<PAGE>
AS FILED WITH THE SECURITIES AND EXCHANGE COMMISSION ON MARCH 17, 1997
REGISTRATION NO. 333-12259
- -------------------------------------------------------------------------------
- -------------------------------------------------------------------------------
SECURITIES AND EXCHANGE COMMISSION
WASHINGTON, D.C. 20549
---------------
AMENDMENT NO. 4
TO
FORM S-1
REGISTRATION STATEMENT
UNDER
THE SECURITIES ACT OF 1933
---------------
BROOKDALE LIVING COMMUNITIES, INC.
(EXACT NAME OF REGISTRANT AS SPECIFIED IN ITS CHARTER)
---------------
8361 36-4103821
DELAWARE (PRIMARY STANDARD INDUSTRIAL (I.R.S. EMPLOYER
(STATE OR OTHER CLASSIFICATION CODE NUMBER) IDENTIFICATION NUMBER)
JURISDICTION OF
INCORPORATION OR ---------------
ORGANIZATION)
77 WEST WACKER DRIVE, SUITE 3900
CHICAGO, ILLINOIS 60601
(312) 456-0239
(ADDRESS, INCLUDING ZIP CODE, AND TELEPHONE NUMBER, INCLUDING AREA CODE, OF
REGISTRANT'S
PRINCIPAL EXECUTIVE OFFICES)
---------------
MARK J. SCHULTE
PRESIDENT AND CHIEF EXECUTIVE OFFICER
BROOKDALE LIVING COMMUNITIES, INC.
77 WEST WACKER DRIVE, SUITE 3900
CHICAGO, ILLINOIS 60601
(312) 456-0239
(NAME, ADDRESS, INCLUDING ZIP CODE, AND TELEPHONE NUMBER, INCLUDING AREA CODE,
OF AGENT FOR SERVICE)
COPIES TO:
WAYNE D. BOBERG, ESQ. J. VAUGHAN CURTIS, ESQ.
BRIAN T. BLACK, ESQ. KIMBERLY A. KNIGHT, ESQ.
WINSTON & STRAWN ALSTON & BIRD
35 WEST WACKER DRIVE 1201 WEST PEACHTREE STREET
CHICAGO, ILLINOIS 60601 ATLANTA, GEORGIA 30309
(312) 558-5600 (404) 881-7000
---------------
APPROXIMATE DATE OF COMMENCEMENT OF PROPOSED SALE OF THE SECURITIES TO THE
PUBLIC: As soon as practicable after the effective date of this Registration
Statement.
---------------
If any of the securities being registered on this Form are to be offered on
a delayed or continuous basis pursuant to Rule 415 under the Securities Act of
1933, check the following box. [_]
If this Form is filed to register additional securities for an offering
pursuant to Rule 462(b) under the Securities Act, please check the following
box and list the Securities Act registration statement number of the earlier
effective registration statement for the same offering. [_]
If this Form is a post-effective amendment filed pursuant to Rule 462(c)
under the Securities Act, check the following box and list the Securities Act
registration statement number of the earlier effective registration statement
for the same offering. [_]
If delivery of the prospectus is expected to be made pursuant to Rule 434,
please check the following box. [_]
---------------
THE REGISTRANT HEREBY AMENDS THIS REGISTRATION STATEMENT ON SUCH DATE OR
DATES AS MAY BE NECESSARY TO DELAY ITS EFFECTIVE DATE UNTIL THE REGISTRANT
SHALL FILE A FURTHER AMENDMENT WHICH SPECIFICALLY STATES THAT THIS
REGISTRATION STATEMENT SHALL THEREAFTER BECOME EFFECTIVE IN ACCORDANCE WITH
SECTION 8(A) OF THE SECURITIES ACT OF 1933 OR UNTIL THE REGISTRATION STATEMENT
SHALL BECOME EFFECTIVE ON SUCH DATE AS THE COMMISSION, ACTING PURSUANT TO SAID
SECTION 8(A), MAY DETERMINE.
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<PAGE>
PART II
INFORMATION NOT REQUIRED IN PROSPECTUS
ITEM 13. OTHER EXPENSES OF ISSUANCE AND DISTRIBUTION.
The following table sets forth the various costs and expenses in connection
with the issuance and distribution of the securities being registered hereby,
other than underwriting discounts and commissions. The Company will bear all
of such expenses. All amounts are estimated except for the Securities and
Exchange Commission ("SEC") registration fee, the National Association of
Securities Dealers, Inc. ("NASD") filing fee and the Nasdaq National Market
listing fee.
<TABLE>
<S> <C>
SEC registration fee.......................................... $ 42,134
NASD filing fee............................................... 12,719
Nasdaq National Market listing fee............................ *
Blue sky fees and expenses (including attorneys' fees and
expenses).................................................... 30,000
Accounting fees and expenses.................................. *
Legal fees and expenses....................................... *
Printing and engraving expenses............................... *
Transfer agent and registrar's fees........................... *
----------
Total..................................................... $3,500,000
==========
</TABLE>
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* To be completed by amendment.
ITEM 14. INDEMNIFICATION OF DIRECTORS AND OFFICERS.
Under Section 145 of the General Corporation Law of the State of Delaware
("Section 145"), a corporation may indemnify its directors, officers,
employees and agents and its former directors, officers, employees and agents
and those who serve, at the corporation's request, in such capacities with
another enterprise, against expenses (including attorneys' fees), as well as
judgments, fines and settlements in non-derivative lawsuits, actually and
reasonably incurred in connection with the defense of any action, suit or
proceeding in which they or any of them were or are made parties or are
threatened to be made parties by reason of their serving or having served in
such capacity. Section 145 provides, however, that such person must have acted
in good faith and in a manner he or she reasonably believed to be in (or not
opposed to) the best interests of the corporation, and, in the case of a
criminal action, such person must have had no reasonable cause to believe his
or her conduct was unlawful. In addition, Section 145 does not permit
indemnification in an action or suit by or in the right of the corporation,
where such person has been adjudged liable to the corporation, unless, and
only to the extent that, a court determines that such person fairly and
reasonably is entitled to indemnity for expenses the court deems proper in
light of liability adjudication. Indemnity is mandatory to the extent a claim,
issue or matter has been successfully defended.
The Company's Amended and Restated By-laws (the "By-laws") provide for
mandatory indemnification of directors and officers generally to the same
extent authorized by Section 145. Under the By-laws, the Company shall advance
expenses incurred by an officer or director in defending any such action if
the director or officer undertakes to repay such amount if it is determined
that he or she is not entitled to indemnification.
The Company maintains directors' and officers' liability insurance.
The Company also intends to enter into indemnification agreements with each
of the Company's directors and certain of its officers. The indemnification
agreements will require, among other things, that the Company indemnify such
directors and officers to the fullest extent permitted by law, and advance to
such directors and officers all related expenses, subject to reimbursement if
it is subsequently determined that indemnification is not permitted. The
Company also must indemnify and advance all expenses incurred by such
directors and officers seeking to enforce their rights under the
indemnification agreements and cover such directors and officers under the
Company's directors' and officers' liability insurance.
II-1
<PAGE>
The Company's Restated Certificate of Incorporation provides that the
Company's directors will not be personally liable to the Company or its
stockholders for monetary damages resulting from breaches of their fiduciary
duty as directors, except (a) for any breach of the directors' duty of loyalty
to the Company or its stockholders, (b) for acts or omissions not in good
faith or which involve intentional misconduct or a knowing violation of law,
(c) under Section 174 of the General Corporation Law of the State of Delaware,
which makes directors liable for unlawful payments of dividends or unlawful
stock repurchases or redemptions, or (d) for transactions from which directors
derive improper personal benefit.
The Underwriting Agreement provides for indemnification by the Underwriters
of the directors, officers and controlling persons of the Company against
certain liabilities, including liabilities under the Securities Act of 1933,
as amended (the "Securities Act"), under certain circumstances.
ITEM 15. RECENT SALES OF UNREGISTERED SECURITIES.
The following sets forth certain information as to all securities sold by
the Company within the last three years that were not registered under the
Securities Act. As to all such transactions, an exemption is claimed under
Section 4(2) of the Securities Act.
On September 4, 1996, the Company issued 100 shares of Common Stock to
Michael W. Reschke for $10.00 per share, or an aggregate purchase price of
$1,000. This Common Stock was purchased solely for investment purposes to
facilitate the organization of the Company. Upon completion of the Offering,
all of the shares so acquired by Mr. Reschke will be redeemed by the Company
for an aggregate redemption price of $1,000.
Simultaneously with the completion of the Offering, the Company also will
issue 2,071,334 shares of Common Stock to PGI in exchange for all of the
capital stock of BLC, its interests in the Heritage and the Devonshire
facilities and the operations relating to its senior and assisted living
division and 328,666 shares of Common Stock to Mark J. Schulte in exchange for
his interests in PGI's senior and assisted living division.
ITEM 16. EXHIBITS AND FINANCIAL STATEMENT SCHEDULES.
(a) EXHIBITS.
<TABLE>
<CAPTION>
EXHIBIT
NUMBER DESCRIPTION
------- -----------
<C> <S>
1.1* Form of Underwriting Agreement
3.1 Form of Restated Certificate of Incorporation of the Company
3.2 Form of Amended and Restated By-laws of the Company
4.1 Form of certificate representing Common Stock of the Company
5.1* Opinion of Winston & Strawn regarding legality of shares being reg-
istered
10.1* Form of Formation Agreement by and among the Company, PGI and Mark
J. Schulte
10.2* Form of Space Sharing Agreement by and between the Company and PGI
10.3 Form of Registration Rights Agreement by and between the Company and
PGI
10.4 Form of Voting Agreement by and among the Company and PGI
10.5 Form of Non-Compete Agreement by and among the Company, PGI and
Michael W. Reschke
10.6+ Subscription Agreement dated September 4, 1996 by and between the
Company and Michael W. Reschke
10.7* Form of Employment Agreement by and between the Company and Michael
W. Reschke
10.8* Form of Employment Agreement by and between the Company and Mark J.
Schulte
10.9* Form of Employment Agreement by and between the Company and Darryl
W. Copeland, Jr.
10.10 Form of Employment Agreement by and between the Company and Matthew
F. Whitlock
</TABLE>
II-2
<PAGE>
<TABLE>
<C> <S>
EXHIBIT DESCRIPTION
NUMBER -----------
-------
10.11 Form of Employment Agreement by and between the Company and Mark J.
Iuppenlatz
10.12 Form of Management Agreement by and between Brookdale Living Commu-
nities of Texas, Inc. and The Island on Lake Travis, Ltd.
10.13 Form of Management Agreement by and between Brookdale Living Commu-
nities of Minnesota, Inc. and Kenwood Associates Limited Partnership
10.14 Form of Stock Incentive Plan
10.15 Form of Indemnification Agreement
10.16* Form of Amended and Restated Agreement of Limited Partnership of
Hallmark Partners, L.P.
10.17 Form of Amended and Restated Partnership Agreement of River Oaks
Partners
10.18 Form of Amended and Restated Agreement of Limited Partnership of The
Ponds of Pembroke Limited Partnership
10.19+ Real Estate Purchase Agreement dated as of September 16, 1996 by and
between PGI and Gables at Brighton Associates
10.20+ Real Estate Purchase Agreement dated as of September 16, 1996 by and
between PGI and Edina Park Plaza Associates Limited Partnership
10.21+ Real Estate Purchase Agreement dated as of September 16, 1996 by and
between PGI and East Mesa Senior Living Limited Partnership
10.22+ Real Estate Purchase Agreement dated as of September 16, 1996 by and
between PGI and Hawthorn Lakes Associates
10.23+ Letter Agreement dated September 17, 1996 by and among PGI, KILICO
Realty Corporation and Kemper Investors Life Insurance Company
10.24+ First Amendment dated December 20, 1996 to Letter Agreement dated
September 17, 1996 by and among PGI, KILICO Realty Corporation and
Kemper Investors Life Insurance Company
10.25+ Purchase and Sale Agreement dated as of February 20, 1997 by and be-
tween the Company and Park Place General Partnership
10.26+ Purchase and Sale Agreement dated as of February 20, 1997 by and be-
tween the Company and Park Place II, L.L.C.
10.27+ Master Lease Agreement dated as of December 27, 1996 by and between
HRPT, as landlord, and BLC, as tenant
10.28+ Sublease Agreement dated as of December 27, 1996 by and between BLC,
as sublandlord, and Brookdale Living Communities of Arizona, Inc.,
as subtenant
10.29+ Sublease Agreement dated as of December 27, 1996 by and between BLC,
as sublandlord, and Brookdale Living Communities of Illinois, Inc.,
as subtenant
10.30+ Sub-Sublease Agreement dated as of December 27, 1996 by and between
Brookdale Living Communities of Illinois, Inc., as sub-sublandlord,
and Hallmark Partners L.P., as sub-subtenant
10.31+ Sublease Agreement dated as of December 27, 1996 by and between BLC,
as sublandlord, and Brookdale Living Communities of New York, Inc.,
as subtenant
10.32+ Real Estate Purchase Agreement dated as of February 24, 1997 by and
between PGI and Firstar DuPage Bank Trust No. 3612 dated December 4,
1989, Firstar DuPage Bank Trust No. 3625 dated February 22, 1990,
West Suburban Bank Trust No. 1975 dated December 13, 1978 and the
direct and indirect beneficiaries thereof
</TABLE>
II-3
<PAGE>
<TABLE>
<C> <S>
10.33+ Real Estate Purchase Agreement dated as of February 14, 1997 by and
between PGI and AC Properties, L.L.C.
10.34+ Contract for Sale dated February 21, 1997 by and between PGI and VG
Office Partnership '95, Ltd.
10.35+ First Amendment dated as of February 21, 1997 to Contract for Sale
dated February 14, 1997 by and between PGI and VG Office Partnership
'95, Ltd.
21.1 Subsidiaries of the Company
23.1+ Consent of Ernst & Young LLP
23.2 Consent of Winston & Strawn (to be included in opinion filed as Ex-
hibit 5.1)
23.3.1+ Consent of Darryl W. Copeland, Jr.
23.3.2+ Consent of Wayne D. Boberg
23.3.3+ Consent of Bruce L. Gewertz
23.3.4+ Consent of Darryl W. Hartley-Leonard
23.3.5+ Consent of Daniel J. Hennessy
24.1+ Powers of attorney (included on signature page included in Part II
of the initial filing)
27.1+ Financial Data Schedule
</TABLE>
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* To be filed by amendment.
+ Previously filed.
(b) FINANCIAL STATEMENT SCHEDULES.
Financial Statement Schedules have been omitted because the information
required to be set forth therein is not applicable or is shown in the
financial statements or notes thereto.
ITEM 17. UNDERTAKINGS.
The undersigned registrant hereby undertakes to provide to the Underwriters
at the closing specified in the Underwriting Agreement certificates in such
denominations and registered in such names as required by the Underwriters to
permit prompt delivery to each purchaser.
Insofar as indemnification for liabilities arising under the Securities Act
may be permitted to directors, officers and controlling persons of the Company
pursuant to the foregoing provisions, or otherwise, the Company
has been advised that in the opinion of the SEC such indemnification is
against public policy as expressed in the Securities Act and is, therefore,
unenforceable. In the event that a claim for indemnification against such
liabilities (other than the payment by the Company of expenses incurred or
paid by a director, officer or controlling person of the Company in the
successful defense of any action, suit or proceeding) is asserted by such
director, officer or controlling person in connection with the securities
being registered, the Company will, unless in the opinion of its counsel the
matter has been settled by controlling precedent, submit to a court of
appropriate jurisdiction the question whether such indemnification by it is
against public policy as expressed in the Securities Act and will be governed
by the final adjudication of such issue.
The undersigned Company hereby further undertakes that:
(1) For purposes of determining any liability under the Securities Act,
the information omitted from the form of prospectus filed as part of this
registration statement in reliance upon Rule 430A and contained in a form
of prospectus filed by the Company pursuant to Rule 424(b)(1) or (4) or
497(h) under the Securities Act shall be deemed to be part of this
registration statement as of the time it was declared effective.
(2) For the purpose of determining any liability under the Securities
Act, each post-effective amendment that contains a form of prospectus shall
be deemed to be a new registration statement relating to the securities
offered therein, and the offering of such securities at that time shall be
deemed to be the initial bona fide offering thereof.
II-4
<PAGE>
SIGNATURES
PURSUANT TO THE REQUIREMENTS OF THE SECURITIES ACT OF 1933, THE COMPANY HAS
DULY CAUSED THIS AMENDMENT NO. 4 TO REGISTRATION STATEMENT TO BE SIGNED ON ITS
BEHALF BY THE UNDERSIGNED, THEREUNTO DULY AUTHORIZED, IN THE CITY OF CHICAGO,
STATE OF ILLINOIS, ON THE 17TH DAY OF MARCH, 1997.
Brookdale Living Communities, Inc.
/s/ Craig G. Walczyk
By___________________________________
Craig G. Walczyk
Vice President--Chief Financial
Officer and Secretary
----------------
PURSUANT TO THE REQUIREMENTS OF THE SECURITIES ACT OF 1933, THIS AMENDMENT
NO. 4 TO REGISTRATION STATEMENT HAS BEEN SIGNED BELOW ON MARCH 17, 1997 BY THE
FOLLOWING PERSONS IN THE CAPACITIES INDICATED.
<TABLE>
<CAPTION>
SIGNATURE TITLE
--------- -----
<S> <C>
Michael W. Reschke* Chairman of the Board, Director
___________________________________________
Michael W. Reschke
Mark J. Schulte* President and Chief Executive Officer
___________________________________________ (principal executive officer), Director
Mark J. Schulte
/s/ Craig G. Walczyk Vice President--Chief Financial Officer and
___________________________________________ Secretary (principal financial officer)
Craig G. Walczyk
Sheryl A. Wolf* Controller (principal accounting officer)
</TABLE> ___________________________________________
Sheryl A. Wolf
/s/ Craig G. Walczyk
*By__________________________________
Craig G. Walczyk, Attorney-in-Fact
II-5
<PAGE>
EXHIBIT INDEX
<TABLE>
<CAPTION>
EXHIBIT PAGE
NUMBER DESCRIPTION NUMBER
------- ----------- ------
<C> <S> <C>
1.1* Form of Underwriting Agreement.............................
3.1 Form of Restated Certificate of Incorporation of the Compa-
ny.........................................................
3.2 Form of Amended and Restated By-laws of the Company........
4.1 Form of certificate representing Common Stock of the Compa-
ny.........................................................
5.1* Opinion of Winston & Strawn regarding legality of shares
being registered...........................................
10.1* Form of Formation Agreement by and among the Company, PGI
and Mark J. Schulte........................................
10.2* Form of Space Sharing Agreement by and between the Company
and PGI....................................................
10.3 Form of Registration Rights Agreement by and between the
Company and PGI............................................
10.4 Form of Voting Agreement by and among the Company and PGI..
10.5 Form of Non-Compete Agreement by and among the Company, PGI
and Michael W. Reschke.....................................
10.6+ Subscription Agreement dated September 4, 1996 by and be-
tween the Company and Michael W. Reschke...................
10.7* Form of Employment Agreement by and between the Company and
Michael W. Reschke.........................................
10.8* Form of Employment Agreement by and between the Company and
Mark J. Schulte............................................
10.9* Form of Employment Agreement by and between the Company and
Darryl W. Copeland, Jr.....................................
10.10 Form of Employment Agreement by and between the Company and
Matthew F. Whitlock........................................
10.11 Form of Employment Agreement by and between the Company and
Mark J. Iuppenlatz.........................................
10.12 Form of Management Agreement by and between Brookdale Liv-
ing Communities of Texas, Inc. and The Island on Lake Trav-
is, Ltd....................................................
10.13 Form of Management Agreement by and between Brookdale Liv-
ing Communities of Minnesota, Inc. and Kenwood Associates
Limited Partnership........................................
10.14 Form of Stock Incentive Plan...............................
10.15 Form of Indemnification Agreement..........................
10.16* Form of Amended and Restated Agreement of Limited Partner-
ship of Hallmark Partners, L.P.............................
10.17 Form of Amended and Restated Partnership Agreement of River
Oaks Partners..............................................
10.18 Form of Amended and Restated Agreement of Limited Partner-
ship of The Ponds of Pembroke Limited Partnership..........
10.19+ Real Estate Purchase Agreement dated as of September 16,
1996 by and between PGI and Gables at Brighton Associates..
10.20+ Real Estate Purchase Agreement dated as of September 16,
1996 by and between PGI and Edina Park Plaza Associates
Limited Partnership........................................
10.21+ Real Estate Purchase Agreement dated as of September 16,
1996 by and between PGI and East Mesa Senior Living Limited
Partnership................................................
10.22+ Real Estate Purchase Agreement dated as of September 16,
1996 by and between PGI and Hawthorn Lakes Associates......
</TABLE>
II-6
<PAGE>
<TABLE>
<CAPTION>
EXHIBIT PAGE
NUMBER DESCRIPTION NUMBER
------- ----------- ------
<C> <S> <C>
10.23+ Letter Agreement dated September 17, 1996 by and among PGI,
KILICO Realty Corporation and Kemper Investors Life Insur-
ance Company ..............................................
10.24+ First Amendment dated December 20, 1996 to Letter Agreement
dated September 17, 1996 by and among PGI, KILICO Realty
Corporation and Kemper Investors Life Insurance Company....
10.25+ Purchase and Sale Agreement dated as of February 20, 1997
by and between the Company and Park Place General Partner-
ship.......................................................
10.26+ Purchase and Sale Agreement dated as of February 20, 1997
by and between the Company and Park Place II, L.L.C........
10.27+ Master Lease Agreement dated as of December 27, 1996 by and
between HRPT, as landlord, and BLC, as tenant..............
10.28+ Sublease Agreement dated as of December 27, 1996 by and be-
tween BLC, as sublandlord, and Brookdale Living Communities
of Arizona, Inc., as subtenant.............................
10.29+ Sublease Agreement dated as of December 27, 1996 by and be-
tween BLC, as sublandlord, and Brookdale Living Communities
of Illinois, Inc., as subtenant............................
10.30+ Sub-Sublease Agreement dated as of December 27, 1996 by and
between Brookdale Living Communities of Illinois, Inc., as
sub-sublandlord, and Hallmark Partners L.P., as sub-subten-
ant........................................................
10.31+ Sublease Agreement dated as of December 27, 1996 by and be-
tween BLC, as sublandlord, and Brookdale Living Communities
of New York, Inc., as subtenant............................
10.32+ Real Estate Purchase Agreement dated as of February 24,
1997 by and between PGI and Firstar DuPage Bank Trust No.
3612 dated December 4, 1989, Firstar DuPage Bank Trust No.
3625 dated February 22, 1990, West Suburban Bank Trust No.
1975 dated December 13, 1978 and the direct and indirect
beneficiaries thereof......................................
10.33+ Real Estate Purchase Agreement dated as of February 14,
1997 by and between PGI and AC Properties, L.L.C...........
10.34+ Contract for Sale dated February 21, 1997 by and between
PGI and VG Office Partnership '95, Ltd.....................
10.35+ First Amendment dated as of February 21, 1997 to Contract
for Sale dated February 14, 1997 by and between PGI and VG
Office Partnership '95, Ltd................................
21.1 Subsidiaries of the Company................................
23.1+ Consent of Ernst & Young LLP...............................
23.2* Consent of Winston & Strawn (to be included in opinion
filed as Exhibit 5.1)......................................
23.3.1+ Consent of Darryl W. Copeland, Jr..........................
23.3.2+ Consent of Wayne D. Boberg.................................
23.3.3+ Consent of Bruce L. Gewertz................................
23.3.4+ Consent of Darryl W. Hartley-Leonard.......................
23.3.5+ Consent of Daniel J. Hennessy..............................
24.1+ Powers of attorney (included on signature page included in
Part II of the initial filing).............................
27.1+ Financial Data Schedule....................................
</TABLE>
- ---------------------
*To be filed by amendment.
+Previously filed.
II-7
<PAGE>
EXHIBIT 3.1
FORM OF
RESTATED CERTIFICATES OF INCORPORATION
OF
BROOKDALE LIVING COMMUNITIES, INC.
Brookdale Living Communities, Inc., a corporation organized and
existing under the laws of the State of Delaware (the "Corporation"), does
hereby certify:
FIRST: That the present name of the Corporation is Brookdale Living
Communities, Inc. and its original Certificate of Incorporation was filed with
the Secretary of State of the State of Delaware on September 4, 1996 (the
"Original Certificate of Incorporation").
SECOND: That, by written consent in lieu of a meeting of the Board of
Directors of said Corporation pursuant to Section 141(f) of the General
Corporation Law of the State of Delaware (the "Delaware General Corporation
Law"), resolutions were duly adopted setting forth a proposed restated
certificate of incorporation of said Corporation (the "Restated Certificate of
Incorporation") and recommending that such Restated Certificate of Incorporation
be approved by the sole stockholder of said Corporation.
THIRD: That thereafter, by written consent in lieu of a special
meeting of the sole stockholder of the Corporation pursuant to Section 228(a) of
the Delaware General Corporation Law, the sole stockholder of the Corporation
adopted a resolution approving the Restated Certificate of Incorporation.
FOURTH: That this Restated Certificate of Incorporation restates and
amends the Original Certificate of Incorporation, and has been duly adopted in
accordance with Sections 242 and 245 of the Delaware General Corporation Law.
FIFTH: That the text of the Original Certificate of Incorporation is
hereby restated and amended to read in its entirety as follows:
ARTICLE 1
NAME
The name of this corporation is BROOKDALE LIVING COMMUNITIES, INC.
(the "Corporation").
<PAGE>
ARTICLE 2
REGISTERED OFFICE AND AGENT
The address of the Corporation's registered office in the State of Delaware
is 1209 Orange Street, in the City of Wilmington, County of New Castle, State of
Delaware 19801. The name of its registered agent at such address is The
Corporation Trust Company.
ARTICLE 3
PURPOSE AND POWERS
The purpose of the Corporation is to engage in any lawful act or activity
for which corporations may be organized under the General Corporation Law of the
State of Delaware (as amended, restated, supplemented or otherwise modified from
time to time, the "Delaware General Corporation Law"). The Corporation shall
have all power necessary or convenient to the conduct, promotion or attainment
of such acts and activities.
ARTICLE 4
CAPITAL STOCK
4.1 AUTHORIZED SHARES.
The total number of shares of all classes of capital stock that the
Corporation shall have authority to issue is 95,000,000 of which 75,000,000
shares shall be Common Stock, having a par value of $0.01 per share ("Common
Stock"), and 20,000,000 shares shall be Preferred Stock, having a par value of
$0.01 per share ("Preferred Stock").
---------------
4.2 COMMON STOCK.
4.2.1 Relative Rights. The Common Stock shall be subject to all of
the rights, privileges, preferences and priorities of the Preferred Stock as set
forth in the certificate(s) of designations filed to establish the respective
classes or series of Preferred Stock. Each share of Common Stock shall have the
same relative rights as and be identical in all respects to all the other shares
of Common Stock.
4.2.2 Dividends. Whenever there shall have been paid, or declared and
set aside for payment, to the holders of shares of any class of capital stock
having preference over the Common Stock as to the payment of dividends, the full
amount of dividends and of sinking fund or retirement payments, if any, to
which such holders are respectively entitled in preference to the Common Stock,
then dividends may be paid on the Common Stock and on any class or series of
capital stock entitled to participate therewith as to dividends, out of any
assets legally available for the payment of dividends thereon, but only when and
as declared by the Board of Directors of the Corporation.
-2-
<PAGE>
4.2.3 Dissolution, Liquidation, or Winding Up. In the event of any
dissolution, liquidation, or winding up of the Corporation, whether voluntary or
involuntary, the holders of the Common Stock, and holders of any class or series
of capital stock entitled to participate therewith, in whole or in part, as to
the distribution of assets in such event, shall become entitled to participate
in the distribution of any assets of the Corporation remaining after the
Corporation shall have paid, or provided for payment of, all debts and
liabilities of the Corporation and after the Corporation shall have paid, or set
aside for payment, to the holders of any class of capital stock having
preference over the Common Stock in the event of dissolution, liquidation, or
winding up of the Corporation the full preferential amounts (if any) to which
they are entitled.
4.2.4 Voting Rights. Each holder of shares of Common Stock shall be
entitled to attend all special and annual meetings of the stockholders of the
Corporation and, share for share and without regard to class, together with the
holders of all other classes of capital stock entitled to attend such meetings
and to vote (except any class or series of capital stock having special voting
rights), to cast one vote for each outstanding share of Common Stock so held
upon any matter or thing (including, without limitation, the election of one or
more directors) properly considered and acted upon by the stockholders.
4.3 PREFERRED STOCK.
The Board of Directors is authorized, subject to limitations prescribed by
the Delaware General Corporation Law and the provisions of this Restated
Certificate of Incorporation, to provide, by resolution or resolutions from time
to time and by filing a certificate(s) pursuant to the Delaware General
Corporation Law, for the issuance of the shares of Preferred Stock in one or
more classes or series, to establish from time to time the number of shares to
be included in each such class or series, to fix the voting powers,
designations, preferences and relative participating, optional, or other
special rights of the shares of each such class or series and to fix the
qualifications, limitations, or restrictions, thereof. Each share of each such
class or series of Preferred Stock shall have the same relative rights as and be
identical in all respects to all other shares of the same class or series.
ARTICLE 5
BOARD OF DIRECTORS
5.1 NUMBER; ELECTION; AND CLASSIFICATION.
The number of directors of the Corporation shall be not less than two nor
more than eleven, the exact number of directors to be fixed from time to time by
or in the manner provided in the
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By-laws of the Corporation. The Board of Directors of the Corporation shall be
divided into three classes, each class consisting of approximately one-third of
the total number of directors. The term of office of each class shall be three
years and shall expire in successive years at the time of the annual meeting of
stockholders; provided, however, that the terms of the Class I and Class II
directors listed below shall be one year and two years, respectively. The
initial classes of directors are as follows:
Class I (terms of office expiring at the 1998 annual meeting of
stockholders) -- Michael W. Reschke and Bruce L. Gewertz;
Class II (terms of office expiring at the 1999 annual meeting of
stockholders) -- Darryl W. Copeland, Jr. and Darryl W. Hartley-Leonard; and
Class III (terms of office expiring at the 2000 annual meeting of
stockholders) -- Mark J. Schulte, Wayne D. Boberg and Daniel J. Hennessy.
At each annual meeting of stockholders, the successors to the class of directors
whose term shall then expire shall be elected to hold office for a term expiring
at the third succeeding annual meeting and until their successors shall be
elected and qualified. Unless and except to the extent that the By-laws of the
Corporation shall otherwise require, the election of directors of the
Corporation need not be by written ballot.
Any vacancy occurring in the Board of Directors, including any vacancy
created by an increase in the number of directors, shall be filled for the
unexpired term by the vote of a majority of the directors then in office,
whether or not a quorum, or by a sole remaining director, and any director so
chosen shall hold office for the remainder of the full term of the class in
which the new directorship was created or the vacancy occurred and until such
director's successor shall have been elected and qualified. No director may be
removed except for cause and then only by an affirmative vote of the holders of
at least a majority of the outstanding shares of capital stock of the
Corporation entitled to vote thereon at a duly constituted meeting of
stockholders called for such purpose. At least thirty days prior to such meeting
of stockholders, written notice shall be sent to the director or directors whose
removal shall be considered at such meeting.
5.2 MANAGEMENT OF BUSINESS AND AFFAIRS OF THE CORPORATION.
The business and affairs of the Corporation shall be managed by or under
the direction of the Board of Directors.
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<PAGE>
5.3 LIMITATION OF LIABILITY
-----------------------
No director of the Corporation shall be liable to the Corporation or its
stockholders for monetary damages for breach of fiduciary duty as a director,
provided that this provision shall not eliminate or limit the liability of a
director (a) for any breach of the director's duty of loyalty to the corporation
or its stockholders, (b) for acts or omissions not in good faith or which
involve intentional misconduct or a knowing violation of law, (c) under Section
174 of the Delaware General Corporation Law, or (d) for any transaction from
which the director derived an improper personal benefit. Any repeal or
modification of this Article 5.3 shall be prospective only and shall not
adversely affect any right or protection of, or any limitation on the liability
of, a director of the Corporation existing at, or arising out of facts or
incidents occurring prior to, the effective date of such repeal or modification.
ARTICLE 6
COMPROMISE OR ARRANGEMENT
Whenever a compromise or arrangement is proposed between the Corporation
and its creditors or any class of them and/or between the Corporation and its
stockholders or any class of them, any court of equitable jurisdiction within
the State of Delaware may, on the application in a summary way of the
Corporation or any creditor or stockholder thereof, or on the application of any
receiver or receivers appointed for the Corporation under the provisions of
Section 291 of the Delaware General Corporation Law or on the application of
trustees in dissolution or of any receiver or receivers appointed for the
Corporation under the provisions of Section 279 of the Delaware General
Corporation Law order a meeting of the creditors or class of creditors, and/or
of the stockholders or class of stockholders of the Corporation, as the case may
be, to be summoned in such manner as the said court directs. If a majority in
number representing three-fourths in value of the creditors or class of
creditors, and/or of the stockholders or class of stockholders of the
Corporation, as the case may be, agree to any compromise or arrangement and to
any reorganization of the Corporation as a consequence of such compromise or
arrangement, the said compromise or arrangement and the said reorganization
shall, if sanctioned by the court to which the said application has been made,
be binding on all the creditors or class of creditors, and/or on all the
stockholders or class of stockholders, of the Corporation, as the case may be,
and also on the Corporation.
ARTICLE 7
AMENDMENT OF BY-LAWS
The Board of Directors or the stockholders may from time to time adopt,
amend or repeal the By-laws of the Corporation. Such action by the Board of
Directors shall require the affirmative
<PAGE>
vote of at least two-thirds of the directors then in office at a duly
constituted meeting of the Board of Directors called for such purpose. Such
action by the stockholders shall require the affirmative vote of the holders of
at least two-thirds of the outstanding shares of capital stock of the
Corporation entitled to vote thereon at a duly constituted meeting of
stockholders called for such purpose.
ARTICLE 8
RESERVATION OF RIGHT TO AMEND
RESTATED CERTIFICATE OF INCORPORATION
The Corporation reserves the right at any time, and from time to time, to
amend, alter, change, or repeal any provision contained in this Restated
Certificate of Incorporation, and other provision authorized by the laws of the
state of Delaware at the time in force may be added or inserted, in the manner
now or hereafter prescribed by law; and all rights preferences, and privileges
of any nature conferred upon stockholders, directors, or any other persons by
and pursuant to this Restated Certificate of Incorporation in its present form
or as hereafter amended are granted subject to the rights reserved in this
Article 8.
ARTICLE 9
STOCKHOLDER MATTERS
9.1 CONSENT IN LIEU OF MEETING.
Any action required or permitted to be taken by the stockholders of the
Corporation must be effected at a duly called annual or special meeting or such
holders and may not be effected by any consent in writing by such holders,
unless such consent is unanimous.
9.2 CALL OF SPECIAL MEETINGS.
Special meetings of the stockholders, for any purpose or purposes, unless
otherwise prescribed by statute, may be called by the Board of Directors, the
Chairman of the Board, the Chief Executive Officer or the President of the
Corporation, and shall be called by the Chief Executive Officer, the President
or the Secretary of the Corporation at the request in writing of stockholders
possessing at least twenty-five percent of the voting power of the issued and
outstanding voting stock of the Corporation entitled to vote generally for the
election of directors. Such request shall include a statement of the purpose or
purposes of the proposed meeting.
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ARTICLE 10
AMENDMENT OF RESTATED CERTIFICATE OF INCORPORATION
Except as set forth in this Article 10 or as otherwise specifically
required by law, no amendment of any provision of this Restated Certificate of
Incorporation shall be made unless such amendment has been first proposed by the
Board of Directors of the Corporation upon the affirmative vote of at least
two-thirds of the directors then in office at a duly constituted meeting of the
Board of Directors called for such purpose and thereafter approved by
stockholders of the Corporation by the affirmative vote of the holders of at
least a majority of the outstanding shares of capital stock of the Corporation
entitled to vote thereon; provided, however, if such amendment is to the
provisions set forth in this clause of Article 10 or in Articles 4.1 (insofar as
relating to the decrease of the authorized number of shares of Preferred Stock),
4.3, 5, 7, or 9 hereof, such amendment must be approved by the affirmative vote
of the holders of at least two-thirds of the outstanding shares of capital stock
of the Corporation entitled to vote thereon rather than a majority of such
shares.
IN WITNESS WHEREOF, Brookdale Living Communities, Inc. has caused this
Restated Certificate of Incorporation to be signed by its duly authorized
officer, as of the ____ day of March, 1997.
BROOKDALE LIVING COMMUNITIES, INC.
By:
---------------------------------------
Name:
-------------------------------------
Title:
------------------------------------
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<PAGE>
EXHIBIT 3.2
FORM OF
AMENDED AND RESTATED BY-LAWS
OF
BROOKDALE LIVING COMMUNITIES, INC.
ARTICLE 1
OFFICES
1.1 REGISTERED OFFICE.
The initial registered office of the Corporation shall be in Wilmington,
Delaware, and the initial registered agent in charge thereof shall be The
Corporation Trust Company, located at 1209 Orange Street, in the City of
Wilmington, County of New Castle, State of Delaware 19801.
1.2 OTHER OFFICES.
The Corporation may also have offices at such other places, both within and
without the State of Delaware, as the Board of Directors may from time to time
determine or as may be necessary or useful in connection with the business of
the Corporation.
ARTICLE 2
MEETINGS OF STOCKHOLDERS
2.1 PLACE OF MEETINGS.
All meetings of the stockholders shall be held at such place as may be
fixed from time to time by the Board of Directors, the Chairman of the Board,
the Chief Executive Officer or the President.
2.2 ANNUAL MEETINGS.
The Corporation shall hold annual meetings of stockholders, commencing with
the year 1998, on such date and at such time as shall be designated from time to
time by the Board of Directors, the Chairman of the Board, the Chief Executive
Officer or the President, at which stockholders shall elect successors to that
class of directors whose terms shall have expired and transact such other
business as may properly be brought before the meeting.
2.3 SPECIAL MEETINGS.
Special meetings of the stockholders, for any purpose or purposes, unless
otherwise prescribed by statute, may be called by the Board of Directors, the
Chairman of the Board, the Chief Executive Officer or the President of the
Corporation, and shall be
<PAGE>
called by the Chief Executive Officer, the President or the Secretary of the
Corporation at the request in writing of the stockholders possessing at least
twenty-five percent of the voting power of the issued and outstanding voting
stock of the Corporation entitled to vote generally for the election of
directors. Such request shall include a statement of the purpose or purposes of
the proposed meeting.
2.4 NOTICE OF MEETINGS.
------------------
Notice of any meeting of stockholders, stating the place, date and hour of
the meeting, and (if it is a special meeting) the purpose or purposes for which
the meeting is called, shall be given to each stockholder entitled to vote at
such meeting not less than ten or more than sixty days before the date of the
meeting (except to the extent that such notice is waived or is not required as
provided in the General Corporation Law of the State of Delaware (as amended,
restated, supplemented or otherwise modified from time to time, the "Delaware
General Corporation Law") or these By-laws). Such notice shall be given in
accordance with, and shall be deemed effective as set forth in, Section 222 (or
any successor section) of the Delaware General Corporation Law.
2.5 WAIVER OF NOTICE.
----------------
Whenever the giving of any notice is required by statute, the Restated
Certificate of Incorporation of the Corporation (which shall include any
amendments thereto and shall be hereinafter referred to as so amended as the
"Certificate of Incorporation") or these By-laws, a waiver thereof, in writing
and delivered to the Corporation, signed by the person or persons entitled to
said notice, whether before or after the event as to which such notice is
required, shall be deemed equivalent to notice. Attendance of a stockholder at a
meeting shall constitute a waiver of notice (a) of such meeting, except when the
stockholder objects at the beginning of the meeting to holding the meeting or
transacting business at the meeting, and (b) (if it is a special meeting) of
consideration of a particular matter at the meeting that is not within the
purpose or purposes described in the meeting notice, except when the stockholder
objects at the beginning of the meeting or at the time the matter is first
discussed to considering the matter at the meeting.
2.6 BUSINESS AT SPECIAL MEETINGS.
----------------------------
Business transacted at any special meeting of stockholders shall be limited
to the purposes stated in the notice (except to the extent that such notice is
waived or is not required as provided in the Delaware General Corporation Law or
these By-laws).
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2.7 LIST OF STOCKHOLDERS.
--------------------
At least ten days before every meeting of stockholders, the officer who has
charge of the stock ledger of the Corporation shall make a list of all
stockholders entitled to vote at the meeting, arranged in alphabetical order and
showing the address of each stockholder. Such list shall be open to the
examination of any stockholder for any purpose germane to the meeting, during
ordinary business hours, for a period of at least ten days prior to the meeting,
either at a place in the city where the meeting is to be held, which place is to
be specified in the notice of the meeting, or, if not so specified, at the place
where the meeting is to be held. Such list shall also, or the duration of the
meeting, be produced and kept open to the examination of any stockholder who is
present at the time and place of the meeting.
2.8 QUORUM AT MEETINGS.
------------------
Stockholders may take action on a matter at a meeting only if a quorum
exists with respect to that matter. Except as otherwise provided by statute or
by the Certificate of Incorporation, the holders of a majority of the shares
entitled to vote at the meeting, and who are present in person or represented by
proxy, shall constitute a quorum at all meetings of the stockholders for the
transaction of business. Where a separate vote by a class or classes is
required, the holders of a majority of the outstanding shares of such class or
classes, who are present in person or represented by proxy, shall constitute a
quorum entitled to take action on that matter. Once a share is represented for
any purpose at a meeting (other than solely to object (a) to holding the meeting
or transacting business at the meeting, or (b) (if it is a special meeting) to
consideration of a particular matter at the meeting that is not within the
purpose or purposes described in the meeting notice), it is deemed present for
quorum purposes for the remainder of the meeting and for any adjournment of that
meeting unless a new record date is or must be set for the adjourned meeting.
The holders of a majority of the voting shares represented at a meeting, whether
or not a quorum is present, may adjourn such meeting from time to time.
2.9 VOTING AND PROXIES.
------------------
Unless otherwise provided in the Delaware General Corporation Law or in the
Certificate of Incorporation, and subject to the other provisions of these By-
laws, each stockholder shall be entitled to one vote on each matter, in person
or by proxy, for each share of the Corporation's capital stock that has voting
power and that is held by such stockholder. No proxy shall be voted or acted
upon after three years from its date, unless the proxy provides for a longer
period. A duly executed appointment of proxy shall be irrevocable if the
appointment of proxy shall be irrevocable if the appointment form states that it
is
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irrevocable and if, and only as long as, it is coupled with an interest
sufficient in law to support an irrevocable power.
2.10 REQUIRED VOTE.
------------
When a quorum is present at any meeting of stockholders, all matters shall
be determined, adopted and approved by the affirmative vote (which need not be
by ballot) of the holders of a majority of the shares present in person or
represented by proxy at the meeting and entitled to vote with respect to the
matter, unless the proposed action is one upon which, by express provision of
the Delaware General Corporation Law, the Certificate of Incorporation or these
By-laws, a different vote is specified and required, in which case such express
provision shall govern and control the decision of such question. Where a
separate vote by a class or classes is required, the affirmative vote of the
holders of a majority of the shares of such class or classes present in person
or represented by proxy at the meeting shall be the act of such class, unless
the proposed action is one upon which, by express provision of the Delaware
General Corporation Law, the Certificate of Incorporation or these By-laws, a
different vote is specified and required, in which case such express provision
shall govern and control the decision of such question. Notwithstanding the
foregoing, directors shall be elected by a plurality of the votes of the shares
present in person or represented by proxy at the meeting and entitled to vote on
the election of directors.
2.11 ACTION WITHOUT A MEETING.
------------------------
Any action required or permitted to be taken by the stockholders of the
Corporation must be effected at a duly called annual or special meeting of such
stockholders and may not be effected by any consent in writing by such
stockholders, unless such consent is unanimous.
2.12 BUSINESS AT ANNUAL MEETING.
--------------------------
At an annual meeting of the stockholders, only such business shall be
conducted as shall have been properly brought before the meeting. To be properly
brought before an annual meeting, business must be (a) specified in the notice
of meeting (or any supplement thereto) given by or at the direction of the Board
of Directors, (b) otherwise properly brought before the meeting by or at the
direction of the Board of Directors, or (c) otherwise properly brought before
the meeting by a stockholder. For business to be properly brought before an
annual meeting by a stockholder, a stockholder must have given timely notice
thereof in writing to the Secretary of the Corporation.
To be timely, a stockholder's notice must be delivered to or mailed and
received at the principal executive offices of the Corporation not less than
sixty days prior to the meeting;
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<PAGE>
provided, however, that in the event that less than seventy-five days' notice
or prior public disclosure of the date of the meeting is given or made to
stockholders, notice by the stockholder to be timely must be so received not
later than the close of business on the fifteenth day following the day on which
such notice of the date of the annual meeting was mailed or such public
disclosure was made. A stockholder's notice to the Secretary shall set forth as
to each matter the stockholder proposes to bring before the annual meeting (a) a
brief description of the business desired to be brought before the annual
meeting and the reasons for conducting such business at the annual meeting, (b)
the name and address, as they appear on the Corporation's books, of the
stockholder proposing such business, (c) the class and number of shares of the
Corporation's capital stock which are beneficially owned by the stockholder, and
(d) any material interest of the stockholder in such business. No later than the
tenth day following the date of receipt of a stockholder notice pursuant to this
Section 2.12, the Chairman of the Board or the Secretary of the Corporation
shall, if the facts warrant, determine and notify in writing the stockholder
submitting such notice that such notice was not made in accordance with the time
limits and/or other procedures prescribed by these By-laws. If no such
notification is mailed to such stockholder within such ten-day period, such
stockholder notice containing a matter of business shall be deemed to have been
made in accordance with the provisions of this Section 2.12. Notwithstanding
anything in these By-laws to the contrary, no business shall be conducted at an
annual meeting except in accordance with the procedures set forth in this
Section 2.12.
ARTICLE 3
DIRECTORS
3.1 POWERS.
------
The business and affairs of the Corporation shall be managed by or under
the direction of the Board of Directors, which may exercise all such powers of
the Corporation and do all such lawful acts and things, subject to any
limitation set forth in the Certificate of Incorporation or as otherwise may be
provided in the Delaware General Corporation Law. The Board of Directors shall
annually elect a Chairman of the Board from among its members and shall
designate, when present, the Chairman of the Board, the Chief Executive Officer
or the President to preside at its meetings. If none of the Chairman of the
Board, the Chief Executive Officer or the President is present, the Board of
Directors may designate another officer to preside at such meeting. Any one or
more of the Chairman of the Board, the Chief Executive Officer and the President
may be the same person. The Board of Directors may also annually elect one or
more Vice Chairmen from among its members, with such duties as the Board of
Directors shall from time to time prescribe.
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3.2 NUMBER, CLASSES, ELECTION AND TERM OF OFFICE.
--------------------------------------------
As of the closing of the Corporation's initial public offering of equity
securities under the Securities Act of 1933, as amended, the total number of
directors which shall constitute the entire Board of Directors shall be seven.
The term "entire Board of Directors" as used herein shall mean the total number
of directors constituting the entire Board of Directors irrespective of the
number of directors then in office or vacancies. Thereafter, the total number
of directors constituting the entire Board of Directors shall be determined by
resolution of the Board of Directors passed by the affirmative vote of at least
two-thirds of the directors then in office, provided that such number shall be
consistent with the minimum and maximum numbers of directors set forth in the
Certificate of Incorporation. The Board of Directors shall be divided into
three classes, each class consisting of approximately one-third of the total
number of directors, as provided in the Certificate of Incorporation. At the
1998 annual meeting of stockholders and at each subsequent annual meeting of
stockholders, directors elected to succeed those whose terms are expiring shall
be elected for a term of office to expire at the third succeeding annual meeting
of stockholders and when their respective successors are duly elected and
qualified. Directors shall be elected at annual meetings of the stockholders,
except as provided in Section 3.3 hereof, and each director elected shall hold
office until his successor is elected and qualified or until his earlier death,
resignation or removal. Directors need not be stockholders.
3.3 VACANCIES.
----------
Vacancies, and newly created directorships resulting from any increase in
the authorized number of any class of directors which in each case are elected
at an annual meeting of the stockholders by every class of stockholders having
the right to vote as a single class, may be filled by a majority of the
directors then in office, although fewer than a quorum, or by a sole remaining
director. Whenever the holders of any class or classes of capital stock or
series thereof are entitled to elect one or more directors by the provisions of
the Certificate of Incorporation, vacancies and newly created directorships of
such class or classes or series may be filled by a majority of the directors
elected by such class or classes or series thereof then in office, or by the
sole remaining director so elected. Each director so chosen shall hold office
until the next election of the class for which such director shall have been
chosen, and until such director's successor is elected and qualified, or until
the director's earlier death, resignation or removal. In the event that one or
more directors resigns from the Board of Directors, effective at a future date,
a majority of the directors then in office, including those who have so
resigned, shall have power to fill such vacancy or vacancies, the vote thereon
to take effect
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<PAGE>
when such resignation or resignations shall become effective, and each director
so chosen shall hold office until the next election of the class for which such
director shall have been chosen, and until such director's successor is elected
and qualified, or until the director's earlier death, resignation or removal.
3.4 MEETINGS.
3.4.1 Regular Meetings. Regular meetings of the Board of Directors
may be held without notice at such time and at such place as shall from time to
time be determined by the Board of directors.
3.4.2 Special Meetings. Special meetings of the Board of Directors
may be called by the Chairman of the Board, the Chief Executive Officer or the
President on one day's notice to each director, either personally or by
telephone, express delivery service (so that the scheduled delivery date of the
notice is at least one day in advance of the meeting), telegram or facsimile
transmission, and on five days' notice by mail (effective upon deposit of such
notice in the mail). The notice need not describe the purpose of a special
meeting.
3.4.3 Telephone Meetings. Members of the Board of Directors may
participate in a meeting of the Board of Directors by any communication by means
of which all participating directors can simultaneously hear each other during
the meeting. A director participating in a meeting by this means is deemed to be
present in person at the meeting.
3.4.4 Action Without Meeting. Any action required or permitted to be
taken at any meeting of the Board of Directors may be taken without a meeting if
the action is taken by all members of the Board. The action must be evidenced by
one or more written consents describing the action taken, signed by each
director, and delivered to the Corporation for inclusion in the minute book.
3.4.5 Waiver of Notice of Meeting. A director may waive any notice
required by statute, the Certificate of Incorporation or these By-laws before or
after the date and time stated in the notice. Except as set forth below, the
waiver must be in writing, signed by the director entitled to the notice, and
delivered to the Corporation for inclusion in the minute book. Notwithstanding
the foregoing, a director's attendance at or participation in a meeting waives
any required notice to the director of the meeting unless the director at the
beginning of the meeting objects to holding the meeting or transacting business
at the meeting and does not thereafter vote for or assent to action taken at the
meeting.
