Exhibit 10.12
SUBMANAGEMENT AGREEMENT
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This Submanagement Agreement (the "Subagreement") is made as of the 1st day
of July, 1997 by and between KENWOOD CONGREGATE ASSOCIATES LIMITED PARTNERSHIP,
an Illinois limited partnership (the "Owner"), ACTIVE LIFE MANAGEMENT
CORPORATION, an Illinois corporation (the "Agent") and BROOKDALE LIVING
COMMUNITIES OF MINNESOTA-II, INC., a Delaware corporation (the "Manager").
A. The Owner is the owner of certain real estate located at 000 Xxxxxx
Xxxxxx, Xxxxxxxxxxx, Xxxxxxxxx, known as The Kenwood, a 156 unit elderly
apartment building (the "Building"). (The Real Estate and the Building are
collectively referred to herein as the "Property").
B. Owner retained Agent to manage the Property pursuant to a management
agreement dated January 1, 1995 (the "Agreement").
C. The Agent desires to subcontract with Manager for Manager to perform
services on behalf of the Agent as required by the Agreement in connection with
the operation of the Property.
D. Manager desires to be retained as the manager of the Property as
hereinafter set forth.
NOW, THEREFORE, OWNER, AGENT AND MANAGER hereby agree as follows:
1. Hiring. The Agent hereby hires the Manager to exclusively rent and
manage and operate the Property, and Manager hereby accepts such
responsibility subject to the terms and conditions of this
Subagreement.
2. Duties of Manager. As Manager of the Property, Manager shall have the
following duties and responsibilities:
(a) Duties.
(i) Hiring. The Manager shall hire, promote, discharge and
supervise the work of the executive staff (i.e., managers
and department heads) of the Property and supervise
through said executive staff the hiring, promotion,
discharge and work of all other employees performing
services in or about the Property. All such personnel
shall be employees of the Manager. All wages,
compensation, fringe benefits, payroll taxes and related
expenses payable to, or in respect of, the Property's
personnel
shall be expenses of the Property. In the hiring of the
executive staff and other employees of the Property, the
Manager will use or cause said executive staff to use
reasonable care to select qualified, competent and
trustworthy employees. The Manager will negotiate with
any labor union lawfully entitled to represent such
employees. Manager agrees that any employees at the
Property who were employees at the Property prior to the
date of this Agreement and who Manager retains on staff
after the turnover of the Property to Manager shall keep
their original dates of hire at the Property for the
purpose of determining seniority and vacation benefits
under Manager's employment benefits program.
(ii) Licenses and Permits. Manager, in the name and at the
expense of the Owner, shall cause to be applied for, and
use its best efforts to obtain and maintain, all licenses
and permits required of the Owner, the Agent or the
Manager in connection with the management and operation of
the Property. The Owner and Agent agrees to execute and
deliver any and all applications and other documents and
to otherwise cooperate to the fullest extent with the
Manager in applying for and obtaining and maintaining such
licenses and permits.
(iii) Insurance. Subject to availability, the Manager will, on
behalf of the Owner and Agent and at the expense of the
Owner, cause to be placed and kept in force at all times
during the term of this Subagreement, all insurance of the
type and in the amounts required to be maintained by any
mortgagee or Owner and naming as insured specific parties
all as set forth in writing by the Owner or Agent and,
subject to the prior written consent of the Owner, such
other insurance as is normally carried by properties
similar in size, type and location as the Property. All
such insurance shall be effected by policies issued by
companies approved in writing by the Owner. Policies of
insurance and certificates therefor, complying with the
standards as set forth in writing by the Owner or Agent,
shall be obtained by the Manager and delivered to such
parties as directed by the Owner or Agent. The Agent and
the Manager will be named as an additional party insured
on all liability policies, and on all other policies, in
which it is reasonable to name Agent and Manager given the
nature of the Agreement and this Subagreement.
