AMENDED AND RESTATED
LIMITED LIABILITY COMPANY AGREEMENT
OF
FORTRESS BROOKDALE ACQUISITION LLC
A DELAWARE LIMITED LIABILITY COMPANY
THIS AMENDED AND RESTATED LIMITED LIABILITY COMPANY
AGREEMENT of FORTRESS BROOKDALE ACQUISITION LLC, a Delaware limited
liability company (the "Company"), is made as of July 26, 2000 (this
"Agreement"), among the undersigned Fortress Registered Investment Trust, a
Delaware business trust ("FRIT"; and also the "Managing Member"; and also a
"Member"), and Health Partners, a Bermuda exempted partnership ("HP"; and
also a "Member"); and, together with FRIT, the "Initial Members"), and the
other Persons (as defined below) who become members of the Company from
time to time in accordance with the provisions hereof (together with the
Initial Members, collectively, the "Members").
RECITALS:
WHEREAS, FRIT caused a Certificate of Formation of the Company
to be filed with the Secretary of State of the State of Delaware on May 12,
2000; and
WHEREAS, each party listed on Schedule A hereto as a Member has
executed a contribution agreement providing for, among other things, the
commitment of capital by such party to the Company;
WHEREAS, FRIT entered into the Limited Liability Operating
Agreement of Fortress Brookdale Acquisition LLC (the "Existing Operating
Agreement"), dated as of May 12, 2000 (the "Initial Closing"); and
WHEREAS, FRIT and the other parties hereto have agreed to amend
and restate the terms and conditions contained in the Existing Operating
Agreement in their entirety as hereinafter set forth.
NOW, THEREFORE, in consideration of the mutual promises and
agreements herein made and intending to be legally bound hereby, the
parties hereto agree as follows:
I. The Existing Operating Agreement is hereby modified so that
all of the terms and conditions of the aforesaid Existing Operating
Agreement shall be restated in their entirety as set forth herein.
II. This Agreement shall be binding upon and inure to the
benefit of the parties hereto, and their respective successors and assigns,
and shall be deemed to be effective as of the date hereof.
III. Any reference in any other document executed in connection
with this Agreement to the Existing Operating Agreement shall be deemed to
refer to this Agreement.
ARTICLE I
GENERAL PROVISIONS
1.1 Registered Office. The registered office of the Company in
this state shall be The Corporation Trust Company, 1209 Orange Street,
Wilmington, Delaware 19801. The Managing Member may change said registered
office from one location to another in the State of Delaware.
1.2 Other Offices. The Company may have one or more offices as
may be established from time to time.
1.3 Purpose; Nature of Business Permitted; Powers. The Company
is organized for the initial object and purpose of (i) acquiring,
purchasing, owning, holding and disposing of (directly or indirectly
through one or more wholly owned Subsidiaries (as hereinafter defined)
securities and the Convertible Note (as hereinafter defined) of Brookdale
Living Communities, Inc., a Delaware corporation ("Brookdale"), (ii)
forming one or more wholly-owned Subsidiaries for purpose of investing in
or merging with Brookdale and (iii) such other activities as limited
liability companies may engage in under the Act (as hereinafter defined) as
the Members may determine from time to time. The Company shall possess and
may exercise all the powers and privileges granted by the Act or by any
other law or by this Agreement, together with any powers incidental
thereto, insofar as such powers and privileges are necessary or convenient
to the conduct, promotion or attainment of the business purposes or
activities of the Company.
1.4 Limited Liability of Members. No Member or any of its
Affiliates (as hereinafter defined) shall have any liability for the debts,
obligations or liabilities of the Company or of any Member.
1.5 Tax Classification. The Members intend that the Company
shall be treated as a partnership for federal income tax purposes, and each
Member and the Company shall file all tax returns and shall otherwise take
all tax and financial reporting positions in a manner consistent with such
treatment.
1.6 Definitions. Unless the context otherwise requires, the
terms defined in this Section 1.6 shall, for the purposes of this
Agreement, have the meanings herein specified (such meanings to be equally
applicable to both the singular and plural forms of the terms defined).
"Act" means the Delaware Limited Liability Company Act (as it
may be amended from time to time and any successor to such Act).
