Exhibit 10.03
MANAGEMENT AGREEMENT - THE INN AT THE AMETHYST
This Management Agreement (the "Agreement") dated as of the 16th day of
March, 1998, is by and between CAREMATRIX OF THE INN AT THE AMETHYST, INC., a
Delaware corporation with an address of 000 Xxxxx Xxxxxx, Xxxxxxx, Xxxxxxxxxxxxx
00000 (the "Lessee"), and NETWEST DEVELOPMENT CORPORATION, an Arizona
corporation, with an address of 0000 Xxxx Xxxxxxxx Xxxxxxxxx, Xxxxx 000, Xxxxxx,
Xxxxxxx 00000 (the "Manager").
WHEREAS, pursuant to that certain Facility Lease Agreement of even date
herewith, by and between Desert Amethyst Phase II Limited Partnership, an
Arizona limited partnership, as lessor (the "Owner"), and the Lessee, as lessee
(the "Lease"), the Lessee has leased a retirement, independent living and
assisted living facility located in Peoria, Arizona, which is comprised of
eighty-one (81) units and is known as the "The Inn at the Amethyst Assisted
Living Community" (the "Facility");
WHEREAS, the Lessee has determined that the hiring of a management
company to provide day-to-day management of the Facility is necessary for the
efficient operation of the Facility;
WHEREAS, the Manager has represented that it is experienced in the
management of assisted living, independent living and other senior housing
facilities which promote clean, safe and secure living environments for its
residents, and, is knowledgeable as to the state and federal requirements
governing the licensure, operation and accreditation of such facilities and that
the employees of the Manager rendering health care services are qualified health
care professionals or are rendering such services under the direction of
qualified health care professionals;
WHEREAS, the Manager has represented that the officers, directors and
employees of the Manager are qualified to render high quality care and services
to its residents,
WHEREAS, based upon the Manager's representations set forth herein, the
Lessee has determined that the hiring of the Manager is cost-effective and
consistent with the Lessee's desire to provide high quality care and services to
the residents at the Facility at the lowest reasonable cost;
WHEREAS, the Lessee has determined that the hiring of the Manager on
the terms and conditions hereinafter set forth will not prevent it from
exercising ultimate control over the policies and operations of the Facility;
and
WHEREAS, the Manager is willing to manage the day-to-day operations of
the Facility on the terms and conditions hereinafter set forth.
NOW, THEREFORE, the parties hereto agree as follows:
1. General Duties. The Lessee engages the Manager to manage, supervise
and operate the Facility with the objective of providing quality care and
assisted and independent living services to the residents of the Facility and to
carry out the general duties relating to the day-to-day operation of the
Facility under the general supervision and direction of the Lessee which duties
include, but are not limited to, the following:
Supervise the performance of all such administrative functions as may
be necessary in connection with the management of the Facility; select,
hire (or contract with), train, supervise, monitor the performance of,
and discipline, promote or terminate (subject to the rights of the
Lessee under Paragraph 2.1 of this Agreement to approve the hiring,
disciplining and termination of the Administrator and all other
Department Heads) all personnel involved in the administration, and the
day-to-day operation of the Facility, including, without limitation,
management, resident assistants, and other health care personnel,
custodial, food service, cleaning, maintenance and other operational
personnel, and secretarial or bookkeeping personnel, each of whom shall
be employees of the Manager; provide centralized accounting, billing,
purchasing and xxxx payment functions for the Facility; establish
systems of accounts and supervise the maintenance of ledgers and other
primary accounting records by the personnel of the Facility; supervise
the financial affairs of the Facility, establish and supervise the
implementation of operating and capital budgets, including those
required to establish reimbursement rates with respect to state or
federal entitlement programs as well as self pay rates, if any; the
preparation and maintenance of true, complete and accurate records
necessary for the preparation of such operating budgets; determine
which items of cost and expense properly relate to resident care;
establish and administer financial controls over the operation of the
Facility; develop and establish financial standards and norms by which
the income, costs and operations of the Facility may be evaluated;
serve as advisor and consultant in connection with policy decisions to
be made by the Lessee; furnish such reports to the Lessee as the Lessee
may reasonably request and/or as the Lessee or the Owner may be
required to provide to any Lender (as hereinafter defined) under any
Loan Documents (as hereinafter defined), and provide the Lessee with
economic and statistical data in connection with or relative to the
operations of the Facility; represent the Facility in its day-to-day
dealings with regulatory and ratesetting authorities. The Manager shall
provide the Lessee with rate setting and cost reporting information
prior to submission (including preparation and submission of reports
for reimbursement), creditors, residents, personnel, agents for
collection and insurers; act as agent for the Lessee in disbursing or
collecting the funds of the facility, in paying the debts and
fulfilling the obligations of the Facility; coordinate and supervise a
marketing plan for the Facility to insure that the Facility obtains
full occupancy as soon as possible, and after the Facility has achieved
full occupancy to assist in the development of an annual marketing plan
and budget to maintain the resident census at a proper level; to do all
other things necessary or proper in connection with the daily operation
and management of the Facility,
2
including, without limitation, everything necessary to ensure
compliance with the Public Health Code of the State of Arizona and with
any other local, state or federal requirements governing or applicable
to retirement, independent living and/or assisted living facilities;
and, under the general supervision of the Lessee, to plan for future
operations and to establish long range policies and goals for the
Facility; the Manager will, at a minimum, meet on a monthly basis with
Lessee's representatives and the Administrator to review financial and
operational statistics of the Facility; the Administrator, in addition,
will attend monthly administration meetings and educational programs.
