AMENDED AND RESTATED LIMITED LIABILITY COMPANY AGREEMENT OF BREA EMERITUS LLC
AMENDED
AND RESTATED
OF
BREA
EMERITUS LLC
THIS
AMENDED AND RESTATED LIMITED LIABILITY COMPANY AGREEMENT (this “Agreement“)
of
BREA EMERITUS LLC (the
“Company“)
is made
and entered into as of the 1ST
day of
December, 2006, by and between EMERITUS CORPORATION, a Washington
corporation (“ESC“),
and
BREA 806 LLC, a Delaware limited liability company (“BREA“).
WHEREAS,
the Company desires to obtain a loan from General Electric Capital Corporation,
a Delaware corporation, in its capacity as mortgage lender of the Loan (together
with its successors and assigns as holders of interests in the Loan,
“Lender”),
in
the original principal amount of up to $167,000,000.00 (the “Loan”),
which
Loan will be made pursuant to that certain Credit Agreement by and between
the
Company and Lender (the “Credit
Agreement”)
and
evidenced by one or more Term Loan Notes in the aggregate original principal
amount of up to $167,000,000.00, by the Company in favor of Lender (the
“Note”),
and
those certain Mortgages or Deeds of Trust, made by the Company for the benefit
of Lender (the “Security
Instrument”);
WHEREAS,
in connection with the Loan, Lender has required that the Company exist as
a
single purpose bankruptcy remote entity with certain bankruptcy remote
provisions;
WHEREAS,
ESC and BREA formed the Company pursuant to the provisions of the Delaware
Limited Liability Company Act, 6 Del. C. § 18-101 et seq., as the same may be
amended from time to time (the “Act”);
and,
in connection therewith, caused to be filed on September 20, 2006 with the
Secretary of State of the State of Delaware, a Certificate of Formation for
BREA
Emeritus LLC as a limited liability company and executed that certain Limited
Liability Company Agreement of the Company, dated as of September 20, 2006
(as
amended, the “Existing
Agreement”),
as
amended by that certain First Amendment to Limited Liability Company Agreement,
dated as of October 24, 2006;
WHEREAS,
the parties hereto now desire to amend and restate in its entirety the Existing
Agreement on the terms and conditions contained herein;
NOW
THEREFORE, in consideration of the agreements and obligations set forth herein
and for other good and valuable consideration, the Members and Independent
Manager hereby agree as follows:
ARTICLE
I
FORMATION AND PURPOSE OF COMPANY; DEFINITIONS
.
Section
1.1 Formation
.
As of
September 20, 2006, the Company has been formed by the filing of a certificate
of formation with the Secretary of State of the State of Delaware. The Company
shall continue to be operated as a limited liability company under the Act,
subject to the provisions set forth in this Agreement.
Section
1.2 Name
.
The
Company’s business shall be conducted solely under the name of “BREA Emeritus
LLC.”
Section
1.3 Term
.
The
term of the Company shall be from the date hereof until the Company is dissolved
as hereinafter provided.
Section
1.4 Purpose
.
The
purpose of the Company shall be to acquire, operate, lease, maintain, market,
finance, sell and otherwise use the “Properties” (as hereinafter defined) for
profit and to engage in all activities related thereto (the “Project”).
The
business of the Company may be conducted directly by the Company or through
direct or indirect wholly-owned subsidiaries of the Company (the “Company
Subsidiaries”).
Section
1.5 Registered
Office; Registered Agent; Principal Office
.
The
registered office and registered agent for service of process of the Company
shall be Corporation Service Company, 0000 Xxxxxxxxxxx Xxxx, Xxxxx 000,
Xxxxxxxxxx, Xxxxxxxx 00000, or such other place as the Members may from time
to
time designate. The principal office of the Company shall be at 000 Xxxx Xxxxxx,
Xxx Xxxx, Xxx Xxxx 00000, or at such other place as the Members shall
agree.
Section
1.6 Members
.
“Member”
means
any of BREA and ESC, and subject to Section
11.9,
their
respective successors and assigns. “Members”
means
BREA and ESC, collectively, and subject to Section
11.9,
their
respective successors and assigns. Upon the occurrence of any event that causes
the last remaining Member of the Company (the “Sole
Member”)
to
cease to be a member of the Company (other than (i) upon an assignment by the
Sole Member of all of its limited liability company interest in the Company
and
the simultaneous admission of the transferee pursuant to the terms of (a) this
Agreement, and (b) the Credit Agreement, or (ii) the resignation of the Sole
Member and the simultaneous admission of an additional member of the Company
pursuant to the terms hereof) (a “Member
Cessation Event”),
Independent Manager shall, without any action of any Person and simultaneously
with the Member Cessation Event, automatically be admitted to the Company as
the
Sole Member of the Company (the “Special
Member”)
and
shall preserve and continue the Company without dissolution. Special Member
may
not resign from the Company or transfer its rights as Special Member unless
a
successor Special Member has been admitted to the Company as Special Member
by
executing a counterpart to this Agreement. Special Member shall be a member
of
the Company that has no interest in the profits, losses and capital of the
Company and has no right to receive any distributions of Company assets.
Pursuant to Section 18-301 of the Act, Special Member shall not be required
to
make any capital contributions to the Company and shall not receive a limited
liability company interest in the Company. Special Member, in its capacity
as
Special Member, may not bind the Company. Except as required by any mandatory
provision of the Act, Special Member, in its capacity as Special Member, shall
have no right to vote on, approve or otherwise consent to any action by, or
matter relating to, the Company, including, without limitation, the merger,
consolidation or conversion of the Company. In order to implement
the
admission to the Company of Special Member, Independent Manager shall execute
a
counterpart to this Agreement. Prior to its admission to the Company as Special
Member, Independent Manager shall not be a member of the Company.
Section
1.7 Definitions
.
The
following terms shall have the respective meanings set forth below:
“Acquisition Costs”
means
the sum of the following costs in connection with the acquisition of the
Properties: (a) the Purchase Price (including the Deposit), net of the
prorations provided for in the Purchase Agreement, and closing costs (excluding
legal fees [it being understood that legal fees are included only to the extent
set forth in clause (b) below]) as indicated in the Closing Statement and
approved by BREA; and (b) to the extent set forth in Exhibit ”A” or as
otherwise approved in writing by the Members, the out-of-pocket due diligence,
pre-closing costs, legal fees (excluding legal fees associated with negotiating
and documenting this Agreement and the Collateral Agreements, the respective
costs of which shall be borne by the respective parties incurring the same)
and
initial reserves, that have been or are anticipated to be incurred by the
Company, any Company Subsidiary or the Members in connection with the
acquisition of the Properties, the formation of the Company, and any Company
Subsidiaries, or Project Financing (including any good faith deposit and
commitment or other fees).
“Administrative
Member Costs”
means
the actual third-party out-of-pocket costs reasonably incurred by ESC on behalf
of or otherwise relating to or intended to benefit the Company or any Company
Subsidiary, such as appraisal, legal, preparation of third party financial
reports, (including the annual preparation of tax returns and/or audits of
the
Company as required) diligence and investigation expenses with respect to the
acquisition on new Properties. Administrative Member Costs is not intended
to
include ESC’s general corporate overhead costs or the costs of any regional or
divisional employees retained by ESC in relation to the Properties, or any
costs
or expense which are not the obligations of ESC in its capacity as property
manager under a Management Agreement.
“Affiliate”
of
a
person or entity (or words of similar import, whether or not capitalized) means
(1) any officer, director, employee, trustee, , member, partner or; or
(2) any corporation, partnership, limited liability company, trust or other
person or entity controlling, controlled by or under common control with the
entity in question (whether directly or indirectly through one or more
intermediaries). Notwithstanding the foregoing, nothing herein shall be
construed to apply to privately held entities and/or ventures owned and/or
operated by Xxxxxx X. Xxxx. However, neither the Company nor any Company
Subsidiary shall be deemed to be an Affiliate of any Member. For the purpose
of
this definition, “control”
means
the possession, directly or indirectly, of the power to decide, affirmatively
(by direction) or negatively (by veto), the management and policies, whether
through the ownership of voting securities or by contract or otherwise.
“Bankruptcy/Dissolution
Event”
with
respect to an entity, means the commencement or occurrence of any of the
following with respect to such entity: (1) a case under Title 11 of
the U.S. Code, as now constituted or hereafter amended, or under any other
applicable federal or state bankruptcy law or other similar law; (2) the
appointment of (or a proceeding to appoint) a trustee or receiver of any
property interest; (3) an attachment, execution or other judicial seizure
of (or a proceeding to attach, execute or seize) a substantial property
interest; (4) an assignment for the
benefit
of creditors; or (5) the general inability to meets its financial obligations
as
and when they are due; or (6) a dissolution or liquidation; provided,
however, that the events described in clauses (1), (2) or (3) shall not be
included if the same are (a) involuntary and not at any time consented to,
(b) contested within thirty (30) days of commencement and thereafter
diligently and continuously contested, and (c) dismissed or set aside, as
the case may be, within ninety (90) days of commencement.
“Budget”
means
the consolidated Operating Budget and Capital Budget, as applicable, for the
Properties. “Operating
Budget”
and
“Capital
Budget”
means
the consolidated operating budget and capital budget, respectively, for the
Company, but not as it relates to a specific Property, as the same may be
modified from time to time with the written approval of BREA, or any other
budget of the Company or any Company Subsidiary. The initial Budget is attached
hereto as Exhibit “B.”
“Business
Agreements”
means
any lease, rental agreement, loan agreement, mortgage, easement, covenant,
restriction or other agreement or instrument at any time or times affecting
the
Company, any Company Subsidiary or all or a portion of any of their respective
assets.
“Claim”
means
any obligation, liability, claim (including any claim for damage to property
or
injury to or death of any persons), lien or encumbrance, loss, damage, cost
or
expense (including any judgment, award, settlement, reasonable attorneys’ fees
and other costs and expenses incurred in connection with the defense of any
actual or threatened action, proceeding or claim [including appellate
proceedings], and any collection costs or enforcement costs).
“Collateral
Agreement”
means
any agreement, instrument, document or covenant concurrently or hereafter made
or entered into under, pursuant to, or in connection with this Agreement
(including the “Management Agreements,” as hereinafter defined), and any
certifications made in connection herewith or therewith or amendment or
amendments made at any time or times heretofore or hereafter to any of the
same.
“Company
Percentages”
means,
initially, the following respective percentages for each of the
Members:
|
Member
|
Company
Percentage
|
|
ESC
|
19%
|
|
BREA
|
81%
|
|
TOTAL:
|
100%
|
“Cure
Period”
means
(1) five (5) business days after written notice to a defaulting Member
or Affiliate specifying the nature of a default or breach under this Agreement
or Collateral Agreement, in connection with a monetary default that is not
a
“Noncurable Default” (as hereinafter defined); (2) thirty (30) days after
written notice to a defaulting Member or Affiliate specifying the nature of
a
default or breach under this Agreement or Collateral Agreement, in connection
with a non-monetary default that is not a Noncurable Default (provided, however,
that if such non-
monetary
default cannot reasonably be cured within such thirty (30) day period, and
such defaulting Member promptly commences the cure of such default and
diligently pursues such cure to completion, then such thirty (30) day
period shall be extended to the extent reasonably necessary, but in no event
after the date that is sixty (60) days after such written notice); and
(3) no period at all for a Noncurable Default.
“Investment
Maintenance Costs”
means
the actual third-party out-of-pocket costs reasonably incurred by BREA (or
its
Affiliates) in connection with making or maintaining its interest in the
Company, or on behalf of or otherwise relating to or intended to benefit the
Company or any Company Subsidiary, such as travel, appraisal, legal, accounting,
(including the annual preparation of tax returns and/or audits of the Company
as
required) diligence and investigation expenses.
“Laws”
(i.e.,
all procedural and substantive federal, state and local laws, moratoria,
initiatives, referenda, ordinances, rules, regulations, standards, orders and
other governmental requirements [including those relating to the environment,
health and safety, or handicapped persons], applicable to the Company, any
Company Subsidiary or all or any portion of their respective
assets).
“Material
Action”
means
to institute proceedings to have the Company be adjudicated bankrupt or
insolvent, or consent to the institution of bankruptcy or insolvency proceedings
against the Company or file a petition seeking, or consent to, reorganization
or
relief with respect to the Company under any applicable federal or state law
relating to bankruptcy, or consent to the appointment of a receiver, liquidator,
assignee, trustee, sequestrator (or other similar official) of the Company
or a
substantial part of its property, or make any assignment for the benefit of
creditors of the Company, or admit in writing the Company’s inability to pay its
debts generally as they become due, or take action in furtherance of any such
action.
“Noncurable
Default”
means
a
default that cannot be cured and includes each of the following: (a) a
breach of a representation or warranty, (b) a breach of Section 6.1 or
any other restriction upon transfer or hypothecation, (c) an intentional
breach, (d) a breach constituting gross negligence or willful misconduct (which,
as used in this Agreement, shall include active or passive fraud, dishonesty
or
bad faith), (e) a breach of Section 5.4 or any other exclusive or
non-competition covenant, (f) a breach of an obligation if there have been
two (2) prior breaches of such obligation or a similar obligation within
the immediately preceding one (1) year period (or if longer, the period
during which the obligation arose on the three most recent prior occasions),
or
(g) taking action on behalf of the Company that is beyond the scope of
authority established by this Agreement.
“Obligation”
means,
with respect to the Company, all amounts, obligations, liabilities, covenants
and duties of every type and description owing by the Company to the
Administrative Agent (as defined in the Credit Agreement), the Lender, any
other
Indemnitee (as defined in the Credit Agreement), any participant, any SPE (as
defined in the Credit Agreement) or, in the case of any Secured Hedging
Agreement, any Affiliate of any of them arising out of, under, or in connection
with, any Loan Document, whether direct or indirect (regardless of whether
acquired by assignment), absolute or contingent, due or to become due, whether
liquidated or not, now existing or hereafter arising and however acquired,
and
whether or not evidenced by any instrument or for the payment of money,
including, without duplication, (a) all Loans, (b) all interest, whether or
not
accruing after the filing of any petition in bankruptcy or after the
commencement of any insolvency,
reorganization
or similar proceeding, and whether or not a claim for post-filing or
post-petition interest is allowed in any such proceeding, and (c) all other
fees, expenses (including fees, charges and disbursement of counsel), interest,
commissions, charges, costs, disbursements, indemnities and reimbursement of
amounts paid and other sums chargeable to the Company under any Loan
Document.
“Permitted
Portfolio Acquisition”
means
the acquisition by ESC, or any Affiliate of ESC, of a portfolio of 3 or more
senior housing facilities, wherein no more than 25% of the units to be acquired
in such portfolio are within 15 miles of any of the Properties. For the purposes
of this definition, any Company Property that is 90% occupied and within the
15
mile radius at the time of ESC’s proposed acquisition shall be exempt from the
15 mile and unit restrictions, and ESC shall be entitled to complete the
proposed acquisition without regard to the 90% occupancy Property or the
restrictions in Section
5.4B.
“Project
Financing”
has the
meaning set forth in Section 2.7.
“Project
Financing Documents”
has
the
meaning set forth in Section 2.7.
“Project
Financing Guaranty Documents”
has the
meaning set forth in Section 2.7.
“Project
Lender”
has
the
meaning set forth in Section 2.7.
“Properties”
means
the assisted living and skilled nursing facility properties (each a
“Property”)
described in Exhibit “C.”
“Purchase
Agreement”
means
the purchase agreement to be entered into between the Company and Seller, for
the purchase and sale of the Properties.
“Requirements”
means
this Agreement, the Operating Budget, the Capital Budget, the Business
Agreements including the Purchase Agreement, as the same may be amended in
accordance with this Agreement and Laws.
“Seller”
means
collectively, Pita General Corporation, an Illinois corporation, and AHC Tenant,
Inc., a Delaware Corporation, and each of the entities listed in Exhibit A
to
the Purchase Agreement, as the seller under the Purchase Agreement.
ARTICLE
II
ACQUISITION OF PROPERTIES
.
Section
2.1 General
.
The
Company shall enter into the Purchase Agreement for the acquisition of the
Properties. Each Property shall be owned in a separate Company
Subsidiary.
A. Defined
Terms
.
As used
herein, the following terms shall have the meanings set forth for the same
in
the Purchase Agreement: “Closing,”
“Closing
Date,”
“Deposit,”
“Escrow
Agent,”
and
“Purchase
Price.“
B. Actions
To Be Taken Under Purchase Agreement
.
At all
times between the date hereof and the Closing, BREA shall take all actions
and
make all final decisions relating to the Purchase Agreement. BREA shall keep
ESC
reasonably informed with respect to all matters related to the
Purchase
Agreement. Without limitation on the foregoing, “Administrative Member” (as
hereinafter defined) shall not enter into the Purchase Agreement or give any
notice, take any action (including the making of any additional deposit and
any
performances in connection with the Closing) or waive any matter under the
Purchase Agreement. The parties will use reasonable efforts to cooperate in
order to meet the time deadlines for consents and performances by the Company
under the Purchase Agreement.
Section
2.2 Representations
and Warranties of ESC
.
ESC
hereby represents and warrants to BREA, the Company, each Company Subsidiary,
and each of them, as follows:
A. Purchase
Agreement
.
ESC
shall not permit any oral modifications or understandings with respect to the
Purchase Agreement and, without limitation, neither the Company, ESC nor any
of
its Affiliates shall deliver to Seller any notice or demand under or in
connection with the Purchase Agreement that is not previously approved in
writing by BREA. The Company or a Company Subsidiary shall be the holder of
all
right, title and interest to the “Purchaser” under the Purchase Agreement
(including the Deposit).
B. Due
Authorization, Execution, Formation, Etc.
This
Agreement and all agreements, instruments and documents herein provided to
be
executed or to be caused to be executed by ESC are, as of the date hereof,
duly
authorized, executed and delivered by and are and will be binding upon the
same.
