Exhibit 99(g)
AMENDED AND RESTATED
LIMITED LIABILITY COMPANY AGREEMENT
OF
FORTRESS BROOKDALE ACQUISITION LLC
dated as of July 26, 2000
TABLE OF CONTENTS
PAGE
ARTICLE I
GENERAL PROVISIONS
1.1 Registered Office. .........................................................................................2
1.2 Other Offices. .............................................................................................2
1.3 Purpose; Nature of Business Permitted; Powers. .............................................................2
1.4 Limited Liability of Members.................................................................................2
1.5 Definitions..................................................................................................2
1.6 Certificates................................................................................................15
ARTICLE II
CAPITAL CONTRIBUTIONS AND CAPITAL ACCOUNTS
2.1 Capital Contributions.......................................................................................15
2.2 Capital Accounts............................................................................................17
2.3 Negative Capital Account. .................................................................................18
2.4 Admission of New Members. .................................................................................18
2.5 Interest. .................................................................................................18
2.6 Additional Capital Contributions............................................................................18
2.7 Capital Withdrawal Rights, Interest and Priority............................................................19
ARTICLE III
MANAGEMENT OF THE COMPANY
3.1 Managing Member. ..........................................................................................19
3.2 Other Ventures. ...........................................................................................21
3.3 Actions by the Members. ...................................................................................21
3.4 Meetings, Quorum; Voting. .................................................................................21
3.5 Waiver of Notice. .........................................................................................21
3.6 Action by Consent. ........................................................................................21
3.7 Officers; Designation; Term; Qualifications.................................................................21
3.8 Guaranteed Payment..........................................................................................22
3.9 Operating Committee.........................................................................................23
3.10 Election of Operating Committee and Meetings................................................................23
3.11 Board of Directors of Brookdale and Committees..............................................................24
3.12 Election of Board of Directors and Meetings.................................................................24
3.13 Audit Committee.............................................................................................25
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3.14 Officers of Subsidiaries....................................................................................25
3.15 Investment..................................................................................................25
3.16 Confidentiality.............................................................................................25
ARTICLE IV
TRANSFERS OF MEMBERSHIP INTERESTS
4.1 Restrictions on Transfer....................................................................................26
4.2 Non-Permitted Transfers.....................................................................................27
4.3 Right of First Offer........................................................................................27
4.4 Tag-Along Rights............................................................................................29
4.5 Buy/Sell Right..............................................................................................31
4.6 Drag-Along Rights...........................................................................................33
ARTICLE V
ALLOCATIONS
5.1 Allocations of Profits and Losses. ........................................................................34
5.2 Adjustments and Special Allocations. ......................................................................34
5.3 Curative Allocations. .....................................................................................36
5.4 Loss Limitation. ..........................................................................................37
5.5 Other Allocation Rules......................................................................................37
5.6 Tax Allocations: Code Section 704(c). .....................................................................37
ARTICLE VI
DISTRIBUTIONS AND EXPENSES
6.1 Distributions of Net Cash Flow. ..........................................................................38
6.2 Amounts Withheld. .........................................................................................38
6.3 Expenses. .................................................................................................38
ARTICLE VII
OTHER TAX MATTERS
7.1 Filing of Tax Returns. ....................................................................................39
7.2 Tax Matters Member. .......................................................................................40
7.3 Records and Accounting. ...................................................................................40
7.4 Access to Accounting Records. .............................................................................40
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7.5 Tax Elections. ............................................................................................40
7.6 Annual Tax Information. ...................................................................................40
ARTICLE VIII
TERM
8.1 Term........................................................................................................41
ARTICLE IX
DISSOLUTION AND TERMINATION OF THE COMPANY
9.1 Voluntary Dissolution by the Members. .....................................................................41
9.2 Continuation of Interest of Member's Representative. ......................................................41
9.3 Dissolution, Winding Up and Liquidation. ..................................................................41
9.4 Compliance With Certain Requirements of the Treasury Regulations;
Deficit Capital Accounts. .................................................................................42
ARTICLE X
INDEMNIFICATION
10.1 Indemnity. ................................................................................................42
10.2 Indemnity for Actions By or In the Right of the Company. ...................................................42
10.3 Indemnity If Successful. ..................................................................................43
10.4 Expenses. .................................................................................................43
10.5 Advance Payment of Expenses. ..............................................................................43
10.6 Other Arrangements Not Excluded. ..........................................................................43
ARTICLE XI
MISCELLANEOUS PROVISIONS
11.1 Entire Agreement. .........................................................................................44
11.2 Amendments. ...............................................................................................44
11.3 Applicable Law. ...........................................................................................44
11.4 Reserved....................................................................................................44
11.5 Headings. .................................................................................................44
11.6 Severability. .............................................................................................44
11.7 Heirs, Successors and Assigns. ............................................................................44
11.8 Tax Reports and Financial Statements........................................................................44
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11.9 Counterparts................................................................................................45
11.10 Filings.....................................................................................................45
11.11 Power of Attorney...........................................................................................45
11.12 Additional Documents........................................................................................45
11.13 Notices.....................................................................................................45
11.14 Waiver of Right to Partition and Xxxx of Accounting.........................................................46
11.15 DISCLOSURES.................................................................................................46
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AMENDED AND RESTATED
LIMITED LIABILITY COMPANY AGREEMENT
OF
FORTRESS BROOKDALE ACQUISITION LLC
A DELAWARE LIMITED LIABILITY COMPANY
THIS AMENDED AND RESTATED LIMITED LIABILITY COMPANY AGREEMENT
of FORTRESS BROOKDALE ACQUISITION LLC, a Delaware limited liabil ity company
(the "Company"), is made as of July 26, 2000 (this "Agreement"), among the
undersigned Fortress Registered Investment Trust, a Delaware business trust
("FRIT"; and also the "Managing Member"; and also a "Member"), and Health
Partners, a Bermuda exempted partnership ("HP"; and also a "Member"); and,
together with FRIT, the "Initial Members"), and the other Persons (as defined
below) who become members of the Company from time to time in accordance with
the provisions hereof (together with the Initial Members, collectively, the
"Members").
RECITALS:
WHEREAS, FRIT caused a Certificate of Formation of the Company
to be filed with the Secretary of State of the State of Delaware on May 12,
2000; and
WHEREAS, each party listed on Schedule A hereto as a Member
has executed a contribution agreement providing for, among other things, the
commitment of capital by such party to the Company;
WHEREAS, FRIT entered into the Limited Liability Operating
Agreement of Fortress Brookdale Acquisition LLC (the "Existing Operating
Agreement"), dated as of May 12, 2000 (the "Initial Closing"); and
WHEREAS, FRIT and the other parties hereto have agreed to
amend and restate the terms and conditions contained in the Existing Operating
Agreement in their entirety as hereinafter set forth.
NOW, THEREFORE, in consideration of the mutual promises and
agreements herein made and intending to be legally bound hereby, the parties
hereto agree as follows:
I. The Existing Operating Agreement is hereby modified so that
all of the terms and conditions of the aforesaid Existing Operating Agreement
shall be restated in their entirety as set forth herein.
II. This Agreement shall be binding upon and inure to the
benefit of the parties hereto, and their respective successors and assigns, and
shall be deemed to be effective as of the date hereof.
III. Any reference in any other document executed in
connection with this Agree ment to the Existing Operating Agreement shall be
deemed to refer to this Agreement.
ARTICLE I
GENERAL PROVISIONS
1.1 Registered Office. The registered office of the Company in
this state shall be The Corporation Trust Company, 0000 Xxxxxx Xxxxxx,
Xxxxxxxxxx, Xxxxxxxx 00000. The Managing Member may change said registered
office from one location to another in the State of Delaware.
1.2 Other Offices. The Company may have one or more offices as
may be established from time to time.
1.3 Purpose; Nature of Business Permitted; Powers. The Company
is orga nized for the initial object and purpose of (i) acquiring, purchasing,
owning, holding and dispos ing of (directly or indirectly through one or more
wholly owned Subsidiaries (as hereinafter defined) securities and the
Convertible Note (as hereinafter defined) of Brookdale Living Com munities,
Inc., a Delaware corporation ("Brookdale"), (ii) forming one or more
wholly-owned Subsidiaries for purpose of investing in or merging with Brookdale
and (iii) such other activities as limited liability companies may engage in
under the Act (as hereinafter defined) as the Mem bers may determine from time
to time. The Company shall possess and may exercise all the powers and
privileges granted by the Act or by any other law or by this Agreement, together
with any powers incidental thereto, insofar as such powers and privileges are
necessary or convenient to the conduct, promotion or attainment of the business
purposes or activities of the Company.
1.4 Limited Liability of Members. No Member or any of its
Affiliates (as hereinafter defined) shall have any liability for the debts,
obligations or liabilities of the Com pany or of any Member.
1.5 Tax Classification. The Members intend that the Company
shall be treated as a partnership for federal income tax purposes, and each
Member and the Company shall file all tax returns and shall otherwise take all
tax and financial reporting positions in a manner consistent with such
treatment.
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1.6 Definitions. Unless the context otherwise requires, the
terms defined in this Section 1.6 shall, for the purposes of this Agreement,
have the meanings herein specified (such meanings to be equally applicable to
both the singular and plural forms of the terms de fined).
"Act" means the Delaware Limited Liability Company Act (as it
may be amended from time to time and any successor to such Act).
"Adjusted Capital Account Deficit" means, with respect to any
Member, the deficit balance, if any, in such Member's Capital Account
as of the end of the relevant Fiscal Period, after giving effect to the
following adjustments: (a) credit to such Capital Account any amounts
that such Member is obligated to restore or deemed obligated to restore
pursuant to the penultimate sentences of Regulations Sections
1.704-2(g)(1) and 1.704-2(i)(5); and (b) debit to such Capital Account
the items described in Regulations Sections 1.704-1(b)(2)(ii)(d)(4),
(5) and (6). This definition of Adjusted Capital Account Deficit is
intended to comply with the provisions of Section 1.704-1(b)(2)(ii)(d)
of the Regulations and shall be interpreted consistently therewith.
"Affiliate" means, with respect to a Person, another Person
that directly or indi rectly controls, is controlled by or is under
common control with such first Person.
"Agreement" has the meaning set forth in the Preamble hereto.
"Amount Solicited" has the meaning set forth in Section 2.6
hereof.
"Annual Business Plan" means the annual business plan of
Brookdale approved by the Operating Committee in accordance with the
provisions of Section 3.9(a) hereof.
"Approved Sale" has the meaning set forth in Section 4.6(a)
hereof.
"Assistant Secretary" has the meaning set forth in Section
3.7(b) hereof.
"Audit Committee" has the meaning set forth in Section 3.13
hereof.
"Bankruptcy" means, with respect to any Person, a "Voluntary
Bankruptcy" or an "Involuntary Bankruptcy". A "Voluntary Bankruptcy"
shall mean, with respect to any Person, (i) an admission in writing by
such Person of its inability to pay its debts gener ally or a general
assignment by such Person for the benefit of creditors, (ii) the filing
of any petition or answer by such Person seeking to adjudicate it a
bankrupt or insolvent or seeking for itself any liquidation, winding
up, reorganization, arrangement, adjustment, protection, relief or
composition of such Person or its debts under any law relating to
bankruptcy, insolvency or reorganization or relief of debtors, or
seeking, consenting to or acquiescing in the entry of an order for
relief or the appointment of a receiver, trustee,
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custodian or other similar official for such Person or for any
substantial part of its prop erty, or (iii) corporate action taken by
such Person to authorize any of the actions set forth above. An
"Involuntary Bankruptcy" shall mean, with respect to any Person,
without the consent or acquiescence of such Person, the entering of an
order for relief or approving a petition for relief or reorganization
or any other petition seeking any reorganization, arrangement,
composition, readjustment, liquidation, dissolution or other similar
relief under any present or future bankruptcy, insolvency or similar
statute, law or regulation or the filing of any such petition against
such Person which petition shall not be dismissed within ninety (90)
Business Days or, without the consent or acquiescence of such Person,
the entering of an order appointing a trustee, custodian, receiver or
liquidator of such Person or of all or any substantial part of the
property of such Person which order shall not be dismissed within sixty
(60) Business Days.
"Board" has the meaning set forth in Section 3.11 hereof.
"Brookdale" has the meaning set forth in Section 1.3 hereof.
"Business Day" means any day other than a Saturday, Sunday or
any other day on which banks in the City of New York are required or
permitted to be closed.
"Buy/Sell Event" means an event triggered by an irreconcilable
dispute concern ing a Major Decision, which shall be deemed to exist on
the tenth day following receipt by the Company and an Initial Member of
a written notice setting forth the sending Initial Member's good faith
basis for believing there is an irreconcilable dispute with respect to
a Major Decision. A Buy/Sell Event may only be initiated by an Initial
Member.
"Buy/Sell Notice" has the meaning set forth in Section 4.5(a)
hereof.
"Buy/Sell Price" has the meaning set forth in Section 4.5(b)
hereof.
"Buy/Sell Right" has the meaning set forth in Section 4.5
hereof.
"Capital Account" has the meaning set forth in Section 2.2
hereof.
"Capital Commitment" means, with respect to each Member, the
amount set forth opposite such Member's name, as amended from time to
time, attached hereto on Sched ule A.
"Capital Contribution" means, with respect to any Member, the
amount of money and the initial Gross Asset Value of any property
(other than money) contributed to the Company in exchange for an
interest in the Company, including additional capital contri butions.
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"Capital Demand Date" has the meaning set forth in Section
2.1(c) hereof.
"Capital Demand Notice" has the meaning set forth in Section
2.1(c) hereof.
"Certificate" has the meaning set forth in Section 1.6 hereof.
"Certificate of Formation" means the Certificate of Formation
referred to in the Recitals hereof and any and all amendments thereto
and restatements thereof filed on behalf of the Company with the office
of the Secretary of State of the State of Delaware pursuant to the
Delaware Act.
"CFO" has the meaning set forth in Section 3.7(b) hereof.