Without limiting the foregoing, the Manager further agrees that it
will:
(a) perform its duties and responsibilities hereunder, in
compliance with all applicable legal requirements;
(b) supervise and direct the management and operation of
the Facility as a retirement, independent living and
assisted living facility, exercising the highest
degree of care used by an experienced management
company, given the financial resources available to
the Facility, the location of the Facility, the
restrictions of applicable legal requirements and all
other relevant circumstances pertaining the Facility;
(c) perform its duties and responsibilities hereunder in
accordance with, and take such actions as are
necessary in order to enable the Owner to maintain
its compliance with, the conditions, covenants and
requirements set forth under any Loan Documents
relating to the management and/or operation of the
Facility [and, without limiting the provisions of
Section 19, the Manager acknowledges that in the
event of any conflict between the provisions hereof
and the provisions of any Loan Documents or the HUD
Regulatory Agreement (as defined under the Lease)
pertaining to the management and/or operation of the
Facility, the provisions of the Loan Documents or the
HUD Regulatory Agreement, as applicable, shall
control]; and
(d) consult with the Lessee and keep the Lessee advised
as to all major policy and business matters relating
to the Facility.
As used herein, the term "Loan Documents" shall mean all documents,
instruments and agreements now or hereafter executed by the Owner evidencing
and/or securing any loan secured by a mortgage, deed of trust or other lien
encumbering the Facility.
As used herein, the term "Lender" shall mean any party that holds the
lender's interest (or any portion thereof) under any Loan Documents.
3
1.1 Opinion of Counsel. The Manager shall have the duty to
consult with counsel for the Lessee whenever questions arise as to the
meaning and interpretations of the phrase "relating to resident care"
as such phrase is used above with reference to the submission of
expenses for reimbursement pursuant to applicable state or federal
statutes or regulations relating to entitlement programs. The Manager
shall be entitled to rely upon any such opinion when rendered by
counsel.
2. Specific Duties. Without limiting the generality of the foregoing,
the Manager shall have the following specific duties.
2.1 Employees. The Manager shall recruit, evaluate, select,
and hire a qualified and properly licensed Administrator who shall be
responsible for the functional operation and management of the Facility
and the supervision of the Facility personnel, on a day-to-day basis,
as well as all on-site medical, resident assistance, custodial, food
service, cleaning, maintenance, secretarial and bookkeeping personnel
for the day-to-day operations of the Facility. All such personnel shall
be employees of the Manager, and the Manager shall retain full
responsibility for payment of their wages, salaries and other
compensation and benefits from the Gross Revenues (as hereinafter
defined) of the Facility. The Manager shall, subject to approval by the
Lessee, establish necessary and desirable personnel policies and
procedures, wage structures and staff schedules for Facility personnel.
The Manager shall have the authority to hire, discipline, promote and
discharge employees of the Lessee who participate in the day-to-day
operation and administration of the Facility; provided, however that
both the Manager and the Lessee must approve the hiring and/or firing
of the Administrator and the Department Heads. Such approval shall not
be unreasonably withheld. With respect to all Facility employees, the
Manager shall maintain payroll records and shall prepare bi-weekly or
semi-monthly payrolls, withholding taxes and Social Security taxes,
shall prepare and submit all required State and Federal Tax or Benefit
returns required with respect to such employees, including, without
limitation, the returns required by FICA, FUTA and all applicable
unemployment compensation laws; shall maintain in force all levels of
workers' compensation insurances required under applicable law; and
shall prepare and submit to the Lessee any certificates of payroll
expenses as may be reasonably requested by the Lessee.