"Adjusted Capital Account Deficit" means, with respect to any
Member, the deficit balance, if any, in such Member's Capital Account
as of the end of the relevant Fiscal Period, after giving effect to
the following adjustments: (a) credit to such Capital Account any
amounts that such Member is obligated to restore or deemed obligated
to restore pursuant to the penultimate sentences of Regulations
Sections 1.704-2(g)(1) and 1.704-2(i)(5); and (b) debit to such
Capital Account the items described in Regulations Sections
1.704-1(b)(2)(ii)(d)(4), (5) and (6). This definition of Adjusted
Capital Account Deficit is intended to comply with the provisions of
Section 1.704-1(b)(2)(ii)(d) of the Regulations and shall be
interpreted consistently therewith.
"Affiliate" means, with respect to a Person, another Person
that directly or indirectly controls, is controlled by or is under
common control with such first Person.
"Agreement" has the meaning set forth in the Preamble hereto.
"Amount Solicited" has the meaning set forth in Section 2.6
hereof.
"Annual Business Plan" means the annual business plan of
Brookdale approved by the Operating Committee in accordance with the
provisions of Section 3.9(a) hereof.
"Approved Sale" has the meaning set forth in Section 4.6(a)
hereof.
"Assistant Secretary" has the meaning set forth in Section
3.7(b) hereof.
"Audit Committee" has the meaning set forth in Section 3.13
hereof.
"Bankruptcy" means, with respect to any Person, a "Voluntary
Bankruptcy" or an "Involuntary Bankruptcy". A "Voluntary Bankruptcy"
shall mean, with respect to any Person, (i) an admission in writing
by such Person of its inability to pay its debts generally or a
general assignment by such Person for the benefit of creditors, (ii)
the filing of any petition or answer by such Person seeking to
adjudicate it a bankrupt or insolvent or seeking for itself any
liquidation, winding up, reorganization, arrangement, adjustment,
protection, relief or composition of such Person or its debts under
any law relating to bankruptcy, insolvency or reorganization or
relief of debtors, or seeking, consenting to or acquiescing in the
entry of an order for relief or the appointment of a receiver,
trustee, custodian or other similar official for such Person or for
any substantial part of its property, or (iii) corporate action taken
by such Person to authorize any of the actions set forth above. An
"Involuntary Bankruptcy" shall mean, with respect to any Person,
without the consent or acquiescence of such Person, the entering of
an order for relief or approving a petition for relief or
reorganization or any other petition seeking any reorganization,
arrangement, composition, readjustment, liquidation, dissolution or
other similar relief under any present or future bankruptcy,
insolvency or similar statute, law or regulation or the filing of any
such petition against such Person which petition shall not be
dismissed within ninety (90) Business Days or, without the consent or
acquiescence of such Person, the entering of an order appointing a
trustee, custodian, receiver or liquidator of such Person or of all
or any substantial part of the property of such Person which order
shall not be dismissed within sixty (60) Business Days.
"Board" has the meaning set forth in Section 3.11 hereof.
"Brookdale" has the meaning set forth in Section 1.3 hereof.
"Business Day" means any day other than a Saturday, Sunday or
any other day on which banks in the City of New York are required or
permitted to be closed.
"Buy/Sell Event" means an event triggered by an irreconcilable
dispute concerning a Major Decision, which shall be deemed to exist
on the tenth day following receipt by the Company and an Initial
Member of a written notice setting forth the sending Initial Member's
good faith basis for believing there is an irreconcilable dispute
with respect to a Major Decision. A Buy/Sell Event may only be
initiated by an Initial Member.
"Buy/Sell Notice" has the meaning set forth in Section 4.5(a)
hereof.
"Buy/Sell Price" has the meaning set forth in Section 4.5(b)
hereof.
"Buy/Sell Right" has the meaning set forth in Section 4.5
hereof.
"Capital Account" has the meaning set forth in Section 2.2
hereof.
"Capital Commitment" means, with respect to each Member, the
amount set forth opposite such Member's name, as amended from time to
time, attached hereto on Schedule A.
"Capital Contribution" means, with respect to any Member, the
amount of money and the initial Gross Asset Value of any property
(other than money) contributed to the Company in exchange for an
interest in the Company, including additional capital contributions.
"Capital Demand Date" has the meaning set forth in Section
2.1(c) hereof.