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<PAGE>
3.5 QUORUM AND VOTE AT MEETINGS.
At all meetings of the Board, a quorum of the Board of Directors consists
of the presence of a majority of the total number of directors constituting the
entire Board of Directors. The affirmative vote of a majority of the directors
present at any meeting at which there is a quorum shall be the act of the Board
of Directors, except as may be otherwise specifically provided by statute, the
Certificate of Incorporation or these By-laws.
3.6 COMMITTEES OF DIRECTORS.
The Board of Directors may by resolution designate one or more committees,
each committee to consist of one or more of the directors of the Corporation.
The Board may designate one or more directors as alternate members of any
committee, who may replace any absent or disqualified member at any meeting of
the committee. If a member of a committee shall be absent from any meeting, or
disqualified from voting thereat, the remaining member or members present and
not disqualified from voting, whether or not such member or members constitute a
quorum, may, by unanimous vote, appoint another member of the Board of Directors
to act at the meeting in the place of such absent or disqualified member. Any
such committee, to the extent provided in the resolution of the Board of
Directors, shall have and may exercise all the powers and authority of the Board
of Directors in the management of the business and affairs of the Corporation,
and may authorize the seal of the Corporation to be affixed to all papers which
may require it; but no such committee shall have the power or authority in
reference to amending the Certificate of Incorporation (except that a committee
may, to the extent authorized in the resolution or resolutions providing for the
issuance of shares of capital stock adopted by the Board of Directors pursuant
to Section 151(a) of the Delaware General Corporation Law, fix the designations
and any of the preferences or rights of such shares relating to dividends,
redemption, dissolution, any distribution of assets of the Corporation or the
conversion into, or the exchange of such shares for, shares of any other class
or classes or any other series of the same or any other class or classes of
capital stock of the Corporation or fix the number of shares of any series of
capital stock or authorize the increase or decrease of any shares of any
series), adopting an agreement of merger or consolidation pursuant to Sections
251, 252, 257, 258, 263 or 264 of the Delaware General Corporation Law,
recommending to the stockholders the sale, lease or exchange of all or
substantially all of the Corporation's property and assets, recommending to the
stockholders a dissolution of the Corporation or a revocation of a dissolution,
or amending these By-laws; and unless the resolution or resolutions, these By-
laws or the Certificate of Incorporation expressly so provide, no such committee
shall have the power or authority to declare a dividend, to authorize the
issuance of capital stock, or to adopt a certificate of ownership and merger
pursuant to Section 253 of the Delaware
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<PAGE>
General Corporation Law. Such committee or committees shall have such name or
names as may be determined from time to time by resolution adopted by the Board
of Directors. Unless otherwise specified in the resolution of the Board of
Directors designating the committee, at all meetings of each such committee of
directors, a majority of the members of the committee shall constitute a quorum
for the transaction of business, and the affirmative vote of a majority of the
members of the committee present at any meeting at which there is a quorum shall
be the act of the committee. Each committee shall keep regular minutes of its
meetings and report the same to the Board of Directors, when required.
3.7 COMPENSATION OF DIRECTORS.
The Board of Directors shall have the authority to fix the compensation of
directors. No such payment shall preclude any director from serving the
Corporation in any other capacity and receiving compensation therefor.
3.8 NOMINEES.
Only persons who are nominated in accordance with the procedures set forth
in this Section 3.8 shall be eligible for election as directors. Nominations of
persons for election to the Board of Directors of the Corporation may be made at
a meeting of stockholders by or at the direction of the Board of Directors or by
any stockholder of the Corporation entitled to vote for the election of
directors at the meeting who complies with notice procedures set forth in this
Section 3.8. Such nominations, other than those made by or at the direction of
the Board of Directors, shall be made pursuant to timely notice in writing to
the Secretary of the Corporation. To be timely, a stockholder notice shall be
delivered to or mailed and received at the principal executive office of the
Corporation not less than sixty days prior to the meeting; provided, however,
that in the event that less than seventy-five days' notice or prior public
disclosure of the date of the meeting is given or made to stockholders, notice
by the stockholder to be timely must be so received not later than the close of
business on the fifteenth day following the day on which such notice of the date
of the meeting was mailed or such public disclosure was made. Such stockholder's
notice shall set forth (a) as to each person whom the stockholder proposes to
nominate for election or re-election as a director, (i) the name, age, business
address, and residence address of such person, (ii) the principal occupation or
employment of such person, (iii) the class and number of shares of the
Corporation's capital stock which are beneficially owned by such person, and
(iv) any other information relating to such person that is required to be
disclosed in solicitations of proxies for election of directors, or is otherwise
required in each case pursuant to Regulation 14A under the Securities Exchange
Act of 1934, as amended (including, without limitation, such person's written
consent to be named in the proxy statement as a nominee and
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to serving as a director if elected), and (b) as to the stockholder giving the
notice, (i) the name and address, as they appear on the Corporation's books, of
such stockholder, and (ii) the class and number of shares of the Corporation's
capital stock which are beneficially owned by such stockholder. At the request
of the Board of Directors, any person nominated by the Board of Directors for
election as a director shall furnish to the Secretary of the Corporation that
information required to be set forth in the stockholder's notice of nomination
which pertains to the nominee. No later than the tenth day following the date of
receipt of a stockholder nomination submitted pursuant to this Section 3.8, the
Chairman of the Board or the Secretary of the Corporation shall, if the facts
warrant, determine and notify in writing the stockholder making such nomination
that such nomination was not made in accordance with the time limits and/or
other procedures described by these By-laws. If no such notification is mailed
to such stockholder within such ten-day period, such nomination shall be deemed
to have been made in accordance with the provisions of this Section 3.8. No
person shall be eligible for election as a director of the Corporation unless
nominated in accordance with the procedures set forth in this Section 3.8.
ARTICLE 4
OFFICERS
4.1 POSITIONS.
The officers of the Corporation shall be a Chairman of the Board, a Chief
Executive Officer, a President, a Chief Financial Officer and a Secretary, and
such other officers as the Board of Directors from time to time may appoint,
including one or more Vice Chairmen, a Chief Operating Officer, Executive Vice
Presidents, a General Counsel, Senior Vice Presidents, Vice Presidents, a
General Counsel, Senior Vice Presidents, Vice Presidents, a Controller,
Assistant Secretaries and Assistant Controllers. Each such officer shall
exercise such powers and perform such duties as shall be set forth below and
such other powers and duties as from time to time may be specified by the Board
of Directors or by an officer(s) authorized by these By-laws or the Board of
Directors to prescribe the duties of such other officers. Any number of offices
may be held by the same person, except that in no event shall the President and
the Secretary be the same person. Each of the Chairman of the Board, the Chief
Executive Officer, the President, the Chief Financial Officer, the Chief
Operating Officer, and/or any Executive Vice President or Senior Vice President
may execute bonds, mortgages and other documents under the seal of the
Corporation, except where required or permitted by law to be otherwise executed
and except where the authorization therefor shall be expressly delegated by the
Board of Directors to some other officer or agent of the Corporation.
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4.2 CHAIRMAN OF THE BOARD.
The Chairman of the Board shall supervise and direct the Chief Executive
Officer and the President, subject to the control of the Board of Directors. The
Chairman of the Board shall preside at all meetings of the stockholders and of
the Board of Directors. The Chairman of the Board may sign, with the Secretary
or any other officer of the Corporation authorized by the Board of Directors,
certificates for shares of the Corporation, and deeds, mortgages, bonds,
contracts, or other instruments which the Board of Directors has authorized to
be executed, except in cases where the signing and execution thereof shall be
expressly delegated by the Board of Directors or by these By-laws to some other
officer or agent of the Corporation, or shall be required by law to be otherwise
signed or executed; and, in general, shall perform all duties incident to the
office of a chairman of the board of a corporation, including those duties
customarily performed by persons occupying such office, and shall perform such
other duties as, from time to time, may be assigned to him or her by the Board
of Directors.
4.3 CHIEF EXECUTIVE OFFICER.
The Chief Executive Officer shall be the principal executive officer of the
Corporation and, subject to the control of the Board of Directors, shall in
general supervise the business and affairs of the Corporation. The Chief
Executive Officer shall report directly to the Chairman of the Board. The Chief
Executive Officer shall, in the absence of the Chairman of the Board, preside at
all meetings of the stockholders and of the Board of Directors. The Chief
Executive Officer may sign, with the Secretary or any other officer of the
Corporation authorized by the Board of Directors, certificates for shares of the
Corporation and deeds, mortgages, bonds, contracts, or other instruments which
the Board of Directors has authorized to be executed, except in cases where the
signing and execution thereof shall be expressly delegated by the Board of
Directors or by these By-laws to some other officer or agent of the Corporation,
or shall be required by law to be otherwise signed or executed; and, in general,
shall perform all duties incident to the office of a chief executive officer of
a corporation, including those duties customarily performed by persons occupying
such office, and shall perform such other duties as, from time to time, may be
assigned to him or her by the Board of Directors or the Chairman of the Board.
4.4 PRESIDENT.
The President shall, with the Chief Executive Officer of the Corporation
and subject to the control of the Board of Directors, in general supervise the
business operations of the Corporation. The President shall report directly to
the Chairman of the Board or, if so directed by the Board of Directors or the
Chairman of the Board, the Chief Executive Officer. The President shall, in the
absence of the Chairman of the Board and the Chief Executive Officer, preside at
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all meetings of the stockholders and of the Board of Directors. In the absence
of the Chief Executive Officer or in the event of a failure or refusal to act of
the Chief Executive Officer, the President shall perform the duties of the Chief
Executive Officer, and when so acting shall have all the powers of, and be
subject to all the restrictions upon, the Chief Executive Officer. The President
may sign, with the Secretary or any other officer of the Corporation authorized
by the Board of Directors, certificates for shares of the Corporation and deeds,
mortgages, bonds, contracts, or other instruments which the Board of Directors
has authorized to be executed, except in cases where the signing and execution
thereof shall be expressly delegated by the Board of Directors or by these By-
laws to some other officer or agent of the Corporation, or shall be required by
law to be otherwise signed or executed; and, in general, shall perform all
duties incident to the office of a president of a corporation, including those
duties customarily performed by persons occupying such office, and shall perform
such other duties as, from time to time, may be assigned to him or her by the
Board of Directors.
4.5 CHIEF FINANCIAL OFFICER.
The Chief Financial Officer of the Corporation, subject to the direction of
the Chief Executive Officer and the President, shall have general charge and
supervision of the financial affairs of the Corporation, including budgetary,
accounting and statistical methods, and shall approve payment, or designate
others serving under him to approve for payment, of all vouchers and warrants
for disbursements of funds, and, in general, shall perform such other duties as
are incident to the office of a chief financial officer of a corporation,
including those duties customarily performed by persons occupying such office,
and shall perform such other duties as, from time to time, may be assigned to
him or her by the Board of Directors, the Chief Executive Officer or the
President.
4.6 CHIEF OPERATING OFFICER.
The Chief Operating Officer of the Corporation shall have general charge
and supervision of the day-to-day operations of the Corporation, subject to the
direction of the Chief Executive Officer and the President and the authority of
the Board of Directors, and, in general, shall perform such other duties as are
incident to the office of a chief operating officer of a corporation, including
those duties customarily performed by persons occupying such office, and shall
perform such other duties as, from time to time, may be assigned to him or her
by the Board of Directors, the Chief Executive Officer or the President.
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4.7 GENERAL COUNSEL.
The General Counsel of the Corporation shall be responsible for supervising
the legal affairs of the Corporation, and, in general, shall perform such other
duties as are incident to the office of a general counsel of a corporation,
including those duties customarily performed by persons occupying such office,
and shall perform such other duties as, from time to time, may be assigned to
him or her by the Board of Directors, the Chief Executive Officer or the
President.
4.8 VICE PRESIDENT.
In the absence of the Chief Executive Officer and the President or in the
event of a failure or refusal to act of the Chief Executive Officer and the
President, the Vice President (or, in the event there be more than one Vice
President, the Vice Presidents in the order designated (e.g., first, the
Executive Vice Presidents in the order of their seniority, second, the Senior
Vice Presidents in the order of their seniority, and, third, the Vice Presidents
in the order of their seniority)) shall perform the duties of the Chief
Executive Officer and the President, and when so acting shall have all the
powers of, and be subject to all the restrictions upon, the Chief Executive
Officer and the President. The Vice President of Vice Presidents, in general,
shall perform such other duties as are incident to the office of a vice
president of a corporation, including those duties customarily performed by
persons occupying such office, and shall perform such other duties as, from time
to time, may be assigned to him or her or them by the Board of Directors, the
Chief Executive Officer or the President. The Board of Directors may designate
one or more Vice Presidents as Executive Vice Presidents or Senior Vice
Presidents.
4.9 SECRETARY.
The Secretary, or an Assistant Secretary, shall attend all meetings of the
Board of Directors and all meetings of the stockholders, and shall record all
the proceedings of the meetings of the stockholders and of the Board of
Directors in a book to be kept for that purpose, and shall perform like duties
for the standing committees, when required. The Secretary shall (a) keep the
minutes of the proceedings of the stockholders and of the Board of Directors in
one or more books provided for that purpose, (b) see that all notices are duly
given in accordance with the provisions of these By-laws or as required by law,
(c) be custodian of the corporate records and the seal of the Corporation and
see that such seal is affixed to all documents the execution of which on behalf
of the Corporation under its seal is duly authorized, (d) when requested or
required, authenticate any records of the Corporation, (e) keep a register of
the post office address of each stockholder which shall be furnished to the
secretary by such stockholder, (f) sign with the Chairman of the Board, the
Chief Executive Officer, the President or a Vice-President certificates for
shares of the Corporation, the issuance of which shall have
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been authorized by resolution of the Board of Directors, (g) have general charge
of the stock transfer books of the Corporation, and (h) in general perform all
duties incident to the office of a secretary of a corporation, including those
duties customarily performed by persons holding such office, and shall perform
such other duties as, from time to time, may be assigned to him or her by the
Board of Directors, the Chief Executive Officer or the President.
4.10 ASSISTANT SECRETARY.
The Assistant Secretary, or if there be more than one, the Assistant
Secretaries in the order determined by the Board of Directors (or if there shall
have been no such determination, then in the order of their election) shall, in
the absence of the Secretary or in the event of the Secretary's inability or
refusal to act or when requested by the Chairman of the Board, the Chief
Executive Officer, the President, the Chief Financial Officer, the Chief
Operating Officer, any Executive Vice President or the Secretary, perform the
duties and exercise the powers of the Secretary, and, in general, shall perform
all duties as are incident to the office of an assistant secretary of a
corporation, including those duties customarily performed by persons holding
such office, and shall perform such other duties as, from time to time, may be
assigned to him or her or them by the Board of Directors, the Chief Executive
Officer, the President, the Chief Financial Officer, the Chief Operating
Officer, any Executive Vice President or the Secretary. An Assistant Secretary
may not be an officer, as determined by the Board of Directors.
4.11 CONTROLLER.
The Controller shall have responsibility for the custody of the corporate
funds and securities and shall keep full and accurate accounts of receipts and
disbursements in books belonging to the Corporation, and shall deposit all
moneys and other valuable effects in the name and to the credit of the
Corporation in such depositories as may be designated by the Board of Directors,
the Chief Executive Officer or the President. The Controller shall also render
to the Chief Executive Officer, the President, the Chief Financial Officer and
the Chief Operating Officer, upon request, and to the Board of Directors, at its
regular meetings, or when the Board of Directors so requires, an account of all
financial transactions and of the financial condition of the Corporation and, in
general, shall perform such duties as are incident to the office of a controller
of a corporation, including those customarily performed by persons occupying
such office, and shall perform all other duties as, from time to time, may be
assigned to him or her by the Board of Directors, the Chief Executive Officer,
the President, the Chief Financial Officer, the Chief Operating Officer or any
Executive Vice President.
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4.12 ASSISTANT CONTROLLER.
The Assistant Controller, or if there shall be more than one, the Assistant
Controllers in the order determined by the Board of Directors (or if there shall
have been no such determination, then in the order of their election), shall, in
the absence of the Controller or in the event of the Controller's inability or
refusal to act, perform the duties and exercise the powers of the Controller,
and, in general, shall perform all duties as are incident to the office of an
assistant controller of a corporation, including those duties customarily
performed by persons occupying such office, and shall perform such other duties
as, from time to time, may be assigned to him or her or them by the Board of
Directors, the Chief Executive Officer, the President, the Chief Financial
Officer, the Chief Operating Officer, any Executive Vice President or the
Controller. An Assistant Controller may or may not be an officer, as determined
by the Board of Directors.
4.13 TERM OF OFFICE.
The officers of the Corporation shall hold office until their successors
are chosen and qualified or until their earlier death, resignation or removal.
Any officer may resign at any time upon written notice to the Corporation. Any
officer elected or appointed by the Board of Directors may be removed at any
time, with or without cause, by the affirmative vote of a majority of the entire
Board of Directors.
4.14 COMPENSATION.
The compensation of officers of the Corporation shall be fixed by the Board
of Directors or by any officer(s) authorized by the Board of Directors to
prescribe the compensation of such other officers.
4.15 FIDELITY BONDS.
The Corporation may secure the fidelity of any or all of its officers or
agents by bond or otherwise.
ARTICLE 5
CAPITAL STOCK
5.1 CERTIFICATES OF STOCK; UNCERTIFICATED SHARES.
The shares of the Corporation shall be represented by certificates,
provided that the Board of Directors may provide by resolution that some or all
of any or all classes or series of the Corporation's capital stock shall be
uncertificated shares. Any such resolution shall not apply to shares represented
by a certificate until such certificate is surrendered to the Corporation.
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Notwithstanding the adoption of such a resolution by the Board of Directors,
every holder of capital stock represented by certificates, and upon request
every holder of uncertificated shares, shall be entitled to have a certificate
(representing the number of shares registered in certificate form) signed in the
name of the Corporation by the Chairman of the Board, the Chief Executive
Officer, the President and the Secretary of the Corporation. Any or all the
signatures on the certificate may be by facsimile. In case any officer, transfer
agent or registrar whose signature or facsimile signature appears on a
certificate shall have ceased to be such officer, transfer agent or registrar
before such certificate is issued, it may be issued by the Corporation with the
same effect as if such person were such officer, transfer agent or registrar at
the date of issue.
5.2 LOST CERTIFICATES.
The Board of Directors, the Chairman of the Board, the Chief Executive
Officer, the President, the Chief Financial Officer or the Secretary may direct
a new certificate of stock to be issued in place of any certificate theretofore
issued by the Corporation and alleged to have been lost, stolen or destroyed,
upon the making of an affidavit of that fact by the person claiming that the
certificate of stock has been lost, stolen or destroyed. When authorizing such
issuance of a new certificate, the Board of Directors or any such officer may,
as a condition precedent to the issuance thereof, require the owner of such
lost, stolen or destroyed certificate or certificates, or such owner's legal
representative, to advertise the same in such manner as the Board of Directors
or such officer shall require and/or to give the Corporation a bond or
indemnity, in such sum or on such terms and conditions as the Board of Directors
or such officer may direct, as indemnity against any claim that may be made
against the Corporation on account of the certificate alleged to have been lost,
stolen or destroyed or on account of the issuance of such new certificate or
uncertificated shares.
5.3 RECORD DATE.
5.3.1 Actions by Stockholders. In order that the Corporation may
determine the stockholders entitled to notice of or to vote at any meeting of
stockholders, the Board of Directors may fix a record date, which record date
shall not precede the date upon which the resolution fixing the record date is
adopted by the Board of Directors, and which record date shall not be more than
sixty days nor less than ten days before the date of such meeting. If no record
date is fixed by the Board of Directors, the record date for determining
stockholders entitled to notice of or to vote at a meeting of stockholders shall
be the close of business on the day next preceding the day on which notice is
given, or, if notice is waived, at the close of business on the day next
preceding the
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day on which the meeting is held. A determination of stockholders of record
entitled to notice of or to vote at a meeting of stockholders shall apply to any
adjournment of the meeting, unless the Board of Directors fixes a new record
date for the adjourned meeting.
In order that the Corporation may determine the stockholders entitled
to consent to corporate action in writing without a meeting, the Board of
Directors may fix a record date, which record date shall not precede the date
upon which the resolution fixing the record date is adopted by the Board of
Directors, and which record date shall not be more than ten days after the date
upon which the resolution fixing the record date is adopted by the Board of
Directors. If no record date has been fixed by the Board of Directors, the
record date for determining stockholders entitled to consent to corporate action
in writing without a meeting, when no prior action by the Board of Directors is
required by the Delaware General Corporation Law shall be the first date on
which a signed written consent setting forth the action taken or proposed to be
taken is delivered to the Corporation in the manner prescribed by Section 213(b)
of the Delaware General Corporation Law. If no record date has been fixed by the
Board of Directors and prior action by the Board of Directors is required by the
Delaware General Corporation Law, the record date for determining stockholders
entitled to consent to corporate action in writing without a meeting shall be at
the close of business on the day on which the Board of Directors adopts the
resolution taking such prior action.
5.3.2 Payments. In order that the Corporation may determine the
stockholders entitled to receive payment of any dividend or other distribution
or allotment of any rights or the stockholders entitled to exercise any rights
in respect of any change, conversion or exchange of capital stock, or for the
purpose of any other lawful action, the Board of Directors may fix a record
date, which record date shall not precede the date upon which the resolution
fixing the record date is adopted, and which record date shall be not more than
sixty days prior to such payment, distribution, allotment or other action. If no
record date is fixed, the record date for determining stockholders for any such
purpose shall be at the close of business on the day on which the Board of
Directors adopts the resolution relating thereto.
5.4 STOCKHOLDERS OF RECORD.
The Corporation shall be entitled to recognize the exclusive right of a
person registered on its books as the owner of shares to receive dividends, to
receive notifications, to vote as such owner, and to exercise all the rights and
powers of an owner. The Corporation shall not be bound to recognize any
equitable or other claim to or interest in such share or shares on the part of
any other person, whether or not it shall have express or other
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notice thereof, except as otherwise may be provided by the Delaware General
Corporation Law.
ARTICLE 6
INDEMNIFICATION
6.1 AUTHORIZATION OF INDEMNIFICATION
--------------------------------
Each person who was or is a party or is threatened to be made a party to or
is involved in any threatened, pending or completed action, suit or proceeding,
whether civil, criminal, administrative or investigative and whether by or in
the right of the Corporation or otherwise (a "proceeding"), by reason of the
fact that he or she, or a person of whom he or she is the legal representative,
is or was a director or officer of the Corporation or is or was serving at the
request of the Corporation as a director, officer, employee, partner (limited or
general) or agent of another corporation or of a partnership, joint venture,
limited liability company, trust or other enterprise, including service with
respect to an employee benefit plan, shall be (and shall be deemed to have a
contractual right to be) indemnified and held harmless by the Corporation (and
any successor to the Corporation by merger or otherwise) to the fullest extent
authorized by, and subject to the conditions and (except as provided herein)
procedures set forth in, the Delaware General Corporation Law, as the same
exists or may hereafter be amended (but any such amendment shall not be deemed
to limit or prohibit the rights of indemnification hereunder for past acts or
omissions of any such person insofar as such amendment limits or prohibits the
indemnification rights that said law permitted the Corporation to provide prior
to such amendment), against all expenses, liabilities and losses (including
attorneys' fees, judgments, fines, ERISA taxes or penalties and amounts paid or
to be paid in settlement) reasonably incurred or suffered by such person in
connection therewith; provided, however, that the Corporation shall indemnify
any such person seeking indemnification in connection with a proceeding (or part
thereof) initiated by such person (except for a suit or action pursuant to
Section 6.2 hereof) only if such proceeding (or part thereof) was authorized by
the Board of Directors of the Corporation. Persons who are not directors or
officers of the Corporation may be similarly indemnified in respect of such
service to the extent authorized at any time by the board of directors of the
Corporation. The indemnification conferred in this Section 6.1 also shall
include the right to be paid by the Corporation (and such successor) the
expenses (including attorneys' fees) incurred in the defense of or other
involvement in any such proceeding in advance of its final disposition;
provided, however, that, if and to the extent the Delaware General Corporation
Law requires, the payment of such expenses (including attorneys' fees) incurred
by a director or officer in advance of the final disposition of a proceeding
shall be made only upon delivery to the Corporation of an undertaking by or on
behalf of such director or
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officer to repay all amounts so paid in advance if it shall ultimately be
determined that such director or officer is not entitled to be indemnified under
this Section 6.1 or otherwise; and provided further, that, such expenses
incurred by other employees and agents may be so paid in advance upon such terms
and conditions, if any, as the Board of Directors deems appropriate.
6.2 RIGHT OF CLAIMANT TO BRING ACTION AGAINST THE CORPORATION.
---------------------------------------------------------
If a claim under Section 6.1 hereof is not paid in full by the Corporation
within sixty days after a written claim has been received by the Corporation,
the claimant may at any time thereafter bring an action against the Corporation
to recover the unpaid amount of the claim and, if successful in whole or in
part, the claimant shall be entitled to be paid also the expense of prosecuting
such action. It shall be a defense to any such action (other than an action
brought to enforce a claim for expenses incurred in connection with any
proceeding in advance of its final disposition where the required undertaking,
if any is required, has been tendered to the Corporation) that the claimant has
not met the standards of conduct which make it permissible under the Delaware
General Corporation Law for the Corporation to indemnify the claimant for the
amount claimed or is otherwise not entitled to indemnification under Section
6.1, but the burden of providing such defense shall be on the Corporation. The
failure of the Corporation (in the manner provided under the Delaware General
Corporation Law) to have made a determination prior to or after the commencement
of such action that indemnification of the claimant is proper in the
circumstances because he or she has met the applicable standard of conduct set
forth in the Delaware General Corporation Law shall not be a defense to the
action or create a presumption that the claimant has not met the applicable
standard of conduct. Unless otherwise specified in an agreement with the
claimant, an actual determination by the Corporation (in the manner provided
under the Delaware General Corporation Law) after the commencement of such
action that the claimant has not met such applicable standard of conduct shall
not be a defense to the action, but shall create a presumption that the claimant
has not met the applicable standard of conduct.
6.3 NON-EXCLUSIVITY.
---------------
The rights to indemnification and advance payment of expenses provided by
Section 6.1 hereof shall not be deemed exclusive of any other rights to which
those seeking indemnification and advance payment of expenses may be entitled
under any by-law, agreement, vote of stockholders or disinterested directors or
otherwise, both as to action in his or her official capacity and as to action in
another capacity while holding such office.
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6.4 SURVIVAL OF INDEMNIFICATION.
The indemnification and advance payment of expenses and rights thereto
provided by, or granted pursuant to, Section 6.1 hereof shall, unless otherwise
provided when authorized or ratified, continue as to a person who has ceased to
be a director, officer, employee, partner or agent and shall inure to the
benefit of the personal representatives, heirs, executors and administrators of
such person.
6.5 INSURANCE.
The Corporation shall have power to purchase and maintain insurance on
behalf of any person who is or was a director, officer, employee or agent of the
Corporation, or is or was serving at the request of the Corporation as a
director, officer, employee, partner (limited or general) or agent of another
corporation or of a partnership, joint venture, limited liability company, trust
or other enterprise, against any liability asserted against such person or
incurred by such person in any such capacity, or arising out of such person's
status as such, and related expenses, whether or not the Corporation would have
the power to indemnify such person against such liability under the provisions
of the Delaware General Corporation Law.
ARTICLE 7
GENERAL PROVISIONS
7.1 INSPECTION OF BOOKS AND RECORDS.
Any stockholder, in person or by attorney or other agent, shall, upon
written demand under oath stating the purpose thereof, have the right during the
usual hours for business to inspect for any proper purpose the Corporation's
stock ledger, a list of its stockholders, and its other books and records, and
to make copies or extracts therefrom. A proper purpose shall mean a purpose
reasonably related to such person's interest as a stockholder. In every instance
where an attorney or other agent shall be the person who seeks the right to
inspection, the demand under oath shall be accompanied by a power of attorney or
such other writing which authorizes the attorney or other agent to so act on
behalf of the stockholder. The demand under oath shall be directed to the
Corporation at its registered office or at its principal place of business.
7.2 DIVIDENDS.
The Board of Directors may declare dividends upon the capital stock of the
Corporation, subject to the provisions of the Certificate of Incorporation and
the laws of the State of Delaware.
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7.3 RESERVES.
The directors of the Corporation may set apart, out of the funds of the
Corporation available for dividends, a reserve or reserves for any proper
purpose and may abolish any such reserve.
7.4 EXECUTION OF INSTRUMENTS.
All checks, drafts or other orders for the payment of money, and promissory
notes of the Corporation shall be signed by such officer or officers or such
other person or persons as the Board of Directors may from time to time
designate.
7.5 FISCAL YEAR.
The fiscal year of the Corporation shall be fixed by resolution of the
Board of Directors.
7.6 SEAL.
The corporate seal shall be in such form as the Board of Directors shall
approve. The seal may be used by causing it or a facsimile thereof to be
impressed or affixed or otherwise reproduced.
7.7 PRONOUNS.
As used herein, all pronouns and any variations thereof shall be deemed to
refer to the masculine, feminine, neuter, singular or plural, as the identity of
the person or entity may require.
7.8 AMENDMENTS.
The Board of Directors or the stockholders may from time to time adopt,
amend or repeal these By-laws of the Corporation. Such action by the Board of
Directors shall require the affirmative vote of at least two-thirds of the
directors then in office at a duly constituted meeting of the Board of Directors
called for such purpose. Such action by the stockholders shall require the
affirmative vote of the holders of at least two-thirds of the outstanding shares
of capital stock of the Corporation entitled to vote thereon at a duly
constituted meeting of stockholders called for such purpose.
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EXHIBIT 4.1
[LOGO OF C NUMBER] [LOGO OF SHARES]
[ LOGO OF BROOKDALE LIVING COMMUNITIES, INC.]
------------------------------------------
SEE REVERSE FOR CERTAIN DEFINITIONS
CUSIP 112462 10 6
INCORPORATED UNDER THE LAWS OF THE STATE OF DELAWARE
THIS CERTIFICATE IS TRANSFERABLE IN CHICAGO, ILLINOIS
COMMON STOCK
This Certifies that
is the owner of
FULLY PAID AND NON-ASSESSABLE SHARES OF COMMON STOCK, PAR VALUE $0.01 PER
SHARE, OF
BROOKDALE LIVING COMMUNITIES, INC.
transferable on the books of the Corporation by the holder hereof in person or
by duly authorized attorney upon the surrender of this Certificate properly
endorsed. This Certificate and the shares represented hereby are subject to the
laws of the State of Delaware and the provisions of the Restated Certificate of
Incorporation and Amended and Restated By-laws of the Corporation as from time
to time amended. This Certificate is not valid unless countersigned and
registered by the Transfer Agent and Registrar.
Witness the facsimile seal of the Corporation and the facsimile signatures
of its duly authorized officers.
CERTIFICATE OF STOCK
Dated:
/s/ Michael W. Reschke /s/ Craig G. Walczyk
CHAIRMAN OF THE BOARD VICE-PRESIDENT--CHIEF FINANCIAL
OFFICER AND SECRETARY
[SEAL OF BROOKDALE LIVING COMMUNITIES INC.]
COUNTERSIGNED AND REGISTERED:
LASALLE NATIONAL BANK
TRANSFER AGENT
AND REGISTRAR
/S/ Mark J. Schulte BY
PRESIDENT AND CHIEF EXECUTIVE OFFICER AUTHORIZED SIGNATURE
<PAGE>
BROOKDALE LIVING COMMUNITIES, INC.
The Corporation is authorized to issue more than one class of stock. The
Corporation shall furnish without charge to each stockholder who so requests a
statement of the powers, designations, preferences and relative, participating,
optional or other rights of each class of stock of the Corporation or series
thereof and the qualifications, limitations or restrictions thereon. Such
requests shall be made to the Corporation's Secretary at the principal executive
offices of the Corporation.
The following abbreviations, when used in the inscription on the face of
this Certificate, shall be construed as though they were written out in full
according to applicable laws or regulations:
TEN COM--as tenants in common
TEN ENT--as tenants by the entireties
JT TEN-- as joint tenants with right of
survivorship and not as tenants
in common
UNIF GIFT MIN ACT --........Custodian.........
(Cust) (Minor)
under Uniform Gifts to Minors Act..............................................
(State)
UNIF TRF MIN ACT -- ..................Custodian (until age.....................)
(Cust)
...................under Uniform Transfers to Minors Act........................
(Minor) (State)
Additional abbreviations may also be used though not in the above list.
ASSIGNMENT
FOR VALUE RECEIVED, hereby sell, assign and transfer unto
----------------------
PLEASE INSERT SOCIAL SECURITY OR OTHER
IDENTIFYING NUMBER OF ASSIGNEE
[ ]
- --------------------------------------------------------------------------------
(PLEASE PRINT OR TYPEWRITE NAME AND ADDRESS, INCLUDING ZIP CODE, OF ASSIGNEE)
- --------------------------------------------------------------------------------
- --------------------------------------------------------------------------------
- --------------------------------------------------------------------------Shares
of the common stock represented by the within Certificate, and do hereby
irrevocably constitute and appoint
- ------------------------------------------------------------------------Attorney
to transfer the said stock on the books of the within named Corporation with
full power of substitution in the premises.
Dated
-------------------------------
X
-------------------------------------
X
------------------------------------
NOTICE: THE SIGNATURE(S) TO THIS ASSIGNMENT
MUST CORRESPOND WITH THE NAME(S)
AS WRITTEN UPON THE FACE OF THE
CERTIFICATE IN EVERY PARTICULAR,
WITHOUT ALTERATION OR ENLARGEMENT
OR ANY CHANGE WHATEVER.
Signature(s) Guaranteed
By
---------------------------------------------------------------------------
THE SIGNATURE(S) SHOULD BE GUARANTEED BY AN ELIGIBLE GUARANTOR INSTITUTION
(BANKS, STOCKBROKERS, SAVINGS AND LOAN ASSOCIATIONS AND CREDIT UNIONS WITH
MEMBERSHIP IN AN APPROVED SIGNATURE GUARANTEE MEDALLION PROGRAM), PURSUANT TO
S.E.C. RULE 17Ad-15.
<PAGE>
EXHIBIT 10.3
FORM OF
REGISTRATION RIGHTS AGREEMENT
-----------------------------
This REGISTRATION RIGHTS AGREEMENT (this "Agreement"), dated
, 1997, is made and entered into by and among BROOKDALE LIVING
COMMUNITIES, INC., a Delaware corporation (the "Corporation"), THE PRIME GROUP,
INC., an Illinois corporation ("Prime"), and PRIME GROUP LIMITED PARTNERSHIP, an
Illinois limited partnership ("PGLP"). Prime, PHI and PGLP are sometimes
referred to herein individually as a "Holder" and collectively as the "Holders."
RECITALS
--------
WHEREAS, the Corporation has filed a Registration Statement on Form
S-1 with the Securities and Exchange Commission (the "Commission") in connection
with the IPO (as hereinafter defined);
WHEREAS, pursuant to the terms of that certain Formation Agreement
dated , 1997, the Corporation has issued an aggregate of 2,071,334
shares (the "Common Shares") of its Common Stock (as hereinafter defined) to the
Holders; and
WHEREAS, the Corporation and the Holders deem it desirable to enter
into this Agreement in connection with the Holders' acquisition of the Common
Shares.
AGREEMENTS
----------
NOW, THEREFORE, in consideration of the recitals and the mutual
promises and covenants herein contained and other good and valuable
consideration, the receipt and sufficiency of which are hereby acknowledged, the
parties hereto hereby agree as follows:
1. Definitions.
(a) Previously Defined Terms. Each capitalized term defined in the
first paragraph and Recitals hereof shall have the meaning set forth above
whenever used herein, unless otherwise expressly provided or unless the context
clearly requires otherwise.
(b) Additional Definitions. In addition to the terms defined in the
first paragraph and Recitals hereof, whenever used herein, the following terms
shall have the meanings set forth below
<PAGE>
unless otherwise expressly provided or unless the context clearly requires
otherwise:
"Affiliate" means, with respect to any Holder, any other Person that
(i) directly or indirectly, through one or more intermediaries, controls, or is
controlled by, or is under common control with, such Holder including, without
limitation, any subsidiary of such Holder or (ii) holds an equity interest (such
as a stock interest or a partnership interest) in such Holder or in a Person
described in clause (i) hereof. With respect to any other specified person
herein, "Affiliate" shall mean any other person that, directly or indirectly,
through one or more intermediaries, controls, or is controlled by, or under
common control with, such specified person.
"Common Stock" means the Common Stock, par value $0.01 per share, of
the Corporation.
"Demand Registrations" has the meaning given to such term in Section
2(a)(iii).
"IPO" means the Corporation's initial underwritten public offering of
shares of Common Stock consummated pursuant to a registration statement declared
effective under the Securities Act.
"Long-Form Demand Registration" has the meaning given to such term in
Section 2(a)(iii).
"Long-Form Registration" has the meaning given to such term in Section
2(a)(i).
"Person" means a natural person, a partnership, a corporation, an
association, a joint stock company, a trust, a joint venture, an unincorporated
organization or a governmental entity or any department, agency or political
subdivision thereof.
"Piggyback Registration" has the meaning given to such term in Section
3(a).
"Registrable Shares" means (i) the Common Shares; (ii) any shares of
Common Stock issued as, or where issued directly or indirectly upon the
conversion or exercise of or with respect to other securities issued as, a
dividend or other distribution with respect to or in exchange or in replacement
of the Common Shares; and (iii) any shares of Common Stock then issuable
directly or indirectly upon the conversion or exercise of or with respect to
other securities which were issued as a dividend or other distribution with
respect to or in exchange or in replacement of the Common Shares; provided,
however, that Registrable Shares shall not include any shares of Common Stock
the sale of which has been registered under the Securities Act pursuant to this
Agreement or sold to the public pursuant to Rule 144 promulgated by the
Commission under the Securities Act (except any sale, distribution or other
disposition by any Holder to any other Holder or an
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<PAGE>
Affiliate of such Holder or an Affiliate of such other Holder). For purposes of
this Agreement, a Person will be deemed to be a Holder of Registrable Shares
whenever such Person holds a security exercisable for or convertible into such
Registrable Shares, whether or not such exercise or conversion has actually been
effected.
"Registration Expenses" has the meaning given to such term in Section
6(a).
"Securities Act" means the Securities Act of 1933, as amended.
"Securities Exchange Act" means the Securities Exchange Act of 1934,
as amended.
"Short-Form Demand Registration" has the meaning given to such term in
Section 2(a)(iii).
"Short-Form Registration" has the meaning in Section 2(a)(ii).
2. Demand Registrations.
(a) Requests for Registration. (i) Subject to the terms and conditions
of this Agreement, one or more Holders of outstanding Registrable Shares at any
time may request registration under the Securities Act of all or part of its or
their Registrable Shares on Form S-1 or any similar long-form registration
statement (a "Long-Form Registration") by delivering a written request to the
Corporation to that effect; provided, however, that, in the case of any such
Long-Form Registration, the Holders requesting the Long Form Registration must
be requesting registration of not less than five percent (5%) of the total
Registrable Shares then outstanding.
(ii) Subject to the terms and conditions of this Agreement, one or
more Holders of any of the then outstanding Registrable Shares at any time may
request registration under the Securities Act of all or part of its or their
Registrable Shares on Form S-2 or S-3 or any similar short-form registration
statement (a "Short-Form Registration"), if available, by delivering a written
request to the Corporation to that effect.
(iii) If the Holders initiating a registration pursuant to Section
2(a) intend to distribute the Registrable Shares by means of any underwriting,
they shall so advise the Corporation in their written notice. Within ten (10)
days after receipt of any such written request, the Corporation will give
written notice of such request to all holders of all registrable securities of
the Corporation (including all other Holders of Registrable Shares), if any, and
will include, subject to the terms of Section 2(d), in any such registration
that constitutes a Demand Registration (as
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<PAGE>
hereinafter defined) all registrable securities with respect to which the
Corporation has received written requests for inclusion therein within fifteen
(15) days after the Corporation's notice has been given. Any Long-Form
Registration and Short-Form Registration requested pursuant to this Section
2(a), other than a registration in which the Corporation sells any of its
securities in a primary offering, are referred to herein, respectively, as a
"Long-Form Demand Registration" and a "Short-Form Demand Registration". All
Long-Form Demand Registrations and Short-Form Demand Registrations shall
collectively be referred to herein as "Demand Registrations". The Corporation
may elect to include its securities in a primary offering in any registration
requested pursuant to this Section 2(a), and such registrations requested
pursuant to this Section 2(a) in which the Corporation sells any of its
securities in a primary offering shall not be deemed to be Demand Registrations
and shall instead be considered Piggyback Registrations and will be governed by
Section 3.
(b) Long-Form Demand Registrations. The Holders of Registrable Shares
may request (i) up to three (3) Long-Form Demand Registrations pursuant to
Section 2(a)(i) during the first five (5) years following the date of the IPO
and (ii) until the Holders own in the aggregate less than ten percent (10%) of
the outstanding Common Stock, up to one (1) Long-Form Demand Registration each
year after the fifth anniversary of the date of the IPO, and the Corporation
will pay all Registration Expenses of the Corporation and the Holders of
Registrable Shares incurred in connection with each such registration; provided,
that in each case the number of Long-Form Demand Registrations otherwise
permitted by this Section 2(b) during a given period shall be reduced by the
number of Short-Form Demand Registrations effected during the corresponding
period pursuant to Section 2(c), if any. A registration will not count as a
Long-Form Demand Registration under this Section 2(b) until it has become
effective; provided that in any event the Corporation will pay the Registration
Expenses of the Corporation and the Holders of Registrable Shares incurred in
connection with any such registration initiated as a Long-Form Demand
Registration. Notwithstanding the immediately preceding sentence, a registration
which does not become effective after the Corporation has filed a registration
statement with respect thereto solely by reason of the refusal to proceed of the
Holders of Registrable Shares shall be deemed to have been effected by such
Holders and shall count as a Long-Form Demand Registration under this Section
2(b), unless the Holders of Registrable Shares making such demand shall have
elected to pay the Registration Expenses of the Corporation and of the Holders
of Registrable Shares incurred in connection therewith.
(c) Short-Form Demand Registrations. The Holders of Registrable Shares
may request (i) up to three (3) Short-Form Demand Registrations pursuant to
Section 2(a)(ii) during the first five (5) years following the date of the IPO
and (ii) until the Holders own in the aggregate less than ten percent (10%) of
the
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<PAGE>
outstanding Common Stock, up to one (1) Short-Form Demand Registration each year
after the fifth anniversary of the date of the IPO, and the Corporation will pay
all Registration Expenses of the Corporation and the Holders of Registrable
Shares incurred in connection with each such registration; provided, that in
each case the number of Short-Form Demand Registrations otherwise permitted by
this Section 2(c) during a given period shall be reduced by the number of Long-
Form Demand Registrations effected during the corresponding period pursuant to
Section 2(b), if any. A registration will not count as a Short-From Demand
Registration under this Section 2(c) until it has become effective; provided
that in any event the Corporation will pay the Registration Expenses of the
Corporation and the Holders of Registrable Shares incurred in connection with
any such registration initiated as a Short-From Demand Registration.
Notwithstanding the immediately preceding sentence, a registration which does
not become effective after the Corporation has filed a registration statement
with respect thereto solely by reason of the refusal to proceed of the Holders
of Registrable Shares shall be deemed to have been effected by such Holders and
shall count as a Short-Form Demand Registration for which the Corporation paid
Registration Expenses under this Section 2(c), unless the Holders of Registrable
Shares making such demand shall have elected to pay the Registration Expenses of
the Corporation and of the Holders of Registrable Shares incurred in connection
therewith.
(d) Priority on Demand Registrations. If a Demand Registration is an
underwritten public offering and the managing underwriter(s) advise the
Corporation that in their opinion the number of Registrable Shares and other
securities (if any) requested to be included exceeds the number of Registrable
Shares and other securities which can be sold in such offering without having a
material adverse effect on the offering, the Corporation will include in such
registration (A) first, the number of Registrable Shares requested to be
included therein, which in the opinion of such underwriter(s) can be sold
without having a material adverse effect on the offering, allocated pro rata
among the Holders of such Registrable Shares on the basis of the number of
Registrable Shares owned by such Holders which such Holders have elected to
include in such registration, and (B) second, such other securities requested to
be included in such registration, if any, which in the opinion of such
underwriter(s) can be sold (after taking into account the Registrable Shares to
be sold pursuant to clause (A) above) without having a material adverse effect
on the offering.
(e) Restrictions on Registrations. (i) The Corporation may postpone
for a reasonable period, not to exceed sixty (60) days, the filing or the
effectiveness of a registration statement for a Demand Registration if the
Corporation has been advised by
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<PAGE>
legal counsel that such filing would require disclosure of a material non-public
fact or non-public information that the Corporation determines reasonably and in
good faith would have a material adverse effect on the negotiation or completion
of any significant transaction that is being contemplated by the Corporation or
any of its subsidiaries at the time such right to delay is exercised. In
addition, the Corporation shall not be required to effect any registration in
accordance with the terms of this Agreement (other than on Form S-3 or any
successor form relating to "shelf" offerings) within one hundred twenty (120)
days after the effective date of any other registration statement of the
Corporation for the IPO or a primary offering (or combined primary and secondary
offering) of its securities (other than a registration statement on Form S-8, or
any successor form).
(ii) No Holder of Registrable Shares may make a request for a Demand
Registration until after the effective date of the IPO.
3. Piggyback Registrations.
(a) Right to Piggyback. Whenever (i) the Corporation intends to
sell its securities in a primary offering pursuant to a registration statement
filed with the Commission or whenever the securities of the Corporation then
issued and outstanding are to be registered under the Securities Act (in either
case, other than pursuant to a registration statement on Form S-8 or Form S-4,
or any successor forms) and (ii) the registration form to be used may also be
used for the registration of Registrable Shares (a "Piggyback Registration"),
the Corporation will give prompt written notice (in any event within ten (10)
business days after its receipt of notice of any exercise of demand registration
rights by holders of the Corporation's securities other than the Registrable
Shares) to all holders of registrable securities (including all Holders of
Registrable Shares) of its intention to effect such a registration and will
include in such registration, subject to the terms of paragraphs (b) and (c) of
this Section 3, all registrable securities with respect to which the Corporation
has received written requests for inclusion therein within thirty (30) days
after the Corporation's notice has been given. The Corporation shall have the
right to postpone or withdraw any Piggyback Registration without obligation or
liability to any holder of registrable securities (including any Holder of
Registrable Shares).
(b) Priority on Primary Registrations. If a Piggyback Registration
is an underwritten primary registration on behalf of the Corporation, and the
managing underwriter(s) advise the Corporation that in their opinion the number
of securities requested to be included in such registration exceeds the number
which can be sold in such offering without having a material adverse effect on
the offering, the Corporation will include in
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<PAGE>
such registration (A) first, the securities the Corporation proposes to sell,
(B) second, the Registrable Shares requested to be included therein which in the
opinion of such underwriter(s) (after taking into account the securities to be
sold pursuant to clause (A) above) can be sold without having a material adverse
effect on the offering, allocated pro rata among the Holders of such Registrable
Shares on the basis of the number of Registrable Shares owned by such Holders
which such Holders have elected to include in such registration, and (C) third,
other securities requested to be included in such registration, if any, which in
the opinion of such underwriter(s) can be sold (after taking into account the
securities to be sold pursuant to clauses (A) and (B) above) without having a
material adverse effect on the offering.
(c) Priority on Secondary Registrations. (i) If a Piggyback
Registration is not an underwritten primary registration on behalf of the
Corporation and is an underwritten secondary registration on behalf of existing
holders of the Corporation's securities, and the managing underwriter(s) advise
the Corporation that in their opinion the number of securities requested to be
included in such registration exceeds the number which can be sold in such
offering without having a material adverse effect on the offering, the
Corporation will include in such registration (A) first, the securities
requested to be included therein by the holders requesting such registration
which in the opinion of such underwriter(s) can be sold without having a
material adverse effect on the offering, (B) second, the Registrable Shares
requested to be included therein which in the opinion of such underwriter(s) can
be sold (after taking into account the securities to be sold pursuant to clause
(A) above) without having a material adverse effect on the offering, allocated
pro rata among the Holders of Registrable Shares on the basis of the number of
Registrable Shares owned by such Holders which such Holders have elected to
include in such registration, and (C) third, other securities requested to be
included in such registration, if any, which in the opinion of such
underwriter(s) can be sold (after taking into account the securities to be sold
pursuant to clauses (A) and (B) above) without having a material adverse effect
on the offering.
(d) Other Registrations. If the Corporation has previously filed a
registration statement with respect to an underwritten registration of
Registrable Shares pursuant to Section 2 or a registration statement which is
not an underwritten primary registration on behalf of the Corporation and which
is an underwritten secondary registration on behalf of holders of the
Corporation's securities pursuant to this Section 3, and if such previous
registration has not been withdrawn or abandoned, the
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<PAGE>
Corporation will not be required to file or cause to be effected any other
registration of any of its equity securities or securities convertible or
exchangeable into or exercisable for its equity securities under the Securities
Act (except on Form S-8, or any successor form), whether on its own behalf or at
the request of any holder or holders of such securities, until a period of one
hundred eighty (180) days has elapsed from the effective date of such previous
registration, unless the lead underwriter managing such previous registered
public offering otherwise agrees.
4. Holdback Agreements.
(a) Each of the Holders of Registrable Shares agrees not to effect
any public sale or distribution of equity securities of the Corporation,
including any public sale pursuant to Rule 144 under the Securities Act, or any
securities convertible into or exchangeable or exercisable for such securities,
during the period (i) commencing on the effective date of the IPO and ending one
hundred eighty (180) days after the effective date of the IPO, unless the
underwriter(s) managing the IPO otherwise agree or (ii) commencing seven (7)
days prior to and ending one hundred twenty (120) days after the effective date
of any underwritten Demand Registration or underwritten Piggyback Registration
in which such Holder sells Registrable Shares (except as part of such
underwritten registration), unless the lead underwriter managing such previous
registered public offering otherwise agrees.
(b) The Corporation agrees (i) not to effect any public sale or
distribution of its equity securities, or any securities convertible into or
exchangeable or exercisable for such securities, during the period commencing
seven days (7) prior to and ending one hundred eighty (180) days after the
effective date of any underwritten Demand Registration or any underwritten
Piggyback Registration (except as part of such underwritten registration or
pursuant to registrations on Form S-8 or Form S-4 or any successor forms),
unless the lead underwriter managing such previous offering otherwise agrees,
and (ii) to use its best efforts to cause each holder of at least 1% (on a
fully-diluted basis) of its equity securities, or any securities convertible
into or exchangeable or exercisable for such securities, purchased from the
Corporation at any time after the date of this Agreement (other than in a
registered public offering), if any, to agree not to effect any public sale or
distribution of any such securities during such period (except as part of such
underwritten registration, if otherwise permitted), unless the lead underwriter
managing the previous offering otherwise agrees.