"Chairman" has the meaning set forth in Section 3.7(b) hereof.
"Code" means the Internal Revenue Code of 1986, as amended
from time to time.
"Company Minimum Gain" means "partnership minimum gain" as set
forth and defined in Regulations Sections 1.704-2(b)(2) and 1.704-2(d).
"Contributing Member" has the meaning set forth in Section
2.1(d) hereof.
"Contribution Agreements" means the agreements executed the
date hereof be tween the Company and each of the Initial Members and in
the future with prospective new Members obligating each such Member to
make the contribution of cash or assets specified therein.
"Convertible Note" means, collectively, those certain 5 1/2%
Convertible Subordi nated Notes Due 2009, purchased pursuant to that
certain Note Purchase Agreement, dated as of April 27, 1999, between
Brookdale and Health Partners.
"COO" has the meaning set forth in Section 3.7(b) hereof.
"Depreciation" means, for each Fiscal Period, an amount equal
to the deprecia tion, amortization, or other cost recovery deduction
allowable with respect to an asset for such Fiscal Period, except that
if the Gross Asset Value of an asset differs from its ad justed basis
for federal income tax purposes at the beginning of such Fiscal Period,
De preciation shall be an amount which bears the same ratio to such
beginning Gross Asset Value as the federal income tax depreciation,
amortization, or other cost recovery deduc tion for such Fiscal Period
bears to such beginning adjusted tax basis; provided, however, that if
the adjusted basis for federal income tax purposes of an asset at the
beginning of such Fiscal Period is zero, Depreciation shall be
determined with reference to such begin ning Gross Asset Value using
any reasonable method selected by the Tax Matters Member.
"Effective Date" means the date hereof.
"Existing Operating Agreement" has the meaning set forth in
the Recitals hereof.
"Expiration Date" has the meaning set forth in Section 2.1(e)
hereof.
"Failed Contribution" has the meaning set forth in Section
2.1(d) hereof.
"Fiscal Period" means (i) the period commencing on the
Effective Date and end ing on December 31, 2000, (ii) any subsequent 12
month period commencing on January 1 and ending on December 31 and
(iii) any portion of the period described in clauses (i) and (ii) of
this sentence for which the Company is required to allocate Profits,
Losses and other items of Company income, gain, loss or deduction
pursuant to Article V hereof.
"Fiscal Year" means (i) the period commencing on the Effective
Date and ending on December 31, 2000, (ii) any subsequent 12 month
period commencing on January 1 and ending on December 31 and (iii) the
period commencing on the immediately preced ing January 1 and ending on
the date on which all property of the Company is distributed to the
Members pursuant to Article IX.
"FRIT" shall have the meaning set forth in the Preamble
hereto.
"Gross Asset Value" means, with respect to any asset, the
asset's adjusted basis for federal income tax purposes, except as
follows:
(a) the initial Gross Asset Value of any
asset contributed by a Member to the Company shall be the fair
market value of such asset at the time it is accepted by the
Company, unreduced by any liability secured by such asset, as
determined by the Operating Committee;
(b) the initial Gross Asset Value of the
securities contributed by FRIT to the Company shall be an
amount equal to the number of such securi ties contributed by
FRIT to the Company multiplied by fifteen ($15.25) dollars;
(c) the Gross Asset Values of all Company
assets shall be ad justed to equal their respective fair
market values, unreduced by any liabilities secured by such
assets, as determined by the Operating Committee as of the fol
lowing times: (i) the acquisition of an additional interest in
the Company by any new or existing Member in exchange for more
than a de minimis Capital Contri bution; (ii) the distribution
by the Company to a Member of more than a de minimis amount of
property as consideration for an interest in the Company; and
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(iii) the liquidation of the Company within the meaning of
Regulations Section 1.704-1(b)(2)(ii)(g), provided that an
adjustment described in clauses (i) and (ii) of this paragraph
shall be made only if the Operating Committee reasonably de
termines that such an adjustment is necessary to reflect the
relative economic in terests of the Members of the Company;
(d) the Gross Asset Values of any Company
asset distributed to any Member shall be adjusted to equal the
fair market value of such asset, unreduced by any liability
secured by such asset, on the date of distribution as
determined by the Operating Committee;
(e) the Gross Asset Value of Company assets
shall be in creased (or decreased) to reflect any adjustments
to the adjusted basis of such assets pursuant to Code Section
734(b) or Code Section 743(b); but only to the extent that
such adjustments are taken into account in determining Capital
Ac counts pursuant to Regulations Section 1.704-1(b)(2)(iv)(m)
and paragraph (f) of the definition of "Profits" and "Losses"
or Section 5.2(g) hereof; and
(f) the initial Gross Asset Value of
the Convertible Note shall be One Hundred and Ten Million
Dollars ($110,000,000).
If the Gross Asset Value of an asset has been determined or
adjusted pursuant to paragraphs (b) or (d) of this definition, such
Gross Asset Value shall thereafter be ad justed by the Depreciation
taken into account with respect to such asset for purposes of computing
Profits and Losses.
"Guaranteed Payment" has the meaning set forth in Section
3.8(a).
"HP" has the meaning set forth in the Preamble hereto.
"HSR Act" means the Xxxx-Xxxxx-Xxxxxx Antitrust Improvements
Act of 1976 (as amended from time to time).
"Indebtedness" means (i) the principal, premium (if any),
interest and related fees and expenses (if any) in respect of (A)
indebtedness for money borrowed and (B) indebt edness evidenced by
notes, debentures, bonds or other similar instruments.
"Initial Capital Demand Notice" has the meaning set forth in
Section 2.1(b) hereof.
"Initial Closing" has the meaning set forth in the Recitals
hereof.
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"Initial Co-Investor" means those investors to whom FRIT shall
transfer Member ship Interests received for up to $50,000,000 worth of
its Capital Commitment, which transfers shall not be subject to the
restrictions set forth in Sections 4.1(a), 4.2, 4.3, 4.4 and 4.6
hereof.
"Initial Members" has the meaning set forth in the Preamble
hereto.
"Major Decision" means those matters not expressly within the
authority of the Managing Member, or not otherwise delegated to the
Managing Member by the Operat ing Committee, including but limited to,
the following actions of the Company, whether action with respect to
such matters is taken directly on behalf of the Company or indi rectly
on behalf of any Subsidiary, including, without limitation, Brookdale:
(a) to add to or increase the capital of the Company
or Brookdale or take any other action described in Article IV
hereof or to issue Membership Inter ests representing
additional capital investment in the Company;
(b) to do anything that would cause a Member, or
require any Mem ber, to repurchase, prepay or incur any
Indebtedness or guarantee or otherwise become personally
liable for any Indebtedness incurred by the Company or
Brookdale, without the prior consent of such Member.
(c) to sell, exchange, finance, refinance, convey or
otherwise dispose of any asset, business, investment, property
or project directly or indirectly owned by the Company or any
Subsidiary (including, without limitation, Brookdale),
including, without limitation, permitting any Subsidiary
(including, without limi tation, Brookdale) of the Company to
cancel, terminate or otherwise materially modify any existing
management agreement;
(d) to undertake an initial public offering of
Membership Interests or other securities of the Company or any
equity interests in any Subsidiary (includ ing, without
limitation, Brookdale) or securities of any Person into which
the Company is proposed to be merged or consolidated in
contemplation of such an initial public offering;
(e) to merge or to consolidate the Company or
Brookdale with, or sell substantially all of the Company's or
Brookdale's assets to, any other Person, other than a merger
of the Company, or a Subsidiary of the Company, with or into
Brookdale;
(f) to amend this Agreement, as set forth in
Section 11.2 hereof;
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(g) to authorize and approve the dissolution of
the Company, as set forth in Section 9.1 hereof;
(h) to admit any new Member, other than the Initial
Co-Investors, to the Company or accept the resignation of any
existing Member of the Company;
(i) acquire any interest in real or personal
property;
(j) confess a judgment against the Company or any
Subsidiary (in cluding, without limitation, Brookdale) in an
amount in excess of $200,000;
(k) to commence a Voluntary Bankruptcy or to decide
not to contest an Involuntary Bankruptcy;
(l) the sale, dissemination, licensing, or the
granting of any right to use, to third parties, of any trade
secrets, customer lists or other intellectual prop erty of the
Company or Brookdale and the decision not to seek enforcement
of a violation of the intellectual property rights of the
Company or Brookdale (e.g., a trademark infringement);
(m) approval of executive compensation and employee
benefit pro grams;
(n) to enter into, amend, extend or waive material
contracts;
(o) approval of each Annual Business Plan and any
changes to any Annual Business Plan;
(p) those matters set forth in Section 2.3 hereof;
(q) capital expenditures made by the Company in
excess of $100,000.
(r) appointment or removal of Officers;
(s) all transactions or agreements between the
Company and its Sub sidiaries and any Members or their
respective Affiliates; and
(t) conversion of all or any portion of the
Convertible Note.
"Managing Member" has the meaning set forth in the Preamble
hereto.
"Member" has the meaning set forth in the Preamble hereto.
8
"Membership Interests" means the units representing the
outstanding limited liability company interests (as defined in the Act)
of the Members of the Company, including, without limitation, each such
Member's respective Capital Account, voting rights and any other
rights, benefits and obligations of such Member under this Agree ment
or the Act.
"Member Nonrecourse Debt" has the meaning of "partner
nonrecourse debt" as set forth in Regulations Section 1.704-2(b)(4).
"Member Nonrecourse Debt Minimum Gain" means an amount, with
respect to each Member Nonrecourse Debt, equal to the Company Minimum
Gain that would result if such Member Nonrecourse Debt were treated as
a Nonrecourse Liability, determined in accordance with Regulations
Section 1.704-2(i)(3).
"Member Nonrecourse Deductions" has the meaning of "partner
nonrecourse deductions" set forth in Regulations Sections 1.704-2(i)(1)
and 1.704-2(i)(2).
"Net Cash Flow" means the gross cash proceeds of the Company
less the portion thereof used to pay or establish reserves for all
Company expenses, debt payments, capi tal improvements, replacements,
and contingencies, all as determined by the Operating Committee in its
absolute and sole discretion, provided, however, that Net Cash Flow
shall not be reduced by depreciation, amortization, cost recovery
deductions, or similar allowances, but shall be increased by any
reductions of reserves previously established pursuant to previously
established reserves.
"1934 Act" means the Securities Exchange Act of 1934, as
amended from time to time.
"1933 Act" has the meaning set forth in Section 11.15(a)
hereof.
"Non-Contributing Member" has the meaning set forth in Section
2.1(d) hereof.
"Nonrecourse Deductions" has the meaning set forth in
Regulations Section 1.704-2(b)(1).
"Nonrecourse Liability" has the meaning set forth in
Regulations Section 1.704- 2(b)(3).
"Notice of Exercise" has the meaning set forth in Section
4.3(b) hereof.
"Notice of Proposed Transfer" has the meaning set forth in
Section 4.3(a) hereof.
"Notified Parties" has the meaning set forth in Section 4.5(a)
hereof.
9
"Notifying Party" has the meaning set forth in Section 4.5(a)
hereof.
"Observer" has the meaning set forth in Section 3.9(a) hereof.
"OC Members" has the meaning set forth in Section 3.9(a)
hereof.
"Offered Interests" has the meaning set forth in Section
4.3(a) hereof.
"Offer Price" has the meaning set forth in Section 4.3(a)
hereof.
"Offer to Contribute" has the meaning set forth in Section 2.6
hereof.
"Officer" means any officer of the Company appointed by the
Operating Commit tee.
"Operating Committee" has the meaning set forth in Section 3.9
hereof.
"Organizer" has the meaning set forth in Section 1.6 hereof.
"Other Committees" has the meaning set forth in Section 3.11
hereof.
"Other Members" has the meaning set forth in Section 4.4(a)
hereof.
"Participating Member" has the meaning set forth in Section
4.4(b) hereof.
"Percentage Interest" means, with respect to each Member, the
percentage set forth opposite its name on Schedule A hereto, as amended
from time to time, which percentage represents the Capital Commitment
of such Member divided by the aggregate amount of the Capital
Commitments of all Members and shall mean a Member's Mem bership
Interest which represents such Member's share of the profits and, if
applicable, losses of the Company and such Member's rights to receive
distributions of the Com pany's assets in accordance with the
provisions of this Agreement.
"Permitted Transferee" means: (i) any Affiliate or Subsidiary
of a Member, or any Affiliate or Subsidiary thereof; (ii) the Company;
(iii) with respect to FRIT, any Initial Co-Investor; (iv) in the event
of the dissolution, liquidation or winding up of any such Person that
is a corporation or partnership or limited liability company, the stock
holders of a corporation that is such Person, the partners of a
partnership that is such Person, the members of a limited liability
company that is such Person or a successor partnership all of the
partners of which or a successor corporation all of the stockholders of
which or a limited liability company all of the members of which are
the Persons who were the partners of such partnership or the
stockholders of such corporation or the mem bers of such limited
liability company immediately prior to the dissolution, liquidation or
10
winding up of such Person; provided, that no such distribution to such
persons shall be permitted if as a result thereof the Company would
become subject to the 1934 Act; (v) a transferee by testamentary or
intestate disposition; (vi) a transferee by inter vivos transfer to the
transferring Person's spouse, children and/or other lineal descendants;
(vii) a trust transferee by inter vivos transfer, the beneficiaries of
which are the transferring Person, spouse, children and/or other lineal
descendants; (viii) a successor nominee or trustee for the beneficial
owner of the shares for which such Person acts as nominee or trustee,
as the case may be; or (ix) an institutional lender for money borrowed
pursuant to bona fide pledge of or the granting of a security interest
in the Member's Membership Interests; provided, however, that any such
Permitted Transferee shall acknowledge in writing that it agrees to be
bound by, and hold the Membership Interests being pledged subject to,
the terms of this Agreement.
"Person" means any individual, corporation, association,
partnership (general or limited), joint venture, trust, joint-stock
company, estate, limited liability company, unincorporated organization
or other legal entity or organization.
