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EXHIBIT 10.32
MANAGEMENT AGREEMENT
THIS MANAGEMENT AGREEMENT (the "Agreement") entered into this ______
day of __________________________________, 199______ by and between Tri Point
Communities, L.P., ("Owner"), a ________________________________________
organized under the laws of the state of Texas, and CAPITAL SENIOR LIVING,
INC., ("Capital"), a corporation organized under the laws of the state of
Texas.
PREAMBLE
OWNER by this Agreement is engaging Capital to provide management
services relating to the operation of _________________________ ("Facility"),
a senior living community located in _____________________________________,
________________________________.
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.
The parties therefore agree as follows:
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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 occurring pursuant to Capital's employee
policy manual. 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
Capital. To the extent the above-stated expenses are incurred
in accordance with the Facility Budget or approved by Owner,
they shall be reimbursed from the Facility operations or Owner
as the case may be.
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 based on reasonable standards 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. It is to be understood that
budgets are only estimates and guidelines of future results
and that budget overruns may occur from time to time.
H. FINANCIAL CONTROLS. Capital shall establish and maintain a
system of financial controls for the Facility.
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I. MONTHLY FINANCIAL STATEMENTS. Capital shall provide to Owner,
on a monthly basis, financial statements and related financial
reports. Such statements and reports shall be provided by the
20th day after the end of the month. These reports shall be
in the form attached as Exhibit "A."
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. Capital shall hold, remit or expend the balance of
such funds, if any, as Owner may direct. 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
xxxxxxxx, 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.
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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.
C. BUDGETS. Owner shall review and approve 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.
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M. PURCHASE OF THE FACILITY.
1. The Owner hereby agrees that so long as Capital is not
in default in the performance of any duty or any
obligation hereunder, Capital shall have the option
exercisable on not less than two (2) months nor more
than four (4) months notice to purchase the Facility
at a purchase price equal to the Fair Market Value of
the Facility. In the event Capital purchases the
Facility pursuant to this option, the Owner shall,
upon receipt from Capital of the applicable purchase
price, deliver to Capital a deed with covenants only
against acts of the Owner conveying the entire
interest of the Owner in and to the Facility to
Capital subject to all Legal Requirements, permitted
encumbrances, the claims of all persons claiming by,
through or under Capital, any other matters assented
to by Capital and all matters for which Capital has
responsibility under this Agreement, and any
encumbrance which Capital elects to assume. The
applicable purchase price shall be paid in cash to the
Owner, or as the Owner may direct, in federal or other
immediately available funds except as otherwise
mutually agreed by the Owner and Capital. All expenses
of such conveyance, including, without limitation,
title examination costs, standard (and extended)
coverage title insurance premiums, attorneys, fees
incurred by the Owner in connection with such
conveyance, recording and transfer taxes and recording
fees and other similar charges shall be paid by
Capital.
2. In the event that it becomes necessary to determine
the Fair Market Value of the Facility for any purpose
of this Agreement, the party required or permitted to
give notice of such required determination shall
include in the notice the name of a person selected to
act as appraiser on its behalf. Within ten (10) days
after receipt of any such notice, the Owner (or
Capital, as the case may be) shall by notice to
Capital (or the Owner, as the case may be) appoint a
second person as appraiser on its behalf.
3. The appraisers thus appointed, each of whom must be
a member of the American Institute of Real Estate
Appraisers (or any successor organization thereto),
shall, within forty-five (45) days after the date of
the notice appointing the first appraiser, proceed to
appraise the Facility to determine the Fair Market
Value of the Facility as of the relevant date (giving
effect to the impact, if any, of inflation from the
date of their decision to the relevant date);
provided, however, that if only one appraiser shall
have been so appointed, or if two appraisers shall
have been so appointed but only one such appraiser
shall have made such determination within fifty (50)
days after the making of Capital's or the Owner's
request, then the determination of such appraiser
shall be final and binding upon the parties. If two
appraisers shall have been appointed and shall have
made their determinations within the respective
requisite periods set forth above and if the
difference between the amounts so determined shall not
exceed ten percent(10%) of the lesser of such amounts,
then the Fair Market Value of the Facility shall be an
amount equal to fifty percent (50%) of the sum of the
amounts so determined. If the difference between the
amounts so determined shall exceed ten percent (10%)
of the lesser of such amounts, then such two
appraisers shall have twenty (20) days to appoint a
third appraiser, but if such appraisers fail to do so,
then either party may request the American Arbitration
Association or any successor organization thereto to
appoint an appraiser within twenty (20) days of such
request, and both parties shall be bound by any
appointment so made within such twenty (20) day
period. If no such appraiser shall have been appointed
within such twenty (20) days or within ninety (90)
days of the original request for a determination of
Fair Market Value of the Facility, whichever is
earlier, either the Owner or Capital may apply to any
court having jurisdiction to have such appointment
made by such court. Any appraiser appointed by the
original appraisers, by the American Arbitration
Association or by such court shall be instructed to
determine the Fair Market Value of the Facility within
thirty (30) days after appointment of such Appraiser.