5. Registration Procedures. Whenever the Holders of Registrable
Shares have requested that any Registrable Shares be registered pursuant to the
terms of this Agreement, the Corporation will use its best efforts to effect the
registration of such Registrable Shares under the Securities Act in accordance
with the
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<PAGE>
intended method of disposition thereof, and pursuant thereto the Corporation
will as expeditiously as possible;
(a) prepare and file with the Commission a registration statement
with respect to such Registrable Shares and use its best efforts to cause such
registration statement to become and remain effective for such period as may be
reasonably necessary to effect the sale of such securities, not to exceed twelve
(12) months;
(b) prepare and file with the Commission such amendments and
supplements to such registration statement and the prospectus used in connection
therewith as may be necessary to keep such registration statement effective for
such period as may be reasonably necessary to effect the sale of such
securities, not to exceed twelve (12) months, and otherwise as may be necessary
to comply with the provisions of the Securities Act with respect to the
disposition of all securities covered by such registration statement during such
period in accordance with the intended methods of disposition by the sellers
thereof as set forth in such registration statement;
(c) furnish to each seller of such Registrable Shares and the
underwriters of the securities being registered such number of copies of such
registration statement, each amendment and supplement thereto, the prospectus
included in such registration statement (including each preliminary prospectus)
and such other documents as such seller or underwriters may reasonably request
in order to facilitate the disposition of the Registrable Shares owned by such
seller or the sale of such securities by such underwriters;
(d) use its best efforts to register or qualify such Registrable
Shares under such other securities or blue sky laws of such jurisdictions as any
seller reasonably requests and do any and all other acts and things which may be
reasonably necessary or advisable to enable such seller to consummate the
disposition in such jurisdictions of the Registrable Shares owned by such seller
(provided that the Corporation will not be required to (i) qualify generally to
do business in any jurisdiction where it would not otherwise be required to
qualify but for this subparagraph, (ii) subject itself to taxation in any such
jurisdiction or (iii) consent to general service of process in any such
jurisdiction);
(e) use its best efforts to cause all such Registrable Shares to be
listed on each securities exchange in which similar securities issued by the
Corporation are then listed;
(f) provide a transfer agent and registrar for all such Registrable
Shares not later than the closing date of the sale of such shares;
(g) enter into such customary agreements (including underwriting
agreements in customary form and substance) and take
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<PAGE>
all such other reasonable and customary actions as the Holders of at least a
majority of the Registrable Shares being sold or the underwriters, if any,
reasonably request in order to expedite or facilitate the disposition of such
Registrable Shares;
(h) make available for reasonable inspection during business hours by
the seller of such Registrable Shares, any managing underwriter participating in
any disposition pursuant to such registration statement, and any attorney,
accountant or other agent retained by any such seller or underwriter, to the
extent permitted by law, all financial and other records, pertinent corporate
documents and properties of the Corporation, and cause the Corporation's
officers, directors, employees and independent accountants to supply all
information reasonably requested by any such seller, underwriter, attorney,
accountant or agent in connection with such registration statement;
(i) notify each seller of such Registrable Shares, promptly after it
shall receive notice thereof, of the time when such registration statement has
become effective or a supplement to any prospectus forming a part of such
registration statement has been filed;
(j) notify each seller of such Registrable Shares of any request by
the Commission for the amendment or supplement of such registration statement or
prospectus or for additional information;
(k) prepare and file with the Commission, promptly upon the request
of any seller of such Registrable Shares, any amendments or supplements to such
registration statement or prospectus which is required under the Securities Act
or the rules and regulations thereunder in connection with the distribution of
Registrable Shares by such seller;
(l) prepare and promptly file with the Commission and promptly notify
each seller of such Registrable Shares of the filing of such amendment or
supplement to such registration statement or prospectus as may be necessary to
correct any statements or omissions if, at the time when a prospectus relating
to such securities is required to be delivered under the Securities Act, any
event shall have occurred, or facts became known, in either case as the result
of which any such prospectus of any other prospectus as then in effect would
include an untrue statement of a material fact or omit to state any material
fact necessary to make the statements therein, in the light of the circumstances
in which they were made, not misleading;
(m) advise each seller of such Registrable Shares, promptly after it
shall receive notice or obtain knowledge thereof, of the issuance of any stop
order by the Commission suspending the effectiveness of such registration
statement or the initiation or threatening of any proceeding for such purpose
and promptly use all
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<PAGE>
reasonable efforts to prevent the issuance of any stop order or to obtain its
withdrawal if such stop order shall be issued;
(n) at least twenty-four (24) hours prior to the filing of any
registration statement or prospectus or any amendment or supplement to such
registration statement or prospectus, furnish a copy thereof to each seller of
such Registrable Shares and refrain from filing any such registration statement,
prospectus, amendment or supplement to which counsel selected by the Holders of
at least a majority of the Registrable Shares being registered shall have
reasonably objected on the grounds that such amendment or supplement does not
comply in all material respects with the requirements of the Securities Act or
the rules and regulations thereunder, unless, in the case of an amendment or
supplement, in the opinion of counsel for the Corporation the filing of such
amendment or supplement is reasonably necessary to protect the Corporation from
any liabilities under any applicable federal or state law and such filing will
not violate applicable laws; and
(o) at the request of any seller of such Registrable Shares in
connection with an underwritten offering, furnish on the date or dates provided
for in the underwriting agreement, a signed counterpart, addressed to such
seller, of: (i) an opinion of counsel, and (ii) a letter or letters from the
independent certified public accountants of the Corporation, in each case
covering such matters as are customarily covered in opinions of issuer's counsel
and in accountants' letters delivered to underwriters in underwritten public
offerings and such other matters as any such seller may reasonably request.
6. Registration Expenses.
(a) In all circumstances in which the Corporation is obligated to pay
Registration Expenses pursuant to this Agreement, all expenses of the
Corporation incident to the Corporation's performance of or compliance with this
Agreement, including, without limitation, all registration and filing fees, fees
and expenses of compliance with securities or blue sky laws, printing expenses,
messenger and delivery expenses, the expenses and fees for listing the
securities to be registered on each securities exchange or other market on which
any shares of Common Stock are then listed, expenses in connection with the
preparation of the registration statement (preliminary or final) or any other
offering document, fees and expenses incurred in the preparation of any
underwriting agreement, expenses incurred to secure any required review by the
National Association of Securities Dealers, Inc., and fees and disbursements of
counsel for the Corporation and its experts and independent certified public
accountants, underwriters (excluding discounts and commissions attributable to
the Registrable Shares included in such registration) and other Persons retained
by the Corporation (all such expenses collectively being herein called
"Registration Expenses"), will be borne by the Corporation. In addition, the
Corporation will pay its internal expenses incident to the Corporation's
performance of or compliance with this Agreement (including, without limitation,
all salaries and expenses of its officers and employees performing legal or
accounting duties), the expense of any annual audit or quarterly
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<PAGE>
review and the expense of any liability insurance obtained by the Corporation.
(b) In all circumstances in which the Corporation is obligated to pay
Registration Expenses of Holders of Registrable Shares pursuant to this
Agreement, the Corporation will reimburse the Holders of Registrable Shares
covered by such registration for the reasonable costs and expenses incurred by
such Holders in connection with such registration, including, without
limitation, the reasonable fees and disbursements of one counsel chosen by the
Holders of a majority of the Registrable Shares requested to be registered in
such registration, but excluding discounts and commissions attributable to the
Registrable Shares included in such registration.
7. Indemnification.
(a) The Corporation agrees to indemnify, to the fullest extent
permitted by law, each seller of Registrable Shares, its directors, officers and
employees and each Person who controls such seller (within the meaning of the
Securities Act or the Securities Exchange Act) against all losses, claims,
damages, liabilities and expenses (including, without limitation, reasonable
attorneys' fees except as limited by Section 7(c)) resulting from any untrue or
alleged untrue statement of a material fact contained in any registration
statement, any final prospectus contained therein or any amendment thereof or
supplement thereto or any omission or alleged omission of a material fact
required to be stated therein or necessary to make the statements thereto not
misleading, except insofar as the same are caused by or contained in any
information furnished in writing to the Corporation by such seller expressly for
use therein or by such seller's failure to deliver a copy of the registration
statement or final prospectus or any amendments or supplements thereto after the
Corporation has furnished such seller with a sufficient number of copies of the
same. The reimbursements required by this Section 7(a) will be made by periodic
payments during the course of the investigation or defense, as and when bills
are received or expenses incurred.
(b) In connection with any registration statement in which a seller
of Registrable Shares is participating, each such seller will furnish to the
Corporation in writing such information as the Corporation reasonably requests
for use in connection with any such registration statement or prospectus and, to
the fullest extent permitted by law, will indemnify the Corporation, its
directors and officers, each underwriter (if any) and each Person who controls
the Corporation or such underwriter (within the meaning of the Securities Act or
the Securities Exchange Act) against all losses, claims, damages, liabilities
and expenses (including, without limitation, reasonable attorneys' fees except
as limited by Section 7(c)) resulting from any untrue statement of a material
fact contained in the registration statement, final
-12-
<PAGE>
prospectus contained therein or any amendment thereof or supplement thereto or
any omission of a material fact required to be stated therein or necessary to
make the statements therein not misleading, but only to the extent that such
untrue statement or omission is contained in any information or affidavit so
furnished in writing by such seller expressly for use therein; provided that the
obligation to indemnify will be several, not joint and several, among such
sellers of Registrable Shares, and the liability of each such seller of
Registrable Shares will be in proportion to, and provided further that such
liability will be limited to, the net amount received by such seller from the
sale of Registrable Shares pursuant to such registration statement.
(c) Any Person entitled to indemnification hereunder will (i) give
prompt written notice to the indemnifying party of any claim with respect to
which it seeks indemnification and (ii) unless in such indemnified party's
reasonable judgment a conflict of interest between such indemnified and
indemnifying parties may exist with respect to such claim, permit such
indemnifying party to assume the defense of such claim with counsel reasonably
satisfactory to the indemnified party. If such defense is assumed, the
indemnifying party will not be subject to any liability for any settlement made
by the indemnified party without the indemnifying party's consent (which consent
will not be unreasonably withheld). The indemnified party will not settle any
claim or liability without first providing the indemnifying party with a
reasonable opportunity to assume the defense. An indemnifying party who is not
entitled to, or elects not to, assume the defense of a claim will not be
obligated to pay the fees and expenses of more than one counsel for all parties
indemnified by such indemnifying party with respect to such claim, unless in the
reasonable judgment of any indemnified party a conflict of interest may exist
between such indemnified party and any other of such indemnified parties with
respect to such claim.
(d) The indemnification provided for under this Agreement will remain
in full force and effect regardless of any investigation made by or on behalf of
the indemnified party or any officer, director or controlling Person of such
indemnified party and will survive the transfer of securities.
(e) If the indemnification provided for in this Section 7 is
unavailable or insufficient to hold harmless an indemnified party in respect of
any losses, claims, damages, liabilities or expenses referred to herein, then
the indemnifying party shall contribute to the amount paid or payable by such
indemnified party as a result of such losses, claims, damages, liabilities or
expenses in such proportion as is appropriate to reflect the relative fault of
the indemnifying party on the one hand, and the indemnified party on the other,
in connection with the statement or omission which resulted in such losses,
claims, damages, liabilities or expenses as well as any other relevant equitable
-13-
<PAGE>
considerations, including the failure to give the notice required hereunder.
The relative fault of the indemnifying party and the indemnified party shall be
determined by reference to, among other things, whether the untrue or alleged
untrue statement of a material fact relates to information supplied by the
indemnifying party or the indemnified party and the parties' relative intent,
knowledge, access to information and opportunity to correct or prevent such
statement or omission. The Corporation and the Holders agree that it would not
be just and equitable if contributions pursuant to this Section 7(e) were
determined by pro rata allocation or by any other method of allocation which did
not take account of the equitable considerations referred to herein. The amount
paid or payable to an indemnified party as a result of the losses, claims,
damages, liabilities or expenses referred to above shall be deemed to include
any legal or other expenses reasonably incurred in connection with investigating
or defending the same. Notwithstanding the foregoing, in no event shall the
amount contributed by any Holder exceed the aggregate net offering proceeds
received by any such Holder from the sale of its Registrable Shares. No person
guilty of fraudulent misrepresentations (within the meaning of Section 11(f) of
the Securities Act) shall be entitled to contribution from any person who is not
guilty of such fraudulent misrepresentation.
8. Current Public Information. At all times after the Corporation
has filed a registration statement with the Commission pursuant to the
requirements of either the Securities Act or the Securities Exchange Act, the
Corporation will use its best efforts to file in a timely manner all reports and
other documents required to be filed by it under the Securities Act and the
Securities Exchange Act and the rules and regulations promulgated by the
Commission thereunder and will use its best efforts to take such further action
as any Holder or Holders of Registrable Shares may reasonably request, all to
the extent required to enable such holders to sell Registrable Shares pursuant
to (i) Rule 144 under the Securities Act (as such rule may be amended from time
to time) or any similar rule or regulation hereafter promulgated by the
Commission or (ii) a registration statement on Form S-2 or S-3 or any similar
registration form hereafter adopted by the Commission. Upon request, the
Corporation shall deliver to any Holder of Registrable Shares a written
statement as to whether it has complied with such requirements.
9. Participation in Underwritten Registrations. No Person may
participate in any registration hereunder which is underwritten unless such
Person (a) agrees to sell such Person's securities on the basis provided in any
underwriting arrangements approved by the Person or Persons entitled hereunder
to approve such arrangements and (b) completes and executes all questionnaires,
powers of attorney, indemnities, underwriting agreements and other documents
required under the terms of such underwriting arrangements. Subject to the
immediately succeeding sentence, the Holders of a
-14-
<PAGE>
majority of the Registrable Shares requested to be registered will have the
right to select the managing underwriter(s) to administer any Demand
Registration which managing underwriter(s) shall be reasonably acceptable to the
Corporation. Notwithstanding the foregoing, the Corporation will have the right
to select the managing underwriter(s) to administer any offering which is
covered by a Piggyback Registration; provided, however, that in any such case
the managing underwriters shall be nationally or regionally recognized
underwriter(s).
10. Implementation and Protection of Registration Rights. The
Corporation will at all times in good faith assist in carrying out all of the
provisions of this Agreement and in the taking of all such action as may be
reasonably necessary or appropriate in order to protect the registration rights
pursuant to this Agreement of the Holders of Registrable Shares.
11. Remedies. Any Person having rights under any provision of this
Agreement will be entitled to enforce such rights specifically, to recover
damages caused by reason of any breach of any provision of this Agreement and to
exercise all other rights granted by law.
12. Amendments and Waivers. Except as otherwise expressly provided
herein, the provisions of this Agreement may be amended or waived at any time
only by the written agreement of the Corporation and the Holders of all of the
then outstanding Registrable Shares. Any waiver, permit, consent or approval of
any kind or character on the part of any such Holders of any provision or
condition of this Agreement must be made in writing and shall be effective only
to the extent specifically set forth in writing.
13. Successors and Assigns. Except as otherwise expressly provided
herein, the provisions of this Agreement shall be binding upon and inure to the
benefit of the respective successors, assigns, heirs, executors and
administrators of the parties hereto, whether so expressed or not. In addition
and whether or not any express assignment has been made, the provisions of this
Agreement which are for the benefit of Holders of Registrable Shares are also
for the benefit of, and enforceable by, any subsequent holder of Registrable
Shares who consent in writing to be bound by this Agreement, and such Person
shall be considered a "Holder" hereunder.
14. Other Registration Rights. Except for the registration rights
granted hereunder, the Corporation will not grant to any Persons the right to
request the Corporation to register any equity securities of the Corporation, or
any securities convertible or exchangeable into or exercisable for such
securities, without the written consent of the Holders of a majority of the then
outstanding Registrable Shares, and except for registrations pursuant to
registration rights granted to the Holders of
-15-
<PAGE>
Registrable Shares hereunder or granted to other Persons pursuant to this
Section 14 or primary registrations of securities by the Corporation or
registrations of securities being resold by affiliates in a Rule 145 transaction
pursuant to registration rights granted to such affiliates that are subordinate
to the registration rights of the Registrable hereunder, the Corporation shall
not register any equity securities of the Corporation, or any securities
convertible or exchangeable into or exercisable for such securities, without the
written consent of the Holders of a majority of the then outstanding Registrable
Shares. The Corporation will not include in any Demand Registration any
securities which are not Registrable Shares without the written consent of the
Holders of a majority of the then outstanding Registrable Shares requesting such
registration. Notwithstanding the foregoing, the Corporation may grant and
register securities pursuant to (a) subordinate piggyback registration rights
not inconsistent with the registration rights granted hereunder to other Persons
and (b) demand registration rights which are subordinate to the rights of the
Holders with respect to Demand Registrations hereunder.
15. Final Agreement. This Agreement constitutes the final agreement
of the parties concerning the matters referred to herein, and supersedes all
prior agreements and understandings.
16. Severability. Whenever possible, each provision of this
Agreement will be interpreted in such manner as to be effective and valid under
applicable law, but if any provision of this Agreement is held to be prohibited
by or invalid under applicable law, such provision will be ineffective only to
the extent of such prohibition or invalidity, without invalidating the remainder
of this Agreement.
17. Descriptive Headings. The descriptive headings of this Agreement
are inserted for convenience of reference only and do not constitute a part of
and shall not be utilized in interpreting this Agreement.
18. Notices. Any notices required or permitted to be sent hereunder
shall be delivered personally or mailed, certified mail, return receipt
requested, or delivered by overnight courier service guaranteeing next business
day delivery, to the following addresses, or such other addresses as shall be
given by notice delivered hereunder, in each case with applicable postage or
delivery charges prepaid, and shall be deemed to have been given upon delivery,
if delivered personally, three business days after mailing, if mailed, or one
business day after delivery to the courier, if delivery by overnight courier
service:
-16-
<PAGE>
If to the Holders, to:
c/o The Prime Group, Inc.
77 West Wacker Drive
Suite 3900
Chicago, Illinois 60601
Attn: Michael W. Reschke
With a copy (which shall not constitute notice) to:
The Prime Group, Inc.
77 West Wacker Drive
Suite 3900
Chicago, Illinois 60601
Attn: Robert J. Rudnik
If to the Corporation, to:
Brookdale Living Communities, Inc.
77 West Wacker Drive
Suite 3900
Chicago, Illinois 60601
Attn: President
With a copy (which shall not constitute notice) to:
Winston & Strawn
35 West Wacker Drive
Chicago, Illinois 60601
Attn: Wayne D. Boberg
19. Governing Law. All questions concerning the construction,
validity and interpretation of, and the performance of the obligations imposed
by, this Agreement shall be governed by and construed in accordance with the
laws of the State of [Delaware] (excluding the choice of law provisions
thereof).
20. Counterparts. This Agreement may be executed in any number of
counterparts, each of which when so executed and delivered shall be deemed an
original, and such counterparts together shall constitute one instrument.
21. Termination of Rights. The registration rights provided by this
Agreement shall terminate on the earlier of (a) first date after the date of the
IPO on which the aggregate number of Registrable Shares then owned by the
Holders constitutes less than ten percent (10%) of the outstanding Common Stock,
and (b) with regard to each Holder of Registrable Shares, at such time as such
Holder shall have an unlimited right to sell all of its Registrable Shares in
the public market without restriction on volume or otherwise.
[signature page follows]
-17-
<PAGE>
IN WITNESS WHEREOF, the parties hereto have caused this Registration
Rights Agreement to be executed and delivered in their names and on their behalf
as of the date first set forth above.
THE CORPORATION:
BROOKDALE LIVING COMMUNITIES, INC.,
a Delaware corporation
By:
------------------------------------------
Name:
----------------------------------------
Its:
-----------------------------------------
THE HOLDERS:
THE PRIME GROUP, INC.,
an Illinois corporation
By:
-----------------------------------------
Name:
---------------------------------------
Its:
----------------------------------------
PRIME GROUP LIMITED PARTNERSHIP,
an Illinois limited partnership
By:
-----------------------------------------
Michael W. Reschke,
President
S-1
<PAGE>
EXHIBIT 10.4
FORM OF
VOTING AGREEMENT
----------------
This VOTING AGREEMENT (this "Agreement"), dated as of ______, 1997, is made
and entered into by and among BROOKDALE LIVING COMMUNITIES, INC., a Delaware
corporation (the "Company"), THE PRIME GROUP, INC., an Illinois corporation
("Prime"), and PRIME GROUP LIMITED PARTNERSHIP, an Illinois limited partnership
(together with Prime, the "TPG Group").
RECITALS
--------
WHEREAS, the Company has filed with the Securities and Exchange Commission
a Form S-1 Registration Statement in connection with the Company's proposed
initial public offering (the "Offering") of its Common Stock, $0.01 par value
per share (the "Common Stock");
WHEREAS, pursuant to the terms of that certain Formation Agreement dated
___________, 1997, the Company has issued an aggregate of 2,071,334 shares of
its Common Stock to the TPG Group, representing 27.6% of the outstanding Common
Stock after giving effect to the Offering; and
WHEREAS, in connection with the Offering, the Company and the TPG Group
have agreed to enter into this Agreement.
AGREEMENTS
----------
NOW, THEREFORE, in consideration of the recitals and the mutual promises
and covenants herein contained and other good and valuable consideration, the
receipt and sufficiency of which are hereby acknowledged, the parties hereto
hereby agree as follows:
1. Agreement to Vote Shares of Common Stock. The TPG Group agrees that,
from and after the completion of the Offering and until this Agreement
terminates pursuant to Section 2 hereof, it will vote all of the TPG Group's
shares of Common Stock at any meeting at which directors of the Company are
elected in favor of that number of independent directors who are not affiliates
of the TPG Group or employees of the TPG Group (any such directors, "Independent
Directors") so that, if such directors were elected, there would be at least
four (4) Independent Directors who are members of the Board of Directors of the
Company. The parties hereto acknowledge and agree that the agreement contained
in the immediately preceding sentence is not, and shall not be construed as, a
guarantee by the TPG Group, or any member thereof, that any of the Independent
Directors for which the TPG Group votes in favor
<PAGE>
of will be elected as a member of the Board of Directors of the Company or that
there will be at least four (4) Independent Directors who are members of the
Board of Directors of the Company.
2. Term. This Agreement will automatically terminate upon the earlier of
(i) three (3) years from the closing date of the Offering or (ii) the date the
TPG Group owns less than ten percent (10%) of the then outstanding Common Stock.
3. Notices. Any notices required or permitted to be sent hereunder shall
be delivered personally or mailed, certified mail, return receipt requested, or
delivered by overnight courier service guaranteeing next business day delivery,
to the following addresses, or such other addresses as shall be given by notice
delivered hereunder, in each case with applicable postage or delivery charges
prepaid, and shall be deemed to have been given upon delivery, if delivered
personally, three business days after mailing, if mailed, or one business day
after delivery to the courier, if delivery by overnight courier service:
If to the Company, to:
Brookdale Living Communities, Inc.
77 West Wacker Drive
Suite 3900
Chicago, Illinois 60601
Attn: President
With a copy to:
Winston & Strawn
35 West Wacker Drive
Chicago, Illinois 60601
Attn: Wayne D. Boberg
If to the TPG Group or any member thereof, to:
c/o The Prime Group, Inc.
77 West Wacker Drive
39th Floor
Chicago, Illinois 60601
Attn: Michael W. Reschke
With a copy to:
The Prime Group, Inc.
77 West Wacker Drive
Suite 3900
Chicago, Illinois 60601
Attn: Robert J. Rudnik
-2-
<PAGE>
4. Final Agreement. This Agreement constitutes the final agreement of the
parties concerning the matters referred to herein, and supersedes all prior
agreements and understandings.
5. Severability. Whenever possible, each provision of this Agreement will
be interpreted in such manner as to be effective and valid under applicable law,
but if any provision of this Agreement is held to be prohibited by or invalid
under applicable law, such provision will be ineffective only to the extent of
such prohibition or invalidity, without invalidating the remainder of this
Agreement.
6. Descriptive Headings. The descriptive headings of this Agreement are
inserted for convenience of reference only and do not constitute a part of and
shall not be utilized in interpreting this Agreement.
7. Governing Law. All questions concerning the construction, validity and
interpretation of, and the performance of the obligations imposed by, this
Agreement shall be governed by and construed in accordance with the laws of the
State of Illinois (excluding the choice of law provisions thereof).
8. Amendments. The provisions of this Agreement may be amended or waived
at any time only by the written agreement of the parties hereto.
9. Successors and Assigns. The provisions of this Agreement shall be
binding upon and inure to the benefit of the respective successors, assigns,
heirs, executors and administrators of the parties hereto, whether so expressed
or not.
[signature page follows]
-3-
<PAGE>
IN WITNESS WHEREOF, the parties hereto have caused this Voting Agreement to
be duly executed and delivered on their behalf as of the date first above
written.
THE COMPANY:
BROOKDALE LIVING COMMUNITIES, INC.,
a Delaware corporation
By:_____________________________
Name:___________________________
Title:__________________________
THE TPG GROUP:
THE PRIME GROUP, INC.,
an Illinois corporation
By:_____________________________
Name:___________________________
Title:__________________________
PRIME GROUP LIMITED PARTNERSHIP,
an Illinois limited partnership
By:_____________________________
Michael W. Reschke,
Managing General Partner
S-1
<PAGE>
EXHIBIT 10.5
FORM OF
NON-COMPETE AGREEMENT
---------------------
This NON-COMPETE AGREEMENT (this "Agreement"), dated as of
_____________, 1997, is made and entered into by and among BROOKDALE LIVING
COMMUNITIES, INC., a Delaware corporation (the "Company"), THE PRIME GROUP,
INC., an Illinois corporation ("TPG"), PRIME HALLMARK, INC., an Illinois
corporation ("PHI"), PRIME GROUP LIMITED PARTNERSHIP, an Illinois limited
partnership (together with TPG, PHI, the "TPG Group"), and MICHAEL W. RESCHKE,
an individual ("Reschke").
RECITALS
--------
WHEREAS, the Company, through its subsidiaries and affiliates, is
engaged primarily in the business of the management, operation, acquisition and
development of senior and assisted living facilities and the provision of senior
and assisted living services at such facilities;
WHEREAS, on the date hereof the Company is entering into a series of
related transactions (the "Formation") pursuant to which it will acquire, among
other things, substantially all of the operations of the senior housing division
of TPG and the ownership interests of the TPG Group and its affiliates in a
portfolio of three senior and assisted living facilities located in Illinois;
WHEREAS, Reschke and the TPG Group, directly or through one or more
affiliates, will continue to engage in certain real estate-related activities
after the Formation including, without limitation, the continued ownership of
the senior and assisted living facility known as The Island on Lake Travis
located in Lago Vista, Texas (the "Island"); and
WHEREAS, as a condition to the consummation of the transactions
described above, and in an effort to eliminate potential conflicts of interest
that may arise in the future as a result of the continuing activities of Reschke
and the TPG Group, the parties hereto desire, subject to certain conditions and
exceptions set forth herein, to enter into certain agreements restricting the
activities of Reschke and the TPG Group for a period expiring on the earlier of
(i) four (4) years from the effective date of the Company's initial public
offering of its Common Stock, $0.01 par value per share (the "IPO"), or (ii) one
(1) year from the date of a merger or sale of all or substantially all of the
stock or assets of the Company.
AGREEMENTS
----------
NOW, THEREFORE, in consideration of the recitals and the mutual
promises and covenants herein contained and other good and
<PAGE>
valuable consideration, the receipt and sufficiency of which are hereby
acknowledged, the parties hereto hereby agree as follows:
1. Definitions.
(a) Previously Defined Terms. Each capitalized term defined in the
first paragraph and Recitals hereof shall have the meaning set forth above
whenever used herein, unless otherwise expressly provided or unless the context
clearly requires otherwise.
(b) Additional Definitions. In addition to the terms defined in the
first paragraph and Recitals hereof, whenever used herein, the following terms
shall have the meanings set forth below unless otherwise expressly provided or
unless the context clearly requires otherwise:
"Affiliate" means (i) any entity in which Reschke and the TPG Group
(either individually or collectively) own or control, directly or indirectly,
fifty percent (50%) or more of the outstanding equity interests, (ii) any entity
with respect to which Reschke and the TPG Group (either individually or
collectively) have the right or power, directly or indirectly, to cause such
entity to (x) develop or acquire an interest in any facilities of the type
included within the Primary Business of the Company or (y) manage or operate any
such facilities, in either case without the consent or approval of a third party
equity owner, and (iii) any entity with respect to which Reschke and the TPG
Group (either individually or collectively) have the right or power, directly or
indirectly, to withhold consent or approval of (x) the development of, or an
acquisition by such entity of an interest in, any facilities of the type
included within the Primary Business of the Company or (y) the engagement by
such entity in the management or operation of any such facilities, in either
case where such consent or approval is required as a condition to consummation
of such acquisition or the engagement in such activity.
"Primary Business of the Company" means the ownership, management,
operation, acquisition and development of senior and assisted living and semi-
acute care facilities.
2. Prohibitions.
(a) Subject to subsections 2(b) and 2(c) below, from and after the
date hereof and during the term of this Agreement, neither Reschke, the TPG
Group nor any Affiliate will develop any facility or acquire any facility or any
direct or indirect interest therein, or manage or operate any such facility,
that is of the type included within the Primary Business of the Company;
provided, that the foregoing shall not prohibit any of Reschke, the TPG Group or
any Affiliate from providing any mortgage financing, from acting as lessor in
any sale-leaseback transaction or from providing any other subordinated debt or
preferred equity financing with respect to any facilities of
-2-
<PAGE>
the type included within the Primary Business of the Company. It is expressly
acknowledged and agreed that, subject to subsections 2(b) and 2(c) below, the
prohibitions set forth in this subsection 2(a) shall apply only to any interest
in, or the development, management or operation of, any facility of the type
included within the Primary Business of the Company located anywhere within the
continental United States of America.
(b) Excluded from the restrictions set forth in subsection 2(a) are
the following properties and interests: (i) any interest in the Company; (ii)
the Island and any interest therein; (iii) any activity which a majority of the
independent members of the board of directors of the Company determines not to
be competitive with any facility which the Company owns or plans to acquire or
develop; (iv) less than 5% of any class of securities listed on a national
securities exchange or traded over-the-counter on the National Association of
Securities Dealers Automated Quotation System Market; and (v) subject to the
proviso at the end of this clause (v), any facilities acquired after the date of
this Agreement that are similar to those acquired, developed, managed or owned
by the Company, but only to the extent such facilities are acquired in
connection with the acquisition of a group of properties; provided, that in the
event of any such acquisition permitted by this clause (v), the Company shall
have the right and opportunity to purchase such similar facilities from Reschke,
the TPG Group or any Affiliate, as applicable, at a price equal to the fair
market value of such similar facilities.
(c) The restrictions set forth in subsection 2(a) shall not prohibit
the sale, lease or other disposition, or any activities incident thereto, of any
property or facilities in which the TPG Group and/or Reschke has an interest on
the date hereof.
3. Term. This Agreement shall be in effect from and after the date
hereof and shall continue in effect for a period expiring on the earlier of (i)
four (4) years from the closing date of the IPO or (ii) one (1) year from the
date of a merger of the Company or the sale of all or substantially all of the
stock or assets of the Company.
4. Reasonable Limit. The parties hereto have attempted to set forth
certain restrictions only to the extent necessary to protect the interests of
the Company. Each of Reschke and the TPG Group expressly acknowledges that the
restrictive covenant contained in subsection 2(a) above along with the
exceptions thereto contained in subsections 2(b) and 2(c) above, constitutes a
reasonable restriction. If, however, the scope or enforceability of the
restrictive covenant contained in this Agreement is disputed at any time, a
court or other trier of fact may modify and enforce the covenant to the extent
that it believes is reasonable under the circumstances existing at the time.
-3-
<PAGE>
5. Breach of Agreement.
(a) A party aggrieved shall notify the other party in writing of any
conflicts, disputes or claims of breach arising under this Agreement. Within
ten (10) business days after such notice is sent, the parties shall meet, shall
develop, as fully as possible, the facts relating to the conflict, dispute or
alleged breach, and shall attempt to resolve the same, it being understood and
agreed that any such resolution shall be subject to the consent and approval of
a majority of the Company's independent directors. If resolution of the dispute
is not made to the satisfaction of the aggrieved party within thirty (30) days
after the notice is sent, the aggrieved party may pursue its legal and equitable
remedies.
(b) In the event of breach of this Agreement, each of Reschke and the
TPG Group acknowledges that the remedy at law would be inadequate and that, in
addition to monetary damages, the Company shall be entitled, after compliance
with the dispute mechanism described in subsection 5(a) above, to seek an
injunctive order restraining such breach.
6. Transferability. The parties hereto agree that this Agreement
shall inure to the benefit of the Company, and its successors and assigns and
shall be transferable and assignable by the Company in connection with the sale
or other transfer of an equity interest in the Company of greater than 50% to an
entity that is not an Affiliate. Upon any such transfer or assignment, and
subject to Section 3, this Agreement shall remain in full force and effect
between Reschke and the TPG Group, on one hand, and such transferees, assignees
or successors in interest, on the other hand. This Agreement shall automatically
terminate in the event Affiliates own, in the aggregate, equity interests in the
Company of greater than 50%. This Agreement shall be binding upon the successors
and assigns of all or substantially all of the business of the TPG Group.
7. Waiver. The waiver by any party to this Agreement of a breach by
any party or any provision of this Agreement shall not operate or be construed
as a waiver of any subsequent breach by any other party. No waiver of any
provision of this Agreement shall be effective, unless in writing and signed by
the party waiving its rights, and then such waiver or consent shall be effective
only in the specific instance and for the specific purpose for which given,
provided further that no waiver by the Company shall be effective unless
accompanied by a certificate of an executive officer of the Company certifying
that a majority of the independent directors of the Company have consented to
and approved such waiver.
8. Notices. Any notices required or permitted to be sent hereunder
shall be delivered personally or mailed, certified mail, return receipt
requested, or delivered by overnight courier service guaranteeing next business
day delivery, to the following
-4-
<PAGE>
addresses, or such other addresses as shall be given by notice delivered
hereunder, in each case with applicable postage or delivery charges prepaid, and
shall be deemed to have been given upon delivery, if delivered personally, three
business days after mailing, if mailed, or one business day after delivery to
the courier, if delivery by overnight courier service:
If to the Company, to:
Brookdale Living Communities, Inc.
77 West Wacker Drive
Suite 3900
Chicago, Illinois 60601
Attn: President
With a copy to:
Winston & Strawn
35 West Wacker Drive
Chicago, Illinois 60601
Attn: Wayne D. Boberg
If to the TPG Group or any member thereof, to:
c/o The Prime Group, Inc.
77 West Wacker Drive
39th Floor
Chicago, Illinois 60601
Attn: Michael W. Reschke
With a copy to:
The Prime Group, Inc.
77 West Wacker Drive
Suite 3900
Chicago, Illinois 60601
Attn: Robert J. Rudnik
If to Michael W. Reschke, to:
c/o The Prime Group, Inc.
77 West Wacker Drive
39th Floor
Chicago, Illinois 60601
Attn: Michael W. Reschke
9. Final Agreement. This Agreement constitutes the final agreement
of the parties concerning the matters referred to herein, and supersedes all
prior agreements and understandings.
-5-
<PAGE>
10. Severability. Whenever possible, each provision of this
Agreement will be interpreted in such manner as to be effective and valid under
applicable law, but if any provision of this Agreement is held to be prohibited
by or invalid under applicable law, such provision will be ineffective only to
the extent of such prohibition or invalidity, without invalidating the remainder
of this Agreement.
11. Descriptive Headings. The descriptive headings of this Agreement
are inserted for convenience of reference only and do not constitute a part of
and shall not be utilized in interpreting this Agreement.
12. Governing Law. All questions concerning the construction,
validity and interpretation of, and the performance of the obligations imposed
by, this Agreement shall be governed by and construed in accordance with the
laws of the State of Illinois (excluding the choice of law provisions thereof).
[signature page follows]
-6-
<PAGE>
IN WITNESS WHEREOF, the parties hereto have caused this Non-Compete
Agreement to be duly executed and delivered on their behalf as of the date first
above written.
THE COMPANY:
BROOKDALE LIVING COMMUNITIES, INC.,
a Delaware corporation
By:________________________________
Name:______________________________
Its:_______________________________
RESCHKE AND THE TPG GROUP:
___________________________________
Michael W. Reschke
THE PRIME GROUP, INC.,
an Illinois corporation
By:________________________________
Name:______________________________
Its:_______________________________
PRIME HALLMARK, INC.,
an Illinois corporation
By:________________________________
Name:______________________________
Its:_______________________________
PRIME GROUP LIMITED PARTNERSHIP,
an Illinois limited partnership
By:________________________________
Michael W. Reschke,
Managing General Partner
-7-
<PAGE>
EXHIBIT 10.10
EMPLOYMENT AGREEMENT
--------------------
THIS EMPLOYMENT AGREEMENT (the "Agreement") is made and entered into this
____ day of ____________, 1997 by and between Brookdale Living Communities,
Inc., a Delaware corporation ("Employer"), and Matthew F. Whitlock, an
individual domiciled in the State of Illinois ("Executive").
W I T N E S S E T H
-------------------
A. Employer is engaged primarily in the ownership, management, leasing,
marketing, acquisition, development and construction of senior and assisted
living facilities throughout the United States.
B. Employer believes that it would benefit from the application of
Executive's particular and unique skill, experience, and background to the
management and operation of Employer.
C. Executive wishes to commit himself to serve Employer in the position
set forth herein on the terms herein provided.
D. The parties wish by this Agreement to set forth the terms and
conditions of the employment relationship between Employer and Executive.
NOW, THEREFORE, in consideration of the foregoing and the mutual covenants
herein set forth, and for other good and valuable consideration, Employer and
Executive hereby agree as follows:
1. Employment and Duties. During the Employment Term (as defined in
Section 2 hereof), Employer agrees to employ Executive, and Executive agrees to
be employed by Employer, as the Vice President - Acquisitions of Employer on the
terms and conditions provided in this Agreement. Executive shall conduct,
operate, manage and promote the business and business concept of Employer, and
exercise such other powers and authority as are provided by the By-laws of
Employer ("By-laws"). The Board of Directors of Employer (the "Board") or the
Chief Executive Officer may from time to time further define and clarify
Executive's duties and services hereunder or under the By-laws as Vice President
- - Acquisitions. Executive agrees to devote Executive's best efforts and
substantially all of Executive's business time, attention, energy and skill to
perform Executive's duties as Vice President - Acquisitions of Employer.
<PAGE>
2. Term. The initial term of this Agreement (the "Initial Term") shall
commence on the date Employer's Registration Statement on Form S-1, as amended
(No. 333-12259; the "Registration Statement") is declared effective (the
"Effective Date") and expire on December 31, 1999 (the "Scheduled Termination
Date"), provided, however, this Agreement shall automatically extend for one
year terms following the Initial Term (each a "Renewal Term", together with the
Initial Term, the "Employment Term"), unless either party shall give the other
party prior to thirty (30) days before the end of the Initial Term or any
Renewal Term, as applicable, written notice of its intention to terminate this
Agreement.
3. Compensation and Related Matters. (a) Base Salary. As compensation
for performing the services required by this Agreement during the Employment
Term, Employer shall pay to Executive an annual salary of no less than Ninety-
Five Thousand Dollars ($95,000) ("Base Compensation"), payable in accordance
with the general policies and procedures for payment of salaries to its
executive personnel maintained, from time to time, by Employer (but no less
frequently than monthly), subject to withholding for applicable federal, state,
and local taxes. Increases in Base Compensation, if any, shall be determined by
the Compensation Committee of the Board (the "Committee") based on periodic
reviews of Executive's performance conducted on at least an annual basis.
(b) Bonus. In addition to Base Compensation, Executive shall have the
right to receive, and Employer agrees to distribute to Executive, performance
bonus distributions (a "Performance Bonus Distribution") in an amount equal to
18/100 of 1% of the total purchase price of each property acquired by Employer,
provided that Executive had primary responsibility or was the procuring cause
for such acquisition, which Performance Distribution shall be payable within
thirty (30) days following the completion of the acquisition. Executive shall
not be entitled to the foregoing bonus with respect to portfolio acquisitions or
acquisitions of (or mergers with) another company or substantially all of the
assets of another company. With respect to such transactions, a separate bonus
arrangement will be structured by Employer on a case-by-case basis, based on,
among other factors, the degree of Executive's involvement in such acquisition
and the size thereof. Executive acknowledges that Executive is entitled to
Performance Bonus Distributions only with respect to acquisitions of properties
for which Executive has primary responsibilities or is the procuring cause and
will not be entitled to a Performance Bonus Distribution with respect to any
other properties acquired by Employer.
(c) Benefits. During the Employment Term and subject to the limitations
and alternative rights set forth in this Section 3(c), Executive and Executive's
eligible dependents shall have the right to participate in any retirement,
pension, insurance, health, dental or other benefit plan or program that has
been or is hereafter adopted by Employer (or in which Employer participates), as
such plans and programs may be amended or modified from time to time by
Employer, according to the terms of such plan or program with all the benefits,
rights and privileges as are enjoyed by any other senior executive officer of
Employer. If the participation of Executive would adversely affect the
qualification of a plan intended to be qualified under Section 401(a) of the
Internal Revenue Code as the same may be amended from time to time (the "Code"),
Employer shall have the right to exclude Executive from that plan in return for
Executive's participation in (i) a nonqualified
2
<PAGE>
deferred compensation plan or (ii) an arrangement providing substantially
comparable benefits under a plan that is either a qualified or nonqualified
under the Code at Employer's option.
(d) Expenses. Executive shall be reimbursed, subject to Employer's receipt
of invoices or similar records as Employer may reasonably request in accordance
with its policies and procedures, as such policies as and procedures may be
amended or modified from time to time by Employer, for all reasonable and
necessary expenses incurred by Executive in the performance of Executive's
duties hereunder.
(e) Vacations. During the Employment Term, Executive shall be entitled to
two (2) weeks paid vacation in accordance with Employer's practices, as such
practices may be amended or modified from time to time by Employer.
4. Stock Options. Employer has established a stock incentive plan (the
"Stock Incentive Plan") that will become effective prior to the completion of
the initial public offering of shares of common stock of Employer (the "Common
Stock") contemplated by the Registration Statement. The Stock Incentive Plan
initially provides, among other things, for the issuance from time to time to
certain officers, directors and other employees of Employer of up to 830,000
stock options ("Options"). On the Effective Date, Employer shall grant to
Executive 25,000 Options that will have such terms and conditions as are set
forth in the Stock Incentive Plan and the Stock Option Agreement to be entered
into between Employer and Executive.
5. Termination and Termination Benefits. (a) Termination by Employer.
(i) Without Cause. Employer may terminate this Agreement and Executive's
employment at any time for any reason or for no reason at all upon thirty (30)
days' prior written notice to Executive following notice of termination. In
connection with the termination of Executive's employment pursuant to this
Section 5(a)(i), Executive shall (A) be paid Executive's Base Compensation in
accordance with Section 3(a) hereof, and be entitled to the benefits set forth
in Sections 3(c), 3(d) and 3(e) hereof, up to the effective date of such
termination, (B) be paid any Performance Bonus Distribution to which Executive
becomes entitled under Section 3(b) hereof as a result of the closing of a
property acquisition occurring prior to or within forty-five days after the date
of such termination, and (C) receive the Termination Compensation specified in
Section 5(d) hereof. For purposes of the Agreement, in the event Employer
defaults in its obligation under Section 9 hereof and, as a consequence thereof,
Executive's employment with Employer (or Employer's successor or assign) is
terminated, such termination shall be deemed to be a termination under this
Section 5(a)(i).
(ii) With Cause. Employer may terminate this Agreement with cause
immediately upon written notice to Executive. Employer may elect to require
Executive to continue to perform Executive's duties under this Agreement for an
additional thirty (30) days following notice of termination. In connection with
the termination of Executive's employment pursuant to this Section 5(a)(ii),
Executive shall (A) be paid Executive's Base Compensation in accordance with
Section 3(a) hereof, and be entitled to the benefits set forth in Sections 3(c),
3(d) and 3(e) hereof, up to the effective date of such termination, and (B) be
paid any Performance Bonus Distribution to which Executive becomes entitled
under Section 3(b) hereof as a result of the closing of a
3
<PAGE>
property acquisition occurring prior to or within forty-five days after the date
of such termination. For purposes of this Section 5(a)(ii), "cause" shall mean
(A) a finding by the Chief Executive Officer of Employer or the Board that
Executive has materially harmed Employer, its business, assets or employees
through an act of dishonesty, material conflict of interest, gross misconduct or
willful malfeasance, (B) Executive's conviction of (or pleading nolo contendere
to) a felony, (C) Executive's failure to perform (which shall not include
inability to perform due to disability) in any material respects Executive's
material duties under this Agreement, (D) the breach by Executive of any of
Executive's material obligations hereunder (other than those covered by clause
(C) above) and the failure of Executive to cure such breach within ten (10) days
after receipt by Executive of a written notice of Employer specifying in
reasonable detail the nature of the breach, (E) Executive's sanction (including
restrictions, prohibitions and limitations agreed to under a consent decree or
agreed order) under, or conviction for violation of, any federal or state
securities law, rule or regulation (provided that in the case of a sanction,
such sanction materially impedes or impairs the ability of Executive to perform
Executive's duties and exercise Executive's responsibilities hereunder in a
satisfactory manner), or (F) Executive's willful breach of any material policies
or procedures of Employer.
(iii) Disability. If due to illness, physical or mental disability, or
other incapacity, Executive shall fail during any four (4) consecutive months to
perform the duties required by this Agreement, Employer may terminate this
Agreement upon thirty (30) days' written notice to Executive. In such event,
Executive shall (A) be paid Executive's Base Compensation in accordance with
Section 3(a) hereof, and be entitled to the benefits set forth in Section 3(c)
hereof (or the after-tax cash equivalent), up to the effective date of such
termination and be entitled to the benefits set forth in Sections 3(d) and 3(e)
hereof up to the date of such disability, and (B) be paid any Performance Bonus
Distribution to which Executive becomes entitled under Section 3(b) hereof as a
result of the closing of a property acquisition occurring prior to or within
forty-five days after the date of such disability. This Section 5(a)(iii) shall
not limit the entitlement of Executive, Executive's estate or beneficiaries to
any disability or other benefits available to Executive under any disability
insurance or other benefits plan or policy which is maintained by Employer for
Executive's benefit. For purposes of this Agreement, the "date of disability"
shall mean the first day of the consecutive period during which Executive fails
to perform the duties required by this Agreement due to illness, physical or
mental disability or other incapacity.
(b) Termination by Executive Without Good Reason. Executive may terminate
this Agreement and Executive's employment at any time for any reason or for no
reason at all upon thirty (30) days' written notice to Employer, during which
period Executive shall continue to perform Executive's duties under this
Agreement if Employer so elects. In connection with the termination of
Executive's employment pursuant to this Section 5(b), Executive shall (A) be
paid Executive's Base Compensation in accordance with Section 3(a) hereof, and
be entitled to the benefits set forth in Sections 3(c), 3(d) and 3(e) hereof, up
to the effective date of such termination, and (B) be paid any Performance Bonus
Distribution to which Executive becomes entitled under Section 3(b) hereof as a
result of the closing of a property acquisition occurring prior to or within
forty-five days after the date of such termination.
4
<PAGE>
(c) Death. Notwithstanding any other provision of this Agreement, this
Agreement shall terminate on the date of Executive's death. In such event,
Executive shall (A) be paid Executive's Base Compensation in accordance with
Section 3(a) hereof, and be entitled to the benefits set forth in Sections 3(c)
(or the after-tax cash equivalent), 3(d) and 3(e) hereof, up to the date of such
death, and (B) be paid any Performance Bonus Distribution to which Executive
becomes entitled under Section 3(b) hereof as a result of the closing of a
property acquisition occurring prior to or within forty-five days after the date
of such death. This Section 5(c) shall not limit the entitlement of Executive,
Executive's estate or beneficiaries under any insurance or other benefits plan
or policy which is maintained by Employer for Executive's benefit.
(d) Termination Compensation. In the event of a termination of this
Agreement pursuant to Section 5(a)(i) hereof, Employer shall pay to Executive,
within thirty (30) days of termination, an amount in one lump sum ("Termination
Compensation") equal to 50% of Executive's annual Base Compensation as of the
effective date of such termination.
6. Covenants of Executive.
(a) No Conflicts. Executive represents and warrants that he is not
personally subject to any agreement, order or decree which restricts Executive's
acceptance of this Agreement and the performance of Executive's duties with
Employer hereunder.
(b) Non-Competition. In return for the performance of the management
duties described in Section 1 hereof, during the Employment Term and for a
period of two years thereafter in the event of the termination of this Agreement
pursuant to the provisions of Sections 5(a)(i), 5(a)(ii) or 5(b) hereof,
Executive shall not, directly or indirectly, in any capacity whatsoever, either
on Executive's own behalf or on behalf of any other person or entity with whom
he may be employed or associated, own any interest in, participate or engage in
the day-to-day supervision, management, development, marketing or operation of
any senior, assisted living or semi-acute care facilities or such other
business as Employer may be engaged in as of the date of the applicable Section
5 termination event (the "Business"). Furthermore, for a period of two years
after any applicable Section 5 termination event, Executive shall not, directly
or indirectly, solicit, attempt to hire or hire any employee of Employer.
Notwithstanding the foregoing, nothing herein shall prohibit Executive from
owning 5% or less of any securities of a competitor engaged in the same Business
if such securities are listed on a nationally recognized securities exchange or
traded over-the-counter on the National Association of Securities Dealers
Automated Quotation System or otherwise.
(c) Non-Disclosure. During the Employment Term and for a period of two
years after the expiration or termination of this Agreement for any reason,
Executive shall not disclose or use, except in the pursuit of the Business for
or on behalf of Employer, any Trade Secret (as hereinafter defined) of Employer,
whether such Trade Secret is in Executive's memory or embodied in writing or
other physical form. For purposes of this Section 6(c), "Trade Secret" means
any information which derives independent economic value, actual or potential,
with respect to Employer from not being generally known to, and not being
readily ascertainable by proper means
5
<PAGE>
by, other persons who can obtain economic value from its disclosure or use and
is the subject of efforts to maintain its secrecy that are reasonable under the
circumstances, including, but not limited to, trade secrets, customer lists,
sales records and other proprietary commercial information. Said term, however,
shall not include general "know-how" information acquired by Executive during
the course of Executive's service which could have been obtained by Executive
from public sources without the expenditure of significant time, effort and
expense which does not relate to Employer.
(d) Return of Documents. Upon termination of Executive's services with
Employer, Executive shall return all originals and copies of books, records,
documents, customer lists, sales materials, tapes, keys, credit cards and other
tangible property of Employer within Executive's possession or under Executive's
control.
(e) Equitable Relief. In the event of any breach by Executive of any of
the covenants contained in this Section 6, it is specifically understood and
agreed that Employer shall be entitled, in addition to any other remedy which it
may have, to equitable relief by way of injunction, an accounting or otherwise
and to notify any employer or prospective employer of Executive as to the terms
and conditions hereof.
(f) Acknowledgment. Executive acknowledges that he will be directly and
materially involved as a senior executive in all important policy and
operational decisions of Employer. Executive further acknowledges that the
scope of the foregoing restrictions has been specifically bargained between
Employer and Executive, each being fully informed of all relevant facts.