"President" has the meaning set forth in Section 3.7(b)
hereof.
"Profits" or "Losses" means, for each Fiscal Period, an amount
equal to the Com pany's taxable income or loss for such Fiscal Period,
determined in accordance with Code Section 703(a) (for this purpose,
all items of income, gain, loss, or deduction required to be stated
separately pursuant to Code Section 703(a)(1) shall be included in
taxable income or loss), with the following adjustments (without
duplication):
(a) any income of the Company that is exempt from
United States Federal income tax and not otherwise taken into
account in computing Profits or Losses pursuant to this
definition shall be added to such taxable income or loss;
(b) any expenditures of the Company described in Code
Section 705(a)(2)(B) or treated as Code Section 705(a)(2)(B)
expenditures pursuant to Regulations Section
1.704-1(b)(2)(iv)(i), and not otherwise taken into account in
computing Profits or Losses pursuant to this definition shall
be subtracted from such taxable income or loss;
(c) in the event the Gross Asset Value of any Company
asset is ad justed pursuant to applicable provisions of the
Regulations, the amount of such adjustment shall be taken into
account as an item of gain (if the adjustment in creases the
Gross Asset Value of the asset) or an item of loss (if the
adjustment decreases the Gross Asset Value of the Asset) from
the disposition of such asset and shall be taken into account
for purposes of computing Profits or Losses;
11
(d) gain or loss resulting from any disposition of
property with respect to which gain or loss is recognized for
federal income tax purposes shall be com puted by reference to
the Gross Asset Value of property disposed of, notwith
standing that the adjusted tax basis of such property differs
from its Gross Asset Value;
(e) in lieu of depreciation, amortization, and other
cost recovery de ductions taken into account in computing such
taxable income or loss there shall be taken into account
Depreciation with respect to each asset of the Company for
such Fiscal Period, computed in accordance with the definition
of Depreciation;
(f) to the extent an adjustment to the adjusted tax
basis of any Com pany asset pursuant to Code Section 734(b) or
Code Section 743(b) is required pursuant to Regulations and
Sections 1.704-1(b)(2)(iv)(m)(4) and 1.704- 1(b)(2)(iv)(m)(2)
to be taken into account in determining Capital Accounts as a
result of a distribution other than in complete liquidation of
a Member's Member ship Interest, the amount of such adjustment
shall be treated as an item of gain (if the adjustment
increases the basis of the asset) or loss (if the adjustment
decreases the basis of the asset) from the disposition of the
asset and shall be taken into account for purposes of
computing Profits or Losses; and
(g) notwithstanding any other provision of this
definition, any items which are specially allocated pursuant
to Section 5.2 or Section 5.3 of this Agree ment shall not be
taken into account in computing Profits or Losses.
The amounts of the items of Company income, gain, loss, or
deduction available to be specially allocated pursuant to Section 5.2
and Section 5.3 hereof shall be deter mined by applying rules analogous
to those set forth in paragraphs (a) through (f) above.
"Primary Option Period" has the meaning set forth in Section
4.3(b) hereof.
"Proposed Transfer" has the meaning set forth in Section
4.3(a) hereof.
"Proposing Member" has the meaning set forth in Section 4.3(a)
hereof.
"Purchase Election" has the meaning set forth in Section
4.5(c) hereof.
"Quorum" has the meaning set forth in Section 3.9(a) hereof.
"Regulations" means the Income Tax Regulations, including
Temporary Regula tions, promulgated under the Code, as the same may be
amended hereafter from time to time (including corresponding provisions
of succeeding Income Tax Regulations).
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"Regulatory Allocations" has the meaning set forth in Section
5.3 hereof.
"Remaining Member" has the meaning set forth in Section 4.3(a)
hereof.
"Representative" has the meaning set forth in Section 9.2
hereof.
"Required Majority" has the meaning set forth in Section
3.9(a) hereof.
"Response Period" has the meaning set forth in Section 4.5(c)
hereof.
"Sale Election" has the meaning set forth in Section 4.5(c)
hereof.
"Secretary" has the meaning set forth in Section 3.7(b)
hereof.
"Subsidiary" of a Person means another Person in which the
first Person owns, directly or indirectly, not less than a majority of
the equity interests. Unless the context otherwise requires, all
references herein to Subsidiaries shall be to Subsidiaries of the
Company.
"Tag-Along Notice" has the meaning set forth in Section 4.4(b)
hereof.
"Tag-Along Notice Period" has the meaning set forth in Section
4.4(b) hereof.
"Tax Matters Member" has the meaning set forth in Section 7.2
hereof.
"Tender Offer" means the tender offer by the Company (directly
or through one or more wholly-owned Subsidiaries) of the shares of
Brookdale which are not then owned by the Company or FRIT.
"Third Party" has the meaning set forth in Section 4.3(a)
hereof.
"Third Party Notice" has the meaning set forth in Section
4.4(a) hereof.
"Third Party Offer" has the meaning set forth in Section
4.4(a) hereof.
"Transfer" has the meaning set forth in Section 4.1(a) hereof.
"Transferring Member" has the meaning set forth in Section
4.4(a) hereof.
"Unpaid Capital Commitment" means, with respect to any Member,
the amount by which (i) the sum of (1) such Member's Capital Commitment
and (2) the amount, if any, by which such Member elects to increase its
Capital Commitment pursuant to the terms hereof and (3) distributions
to such Member in respect of a return of Capital Contri butions, if
any, pursuant to the terms hereof, exceeds (ii) the aggregate of all
amounts actually contributed to the Company by such Member pursuant to
Section 2.1.
"Voting Representative" has the meaning set forth in Section
9.2 hereof.
Any capitalized term not defined herein shall have the meaning
ascribed to such term in the Act.
1.6 Certificates. The Managing Member, each Officer, Xxxx X.
Xxxxxx, Xxxxxxx Xxxxxx and Xxxxxxxxx Xxxxxxx (each, an "Organizer") are
authorized Persons within the meaning of the Act to execute, deliver and file
the Certificate of Formation and any other certifi xxxxx (and any amendments
and/or restatements thereof) necessary for the Company to qualify to do business
in a jurisdiction in which the Company may wish to conduct business (each, a
"Certificate"). The Company hereby ratifies the execution, delivery and filing
by each Organizer of all Certificates heretofore executed, delivered or filed by
such Organizer.
ARTICLE II
CAPITAL CONTRIBUTIONS AND CAPITAL ACCOUNTS
2.1 Capital Contributions.
(a) In exchange for its Membership Interests, each Member
hereby agrees to contribute an amount equal to its Capital Commitment (less
amounts previously contributed) upon receipt of a Capital Demand Notice from the
Operating Committee in accordance with Section 2.1(b) hereof and the
Contribution Agreements.
(b) FRIT was admitted to the Company at the Initial Closing
and HP shall be admitted to the Company on the date hereof. FRIT has previously
contributed capital to the Company in the amount specified in Schedule A
attached hereto. Each Member shall make contributions to the Company on Capital
Demand Dates upon receipt of Capital Demand No tices, in accordance with and
subject to the limitations set forth in this Section 2.1. Except as specified
below with respect to the Initial Capital Demand Notice, on any Capital Demand
Date, each Member shall contribute to the Company in dollars an amount equal to
such portion of its Unpaid Capital Commitment as shall be specified by the
Operating Committee in a Capital Demand Notice delivered in respect of such
Capital Demand Date. The first Capital Demand Notice (the "Initial Capital
Demand Notice") shall be delivered by facsimile at least two (2) Business Days
prior to the closing of the Tender Offer, and shall be in an amount equal to
each of FRIT's and HP's Unpaid Capital Commitments (which, in the case of HP,
shall be satisfied by transfer of the Convertible Note to the Company). All
Members shall pay their pro rata Capital Commitment on the Capital Demand Date
specified in the applicable Capital Demand Notice.
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(c) For purposes of this Agreement, (i) a "Capital Demand
Date" shall mean a date on which Members are required by the Operating Committee
to contribute capital to the Company not in excess of their Capital Commitments,
which date (A) shall be specified by the Operating Committee in a Capital Demand
Notice delivered by the Managing Member to each of the Members, and (B) shall be
no less than fifteen (15) days from the date of delivery of a Capital Demand
Notice by the Managing Member; and (ii) a "Capital Demand Notice" shall mean a
written notice requiring the contribution of capital to the Company, which
notice shall (A) be delivered by the Managing Member to each Member, (B) call
for contribution to the Company of the amount of capital not in excess of such
Member's Capital Commitment determined by the Operating Committee to be
appropriate to fund particular development projects or acquire addi tional
assets for the Company or meet the expenses of the Company (including the
payment of the Guaranteed Payment to the Managing Member) permitted to be paid
by the Company hereun der, and (C) call for a contribution of capital by each
Member in an amount which represents such Member's Percentage Interest of the
aggregate of the amounts payable by all Members on the relevant Capital Demand
Date. The foregoing notwithstanding, the Managing Member, by prompt notice to
each Member by telex, telecopier or cable, which shall be delivered at least two
(2) Business Days prior to the Capital Demand Date, may postpone the Capital
Demand Date one or more times for any reason to a specific date, or to a future
date to be confirmed on two (2) Business Days' notice, in each case no later
than forty-five (45) consecutive days following the originally scheduled Capital
Demand Date, or, if such forty-fifth (45th) day shall not be a Busi ness Day,
then the next succeeding Business Day, whereupon such rescheduled Capital Demand
Date shall thereafter be the scheduled Capital Demand Date for purposes of this
Agreement. To the extent the information contained in the Capital Demand Notice
delivered with respect to the originally scheduled Capital Demand Date has
materially changed, the notice of postponement shall notify the Members of such
changes.
(d) If at any time or times a Member shall fail to timely make
any Capital Contributions to the Company which such Member is obligated to make
under this Agreement and the Contribution Agreement (such Member is hereinafter
referred to as a "Non-Contributing Member"), then, without limiting the rights
or remedies available to the Company or the other Members by reason of the
breach by a Non-Contributing Member, the other Members may (but shall not be
obligated to), in proportion to their respective Membership Interests (such
Members are hereinafter referred to as the "Contributing Members"), pay all or
any part of the payment which a Non-Contributing Member failed to contribute to
the Company (the "Failed Contribu tion") and treat such amount as a contribution
to the Company, in which case the amount contri buted shall be deemed a Capital
Contribution by such Contributing Members as of the date made. If a Contributing
Member or Members shall elect to make such a Capital Contribution, the
Membership Interests of each Contributing Member shall be increased by a
fraction the numerator of which is equal to 1.25 times the portion of the Failed
Contribution contributed by such Contributing Member and the denominator of
which is equal to the total amount of Capital Contributions that all Members
have made to the Company (including the Capital Contributions by the
Contributing Members pursuant to this Section 2.1(d)) through and including the
date such Contributing Member contributed such portion. The Membership Interests
of the Non- Contributing Member shall be reduced by the percentage by which the
Contributing Members' Membership Interests were increased pursuant to the
preceding sentence; provided, however, that the Contributing Member's Membership
Interest shall not be increased beyond that percentage represented by the
Non-Contributing Member's entire Membership Interest.
(e) Capital Contributions by the Members (other than the
initial Capital Contribution by HP) shall be made in dollars by wire transfer of
federal funds to an account or accounts of the Company specified in the
applicable Capital Demand Notice. Other than as set forth in this Article II, no
Member shall be entitled to any interest or compensation by reason of its
Capital Contributions or by reason of serving as a Member. No Member shall be
required to lend any funds to the Company. Upon the expiration of the term
hereof (the "Expiration Date"), the amount of each Member's Unpaid Capital
Commitment shall be canceled except to the extent necessary (A) to complete
investments in progress, (B) to pay the Company's operating expenses, including
the Guaranteed Payment, and (C) to fund necessary reserves and costs related to
the Company's indemnification obligations, and the Managing Member shall have
the right to deliver Capital Demand Notices with respect thereto after the
Expiration Date.
2.2 Capital Accounts. A separate capital account (each a
"Capital Account") for each Member shall be established on the books and records
of the Company in compliance with Section 704(b) of the Code and the Regulations
promulgated thereunder and such Capital Accounts shall be maintained for each
Member in accordance with the following provisions, without duplication:
(a) to each Member's Capital Account there shall be
credited such Member's Capital Contributions, such Member's share of
Profits and items in the nature of income or gain which are specially
allocated to such Member pursuant to Section 5.2 and Section 5.3
hereof, and the amount of any Company liabilities assumed by such
Member or which are secured by any Company property distributed to such
Member;
(b) to each Member's Capital Account there shall be
debited the amount of cash and the Gross Asset Value of any Company
property distributed to such Member pursuant to any provision of this
Agreement, such Member's share of Losses and any items in the nature of
expenses or losses which are specially allocated pursuant to Section
5.2 or Section 5.3 hereof, and the amount of any liabilities of such
Member assumed by the Company or which are secured by any property
contributed by such Member to the Company;
(c) in the event all or a portion of a Member's
Membership Interest in the Company is transferred, the transferee shall
succeed to the Capital Account of the transferor to the extent it
relates to the transferred interest;
14
(d) in determining the amount of any liability for
purposes of Sections 2.2(a) and 2.2(b) hereof, there shall be taken
into account Code Section 752(c) and any other applicable provisions of
the Code and Regulations; and
(e) immediately prior to the actual or deemed
distribution of property of the Company (other than the distribution of
cash) upon a dissolution and liquidation of the Company, the Capital
Accounts of the Members shall be adjusted (consistent with the
provisions hereof and Regulations under Section 704 of the Code) upward
or downward to reflect any unrealized gain or unrealized loss
attributable to property of the Company, as if such unrealized gain or
unrealized loss had been recognized upon an actual sale of each asset
immediately prior to such distribution and had been allocated to the
Members at such time. The provisions of this Section 2.2(e) are
intended to meet the requirements of Regulations Section
1.704-1(b)(2)(iv)(e).