"Capital Demand Notice" has the meaning set forth in Section
2.1(c) hereof.
"Certificate" has the meaning set forth in Section 1.6 hereof.
"Certificate of Formation" means the Certificate of Formation
referred to in the Recitals hereof and any and all amendments thereto
and restatements thereof filed on behalf of the Company with the
office of the Secretary of State of the State of Delaware pursuant to
the Delaware Act.
"CFO" has the meaning set forth in Section 3.7(b) hereof.
"Chairman" has the meaning set forth in Section 3.7(b) hereof.
"Code" means the Internal Revenue Code of 1986, as amended from
time to time.
"Company Minimum Gain" means "partnership minimum gain" as set
forth and defined in Regulations Sections 1.704-2(b)(2) and
1.704-2(d).
"Contributing Member" has the meaning set forth in Section
2.1(d) hereof.
"Contribution Agreements" means the agreements executed the
date hereof between the Company and each of the Initial Members and
in the future with prospective new Members obligating each such
Member to make the contribution of cash or assets specified therein.
"Convertible Note" means, collectively, those certain 5 1/2%
Convertible Subordinated Notes Due 2009, purchased pursuant to that
certain Note Purchase Agreement, dated as of April 27, 1999, between
Brookdale and Health Partners.
"COO" has the meaning set forth in Section 3.7(b) hereof.
"Depreciation" means, for each Fiscal Period, an amount equal
to the depreciation, amortization, or other cost recovery deduction
allowable with respect to an asset for such Fiscal Period, except
that if the Gross Asset Value of an asset differs from its adjusted
basis for federal income tax purposes at the beginning of such Fiscal
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
Fiscal Period bears to such beginning adjusted tax basis; provided,
however, that if the adjusted basis for federal income tax purposes
of an asset at the beginning of such Fiscal Period is zero,
Depreciation shall be determined with reference to such beginning
Gross Asset Value using any reasonable method selected by the Tax
Matters Member.
"Effective Date" means the date hereof.
"Existing Operating Agreement" has the meaning set forth in the
Recitals hereof.
"Expiration Date" has the meaning set forth in Section 2.1(e)
hereof.
"Failed Contribution" has the meaning set forth in Section
2.1(d) hereof.
"Fiscal Period" means (i) the period commencing on the
Effective Date and ending on December 31, 2000, (ii) any subsequent
12 month period commencing on January 1 and ending on December 31 and
(iii) any portion of the period described in clauses (i) and (ii) of
this sentence for which the Company is required to allocate Profits,
Losses and other items of Company income, gain, loss or deduction
pursuant to Article V hereof.
"Fiscal Year" means (i) the period commencing on the Effective
Date and ending on December 31, 2000, (ii) any subsequent 12 month
period commencing on January 1 and ending on December 31 and (iii)
the period commencing on the immediately preceding January 1 and
ending on the date on which all property of the Company is
distributed to the Members pursuant to Article IX.
"FRIT" shall have the meaning set forth in the Preamble hereto.
"Gross Asset Value" means, with respect to any asset, the
asset's adjusted basis for federal income tax purposes, except as
follows:
(a) the initial Gross Asset Value of any asset
contributed by a Member to the Company shall be the fair market
value of such asset at the time it is accepted by the Company,
unreduced by any liability secured by such asset, as determined
by the Operating Committee;
(b) the initial Gross Asset Value of the securities
contributed by FRIT to the Company shall be an amount equal to
the number of such securities contributed by FRIT to the
Company multiplied by fifteen ($15.25) dollars;
(c) the Gross Asset Values of all Company assets
shall be adjusted to equal their respective fair market values,
unreduced by any liabilities secured by such assets, as
determined by the Operating Committee as of the following
times: (i) the acquisition of an additional interest in the
Company by any new or existing Member in exchange for more than
a de minimis Capital Contribution; (ii) the distribution by the
Company to a Member of more than a de minimis amount of
property as consideration for an interest in the Company; and
(iii) the liquidation of the Company within the meaning of
Regulations Section 1.704-1(b)(2)(ii)(g), provided that an
adjustment described in clauses (i) and (ii) of this paragraph
shall be made only if the Operating Committee reasonably
determines that such an adjustment is necessary to reflect the
relative economic interests of the Members of the Company;
(d) the Gross Asset Values of any Company asset
distributed to any Member shall be adjusted to equal the fair
market value of such asset, unreduced by any liability secured
by such asset, on the date of distribution as determined by the
Operating Committee;
(e) the Gross Asset Value of Company assets shall
be increased (or decreased) to reflect any adjustments to the
adjusted basis of such assets pursuant to Code Section 734(b)
or Code Section 743(b); but only to the extent that such
adjustments are taken into account in determining Capital
Accounts pursuant to Regulations Section 1.704-1(b)(2)(iv)(m)
and paragraph (f) of the definition of "Profits" and "Losses"
or Section 5.2(g) hereof; and
(f) the initial Gross Asset Value of the
Convertible Note shall be One Hundred and Ten Million Dollars
($110,000,000).
