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EXHIBIT 10.25
MANAGEMENT AGREEMENT
THIS MANAGEMENT AGREEMENT (the "Agreement") effective the 1st day of
April, 1997 by and between XXXXXXX RETIREMENT SERVICES, INC., ("Xxxxxxx"), a
non-profit corporation organized under the laws of the state of Texas, and
CAPITAL SENIOR MANAGEMENT 1, INC., (Capital), a for-profit corporation
organized under the laws of the state of Texas.
PREAMBLE
XXXXXXX by this Agreement is engaging Capital to provide management
services relating to the operation of Xxxxxxx Baptist Haven, a senior living
community located in Houston, Texas ("the Facility").
Capital and Xxxxxxx share a commitment to make the retirement years of
residents as meaningful and comfortable as possible. Both share the philosophy
that the retirement environment should allow for and encourage contained
personal growth and independent living for the elderly, and when independent
living is no longer possible, then the same retirement environment should have
the flexibility to provide quality health care in the midst of a high degree of
understanding, compassion and companionship enhanced by and based upon the
prior years of residence in the same community.
This Agreement is founded on the following assumptions:
Xxxxxxx 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 Xxxxxxx.
c. Annually review and approve the budget.
d. Annually review the policies and goals which have
been established.
e. Provide Christian social service ministry from the
Facility that is resident and community- based.
Capital assumes primary responsibility to:
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a. Implement the policies established by Xxxxxxx.
b. Supervise the day-to-day management of the Facility,
including all resident activities.
c. Provide to Xxxxxxx full, timely and accurate
information as to past operations.
d. Provide to Xxxxxxx projections and recommendations
relating to the future operations of the Facility.
The parties therefore agree as follows:
I. RESPONSIBILITIES OF CAPITAL
A. RECOMMENDED POLICIES. Capital shall recommend policies and
goals to be established by Xxxxxxx 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 and policies established by
Xxxxxxx.
C. MARKETING DUTIES. Capital shall manage and supervise the
marketing program. Capital shall periodically review the
residency agreement and recommend changes thereto as and if
required.
D. EMPLOYEES. All Facility-based Employees, including the
administrative employees, shall be employees of Capital with
the exception of Xxxxxxx ministry-based employees. 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 treated as an expense of
Capital to be reimbursed from the cash flow provided by the
Facility operations if sufficient to reimburse such expenses;
if said cash flow is not sufficient, such expenses shall be
reimbursed by Xxxxxxx.
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E. OPERATING PROCEDURES. Capital shall develop, install and
maintain operating procedures, systems and controls.
F. FACILITY EXPANSION. Capital shall make recommendations
regarding construction, remodeling or expansion of the
Facility.
G. BUDGETS. Capital shall prepare 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.
I. MONTHLY FINANCIAL STATEMENTS. Capital shall provide to
Xxxxxxx, on a monthly basis, financial statements and related
financial reports.
J. MARKETING REPORTS. Capital shall, on a weekly and monthly
basis, provide sales and occupancy reports to Xxxxxxx, as well
as the results of the annual resident satisfaction survey.
K. LEGAL COUNSEL. Capital, at Facility expense, shall coordinate
with Xxxxxxx 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 Xxxxxxx,
deposit all such funds in a residential depository account at
a FDIC insured bank approved by Xxxxxxx. The style of the
account shall be in the name of the Facility with designated
representatives from Xxxxxxx 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 Xxxxxxx. The style of the account
shall be in the name of the Facility with designated
representatives from Xxxxxxx and Capital being the only
parties authorized to draw from said account. Capital shall
pay out of such Operating Expense Account all operating
expenses (including Capital's Management Fee and any other
sums due to Capital from Xxxxxxx), 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 Xxxxxxx may direct. These funds shall
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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
Xxxxxxx, 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,
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. XXXXXXX'X RESPONSIBILITIES
A. POLICIES. Xxxxxxx shall establish the policies for the
Facility.
B. GOALS. Xxxxxxx shall establish the short range and long range
goals of the Facility.
C. BUDGETS. Xxxxxxx shall review and approve budgets for the
operation of the Facility.
