EXHIBIT 10.3
DEVELOPMENT AGREEMENT
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This DEVELOPMENT AGREEMENT (this "Agreement"), dated as of March 31, 1998,
is made and entered into by and between AH MICHIGAN OWNER LIMITED PARTNERSHIP,
an Ohio limited partnership ("Owner"), and BROOKDALE LIVING COMMUNITIES OF
MICHIGAN, INC., a Delaware corporation ("Developer").
RECITALS
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WHEREAS, Owner is acquiring certain real property from Developer pursuant
to that certain Purchase and Sale Agreement of even date herewith between
Developer, as seller, and Owner, as purchaser (the "Purchase and Sale
Agreement"), and desires to develop it for use as a senior and assisted living
facility in Austin, Texas, which is currently referred to as The Heritage at
Xxxxxx Ranch (the "Project");
WHEREAS, Developer is experienced and qualified in the business of
developing senior and assisted living facilities such as the Project, and Owner
desires to engage Developer to perform development services in connection with
the construction of the Project;
WHEREAS, Developer has commenced construction of the Project and has
entered into a construction contract, an architectural contract and other
contracts related thereto, and hereafter shall enter into additional contracts
and amendments, change orders, modifications or supplements of or to any of the
foregoing (collectively, the "Construction Contracts"); and
WHEREAS, Owner desires to retain Developer to, and Developer is willing to,
perform development services in connection with the construction of the Project
on the terms and subject to the conditions set forth in this Agreement.
AGREEMENTS
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NOW, THEREFORE, in consideration of the recitals and the mutual promises
and covenants herein contained and for other good and valuable consideration,
the receipt and sufficiency of which are hereby acknowledged, the parties hereto
hereby agree as follows:
1. Responsibilities of Developer.
(a) Owner hereby engages Developer to perform the services in
connection with the development and construction of the Project normally and
customarily performed by a developer of a commercial real estate project and as
further described herein, and Developer hereby accepts such engagement and,
subject to the conditions set forth in this Agreement, agrees to provide such
services, at Owner's expense. During the term of this Agreement, Developer
shall have full authority to construct the Project or cause the Project to be
constructed as a senior and assisted living facility, and shall have full and
complete control and reign over, and use of, the entire Project, including its
common areas. Without limiting the generality of the foregoing, Developer
shall, at Owner's expense, have full authority as follows:
(i) Regulatory Compliance. Developer shall use reasonable
efforts to obtain and maintain all licenses, permits, qualifications and
approvals from any applicable governmental or regulatory authority required for
the construction of the Project. In addition, Developer shall supervise and
coordinate the preparation and filing of (and, where required to do so under
applicable law or regulations, file) all reports or other information required
by all state or other governmental agencies having jurisdiction over the Project
and shall deliver copies of all such reports and information to Owner
simultaneously with such filings. Developer shall cooperate with governmental
inspection and enforcement activities.
(ii) Equipment and Improvements. Developer shall, on behalf of
Owner, acquire or effect the acquisition of equipment and improvements which are
needed to operate the Project or its services.
(iii) Existing Contracts. Developer shall have the right and
authority, at the Owner's expense, to enter into, perform, and modify its
obligations and duties under the Construction Contracts and to deal with, and
enforce the obligations of, all parties thereto.
(iv) Legal Proceedings. Developer shall have the right and
authority, on its own behalf or through legal counsel designated by Developer,
direct all legal matters and proceedings that are within the scope of
Developer's authority pursuant to this Agreement. Without limiting the
generality of the foregoing, Developer is authorized (without the prior written
consent of Owner) to (a) settle, in the name and on behalf of Owner and on
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such terms and conditions as Developer may deem to be in the best interests of
the Project, any and all claims or demands arising out of, or in connection
with, the operation of the Project, whether or not legal action has been
instituted and (b) enter into such agreements with any governmental agencies
having jurisdiction over the Project deemed necessary or desirable by Developer
in its sole and absolute judgment. All such amounts paid in respect of any such
settlements and agreements shall be expenses of the Project and be paid by
Owner. Developer will give notice promptly to Owner of all demands and claims
and all settlements and legal actions, but the failure to give such notice shall
not affect the preceding provisions of this paragraph.
