partnerships in which it serves as general partner (collectively "NHR" or "Corporation"), and TENNESSEE HEALTHCARE ADVISORS, LLC a Tennessee limited liability company ("Advisor"), whose sole member is National HealthCare Corporation ("NHC"). WHEREAS, the original Advisory, Administrative Services and Facilities Agreement (the "Agreement") between the Corporation and NHC was entered into on December 29, 1997; and WHEREAS, with the passage of time and changes in business activities of NHR and NHC they have agreed to restate the agreement and certain particulars, including (at the request of NHC) the change of its subsidiary, Tennessee HealthCare Advisors, LLC, to become the Advisor; and WHEREAS, NHR is agreeable to these changes, including the substitution of Tennessee HealthCare Advisors, LLC as Advisor, provided, however, that its duties and responsibilities under the Restated Agreement are guaranteed by Advisor's sole member, NHC; and WHEREAS, the Corporation is qualified 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 continue 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 contractor relationships; NOW, THEREFORE, in consideration of the premises and of the mutual covenants herein contained, Corporation and 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: 1 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 advisors, 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 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 NHR/OP, L.P. and its subsidiaries. 2. 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. 2 3. 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. 4. 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. 5. 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. 6. Bank Accounts. The Advisor, at the expense of the Corporation, may establish and maintain one or more bank accounts in the Corporation's 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. 7. 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. 8. 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 the 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. 9. 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. 10. Compensation to Advisor. The Corporation shall pay the Advisor for its services hereunder the greater of i) two and one-half percent (2.5%) of Corporation's consolidated gross revenues calculated according to generally accepted accounting principles, or ii) $500,000. Advisor's compensation shall be payable in 3 monthly installments on the last day of each month, adjusted annually upon completion of audit. 11. Expenses of the Advisor. Except as provided in Section 12 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 and services necessary for the maintenance of the books and records of the Corporation; b. employment expenses of all 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 investment is made by the Corporation; 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 miscellaneous administrative and other expenses of the Advisor, whether or not relating to the performance by the Advisor of its functions hereunder. 12. 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 otherwise provided in Section 11 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; e. 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); f. insurance as required by the Directors (including Directors' and Officers' liability insurance); g. 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; h. 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 of the Corporation's securities; i. transfer agent's, registrar's, dividend disbursing agent's, dividend reinvestment plan agent's and 4 indenture trustee's fees and charges; j. legal, auditing fees, Section 404 certification fees, costs and expenses of the Corporation; and k. legal, auditing, accounting, underwriting, brokerage, listing, registration and other fees and printing, engraving and other expenses and taxes incurred in connection with the organization or financing of the Corporation, or for the issuance, distribution, transfer, registration and listing of the Corporation's securities. 13. 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, cashflow, 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. 14. Term; Termination of Agreement. This Agreement shall continue in force from the date hereof for an indefinite term; provided that either party may terminate this Agreement upon written notice of termination given to the other party at least ninety days prior to the effective date of such termination; provided, further, that the Corporation may terminate this Agreement at any time upon the continuation of any event described in Section 17 hereof or otherwise for cause. Upon termination of this Agreement for any reason the Advisor shall cooperate with the Corporation to provide for an orderly transition. 15. 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. 16. 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. 17. 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 5 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 17 shall occur, it will give written notice thereof to the Directors within seven (7) days after the occurrence of such event. 18. Action Upon Termination. From and after the effective date of termination of this Agreement, pursuant to Section 14, 16 or 17 hereof, the Advisor, except as provided in Section 10, shall not be entitled to compensation for further services hereunder but shall be paid all compensation accruing to the date of termination. 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. 19. 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 party nor its partners nor any shareholders, directors, officers or employees of any of its partners shall be liable to the other party, its 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 person acting on behalf of the party to be in the best interests of the party, or for any other act except an act constituting bad fath, willful misfeasance, gross negligence or reckless disregard of its duties. 20. 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: Robert G. Adams National Health Realty, Inc. 100 Vine Street, Suite 1400 Murfreesboro, Tennessee 37130 The Advisor: R. Michael Ussery Tennessee HealthCare Advisors 100 Vine Street, Suite 1400 Murfreesboro, Tennessee 37130 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 20. 21. 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. 6 22. Governing Law. The provisions of this Agreement shall be construed and interpreted in accordance with the laws of the State of Tennessee 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 /s/ Robert G. Adams ----------------------------------- Name: Robert G. Adams Title: President TENNESSEE HEALTHCARE ADVISORS By /s/ R. Michael Ussery ----------------------------------- Name: R. Michael Ussery Title: Vice President & Secretary 7