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EXHIBIT 10.55
FORM OF MANAGEMENT AGREEMENT
THIS MANAGEMENT AGREEMENT (the "Agreement") entered into effective as
of the ____ day of , ______ by and between Tried Senior Living__, L.P.
("Owner"), a limited partnership organized under the laws of the State of
California, and CAPITAL SENIOR LIVING, INC. ("Capital"), a corporation organized
under the laws of the State of Texas.
NOW, THEREFORE, in consideration of the foregoing and of the mutual
covenants, conditions and agreements hereinafter set forth, the parties hereby
agree as follows:
PREAMBLE
OWNER by this Agreement is engaging Capital to provide management
services relating to the operation of a senior living community to be located
in on the land identified in Exhibit A.
This Agreement is founded on the following assumptions:
Owner retains primary responsibility to:
a. Establish the policies of the Facility and to plan for its
short-range and long-range goals.
b. Review and evaluate the performance of Capital in carrying out the
established policies and in attaining the goals established by
Owner.
c. Annually review and approve the budget.
d. Annually review the policies and goals which have been established.
Capital assumes primary responsibility to:
a. Implement the policies established by Owner.
b. Supervise the day-to-day management of the Facility, including all
resident activities.
c. Provide to Owner full, timely and accurate information as to past
operations.
d. Provide to Owner projections and recommendations relating to the
future operations of the Facility.
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The parties therefore agree as follows:
I. RESPONSIBILITIES OF CAPITAL
A. RECOMMENDED POLICIES. Capital shall recommend policies and goals
to be established by Owner and shall evaluate such policies and
goals on an ongoing basis.
B. MANAGEMENT DUTIES. Capital shall supervise the operation of the
Facility, provide management services, install operating
procedures and oversee day-to-day operations, all subject to and
in accordance with the budgets approved by and policies
established by Owner.
C. MARKETING DUTIES. Capital shall manage and supervise the marketing
program. Capital shall establish and periodically review the
residency agreement and if required, recommend changes thereof.
D. EMPLOYEES. All Facility-based Employees, including the
administrative employees, shall be employees of Capital. Capital
shall have sole authority over Facility-based Employees and
Non-Facility-based Employees who are directly responsible for the
Facility and all matters pertaining thereto and shall be
responsible for all actions and omissions of such employees. All
costs of hiring, equipping and providing the services of
Facility-based Employees, including, but not limited to,
compensation, health insurance, employer liability insurance,
payroll taxes, bonding, workers compensation insurance, benefits
and vacations shall be an expense of Owner.
E. OPERATING PROCEDURES. Capital shall develop, install and maintain
operating procedures, systems and controls.
F. FACILITY EXPANSION. Capital shall make recommendations regarding
remodeling or expansion of the Facility.
G. BUDGETS. Capital shall prepare for review and approval by Owner,
such approval not to be unreasonably withheld, annual operating
budgets for revenue, expense and cash flow of the Facility and a
capital expenditures budget. Budgets shall be prepared in advance
of each fiscal year. Cash flow projections shall accompany each
operating budget. Any changes to the budgets must be approved by
Owner, such approval not to be unreasonably withheld.
H. FINANCIAL CONTROLS. Capital shall establish and maintain a system
of financial controls for the Facility.
I. MONTHLY FINANCIAL STATEMENTS. Capital shall provide to Owner, on a
monthly basis, financial statements and related financial reports.
Such statements and
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reports shall be provided by the 20th day after the end of the
month. These reports shall be in the form attached as Exhibit "B."
J. MARKETING REPORTS. Capital shall, on a weekly and monthly basis,
provide sales and occupancy reports to Owner, as well as the
results of the annual resident satisfaction survey.
K. LEGAL COUNSEL. Capital, at Facility expense, shall coordinate with
Owner the utilization of legal counsel relating to Facility
operations.