The Manager shall provide the Lessee with monthly reports of
all hiring, disciplinary actions, promotions and firings at the
Facility for the month, and any other reports or materials reasonably
requested by the Lessee.
2.2 Purchasing. The Manager shall purchase for the account of
the Lessee all necessary foodstuffs, supplies, materials, appliances,
tools and equipment necessary in the operation of the Facility. The
Manager shall arrange contracts for electricity, gas, telephone, cable
television and any other utility or service necessary to the operation
of the Facility. The Manager shall, on behalf of the Lessee, contract
4
for and supervise the making of any necessary repairs, alterations, and
improvements to the Facility; provided, however, that in the case of
any capital expenditure, alteration or improvement, the cost of which
exceeds FIVE THOUSAND DOLLARS ($5,000), the Manager shall obtain the
prior written approval of the Lessee; and provided, further, that no
such prior written approval shall be required if the expenditure is
made under circumstances requiring emergency action so long as the
Manager attempts to notify the Lessee on a concurrent basis. The
Manager shall prepare and submit to the Lessee any certificates of
purchasing expenses incurred for the Facility as may be reasonable
requested by the Lessee or required under any Loan Documents or the
Lease.
2.3 Collection of Accounts. The Manager shall prepare and
submit bills and collect for the account of the Lessee any and all
moneys owing to the Lessee, including, but not general to sums due from
residents.
2.4 Bookkeeping. The Manager shall establish and maintain a
record and bookkeeping system for the operation and conduct of business
at the Facility in accordance with generally accepted accounting
principles consistently applied. Books and records at the Facility
shall be maintained by an employee of the Manager. Full books of
account with entries of all receipts and expenditures related to the
operation of the Facility shall be maintained at the offices of the
Manager and shall be open for inspection by representatives of the
Lessee during normal business hours. The Manager shall be responsible
for filing all local, state and federal tax returns relating to the
operation of the Facility, with the exception of income tax returns,
and shall be responsible for penalties, interest, and audit costs
arising out of late, inaccurate, or incomplete filings, or the
Manager's failure to file such tax returns (provided, however, that the
Lessee makes available sufficient funds for payment of any taxes due
and has approved and executed any necessary returns in a timely
fashion).
2.5 Financial Reports. The Manager shall furnish to the Lessee
the following financial reports:
(a) as soon as possible and not later than thirty-five
(35) days after the close of each calendar month, a
balance sheet as of the end of the month and a
statement of income and retained earnings for the
month and for the year to date together (with a
comparison to the budget) with detailed statement of
receipts, disbursements, accounts payable and
accounts receivable as of the end of such monthly
period (with a comparison to the budget), provided,
however, that the computer services or any other
charges connected with the preparation of such
information shall not be an expense of the Lessee;
(b) as soon as possible and not later than forty-five
(45) days after the close of each fiscal year, a
year-end compilation report including a
5
balance sheet as of the end of such year and a
statement of income and retained earnings;
(c) as soon as possible after the close of the year for
rate-setting purposes and not later than the
applicable deadline, a year-end cost report showing
cost and expenditures relating to resident care, such
report in all respects, being in compliance with the
requirements of any entity or authority to whom the
Lessee may be obligated to furnish reports all in a
form suitable for submission to the party;
(d) as soon as possible after the end of each quarter
commencing with the first quarter for which a
calculation is required to be made pursuant to any
agreement by and between the Lessee and any lender,
such unaudited financial statements, rate covenant,
calculation or other indication of compliance as may
be required under any Loan Documents; and
(e) such other and further reports or calculations as may
be required under any Loan Documents or the Lease in
accordance with the deadlines set forth therein.
2.6 Residents. The Manager shall use its best efforts to
maintain the resident census at the Facility in such numbers and in
such a manner as in the Manager's judgment, will tend to maintain the
financial stability of the Facility and, without limiting any of the
other provisions set forth herein, will comply with the operational
conditions, covenants and requirements relating to the Facility set
forth in any Loan Documents or the Lease.
2.7 Budgets. The Manager shall prepare and submit to the
Lessee the following: (a) as soon as possible and not later than thirty
(30) days before the close of each fiscal year, or on such earlier date
as may be required under any Loan Documents or the Lease, a detailed
written capital and operating budget for the next succeeding fiscal
year (broken down by month) showing projected ordinary and
extraordinary expenditures and projected revenues for such budget
period; and (b) such other budgets as may be reasonably required under
any of the Loan Documents or the Lease or by any governmental authority
having jurisdiction over the Facility.