If the Gross Asset Value of an asset has been determined or
adjusted pursuant to paragraphs (b) or (d) of this definition, such
Gross Asset Value shall thereafter be adjusted by the Depreciation
taken into account with respect to such asset for purposes of
computing Profits and Losses.
"Guaranteed Payment" has the meaning set forth in Section
3.8(a).
"HP" has the meaning set forth in the Preamble hereto.
"HSR Act" means the Hart-Scott-Rodino Antitrust Improvements
Act of 1976 (as amended from time to time).
"Indebtedness" means (i) the principal, premium (if any),
interest and related fees and expenses (if any) in respect of (A)
indebtedness for money borrowed and (B) indebtedness evidenced by
notes, debentures, bonds or other similar instruments.
"Initial Capital Demand Notice" has the meaning set forth in
Section 2.1(b) hereof.
"Initial Closing" has the meaning set forth in the Recitals
hereof.
"Initial Co-Investor" means those investors to whom FRIT shall
transfer Membership Interests received for up to $50,000,000 worth of
its Capital Commitment, which transfers shall not be subject to the
restrictions set forth in Sections 4.1(a), 4.2, 4.3, 4.4 and 4.6
hereof.
"Initial Members" has the meaning set forth in the Preamble
hereto.
"Major Decision" means those matters not expressly within the
authority of the Managing Member, or not otherwise delegated to the
Managing Member by the Operating Committee, including but limited to,
the following actions of the Company, whether action with respect to
such matters is taken directly on behalf of the Company or indirectly
on behalf of any Subsidiary, including, without limitation,
Brookdale:
(a) to add to or increase the capital of the Company or
Brookdale or take any other action described in Article IV
hereof or to issue Membership Interests representing additional
capital investment in the Company;
(b) to do anything that would cause a Member, or require
any Member, to repurchase, prepay or incur any Indebtedness or
guarantee or otherwise become personally liable for any
Indebtedness incurred by the Company or Brookdale, without the
prior consent of such Member.
(c) to sell, exchange, finance, refinance, convey or
otherwise dispose of any asset, business, investment, property
or project directly or indirectly owned by the Company or any
Subsidiary (including, without limitation, Brookdale),
including, without limitation, permitting any Subsidiary
(including, without limitation, Brookdale) of the Company to
cancel, terminate or otherwise materially modify any existing
management agreement;
(d) to undertake an initial public offering of Membership
Interests or other securities of the Company or any equity
interests in any Subsidiary (including, without limitation,
Brookdale) or securities of any Person into which the Company
is proposed to be merged or consolidated in contemplation of
such an initial public offering;
(e) to merge or to consolidate the Company or Brookdale
with, or sell substantially all of the Company's or Brookdale's
assets to, any other Person, other than a merger of the
Company, or a Subsidiary of the Company, with or into
Brookdale;
(f) to amend this Agreement, as set forth in Section 11.2
hereof;
(g) to authorize and approve the dissolution of the
Company, as set forth in Section 9.1 hereof;
(h) to admit any new Member, other than the Initial
Co-Investors, to the Company or accept the resignation of any
existing Member of the Company;
(i) acquire any interest in real or personal property;
(j) confess a judgment against the Company or any
Subsidiary (including, without limitation, Brookdale) in an
amount in excess of $200,000;
(k) to commence a Voluntary Bankruptcy or to decide not
to contest an Involuntary Bankruptcy;
(l) the sale, dissemination, licensing, or the granting
of any right to use, to third parties, of any trade secrets,
customer lists or other intellectual property of the Company or
Brookdale and the decision not to seek enforcement of a
violation of the intellectual property rights of the Company or
Brookdale (e.g., a trademark infringement);
(m) approval of executive compensation and employee
benefit programs;
(n) to enter into, amend, extend or waive material
contracts;
(o) approval of each Annual Business Plan and any changes
to any Annual Business Plan;
(p) those matters set forth in Section 2.3 hereof;
(q) capital expenditures made by the Company in excess of
$100,000.