This Section 2.2 and the other provisions of this Agreement
relating to the mainte xxxxx of Capital Accounts are intended to comply with
Regulations Section 1.704-1(b), and shall be interpreted and applied in a manner
consistent with such Regulations. Notwithstanding that a particular adjustment
is not set forth in this Section 2.2, the Capital Accounts of the Members shall
be adjusted as required by, and in accordance with, the capital account
maintenance rules of Regulations Section 1.704-1(b).
2.3 Negative Capital Account. No Member shall be required to
make up an Adjusted Capital Account Deficit nor pay to any Member the amount of
any such deficit in any such account.
2.4 Admission of New Members. Unless otherwise permitted under
Article IV hereof and except with respect to any Initial Co-Investors, new
Members may only be ad mitted to membership in the Company with the approval of
the Operating Committee. A new Member must agree in writing to be bound by the
terms and provisions of the Certificate of Formation and this Agreement, as
amended, and upon admission, the new Member shall have all rights and duties of
a Member of the Company. It is understood and agreed that the Membership
Interests offered to the Initial Co-Investors and up to $105 million of
additional Capital Commit ments expected to be offered to the Initial Members,
Initial Co-Investors and new investors, shall be offered at substantially the
same Gross Asset Value as the Membership Interests of the Initial Members.
2.5 Interest. No interest shall be paid or credited to the
Members on their Capital Accounts or upon any undistributed profits left on
deposit with the Company.
15
2.6 Additional Capital Contributions. Other than to the extent
of the Capital Commitments set forth on Schedule A hereto, in no event shall any
Member be required to make an additional Capital Contribution to the Company.
However, the Operating Committee may authorize the Company to receive additional
Capital Contributions and the Company may solicit such additional Capital
Contributions from the Members, in an amount authorized by the Operat ing
Committee (the "Amount Solicited") in accordance with the provisions of Section
2.1 hereof. The Company shall send a notice of solicitation to all the Members
and each Member wishing to make an additional Capital Contribution shall so
notify the Company in writing within 20 days after delivery of the notice,
indicating the amount such Member offers to contribute (the "Offer to
Contribute"). If such Member does not make an Offer to Contribute which equals
or exceeds the entire Amount Solicited, the Company may, at its option, by
action of the Operating Commit tee, elect to accept the Offers to Contribute it
has received or reject such Offers to Contribute and cancel the solicitation.
2.7 Capital Withdrawal Rights, Interest and Priority.
Except as expressly provided in this Agreement, no Member
shall be entitled to withdraw or reduce such Member's Capital Account in whole
or in part until the dissolution and winding-up of the Company, except as
distributions pursuant to Article VI may represent returns of capital. No Member
shall be entitled to receive or be credited with any interest on the balance in
such Member's Capital Account at any time. A Member who withdraws or purports to
with draw as a Member of the Company without the consent of the other Members or
as otherwise allowed by this Agreement shall be liable to the Company for any
damages suffered by the Company on account of the breach and shall not be
entitled to receive any payment on its Mem bership Interests or a return of its
Capital Contribution until the time otherwise provided herein for distributions
to Members.
ARTICLE III
MANAGEMENT OF THE COMPANY
3.1 Managing Member.
(a) The Managing Member shall have exclusive power and
authority, in the name of and on behalf of the Company, to perform all acts and
do all things which the Operating Committee has expressly delegated to it and
which the Operating Committee deems necessary or desirable to conduct the
business of the Company. No Member other than the Managing Mem ber shall have
the power to sign for or bind the Company to any agreement or document in its
capacity as Member.
(b) Unless otherwise restricted by the Operating Committee,
the Managing Member shall, subject to all applicable provisions of this
Agreement, be authorized in the name of and on behalf of the Company:
16
(i) to enter into, execute, amend, supplement,
acknowledge and de liver any and all contracts, agreements, or other
instruments for the operation of the Company;
(ii) in general to do all things and execute all
documents necessary or appropriate to conduct the business of the
Company as set forth in Section 1.3 hereof, or to protect and preserve
the Company's assets. The Managing Member may delegate any or all of
the foregoing powers;
(iii) upon the closing of the Tender Offer, to cause
the Company (or its applicable Subsidiary) to vote the stock of
Brookdale or otherwise agree with Brookdale to (1) elect three (3)
individuals nominated by FRIT, one of whom shall be Xxxxxx X. Xxxxx,
and two (2) individuals nominated by HP, one of whom shall be Xxxx X.
Xxxxxx, to serve on the Board and the Other Committees in accordance
with the provisions of Section 3.11 hereof, (2) elect Xxxxxx X. Xxxxx
as Chairman of the Board and (3) elect three (3) individuals as the
sole members of the Executive Committee of the Board, one to be
nominated by FRIT, one to be nominated by HP, which nominee shall be
Xxxx X. Xxxxxx, and one nominee who shall be selected by unanimous
decision of FRIT and HP, which nominee shall initially be Xxxx Xxxxxxx.
(iv) at least thirty (30) days before the
commencement of each fiscal year of Brookdale, to cause the Company (or
its applicable Subsidiary) to propose each Annual Business Plan to the
Operating Committee;
(v) to cause the Company to pay to the Managing
Member the Guaran xxxx Payment; and
(vi) to cause the Company to (1) enter into, or
cause one or more of the Company's Subsidiaries to enter into, an
agreement and plan of merger with Brookdale and (2) make all filings
required by law, including, without limitation, filings under the 1934
Act, the 1933 Act and the HSR Act.
(c) The Managing Member is required to be a Member, and shall
hold office until its resignation or removal in accordance with the provisions
hereof. The Managing Mem ber is a "manager" of the Company (within the meaning
of the Act). The Managing Member shall devote such time to the business and
affairs of the Company as it deems necessary, in its sole discretion, for the
performance of its duties, but in any event, shall not be required to devote
full time to the performance of such duties and may delegate its duties and
responsibilities as provided in this Agreement.
(d) Any action taken by the Managing Member, and the signature
of the Managing Member (or an authorized representative thereof) on any
agreement, contract, instru ment or other document on behalf of the Company,
shall be sufficient to bind the Company and shall conclusively evidence the
authorization and approval of the Company and its Members with respect thereto.
(e) Any Person dealing with the Company, the Managing Member
or any Member may rely upon a certificate signed by the Managing Member as to
(i) the identity of the Managing Member or any Member, (ii) any factual matters
relevant to the affairs of the Com pany, (iii) the Persons who are authorized to
execute and deliver any document on behalf of the Company or (iv) any action
taken or omitted by the Company or the Managing Member.
(f) In addition to its other duties hereunder, the Managing
Member shall provide the following services for the Company: (i) asset
underwriting; (ii) acquisition assess ment and advice; (iii) financing analysis
and advice; and (iv) structured finance assistance and advice.
3.2 Other Ventures. It is expressly agreed that the Members
and any Affili ates, officers, directors, managers, stockholders, partners or
employees of such Members, may engage in other business ventures of every nature
and description, whether or not in competition with the Company, independently
or with others, and neither the Company nor the Members shall have any rights in
and to any independent venture or activity or the income or profits derived
therefrom.
3.3 Actions by the Members. Except as specifically set forth
herein, no Member other than the Managing Member shall be entitled to vote on
actions of the Company. All Major Decisions shall be made in accordance with the
terms of Section 3.9 hereof, provided, however, that the Chairman shall be
advised and consulted regarding any Major Decision within five (5) Business Days
prior to the meeting at which such Major Decision is to be considered.
3.4 Meetings, Quorum; Voting. Meetings of the Members, for any
purpose or purposes whatsoever, may be called at any time by any Members. The
Members may vote, approve a matter or take any action permitted to be taken by
the Members pursuant to this Article III, by the vote of two thirds of the
Members at a meeting, in person or by proxy, or without a meeting by written
consent or otherwise. For any meeting of Members, the presence in person or by
proxy of Members owning two thirds of the Membership Interests entitled to vote
at the time of the action taken constitutes a quorum for the transaction of
business.
3.5 Waiver of Notice. The actions taken at any meeting of the
Members en titled to vote, however called and noticed or wherever held, shall be
as valid as though taken at a meeting duly held after regular call and notice,
if a quorum be present and if, either before or after the meeting, each of the
Members entitled to vote not present receives notice of such ac tions.
17
3.6 Action by Consent. Any action may be taken by the Members
entitled to vote without a meeting if authorized by the consent of two thirds of
Members entitled to vote. In no instance where action is authorized by consent
need a meeting of Members be called or noticed. However, a copy of the action
taken to be by such consent must be promptly sent to all Members entitled to
vote.
3.7 Officers; Designation; Term; Qualifications.
(a) The Operating Committee may, from time to time, designate
one or more Persons to be Officers of the Company. The names of the Persons
initially designated as the Officers of the Company are set forth in Schedule B
hereto, such Persons to serve in such offices until resignation or removal. Any
Officer so designated shall have such authority and perform such duties as the
Operating Committee may, from time to time, delegate to such Person. The
Operating Committee may assign titles to particular Officers, and unless the
Operating Commit tee decides otherwise, the assignment of such title shall
constitute the delegation to such Officer of the authority and duties that are
normally associated with that office, subject to any specific delegation of
authority and duties made to such Officer by the Operating Committee pursuant to
this Section 3.7. Each Officer shall hold office for the term for which such
Officer is designated and until his or her successor shall be duly designated
and shall qualify or until his or her death, resignation or removal (with or
without cause) by the Operating Committee or as otherwise provided in this
Agreement. Any Person may hold any number of offices. No Officer need be a
manager, a Member, a Delaware resident, or a United States citizen. Designation
of such a Person as an Officer of the Company shall not of itself create any
contract rights.
(b) The Officers shall include a chairman (the "Chairman"), a
President (the "President"), a chief financial officer (the "CFO") and a
secretary (the "Secretary") and, in the sole discretion of the Operating
Committee, an assistant secretary (the "Assistant Secretary").
(c) Any Officer of the Company may be removed as such, with or
without cause, by the Operating Committee; provided, however, that such removal
shall be without prejudice to the contract rights, if any, of the Person so
removed. Any Officer of the Company may resign as such at any time upon written
notice to the Chairman. Such resignation shall be made in writing and shall take
effect at the time specified therein, or if no time is specified therein, at the
time of its receipt by the Chairman. The acceptance of a resignation shall not
be necessary to make it effective unless expressly so provided in the
resignation.
(d) Any vacancy occurring in any office of the Company may be
filled by the person designated by the Operating Committee.
(e) The compensation, if any, of the Officers of the Company
shall be fixed from time to time by the Operating Committee.
18
(f) Each Officer of the Company is an agent of the Company for
the purpose of the business of the Company, and the act of each Officer for
apparently carrying on in the usual the business of the Company binds the
Company, unless (i) the Officer so acting has in fact no authority to act for
the Company in the particular matter and (ii) the Person with whom such Officer
is dealing has knowledge of the fact that such officer has no such authority. An
act of an Officer which is not apparently for the carrying on of the business of
the Company in the usual way does not bind the Company unless authorized by the
Operating Committee.
3.8 Guaranteed Payment.
(a) The Company shall make a Guaranteed Payment to the
Managing Mem ber, within the meaning of Section 707(c) of the Code, for the use
of capital contributed to the Company by the Managing Member, in an amount equal
to One Million Dollars ($1,000,000) per annum, for the period between the date
hereof and the fifth anniversary hereof for a total of Five Million Dollars
($5,000,000).
(b) If any Guaranteed Payment is not paid on the due date
thereof (other than by reason of the Managing Member's failure to cause the
Company to pay it notwithstanding the availability of sufficient funds
therefor), the amount of such Guaranteed Payment shall accrue interest at the
prime rate of interest charged by Bank of America, N.A. to its most creditworthy
customers, compounded annually, from the due date thereof to the date same is
actually paid.
(c) All payments required under this Section 3.8 shall be made
in dollars by wire transfer of federal funds to an account designated by the
Managing Member or by certified or official bank check or checks in New York
Clearing House or similar next day funds payable to the order of the Managing
Member.
(d) If the Managing Member shall cease to be the Managing
Member under this Agreement, then, from and after the date of such cessation,
the Guaranteed Payment shall cease accruing to the Managing Member hereunder.
3.9 Operating Committee. The Members will establish an
Operating Commit tee (the "Operating Committee") which shall be responsible for
all actions not specifically dele gated to the Managing Member, including but
not limited to those defined as Major Decisions, and shall oversee and review
the operations of the Company and Brookdale. The members (collectively, "OC
Members" and each individually, an "OC Member") of the Operating Com mittee
shall initially be those persons whose names are set forth on Schedule C
attached hereto. All OC Members shall serve until voluntary resignation or
retirement, or removal with or without cause by the Member appointing such OC
Member. Approval of Major Decisions and all other matters required to be
submitted by law or otherwise for vote or action by the Operating Com mittee
shall require approval of two thirds of the entire Operating Committee (the
"Required Majority"). At least two thirds of the entire Operating Committee must
be present for there to be a quorum at a meeting of the Operating Committee (a
"Quorum") or acting by written consent.
19
Each OC Member may invite one or more designees to accompany him or her to a
meeting of the Operating Committee or attend a meeting in his or her absence
(each, an "Observer"). However, an Observer shall not be counted for purposes of
determining whether a Quorum existed or whether a matter was approved by a
Required Majority.
3.10 Election of Operating Committee and Meetings.
(a) FRIT shall have the right to appoint three (3) OC Members
to the Operat ing Committee and HP shall have the right to appoint two (2) OC
Members to the Operating Committee.
(b) In the event that a vacancy among the OC Members shall
occur at any time, the Member (which shall be either FRIT or HP) making the
original appointment shall appoint another person to fill the vacancy.
(c) The Operating Committee shall meet quarterly and at such
other times as at least one OC Member appointed by FRIT (or its successor or
assign) and one OC Member appointed by HP (or its successor or assign) shall
agree.
(d) Any action required or permitted to be taken by the
Operating Committee at a meeting may be taken without a meeting if a consent in
writing, setting forth the action so taken, shall be signed (facsimile
signatures acceptable) by two thirds of the OC Members.