D. CAPITAL'S PERFORMANCE. Xxxxxxx shall review and evaluate the
performance of Capital in carrying out the policies for the
Facility.
E. LEGAL COUNSEL. Xxxxxxx shall obtain legal counsel to perform
all necessary legal services relating to Xxxxxxx'x ownership
of the Facility.
F. AUDITS. Xxxxxxx, 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 Xxxxxxx'x
representatives. All labor and expense associated with such
review shall be borne by Xxxxxxx.
G. DIRECTIVES. In order to assure proper coordination, Xxxxxxx
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,
Xxxxxxx shall, within fourteen (14) days of issuance, furnish
to Capital copies of
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any and all Facility-related reports, including the annual
audit (if any) as well as copies of the minutes of all local
advisory Board meetings, other than items relating to the
performance of Capital.
I. ADVISORY BOARD MEETINGS. If applicable, during the term of
this Agreement, a representative of Capital shall be a member
of the local advisory board and attend any regular or special
meeting of the local advisory Board other than any part
thereof involving evaluation of the performance of Capital
under this Agreement. Xxxxxxx shall give Capital the same
notice of local advisory Board meetings as is required to be
given to Board members.
J. CHANGE OF RESIDENCY AGREEMENT. Xxxxxxx 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.
K. DECISIONS. Xxxxxxx shall examine documents submitted by
Capital and render decisions pertaining thereto promptly to
avoid unreasonable delay.
L. UNIFORM ACCOUNTS. Facility shall use the uniform chart of
accounts recommended by Capital.
M. FURNISHING INFORMATION. Xxxxxxx agrees at its expense to
install and maintain a computer terminal compatible with the
mainframe computer currently in use by Capital and to transmit
data to the Capital mainframe computer via telephone lines.
III. INSURANCE.
A. Capital shall maintain, in full force and effect, at the
Facility's expense, the following insurance protecting Xxxxxxx
and Capital and their officers and employees:
1. Employee's fidelity insurance
2. Worker's 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.
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Such policy or policies shall be written by a responsible
insurance company or companies satisfactory to Xxxxxxx and in
kind and amounts satisfactory to Xxxxxxx. Certificates of
insurance showing compliance with the foregoing requirements
shall be furnished by Capital to Xxxxxxx. Certificates shall
state that the policy or policies will not be canceled or
altered without at least 30 days prior written notice to
Xxxxxxx.
X. Xxxxxxx shall procure and maintain, in full force and effect,
at Xxxxxxx'x expense the following insurance protecting
Xxxxxxx 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 Xxxxxxx
or Capital 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 Xxxxxxx to Capital. Certificates shall
state that the policy or policies will not be canceled or
altered without at least 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 and
continue for a period of five (5) years, except that either
party may terminate this Agreement on thirty days notice after
the earlier of the move-out of the final resident from the
Facility, or after the Fixed Term (as hereinafter defined) by
giving ninety (90) days written notice to the other party. The
Fixed Term shall be thirty-six (36) months, except that if tax
exempt financing is not utilized or if the U.S. Treasury
Department liberalizes its current published advance ruling
guidelines (Rev. Proc. 82-14, 1982-1 C.B. 459) to extend the
period in which a management contract may be non-terminable
without adversely affecting the tax-exempt status of bonds
issued to finance the Facility to which the management
contract relates, and if, in the opinion of bond counsel, such
Treasury action applies to the bonds issued to finance the
Facility, then the Fixed Term shall be the maximum period
allowed for advance ruling purposes, but not more than five
(5) years. If Xxxxxxx terminates the Agreement prior to the
expiration of the Fixed Term for any reason other than the
move out of the final
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resident as listed above, or if Capital terminates this
Agreement during the Fixed 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 Fixed 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.
B. TERMINATION FOR CAUSE.
1. This Agreement may be terminated by Xxxxxxx 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
Xxxxxxx and such failure is the result of
Capital's willful misconduct, gross
negligence or unlawful act.