Accordingly, Executive acknowledges that the foregoing restrictions of Section 6
are fair and reasonable, are minimally necessary to protect Employer, its other
stockholders and the public from the unfair competition of Executive who, as a
result of Executive's performance of services on behalf of Employer, will have
had unlimited access to the most confidential and important information of
Employer, its business and future plans. Executive furthermore acknowledges
that no unreasonable harm or injury will be suffered by Executive from
enforcement of the covenants contained herein and that he will be able to earn a
reasonable livelihood following termination of Executive's services
notwithstanding enforcement of the covenants contained herein.
7. Prior Agreements. This Agreement supersedes and is in lieu of any and
all other employment arrangements between Executive and Employer or its
predecessor or any subsidiary and any and all such employment agreements and
arrangements are hereby terminated and deemed of no further force or effect.
8. Assignment. Neither this Agreement nor any rights or duties of
Executive hereunder shall be assignable by Executive and any such purported
assignment by Executive shall be void. Employer may assign all or any of its
rights hereunder provided that substantially all of the assets of Employer are
also transferred to the same party.
9. Successor to Employer. Employer will require any successor or assign
(whether direct or indirect, by purchase, merger, consolidation or otherwise) to
all or substantially all the business and/or assets of Employer, as the case may
be, by agreement in form and substance
6
<PAGE>
reasonably satisfactory to Executive, expressly, absolutely and unconditionally
to assume and agree to perform this Agreement in the same manner and to the same
extent that Employer would be required to perform it if no such succession or
assignment had taken place. Any failure of Employer to obtain such agreement
prior to the effectiveness of any such succession or assignment shall be a
material breach of this Agreement. This Agreement shall inure to the benefit of
and be enforceable by Executive's personal and legal representatives, executors,
administrators, successors, heirs, distributees, devisees and legatees. If
Executive should die while any amounts are still payable to Executive hereunder,
all such amounts, unless otherwise provided herein, shall be paid in accordance
with the terms of this Agreement to Executive's devisee, legatee or other
designee or, if there be no such designee, to Executive's estate.
10. Notices. Any notice required or permitted to be given under this
Agreement shall be sufficient if in writing and if personally delivered or sent
by courier or certified mail, postage or delivery charges prepaid, to the
following addresses:
(a) if to Executive, to:
Matthew F. Whitlock
825 W. Webster
37th Floor
Chicago, IL 60614
(b) if to Employer, to:
Brookdale Living Communities, Inc.
Suite 3900
77 West Wacker Drive
Chicago, IL 60601
Attn: Chief Executive Officer
With a copy to:
--------------
Brookdale Living Communities, Inc.
Suite 3900
77 West Wacker Drive
Chicago, IL 60601
Attn: General Counsel
and to:
------
Winston & Strawn
35 West Wacker Drive
Chicago, IL 60601
7
<PAGE>
Attn: Wayne D. Boberg
Any notice, claim, demand, request or other communication given as provided in
this Section 10, if delivered personally, shall be effective upon delivery; and
if given by courier, shall be effective one (1) business day after deposit with
the courier if next day delivery is guaranteed; and if given by mail, shall be
effective three (3) business days after deposit in the mail. Either party may
change the address at which it is to be given notice by giving written notice to
the other party as provided in this Section 10.
11. Amendment. This Agreement may not be changed, modified or amended
except in writing signed by both parties hereto.
12. Waiver of Breach. The waiver by either party of the breach of any
provision of this Agreement shall not operate or be construed as a waiver of any
subsequent breach by either party.
13. Severability. Employer and Executive each expressly agree and
contract that it is not the intention of either party to violate any public
policy, statutory or common law, and that if any covenant, sentence, paragraph,
clause or combination of the same of this Agreement (a "Contractual Provision")
is in violation of the law of any state where applicable, such Contractual
Provision shall be void in the jurisdictions where it is unlawful, and the
remainder of such Contractual Provision, if any, and the remainder of this
Agreement shall remain binding on the parties such that such Contractual
Provision shall be binding only to the extent that such Contractual Provision is
lawful or may be lawfully performed under then applicable laws. In the event
that any part of any Contractual Provision of this Agreement is determined by a
court of competent jurisdiction to be overly broad thereby making the
Contractual Provision unenforceable, the parties hereto agree, and it is their
desire, that such court shall substitute a judicially enforceable limitation in
its place, and that the Contractual Provision, as so modified, shall be binding
upon the parties as if originally set forth herein.
14. Equitable Relief. In the event of any breach by Executive of any of
the covenants contained in this Agreement, it is specifically understood and
agreed that Employer shall be entitled, in addition to any other remedy which it
may have, to equitable relief by way of injunction, an accounting or otherwise
and to notify any employer or prospective employer of Executive as to the terms
and conditions hereof.
15. Indemnification. Executive shall indemnify Employer for any and all
consequential damages, costs and expenses resulting from any of Executive's acts
or omissions that constitute bad faith, willful or intentional conduct that
cause harm to Employer's business or reputation. Executive also shall indemnify
Employer for any and all consequential damages, costs and expenses resulting
from Executive's acts of omission constituting reckless disregard of Executive's
duties to Employer following notice thereof by Employer after it becomes aware
of such conduct and Executive's failure to so cure within thirty (30) days.
8
<PAGE>
16. Governing Law. This Agreement shall be governed by, and construed,
interpreted and enforced in accordance with the laws of the State of Illinois,
exclusive of the conflict of laws provisions of the State of Illinois.
[signature page follows]
9
<PAGE>
IN WITNESS WHEREOF, the parties hereto have executed this Agreement as of
the date first written above.
EMPLOYER:
BROOKDALE LIVING COMMUNITIES, INC.
By:____________________________________
Title:_________________________________
_______________________________________
Matthew F. Whitlock
10
<PAGE>
EXHIBIT 10.11
EMPLOYMENT AGREEMENT
--------------------
THIS EMPLOYMENT AGREEMENT (the "Agreement") is made and entered into this
____ day of ____________, 1997 by and between Brookdale Living Communities,
Inc., a Delaware corporation ("Employer"), and Mark J. Iuppenlatz, an individual
domiciled in the State of Illinois ("Executive").
W I T N E S S E T H
-------------------
A. Employer is engaged primarily in the ownership, management, leasing,
marketing, acquisition, development and construction of senior and assisted
living facilities throughout the United States.
B. Employer believes that it would benefit from the application of
Executive's particular and unique skill, experience, and background to the
management and operation of Employer.
C. Executive wishes to commit himself to serve Employer in the position
set forth herein on the terms herein provided.
D. The parties wish by this Agreement to set forth the terms and
conditions of the employment relationship between Employer and Executive.
NOW, THEREFORE, in consideration of the foregoing and the mutual covenants
herein set forth, and for other good and valuable consideration, Employer and
Executive hereby agree as follows:
1. Employment and Duties. During the Employment Term (as defined in
Section 2 hereof), Employer agrees to employ Executive, and Executive agrees to
be employed by Employer, as the Vice President - Development of Employer on the
terms and conditions provided in this Agreement. Executive shall conduct,
operate, manage and promote the business and business concept of Employer, and
exercise such other powers and authority as are provided by the By-laws of
Employer ("By-laws"). The Board of Directors of Employer (the "Board") or the
Chief Executive Officer may from time to time further define and clarify
Executive's duties and services hereunder or under the By-laws as Vice President
- - Development. Executive agrees to devote Executive's best efforts and
substantially all of Executive's business time, attention, energy and skill to
perform Executive's duties as Vice President - Development of Employer.
<PAGE>
2. Term. The initial term of this Agreement (the "Initial Term") shall
commence on the date Employer's Registration Statement on Form S-1, as amended
(No. 333-12259; the "Registration Statement") is declared effective (the
"Effective Date") and expire on December 31, 1999 (the "Scheduled Termination
Date"), provided, however, this Agreement shall automatically extend for one
year terms following the Initial Term (each a "Renewal Term", together with the
Initial Term, the "Employment Term"), unless either party shall give the other
party prior to thirty (30) days before the end of the Initial Term or any
Renewal Term, as applicable, written notice of its intention to terminate this
Agreement.
3. Compensation and Related Matters. (a) Base Salary. As compensation
for performing the services required by this Agreement during the Employment
Term, Employer shall pay to Executive an annual salary of no less than One
Hundred Thirty-Five Thousand Dollars ($135,000) ("Base Compensation"), payable
in accordance with the general policies and procedures for payment of salaries
to its executive personnel maintained, from time to time, by Employer (but no
less frequently than monthly), subject to withholding for applicable federal,
state, and local taxes. Increases in Base Compensation, if any, shall be
determined by the Compensation Committee of the Board (the "Committee") based on
periodic reviews of Executive's performance conducted on at least an annual
basis.
(b) Bonus. In addition to Base Compensation, Executive shall have the
right to receive, and Employer agrees to distribute to Executive, performance
bonus distributions (a "Performance Bonus Distribution") with respect to each
facility developed by Employer or one of its affiliates with respect to which
Executive had primary responsibility, structured as follows:
(i) A Performance Bonus Distribution in the amount of $7,500 will be paid
to Executive within thirty (30) days following the day on which a development
site is put under contract and all required zoning approvals and/or municipal
approvals for the proposed development have been received;
(ii) A Performance Bonus Distribution in the amount of $7,500 will be paid
to Executive within thirty (30) days following the day on which all required
permits to commence and complete the construction of a facility on the
development site have been received and the full construction of the facility
has commenced;
(iii) In the event the acquisition of the development site or the
development or construction of the facility is financed, in whole or in part,
with the proceeds of tax-exempt bonds, a Performance Bonus Distribution in the
amount of $10,000 will be paid to Executive within thirty (30) days following
the day on which tax-exempt bonds are issued and Employer (or an affiliate of
Employer) has received a draw from the proceeds generated from the sale of such
bonds;
(iv) In the event the acquisition of the development site or the
development or construction of the facility is financed, in whole or in part, by
the proceeds of tax increment financing ("TIF") bonds or other material
municipal assistance, a Performance Bonus Distribution in an amount equal to the
lower of (A) $5,000 or (B) three percent (3%) of the present value of the
2
<PAGE>
economic benefit to Employer of such TIF financing or municipal assistance will
be paid to Executive within thirty (30) days following the day on which the TIF
bonds are issued or the other municipal assistance approved and Employer (or an
affiliate of Employer) has received a draw from the proceeds of the TIF bonds or
has received all or a significant portion of the municipal assistance; and
(v) A Performance Bonus Distribution in the amount of $10,000 will be paid
to Executive within thirty (30) days following the day on which a Certificate of
Occupancy is received for or with respect to the entire facility.
Executive acknowledges that Executive is entitled to Performance Bonus
Distributions only with respect to development sites and the development of
facilities for which Executive has primary responsibilities and will not be
entitled to a Performance Bonus Distribution with respect to any other
development projects undertaken by Employer.
(c) Benefits. During the Employment Term and subject to the limitations
and alternative rights set forth in this Section 3(c), Executive and Executive's
eligible dependents shall have the right to participate in any retirement,
pension, insurance, health, dental or other benefit plan or program that has
been or is hereafter adopted by Employer (or in which Employer participates), as
such plans and programs may be amended or modified from time to time by
Employer, according to the terms of such plan or program with all the benefits,
rights and privileges as are enjoyed by any other senior executive officer of
Employer. If the participation of Executive would adversely affect the
qualification of a plan intended to be qualified under Section 401(a) of the
Internal Revenue Code as the same may be amended from time to time (the "Code"),
Employer shall have the right to exclude Executive from that plan in return for
Executive's participation in (i) a nonqualified deferred compensation plan or
(ii) an arrangement providing substantially comparable benefits under a plan
that is either a qualified or nonqualified under the Code at Employer's option.
(d) Expenses. Executive shall be reimbursed, subject to Employer's receipt
of invoices or similar records as Employer may reasonably request in accordance
with its policies and procedures, as such policies as and procedures may be
amended or modified from time to time by Employer, for all reasonable and
necessary expenses incurred by Executive in the performance of Executive's
duties hereunder.
(e) Vacations. During the Employment Term, Executive shall be entitled to
two (2) weeks paid vacation in accordance with Employer's practices, as such
practices may be amended or modified from time to time by Employer.
4. Stock Options. Employer has established a stock incentive plan (the
"Stock Incentive Plan") that will become effective prior to the completion of
the initial public offering of shares of common stock of Employer (the "Common
Stock") contemplated by the Registration Statement. The Stock Incentive Plan
initially provides, among other things, for the issuance from time to time to
certain officers, directors and other employees of Employer of up to 830,000
stock options ("Options"). On the Effective Date, Employer shall grant to
Executive 25,000 Options that will
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have such terms and conditions as are set forth in the Stock Incentive Plan and
the Stock Option Agreement to be entered into between Employer and Executive.
5. Termination and Termination Benefits. (a) Termination by Employer.
(i) Without Cause. Employer may terminate this Agreement and Executive's
employment at any time for any reason or for no reason at all upon thirty (30)
days' prior written notice to Executive following notice of termination. In
connection with the termination of Executive's employment pursuant to this
Section 5(a)(i), Executive shall (A) be paid Executive's Base Compensation in
accordance with Section 3(a) hereof, and be entitled to the benefits set forth
in Sections 3(c), 3(d) and 3(e) hereof, up to the effective date of such
termination, (B) be paid any Performance Bonus Distribution to which Executive
becomes entitled as a result of the occurrence of any of the events specified in
Section 3(b)(i) through (v) hereof prior to the date of such termination and (C)
receive the Termination Compensation specified in Section 5(d) hereof. For
purposes of this Agreement, in the event Employer defaults in its obligation
under Section 9 hereof and, as a consequence thereof, Executive's employment
with Employer (or Employer's successor or assign) is terminated, such
termination shall be deemed to be a termination under this Section 5(a)(i).
(ii) With Cause. Employer may terminate this Agreement with cause
immediately upon written notice to Executive. Employer may elect to require
Executive to continue to perform Executive's duties under this Agreement for an
additional thirty (30) days following notice of termination. In connection with
the termination of Executive's employment pursuant to this Section 5(a)(ii),
Executive shall (A) be paid Executive's Base Compensation in accordance with
Section 3(a) hereof, and be entitled to the benefits set forth in Sections 3(c),
3(d) and 3(e) hereof, up to the effective date of such termination, and (B) be
paid any Performance Bonus Distribution to which Executive becomes entitled as a
result of the occurrence of any of the events specified in Section 3(b)(i)
through (v) hereof prior to the date of such termination. For purposes of this
Section 5(a)(ii), "cause" shall mean (A) a finding by the Chief Executive
Officer of Employer or the Board that Executive has materially harmed Employer,
its business, assets or employees through an act of dishonesty, material
conflict of interest, gross misconduct or willful malfeasance, (B) Executive's
conviction of (or pleading nolo contendere to) a felony, (C) Executive's failure
to perform (which shall not include inability to perform due to disability) in
any material respects Executive's material duties under this Agreement, (D) the
breach by Executive of any of Executive's material obligations hereunder (other
than those covered by clause (C) above) and the failure of Executive to cure
such breach within ten (10) days after receipt by Executive of a written notice
of Employer specifying in reasonable detail the nature of the breach, (E)
Executive's sanction (including restrictions, prohibitions and limitations
agreed to under a consent decree or agreed order) under, or conviction for
violation of, any federal or state securities law, rule or regulation (provided
that in the case of a sanction, such sanction materially impedes or impairs the
ability of Executive to perform Executive's duties and exercise Executive's
responsibilities hereunder in a satisfactory manner), or (F) Executive's willful
breach of any material policies or procedures of Employer.
(iii) Disability. If due to illness, physical or mental disability, or
other incapacity, Executive shall fail during any four (4) consecutive months to
perform the duties required by this Agreement, Employer may terminate this
Agreement upon thirty (30) days' written
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notice to Executive. In such event, Executive shall (A) be paid Executive's
Base Compensation in accordance with Section 3(a) hereof, and be entitled to the
benefits set forth in Section 3(c) hereof (or the after-tax cash equivalent), up
to the effective date of such termination and be entitled to the benefits set
forth in Sections 3(d) and 3(e) hereof up to the date of such disability, and
(B) be paid any Performance Bonus Distribution to which Executive becomes
entitled as a result of the occurrence of any of the events specified in Section
3(b)(i) through (v) hereof prior to the date of such disability. This Section
5(a)(iii) shall not limit the entitlement of Executive, Executive's estate or
beneficiaries to any disability or other benefits available to Executive under
any disability insurance or other benefits plan or policy which is maintained by
Employer for Executive's benefit. For purposes of this Agreement, the "date of
disability" shall mean the first day of the consecutive period during which
Executive fails to perform the duties required by this Agreement due to illness,
physical or mental disability or other incapacity.
(b) Termination by Executive Without Good Reason. Executive may terminate
this Agreement and Executive's employment at any time for any reason or for no
reason at all upon thirty (30) days' written notice to Employer, during which
period Executive shall continue to perform Executive's duties under this
Agreement if Employer so elects. In connection with the termination of
Executive's employment pursuant to this Section 5(b), Executive shall (A) be
paid Executive's Base Compensation in accordance with Section 3(a) hereof, and
be entitled to the benefits set forth in Sections 3(c), 3(d) and 3(e) hereof, up
to the effective date of such termination, and (B) be paid any Performance Bonus
Distribution to which Executive becomes entitled as a result of the occurrence
of any of the events specified in Section 3(b)(i) through (v) hereof prior to
the date of such termination.
(c) Death. Notwithstanding any other provision of this Agreement, this
Agreement shall terminate on the date of Executive's death. In such event,
Executive shall (A) be paid Executive's Base Compensation in accordance with
Section 3(a) hereof, and be entitled to the benefits set forth in Sections 3(c)
(or the after-tax cash equivalent), 3(d) and 3(e) hereof, up to the date of such
death, and (B) be paid any Performance Bonus Distribution to which Executive
becomes entitled as a result of the occurrence of any of the events specified in
Section 3(b)(i) through (v) hereof prior to the date of such death. This
Section 5(c) shall not limit the entitlement of Executive, Executive's estate or
beneficiaries under any insurance or other benefits plan or policy which is
maintained by Employer for Executive's benefit.
(d) Termination Compensation. In the event of a termination of this
Agreement pursuant to Section 5(a)(i) hereof, Employer shall pay to Executive,
within thirty (30) days of termination, an amount in one lump sum ("Termination
Compensation") equal to 50% of Executive's annual Base Compensation as of the
effective date of such termination.
6. Covenants of Executive.
(a) No Conflicts. Executive represents and warrants that he is not
personally subject to any agreement, order or decree which restricts Executive's
acceptance of this Agreement and the performance of Executive's duties with
Employer hereunder.
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(b) Non-Competition. In return for the performance of the management
duties described in Section 1 hereof, during the Employment Term and for a
period of two years thereafter in the event of the termination of this Agreement
pursuant to the provisions of Sections 5(a)(i), 5(a)(ii) or 5(b) hereof,
Executive shall not, directly or indirectly, in any capacity whatsoever, either
on Executive's own behalf or on behalf of any other person or entity with whom
he may be employed or associated, own any interest in, participate or engage in
the day-to-day supervision, management, development, marketing or operation of
any senior, assisted living or semi-acute care facilities or such other
business as Employer may be engaged in as of the date of the applicable Section
5 termination event (the "Business"). Furthermore, for a period of two years
after any applicable Section 5 termination event, Executive shall not, directly
or indirectly, solicit, attempt to hire or hire any employee of Employer.
Notwithstanding the foregoing, nothing herein shall prohibit Executive from
owning 5% or less of any securities of a competitor engaged in the same Business
if such securities are listed on a nationally recognized securities exchange or
traded over-the-counter on the National Association of Securities Dealers
Automated Quotation System or otherwise.
(c) Non-Disclosure. During the Employment Term and for a period of two
years after the expiration or termination of this Agreement for any reason,
Executive shall not disclose or use, except in the pursuit of the Business for
or on behalf of Employer, any Trade Secret (as hereinafter defined) of Employer,
whether such Trade Secret is in Executive's memory or embodied in writing or
other physical form. For purposes of this Section 6(c), "Trade Secret" means
any information which derives independent economic value, actual or potential,
with respect to Employer from not being generally known to, and not being
readily ascertainable by proper means by, other persons who can obtain economic
value from its disclosure or use and is the subject of efforts to maintain its
secrecy that are reasonable under the circumstances, including, but not limited
to, trade secrets, customer lists, sales records and other proprietary
commercial information. Said term, however, shall not include general "know-
how" information acquired by Executive during the course of Executive's service
which could have been obtained by Executive from public sources without the
expenditure of significant time, effort and expense which does not relate to
Employer.
(d) Return of Documents. Upon termination of Executive's services with
Employer, Executive shall return all originals and copies of books, records,
documents, customer lists, sales materials, tapes, keys, credit cards and other
tangible property of Employer within Executive's possession or under Executive's
control.
(e) Equitable Relief. In the event of any breach by Executive of any of
the covenants contained in this Section 6, it is specifically understood and
agreed that Employer shall be entitled, in addition to any other remedy which it
may have, to equitable relief by way of injunction, an accounting or otherwise
and to notify any employer or prospective employer of Executive as to the terms
and conditions hereof.
(f) Acknowledgment. Executive acknowledges that he will be directly and
materially involved as a senior executive in all important policy and
operational decisions of Employer. Executive further acknowledges that the
scope of the foregoing restrictions has been
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specifically bargained between Employer and Executive, each being fully informed
of all relevant facts. Accordingly, Executive acknowledges that the foregoing
restrictions of Section 6 are fair and reasonable, are minimally necessary to
protect Employer, its other stockholders and the public from the unfair
competition of Executive who, as a result of Executive's performance of services
on behalf of Employer, will have had unlimited access to the most confidential
and important information of Employer, its business and future plans. Executive
furthermore acknowledges that no unreasonable harm or injury will be suffered by
Executive from enforcement of the covenants contained herein and that he will be
able to earn a reasonable livelihood following termination of Executive's
services notwithstanding enforcement of the covenants contained herein.
7. Prior Agreements. This Agreement supersedes and is in lieu of any and
all other employment arrangements between Executive and Employer or its
predecessor or any subsidiary and any and all such employment agreements and
arrangements are hereby terminated and deemed of no further force or effect.
8. Assignment. Neither this Agreement nor any rights or duties of
Executive hereunder shall be assignable by Executive and any such purported
assignment by Executive shall be void. Employer may assign all or any of its
rights hereunder provided that substantially all of the assets of Employer are
also transferred to the same party.
9. Successor to Employer. Employer will require any successor or assign
(whether direct or indirect, by purchase, merger, consolidation or otherwise) to
all or substantially all the business and/or assets of Employer, as the case may
be, by agreement in form and substance reasonably satisfactory to Executive,
expressly, absolutely and unconditionally to assume and agree to perform this
Agreement in the same manner and to the same extent that Employer would be
required to perform it if no such succession or assignment had taken place. Any
failure of Employer to obtain such agreement prior to the effectiveness of any
such succession or assignment shall be a material breach of this Agreement.
This Agreement shall inure to the benefit of and be enforceable by Executive's
personal and legal representatives, executors, administrators, successors,
heirs, distributees, devisees and legatees. If Executive should die while any
amounts are still payable to Executive hereunder, all such amounts, unless
otherwise provided herein, shall be paid in accordance with the terms of this
Agreement to Executive's devisee, legatee or other designee or, if there be no
such designee, to Executive's estate.
10. Notices. Any notice required or permitted to be given under this
Agreement shall be sufficient if in writing and if personally delivered or sent
by courier or certified mail, postage or delivery charges prepaid, to the
following addresses:
(a) if to Executive, to:
Mark J. Iuppenlatz
485 Clavey Lane
Highland Park, IL 60035
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(b) if to Employer, to:
Brookdale Living Communities, Inc.
Suite 3900
77 West Wacker Drive
Chicago, IL 60601
Attn: Chief Executive Officer
With a copy to:
--------------
Brookdale Living Communities, Inc.
Suite 3900
77 West Wacker Drive
Chicago, IL 60601
Attn: General Counsel
and to:
------
Winston & Strawn
35 West Wacker Drive
Chicago, IL 60601
Attn: Wayne D. Boberg
Any notice, claim, demand, request or other communication given as provided in
this Section 10, if delivered personally, shall be effective upon delivery; and
if given by courier, shall be effective one (1) business day after deposit with
the courier if next day delivery is guaranteed; and if given by mail, shall be
effective three (3) business days after deposit in the mail. Either party may
change the address at which it is to be given notice by giving written notice to
the other party as provided in this Section 10.
11. Amendment. This Agreement may not be changed, modified or amended
except in writing signed by both parties hereto.
12. Waiver of Breach. The waiver by either party of the breach of any
provision of this Agreement shall not operate or be construed as a waiver of any
subsequent breach by either party.
13. Severability. Employer and Executive each expressly agree and
contract that it is not the intention of either party to violate any public
policy, statutory or common law, and that if any covenant, sentence, paragraph,
clause or combination of the same of this Agreement (a "Contractual Provision")
is in violation of the law of any state where applicable, such Contractual
Provision shall be void in the jurisdictions where it is unlawful, and the
remainder of such Contractual Provision, if any, and the remainder of this
Agreement shall remain binding on the parties such that such Contractual
Provision shall be binding only to the extent that such Contractual Provision is
lawful or may be lawfully performed under then applicable laws. In the event
that any part of any
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Contractual Provision of this Agreement is determined by a court of competent
jurisdiction to be overly broad thereby making the Contractual Provision
unenforceable, the parties hereto agree, and it is their desire, that such court
shall substitute a judicially enforceable limitation in its place, and that the
Contractual Provision, as so modified, shall be binding upon the parties as if
originally set forth herein.
14. Equitable Relief. In the event of any breach by Executive of any of
the covenants contained in this Agreement, it is specifically understood and
agreed that Employer shall be entitled, in addition to any other remedy which it
may have, to equitable relief by way of injunction, an accounting or otherwise
and to notify any employer or prospective employer of Executive as to the terms
and conditions hereof.
15. Indemnification. Executive shall indemnify Employer for any and all
consequential damages, costs and expenses resulting from any of Executive's acts
or omissions that constitute bad faith, willful or intentional conduct that
cause harm to Employer's business or reputation. Executive also shall indemnify
Employer for any and all consequential damages, costs and expenses resulting
from Executive's acts of omission constituting reckless disregard of Executive's
duties to Employer following notice thereof by Employer after it becomes aware
of such conduct and Executive's failure to so cure within thirty (30) days.
16. Governing Law. This Agreement shall be governed by, and construed,
interpreted and enforced in accordance with the laws of the State of Illinois,
exclusive of the conflict of laws provisions of the State of Illinois.
[signature page follows]
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IN WITNESS WHEREOF, the parties hereto have executed this Agreement as of
the date first written above.
EMPLOYER:
BROOKDALE LIVING COMMUNITIES, INC.
By:_____________________________________
Title:__________________________________
________________________________________
Mark J. Iuppenlatz
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EXHIBIT 10.12
FORM OF
MANAGEMENT AGREEMENT
--------------------
This MANAGEMENT AGREEMENT (this "Agreement"), dated as of
______________, 1997, is made and entered into by and between THE ISLAND ON LAKE
TRAVIS, LTD., a Texas limited partnership ("Owner"), and BROOKDALE LIVING
COMMUNITIES OF TEXAS, INC., a Delaware corporation ("Manager").
RECITALS
--------
WHEREAS, Owner owns the senior and assisted living facility identified
on Schedule A hereto (the "Facility");
WHEREAS, Manager is experienced and qualified in the business of
owning and operating senior and assisted living facilities such as the Facility,
and Owner desires to engage Manager to operate the Facility; and
WHEREAS, Manager is willing to operate the Facility on the terms and
subject to the conditions set forth in this Agreement.
AGREEMENTS
----------
NOW, THEREFORE, in consideration of the recitals and the mutual
promises and covenants herein contained and for other good and valuable
consideration, the receipt and sufficiency of which are hereby acknowledged, the
parties hereto hereby agree as follows:
1. Responsibilities of Manager.
---------------------------
(a) Owner hereby engages Manager to operate the Facility, and Manager
hereby accepts such engagement and agrees to operate the Facility, at Owner's
expense, so as to provide all services required by applicable law and
regulations and by the terms and subject to the conditions set forth in this
Agreement. During the term of this Agreement, Manager shall have full authority
to operate and manage the Facility as a senior and assisted living facility in
accordance with applicable law and regulations and the terms and conditions
hereof, and shall have full and complete control and reign over, and use of, the
entire Facility, including its common areas. Without limiting the generality of
the foregoing, Manager shall have full authority and responsibility as follows:
(i) Operational Policies and Forms. Subject to the applicable Annual
Budget (as defined in Section 1(a)(xii)), Manager shall establish and implement
such operational policies and procedures, and develop such new policies and
procedures, as Manager may deem necessary to cause or to ensure the
establishment
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and maintenance of operational standards appropriate for the nature of the
Facility.
(ii) Charges. Manager shall establish the schedules of charges for
residents of the Facility, including appropriate charges for any and all special
services rendered for residents at the Facility.
(iii) Information. Manager shall develop any informational
material, mass media releases, and other related publicity materials, that it
deems necessary for the operation of the Facility.
(iv) Regulatory Compliance. Manager shall use its reasonable best
efforts to maintain all licenses, permits, qualifications and approvals from any
applicable governmental or regulatory authority required for the operation of
the Facility, to operate the Facility in compliance with all applicable laws and
regulations, and to comply with such laws and regulations in performing
Manager's obligations under this Agreement. In addition, Manager shall
supervise and coordinate the preparation and filing of (and, where required to
do so under applicable law or regulations, file) all reports or other
information required by all state or other governmental agencies having
jurisdiction over the Facility and shall deliver copies of all such reports and
information to Owner simultaneously with such filings. Manager shall cooperate
with governmental inspection and enforcement activities.
(v) Equipment and Improvements. Subject to the applicable Annual
Budget, Manager shall, on behalf of Owner, acquire or effect the acquisition of
equipment and improvements which are needed to maintain or upgrade the quality
of the Facility or its services, to replace obsolete or run-down equipment, or
to correct any other deficiencies which may be identified by Manager during the
term of this Agreement, and shall make, or engage third parties to make, all
such repairs, replacements and maintenance and shall cause to be acquired all
necessary equipment, including replacement equipment.
(vi) Accounting. Manager shall supervise and coordinate accounting
support to, and records for, the Facility, including the following:
A. a monthly balance sheet and statement of operations for the
Facility, to be submitted to Owner within thirty (30) days after the end of each
calendar month;
B. resident billing records;
C. accounts receivable and collection records;
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D. accounts payable records;
E. all payroll functions, including preparation of payroll checks,
establishment of depository accounts for with-holding taxes, payment of such
taxes (at Owner's sole expense), filing of payroll reports and the issuance of
W-2 forms to all employees;
F. a complete general ledger for the purposes of recording and
summarizing all transactions for the Facility; and
G. the preparation and filing of all necessary reports as required by
any and all governmental authorities having jurisdiction over the Facility or
the operation thereof and the simultaneous provision of copies thereof to Owner.
Manager shall file, on its own behalf or on behalf of Owner, all such reports as
are required to be filed by Manager or Owner.
All accounting procedures and systems utilized in providing said support shall
be in accordance with the operating capital and cash programs developed by
Manager and approved by Owner, which programs shall conform to generally
accepted accounting principles and shall not materially distort income or loss.
Subject to the applicable Annual Budget, nothing herein shall preclude Manager
from engaging a third party to assist it in the performance of the accounting
duties provided for herein.
(vii) Reports. Manager shall supervise and coordinate the
preparation of any reasonable operational information which may from time to
time be specifically requested by Owner, including any information and reports
needed to assist Owner in completing its tax returns and in complying with any
reporting obligations imposed by any mortgagees or lessors of the Facility. In
addition, (i) within thirty (30) days after the end of each calendar month,
Manager shall supervise and coordinate the preparation and the delivery to Owner
of an unaudited balance sheet of the Facility, dated as of the last day of such
month, and unaudited statements of income and expenses and cash flow for such
month relating to the operation of the Facility and (ii) within ninety (90) days
after the end of the fiscal year of the Facility, Manager shall supervise and
coordinate the preparation and the delivery to Owner of audited financial
statements, including a balance sheet of the Facility dated as of the last day
of said fiscal year and statements of income and expense and changes in
financial position and an unaudited statement of cash flow for the fiscal year
then ended relating to the operation of the Facility. In addition, Manager shall
supervise and coordinate the preparation and the delivery to Owner of monthly
occupancy reports and related information with respect to the Facility. All
originals of the books, forms and records generated by Manager in connection
with the operation of the Facility shall be Manager's property;
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provided, that Manager shall provide Owner with copies of any of such books,
forms and records reasonably requested by Owner.
(viii) Bank Accounts. Manager shall establish an account or accounts
and shall deposit therein all money received by Manager on Owner's behalf from
the operation of the Facility. Withdrawals and payments from this account shall
be made only on checks signed by one or more person or persons designated by
Manager. Manager shall give Owner written notice as to the identity of such
authorized signatories on such account. Subject to paragraph (2) of Section
1(a)(xii), all expenses incurred in the operation of the Facility in accordance
with the terms of the Annual Budgets, including, but not limited to, Facility
mortgage or lease payments, payroll and employee benefits and payment of Fees,
shall be paid by check drawn on this account. Monthly payments shall be made
out of this account first to pay any debt service or rent due with respect to
the Facility, next to pay the operating expenses of the Facility in such order
of priority as Manager deems appropriate to the operation of the Facility (other
than the Fees), and, thereafter, to pay the Fees. Any Fees which are not paid
when due as a result of an insufficiency of revenues from the Facility to cover
the same shall accrue and shall be due and payable promptly by Owner.
(ix) Personnel. Manager shall have full power and authority to
recruit, hire, train, promote, direct, discipline and fire all Facility
personnel, including the Administrator of the Facility; establish salary levels,
personnel policies and employee benefits; and establish employee performance
standards, all as Manager determines to be necessary or desirable during the
term of this Agreement to ensure the efficient and satisfactory operation of all
departments within, and all services offered by, the Facility. All of the
foregoing obligations shall be undertaken in accordance with the Annual Budgets
and applicable law and regulations. All of the Facility personnel shall be the
employees of Manager, unless otherwise agreed by Owner and Manager, and all
salary, bonuses, fringe benefits, payroll taxes and related expenses payable to
or in respect of the Facility's on-site personnel holding the positions of
Executive Director of the Facility and positions subordinate thereto shall be
expenses of the Facility. Manager agrees to employ as of the date of this
Agreement all individuals who are working at the Facility as of the date of this
Agreement and assume all liabilities and obligations to or with respect to such
individuals and indemnify, defend and hold harmless Owner and its affiliates
against any and all claims made by such individuals in respect of their
respective employment at the Facility.
(x) Supplies and Equipment. Manager shall purchase, on behalf of
Owner, supplies and non-capital equipment needed to operate the Facility within
the budgetary limits set forth in the Annual Budgets.
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(xi) Legal Proceedings. Manager shall, through legal counsel
designated by Manager and reasonably satisfactory to Owner, direct all legal
matters and proceedings that are within the scope of Manager's authority
pursuant to this Agreement, including without limitation, instituting any
necessary legal actions or proceedings to collect obligations owing to the
Facility, canceling or terminating any contract or agreement relating to the
Facility for breach thereof or default thereunder, and otherwise enforce the
obligations of the residents, sponsors, licensees, customers and any other users
of the Facility. Without limiting the generality of the foregoing, Manager is
authorized (without the prior written consent of Owner) to settle, in the name
and on behalf of Owner and on such terms and conditions as Manager may deem to
be in the best interests of the Facility, any and all claims or demands arising
out of, or in connection with, the operation of the Facility, whether or not
legal action has been instituted, provided that such settlement does not exceed
the amount for each such individual claim or demand as set forth in the most
recently approved Annual Budget. All such amounts paid in respect of any such
settlements shall be expenses of the Facility. Manager will give notice promptly
to Owner of all demands and claims and all settlements and legal actions, but
the failure to give such notice shall not affect the preceding provisions of
this paragraph.
(xii) Annual Budgets.
(1) Preparation and Submission. Owner and Manager acknowledge that
they have agreed upon the budget for the Facility through December 31, 1997. At
least ninety (90) days prior to January 1, 1998 and each subsequent calendar
year that commences during the term of this Agreement, Manager shall submit to
Owner a proposed annual budget for the Facility projecting the revenues
available and funds required during such fiscal year in order to operate the
Facility and to make capital improvements necessary or desirable in order to
keep the Facility's physical plant in good condition and repair. The proposed
annual budget shall be based upon data and information then available to Manager
and shall include, without limitation, estimated salaries and fringe benefits
for all personnel groups, projected staffing patterns for the Facility,
estimates of required capital expenditures and purchases of equipment, supplies,
inventory, food and similar items, and an estimate of the level of rates and
charges to residents of the Facility sufficient to generate revenue necessary to
operate the Facility and make the capital improvements projected in such budget.
The proposed annual budget shall be an estimate of revenues and costs, and Owner
and Manager acknowledge that (x) projected revenue may not be actually received
and (y) projected costs may be exceeded by actual expenses and capital
expenditures incurred in connection with the operation and maintenance of the
Facility. By submitting such a projected budget, Manager will not be deemed to
be providing a guarantee or warrant as to the
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projected revenue, expenses or capital expenditures of the Facility.
(2) Adoption. The Facility budget for the period ending [December 31,
1997] referred to in the immediately preceding paragraph and each annual budget
as finally established in accordance with this paragraph (2) (including as it
may thereafter be revised from time to time during a calendar year pursuant to
the written agreement of Owner and Manager), as the same may be modified by
Owner and Manager, shall constitute an "Annual Budget" for all purposes under
this Agreement. Owner shall, within fifteen (15) days following receipt from
Manager of a proposed annual budget proposal, notify Manager of either (i)
Owner's approval of such proposed annual budget or (ii) those items of which
Owner approves and those items of which Owner disapproves. In the event that
Owner does not either approve or disapprove of, in total or in part, such
proposed annual budget in writing within such 15-day period, then such proposed
annual budget shall be deemed approved by Owner and shall be the Annual Budget
for such calendar year. If Owner disapproves of the proposed annual budget
either in total or in part within such 15-day period, then Owner and Manager
shall have thirty (30) days from the date of Owner's disapproval notice to
formulate a mutually agreeable Annual Budget. If the parties are unable to reach
an agreement within said thirty (30) day period, then the Annual Budget for the
immediately preceding calendar year, including any such prior Annual Budget
determined in accordance with this sentence, increased by the greater of 5% and
the percentage increase in the Consumer Price Index -- Urban Wage Earners (or,
if such index is no longer published, such other index as is determined by
Manager in good faith to be comparable) during the 12-month period ended on
November 30th of such preceding year, shall constitute the Annual Budget pending
the final adoption of an Annual Budget; provided, however, that the budgeted
items for the categories of heat, light, power, insurance and real estate taxes
shall be deemed increased as required to reflect actual expenses for the
succeeding calendar year).
(3) Efforts to Operate within Annual Budget. Manager agrees to use
its reasonable best efforts to operate the Facility in accordance with the
Annual Budgets. Subject to the foregoing limitation, Owner shall be responsible
on a periodic basis, as and when needed, for all expenses and capital
expenditures incurred in connection with the operation and maintenance of the
Facility, including, without limitation, Fees and cost overruns which exceed the
projections in the then current Annual Budget; provided, however, that (except
as provided in the next sentence) Owner shall not be responsible for cost
overruns which exceed the relevant amount provided for in such Annual Budget by
more than 10%, if the incurrence of such overruns was subject to the reasonable
control of Manager. Notwithstanding anything in this Agreement, if Manager
determines in good faith that the incurrence of any expenditure is required in
order to comply with
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applicable law or regulations, then, with Owner's prior approval, Manager shall
be entitled to make such expenditures, and all such expenditures shall be
deemed, for all purposes of this Agreement, to be in accordance with the then
current Annual Budget.
(xiii) Collection of Accounts. Manager shall issue bills and collect
accounts and monies owed for goods and services furnished by the Facility,
including, but not limited to, enforcing the rights of Owner and the Facility as
creditor under any contract or in connection with the rendering of any services.
Any actions taken by Manager to collect said accounts receivable shall be in
accordance with the applicable laws, rules and regulations governing the
collection of accounts receivable and in accordance with the applicable Annual
Budget.
(xiv) Contracts. Subject to Owner's prior approval, Manager shall
negotiate, enter into, secure, cancel and/or terminate such agreements and
contracts which Manager may deem necessary or advisable for the operation of the
Facility, including, without limitation, the furnishing of concessions,
supplies, utilities, extermination, refuse removal and other services. Where
lawful and provided Owner has approved, said agreements and contracts will be
entered into in the name of and on behalf of Owner.
A. Exclusive Representative. It is understood and agreed that
Manager shall be the exclusive representative of Owner for purposes of
communicating and dealing directly with the regulatory authorities, governmental
agencies, employees, independent contractors, suppliers, residents, sponsors,
licensees, customers and guests of the Facility. Any communications from Owner
to such persons or entities or authorities shall be directed through Manager
unless Owner determines that direct communications between Owner and one or more
such persons or entities is appropriate. Owner currently maintains and will
continue to maintain contact relationships with certain of the above-mentioned
persons and entities.
2. Insurance. Manager shall arrange for and maintain all necessary and
proper hazard insurance covering the Facility, including the furniture, fixtures
and equipment situated thereon, all necessary and proper malpractice and public
liability insurance for Manager's and Owner's protection and for the protection
of Manager's and Owner's directors, officers, partners, agents and the
Facility's personnel. Manager shall also arrange for and maintain all employee
health and worker's compensation insurance for the Facility's personnel. Any
insurance provided pursuant to this paragraph shall comply with the requirements
of any applicable Facility mortgage or lease and, with the exception of the
insurance maintained by Manager for its own protection, shall be an expense of
the Facility.
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3. Proprietary Interest. The systems, methods, procedures and controls
employed by Manager and any written materials or brochures developed by Manager
to document the same are to remain the property of Manager provided, Manager
shall provide Owner with a copy or copies of such materials and brochures.
4. Term of Agreement; Effect of Termination. Unless this Agreement is
sooner terminated as hereinafter provided in Section 5 or in this Section 4 or
as otherwise agreed in writing, the initial term of this Agreement shall
commence on the date hereof and shall end on the second anniversary of the date
hereof, with successive automatic renewal periods of one (1) year each
thereafter, unless either party notifies the other in writing, within ninety
(90) days prior to the expiration of the then current term, of such party's
intention not to exercise the then upcoming automatic renewal period. This
Agreement may be terminated (i) by Owner (x) upon sixty (60) days' prior written
notice to Manager given at any time after the last day of the 24th month of the
term of this Agreement or (y) at any time after the date hereof for Cause (as
hereinafter defined), or (ii) by Manager upon sixty (60) days' prior written
notice to Owner given at any time after the date hereof; provided, however, that
in the event of a termination by Manager pursuant to clause (ii) above, Manager
shall cooperate with and assist Owner in engaging a qualified replacement
manager for the Facility. Upon any termination of this Agreement pursuant to the
immediately preceding sentence, the parties hereto shall have no further
obligations or liabilities other than the right of Manager to receive Fees
through the date of termination and Manager's obligation to cooperate with Owner
to facilitate a smooth transition to a qualified replacement manager for the
Facility, except that, upon the expiration or earlier termination of this
Agreement for any reason, the parties shall cooperate (at Owner's expense) to
minimize the impact of the change on the residents of the Facility, and during
any such period for which Manager provides services or assists in the operation
of the Facility in connection therewith it shall be entitled to receive an
appropriate fee therefor.
For purposes of this Agreement, "Cause" shall mean (i) fraud,
misappropriation or embezzlement by Manager involving Owner's property or other
wrongful acts by Manager that materially impair the goodwill or business of
Owner or the Facility or that cause material damage to Owner's property,
goodwill or business or (ii) continued failure by Manager to substantially
perform its duties and obligations owing to Owner under this Agreement, after a
written demand for performance by Manager is delivered to Manager by Owner that
specifically identifies the manner in which Owner believes Manager has not
substantially performed its duties and after Manager has been given at least
thirty (30) days in which to cure such performance deficiencies.
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5. Events of Default and Remedies.
(a) Defaults. Each of the following shall constitute an Event of
Default hereunder:
(1) if Owner shall fail to pay or allow payment of any installment of
the Fees due to Manager in accordance with Section 8 hereof for a period of
thirty (30) days after written notice of such default from Manager;
(2) if either Owner, on the one hand, or Manager, on the other, fail
to perform in any material respect any term, provision, or covenant of this
Agreement (other than as set forth in Section 5(a)(1)) and (i) such failure
continues after written notice from the other party specifying such failure to
perform (unless such failure cannot reasonably be cured within such 30-day
period) or (ii) the defaulting party fails to endeavor vigorously and
continuously to cure such default as promptly as is practicable; or
(3) if either Owner, on the one hand, or Manager, on the other, is
dissolved or liquidated, applies for or consents to the appointment of a
receiver, trustee or liquidator of all or a substantial part of its assets,
files a voluntary petition in bankruptcy or is the subject of an involuntary
bankruptcy filing, makes a general assignment for the benefit of creditors, or
files a petition or an answer seeking reorganization or arrangement with
creditors or to take advantage of any insolvency law, or if an order, judgment
or decree shall be entered by any court of competent jurisdiction, on the
application of a creditor, adjudicating Owner or Manager bankrupt or insolvent
or approving a petition seeking reorganization of Owner or Manager or appointing
a receiver, trustee or liquidator for such party of all or a substantial part of
its assets, and such order, judgment or decree shall continue unstayed and in
effect for any period of sixty (60) consecutive days.
(b) Remedies. At any time after the occurrence and during the
continuance of an Event of Default, the party who has not committed or suffered
the Event of Default may, at its option, terminate this Agreement by giving
written notice to the other party and, except as provided in this Agreement,
shall be entitled to exercise all rights and remedies available under applicable
law; provided, however, that Owner may cause the effective date of any
termination by Manager to be deferred for up to ninety (90) days to afford Owner
the opportunity to engage a replacement operator of the Facility.
6. Facility Operations.
(a) No Guarantee of Profitability. Manager does not guarantee that
operation of the Facility will be profitable, but Manager shall use its best
efforts to operate the Facility in as
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cost effective and profitable a manner as reasonably possible consistent with
maintaining operations in accordance with the senior and assisted living
industry's then prevailing standards in the geographic area in which the
Facility is located.
(b) Standard of Performance; Acting within Budget. In performing its
obligations under this Agreement, Manager shall use its reasonable best efforts
and act in good faith and with professionalism in accordance with the Annual
Budgets and the prevailing standards of the senior and assisted living industry
in the geographic area in which the Facility is located.
(c) Force Majeure. The parties will not be deemed to be in violation
of this Agreement if they are prevented from performing any of their respective
obligations hereunder for any reason beyond their control, including, without
limitation, strikes, shortages, war, acts of God, or any applicable statute,
regulation or rule of federal, state or local government or agency thereof
having jurisdiction over the Facility or the operations thereof.
7. Withdrawal of Funds by Manager.
Owner and Manager acknowledge and agree that the efficient operation
of the Facility requires that Manager have ready access to the funds required
therefor. Accordingly, unless otherwise agreed by Owner and Manager, Owner
agrees not to withdraw any funds from the Facility's bank account(s) reasonably
believed by Manager to be required for the proper operation of the Facility or
maintenance of appropriate reserves with respect thereto as set forth in the
most recently approved Annual Budget.
8. Fees.
During the term of this Agreement (or any period thereafter while
Manager continues to provide services or assist in the operation of the Facility
as contemplated by Section 4), Manager shall be entitled to receive management
fees (the "Fees") equal to five percent (5%) of the gross revenues of the
Facility during each month or portion thereof occurring during such term. Fees
shall be paid on a monthly basis simultaneously with the delivery by Manager to
Owner of the monthly statements provided for in Section 1(a)(vii).
9. Assignment. This Agreement shall not be assigned (including by
operation of law, whether by merger or consolidation (excluding a merger
effected solely for the purpose of changing Owner's jurisdiction of
incorporation that does not affect the stock ownership of Owner in any material
respect) or otherwise) by Owner, on the one hand, or by Manager, on the other,
without the prior written consent of the other party; provided, however, that to
the extent permitted by applicable law and regulations, and
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subject to the receipt of all required licenses, permits, approvals and
authorizations of applicable governmental agencies, this Agreement may be
assigned by Manager to one or more corporations or other legal entities all the
shares (and, in the case of legal entities other than corporations, all the
equity ownership and voting control) of which are owned by Manager or by
Brookdale Living Communities, Inc. (the owner of all of the outstanding stock of
Manager).
10. Notices. Any notices required or permitted to be sent hereunder shall
be delivered personally or mailed, certified mail, return receipt requested, or
delivered by overnight courier service to the following addresses, or such other
addresses as shall be given by notice delivered hereunder, and shall be deemed
to have been given upon delivery, if delivered personally, three (3) business
days after mailing, if mailed, or one business day after delivery to the
courier, if delivery by overnight courier service:
If to Owner, to:
The Island on Lake Travis, Ltd.
c/o The Prime Group, Inc.
77 West Wacker Drive
Suite 3900
Chicago, Illinois 60601
Attn: Michael W. Reschke
With a copy to:
The Prime Group, Inc.
77 West Wacker Drive
Suite 3900
Chicago, Illinois 60601
Attn: Robert J. Rudnik
If to Manager, to:
Brookdale Living Communities, Inc.
77 West Wacker Drive
Suite 3900
Chicago, Illinois 60601
Attn: President
With a copy to:
Winston & Strawn
35 West Wacker Drive
Chicago, Illinois 60601
Attn: Wayne D. Boberg
11. Relationship of the Parties. The relationship of Manager to Owner
in connection with this Agreement shall be that of an
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independent contractor, and all acts performed by Manager during the term hereof
shall be deemed to be performed in Manager's capacity as an independent
contractor. Nothing contained in this Agreement is intended to or shall be
construed to give rise to or create a partnership or joint venture or lease
between Owner, its successors and assigns, on the one hand, and Manager, its
successors and assigns, on the other hand.
12. Entire Agreement. This Agreement and any documents executed in
connection herewith contain the entire agreement among the parties and shall be
binding upon their respective successors and assigns, and shall be construed in
accordance with the laws of the State of Texas. This Agreement may not be
modified or amended except by written instrument signed by the parties hereto.
13. Contract Modifications for Certain Legal Events. In the event
any state or federal laws or regulations, whether now existing or enacted or
promulgated after the effective date of this Agreement, are interpreted by
judicial decision, a regulatory agency or legal counsel of both parties in such
a manner as to indicate that the structure of this Agreement may be in violation
of such laws or regulations, Owner and Manager agree to cooperate in
restructuring their relationship and this Agreement to eliminate such violation
or to reduce the risk thereof to the extent such restructuring can be
accomplished upon commercially reasonable terms; provided, that any such
restructuring shall, to the maximum extent possible, preserve the underlying
economic and financial arrangements between Owner and Manager. The parties
agree that such amendment may require either or both parties to obtain
appropriate regulatory licenses and approvals.