2.8 Certification, Licenses and Accreditation. The Manager
shall prepare all reports and materials and follow all procedures
necessary to obtain and/or maintain all federal and state certificates,
licenses and accreditation necessary to maintain the Facility as a
retirement, independent living and assisted living facility.
2.9 Liaison with Agencies. To the extent desired by the
Lessee, the Manager shall represent the Lessee in all formal or
informal proceedings before all
6
state and federal agencies engaged in the regulation, payment,
rate-setting, and/or licensing of retirement, independent living and
assisted living facilities. The Lessee reserves the right to approve
all settlements prior to their finalization.
2.10 Insurance. The Manager shall obtain and maintain at the
Lessee's expense and on behalf of the Lessee and with the Lessee's
prior written approval, all necessary liability, fire and extended
coverage workers' compensation, business interruption (to the extent
required under any Loan Documents) and malpractice insurance covering
the Facility, its equipment, and the employees of the Manager employed
at the Facility; which policies of insurance shall name the Lessee and
the Manager as coinsured and shall name the Owner and any Lender as an
additional insureds. Such insurance, in kinds and amounts acceptable to
the Lessee, the Owner, the Department (as defined under the Lease)
under the HUD Financing Documents (as defined under the Lease) and any
Lender in accordance with the terms of any Loan Documents, shall be
written by a responsible insurance company or companies satisfactory to
the Lessee, the Owner, the Department and any Lender and, upon any
request of the Lessee, made from time to time, a certificate of
insurance shall be provided to the Lessee, the Owner, the Department
and any Lender. The Lessee shall retain the right to designate any
insurance agent or agency of its choice through which such insurance
shall be obtained. The insurer shall agree to notify the Lessee in
writing in advance of any intended cancellation of such insurance
policies. With limiting any other provisions set forth herein, the
Manager acknowledges and agrees that all such insurance obtained and
maintained hereunder must satisfy the applicable conditions and
requirements set forth under any Loan Documents and under the Lease.
2.11 Technical and Professional Services. The Manager may,
with the prior written approval of the Lessee and at the Lessee's
expense, secure such engineering, legal, and other specialized
technical and professional services as may be necessary to advise or to
represent the Lessee in connection with any matter involving or arising
out of the Lessee's use and/or operation of the Facility and/or the
conduct of the affairs of the Facility.
2.12 Marketing. The Manager will maintain, develop and/or
coordinate advertising and promotional materials, internal and external
public relations programs, sales and staff development programs, and
customer satisfaction programs for the Facility. The Manager shall
develop a yearly marketing plan and budget based on the Facility's
yearly census program and image.
2.13 Administrative. The Manager shall:
(i) establish, implement and supervise procedures to
provide staff review of all operational areas. The status of
such reviews shall be discussed and/or addressed in regularly
scheduled quarterly meetings and at other
7
meetings as may be necessary or desirable with the Lessee and
the Administrator; and
(ii) provide on-going review and monitoring of all
obligations of the Facility to regulatory agencies with
respect to inspections and compliance requirements for
licensing of the Facility (which status shall be reviewed in
regularly scheduled quarterly meetings and at other meeting as
may be necessary or desirable with the Lessee).
2.14 Plant and Maintenance. The Manager shall:
(i) in consultation with the Lessee, address all
reasonable and customary maintenance items (it being
understood that any such items may be provided by outside
parties if economically feasible), and to the extent
reasonably deemed feasible by the Manager, the services or
regular maintenance employees shall be used; and
(ii) contract with qualified independent contractors
for the maintenance and repair of air-conditioning systems and
laundry equipment and for extraordinary repairs beyond the
capability of regular maintenance employees.
2.15 Lease Obligations and Obligations under the HUD Financing
Documents. The Manager acknowledges that it has received a copy of the
Lease and the HUD Financing Documents and is familiar with the terms
thereof. Notwithstanding any other provision of this Agreement, the
Manager agrees that in the event the Manager's obligations hereunder
conflict or are inconsistent with the obligations of Lessee under the
Lease or any of the obligations under the HUD Financing Documents, the
obligations of the Manager herein shall be automatically modified
without any action on the part of the parties hereto so as to comply
with all such conflicting or inconsistent terms of the Lease and the
HUD Financing Documents.