ESC is a corporation duly formed, validly existing and in good standing under
the laws of the state of its formation. ESC is duly authorized and qualified
to
enter into and do all things required of it under this Agreement and the
Collateral Agreements it is executing in connection with this transaction
(including compliance with all applicable doing business laws). Neither this
Agreement, any Collateral Agreement nor any agreement, document or instrument
executed or to be executed in connection with the same, nor anything provided
in
or contemplated by this Agreement or any such other agreement, document or
instrument, breaches, invalidates, cancels, makes inoperative or interferes
with, or results in the acceleration or maturity of, or requires any consent
or
authorization that has not been obtained under, any contract, agreement, lease,
easement, right or interest, law or regulation to which ESC or, to the best
knowledge of ESC, any of the Properties, is subject.
C. Information
Acquired From Due Diligence
.
ESC
shall keep BREA fully informed of all information gathered from ESC’s due
diligence with respect to each Property.
D. Competing
Projects
.
As of
the date of this Agreement, except for the properties (the “Existing
Competing Projects”)
identified on Exhibit ”D,” neither ESC nor any of its Affiliates holds any
interest, directly or indirectly, in any real estate (excluding personal
residences) within a 15-mile radius of any Property.
Section
2.3 Representations
and Warranties of BREA
.
BREA
hereby represents and warrants to ESC, the Company, and each Company Subsidiary,
and each of them, as follows:
A. Purchase
Agreement
.
BREA
shall not permit any oral modifications or understandings with respect to the
Purchase Agreement and, without limitation, neither the Company, BREA nor any
of
its Affiliates shall deliver to Seller any notice or demand under or in
connection with the Purchase Agreement until BREA has consulted with ESC
regarding same. The Company or a
Company
Subsidiary shall be the holder of all right, title and interest to the
“Purchaser” under the Purchase Agreement (including the Deposit).
B. Due
Authorization, Execution, Formation, Etc
.
This
Agreement and all agreements, instruments and documents herein provided to
be
executed or to be caused to be executed by BREA are, as of the date hereof,
duly
authorized, executed and delivered by and are and will be binding upon the
same.
BREA is a limited liability company, duly formed, validly existing and in good
standing under the laws of Delaware. BREA is duly authorized and qualified
to
enter into and to do all things required of it under this Agreement and the
Collateral Agreements it is executing in connection with this transaction
(including compliance with all applicable doing business laws). Neither this
Agreement nor any agreement, document or instrument executed or to be executed
in connection with the same, nor anything provided in or contemplated by this
Agreement or any such other agreement, document or instrument, breaches,
invalidates, cancels, makes inoperative or interferes with, or results in the
acceleration or maturity of, or requires any consent or authorization that
has
not been obtained under, any contract, agreement, lease, easement, right or
interest, law or regulation, to which BREA is subject (other than as a result
of
its entry into this Agreement).
Section
2.4 Deposit
.
The
Deposit shall constitute property of the Company and shall be held and applied
by the Escrow Agent pursuant to the Purchase Agreement. The parties shall use
reasonable efforts to ensure that the Deposit is invested in an interest-bearing
federally insured account with the Escrow Agent or such other investment as
may
be approved in writing by the parties. The approval of BREA shall be required
for: (1) any action or omission that would result in a forfeiture or delay
in the return of any portion of the Deposit; (2) the exercise of any of the
Company’s rights under the Purchase Agreement to terminate the transaction and
receive a refund of the Deposit; (3) the extension of the Closing Date; and
(4) whether to proceed with the Closing. If the Company is entitled to a
return of the Deposit under the terms of the Purchase Agreement and for any
reason Seller disputes the return of the Deposit to the Company, BREA and ESC
shall cause the Company to diligently pursue the refund of the Deposit. In
the
event of a refund of any portion of the Deposit and any interest thereon, such
refund shall be delivered to the Members in accordance with their respective
Company Percentages.
Section
2.5 Failure
to Acquire the Properties. In the event that the Company does not acquire the
Properties pursuant to the Purchase Agreement, then: (1) the Company shall
engage in no other activities, (2) BREA shall cause the dissolution and orderly
liquidation of the Company (subject to the completion of the activities set
forth in Section 2.4 in connection with the return of the Deposit), and (3)
except for the Members’ internal costs and legal expenses in connection with the
negotiation of this Agreement, for which each of BREA and ESC shall bear its
own
costs, all due diligence costs incurred by the Members shall be reimburse by
the
Company; provided, however, that (x) if the failure to timely acquire the
Properties is intentionally caused by facts or circumstances that constitute
a
breach or default of a Member or an Affiliate under this Agreement, the Purchase
Agreement, or any Collateral Agreement, then such Member shall reimburse the
other Member for its costs and expenses under or in connection with this
Agreement and neither such defaulting Member nor any Affiliate thereof shall
pursue the acquisition of any interest in the Properties for the 24-month period
after the dissolution of the Company, and (y) if clause (x) does not apply
and
if a Member or an Affiliate acquires an interest in the Properties without
the
other Member or an Affiliate, or assigns or sells rights to acquire an interest
in the Properties to a third party, on or before the date that is twelve (12)
months after the dissolution of the Company, then the acquiring or
assigning
Member shall bear 100% of all Acquisition Costs and all legal costs of formation
and shall promptly reimburse the other Member and its Affiliates for any such
costs paid or incurred by them.
Section
2.6 Brokers
.
Each
Member represents and warrants to the other Member, the Company, and each
Company Subsidiary, and each of them, that no broker or finder has been engaged
by it in connection with any of the transactions contemplated by this Agreement
or to its knowledge is in any way connected with any of such transactions (the
parties acknowledging that Seller may have engaged certain brokers in connection
with the Purchase Agreement, as more particularly described therein, and that
Seller is responsible for all amounts due to such brokers). In the event of
a
“Claim” (as hereinafter defined) for a broker’s or finder’s fee or commission in
connection herewith, then each Member shall, to the fullest extent permitted
by
applicable law, indemnify, protect, defend and hold the other Members, the
Company, each Company Subsidiary, and their respective assets harmless from
and
against the same if it shall be based upon any statement or agreement alleged
to
have been made by it or its Affiliates.
Section
2.7 Project
Financing.
Giving
due consideration to market and property conditions, BREA shall make
commercially reasonable efforts to obtain Project Financing, upon such terms
and
conditions as are acceptable to BREA in its sole discretion; provided, however,
that BREA shall consult with ESC as to the terms of such Project Financing,
and
in no event shall the Project Financing be secured by real property in addition
to the Properties. BREA shall be responsible for the negotiation of the
documents required to be executed by the Company or any Subsidiary Company
pursuant to any Project Financing (the “Project
Financing Documents”).
All
costs expended in connection with the Project Financing, including but not
limited to attorneys’ fees with respect to the Project Financing Documents,
shall be payable by the Company. “Project
Financing”
means
any financing or refinancing obtained by the Company or any Company Subsidiary.
The lender under the Project Financing is herein called the “Project
Lender.”
ESC
shall, or shall cause its creditworthy Affiliates satisfactory to the Project
Lender, to execute and deliver such non-recourse carve-out guaranties,
environmental indemnities and other related documents (“Project
Financing Guaranty Documents”)
as are
required by the Project Lender and approved in the reasonable discretion of
ESC.
Subject to Section
11.2,
any
amounts paid by ESC or its Affiliates pursuant to such Project Financing
Guaranty Documents shall be paid by ESC in its individual capacity and not
by
ESC in its capacity as a Member of the Company; and any such payment or any
performance under (or the execution of) the Project Financing Guaranty Documents
shall not be deemed to be a Capital Contribution or loan by ESC to the Company,
shall not increase ESC’s capital account or Company Percentage, and shall not
entitle ESC to the recoupment of, or the payment of any interest, charge or
other credit or consideration from the Company.
Section
2.8 Survival
.
All
warranties, representations, covenants, obligations and agreements contained
in
this Agreement shall survive the Closing and any and all performances hereunder.
All warranties and representations shall be effective regardless of any
investigation made or which could have been made by the party benefiting from
such warranties and representations.
ARTICLE
III
CAPITALIZATION AND LOANS BY MEMBERS
.
Section
3.1 Initial
Contributions By Members
.
A. Initial
Contributions
.
On or
about September 5, 2006, an Affiliate of BREA made the
initial
portion of the Deposit in the amount of $5,000,000. As a result thereof, BREA
shall be deemed to have contributed $5,000,000 to the Company.
B. Payments
of Deposit.
On or
about October 12, 2006, BREA made a contribution to the Company of $7,150,000,
and ESC made a contribution to the Company of $2,850,000, which amounts were
used to fund the remainder of the Deposit required to be made under the Purchase
Agreement.
C. Acquisition
Costs
.
Subject
to Article II, each Member shall contribute its Company Percentage of the
Acquisition Costs (to the extent such Acquisition Costs are not funded by the
Project Financing in connection therewith or by the Deposit) on the Closing
Date. On or before the Closing Date, Administrative Member shall deliver a
“Contribution Request” (as hereinafter defined) in the manner provided in
Section 3.2 for such Acquisition Costs, which Contribution Request shall
include a copy of the preliminary closing statement prepared in connection
with
the Closing and the Project Financing indicating such Acquisition Costs (the
“Closing
Statement”),
wiring instructions to the Escrow Agent, the amount required to be funded by
each Member under this subsection, and the deadline under the Purchase Agreement
for receipt of such funds by the Escrow Agent. On the Closing Date,
Administrative Member shall cause the Escrow Agent to deliver such funds on
behalf of the Company to pay the Acquisition Costs as indicated on the Closing
Statement, but only after obtaining the prior written approval of BREA and
ESC
of the final Closing Statement. Each Member will receive a credit towards such
contribution obligations equal to the amount of Acquisition Costs previously
paid or contributed by such Member.
Section
3.2 Additional
Capital Contributions by the Members
.
In
addition to the contributions made pursuant to Section 3.1, but subject to
the limitations hereinafter set forth in this Agreement (including
Section 5.1B(8)), each Member shall contribute from time to time its
Company Percentage (subject to Section 3.5) of the capital required to meet
the financial obligations of the Company. Each contribution under this
Section 3.2 is herein called a “Subsequent
Contribution.”
No
additional capital contributions shall be required to be made by the Members
other than as expressly provided in this Section 3.2.
A. Contribution
Requests
.
If BREA
reasonably anticipates that there will be capital requirements for any given
calendar month, then, at least ten (10) business days prior to the first day
of
such calendar month, BREA shall submit a written contribution request for such
month to the Members describing such capital requirements and meeting the
requirements of this subsection A (“Contribution
Request”).
Each
Contribution Request shall (1) describe in reasonable detail the
anticipated capital requirements for such month; and (2) set forth each
Member’s required contribution. BREA may submit Contribution Requests to the
Members no more frequently than once each month, unless there is an emergency,
in which event BREA shall immediately notify the Members in writing.
Administrative Member shall have the obligation to notify BREA of anticipated
capital requirements, in which event BREA may submit a Contribution
Request.
B. Deposit
.
Within
ten (10) business days after a Contribution Request is delivered to the Members,
each Member shall contribute to the Company by deposit into the “Operating
Accounts” (as hereinafter defined) the amount to be contributed by such Member
under such Contribution Request.
10
C. Use
of
Contributions
.
Administrative Member acknowledges that the Operating Budget and the Capital
Budget restrict disbursements to line items in cost categories (subject to
the
deviations permitted under Section 5.1B(3)). Administrative Member shall
use the contributions made pursuant to Section 3.1 and Subsequent
Contributions in conformity with the Requirements.
Section
3.3 Failure
to Contribute
.
A. Upon
the
failure of a Member (the “Non-Contributing
Member”),
for a
period in excess of ten (10) days, to make its share of any required capital
contribution under Section 3.1 or 3.2 (the portion thereof not contributed
by or returned to such Non-Contributing Member being referred to herein as
the
“Deficiency”),
then
the other Member (the “Contributing
Member”),
if it
has timely made its share of such capital contribution, may, in its sole and
absolute discretion within ten (10) days after the expiration of the foregoing
ten (10) day period, (1) withdraw its share of such contribution, in which
event such Subsequent Contribution shall be deemed cancelled but the
Non-Contributing Member shall not be released of its liability for damages
resulting from its failure to contribute its share of the same, (2) loan to
the Non-Contributing Member such Deficiency by depositing the same into the
Operating Accounts, or (3) contribute to the Company such Deficiency by
depositing the same into the Operating Accounts, which contribution shall reduce
the Non-Contributing Member’s Company Percentage pursuant to subsection D below.
If the Contributing Member fails, within such ten (10) day period, to deposit
the Deficiency into the Operating Accounts, then it shall be deemed to have
elected to proceed under clause (1) above and the Company shall promptly
return to the Contributing Member its share of such contribution.
B. If
the
Contributing Member proceeds under clause (2) of subsection A above,
then the Non-Contributing Member shall be deemed to have contributed the
Deficiency and the loan (which shall be called a “Default
Loan”)
shall
bear interest at the “Applicable
Rate”
(which,
as used herein, means, from time to time, the lesser of (A) 20% per annum,
compounded annually, or (B) 10% per annum in excess of the prime rate of
interest publicly announced by Citibank, N.A, compounded annually, but not
less
than 15% per annum, compounded annually, but not more than the maximum amount
allowable under applicable law), and shall be due and payable ten (10) days
after the date made. Notwithstanding the provisions of Section 4.1, all
distributions which would otherwise be made to the Non-Contributing Member
shall
be paid instead to the Contributing Member that makes such Default Loan until
the Default Loan (and all interest thereon) has been paid in full. Any such
payments and distributions shall be deemed to have been distributed to the
Non-Contributing Member and then turned over in payment of such Default Loan.
All payments shall be applied first to interest and then to
principal.
C. If
a
Default Loan (including all interest thereon) to ESC is not fully paid when
due
(i.e., within ten (10) days), then an event shall be deemed to have occurred
under Section 7.2A(2) entitling BREA to deliver a “Termination Notice” (as
hereinafter defined). Notwithstanding the foregoing, BREA shall not be permitted
to deliver a Termination Notice with respect to a Default Loan that results
from
a Contribution Request made upon BREA’s decision pursuant to its rights under
0,
unless
such Contribution Request is made in connection with an emergency or for
necessary capital contributions (e.g., to meet the requirements of any Project
Financing, to pay any applicable taxes, to prevent physical waste to any
Property).
11
D. If
the
Contributing Member proceeds under clause (3) of subsection A above, then the
Company Percentages of the Members shall be recalculated and reset as of such
time based upon the ratio of all contributions made by a Member (irrespective
of
any contributions that may have been previously returned to a Member) to all
contributions made by all of the Members (irrespective of any contributions
that
may have been previously returned to a Member). Notwithstanding the foregoing,
however, any capital contributions which are made by ESC pursuant to Section
3.5
and are attributable to distributions under the “Promote Clauses” (as
hereinafter defined) shall not be considered as capital contributions for
purposes of the foregoing calculation. To the extent that the Company Percentage
of ESC is reduced under this subsection D, the percentages set forth in clause
(2) of Section 4.1B, clause (2) of Section 4.1C and clause (2) of Section 4.1D
shall be reduced in the same proportion (as the proportionate reduction in
ESC’s
Company Percentage) and the corresponding percentages in clause (1) of Section
4.1B, clause (1) of Section 4.1C and clause (1) of Section 4.1D shall be
increased accordingly.
E. The
rights of the Company and its Members pursuant to this Section 3.3 are not
exclusive and shall not be deemed to waive any other right or remedy of the
Company or any Member under this Agreement, at law or in equity, against any
Non-Contributing Member for failure to make any required capital
contribution.
Section
3.4 Member
Loans
.
Except
as set forth in Section 3.3 above, no loan to the Company or any Company
Subsidiary shall be made by a Member without the prior written consent of all
of
the Members.
Section
3.5 Contributions
After Profit Distributions
.
Notwithstanding anything to the contrary in this Agreement, if any contribution
or Member loan is to be made after any amount has been distributed under
Section 4.1B, then such contribution or Member loan shall be made in
accordance with the Members’ respective proportionate shares of the
distributions made under each subsection of Section 4.1 (in reverse order)
unless (and until) on the date of such contribution or Member loan, (1) the
aggregate amount of contributions and Member loans then or theretofore made
in
accordance with such proportionate shares by reason of this Section 3.5
equals (2) the aggregate amount of distributions then or theretofore made under
such subsection.
ARTICLE
IV
DISTRIBUTIONS
.
Section
4.1 Distributions
.
Subject
to Sections 3.3, 4.4, 4.5 and 7.2 (and except as provided in Article V of
the “Tax Exhibit” [as hereinafter defined]), each distribution of “Distributable
Cash”
(i.e.,
the amount of cash the Members approve as being available for distribution,
after taking into account the future capital requirements of the Company and
any
restrictions under the loan documents of the Company and the Company
Subsidiaries) shall be made as follows:
A. First
Level
.
All
such Distributable Cash shall first be distributed, in preference and priority
to any other distribution of Distributable Cash, to BREA and ESC in accordance
with their respective relative Company Percentages until there shall have been
distributed to BREA from such Distributable Cash under this subsection A an
amount equal to the then “15% IRR Deficiency” (as defined in Exhibit ”E”
[the “IRR
Exhibit”]);
and
there shall be no distributions of Distributable Cash under subsection B, C
or D below at any time when there is a positive 15% IRR Deficiency.
12
B. Second
Level
.
The
balance, if any, of such Distributable Cash remaining after the distributions
pursuant to subsection A above shall be distributed to BREA and ESC, as
follows: (1) 85% to BREA and ESC in accordance with their respective relative
Company Percentages; and (2) the remaining 15% to Administrative Member; until
there shall have been distributed to BREA from such Distributable Cash under
this subsection B an amount equal to the then “20% IRR Deficiency” (as
defined in the IRR Exhibit); and there shall be no distributions of
Distributable Cash under subsection C or D below at any time when there is
a
positive 20% IRR Deficiency;
C. Third
Level
.