(iv) Books, Records and Reports. During the term of the
Subagreement, the Manager shall cause to be prepared and
submitted to the Owner, the Agent and such other parties
as designated by the Owner or Agent, those books and
reports as set forth on Exhibit A attached hereto (the
foregoing books,
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records and reports, as well as those requested by the
Owner or Agent, as hereinafter provided, are collectively
referred to as the "Reporting Documents"). In addition
thereto, the Manager shall furnish, at the Owner's
expense, such additional Reporting Documents as required
from time to time by the Owner or Agent pursuant to a
written request to the Manager. All such Reporting
Documents shall be furnished within the time limits set
forth on Exhibit A or as set forth in writing by the Owner
or Agent and shall be compiled and prepared in accordance
with the directions of the Owner or Agent and general
accounting standards utilized in the residential housing
industry generally applicable to the Property. Nothing
contained herein shall require the Manager to prepare any
statements or reports that deal with the Owner or the
Agent as an individual entity, but shall be limited to
statements and reports relating to the Property and the
operation thereof. The parties acknowledge that all costs
included in preparation of the Reporting Documents
including, without limitation, expenses for personnel,
computers, equipment and supplies, shall be an expense of
the Owner; provided, however, that Manager agrees that
such costs will not exceed the current budgeted
administrative and employee expenses for the Property,
except for typical cost of living increases on an annual
basis. Any outside annual audit would be at the expense of
the Owner. Manager shall be permitted to charge the Owner
or the Property up to $5,000 in order to implement
Manager's operating and reporting system. Manager agrees
to charge the Project no more than $2,500 of the above
charge in 1997. Manager shall receive the balance of the
charge in 1998. Manager agrees that any costs in excess of
the $5,000 or which exceed the current budgeted
administrative and employee expenses for the Property
(subject to cost of living increases on an annual basis)
shall be borne by Manager or offset against Manager's fee.
(v) Legal Action. The Manager shall institute in its own name
or in the name of the Owner, but in any event at the
expense of the Owner, any and all legal action or
proceedings which the Manager deems advisable to collect
rents or other income from tenants or to oust or
dispossess tenants or other persons in possession of the
units therefrom, or to cancel or terminate any lease,
license or concession agreement for the licensee or
concessionaire.
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(vi) Collection of Rents. The Manager shall collect all monthly
rents, charges, fees and assessments and security
deposits due from tenants; all rents and/or fees due from
users of the garage or parking spaces and from users or
lessees of other nondwelling facilities in the Property;
and all sums due from concessionaires in consequence of
the authorized operation of facilities in the Property.
All such sums so collected shall be deposited in Manager's
custodial account, as hereinafter provided, or as
otherwise may be provided by applicable law as in the case
of security deposits.
(vii) Banking and Disbursements. The Manager shall deposit in a
banking institution or institutions mutually approved by
the Owner, Agent and the Manager in accounts in the name
of the Owner, all monies furnished by the Owner or Agent
as working funds and all monies received by the Manager in
connection with the operations of the Property. The
Manager shall disburse and pay the same on behalf of and
in the name of the Owner or Agent in such amounts and at
such time as the same are required to be made in
connection with the operation of the Property in the
payment of expenses thereof and disbursements of monies to
the Owner or Agent.
(viii) Operating Supplies. The Manager shall purchase all
necessary food, beverages, operating supplies and other
materials and supplies in the name of, for the account of
and at the expense of, the Owner.
(ix) Concession Contracts. For the benefit of and subject to
the approval by the Owner, the Manager shall make
arrangements for the concessionaires, licensees, tenants
or other intended users of the facilities of the Property.
(x) Utilities and Services. The Manager shall enter into
contracts in the name and at the expense of the Owner for
the furnishing to the Property of electricity, gas, water,
steam, telephone, cleaning (including window cleaning),
exterminators, elevator and boiler maintenance, air-
conditioning maintenance, master television antennas'
installation and service, laundry service, dry cleaning
service, and any other utilities, services and concessions
as are provided in connection with the maintenance and
operation of property similar to the Property.
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(xi) Maintenance and Repair. Manager shall cause the
buildings, appurtenances and grounds of the Property to
be maintained at Owner's expense according to standards
acceptable to Owner or Agent, including, but not limited
to, interior and exterior cleaning, painting, and
decorating of the areas, and repair and maintenance of
plumbing, HVAC, electrical and other systems within the
areas, subject to any limitations imposed by Owner or
Agent in a written notice to Manager in addition to
those contained herein. For any one item of repair or
replacement, the expense incurred shall not exceed the
sum of ONE THOUSAND FIVE HUNDRED ($1,500.00) DOLLARS
unless specifically authorized by Owner or Agent or
specified in the Budget, provided, however, that
emergency repairs, involving manifest danger to life or
property, or immediately necessary for the preservation
and safety of the Property, or for the safety of the
tenants or occupants, or required to avoid the
suspension of any necessary service to the Property, may
be made by the Manager irrespective of the cost
limitation imposed by this paragraph. Notwithstanding
this authority as to emergency repairs, it is understood
and agreed that the Manager will, if at all possible,
confer immediately with Owner or Agent regarding such
expenditure.
(xii) Consultants. From time to time and as provided for in
the Budget (as hereinafter defined) and as approved by
the Owner or Agent, the Manager shall be authorized to
retain the services of consultants in connection with
the operation or management of the Property.