(e) The OC Members may also participate in a meeting by means
of a con xxxxxxx telephone or other standard forms of telecommunication
equipment by means of which all persons participating in the meeting can hear
each other at the same time and participation by such means shall constitute
presence in person at a meeting, except where a person participates in a meeting
for the express purpose of objecting to the transaction of any business on the
ground that the meeting is not lawfully called or convened.
3.11 Board of Directors of Brookdale and Committees. Each of
FRIT and HP shall have the right to appoint the individuals to serve on the
Board of Directors of Brookdale (the "Board") and, if established, any
management, executive, administrative or similar commit tee of Brookdale
(collectively, the "Other Committees") as set forth in Section 3.12 hereof. All
members of the Board and the Other Committees shall serve until voluntary
resignation or retirement, or removal with or without cause by the Member
appointing such member. The procedures governing decision-making by the Board
and the Other Committees shall be the same as those of the Operating Committee.
Except for Major Decisions expressly retained by the Operating Committee, the
Board shall have all powers and duties and the full discretion to manage and
conduct the business and affairs of Brookdale, all in accordance with the
By-Laws and Articles of Incorporation of Brookdale.
20
3.12 Election of Board of Directors and Meetings.
(a) FRIT shall have the right to appoint three (3) directors
to the Board and HP shall have the right to appoint two (2) directors to the
Board.
(b) In the event that a vacancy among the directors shall
occur at any time, the Member (which shall be either FRIT or HP) making the
original appointment shall appoint another person to fill the vacancy.
(c) The Board shall meet quarterly and at such other times as
at least one director appointed by FRIT (or its successor or assign) and one
director appointed by HP (or its successor or assign) shall agree.
(d) Any action required or permitted to be taken by the Board
at a meeting may be taken without a meeting if a consent in writing, setting
forth the action so taken, shall be signed (facsimile signatures acceptable) by
two thirds of the directors.
(e) The directors may also participate in a meeting by means
of a conference telephone or other standard forms of telecommunication equipment
by means of which all per sons participating in the meeting can hear each other
at the same time and participation by such means shall constitute presence in
person at a meeting, except where a person participates in a meeting for the
express purpose of objecting to the transaction of any business on the ground
that the meeting is not lawfully called or convened.
3.13 Audit Committee. The Operating Committee shall establish
an Audit Committee (the "Audit Committee") which periodically will review with
the Company's and Brookdale's independent public accountants, its accounting
methods, practices and policies. The Audit Committee shall be comprised of an
equal number of individuals appointed by each Mem ber.
3.14 Officers of Subsidiaries. All officers of Subsidiaries
(other than Brookdale) of the Company shall be selected by the Operating
Committee in its sole discretion. Officers of Brookdale shall be appointed by
the Board in its sole discretion.
3.15 Investment. Nothing in this Agreement shall be construed
so as to pro hibit any Member or its respective Affiliates from owning,
operating or investing in any business of any nature and description,
independently or with others, regardless of whether such business is competitive
with the Company or Brookdale, and no Member need disclose its intention to make
any such investment to the other, nor advise the Company of the opportunity
presented by any such prospective investment.
21
3.16 Confidentiality. The Members agree that for the term of
this Agreement and for a period of one year after the termination hereof, (i)
each shall use its best efforts to cause its directors, officers and employees
and Affiliates to keep confidential all intellectual property and other
proprietary information of the Company and Brookdale, including all information
concerning pricing and terms of sale of products, and (ii) each Member shall
hold and shall cause their consultants and advisors to hold in strict
confidence, unless compelled to disclose by xxxx cial or administrative process
or, in the opinion of its counsel, by other requirements of law, all documents
and information concerning any other party hereto furnished it by such other
party or its representatives in connection with the transactions contemplated by
this Agreement, except to the extent that any other information referred to in
clause (i) or (ii) above can be shown to have been (x) previously known by the
party to which it is furnished, (y) in the public domain through no fault of
such party or (z) later lawfully acquired from other sources by the party to
which it was furnished.
ARTICLE IV
TRANSFERS OF MEMBERSHIP INTERESTS
4.1 Restrictions on Transfer.
(a) No Member, nor any assignee or successor in interest of
any Member, in cluding a Permitted Transferee, shall (voluntarily or
involuntarily) directly or indirectly, transfer, assign or otherwise dispose of
(each, a "Transfer") its Membership Interests or any economic benefit therein
(including a Transfer pursuant to a foreclosure sale of any of the assets of a
Member), or in any part thereof, or in all or any part of the assets of the
Company, without the prior written consent of the Operating Committee (which may
be withheld for any or no reason) except to a Permitted Transferee, except as
provided in Sections 4.3, 4.4, 4.5 and 4.6 hereof and except in connection with
a transfer by FRIT of its Membership Interests to any Initial Co- Investors.
Subject to the other restrictions on Transfers contained herein, any Member
intending to Transfer its Membership Interests under this Agreement may Transfer
any percentage of its Membership Interests up to 20% of such Member's initial
Membership Interest (or if such Mem ber shall acquire additional Membership
Interests, 20% of such higher Percentage Interest). Any Member intending to
Transfer its Membership Interests in excess of 20% shall Transfer 100% of its
remaining Membership Interests. The rights to appoint OC Members to the
Operating Com mittee and to appoint individuals to serve on the Board and Other
Committees pursuant to Sec tions 3.10, 3.11 and 3.12 hereunder shall be
transferred to such transferee as shall acquire 80% or more of an Initial
Member's initial Membership Interest; provided, however, that for purposes of
this section, it is understood that the initial Membership Interest for FRIT
shall be determined after giving effect to the Transfer of the $50,000,000 to
the Initial Co-Investors by FRIT.
(b) Any transferee of a Membership Interest shall become a
substitute Mem ber upon: (i) the transferee agreeing to be bound by all the
terms and conditions of the Certifi cate of Formation and this Agreement as then
in effect; (ii) compliance with applicable federal and state securities laws;
and (iii) receipt of any necessary regulatory approvals. Unless and until a
transferee is admitted as a substitute Member, the transferee shall have no
right to exercise any of the powers, rights and privileges of a Member
hereunder. A Member who has transferred its Membership Interests shall cease to
be a Member upon Transfer of all of the Member's Member ship Interests and
thereafter shall have no powers, rights and privileges as a Member hereunder
except as otherwise expressly provided herein.
(c) The Company, each Member, the Operating Committee, the
Managing Member, the Officers of the Company and any other Person or Persons
having business with the Company need only deal with Members who are admitted as
Members or as substitute Members of the Company, and they shall not be required
to deal with any other Person by reason of a Transfer by a Member, except as
otherwise provided in this Agreement. In the absence of the substitution (as
provided herein) of a Member for a transferring Member, any payment to a Member
shall acquit the Company, the Operating Committee and the Managing Member of all
liability to any other Persons who may be interested in such payment by reason
of an assignment by such Member.
(d) Notwithstanding anything in this Article IV to the
contrary, no Transfer of a Membership Interest by a Member, shall be effective
unless and until such Member has ful filled all of its obligations under Section
2.1 hereof.
4.2 Non-Permitted Transfers.
(a) Any purported Transfer of Membership Interests or any
economic interest therein not in compliance with Section 4.1, 4.3, 4.4, 4.5 or
4.6 hereof shall be null and void ab initio, regardless of any notice provided
to the Company, and shall not create any obligation or liability of the Company
to the purported transferee, and any Person purportedly acquiring any Membership
Interests or any economic interest therein purportedly transferred not in
compliance with Section 4.1, 4.3, 4.4, 4.5 or 4.6 hereof shall not be entitled
to admission to the Company as a substitute Member.
(b) In the case of an attempted Transfer of any Membership
Interests or any economic benefit therein that is not in compliance with Section
4.1, 4.3, 4.4, 4.5 or 4.6 hereof, the parties engaging or attempting to engage
in such Transfer shall indemnify and hold harmless the Company, the Operating
Committee and the other Members from all cost, liability and damage that any of
such indemnified persons may incur (including, without limitation, incremen tal
tax liability and attorneys' fees and expenses) as a result of such Transfer or
attempted Trans fer and the enforcement of this indemnity.
(c) No Member, nor any assignee or successor in interest of
any member, including a Permitted Transferee, shall Transfer its Membership
Interests or any economic benefit therein if such Transfer would cause the
Company to be treated as a "publicly traded
22
partnership" within the meaning of Code Section 7704 and the regulations
promulgated thereun der.
4.3 Right of First Offer.
(a) If a Member proposes to Transfer (each, a "Proposed
Transfer") any of its Membership Interests (the "Offered Interests") to any
Person (each, a "Third Party") other than to a Permitted Transferee, such Member
(the "Proposing Member") shall submit a written notice (a "Notice of Proposed
Transfer") to the other Members (the "Remaining Members") describing the
material terms and conditions of the Proposed Transfer in reasonable detail,
including, without limitation, the proposed purchase price (which shall be for
cash only) (the "Offer Price").
(b) Upon receipt of the Notice of Proposed Transfer, each of
the Remaining Members shall have the primary right, but not the obligation, for
a period (the "Primary Option Period") of ten (10) Business Days following
receipt of the Notice of Proposed Transfer, to elect to purchase at the Offer
Price a portion of the Offered Interests equal to such Remaining Mem ber's pro
rata portion which portion shall be equal to a fraction the numerator of which
is the Membership Interests owned by the Remaining Members electing to purchase
Offered Interests and the denominator of which is the total Membership Interests
as of the date of the Notice of Proposed Transfer owned by all of the Members
(other than the Proposing Member), on the same terms and conditions as are set
forth in the Notice of Proposed Transfer. Each Remaining Mem ber shall also have
a secondary right, on the same terms as are set forth in the Notice of Proposed
Transfer, for a period of ten (10) Business Days from the expiration of the
Primary Option Period, to purchase any or all of the remaining portion of the
Offered Interests not purchased by any other Remaining Member in the exercise of
his or its primary right. If, however, there is more than one Remaining Member
desiring to exercise secondary rights to purchase any such remaining Offered
Interests and they do not agree on the number of such Offered Interests to be
purchased by each within five (5) Business Days from the expiration of the
Primary Option Period, then each such Remaining Member shall be entitled to
purchase such proportion of those Offered Interests which remain undisposed of
as the Membership Interests owned by such Re maining Member bears to the total
Membership Interests held by all of the Members desiring to purchase such
Offered Interests. The primary and secondary rights of the Remaining Members set
forth herein are exercisable in each case by delivery of one notice to the
Company and the Proposing Member (a "Notice of Exercise") within the time
periods specified herein, which Notice of Exercise shall specify a time and
place of closing, which closing shall Occur not less than thirty (30) days and
not more than sixty (60) days from the date of delivery of the Notice of
Exercise.
(c) In the event that the Remaining Members exercise their
rights to purchase all but not less than all of the Offered Interests in
accordance with Section 4.3(b), then the Pro posing Member must sell the Offered
Interests elected to be purchased by the Remaining Mem bers to such Remaining
Members at the closing specified in Section 4.3(b) hereof. The Propos ing Member
shall notify each such Remaining Member of the portion of Offered Interests to
be
23
sold to such Remaining Members. At such closing, the Proposing Member shall, and
hereby covenants to, Transfer the Offered Interests to such Remaining Members
free and clear of any and all liens, mortgages, pledges, security interests or
other restrictions or encumbrances against payment of the Offer Price in
accordance with the notices specified in Sections 4.3(a) and (b) hereof.
(d) If (i) all notices required to be given pursuant to
Sections 4.3(a) and (b) hereof have been duly given and (ii) all of the Offered
Interests are not purchased by the Remain ing Members in accordance with
Sections 4.3(b) and (c) hereof, then the Proposing Member shall have the right,
for a period of ninety (90) days from the earlier of (i) the expiration of the
last applicable option period pursuant to Section 4.3 (b) hereof with respect to
such Notice of Pro posed Transfer and (ii) the date on which such Proposing
Member receives notice from all of the Remaining Members that they will not
exercise the options granted pursuant to Sections 4.3(b) and (c) hereof to sell,
subject to Section 4.4 hereof, to any Third Party the Offered Interests at a
price not less than the Offer Price and on terms and conditions as favorable as
offered to the Remaining Members.
(e) In the event that the Remaining Members do not exercise
their options to purchase all of the Offered Interests, and the Proposing Member
shall not have sold the Offered Interests as to which such options shall not
have been exercised, to a Third Party for any reason before the expiration, as
applicable, of the ninety (90)-day period described in Section 4.3(d) hereof, or
such Proposing Member withdraws the Notice of Proposed Transfer, then such Pro
posing Member shall not give another Notice of Proposed Transfer pursuant to
Section 4.3(a) hereof for a period of one hundred twenty (120) days from the
last day of such ninety (90)-day period.
(f) If any Member does not purchase any of the Offered
Interests under this Section 4.3 but wishes to sell Membership Interests under
Section 4.4 hereof, such Member must deliver a Tag-Along Notice pursuant to
Section 4.4(b) hereof simultaneously with declining such Member's right to
purchase under this Section 4.3 hereof.
4.4 Tag-Along Rights.
(a) Except for Transfers permitted by the express terms of
Sections 4.3, 4.5 and 4.6 hereof, if a Member (each, a "Transferring Member")
intends to Transfer any or all of the Membership Interests then owned by or in
the name of such Transferring Member to a Third Party (each, a "Third Party
Offer"), the Transferring Member shall promptly, acting in good faith (i) cause
the Third Party Offer to be reduced to writing, which shall identify the Third
Party, the Membership Interests proposed to be transferred to the Third Party by
the Transferring Member, the price to be paid in cash by the Third Party and all
other material terms and conditions of the Third Party Offer and (ii) provide
written notice (the "Third Party Notice") of such Third Party Offer to each of
the other Members (the Members receiving a Third Party Notice pursuant to this
sentence being collectively referred to herein as the "Other Members"), which
Third Party Notice
24
shall (x) contain an offer by such Third Party to purchase or otherwise acquire
from each Other Member such Other Member's Membership Interests (to the extent
such Third Party Offer shall be allocable to such Other Member pursuant to
Section 4.4(c) hereof) on the same terms and conditions as the Third Party Offer
(except that the only representation and warranty that such Other Member shall
be required to make in connection with any such Transfer is a warranty with
respect to his or its own ownership of the Membership Interests to be sold by
him or it and his or its ability to convey title thereto free and clear of any
and all liens, mortgages, pledges, security interests or other restrictions or
encumbrances), (y) be accompanied by a true and correct copy of the Third Party
Offer and (z) specify the total Membership Interests then owned by the Transfer
ring Member.