The
balance, if any, of such Distributable Cash remaining after the distributions
pursuant to subsections A and B above shall be distributed to BREA and ESC,
as
follows: (1) 80% to BREA and ESC in accordance with their respective
relative Company Percentages; and (2) the remaining 20% to Administrative
Member; until there shall have been distributed to BREA from such Distributable
Cash under this subsection C an amount equal to the then “25% IRR
Deficiency” (as defined in the IRR Exhibit); and there shall be no distributions
of Distributable Cash under subsection D below at any time when there is a
positive 25% IRR Deficiency; and
D. Fourth
Level
.
The
balance, if any, of such Distributable Cash remaining after the distributions
pursuant to subsections A, B and C above shall be distributed to BREA and ESC,
as follows: (1) 75% to BREA and ESC in accordance with their respective
Company Percentages; and (2) the remaining 25% to Administrative
Member.
The
net
cash portion or net proceeds from (i) a sale of the Properties or any part
thereof, (ii) a refinance of any Property, (iii) a sale of all of the membership
interests in any Company Subsidiary, (iv) a sale of all of the ownership
interests in the Company, together with all installments and payments of cash
(including interest) of or against any deferred portion of such purchase price,
shall be distributed in accordance with the levels provided above, with each
person or entity entitled to payment under a level receiving the entire amount
of such cash until the sum payable under such level shall have been discharged
in cash.
Section
4.2 Timing
of Distributions
.
Except
for distributions of Distributable Cash with respect to a sale, financing or
other capital event (which shall be distributed within one (1) business day
after such capital event or as soon thereafter as is reasonably practicable),
distributions of Distributable Cash shall be made on a monthly basis
concurrently with the date the “Periodic Report” (as hereinafter defined) for
such month is required to be delivered pursuant to this Agreement, unless
otherwise agreed by the Members. At BREA’s request, distributions of proceeds
from a capital event shall be made directly from the closing (whether through
a
closing escrow or otherwise) of such capital event. Each Periodic Report shall
include a calculation by Administrative Member of the amount of Distributable
Cash for such month and a calculation by Administrative Member of the respective
distributions to the Members pursuant to this Article IV (such calculation
of the distributions to be made as of the first day of the month immediately
succeeding such calendar month). Notwithstanding the foregoing, there shall
be
no distributions under the Promote Clauses during the period, if any, from
the
date a notice of default is given to Administrative Member or ESC in its
capacity as property manager under a Management Agreement, until the date such
default is cured, and from the date a Termination Notice is given to the date
the Termination Notice becomes effective (or the arbitrator determines that
it
is not effective);
13
Section
4.3 Distributions
of Capital
.
Except
as expressly provided in this Agreement or as otherwise agreed by the Members,
no Member shall be entitled to withdraw capital or to receive distributions
of
or against capital without the prior written consent of, and upon the terms
and
conditions agreed upon by, the Members. Each Member shall look solely to the
assets of the Company for return of such Member’s capital
contributions.
Section
4.4 Limitation
on Distributions
.
Notwithstanding any other provision of this Agreement, neither the Company,
nor
the Administrative Member on behalf of the Company, shall make a distribution
to
a Member on account of its interest in the Company if such distribution would
violate Section 18-607 of the Act or other applicable law.
Section
4.5 Adjustment
to Promote Clauses
.
Notwithstanding the provisions of Section
4.1
to the
contrary, in the event of a sale of fifty percent (50%) or more of BREA’s
membership interests in the Company in which ESC does not invoke its “tag along”
rights under Section
10.4
(a
“BREA
Sale”),
BREA
shall be deemed to have sold its membership interest in the Company, or a
portion thereof (in the event of a sale of less than all of its membership
interest), and ESC shall be deemed to have sold its right to receive
distributions pursuant to the Promote Clauses, or a portion thereof (in the
event of a sale of less than all of BREA’s membership interest), and the net
proceeds of the BREA Sale shall be paid to BREA and ESC as follows: (i) the
net
proceeds from the BREA Sale shall be “grossed up” (the “Grossed
Up Sale Price”)
by
dividing such amount by the Company Percentage transferred by BREA (the
“Transferred
Percentage”),
(ii)
ESC shall receive an amount equal to the Transferred Percentage multiplied
by
the amount ESC would have received in respect of the Promote Clauses if the
Grossed Up Sale Price were then distributed as Distributable Cash pursuant
to
Section
4.1,
and
(iii) BREA shall receive the balance of the net proceeds of the BREA Sale.
Thereafter, (i) any transferee of BREA’s membership interest in the Company
shall be entitled to receive the Transferred Percentage of all distributions
of
Distributable Cash, and (ii) all remaining Distributable Cash shall then be
distributed to BREA and ESC pursuant to Section
4.1.
ARTICLE
V
POWERS,
RIGHTS AND DUTIES OF MEMBERS
.
Section
5.1 Authority
of Members
.
Management of the Company shall be vested in the Members in accordance with
this
Agreement.
A. Authority
of ESC as Administrative Member
.
Except
as otherwise provided in this Agreement, ESC shall act as the Administrative
Member of the Company (the “Administrative
Member”)
and
shall have the duty and authority, on behalf of the Company, to do all things
appropriate to the accomplishment of the purposes of the Company, subject to
and
in accordance with the Requirements. It is acknowledged that the initial Budget
is preliminary in nature; ESC shall deliver a final initial Budget for BREA’s
review and approval within ninety (90) days after the Closing.
B. Major
Decisions
.
Administrative Member shall use diligent efforts to keep BREA fully informed
regarding all material matters relating to the Company, each Company Subsidiary
and their respective operations and assets (and such other specific matters
as
BREA may reasonably request from time to time) and shall so consult on a monthly
basis and at all reasonable times requested by BREA, and without limitation
on
the foregoing, shall promptly inform BREA with respect to any major or
significant matters, including “Major Decisions” (as hereinafter defined), so
that BREA
may
exercise its rights under this Agreement. Each of the following matters
(“Major
Decisions”)
shall
require the prior written approval of ESC and BREA (and may be proposed by
either Member):
(1) Subject
to Section
5.1B(3),
the
adoption of, and any supplement to, revision of, or deviation from the Budget
in
any material respect, and any activity by the Company or any Company Subsidiary
which is inconsistent with the Budget in any material respect and (except as
provided in clause (3) below) any expenditure by the Company or any Company
Subsidiary which is inconsistent with the Budget.
(2) Without
limitation on subsection B(1) above, the adoption of, and any supplement
to, or revision of, each Budget.
(3) Without
limitation on subsection B(1) above, but subject to this
subsection B(3), any deviation from or expenditure inconsistent with the
Operating Budget and Capital Budget (or the entry into any agreement requiring
such deviation or expenditure). The consent of BREA to an expenditure payable
to
an unrelated third party exceeding the amount specified for such expenditure
in
the Operating Budget shall not be required in any of the following
circumstances: (a) Administrative Member, in its reasonable judgment, deems
there to be an emergency requiring such expenditures to effectuate immediate
action necessary for the protection of the assets of the Company or any Company
Subsidiary or to avoid property damage or personal injury or to preserve the
well being of residents in the Property (b) such expenditure would
not cause the aggregate amount of the expenses (excluding the expenses
described in clause (c) below) within the Operating Budget to exceed 105%
of the entire amount of budgeted expenses (excluding the expenses described
in
clause (c) below) in the Operating Budget (taking into account the amounts
expended to date and reasonably anticipated expenses); or (c) expenditures
for real property taxes and assessments and utilities. The provisions of
clause (b) above are intended to be in lieu of any contingency category
that covers, in whole or in part, costs of the types described in any of the
other categories under the Operating Budget (so that excess costs in a specific
category might be covered by such contingency category) and accordingly, there
shall be no such contingency line item in the Operating Budget; the provisions
of clause (b) above are not intended, however, to be in lieu of a
contingency category for unanticipated costs that are not of the types described
in other categories under the Operating Budget. Notwithstanding the foregoing,
if the Administrative Member reasonably believes that any Budget excess related
to variable expenses shall be corrected prior to the end of the applicable
fiscal year, or that such excess is proportionately offset by non-forecasted
revenue gains (without any decrease in applicable profit margins), then such
excess shall not be considered for the purposes of Default under this section
or
any other section until such fiscal year is concluded and reconciled. In the
event the reconciliation demonstrates that the Budget excess related to variable
expenses was corrected prior to the end of the such fiscal year, or was
proportionately offset by non-forecasted revenue gains (without any decrease
in
applicable profit margins), then any penalty or default under this Agreement
related to such excess shall be waived by BREA or any other Member seeking
to
enforce such provisions. Administrative Member shall promptly notify BREA,
both
by telephone and in writing, of each permitted Budget deviation made pursuant
to
this subsection (3) and shall promptly supply BREA with such information
with respect thereto as BREA may reasonably request.
(4) The
entry
into any construction, development or other agreement which provides for a
term
greater than three (3) months (unless terminable by the Company or the
applicable
Company Subsidiary without cause or penalty upon thirty (30) days’ notice to the
other party) or contemplates an aggregate amount to be spent by the Company
or a
Company Subsidiary under such agreement in excess of $50,000 (and a series
of
related agreements for amounts less than $50,000 shall be construed as a single
agreement for purposes of this subsection (4)); or any termination or
material modification to any of the foregoing.
(5) Except
as
expressly provided in the Budget or in the applicable Management Agreement,
any
lease of space in a Property and the terms thereof; or any termination or
material modification of any such lease.
(6) Any
transaction or matter that is not in the ordinary course of the Company’s or any
Company Subsidiary’s business relating to the Property, including (a) any
action or agreement with respect to any new projects or acquisition of any
property by the Company or any Company Subsidiary other than the Property;
(b) any capital transaction (including any sale, financing or refinancing
of the assets of the Company or any Company Subsidiary or any portion thereof)
and the terms thereof; (c) any pledge, mortgage, encumbrance, or grant of a
security interest in, any assets of the Company or any Company Subsidiary;
or
(d) any activity, that is not contemplated by, or is materially
inconsistent with, the Budget.
(7) Any
agreement or other transaction or allocation among two or more of the Company
and the Company Subsidiaries; and any agreement, compensation or reimbursement
to, or other transaction with any Affiliate of Administrative Member or any
other person or entity with which Administrative Member or any of its Affiliates
has a significant business relationship.
(8) The
amount of, whether and when to make, contributions to the Company or any Company
Subsidiary and distributions by the Company or any Company Subsidiary, including
the determination of the amount of reserves to be maintained by the Company
or
any Company Subsidiary.
(9) Any
litigation, arbitration or settlement involving the Company’s or a Company
Subsidiary’s assets.
(10) All
income tax elections, tax returns and tax audits.
(11) Any
construction within the Property, including the establishment of and any
material amendment or supplement to the plans and specifications for such
construction work.
(12) The
engagement of attorneys, accountants, consultants and other
professionals.
(13) The
determination of what zoning, variances, map approvals, entitlements, permits
or
other governmental approvals to obtain for the Property and what payments and
obligations (including concessions by, and restrictions on, the Company, any
Company Subsidiary or any of their respective assets or the Property) will
be
incurred in connection therewith.
(14) The
insurance program for the Company or any Company Subsidiary, including insurers,
coverages and policy amounts; provided that, in the event of a disagreement,
the
Company or any Company Subsidiary shall implement the insurance program proposed
by BREA.
16
(15) Subject
to Section
7.1
below,
any modification or termination of any Management Agreement.
(16) Extension
of the term of the Company or any Company Subsidiary.
(17) Any
act
in contravention of this Agreement or which would make it impossible to carry
on
the business of the Company or any Company Subsidiary.
(18) Possession
of any Company or Company Subsidiary assets or assignment of the rights of
the
Company in specific assets of the Company or any Company Subsidiary for other
than the purpose of the Company or such Company Subsidiary.
(19) Admission
of a person or entity as a Member, manager or otherwise to the Company or a
Company Subsidiary, except as expressly permitted in this
Agreement.
(20) The
merger or consolidation of the Company or any Company Subsidiary with any other
entity.
(21) Any
assignment by the Company or any Company Subsidiary for the benefit of creditors
or any guarantee, indemnity bond or surety bond by the Company or any Company
Subsidiary.
(22) A
loan by
the Company or any Company Subsidiary to any Member or third party or the
extension of credit to any person, firm or corporation, on behalf of the Company
or any Company Subsidiary.
(23) Confession
of any judgment on behalf of the Company or any Company Subsidiary.
(24) The
filing on behalf of the Company or any Company Subsidiary of any petition,
or
consent to the appointment of a trustee or receiver or any judgment or order,
under state or federal bankruptcy laws.
(25) Distribution
of any property in kind to any Member.
(26) The
employment of employees of the Company or any Company Subsidiary (it being
understood that ESC is to have its own employees).
(27) Any
action outside the purposes specified in Section 1.4.
(28) Press
releases for the Property, the Company or any Company Subsidiary, subject to
ESC’s disclosure obligations as a public company, provided that ESC shall
consult with BREA as to content before making any such press releases related
to
the Company, any Company Subsidiary, or any Property.
(29) Any
other
decision or action which requires the approval of BREA or the Members as
provided elsewhere in this Agreement or which materially affects the Company,
any Company Subsidiary or any of their respective assets or operations
thereof.
Any
matter that is included under any of the foregoing clauses under this
subsection B shall be a Major Decision even if it is not covered by (or
excluded from) any other clause under this subsection B (so that, for
example, if a Budget contemplating a $200,000 construction contract is approved
under subsection B(2) above, then the contract remains subject to approval
under subsection B(4) above).
C. BREA
Override Rights
.
Notwithstanding anything to the contrary herein, but excepting Section
5.1B(6)(a),
(6)(c) (except as it relates to a Project Financing), (6)(d), (9) (17), and
(19)
through (24) above, in the event that the Members do not agree in writing on
any
Major Decision for a period of five (5) business days (but if a decision must
be
made in order to meet a deadline or BREA otherwise determines in its good faith
judgment that a matter is urgent, then such period shall be reduced to one
(1)
business day) after written notice from BREA, the decision of BREA regarding
such Major Decision shall be final and binding on the Company and any applicable
Company Subsidiary (and BREA shall have the right, acting alone, to implement
such Major Decision on behalf of the Company [subject to compliance with the
requirements of any Project Financing] and any applicable Company Subsidiary
and
ESC shall take such action as BREA reasonably requests in connection with the
same), provided that in the event the action is contrary to ESC’s written
recommendation based upon ESC’s good faith judgment, BREA will waive any claims
it may have against ESC with regard to any adverse impacts or effects resulting
solely from ESC’s taking such action at BREA’s insistence.
D. Required
Signatures
.
BREA’s
signature (or a written consent granting Administrative Member sole authority
to
sign) shall be required for all contracts (including documents related to the
sale, financing or transfer of any portion of the assets of the Company or
any
Company Subsidiary) entered into by or on behalf of the Company or any Company
Subsidiary (and only BREA’s signature shall be required for contracts that
constitute a Major Decision if Administrative Member has previously executed
a
written consent granting the BREA authority to execute such contract); provided,
however, that only Administrative Member’s signature will be required for
contracts and agreements that are provided for in the Operating Budget or
Capital Budget, in addition to ordinary and customary regulatory and corporate
filings related to obtaining and maintaining healthcare licenses, and operating
licenses and permits, and are permitted to be entered into without the consent
of BREA under this Agreement.
E. Authorization
of the Acquisition and Loan
.
The
Company and, as applicable, the Company Subsidiaries are authorized and directed
to execute and deliver appropriate conveyance instruments in connection with
the
consummation of the acquisition of the Properties contemplated by the Purchase
Agreement (the “Conveyance
Documents”),
and
the Credit Agreement, the Note, and other documents entered into in connection
with the Loan (collectively, the “Loan
Documents”).
The
execution and delivery of the Conveyance Documents and the Loan Documents by
the
Administrative Member on behalf of the Company and, as applicable, the Company
Subsidiaries, is hereby ratified and confirmed as the duly authorized action
of
the Company and, as applicable, the Company Subsidiaries. Furthermore, the
Company, and, as applicable, the Company Subsidiaries are hereby authorized
and
directed to do any and all things deemed necessary or advisable and in the
best
interest of the Company in connection with the Loan, and are each hereby
severally authorized and directed to execute and deliver appropriate loan
instruments in the name of the Company or, as applicable, the Company
Subsidiaries, in favor of the Lender in connection with the Loan, and to execute
and deliver appropriate instruments of whatever kind or character and to
execute
and deliver all instruments, documents, certificates and agreements in this
connection required by Lender. Only the Administrative Member’s signature, on
behalf of the Company (on its own behalf or in its capacity as sole member
of
each of the Company Subsidiaries), shall be required to bind the Company and/or
the Company Subsidiaries, as applicable, with respect to the Conveyance
Documents and the Loan Documents.
F. Affiliate
Transactions
.
Notwithstanding anything to the contrary herein (but without limitation on
the
approval rights under Section 5.1B), but subject to Section
7.1,
if
there is a contract between the Company or any Company Subsidiary, on the one
hand, and a Member or an Affiliate of a Member, on the other hand, then the
other Member shall have the right unilaterally (but not the obligation) to
make
any decision by the Company with respect to such Affiliate contract (as party
to
the contract or as the sole member of such Company Subsidiary) to exercise
any
right or remedy by reason of a default, terminate, extend, modify or agree
to a
waiver or forbearance. Any other approval, consent or other determination to
be
made by the Company or such Company Subsidiary under such contract shall be
subject to the approval of both Members. If a contract with an Affiliate is
terminated, any substitute contract shall be with a third party reasonably
satisfactory to the Members.
G. Limitations
of Activities
.
The
Company shall comply with the provisions provided in Exhibit “I” attached hereto
and incorporated herein by reference (the “Special
Purpose Provisions”)
which
are being adopted to comply with certain provisions required to qualify the
Company as a “single purpose entity”. Notwithstanding anything to the contrary
in this Agreement or in any other document governing the formation, management
or operation of the Company, for so long as any Obligation is outstanding,
neither Member nor the Company shall amend, alter, change any of Exhibit “I” or
any other provision of this or any other document governing the formation,
management or operation of the Company in a manner that is inconsistent with
any
of the Special Purpose Provisions, unless the Lender consents in writing.
Subject to this Section
5.1G,
provisions contained in this Agreement may be amended, altered or changed in
accordance with Section
11.7.