(xiii) Necessary Acts. At the expense of the Owner, the
Manager shall use its best efforts to perform all such
acts and things to be done in and about the Property,
which shall be necessary to comply with all applicable
statutes, ordinances, laws, rules, regulations, orders,
requirements and agreements of or with any federal,
state or municipal government and appropriate
departments, commissions, boards and officers having
jurisdiction over the use or manner of use of the
Property or the maintenance or operation thereof, as
well as with all orders and requirements of the local
board of fire underwriters or any other body which may
hereafter exercise similar functions, as well as with
the requirements of any lender and any health service
provider; provided, however, that such action shall not
be taken without the written approval of the Owner or
Agent unless it is provided for in the current Budget or
involves an
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emergency or the failure to promptly comply with any order
or violation shall result in the suspension of operations
of the Property or shall expose any party hereto to the
imminent danger of criminal liability, then in such event
the Manager shall cause the same to be done or complied
with at the expense of the Owner, provided further,
however, that notice to the Owner and Agent of such act
shall be given as soon as practicable.
(xiv) Emergency Repairs. At Owner's expense, the Manager shall
make any emergency repairs required to preserve the
immediate safety of person or property or necessary to
prevent the imminent cessation of the Property's
operations, provided that notice of the nature and extent
of the repairs shall be given to the Owner as soon as
practical given the circumstances of the emergency.
(xv) Annual Budgets.
(A) Preparation and Submission. Manager acknowledges that
Manager has received from Agent the budget for the
Property through December 31, 1997. At least forty
five (45) days prior to December 31, 1997 and prior
to December 31 for each subsequent calendar year that
commences during the term of this Subagreement.
Manager shall submit to Agent and Owner a proposed
annual budget for the Property projecting the
revenues available and funds required during such
fiscal year in order to operate the Property and to
make capital improvements necessary or desirable in
order to keep the Building's physical plant in good
condition and repair. The proposed annual budget
shall be based upon data and information then
available to Manager and shall include, without
limitation, estimated salaries and fringe benefits
for all personnel groups, projected staffing
expenditures and purchases of equipment, supplies,
inventory, food and similar items, and an estimate of
the level of rates and charges to residents of the
Property. The proposed annual budget shall be an
estimate of revenues and costs, and Owner, Agent and
Manager acknowledge that (1) projected revenue may
not actually be received and (2) projected costs may
be exceeded by actual expenses and capital
expenditures incurred in connection with the
operation and
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maintenance of the Property. By submitting such projected
budget, Manager will not be deemed to be providing a
guarantee or warranty as to the projected revenue, expenses
or capital expenditures of the Property.
(B) Adoption. The budget for the period ending December 31, 1997
and each annual budget as finally established in accordance
with this paragraph (B) (including as it may thereafter be
revised from time to time during a calendar year pursuant to
the written agreement of Owner, Agent and Manager), as the
same may be modified by Owner, Agent and Manager, shall
constitute the "Budget" for all purposes under this
Subagreement. Owner and Agent shall, within thirty days (30)
days following receipt of a proposed annual budget proposal,
notify Manager of either (1) Owner's and Agent's approval of
such proposed annual budget or (2) those items of which
Owner and Agent approve and those items of which Owner and
Agent disapprove. In the event that Owner or Agent does not
either approve or disapprove of, in total or in part, such
proposal annual budget in writing within such 30 day period,
then such proposed annual budget shall be deemed approved by
Owner and Agent and shall be the Budget for such calendar
year. If Owner or Agent disapproves of the proposed annual
budget either in total or in part within such 30 day period,
then Owner, Agent and Manager shall have thirty (30) days
from the date of the disapproval notice to formulate a
mutually agreeable Budget. If the parties are unable to
reach an agreement within said 30 day period, then the
Budget for the immediately preceding calendar year,
including any such prior Budget determined in accordance
with this sentence, shall constitute the Budget pending
final adoption of a Budget; provided, however, that the
budgeted items for the categories of heat, light, power,
insurance and real estate taxes shall be deemed increased or
decreased as required to reflect actual expenses for the
preceding calendar year.
(C) Efforts to Operate within Annual Budget. Manager agrees to
use its reasonable best efforts to operate the Property in
accordance with the Budget.
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Notwithstanding anything in this Agreement, if
Manager determines in good faith that the incurrence
of any expenditure is required in order to comply
with applicable law or regulations, then Manager
shall be entitled to make such expenditures up to
$5,000 in any calendar year, and all such
expenditures shall be deemed, for all purposes of
this Agreement, to be in accordance with the then
current Budget.