L. RENTAL COLLECTIONS AND DISBURSEMENTS. Capital shall collect the
revenues from the residents and, on behalf of Owner, deposit all
such funds in a residential depository account at a FDIC insured
bank approved by Owner. The style of the account shall be in the
name of the Facility with designated representatives from Owner
and Capital being the only parties authorized to draw from said
account.
On an as needed basis, Capital shall transfer the funds from the
above stated account into an Operating Expense Account in the name
of the Facility. The account shall be in a FDIC insured bank
approved by Owner. The style of the account shall be in the name
of the Facility with designated representatives from Owner and
Capital being the only parties authorized to draw from said
account. Capital shall pay out of such Operating Expense Account
all operating expenses for which payment has been approved in
accordance with the budget or approved by Owner (including
Capital's Management Fee and any other sums due to Capital from
Owner), and all other sums properly payable pursuant to any of the
provisions of this Agreement. These funds shall not be co-mingled
with funds from any other projects and/or facilities managed
and/or operated by Capital.
M. ACCOUNTING SYSTEMS AND SOFTWARE. Capital shall provide to Owner,
during the term of this Agreement, appropriate on-site accounting
systems and software, which shall include complete accounting,
bookkeeping and record keeping services for the Facility,
specifically including, but not limited to, resident billings,
accounts payable, accounts receivable, general ledger and
inventory records and maintain demographic information on the
residents. Acquisition of software for Facility based operations,
software maintenance and update charges will be budgeted expenses
of the Facility. Payroll processing may be delegated to a third
party, the cost of which will be the responsibility of the
Facility.
II. OWNER'S RESPONSIBILITIES
A. POLICIES. Owner shall establish the policies for the Facility.
B. GOALS. Owner shall establish the short range and long range goals
of the Facility.
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C. BUDGETS. Owner shall review and approve, such approval not to be
unreasonably withheld, budgets for the operation of the Facility.
D. CAPITAL'S PERFORMANCE. Owner shall review and evaluate the
performance of Capital in carrying out the policies for the
Facility.
E. LEGAL COUNSEL. Owner shall obtain legal counsel to perform all
necessary legal services relating to Owner's ownership of the
Facility.
F. AUDITS. Owner, at its discretion, may engage certified public
accountants to perform annual audits of the Facility as well as
prepare any other reports required for federal or state regulatory
agencies which require licensure and/or certification. Every
quarter, upon receipt of reasonable notice to Capital, all
financial records pertaining to the Facility will be open for
inspection and review by Owner's representatives. All labor and
expense associated with such review shall be borne by Owner.
G. DIRECTIVES. In order to assure proper coordination, Owner shall
issue any directions concerning the operations of the Facility
only through the President or Vice President of Capital.
H. OPERATING REPORTS. During the term of this Agreement, Owner shall,
within fourteen (14) days of issuance, furnish to Capital copies
of any and all Facility-related reports, including the annual
audit (if any).
I. CHANGE OF RESIDENCY AGREEMENT. Owner shall not change the
Residency Agreement without consulting with and seeking approval
of Capital unless required to do so to comply with any applicable
law or regulation.
J. DECISIONS. Owner shall examine documents submitted by Capital and
render decisions pertaining thereto promptly to avoid unreasonable
delay.
K. UNIFORM ACCOUNTS. Facility shall use the uniform chart of accounts
recommended by Capital.
L. FURNISHING INFORMATION. Owner agrees at its expense to install and
maintain a computer terminal at the Facility compatible with the
mainframe computer currently in use by Capital and to transmit
data to Capital via telephone lines.
M. RIGHT OF FIRST REFUSAL.
1. hereby grants to Capital a right of first refusal in the
event that decides to sell the Facility during the initial
term of this Agreement. shall furnish Capital with a written
copy of the terms and conditions of the proposed sale, which
terms and conditions shall be certified by as bona fide and
Capital shall have forty-five (45) days from the date of
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receipt of such written copy within which to notify
whether Capital desires to exercise its rights of first
refusal to purchase the Facility on the same terms and
conditions. If Capital fails to notify of its desire to
exercise its right of first refusal within such forty-five
(45) day period, Capital shall be deemed to have not
exercised its right of first refusal hereunder.