14. Captions. The captions used herein are for convenience of
reference only and shall not be construed in any manner to limit or modify any
of the terms hereof.
15. Severability. In the event one or more of the provisions
contained in this Agreement is deemed to be invalid, illegal or unenforceable in
any respect under applicable law, the validity, legality and enforceability of
the remaining provisions hereof shall not in any way be impaired thereby.
16. Remedies Cumulative; No Waiver. No right or remedy herein
conferred upon or reserved to any of the parties hereto is intended to be
exclusive of any other right or remedy, and each and every right and remedy
shall be cumulative and in addition to any other right or remedy given
hereunder, or now or hereafter legally existing upon the occurrence of an Event
of Default hereunder. The failure of any party hereto to insist at any time
upon the strict observance or performance of any of the provisions of this
Agreement or to exercise any right or remedy as provided in this Agreement shall
not impair any such right or remedy or be construed as a waiver or
relinquishment thereof with respect to subsequent
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defaults. Every right and remedy given by this Agreement to the respective
parties hereto may be exercised from time to time and as often as may be deemed
expedient by such parties. To the extent either party hereto incurs legal fees
and expenses in connection with such party's enforcement of any of its rights
hereunder as a result of a breach of this Agreement by the other party hereto
(the "Breaching Party"), then, to the extent it is determined, either by the
admission of the Breaching Party or by a court having competent jurisdiction
over such dispute, that the Breaching Party had committed the alleged breach of
this Agreement, then the Breaching Party shall pay all such reasonable
attorneys' fees and expenses incurred by the other party in connection with such
enforcement.
17. Counterparts. This Agreement may be executed in any number of
counterparts, each of which shall be an original, and each such counterpart
shall together constitute but one and the same Agreement.
[signature page follows]
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<PAGE>
IN WITNESS WHEREOF, the parties hereto have caused this Management
Agreement to be executed and delivered in their names and on their behalf as of
the date first set forth above.
OWNER:
THE ISLAND ON LAKE TRAVIS, LTD., a
Texas limited partnership
By: The Lake Travis Island, Ltd.,
a Texas limited partnership,
its General Partner
By: The Prime Group, Inc., an
Illinois corporation, its
General Partner
By:____________________________
Name:__________________________
Title:_________________________
MANAGER:
BROOKDALE LIVING COMMUNITIES OF
TEXAS, INC., a Delaware corporation
By:_________________________________
Name:_______________________________
Title:______________________________
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SCHEDULE A
DESCRIPTION OF FACILITY
The real property and improvements commonly known as The Island on Lake Travis,
located at 3404 American Drive, Lago Vista, Texas.
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<PAGE>
EXHIBIT 10.13
FORM OF
MANAGEMENT AGREEMENT
--------------------
This MANAGEMENT AGREEMENT (this "Agreement"), dated as of
______________, 1997, is made and entered into by and between KENWOOD ASSOCIATES
LIMITED PARTNERSHIP, a Minnesota limited partnership ("Owner"), and BROOKDALE
LIVING COMMUNITIES OF MINNESOTA, INC., a Delaware corporation ("Manager").
RECITALS
--------
WHEREAS, Owner owns the senior and assisted living facility identified
on Schedule A hereto (the "Facility");
WHEREAS, Manager is experienced and qualified in the business of
owning and operating senior and assisted living facilities such as the Facility,
and Owner desires to engage Manager to operate the Facility; and
WHEREAS, Manager is willing to operate the Facility on the terms and
subject to the conditions set forth in this Agreement.
AGREEMENTS
----------
NOW, THEREFORE, in consideration of the recitals and the mutual
promises and covenants herein contained and for other good and valuable
consideration, the receipt and sufficiency of which are hereby acknowledged, the
parties hereto hereby agree as follows:
1. Responsibilities of Manager.
(a) Owner hereby engages Manager to operate the Facility, and Manager
hereby accepts such engagement and agrees to operate the Facility, at Owner's
expense, so as to provide all services required by applicable law and
regulations and by the terms and subject to the conditions set forth in this
Agreement. During the term of this Agreement, Manager shall have full authority
to operate and manage the Facility as a senior and assisted living facility in
accordance with applicable law and regulations and the terms and conditions
hereof, and shall have full and complete control and reign over, and use of, the
entire Facility, including its common areas. Without limiting the generality of
the foregoing, Manager shall have full authority and responsibility as follows:
(i) Operational Policies and Forms. Subject to the applicable Annual
Budget (as defined in Section 1(a)(xii)), Manager shall establish and implement
such operational policies and procedures, and develop such new policies and
procedures, as Manager may deem necessary to cause or ensure the establishment
and
<PAGE>
maintenance of operational standards appropriate for the nature of the Facility.
(ii) Charges. Manager shall establish the schedules of charges for
residents of the Facility, including appropriate charges for any and all special
services rendered for residents at the Facility.
(iii) Information. Manager shall develop any informational material,
mass media releases, and other related publicity materials, that it deems
necessary for the operation of the Facility.
(iv) Regulatory Compliance. Manager shall use its reasonable best
efforts to maintain all licenses, permits, qualifications and approvals from any
applicable governmental or regulatory authority required for the operation of
the Facility, to operate the Facility in compliance with all applicable laws and
regulations, and to comply with such laws and regulations in performing
Manager's obligations under this Agreement. In addition, Manager shall supervise
and coordinate the preparation and filing of (and, where required to do so under
applicable law or regulations, file) all reports or other information required
by applicable state or other governmental agencies having jurisdiction over the
Facility and shall deliver copies of all such reports and information to Owner
simultaneously with such filings. Manager shall cooperate with governmental
inspection and enforcement activities.
(v) Equipment and Improvements. Subject to the applicable Annual
Budget, Manager shall, on behalf of Owner, acquire or effect the acquisition of
equipment and improvements which are needed to maintain or upgrade the quality
of the Facility or its services, to replace obsolete or run-down equipment, or
to correct any other deficiencies which may be identified by Manager during the
term of this Agreement, and shall make, or engage third parties to make, all
such repairs, replacements and maintenance and shall cause to be acquired all
necessary equipment, including replacement equipment.
(vi) Accounting. Manager shall supervise and coordinate accounting
support to, and shall maintain records for, the Facility, including the
following:
A. a monthly balance sheet and statement of operations for the
Facility, to be submitted to Owner within thirty (30) days after the end of each
calendar month;
B. resident billing records;
C. accounts receivable and collection records;
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D. accounts payable records;
E. all payroll functions, including preparation of payroll checks,
establishment of depository accounts for withholding taxes, payment of such
taxes (at Owner's sole expense), filing of payroll reports and the issuance of
W-2 forms to all employees;
F. a complete general ledger for the purposes of recording and
summarizing all transactions for the Facility; and
G. the preparation and filing of all necessary reports as required by
applicable governmental authorities and the simultaneous provision of copies
thereof to Owner. Manager shall file all such reports as are required to be
filed by Manager.
All accounting procedures and systems utilized in providing said support shall
be in accordance with the operating capital and cash programs developed by
Manager, which programs shall conform to generally accepted accounting
principles and shall not materially distort income or loss. Subject to the
applicable Annual Budget, nothing herein shall preclude Manager from engaging a
third party to assist it in the performance of the accounting duties provided
for herein.
(vii) Reports. Manager shall supervise and coordinate the preparation
of any reasonable operational information which may from time to time be
specifically requested by Owner, including any information needed to assist
Owner in completing its tax returns and in complying with any reporting
obligations imposed by any mortgagees or lessors of the Facility. In addition,
(i) within thirty (30) days after the end of each calendar month, Manager shall
supervise and coordinate the preparation and the delivery to Owner of an
unaudited balance sheet of the Facility, dated as of the last day of such month,
and an unaudited statement of income and expenses for such month relating to the
operation of the Facility and (ii) within ninety (90) days after the end of the
fiscal year of the Facility, Manager shall supervise and coordinate the
preparation and the delivery to Owner of unaudited financial statements,
including a balance sheet of the Facility dated as of the last day of said
fiscal year and a statement of income and expense for the fiscal year then ended
relating to the operation of the Facility. In addition, Manager shall supervise
and coordinate the preparation and the delivery to Owner of monthly occupancy
reports and related information with respect to the Facility. All originals of
the books, forms and records generated by Manager in connection with the
operation of the Facility shall be Manager's property.
(viii) Bank Accounts. Manager shall establish an account or accounts
and shall deposit therein all money received by Manager on Owner's behalf from
the operation of the Facility.
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Withdrawals and payments from account(s) shall be made only on checks signed by
one or more person or persons designated by Manager. Manager shall give Owner
written notice as to the identity of such authorized signatories on such
account(s). Subject to paragraph (2) of Section 1(a)(xii), all expenses incurred
in the operation of the Facility in accordance with the terms of the Annual
Budgets, including, but not limited to, Facility mortgage or lease payments,
payroll and employee benefits and payment of Fees, shall be paid by check drawn
on these account(s). Monthly payments shall be made out of these account(s)
first to pay any debt service or rent due with respect to the Facility and
thereafter to pay the operating expenses (including the Fees) of the Facility in
such order of priority as Manager deems appropriate to the operation of the
Facility; provided, that if in any period funds in such account(s) are not
sufficient to pay all operating expenses (including the Fees) of the Facility
then due and payable, then the funds drawn from the account(s) to pay such
expenses for such period shall be allocated pro rata between the Fees and the
other expenses then paid. Any Fees which are not paid when due as a result of an
insufficiency of revenues from the Facility to cover the same shall accrue and
shall be due and payable promptly by Owner.
(ix) Personnel. Manager shall have full power and authority to
recruit, hire, train, promote, direct, discipline and fire all Facility
personnel, including the Administrator of the Facility; establish salary levels,
personnel policies and employee benefits; and establish employee performance
standards, all as Manager determines to be necessary or desirable during the
term of this Agreement to ensure the efficient and satisfactory operation of all
departments within, and all services offered by, the Facility. All of the
foregoing obligations shall be undertaken in accordance with the Annual Budgets
and applicable law and regulations. All of the Facility personnel shall be the
employees of Manager, and all salary, bonuses, fringe benefits, payroll taxes
and related expenses payable to or in respect of the Facility's personnel shall
be expenses of the Facility.
(x) Supplies and Equipment. Manager shall purchase, on behalf of
Owner, supplies and non-capital equipment needed to operate the Facility within
the budgetary limits set forth in the Annual Budgets.
(xi) Legal Proceedings. Manager shall, through legal counsel
designated by Manager, direct all legal matters and proceedings that are within
the scope of Manager's authority pursuant to this Agreement, including without
limitation, instituting any necessary legal actions or proceedings to collect
obligations owing to the Facility, canceling or terminating any contract or
agreement relating to the Facility for breach thereof or default thereunder, and
otherwise enforce the obligations of the residents, sponsors, licensees,
customers and any other users of
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the Facility. Without limiting the generality of the foregoing, Manager is
authorized to settle, in the name and on behalf of the Owner and on such terms
and conditions as Manager may deem to be in the best interests of the Facility,
any and all claims or demands arising out of, or in connection with, the
operation of the Facility, whether or not legal action has been instituted,
provided that such settlement does not exceed $25,000 for each such individual
claim or demand. All such amounts paid in respect of any such settlements shall
be expenses of the Facility. Manager will give notice promptly to Owner of all
demands and claims and all settlements and legal actions, but the failure to
give such notice shall not affect the preceding provisions of this paragraph.
(xii) Annual Budgets.
--------------
(1) Preparation and Submission. Owner and Manager acknowledge that
they have agreed upon the budget for the Facility through December 31, 1997. At
least ninety (90) days prior to December 31, 1997 and each subsequent calendar
year that commences during the term of this Agreement, Manager shall submit to
Owner a proposed annual budget for the Facility projecting the revenues
available and funds required during such fiscal year in order to operate the
Facility and to make capital improvements necessary or desirable in order to
keep the Facility's physical plant in good condition and repair. The proposed
annual budget shall be based upon data and information then available to Manager
and shall include, without limitation, estimated salaries and fringe benefits
for all personnel groups, projected staffing patterns for the Facility,
estimates of required capital expenditures and purchases of equipment, supplies,
inventory, food and similar items, and an estimate of the level of rates and
charges to residents of the Facility sufficient to generate revenue necessary to
operate the Facility and make the capital improvements projected in such budget.
The proposed annual budget shall be an estimate of revenues and costs, and Owner
and Manager acknowledge that (x) projected revenue may not be actually received
and (y) projected costs may be exceeded by actual expenses and capital
expenditures incurred in connection with the operation and maintenance of the
Facility. By submitting such a projected budget, Manager will not be deemed to
be providing a guarantee or warrant as to the projected revenue, expenses or
capital expenditures of the Facility.
(2) Adoption. The Facility budget for the period ending
December 31, 1997 referred to in the immediately preceding paragraph and each
annual budget as finally established in accordance with this paragraph (2)
(including as it may thereafter be revised from time to time during a calendar
year pursuant to the written agreement of Owner and Manager), as the same may be
modified by Owner and Manager, shall constitute an "Annual Budget" for all
purposes under this Agreement. Owner shall, within fifteen (15) days following
receipt of a proposed annual budget proposal,
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notify Manager of either (i) Owner's approval of such proposed annual budget or
(ii) those items of which Owner approves and those items of which Owner
disapproves. In the event that Owner does not either approve or disapprove of,
in total or in part, such proposed annual budget in writing within such 15-day
period, then such proposed annual budget shall be deemed approved by Owner and
shall be the Annual Budget for such calendar year. If Owner disapproves of the
proposed annual budget either in total or in part within such 15-day period,
then Owner and Manager shall have thirty (30) days from the date of Owner's
disapproval notice to formulate a mutually agreeable Annual Budget. If the
parties are unable to reach an agreement within said thirty (30) day period,
then the Annual Budget for the immediately preceding calendar year, including
any such prior Annual Budget determined in accordance with this sentence,
increased by the greater of 5% and the percentage increase in the Consumer Price
Index -- Urban Wage Earners (or, if such index is no longer published, such
other index as is determined by Manager in good faith to be comparable) during
the 12-month period ended on November 30th of such preceding year, shall
constitute the Annual Budget pending the final adoption of an Annual Budget;
provided, however, that the budgeted items for the categories of heat, light,
power, insurance and real estate taxes shall be deemed increased as required to
reflect actual expenses for the succeeding calendar year).
(3) Efforts to Operate within Annual Budget. Manager agrees to use
its reasonable best efforts to operate the Facility in accordance with the
Annual Budgets. Subject to the foregoing limitation, Owner shall be responsible
on a periodic basis, as and when needed, for all expenses and capital
expenditures incurred in connection with the operation and maintenance of the
Facility, including, without limitation, Fees and cost overruns which exceed the
projections in the then current Annual Budget; provided, however, that (except
as provided in the next sentence) Owner shall not be responsible for cost
overruns which exceed the relevant amount provided for in such Annual Budget by
more than 10%, if the incurrence of such overruns was subject to the reasonable
control of Manager. Notwithstanding anything in this Agreement, if Manager
determines in good faith that the incurrence of any expenditure is required in
order to comply with applicable law or regulations or to provide services in
accordance with the senior and assisted living industry's then prevailing
standards in the area in which the Facility is located, then Manager shall be
entitled to make such expenditures, and all such expenditures shall be deemed,
for all purposes of this Agreement, to be in accordance with the then current
Annual Budget.
(xiii) Collection of Accounts. Manager shall issue bills and collect
accounts and monies owed for goods and services furnished by the Facility,
including, but not limited to, enforcing the rights of Owner and the Facility as
creditor under any contract or in connection with the rendering of any services.
Any actions
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taken by Manager to collect said accounts receivable shall be in accordance with
the applicable laws, rules and regulations governing the collection of accounts
receivable.
(xiv) Contracts. Consistent with or as otherwise contemplated by the
Annual Budgets, Manager shall negotiate, enter into, secure, cancel and/or
terminate such agreements and contracts which Manager may deem necessary or
advisable for the operation of the Facility, including, without limitation, the
furnishing of concessions, supplies, utilities, extermination, refuse removal
and other services. Where lawful, said agreements and contracts will be entered
into in the name of and on behalf of Owner.
A. Exclusive Representative. It is understood and agreed that Manager
shall be the exclusive representative of Owner for purposes of communicating and
dealing directly with the regulatory authorities, governmental agencies,
employees, independent contractors, suppliers, residents, sponsors, licensees,
customers and guests of the Facility. Any communications from Owner to such
persons or entities or authorities shall be directed through Manager.
2. Insurance. Manager shall arrange for and maintain all necessary and
proper hazard insurance covering the Facility, including the furniture, fixtures
and equipment situated thereon, all necessary and proper public liability
insurance for Manager's and Owner's protection. Manager shall also arrange for
and maintain all employee health and worker's compensation insurance for the
Facility's personnel. Any insurance provided pursuant to this paragraph shall
comply with the requirements of any applicable Facility mortgage or lease and
shall be an expense of the Facility.
3. Proprietary Interest. The systems, methods, procedures and controls
employed by Manager and any written materials or brochures developed by Manager
to document the same are to remain the property of Manager and are not, at any
time during or after the term of this Agreement, to be utilized, distributed,
copied or otherwise employed or acquired by Owner, except as authorized by
Manager.
4. Term of Agreement; Effect of Termination. The term of this
Agreement shall commence on the date hereof and shall end on the tenth
anniversary of the date hereof, unless this Agreement is sooner terminated as
hereinafter provided in Section 5 or in this Section 4 or as otherwise agreed in
writing. This Agreement may be terminated (i) by Owner (x) upon six months'
prior written notice to Manager given at any time after the last day of the 29th
month of the term of this Agreement or (y) for Cause (as hereinafter defined),
or (ii) by Manager (A) upon six months' prior written notice to Owner given at
any time after the last day of the 29th month of the term of this Agreement, or
(B) upon the occurrence of
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<PAGE>
a Change in Control (as hereinafter defined) of Owner; provided, however, that
in the event of a termination by Manager pursuant to clause (ii) (A) above,
Manager shall cooperate with and assist Owner in engaging a qualified
replacement manager for the Facility. Upon any termination of this Agreement
pursuant to the immediately preceding sentence, the parties hereto shall have no
further obligations or liabilities other than the right of Manager to receive
Fees through the date of termination, except that, upon the expiration or
earlier termination of this Agreement for any reason, the parties shall
cooperate (at Owner's expense) to minimize the impact of the change on the
residents of the Facility, and during any such period for which Manager provides
services or assists in the operation of the Facility in connection therewith it
shall be entitled to receive the Fees provided for herein.
For purposes of this Agreement, "Cause" shall mean (i) fraud,
misappropriation or embezzlement by Manager involving Owner's property or other
wrongful acts by Manager that materially impair the goodwill or business of
Owner or the Facility or that cause material damage to Owner's property,
goodwill or business or (ii) continued failure by Manager to substantially
perform its duties and obligations owing to Owner under this Agreement, after a
written demand for substantial performance by Manager is delivered to Manager by
Owner that specifically identifies the manner in which Owner believes Manager
has not substantially performed its duties and after Manager has been given at
least 60 days in which to cure such performance deficiencies, and a "Change in
Control" of the Owner shall be deemed to have occurred if (x) any person or
group (within the meaning of Section 13(d)(3) of the Securities Exchange Act of
1934, as amended (the "Exchange Act") or any successor provision) shall acquire
beneficial ownership (determined in accordance with Rule 13d-3 promulgated under
the Exchange Act or any successor provision) of securities of Owner representing
more than fifty percent (50%) of the total outstanding voting power of
securities of Owner entitled to vote for the election of directors of Owner or
(y) Daniel N. Epstein is no longer [a General Partner] or [in control of the
Managing General Partner] of Owner.
5. Events of Default and Remedies.
(a) Defaults. Each of the following shall constitute an Event of
Default hereunder:
(1) if Owner shall fail to pay or allow payment of any installment of
the Fees due to Manager in accordance with Section 7 hereof for a period of
seven (7) days after written notice of such default from Manager;
(2) if either Owner, on the one hand, or Manager, on the other, fail
to perform in any material respect any term, provision, or covenant of this
Agreement (other than as set forth in Section 5(a)(1)) and (i) such failure
continues after written notice from
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<PAGE>
the other party specifying such failure to perform (unless such failure cannot
reasonably be cured within such 30-day period) or (ii) the defaulting party
fails to endeavor vigorously and continuously to cure such default as promptly
as is practicable; or
(3) if either Owner, on the one hand, or Manager, on the other, is
dissolved or liquidated, applies for or consents to the appointment of a
receiver, trustee or liquidator of all or a substantial part of its assets,
files a voluntary petition in bankruptcy or is the subject of an involuntary
bankruptcy filing, makes a general assignment for the benefit of creditors, or
files a petition or an answer seeking reorganization or arrangement with
creditors or to take advantage of any insolvency law, or if an order, judgment
or decree shall be entered by any court of competent jurisdiction, on the
application of a creditor, adjudicating Owner or Manager bankrupt or insolvent
or approving a petition seeking reorganization of Owner or Manager or appointing
a receiver, trustee or liquidator for such party of all or a substantial part of
its assets, and such order, judgment or decree shall continue unstayed and in
effect for any period of sixty (60) consecutive days.
(b) Remedies. At any time after the occurrence and during the
continuance of an Event of Default, the party who has not committed or suffered
the Event of Default may, at its option, terminate this Agreement by giving
written notice to the other party and, except as provided in this Agreement,
shall be entitled to exercise all rights and remedies available under applicable
law; provided, however, that Owner may cause the effective date of any
termination by Manager to be deferred for up to [ninety (90)] days to afford
Owner the opportunity to engage a replacement operator of the Facility. Without
limiting the generality of the foregoing, if Owner is the defaulting party, or
if Owner shall terminate the Agreement other than as a result of an Event of
Default caused by Manager, then Owner shall pay Manager, within thirty (30) days
following the date of such termination, the sum of (x) all unpaid Fees accrued
through the date of such termination and all unpaid amounts for which Manager is
then entitled to receive reimbursement under this Agreement and (y) as
liquidated damages and not as a penalty, the product of an amount equal to three
percent (3%) of the average monthly gross revenues of the Facility for the
twelve months immediately preceding the date of termination and the lesser of
(A) [ ] and (B) the number of months remaining in the term of this Agreement
immediately prior to such termination. If this Agreement is terminated by
Manager pursuant to Section 5(a)(1) or the immediately preceding sentence, and
Manager incurs legal fees in connection with the enforcement of its rights to
such Fees and liquidated damages, as applicable, Owner shall pay all reasonable
attorneys' fees and other expenses incurred by Manager in connection with such
enforcement. In the event of any breach of this Agreement by Manager, including
any breach resulting in an Event of Default, Owner's sole remedy shall be to
terminate this
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<PAGE>
Agreement in accordance with the terms hereof, and Owner shall have no other
liability hereunder.
6. Facility Operations.
-------------------
(a) No Guarantee of Profitability. Manager does not guarantee that
operation of the Facility will be profitable, but Manager shall use its best
efforts to operate the Facility in as cost effective and profitable a manner as
reasonably possible consistent with maintaining operations in accordance with
the senior and assisted living industry's then prevailing standards in the
geographic area in which the Facility is located.
(b) Standard of Performance; Acting within Budget. In performing its
obligations under this Agreement, Manager shall use its reasonable best efforts
and act in good faith and with professionalism in accordance with the Annual
Budgets and the prevailing standards of the senior and assisted living industry
in the geographic area in which the Facility is located.
(c) Force Majeure. The parties will not be deemed to be in violation
of this Agreement if they are prevented from performing any of their respective
obligations hereunder for any reason beyond their control, including, without
limitation, strikes, shortages, war, acts of God, or any statute, regulation or
rule of federal, state or local government or agency thereof.
7. Withdrawal of Funds by Manager.
------------------------------
Owner and Manager acknowledge and agree that the efficient operation
of the Facility requires that Manager have ready access to the funds required
therefor. Accordingly, unless otherwise agreed by Owner and Manager, Owner
agrees not to withdraw any funds from the Facility's bank account(s) reasonably
believed by Manager to be required for the proper operation of the Facility or
maintenance of appropriate reserves with respect thereto. Owner hereby agrees
that it shall, from time to time upon the advice or reasonable request of
Manager, deposit such funds in the Facility's bank accounts as is necessary to
operate the Facility including to make the payments identified in Section
1(a)(viii) (including the Fees) as and when such amounts are due and payable.
8. Fees.
----
During the term of this Agreement (or any period thereafter while
Manager continues to provide services or assist in the operation of the Facility
as contemplated by Section 4), Manager shall be entitled to receive management
fees equal to (i) three percent (3%) of the gross revenues of the Facility (the
"Gross Revenue Fees") during each month or portion thereof occurring during such
term plus (ii) an amount each year (or portions thereof) during such term equal
to twenty percent (20%) of
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<PAGE>
any increase in the net operating income of the Facility during such year in
excess of $600,000 (the "NOI Fees" and, together with the Gross Revenue Fees,
the "Fees"). The Gross Revenue Fees shall be paid on a monthly basis
simultaneously with the delivery by Manager to Owner of the monthly statements
provided for in Section 1(a)(vii). The NOI Fees shall be paid on an annual basis
within ten (10) business days of the delivery by Manager to Owner of the
annual fiscal year financial statements provided for in Section 1 (a)(vii).
9. Assignment. This Agreement shall not be assigned (including by
operation of law, whether by merger or consolidation (excluding a merger
effected solely for the purpose of changing Owner's jurisdiction of
incorporation that does not affect the stock ownership of Owner in any material
respect) or otherwise) by Owner, on the one hand, or by Manager, on the other,
without the prior written consent of the other party; provided, however, that to
the extent permitted by applicable law and regulations, and subject to the
receipt of all required licenses, permits, approvals and authorizations of
applicable governmental agencies, this Agreement may be assigned by Manager to
one or more corporations or other legal entities all the shares (and, in the
case of legal entities other than corporations, all the equity ownership and
voting control) of which are owned by Manager.
10. Notices. Any notices required or permitted to be sent hereunder shall
be delivered personally or mailed, certified mail, return receipt requested, or
delivered by overnight courier service to the following addresses, or such other
addresses as shall be given by notice delivered hereunder, and shall be deemed
to have been given upon delivery, if delivered personally, three (3) business
days after mailing, if mailed, or one business day after delivery to the
courier, if delivery by overnight courier service:
If to Owner, to:
Kenwood Associates Limited Partnership
222 North LaSalle Street
Suite 1414
Chicago, Illinois 60601
Attn: Daniel N. Epstein
With a copy to:
James T. Buchholz, Esq.
Attorney at Law
222 North LaSalle Street
Suite 1414
Chicago, Illinois 60601
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<PAGE>
If to Manager, to:
Brookdale Living Communities of Minnesota, Inc.
77 West Wacker Drive
Suite 3900
Chicago, Illinois 60601
Attn: President
With a copy to:
Winston & Strawn
35 West Wacker Drive
Chicago, Illinois 60601
Attn: Wayne D. Boberg
11. Relationship of the Parties. The relationship of Manager to Owner in
connection with this Agreement shall be that of an independent contractor and
all acts performed by Manager during the term hereof shall be deemed to be
performed in Manager's capacity as an independent contractor. Nothing contained
in this Agreement is intended to or shall be construed to give rise to or create
a partnership or joint venture or lease between Owner, its successors and
assigns on the one hand, and Manager, its successors and assigns, on the other
hand.
12. Entire Agreement. This Agreement and any documents executed in
connection herewith contain the entire agreement among the parties and shall be
binding upon their respective successors and assigns, and shall be construed in
accordance with the laws of the State of Minnesota. This Agreement may not be
modified or amended except by written instrument signed by the parties hereto.
13. Contract Modifications for Certain Legal Events. In the event any
state or federal laws or regulations, whether now existing or enacted or
promulgated after the effective date of this Agreement, are interpreted by
judicial decision, a regulatory agency or legal counsel of both parties in such
a manner as to indicate that the structure of this Agreement may be in violation
of such laws or regulations, Owner and Manager agree to cooperate in
restructuring their relationship and this Agreement to eliminate such violation
or to reduce the risk thereof; provided, that any such restructuring shall, to
the maximum extent possible, preserve the underlying economic and financial
arrangements between Owner and Manager. The parties agree that such amendment
may require either or both parties to obtain appropriate regulatory licenses and
approvals. Owner and Manager agree that the foregoing is not a binding
obligation to consummate any transactions contemplated by, or discussed during
negotiations conducted under, this Section 13, it being understood any such
amendment or restructuring of this Agreement shall be entered into at the sole
and absolute discretion of Owner and Manager.
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<PAGE>
14. Captions. The captions used herein are for convenience of reference
only and shall not be construed in any manner to limit or modify any of the
terms hereof.
15. Severability. In the event one or more of the provisions contained in
this Agreement is deemed to be invalid, illegal or unenforceable in any respect
under applicable law, the validity, legality and enforceability of the remaining
provisions hereof shall not in any way be impaired thereby.
16. Remedies Cumulative; No Waiver. No right or remedy herein conferred
upon or reserved to any of the parties hereto is intended to be exclusive of any
other right or remedy, and each and every right and remedy shall be cumulative
and in addition to any other right or remedy given hereunder, or now or
hereafter legally existing upon the occurrence of an Event of Default hereunder.
The failure of any party hereto to insist at any time upon the strict observance
or performance of any of the provisions of this Agreement or to exercise any
right or remedy as provided in this Agreement shall not impair any such right or
remedy or be construed as a waiver or relinquishment thereof with respect to
subsequent defaults. Every right and remedy given by this Agreement to the
respective parties hereto may be exercised from time to time and as often as may
be deemed expedient by such parties.
17. Counterparts. This Agreement may be executed in any number of
counterparts, each of which shall be an original, and each such counterpart
shall together constitute but one and the same Agreement.
[signature page follows]
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<PAGE>
IN WITNESS WHEREOF, the parties hereto have caused this Management
Agreement to be executed and delivered in their names and on their behalf as of
the date first set forth above.
OWNER:
KENWOOD ASSOCIATES LIMITED PARTNERSHIP,
a Minnesota limited partnership
By:
-------------------------------
Name:
-----------------------------
Title:
----------------------------
MANAGER:
BROOKDALE LIVING COMMUNITIES OF MINNESOTA, INC.,
a Delaware corporation
By:
-------------------------------
Name:
-------------------------------
Title:
------------------------------
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<PAGE>
SCHEDULE A
DESCRIPTION OF FACILITY
The real property and improvements commonly known as the Kenwood, located at 825
Summit Avenue, Minneapolis, Minnesota.
<PAGE>
EXHIBIT 10.14
BROOKDALE LIVING COMMUNITIES, INC.
STOCK INCENTIVE PLAN
<PAGE>
TABLE OF CONTENTS
Section Page
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<TABLE>
<CAPTION>
<S> <C>
1. PURPOSE OF PLAN........................................................... 1
2. DEFINITIONS............................................................... 1
3. STOCK SUBJECT TO PLAN..................................................... 4
3.1 Stock Subject to Plan.............................................. 4
3.2 Unexercised Options................................................ 4
3.3 Changes in Company Capitalization.................................. 4
4. GRANTING OF OPTIONS....................................................... 4
4.1 Eligibility........................................................ 4
4.2 Incentive Stock Options............................................ 4
4.3 Granting of Options................................................ 5
4.4 Administration Of the Plan......................................... 5
5. TERMS OF OPTIONS.......................................................... 6
5.1 Option Agreement................................................... 6
5.2 Vesting of Options................................................. 7
5.3 Option Exercise Price.............................................. 7
5.4 Exercise Periods................................................... 7
5.5 Requirement of Continued Employment................................ 8
5.6 Adjustments in Outstanding Options................................. 9
5.7 Merger, Consolidation, Acquisition, Liquidation or Dissolution..... 9
5.8 No Right to Continued Employment................................... 9
6. EXERCISE OF OPTIONS.......................................................10
6.1 Person Eligible to Exercise........................................10
6.2 Partial Exercise...................................................10
6.3 Manner of Exercise.................................................10
6.4 Conditions to Issuance of Stock Certificates.......................11
6.5 Rights as Stockholders.............................................12
6.6 Transfer Restrictions..............................................12
7. ADDITIONAL PROVISIONS.....................................................12
7.1 Approval of Plan by Stockholders...................................12
7.2 Nontransferability.................................................12
7.3 Death or Disability of Optionee....................................12
7.4 Securities Act.....................................................13
</TABLE>
i
<PAGE>
<TABLE>
<CAPTION>
Section Page
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<S> <C>
7.5 Withholding of Tax.................................................13
7.6 Termination and Amendment of Plan..................................13
7.7 Duties of the Company..............................................13
8. GENERAL PROVISIONS........................................................14
</TABLE>
ii
<PAGE>
SECTION 1. PURPOSE OF PLAN
The purpose of the Brookdale Living Communities, Inc. Stock Incentive Plan
(the "Plan") is to provide a means by which Brookdale Living Communities, Inc.
(the "Company") may attract and retain directors, executive officers and other
key employees with outstanding qualifications and consultants and advisers who
provide substantial and important services to the Company, by affording those
individuals with incentives to exert maximum efforts for the success of the
Company through opportunities to participate in the growth, development and
financial success of the Company.
SECTION 2. DEFINITIONS
Wherever the following capitalized terms are used in the Plan, they shall
have the following respective meanings:
2.1 "Board of Directors" means the Board of Directors of the Company.
2.2 "Change in Control" shall be deemed to have occurred if
(a) any "person" (as such term is used in Sections 13(d) and 14(d) of
the Exchange Act), other than a trustee or other fiduciary holding securities
under an employee benefit plan of the Company, a corporation owned directly or
indirectly by the stockholders of the Company in substantially the same
proportions as their ownership of the Common Stock, Michael W. Reschke or The
Prime Group, Inc. or any of their respective affiliates, becomes the "beneficial
owner" (as defined in Rule 13d-3 under the Exchange Act), directly or
indirectly, of securities of the Company representing 50% or more of the total
voting power represented by the Company's then outstanding securities which vote
generally in the election of directors (referred to herein as "Voting
Securities");
(b) during any period of two consecutive years, individuals who at the
beginning of such period constitute the Board of Directors and any new directors
whose election by the Board of Directors or nomination for election by the
Company's stockholders was approved by a vote of at least two-thirds (2/3) of
the directors then still in office who either were directors at the beginning of
the period or whose election or nomination for election was previously so
approved, cease for any reason to constitute a majority of the Board of
Directors;
(c) the stockholders of the Company approve a merger or consolidation
of the Company with any other corporation, other than a merger or consolidation
which would result in the Voting Securities of the Company outstanding
immediately prior thereto continuing to represent (either by remaining
outstanding or by being converted into Voting Securities of the surviving
entity) more than 50% of the total voting power represented by the Voting
Securities of the Company or such surviving entity outstanding immediately after
such merger or consolidation, or
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<PAGE>
(d) the stockholders of the Company approve a plan of complete
liquidation of the Company or an agreement for the sale or disposition by
the Company (in one transaction or a series of transactions) of all or
substantially all of the Company's assets.
2.3 "Code" means the Internal Revenue Code of 1986, as amended.
2.4 "Committee" means as specified in Section 4.4.
2.5 "Common Stock" means the Common Stock of the Company, par value $0.01
per share.
2.6 "Company" means Brookdale Living Communities, Inc., a Delaware
corporation. In addition, "Company" shall mean any corporation assuming, or
issuing new employee stock options in substitution for, Incentive Stock Options
outstanding under the Plan, in a transaction to which Section 424(a) of the Code
applies.
2.7 "Date of Grant" the date as of which an Option has been granted
pursuant to the Plan.
2.8 "Disability" means, with respect to an individual, a physical or
mental condition resulting from any medically determinable physical or mental
impairment that renders such individual incapable of engaging in any substantial
gainful employment and that can be expected to result in death or that has
lasted or can be expected to last for a continuous period of not less than four
consecutive months.
2.9 "Eligible Individual" means (i) any director, officer or key employee
of the Company or a Subsidiary, (ii) any officer or key employee of a
partnership in which the Company owns directly or indirectly at least 50% of the
capital or profits interest or (iii) any consultant or adviser whom the
Committee determines provides substantial and important service to the Company.
2.10 "Exchange Act" means the Securities Exchange Act of 1934, as amended.
2.11 "Fair Market Value" means the per share value of the Common Stock as
of a given date, determined as follows:
(a) If the Common Stock is listed or admitted for trading on the New
York Stock Exchange (or if not, on another national securities exchange
upon which the Common Stock is listed), the Fair Market Value of the Common
Stock is the closing quotation for such stock based on composite
transactions for the New York Stock Exchange (or if not listed on it, such
other national securities exchange) on the last trading day for such stock
prior to such given date.
(b) If the Common Stock is not traded on any national securities
exchange, but is quoted on the National Association of Securities Dealers,
Inc. Automated Quotation
2
<PAGE>
System (NASDAQ System) or any similar system of automated dissemination of
quotations of prices in common use, the Fair Market Value of the Common
Stock is the average of the last sales price (if the stock is then listed
as a national market issue under the NASDAQ System) or the mean between the
closing representative bid and asked prices (in all other cases) for the
stock on the last 5 trading days for such stock preceding such given date
as reported by the NASDAQ System (or such similar quotation system).
(c) If neither clause (a) nor clause (b) of this Section 2.12 is
applicable, the Fair Market Value of the Common Stock is the fair market
value per share as of such valuation date, as determined by the Board of
Directors in good faith and in accordance with uniform principles
consistently applied.
2.12 "Incentive Stock Option" means an Option which qualifies under
Section 422 of the Code and which is designated as an Incentive Stock Option by
the Company or the Committee.
2.13 "Non-Qualified Option" means an Option which is not an Incentive
Stock Option and which is designated as a Non-Qualified Option by the Company or
the Committee.
2.14 "Option" means any Incentive Stock Option or Non-Qualified Option
granted under this Plan.
2.15 "Optionee" means an Eligible Individual to whom an Option is granted
under this Plan.
2.16 "Plan" means the Brookdale Living Communities, Inc. Stock Incentive
Plan, as it may be amended from time to time.
2.17 "Secretary" means the Secretary of the Company.
2.18 "Securities Act" means the Securities Act of 1933, as amended.
2.19 "Severance Date" means (i) as to an Eligible Individual who is an
employee of the Company, a Subsidiary or a Company-owned partnership, the date
the individual ceases to be so employed, (ii) as to an Eligible Individual who
is a director of the Company or a Subsidiary but not an employee described in
(i) next above, the date the individual ceases to be such a director, or (iii)
as to an Eligible Individual who is not included in (i) or (ii) above, the date
specified in the applicable Stock Option Agreement.
2.20 "Stock Option Agreement" means the agreement reflecting the terms and
conditions of an Option pursuant to Section 5.1.
2.21 "Subsidiary" means a subsidiary of the Company within the meaning of
Section 424(f) of the Code.
3
<PAGE>
SECTION 3. STOCK SUBJECT TO PLAN
3.1 Stock Subject to Plan
The stock subject to an Option shall be shares of the Company's Common
Stock. The aggregate number of such shares which may be issued upon exercise of
Options granted under Section 4 of the Plan shall not exceed 830,000, unless and
until a larger number shall have been approved by the Company's stockholders
pursuant to Section 7.6.
3.2 Unexercised Options
If any Option expires or is cancelled without having been fully
exercised, a new Option or Options for the number of shares of Common Stock that
would have been issued upon exercise of the unexercised portion of such Option
may be granted under this Plan, subject to the limitations of Section 3.1.
3.3 Changes in Company Capitalization
In the event that the outstanding shares of Common Stock are hereafter
changed into or exchanged for a different number or kind of shares or other
securities of the Company, or of another corporation, by reason of
reorganization, merger, consolidation, recapitalization, reclassification, or
the number of shares is increased or decreased by reason of a stock split, stock
dividend, combination of shares or any other increase or decrease in the number
of such shares of Common Stock effected without receipt of consideration by the
Company (provided, however, that conversion or exchange of any convertible or
exchangeable securities of the Company shall not be deemed to have been
"effected without receipt of consideration"), the Committee shall make
appropriate adjustments in the number and kind of shares for the purchase of
which Options may be granted, including adjustments of the limitations in
Section 3.1 and Section 4.1.
SECTION 4. GRANTING OF OPTIONS
4.1 Eligibility
The maximum number of shares of Common Stock that may be subject to
Options granted during any calendar year to any one Optionee shall not exceed
150,000. Options granted to an Eligible Individual who is an employee of the
Company or a Subsidiary may be either Incentive Stock Options or Non-Qualified
Options. Options granted to any other Eligible Individual may only be Non-
Qualified Options.
4.2 Incentive Stock Options
No Incentive Stock Option shall be granted unless it qualifies as an
"incentive stock option" under Section 422 of the Code on the Date of Grant.
4
<PAGE>
4.3 Granting of Options
(a) Subject to the availability of shares as provided under Sections
3.1 and 7.6, the Committee shall from time to time, in its absolute
discretion:
(i) Determine who are the Eligible Individuals and select from
among them those to be granted Options;
(ii) Determine the number of shares to be subject to such Options
granted to such selected individuals, and to the extent permitted by
the Code, determine whether such Options are to be Incentive Stock
Options or Non-Qualified Options; and
(iii) Determine the terms and conditions of such Options,
consistent with the Plan.
(b) Upon the selection of an individual to be granted an Option, the
Committee shall instruct the Secretary to issue such Option and may impose
such conditions on the grant of such Option as it deems appropriate.
Without limiting the generality of the preceding sentence, the Committee
may, in its discretion and on such terms as it deems appropriate, require
as a condition on the grant of an Option to an individual that the
individual surrender for cancellation some or all of the unexercised
Options which have been previously granted to him. An Option the grant of
which is conditioned upon such surrender may have an Option price lower (or
higher) than the Option price of the surrendered Option, may cover the same
(or a lesser or greater) number of shares as the surrendered Option, may
contain such other terms as the Committee deems appropriate and shall be
exercisable in accordance with its terms, without regard to the number of
shares, price, Option period or any other term or condition of the
surrendered Option.
4.4 Administration Of the Plan
(a) The Plan shall be administered by the Compensation Committee of
the Board, or by any other Committee appointed by the Board, which
Committee (unless otherwise determined by the Board) shall satisfy the
"nonemployee director" requirements of Rule 16 b-3 under the Exchange Act
and the regulations of Rule 16b-3 under the Exchange Act and the "outside
director" provisions of Code Section 162(m), or any successor regulations
or provisions. The members of the Committee shall be appointed from time to
time by, and shall serve at the discretion of, the Board of Directors.
Committee members may resign by delivering written notice to the Secretary.
(b) Except as otherwise provided in the Plan and except as otherwise
expressly stated to the contrary in the Company's Articles of
Incorporation, Bylaws, or elsewhere, the Committee shall have the sole
discretionary authority (i) to select the Eligible Individuals who are to
be granted Options under the Plan, (ii) to determine the number of Options
to be granted to any Eligible Individual at any time, (iii) to authorize
the granting of Options, (iv) to impose such conditions and restrictions on
Options as it determines appropriate, (v) to
5
<PAGE>
interpret the Plan, (vi) to prescribe, amend and rescind rules and
regulations relating to the Plan, and (vii) to take any other actions in
connection with the Plan as it may deem necessary or advisable for the
administration of the Plan. The determinations of the Committee on the
matters referred to in this Section 4 shall be conclusive.
(c) A majority of the members of the Committee shall constitute a
quorum. All determinations of the Committee shall be made by a majority of
its members. Any decision or determination reduced to writing and signed by
all of the members of the Committee shall be fully effective as if it had
been made by a majority vote at a meeting duly called and held.
(d) The Committee may delegate to one or more persons any of its
powers, other than its power to authorize the granting of Options, or
designate one or more persons to do or perform those matters to be done or
performed by the Committee, including administration of the Plan. Any
person or persons delegated or designated by the Committee shall be subject
to the same obligations and requirements imposed on the Committee and its
members under the Plan.
(e) Members of the Committee shall receive such compensation for their
services as members as may be determined by the Board of Directors. All
expenses and liabilities incurred by members of the Committee in connection
with the administration of the Plan shall be borne by the Company. The
Committee may employ attorneys, consultants, accountants, appraisers,
brokers or other persons. The Committee, the Company and the Board of
Directors shall be entitled to rely upon the advice, opinions or valuations
of any such persons. All elections taken and all interpretations and
determinations made by the Committee in good faith shall be final and
binding upon all Optionees, the Company and all other interested persons.
No member of the Committee shall be personally liable for any action,
determination or interpretation made in good faith with respect to the
Plan. Members of the Committee and each person or persons designated or
delegated by the Committee shall be entitled to indemnification by the
Company for any action or any failure to act in connection with services
performed by or on behalf of the Committee for the benefit of the Company
to the fullest extent provided or permitted by the Company's Articles of
Incorporation, Bylaws, any insurance policy or other agreement intended for
the benefit of the Committee, or by any applicable law.
SECTION 5. TERMS OF OPTIONS
5.1 Option Agreement
Each Option shall be evidenced by a written Stock Option Agreement,
which shall be executed by the Optionee and an authorized officer of the Company
and which shall indicate the Date of the Grant and contain such terms and
conditions as the Committee shall determine with respect to such Option,
consistent with the Plan. Stock Option Agreements evidencing Incentive Stock
Options shall contain such terms and conditions as may be necessary to qualify
such Options as "incentive stock options" under Section 422 of the Code.
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5.2 Vesting of Options
(a) Options granted under the Plan shall vest as determined by the
Committee and set forth in the respective Stock Option Agreement.
(b) Unless otherwise provided in the Stock Option Agreement, in the
event of a Change in Control on or before the Optionee's Severance Date,
each outstanding Option held by such Optionee to the extent not theretofore
vested shall fully vest as of the date of such Change in Control.
(c) Subject to the provisions of Section 7.3, Options which have been
granted but not yet vested under this Section 5.2 as of an Optionee's
Severance Date shall be forfeited unless otherwise provided in the Stock
Option Agreement.
5.3 Option Exercise Price
The exercise price per share for Options granted under the Plan shall be
set by the Committee; provided, however, that the price per share shall be not
less than 100% of the Fair Market Value of such share on the Date of Grant;
provided, further, that, in the case of an Incentive Stock Option, the price per
share shall not be less than 110% of the Fair Market Value of such share on the
Date of Grant in the case of an individual then owning (within the meaning of
Section 424(d) of the Code) more than 10% of the total combined voting power of
all classes of stock of the Company or any Subsidiary.
5.4 Exercise Periods
(a) No Option may be exercised in whole or in part until it has
vested, except as may be provided in Section 5.7.
(b) Subject to the provisions of Sections 5.4(c), 5.7 and 7.3,
Options shall become exercisable at such times and in such installments
(which may be cumulative) as the Committee shall provide in the terms of
each individual Stock Option Agreement; provided, however, that, by
resolution adopted after an Option is granted, the Committee may, on such
terms and conditions as it may determine to be appropriate and subject to
Sections 5.4(c), 5.7 and 7.3, accelerate the time at which such Option or
any portion thereof may be exercised.
(c) To the extent that the aggregate Fair Market Value of stock with
respect to which Incentive Stock Options (within the meaning of Section 422
of the Code, but without regard to Section 422(d) of the Code) are
exercisable for the first time by an Optionee during any calendar year
(under the Plan and all other incentive stock option plans of the Company)
exceeds $100,000, such Options shall be treated as Non-Qualified Options.
The rule set forth in the preceding sentence shall be applied by taking
Options into account in the order in which they were granted. For purposes
of this Section 5.4(c), the Fair Market Value of Common Stock shall be
determined as of the time the Option with respect to such Common Stock is
granted.
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(d) No Option may be exercised to any extent by anyone after the
first to occur of the following events:
(i) In the case of an Incentive Stock Option,
(A) the expiration of ten years from the Date of Grant; or
(B) in the case of an Optionee owning (within the meaning of
Section 424(d) of the Code), at the Date of Grant, more than 10%
of the total combined voting power of all classes of stock of the
Company or any subsidiary of the Company, the expiration of five
years from the Date of Grant; or
(C) except in the case of any Optionee who is disabled
(within the meaning of Section 22(e)(3) of the Code), the
expiration of three months from the Optionee's Severance Date
unless either such Severance Date occurs due to such Optionee's
death or the Optionee dies within said three-month period; or
(D) in the case of an Optionee who is disabled (within the
meaning of Section 22(e)(3) of the Code), the expiration of one
year from the Optionee's Severance Date unless either such
Severance Date occurs due to such Optionee's death or the
Optionee dies within said one-year period; or
(E) the expiration of one year from the date of the
Optionee's death.
(ii) In the case of a Non-Qualified Option,
(A) the expiration of ten years from the Date of Grant; or
(B) the expiration of one year from the Optionee's Severance
Date unless the Optionee dies within said one-year period; or
(C) the expiration of one year from the date of the
Optionee's death.
(e) Subject to the provisions of Section 5.4(d), the Committee shall
provide, in the terms of each individual Stock Option Agreement, when such
Option expires and becomes unexercisable.
5.5 Requirement of Continued Employment
An Option shall be forfeited if the Optionee's Severance Date occurs
within one year from the Date of Grant unless such Severance Date occurs
due to a Change in Control.
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5.6 Adjustments in Outstanding Options
In the event that the outstanding shares of Common Stock subject to
Options are changed into or exchanged for a different number or kind of shares
of the Company or other securities of the Company by reason of merger,
consolidation, recapitalization, reclassification, or the number of shares is
increased or decreased by reason of a stock split-up, stock dividend,
combination of shares or any other increase or decrease in the number of such
shares of Common Stock effected without receipt of consideration by the Company
(provided, however, that conversion of any convertible securities of the Company
shall not be deemed to have been "effected without receipt of consideration"),
the Committee shall make appropriate adjustments in the number and kind of
shares as to which all outstanding Options, or portions thereof then
unexercised, shall be exercisable, to the end that after such event the
Optionee's proportionate interest shall be maintained as before the occurrence
of such event. Such adjustment in an outstanding Option shall be made without
change in the total price applicable to the Option or the unexercised portion of
the Option (except for any change in the aggregate price resulting from
rounding-off of share quantities or prices) and with any necessary corresponding
adjustment in Option price per share; provided, however, that, in the case of
Incentive Stock Options, each such adjustment shall be made in such manner as
not to constitute a "modification" within the meaning of Section 424(h)(3) of
the Code. Any such adjustment made by the Committee shall be final and binding
upon all Optionees, the Company and all other interested persons.
5.7 Merger, Consolidation, Acquisition, Liquidation or Dissolution
Notwithstanding the provisions of Section 5.6, in its absolute
discretion, and on such terms and condition as it deems appropriate, the
Committee may provide by the terms of any Option that such Option cannot be
exercised after the merger or consolidation of the Company with or into another
corporation, the acquisition by another corporation or person (excluding any
trustee or other fiduciary holding securities under an employee benefit plan of
the Company) of all or substantially all of the Company's assets or more than
50% of the Company's then outstanding voting stock, or the liquidation or
dissolution of the Company; and if the Committee so provides, it may, in its
absolute discretion and on such terms and conditions as it deems appropriate,
also provide, either by the terms of such Option or by a resolution adopted
prior to the occurrence of such merger, consolidation, acquisition, liquidation
or dissolution, that, for some period of time prior to such event, such Option
shall be exercisable to all shares covered thereby, notwithstanding anything to
the contrary in Section 5.4(a), Section 5.4(b) and/or any installment provisions
of such Option.