(xvi) Fidelity Bond. As soon as practicable after the date of
this Agreement, Manager shall furnish and maintain for the
duration of this Subagreement and any renewals or
extensions, plus 30 days after its expiration or
termination, a commercial blanket bond (the "Fidelity
Bond") in favor of Owner and Agent, jointly or severally,
in an amount not less than two (2) months gross potential
rents for the Property plus tenants' security deposits.
The Fidelity Bond shall be in a form and with a company
reasonably acceptable to Owner and Agent. The Fidelity
Bond shall cover Manager and all employees hired by
Manager in connection with this Subagreement. The Fidelity
Bond shall cover losses discovered by Owner or Agent for a
period of two (2) years after the occurrence of such
losses. The cost of the Fidelity Bond shall be an
operating expense of the Property.
(b) Proper Operation of the Property. Subject to the provisions of
this Subagreement, the Manager shall take all other action, at
Owner's expense, to operate the Property at all times in a first
class manner given the nature and condition of the Property as of
the date hereof.
(c) Qualifications on the Manager's Duties. All of the foregoing set
forth herein with respect to the Manager's duties and
responsibilities shall be subject to the reservation on the part
of the Owner and Agent to give Manager directions with respect to
all aspects of the operation of the Property; but such
reservation of authority shall not diminish Manager's
responsibility, except to the extent that the Manager has acted
pursuant to the directions issued by Owner or Agent; provided,
however, that the Manager shall have the exclusive right to
supervise the day to day operations of the Property. The Manager
will be available to consult with the Owner and Agent on matters
of general policy, planning and goals. If any duties and
responsibilities to be carried out by the Manager involve the
expenditure of money or the incurring of obligations or
settlement of a claim not in litigation the Manager shall not
incur the same unless the expense, obligation or cost
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is provided for in the then current Budget or otherwise allowed
(e.g. in an emergency or incurred in accordance with this
Subagreement). The Owner will not object to any expenditure made
by the Manager in good faith in accordance with the provisions
hereof. The Manager shall have no responsibility under this
Subagreement to take action involving the expenditure of money or
the incurring of obligations unless adequate funds therefor are
available out of the Property operations or otherwise are
provided by the Owner.
(d) Manager's General Undertaking.
(i) No Guarantee of Profitability. Manager does not guarantee
that operation of the Property will be profitable, but
Manager shall use its best efforts to operate the Property
in as cost effective and profitable a manner as reasonably
possible consistent with maintaining operations in
accordance with the senior and assisted living industry's
highest prevailing standards in the Minneapolis/St. Xxxx
metropolitan area.
(ii) Standard of Performance; Acting within Budget. In performing
its obligations under this Subagreement Manager shall use
its reasonable best efforts and act in good faith and with
professionalism in accordance with the Budget and the
highest prevailing standards of the senior and assisted
living industry in the Minneapolis/St. Xxxx metropolitan
area.
3. Term. The term of this Subagreement shall commence on July 1, 1997
(the "Commencement Date") and shall terminate, unless sooner
terminated as hereinafter provided or as otherwise agreed in writing,
on December 31, 2005.
(a) This Subagreement may be terminated (i) by Owner and Agent (A)
upon six months' prior written notice to Manager given at any
time after the last day of the 29th month of the term of this
Subagreement or (B) for Cause (as hereinafter defined), or (ii)
by Manager (A) upon six months' prior written notice to Owner and
Agent given at any time after the last day of the 29th month of
the term of this Subagreement or (B) upon the occurrence of a
Change in Control (as hereinafter defined) of Owner; provided,
however, that in the event of a termination by Manager pursuant
to clause (ii)(A) above, Manager shall cooperate with and assist
Owner and Agent during said six month period in engaging a
qualified replacement manager for the Property. Upon any
termination of this Subagreement pursuant to the immediately
preceding sentence, the parties hereto shall have no further
obligations or liabilities other than the right of Manager to
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receive fees through the date of termination, except that, upon
the expiration or earlier termination of this Subagreement for
any reason, the parties shall cooperate (at Owner's expense) to
minimize the impact of the change on the residents of the
Property, and during any such period for which Manager provides
services or assists in the operation of the Property in
connection therewith, it shall be entitled to receive the fees
provided herein.
For purposes of this Subagreement, "Cause" shall mean (i) fraud,
misappropriation or embezzlement by Manager involving Owner's or
Agent's property or other wrongful acts by Manager that
materially impair the goodwill or business of Owner or the
Property or that cause material damage to Owner's property,
goodwill or business or (ii) failure by Manager to substantially
perform its duties and obligations owing to Owner and Agent under
this Subagreement after a written demand for substantial
performance by Manager is delivered to Manager by Owner or Agent
that specifically identifies the manner in which Owner or Agent
believes Manager has not substantially performed its duties and
after Manager has been given at least 30 days in which to cure
such performance deficiencies; and a "Change in Control" of the
Owner shall be deemed to have occurred if (A) any unrelated
person or group shall acquire 50% or more of the Owner's
partnership interests and (B) both Partners for Senior
Communities, Inc. and Xxxxx Xxxxx are no longer general partners
of the Owner and (C) any substituted general partner of Owner is
not substantially owned (at least 50%) or otherwise controlled by
any one or more of the shareholders of Partners for Senior
Communities, Inc. as of the date of this Subagreement.