2. If Capital exercises its right of first refusal, Capital
shall have an additional sixty (60) days following expiration
of the forty-five (45) day notice period within which to
obtain financing to purchase the Facility. Capital shall
notify whether it has obtained financing to purchase the
Facility within such sixty (60) day period. If Capital fails
to notify of its having obtained financing within such
sixty (60) day period, Capital shall be deemed not to have
obtained the requisite financing.
3. If Capital gives timely notice of the exercise of its
right of first refusal and having obtained the requisite
financing to purchase the Facility, the closing on the sale
to Capital shall take place within thirty (30) days after the
expiration of the sixty (60) day period on materially the
same terms and conditions as set forth in the bona fide
offer; provided, however, that Capital shall furnish
with a non-refundable deposit equal to five percent (5%) of
the purchase price, to be credited with interest earned
thereon against the purchase price at the closing in order to
extend the closing for such thirty (30) day period.
4. If Capital fails to give timely notice of the exercise of
its rights of first refusal or having obtained the requisite
financing to purchase the Facility, shall be free to
close on the sale to the proposed purchaser, with the closing
to take place within one hundred eighty (180) days after the
failure of Capital to give timely notice, but only on
materially the same terms and conditions as set forth in the
bona fide offer. If such closing to the proposed purchaser
does not occur within such one hundred eighty (180) day
period or if the terms and conditions of the proposed sale
are not materially the same as set forth in the bona fide
offer, the Facility may not be sold without Capital once gain
offered the right to exercise its right of first refusal
hereunder.
5. Any sale, sub-lease or assignment with respect to the
Facility, other than to Capital, shall be expressly subject
to the terms and provisions of this Agreement and shall not
relieve of its liability or obligations hereunder and
shall cause any purchaser, assignee or sub-lessee to
deliver to Capital written acknowledgement of its agreement
to perform hereunder including the payment of the management
fee described herein. may at any time, without the consent of
Capital, 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, so long as the mortgage and/or
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successor in interest confirms its consent to be bound by the
terms of this Agreement within ten (10) days following
Capital's demand therefor; provided, however, that so long as
has no right to terminate this Agreement because of the
default of Capital hereunder; in the event of any
foreclosure of other proceeding under any such deed or trust,
mortgage or other security instruments to enforce the lien or
security interest thereby created, this Agreement shall
continue in full force and effect notwithstanding such
foreclosure or other proceedings.
III. INSURANCE
A. Capital shall maintain, in full force and effect, at the
Facility's expense, the following insurance protecting Owner and
Capital and their officers and employees:
1. Employee's fidelity insurance
2. Workers compensation and employers liability insurance
3. Professional liability insurance
4. Comprehensive general public liability insurance and
overlying umbrella liability coverage against loss or
liability for damages for personal injury or death occurring
on, in or about the Facility.
Such policy or policies shall be written by a responsible
insurance company or companies satisfactory to Owner and in
kind and amounts satisfactory to Owner. Certificates of
insurance showing compliance with the foregoing requirements
shall be furnished by Capital to Owner. Certificates shall
state that the policy or policies will not be canceled or
altered without at least 30 days prior written notice to
Owner.
B. Owner shall procure and maintain, in full force and effect, at
Owner's expense the following insurance protecting Owner and
Capital and their officers and employees:
1. Property Insurance for loss or damage by fire and other
perils insurable under the broad form of extended coverage
insurance available in the area where the Facility is
located, and improvements, and contents thereof, constituting
all or any portion of the Facility.
2. Insurance for automobiles owned or hired by Owner and used in
connection with the Facility.