5.8 No Right to Continued Employment
Nothing in this Plan or in any Stock Option Agreement hereunder shall
confer upon any Optionee any right to continued employment or retention in
service or shall interfere with or restrict in any way the rights of the
Company, a Subsidiary or any other person to terminate or discharge any Optionee
at any time for any reason whatsoever.
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SECTION 6. EXERCISE OF OPTIONS
6.1 Person Eligible to Exercise
During the lifetime of the Optionee, only such Optionee may exercise
an Option (or any portion thereof) granted to such Optionee. After the death of
the Optionee, any exercisable portion of an Option may, prior to the time when
such portion becomes unexercisable under the Plan or the applicable Stock Option
Agreement, be exercised by the personal representative of such Optionee or by
any person empowered to do so under the deceased Optionee's will or under the
then applicable laws of descent and distribution.
6.2 Partial Exercise
At any time and from time to time prior to the time when any
exercisable Option or exercisable portion thereof becomes unexercisable under
the Plan or the applicable Stock Option Agreement, such Option or portion
thereof may be exercised in whole or in part; provided, however, that the
Company shall not be required to issue fractional shares and the Committee may,
by the terms of the Stock Option Agreement, require any partial exercise to be
with respect to a specified minimum number of shares.
6.3 Manner of Exercise
An exercisable Option, or any exercisable portion thereof, may be
exercised solely by delivery to the Secretary or his office of all of the
following prior to the time when such Option or such portion becomes
unexercisable under the Plan or the applicable Stock Option Agreement:
(a) notice in writing signed by the Optionee or other person then
entitled to exercise such Option or portion, stating that such Option or
portion is exercised, such notice complying with all applicable rules
established by the Committee; and
(b) (i) full payment (in cash or by check) for the shares with respect
to which such Option or portion is thereby exercised; or
(ii) if permitted under the terms of an Optionee's Stock Option
Agreement or with the consent of the Committee, (A) shares of the
Company's Common Stock owned by the Optionee duly endorsed for
transfer to the Company, or (B) shares of the Company's Common Stock
issuable to the Optionee upon exercise of the Option, with a Fair
Market Value on the date of Option exercise equal to the aggregate
Option price of the shares with respect to which such Option or
portion is thereby exercised; or
(iii) with the consent of the Committee, a full recourse
promissory note bearing interest (at least such rate as shall then
preclude the imputation of interest under the Code or any successor
provision) and payable upon such terms as may be prescribed by the
Committee. The Committee may also prescribe the form of such note and
the security to be given for such note. No Option may, however, be
exercised by
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delivery of a promissory note or by a loan from the Company when or
where such loan or other extension of credit is prohibited by law; or
(iv) with the consent of the Committee, any combination of the
consideration provided in the foregoing subsections (i), (ii) and
(iii); and
(c) the payment to the Company of all amounts which it is required to
withhold under federal, state or local law in connection with the exercise
of the Option; provided that, with the consent of the Committee, (i) shares
of the Company's Common Stock owned by the Optionee duly endorsed for
transfer, or (ii) shares of the Company's Common Stock issuable to the
Optionee upon exercise of the Option, valued at Fair Market Value as of the
date of Option exercise, may be used to make all or part of such payment;
and
(d) such representations and documents as the Committee, in its
absolute discretion, deems necessary or advisable to effect compliance with
all applicable provisions of the Securities Act and any other federal or
state securities laws or regulations, including the representation that the
shares of the Common Stock are being acquired for investment and not
resale. The Committee may, in its absolute discretion, also take whatever
additional actions it deems appropriate to effect such compliance
including, without limitation, placing legends on share certificates and
issuing stop-transfer orders to transfer agents and registrars; and
(e) in the event that the Option or portion thereof shall be exercised
pursuant to Section 6.1 by any person or persons other than the Optionee,
appropriate proof of the right of such person or persons to exercise the
Option or portion thereof.
6.4 Conditions to Issuance of Stock Certificates
The shares of Common Stock issuable and deliverable upon the exercise
of an Option, or any portion thereof, may be either previously authorized but
unissued shares or issued shares which have then been reacquired by the Company.
The Company shall not be required to issue or deliver any certificate or
certificates for shares of Common Stock purchased upon the exercise of any
Option or portion thereof prior to fulfillment of all of the following
conditions:
(a) the satisfaction of all requirements set forth in Section 6.3,
including payment of the exercise price; and
(b) the obtaining of any approval or other clearance from any state or
federal governmental agency which the Committee shall, in its absolute
discretion, determine to be necessary or advisable; and
(c) the lapse of such reasonable period of time following the exercise
of the Option as the Committee may establish from time to time for reasons
of administrative convenience.
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6.5 Rights as Stockholders
The holders of Options shall not be, nor have any of the rights or
privileges of, stockholders of the Company in respect to any shares purchasable
upon the exercise of any part of an Option unless and until the Option is
exercised, the Option price has been paid to the Company and certificates
representing such shares have been issued by the Company to such holders.
6.6 Transfer Restrictions
The Committee, in its absolute discretion, may impose such
restrictions on the transferability of the shares purchasable upon the exercise
of an Option as it deems appropriate. Any such restriction shall be set forth in
the respective Stock Option Agreement and may be referred to on the certificates
evidencing such shares. The Committee may require any Optionee to give the
Company prompt notice of any disposition of shares of stock acquired by exercise
of an Incentive Stock Option, within two years from the Date of Grant of such
Option or one year after the acquisition of such shares by such Optionee. The
Committee may direct that the certificates evidencing shares acquired by
exercise of an Option refer to such requirement to give prompt notice of
disposition.
SECTION 7. ADDITIONAL PROVISIONS
7.1 Approval of Plan by Stockholders
This Plan will be submitted for the approval of the Company's
stockholders within twelve months before or after the date of the Board of
Directors' initial adoption of the Plan. Options may be granted prior to such
stockholder approval; provided, however, that such Options shall not be
exercisable prior to the time when the Plan is approved by the stockholders;
provided, further, that if such approval has not been obtained at the end of
said twelve-month period, all Options previously granted under the Plan shall
thereupon be cancelled and become null and void.
7.2 Nontransferability
No Option or interest or right therein or part thereof shall be
liable for the debts, contracts or engagements of the Optionee or any successors
in interest to the Optionee or shall be subject to disposition by transfer,
alienation, anticipation, pledge, encumbrance, assignment or any other means
whether such disposition be voluntary or involuntary or by operation of law by
judgment, levy, attachment, garnishment or any other legal or equitable
proceedings (including bankruptcy), and any attempted disposition thereof shall
be null and void and of no effect; provided, however, that nothing in this
Section 7.2 shall prevent transfers by will or by the applicable laws of descent
and distribution.
7.3 Death or Disability of Optionee
If an Optionee dies or incurs a Severance Date due to Disability, any
Option of such Optionee which has been outstanding for at least one year shall
fully and immediately be vested. In the event of an Optionee's death the
executor, administrator or other personal representative of
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the Optionee's estate, or any heir, successor, assign or other transferee of the
Optionee receiving such Options by will or by the laws of descent and
distribution, shall have the right, subject to the restrictions hereof, to
exercise all vested Options to acquire shares of Common Stock subject to such
Options at any time within one year after the date of the Optionee's death.
7.4 Securities Act
No shares of Common Stock of the Company shall be required to be
distributed until the Company shall have taken such action, if any, as is then
required to comply with the provisions of the Securities Act or any other then
applicable securities law. The Company reserves the right to place a legend on
any stock certificate issued pursuant to the Plan to assure compliance with this
Section and with the vesting requirements of Section 5.2.
7.5 Withholding of Tax
The Company shall have the right to deduct from compensation otherwise
payable to an Optionee any federal, state or local income or other taxes
required by law to be withheld with respect to any distributions under the Plan.
7.6 Termination and Amendment of Plan
The Committee may at any time suspend or terminate the Plan, or make such
modifications of the Plan as it shall deem advisable, provided that the Plan
shall not be so changed to increase the cost of the Plan to the Company.
However, without approval of the Company's stockholders given within twelve
months before or after the action by the Committee, no action of the Committee
may, except as provided in Section 3.3, increase any limit imposed in Section
3.1 on the maximum number of shares which may be issued upon exercise of
Options, materially modify the eligibility requirements of Section 4.1, reduce
the minimum Option price requirements of Section 5.3, or extend the limit
imposed in this Section 7.6 on the period during which Options may be granted.
No Option may be granted during any period of suspension nor after termination
of the Plan, and in no event may any Option be granted under this Plan after the
first to occur of the following events:
(a) the expiration of ten years from the date the Plan is adopted by
the Board of Directors; or
(b) the expiration of ten years from the date the Plan is approved by
the Company's stockholders under Section 7.1.
7.7 Duties of the Company
The Company shall, at all times during the term of each Option,
reserve and keep available for issuance or delivery such number of shares of
Common Stock as will be sufficient to satisfy the requirements of all Options at
the time outstanding, shall pay all original issue taxes with respect to the
issuance or delivery of shares pursuant to the exercise of such Option and all
other fees and expenses necessarily incurred by the Company in connection
therewith.
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SECTION 8. GENERAL PROVISIONS
(a) No individual shall have any claim or right to be granted Options
under the Plan. Neither the adoption and maintenance of the Plan nor the
granting of Options pursuant to the Plan shall be deemed to constitute a
contract of employment between the Company and any individual or to be a
condition of the employment of any person.
(b) The Company shall pay all costs and expenses of administering the
Plan.
(c) The granting of Options and the issuance of shares of Common Stock
under the Plan shall be subject to all applicable laws, rules, and
regulations, and to such approvals by any governmental agencies or national
securities exchanges as may be required. The provisions of this Plan shall
be interpreted so as to comply with the conditions or requirements of the
Securities Act, the Exchange Act, and rules and regulations issued
thereunder unless a contrary interpretation of any such provision is
otherwise required by applicable law.
(d) The granting of an Option shall impose no obligation upon the
Optionee to exercise such option.
(e) Whenever the context so indicates, the singular or plural number,
and the masculine, feminine or neuter gender shall each be deemed to
include the other.
(f) This Plan and all Option agreements entered into pursuant thereto
shall be construed and enforced in accordance with, and governed by, the
laws of the State of Delaware, determined without regard to its conflict of
interest rules.
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EXHIBIT 10.15
FORM OF
INDEMNIFICATION AGREEMENT
-------------------------
This INDEMNIFICATION AGREEMENT (this "Agreement"), dated as of
__________________, 1997, is made and entered into by and between Brookdale
Living Communities, Inc., a Delaware corporation (the "Company"), and
__________________ ("Indemnitee"), an individual who is a director and/or
officer of the Company.
RECITALS
WHEREAS, Section 6 of the Amended and Restated By-laws of the Company
(the "By-laws"), in part, provides that the Company, subject to the limitations
set forth therein, shall indemnify and hold harmless each person who was or is a
party or is threatened to be made a party to or is involved in any threatened,
pending or completed action, suit or proceeding, whether civil, criminal,
administrative, or investigative and whether by or in the right of the Company
or otherwise, by reason of the fact that he or she is or was an officer or
director of the Company or is or was serving at the request of the Company as an
officer, director, employee, partner (limited or general) or agent of another
corporation or of a partnership, joint venture, limited liability company,
trust, or other enterprise; and
WHEREAS, in recognition of Indemnitee's need for protection against
personal liability in order to enhance Indemnitee's continued service to the
Company and Indemnitee's reliance on the provisions of Section 6 of the By-laws
requiring indemnification under certain circumstances, and in part to provide
Indemnitee with specific contractual assurance that indemnification protection
will be available and to implement such By-law provisions, the Company wishes to
provide in this Agreement for the indemnification of, and the advancement of
expenses to, Indemnitee to the fullest extent permitted by law.
AGREEMENTS
NOW, THEREFORE, in consideration of the recitals and the mutual
promises and covenants contained herein and other good and valuable
consideration, the receipt and sufficiency of which are hereby acknowledged, the
parties hereto hereby agree as follows:
1. Right to Indemnification. The Company shall, to the fullest
extent permitted by applicable law in effect from time to time, but subject to
the limitations set forth in this Agreement, indemnify and hold harmless
Indemnitee in the event that Indemnitee was or is a party to or is involved or
becomes involved in any manner (including, without limitation, as a party,
intervenor or a witness) or is threatened to be made so involved in any
threatened, pending or completed investigation, claim, action, suit or
<PAGE>
proceeding, whether civil, criminal, administrative or investigative (including
without limitation, any action, suit or proceeding by or in the right of the
Company to procure a judgment in its favor) (a "Proceeding"), by reason of the
fact that Indemnitee, or a person of whom Indemnitee is the legal
representative, is or was a director and/or officer of the Company, or is or was
serving at the request of the Company as an officer, director, employee, partner
(limited or general) or agent of another corporation or of a partnership, joint
venture, limited liability company, trust or other enterprise (including,
without limitation, service with respect to an employee benefit plan), against
all expenses, liabilities and losses (including attorneys' fees, judgments,
fines, taxes, penalties and amounts paid or to be paid in settlement) reasonably
incurred by Indemnitee in connection with such Proceeding. Such indemnification
shall be a contract right and shall include the right to receive payment in
advance of any expenses incurred by Indemnitee in connection with such
Proceeding, consistent with the provisions of applicable law in effect from time
to time.
2. Indemnification; Not Exclusive Right. The right of indemnification
provided in this Agreement shall not be exclusive of and shall be in addition
to, and not in lieu of, any other rights to which Indemnitee may otherwise be
entitled under applicable law, the By-laws, or otherwise. Nothing in this
Agreement shall diminish or otherwise restrict Indemnitee's right to
indemnification under applicable law, the By-laws or otherwise. The provisions
of this Agreement shall inure to the benefit of the heirs, executors,
administrators and other legal representatives of Indemnitee and shall be
applicable to Proceedings commenced or continuing after the adoption of this
Agreement, whether arising from acts or omissions occurring before or after its
execution and delivery.
3. Advancement of Expenses; Procedures; Presumptions and Effect of
Certain Proceedings; Remedies. In furtherance, but not in limitation of the
foregoing provisions, the following procedures, presumptions and remedies shall
apply with respect to the advancement of expenses and the right to
indemnification under this Agreement:
(a) Advancement of Expenses. All reasonable expenses incurred by or on
behalf of Indemnitee in the defense of or other involvement in or otherwise in
connection with any Proceeding shall be advanced to Indemnitee by the Company
within twenty (20) days after the receipt by the Company of a statement or
statements from Indemnitee requesting such advance or advances from time to
time, whether prior to or after final disposition of such Proceeding. Such
statement or statements shall reasonably evidence the expenses incurred by
Indemnitee and, if required by law in effect at the time of such advance, shall
include or be accompanied by an undertaking by or on behalf of Indemnitee to
repay the amounts
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advanced if it should ultimately be determined that Indemnitee is not entitled
to be indemnified against such expenses pursuant to this Agreement.
(b) Procedure for Determination of Entitlement to Indemnification.
(i) To obtain indemnification under this Agreement, Indemnitee
shall submit to the Secretary of the Company a written request, including such
documentation and information as is reasonably available to Indemnitee and
reasonably necessary to determine whether and to what extent Indemnitee is
entitled to indemnification (the "Supporting Documentation"). The determin-ation
of Indemnitee's entitlement to indemnification shall be made not later than
sixty (60) days after receipt by the Company of the written request for
indemnification together with the Supporting Documentation. The Secretary of the
Company shall, promptly upon receipt of such a request for indemnification,
advise the Board of Directors of the Company (the "Board of Directors") in
writing that Indemnitee has requested indemnification pursuant to this
Agreement.
(ii) Indemnitee's entitlement to indemnification under this
Agreement shall be determined in one of the following ways: (A) by a majority
vote of the Disinterested Directors (as hereinafter defined), even though less
than a quorum of the Board of Directors; (B) by a written opinion of Independent
Counsel (as hereinafter defined) if (1) a Change of Control (as hereinafter
defined) shall have occurred and Indemnitee so requests or (2) there are no
Disinterested Directors, or a majority of Disinterested Directors, even though
less than a quorum, so directs; (C) by the stockholders of the Company (but only
if a majority of the Disinterested Directors, even though less than a quorum,
presents the issue of entitlement to indemnification to the stockholders for
their determination); or (D) as provided in Section 3(c).
(iii) In the event the determination of entitlement to
indemnification is to be made by Independent Counsel pursuant to Section
3(b)(ii), a majority of the Disinterested Directors, or in the absence of any
Disinterested Directors, a majority of the Board of Directors, shall select the
Independent Counsel, but only an Independent Counsel to which Indemnitee does
not reasonably object; provided, however, that if a Change of Control shall have
occurred, Indemnitee shall select such Independent Counsel, but only an
Independent Counsel to which the Board of Directors does not reasonably object.
(c) Presumptions and Effect of Certain Proceedings. Except as
otherwise expressly provided in this Agreement, Indemnitee shall be presumed to
be entitled to indemnification under this Agreement upon submission of a request
for
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<PAGE>
indemnification together with the Supporting Documentation in accordance with
Section 3(b)(i), and thereafter the Company shall have the burden of proof to
overcome that presumption in reaching a contrary determination. In any event, if
the person or persons empowered under Section 3(b) to determine entitlement to
indemnification shall not have been appointed or shall not have made a
determination within sixty (60) days after receipt by the Company of the request
therefor together with the Supporting Documentation, Indemnitee shall be deemed
to be entitled to indemnification and shall be entitled to such indemnification
unless (A) Indemnitee misrepresented or failed to disclose a material fact in
making the request for indemnification or in the Supporting Documentation or (B)
such indemnification is prohibited by law. The termination of any Proceeding
described in Section 1, or of any claim, issue or matter herein, by judgment,
order, settlement or conviction, or upon a plea of nolo contendere or its
equivalent, shall not, of itself, adversely affect the right of Indemnitee to
indemnification or create a presumption that Indemnitee did not act in good
faith and in a manner which Indemnitee reasonably believed to be in or not
opposed to the best interests of the Company or, with respect to any criminal
Proceeding, that Indemnitee had reasonable cause to believe that his or her
conduct was unlawful.
(d) Remedies of Indemnitee.
(i) In the event that a determination is made pursuant to Section
3(b) that Indemnitee is not entitled to indemnification under this Agreement,
Indemnitee shall be entitled to seek an adjudication of his or her entitlement
to such indemnification either at Indemnitee's sole option, in (x) an
appropriate court of the State of Delaware or any other court of competent
jurisdiction or (y) an arbitration to be conducted by a single arbitrator
pursuant to the rules of the American Arbitration Association; it being
understood that any such judicial proceeding or arbitration shall be de novo and
Indemnitee shall not be prejudiced by reason of such adverse determination; and
in any such judicial proceeding or arbitration the Company shall have the burden
of proving that Indemnitee is not entitled to indemnification under this
Agreement.
(ii) If a determination shall have been made or deemed to have
been made, pursuant to Section 3(b) or (c), that Indemnitee is entitled to
indemnification, the Company shall be obligated to pay the amounts constituting
such indemnification within ten (10) business days after such determination has
been made or deemed to have been made and shall be conclusively bound by such
determination unless (A) Indemnitee misrepresented or failed to disclose a
material fact in making the request for indemnification or in the Supporting
Documentation or (B) such indemnification is prohibited by law. In the event
that advancement of expenses is not timely made pursuant to Section 3(a)
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or payment of indemnification is not made within ten (10) business days after a
determination of entitlement to indemnification has been made or deemed to have
been made pursuant to Section 3(b) or (c), Indemnitee shall be entitled to seek
judicial enforcement of the Company's obligation to pay to Indemnitee such
advancement of expenses or indemnification. Notwithstanding the foregoing, the
Company may bring an action, in an appropriate court in the State of Delaware or
any other court of competent jurisdiction, contesting the right of Indemnitee to
receive indemnification hereunder due to the occurrence of an event described in
subclause (A) or (B) of this clause (ii) (a "Disqualifying Event"); provided,
however, that in any such action the Company shall have the burden of proving
the occurrence of such Disqualifying Event.
(iii) The Company shall be precluded from asserting in any
judicial proceeding or arbitration commenced pursuant to this Section 3(d) that
the procedures and presumptions of this Agreement are not valid, binding and
enforceable and shall stipulate in any such court or before any such arbitrator
that the Company is bound by all the provisions of this Agreement.
(iv) In the event that Indemnitee, pursuant to this Section 3(d),
seeks a judicial adjudication of or an award in arbitration to enforce his or
her rights under, or to recover damages for breach of, this Agreement,
Indemnitee shall be entitled to recover from the Company, and shall be
indemnified by the Company against, any expenses actually and reasonably
incurred by Indemnitee if Indemnitee prevails in such judicial adjudication or
arbitration. If it shall be determined in such judicial adjudication or
arbitration that Indemnitee is entitled to receive part but not all of the
indemnification or advancement of expenses sought, all such expenses incurred by
Indemnitee in connection with such judicial adjudication or arbitration shall be
paid.
(e) Definitions. For the purposes of this Section 3:
(i) "Change in Control" means a change in control of the Company
of a nature that would be required to be reported in response to Item 6(e) of
Schedule 14A of Regulation 14A promulgated under the Securities Exchange Act of
1934, as amended (the "Act"), whether or not the Company is then subject to such
reporting requirement; provided, that without limitation, such a change in
control shall be deemed to have occurred if (A) any "Person" (as such term is
used in Sections 13(d) and 14(d) of the Act) (other than The Prime Group, Inc.,
an Illinois corporation) becomes after the date hereof the "beneficial owner"
(as defined in Rule 13d-3 under the Act), directly or indirectly, of securities
of the Company representing more than fifty percent (50%) of the combined voting
power of the Company's then outstanding securities without the prior approval of
at least two-thirds of the members of the Board of Directors in office
immediately prior to such acquisition; (B) the Company is a party to a merger,
consolidation, sale of
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<PAGE>
assets or other reorganization, or a proxy contest, as a consequence of which
members of the Board of Directors in office immediately prior to such
transaction or event constitute less than a majority of the Board of Directors
thereafter or (C) during any period of two (2) consecutive years, individuals
who at the beginning of such period constituted the Board of Directors
(including for this purpose any new director whose election or nomination for
election by the Company's stockholders was approved by a vote of at least a
majority of the directors then still in office who were directors at the
beginning of such period) cease for any reason to constitute at least a majority
of the Board of Directors.
(ii) "Disinterested Director" means a director of the Company who
is not or was not a party to the Proceeding in respect of which indemnification
is sought by Indemnitee.
(iii) "Independent Counsel" means a law firm or a member of a law
firm that neither presently is, nor in the past five (5) years has been,
retained to represent (A) the Company or Indemnitee in any matter material to
either such party or (B) any other party to the Proceeding giving rise to a
claim for indemnification under this Agreement. Notwithstanding the foregoing,
the term "Independent Counsel" shall not include any person who, under the
applicable standards of professional conduct then prevailing under the law of
the State of Delaware, would have a conflict of interest in representing either
the Company or Indemnitee in an action to determine Indemnitee's rights under
this Agreement.
4. Notification and Defense of Claim. Promptly after receipt of notice
of the commencement of any action, suit or proceeding, Indemnitee will, if a
claim for indemnification in respect thereof is to be made against the Company
under this Agreement, notify the Company of the commencement thereof, but the
omission so to notify the Company will not relieve the Company from any
liability that the Company may have to Indemnitee under this Agreement unless
the Company is materially prejudiced thereby. With respect to any such action,
suit or proceeding as to which Indemnitee notifies the Company of the
commencement thereof:
(a) the Company will be entitled to participate therein at its own
expense; and
(b) except as otherwise provided below, the Company jointly with any
other indemnifying party similarly notified will be entitled to assume the
defense thereof, with counsel reasonably satisfactory to Indemnitee. After
notice from the Company to Indemnitee of the Company's election so to assume the
defense thereof, the Company will not be liable to Indemnitee under this
Agreement for any legal or other expenses subsequently incurred by Indemnitee in
connection with the defense thereof other than
-6-
<PAGE>
reasonable costs of investigation or as otherwise provided below. Indemnitee
shall have the right to employ Indemnitee's own counsel in such action, suit or
proceeding, but the fees and disbursements of such counsel incurred after notice
from the Company of the Company's assumption of the defense thereof shall be at
the expense of Indemnitee unless (i) the employment by counsel by Indemnitee has
been authorized by the Company, (ii) Indemnitee shall have reasonably concluded
that there may be a conflict of interest between the Company and Indemnitee in
the conduct of the defense of such action, (iii) such action, suit or proceeding
seeks penalties or other relief against Indemnitee with respect to which the
Company could not provide monetary indemnification to Indemnitee (such as
injunctive relief or incarceration) or (iv) the Company shall not in fact have
employed counsel to assume the defense of such action, in each of which cases
the fees and disbursements of counsel shall be at the expense of the Company.
The Company shall not be entitled to assume the defense of an any action, suit
or proceeding brought by or on behalf of the Company, or as to which Indemnitee
shall have reached the conclusion specified in clause (ii) above, or which
involves penalties or other relief against Indemnitee of the type referred to in
clause (iii) above. It is acknowledged that a director or former director shall
be entitled under circumstances specified in the By-laws to expenses of separate
legal counsel, up to the amount specified therein.
(c) The Company shall not be liable to indemnify Indemnitee under this
Agreement for any amounts paid in settlement of any action or claim effected
without the Company's written consent. The Company shall not settle any action
or claim in any manner that would impose any penalty or limitation on Indemnitee
without Indemnitee's written consent. Neither the Company nor Indemnitee will
unreasonably withhold consent to any proposed settlement.
5. Severability. If any provision or provisions of this Agreement
shall be held to be invalid, illegal or unenforceable for any reason whatsoever:
(a) the validity, legality and enforceability of the remaining provisions of
this Agreement (including, without limitation, all portions of any paragraph of
this Agreement containing any such provision held to be invalid, illegal or
unenforceable, that are not themselves invalid, illegal or unenforceable) shall
not in any way be affected or impaired thereby and (b) to the fullest extent
possible, the provisions of this Agreement (including, without limitation, all
portions of any paragraph of this Agreement containing any such provision held
to be invalid, legal or unenforceable, that are not themselves invalid, illegal
or unenforceable) shall be construed so as to give effect to the intent
manifested by the provision held invalid, illegal or unenforceable.
6. Company's Right to Indemnification. Nothing in this Agreement
shall diminish, limit or otherwise restrict or modify in
-7-
<PAGE>
any way the Company's right to indemnification or contribution from an
Indemnitee or an Indemnitee's obligation to indemnify or hold harmless the
Company under any agreement, instrument, commitment or understanding now or
hereafter in effect.
7. Cancellation. The Company may cancel the provisions of this
Agreement prospectively only upon thirty (30) days' prior written notice to
Indemnitee, in order to afford Indemnitee an opportunity to resign as an officer
and/or director of the Company rather than continue to serve absent
indemnification provided under this Agreement; it being understood that
"prospectively only" shall mean that the Agreement shall remain in full force
and effect for all acts or omissions that occur, and all Proceedings which are
based on acts or omissions which have or allegedly have occurred, through the
effective date of any such cancellation.
8. Amendments and Waiver. No amendment, modification or discharge or
this Agreement, and no waiver hereunder, shall be valid or binding unless set
forth in writing and duly executed by both of the parties hereto. Neither the
waiver by any of the parties hereto of a breach of or a default under any of the
provisions of this Agreement, nor the failure of any of the parties, on one or
more occasions, to enforce any of the provisions of this Agreement or to
exercise any right or privilege hereunder shall thereafter be construed as a
waiver of any subsequent breach or default of a similar nature, or as a waiver
of any of such provisions, rights or privileges hereunder. No delay or failure
on the part of any party in exercising any right, power or privilege under this
Agreement or under any other instrument given in connection with or pursuant to
this Agreement shall impair any such right, power or privilege or be construed
as a waiver of any default or any acquiescence therein. No single or partial
exercise of any such right, power or privilege shall preclude the further
exercise of such right, power or privilege, or the exercise of any other right,
power or privilege.
9. Subrogation. In the event of payment under this Agreement, the
Company shall be subrogated to the extent of such payment to all of the rights
of recovery of Indemnitee, who shall execute all papers required and shall do
everything that may be necessary to secure such rights, including the execution
and delivery of such documents necessary to enable the Company effectively to
bring suit to enforce such rights.
10. No Duplication of Payment. The Company shall not be liable under
this Agreement to make any payment in connection with any claim made against
Indemnitee to the extent Indemnitee has otherwise actually received payment
(under any insurance policy, By-law provision or otherwise) of the amounts
otherwise indemnifiable hereunder.
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<PAGE>
11. Notices. Any notices required or permitted to be sent hereunder
shall be delivered personally or mailed, certified mail, return receipt
requested, or delivered by overnight courier service guaranteeing next business
day delivery, to the following addresses, or such other addresses as shall be
given by notice delivered hereunder, in each case with applicable postage or
delivery charges prepaid, and shall be deemed to have been given upon delivery,
if delivered personally, three business days after mailing, if mailed, or one
business day after delivery to the courier, if delivery by overnight courier
service:
If to the Company, to:
Brookdale Living Communities, Inc.
77 West Wacker Drive
Suite 3900
Chicago, Illinois 60601
Attn: President
With a copy to:
Winston & Strawn
35 West Wacker Drive
Chicago, Illinois 60601
Attn: Wayne D. Boberg
If to Indemnitee, to:
----------------------------------
----------------------------------
----------------------------------
----------------------------------
Attn:
-----------------------------
12. Governing Law; Headings. This Agreement shall be governed by and
construed and enforced in accordance with the laws of the State of Delaware
applicable to contracts made and to be performed in such state without giving
effect to the principles of conflicts of laws. The section and other headings
contained in this Agreement are for reference purposes only and shall not affect
in any way the meaning of interpretation of this Agreement.
[signature page follows]
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<PAGE>
IN WITNESS WHEREOF, the parties hereto have caused this
Indemnification Agreement to be duly executed and delivered on their behalf as
of the date first written above.
THE COMPANY:
BROOKDALE LIVING COMMUNITIES,
INC., a Delaware corporation
By:
----------------------------------
Name:
---------------------------------
Title:
--------------------------------
INDEMNITEE:
By:
-----------------------------------
Name:
---------------------------------
S-1
<PAGE>
EXHIBIT 10.17
FORM OF
AMENDED AND RESTATED
PARTNERSHIP AGREEMENT
OF
RIVER OAKS PARTNERS,
AN ILLINOIS GENERAL PARTNERSHIP
<PAGE>
<TABLE>
<CAPTION>
TABLE OF CONTENTS
PAGE
<S> <C>
ARTICLE I
CERTAIN DEFINITIONS.................................................. 2
1.1 "Act"......................................................... 2
1.2 "Affiliate"................................................... 2
1.3 "Agreement" or "Partnership Agreement"........................ 2
1.4 "Assignee".................................................... 2
1.5 "Available Cash Flow"......................................... 2
1.6 "BHI"......................................................... 3
1.7 "BLC"......................................................... 3
1.8 "Capital Account"............................................. 3
1.9 "Capital Contributions"....................................... 4
1.10 "Code"........................................................ 5
1.11 "Depreciation"................................................ 5
1.12 "Gross Asset Value"........................................... 5
1.13 "Interest".................................................... 6
1.14 "Managing Partner"............................................ 6
1.15 "Nonrecourse Deductions"...................................... 6
1.16 "Nonrecourse Liability"....................................... 6
1.17 "Partner Minimum Gain"........................................ 7
1.18 "Partner Nonrecourse Debt".................................... 7
1.19 "Partner Nonrecourse Deductions".............................. 7
1.20 "Partners".................................................... 7
1.21 "Partnership"................................................. 7
1.22 "Partnership Minimum Gain".................................... 7
1.23 "Percentage Interest"......................................... 7
1.24 "Person"...................................................... 7
1.25 "Profits" and "Losses"........................................ 7
1.26 "Project"..................................................... 8
1.27 "Property".................................................... 8
1.28 "Recapture Gain".............................................. 8
1.29 "Regulations"................................................. 9
1.30 "Tax Matters Partner"......................................... 9
1.31 "Transfer".................................................... 9
ARTICLE II
THE PARTNERSHIP...................................................... 9
2.1 Organization.................................................. 9
2.2 Partnership Name.............................................. 9
2.3 Purpose....................................................... 9
2.4 Principal Place of Business................................... 9
2.5 Term.......................................................... 10
2.6 Filings; Agent for Service of Process......................... 10
2.7 Reservation of Other Business Opportunities................... 10
ARTICLE III
PARTNERS' CAPITAL CONTRIBUTIONS;.......................................... 10
ADDITIONAL FINANCING AND CONTRIBUTIONS.................................... 10
3.1 Partners...................................................... 10
3.2 Additional Financing.......................................... 10
3.3 Other Matters................................................. 11
</TABLE>
<PAGE>
<TABLE>
<CAPTION>
<S> <C>
ARTICLE IV
ALLOCATIONS............................................................ 11
4.1 Profits......................................................... 11
4.2 Losses.......................................................... 11
4.3 Special Allocations............................................. 11
4.4 Curative Allocations............................................ 13
4.5 Other Allocation Rules.......................................... 15
4.6 Tax Allocations; Code Section 704(c)............................ 16
ARTICLE V
DISTRIBUTIONS.......................................................... 17
5.1 Distributions of Available Cash Flow............................ 17
5.2 Withholding..................................................... 18
ARTICLE VI
MANAGEMENT OF PARTNERSHIP.............................................. 18
6.1 Management of Partnership....................................... 18
6.2 [Intentionally Omitted.]........................................ 20
6.3 Compensation and Expense Reimbursement
of Partners................................................... 20
6.4 Limitation of Liability......................................... 20
6.5 Indemnification................................................. 20
ARTICLE VII
BOOKS AND RECORDS...................................................... 21
7.1 Books and Records............................................... 21
7.2 Bank Accounts................................................... 21
7.3 Tax Returns..................................................... 21
7.4 Tax Decisions and Elections..................................... 22
7.5 Tax Examination................................................. 22
ARTICLE VIII
TRANSFER OR ASSIGNMENT OF PARTNERSHIP INTERESTS........................ 22
8.1 Restrictions on Transfer........................................ 22
8.2 Admission of Transferees........................................ 23
ARTICLE IX
DISSOLUTION AND WINDING UP............................................. 23
9.1 Liquidating Events.............................................. 23
9.2 Winding Up...................................................... 23
9.3 Liquidating Trust............................................... 24
ARTICLE X
MISCELLANEOUS.......................................................... 25
10.1 Notices......................................................... 25
10.2 Binding Effect.................................................. 26
10.3 Creditors....................................................... 26
10.4 Remedies Cumulative............................................. 26
10.5 Construction.................................................... 27
10.6 Headings........................................................ 27
10.7 Severability.................................................... 27
</TABLE>
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<PAGE>
<TABLE>
<CAPTION>
<S> <C>
10.8 Incorporation by Reference..................................... 27
10.9 Further Action................................................. 27
10.10 Variation of Pronouns.......................................... 27
10.11 Governing Law.................................................. 27
10.12 Waiver of Action for Partition................................. 27
10.13 Counterpart Execution.......................................... 27
</TABLE>
EXHIBIT A - PARTNERS' CAPITAL CONTRIBUTIONS
EXHIBIT B - PROJECT DESCRIPTION
-iii-
<PAGE>
FORM OF
AMENDED AND RESTATED
PARTNERSHIP AGREEMENT
OF
RIVER OAKS PARTNERS,
AN ILLINOIS GENERAL PARTNERSHIP
-------------------------------
This AMENDED AND RESTATED AGREEMENT OF GENERAL PARTNERSHIP (this
"Agreement") is entered into this _______ day of __________, 1997, by and
between Brookdale Living Communities, Inc., a Delaware corporation ("BLC"), and
Brookdale Holdings, Inc., a Delaware corporation ("BHI"), as Partners, pursuant
to the provisions of the Illinois Uniform Partnership Act, as amended, on the
following terms and conditions:
WITNESSETH:
WHEREAS, The Prime Group, Inc., an Illinois corporation ("Prime"), and
KILICO Realty Corporation, an Illinois corporation ("KILICO"), entered into that
certain Partnership Agreement of River Oaks Partners, dated as of December 27,
1989, as amended as of December 31, 1991, and as further amended as of March 22,
1994 and as of August 31, 1994 (as so amended, the "Original Agreement");
WHEREAS, pursuant to that certain Formation Agreement, dated as of the
date hereof (the "Formation Agreement"), by and among BLC, Mark J. Schulte, an
individual, Prime and Prime Group Limited Partnership, an Illinois limited
partnership, Prime is assigning, as of the date hereof, a one percent (1%)
Interest (as hereinafter defined) in the Partnership (as hereinafter defined) to
BHI (the "BHI Assignment");
WHEREAS, pursuant to that certain letter agreement, dated September
17, 1996, by and among Prime, KILICO and Kemper Investors Life Insurance
Company, as amended, KILICO is assigning, as of the date hereof immediately
after the BHI Assignment, its fifty percent (50%) Interest in the Partnership to
Prime (the "KILICO Assignment");
WHEREAS, pursuant to the Formation Agreement, Prime is assigning, as
of the date hereof immediately after the KILICO Assignment, a ninety-nine
percent (99%) Interest in the Partnership to BLC;
WHEREAS, the parties hereto desire to amend and restate the Original
Agreement in its entirety, and desire to reflect herein, among other things, (i)
the withdrawal of Prime and KILICO as partners of the Partnership; (ii) the
admission of BLC and BHI as partners in the Partnership; and (iii) certain other
amendments to the Original Agreement so that the Original Agreement, as amended
and restated, reads, in its entirety, as follows:
<PAGE>
ARTICLE I
CERTAIN DEFINITIONS
For purposes of this Agreement, the following terms shall have the
meanings set forth in this Article I (such meanings to be equally applicable in
both the singular and plural forms of the term defined).
1.1 "Act" means the Illinois Uniform Partnership Act, as amended from
time to time (or any corresponding provisions of succeeding law).
1.2 "Affiliate" means any (i) Person owning a majority interest in any
corporate Partner; (ii) Person owning an interest as a general partner of any
Partner or a majority interest as a limited partner of any Partner; (iii) Person
who is an officer, director, trustee, partner or stockholder of any Partner or
of any Person described in the preceding clause (ii); or (iv) Person that is
controlling, controlled by or under common control with a Partner or any Person
described in the preceding clauses (i), (ii) or (iii).
1.3 "Agreement" or "Partnership Agreement" means this Amended and
Restated Partnership Agreement, as amended from time to time. Words such as
"herein," "hereinafter," "hereof," and "hereunder" refer to this Agreement as a
whole, unless the context otherwise requires.
1.4 "Assignee" means any Person who has acquired a beneficial interest
in the Interest of a Partner in the Partnership.
1.5 "Available Cash Flow" means, with respect to the applicable period
of measurement (i.e., any period beginning on the first day of the fiscal year
or other period commencing immediately after the last day of the calculation of
Available Cash Flow which was distributed, and ending on the last day of the
month, quarter or other applicable period immediately preceding the date of
calculation), the excess, if any, of the gross cash receipts of the Partnership
for such period from all sources whatsoever, including, without limitation, the
following:
(a) (i) all rents, revenues, income and proceeds derived by the
Partnership from its operations, including, without limitation,
distributions received by the Partnership from any entity in which the
Partnership has an interest; (ii) all proceeds and revenues received on
account of any sales of property of the Partnership or as a refinancing for
payments
2
<PAGE>
of principal, interest, costs, fees, penalties or otherwise on account of
any loans made by the Partnership or financings or refinancings of any
property of the Partnership; (iii) the amount of any insurance proceeds and
condemnation awards of property of the Partnership; (iv) all Capital
Contributions received by the Partnership from its Partners; (v) all cash
amounts previously reserved by the Partnership, if the specific purposes
for which such amounts were reserved are no longer applicable; and (vi) the
proceeds of liquidation of the Partnership's property in accordance with
this Agreement:
over the sum of:
(b) (i) all operating costs and expenses of the Partnership and
capital expenditures made during such period (without deduction, however,
for any capital expenditures, charges for depreciation or other expenses
not paid in cash or expenditures from reserves described in (vii) below);
(ii) all costs and expenses expended or payable during such period in
connection with the sale or other disposition, or financing or refinancing,
of property of the Partnership or the recovery of insurance or condemnation
proceeds; (iii) all fees provided for under this Agreement; (iv) all debt
service, including principal and interest, paid during such period on all
indebtedness of the Partnership; (v) all Capital Contributions, advances,
reimbursements or similar payments made to any Person (whether a
partnership, corporation or other entity) in which the Partnership has an
interest; (vi) all loans made by the Partnership to any Person in which the
Partnership has an interest (whether a partnership, corporation or other
entity); and (vii) any and all reserves reasonably determined by the
General Partner for working capital, capital improvements, payments of
periodic expenditures, debt service or other purposes.
1.6 "BHI" means Brookdale Holdings, Inc., a Delaware corporation.
1.7 "BLC" means Brookdale Living Communities, Inc., a Delaware
corporation.
1.8 "Capital Account" means, with respect to any Partner, the Capital
Account maintained for such Partner in accordance with the following provisions:
(i) To each Partner's Capital Account there shall be credited such
Partner's Capital Contributions, such Partner's distributive share of
Profits and any items in the nature of income or gain which are specially
allocated pursuant to
3
<PAGE>
Sections 4.3 or 4.4 hereof, and the amount of any Partnership liabilities
assumed by such Partner.
(ii) To each Partner's Capital Account there shall be debited the
amount of cash and the Gross Asset Value of any Property distributed to
such Partner pursuant to any provision of this Agreement, such Partner's
distributive share of Losses and any items in the nature of expenses or
losses which are specially allocated pursuant to Sections 4.3 or 4.4
hereof.
(iii) In determining the amount of any liability for purposes of the
foregoing subparagraphs (i) and (ii), there shall be taken into account
Code Section 752(c) and any other applicable provisions of the Code and
Regulations.
The foregoing provisions and the other provisions of this Agreement
relating to the maintenance of Capital Accounts are intended to comply with
Regulations Sections 1.704-1(b) and 1.704-2, and shall be interpreted and
applied in a manner consistent with such Regulations. In the event the Managing
Partner shall determine that it is prudent to modify the manner in which the
Capital Accounts, or any debits or credits thereto (including, without
limitation, debits or credits relating to liabilities which are secured by
contributed or distributed property or which are assumed by the Partnership, a
Partner or Partners are computed in order to comply with such Regulations, the
Managing Partner may make such modification, provided that it is not likely to
have a material adverse effect on the amounts distributable to any Partner
pursuant to Article IX hereof upon the dissolution of the Partnership. The
Managing Partner also shall (i) make any adjustments that are necessary or
appropriate to maintain equality between the Capital Accounts of the Partners
and the amount of Partnership capital reflected on the Partnership's balance
sheet, as computed for book purposes, in accordance with Regulations Section
1.704-1(b)(2)(iv)(q), and (ii) make any appropriate modifications in the event
unanticipated events might otherwise cause this Agreement not to comply with
Regulations Sections 1.704-1(b) or 1.704-2.
1.9 "Capital Contributions" means, with respect to any Partner, the
amount of money and the initial Gross Asset Value of any property (other than
money), net of the amount of any debt to which such property is subject,
contributed to the Partnership with respect to the Interest in the Partnership
held by such Partner. The principal amount of a promissory note which is not
readily tradable on an established securities market and which is contributed to
the Partnership by the maker of the note shall not be included in the Capital
Account of any Person until the Partnership makes a taxable disposition of the
note or until (and
4
<PAGE>
to the extent) such Partner makes principal payments on the note, all in
accordance with Regulations Section 1.704-1(b)(2)(iv)(d)(2).
1.10 "Code" means the Internal Revenue Code of 1986, as amended from
time to time (or any corresponding provisions of succeeding law).
1.11 "Depreciation" means, for each fiscal year or other period, an
amount equal to the depreciation, amortization or other cost recovery deduction
allowable with respect to an asset for such year or other period, except that,
if the Gross Asset Value of an asset differs from its adjusted basis for federal
income tax purposes at the beginning of such year or other period, Depreciation
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 deduction for such year or other period bears to such beginning
adjusted tax basis; provided, however, that, if the federal income tax
depreciation, amortization or other cost recovery deduction for such year is
zero, Depreciation shall be determined with reference to such beginning Gross
Asset Value using any reasonable method selected by the Managing Partner.
1.12 "Gross Asset Value" means, with respect to any asset, the asset's
adjusted basis for federal income tax purposes, except as follows:
(i) The initial Gross Asset Value of any asset contributed by a
Partner to the Partnership shall be the gross fair market value of such
asset, as determined by the contributing Partner and the Partnership;
(ii) The Gross Asset Values of all Partnership assets shall be
adjusted to equal their respective gross fair market values, as reasonably
determined by the Managing Partner, as of the following times: (a) the
acquisition of an additional Interest in the Partnership by any new or
existing Partner in exchange for more than a de minimis Capital
Contribution; (b) the distribution by the Partnership to a Partner of more
than a de minimis amount of Partnership assets, including money, as
consideration for an Interest in the Partnership; and (c) the liquidation
of the Partnership within the meaning of Regulations Section 1.704-
1(b)(2)(ii)(g); provided, however, that adjustments pursuant to clauses (a)
and (b) above shall be made only if the Managing Partner reasonably
determines that such adjustments are necessary or appropriate to reflect
the relative economic interests of the Partners in the Partnership;
5
<PAGE>
(iii) The Gross Asset Value of any Partnership asset distributed to
any Partner shall be the gross fair market value of such asset on the date
of distribution; and
(iv) The Gross Asset Values of Partnership assets shall be increased
(or decreased) to reflect any adjustments to the adjusted basis of such
assets pursuant to Code Sections 734(b) or 743(b), but only to the extent
that such adjustments are taken into account in determining Capital
Accounts pursuant to Regulations Section 1.704-1(b)(2)(iv)(m) and the
definition of "Capital Account" hereof; provided, however, that Gross Asset
Values shall not be adjusted pursuant to this subparagraph (iv) to the
extent the Managing Partner determines that an adjustment pursuant to the
foregoing subparagraph (ii) of this definition hereof is necessary or
appropriate in connection with a transaction that would otherwise result in
an adjustment pursuant to this subparagraph (iv).
If the Gross Asset Value of an asset has been determined or adjusted pursuant to
any of the foregoing subparagraphs (i), (ii) or (iv), such Gross Asset Value
shall thereafter be adjusted by the Depreciation taken into account with respect
to such asset for purposes of computing Profits and Losses.
1.13 "Interest" means a Partner's ownership interest in the
Partnership, including any and all benefits to which the holder of such an
Interest may be entitled as provided in this Agreement, together with all
obligations of such Partner to comply with the terms and provisions of this
Agreement.
1.14 "Managing Partner" means BHI and any successor Partner who shall
be so designated by the Partners pursuant to this Agreement to manage the
affairs of the Partnership and the Partnership Property.
1.15 "Nonrecourse Deductions" has the meaning set forth in Regulations
Section 1.704-2(b). The amount of Nonrecourse Deductions for a Partnership
fiscal year equals the excess, if any, of the net increase, if any, in the
amount of Partnership Minimum Gain during that fiscal year over the aggregate
amount of any distributions during that fiscal year of proceeds of a Nonrecourse
Liability that are allocable to an increase in Partnership Minimum Gain,
determined according to the provisions of Regulations Section 1.704-2(c).
1.16 "Nonrecourse Liability" has the meaning set forth in Regulations
Section 1.704-2(b)(3).
6
<PAGE>
1.17 "Partner Minimum Gain" has the meaning set forth in the
definition of "partner nonrecourse debt minimum gain" in Regulations Section
1.704-2(i).
1.18 "Partner Nonrecourse Debt" has the meaning set forth in
Regulations Section 1.704-2(b)(4).
1.19 "Partner Nonrecourse Deductions" has the meaning set forth in
Regulations Section 1.704-2(i). The amount of Partner Nonrecourse Deductions
with respect to a Partner Nonrecourse Debt for a Partnership fiscal year equals
the excess, if any, of the net increase, if any, in the amount of Partnership
Minimum Gain attributable to such Partner Nonrecourse Debt during that fiscal
year over the aggregate amount of any distributions during that fiscal year to
the Partner that bears the economic risk of loss for such Partner Nonrecourse
Debt to the extent such distributions are from the proceeds of such Partner
Nonrecourse Debt and are allocable to an increase in Partnership Minimum Gain
attributable to such Partner Nonrecourse Debt, determined in accordance with
Regulations Section 1.704-2(i).
1.20 "Partners" means BLC and BHI and any person who is admitted as a
Partner, from time to time, pursuant to the terms of this Agreement. "Partner"
means any one of the Partners.
1.21 "Partnership" means the partnership formed pursuant to the
Original Agreement and continued pursuant to this Agreement and the partnership
continuing the business of this Partnership in the event of dissolution as
herein provided.
1.22 "Partnership Minimum Gain" has the meaning set forth in
Regulations Section 1.704-2(d).
1.23 "Percentage Interest" means the percentage set forth for the
Partners on Exhibit A hereto.
1.24 "Person" means any individual, general partnership, limited
partnership, corporation, trust or other association or entity.
1.25 "Profits" and "Losses" means, for each fiscal year or other
period, an amount equal to the Partnership's taxable income or loss for such
year or 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:
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(i) Any income of the Partnership that is exempt from 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;
(ii) Any expenditures of the Partnership 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;
(iii) In the event the Gross Asset Value of any Partnership asset is
adjusted pursuant to subparagraph (ii) or (iv) of the definition of Gross
Asset Value hereof, the amount of such adjustment shall be taken into
account as gain or loss from the disposition of such asset for purposes of
computing Profits or Losses;
(iv) 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 computed by reference to the Gross Asset Value of the property
disposed of notwithstanding that the adjusted tax basis of such property
differs from its Gross Asset Value;
(v) In lieu of the depreciation, amortization and other cost recovery
deductions taken into account in computing such taxable income or loss,
there shall be taken into account Depreciation for such fiscal year or
other period, computed in accordance with the definition of Depreciation
herein; and
(vi) Notwithstanding any other provision of this definition of
"Profits" and "Losses," any items which are specially allocated pursuant to
Sections 4.3 or 4.4 hereof shall not be taken into account in computing
Profits or Losses.
1.26 "Project" means the senior and assisted living facility
described in Exhibit B hereto and all of the Partnership's interest therein,
including all real estate related thereto and buildings and improvements
thereon.
1.27 "Property" means all real and personal property acquired by the
Partnership and any improvements thereto, and shall include both tangible and
intangible property.
1.28 "Recapture Gain" has the meaning set forth in Section 4.6(e).
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1.29 "Regulations" means the Income Tax Regulations, including
Temporary Regulations, promulgated under the Code, as such regulations may be
amended from time to time (including corresponding provisions of succeeding
regulations).
1.30 "Tax Matters Partner" shall mean BHI or any successor Managing
Partner.
1.31 "Transfer" means, as a noun, any voluntary or involuntary
transfer, sale, pledge, hypothecation or other disposition or encumbrance and,
as a verb, voluntarily or involuntarily to transfer, sell, pledge, hypothecate
or otherwise dispose of or encumber.