In the
event of any conflict between any of the Special Purpose Provisions and any
other provision of this or any other document governing the formation,
management or operation of the Company, the Special Purpose Provisions shall
control.
H. Independent
Manager
.
As long
as any Obligation is outstanding, the Member shall cause the Company at all
times to have at least one (1) Independent Manager who will be appointed by
the
Company. To the fullest extent permitted by law, including Section 18 1101(c)
of
the Act, the Independent Manager shall consider only the interests of the
Company and its creditors in acting or otherwise voting on a Material Action.
Subject to this Section
5.1H,
the
Company may remove, with or without cause, the Independent Manager. No
resignation or removal of the Independent Manager, and no appointment of a
successor Independent Manager, shall be effective until such successor shall
have accepted his or her appointment as an Independent Manager by a written
instrument, which may be a counterpart signature page to this Agreement as
required by this Section
5.1H.
In the
event of a vacancy in the position of Independent Manager, the Member shall,
as
soon as practicable, appoint a successor Independent Manager. All right, power
and authority of the Independent Manager shall be limited to the extent
necessary to exercise those rights and perform those duties specifically set
forth in this Agreement and the Independent Manager shall have no authority
to
bind the Company. Except as provided in the second sentence of this Section
5.1H,
in
exercising its rights and performing its duties under this Agreement, the
Independent Manager shall
have
a
fiduciary duty of loyalty and care similar to that of a director of a business
corporation organized under the General Corporation Law of the State of
Delaware. No Independent Manager shall at any time serve as trustee in
bankruptcy for any Affiliate of the Company. By signing this Agreement, an
Independent Manager agrees that, should such Independent Manager become a
Special Member, such Independent Manager will be subject to and bound by the
provisions of this Agreement applicable to a Special Member.
I. Appointment
of Independent Manager
.
Xxxxxx
X. Xxxxxx is hereby appointed as an Independent Manager of the Company, and
hereby accepts such appointment and agrees to act as an Independent Manager
as
set forth herein. Further, Xxxxxx X. Xxxxxx hereby represents and warrants
that
he or she meets the requirements contained in the definition of Independent
Manager set forth in Exhibit “I” attached hereto and acknowledges that the
Company is relying on such representation and warranty.
Section
5.2 Compensation
.
Except
for the fees or other sums payable as provided under the Management Agreement,
neither ESC nor BREA, nor any Affiliate thereof shall receive any fee or other
compensation in connection with the performance by it of its obligations under
this Agreement, it being the intent of the Members that the distributions to
ESC
under the Promote Clauses shall be full compensation to ESC for its duties
as
Administrative Member under this Agreement. Investment Maintenance Costs and
Administrative Member Costs shall be at the sole expense of the Company and
shall be reimbursed promptly by the Company to BREA and ESC (or their respective
Affiliates), as applicable, provided such third party expenses are without
duplication of any other amounts paid or reimbursable by the Company. All third
party expenses incurred by ESC (or its Affiliates) on behalf of or relating
to
the Company are reimbursable by the Company only to the extent, if any,
specifically enumerated and payable under the Operating Budget, this Agreement
or the Management Agreement.
Section
5.3 Certain
Obligations of Administrative Member
.
A. Generally
.
Administrative Member shall fully and faithfully discharge its obligations
and
responsibilities, shall devote such time and attention to affairs of the Company
and the Company Subsidiaries as may be reasonably necessary for the proper
management and supervision of the business of the Company and the Company
Subsidiaries and the discharge of its duties under this Agreement.
Administrative Member shall, at all times, exercise good faith and shall use
diligent and professional efforts to promote and protect the best interests
of
the Company and the Company Subsidiaries (without consideration being made
to
the separate interests of any particular Member, including the effect of any
action or omission upon the distributions provided for in Article IV).
Administrative Member shall diligently and continuously pursue the operation
of
the Properties consistent with the Budget and in accordance with its reasonable
professional business judgment.
B. Project
Administration
.
Without
limitation on the foregoing or other provisions of this Article V,
Administrative Member shall use commercially reasonable efforts to coordinate
and manage the operation, leasing, and marketing of the Properties to
prospective residents within the time schedules set forth in, and in full
compliance with, all Requirements. Administrative Member’s obligations shall
include the obligations set forth in Exhibit ”F” (the “Administrative
Obligations Exhibit“).
20
C. Books
and Records
.
Administrative Member shall cause to be kept proper and complete records and
books of account in which shall be entered fully and accurately all transactions
and other matters relating to the business of the Company or the Company
Subsidiaries as are usually entered into such records and books of account
kept
for businesses of a like character. The records and books of the Company or
the
Company Subsidiaries shall be kept on an accrual basis in accordance with
generally accepted accounting principles (“GAAP“),
except as the Members may otherwise determine. At all times, such books and
records shall be available at the Administrative Member’s principal place of
business for inspection, examination, photocopying or audit by any Member,
or
the duly authorized representative thereof, during reasonable business hours
and
upon reasonable advance notice for any purpose reasonably related to such
Member’s interest as a Member.
D. Reports
.
Administrative Member shall provide the Members with reports as follows (with
a
breakdown for each Company Subsidiary, if applicable):
(1) Annual
financial statements (balance sheet and income statement) in a format acceptable
to BREA including a combining schedule for each of the Company Subsidiaries
within ninety (90) days of the end of the fiscal year, audited by the
“Company’s
Accountants“
(i.e.,
KPMG or another independent nationally recognized accounting firm approved
by
the Members).
(2) Copies
of
the Company’s annual federal and state income tax returns as prepared by the
Company’s Accountants together with a copy of that certain IRS form commonly
referred to as a “Schedule K-1,” (if applicable) plus a copy of any
applicable state equivalents, within one hundred and twenty (120) days
following the end of each fiscal year.
(3) A
monthly
report for each calendar month, certified by Administrative Member to be true,
accurate and complete in all material respects, and submitted to BREA within
thirty (30) days of the end of each such calendar month (the “Periodic
Report“).
Each
Periodic Report shall be in accordance with GAAP and consistent with the
financial statement format to be delivered under subsection D(1) above,
unless a deviation is approved by BREA, and shall include the following:
(a) an operating statement and report of financial condition of the Company
and each Company Subsidiary for such period, including combining financial
statements for each of the Company Subsidiaries; (b) a statement containing
Administrative Member’s estimate of the amount needed to be contributed by the
Members pursuant to Article III for the succeeding month; (c) a
variance report, comparing actual costs and expenses and revenues with budgeted
costs and expenses and revenues on a category basis along with a reasonably
detailed explanation of all material or significant variances and all changes
in
any time schedules relating thereto; (d) an occupancy report, and a current
rent roll; and (e) if applicable, a calculation by Administrative Member of
the amount of Distributable Cash for the preceding calendar month and a
calculation by Administrative Member of the respective distributions if any,
to
Members pursuant to Article IV, including a calculation of the IRR
Deficiency amounts, if any.
(4) The
reports described on the Administrative Obligations Exhibit “F.”
(5) Such
other reports as may be required by the lenders of the Company or any Company
Subsidiaries.
21
(6) Such
other reports as BREA shall reasonably require, provided that the cost of
preparing same shall be borne by the Company and shall be included in
Administrative Member Costs.
E. Working
Capital Reserve and Other Reserves
.
Administrative Member shall cause and maintain reasonable reserves as set forth
in the applicable approved Operating Budget for future costs, expenses and
payments or for substantial costs (including capital repairs, improvements
and
replacements), to the extent the payment of such costs is not contemplated
by
other reserves maintained by or on behalf of the Company, any Company Subsidiary
or any Project Lender and the amount of such reserves is approved by
BREA.
F. Company
Accounts
.
All
funds of the Company shall be deposited by Administrative Member into one or
more federally insured operating accounts (collectively, the “Operating
Accounts“).
Administrative Member shall transfer portions of the balance of the Operating
Accounts which are not immediately needed to pay for operations of the Company
(whether in order to make a contribution to any Company Subsidiary or otherwise)
from time to time to a bank controlled investment account (that invests in
high
grade commercial paper) in accordance with sound cash management principles
(“Money
Market Account“).
If
there are Company Subsidiaries, each shall deposit, or cause to be deposited,
the revenues of the Properties into one of the Operating Accounts. The Operating
Accounts and Money Market Account (collectively, the “Accounts“)
shall
be maintained in the name of the Company with a money center financial
institution approved by BREA. The funds within the Accounts shall be segregated
from, and not commingled with any accounts of any Member or Affiliate thereof,
or any other accounts that the Members may hereafter establish for the Company
or any Company Subsidiary from time to time. The investment of the funds within
the Accounts shall be directed by Administrative Member, subject to the approval
by BREA. Withdrawals from the Accounts shall be made upon such signature or
signatures as Administrative Member may designate (provided that such
signatories are approved by BREA), and shall be made only in connection with
expenses related to the Company assets (including contributions to a Company
Subsidiary) which are in conformance with the Requirements.
Section
5.4 Other
Activities
.
A. Generally
.
Except
as otherwise provided in this Agreement or in any agreement among one or more
of
the Members or their Affiliates: (1) each Member recognizes that the other
Member has an interest in investing in, developing, constructing, operating,
transferring, leasing and otherwise using real property and interests therein
for profit, and engaging in any and all activities related or incidental thereto
and that each will make other investments consistent with such interests;
(2) neither the Company nor any Company Subsidiary nor any Member shall
have any right by virtue of this Agreement or the relationship created hereby
in
or to any other ventures or activities in which any Member is involved or to
the
income or proceeds derived therefrom; (3) the pursuit of other ventures and
activities by any Member, even if competitive with the business of the Company
or any Company Subsidiary, is hereby consented to by the other Member and shall
not be deemed wrongful or improper; (4) no Member and no Affiliate of a
Member shall be obligated to present any particular investment opportunity
to
the Company, even if such opportunity is of a character which, if presented
to
the Company or any Company Subsidiary, could be taken by the Company or any
Company
Subsidiary; and (5) each Member and each Affiliate of a Member shall have
the right to take for its own account, or to recommend to others, any such
particular investment opportunity.
B. Anti-Competition
Covenant
.
ESC
shall not attempt, either directly or through an Affiliate, to (1) except
in connection with a Permitted Portfolio Acquisition or the Existing Competing
Projects, acquire an interest in, develop, operate or manage any property that
is or will be in competition with the Properties in its immediate marketing
area, except for the benefit of the Company or any Company Subsidiary so long
as
the Company or any Company Subsidiary owns any portion of the Properties;
(2) except with respect to any Existing Competing Projects, develop any
property within a 15-mile radius of the Properties in competition with the
Properties; (3) divert any person that is a then existing or potential
resident at any of the Properties or treat any Existing Competing Projects
or
any properties acquired as part of a Permitted Portfolio Acquisition in a manner
which is less favorable to the Properties or the Company. BREA shall not develop
any senior housing property within a 15 mile radius of the Properties in
competition with the Properties.
Section
5.5 Liability
of Members
.
Subject
to the provisions of any other agreement to which the Members are parties,
and
except for the obligations to a Member or Members or the Company or any Company
Subsidiary imposed under such other agreement, no Member shall be liable,
responsible or accountable in damages or otherwise to the Company or any Company
Subsidiary or the other Member for any action taken or failure to act by such
Member in its business judgment on behalf of the Company within the scope of
the
authority conferred on it by this Agreement unless such action or omission
constitutes a matter as to which such Member is obligated to indemnify the
Company under Section 5.7. Unless otherwise agreed upon in writing by the
Members, to the fullest extent permitted by the Act: (1) no Member, nor
Special Member, nor Independent Manager, shall be liable for the debts,
liabilities, contracts or any other obligations of the Company or a Company
Subsidiary, (2) the Members shall be liable to make contributions (or, if
applicable, loans) only to the extent required under this Agreement,
(3) and, without limitation, except as approved by the Members, any
indemnification obligation of the Company hereunder shall be limited to the
assets of the Company, and (4) no Member shall have personal liability for
the repayment of the contributions or loans of any other Member, except as
may
be expressly required under this Agreement. Except as expressly provided in
this
Agreement, nothing in this Agreement shall confer any rights or remedies under
or by reason of this Agreement on any person or entity other than the Members
and their respective successors and assigns, nor shall anything in this
Agreement relieve or discharge the obligation or liability of any third person
to any party to this Agreement, nor shall any provision of this Agreement give
any third person any right of subrogation or action over or against any party
to
this Agreement. Without limitation on the foregoing, to the fullest extent
permitted by the Act, no third party shall have any right to enforce any
contribution obligation on a Member. In no event shall any Member have any
fiduciary duty to the Company or to any other Member, except for ESC’s fiduciary
duty to the Members, the Company and the Company Subsidiaries in its capacity
as
property manager for the Properties.
Section
5.6 Indemnity
of Members
.
The
Company shall, to the fullest extent permitted by applicable law, indemnify,
defend and hold each Member harmless from and against any Claims suffered or
sustained by it by reason of any acts, omissions or alleged acts or omissions
by
such Member on behalf of the Company within the scope of authority conferred
on
it by this Agreement or arising from the fact that such Member is a Member
of
the Company; provided that the acts or omissions or alleged acts or omissions
upon which such actual or threatened action, proceeding or
claim
is
based were in good faith in accordance with its business judgment and did not
constitute a matter as to which such Member is obligated to indemnify the
Company under Section 5.7.
Section
5.7 Indemnification
by Members
.
Each
Member shall, to the fullest extent permitted by applicable law, indemnify,
defend and hold the Company, each Company Subsidiary, the other Member, and
the
assets of the Company and each Company Subsidiary, harmless from and against
any
and all Claims suffered or sustained by it by reason of any act or omission
constituting (a) breach or default by such Member or any Affiliate under
this Agreement or any Collateral Agreement (including a breach of any
representation or warranty by such Member or any Affiliate under this Agreement
or any Collateral Agreement) or (b) gross negligence or willful misconduct
by such Member or any Affiliate.
Section
5.8 Contractual
Duties Prevail
.
To the
extent that, at law or in equity, a Member has duties (including fiduciary
duties) and liabilities relating thereto to the Company or any Company
Subsidiary or to the other Member, a Member acting pursuant to this Agreement
shall not be liable to the Company or any Company Subsidiary or to any other
Member except to the extent provided in Section 5.5. The provisions of this
Agreement, to the extent that they restrict the duties and liabilities of a
Member otherwise existing at law or in equity, are agreed by the parties hereto
to replace such other duties and liabilities of such Member.
Section
5.9 BREA
Review
.
A. Development
Consultant
.
BREA
reserves the right to retain a consultant (“Consultant“),
at
the Company’s expense, as BREA’s consultant in connection with the Properties
(including any remediation, development or construction with respect to the
Properties), in order to advise BREA in connection with all approvals requested
of BREA under this Agreement, and the administration of all Contribution
Requests. If Consultant is retained, he shall be furnished with copies of all
information, reports, documents, notices and other materials required to be
provided to BREA pursuant to this Agreement, at the same time furnished to
BREA.
In addition, BREA shall have the right by written notice to ESC to cause ESC
to
furnish certain of such information, reports, documents, notices or other
materials solely to Consultant.
B. BREA
Approvals
.
BREA’s
approval of any matter in connection with this Agreement shall be for the sole
purpose of protecting BREA’s investment in the Company, and shall not constitute
a waiver of any default by Administrative Member or its Affiliates under this
Agreement or any Collateral Agreement (unless such waiver is expressly made
by
BREA in writing with specific reference to such default and agreement) or a
representation by BREA of any kind with regard to the matter being approved;
provided, however, that the foregoing shall not limit Administrative Member’s
right to rely on any written approval of BREA under this Agreement as
constituting BREA’s approval under this Agreement. BREA is under no duty to
visit any portion of the Properties or to supervise or observe construction
or
to examine any books or records. No site visit, observation or examination
by
BREA shall impose any liability on BREA, result in any waiver of any default
by
Administrative Member under this Agreement, or constitute a representation
that
any of the assets of the Company or any Company Subsidiary complies or will
comply with any of the Requirements or that any construction is free from
defective materials or workmanship. Neither Administrative Member nor any other
party is entitled to rely on any site visit, observation or examination by
BREA,
and BREA assumes no personal responsibility for any negligent or defective
design
or
construction. BREA shall have the right to contact representatives of the local,
state and other governmental authorities having jurisdiction over any part
of
the Properties, or engineers, architects, contractors, suppliers or other third
parties involved with the Properties, in order to verify compliance by
Administrative Member with this Agreement.
Section
5.10 Management
Agreement.
The
Members hereby approve of the form of Management Agreement (the “Management
Agreement“)
attached as Exhibit “G.” A separate Management Agreement in such form shall be
executed with respect to each Property with ESC in its capacity as property
manager for the applicable Property.
Section
5.11 Licensing.
Administrative Member shall cause each Company Subsidiary to obtain all
applicable healthcare or other licenses (the “Operating
Licenses“)
recommended by the Company’s healthcare counsel, or otherwise required to permit
the operation of the Properties. In the event that the Operating Licenses are
not obtained by the Closing Date, the Company, Company Subsidiaries and ESC
in
its capacity as property manager pursuant to the Management Agreements, acting
directly or through their Affiliates and subsidiaries, as necessary, shall
enter
into sale/leasebacks or other similar temporary arrangements acceptable to
the
Members with Seller and Seller’s affiliates, as recommended by the Company’s
healthcare counsel, to permit the acquisition and operation of the Properties,
under Seller’s and Seller’s affiliates’ licenses.
ARTICLE
VI
TRANSFER
OF COMPANY INTERESTS
.
Section
6.1 Restrictions
on Transfer
.
A. Except
as
expressly provided to the contrary in this subsection A, no sale, exchange,
delivery, assignment, transfer, encumbrance, pledge, hypothecation or other
disposition, whether voluntary, involuntary, by operation of law or otherwise
(a
“Transfer“)
shall
be made by a Member of the whole or any part of its interest in the Company
(including its interest in the capital or profits of the Company) without the
prior written consent of BREA. Without obtaining the prior consent of ESC (but
with prior notice to ESC), BREA may make a Transfer (i) to any Affiliate of
BREA, (ii) as part of a merger, consolidation or similar transaction involving
a
substantial portion of the assets of BREA any controlling, controlled by or
under common control with BREA, or (iii) subject to the provisions of
ARTICLE
X
and
ESC’s rights thereunder, in connection with the sale of all or a portion of its
interests to a third party.