(b) Owner may terminate this Subagreement in the event of a taking by
governmental action or conveyance in lieu thereof of all or a
substantial portion of the Property which makes it uneconomical
in Owner's judgment to continue to operate the Property, and the
termination shall be effective as of the date of such taking or
conveyance in lieu thereof.
(c) Owner may terminate this Subagreement in the event of the total
or substantial damage or destruction of the Property from fire or
other casualty if Owner elects, within ninety (90) days of the
date of the casualty, not to rebuild, repair or restore the
Property; and the termination shall be effective as of the date
the Property ceased operation.
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4. Events of Default and Remedies.
(a) Defaults. Each of the following shall constitute an Event of Default
hereunder:
(i) if Owner or Agent shall fail to pay or allow payment of any
installment of the fees due to Manager in accordance with
Section 5 hereof for a period of seven (7) days after written
notice of such default from Manager;
(ii) if Owner or Agent, on the one hand, or Manager, on the other,
fails to perform in any material respect any term, provision,
or covenant of this Subagreement [other than as set forth in
Section 4(a)(i)]; and such failure continues for (30) days
after written notice from the other party specifiying such
failure to perform, unless such failure cannot reasonably be
cured within such 30 day period and the defaulting party
commences to cure within such 30 day period and diligently
pursues the completion of the cure as promptly as is
practicable; or
(iii) if either Owner or Agent, on the one hand, or Manager, on the
other, is dissolved or liquidated, applies for or consents to
the appointment of a receiver, trustee or liquidator of all or
a substantial part of its assets, files a voluntary petition in
bankruptcy or is the subject of an involuntary bankruptcy
filing, a petition or an answer seeking reorganization or
arrangement with creditors or to take advantage of any
insolvency law, or if an order, judgment or decree shall be
entered by any court of competent jurisdiction, on the
application of a creditor, adjudicating Owner, Agent or Manager
bankrupt or insolvent or approving a petition seeking
reorganization of Owner, Agent or Manager or appointing a
receiver, trustee or liquidator for such party of all or a
substantial part of its assets, and such order, judgment or
decree shall continue unstayed and in effect for any period of
sixty (60) consecutive days.
(b) Remedies. At any time after the occurrence and during the continuance
of an Event of Default, the party who has not committed the Event of
Default may, at its option, terminate this Subagreement by giving
written notice to the other party and, except as provided in this
Subagreement shall be entitled to exercise all rights and remedies
available under applicable law; provided, however, that Owner or Agent
may cause the effective date of any termination of Manager to be
deferred for up to thirty (30) days to afford Owner or Agent the
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opportunity to engage a replacement operator of the Property
provided that Manager shall be compensated through the date of
termination. Without limiting the generality of the foregoing, if
Owner or Agent is the defaulting party, or if Owner or Agent
shall terminate the Subagreement other than as a result of an
Event of Default or pursuant to Section 3 of this Subagreement,
then Agent shall pay Manager, within thirty (30) days following
the date of such termination, the sum of (i) all unpaid fees
accrued through the date of such termination and all unpaid
amounts for which Manager is then entitled to receive
reimbursement under this Subagreement and (ii) as liquidated
damages and not as a penalty, the product of (A) an amount equal
to three percent (3%) of the average Gross Monthly Revenues (as
hereinafter defined) of the Property for the twelve months
immediately preceding the date of termination and (B) the lesser
of (1) six and (2) half of the number of months remaining in the
term of this Subagreement immediately prior to such termination.
In the event of any breach of this Subagreement by Manager,
including any breach resulting in an Event of Default, Owner's
and Agent's sole remedy shall be to terminate this Subagreement
in accordance with the terms hereof, and Owner and Agent shall
have no other liability to Manager hereunder.