3. Management Fee. The Manager shall be paid for the services rendered
by it hereunder a management fee equal to four and 75/100 percent (4.75%) of the
Gross Revenues resulting from the operation of the Facility (the "Management
Fee") payable in equal monthly installments, in arrears. The Management Fee
shall be due on or before the fifteenth day of each month following the month in
which services were rendered. Unpaid Management Fees shall bear interest from
the due date therefor at the rate of ten percent (10%) per annum. The term
"Gross Revenues" shall be defined to mean all of the gross collectible rental
receipts from residents of the Facility plus ancillary revenues less bad debt.
The Management Fee shall be automatically subordinate to the payment of rent
under the Lease and the Manager hereby agrees to execute and deliver any and all
documents, agreements, and instruments requested by the Owner to further
evidence such subordination.
8
4. Expenses.
4.1 Lessee Expenses. Except as herein expressly otherwise
provided, the Lessee shall bear all the expenses of operating the
Facility not assumed by the Manager and, without limiting the
generality of the foregoing, it is specifically agreed that the
following expenses of the Facility shall not be borne by the Manager:
(a) Fees and expenses of any independent professional
expressly retained by the Lessee, or retained by the
Manager for the account of the Lessee with the prior
written permission of the Lessee, for any purpose.
(b) Interest and discounts on indebtedness incurred or
assumed by the Lessee.
(c) Taxes, imposts, levies or other charges on the
existence, operation, receipts, income or property of
the Lessee; provided, however, that all interest and
penalties incurred as a result of the Manager's
failure to timely file all returns which the Manager
is required to file pursuant to this Agreement, or to
make timely payment of all taxes, levies, imposts, or
other charges, to the extent that sufficient funds
were available to the Manager as of the date such
payments were due and to the extent that the Lessee
had timely approved and executed any necessary
returns in connection therewith, shall be the
responsibility of the Manager.
(d) Expenses connected directly or indirectly with the
design, acquisition, disposition or ownership of real
and personal property devoted, used, or consumed in
the business of the Facility, including, without
limitation, expenses incurred in connection with
maintenance, repair and improvement of such real and
personal property; all real estate and personal
property tax assessed against such property, premiums
for property and liability insurance on property
leased by the Lessee; brokerage commissions; and fees
and expenses of consultants, managers and agents
retained directly by the Lessee.
(e) The Management Fee.
(f) Legal fees and related expenses pertaining to the
sale, mortgaging or leasing of property, litigation
and proceedings relating to rates and charges at the
Facility, and any other litigation or proceedings to
which the Lessee is a party. Such fees shall not,
however, include those fees resulting from or arising
out of negligence by the Manager.
9
(g) Principal and interest on any loan to the Owner
payable under the Loan Documents (as the same may be
passed through to the Lessee as a rent obligation
under the Lease).
(h) Principal and interest on any loan to the Lessee
relating to the Facility.
(i) Salary and expenses (including, without limitation,
payroll taxes, cost of employee benefit plans,
travel, insurance and fidelity bonds) of the
employees of the Manager employed at the Facility.
In the event there are insufficient funds available to the
Manager to pay expenses which the Manager is authorized to incur and
pay hereunder, including without limitation, any taxes to be paid on
behalf of the Lessee by the Manager and the Management Fee, the Manager
shall promptly notify the Lessee in writing of the amount necessary to
pay such deficit (and the reason for such deficit) and the Lessee shall
provide such necessary funds to the Manager within ten (10) days after
receipt of such notice.
4.3 Deposit and Disbursement of Funds and Fidelity Bond.
(i) The Manager shall establish and administer the overall
rate structure of the Facility and shall supervise the issuance of
bills and the collection of accounts as the true and lawful
attorney-in-fact for the Lessee. The Manager shall take possession of
and endorse the name of the Lessee on all notes, checks, money orders,
insurance payments, and any other instruments received in payment of
accounts described below.
(ii) The Manager shall establish such accounts for the
Facility in the Manager's name, separate from all other accounts and
funds of the Manager, with a bank or banks whose deposits are insured
by the Federal Deposit Insurance Corporation ("FDIC") or with a savings
and loan institution or institutions whose deposits are insured by the
Federal Savings and Loan Insurance Corporation ("FSLIC") as it deems
necessary or desirable. The Manager on behalf of the Lessee shall use
reasonable efforts to collect (if necessary using legal counsel
approved in writing by the Lessee) when due all charges receivable by
the Lessee (whether from residents, third-party payors or others) in
connection with the operation of the Facility and deposit all monies
received in such accounts. The Manager and the Lessee shall deposit
into such accounts all monies furnished by the Lessee as working funds
and all receipts and monies arising from the operation of the Facility
or otherwise received by the Lessee or by the Manager for and on behalf
of the Lessee.