(b) Each Other Member desiring to accept the offer (each, a
"Participating Member") set forth in the Third Party Notice shall, within ten
(10) Business Days after the date the Third Party Notice is received by such
Other Member (as such period may be extended pursuant to Section 4.4(d) hereof,
(each, a "Tag-Along Notice Period"), deliver a written notice to the
Transferring Member (each, a "Tag-Along Notice"), which notice shall (i) specify
the percentage of Membership Interests which such Participating Member wishes to
Transfer pursu ant to the Third Party Offer and the Membership Interests then
owned by such Participating Member and (ii) constitute a firm acceptance by such
Other Member of the Third Party Offer, except as otherwise provided in Section
4.4(c) and (d) hereof.
(c) If one or more Other Members give the Transferring Member
a timely Tag-Along Notice, then the Transferring Member shall use all reasonable
efforts to cause the Third Party to agree to acquire all Membership Interests
identified in all Tag-Along Notices that are timely given to the Transferring
Member, upon the same terms and conditions as are applica ble to the
Transferring Member's Membership Interests. If such Third Party is unwilling or
unable to acquire all of such additional Membership Interests upon such terms,
then the Transfer ring Member may elect to either cancel such proposed Transfer
or allocate the maximum Mem bership Interests that such Third Party is willing
to purchase among the Transferring Member and the Participating Members, with
(i) each Participating Member permitted to sell Membership Interests
corresponding to the percentage of all Membership Interests held by such
Participating Member and (ii) the Transferring Member permitted to sell
Membership Interests equal to the remaining Membership Interests that such Third
Party is willing to purchase (e.g., if the Third Party Notice contemplated a
Transfer of a 10% Membership Interest by the Transferring Mem ber, and if the
Transferring Member at such time owns a 30% Membership Interest and one Other
Member who owns a 20% Membership Interest elects to participate, then the
Transferring Member would be entitled to sell a 6% Membership Interest and the
Other Member would be entitled to sell a 4% Membership Interest).
(d) In the event that the terms and conditions of any Third
Party Offer shall be modified in any way prior to the consummation of the
respective Transfers of Membership Interests contemplated by such Third Party
Offer, the Transferring Member shall send a copy of the amended Third Party
Offer to each of the Participating or Other Members. Any Other Mem ber desiring
to Transfer Membership Interests pursuant to the amended Third Party Offer, or
any Participating Member desiring to amend or withdraw its Tag-Along Notice may
do so by deliver ing notice within three (3) Business Days after receipt of such
amended Third Party Offer to the Transferring Member. If such notice is not
timely delivered, such Other Member shall be deemed to have elected not to
participate in the Third Party Offer, or such Participating Member, as the case
may be, shall be deemed to have elected to participate in such Third Party Offer
under the same terms and conditions that such Participating Member shall have
originally elected to Transfer its Membership Interests.
(e) Within three (3) Business Days after the termination of
the Tag-Along Notice Period (including any extension thereof) with respect to
any Third Party Offer, (i) the Transferring Member, after review of the
Tag-Along Notices received, and notices of with drawal, if any, shall give
written notice to each Participating Member of (A) such Participating Member's
Membership Interests to be purchased pursuant to the Third Party Offer, showing
the basis for the calculation thereof, and (B) the time and place of the
closing, which shall occur not fewer than two (2) Business Days and not more
than fifteen (15) Business Days from the date such notice is given. At the
closing, each Participating Member shall, and hereby covenants to, Transfer such
Participating Member's Membership Interests to be sold to such Third Party free
and clear of any and all liens, mortgages, pledges, security interests or other
restrictions or encumbrances against payment of the purchase price for such
Membership Interests. If any Participating Member fails to deliver any
Membership Interests to the Third Party, each of the other Participating Members
(and the Transferring Member) shall be entitled to increase the Membership
Interests that it may Transfer in connection with the Third Party Offer by
allocating such Participating Member's Membership Interests in the manner set
forth in Section 4.4(c). If such Third Party does not purchase such Membership
Interests from all Participating Members on the same terms and conditions
applicable to the Transferring Member, then the entire pro posed Transfer by the
Transferring Member to such Third Party shall be invalid.
(f) If at the termination of the Tag-Along Notice Period (and
any extension thereof) any Other Member shall not have accepted the offer
contained in the Third Party Notice, such other Member shall be deemed to have
waived any and all of his or its rights under this Section 4.4 to Transfer his
or its Membership Interests to such Third Party on the terms specified in the
Third Party Offer.
4.5 Buy/Sell Right.
Upon the occurrence of a Buy/Sell Event, each Initial Member
shall have the right (each, a "Buy/Sell Right") to buy all of the Membership
Interests in the Company held by the other Initial Member or to sell all of its
Membership Interests in the Company to such other Initial Member. The Buy/Sell
Right shall be exercised in accordance with the following provi sions:
25
(a) Upon the occurrence of a Buy/Sell Event in
connection with an irreconcilable dispute concerning a Major Decision,
an Initial Member shall notify the other Initial Member (the Initial
Member first giving notice pursuant to this Section 4.5 is referred to
hereinafter as a "Notifying Party", and the other Initial Member so
receiving notice from the Notifying Party is referred to hereinafter as
the "Notified Party") in writ ing, with a copy to the Operating
Committee, that it intends to exercise its Buy/Sell Right (each, a
"Buy/Sell Notice"). Once the Notifying Party delivers the Buy/Sell
Notice, the Notified Party may not exercise its Buy/Sell Right until
the procedure established in this Section 4.5 is concluded with respect
to such Buy/Sell Notice or until the Notifying Party breaches any
provision established in this Section 4.5.
(b) The Buy/Sell Notice shall contain an
unconditional promise by the Notifying Party, at the election of the
Notified Party, to either (i) sell all of its Member ship Interests in
the Company to the Notified Party, or (ii) acquire all of the
Membership Interests in the Company of the Notified Party, in either
case at a cash price (specified as a cash dollar price per 1%
Membership Interest equal to the price stated in the Buy/Sell Notice
(the "Buy/Sell Price")) and within the time periods specified in this
Section 4.5.
(c) Within fifteen (15) days after receipt of the
Buy/Sell Notice by the Notified Party (each, a "Response Period"), the
Notified Party shall notify the Operating Committee of the Notified
Party's election to either: (i) accept the Notifying Party's offer to
purchase the Notified Party's Membership Interests in the Company at
the Buy/Sell Price (each, a "Sale Election"), or (ii) accept the
Notifying Party's offer to sell all of its Membership Interests in the
Company at the Buy/Sell Price (each, a "Purchase Election").
(d) Within two (2) Business Days from the earlier of
the expiration of the Response Period or receipt by the Operating
Committee of the election of the Notified Party contemplated to be
delivered by Section 4.5(c), the Operating Committee shall send a
written notice to all Members, informing them with respect to the
Notified Party whether it made a Sale Election or a Purchase Election.
(e) If the Notified Party fails to notify the
Operating Committee within the Response Period it shall be deemed to
have made a Sale Election.
(f) If the Notified Party makes a Purchase Election,
then the Notified Party shall purchase such part of the Notifying
Party's Membership Interests in the Com pany as represents the Notified
Party's pro rata portion of all of the Membership Interests in the
Company at the Buy/Sell Price.
(g) If the Notified Party makes a Sale Election, then
the Notifying Party shall purchase for cash at the Buy/Sell Price the
Notified Party's Membership Interests in the Company.
26
(h) The closing on any Transfer of Membership
Interests pursuant to this Section 4.5 shall occur on or prior to the
date which is forty five (45) days after the date on which the notice
described in Section 4.5(d) is mailed and each of the parties agrees to
execute all documents and do all things necessary to close the
Transfer.
(i) (i) If the Notified Party fails to purchase the
Membership Interests of a Notifying Party pursuant to the exercise of a
Purchase Election at the closing in accordance with Section 4.5(i),
then the Notifying Party shall have the right, for a period of thirty
(30) days from the date originally scheduled for the closing pursuant
to Section 4.5(i), to purchase the Notified Party's Membership
Interests at a cash price equal to 80% of the Buy/Sell Price; and (ii)
if the Notifying Party fails to purchase the Membership Interests of
the Notified Party pursuant to the exercise of a Sale Election at the
closing in accordance with Section 4.5(i), then the Notified Party
shall have the right, for a period of thirty (30) days from the date
originally scheduled for the closing pursuant to Section 8.05(i), to
purchase the Notifying Party's Membership Interests at a cash price
equal to 80% of the Buy/Sell Price.
(j) Any Membership Interests transferred pursuant to
this Section 4.5 shall be transferred free and clear of any and all
liens, mortgages, pledges, interests or other restrictions or
encumbrances.
(k) No Initial Member shall be entitled to exercise a
Buy/Sell Right during the pendency of a Proposed Transfer by the other
Initial Member under Section 4.3 hereof or a Third Party Offer under
Section 4.4 hereof.
4.6 Drag-Along Rights.
(a) If the Operating Committee approves a sale of the Company
or substan tially all of its assets to a Third Party (an "Approved Sale"),
whether by way of merger, xxxxxxx dation, sale of interests or assets, or
otherwise, all Members shall consent to and raise no objec tions against the
Approved Sale, and if the Approved Sale is structured as (i) a merger or xxxxxxx
dation of the Company, or a sale of all or substantially all of the Company's
assets, each Member shall waive any dissenters rights, appraisal rights or
similar rights in connection with such merger, consolidation or asset sale, or
(ii) a sale of the Membership Interests of the Company, the Members shall agree
to sell their Membership Interests on the terms and conditions approved by the
Operating Committee in accordance with the terms hereof. The Members shall take
all necessary and desirable actions approved by the Operating Committee in
connection with the consummation of the Approved Sale, including the execution
of such agreements and such instruments and other actions reasonably necessary
(i) to provide the representations, warranties, indemnities, covenants,
conditions, escrow agreements and other provisions and agreements relating to
such Approved Sale, to the extent reasonably customary in similar transactions,
and (ii) to effectuate the allocation and distribution of the aggregate
consideration upon the Approved Sale as set forth below.
27
(b) The obligations of the Members pursuant to this Section
4.6 are subject to the following conditions:
(i) upon consummation of the Approved Sale, each
Member shall receive the same proportion of the aggregate consideration
from the Approved Sale with respect to its Membership Interests that
such Member would have received if such aggre gate consideration had
been distributed by the Company in complete liquidation pursuant to
this Agreement (giving effect to applicable orders of priority);
(ii) if any Members are given an option as to the
form and amount of consideration to be received, all Members will be
given the same option;
(iii) no Member shall be obligated to make any
out-of-pocket expendi ture prior to the consummation of the Approved
Sale (excluding modest expenditures for postage, copies, etc.) and no
Member shall be obligated to pay more than his or its pro rata share
(based upon the amount of consideration received) of reasonable
expenses incurred in connection with a consummated Approved Sale to the
extent such costs are incurred for the benefit of all Members and are
not otherwise paid by the Company or the acquiring party, provided that
a Member's liability for such expenses shall be capped at the total
purchase price received by such Member for his or its Membership
Interests; and
(iv) in the event that the Members are required to
provide any represen tations or indemnities in connection with the
Approved Sale (other than representations and indemnities concerning
each Member's valid ownership of his or its Membership Interests, free
and clear of any and all liens, mortgages, pledges, security interests
or other restrictions or encumbrances, each Member's authority, power
and right to enter into and consummate such purchase or merger
agreement without violating any other agreement and other
representations and indemnities which are individual to each Member),
then no Member shall be liable for more than his or its pro rata share
(based upon the Member ship Interests held and not the amount of
consideration received) of any liability for misrepresentation or
indemnity and such liability shall not exceed the total purchase price
received by such Member for his or its Membership Interests.
ARTICLE V
ALLOCATIONS
28
5.1 Allocations of Profits and Losses. This Section 5.1 sets
forth the general rules for both the book allocations to reflect the economic
arrangements of the Members and for the tax allocations for U.S. Federal income
tax purposes pursuant to Section 704(b) of the Code and the Regulations
promulgated thereunder. The Profits and Losses of the Company (including each
item of income, gain, loss and deduction) shall be allocated with respect to
each Fiscal Period as of the end of such Fiscal Period as follows:
(a) Profits. After giving effect to the special
allocations set forth in Sections 5.2 and 5.3 hereof, Profits for any
Fiscal Period shall be allocated among Mem bers in accordance with
their respective Percentage Interests.
(b) Losses. After giving effect to the special
allocations set forth in Sections 5.2 and 5.3 hereof and subject to
Section 5.4, Losses for any Fiscal Period shall be allocated to the
Members in accordance with their respective Percentage Interests.
5.2 Adjustments and Special Allocations. Any allocation
pursuant to Section 5.1 hereof will, however, be subject to any adjustment
required to comply with Regulations Sections 1.704-1 and 1.704-2, including,
without limitation, the following adjustments and special allocations which
shall be made in the following order of priority and prior to any alloca tion
under Section 5.1 hereof:
(a) Minimum Gain Chargeback. Except as otherwise
provided in Regulations Section 1.704-2(f), notwithstanding any other
provision of this Article V, if there is a net decrease in Company
Minimum Gain during any Fiscal Period, each Mem ber shall be
specifically allocated items of Company income and gain for such Fiscal
Period (and, if necessary, subsequent Fiscal Periods) in an amount
equal to such Mem ber's share of the net decrease in Company Minimum
Gain, determined in accordance with Regulations Section 1.704-2(g).