(v) Other Matters. Developer shall, on its own behalf or, if
necessary, on Owner's behalf, be permitted to enter into such other agreements,
contracts, easements and to perform such other acts as are necessary or
desirable, in Developer's sole and absolute discretion, for the completion and
operation of the Project.
2. Responsibilities of Owner. Owner shall not interfere with Developer in
connection with the development of the Project in accordance with the terms of
this Agreement. Owner acknowledges and agrees that the development of the
Project is within the exclusive control of Developer, and Owner hereby grants
Developer sole and exclusive possession and control over the Project. Owner
hereby assumes and agrees to pay in accordance with the next sentence hereof (i)
all costs, expenses and obligations incurred by Developer through and including
the date of this Agreement in connection with the development and construction
of the Project which have not been paid as of the date of this Agreement, which
costs, expenses and obligations include, but are not necessarily limited to
retainage held back from the general contractor of the Project ($99,609.40 as of
February 28, 1998) and accrued developer's fees payable by Developer to
Brookdale Living Communities, Inc. ($483,145.24 as of February 28, 1998), (ii)
all closing costs incurred by Developer, as seller, under the Purchase and Sale
Agreement and (iii) all costs, expenses and obligations incurred by Developer
from and after the date of this Agreement in connection with the development and
construction of the Project. Developer shall be responsible for the payment of
all such costs, expenses and obligations which become due and payable during the
term of this Agreement, and Owner shall reimburse Developer for all amounts paid
by Developer immediately upon termination of this Agreement.
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3. Exclusive Representative/Attorney-in-Fact. It is understood and agreed
that Developer shall be the exclusive representative of Owner for purposes
described in this Agreement, including, without limitation, all acts, functions
and activities which would normally and customarily be performed by a developer
of real estate in connection with the construction of a major commercial
project. Any communications, any regulatory authorities, governmental agencies,
contractors, materialmen suppliers, employees of the Project shall be directed
through Developer.
4. Insurance. Developer shall, at Owner's expense, arrange for and
maintain all necessary and proper hazard insurance covering the Project,
including the furniture, fixtures and equipment situated thereon, all necessary
and proper public liability insurance for the protection of Developer and Owner.
Developer shall, at Owner's expense, also arrange for and maintain all employee
health and worker's compensation insurance for the Project's personnel. Any
insurance provided pursuant to this paragraph shall be an expense of the Project
payable by Owner.
5. Proprietary Interest. The systems, methods, procedures and controls
employed by Developer and any written materials or brochures developed by
Developer to document the same are to remain the property of Developer and are
not, at any time during or after the term of this Agreement, to be utilized,
distributed, copied or otherwise employed or acquired by Owner, except as
authorized by Developer.
6. Term of Agreement. Unless this Agreement is sooner terminated as
hereinafter expressly provided in Section 7 or as otherwise agreed in writing by
both parties, the term of this Agreement shall commence on the date hereof and
shall end on the earlier to occur of (i) the date on which the amounts due under
that certain Note dated March 30, 1998 made by Owner to Developer in the amount
of $3,044,082.12 are payable (whether at maturity of such Note or by reason of
the acceleration of such Note or prepayment thereunder) and (ii) June 30, 1998.