(r) appointment or removal of Officers;
(s) all transactions or agreements between the Company
and its Subsidiaries and any Members or their respective
Affiliates; and
(t) conversion of all or any portion of the Convertible
Note.
"Managing Member" has the meaning set forth in the Preamble
hereto.
"Member" has the meaning set forth in the Preamble hereto.
"Membership Interests" means the units representing the
outstanding limited liability company interests (as defined in the
Act) of the Members of the Company, including, without limitation,
each such Member's respective Capital Account, voting rights and any
other rights, benefits and obligations of such Member under this
Agreement or the Act.
"Member Nonrecourse Debt" has the meaning of "partner
nonrecourse debt" as set forth in Regulations Section 1.704-2(b)(4).
"Member Nonrecourse Debt Minimum Gain" means an amount, with
respect to each Member Nonrecourse Debt, equal to the Company Minimum
Gain that would result if such Member Nonrecourse Debt were treated
as a Nonrecourse Liability, determined in accordance with Regulations
Section 1.704-2(i)(3).
"Member Nonrecourse Deductions" has the meaning of "partner
nonrecourse deductions" set forth in Regulations Sections
1.704-2(i)(1) and 1.704-2(i)(2).
"Net Cash Flow" means the gross cash proceeds of the Company
less the portion thereof used to pay or establish reserves for all
Company expenses, debt payments, capital improvements, replacements,
and contingencies, all as determined by the Operating Committee in
its absolute and sole discretion, provided, however, that Net Cash
Flow shall not be reduced by depreciation, amortization, cost
recovery deductions, or similar allowances, but shall be increased by
any reductions of reserves previously established pursuant to
previously established reserves.
"1934 Act" means the Securities Exchange Act of 1934, as
amended from time to time.
"1933 Act" has the meaning set forth in Section 11.15(a)
hereof.
"Non-Contributing Member" has the meaning set forth in Section
2.1(d) hereof.
"Nonrecourse Deductions" has the meaning set forth in
Regulations Section 1.704-2(b)(1).
"Nonrecourse Liability" has the meaning set forth in
Regulations Section 1.704- 2(b)(3).
"Notice of Exercise" has the meaning set forth in Section
4.3(b) hereof.
"Notice of Proposed Transfer" has the meaning set forth in
Section 4.3(a) hereof.
"Notified Parties" has the meaning set forth in Section 4.5(a)
hereof.
"Notifying Party" has the meaning set forth in Section 4.5(a)
hereof.
"Observer" has the meaning set forth in Section 3.9(a) hereof.
"OC Members" has the meaning set forth in Section 3.9(a)
hereof.
"Offered Interests" has the meaning set forth in Section 4.3(a)
hereof.
"Offer Price" has the meaning set forth in Section 4.3(a)
hereof.
"Offer to Contribute" has the meaning set forth in Section 2.6
hereof.
"Officer" means any officer of the Company appointed by the
Operating Committee.
"Operating Committee" has the meaning set forth in Section 3.9
hereof.
"Organizer" has the meaning set forth in Section 1.6 hereof.
"Other Committees" has the meaning set forth in Section 3.11
hereof.
"Other Members" has the meaning set forth in Section 4.4(a)
hereof.
"Participating Member" has the meaning set forth in Section
4.4(b) hereof.
"Percentage Interest" means, with respect to each Member, the
percentage set forth opposite its name on Schedule A hereto, as
amended from time to time, which percentage represents the Capital
Commitment of such Member divided by the aggregate amount of the
Capital Commitments of all Members and shall mean a Member's
Membership Interest which represents such Member's share of the
profits and, if applicable, losses of the Company and such Member's
rights to receive distributions of the Company's assets in accordance
with the provisions of this Agreement.