Allocations pursuant to the previous sentence shall be made in
proportion to the respective amounts required to be allocated to each
Member in accordance with Regulations Sections 1.704-2(f)(6) and
1.704-2(j)(2). This Section 5.2(a) is intended to comply with the
minimum gain chargeback requirements in Regula tions Section 1.704-2(f)
and shall be interpreted consistently therewith.
(b) Member Minimum Gain Chargeback. Except as
otherwise pro vided in Regulations Section 1.704-2(i)(4),
notwithstanding any other provision of this Article V, if there is a
net decrease in Member Nonrecourse Debt Minimum Gain attribut able to a
Member Nonrecourse Debt during any Fiscal Period, each Member who has a
share of the Member Nonrecourse Debt Minimum Gain attributable to such
Member Nonrecourse Debt, determined in accordance with Regulations
Section 1.704-2(i)(5), shall be specifically allocated items of Company
income and gain for such Fiscal Period (and, if necessary, subsequent
Fiscal Periods) in an amount equal to such Member's share of the net
decrease in Member Nonrecourse Debt, determined in accordance with
Regula tions Section 1.704-2(i)(4). Allocations pursuant to the
previous sentence shall be made
29
in proportion to the respective amounts required to be allocated to
each Member pursuant thereto. The items to be allocated shall be
determined in accordance with Regulations Sections 1.704-2(i)(4) and
1.704-2(j)(2). This Section 5.2(b) is intended to comply with the
minimum gain chargeback requirement in Regulations Section
1.704-2(i)(4) and shall be interpreted consistently therewith.
(c) Qualified Income Offset. If any Member
unexpectedly receives any adjustments, allocations or distributions
described in Regulations Sections 1.704- 1(b)(2)(ii)(d)(4), (5) or (6),
items of Company income and gain shall be specially allo cated to each
such Member in an amount and manner sufficient to eliminate, to the
extent required by the Regulations, the Adjusted Capital Account
Deficit of such Member as quickly as possible, provided that an
allocation pursuant to this Section 5.2(c) shall be made only if and to
the extent that such Member would have an Adjusted Capital Ac count
Deficit after all other allocations provided for in this Article V have
been tenta tively made as if this Section 5.2(c) were not in this
Agreement.
(d) Gross Income Allocation. In addition, if any
Member has an Adjusted Capital Account Deficit in its Capital Account
at the end of any Fiscal Period or portion thereof that is in excess of
the sum of (i) the amount such Member is obligated to restore pursuant
to any provision of this Agreement, and (ii) the amount such Member is
deemed to be obligated to restore pursuant to the penultimate sentences
of Regulations Sections 1.704-2(g)(1) and 1.704-2(i)(5), each such
Member shall be specially allocated items of Company income and gain in
the amount of such excess as quickly as possible, provided that an
allocation pursuant to this Section 5.2(d) shall be made only if and to
the extent that such Member would have an Adjusted Capital Account
Deficit in excess of such sum after all other allocations provided for
in this Article V have been made as if this Section 5.2(d) were not in
this Agreement.
(e) Nonrecourse Deductions. Nonrecourse Deductions
for any Fiscal Period shall be specially allocated under Regulations
Section 1.704-2(e) among the Members in accordance with their
respective Percentage Interests.
(f) Member Nonrecourse Deductions. In accordance with
the princi ples set forth in Regulations Section 1.704-2(i), any Member
Nonrecourse Deductions for any Fiscal Period shall be specially
allocated to the Members in accordance with the ratios in which they
potentially bear the economic risk of loss with respect to such Mem ber
Nonrecourse Debt to which such Member Nonrecourse Deductions are
attributable in accordance with the Regulations Section 1.704-2(i).
(g) Section 754 Adjustments. To the extent an
adjustment to the adjusted tax basis of any Company asset, pursuant to
Section 734(b) of the Code or Section 743(b) of the Code is required,
pursuant to Regulations Section 1.704- 1(b)(2)(iv)(m)(2) or
1.704-1(b)(2)(iv)(m)(4), to be taken into account in determining
30
Capital Accounts as a result of a distribution to a Member in complete
liquidation of such Member's interest in the Company, the amount of
such adjustment to Capital Accounts shall be treated as an item of gain
(if the adjustment increases the basis of the assets) or loss (if the
item decreases such basis) and such gain or loss shall be specifically
allocated to the Members in accordance with their Percentage Interests
in the Company in the event Regulations Section 1.704-1(b)(2)(iv)(m)(2)
applies, or to the Member to whom such distribution was made in the
event that Regulations Section 1.704-1(b)(2)(iv)(m)(4) applies.
5.3 Curative Allocations. The allocations set forth in
Sections 5.2(a), 5.2(b), 5.2(c), 5.2(d), 5.2(e), 5.2(f) and 5.4 hereof
(collectively, the "Regulatory Allocations") are in tended to comply with
certain requirements of the Regulations. It is the intent of the parties to this
Agreement that, to the extent possible, all Regulatory Allocations may be offset
either with other Regulatory Allocations or with special allocations of other
items of Company income, gain, loss or deduction pursuant to this Section 5.3
hereof. Therefore, notwithstanding any other provision of this Article V (other
than the Regulatory Allocations) to the contrary, the Tax Matters Member may in
its discretion make such offsetting special allocations of Company income, gain,
loss or deduction in whatever manner it determines appropriate so that, after
such offsetting allocations are made, each Member's Capital Account balance is,
to the extent possible, equal to the Capital Account balance such Member would
have had the Regulatory Allocations not been part of this Agreement and all
Company items were allocated pursuant to Sections 5.1 hereof.
5.4 Loss Limitation. Notwithstanding the foregoing provisions
of Section 5.1 hereof, the Losses allocated pursuant to Section 5.1 hereof shall
not exceed the maximum amount of Losses that can be so allocated without causing
any Member to have an Adjusted Capital Account Deficit at the end of any Fiscal
Period. In the event some but not all of the Members would have Adjusted Capital
Account Deficits as a consequence of an allocation of Losses pursuant to Section
5.1 hereof, the limitation set forth in this Section 5.4 shall be applied on a
Member by Member basis so as to allocate the maximum permissible Losses to each
Mem ber under Regulations Section 1.704-1(b)(2)(ii)(d). All Losses in excess of
the limitation set forth in this Section 5.4 shall be allocated to other Members
in accordance with the positive balances in such Member's capital accounts so as
to allocate the maximum permissible Losses to each Member under Regulations
Section 1.704-1(b)(2)(ii)(d).
5.5 Other Allocation Rules.
(a) For purposes of determining the Profits, Losses or other
items allocable to any period, Profits, Losses and such other items shall be
determined on a daily, monthly or other basis as determined by the Tax Matters
Member using any permissible method under Section 706 of the Code and the
Regulations thereunder.
31
(b) The Members are aware of the United States Federal income
tax conse quences of the allocations made by this Article V and hereby agree to
be bound by the provisions of this Article V in reporting their shares of
Company income and loss for income tax purposes.
(c) Solely for purposes of determining a Member's
proportionate share of the "excess nonrecourse liabilities" of the Company
within the meaning of Regulations Section 1.752-3(a)(3), the Member's Membership
Interests in the Company profits are in proportion to their Percentage
Interests.
5.6 Tax Allocations: Code Section 704(c).
(a) In accordance with Code Section 704(c) and the Regulations
thereunder, items of income, gain, loss and deduction with respect to any
property contributed to the capital of the Company shall, solely for income tax
purposes, be allocated among the Members so as to take account of any variation
between the adjusted tax basis of such property at the time of contribution to
the Company for federal income tax purposes and its initial Gross Asset Value at
the time of contribution using an allocation method in accordance with
applicable Regulations determined by the Tax Matters Member.
(b) In the event the Gross Asset Value of any Company asset is
adjusted in accordance with the definition of Gross Asset Value hereof,
subsequent allocations of items of income, gain, loss, and deductions with
respect to such asset shall take account of any variation between the adjusted
tax basis of such asset for federal income tax purposes and its adjusted Gross
Asset Value in a manner consistent with the principles of Code Section 704(c)
and the Regulations thereunder.
(c) Any elections or other decisions relating to such
allocations shall be made by the Tax Matters Member in any manner that
reasonably reflects the purpose and intention of this Agreement. Allocations
pursuant to this Section 5.6 are solely for purposes of Federal, state, and
local income taxes and shall not affect, or in any way be taken into account in
computing, any Member's Capital Account or share of Profits or Losses, other
items, or distributions pursu ant to any provision of this Agreement.
ARTICLE VI
DISTRIBUTIONS AND EXPENSES
6.1 Distributions of Net Cash Flow. Net Cash Flow shall be
determined by the Operating Committee. At such time as is determined by the
Operating Committee, the Managing Member shall distribute the Net Cash Flow in
such amounts and in such proportions to the Members in accordance with their
respective Membership Interests.
32
6.2 Amounts Withheld. All amounts withheld pursuant to the
Code or any provisions of state, local or foreign tax law with respect to any
payment, distribution, allocation or other consideration paid to the Members,
including in connection with a contribution of assets to the Company by a
Member, shall be treated as amounts paid or distributed, as the case may be, to
the Members with respect to which such amount was withheld pursuant to this
Section 6.2 for all purposes under this Agreement. The Company is authorized to
withhold from payments, distributions, or other consideration paid to Members,
and with respect to allocations to the Members, and to pay over to any Federal,
state or local government or any foreign government, any amounts required to be
so withheld pursuant to the Code or any provisions of any other Federal, state
or local law or any foreign law, and shall allocate any such amounts to the Mem
bers with respect to which such amounts were withheld.
6.3 Expenses. Except as otherwise provided in this Agreement,
the Company will be responsible for all expenses including, without limitation:
(a) all expenses incurred by the Members or their
Affiliates in organizing the Company;
(b) all expenses related to the business of the
Company including, without limitation, administrative expenses of the
Company, including the maintenance of books and records of the Company,
the preparation and dispatch to the Members of checks, financial
reports, tax returns and notices required pursuant to this Agreement or
in connection with the holding of any meetings of the Members;
(c) all expenses incurred by the Managing Member on
behalf of the Company and the Members;
(d) all expenses incurred in connection with any
indebtedness or guarantees of the Company or any proposed or definitive
credit facility or other credit arrangement;
(e) all expenses incurred in connection with any
litigation or arbitra tion involving the Company (including the cost of
any investigation and preparation) and the amount of any judgment or
settlement paid in connection therewith;
(f) all expenses for indemnity or contribution
payable by the Company to any Person;
(g) all expenses incurred in connection with the
collection of amounts due to the Company from any Person;
(h) all expenses incurred in connection with the
preparation of amend ments to this Agreement;
33
(i) all expenses incurred in connection with the
liquidation, dissolu tion and winding up of the Company;
(j) all expenses otherwise allocated in good faith to
the Company by the Managing Member; and
(k) payment of the Guaranteed Payment to the Managing
Member.
ARTICLE VII
OTHER TAX MATTERS
7.1 Filing of Tax Returns. The Tax Matters Member shall
prepare and file, or cause the Company to prepare and file, a United States
Federal information tax return in com pliance with Section 6031 of the Code and
any other required state and local income tax and other information returns for
each Fiscal Year of the Company.
7.2 Tax Matters Member. The Managing Member shall be
designated on the Company's annual federal information return as the Tax matters
Member of the Company (the "Tax Matters Member") as provided in Section
6231(a)(7) of the Code.
7.3 Records and Accounting. The books and records of the
Company shall reflect all Company transactions and shall be appropriate and
adequate for the Company's busi ness. The Fiscal Year of the Company for
financial reporting and for federal income tax pur poses shall be the calendar
year.
7.4 Access to Accounting Records. All books and records of the
Company shall be maintained at any office of the Company or at the Company's
principal place of busi ness, and each Member, and any duly authorized
representative, shall have access to them at such office of the Company and the
right to inspect and copy them at reasonable times.
7.5 Tax Elections. The Tax Matters Member shall make
the following elections on behalf of the Company:
(a) to elect the calendar year as the Company's
Fiscal Year if permitted by applicable law;
(b) to elect the accrual method of accounting;
(c) in the event any Membership Interest is
transferred in accordance with this Agreement or any of the Company's
property is distributed to any Member, at
34
the request of the Member, to elect, in accordance with Sections 734,
743 and 754 of the Code and applicable Regulations and comparable state
law provisions, to adjust basis;
(d) to elect to treat all organization and start-up
costs of the Company as deferred expenses amortizable over 60 months
under Sections 195 and 709 of the Code; and
(e) to elect with respect to such other federal,
state and local tax mat ters as the Tax Matters Member shall determine
from time to time.
ARTICLE VIII
TERM
8.1 Term. The term of the Company shall begin on the date the
Certificate of Formation is filed with the Delaware Secretary of State and shall
continue indefinitely, unless terminated prior thereto in accordance with the
provisions hereof or pursuant to the Act.
ARTICLE IX
DISSOLUTION AND TERMINATION OF THE COMPANY
9.1 Voluntary Dissolution by the Members. The Company must be
dissolved and its affairs shall be wound up upon: (a) the two thirds vote of the
Members or (b) the sale or transfer by the Company or its wholly owned
Subsidiaries of all of the securities of Brookdale beneficially owned by the
Company or its wholly owned Subsidiaries to any Person other than a wholly owned
Subsidiary of the Company.
9.2 Continuation of Interest of Member's Representative. Upon
the expulsion, receivership, dissolution or Bankruptcy of a Member, the personal
representative, trustee-in- bankruptcy, debtor-in-possession, receiver, other
representative, successor, heirs or legatee (each a "Representative") of such a
Member shall immediately succeed to the Membership Interests of such Member in
the Company. Such Representative shall appoint an individual (which may be such
Representative) who will represent the Representative's voting interest in the
Company (the "Voting Representative"). The Voting Representative is subject to
the two thirds approval of the remaining Members, which approval shall not be
unreasonably withheld. If the Voting Repre sentative is not approved by the
remaining Members, the Representative may select another Voting Representative
subject to the approval by the remaining Members.