Such policy or policies shall be written by a responsible
insurance company or companies satisfactory to Capital in
kind and amounts
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satisfactory to Capital. Certificates of insurance showing
compliance with the foregoing requirements shall be furnished
by Owner to Capital. Certificates shall state that the policy
or policies will not be canceled or altered without at lease
thirty (30) days prior written notice to Capital.
IV. TERM AND TERMINATION OF THIS AGREEMENT.
A. TERM AND TERMINATION WITHOUT CAUSE. This Agreement shall commence
on the date set forth on the first page hereof. Payment under
Section V herein shall commence on the date of the first resident
move-in. The term of this Agreement shall continue for a period of
ten (10) years from the date of the first resident move-in (the
"Initial Term") and continue for the Initial Term unless
terminated by law or otherwise according to its terms. Capital
shall have the option to extend the term of this Agreement for an
additional five (5) year renewal option on the same terms and
conditions as herein provided (the "Extended Term").
B. If Owner terminates the Agreement prior to the expiration of
the Initial Term without cause or if Capital terminates this
Agreement during the Initial Term for cause as provided in
Paragraph IV. B. below, severance compensation in an amount equal
to the then-current monthly management fee times the number of
months remaining in the Initial Term shall be paid to Capital upon
the effective date of termination. Any such termination shall be
effective upon the expiration of the ninety (90) day period
following the giving of the notice or on such later date as may be
specified in the notice.
C. TERMINATION FOR CAUSE.
1. This Agreement may be terminated by Owner for cause for the
following reasons:
a. In the event of material breach by Capital of a material
term hereof, which breach is not cured within sixty (60)
days after notice by Owner.
b. In the event that a petition in bankruptcy is filed
by Capital or its permitted assignee, or in the event
Capital or its permitted assignee makes an assignment
for the benefit of creditors or takes advantage of an
insolvency act, by notice to Capital or assignee.
c. In the event that (i) Capital's or any permitted
assignee's corporate existence is dissolved and the
duties under this Agreement are not assumed by Capital
or an affiliate of Capital (ii), Capital or any
permitted assignee ceases to do business for any reason,
by notice to Capital or such assignee and the duties
under this Agreement are not assumed by Capital or
Capital's Affiliate.
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2. This Agreement may be terminated for cause by Capital in the
event that Capital fails to receive reimbursement of
reimbursable expenses or any compensation due Capital
pursuant to the terms of this Agreement or any other
compensation due Capital, and such failure continues for a
period of sixty (60) days after Capital's written notice
thereof to Owner; provided however, that this Agreement shall
not be so terminated if Owner pays Capital all such expenses
and compensation then due and payable on or before the
expiration of said sixty (60) day period.
Capital shall have the right to terminate this Agreement if
Capital fails to receive reimbursements or compensation as a
result of a subordination agreement by Capital in favor of a
lender of Owner, but such termination shall not be considered
for cause and shall not entitle Capital to the severance
compensation provided for in Section IV.B. hereof.
3. No termination of this Agreement shall affect any
obligation owing by either party hereto to the other which
accrued prior to the effective date of such termination.
D. COVENANTS SURVIVING TERMINATION. The termination of this Agreement
shall not terminate the right of Owner or Capital to
indemnification relating to events occurring during the term of
this Agreement under Article VI. K. and to protection of Owner's
or Capital's property rights under Article VI.B.
V. COMPENSATION
A. OPERATIONS MANAGEMENT FEES. Owner shall pay to Capital a fee in
the amount set forth below, payable by the fifteenth day of each
month. Payment shall commence on the date of the first resident
move-in. The amount to be paid monthly shall be 5% of Gross
Revenues generated during the immediately proceeding month
provided that the monthly management fee shall not be less than
[85% of stabilized gross revenue] ("Monthly Management Fee").