5. Compensation. Except as provided for upon termination, as compensation
for its services to be rendered hereunder, the Agent shall pay to the
Manager the following sums:
(a) As regular compensation to commence on Commencement Date and
continuing thereafter, determined on a monthly basis, a sum equal
to three percent (3%) of the Gross Monthly Revenues of the
Property; provided, however, that Manager shall receive no
regular compensation under this Section 5(a) for the first ten
months of the term of this Subagreement. Such monthly fee shall
be payable out of the custodial account(s) to the extent of funds
available therein and otherwise by the Agent or Owner. Such
monthly fee shall be payable in arrears upon submission to the
Owner and Agent of the monthly reports as provided in Paragraph
2(a)(iv) above. "Gross Monthly Revenues" shall mean and include
all revenues and income of any kind derived directly or
indirectly from the Property actually collected by the Manager as
rents or other charges for use or occupancy of space or
facilities or services in the Property in a calendar month,
including food, furniture rental, parking, forfeited amounts
collected as security deposits, late charges, income from coin-
operated machines, and all other miscellaneous income collected
at the Property; excluding, however, any and all interest or
investment income, insurance
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proceeds, tax refunds of Owner, eminent domain awards, and
dividends on insurance policies.
(b) As an incentive management fee, Agent shall pay Manager an amount
each year (or portion thereof) during the term hereof equal to
twenty percent (20%) of any increase in the Net Operating
Income (as hereinafter defined) of the Property for any calendar
year over the Net Operating Income for the previous calendar
year; provided, however, that no incentive fee will be due for
any calendar year if the Net Operating Income for the Project for
that calendar year does not exceed $600,000. If Manager manages
the Property for a portion of a calendar year, the incentive fee,
if any, will be prorated for the number of months Manager
actually managed the property during that calendar year. The
incentive fee will be due within fifteen (15) days of Owner's and
Agent's receipt of the completed audited financial statement for
the calendar year for which the incentive fee is being
calculated. For purposes of calculating the incentive fee, "Net
Operating Income" shall mean the Gross Monthly Revenues for the
calendar year less all expenses required to own and operate the
Property, including, without limitation, real estate taxes,
insurance, the greater of actual or budgeted capital improvements
(provided that if the budgeted capital improvements amount is
higher than the actual amount, the difference shall be subtracted
from the capital improvements amount in subsequent years in order
to avoid double counting a portion of the capital improvements
expense) and budgeted capital reserve deposits and excluding debt
service payments, depreciation and Owner's income taxes. In
calculating the incentive fee for calendar years 1997 and 1998,
the operating expenses shall include a management fee of 3% of
the Gross Monthly Revenues for those initial ten months of the
Term hereunder during which no fee is actually being paid to or
accrued on behalf of Manager.
6. Operating Expenses. In performing its duties hereunder during the
term of this Subagreement, the Manager shall act solely as agent for
the account of the Owner or Agent. The Manager shall in no event be
required to advance any of its own funds for the operation of the
Property nor to incur any liability in connection therewith unless the
Owner or Agent shall furnish the Manager with funds necessary for the
discharge thereof.
7. Group Purchases. It is acknowledged by the parties that the Manager
may be engaged in the management or operation of other properties
similar to the Property. In connection therewith, the Manager agrees
that if any items required for the Property or services to be
furnished to the Property are purchased by the Manager at a cost
savings on a group basis for other
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properties managed or operated by the Manager, the Manager will, to
the extent practical, purchase such services or items for the Property
on a group basis. It is understood and agreed by the Manager that, in
and about managing the Property, any and all services, supplies,
equipment, goods or the like purchased on behalf of the Property shall
be purchased at the actual cost to the Manager from the supplier.
8. Assignability. Agent may assign this Subagreement to Owner at any
time. Except as herein provided, neither Owner nor Agent shall have
the right to assign this Subagreement to any person or entity without
the prior written consent of the Manager. Owner may assign the
Agreement and the Subagreement to a subsequent owner of the Property
without obtaining Manager's consent. The Manager shall not have the
right to assign this Subagreement without the prior written consent of
the Owner. Nothwithstanding a the foregoing, and only to the extent
permitted by applicable law and regulations and subject to Manager's
receipt of all required licenses permits. approvals and authorizations
of applicable governmental agencies, the Manager shall have the right
to assign this Subagreement to a wholly-owned subsidiary of the
Manager which subsidiary shall remain a wholly-owned subsidiary of the
Manager at all times hereunder. In the event of any such assignment to
a subsidiary, prior written notice thereof shall be given to the
Owner.
9 Limitation on Owner's and Agent's Liability Manager acknowledges that
Manager's sources of compensation hereunder are limited to (i)
revenues from the Property. (ii) advances voluntary made by Owner or
(iii) advances voluntarily made by Agent. Manager agrees that Agent
shall be under no obligation whatsoever to make any advances to
Manager to cover any operating shortfalls of whatever nature,
including Manager's compensation hereunder. Manager further agrees
that Owner liability hereunder shall be limited to the Owner's assets,
less third party liabilities, and that no partner of Owner shall be
personally responsible for any amounts ever due Manager under this
Subagreement.