B. No
Transfer in violation of the provisions hereof shall be valid or effective
for
any purpose, and no consent to one or more of the same shall be deemed consent
to any other of the same.
Section
6.2 Effect
of Assignment; Documents
.
In the
event of any sale or assignment permitted hereunder, subject to
Article VIII, the Company shall not be dissolved but instead shall continue
as before, with, however, the addition or substitution of such transferee or
assignee as a Member of the Company. No such Transfer shall relieve the assignor
from any of its obligations under this Agreement . Notwithstanding the
foregoing, as a condition to any sale or assignment by a Member, the assignee
must execute and deliver to the non-assigning Member on behalf of the Company
an
assumption (in form reasonably satisfactory to the non-assigning member) of
all
the obligations of the assignor under this Agreement arising from and after
the
date of such assignment.
Upon
execution and delivery of such assumption, the Members shall execute a document
in form reasonably satisfactory to all Members evidencing the admission of
such
transferee.
ARTICLE
VII
CERTAIN
REMEDIES
.
Section
7.1 Termination
of Management Agreements for Failure to Achieve Performance
Benchmarks
.
A. Performance
Benchmarks
.
(1) In
addition to the rights and remedies set forth in the Management Agreements,
the
occurrence of one of the following events (the “Performance
Benchmarks”),
that
is not cured by the payment of money by ESC within sixty (60) days after notice
of failure to meet a Performance Benchmark, shall entitle BREA, at its election,
on behalf of the Company, to cause the Company Subsidiaries, to terminate all,
but not some, of the Management Agreements:
(a) The
Company fails to meet the revenues budgeted in the Operating Budgets (i) by
more
than 10% in any two out of three consecutive fiscal years or (ii) by more than
30% in the aggregate accumulated over any three consecutive fiscal years,
or
(b) The
Company fails to achieve an aggregate “Portfolio Cash Return” (as defined
below), measured within thirty (30) days after the end of the fourth quarter
of
each fiscal year of the Company beginning with the third fiscal year, of 10%
of
the then outstanding debt on the Project beginning with the third fiscal year
and each subsequent fiscal year. “Portfolio
Cash Return”
means:
(i) the total revenue for the fiscal year just ended (the trailing twelve (12)
months); less (ii) total Operating Expenses for the trailing twelve (12) months,
less (iii) an annual provision for capital expenditures of $350 per unit of
the
Project. “Operating
Expenses”
means
all expenses of the Project before interest, taxes, depreciation and
amortization, but including management fees.
(2) Either
Performance Benchmark identified in items (a) and (b) above may be adjusted
for
Extraordinary Income and Extraordinary Expense items. “Extraordinary
Income and Extraordinary Expenses”
means
material items of a character significantly different from the typical or
customary business activities of the Properties, which would not be expected
to
recur frequently and which would not be considered as recurring factors in
any
evaluation of the ordinary operating process of the Properties, and which would
be treated as extraordinary income or extraordinary expenses under GAAP, and
including without limitation, litigation and defense costs incurred in
connection with claims by residents and others and insurance deductibles, if
any, relating to liability claims and casualty losses.
Section
7.2 Termination
of Administrative Member Rights
.
A. Termination
Notice
.
BREA
may deliver a termination notice to ESC (“Termination
Notice”)
removing ESC as Administrative Member upon the occurrence of any of the
following events:
(1) Any
gross
negligence or willful misconduct by ESC or any of its Affiliates.
26
(2) Any
material breach of this Agreement or any Collateral Agreement (including, but
not limited to, any Management Agreement) by ESC or any of its Affiliates
(including the failure to timely make a required contribution under
Article III or a breach of Article VI or a breach of a representation
or warranty by ESC or its Affiliates hereunder or under a Collateral Agreement)
which is not cured within the Cure Period (or, without limitation on the
foregoing, the Company, any Company Subsidiary, or any Member has not been
made
whole prior to the expiration of the Cure Period).
(3) The
failure by ESC to provide reasonably effective management of the Company, each
Company Subsidiary, and their respective Company assets in its capacity as
Administrative Member pursuant to Article V hereof in a manner
substantially consistent with prevailing commercial practices for the
development, operation, marketing and sale of property similar to the assets
of
the Company and the Company Subsidiaries (and such failure has or is reasonably
expected to have a material and adverse effect upon the Company, any Company
Subsidiary or their respective assets), and the failure to correct such
deficiencies within the Cure Period.
(4) The
occurrence of a Bankruptcy/Dissolution Event with respect to ESC.
(5) A
termination of the Management Agreements pursuant to Section
7.1.
B. Procedure;
Arbitration
.
The
Termination Notice shall specify the basis for the same and shall become
effective (1) ten (10) days after the date of the Termination Notice
in connection with a termination described in subsection A(1), A(2) or A(3)
above, and (2) immediately in connection with a termination described in
subsection A(4) above. However, ESC may dispute the existence of grounds for
the
termination described in subsection A(1), A(2) or A(3) (but not
subsection A(4)) by written notice (“Arbitration
Notice”)
to BREA
within ten (10) days after its receipt of the Termination Notice. If ESC
fails to provide an Arbitration Notice within such ten (10) day period,
then notwithstanding anything to the contrary herein, ESC shall have no right
to
dispute the effectiveness of the Termination Notice, which shall be conclusive.
In the event an Arbitration Notice is given within the period set forth above,
then (a) the dispute shall be resolved by arbitration as provided in
Section 7.3, and (b) if the arbitrator upholds the grounds for
termination, then the Termination Notice shall thereupon become
effective.
C. Effect
of Termination Notice
.
If a
Termination Notice becomes effective, then:
(1) BREA
or
its designee shall become the Administrative Member with all the power and
authority previously possessed by ESC as Administrative Member; and ESC shall
remain a Member in the Company, but with no power, authority or right to vote,
approve or act for or bind the Company with respect to any matter in connection
with the Company or its operation (and, without limitation, ESC shall have
no
further rights under Section 5.1).
(2) ESC
shall
execute and acknowledge any required amendments to this Agreement reflecting
the
foregoing, in such form and content as BREA may reasonably prescribe.
(3) Subject
to the transfer of any Operating Licenses, ESC shall not be responsible for
any
obligation of the Administrative Member under this Agreement first accruing
after
the
Termination Notice becomes effective (other than obligations that would apply
to
ESC under this Agreement regardless of its status as Administrative Member,
including contribution obligations).
(4) Except
in
the event of a Termination Notice pursuant to Section
7.2A(5),
the
distributions under the “Promote
Clauses”
(i.e.,
clause (2) of Section 4.1B, clause (2) of Section 4.1C and
clause (2) of Section 4.1D) shall thereafter be distributed to the
Members in accordance with their respective Company Percentages; and no further
fees or reimbursements shall be payable to ESC as Administrative
Member.
(5) ESC
shall
forthwith: (a) deliver to BREA a final accounting; (b) surrender and
deliver to BREA all rents and income, including tenant security deposits, of
the
Properties and other monies of the Company or any Company Subsidiary held by,
or
under the control of ESC; (c) deliver to BREA, as received, any monies due
the Company or any Company Subsidiary received after such removal;
(d) deliver to BREA or its designee, all materials and supplies, keys,
leases, contracts and documents, all other accounting papers and records of
the
Company or any Company Subsidiary, and all books and records, receipts for
deposits, bills and other materials in ESC’s possession that relate to the
Properties; and (e) execute and deliver to BREA a notice to third parties
directly involved with the Properties in form reasonably satisfactory to BREA
to
the effect that ESC is no longer Administrative Member.
(6) ESC
shall
cooperate with the Company and each Company Subsidiary to allow the Company
and
each Company Subsidiary to effectively and productively continue the operation,
marketing and other activities of the Company. Without limitation on the
foregoing, ESC shall deliver to the Company such information and documentation
in ESC’s control or possession at the time of removal as BREA may reasonably
request concerning the Properties, including any potential residents for the
Properties known by ESC at the time of removal.
D. Replacement
Administrative Member
.
In the
event that ESC is removed as or otherwise ceases to be the Administrative
Member, BREA shall have the right to admit a new Member to the Company to
function as a replacement administrative member and to receive fees and
reimbursements as reasonably determined by BREA so long as the distributions
to
all Members are diluted proportionately. Notwithstanding anything to the
contrary herein, all Members shall execute and deliver such amendments to this
Agreement as BREA may reasonably request in order to implement the
foregoing.
Section
7.3 ARBITRATION
OF DISPUTES
.
ANY
DISPUTE AMONG THE MEMBERS UNDER SECTION 7.2 AS TO THE EFFECTIVENESS OF A
TERMINATION NOTICE (OTHER THAN A TERMINATION NOTICE GIVEN UNDER
SECTION 7.2A(4)) SHALL BE RESOLVED AND FINALLY DETERMINED BY ARBITRATION AS
SET FORTH IN THIS SECTION 7.3. ANY ARBITRATION PURSUANT TO THIS SECTION
SHALL, TO THE FULLEST EXTENT PERMITTED BY LAW, BE HELD IN WILMINGTON, DELAWARE.
IF THE PARTIES DO NOT MUTUALLY AGREE UPON AN ARBITRATOR WITHIN FIVE (5)
BUSINESS DAYS AFTER NOTICE FROM ONE PARTY TO THE OTHER, THEN ANY PARTY MAY
APPLY
TO THE CHANCERY OR SUPERIOR COURT IN WILMINGTON, DELAWARE FOR AN ORDER
APPOINTING AN ARBITRATOR. IN CONNECTION WITH ANY SUCH APPLICATION, ANY PARTY
MAY
PROPOSE ONE OR MORE PERSONS TO ACT AS THE
ARBITRATOR
PROVIDED THAT ANY SUCH PERSON OR PERSONS SHALL BE INDEPENDENT AND SHALL BE
(X) A LICENSED ATTORNEY WITH AT LEAST TEN (10) YEARS’ EXPERIENCE IN
CONNECTION WITH THE DEVELOPMENT AND OPERATION OF REAL ESTATE SIMILAR TO THE
PROPERTY OR (Y) A RETIRED JUDGE OF ANY CHANCERY OR SUPERIOR COURT,
APPELLATE COURT OR UNITED STATES DISTRICT COURT IN WILMINGTON, DELAWARE. AFTER
THE APPOINTMENT OF THE ARBITRATOR, THE PARTIES SHALL HAVE THE RIGHT TO TAKE
DEPOSITIONS AND TO OBTAIN DISCOVERY BY OTHER MEANS REGARDING THE SUBJECT MATTER
OF THE ARBITRATION AS IF THE MATTER WERE PENDING IN ANY CHANCERY OR SUPERIOR
COURT IN WILMINGTON, DELAWARE, ALTHOUGH THE ARBITRATOR MAY, FOR GOOD CAUSE
SHOWN, LIMIT THE NATURE AND EXTENT OF SUCH DISCOVERY AND ESTABLISH OR MODIFY
THE
SCHEDULE RELATING TO ANY DISCOVERY REQUESTS OR APPLICATIONS RELATING THERETO.
THE ARBITRATOR SHALL HAVE THE POWER TO DECIDE ALL OTHER PROCEDURAL ISSUES,
INCLUDING THE FOLLOWING: THE DATE, TIME AND PLACE OF ANY HEARING; THE FORM,
TIMING, AND SUBJECT MATTER OF ANY PRE-HEARING DOCUMENTS TO BE SUBMITTED BY
THE
PARTIES; AND ANY EVIDENTIARY OR PROCEDURAL ISSUES THAT MAY ARISE AT OR IN
CONNECTION WITH ANY ARBITRATION HEARING. THE AWARD OF THE ARBITRATOR SHALL
BE
CONCLUSIVE AND BINDING, AND ANY PARTY MAY SEEK TO HAVE THE AWARD CONFIRMED
BY
WAY OF A COURT ORDER. ALL FEES AND EXPENSES OF THE ARBITRATOR AND ALL OTHER
EXPENSES OF THE ARBITRATION SHALL BE BORNE INITIALLY BY THE MEMBERS EQUALLY
(I.E., 50% FOR EACH MEMBER), BUT ULTIMATELY SHALL BE BORNE BY THE NON-PREVAILING
PARTY IN THE ARBITRATION. THE ARBITRATION SHALL BE LIMITED TO THE EFFECTIVENESS
OR INEFFECTIVENESS OF A TERMINATION NOTICE (INCLUDING DETERMINING WHETHER ONE
OF
THE EVENTS UNDER SECTION 7.2A HAS OCCURRED). NOTHING CONTAINED HEREIN SHALL
BE CONSTRUED AS TO PREVENT ANY PARTY FROM SEEKING PROVISIONAL OR EQUITABLE
RELIEF FROM A COURT ON THE BASIS THAT, UNLESS SUCH RELIEF IS OBTAINED, ANY
AWARD
THAT THE ARBITRATOR MAY MAKE WILL BE INEFFECTUAL.
Section
7.4 No
Partition
.
Each
Member hereby irrevocably waives any and all rights that it may have to maintain
any action for partition of any of the assets of the Company or any Company
Subsidiary.
Section
7.5 Cumulative
Remedies
.
Subject
to the limitations expressly herein set forth, no remedy conferred upon the
Company or any Member in this Agreement is intended to be exclusive of any
other
remedy herein or by law provided or permitted, but each shall be cumulative
and
shall be in addition to every other remedy given hereunder or now or hereafter
existing at law, in equity or by statute.
Section
7.6 Attorneys’
Fees
.
Subject
to Section 7.3, if the Company or any Member obtains a judgment against any
other Member in connection with a dispute arising under or in connection with
this Agreement (whether in an action or through arbitration), such party shall
be entitled to recover its court (or arbitration) costs, and reasonable
attorneys’ fees (including the reasonable value of in-house attorney services)
and disbursements incurred in connection therewith and in any appeal or
enforcement proceeding thereafter, in addition to all other recoverable
costs.
29
Section
7.7 No
Waiver
.
No
waiver by a Member or the Company of any breach of this Agreement shall be
deemed to be a waiver of any other breach of any kind or nature, and no
acceptance of payment or performance by a Member or the Company after any such
breach shall be deemed to be a waiver of any breach of this Agreement, whether
or not such Member or the Company knows of such breach at the time it accepts
such payment or performance. No failure or delay on the part of a Member or
the
Company to exercise any right it may have shall prevent the exercise thereof
by
such Member or the Company at any time such other may continue to be so in
default, and no such failure or delay shall operate as a waiver of any
default.
Section
7.8 No
Suretyship Defenses
.
Each
Member hereby waives any guarantor or suretyship defense that may otherwise
apply with respect to this Agreement (including Sections 4.4, 5.7, 7.1A and
7.2C(2)).
ARTICLE
VIII
DISSOLUTION OF THE COMPANY
.
Section
8.1 Events
Giving Rise to Dissolution
.
No act,
thing, occurrence, event or circumstance shall cause or result in the
dissolution of the Company; except that the happening of any one of the
following events (individually, a “Dissolution
Event”)
shall
work an immediate dissolution of the Company.
A. Intentionally
deleted.
B. Intentionally
deleted.
C. The
sale
of all of the real estate assets of the Company and each Company Subsidiary
(provided, however, that if a portion of the purchase price of such sale is
evidenced by a promissory note, the Company shall not be dissolved by reason
of
such sale so long as the Company or a Company Subsidiary is the holder of such
promissory note).
D. The
unanimous agreement in writing by the Members to dissolve the
Company.
E. The
expiration of the term of the Company pursuant to Section 1.3 of this
Agreement.
F. The
entry
of a decree of judicial dissolution of the Company under Section 18-802 of
the Act.
G. The
occurrence of the event described in Section 2.5.
Without
limitation on the other provisions hereof, the resignation, expulsion or
dissolution of any Member, the occurrence of a Bankruptcy/Dissolution Event
with
respect to a Member, the assignment of all or any part of a Member’s interest in
the Company, the occurrence of any event that terminates the continued
membership of a Member under the Act or the admission of a new Member shall
not
dissolve the Company and the business of the Company shall continue. Except
as
otherwise provided in this Agreement: (i) without the consent of the
Members, no Member may retire or withdraw from the Company; and (ii) a
withdrawing Member shall not be entitled to receive any distributions and shall
not otherwise be entitled to receive the fair value of its membership interest
in the Company.
30
Section
8.2 Procedure
.
In the
event of the dissolution of the Company for any reason, the “Winding-Up
Member”
(i.e.,
(1) BREA if BREA gives ESC written notice of its election to be the
Winding-Up Member, and (2) otherwise Administrative Member) shall commence
to wind up the affairs of the Company and Company Subsidiaries and to liquidate
their respective investments. The Members shall continue to share profits,
losses, gain or loss on sale or disposition, and Distributable Cash during
the
period of liquidation in the same manner and proportion as though the Company
had not dissolved (subject, however, to any adjustments hereunder that may
apply
whether by reason of Section 7.2A(4) or otherwise). Subject to the prior
written approval of BREA, the Winding-Up Member shall have discretion to
determine in good faith the time, manner and terms of any sale or sales of
the
assets of the Company and the Company Subsidiaries pursuant to such liquidation
having due regard to the activity and condition of the relevant market and
general financial and economic conditions.
A. Following
the satisfaction of all debts and liabilities of the Company and the Company
Subsidiaries and all expenses of liquidation (whether by payment or the making
of reasonable provision for payment thereof), the proceeds of the liquidation
and any other funds of the Company shall be distributed in accordance with
Section 5.1 of Exhibit ”H” (the “Tax
Exhibit”)
(after
deducting from the distributive share of a Member any sum such Member owes
the
Company).