"Permitted Transferee" means: (i) any Affiliate or Subsidiary
of a Member, or any Affiliate or Subsidiary thereof; (ii) the
Company; (iii) with respect to FRIT, any Initial Co-Investor; (iv) in
the event of the dissolution, liquidation or winding up of any such
Person that is a corporation or partnership or limited liability
company, the stockholders of a corporation that is such Person, the
partners of a partnership that is such Person, the members of a
limited liability company that is such Person or a successor
partnership all of the partners of which or a successor corporation
all of the stockholders of which or a limited liability company all
of the members of which are the Persons who were the partners of such
partnership or the stockholders of such corporation or the members of
such limited liability company immediately prior to the dissolution,
liquidation or winding up of such Person; provided, that no such
distribution to such persons shall be permitted if as a result
thereof the Company would become subject to the 1934 Act; (v) a
transferee by testamentary or intestate disposition; (vi) a
transferee by inter vivos transfer to the transferring Person's
spouse, children and/or other lineal descendants; (vii) a trust
transferee by inter vivos transfer, the beneficiaries of which are
the transferring Person, spouse, children and/or other lineal
descendants; (viii) a successor nominee or trustee for the beneficial
owner of the shares for which such Person acts as nominee or trustee,
as the case may be; or (ix) an institutional lender for money
borrowed pursuant to bona fide pledge of or the granting of a
security interest in the Member's Membership Interests; provided,
however, that any such Permitted Transferee shall acknowledge in
writing that it agrees to be bound by, and hold the Membership
Interests being pledged subject to, the terms of this Agreement.
"Person" means any individual, corporation, association,
partnership (general or limited), joint venture, trust, joint-stock
company, estate, limited liability company, unincorporated
organization or other legal entity or organization.
"President" has the meaning set forth in Section 3.7(b) hereof.
"Profits" or "Losses" means, for each Fiscal Period, an amount
equal to the Company's taxable income or loss for such Fiscal Period,
determined in accordance with Code Section 703(a) (for this purpose,
all items of income, gain, loss, or deduction required to be stated
separately pursuant to Code Section 703(a)(1) shall be included in
taxable income or loss), with the following adjustments (without
duplication):
(a) any income of the Company that is exempt from United
States Federal income tax and not otherwise taken into account
in computing Profits or Losses pursuant to this definition
shall be added to such taxable income or loss;
(b) any expenditures of the Company described in Code
Section 705(a)(2)(B) or treated as Code Section 705(a)(2)(B)
expenditures pursuant to Regulations Section
1.704-1(b)(2)(iv)(i), and not otherwise taken into account in
computing Profits or Losses pursuant to this definition shall
be subtracted from such taxable income or loss;
(c) in the event the Gross Asset Value of any Company
asset is adjusted pursuant to applicable provisions of the
Regulations, the amount of such adjustment shall be taken into
account as an item of gain (if the adjustment increases the
Gross Asset Value of the asset) or an item of loss (if the
adjustment decreases the Gross Asset Value of the Asset) from
the disposition of such asset and shall be taken into account
for purposes of computing Profits or Losses;
(d) gain or loss resulting from any disposition of
property with respect to which gain or loss is recognized for
federal income tax purposes shall be computed by reference to
the Gross Asset Value of property disposed of, notwithstanding
that the adjusted tax basis of such property differs from its
Gross Asset Value;
(e) in lieu of depreciation, amortization, and other cost
recovery deductions taken into account in computing such
taxable income or loss there shall be taken into account
Depreciation with respect to each asset of the Company for such
Fiscal Period, computed in accordance with the definition of
Depreciation;
(f) to the extent an adjustment to the adjusted tax basis
of any Company asset pursuant to Code Section 734(b) or Code
Section 743(b) is required pursuant to Regulations and Sections
1.704-1(b)(2)(iv)(m)(4) and 1.704- 1(b)(2)(iv)(m)(2) to be
taken into account in determining Capital Accounts as a
result of a distribution other than in complete liquidation of
a Member's Membership Interest, the amount of such adjustment
shall be treated as an item of gain (if the adjustment
increases the basis of the asset) or loss (if the adjustment
decreases the basis of the asset) from the disposition of the
asset and shall be taken into account for purposes of computing
Profits or Losses; and
(g) notwithstanding any other provision of this
definition, any items which are specially allocated pursuant to
Section 5.2 or Section 5.3 of this Agreement shall not be taken
into account in computing Profits or Losses.