10. Notices. All notices, demands, requests, consents, approvals and other
communications (herein collectively called "Notices") required or
permitted to be given hereunder or which are to be given with respect
to this Subagreement shall be in writing and shall be deemed
effectively given: (i) upon personal delivery or receipt, (ii) if
mailed, upon the first to occur of receipt or the expiration of
seventy-two (72) hours after deposit with the United States Postal
Service, certified or registered mail, postage prepaid and sent to a
party at its address as set forth below, (iii) if sent by overnight
courier, upon the first business day after being placed with such
courier for delivery to a party at its address as set forth below, or
(iv) if by facsimile,
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upon the date transmission to the party at the facsimile number set
forth below occurs, provided the transmission is completed by 4:00 PM
CST and a copy of the transmission confirmation and a copy of the
notice arc sent to the receiving party by regular mail on the date of
the transmission. Notices sent by facsimile after 4:00 PM CSI~ or on a
non-business day shall be deemed effectively given on the next
business day following the transmission. The addresses and facsimile
number for Notices are:
IF TO MANAGER: Brookdale Living Communities of
Minnesota-II, Inc.
c/o Brookdale Living Communities, Inc.
00 Xxxx Xxxxxx Xxxxx
Xxxxx 0000
Xxxxxxx, XX 00000
Facsimile No.: 312/917-0460
Attention: Xxxx X. Xxxxxxx
with a copy to: General Counsel of Manager at Manager's
address but at facsimile number 312/917-7284
IF TO AGENT: ActiveLife Management Corporation
000 X. XxXxxxx Xxxxxx, Xxxxx 0000
Xxxxxxx, XX 00000
Facsimile No.: 3l2/726-0091
Attention: Xxxxx Xxxxx
IF TO OWNER: Kenwood Congregate Associates Limited
Partnership
000 X. XxXxxxx Xxxxxx
Xxxxx 0000
Xxxxxxx, XX 00000
Facsimile No.: (000) 000-0000
Attention: Xxxxxx X. Xxxxxxx
Either party may change its notice address or facsimile number at any time by
providing written notice thereof to the other party.
11. Governing Law. This Subagreement has been made and entered into in the
State of lllinois and shall be construed in accordance with the laws
of the State of Illinois.
12. Relationship of the Parties. The relationship of Manager to Owner and
to Agent in connection with this Subagreement shall be that of an
independent contractor, and all acts performed by Manager during the
term hereof shall
15
be deemed to be performed in Manager's capacity as an independent
contractor. Nothing contained in this Subagreement is intended to or
shall be construed to give rise to or create a partnership or joint
venture or lease between Owner, Agent or their successors and assigns
on the one hand, and Manager, itS successors and assigns on the other
hand.
13. Entire Agreement. This Subagreement and any documents executed in
connection herewith contain the entire agreement among the parties and
shall be binding upon their respective successors and assigns. This
Subagreement may not be modified or amended except by written
instrument signed by the parties hereto.
14. Contract Modifications for Certain Legal Events. In the event any
state or federal laws or regulations, whether now existing or enacted
or promulgated after the effective date of this Subagreement are
interpreted by judicial decision, a regulatory agency or legal counsel
of the parties in such a manner as to indicate that the structure of
this Subagreement may be in violation of such lass or regulations
Owner, Agent and Manager agree to cooperate In restructuring their
relationship and this Subagreement to eliminate such violation or to
reduce the risk thereof; provided, that any such restructuring shall,
to the maximum extent possible, preserve the underlying economic and
financial arrangements between Owner, Agent and Manager. The parties
agree that such amendment may require one or more of the parties to
obtain appropriate regulatory licenses and approvals. Owner, Agent and
Manager agree that the foregoing is not a binding obligation to
consummate any transactions contemplated by, or discussed during
negotiations conducted under, this Section 13, it being understood any
such amendment or restructuring of this Subagreement shall be entered
into at the sole and absolute discretion of Owner and Manager.
15. Captions. The captions used herein are for convenience of reference
only and shall not be construed in any manner to limit or modify any
of the terms hereof.
16. Severability. In the event one or more of the provisions contained in
this Subagreement is deemed to be invalid, illegal or unenforceable in
any respect under applicable law, the validity, legality and
enforceability of the remaining provisions hereof shall not in any way
be impaired thereby.