B. Each
Member shall look solely to the assets of the Company for all distributions
with
respect to the Company and its capital contribution thereto and share of profits
or losses thereof and shall have no recourse therefor (in the event of any
deficit in a Member’s capital account or otherwise) against the other Member;
provided that nothing herein contained shall relieve any Member of such Member’s
obligation to make the capital contributions herein provided or to pay any
liability or indebtedness owing the Company by such Member, and the Company
and
the other Member shall be entitled at all times to enforce such obligations
of
such Member. No holder of a Company interest shall have any right to demand
or
receive property other than cash upon dissolution of the Company.
C. Upon
the
completion of the winding up of the Company and the distribution of all Company
funds, the Winding-Up Member shall have the authority to execute and record
a
certificate of cancellation of the certificate of formation of the Company,
as
well as any and all other documents required to effectuate the dissolution
and
termination of the Company, and the Company shall terminate.
ARTICLE
IX
CERTAIN
INCORPORATED MATTERS
.
Section
9.1 Tax
and Accounting
.
Each
and all of the provisions of the Tax Exhibit are incorporated herein and shall
constitute part of this Agreement. The Tax Exhibit provides for, among other
matters, the establishment and maintenance of capital accounts, and the
allocation of profits and losses of the Company. The Company shall be operated
as a limited liability company solely for state and federal income tax
purposes.
ARTICLE
X RIGHT
OF
FIRST OPPORTUNITY.
Section
10.1 Right
of First Opportunity
.
In the
event that BREA desires to sell all of the Properties or any Property (either
directly or through the sale of a Company Subsidiary) and Administrative Member
does not desire to sell such Property, or in the event BREA desires to sell
substantially
all of its interest in the Company (“BREA’s
Membership Interest”)
to an
unaffiliated third party, then, prior to BREA exercising its override right
set
forth in Section 5.1.C of this Agreement and marketing the applicable Property
or BREA’s Membership Interest for sale, BREA shall send Administrative Member a
written notice informing Administrative Member that BREA intends to market
the
applicable Property for sale or BREA’s Membership Interest (an “Intent
to Sell Notice”).
Administrative Member shall have thirty (30) days from the date of receipt
of
the Intent to Sell Notice to notify BREA in writing that either (a)
Administrative Member is prepared to purchase the applicable Property, or BREA’s
Membership Interest, as applicable, at a purchase price (“Administrative
Member’s Price”)
that
shall be specified in such notice (a notice delivered pursuant to this Section
10.1 is referred to herein as a “Purchase
Offer”),
or
(b) Administrative Member is not prepared to purchase the applicable Property,
or BREA’s Membership Interest, as applicable. Failure of Administrative Member
to respond in writing to the Intent to Sell Notice within such thirty (30)
day
period shall be deemed an election by Administrative Member that Administrative
Member is not prepared to purchase the Property or BREA’s Membership Interest,
as applicable.
Section
10.2 Acceptance
of Offer
.
A. Closing
and Deposit
.
In the
event that Administrative Member delivers a Purchase Offer, then BREA shall
have
a twenty (20) day period in which to elect either to accept or reject the
Purchase Offer. If BREA delivers a written notice (an “Acceptance
Notice”)
that
it accepts the Purchase Offer, then the Company shall sell the applicable
Property to Administrative Member, or BREA shall sell BREA’s Membership
Interest, as applicable, and Administrative Member shall be obligated to
purchase the applicable Property or BREA’s Membership Interest, as applicable,
for a purchase price equal to Administrative Member’s Price, on the date (the
“Purchase
Date”)
that
is sixty (60) days after the delivery date of the Acceptance Notice, provided
that Administrative Member shall have the right to extend the Purchase Date
for
an additional thirty (30) days upon prior notice to BREA accompanied by an
additional “Purchase Deposit” (as hereinafter defined), above the Purchase
Deposit set forth below, equal to five percent (5%) of Administrative Member’s
Purchase Price. In the event that Administrative Member becomes obligated to
purchase the applicable Property or BREA’s Membership Interest as provided
above, then Administrative Member shall transmit via wire transfer into an
account specified by BREA, or by a certified check from a bank reasonably
acceptable to BREA, readily available funds in an amount equal to five percent
(5%) of Administrative Member’s Price (the “Purchase
Deposit”)
payable to the Company, within five (5) business days after the Purchase Offer
is accepted. If Administrative Member does not deliver the Purchase Deposit
as
aforesaid within such five (5) business day period, or otherwise materially
defaults under the provisions of this Article X, then the acceptance of the
Purchase Offer shall be canceled, and Administrative Member shall lose its
rights to purchase the applicable Property or BREA’s Membership Interest, as
applicable, pursuant to the Purchase Offer and shall have no further rights
thereafter to deliver another Purchase Offer. The Purchase Deposit, if made,
shall be non-refundable to Administrative Member in all events other than the
failure of the closing of the sale of the applicable Property, or BREA’s
Membership Interest, as applicable, to occur by reason of the default by BREA
or
the Company as directed by BREA (in which case the Purchase Deposit shall be
promptly refunded to Administrative Member). Upon the closing of the sale on
the
Purchase Date, the Purchase Deposit shall be a credit against Administrative
Member’s Price. In the event of a default in any material respect by
Administrative Member in connection with the execution of a sale pursuant to
this Section
10.2A,
BREA
may terminate the sale to be held on the
Purchase
Date and retain the Purchase Deposit as liquidated damages (in which event
Administrative Member shall thereafter have no right to deliver any further
Purchase Offers). The retention of the Purchase Deposit by BREA (for the sole
benefit of BREA) in connection with a default by Administrative Member hereunder
shall be without limitation upon any other remedy that the Company and BREA
may
have against Administrative Member in connection with such default, including
an
action for damages and a right for a period of thirty (30) days after such
default to elect to purchase the applicable Property pursuant to the terms
of
this Article X as if it were the Administrative Member, but at a price equal
to
ninety-five percent (95%) of Administrative Member’s Price. Such retention of
the Purchase Deposit as provided herein shall not constitute a distribution
of
Distributable Cash nor be deemed a distribution or return of capital for
purposes of Article IV of this Agreement.
B. Closing
Mechanics
.
If the
Purchase Offer is accepted and Administrative Member timely deposits the
Purchase Deposit, the sale of the applicable Property, or BREA’s Membership
Interest, as applicable, as provided hereunder shall take place at a closing
conference held on the Purchase Date at the principal office of the Company
or
at such other location as may be agreed upon by the Members. At such closing
conference, the Company shall be authorized and directed to retain the Purchase
Deposit and any interest accrued thereon as a portion of the Administrative
Member’s Price, and the remaining portion of Administrative Member’s Price shall
be paid in immediately available funds, provided, however, Administrative
Member’s Price actually paid to BREA shall be reduced by the amount that ESC
would receive pursuant to Section
4.1
and
Section
4.5
if such
Property or BREA’s Membership Interest were sold to a third party for the
Administrative Member’s Price. The Company and Administrative Member shall
execute such documents and instruments are may be necessary or appropriate
to
effect the sale of the Property, or BREA’s Membership Interest, as applicable,
pursuant to the terms hereof, including, any sale/leaseback agreements and
transition services agreements necessary to allow Administrative Member to
operate a Property pending Administrative Member obtaining licensure therefore,
which agreements shall be on forms reasonably acceptable to the
parties.
Section
10.3 Failure
to Accept or Elect
.
If (a)
BREA delivers a written notice that it rejects the Purchase Offer, (b)
Administrative Member fails to deposit the Purchase Deposit within five (5)
business days after a Purchase Offer is accepted, or (c) Administrative Member
elects or is deemed to have elected not to purchase the applicable Property,
or
BREA’s Membership Interest, as applicable, then, in any such event, BREA may
market BREA’s Membership Interest or the applicable Property for sale (directly
or through the sale of the applicable Company Subsidiary) and cause the Company
to sell the applicable Property (directly or through the sale of the applicable
Subsidiary) at any time during the one hundred eighty (180) days following
the
date that Administrative Member’s right to purchase the applicable Property,
BREA’s Membership Interest, as applicable, expires or is otherwise lost (the
“Marketing
Period”).
If
Administrative Member did not deliver a Purchase Offer or if Administrative
Member fails to deposit the Purchase Deposit within ten (10) days after a
Purchase Offer is accepted, then, in either case, BREA may cause the Company
to
sell BREA’s Membership Interest or the applicable Property during the Marketing
Period for any price that is acceptable to BREA. If Administrative Member
delivers a Purchase Offer and such Purchase Offer is rejected by BREA, then
BREA
may cause the Company to sell BREA’s Membership Interest or the applicable
Property for a purchase price that is not more than $5,000,000 lower than
Administrative Member’s Price as set forth in the Purchase Offer delivered by
Administrative Member after receipt of the applicable Intent to Sell Notice,
provided that if the
proposed
sale relates to less than eighty percent (80%) of the Properties, the foregoing
threshold shall be not less than ninety-five percent (95%) of Administrative
Member’s Price as set forth in the Purchase Offer, rather than $5,000,000. If
BREA desires to cause the Company to sell BREA’s Membership Interest or the
applicable Property for a purchase price that is more than $5,000,000 lower
than, or less than ninety-five percent (95%) of, as applicable, Administrative
Member’s Price as set forth in the Purchase Offer that Administrative Member
delivered after receipt of the applicable Intent to Sell Notice, then, prior
to
agreeing to sell BREA’s Membership Interest or the applicable Property to a
third party for such price, BREA must deliver a written notice to Administrative
Member (a “Supplemental
Notice”),
which
Supplemental Notice shall identify the proposed sale price (the “Third
Party Price”).
Administrative Member shall have five (5) business days from the date of receipt
of the Supplemental Notice to notify BREA in writing that either (a)
Administrative Member is prepared to purchase BREA’s Membership Interest or the
applicable Property at a purchase price equal to the Third Party Price, or
(b)
Administrative Member is not prepared to purchase BREA’s Membership Interest or
the applicable Property. Failure of Administrative Member to respond in writing
to the Supplemental Notice within such five (5) business day period shall be
deemed an election by Administrative Member that Administrative Member is not
prepared to purchase BREA’s Membership Interest or the applicable Property. If
Administrative Member elects not to, or is deemed to elect not to purchase
BREA’s Membership Interest or the applicable Property, then BREA may sell BREA’s
Membership Interest or cause the Company to sell the applicable Property to
the
third party at the Third Party Price. If Administrative Member elects to
purchase BREA’s Membership Interest or the applicable Property for the Third
Party Price, then the sale of BREA’s Membership Interest or the applicable
Property shall take place in accordance with the terms of Section 10.2 hereof,
except that the terms of Section 10.2 shall be modified to reflect a purchase
price equal to the Third Party Price.
Section
10.4 Tag
Along Rights
.
If BREA
elects to sell BREA’s Membership Interest within a Marketing Period, ESC shall
have the right to elect to “tag along” with said sale on a pro rata basis in
accordance with the terms and conditions negotiated by BREA for the sale of
BREA’s Membership Interest; and failure by ESC to make such election within ten
(10) business days of receipt of notice from BREA regarding same period shall
be
deemed an election by ESC to not tag along on such sale.
Section
10.5 Unsolicited
Offers to Purchase
.
If BREA
receives an unsolicited third party offer to sell all of the Properties, any
Property, or BREA’s Membership Interest, then the thirty (30) day period set
forth in Section 10.1 above shall be reduced to fifteen (15) days
Section
10.6 Failure
to Sell
.
If BREA
is unable to sell BREA’s Membership Interest or the applicable Property within a
Marketing Period, then, prior to any further marketing or any subsequent
marketing of BREA’s Membership Interest or the applicable Property, BREA must
send Administrative Member a new Intent to Sell Notice, and the process set
forth in Section 10.1 through this Section 10.4 shall occur.
Section
10.7 Method
of Sale
.
The
sale of a Property to a third party may be accomplished, in the sole and
absolute discretion of BREA, as a sale of such Property or as a sale of the
Company’s interest in the Company Subsidiary that owns such
Property.
34
ARTICLE
XI
MISCELLANEOUS.
Section
11.1 Notices
.
Any
notice which a party is required or may desire to give the other party shall
be
in writing and may be delivered (1) personally, (2) by United States
registered or certified mail, postage prepaid, (3) by Federal Express or
other reputable courier service regularly providing evidence of delivery (with
charges paid by the party sending the notice), or (4) by facsimile,
provided that such telecopy shall be immediately followed by delivery of such
notice pursuant to clause (1), (2) or (3) above. Any such notice to a party
shall be addressed at the address set forth below the name of such party on
the
signature pages at the end of this Agreement (subject to the right of a party
to
designate a different address for itself by notice similarly given). Service
of
any such notice or other communications so made shall be deemed effective on
the
day of actual delivery (whether accepted or refused) as evidenced by confirmed
answerback if by facsimile (provided that if any notice or other communication
to be delivered by facsimile cannot be transmitted because of a problem
affecting the receiving party’s facsimile machine, the deadline for receiving
such notice or other communication shall be extended through the next business
day), as shown by the addressee’s return receipt if by certified mail, and as
confirmed by the courier service if by courier; provided, however, that if
such
actual delivery occurs after 5:00 p.m. (local time where received) or on a
non-business day, then such notice or demand so made shall be deemed effective
on the first business day after the day of actual delivery. No communications
via electronic mail shall be effective to give any notice, request, direction,
demand, consent, waiver, approval or other communications
hereunder.
Section
11.2 Contribution
Agreement
.
A. If
any
Project Lender or any other party (collectively, “Indemnitee”)
collects from any Member or its Affiliate (the “Paying
Member“)
all or
any part of any amounts due under any Project Financing, or any replacement
thereof, or any indemnity provided to Seller in connection with the Closing
(collectively, the “Unpaid
Liabilities”)
pursuant to any letter of credit, guaranty, environmental indemnity agreement,
or other indemnity agreement, the amount of which Unpaid Liabilities is not
reimbursed to the Paying Member by the Company within five (5) business days
after the Company’s receipt of written demand for such reimbursement (a
“Guaranty
Payment”),
then
the Paying Member shall give a written demand to the other Member (the
“Non-Paying
Member”)
specifying the amount of the Guaranty Payment and providing reasonable evidence
of such Guaranty Payment by the Paying Member to Indemnitee (a “Demand
Notice“).Within five (5) business days after its receipt of a Demand Notice from
the Paying Member, the Non-Paying Member shall remit to the Paying Member an
amount equal to the Guaranty Payment multiplied by such Non-Paying Member’s
Company Percentage (a “Liability
Percentage”)
of the
Guaranty Payment. Each Member agrees to consult with the other Member prior
to
making any Guaranty Payment and, upon request, to advise the other Member of
the
aggregate amount the Paying Member has paid under any guaranty or environmental
indemnity agreement.
B. If
any
Member shall fail to make any payment required to be made pursuant to this
Agreement within the time period specified in Section
11.2A,
then
interest will accrue on such unpaid amount from the date of the relevant Demand
Notice until paid or otherwise satisfied at a rate equal to Applicable Rate,
and
the same shall be due and payable to the Paying
Member
along with any costs of collection incurred by the Paying Member, including
reasonable attorneys’ fees and expenses.
C. Notwithstanding
anything to the contrary contained in this Agreement, in the event that
Indemnitee is entitled to enforce the Unpaid Liabilities of the Company against
the Company or one of the Members due to the fraud, grossly negligent actions,
or intentional misconduct by the other Member, or such Member’s direct and
indirect members, partners, shareholders, officers, directors, employees or
agents, or actions by such Member outside the scope of its authority under
this
Agreement (such acts being herein referred to as the “Recourse
Acts”),
then
such Member shall be 100% liable to the other Member for any obligation,
liability, claim, loss, damage, cost or expense (including any judgment, award,
settlement, reasonable attorneys’ fees and other costs and expenses incurred in
connection with the defense of any actual or threatened action, proceeding
or
claim [including appellate proceedings], and any collection costs or enforcement
costs) (collectively, “Claims”),
arising in connection with the Recourse Acts, and such Member shall indemnify,
protect, defend and hold such other Member harmless from and against any and
all
Claims suffered or sustained by it by reason of such first Member’s Recourse
Acts.
D. If
the
assets of the Company are inadequate to fully satisfy any Unpaid Liabilities,
and BREA or Administrative Member is required to make any Guaranty Payment,
then, except with respect to payments made due to the Recourse Acts, which
shall
be made in accordance with the provisions of Paragraph C above, the parties
agree as follows:
(1) Until
the
Project Financing, or any replacement thereof has been repaid in full, and
the
Property has been sold to a third party, in the event distributions have been
made under the Promote Clause, any amounts the Members are obligated hereunder
(or otherwise agree in writing) to pay with respect to any Guaranty Payments
shall, notwithstanding anything to the contrary herein, be made as
follows:
(a) initially,
in accordance with the allocations under the Promote Clauses (up to an amount
equal to the amount previously distributed under the Promote Clauses),
and
(b) thereafter,
the balance, if any, of the Guaranty Payments shall be made by the Members
pari
passu in accordance with their Company Percentages.
(2) Any
payments made by BREA, whether a Guaranty Payment to Indemnitee or a payment
to
the Paying Member for BREA’s Liability Percentage of a Guaranty Payment, shall
be deemed to be a contribution by BREA under this Agreement.
(3) Any
payment made by Administrative Member, whether a Guaranty Payment to Indemnitee
or a payment to the Paying Member for Administrative Member’s Liability
Percentage of a Guaranty Payment, shall be deemed to be a contribution by
Administrative Member under this Agreement.
(4) The
Company shall be deemed to have made the Guaranty Payments to the Indemnitee.
36
Section
11.3 Acknowledgement
by Members
.