7. Events of Default and Remedies.
(a) Event of Default. At the option of the non-
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defaulting party, each of the following shall constitute an "Event of Default"
hereunder:
(i) if Owner shall fail to pay or allow payment of any installment of
the Fees due to Developer in accordance with Section 10 hereof for a period of
five (5) days after written notice of such failure from Developer;
(ii) if Owner fails to perform in any material respect any term,
provision, or covenant of this Agreement (other than as set forth in Section
7(a)(i)) and (A) such failure continues for ten (10) days after written notice
from Developer specifying such failure to perform (unless such failure cannot be
cured by the payment of money and cannot reasonably be cured within such 10-day
period, in which event, Owner shall have an additional period, not to exceed an
additional thirty (30) days, in which to cure the default) or (B) Owner fails to
endeavor diligently and continuously to cure such default as promptly as is
practicable;
(iii) if Developer fails to perform in any material respect any term,
provision, or covenant of this Agreement and (A) subject to Section 8 below,
such failure continues for thirty (30) days after written notice from Owner
specifying such failure to perform (unless such failure cannot reasonably be
cured within such 30-day period, in which event, the defaulting party shall have
an additional period as is necessary to cure the default) or (B) Developer fails
to endeavor diligently and continuously to cure such default as promptly as is
practicable;
(iv) if either Owner, on the one hand, or Developer, 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, makes a general assignment for the benefit of creditors, or
files 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 or Developer bankrupt or insolvent
or approving a petition seeking reorganization of Owner or Developer 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.
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(b) Remedies. At any time after the occurrence and during the
continuance of any Event of Default caused by Owner, Developer may, at its
option, do one or more of the following: (i) exercise its rights under that
certain Guaranty ("Guaranty") dated as of the date hereof made by AH Michigan
CGP, Inc., an Ohio corporation and AH Michigan Subordinated, LLC, an Ohio
limited liability company (collectively, the "Guarantors"), and that certain
Collateral Assignment of Partnership Interests dated as of the date hereof made
by the Guarantors ("Assignment"), (ii) terminate this Agreement by giving
written notice to Owner and/or (iii) exercise all rights and remedies available
under law or equity. At any time after the occurrence and during the continuance
of an Event of Default caused by Developer under Section 7(a)(iv) above, Owner
may, at its option, terminate this Agreement by giving written notice to
Developer. At any time after the occurrence and during the continuance of an
Event of Default caused by Developer (other than under Section 7(a)(iv) above),
Owner may, as its option, terminate this Agreement in accordance with the terms
hereof and Developer shall have no other liability to Owner hereunder.
8. Force Majeure. The parties will not be deemed to be in violation or
breach of this Agreement if they are prevented from performing any of their
respective obligations hereunder for any reason beyond their control, including,
without limitation, strikes, shortages, war, acts of God, or any applicable
statute, regulation or rule of federal, state or local government or agency
thereof having jurisdiction over the Project or the operations thereof.
9. [Intentionally Omitted]
10. Fees. During the term of this Agreement, Developer shall be entitled
to receive development fees (the "Fees") in an amount and payable by Owner as
follows:
(a) all corporate overhead and administrative costs and capitalized
interest costs incurred by Developer after the date hereof in performing
the services under this Agreement; and
(b) an additional amount equal to the amount specified in Section
10(a) above.
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The Fees described in this Section 10 above shall accrue and shall be due and
payable by Owner to Developer in cash on the date on which this Agreement is
terminated.
11. Assignment. This Agreement shall not be assigned (including by
operation of law, whether by merger or consolidation (excluding a merger
effected solely for the purpose of changing Owner's jurisdiction of
incorporation that does not affect the ownership interests of Owner in any
material respect) or otherwise) by Owner, on the one hand, or by Developer, on
the other, without the prior written consent of the other party; provided,
however, that to the extent permitted by applicable law and regulations, and
subject to the receipt of all required licenses, permits, approvals and
authorizations of applicable governmental agencies, this Agreement may be
assigned by Developer to one or more corporations or other legal entities all
the shares (and, in the case of legal entities other than corporations, all the
equity ownership and voting control) of which are owned, directly or indirectly,
by Developer or by Brookdale Living Communities, Inc.