(iii) Draws on such accounts may be made by the sole signature
of an authorized representative of the Manager (or by wiring
instructions from such authorized representative of the Manager) and
shall be paid to the Manager (or its
10
affiliates) to reimburse the Manager (or its affiliates) for payments
made pursuant to this Agreement by the Manager (or its affiliates) from
its own accounts. The Lessee hereby appoints the Manager for the term
of this Agreement as the Lessee's true and lawful attorney-in-fact to
withdraw, by writing checks against such accounts, funds for
reimbursement of all amounts payable pursuant to this Agreement in
connection with the operation of the Facility. The Manager shall
disburse and pay in the same form such accounts on behalf and in the
name of the Lessee in such amounts and at such times as the same are
deemed by the Manager to be appropriate or required to be made in
connection with, first, payments required by the Lease, and second,
payments of ownership, maintenance and operating expenses of the
Facility and the other costs, expenses and expenditures provided for in
this Agreement (other than the Manager's Management Fee) and third,
payment of the Management Fee provided for in Paragraph 3 hereof.
(iv) The Manager will furnish a fidelity bond which is at
least equal to the gross potential income of the Facility for two (2)
months and is conditioned to protect the Owner, the Lessee, the
Department and any Lender against the misapplication of Facility funds
by the Manager, its employees and representatives and any other
employees of the Facility. The other terms and conditions of the bond
and the surety thereon, will be subject to the approval of the Lessee.
If any of the Manager's principals and/or supervisory staff have access
to funds or accounts of the Lessee or the Facility, the Manager will
pay fidelity bond costs for its principals and supervisory staff. The
bond costs for employees of the Manager employed at the Facility will
be paid by the Manager from the Gross Revenues of the Facility.
5. Duty of the Manager. The Manager shall render the services called
for hereunder in the utmost good faith, and the Manager acknowledges that it is
acting in fiduciary capacity with respect to the Lessee and owes the Lessee the
highest duty of care.
6. Relationship of the Parties. The Lessee and the Manager are not
partners or joint venturers with each other, and nothing herein shall be
construed so as to make them such partners or joint ventures or impose on either
of them any liability as partners or joint venturers. All dealings between the
Lessee and the Manager are at arms length as between non-related parties as
independent contractor and Lessee.
7. Term and Termination.
7.1 Period of the Term. This Agreement shall continue in force
for a period of fifteen years (15) commencing on March 16, 1998 (the
"Commencement Date") and terminating on March 15, 2013 unless earlier
terminated pursuant to Paragraph 7.2. The Lessee shall have the option
to extend the Agreement for three (3) additional five (5) year renewal
terms upon ninety (90) days written notice to the Manager.
11
7.2 Termination for Cause. Except for a failure by the Lessee
to pay the Manager the Management Fee as a result of the subordination
described in Paragraph 3 of this Agreement, either party may terminate
this Agreement for "cause" by delivering thirty (30) days written
notice to the other. "Cause" shall include, but not be general to, each
of the following:
(i) the violation by either party of any material
provision in or obligation imposed by this Agreement
(other than the failure of the Lessee to pay the
Management Fee as a result of the subordination
described in Paragraph 3 of this Agreement) which
violation shall not have been cured to the reasonable
satisfaction of the other party within thirty (30)
days following the date on which written notice of
termination has been received by the party who has
violated a material provision or obligation imposed
by this Agreement;
(ii) any illegal or improper act engaged in by either
party in the operation of the Facility;
(iii) if the other party files or has a petition or
complaint in receivership or bankruptcy filed against
it which has not been dismissed within ninety (90)
days of such filing; or
(iv) if the Lessee is required pursuant to the terms and
conditions of any Loan Documents or the Lease to
retain new management for the Facility.
If this Agreement is terminated for cause, the Lessee shall
pay the Manager any installment(s) of the Management Fee then accrued
under this Agreement together with any reimbursable expenses then due
within fifteen (15) days after such termination, and neither party
shall have any further obligations to the other.
7.3 Termination for Failure to Pay Management Fee on a Timely
Basis. The Manager may terminate this Agreement upon thirty (30) days
written notice of the Lessee's failure to pay the Management Fee when
due unless the Lessee cures the payment default within thirty (30) days
after receiving written notice form the Manager; provided, however, if
such failure to pay the Management Fee on a timely basis is due to a
subordination of the Management Fee as provided in Paragraph 3 of this
Agreement, then the Manager shall only have the right to terminate this
Agreement for failure to be paid on a timely basis upon sixty (60) days
written notice to the Lessee if the Manager has not received the
Management Fee on a timely basis for a period of four (4) consecutive
months.