Each
Member acknowledges the following: (A) it is familiar with the business
proposed to be conducted by the Company and the Company Subsidiaries;
(B) it has been advised that its interest in the Company may not be sold,
transferred, or otherwise disposed of except as provided herein; (C) it
understands that its interest in the Company has not been registered under
the
Securities Act of 1933 as amended (the “Securities
Act”),
or
any State securities laws, in reliance on an exemption for private offerings
or
the fact that it is not a security and if its interest in the Company is a
security, such Member may not be able to resell it unless it is registered
under
the Securities Act and applicable State securities laws or unless an exemption
from such registration is available; (D) it is a “sophisticated investor”
with substantial prior experience in high-risk business investments of the
type
described in this Agreement and is aware of and familiar with the risks
associated with a private limited liability company and would qualify as an
“accredited investor” as such is defined in Rule 501 of Regulation D,
as enacted pursuant to Sections 3(b) and 4(2) of the Securities Act;
(E) it is acquiring its interest in the Company for its own account, for
investment only and with no present intention of distributing, reselling,
pledging, or otherwise disposing of its interest; and (F) that it is
familiar with the type of investment which its interest in the Company
constitutes and has reviewed the acquisition of such interest with its tax
and
independent legal counsel and investment representatives to the extent it deems
necessary.
Section
11.4 Construction
.
Every
covenant, term, and provision of this Agreement shall be construed simply
according to its fair meaning and not strictly for or against any Member
(notwithstanding any rule of law requiring an Agreement to be strictly construed
against the drafting party).
Section
11.5 Time
is of the Essence
.
Subject
to Section 11.13, time is of the essence with respect to this
Agreement.
Section
11.6 Entire
Agreement
.
This
Agreement constitutes the entire agreement between the parties. This Agreement
supersedes any prior agreement or understandings between the
parties.
Section
11.7 Amendments
.
This
Agreement may be amended by written agreement of amendment executed by all
Members, but not otherwise, unless expressly provided herein.
Section
11.8 Governing
Law
.
This
Agreement and the rights of the parties hereunder shall be governed by and
interpreted in accordance with the laws of the State of Delaware (without regard
to conflicts of laws). Subject to Section 7.3, each of the parties hereto
irrevocably and unconditionally agrees (1) to be subject to the exclusive
jurisdiction of the courts of the State of Delaware and of the federal courts
sitting in the State of Delaware, and (2)(a) to the extent such party is
not otherwise subject to service of process in the State of Delaware, to appoint
and maintain an agent in the State of Delaware as such party’s agent for
acceptance of legal process and notify the other party or parties hereto of
the
name and address of such agent, and (b) that service of process may, to the
fullest extent permitted by law, also be made on such party by prepaid certified
mail with a proof of mailing receipt validated by the United States Postal
Service constituting evidence of valid service, and that service made pursuant
to (2)(a) or (b) above shall, to the fullest extent permitted by law, have
the
same legal force and effect as if served upon such party within the State of
Delaware.
37
Section
11.9 Successors
and Assigns
.
Except
as herein otherwise specifically provided, this Agreement shall be binding
upon
and inure to the benefit of the parties and their legal representatives,
successors and assigns.
Section
11.10 Captions
.
Captions contained in this Agreement in no way define, limit or extend the
scope
or intent of this Agreement.
Section
11.11 Severability
.
If any
provision of this Agreement, or the application of such provision to any person
or circumstance, shall be held invalid, the remainder of this Agreement, or
the
application of such provision to the persons or circumstances, shall not be
affected thereby.
Section
11.12 Counterparts
.
This
Agreement may be executed in several counterparts, each of which shall be deemed
an original, but all of which shall constitute one and the same
document.
Section
11.13 Certain
Terminology
.
A. Whenever
the words “including,” “include” or “includes” are used in this Agreement, they
should be interpreted in a non-exclusive manner as though the words,” without
limitation,” immediately followed the same.
B. Except
as
otherwise indicated, all Article, Section and Exhibit references in this
Agreement shall be deemed to refer to the Sections and Articles in, and the
Exhibits to, this Agreement.
C. Wherever
the words “herein” or “hereunder” appear in this Agreement, they shall be
interpreted to mean “in this Agreement” or “under this Agreement,”
respectively.
D. As
used
herein, “good faith” means “honesty in fact” as such phrase is used in the
Uniform Commercial Code, as adopted in the State of Delaware as of the date
of
this Agreement.
Section
11.14 Non-Business
Days
.
Whenever action must be taken (including the giving of notice or the delivery
of
documents) under this Agreement during a certain period of time or by a
particular date that ends or occurs on a non-business day (i.e., Saturday,
Sunday or a holiday recognized by the U.S. federal government or the State
of
New York or Delaware), then such period or date shall be extended until the
immediately following business day.
Section
11.15 Incorporation
of Exhibits
.
All
exhibits attached and referred to in this Agreement are hereby incorporated
herein as fully set forth in (and shall be deemed to be a part of) this
Agreement.
Section
11.16 Effectiveness
.
In no
event shall any draft of this Agreement create any obligation or liability,
it
being understood that this Agreement shall be effective and binding only when
a
counterpart hereof has been executed and delivered by each party
hereto.
IN
WITNESS WHEREOF, the undersigned have executed this Agreement as of the date
first above written.
[Remainder
of page intentionally left blank; signatures follow]
BREA’s
Signature Page for Amended and Restated Limited Liability Company
Agreement
for
BREA Emeritus LLC
dated
as of December 1, 2006
BREA:
BREA
806 LLC,
a
Delaware limited liability company
By: BREA
Senior Housing LLC,
a
Delaware limited liability company,
its
managing member
By:
/s/
Xxxxx
Xxxx
Name: Xxxxx
Xxxx
Title:
Address:
c/o
The
Blackstone Group
000
Xxxx
Xxxxxx
Xxx
Xxxx,
Xxx Xxxx 00000
Attention:
Mr. Xxxxx Xxxx
Telephone: (000)
000-0000
Facsimile: (000)
000-0000
With
Copy To:
Pircher,
Xxxxxxx & Xxxxx
000
Xxxxx
Xxxxxxxx Xxxxxx, Xxxxx 0000
Xxxxxxx,
Xxxxxxxx 00000
Attention:
Real Estate Notices (JDL)
Telephone: (000)
000-0000
Facsimile: (000)
000-0000
ESC’s
Signature Page for Amended and Restated Limited Liability Company
Agreement
for
BREA Emeritus LLC
dated
as of December 1, 2006
ESC:
EMERITUS
CORPORATION,
a
Washington corporation
By: /s/
Xxxxxxx X. Xxxxxxxxxx ________
Name: Xxxxxxx
X. Xxxxxxxxxx
Title: Vice
President of Finance
Address:
0000
Xxxxxxx Xxxxxx, Xxxxx
Xxxxxxx,
Xxxxxxxxxx 00000
Attention:
Xxxx Xxxxxxxxxx, Esq.
Telephone: (000)
000-0000
Facsimile: (000)
000-0000
With
Copy to:
Xxxxxx
Pepper PLLC
0000
Xxxxx Xxxxxx, Xxxxx 0000
Xxxxxxx,
Xxxxxxxxxx 00000-0000
Attention:
Xxxxx XxXxxxxxx, Esq.
Telephone: (000)
000-0000
Facsimile: (000)
000-0000
Independent
Manager Signature Page for
Amended
and Restated Limited Liability Company Agreement
for
BREA Emeritus LLC
dated
as of December 1, 2006
Independent
Manager:
/s/
Xxxxxx X. Xxxxxx
XXXXXX
X.
XXXXXX
BREA
Emeritus LLC
EXHIBITS
A
-
Certain Acquisition Costs
B
-
Initial Operating Budget and Capital Budget
C
-
Properties
D
-
Existing Competing Projects
E
-
Certain IRR Deficiency Calculations
F
-
Certain Obligations of Administrative Member
G
- Form
of Property Management Agreement
H
-
Certain Tax and Accounting Matters
I
-
Special Purpose Provisions
EXHIBIT
“A”
CERTAIN
ACQUISITION COSTS
1.
Out-of-pocket due diligence expenses.
2.
All
third party legal fees.
3.
The
cost of all third party reports.
EXHIBIT
“B”
INITIAL
OPERATING BUDGET AND CAPITAL BUDGET
EXHIBIT
“C”
PROPERTIES
1. Cypress
Court at East Mesa
|
0000
Xxxx Xxxxx Xxxxxx
|
|
Xxxx,
Xxxxxxx 00000
|
2. Cypress
Court at Peoria
0000
Xxxx
Xxxxx Xxxxx Xxxxx
Xxxxxx,
Xxxxxxx 00000
3. Cypress
Court at Sun City West
21739
N.
000xx Xxxxxx
Xxx
Xxxx
Xxxx, Xxxxxxx 00000
4. Cypress
Court at Tucson
0000
X.
Xxxx Xxxx
Xxxxxx,
Xxxxxxx 00000
5. Cypress
Gardens
at
Brea
000
Xxxx
Xxxxxxx Xxxxxx
Xxxx,
Xxxxxxxxxx 00000
6. Cypress
Gardens at Citrus Heights
0000
Xxxxx Xxxxx Xxxx
Xxxxxx
Xxxxxxx, Xxxxxxxxxx 00000
7. Cypress
Gardens at Whittier
0000
X.
Xxxxxxx Xxxxxx and
0000
Xxxxxxx Xxxxxx
Xxxxxxxx,
Xxxxxxxxxx 00000
8. Cypress
Court at Denver
0000
X.
Xxxxxx Xxxxxx
Xxxxxx,
Xxxxxxxx 00000
9. Cypress
Court at Colorado Springs
0000
Xxxxx Xxxxxxx Xxxxxxxxx
Xxxxxxxx
Xxxxxxx, Xxxxxxxx 00000
10. Cypress
Gardens at Boynton Village
0000
Xxxxx Xxxxxxx Xxxxxxx
Xxxxxxx
Xxxxx, Xxxxxxx 00000
11. Cypress
Gardens at Sarasota
0000
Xxxxx Xxxx
Xxxxxxxx,
Xxxxxxx 00000
12. Cypress
Gardens at Dunedin
000
Xxxxxxxx Xxxxxx
Xxxxxxx,
Xxxxxxx 00000
13. Cypress
Gardens at Xxxxxx Ranch and Health Care Center
0000
Xxxxxx Xxxxx Xxxxxxx
Xxxxxxxx,
Xxxxxxx 00000
14. Cypress
Court at Decatur
000
Xxxxx
Xxxxx
Xxxxxxx,
Xxxxxxx 00000
15. Cypress
Gardens at Xxxxx Springs
0000
Xxxxxxxxx Xxxxx
Xxxxxxx,
Xxxxxxx 00000
16. Cypress
Court at Xxxxx Springs
0000
Xxxxxxxxx Xxxxx
Xxxxxxx,
Xxxxxxx 00000
17. Cypress
Court at Vinings Place
0000
Xxxxx Xxxxx Xxxxx,
XX
Xxxxxx,
Xxxxxxx 00000
18. Cypress
Court at Overland Park
00000
Xxxxxxx
Xxxxxxxx
Xxxx, Xxxxxx 00000
19. Rosewood
Estates at
South
Park
0000
Xxxx
Xxxx
Xxxxxxxxx,
Xxxxx Xxxxxxxx 00000
20. Cypress
Gardens at Wayne
000
Xxxxxxx Xxxxxxxx
Xxxxx,
Xxx Xxxxxx 00000
21. Cypress
Gardens at Emerson
000
Xxx
Xxxx Xxxx
Xxxxxxx,
Xxx
Xxxxxx 00000
22. Cypress
Gardens at West Orange
000
Xxxxxxxx Xxxxxx
Xxxx
Xxxxxx, Xxx Xxxxxx 00000
23. Cypress
Court at Reno
0000
Xxxxxx
Xxxxxx
Xxxx,
Xxxxxx 00000
24. Cypress
Gardens at Westlake
00000
Xxxxxxx Xxxx
Xxxxxxxx,
Xxxx 00000
25. Cypress
Court
at
Roanoke
0000
Xxxxxxxxx Xxxx, XX
Xxxxxxx,
Xxxxxxxx 00000
EXHIBIT
“D”
EXISTING
COMPETING PROJECTS
EXHIBIT
“E”
CERTAIN
IRR DEFICIENCY CALCULATIONS
This
Exhibit describes the internal rate of return calculation contemplated by
Section 4.1 of the limited liability company agreement (this “Agreement“)
to
which this Exhibit is attached and of which this Exhibit forms a part. Except
as
otherwise indicated in this Exhibit, each capitalized term used herein shall
have the meaning given to the same elsewhere in this Agreement.
A. CERTAIN
DEFINITIONS.
“Contributions“
means
(i) the sum of all contributions made under this Agreement by BREA to the
Company on or after Time 0 and (ii) as of the date any Property is acquired
by
the Company (or any Company Subsidiary), an additional amount equal to 0.81%
of
the total gross cost basis of such Property to the Company (or such Company
Subsidiary). If an escrow is used or advances are made by BREA or an affiliate
prior to the date hereof and later treated as, or credited against, BREA’s
contributions, then Contributions shall be deemed made on the date amounts
are
so deposited into escrow or advanced.
“Distributions“
for
a
particular IRR Rate means all distributions made to BREA under the applicable
subsections of Section 4.1 on or after Time 0. The applicable
subsections are as follows: if the IRR Rate is 15% per annum, then the
applicable subsection is 4.1A; if the IRR Rate is 20% per annum, then the
applicable subsections are 4.1A and 4.1B; and if the IRR Rate is 25% per annum,
then the applicable subsections are 4.1A, 4.1B and 4.1C.
“IRR
Rate“
means
15% per annum, 20% per annum or 25% per annum, as applicable
“Time
0“
means
September 5, 2006. However, if an escrow is used or BREA or an affiliate
otherwise advanced funds for the Company prior to the date of this Agreement
(e.g.,
for a
portion of a deposit), then Time 0 shall mean the date BREA or such
affiliate deposits funds in such escrow or makes such advance.
B. DEFINITION
AND CALCULATION OF IRR DEFICIENCY.
With
respect to the applicable IRR Rate, the “IRR
Deficiency“
as
of
any particular date means the amount by which (1) the future value as of
such date at such IRR Rate, compounded annually, of all Contributions made
on or
before such date (which shall include both such Contributions themselves and
an
annually compounded return on such Contributions using such IRR Rate), exceeds
(2) the future value (as of such date) at such IRR Rate, compounded
annually, of all Distributions for such IRR Rate (excluding, however, any
Distribution to be made on such date and with respect to which such calculation
is being made) made on or before such date (which shall include both such
Distributions themselves and an annually compounded return on such Distributions
using such IRR Rate). The “15%
IRR Deficiency“
is
the
IRR Deficiency using an IRR Rate of 15% per annum, the “20%
IRR Deficiency“
is
the
IRR Deficiency using an IRR Rate of 20% per annum, and the “25%
IRR Deficiency“
is
the
IRR Deficiency using an IRR Rate of 25% per annum.
EXHIBIT
“F”
CERTAIN
OBLIGATIONS OF ADMINISTRATIVE MEMBER
Subject
to Section 5.1, Administrative Member’s responsibilities include:
| · |
Maintain/manage
or cause to be maintained and managed at company expense LLC level
documentation and procedures
|
| · |
Preparing
an Operating Budget and Capital Budget) for BREA’s review and approval at
least forty-five (45) days prior to commencement of each calendar
year and
making such changes thereto as the Members may
approve
|
| · |
Coordinating
and facilitating and/or causing the preparation of financial and
operational reports, disclosures and statements required under the
terms
of any loan documents at company
expense.
|
| · |
Monitor
lender relationship
|
| · |
Prepare
distribution recommendations
|
| · |
Prepare
and deliver capital calls for
approval
|
PROPERTY
OPERATIONS
| · |
Determine
and recommend to the Company and each Company Subsidiary most effective
manner for property operations including internal management, third-party
property management, third-party facilities
management
|
| · |
Oversee
third-party property, facilities, and/or financial managers, if
any
|
INSURANCE
Administrative
Member shall cause the Company and the Company Subsidiaries, at a minimum,
to
obtain and maintain, without interruption, the insurance or self insurance
coverages stipulated hereunder for the benefit of the Company and the Company
Subsidiaries and each Member, but only to the extent of such party’s interest in
the Property:
(a) Property.
The
Company or the applicable Company Subsidiary shall, at a minimum, obtain and
maintain, without interruption, the insurance coverages stipulated hereunder
for
the benefit of the Company and the applicable Company Subsidiary and each
Member, but only to the extent of such party’s interest in the
Property:
(i) Replacement
Cost.
The
Property shall be insured on a Full Replacement Cost basis. Full Replacement
Cost is defined as the cost of replacing all improvements, together with
appurtenances and betterments in compliance with prevailing building codes,
without deduction for physical depreciation thereof, at the time of replacement
of the Property, following a loss. If the Property is vertically improved,
full
Replacement Cost shall be determined by an appraisal made at
least
once every three (3) years, by an appraiser, appraisal company or insurance
company. The value so determined shall be binding and conclusive. The policy
shall further provide that, in the event of a total or constructive total loss,
the Company and the applicable Company Subsidiaries shall not be unreasonably
restricted from applying the proceeds to the re-building of the improvements
at
such other location as the Company and the applicable Company Subsidiaries
shall
elect. The Property shall be insured on an All Risk basis, and such policy
shall
include coverage for losses due to the peril of windstorm. The policy shall
be
endorsed to provide coverage for demolition and increased cost of construction
to conform to local ordinance.
(ii) Rent
Loss/Business Interruption.
If
applicable, the Company or the applicable Company Subsidiary shall maintain,
after substantial completion of the improvements, rent loss/business
interruption insurance sufficient to prevent the Company and the applicable
Company Subsidiaries from being a coinsurer under the terms of the policy,
and
in an amount equal to either twelve months’ projected gross income from the
Property, or for the length of time it would take to demolish and rebuild all
improvements.
(iii) Builder’s
Risk.
During
the period of any construction, repair, renovation, restoration or replacement
of the improvements or the Property, the Company or the applicable Company
Subsidiary shall obtain and maintain a completed value “All Risk” Builder’s Risk
policy in an amount equal to one hundred percent (100%) of the replacement
cost
of the Property. Coverage should include, but not be limited to, collapse,
soft
costs, transit, earthquake, flood, windstorm, off-site storage, expediting
expenses, demolition and increased cost of construction (for renovation and/or
additions to existing structures), water damage, permission for partial
occupancy, and automatic reinstatement. The policy is to be written on a
non-reporting basis, and in an amount not less than the total value of the
Property (less the value of such uninsurable items as land, site preparation,
grading, paving, parking lots). The coverage may be provided as an extension
to
the property policy in force if the requirements herein are satisfied, subject
to approval by the Members.