12. Notices. Any notices required or permitted to be sent hereunder shall
be delivered personally or by facsimile (with answer back acknowledged) or
mailed, certified mail, return receipt requested, or delivered by overnight
courier service to the following addresses, or such other addresses as shall be
given by notice delivered hereunder, and shall be deemed to have been given upon
delivery, if delivered personally, upon receipt with answer back acknowledged,
if delivered by facsimile, three (3) business days after mailing, if mailed, or
one business day after delivery to the courier, if delivery by overnight courier
service:
If to Owner, to:
AH Michigan Owner Limited Partnership
00 Xxxxx Xxxx Xxxxxx, Xxxxx 0000
Xxxxxxxx, Xxxx 00000
Attn: Xxxxx X. Xxxxxxx
Facsimile: (000) 000-0000
If to Developer, to:
c/o Brookdale Living Communities, Inc.
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00 Xxxx Xxxxxx Xxxxx
Xxxxx 0000
Xxxxxxx, Xxxxxxxx 00000
Attn: Xxxxxx X. Xxxxxxxx, Xx.
Facsimile: (000) 000-0000
With a copy to:
c/o Brookdale Living Communities, Inc.
00 Xxxx Xxxxxx Xxxxx
Xxxxx 0000
Xxxxxxx, Xxxxxxxx 00000
Attn: Xxxxxx X. Xxxxxx
Facsimile: (000) 000-0000
and to:
Winston & Xxxxxx
00 Xxxx Xxxxxx Xxxxx
Xxxxxxx, Xxxxxxxx 00000
Attn: Xxxxx X. Xxxxxx, Esq.
Facsimile: (000) 000-0000
13. Relationship of the Parties. The relationship of Developer to Owner in
connection with this Agreement shall be that of an independent contractor, and
all acts performed by Developer during the term hereof shall be deemed to be
performed in Developer's capacity as an independent contractor. Nothing
contained in this Agreement is intended to or shall be construed to give rise to
or create a partnership or joint venture or lease between Owner, its successors
and assigns, on the one hand, and Developer, its successors and assigns, on the
other hand.
14. Entire Agreement. This Agreement and any documents executed in
connection herewith contain the entire agreement among the parties with respect
to the subject matter hereof and, subject to the restrictions contained in
Section 11 above, shall be binding upon their respective successors and assigns,
and shall be construed in accordance with the laws of the state where the
Project is located. This Agreement may not be modified or amended except by
written instrument signed by the parties hereto.
15. Contract Modifications for Certain Legal Events. In the event any
state or federal laws or regulations, whether now
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existing or enacted or promulgated after the effective date of this Agreement,
are interpreted by judicial decision, a regulatory agency or legal counsel of
both parties in such a manner as to indicate that the structure of this
Agreement may be in violation of such laws or regulations, Owner and Developer
agree to cooperate in restructuring their relationship and this Agreement to
eliminate such violation or to reduce the risk thereof to the extent such
restructuring can be accomplished upon commercially reasonable terms; provided,
that any such restructuring shall, to the maximum extent possible, preserve the
underlying economic and financial arrangements between Owner and Developer. The
parties agree that such amendment may require either or both parties to obtain
appropriate regulatory licenses and approvals.
16. 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.
17. Severability. In the event one or more of the provisions contained in
this Agreement 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.
18. Counterparts. This Agreement 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. Limitation of Personal Liability. Notwithstanding any other provision
of this Agreement to the contrary, in no event shall any officer, director,
member, partner, manager, shareholder, incorporator or agent of Owner or of
Owner's affiliates be personally liable to Developer for any of Owner's
obligations under this Agreement, except as expressly provided in the Guaranty
and the Assignment.
[signature page follows]
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IN WITNESS WHEREOF, the parties hereto have caused this Development
Agreement to be executed and delivered in their names and on their behalf as of
the date first set forth above.
OWNER:
AH MICHIGAN OWNER LIMITED PARTNERSHIP,
an Ohio limited partnership
By: AH Michigan CGP, Inc.,
its general partner
By:________________________________
Title:_____________________________
DEVELOPER:
BROOKDALE LIVING COMMUNITIES OF MICHIGAN,
INC., a Delaware corporation
By:_____________________________________
Title:__________________________________
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