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 or (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. In the event of a change of controlling
ownership interest in Capital or Capital
Senior Living, Inc. Controlling ownership
shall be defined as a change of greater than
50% from the present 100% ownership of Xxxxx
X. Xxxxxx and Xxxxxxx X. Xxxx and affiliates
of which they control. Notwithstanding the
above, in the event that a public offering of
the stock of Capital or Capital Senior
Living, Inc, the controlling ownership shall
be defined as a change of greater than an
aggregate 30% ownership of Xxxxx X. Xxxxxx
and Xxxxxxx X. Xxxx and affiliates of which
they control, as well as ownership of current
management of Capital or Capital Senior
Living, Inc.
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2. This Agreement may be terminated 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 Xxxxxxx; however, this
Agreement shall not be so terminated if Xxxxxxx 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 Capital to
indemnification relating to events occurring during the term
of this Agreement under Article VI. L. and to protection of
its property rights under Article VI.B.
V. COMPENSATION
A. OPERATIONS MANAGEMENT FEES. Xxxxxxx shall pay to Capital a
fee in the amount set forth below, payable on the fifteenth
day of each month commencing with the second month this
Agreement is executed and ending on the last day of the month
after which this Agreement is terminated:
1. The amount to be paid monthly shall be the greater of
$5,000.00 per month or 5% of Gross Revenues generated
during the immediately preceding month. "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 Xxxxxxx as a result of any insured loss
(except proceeds for rent loss insurance); (iv)
capital contributions made by any partner of Xxxxxxx;
(v) loans by Xxxxxxx; 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
Xxxxxxx and Capital that if the
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Gross Revenues of the Facility are insufficient to
pay all disbursements, including the Monthly
Management Fee or any portion thereof, then Xxxxxxx
shall remain responsible for such disbursements. It
is further agreed between Xxxxxxx and Capital that in
no event will any disbursement be made to Xxxxxxx
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. 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 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.
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 or was not required to
be insured against. 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 "Xxxxxxx
Baptist Haven," ideas and documents, forms, occupancy
development material, specifically for and related to Xxxxxxx
Baptist Haven shall be the property of Xxxxxxx. 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. Xxxxxxx may use such materials which are the
property of Capital and information in the operation and
management of the Facility, as may be recommended by Capital,
but 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 Capital.
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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 Xxxxxxx with respect to the Facility or otherwise.
D. ADDITIONAL ACTION. In order to carry out the intent and
spirit of this Agreement, Xxxxxxx 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 Xxxxxxx. 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.
G. ASSIGNMENT, ETC. Capital shall not, without Xxxxxxx'x 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. NO PERSONAL LIABILITY. This Agreement has been executed on
behalf of Xxxxxxx and Capital by their respective officers
solely in their representative capacities and no officer,
director, agent, employee or attorney of Xxxxxxx or Capital
shall have any personal liability hereunder to any person.
J. NON-COMPETE. Without the prior written consent of Capital,
for a period of three years following termination of this
Agreement, Xxxxxxx will not employ or engage any person who
was a Capital employee hired by Capital on or after the
effective date of this Agreement and who was not previously an
employee of Xxxxxxx. Additionally, Capital will not operate,
manage or develop any facilities within a 5 mile radius of the
Facility except for any facility owned by Xxxxxxx.
K. 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.
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L. INDEMNIFICATION. Xxxxxxx will indemnify and hold harmless
Capital from any and all liability arising incident to
Xxxxxxx'x performance of its duties under this Agreement.
Capital will indemnify and hold harmless Xxxxxxx from any and
all liabilities arising incident to Capital's performance of
its duties under this Agreement.
X. Xxxxxxx 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 Xxxxxxx of
Capital's knowledge of any such noncompliance.
N. 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, except that the
selection of the Arbitrator shall be done pursuant to this
Paragraph and the proceeding shall be governed solely by the
Selected Arbitrator. 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 selection 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.
XXXXXXX RETIREMENT SERVICES, INC. CAPITAL SENIOR MANAGEMENT 1, INC.
By: /s/ XXXXXXX X. XXXX By: /s/ XXXXX X. XXXXXXXX
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Title: President/CEO Title: V.P.
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