The determination of the appraiser which differs most
in terms of dollar amount from the determinations of
the other two appraisers shall be excluded, and fifty
percent (50%) of the sum of the remaining two
determinations shall be final and binding upon the
Owner and Capital as the Fair Market Value of the
Facility.
4. This provision for determination by appraisal shall
be specifically enforceable to the extent such remedy
is available under applicable law, and any
determination hereunder shall be final and binding
upon the parties except as otherwise provided by
applicable law.
The Owner and Capital shall each pay the fees and
expenses of the appraiser appointed by it and each
shall pay one-half of the fees and expenses of the
third appraiser and one-half of all other cost and
expenses incurred in connection with each appraisal.
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5. Capital shall agree to enter into a Subordination
Agreement on reasonable terms and conditions with any
lender from whom Owner obtains a loan secured by the
Facility.
6. For purposes of this Paragraph II, M., except as
otherwise expressly provided in this Agreement, the
terms defined in this Paragraph II, M. shall have
the following meanings assigned to them:
Fair Market Value: The fair market value of the
Facility, including all capital additions, and including the
land and all other portions of the Facility, and (a) determined
in accordance with the appraisal procedures set forth in
Paragraphs II, M. 2 and 3 or in such other manner as shall be
mutually acceptable to Owner and Capital (including, without
limitations as a negotiated percentage of total project costs)
and (b) not taking into account any reduction in value
resulting from any lien to which the Facility, the Owner and
Capital is otherwise required to remove of the transaction.
However, the positive or negative effect on the value of the
Facility attributable to the interest rate, amortization
schedule, maturity date, prepayment provisions and other terms
and conditions of any lien on the Facility which is not so
required or agreed to be removed shall be taken into account in
determining the Fair Market Value of the Facility. The Fair
Market Value shall be determined as the overall value based on
due consideration of the "income" approach, the "comparable
sales" approach, and the "replacement cost" approach.
Legal Requirements: Collectively, all statutes,
ordinances, by-laws, codes, rules, regulations, restrictions,
orders, judgments, decrees and injunctions (including,
without limitation, all applicable building, environmental,
health code, zoning, subdivision, and other land use and
health-care licensing statutes, ordinances, by-laws, codes,
rules and regulations), whether now or hereafter enacted,
promulgated or issued by any governmental authority or
accreditation body.
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
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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 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 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 Agreementfor 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.
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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.
d. At any time after the Initial Term, with or
without cause.
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,
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.
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.
C. 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.
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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.
1. 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 Five Thousand Dollars ($5,000.00)
("Monthly Management Fee"). "Gross Revenues" shall
be defined as gross monthly revenues from the
operation of the Facility. 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 depositions 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; (iv)
capital contributions made by any partner of Owner;
(v) loans by Owner; and (vi) proceeds from capital,
financing and any other transactions not in the
ordinary course of operation of such Facility. 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.
2. In addition to the Monthly Management Fee stated
above, Owner shall also pay Capital a marketing
lease-up fee of $500.00 for each unit leased at the
time the unit is initially occupied.
B. CERTAIN EXPENSES. In accordance with the Annual Budgets, the
Facility will reimburse Capital for the cost of reasonable
transportation, lodging and meal expenses for
non-Facility-based employees of Capital or its outside
consultants when traveling in connection with the performance
of the services being performed pursuant to this Agreement,
together with any reasonable long distance telephone expenses,
copying, mailing or
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express shipments and other miscellaneous out of pocket
expenses that relate to the marketing and management of the
Facility. Relocation, education, professional memberships and
licensing expenses of the Facility-based administrative
employees shall also be an expense of the Facility subject to
Owner's prior approval.
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. PROPERTY OF CAPITAL. Trade names, including the name "The
Waterford" architectural and design concepts and plans, ideas
and documents, forms, occupancy development material,
specifically for and related to Owner and/or its Facility shall
be the exclusive property of Owner. Trade names, ideas and
documents, forms and occupancy development material, not
directly related to the Facility and supplied by Capital are to
be considered proprietary and will remain the property of
Capital. Either party may only use such materials which are
the property of the other and information in the operation and
management of the Facility, and may not use such materials or
information after termination of this Agreement for the
development or expansion of the Facility or for new projects
for itself or others without the written consent of the party
owning such material or information.
C. 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.
D. 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.
E. 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.
F. BINDING EFFECT. This Agreement shall be binding upon and
shall inure to the benefit of the parties hereto, their
successors and assigns.
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G. 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.
H. GOVERNING LAW. This Agreement, its interpretation, validity
and performance shall be governed by the laws of the State of
Texas.
I. 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 person who was
a Capital employee assigned to the administrative staff of the
Facility at any time during the last twelve (12) months of the
term of this Agreement. This section shall not apply to Owner
upon sale of the Facility or termination of the Agreement by
Owner for cause.
J. 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.
K. 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.
L. 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
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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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CAPITAL SENIOR LIVING, INC.
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By: By:
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Title: Title:
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