35
9.3 Dissolution, Winding Up and Liquidation. Upon a
dissolution of the Company, the Company shall continue solely for purposes of
winding up its affairs in an orderly manner, liquidating its assets, and
satisfying claims of its creditors. The liquidator of the Com pany shall take
full account of the Company's liabilities and property and shall cause the
property or the proceeds from the sale thereof, to the extent sufficient
therefor, to be applied and distri buted, to the maximum extent permitted by
law, in the following order:
(a) first, to creditors (including Members who are
creditors) in satis faction of all of the Company's debts and other
liabilities; and
(b) second, to the Members in accordance with the
positive balance in their Capital Accounts, after giving effect to all
contributions, distributions and alloca tions for all periods.
9.4 Compliance With Certain Requirements of the Treasury
Regulations; Deficit Capital Accounts. In the event that the Company is
"liquidated" within the meaning of Regulations Section 1.704-1(b)(2)(ii)(g),
distributions shall be made pursuant to this Article IX to the Members who have
positive Capital Account balances in compliance with the Regulations Section
1.704-1(b)(2)(ii)(b)(2). In the event that any Member has a deficit balance in
his Capital Account (after giving effect to all contributions, distributions and
allocations for all Fiscal Peri ods), such Member shall have no obligation to
make any contribution to the capital of the Com pany with respect to such
deficit, and such deficit shall not be considered a debt owned to the Company or
to any other Person for any purposes whatsoever.
ARTICLE X
INDEMNIFICATION
10.1 Indemnity. Subject to the provisions of Section 10.4
hereof, the Company shall indemnify any Person who was or is a party or is
threatened to be made a party to any threatened, pending or completed action,
suit or proceeding, whether civil, criminal, administra tive or investigative,
except an action by or in the right of the Company, by reason of the fact that
such Person is or was a Managing Member, Member, Officer, director, controlling
person, employee, legal representative or agent of the Company, or is or was
serving at the request of the Company as manager, director, officer, partner,
shareholder, controlling person, employee, legal representative or agent of
another limited liability company, partnership, corporation, joint venture,
trust or other enterprise, against expenses, including attorneys' fees,
judgment, fines and amounts paid in settlement actually and reasonably incurred
by such person in connection with the action, suit or proceeding if such person
acted in good faith and in a manner which such person reasonably believed to be
in or not opposed to the best interests of the Company, and, with respect to a
criminal action or proceeding, had no reasonable cause to believe such person's
conduct was unlawful.
36
10.2 Indemnity for Actions by or in the Right of the Company.
In accordance with the provisions of Section 10.4 hereof, the Company shall
indemnify any Person who was or is a party or is threatened to be made a party
to any threatened, pending or completed action or suit by or in the right of the
Company to procure a judgment in its favor by reason of the fact that such
Person is or was a Managing Member, Member, director, Officer, controlling
person, employee, legal representative or agent of the Company, or is or was
serving at the request of the Company as a Managing Member, member, director,
officer, partner, shareholder, controlling person, employee, legal
representative or agent of another limited liability company, corporation,
partnership, joint venture, trust or other enterprise, against expenses,
including amounts paid in settlement and attorneys' fees actually and reasonably
incurred by such Person in connection with the defense or settlement of the
actions or suit if such person acted in good faith and in a manner which such
person reasonably believed to be in or not opposed to the best interests of the
Com pany.
10.3 Indemnity if Successful. The Company shall indemnify a
Managing Member, Member, Officer, director, controlling person, employee, legal
representative or agent of the Company against expenses, including attorneys'
fees, actually and reasonably incurred by such party in connection with the
defense of any action, suit or proceeding referred to in Sections 10.1 and 10.2
hereof or in defense of any claim, issue or matter therein, to the extent that
such person or entity has been successful on the merits.
10.4 Expenses. Any indemnification under Sections 10.1 and
10.2 hereof, as well as the advance payment of expenses permitted under Section
10.5 hereof shall be made by the Company to the fullest extent permitted under
the Act.
10.5 Advance Payment of Expenses. The expenses of the Managing
Member and Members incurred in defending a civil or criminal action, suit or
proceeding may be paid by the Company as they are incurred and in advance of the
final disposition of the action, suit or proceeding, upon receipt of an
undertaking by or on behalf of the Managing Member or Mem bers, as the case may
be, to repay the amount if it is ultimately determined by a court of compe tent
jurisdiction that such Managing Member or Member is not entitled to be
indemnified by the Company. The provisions of this subsection do not affect any
rights to advancement of expenses to which personnel other than Managing Member
or Members may be entitled under any contract or otherwise by law.
10.6 Other Arrangements Not Excluded. The indemnification
and advancement of expenses authorized in or ordered by a court pursuant to
this Article X:
(a) does not exclude any other rights to which a
Person seeking indem nification or advancement of expenses may be
entitled under the Certificate of Formation or any agreement, vote of
Members entitled to vote or otherwise, for either an action in such
Person's official capacity or an action in another capacity while
holding office,
37
except that indemnification, unless ordered by a court pursuant to
Section 10.5 above, may not be made to or on behalf of the Managing
Member or any Member if a final adjudication established that the acts
or omissions involved intentional misconduct, fraud or a knowing
violation of the law and was material to the cause of action; and
(b) continues for a Person who has ceased to be a
Managing Member, Member, employee or agent and inures to the benefit of
the heirs, executors and adminis trators of such a Person.
ARTICLE XI
MISCELLANEOUS PROVISIONS
11.1 Entire Agreement. This Agreement and the Certificate of
Formation constitute the complete and exclusive statement of the agreement among
the Members with respect to the subject matter contained therein. This Agreement
and the Certificate of Formation replace and supersede all prior agreements by
and among the Members with respect to the sub ject matter contained herein.
11.2 Amendments. This Agreement may be amended by (a) the two
thirds vote of the Membership Interests or (b) by action of the Operating
Committee if notice is mailed by the Managing Member to each Member and such
amendment is not objected to by any Member within thirty (30) days of mailing to
Members.
11.3 Applicable Law. The Certificate of Formation and this
Agreement, and its application, shall be governed exclusively by its terms and
the laws of the State of Delaware.
11.4 Reserved.
11.5 Headings. The headings in this Agreement are inserted for
convenience only and are in no way intended to describe, interpret, define, or
limit the scope, extent or intent of this Agreement or any provisions contained
herein.
11.6 Severability. If any provision of this Agreement or the
application thereof to any Person or circumstance shall be deemed invalid,
illegal or unenforceable to any extent, the remainder of this Agreement and the
application thereof shall not be affected and shall be en forceable to the
fullest extent permitted by law.
11.7 Heirs, Successors and Assigns. Each and all of the
covenants, terms, provisions and agreements contained in this Agreement shall be
binding upon and inure to the benefit of the existing Members, all new and
substituted Members, and their respective assignees (whether permitted by this
Agreement or not), heirs, legal representatives, successors and as signs.
38
11.8 Tax Reports and Financial Statements. After the end of
each Fiscal Year, the Officers, under the supervision and control of the
Managing Member, shall, as promptly as possible and in any event within sixty
(60) days after the close of the Fiscal Year, cause to be prepared and
transmitted to each Member federal income tax form K-1 and all information
necessary for the preparation of such Member's federal income tax return.
11.9 Counterparts. This Agreement may be executed in several
counterparts with the same effect as if the parties executing the several
counterparts had all executed one counterpart.
11.10 Filings. Following the execution and delivery of this
Agreement, the Officers or their designee, under the supervision and control of
the Managing Member shall promptly prepare any documents required to be filed
and recorded under the Act, and the Offi cers or such designee shall promptly
cause each such document to be filed and recorded in accordance with the Act
and, to the extent required by local law, to be filed and recorded or notice
thereof to be published in the appropriate place in each jurisdiction in which
the Company may hereafter establish a place of business. The Officers or such
designee, under the supervision and control of the Managing Member, shall also
promptly cause to be filed, recorded and pub lished such statements of
fictitious business name and any other notices, certificates, statements or
other instruments required by any provision of any applicable law of the United
States or any state or other jurisdiction which governs the conduct of its
business from time to time.
11.11 Power of Attorney. Except for any requirement for the
consent or power of the Members pursuant to Article III hereof, each Member does
hereby constitute and appoint each Officer and the Managing Member as its true
and lawful representative and attorney-in-fact, in its name, place and stead, to
make, execute, sign, deliver and file (a) any amendment to the Certificate of
Formation of the Company, any amendment thereof required because of an amend
ment to this Agreement or in order to effectuate any change in the membership of
the Company, (b) this Agreement, (c) any amendments to this Agreement and (d)
all such other instruments, documents and certificates which may from time to
time be required by the laws of the United States of America, the State of
Delaware or any other jurisdiction, or any political subdivision or agency
thereof, to effectuate, implement and continue the valid and subsisting
existence of the Company or to dissolve the Company or for any other purpose
consistent with this Agreement and the transactions contemplated hereby. The
power of attorney granted hereby is coupled with an interest and shall (i)
survive and not be affected by the subsequent death, incapacity, disabil ity,
dissolution, termination or bankruptcy of the Member granting the same or the
transfer of all or any portion of such Member's Interest and (ii) extend to such
Member's successors, assigns and legal representatives.
39
11.12 Additional Documents. Each Member, upon the request of
the Managing Member, agrees to perform all further acts and execute, acknowledge
and deliver any documents that may be reasonably necessary to carry out the
provisions of this Agreement.
11.13 Notices. All notices, requests and other communications
to any party hereunder shall be in writing (including facsimile or similar
writing) and shall be given to such party (and any other Person designated by
such party) at its address or facsimile number set forth in a schedule filed
with the records of the Company or such other address or facsimile number as
such party may hereafter specify to the Managing Member or Officers of the
Company. Each such notice, request or other communication shall be effective (a)
if given by facsimile, when transmitted to the number specified pursuant to this
Section and the appropriate confirmation is received, (b) if given by mail,
seventy-two (72) hours after such communication is deposited in the mails with
first class postage prepaid, addressed as aforesaid, (c) if given by reputable
over night courier, on the next Business Day or (d) if given by any other means,
when delivered at the address specified pursuant to this Section 11.13.
11.14 Waiver of Right to Partition and Xxxx of Accounting. To
the fullest extent permitted by applicable law, each of the Members covenants
that it will not, and hereby waives any right to, file a xxxx for partnership
accounting. Each of the Members irrevocably waives any right that it may have to
maintain any action for dissolution of the Company or partition with respect to
any of the Company's assets.
11.15 DISCLOSURES.
(a) THE INTERESTS OFFERED HEREBY HAVE NOT BEEN REGIS TERED
UNDER THE SECURITIES EXCHANGE ACT OF 1933, AS AMENDED (THE "1933 ACT"), OR THE
SECURITIES LAWS OF CERTAIN STATES AND ARE BEING OFFERED AND SOLD IN RELIANCE ON
EXEMPTIONS FROM THE REGISTRATION REQUIRE MENTS OF THE 1933 ACT AND SUCH LAWS.
THE INTERESTS ARE SUBJECT TO RESTRICTIONS ON TRANSFERABILITY AND RESALE AND MAY
NOT BE TRANS FERRED OR RESOLD EXCEPT AS PERMITTED UNDER THE 1933 ACT AND SUCH
LAWS PURSUANT TO REGISTRATION OR EXEMPTION THEREFROM.
(b) THERE WILL NOT BE ANY PUBLIC MARKET FOR THE INTER ESTS.
THE LIMITED LIABILITY COMPANY AGREEMENT GENERALLY PROHIBITS TRANSFERS OF
INTERESTS WITHOUT THE CONSENT OF THE OPERATING COM MITTEE IN ITS SOLE DISCRETION
AND FEDERAL AND STATE SECURITIES LAWS ALSO RESTRICT TRANSFERS OF INTERESTS.
[THE REMAINDER OF THIS PAGE IS INTENTIONALLY LEFT BLANK]
40
IN WITNESS WHEREOF, this Limited Liability Company Agreement
was adopted by a unanimous vote of all of the Members at the organizational
meeting thereof held as of July 26, 2000.
MANAGING MEMBER:
FORTRESS REGISTERED INVESTMENT TRUST, a
Delaware business trust, as Managing Member and a Member
By: /s/ Xxxxxx X. Xxxxx
----------------------------------------------------
Name: Xxxxxx X. Xxxxx
Title: Chief Executive Officer
MEMBERS:
HEALTH PARTNERS, a Bermuda exempted partnership,
as a Member
By: Capital Z Financial Services Fund II, L.P.,
its general partner
By: Capital Z Partners, Ltd., its general partner
By: Capital Z Partners, L.P.,
its general partner
By: /s/ Xxxx X. Xxxxxx
----------------------------------------------------
Name: Xxxx X. Xxxxxx
Title: Senior Vice President
41
SCHEDULE A
Schedule of Capital Commitments and Contributions of Members
PRIOR CAPITAL CAPITAL MEMBERSHIP INTEREST
MEMBER'S NAME CONTRIBUTION COMMITMENT PERCENTAGE
------------- ------------ ---------- ----------
Fortress Registered $ 61,066,3381 $ 160,000,000 59.3%
Investment Trust
Health Partners 0 $ 110,000,0002 40.7%
------------------------------
1 Representing 4,004,350 shares of Common Stock of Brookdale at $15.25
per share.
2 In the form of the Convertible Note
A-1
SCHEDULE B
Initial Officers
Position
--------
Xxxxxx X. Xxxxx Chairman
Xxxx X. Xxxxxx President
Xxxxxxx X. Xxxxxx CFO
Xxxxxx X. Xxxxxxx Secretary
B-1
SCHEDULE C
Initial OC Members
FRIT:
-----
1. Xxxxxx X. Xxxxx
2. Xxxxxxx X. Xxxxxxx
3. Xxxxxx X. Xxxxxxx
HP
--
1. Xxxx X. Xxxxxx
2. Xxxx X. Xxxxx
C-1