ARTICLE II
THE PARTNERSHIP
2.1 Organization. The Partners hereby agree to (i) continue the
Partnership as a general partnership pursuant to the provisions of the Act and
upon the terms and conditions set forth in this Agreement and (ii) amend and
restate herein the Partnership Agreement in its entirety.
2.2 Partnership Name. The name of the Partnership shall be "River
Oaks Partners" and all business of the Partnership shall be conducted in such
name or such other name as the Managing Partner shall determine. The Partnership
shall hold all of its property in the name of the Partnership and not in the
name of any Partner.
2.3 Purpose. The purpose and business of the Partnership shall be to
own real property, including, without limitation, the Land, to acquire, lease,
own, mortgage or otherwise encumber personal property, fixtures and real
property to accomplish the foregoing; to operate, manage, lease (or cause the
operation, management and leasing by independent contractors including a Partner
or its Affiliates) any Property owned by the Partnership, and otherwise deal in
and with the business and assets of the Partnership; and to do any and all other
acts which may be necessary or incidental to any of the foregoing or the
promotion or conduct of the business of the Partnership or any of the
Partnership Property, including, without limitation, being a partner in another
partnership or other partnerships.
2.4 Principal Place of Business. The principal place of business of
the Partnership shall be c/o The Prime Group, Inc., 77 West Wacker Drive,
Chicago, Illinois 60601 or such other
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location as may be designated from time to time by the Managing Partner.
2.5 Term. The term of the Partnership commenced on the date of the
Original Agreement and shall continue until the winding up and liquidation of
the Partnership and its business is completed, as provided in Article IX hereof.
2.6 Filings; Agent for Service of Process.
(a) The Managing Partner is authorized to execute, file and/or record
with such proper authorities in each jurisdiction in which the Partnership
conducts business, such certificates or other documents as shall be necessary,
appropriate or desirable, in the judgment of the Managing Partner, to legally
form the Partnership and conduct the business of the Partnership.
(b) The agent for service of process in the State of Illinois shall be
Wayne D. Boberg, 35 West Wacker Drive, Suite 4200, Chicago, Illinois 60601. The
Managing Partner, in its sole and absolute discretion, may change the registered
agent and appoint successor registered agents.
2.7 Reservation of Other Business Opportunities. No business
opportunities other than those actually exploited by the Partnership pursuant to
Section 2.3 shall be deemed the property of the Partnership, and any Partner or
its Affiliate may engage in or possess an interest in any other business
venture, independently or with others, of any nature or description; and neither
any other Partner nor the Partnership shall have any rights by virtue hereof in
and to such other business ventures or to the income or profits derived
therefrom. The provisions of this Section 2.7 shall be subject to, and not in
any way affect the enforceability of, any separate agreement by a Partner or any
Affiliate thereof restricting or prohibiting certain business activities of such
Partner or Affiliate.
ARTICLE III
PARTNERS' CAPITAL CONTRIBUTIONS;
ADDITIONAL FINANCING AND CONTRIBUTIONS
3.1 Partners. The name, address, initial Capital Contribution and
Percentage Interest of each of the Partners is set forth on Exhibit A hereto.
3.2 Additional Financing. The sums of money required to finance the
business and affairs of the Partnership shall be derived from the Capital
Contributions by the Partners to the
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Partnership, from funds generated from the operation and the business of the
Partnership and from any loans, financings or other indebtedness which the
Managing Partner may, in its discretion, approve for the Partnership. No
additional Capital Contributions shall be made to the Partnership except at the
direction of the Managing Partner.
3.3 Other Matters.
(a) Except as otherwise provided in this Agreement, no Partner shall
demand or receive a return of its Capital Contributions from the Partnership
without the consent of the other Partners. Under circumstances requiring a
return of any Capital Contributions, no Partner shall have the right to receive
property other than cash except as may be specifically provided herein.
(b) No Partner shall receive any interest, salary or drawing with
respect to its Capital Contributions or its Capital Account or for services
rendered on behalf of the Partnership or otherwise in its capacity as a Partner,
except as otherwise provided in this Agreement or with the consent of the other
Partners.
ARTICLE IV
ALLOCATIONS
4.1 Profits. After giving effect to the special allocations set
forth in Sections 4.3 and 4.4 hereof, Profits for any fiscal year shall be
allocated pro rata between the Partners in accordance with their Percentage
Interests.
4.2 Losses. After giving effect to the special allocations set forth
in Sections 4.3 and 4.4 hereof, Losses for any fiscal year shall be allocated to
the Partners pro rata to the Partners in accordance with their Percentage
Interests.
4.3 Special Allocations. The following special allocations will be
made in following order and priority:
(a) If there is a net decrease in Partnership Minimum Gain during
any fiscal year, each Partner will be specially allocated items of Partnership
income and gain for such year (and, if necessary, subsequent years) in
proportion to, and to the extent of, an amount equal to such Partner's share of
the net decrease in Partnership Minimum Gain determined in accordance with
Regulations Section 1.704-2(g)(2). The items to be allocated will be determined
in accordance with Regulations Section 1.704-2(f). This
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Section 4.3(a) is intended to comply with such Sections of the Regulations and
will be interpreted consistently therewith.
(b) The allocations otherwise required pursuant to Section 4.3(a)
hereof will not apply to a Partner to the extent that: (i) such Partner's share
of the net decrease in Partnership Minimum Gain is caused by a guaranty,
refinancing or other change in the instrument evidencing a nonrecourse debt of
the Partnership which causes such debt to become a partially or wholly recourse
debt or a Partner Nonrecourse Debt, and such Partner bears the economic risk of
loss (within the meaning of Regulations Section 1.752-2) for such changed debt;
(ii) such Partner's share of the net decrease in Partnership Minimum Gain
results from the repayment of a nonrecourse liability of the Partnership, which
repayment is made using funds contributed by such Partner to the capital of the
Partnership; (iii) the Service, pursuant to Regulations Section 1.704-2(f)(4),
waives the requirement of such allocation in response to a request for such
waiver made by the Managing Partner on behalf of the Partnership (which request
the Managing Partner may or may not make, in their discretion, if it determines
that the Partnership would be eligible therefor); or (iv) additional exceptions
to the requirement of such allocation are established by revenue rulings issued
by the Internal Revenue Service pursuant to Regulations Section 1.704-2(f)(5),
which exceptions apply to such Partner, as determined by the Managing Partner in
its discretion.
(c) Except as provided in Section 4.3(a) hereof, if there is a
net decrease in Partner Minimum Gain attributable to Partner Nonrecourse Debt
during any fiscal year, determined in accordance with Regulations Section 1.704-
2(i)(3), then, except as provided in Regulations Section 1.704-2(i)(4), each
Partner who has a share of the Partner Minimum Gain attributable to such Partner
Nonrecourse Debt, determined in accordance with Regulations Section 1.704-
2(i)(5), will be allocated items of income and gain for such fiscal year (and,
if necessary, subsequent fiscal years) equal to such Partner's share of the net
decrease in Partner Minimum Gain. The items to be allocated will be determined
in accordance with Regulations Section 1.704-2(j)(2). This Section 4.3(c) is
intended to comply with Regulations Section 1.704-2(i) and will be applied and
interpreted in accordance with such regulation.
(d) Any item of Partnership loss, deduction or expenditure under
Code Section 705(a)(2)(b) attributable to Partner Nonrecourse Debt will be
allocated in accordance with Regulations Section 1.704-2(i) to the Partner who
bears the economic risk of loss for such debt.
(e) In the event any Partner unexpectedly receives any
adjustments, allocations or distributions described in
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Regulations Section 1.704-1(b)(2)(ii)(d)(4), (5) or (6) resulting in an Adjusted
Capital Account Deficit for such Partner, items of income and gain will be
specially allocated to such Partner in any amount and manner sufficient to
eliminate, to the extent required by the Regulations, such Adjusted Capital
Account Deficit as quickly as possible. The items to be allocated will be
determined in accordance with Regulations Section 1.704-1(b)(2)(ii)(d)(6). This
Section 4.3(e) is intended to comply with Regulations Section 1.704-
1(b)(2)(ii)(d) and will be applied and interpreted in accordance with such
regulation.
(f) No items of loss or deduction will be allocated to any
Partner to the extent that any such allocation would cause the Partner to have
an, or increase the amount of an existing, Adjusted Capital Account deficit at
the end of any Fiscal Year. All items of loss or deduction in excess of the
limitation set forth in this Section 4.3(f) will be allocated among such other
Partners, which have positive Adjusted Capital Account balances, pro rata, in
proportion to such Adjusted Capital Account balances, until each Partner's
positive Adjusted Capital Account balance is reduced to zero. Thereafter , any
remaining items of loss or deduction will be allocated to the Partners, pro
rata, in proportion to their relative aggregate Capital Contributions.
(g) In the event any Partner has an Adjusted Capital Account
Deficit at the end of any fiscal year, each such Partner will be specially
allocated items of Partnership income and gain (consisting of a pro rata portion
of each item of Partnership income and gain) as quickly as possible to eliminate
such Adjusted Capital Account Deficit, provided that an allocation pursuant to
this Section 4.3(g) will be made if and only to the extent that such Partner
would have an Adjusted Capital Account Deficit in excess of such sum after all
other allocations provided for in this Article IV have been tentatively made.
(h) To the extent an adjustment to the adjusted tax basis of any
Property pursuant to Sections 734(b) or 743(b) of the Code is required, pursuant
to Regulations Section 1.704-1(b)(2)(iv)(m), to be taken into account in
determining Capital Accounts, the amount of such adjustment to the Capital
Accounts will be treated as an item of gain (if the adjustment increases the
basis of the asset) or loss (if the adjustment decreases such basis) and such
gain or loss will be specially allocated among the Partners in a manner
consistent with the manner in which their Capital Accounts are required to be
adjusted pursuant to such Section of the Regulations.
4.4 Curative Allocations.
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(a) The "Regulatory Allocations" consist of the "Basic Regulatory
Allocations," as defined in Section 4.4(b) hereof, the "Nonrecourse Regulatory
Allocations," as defined in Section 4.4(c) hereof, and the "Partner Nonrecourse
Regulatory Allocations," as defined in Section 4.4(d) hereof.
(b) The "Basic Regulatory Allocations" consist of allocations pursuant
to Sections 4.3(e), 4.3(f), 4.3(g) and 4.3(h) hereof. Notwithstanding any other
provision of this Agreement, other than the Regulatory Allocations, the Basic
Regulatory Allocations shall be taken into account in allocating items of
income, gain, loss and deduction among the Partners so that, to the extent
possible, the net amount of such allocations of the Basic Regulatory Allocations
and such other items to each Partner shall be equal to the net amount that would
have been allocated to each such Partner as if the Basic Regulatory Allocations
had not occurred. For purposes of applying the foregoing sentence, allocations
pursuant to this Section 4.4(b) shall only be made with respect to allocations
pursuant to Section 4.3(h) hereof to the extent the Managing Partner reasonably
determines that such allocations will otherwise be inconsistent with the
economic agreement among the parties to this Agreement.
(c) The "Nonrecourse Regulatory Allocations" consist of all
allocations pursuant to Sections 4.3(a) hereof. Notwithstanding any other
provision of this Agreement, other than the Regulatory Allocations, the
Nonrecourse Regulatory Allocations shall be taken into account in allocating
items of income, gain, loss and deduction among the Partners so that, to the
extent possible, the net amount of such allocations of the Nonrecourse
Regulatory Allocations and such other items to each Partner shall be equal to
the net amount that would have been allocated to each such Partner if the
Nonrecourse Regulatory Allocations had not occurred. For purposes of applying
the foregoing sentence, no allocations pursuant to this Section 4.4(c) shall be
made prior to the Partnership fiscal year during which there is a net decrease
in Partnership Minimum Gain, and then only to the extent necessary to avoid any
potential economic distortions caused by such net decrease in Partnership
Minimum Gain.
(d) The "Partner Nonrecourse Regulatory Allocations" consist of all
allocations pursuant to Sections 4.3(c) and 4.3(d) hereof. Notwithstanding any
other provision of this Agreement, other than the Regulatory Allocations, the
Partner Nonrecourse Regulatory Allocations shall be taken into account in
allocating items of income, gain, loss and deduction among the Partners so that,
to the extent possible, the net amount of such allocations of the Partner
Nonrecourse Regulatory Allocations and such other items to each Partner shall be
equal to the net amount that would have
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been allocated to each such Partner if the Partner Nonrecourse Regulatory
Allocations had not occurred. For purposes of applying the foregoing sentence
(i) no allocations pursuant to this Section 4.4(d) shall be made with respect to
allocations pursuant to Section 4.3(c) relating to a particular Partner
Nonrecourse Debt prior to the Partnership fiscal year during which there is a
net decrease in Partner Minimum Gain attributable to such Partner Nonrecourse
Debt, and then only to the extent necessary to avoid any potential economic
distortions caused by such net decrease in Partner Minimum Gain, and (ii)
allocations pursuant to this Section 4.4(d) shall be deferred with respect to
allocations pursuant to Section 4.3(d) hereof relating to a particular Partner
Nonrecourse Debt to the extent the Managing Partner reasonably determines that
such allocations are likely to be offset by subsequent allocations pursuant to
Section 4.3(c) hereof.
(e) The Managing Partner shall have reasonable discretion, with
respect to each Partnership fiscal year, to (i) apply the provisions of Sections
4.4(b), 4.4(c) and 4.4(d) hereof in whatever order is likely to minimize the
economic distortions that might otherwise result from the Regulatory Allocations
and (ii) divide all allocations pursuant to Sections 4.4(b), 4.4(c) and 4.4(d)
hereof among the Partners in a manner that is likely to minimize such economic
distortions.
4.5 Other Allocation Rules.
(a) For purposes of determining the Profits, Losses or any other items
allocable to any period, Profits, Losses and any such other items shall be
determined on a daily, monthly or other basis, as determined by the Managing
Partner using any permissible method under Code Section 706 and the Regulations
thereunder.
(b) For purposes of Regulations Section 1.752-3(a)(3), the Partners
agree that Nonrecourse Liabilities of the Partnership in excess of the sum of
(A) the amount of Partnership Minimum Gain and (B) the total amount of built-in
gain (as defined in Regulations Section 1.752-3(a)(2)) shall be allocated among
the Partners in accordance with their respective Percentage Interests.
(c) In the event Interests are transferred in accordance with the
provisions of Article VIII hereof during any fiscal year, the distributive share
of Partnership income, gain, loss and deductions attributable to such
transferred Interests for that year shall be apportioned between the transferor
and the transferee in proportion to the number of days during such fiscal year
that each was the owner of the Interests transferred, but subject to the
constraints and limitations imposed by Code Section 706. Distributions with
respect to Interests transferred shall be
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made only to Partners of record on a date designated by the Managing Partner as
the date of such distribution.
4.6 Tax Allocations; Code Section 704(c).
(a) In accordance with Code Section 704(c) and the Regulations
thereunder, solely for income tax purposes, income, gain, loss and deduction
with respect to any property contributed to the capital of the Partnership
(including income, gain, loss and deduction determined with respect to the
alternative minimum tax) shall, be allocated among the Partners so as to take
account of any variation between the adjusted basis of such property to the
Partnership for federal income tax purposes (including such adjusted basis for
alternative minimum tax purposes) and its initial Gross Asset Value, including,
but not limited to, special allocations to a contributing Partner that are
required under Code Section 704(c) to be made upon distribution of such property
to any of the non-contributing Partners.
(b) In the event the Gross Asset Value of any Partnership asset is
adjusted pursuant to paragraph (ii) of the definition of "Gross Asset Value"
contained herein, solely for federal income tax purposes, subsequent allocations
of income, gain, loss and deduction with respect to such asset (including
income, gain, loss and deduction determined with respect to the alternative
minimum tax) will take account of any variation between the adjusted basis of
such asset (including such adjusted basis for alternative minimum tax purposes)
and its Gross Asset Value in the same manner as under Code Section 704(c) and
the Regulations thereunder.
(c) Any elections or other decisions relating to allocations under
this Section 4.6, including the selection of any allocation method permitted
under Regulations Section 1.704-3, will be made as approved by the Managing
Partner in any manner that reasonably reflects the purpose and intention of this
Agreement. Except as otherwise provided in this Section 4.6, all items of
Partnership income, gain, loss, deduction and credit will for tax purposes be
divided among the Partners in the same manner as they share correlative Profits,
Losses or Partnership items of income, gain, loss or deduction, as the case may
be, for the fiscal year. Allocations pursuant to this Section 4.6 are solely for
purposes of federal, state and local taxes and will not affect, or in any way be
taken into account in computing, any Partner's Capital Account or share of
Profits, Losses or other items or distributions pursuant to any provision of
this Agreement.
(d) If any taxable item of income or gain is computed differently from
the taxable item of income or gain which results
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for purposes of the alternative minimum tax, then to the extent possible,
without changing the overall allocations of items for purposes of either the
Partners' Capital Accounts or the regular income tax (i) each Partner will be
allocated items of taxable income or gain for alternative minimum tax purposes
taking into account the prior allocations of originating tax preferences or
alternative minimum tax adjustments to such Partner (and its predecessors) and
(ii) other Partnership items of income or gain for alternative minimum tax
purposes of the same character that would have been recognized, but for the
originating tax preferences or alternative minimum tax adjustments, will be
allocated away from those Partners that are allocated amounts pursuant to clause
(i) so that, to the extent possible, the other Partners are allocated the same
amount, and type, of alternative minimum tax income and gain that would have
been allocated to them had the originating tax preferences or alternative
minimum tax adjustments not occurred.
(e) If any portion of gain recognized from the disposition of property
by the Partnership represents the "recapture" of previously allocated deductions
by virtue of the application of Code Section 1245 or 1250 ("Recapture Gain"),
such Recapture Gain will be allocated as follows:
First, to the Partners, pro rata, in proportion to the lesser of each
Partner's (i) allocable share of the total gain recognized from the disposition
of such Partnership property and (ii) share of depreciation or amortization with
respect to such property (as determined under Proposed Treasury Regulation
section 1.1245-1(e)(2)), until each such Partner has been allocated Recapture
Gain equal to such lesser amount; and
Second, the balance of Recapture Gain will be allocated among the Partners
whose allocable shares of total gain exceed their shares of depreciation or
amortization with respect to such property (as determined under Proposed
Treasury Regulation section 1.1245-1(e)(2)), in proportion to their shares of
total gain (including Recapture Gain) from the disposition of such property;
provided, however, that no Partner will be allocated Recapture Gain under this
Section 4.6(e) in excess of the total gain allocated to such Partner from such
disposition.
ARTICLE V
DISTRIBUTIONS
5.1 Distributions of Available Cash Flow. Except as otherwise provided
in Article IX hereof, Available Cash Flow, if any, shall be distributed, at such
times as the Managing Partner
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may determine to be appropriate, to the Partners in accordance with their
respective Percentage Interests.
5.2 Withholding. Notwithstanding any other provision of this
Agreement, the Tax Matters Partner is authorized to take any action that it
determines to be necessary or appropriate to cause the Partnership to comply
with any withholding requirements established under any federal, state or local
tax law, including, without limitation, withholding on any distribution to any
Partner. For all purposes of this Article V, any amount withheld on any
distribution and paid over to the appropriate governmental body shall be treated
as if such amount had, in fact, been distributed to the Partner.
ARTICLE VI
MANAGEMENT OF PARTNERSHIP
6.1 Management of Partnership.
(a) The Partners hereby authorize the appointment of BHI as the
Managing Partner of the Partnership.
(b) The exclusive management and control of the business and affairs
of the Partnership shall be vested in the Managing Partner. Each Partner hereby
waives any and all claims such Partner may have against the Partnership or any
other Partner for breach of fiduciary duty, or other similar responsibility or
obligation. The Managing Partner shall have full power and authority to do all
things deemed necessary or desirable by it to conduct the business of the
Partners, including, without limitation, the following:
(i) the making of any expenditures, the lending or borrowing of
money, the assumption, guarantee of or other contracting of indebtedness
and other liabilities, the issuance of evidences of indebtedness and the
incurring of any obligations it deems necessary for the conduct of the
activities of the Partnership;
(ii) the making of tax, regulatory and other filings or rendering
of periodic or other reports to governmental or other agencies having
jurisdiction over the Partnership or the business or assets of the
Partnership;
(iii) the acquisition, disposition, mortgage, pledge,
encumbrance, hypothecation or exchange of any assets of the Partnership or
the merger or other combination of the Partnership with or into another
entity;
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(iv) the use of the assets of the Partnership (including, without
limitation, cash on hand) for any purpose and on any terms it sees fit,
including, without limitation, the financing of the conduct of the
operations of the Managing Partner or the Partnership, the lending of funds
to other Persons and the repayment of obligations of the Partnership;
(v) the negotiation, execution and performance of any contracts,
conveyances or other instruments that the Managing Partner considers useful
or necessary to the conduct of the Partnership's operations or the
implementation of the Managing Partner's powers under this Agreement,
including management or development agreements with respect to the Project;
(vi) the distribution of Partnership cash or other Partnership
assets in accordance with this Agreement;
(vii) the selection and dismissal of employees of the Partnership
or the Managing Partner and agents, outside attorneys, accountants,
consultants and contractors of the Managing Partner or the Partnership and
the determination of their compensation and other terms of employment or
hiring;
(viii) the maintenance of insurance for the benefit of the
Partnership;
(ix) the formation of or acquisition of an interest in and the
contribution of property to any further limited or general partnerships,
joint ventures or other relationships that it deems desirable;
(x) the control of any matters affecting the rights and
obligations of the Partnership, including the conduct of litigation,
incurring of legal expense and settlement of claims and litigation, and the
indemnification of any Person against liabilities and contingencies to the
extent permitted by law;
(xi) the undertaking of any action in connection with the
Partnership's direct or indirect investment in any other Person (including,
without limitation, the contribution or loan of funds by the Partnership to
such Persons); and
(xii) the determination of the fair market value of any
Partnership property distributed in kind using such reasonable method of
valuation as the Managing Partner may adopt.
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(c) The Partners agree that the Managing Partner is authorized to
execute, deliver and perform the above-mentioned agreements and transactions on
behalf of the Partnership without any further act, approval or vote of the
Partners.
(d) At all times from and after the date hereof, the Managing Partner
may cause the Partnership to obtain and maintain casualty, liability and other
insurance on the properties of the Partnership.
(e) At all times from and after the date hereof, the Managing Partner
may cause the Partnership to establish and maintain working capital reserves in
such amounts as the Managing Partner, in its sole and absolute discretion, deems
appropriate and reasonable from time to time.
6.2 [Intentionally Omitted.]
6.3 Compensation and Expense Reimbursement of Partners.
(a) No payment will be made by the Partnership for the services of any
Partner or any member, employee, agent or partner of any Partner or an Affiliate
thereof, except as may be expressly approved by the Managing Partner.
(b) Each of the Partners, and all Affiliates thereof, shall be
reimbursed by the Partnership for the reasonable out-of-pocket expenses incurred
by such Partner, or an Affiliate thereof, on behalf of the Partnership in
connection with the business and affairs of the Partnership, including all
legal, accounting, travel and other similar expenses reasonably incurred by the
Partners in connection with the formation of the Partnership or the acquisition,
development, renovation, rehabilitation, repair, management or operation of the
Partnership Property.
6.4 Limitation of Liability. Neither the Partners, nor any officer,
director, partner, employee or Affiliate of any Partner shall be liable,
responsible or accountable in damages or otherwise to the Partnership or any
Partner for any action taken or failure to act on behalf of the Partnership
within the scope of the authority conferred on such Person by this Agreement or
by law, unless such action or omission was performed or omitted fraudulently or
in bad faith or constituted gross negligence or willful misconduct.
6.5 Indemnification. The Partnership shall indemnify and hold
harmless the Partners and each of their respective partners, officers,
directors, stockholders, employees, agents and Affiliates (collectively the
"Parties") from and against any loss,
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expense, damage or injury suffered or sustained by the Parties (or any of them)
by reason of any acts, omissions or alleged acts or omissions arising out of its
or their activities on behalf of the Partnership or in furtherance of the
interests of the Partnership, including, but not limited to, any judgment,
award, settlement, reasonable attorney's fees and other costs or expenses
incurred in connection with the defense of any actual or threatened action,
proceeding or claim provided that the acts, omissions or alleged acts or
omissions upon which such actual or threatened action, proceeding or claim is
based was performed or omitted in good faith and were not performed or omitted
fraudulently or in bad faith or as a result of gross negligence or willful
misconduct by any such Party and provided that such Party reasonably believed
that the acts, omissions or alleged acts or omissions upon which such actual or
threatened action, proceeding or claim is based was in the best interests of the
Partnership. Such indemnification shall be made only to the extent of the assets
of the Partnership.
ARTICLE VII
BOOKS AND RECORDS
7.1 Books and Records. The Managing Partner shall keep proper and
usual books and records pertaining to the Partnership's business on an accrual
basis in accordance with tax accounting principles or generally accepted
accounting principles consistently applied, showing all of its assets and
liabilities, receipts and disbursements, profits and losses, Partners' Capital
Contributions and distributions and all transactions entered into by the
Partnership. The books and records and all files of the Partnership shall be
kept at its principal office or such other place as the Managing Partner may
designate from time to time. The fiscal year of the Partnership shall end on
December 31 of each year.
7.2 Bank Accounts. Funds of the Partnership shall be deposited in an
account or accounts in the bank or banks designated by the Managing Partner.
Such account or accounts shall be in the name of the Partnership and shall be
subject to withdrawal only upon signatures of those Persons authorized from time
to time by the Managing Partner.
7.3 Tax Returns. Federal, state and local tax returns of the
Partnership shall be prepared and timely filed by or at the direction of the
Managing Partner at the expense of the Partnership.
21
<PAGE>
7.4 Tax Decisions and Elections. BHI is hereby designated the "Tax
Matters Partner" of the Partnership for all purposes under this Agreement and as
such term is defined under the Code. The Tax Matters Partner shall make or
revoke all elections and take all reporting positions which, in its discretion,
it deems necessary or desirable for the Partnership. Each item of Partnership
income and deduction shall be separately reported on each Partner's income tax
return, pursuant to Regulations Section 1.702-1(a). The Managing Partner shall
make the election under Code Section 754. Tax decisions and elections for the
Partnership not provided for herein shall be determined and made by the Managing
Partner. The Managing Partner shall provide all Partners with all tax
information that the Managing Partner receives, shall notify all Partners of any
meetings with respect to the Partnership's income tax returns and shall afford
representatives of each Partner the opportunity to be present at such meetings.
No Partner shall take a position on any income tax return which is inconsistent
with any position taken by the Partnership on the Partnership's income tax
returns.
7.5 Tax Examination. Each Partner shall give prompt notice to the
other Partners upon receipt of notice that the Internal Revenue Service or any
state or local taxing authority intends to examine any Partnership income tax
returns. The Tax Matters Partner shall promptly notify the Partners of the
commencement of any administrative or judicial proceedings involving the tax
treatment of items of Partnership income, loss, deductions and credits, and
shall further keep the Partners fully informed of all material developments
involved in such proceedings.
ARTICLE VIII
TRANSFER OR ASSIGNMENT OF PARTNERSHIP INTERESTS
8.1 Restrictions on Transfer. Each Partner may Transfer all or any
portion of its rights or Interest in the Partnership, but may not withdraw or
retire from the Partnership without the prior written consent of the Managing
Partner; provided, however, that no Transfer will be permitted until the
Transferee (a) delivers to the Managing Partner a written instrument evidencing
such Transfer; (b) executes a copy of this Agreement accepting and agreeing to
all of the terms, conditions and provisions of this Agreement; and (c) pays to
the Partnership its reasonable out-of-pocket costs and expenses incurred in
connection with such Transfer and the admission of the Transferee as a Partner.
22
<PAGE>
8.2 Admission of Transferees. A Transferee of a Partner Interest in
accordance with the provisions of Section 8.1 of this Article VIII shall be
admitted as a Partner with respect to the Interest Transferred upon the
fulfillment of such provisions. Until such provisions are fulfilled, a
Transferee shall not be admitted to the Partnership or otherwise be recognized
by the Partnership as having any rights as a Partner, including any right to
receive distributions from the Partnership (directly or indirectly) or to
acquire an interest in the capital or profits of the Partnership.
ARTICLE IX
DISSOLUTION AND WINDING UP
9.1 Liquidating Events. The Partnership shall dissolve and commence
winding up and liquidating upon the first to occur of any of the following
("Liquidating Events"):
(a) December 31, 2047;
(b) the sale of all or substantially all of the Property;
(c) the unanimous agreement of all Partners;
(d) the happening of any other event that makes it unlawful,
impossible or impractical to carry on the business of the Partnership; or
(e) an event of dissolution required under the Act.
The Partners hereby agree that, notwithstanding any provision of the Act, the
Partnership shall not dissolve prior to the occurrence of a Liquidating Event.
Furthermore, if an event specified in Section 9.1(e) hereof occurs, the
remaining Partners may, within ninety (90) days of the date such event occurs,
unanimously vote to continue the Partnership business, in which case the
Partnership shall not dissolve and the occurrence of the event under Section
9.1(e) shall not be deemed a Liquidating Event. The Partners further agree that
in the event the Partnership is dissolved prior to a Liquidating Event, the
Partnership may be continued upon the unanimous vote of the existing Partners at
such time to so continue the Partnership, provided such vote occurs within
thirty (30) days of the event triggering such dissolution.
9.2 Winding Up. Upon the occurrence of a Liquidating Event, the
Partnership shall continue solely for the purpose of winding up its affairs in
an orderly manner, liquidating its assets
23
<PAGE>
and satisfying the claims of its creditors and Partners. No Partner shall take
any action that is inconsistent with, or not necessary to or appropriate for,
the winding up of the Partnership's business and affairs. The Managing Partner
(or, in the event there is no Managing Partner, the other Partners or any Person
elected by a majority of the other Partners) shall be responsible for overseeing
the winding up and dissolution of the Partnership and shall take full account of
the Partnership's liabilities and the Partnership Property shall be liquidated
as promptly as is consistent with obtaining the fair value thereof, and the
proceeds therefrom, to the extent sufficient, shall be applied and distributed
in the following order:
(a) First, to the payment and discharge of all of the Partnership's
debts and liabilities to creditors other than Partners;
(b) Second, to the payment and discharge of all of the Partnership's
debts and liabilities to Partners; and
(c) The balance, if any, to the Partners in accordance with their
respective Capital Accounts, after giving effect to all contributions,
distributions and allocations for all periods.
9.3 Liquidating Trust. In the discretion of the Managing Partner (or
such other Person responsible for overseeing the winding up and dissolution of
the Partnership), a pro rata portion of the distributions that would otherwise
be made to the Partners pursuant to this Article IX may be:
(a) distributed to a trust established for the benefit of the
Partners, provided such trust is a liquidating trust or a grantor trust for
federal income tax purposes, for the purpose of liquidating Partnership
assets, collecting amounts owed to the Partnership and paying any
contingent or unforeseen liabilities or obligations of the Partnership or
of the Partners arising out of or in connection with the Partnership. The
assets of any such trust shall be distributed to the Partners from time to
time at such times and in such amounts as determined, in the reasonable
discretion of the Managing Partner (or such other Person responsible for
overseeing the winding up and dissolution of the Partnership), to be
appropriate in the same proportions as the amount distributed to such trust
by the Partnership would otherwise have been distributed to the Partners
pursuant to this Agreement; or
24
<PAGE>
(b) withheld to provide a reasonable reserve for Partnership
liabilities (contingent or otherwise) and to reflect the unrealized portion
of any installment obligations owed to the Partnership, provided that such
withheld amounts shall be distributed to the Partners as soon as
practicable.
ARTICLE X
MISCELLANEOUS
10.1 Notices. Any notice or other communication required or permitted
hereunder shall be in writing and shall be deemed to have been duly given on the
date of service if served personally; three (3) business days after the date of
mailing, if mailed, by first class mail, registered or certified, postage
prepaid; one (1) business day after delivery to the courier if sent by private
receipt courier guaranteeing next day delivery, delivery charges prepaid and, in
each case, addressed as follows:
If to BLC to:
Brookdale Living Communities, Inc.
77 West Wacker Drive
Chicago, Illinois 60601
Attention: President
Facsimile No.: (312) 917-0460
with a copy to:
Winston & Strawn
35 West Wacker Drive
Chicago, Illinois 60601
Attention: Wayne D. Boberg, Esq.
Facsimile No.: (312) 558-5700
and to:
Brookdale Living Communities, Inc.
77 West Wacker Drive
Chicago, Illinois 60601
Attention: Michael W. Reschke
Facsimile No.: (312) 917-1511
25
<PAGE>
and, if to BHI to:
c/o Brookdale Holdings, Inc.
77 West Wacker Drive
Chicago, Illinois 60601
Attention: President
Facsimile No.: (312) 917-0460
with a copy to:
Winston & Strawn
35 West Wacker Drive
Chicago, Illinois 60601
Attention: Wayne D. Boberg, Esq.
Facsimile No.: (312) 558-5700
and to:
Brookdale Living Communities, Inc.
77 West Wacker Drive
Chicago, Illinois 60601
Attention: Michael W. Reschke
Facsimile No.: (312) 917-1511
or at such other place as the respective Partner may, from time to time,
designate in a written notice to the other Partners. All communications among
Partners in the normal course of the Partnership business shall be deemed
sufficiently given if sent by regular mail, postage prepaid.
10.2 Binding Effect. Except as otherwise provided in this Agreement,
every covenant, term and provision of this Agreement shall be binding upon and
inure to the benefit of the Partners and their respective heirs, legatees, legal
representatives, successors, transferees and assigns.
10.3 Creditors. None of the provisions of this Agreement shall be for
the benefit of or enforced by any creditor of the Partnership or any Partner.
10.4 Remedies Cumulative. No remedy herein conferred upon any party
is intended to be exclusive of any other remedy, and each and every such remedy
shall be cumulative and shall be in addition to every other remedy given
hereunder or now or hereafter existing at law or in equity or by statute or
otherwise. No single or partial exercise by any party of any right, power or
remedy hereunder shall preclude any other or further exercise thereof.
26
<PAGE>
10.5 Construction. Every covenant, term and provision of this
Agreement shall be construed simply according to its fair meaning and not
strictly for or against any Partner.
10.6 Headings. Section and other headings contained in this Agreement
are for reference purposes only and are not intended to describe, interpret,
define or limit the scope, extent or intent of this Agreement or any provision
hereof.
10.7 Severability. Every provision of this Agreement is intended to
be severable. If any term or provision hereof is illegal or invalid for any
reason whatsoever, such illegality or invalidity shall not affect the validity
or legality of the remainder of this Agreement.
10.8 Incorporation by Reference. Every exhibit, schedule and other
appendix attached to this Agreement and referred to herein is hereby
incorporated in this Agreement by reference.
10.9 Further Action. Each Partner, upon the request of the Managing
Partner, agrees to perform all further acts and execute, acknowledge and deliver
any documents which may be reasonably necessary, appropriate or desirable to
carry out the provisions of this Agreement.
10.10 Variation of Pronouns. All pronouns and any variations thereof
shall be deemed to refer to masculine, feminine or neuter, singular or plural,
as the identity of the Person or Persons may require.
10.11 Governing Law. The laws of the State of Illinois shall govern
the validity of this Agreement, the construction of its terms and the
interpretation of the rights and duties of the Partners, without regard to the
principles of conflicts of laws.
10.12 Waiver of Action for Partition. Each of the Partners irrevocably
waives any right that it may have to maintain any action for partition with
respect to any of the Partnership Property.
10.13 Counterpart Execution. This Agreement may be executed in any
number of counterparts with the same effect as if all of the Partners had signed
the same document. All counterparts shall be construed together and shall
constitute one agreement.
[signature page follows]
27
<PAGE>
IN WITNESS WHEREOF, the parties have entered into this Agreement as of
the day first above set forth.
WITHDRAWING PARTNERS:
--------------------
KILICO REALTY CORPORATION, an
Illinois corporation
By:
----------------------------
Its:
-----------------------
THE PRIME GROUP, INC., an Illinois
corporation
By:
----------------------------
Its:
-----------------------
PARTNERS:
--------
BROOKDALE LIVING COMMUNITIES, INC.,
a Delaware corporation
By:
----------------------------
Its:
-----------------------
BROOKDALE HOLDINGS, INC., a Delaware
corporation
By:
----------------------------
Its:
-----------------------
28
<PAGE>
EXHIBIT A
---------
AMENDED AND RESTATED
PARTNERSHIP AGREEMENT
OF
RIVER OAKS PARTNERS,
AN ILLINOIS GENERAL PARTNERSHIP
<TABLE>
<CAPTION>
GROSS ASSET VALUE OF PERCENTAGE
NAMES AND ADDRESSES CAPITAL CONTRIBUTIONS PROPERTY CONTRIBUTED INTERESTS
- ------------------- --------------------- -------------------- ----------
<S> <C> <C> <C>
Brookdale Living N/A N/A 99%
Communities, Inc.
77 West Wacker Drive
Chicago, Illinois 60601
Brookdale Holdings, Inc. N/A N/A 1%
77 West Wacker Drive
Chicago, Illinois 60601
----- ----
TOTALS N/A 100%
===== ====
</TABLE>
1
<PAGE>
EXHIBIT B
---------
PROJECT DESCRIPTION
[legal description of the Heritage facility
to be attached at closing]
1
<PAGE>
EXHIBIT 10.18
FORM OF
AMENDED AND RESTATED
AGREEMENT OF LIMITED PARTNERSHIP
OF
THE PONDS OF PEMBROKE LIMITED PARTNERSHIP,
AN ILLINOIS LIMITED PARTNERSHIP
<PAGE>
TABLE OF CONTENTS
-----------------
PAGE
----
<TABLE>
<CAPTION>
<S> <C>
ARTICLE I
CERTAIN DEFINITIONS............................................. 2
1.1 "Act".................................................... 2
1.2 "Adjusted Capital Account Deficit"....................... 2
1.3 "Affiliate".............................................. 3
1.4 "Agreement" or "Partnership Agreement"................... 3
1.5 "Assignee"............................................... 3
1.6 "Available Cash Flow".................................... 3
1.7 "BHI".................................................... 4
1.8 "BLC".................................................... 4
1.9 "Capital Account"........................................ 4
1.10 "Capital Contributions".................................. 5
1.11 "Certificate"............................................ 6
1.12 "Code"................................................... 6
1.13 "Depreciation"........................................... 6
1.14 "General Partner"........................................ 6
1.15 "Gross Asset Value"...................................... 6
1.16 "Interest"............................................... 7
1.17 "Limited Partner"........................................ 7
1.18 "Nonrecourse Deductions"................................. 8
1.19 "Nonrecourse Liability".................................. 8
1.20 "Partner Minimum Gain"................................... 8
1.21 "Partner Nonrecourse Debt"............................... 8
1.22 "Partner Nonrecourse Deductions"......................... 8
1.23 "Partners"............................................... 8
1.24 "Partnership"............................................ 8
1.25 "Partnership Minimum Gain"............................... 9
1.26 "Percentage Interest".................................... 9
1.27 "Person"................................................. 9
1.29 "Project"................................................ 10
1.30 "Property"............................................... 10
1.31 "Recapture Gain"......................................... 10
1.32 "Regulations"............................................ 10
1.33 "Tax Matters Partner".................................... 10
1.34 "Transfer"............................................... 10
ARTICLE II
THE PARTNERSHIP................................................. 10
2.1 Organization............................................. 10
2.2 Partnership Name......................................... 10
2.3 Purpose.................................................. 11
2.4 Principal Place of Business.............................. 11
2.5 Term..................................................... 11
2.6 Filings; Agent for Service of Process.................... 11
2.7 Reservation of Other Business Opportunities.............. 12
ARTICLE III
PARTNERS' CAPITAL CONTRIBUTIONS;
ADDITIONAL FINANCING AND CONTRIBUTIONS.......................... 12
</TABLE>
<PAGE>
<TABLE>
<CAPTION>
<S> <C>
3.1 General Partner......................................... 12
3.2 Limited Partners........................................ 12
3.3 Additional Financing.................................... 12
3.4 Other Matters........................................... 13
ARTICLE IV
ALLOCATIONS.................................................... 13
4.1 Profits................................................. 13
4.2 Losses.................................................. 13
4.3 Special Allocations..................................... 13
4.4 Curative Allocations.................................... 15
4.5 Other Allocation Rules.................................. 17
4.6 Tax Allocations; Code Section 704(c).................... 17
ARTICLE V
DISTRIBUTIONS.................................................. 19
5.1 Distributions of Available Cash Flow.................... 19
5.2 Withholding............................................. 19
ARTICLE VI
MANAGEMENT OF PARTNERSHIP...................................... 20
6.1 Management of Partnership............................... 20
6.2 [Intentionally Omitted.]................................ 22
6.3 Compensation and Expense Reimbursement of Partners...... 22
6.4 Limitation of Liability................................. 22
6.5 Indemnification......................................... 22
6.6 No Participation in Management.......................... 23
6.7 No Personal Liability................................... 23
ARTICLE VII
BOOKS AND RECORDS.............................................. 23
7.1 Books and Records....................................... 23
7.2 Bank Accounts........................................... 23
7.3 Tax Returns............................................. 24
7.4 Tax Decisions and Elections............................. 24
7.5 Tax Examination......................................... 24
ARTICLE VIII
TRANSFER OR ASSIGNMENT OF PARTNERSHIP INTERESTS................ 24
8.1 Restrictions on Transfer................................ 24
8.2 Admission of Transferees................................ 25
ARTICLE IX
DISSOLUTION AND WINDING UP..................................... 25
9.1 Liquidating Events...................................... 25
9.2 Winding Up.............................................. 25
9.3 Liquidating Trust....................................... 26
ARTICLE X
MISCELLANEOUS.................................................. 27
10.1 Notices................................................... 27
</TABLE>
-ii-
<PAGE>
<TABLE>
<CAPTION>
<S> <C>
10.2 Binding Effect........................................... 28
10.3 Creditors................................................ 28
10.4 Remedies Cumulative...................................... 28
10.5 Construction............................................. 29
10.6 Headings................................................. 29
10.7 Severability............................................. 29
10.8 Incorporation by Reference............................... 29
10.9 Further Action........................................... 29
10.10 Variation of Pronouns.................................... 29
10.11 Governing Law............................................ 29
10.12 Waiver of Action for Partition........................... 29
10.13 Counterpart Execution.................................... 29
</TABLE>
EXHIBIT A - PARTNERS' CAPITAL CONTRIBUTIONS
EXHIBIT B - PROJECT DESCRIPTION
-iii-
<PAGE>
FORM OF
AMENDED AND RESTATED
AGREEMENT OF LIMITED PARTNERSHIP
OF
THE PONDS OF PEMBROKE LIMITED PARTNERSHIP,
AN ILLINOIS LIMITED PARTNERSHIP
-------------------------------
This AMENDED AND RESTATED AGREEMENT OF LIMITED PARTNERSHIP (this
"Agreement") is entered into this _______ day of ________________, 1997, by and
between Brookdale Holdings, Inc., a Delaware corporation ("BHI"), as the General
Partner, and Brookdale Living Communities, Inc., a Delaware corporation ("BLC"),
as the Limited Partner, pursuant to the provisions of the Illinois Revised
Uniform Limited Partnership Act, as amended, on the following terms and
conditions:
WITNESSETH:
WHEREAS, KILICO Realty Corporation, an Illinois corporation
("KILICO"), The Prime Group, Inc., an Illinois corporation ("Prime") and Arnold
G. Gough, an individual, ("Gough"), entered into that certain Agreement of
Limited Partnership of The Ponds of Pembroke Limited Partnership, dated as of
December 11, 1987, as amended as of December 11, 1990 and as further amended as
of August 15, 1991, as of December 31, 1991, as of March 22, 1994 and as of
August 31, 1994 (as so amended, the "Original Agreement");
WHEREAS, among other things, the amendments referred to in the
immediately preceding recital effected (i) the transfer of the interest of Gough
in the Partnership (as hereinafter defined) from Gough to Kemper Investors Life
Insurance Company, an Illinois insurance corporation ("Kemper"), (ii) the
withdrawal of Gough as a limited partner of the Partnership; and (iii) the
admission of Kemper as a limited partner of the Partnership;
WHEREAS, pursuant to that certain Formation Agreement, dated as of the
date hereof (the "Formation Agreement"), by and among BLC, Mark J. Schulte, an
individual, Prime and Prime Group Limited Partnership, an Illinois limited
partnership, Prime is assigning, as of the date hereof, a one percent (1%)
limited partner Interest (as hereafter defined) in the Partnership to BHI (the
"BHI Assignment")(it being understood that BHI shall be admitted to the
Partnership as the General Partner);
WHEREAS, pursuant to that certain letter agreement, dated September
17, 1996, by and among Prime, KILICO and Kemper, as amended, (i) KILICO is
assigning, as of the date hereof immediately after the BHI Assignment, a fifty
percent (50%) general partner Interest in the Partnership to Prime and (ii)
Kemper is assigning, as of the date hereof immediately after the BHI Assignment,
a twenty-five percent (25%) limited partner Interest in the Partnership to Prime
(such assignment, together with the assignment
<PAGE>
by KILICO described in clause (i) of this recital, is referred to herein as the
"Kemper Assignment");
WHEREAS, pursuant to the Formation Agreement, Prime is assigning, as
of the date hereof immediately after the Kemper Assignment, a ninety-nine
percent (99%) Interest in the Partnership (consisting of its then remaining
twenty-four percent (24%) limited partner Interest and the Interests acquired by
Prime pursuant to the Kemper Assignment) to BLC (it being understood that BLC
shall be admitted to the Partnership as the Limited Partner):
WHEREAS, the parties hereto desire to amend and restate the Original
Agreement in its entirety, and desire to reflect herein, among other things, (i)
the withdrawal of Prime, KILICO and Kemper as partners of the Partnership, (ii)
the admission of BHI as the General Partner of the Partnership; (iii) the
admission of BLC as the Limited Partner of the Partnership; and (iv) certain
other amendments to the Original Agreement so that the Original Agreement, as
amended and restated, reads, in its entirety, as follows:
ARTICLE I
CERTAIN DEFINITIONS
For purposes of this Agreement, the following terms shall have the
meanings set forth in this Article I (such meanings to be equally applicable in
both the singular and plural forms of the term defined).
1.1 "Act" means the Illinois Revised Uniform Limited Partnership
Act, as amended from time to time (or any corresponding provisions of succeeding
law).
1.2 "Adjusted Capital Account Deficit" means, with respect to any
Limited Partner, the deficit balance, if any, in such Limited Partner's Capital
Account as of the end of the relevant fiscal year, after giving effect to the
following adjustments:
(i) Credit to such Capital Account any amounts which such Partner is
obligated to restore pursuant to any provision of this Agreement or
pursuant to Regulations Section 1.704-1(b)(2)(ii)(c) or 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); and
(ii) Debit to such Capital Account the items described in Regulations
Sections 1.704-1(b)(2)(ii)(d)(4), 1.704-1(b)(2)(ii)(d)(5) and 1.704-
1(b)(2)(ii)(d)(6).
2
<PAGE>
The foregoing definition of Adjusted Capital Account Deficit is intended to
comply with the provisions of Regulations Section 1.704-1(b)(2)(ii)(d) and shall
be interpreted consistently therewith.
1.3 "Affiliate" means any (i) Person owning a majority interest in
any corporate Partner; (ii) Person owning an interest as a general partner of
any Partner or a majority interest as a limited partner of any Partner; (iii)
Person who is an officer, director, trustee, partner or stockholder of any
Partner or of any Person described in the preceding clause (ii); or (iv) Person
that is controlling, controlled by or under common control with a Partner or any
Person described in the preceding clauses (i), (ii) or (iii).
1.4 "Agreement" or "Partnership Agreement" means this Amended and
Restated Agreement of Limited Partnership, as amended from time to time. Words
such as "herein," "hereinafter," "hereof," and "hereunder" refer to this
Agreement as a whole, unless the context otherwise requires.
1.5 "Assignee" means any Person who has acquired a beneficial
interest in the Interest of a Partner in the Partnership.
1.6 "Available Cash Flow" means, with respect to the applicable
period of measurement (i.e., any period beginning on the first day of the fiscal
year or other period commencing immediately after the last day of the
calculation of Available Cash Flow which was distributed, and ending on the last
day of the month, quarter or other applicable period immediately preceding the
date of calculation, the excess, if any, of the gross cash receipts of the
Partnership for such period from all sources whatsoever, including, without
limitation, the following:
(a) (i) all rents, revenues, income and proceeds derived by the
Partnership from its operations, including, without limitation,
distributions received by the Partnership from any entity in which the
Partnership has an interest; (ii) all proceeds and revenues received on
account of any sales of property of the Partnership as a refinancing for
payments of principal, interest, costs, fees, penalties or otherwise on
account of any loans made by the Partnership or, financings or refinancings
of any property of the Partnership; (iii) the amount of any insurance
proceeds and condemnation awards of property of the Partnership; (iv) all
Capital Contributions received by the Partnership from its Partners; (v)
all cash amounts previously reserved by the Partnership, if the specific
purposes for which such amounts were reserved are no
3
<PAGE>
longer applicable; and (vi) the proceeds of liquidation of the
Partnership's property in accordance with this Agreement:
over the sum of:
(b) (i) all operating costs and expenses of the Partnership and
capital expenditures made during such period (without deduction, however,
for any capital expenditures, charges for depreciation or other expenses
not paid in cash or expenditures from reserves described in (vii) below);
(ii) all costs and expenses expended or payable during such period in
connection with the sale or other disposition, or financing or refinancing,
of property of the Partnership or the recovery of insurance or condemnation
proceeds; (iii) all fees provided for under this Agreement; (iv) all debt
service, including principal and interest, paid during such period on all
indebtedness of the Partnership; (v) all Capital Contributions, advances,
reimbursements or similar payments made to any Person (whether a
partnership, corporation or other entity) in which the Partnership has an
interest; (vi) all loans made by the Partnership to any Person in which the
Partnership has an interest (whether a partnership, corporation or other
entity); and (vii) any reserves reasonably determined by the General
Partner for working capital, capital improvements, payments of periodic
expenditures, debt service or other purposes.
1.7 "BHI" means Brookdale Holdings, Inc., a Delaware corporation.
1.8 "BLC" means Brookdale Living Communities, Inc., a Delaware
corporation
1.9 "Capital Account" means, with respect to any Partner, the
Capital Account maintained for such Partner in accordance with the following
provisions:
(i) To each Partner's Capital Account there shall be credited such
Partner's Capital Contributions, such Partner's distributive share of
Profits and any items in the nature of income or gain which are specially
allocated pursuant to Sections 4.3 or 4.4 hereof, and the amount of any
Partnership liabilities assumed by such Partner or which are secured by any
Property distributed to such Partner.
(ii) To each Partner's Capital Account there shall be debited the
amount of cash and the Gross Asset Value of any Property distributed to
such Partner pursuant to any provision of this Agreement, such Partner's
distributive share of Losses and any items in the nature of expenses or
losses which are
4
<PAGE>
specially allocated pursuant to Sections 4.3 or 4.4 hereof, and the amount
of any liabilities of such Partner assumed by the Partnership.