7.4 Termination Due to Change in Ownership or Control. In the
event that the Lessee assigns its interest in the Lease to any
non-related party or any other
12
permitted transfer described in Section 19.4 of the Lease occurs, the
Lessee shall have the right to terminate the Agreement by giving the
Manager ninety (90) days' prior written notice. Such notice must be
given prior to the consummation of such assignment or other permitted
transfer. Related parties shall include, but not be limited to, family
members, relatives, employees and business partners.
The Manager shall be paid by the Lessee prior to or at the
consummation of such assignment or other permitted transfer for any
services rendered through the termination date and any other
outstanding sums.
7.5 Termination Due to Breach under HUD Financing Documents.
The HUD Secretary (as defined under the Lease) may terminate this Agreement in
the event of (a) any failure by the Manager to comply with the terms of the
Management Certificate or other good cause, thirty (30) days after the
Department and/or HUD Secretary has mailed the Lessee and the Manager a notice
of termination and (b) any default under any of the HUD Financing Documents
(including, without limitation, the HUD Regulatory Agreement), immediately upon
the issuance of a notice of termination to the Lessee and the Manager. If this
Agreement is terminated pursuant to the provisions of this Section 7.5, the
Lessee shall promptly make arrangements satisfactory to the Department and/or
the HUD Secretary for the continuing proper management of the Facility.
8. Covenant Not to Compete. The Manager agrees that it will not
directly or indirectly manage, own or operate a senior housing facility, or
permit any of its subsidiaries to directly or indirectly manage or own a senior
housing facility within a fifteen (15) mile radius of the Facility, without the
prior written consent of the Lessee during the term of this Agreement.
9. Indemnification. The Lessee shall indemnify the Manager and hold it
harmless of, from and against all costs, claims, damages or expenses, including
reasonable attorney's fees (collectively "Cost"), incurred or suffered by the
Manager and arising out of acts performed within the scope of this Agreement.
Notwithstanding the foregoing, the Lessee shall have no obligation to indemnify
the Manager or hold it harmless of, from, and against Costs incurred or suffered
by the Manager as a result of the Manager's fraud, willful misconduct, or
negligence, and for Costs incurred or suffered by the Manager as a result of the
Manger's failure to submit proper reports to the appropriate regulatory
agencies, to keep true, accurate and complete records or to obtain any necessary
opinion of counsel as required by Section 1.1 of this Agreement. The Manager
shall indemnify the Lessee and hold it harmless of, from and against all Costs
incurred or suffered by the Lessee as a result of any of the Manager's fraud,
willful misconduct, or negligence, or as a result of the Manager's failure to
submit proper reports to the appropriate regulatory agencies, to keep true,
accurate and complete records or to obtain any necessary opinion of counsel as
required by Paragraph 1.1 of this Agreement.
13
10. Access to Books and Records. As a subcontractor that may be subject
to Section 1861 (v)(1)(I) of the Social Security Act (the "Act"), the Manager
shall, upon written request, and in accordance with the above-mentioned section
of the Act and regulations promulgated pursuant thereto, make available to the
Comptroller General, the Secretary of Health and Human Services, and their duly
authorized representatives, a copy of this Agreement and access to the Manager's
books, documents, and records necessary to verify the nature and extent of the
costs of services provided to the Lessee. Such access will be available until
the expiration of four (4) years after the services to which the related cost
have been furnished. The provision of this Paragraph 10 shall apply only if this
Agreement is covered by the Act and such provisions shall become void and shall
be of no further force or effect, if, at the time a request is made, this
Agreement is not subject to the Act. The Manager agrees that if it carries out
any of the duties of this Agreement through subcontract with a related
organization which subcontract has a value or cost of $10,000 or more over a
twelve (12) month period, the Manager will obtain an identical access
requirement in such subcontract.
11. Amendments. This Agreement shall not be changed, modified,
terminated or discharged, in whole or in part, except by an instrument in
writing signed by the Lessee and the Manager or their respective successors or
assigns, or otherwise as provided herein. The Manager agrees to make any
reasonable modifications to the Agreement as may be required by any lender. Such
modifications shall be in writing and signed by the Lessee and the Manager.