17. Remedies Cumulative; No Waiver. No right or remedy herein conferred
upon or reserved to any of the parties hereto is intended to be
exclusive of any other right or remedy, and each and every right and
remedy shall be cumulative and in addition to any other right or
remedy given hereunder, or now or hereafter legally existing upon the
occurrence of an Event of Default
16
hereunder. The failure of any party hereto to insist at any time
upon the strict observance or performance of any of the
provisions of this Subagreement or to exercise any right or
remedy as provided in this Subagreement shall not impair any such
right or remedy or be construed as a waiver or relinquishment
thereof with respect to subsequent defaults. Every right and
remedy given by this Subagreement to the respective parties
hereto may be exercised from time to time and as often as may be
deemed expedient by such parties.
18. Counterparts. This Subagreement may be executed in any number of
counterparts, each of which shall be an original, and each such
counterpart shall together constitute but one and the same
Agreement.
19. Option to Purchase. Owner hereby grants Manager an option to
purchase the Property for $23,400,000, subject to the terms and
conditions of a real estate sale contract mutually acceptable to
both Owner and Manager. Except as provided in the paragraph
below, this option shall terminate upon the earlier to occur of
(a) the termination of this Subagreement, (b) the assignment of
this Subagreement by Manager except as permitted under Section 8
hereof, unless Owner agrees in writing at the time of such
assignment that the assignee may assume this option for its
remaining term and (c) June 30, 2000 (the "Option Period").
Owner agrees to provide Manager with any proposed terms of sale
if Owner decides to sell the Property.
At any time during the Option Period, Owner may give Manager
notice of Owner's intent to sell the Property. Manager shall have
30 days from the date of Owner's notice to exercise Manager's
option to purchase the Property at the price set forth herein. If
Manager exercises the option, Manager and Owner shall proceed in
good faith to close the sale of the Property to Manager within
120 days from the date of Owner's notice. If the sale fails to
close within said period for reasons other than a default by
Owner, the Manager's option to purchase shall automatically
terminate on the 121st day following the date of Owner's notice,
unless the parties mutually agree otherwise in writing. If
Manager does not exercise its option to purchase within 30 days
of the date of Owner's notice, Owner shall have 120 days from the
date of Owner's notice to transfer the Property to another party.
If Owner fails to complete the transfer to another party within
such period, Manager's option to purchase shall be automatically
reinstated on the 121st day following the date of Owner's notice
to Manager, unless the parties mutually agree otherwise in
writing.
20. Agreement not to be Recorded. This Subagreement shall not be
recorded. Any violation of this provision shall render this
Subagreement void.
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IN WITNESS WHEREOF, the parties have executed and delivered this
Subagreement on the date first above written.
OWNER: MANAGER:
KENWOOD CONGREGATE ASSOCIATES BROOKDALE LIVING COMMUNITIES
LIMITED PARTNERSHIP OF MINNESOTA, INC.
an Illinois limited partnership a Delaware corporation
By: Partners for Senior Communities, Inc.
a general partner
By: /s/ Xxxxxx X. Xxxxxxx By: /s/ Xxxx X. Xxxxxxx
--------------------------- ---------------------------
Name: Xxxxxx X. Xxxxxxx Name: Xxxx X. Xxxxxxx
------------------------- -------------------------
Title: Vice President Title: President
------------------------ ------------------------
AGENT:
ACTIVELIFE MANAGEMENT CORPORATION
an Illinois corporation
By: /s/ Xxxxxx X. Xxxxxxx
-------------------------------
Name: Xxxxxx X. Xxxxxxx
-----------------------------
Title: Vice President
----------------------------
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EXHIBIT A
MONTHLY REPORT COMPONENTS
Set forth below is a list of the components of the Monthly Reports to be
provided to Owner and Agent pursuant to Section 2(a)(iv):
1. Statement of income and expenses, with a comparison to budget, for
both the month and the year-to-date.
2. Reconciled bank statements for all Accounts.
3. Detailed listing of all cash disbursements in check number order.
4. General ledger listing cash receipts and disbursements in account
number order.
5. Statement of changes in financial condition.
6. Monthly trial balance.
7. Analysis of significant variances from budget.
8. Balance sheet.
The monthly reports with respect to each month shall be delivered to the
Owner by the twentieth (20th) day of the following month.
ANNUAL REPORT COMPONENT
With respect to each fiscal year ending during the term of this
Subagreement the Manager will have an annual financial report prepared by a
certified public accountant based upon such person's examination of the books
and records of the Owner and the Manager. Such report shall be delivered to the
Owner by the seventy-fifth (75th) day following the end of such fiscal year.
Owner shall pay the compensation for the certified public accountant.
RECORDS
The Manager shall establish and maintain a comprehensive system of records,
books and accounts in a manner reasonably satisfactory to Owner. All records
will be subject to examination by the Owner at reasonable hours by any
authorized representative of Owner.
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