"Gross Revenues" shall be as defined in Section V.B. The Monthly
Management Fee for the Facility shall be payable monthly in
arrears following calculations thereof upon submission of a
monthly statement for such Facility from Capital. It is agreed
between Owner and Capital that if the Gross Revenues of the
Facility are insufficient to pay all disbursements, including the
Monthly Management Fee or any portion thereof, then Owner shall
remain responsible for such disbursements. It is further agreed
between Owner and Capital that in no event will any disbursement
be made to Owner from any Facility Account until all accrued and
unpaid fees to Capital and repayments, if any, to Capital for
Capital's advancement of funds to cover any insufficiencies in
such Facility's Rental or Payroll Account have been paid in full.
B. INCENTIVE MANAGEMENT FEE. In addition to the Monthly Management
Fee stated above, as additional compensation for the services to
be rendered by Capital
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during the Term, Capital shall be paid a fee (the "Incentive
Management Fee") based upon performance standards which shall be
mutually agreed upon by Owner and Capital. Unless otherwise
mutually agreed upon by Owner and Capital, the Incentive
Management Fee shall equal 25% of the amount, if any, by which Net
Cash Flow for any annual or shorter period during the Term ending
December 31 of any year or for the last period in the Term ending
on the last day of the Term exceeds the agreed upon performance
standards.
For purposes of this Section V.B., "Net Cash Flow" shall mean, for
any period for which such sum is being computed, the excess of (a)
Gross Revenues for the Facility during such period over (b)
Operating Expenses for the Facility during such period. "Gross
Revenues" shall mean and refer, for any period for which such
Gross Revenues are being determined, the sum of the total gross
revenues of the Facility from operations received during such
period, including all receipts from (i) rent of units at the
Facility, (ii) rent or business interruption insurance, if any,
(iii) revenue of the Facility for or on account of any and all
goods provided and services rendered or activities during such
period, (iv) reimbursements of expenses paid by the Facility which
are to be borne by others, (v) deposits in the event of forfeiture
thereof to the Facility and (vi) other revenues and receipts
realized by the Facility from operations and customarily included
in Net Cash Flow; Gross Revenues shall not include (i) security
deposits received from residents and, if applicable, interest
accrued thereon for the benefit of the residents until such
deposits or interest are applied for rental payments; (ii)
proceeds from the sale or dispositions of all or any part of such
Facility; (iii) insurance proceeds received by Owner as a result
of any insured loss (except proceeds for rent loss insurance) and
proceeds from any condemnation action; (iv) capital contributions
made by any partner of Owner; (v) loans by Owner or its partners;
(vi) proceeds from capital, financing and any other transactions
not in the ordinary course of operation of such Facility and (vii)
advance rentals paid (until such time as they are earned).
"Operating Expenses" shall mean, for any period for which such
Operating Expenses are being determined, the sum of the total
gross expenditures of the Facility for operations during such
period, including (A) all cash operating expenses (including the
Monthly Management Fee, any Incentive Management Fee, all
commissions and other fees, expenses and allowances paid to
Capital), (B) any other expenditures of the Facility which are not
treated as capital expenditures under generally accepted
accounting practices, and (C) real estate taxes, personal property
taxes and sales taxes; provided however, that Operating Expenses
shall not include any payments or expenditures to the extent the
sources or funds used for such payments or expenditures are not
included in Gross Revenues.
C. CERTAIN EXPENSES. In accordance with the Annual Budgets, the
Facility will reimburse Capital for all overhead and expenses
incurred by Capital in performing these services under this
Agreement, to include, but not be limited to, insurance, salaries
of Facility and non-Facility employees, office supplies, the cost
of reasonable transportation, lodging and meal expenses for
non-Facility-based
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employees of Capital or its outside consultants when traveling in
connection with the performance of the services being performed
pursuant to this Agreement, telephone expenses, copying and
mailing and express shipments. Relocation, education, professional
memberships and licensing expenses of the Facility-based
administrative employees shall also be an expense of the Facility.
VI. MISCELLANEOUS
A. INSURANCE-SUBROGATION. No indemnity shall be paid to the other
party under this Agreement where the claim, damage, liability,
loss or expense incurred was required to be insured against by
such other party. Any insurance policies obtained by the parties
pursuant to this Agreement shall contain provisions or have the
effect of waiving any right of subrogation by the insurer of one
party against the other party or its insurer.