12. Governing Law. The provisions of this Agreement shall be governed
by, construed, and interpreted in accordance with the laws of the State of
Arizona. Any change in or enactment of any applicable law which has the effect
of rendering any part of this Agreement invalid, illegal, or unenforceable shall
not render the remainder of this Agreement invalid, illegal, or unenforceable,
and the parties hereto agree that, in the event that any part of this Agreement
is rendered in valid, illegal, or unenforceable, they shall negotiate in good
faith to amend any such part of this Agreement so as to comply with any such
law, as amended, and to further the respective objectives of the parties hereto.
13. Assignment. Neither the Lessee nor the Manager shall assign its
interest in this Agreement without the prior written consent of the other.
14. Successors. This Agreement shall be binding upon and inure to the
benefit of the parties and to their respective successors and assigns.
15. Captions. The captions of this Agreement are for convenience and
reference only and in no way define, describe, extend or limit the scope or
intent of this Agreement or the intent of any provision contained in this
Agreement.
16. Notices. Any notice, demand, consent, or other written instrument
required or permitted to be given under this Agreement ("Notice") shall be in
writing signed by the party
14
giving such Notice and shall be hand delivered, sent by telecopier, nationally
recognized overnight carrier or sent, postage prepaid, by Certified or
Registered Mail, Return Requested, to the other party at the addresses listed
below:
As to Lessee: Carematrix of The Inn at the Amethyst, Inc.
000 Xxxxx Xxxxxx
Xxxxxxx, XX 00000
Attn: Xxxxx M, Xxxxx, III, Esq.
General Counsel/Executive Vice President
With a copy to: Xxxxxx, XxXxxxxxx & Fish, LLP
Xxx Xxxxxxxxxxxxx Xxxxx
Xxxxxx, XX 00000-0000
Attn: Xxxxxxxx Xxxxxxx, Esq.
As the Manager: Netwest Development Corporation
0000 Xxxx Xxxxxxxx Xxxxxxxxx
Xxxxx 000
Xxxxxx, XX 00000
Attn: Xxx X. X'Xxxxx, General Counsel
Any party shall have the right to change the place to which such Notice shall be
sent or delivered by similar notice sent in like manner to all other parties
hereto. All Notices sent by certified mail shall be deemed received upon the
earlier of three (3) days after the date postmarked or the date of actual
receipt. All Notices that are hand delivered shall be deemed received upon
delivery to the office or address of the addressee.
17. Property. Trade names, marketing materials, marketing ideas and
development material and records developed specifically for and related to the
Facility shall be the property the Lessee. Trade names, ideas and documents,
forms and development material not developed specifically for the Facility are
to be considered proprietary and will remain the property of the Manager. All
operational forms and documents including but not limited to policy and
procedure manuals, operational forms, level of care determination systems,
management policy books, inspection control manuals, and resident assistant
management books are and will remain the property of the Manager. All financial
management forms, documents and software systems including but not limited to
bookkeeping manuals, financial forms, financial spreadsheets, database or word
processing forms, and financial accounting packages are and will remain the
property of the Manager. Upon the termination of this Agreement, the Lessee
shall have the option to purchase operational material, except for the financial
accounting packages, belonging to the Manager at a mutually agreed upon price.
18. Counterparts. This Agreement may be executed in counterparts, each
of which shall be deemed original.
15
19. Consents. In the event that the Lender's consent is required by the
terms hereof for any purpose whatsoever, it is understood and agreed that (i)
the Lessee's consent shall be subject to the consent of any Lender to the extent
that such consent from any Lender is required under the terms of the applicable
Loan Documents (which consent the Lessee shall seek to obtain), (ii) the
Lessee's consent shall be subject to the consent of the Owner Lender to the
extent that such consent from the Owner is required under the terms of the Lease
(which consent the Lessee shall seek to obtain) and (iii) notwithstanding
anything to the contrary set forth herein, it shall not be deemed unreasonable
for the Lessee to withhold its consent in any given circumstance based upon the
Lessee's inability to obtain any required consent from any Lender or the Owner.
16
IN WITNESS WHEREOF, the parties have executed this Management Agreement
as of the date first set forth above.
WITNESS: LESSEE:
-------- -------
CAREMATRIX OF THE INN AT THE AMETHYST,
INC.
____________________________ By: _________________________________
Name: Name: Xxxxx X. Xxxxx, III, Esq.
Title: Executive Vice President
WITNESS: MANAGER:
-------- --------
NETWEST DEVELOPMENT CORPORATION
____________________________ By: _________________________________
Name: Name: Xxxxxxxxx X. Xxxx
Title: President
17