(iv) Flood.
If at
any time the Property is in an area that has been identified by the Federal
Insurance Administration as having special flood and/or mudslide hazards, and
in
which the sale of flood insurance has been made available under the National
Flood Insurance Act of 1968, the Company or the applicable Company Subsidiary
shall purchase and maintain a flood insurance policy. In the event that the
Property is in an area identified as subject to flood and/or mudslide hazards,
the Company or the applicable Company Subsidiary shall obtain a certificate
or
letter stating that the Property is insured for losses arising out of these
perils.
(v) Earthquake.
If the
Property is in an area identified by any governmental, engineering or any hazard
underwriting agencies as being subject to the peril of earthquake, with a
Maximum Probable Loss (MPL) of between ten percent (10%) and twenty percent
(20%), the Company or the applicable Company Subsidiary shall obtain earthquake
insurance equal to fifty percent (50%) of the replacement cost of the
Property.
(b) Liability.
(i) the
Company shall obtain and maintain Commercial General Liability insurance on
the
broadest forms available for similar risks, written on an “occurrence policy
form,” against all claims for bodily injury, disease or death, property damage,
personal injury and
contractual
liability (deleting any exclusion restricting coverage for contractual
obligations for claims occurring on, in or about the Property and adjoining
premises, explosion, collapse, and underground property damage) in an amount
of
not less than $1,000,000 arising out of any one occurrence. Such insurance
may
be provided under a primary and an umbrella policy or policies. If liability
coverage for the Property is included under any blanket policy written on an
aggregate form, then the annual aggregate limit of insurance must not be less
than $1,000,000. The policy shall be endorsed to include the Company, each
Company Subsidiary and each Member as an additional insured subject to the
benefits stipulated under subsection (i)(v) hereof.
(ii) During
any period of construction, repair, restoration, renovation or replacement
of
the Property, the Company or the applicable Company Subsidiary shall cause
the
general contractor to maintain commercial liability insurance (or the Company’s
and contractor’s protective liability insurance in the name of the Company, each
Company Subsidiary and each Member), with extension for, but not limited to,
products/completed operations, with limits of not less than $5,000,000 per
occurrence. The Company or the applicable Company Subsidiary shall also cause
the general contractor to require its subcontractors of any tier to provide
confirmation of commercial liability coverage (including products/completed
operations, if applicable) with a limit of not less than $1,000,000. The general
contractors and the subcontractors shall have the Company and each Company
Subsidiary included on the insurance required herein as additional
insureds.
(c) Workers’
Compensation.
The
Company and each Company Subsidiary will maintain Workers’ Compensation and
Employer’s Liability insurance, or their equivalent, for all its employees (if
any), and will cause any of its agents, contractors and subcontractors of any
tier to maintain similar insurance for all their respective employees, to the
fullest extent required under the laws of the jurisdiction in which the Property
is located.
(d) Errors
and Omission.
The
Company and each Company Subsidiary will cause any professional consultants,
including architects and engineers, to maintain coverage in limits of not less
than $1,000,000.
(e) Other
Insurance.
In
addition to the above, the Company and each Company Subsidiary shall maintain
all insurance, Directors and Officers Insurance and surety and fidelity bonds
in
amounts and for such periods that are deemed to be prudent, or are customarily
maintained by persons or entities operating properties of like kind,
construction and occupancy in the locality of the Property.
(f) (g) All
Insurance.
Unless
specified on any of the policies required above, and such specification is
reciprocated on other corresponding policies, all insurance required herein
will
be primary and not excess over, contributory or participating with any other
insurance carried by individual Members or their respective affiliates or
agents.
(h) Other
Requirements With Respect to Insurance.
The
following provisions shall apply with respect to all insurance coverage required
above:
(i) Insurance
Companies:
All
insurance required herein shall be issued by insurance companies of recognized
good standing, with a rating of at least A in Best’s Key Rating Guide, and must
be licensed to do business in the state in which the Property is located.
Coverage
under
blanket policies may be extended by endorsements provided the insurers meet
the
requirements stipulated herein. Each policy shall not have more than a
commercially reasonable deductible for any occurrence, except for mandatory
deductibles where required under local regulations, or when required by insurers
for specific catastrophic perils.
(ii) Evidence
of Insurance:
The
Company and each Company Subsidiary shall obtain, before the expiration date
of
each such policy, certificates or binders evidencing such insurance, or
endorsements, thereof acceptable to BREA.
(iii) (iv) Cancellation:
The
Company and each Company Subsidiary shall within 30 days notify each Member
of
any cancellation of, non-renewal, or such material change as may adversely
affect any insurance policy or coverage in force. Each policy shall contain
a
provision obligating the insurer to send at least thirty (30) days’ prior
written notice to each Member and any party included as an additional insured
or
loss payee notifying them of the intent to cancel or make such change, and
that
any loss otherwise payable to them thereunder shall be paid notwithstanding
any
act or negligence on their part or that of the Company or any Company Subsidiary
which might, absent such provision, result in a forfeiture of all or part of
such insurance payment.
(v) Separate
Insurance:
Without
the prior written consent of the Members, neither the Company nor any Company
Subsidiary shall not purchase separate insurance concurrent in form or
contributing in the event of loss, with the insurance required
hereunder.
(vi) Payment
of Premium:
The
Company and each Company Subsidiary shall be solely responsible for, and
promptly pay when due, any and all premiums on all such insurance to be carried
by the Company and each Company Subsidiary.
(vii) Waiver
of Subrogation:
The
Members, the Company and each Company Subsidiary waive any claims against one
another with respect to the insurance actually carried to the extent of the
proceeds realized from such insurance coverage.
GENERAL
| · |
Conducting
or causing to be conducted the day-to-day business and affairs of
the
Company in accordance with the Requirements, including all matters
which
do not constitute Major Decisions
|
| · |
Implementing
the Major Decisions of the Company
|
| · |
Monitoring
and supervising the performance of the
Property
|
| · |
Paying
approved expenses, including principal and interest payments under
the
Project Financing and all taxes, assessments and other impositions
applicable to the Property payable by the Company or any Company
Subsidiary
|
| · |
Executing
on behalf of and in the name of the Company or the applicable Company
Subsidiary all agreements that do not constitute Major Decisions
that are
required for the day-to-day operations of the business of the Company
and
each Company Subsidiary
|
| · |
Suing,
prosecuting, settling or compromising all claims by or against third
parties subject and in accordance with the
Requirements
|
| · |
Requiring
contractors providing services in connection with the Property to
maintain
adequate insurance and, to the extent reasonably appropriate, sufficient
bonds and similar items
|
| · |
Protecting
and preserving the title and interest of the Company, each Company
Subsidiary and their respective
assets
|
| · |
Filing
all disclosure documents related to the Property required by law
and
taking any other actions necessary or advisable in order to comply
with
the Requirements
|
| · |
Performing
all business functions and otherwise operating and managing the Property
in accordance with the Requirements
|
| · |
Overseeing
third party providers’ services to ensure that Property is managed to
yield optimal returns
|
| · |
Performing
such other duties as may be reasonably requested from time to time
by
BREA
|
*
*
*
EXHIBIT
“G”
FORM
OF
MANAGEMENT AGREEMENT
EXHIBIT
“H”
CERTAIN
TAX AND ACCOUNTING MATTERS
EXHIBIT
I
SPECIAL
PURPOSE PROVISIONS
“Single
Purpose Entity”
shall
mean an entity whose organizational documents contain restrictions on its
purpose and activities and impose requirements intended to preserve its
separateness that are substantially similar to following provisions (the
“Special
Purpose Provisions”):
| (i) |
is
formed or organized solely for the purpose of owning, holding, developing,
using, operating and financing, directly a Property, or, in the case
of an
entity formed or organized solely for the purpose of owning, holding,
developing, using, operating and financing (as used in this Exhibit
“I”,
the “Parent”), indirectly, an ownership interest in a Property,
|
| (ii) |
does
not engage in any business unrelated to such Property or with respect
to
the Parent, indirectly, all of the Properties and the ownership,
development, use, operation and financing thereof,
|
| (iii) |
has
not and will not have any assets other than those related to its
interest
in such Property or with respect to the Parent, indirectly, all of
the
Properties or the operation, management and financing thereof or
any
Indebtedness other than the Permitted Indebtedness,
|
| (iv) |
except
if consolidated with other borrowers under the Loan, maintains its
own
separate books and records and its own accounts, in each case, which
are
separate and apart from the books and records and accounts of any
other
Person,
|
| (v) |
holds
itself out as being a entity, separate and apart from any other entity,
|
| (vi) |
does
not and will not commingle its funds or assets with those of any
other
entity,
|
| (vii) |
conducts
its own business in its own name,
|
| (viii) |
except
if consolidated with other borrowers under the Loan, maintains separate
financial statements,
|
| (ix) |
pays
its own liabilities out of its own funds,
|
| (x) |
observes
all limited liability company formalities,
|
| (xi) |
pays
the salaries of its own employees, if any, and maintains a sufficient
number of employees, if any, in light of its contemplated business
operations,
|
| (xii) |
except
as expressly permitted under the Loan Documents, or to the other
borrowers
with respect to the Loan, does not guarantee or otherwise obligate
itself
with respect to the debts of any other entity (other than by endorsements
of negotiable instruments for deposit or collection in the ordinary
course
of business) or hold out its credit as being available to satisfy
the
obligations of any other entity,
|
| (xiii) |
does
not acquire obligations or securities of its partners, members or
shareholders,
|
| (xiv) |
allocates
fairly and reasonably shared expenses, including, without limitation,
any
overhead for shared office space, if any,
|
| (xv) |
uses
separate stationery, invoices, and checks,
|
| (xvi) |
maintains
an arm’s length relationship with its Affiliates,
|
| (xvii) |
other
than pursuant to the Loan Documents does not and will not pledge
its
assets for the benefit of any other person or make any loans or advances
to any other person,
|
| (xviii) |
does
and will continue to use commercially reasonable efforts to correct
any
known misunderstanding regarding its separate identity,
|
| (xix) |
maintains
adequate capital in light of its contemplated business operations;
provided, however, this provision shall not require any member of
any
borrower under the Loan, or any other party, to make any capital
contributions to any borrower under the Loan, and
|
| (xx) |
has
not and will not engage in, seek, or consent to the dissolution,
winding
up, liquidation, consolidation or merger and except as otherwise
permitted
in this Agreement, has not and will not engage in, seek or consent
to any
asset sale, transfer or partnership, membership or shareholder interests,
or amendments of its organizational documents.
|
In
addition, if such entity is a partnership, (1) all general partners of such
entity shall be Single Purpose Entities (owning nothing other than its general
partnership interests); and (2) if such entity has more than one general
partner, then the organizational documents shall provide that such entity shall
continue (and not dissolve) for so long as a solvent general partner exists.
In
addition, if such entity is a corporation, then, at all times: (a) such entity
shall have at least one (1) Independent Director and (b) the board of directors
of such entity may not take any action requiring the unanimous affirmative
vote
of 100% of the members of the board of directors unless all of the directors,
including the Independent Directors, shall have participated in such vote.
In
addition, if such entity is a limited liability company, (A) such entity shall
have at least one (1) Independent Manager or Independent Member, (B) if such
entity is managed by a board of managers, the board of managers of such entity
may not take any action requiring the unanimous affirmative vote of 100% of
the
members of the board of managers unless all of the managers, including the
Independent Managers, shall have participated in such vote, (C) if such entity
is not managed by a board of managers, the members of such entity may not take
any action requiring the affirmative vote of 100% of the members of such entity
unless all of the members, including the Independent Members, shall have
participated in such vote, (D) except in the case of the Parent, each managing
member shall be a Single Purpose Entity and, in the case of the Parent, shall
own nothing other than the Equity Interests in the SPEs, and (E) its
organizational documents shall provide that until all of the indebtedness and
obligations under the Loan are paid in full such entity will not dissolve.
In
addition, the organizational documents of such entity shall provide that such
entity without the unanimous consent of all of the partners, managers, directors
or members, as applicable, shall not with respect to itself or to any other
entity in which it has a direct or indirect legal or beneficial interest (A)
seek or consent to the appointment of a receiver, liquidator, assignee, trustee,
sequestrator, custodian or other similar official for the benefit of the
creditors of such entity or all or any portion of such entity’s properties, (B)
take any action that could reasonably be expected to cause such entity to become
insolvent, petition or otherwise institute insolvency proceedings or otherwise
seek any relief under any laws relating to the relief from debts or the
protection of debtors
generally,
“or” (C) take any action would cause such entity not to satisfy the requirements
set forth herein for a Single Purpose Entity.
INDEX
OF DEFINED TERMS
|
Termination
Notice
|
Page
|
|
|
|
||
|
15%
IRR Deficiency
|
53
|
|
|
20%
IRR Deficiency
|
53
|
|
|
25%
IRR Deficiency
|
54
|
|
|
Acceptance
Notice
|
36
|
|
|
Accounts
|
24
|
|
|
Acquisition
Costs
|
3
|
|
|
Act
|
1
|
|
|
Administrative
Member
|
16
|
|
|
Administrative
Member Costs
|
3
|
|
|
Administrative
Member's Price
|
35
|
|
|
Administrative
Obligations Exhibit
|
23
|
|
|
Affiliate
|
3
|
|
|
Agreement
|
1,
53
|
|
|
Applicable
Rate
|
12
|
|
|
Arbitration
Notice
|
30
|
|
|
Bankruptcy/Dissolution
Event
|
4
|
|
|
BREA
|
1
|
|
|
BREA
Sale
|
16
|
|
|
BREA's
Membership Interest
|
35
|
|
|
Budget
|
4
|
|
|
Business
Agreements
|
4
|
|
|
Capital
Budget
|
4
|
|
|
Claim
|
4
|
|
|
Claims
|
40
|
|
|
Closing
|
7
|
|
|
Closing
Date
|
7
|
|
|
Closing
Statement
|
11
|
|
|
Collateral
Agreement
|
4
|
|
|
Company
|
1
|
|
|
Company
Percentages
|
4
|
|
|
Company
Subsidiaries
|
2
|
|
|
Company's
Accountants
|
23
|
|
|
Consultant
|
27
|
|
|
Contributing
Member
|
12
|
|
|
Contribution
Request
|
11
|
|
|
Contributions
|
53
|
|
|
control
|
4
|
|
|
Conveyance
Documents
|
20
|
|
|
Credit
Agreement
|
1
|
|
|
Cure
Period
|
5
|
|
|
Default
Loan
|
12
|
|
|
Deficiency
|
12
|
|
Deposit
|
7
|
|
|
Dissolution
Event
|
33
|
|
|
Distributable
Cash
|
14
|
|
|
Distributions
|
53
|
|
|
ESC
|
1
|
|
|
Escrow
Agent
|
7
|
|
|
Existing
Agreement
|
1
|
|
|
Existing
Competing Projects
|
8
|
|
|
Extraordinary
Income and Extraordinary Expenses
|
29
|
|
|
GAAP
|
23
|
|
|
Grossed
Up Sale Price
|
16
|
|
|
Guaranty
Payment
|
39
|
|
|
Indemnitee
|
39
|
|
|
Intent
to Sell Notice
|
35
|
|
|
Investment
Maintenance Costs
|
5
|
|
|
IRR
Deficiency
|
53
|
|
|
IRR
Exhibit
|
14
|
|
|
IRR
Rate
|
53
|
|
|
Laws
|
5
|
|
|
Lender
|
1
|
|
|
Liability
Percentage
|
39
|
|
|
Loan
|
1
|
|
|
Loan
Documents
|
20
|
|
|
Major
Decisions
|
16
|
|
|
Management
Agreement
|
27
|
|
|
Marketing
Period
|
37
|
|
|
Material
Action
|
5
|
|
|
Member
|
2
|
|
|
Member
Cessation Event
|
2
|
|
|
Members
|
2
|
|
|
Money
Market Account
|
24
|
|
|
Non-Contributing
Member
|
12
|
|
|
Noncurable
Default
|
5
|
|
|
Non-Paying
Member
|
39
|
|
|
Note
|
1
|
|
|
Obligation
|
6
|
|
|
Operating
Accounts
|
24
|
|
|
Operating
Budget
|
4
|
|
|
Operating
Expenses
|
29
|
|
|
Operating
Licenses
|
28
|
|
|
Paying
Member
|
39
|
|
|
Performance
Benchmarks
|
29
|
|
|
Periodic
Report
|
23
|
|
|
Permitted
Portfolio Acquisition
|
6
|
|
|
Portfolio
Cash Return
|
29
|
|
|
Project
|
2
|
|
Project
Financing
|
6,
10
|
|
|
Project
Financing Documents
|
6,
10
|
|
|
Project
Financing Guaranty Documents
|
6,
10
|
|
|
Project
Lender
|
6,
10
|
|
|
Promote
Clauses
|
31
|
|
|
Properties
|
6
|
|
|
Property
|
6
|
|
|
Purchase
Agreement
|
6
|
|
|
Purchase
Date
|
36
|
|
|
Purchase
Deposit
|
36
|
|
|
Purchase
Offer
|
35
|
|
|
Purchase
Price
|
7
|
|
|
Recourse
Acts
|
40
|
|
|
Requirements
|
7
|
|
|
Securities
Act
|
41
|
|
|
Security
Instrument
|
1
|
|
|
Seller
|
7
|
|
|
Sole
Member
|
2
|
|
|
Special
Member
|
3
|
|
|
Special
Purpose Provisions
|
21
|
|
|
Subsequent
Contribution
|
11
|
|
|
Supplemental
Notice
|
38
|
|
|
Tax
Exhibit
|
34
|
|
|
Termination
Notice
|
30
|
|
|
Third
Party Price
|
38
|
|
|
Time
0
|
53
|
|
|
Transfer
|
28
|
|
|
Transferred
Percentage
|
16
|
|
|
Unpaid
Liabilities
|
39
|
|
|
Winding-Up
Member
|
34
|