B. STATUS OF PARTIES. It is expressly understood and agreed that
Capital shall act as an independent contractor in the performance
of this Agreement. No provision hereof shall be deemed or
construed to create a partnership or a joint venture between Owner
with respect to the Facility or otherwise.
C. ADDITIONAL ACTION. In order to carry out the intent and spirit of
this Agreement, Owner and Capital will do all acts and things
necessary including the execution of other agreements.
D. ENTIRE AGREEMENT. This Agreement sets forth the entire Agreement
between Capital and Owner. Any change or modification of this
Agreement must be in writing and signed by all parties hereto.
E. BINDING EFFECT. This Agreement shall be binding upon and shall
inure to the benefit of the parties hereto, their successors and
assigns.
F. ASSIGNMENT, ETC. Except for an assignment by Capital to an
affiliate, Capital shall not, without Owner's prior written
approval (which approval shall not be unreasonably withheld),
assign any of its rights or obligations under this Agreement.
G. GOVERNING LAW. This Agreement, its interpretation, validity and
performance shall be governed by the laws of the State of Texas.
H. NON-COMPETE. Without the prior written consent of Capital, for a
period of three years following termination of this Agreement,
Owner will not employ or engage any Capital employee assigned to
or employed by the Facility at any time during the last twelve
(12) months of the term of this Agreement. This Section shall not
apply to any lender of Owner which takes over control of the
Facility.
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I. CONDITIONS BEYOND CONTROL OF PARTIES. Neither party shall be held
liable for failure to comply with any of the terms of this
Agreement when such failure has been caused solely by fire, labor
dispute, strike, war, insurrection, government restrictions, force
majeure, or act of God beyond the control and without fault on the
part of the party involved, provided such party uses due diligence
to remedy such default. Circumstances are likely to arise from
time to time which may require that budgets be exceeded, and
Capital shall not be liable for budget overruns.
J. INDEMNIFICATION. Owner will indemnify and hold harmless Capital
from any and all liability arising incident to Owner's performance
of its duties under this Agreement. Capital will indemnify and
hold harmless Owner from any and all liabilities arising incident
to Capital's performance of its duties under this Agreement.
Owner shall also indemnify and hold Capital harmless against any
and all losses, costs or expenses incurred by Capital by reason
of, arising out of or in any way related to noncompliance by the
Facility with all applicable state, federal and local laws,
ordinances, rules and regulations relating to the physical
condition of the property of the Facility, provided Capital shall
promptly notify Owner of Capital's knowledge of any such
noncompliance.
K. ARBITRATION. In the event of any dispute, claim or controversy of
any kind between the parties, concerning this Agreement or the
termination of this Agreement, the matter shall be submitted to
arbitration in accordance with rules of the American Arbitration
Association. The parties jointly shall agree on an arbitrator. If
the parties are unable to agree, in good faith within a reasonable
time, on the selection of an arbitrator, either party may request
appointment of an arbitrator chosen by the American Arbitration
Association who shall be the Selected Arbitrator. Such arbitrator
shall be limited in his decision to a choice between the final
position as requested by each party. Said arbitration shall be
held in Dallas/Ft. Worth, Texas or such other place as is mutually
agreeable. The arbitration decision shall be final and binding on
both parties unless the arbitration is fraudulent or so grossly
erroneous as to necessarily imply bad faith. Costs of arbitration
are to be shared by both parties equally, provided that the
arbitrator may choose to award the costs of arbitration against
the losing party if the arbitrator determined that the final
position urged by the losing party was not reasonable.
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TRIAD SENIOR LIVING _, L.P. CAPITAL SENIOR LIVING, INC.
By: Triad Senior Living, Inc.
Its General Partner
By: By:
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Name: Name:
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Title: Title:
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