(iii) In determining the amount of any liability for purposes of the
foregoing subparagraphs (i) and (ii), there shall be taken into account
Code Section 752(c) and any other applicable provisions of the Code and
Regulations.
The foregoing provisions and the other provisions of this Agreement
relating to the maintenance of Capital Accounts are intended to comply with
Regulations Sections 1.704-1(b) and 1.704-2, and shall be interpreted and
applied in a manner consistent with such Regulations. In the event the General
Partner shall determine that it is prudent to modify the manner in which the
Capital Accounts, or any debits or credits thereto (including, without
limitation, debits or credits relating to liabilities which are secured by
contributed or distributed property or which are assumed by the Partnership,
General Partner or the Limited Partners) are computed in order to comply with
such Regulations, the General Partner may make such modification, provided that
it is not likely to have a material adverse effect on the amounts distributable
to any Partner pursuant to Article IX hereof upon the dissolution of the
Partnership. The General Partner also shall (i) make any adjustments that are
necessary or appropriate to maintain equality between the Capital Accounts of
the Partners and the amount of Partnership capital reflected on the
Partnership's balance sheet, as computed for book purposes, in accordance with
Regulations Section 1.704-1(b)(2)(iv)(q), and (ii) make any appropriate
modifications in the event unanticipated events might otherwise cause this
Agreement not to comply with Regulations Sections 1.704-1(b) or 1.704-2.
1.10 "Capital Contributions" means, with respect to any Partner, the
amount of money and the initial Gross Asset Value of any property (other than
money), net of the amount of any debt to which such property is subject,
contributed to the Partnership with respect to the Interest in the Partnership
held by such Partner. The principal amount of a promissory note which is not
readily tradable on an established securities market and which is contributed to
the Partnership by the maker of the note shall not be included in the Capital
Account of any Person until the Partnership makes a taxable disposition of the
note or until (and to the extent) such Partner makes principal payments on the
note, all in accordance with Regulations Section 1.704-1(b)(2)(iv)(d)(2).
1.11 "Certificate" shall mean the Certificate of Limited Partnership
of the Partnership filed with the Secretary of State of Illinois in accordance
with the Act or the applicable predecessor
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statute thereof, as such Certificate may be amended from time to time.
1.12 "Code" means the Internal Revenue Code of 1986, as amended from
time to time (or any corresponding provisions of succeeding law).
1.13 "Depreciation" means, for each fiscal year or other period, an
amount equal to the depreciation, amortization or other cost recovery deduction
allowable with respect to an asset for such year or other period, except that,
if the Gross Asset Value of an asset differs from its adjusted basis for federal
income tax purposes at the beginning of such year or other period, Depreciation
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 deduction for such year or other period bears to such beginning
adjusted tax basis; provided, however, that, if the federal income tax
depreciation, amortization or other cost recovery deduction for such year is
zero, Depreciation shall be determined with reference to such beginning Gross
Asset Value using any reasonable method selected by the General Partner; and
provided, further, however, that to the extent the "remedial" method described
in Regulations Section 1.704-3 is elected pursuant to the terms of this
Agreement, Depreciation will be determined in a manner consistent therewith.
1.14 "General Partner" means any Person which (i) is referred to as
such in the first paragraph of this Agreement or has become a General Partner
pursuant to the terms of this Agreement and (ii) has not ceased to be a General
Partner pursuant to the terms of this Agreement.
1.15 "Gross Asset Value" means, with respect to any asset, the
asset's adjusted basis for federal income tax purposes, except as follows:
(i) The initial Gross Asset Value of any asset contributed by a
Partner to the Partnership shall be the gross fair market value of such
asset, as determined by the contributing Partner and the Partnership;
(ii) The Gross Asset Values of all Partnership assets shall be
adjusted to equal their respective gross fair market values, as reasonably
determined by the General Partner, as of the following times: (a) the
acquisition of an additional Interest in the Partnership by any new or
existing Partner in exchange for more than a de minimis Capital
Contribution; (b) the distribution by the Partnership to a Partner of more
than a de minimis amount of Partnership assets, including money, as
consideration for an Interest in the Partnership; and (c) the
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liquidation of the Partnership within the meaning of Regulations Section
1.704-1(b)(2)(ii)(g); provided, however, that adjustments pursuant to
clauses (a) and (b) above shall be made only if the General Partner
reasonably determines that such adjustments are necessary or appropriate to
reflect the relative economic interests of the Partners in the Partnership;
(iii) The Gross Asset Value of any Partnership asset distributed to
any Partner shall be the gross fair market value of such asset on the date
of distribution; and
(iv) The Gross Asset Values of Partnership assets shall be increased
(or decreased) to reflect any adjustments to the adjusted basis of such
assets pursuant to Code Sections 734(b) or 743(b), but only to the extent
that such adjustments are taken into account in determining Capital
Accounts pursuant to Regulations Section 1.704-1(b)(2)(iv)(m) and the
definition of "Capital Account" hereof; provided, however, that Gross Asset
Values shall not be adjusted pursuant to this subparagraph (iv) to the
extent the General Partner determines that an adjustment pursuant to the
foregoing subparagraph (ii) of this definition hereof is necessary or
appropriate in connection with a transaction that would otherwise result in
an adjustment pursuant to this subparagraph (iv).
If the Gross Asset Value of an asset has been determined or adjusted pursuant to
any of the foregoing subparagraphs (i), (ii) or (iv), such Gross Asset Value
shall thereafter be adjusted by the Depreciation taken into account with respect
to such asset for purposes of computing Profits and Losses.
1.16 "Interest" means a Partner's ownership interest in the
Partnership, including any and all benefits to which the holder of such an
Interest may be entitled as provided in this Agreement, together with all
obligations of such Partner to comply with the terms and provisions of this
Agreement.
1.17 "Limited Partner" means the Person (i) the name of which is set
forth on Exhibit A attached hereto and designated as such or who has become a
Limited Partner pursuant to the terms of this Agreement and (ii) who holds an
Interest. "Limited Partners" means all such Persons if at any time there shall
be more than one Limited Partner. All references in this Agreement to a
majority in interest or a specified percentage of the Limited Partners shall
mean Limited Partners whose combined Percentage Interests represent more than
50% or such specified percentage, respectively, of the Percentage Interests then
held by all Limited Partners.
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1.18 "Nonrecourse Deductions" has the meaning set forth in
Regulations Section 1.704-2(b). The amount of Nonrecourse Deductions for a
Partnership fiscal year equals the excess, if any, of the net increase, if any,
in the amount of Partnership Minimum Gain during that fiscal year over the
aggregate amount of any distributions during that fiscal year of proceeds of a
Nonrecourse Liability that are allocable to an increase in Partnership Minimum
Gain, determined according to the provisions of Regulations Section 1.704-2(c).
1.19 "Nonrecourse Liability" has the meaning set forth in Regulations
Section 1.704-2(b)(3).
1.20 "Partner Minimum Gain" has the meaning set forth in the
definition of "partner nonrecourse debt minimum gain" in Regulations Section
1.704-2(i)(2), and will be computed as provided in Regulations Section 1.704-
2(i)(3).
1.21 "Partner Nonrecourse Debt" has the meaning set forth in
Regulations Section 1.704-2(b)(4).
1.22 "Partner Nonrecourse Deductions" has the meaning set forth in
Regulations Section 1.704-2(i). The amount of Partner Nonrecourse Deductions
with respect to a Partner Nonrecourse Debt for a Partnership fiscal year equals
the excess, if any, of the net increase, if any, in the amount of Partnership
Minimum Gain attributable to such Partner Nonrecourse Debt during that fiscal
year over the aggregate amount of any distributions during that fiscal year to
the Partner that bears the economic risk of loss for such Partner Nonrecourse
Debt to the extent such distributions are from the proceeds of such Partner
Nonrecourse Debt and are allocable to an increase in Partnership Minimum Gain
attributable to such Partner Nonrecourse Debt, determined in accordance with
Regulations Section 1.704-2(i).
1.23 "Partners" means the General Partner and the Limited Partners,
where no distinction is required by the context in which the term is used
herein. "Partner" means any one of the Partners. All references in this
Agreement to a majority interest or a specified percentage of the Partners shall
mean Partners whose combined Percentage Interests represent more than 50% or
such specified percentage, respectively, of the Percentage Interests then held
by all Partners.
1.24 "Partnership" means the partnership formed pursuant to the
Original Agreement and continued pursuant to this Agreement and the partnership
continuing the business of this Partnership in the event of dissolution as
herein provided.
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1.25 "Partnership Minimum Gain" has the meaning set forth in
Regulations Section 1.704-2(b)(2), and will be computed as provided in
Regulations Section 1.704-2(d).
1.26 "Percentage Interest" means the percentage set forth for the
General Partner and Limited Partners on Exhibit A hereto.
1.27 "Person" means any individual, general partnership, limited
partnership, corporation, trust or other association or entity.
1.28 "Profits" and "Losses" and reference to any item of income,
gain, loss or deduction thereof, mean, for each fiscal year or other period, an
amount equal to the Partnership's taxable income or loss for such year or
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:
(i) Any income of the Partnership that is exempt from 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;
(ii) Any expenditures of the Partnership 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;
(iii) In the event the Gross Asset Value of any Partnership asset is
adjusted pursuant to subparagraph (ii) or (iv) of the definition of Gross
Asset Value hereof, the amount of such adjustment shall be taken into
account as gain or loss from the disposition of such asset for purposes of
computing Profits or Losses;
(iv) 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 computed by reference to the Gross Asset Value of the property
disposed of notwithstanding that the adjusted tax basis of such property
differs from its Gross Asset Value;
(v) In lieu of the depreciation, amortization and other cost recovery
deductions taken into account in computing such taxable income or loss,
there shall be taken into account
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Depreciation for such fiscal year or other period, computed in accordance
with the definition of Depreciation herein; and
(vi) Notwithstanding any other provision of this definition of
"Profits" and "Losses," any items which are specially allocated pursuant to
Sections 4.3 or 4.4 hereof shall not be taken into account in computing
Profits or Losses.
1.29 "Project" means the senior and assisted living facility
described in Exhibit B attached hereto and all of the Partnership's interest
therein, including all real estate related thereto and buildings and
improvements thereon.
1.30 "Property" means all real and personal property acquired by the
Partnership and any improvements thereto and shall include both tangible and
intangible property.
1.31 "Recapture Gain" has the meaning set forth in Section 4.6(e).
1.32 "Regulations" means the Income Tax Regulations, including
Temporary Regulations, promulgated under the Code, as such regulations may be
amended from time to time (including corresponding provisions of succeeding
regulations).
1.33 "Tax Matters Partner" shall mean BHI or any successor General
Partner.
1.34 "Transfer" means, as a noun, any voluntary or involuntary
transfer, sale, pledge, hypothecation or other disposition or encumbrance and,
as a verb, voluntarily or involuntarily to transfer, sell, pledge, hypothecate
or otherwise dispose of or encumber.
ARTICLE II
THE PARTNERSHIP
2.1 Organization. The Partners hereby agree to (i) continue the
Partnership as a limited partnership pursuant to the provisions of the Act and
upon the terms and conditions set forth in this Agreement and (ii) amend and
restate herein the Partnership Agreement in its entirety.
2.2 Partnership Name. The name of the Partnership shall be "The
Ponds of Pembroke Limited Partnership" and all business of the Partnership shall
be conducted in such name or such other name as the General Partner shall
determine. The Partnership
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shall hold all of its property in the name of the Partnership and not in the
name of any Partner.
2.3 Purpose. The purpose and business of the Partnership shall be to
own real property, including, without limitation, the Project, to acquire,
lease, own, mortgage or otherwise encumber personal property, fixtures and real
property to accomplish the foregoing; to operate, manage, lease (or cause the
operation, management and leasing by independent contractors including a Partner
or its Affiliates) any Property owned by the Partnership, and otherwise deal in
and with the business and assets of the Partnership; and to do any and all other
acts which may be necessary or incidental to any of the foregoing or the
promotion or conduct of the business of the Partnership or any of the
Partnership Property, including, without limitation, being a partner in another
partnership or other partnerships.
2.4 Principal Place of Business. The principal place of business of
the Partnership shall be c/o The Prime Group, Inc., 77 West Wacker Drive,
Chicago, Illinois 60601 or such other location as may be designated from time to
time.
2.5 Term. The term of the Partnership commenced on the date on
which the Certificate was filed in the office of the Secretary of State of
Illinois in accordance with the Act and shall continue until the winding up and
liquidation of the Partnership and its business is completed, as provided in
Article IX hereof.
2.6 Filings; Agent for Service of Process.
(a) The Certificate has been filed in the office of the Secretary of
State of Illinois in accordance with the provisions of the Act. The General
Partner shall take any and all other actions reasonably necessary to perfect and
maintain the status of the Partnership as a limited partnership under the laws
of the State of Illinois. The General Partner shall cause amendments to the
Certificate to be filed whenever required by the Act. Such amendments may be
executed by the General Partner only.
(b) The General Partner shall execute and cause to be filed original
or amended Certificates and shall take any and all other actions as may be
reasonably necessary to perfect and maintain the status of the Partnership as a
limited partnership or similar type of entity under the laws of any other states
or jurisdictions in which the Partnership engages in business.
(c) The agent for service of process on the Partnership in the State
of Illinois, and the address of such agent, shall initially be Wayne D. Boberg,
35 West Wacker Drive, Suite 4200, Chicago, Illinois 60601 or any successor as
appointed by the
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General Partner. The General Partner, in it sole and absolute discretion, may
change the registered agent and appoint successor registered agents.
(d) Upon the dissolution of the Partnership, the General Partner (or,
in the event there is no remaining General Partner, the Person responsible for
winding up and dissolution of the Partnership pursuant to Article IX hereof)
shall promptly execute and cause to be filed certificates of dissolution in
accordance with the Act and the laws of any other states or jurisdictions in
which the Partnership has filed certificates.
2.7 Reservation of Other Business Opportunities. No business
opportunities other than those actually exploited by the Partnership pursuant to
Section 2.3 shall be deemed the property of the Partnership, and any Partner or
its Affiliate may engage in or possess an interest in any other business
venture, independently or with others, of any nature or description; and neither
any other Partner nor the Partnership shall have any rights by virtue hereof in
and to such other business ventures, or to the income or profits derived
therefrom. The provisions of this Section 2.7 shall be subject to, and not in
any way affect the enforceability of, any separate agreement by a Partner or any
Affiliate thereof restricting or prohibiting certain business activities of such
Partner or Affiliate.
ARTICLE III
PARTNERS' CAPITAL CONTRIBUTIONS;
ADDITIONAL FINANCING AND CONTRIBUTIONS
3.1 General Partner. The name, address, Capital Contribution and
Percentage Interest of the General Partner is set forth on Exhibit A hereto.
3.2 Limited Partners. The name, address, initial Capital
Contribution and Percentage Interest of the Limited Partners are set forth on
Exhibit A attached hereto.
3.3 Additional Financing. The sums of money required to finance the
business and affairs of the Partnership shall be derived from the Capital
Contributions made by the Partners to the Partnership, from funds generated from
the operation and the business of the Partnership and from any loans, bond
financing or other indebtedness which the General Partner may, in its
discretion, approve for the Partnership. No additional Capital Contributions
shall be made to the Partnership except at the direction of the General Partner.
3.4 Other Matters.
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(a) Except as otherwise provided in this Agreement, no Partner shall
demand or receive a return of its Capital Contributions from the Partnership
without the consent of the other Partners. Under circumstances requiring a
return of any Capital Contributions, no Partner shall have the right to receive
property other than cash except as may be specifically provided herein.
(b) No Partner shall receive any interest, salary or drawing with
respect to its Capital Contributions or its Capital Account or for services
rendered on behalf of the Partnership or otherwise in its capacity as a Partner,
except as otherwise provided in this Agreement or with the consent of the other
Partner.
ARTICLE IV
ALLOCATIONS
4.1 Profits. Subject to the allocation rules of Sections 4.3 and
4.4 hereof, Profits for any fiscal year will be allocated among Partners in
proportion to their respective Percentage Interests.
4.2 Losses. Subject to the allocation rules of Sections 4.3 and 4.4
hereof, Losses for any fiscal year will be allocated among Partners in
proportion to their respective Percentage Interests.
4.3 Special Allocations. The following special allocations will be
made in following order and priority:
(a) If there is a net decrease in Partnership Minimum Gain during
any fiscal year, each Partner will be specially allocated items of Partnership
income and gain for such year (and, if necessary, subsequent years) in
proportion to, and to the extent of, an amount equal to such Partner's share of
the net decrease in Partnership Minimum Gain determined in accordance with
Regulations Section 1.704-2(g)(2). The items to be allocated will be determined
in accordance with Regulations Section 1.704-2(f). This Section 4.3(a) is
intended to comply with such Sections of the Regulations and will be interpreted
consistently therewith.
(b) The allocations otherwise required pursuant to Section 4.3(a)
hereof will not apply to a Partner to the extent that: (i) such Partner's share
of the net decrease in Partnership Minimum Gain is caused by a guaranty,
refinancing or other change in the instrument evidencing a nonrecourse debt of
the Partnership which causes such debt to become a partially or wholly recourse
debt or a Partner Nonrecourse Debt, and such Partner bears the economic risk of
loss (within the meaning of Regulations Section
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1.752-2) for such changed debt; (ii) such Partner's share of the net decrease in
Partnership Minimum Gain results from the repayment of a nonrecourse liability
of the Partnership, which repayment is made using funds contributed by such
Partner to the capital of the Partnership; (iii) the Service, pursuant to
Regulations Section 1.704-2(f)(4), waives the requirement of such allocation in
response to a request for such waiver made by the General Partner on behalf of
the Partnership (which request the General Partner may or may not make, in their
discretion, if it determines that the Partnership would be eligible therefor);
or (iv) additional exceptions to the requirement of such allocation are
established by revenue rulings issued by the Internal Revenue Service pursuant
to Regulations Section 1.704-2(f)(5), which exceptions apply to such Partner, as
determined by the General Partner in its discretion.
(c) Except as provided in Section 4.3(a) hereof, if there is a
net decrease in Partner Minimum Gain attributable to Partner Nonrecourse Debt
during any fiscal year, determined in accordance with Regulations Section 1.704-
2(i)(3), then, except as provided in Regulations Section 1.704-2(i)(4), each
Partner who has a share of the Partner Minimum Gain attributable to such Partner
Nonrecourse Debt, determined in accordance with Regulations Section 1.704-
2(i)(5), will be allocated items of income and gain for such fiscal year (and,
if necessary, subsequent fiscal years) equal to such Partner's share of the net
decrease in Partner Minimum Gain. The items to be allocated will be determined
in accordance with Regulations Section 1.704-2(j)(2). This Section 4.3(c) is
intended to comply with Regulations Section 1.704-2(i) and will be applied and
interpreted in accordance with such regulation.
(d) Any item of Partnership loss, deduction or expenditure under
Code Section 705(a)(2)(b) attributable to Partner Nonrecourse Debt will be
allocated in accordance with Regulations Section 1.704-2(i) to the Partner who
bears the economic risk of loss for such debt.
(e) In the event any Partner unexpectedly receives any
adjustments, allocations or distributions described in Regulations Section
1.704-1(b)(2)(ii)(d)(4), (5) or (6) resulting in an Adjusted Capital Account
Deficit for such Partner, items of income and gain will be specially allocated
to such Partner in any amount and manner sufficient to eliminate, to the extent
required by the Regulations, such Adjusted Capital Account Deficit as quickly as
possible. The items to be allocated will be determined in accordance with
Regulations Section 1.704-1(b)(2)(ii)(d)(6). This Section 4.3(e) is intended to
comply with Regulations Section 1.704-1(b)(2)(ii)(d) and will be applied and
interpreted in accordance with such regulation.
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(f) No items of loss or deduction will be allocated to any
Partner to the extent that any such allocation would cause the Partner to have
an, or increase the amount of an existing, Adjusted Capital Account deficit at
the end of any Fiscal Year. All items of loss or deduction in excess of the
limitation set forth in this Section 4.3(f) will be allocated among such other
Partners, which have positive Adjusted Capital Account balances, pro rata, in
proportion to such Adjusted Capital Account balances, until each Partner's
positive Adjusted Capital Account balance is reduced to zero. Thereafter , any
remaining items of loss or deduction will be allocated to the Partners, pro
rata, in proportion to their relative aggregate Capital Contributions.
(g) In the event any Partner has an Adjusted Capital Account
Deficit at the end of any fiscal year, each such Partner will be specially
allocated items of Partnership income and gain (consisting of a pro rata portion
of each item of Partnership income and gain) as quickly as possible to eliminate
such Adjusted Capital Account Deficit, provided that an allocation pursuant to
this Section 4.3(g) will be made if and only to the extent that such Partner
would have an Adjusted Capital Account Deficit in excess of such sum after all
other allocations provided for in this Article IV have been tentatively made.
(h) To the extent an adjustment to the adjusted tax basis of any
Property pursuant to Sections 734(b) or 743(b) of the Code is required, pursuant
to Regulations Section 1.704-1(b)(2)(iv)(m), to be taken into account in
determining Capital Accounts, the amount of such adjustment to the Capital
Accounts will be treated as an item of gain (if the adjustment increases the
basis of the asset) or loss (if the adjustment decreases such basis) and such
gain or loss will be specially allocated among the Partners in a manner
consistent with the manner in which their Capital Accounts are required to be
adjusted pursuant to such Section of the Regulations.
4.4 Curative Allocations.
(a) The "Regulatory Allocations" consist of the "Basic Regulatory
Allocations," as defined in Section 4.4(b) hereof, the "Nonrecourse Regulatory
Allocations," as defined in Section 4.4(c) hereof, and the "Partner Nonrecourse
Regulatory Allocations," as defined in Section 4.4(d) hereof.
(b) The "Basic Regulatory Allocations" consist of allocations pursuant
to Sections 4.3(e), 4.3(f), 4.3(g) and 4.3(h) hereof. Notwithstanding any other
provision of this Agreement, other than the Regulatory Allocations, the Basic
Regulatory Allocations shall be taken into account in allocating items of
income, gain, loss and deduction among the Partners so that, to the
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extent possible, the net amount of such allocations of the Basic Regulatory
Allocations and such other items to each Partner shall be equal to the net
amount that would have been allocated to each such Partner as if the Basic
Regulatory Allocations had not occurred. For purposes of applying the foregoing
sentence, allocations pursuant to this Section 4.4(b) shall only be made with
respect to allocations pursuant to Section 4.3(h) hereof to the extent the
General Partner reasonably determines that such allocations will otherwise be
inconsistent with the economic agreement among the parties to this Agreement.
(c) The "Nonrecourse Regulatory Allocations" consist of all
allocations pursuant to Sections 4.3(a) hereof. Notwithstanding any other
provision of this Agreement, other than the Regulatory Allocations, the
Nonrecourse Regulatory Allocations shall be taken into account in allocating
items of income, gain, loss and deduction among the Partners so that, to the
extent possible, the net amount of such allocations of the Nonrecourse
Regulatory Allocations and such other items to each Partner shall be equal to
the net amount that would have been allocated to each such Partner if the
Nonrecourse Regulatory Allocations had not occurred. For purposes of applying
the foregoing sentence, no allocations pursuant to this Section 4.4(c) shall be
made prior to the Partnership fiscal year during which there is a net decrease
in Partnership Minimum Gain, and then only to the extent necessary to avoid any
potential economic distortions caused by such net decrease in Partnership
Minimum Gain.
(d) The "Partner Nonrecourse Regulatory Allocations" consist of all
allocations pursuant to Sections 4.3(c) and 4.3(d) hereof. Notwithstanding any
other provision of this Agreement, other than the Regulatory Allocations, the
Partner Nonrecourse Regulatory Allocations shall be taken into account in
allocating items of income, gain, loss and deduction among the Partners so that,
to the extent possible, the net amount of such allocations of the Partner
Nonrecourse Regulatory Allocations and such other items to each Partner shall be
equal to the net amount that would have been allocated to each such Partner if
the Partner Nonrecourse Regulatory Allocations had not occurred. For purposes of
applying the foregoing sentence (i) no allocations pursuant to this Section
4.4(d) shall be made with respect to allocations pursuant to Section 4.3(c)
relating to a particular Partner Nonrecourse Debt prior to the Partnership
fiscal year during which there is a net decrease in Partner Minimum Gain
attributable to such Partner Nonrecourse Debt, and then only to the extent
necessary to avoid any potential economic distortions caused by such net
decrease in Partner Minimum Gain, and (ii) allocations pursuant to this Section
4.4(d) shall be deferred with respect to allocations pursuant to Section 4.3(d)
hereof relating to a particular Partner Nonrecourse Debt to the extent the
General Partner reasonably determines that
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such allocations are likely to be offset by subsequent allocations pursuant to
Section 4.3(c) hereof.
(e) The General Partner shall have reasonable discretion, with respect
to each Partnership fiscal year, to (i) apply the provisions of Sections 4.4(b),
4.4(c) and 4.4(d) hereof in whatever order is likely to minimize the economic
distortions that might otherwise result from the Regulatory Allocations and (ii)
divide all allocations pursuant to Sections 4.4(b), 4.4(c) and 4.4(d) hereof
among the Partners in a manner that is likely to minimize such economic
distortions.
4.5 Other Allocation Rules.
(a) For purposes of determining the Profits, Losses or any other items
allocable to any period, Profits, Losses and any such other items shall be
determined on a daily, monthly or other basis, as determined by the General
Partners using any permissible method under Code Section 706 and the Regulations
thereunder.
(b) For purposes of Regulations Section 1.752-3(a)(3), the Partners
agree that Nonrecourse Liabilities of the Partnership in excess of the sum of
(A) the amount of Partnership Minimum Gain and (B) the total amount of built-in
gain (as defined in Regulations Section 1.752-3(a)(2)) shall be allocated among
the Partners in accordance with their respective Percentage Interests.
(c) In the event Interests are transferred in accordance with the
provisions of Article VIII hereof during any fiscal year, the distributive share
of Partnership income, gain, loss and deductions attributable to such
transferred Interests for that year shall be apportioned between the transferor
and the transferee in proportion to the number of days during such fiscal year
that each was the owner of the Interests transferred, but subject to the
constraints and limitations imposed by Code Section 706. Distributions with
respect to Interests transferred shall be made only to Partners of record on a
date designated by the General Partner as the date of such distribution.
4.6 Tax Allocations; Code Section 704(c).
(a) In accordance with Code Section 704(c) and the Regulations
thereunder, solely for income tax purposes, income, gain, loss and deduction
with respect to any property contributed to the capital of the Partnership
(including income, gain, loss and deduction determined with respect to the
alternative minimum tax) shall, be allocated among the Partners so as to take
account of any variation between the adjusted basis of such property to the
Partnership for federal income tax purposes (including such adjusted basis for
alternative minimum tax purposes) and its
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initial Gross Asset Value, including, but not limited to, special allocations to
a contributing Partner that are required under Code Section 704(c) to be made
upon distribution of such property to any of the non-contributing Partners.
(b) In the event the Gross Asset Value of any Partnership asset
is adjusted pursuant to paragraph (ii) of the definition of "Gross Asset Value"
contained herein, solely for federal income tax purposes, subsequent allocations
of income, gain, loss and deduction with respect to such asset (including
income, gain, loss and deduction determined with respect to the alternative
minimum tax) will take account of any variation between the adjusted basis of
such asset (including such adjusted basis for alternative minimum tax purposes)
and its Gross Asset Value in the same manner as under Code Section 704(c) and
the Regulations thereunder.
(c) Any elections or other decisions relating to allocations
under this Section 4.6, including the selection of any allocation method
permitted under Regulations Section 1.704-3, will be made as approved by the
General Partner in any manner that reasonably reflects the purpose and intention
of this Agreement. Except as otherwise provided in this Section 4.6, all items
of Partnership income, gain, loss, deduction and credit will for tax purposes be
divided among the Partners in the same manner as they share correlative Profits,
Losses or Partnership items of income, gain, loss or deduction, as the case may
be, for the fiscal year. Allocations pursuant to this Section 4.6 are solely for
purposes of federal, state and local taxes and will not affect, or in any way be
taken into account in computing, any Partner's Capital Account or share of
Profits, Losses or other items or distributions pursuant to any provision of
this Agreement.
(d) If any taxable item of income or gain is computed differently
from the taxable item of income or gain which results for purposes of the
alternative minimum tax, then to the extent possible, without changing the
overall allocations of items for purposes of either the Partners' Capital
Accounts or the regular income tax (i) each Partner will be allocated items of
taxable income or gain for alternative minimum tax purposes taking into account
the prior allocations of originating tax preferences or alternative minimum tax
adjustments to such Partner (and its predecessors) and (ii) other Partnership
items of income or gain for alternative minimum tax purposes of the same
character that would have been recognized, but for the originating tax
preferences or alternative minimum tax adjustments, will be allocated away from
those Partners that are allocated amounts pursuant to clause (i) so that, to the
extent possible, the other Partners are allocated the same amount, and type, of
alternative minimum tax income and gain
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that would have been allocated to them had the originating tax preferences or
alternative minimum tax adjustments not occurred.
(e) If any portion of gain recognized from the disposition of
property by the Partnership represents the "recapture" of previously allocated
deductions by virtue of the application of Code Section 1245 or 1250 ("Recapture
Gain"), such Recapture Gain will be allocated as follows:
First, to the Partners, pro rata, in proportion to the lesser of each
Partner's (i) allocable share of the total gain recognized from the disposition
of such Partnership property and (ii) share of depreciation or amortization with
respect to such property (as determined under Proposed Treasury Regulation
section 1.1245-1(e)(2)), until each such Partner has been allocated Recapture
Gain equal to such lesser amount; and
Second, the balance of Recapture Gain will be allocated among the Partners
whose allocable shares of total gain exceed their shares of depreciation or
amortization with respect to such property (as determined under Proposed
Treasury Regulation section 1.1245-1(e)(2)), in proportion to their shares of
total gain (including Recapture Gain) from the disposition of such property;
provided, however, that no Partner will be allocated Recapture Gain under this
Section 4.6(e) in excess of the total gain allocated to such Partner from such
disposition.
ARTICLE V
DISTRIBUTIONS
5.1 Distributions of Available Cash Flow. Except as otherwise provided
in Article IX hereof, Available Cash Flow, if any, shall be distributed, at such
times as the General Partner may determine to be appropriate, to the Partners in
accordance with their respective Percentage Interests.
5.2 Withholding. Notwithstanding any other provision of this
Agreement, the Tax Matters Partner is authorized to take any action that it
determines to be necessary or appropriate to cause the Partnership to comply
with any withholding requirements established under any federal, state or local
tax law, including, without limitation, withholding on any distribution to any
Partner. For all purposes of this Article V, any amount withheld on any
distribution and paid over to the appropriate governmental body shall be treated
as if such amount had, in fact, been distributed to the Partner.
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ARTICLE VI
MANAGEMENT OF PARTNERSHIP
6.1 Management of Partnership.
(a) The exclusive management and control of the business and affairs
of the Partnership shall be vested in the General Partner. The powers of the
General Partner shall include all powers, statutory or otherwise, possessed by
or permitted to general partners under the laws of the State of Illinois. Each
Partner hereby waives any and all claims such Partner may have against the
Partnership or any other Partner for breach of fiduciary duty or other similar
responsibility or obligation. The General Partner shall have full power and
authority to do all things deemed necessary or desirable by it to conduct the
business of the Partners, including, without limitation, the following:
(i) the making of any expenditures, the lending or borrowing of
money, the assumption, guarantee of or other contracting of indebtedness
and other liabilities, the issuance of evidences of indebtedness and the
incurring of any obligations it deems necessary for the conduct of the
activities of the Partnership;
(ii) the making of tax, regulatory and other filings or rendering
of periodic or other reports to governmental or other agencies having
jurisdiction over the Partnership or the business or assets of the
Partnership;
(iii) the acquisition, disposition, mortgage, pledge,
encumbrance, hypothecation or exchange of any assets of the Partnership or
the merger or other combination of the Partnership with or into another
entity;
(iv) the use of the assets of the Partnership (including, without
limitation, cash on hand) for any purpose and on any terms it sees fit,
including, without limitation, the financing of the conduct of the
operations of the General Partner or the Partnership, the lending of funds
to other Persons and the repayment of obligations of the Partnership;
(v) the negotiation, execution and performance of any contracts,
conveyances or other instruments that the General Partner considers useful
or necessary to the conduct of the Partnership's operations or the
implementation of the General Partner's powers under this Agreement,
including management and development agreements with respect to the
Project;
20
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(vi) the distribution of Partnership cash or other Partnership
assets in accordance with this Agreement;
(vii) the selection and dismissal of employees of the Partnership
or the General Partner and agents, outside attorneys, accountants,
consultants and contractors of the General Partner or the Partnership and
the determination of their compensation and other terms of employment or
hiring;
(viii) the maintenance of insurance for the benefit of the
Partnership;
(ix) the formation of or acquisition of an interest in and the
contribution of property to any further limited or general partnerships,
joint ventures or other relationships that it deems desirable;
(x) the control of any matters affecting the rights and
obligations of the Partnership, including the conduct of litigation,
incurring of legal expense and settlement of claims and litigation and the
indemnification of any Person against liabilities and contingencies to the
extent permitted by law;
(xi) the undertaking of any action in connection with the
Partnership's direct or indirect investment in any other Person (including,
without limitation, the contribution or loan of funds by the Partnership to
such Persons); and
(xii) the determination of the fair market value of any
Partnership property distributed in kind using such reasonable method of
valuation as it may adopt.
(b) The Limited Partners agree that the General Partner is authorized
to execute, deliver and perform the above-mentioned agreements and transactions
on behalf of the Partnership without any further act, approval or vote of the
Limited Partners.
(c) Without limiting the generality of the authority granted to the
General Partner in Section 6.1(a), the General Partner shall provide accounting,
administrative, management, marketing and promotion, property management,
leasing, tenant coordination, development, construction management, renovation,
redevelopment and rehabilitation services to the Partnership in its capacity as
a Partner of the Partnership.
(d) At all times from and after the date hereof, the General Partner
may cause the Partnership to obtain and maintain casualty, liability and other
insurance on the properties of the Partnership.
21
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(e) At all times from and after the date hereof, the General Partner
may cause the Partnership to establish and maintain working capital reserves in
such amounts as the General Partner, in its sole and absolute discretion, deems
appropriate and reasonable from time to time.
6.2 [Intentionally Omitted.]
6.3 Compensation and Expense Reimbursement of Partners.
(a) No payment will be made by the Partnership for the services of any
Partner or any member, employee, agent or partner of any Partner or an Affiliate
thereof, except as may be expressly approved by the General Partner.
(b) Each of the Partners, and all Affiliates thereof, shall, at the
request of each such Partner, be reimbursed by the Partnership for the
reasonable out-of-pocket expenses incurred by such Partner, or an Affiliate
thereof, on behalf of the Partnership in connection with the business and
affairs of the Partnership, including all legal, accounting, travel and other
similar expenses reasonably incurred by the Partners in connection with the
formation of the Partnership or the acquisition, development, renovation,
rehabilitation, repair, management or operation of the Partnership Property.
6.4 Limitation of Liability. Neither the Partners, nor any officer,
director, partner, employee or Affiliate of any Partner shall be liable,
responsible or accountable in damages or otherwise to the Partnership or any
Partner for any action taken or failure to act on behalf of the Partnership
within the scope of the authority conferred on such Person by this Agreement or
by law, unless such action or omission was performed or omitted fraudulently or
in bad faith or constituted gross negligence or willful misconduct.
6.5 Indemnification. The Partnership shall indemnify and hold
harmless the General Partner and the Limited Partners and each of their
respective partners, officers, directors, stockholders, employees, agents and
Affiliates (collectively the "Parties") from and against any loss, expense,
damage or injury suffered or sustained by the Parties (or any of them) by reason
of any acts, omissions or alleged acts or omissions arising out of its or their
activities on behalf of the Partnership or in furtherance of the interests of
the Partnership, including, but not limited to, any judgment, award, settlement,
reasonable attorney's fees and other costs or expenses incurred in connection
with the defense of any actual or threatened action, proceeding or claim
provided that the acts, omissions or alleged acts or omissions upon which such
actual or threatened action, proceeding or claim is based was
22
<PAGE>
performed or omitted in good faith and were not performed or omitted
fraudulently or in bad faith or as a result of gross negligence or willful
misconduct by any such Party and provided that such Party reasonably believed
that the acts, omissions, or alleged acts or omissions upon which such actual or
threatened action, proceeding or claim is based was in the best interests of the
Partnership. Such indemnification shall be made only to the extent of the assets
of the Partnership.
6.6 No Participation in Management. The Limited Partners shall not
participate in the management or control of the Partnership's business, nor
shall the Limited Partners transact any business for the Partnership or have the
power to act for or bind the Partnership, said powers being vested solely and
exclusively in the General Partner.
6.7 No Personal Liability. The Limited Partners shall not have any
personal liability whatsoever, whether to the Partnership, to the General
Partner or to the creditors of the Partnership for the debts, obligations,
expenses or liabilities of the Partnership or any of its losses, beyond the
Limited Partner's Capital Contribution.
ARTICLE VII
BOOKS AND RECORDS
7.1 Books and Records. The General Partner shall keep proper and
usual books and records pertaining to the Partnership's business on an accrual
basis in accordance with tax accounting principles or generally accepted
accounting principles consistently applied, showing all of its assets and
liabilities, receipts and disbursements, profits and losses, Partners' Capital
Contributions and distributions and all transactions entered into by the
Partnership. The books and records and all files of the Partnership shall be
kept at its principal office or such other place as the General Partner may
designate from time to time. The fiscal year of the Partnership shall end on
December 31 of each year.
7.2 Bank Accounts. Funds of the Partnership shall be deposited in
an account or accounts in the bank or banks designated by the General Partner.
Such account or accounts shall be in the name of the Partnership and shall be
subject to withdrawal only upon signatures of those Persons authorized from time
to time by the General Partner.
23
<PAGE>
7.3 Tax Returns. Federal, state and local tax returns of the
Partnership shall be prepared and timely filed by or at the direction of the
General Partner at the expense of the Partnership.
7.4 Tax Decisions and Elections. The General Partner is hereby
designated the "Tax Matters Partner" of the Partnership for all purposes under
this Agreement and as such term is defined under the Code. The Tax Matters
Partner shall make or revoke all elections and take all reporting positions
which, in its discretion, it deems necessary or desirable for the Partnership.
Each item of Partnership income and deduction shall be separately reported on
each Partner's income tax return, pursuant to Regulations Section 1.702-1(a).
The General Partner may, in its discretion, make the election under Code Section
754. Tax decisions and elections for the Partnership not provided for herein
shall be determined and made by the General Partner. The General Partner shall
provide all Partners with all tax information that the General Partner receives,
shall notify all Partners of any meetings with respect to the Partnership's
income tax returns and shall afford representatives of each Partner the
opportunity to be present at such meetings. No Partner shall take a position on
any income tax return which is inconsistent with any position taken by the
Partnership on the Partnership's income tax returns.
7.5 Tax Examination. Each Partner shall give prompt notice to the
other Partners upon receipt of notice that the Internal Revenue Service or any
state or local taxing authority intends to examine any Partnership income tax
returns. The Tax Matters Partner shall promptly notify the Partners of the
commencement of any administrative or judicial proceedings involving the tax
treatment of items of Partnership income, loss, deductions and credits, and
shall further keep the Partners fully informed of all material developments
involved in such proceedings.
ARTICLE VIII
TRANSFER OR ASSIGNMENT OF PARTNERSHIP INTERESTS
8.1 Restrictions on Transfer. Each Partner may Transfer all or any
portion of its rights or Interest in the Partnership, but may not withdraw or
retire from the Partnership without the prior written consent of the General
Partner; provided, however, that no Transfer will be permitted until the
Transferee (a) delivers to the General Partner a written instrument evidencing
such Transfer; (b) executes a copy of this Agreement accepting and agreeing to
all of the terms, conditions and provisions of this Agreement; and (c) pays to
the Partnership its reasonable out-of-pocket costs and expenses incurred in
connection with such Transfer and the admission of the Transferee as a Partner.
24
<PAGE>
8.2 Admission of Transferees. A Transferee of a Partner Interest in
accordance with the provisions of Section 8.1 of this Article VIII shall be
admitted as a Partner with respect to the Interest Transferred upon the
fulfillment of such provisions. Until such provisions are fulfilled, a
Transferee shall not be admitted to the Partnership or otherwise be recognized
by the Partnership as having any rights as a Partner, including any right to
receive distributions from the Partnership (directly or indirectly) or to
acquire an interest in the capital or profits of the Partnership.
ARTICLE IX
DISSOLUTION AND WINDING UP
9.1 Liquidating Events. The Partnership shall dissolve and commence
winding up and liquidating upon the first to occur of any of the following
("Liquidating Events"):
(a) December 31, 2047;
(b) the sale of all or substantially all of the Property;
(c) the unanimous agreement of all Partners;
(d) the happening of any other event that makes it unlawful,
impossible or impractical to carry on the business of the Partnership; or
(e) an event of dissolution required under the Act.
The Partners hereby agree that, notwithstanding any provision of the Act or the
Illinois Uniform Partnership Act, the Partnership shall not dissolve prior to
the occurrence of a Liquidating Event. Furthermore, if an event specified in
Section 9.1(e) hereof occurs, the remaining Partners may, within ninety (90)
days of the date such event occurs, unanimously vote to elect a successor
General Partner (if necessary) and continue the Partnership business, in which
case the Partnership shall not dissolve and the occurrence of the event under
Section 9.1(e) shall not be deemed a Liquidating Event. The Partners further
agree that in the event the Partnership is dissolved prior to a Liquidating
Event, the Partnership may be continued upon the unanimous vote of the existing
Partners at such time to so continue the Partnership, provided such vote occurs
within thirty (30) days of the event triggering such dissolution.
9.2 Winding Up. Upon the occurrence of a Liquidating Event, the
Partnership shall continue solely for the purpose of
25
<PAGE>
winding up its affairs in an orderly manner, liquidating its assets and
satisfying the claims of its creditors and Partners. No Partner shall take any
action that is inconsistent with, or not necessary to or appropriate for, the
winding up of the Partnership's business and affairs. The General Partner (or,
in the event there is no General Partner, the Limited Partners or any Person
elected by a majority of the Limited Partners) shall be responsible for
overseeing the winding up and dissolution of the Partnership and shall take full
account of the Partnership's liabilities and the Partnership Property shall be
liquidated as promptly as is consistent with obtaining the fair value thereof,
and the proceeds therefrom, to the extent sufficient, shall be applied and
distributed in the following order:
(a) First, to the payment and discharge of all of the Partnership's
debts and liabilities to creditors other than Partners;
(b) Second, to the payment and discharge of all of the Partnership's
debts and liabilities to Partners; and
(c) The balance, if any, to the General Partner and Limited Partners
in accordance with their respective Capital Accounts, after giving effect
to all contributions, distributions and allocations for all periods.
9.3 Liquidating Trust. In the discretion of the General Partner (or
such other Person responsible for overseeing the winding up and dissolution of
the Partnership), a pro rata portion of the distributions that would otherwise
be made to the General Partner and Limited Partners pursuant to this Article IX
may be:
(a) distributed to a trust established for the benefit of the General
Partner and the Limited Partners, provided such trust is a liquidating
trust or a grantor trust for federal income tax purposes, for the purpose
of liquidating Partnership assets, collecting amounts owed to the
Partnership and paying any contingent or unforeseen liabilities or
obligations of the Partnership or of the General Partner arising out of or
in connection with the Partnership. The assets of any such trust shall be
distributed to the General Partner and the Limited Partners from time to
time at such times and in such amounts as determined, in the reasonable
discretion of the General Partner (or such other Person responsible for
overseeing the winding up and dissolution of the Partnership), to be
appropriate in the same proportions as the amount distributed to such trust
by the Partnership would otherwise have been distributed to the General
Partner and the Limited Partners pursuant to this Agreement; or
26
<PAGE>
(b) withheld to provide a reasonable reserve for Partnership
liabilities (contingent or otherwise) and to reflect the unrealized portion
of any installment obligations owed to the Partnership, provided that such
withheld amounts shall be distributed to the General Partner and the
Limited Partners as soon as practicable.
ARTICLE X
MISCELLANEOUS
10.1 Notices. Any notice or other communication required or
permitted hereunder shall be in writing and shall be deemed to have been duly
given on the date of service if served personally; three (3) business days after
the date of mailing, if mailed, by first class mail, registered or certified,
postage prepaid; one (1) business day after delivery to the courier if sent by
private receipt courier guaranteeing next day delivery, delivery charges
prepaid, and in each case, addressed as follows:
If to BLC, to:
Brookdale Living Communities, Inc.
77 West Wacker Drive
Chicago, Illinois 60601
Attention: President
Facsimile No.: (312) 917-0460
with a copy to:
Winston & Strawn
35 West Wacker Drive
Chicago, Illinois 60601
Attention: Wayne D. Boberg, Esq.
Facsimile No.: (312) 558-5700
and to:
Brookdale Living Communities, Inc.
77 West Wacker Drive
Chicago, Illinois 60601
Attention: Michael W. Reschke
Facsimile No.: (312) 917-1511
27
<PAGE>
and, if to BHI, to:
Brookdale Holdings, Inc.
77 West Wacker Drive
Chicago, Illinois 60601
Attention: President
Facsimile No.: (312) 917-0460
with a copy to:
Winston & Strawn
35 West Wacker Drive
Chicago, Illinois 60601
Attention: Wayne D. Boberg, Esq.
Facsimile No.: (312) 558-5700
and to:
Brookdale Living Communities, Inc.
77 West Wacker Drive
Chicago, Illinois 60601
Attention: Michael W. Reschke
Facsimile No.: (312) 917-1511
or at such other place as the respective Partner may, from time to time,
designate in a written notice to the other Partners. All communications among
Partners in the normal course of the Partnership business shall be deemed
sufficiently given if sent by regular mail, postage prepaid.
10.2 Binding Effect. Except as otherwise provided in this Agreement,
every covenant, term and provision of this Agreement shall be binding upon and
inure to the benefit of the Partners and their respective heirs, legatees, legal
representatives, successors, transferees and assigns.
10.3 Creditors. None of the provisions of this Agreement shall be
for the benefit of or enforced by any creditor of the Partnership or any
Partner.
10.4 Remedies Cumulative. No remedy herein conferred upon any party
is intended to be exclusive of any other remedy, and each and every such remedy
shall be cumulative and shall be in addition to every other remedy given
hereunder or now or hereafter existing at law or in equity or by statute or
otherwise. No single or partial exercise by any party of any right, power or
remedy hereunder shall preclude any other or further exercise thereof.
28
<PAGE>
10.5 Construction. Every covenant, term and provision of this
Agreement shall be construed simply according to its fair meaning and not
strictly for or against any Partner.
10.6 Headings. Section and other headings contained in this
Agreement are for reference purposes only and are not intended to describe,
interpret, define or limit the scope, extent or intent of this Agreement or any
provision hereof.
10.7 Severability. Every provision of this Agreement is intended to
be severable. If any term or provision hereof is illegal or invalid for any
reason whatsoever, such illegality or invalidity shall not affect the validity
or legality of the remainder of this Agreement.
10.8 Incorporation by Reference. Every exhibit, schedule and other
appendix attached to this Agreement and referred to herein is hereby
incorporated in this Agreement by reference.
10.9 Further Action. Each Partner, upon the request of the General
Partner, agrees to perform all further acts and execute, acknowledge and deliver
any documents which may be reasonably necessary, appropriate or desirable to
carry out the provisions of this Agreement.
10.10 Variation of Pronouns. All pronouns and any variations thereof
shall be deemed to refer to masculine, feminine or neuter, singular or plural,
as the identity of the Person or Persons may require.
10.11 Governing Law. The laws of the State of Illinois shall govern
the validity of this Agreement, the construction of its terms, and the
interpretation of the rights and duties of the Partners, without regard to the
principles of conflicts of laws.
10.12 Waiver of Action for Partition. Each of the Partners
irrevocably waives any right that it may have to maintain any action for
partition with respect to any of the Partnership Property.
10.13 Counterpart Execution. This Agreement may be executed in any
number of counterparts with the same effect as if all of the Partners had signed
the same document. All counterparts shall be construed together and shall
constitute one agreement.
[signature pages follow]
29
<PAGE>
IN WITNESS WHEREOF, the parties have entered into this Agreement as of
the day first above set forth.
WITHDRAWING PARTNERS:
--------------------
KILICO REALTY CORPORATION, an
Illinois corporation
By:
---------------------------------------------
Its:
-----------------------------------------
KEMPER INVESTORS LIFE INSURANCE COMPANY, an
Illinois insurance corporation
By:
---------------------------------------------
Its:
-----------------------------------------
THE PRIME GROUP, INC., an Illinois corporation
By:
---------------------------------------------
Its:
30
<PAGE>
GENERAL PARTNER:
---------------
BROOKDALE HOLDINGS, INC., a Delaware corporation
By:
---------------------------------------------
Its:
-----------------------------------------
LIMITED PARTNER:
---------------
BROOKDALE LIVING COMMUNITIES, INC., a Delaware
corporation
By:
---------------------------------------------
Its:
-----------------------------------------
31
<PAGE>
EXHIBIT A
---------
AMENDED AND RESTATED
AGREEMENT OF LIMITED PARTNERSHIP
OF
PONDS OF PEMBROKE LIMITED PARTNERSHIP,
AN ILLINOIS LIMITED PARTNERSHIP
<TABLE>
<CAPTION>
GROSS ASSET VALUE OF PERCENTAGE
NAMES AND ADDRESSES CAPITAL CONTRIBUTIONS PROPERTY CONTRIBUTED INTERESTS
- ------------------- --------------------- -------------------- ----------
<S> <C> <C> <C>
Brookdale Holdings, Inc. GENERAL PARTNER
77 West Wacker Drive
Chicago, Illinois 60601 N/A N/A 1%
Brookdale Living LIMITED PARTNER
Communities, Inc.
77 West Wacker Drive
Chicago, Illinois 60601 N/A N/A 99%
---------- ----
TOTALS N/A 100%
=== ====
</TABLE>
1
<PAGE>
EXHIBIT B
---------
PROJECT DESCRIPTION
[legal description of the Devonshire facility
to be attached at closing]
1
<PAGE>
EXHIBIT 21.1
<TABLE>
<CAPTION>
Subsidiaries of the Company (including indirectly owned
subsidiaries)
<S> <C>
Name State of Incorporation
- ---- ----------------------
BLC Property, Inc. Delaware
Brookdale Living Communities of Delaware
Arizona, Inc.
Brookdale Living Communities of Delaware
Illinois, Inc.
Brookdale Living Communities of Delaware
New York, Inc.
Brookdale Holdings, Inc. Delaware
Brookdale Living Communities of Delaware
Delaware, Inc.
Brookdale Living Communities of Delaware
Illinois-II, Inc.
Brookdale Living Communities of Delaware
Michigan, Inc.
Brookdale Living Communities of Delaware
Minnesota, Inc.
Brookdale Living Communities of Delaware
Texas, Inc.
Brookdale Living Communities of Delaware
Washington, Inc.
</TABLE>