The amounts of the items of Company income, gain, loss, or
deduction available to be specially allocated pursuant to Section 5.2
and Section 5.3 hereof shall be determined by applying rules
analogous to those set forth in paragraphs (a) through (f) above.
"Primary Option Period" has the meaning set forth in Section
4.3(b) hereof.
"Proposed Transfer" has the meaning set forth in Section 4.3(a)
hereof.
"Proposing Member" has the meaning set forth in Section 4.3(a)
hereof.
"Purchase Election" has the meaning set forth in Section 4.5(c)
hereof.
"Quorum" has the meaning set forth in Section 3.9(a) hereof.
"Regulations" means the Income Tax Regulations, including
Temporary Regulations, promulgated under the Code, as the same may be
amended hereafter from time to time (including corresponding
provisions of succeeding Income Tax Regulations).
"Regulatory Allocations" has the meaning set forth in Section
5.3 hereof.
"Remaining Member" has the meaning set forth in Section 4.3(a)
hereof.
"Representative" has the meaning set forth in Section 9.2
hereof.
"Required Majority" has the meaning set forth in Section 3.9(a)
hereof.
"Response Period" has the meaning set forth in Section 4.5(c)
hereof.
"Sale Election" has the meaning set forth in Section 4.5(c)
hereof.
"Secretary" has the meaning set forth in Section 3.7(b) hereof.
"Subsidiary" of a Person means another Person in which the
first Person owns, directly or indirectly, not less than a majority
of the equity interests. Unless the context otherwise requires, all
references herein to Subsidiaries shall be to Subsidiaries of the
Company.
"Tag-Along Notice" has the meaning set forth in Section 4.4(b)
hereof.
"Tag-Along Notice Period" has the meaning set forth in Section
4.4(b) hereof.
"Tax Matters Member" has the meaning set forth in Section 7.2
hereof.
"Tender Offer" means the tender offer by the Company (directly
or through one or more wholly-owned Subsidiaries) of the shares of
Brookdale which are not then owned by the Company or FRIT.
"Third Party" has the meaning set forth in Section 4.3(a)
hereof.
"Third Party Notice" has the meaning set forth in Section
4.4(a) hereof.
"Third Party Offer" has the meaning set forth in Section 4.4(a)
hereof.
"Transfer" has the meaning set forth in Section 4.1(a) hereof.
"Transferring Member" has the meaning set forth in Section
4.4(a) hereof.
"Unpaid Capital Commitment" means, with respect to any Member,
the amount by which (i) the sum of (1) such Member's Capital
Commitment and (2) the amount, if any, by which such Member elects to
increase its Capital Commitment pursuant to the terms hereof and (3)
distributions to such Member in respect of a return of Capital
Contributions, if any, pursuant to the terms hereof, exceeds (ii) the
aggregate of all amounts actually contributed to the Company by such
Member pursuant to Section 2.1.
"Voting Representative" has the meaning set forth in Section
9.2 hereof.
Any capitalized term not defined herein shall have the meaning
ascribed to such term in the Act.
1.6 Certificates. The Managing Member, each Officer, Adam M.
Endick, Deborah Reusch and Catherine Ledyard (each, an "Organizer") are
authorized Persons within the meaning of the Act to execute, deliver and
file the Certificate of Formation and any other certificates (and any
amendments and/or restatements thereof) necessary for the Company to
qualify to do business in a jurisdiction in which the Company may wish to
conduct business (each, a "Certificate"). The Company hereby ratifies the
execution, delivery and filing by each Organizer of all Certificates
heretofore executed, delivered or filed by such Organizer.
ARTICLE II
CAPITAL CONTRIBUTIONS AND CAPITAL ACCOUNTS
2.1 Capital Contributions.
(a) In exchange for its Membership Interests, each Member
hereby agrees to contribute an amount equal to its Capital Commitment (less
amounts previously contributed) upon receipt of a Capital Demand Notice
from the Operating Committee in accordance with Section 2.1(b) hereof and
the Contribution Agreements.
(b) FRIT was admitted to the Company at the Initial Closing and
HP shall be admitted to the Company on the date hereof. FRIT has previously
contributed capital to the Company in the amount specified in Schedule A
attached hereto. Each Member shall make contributions to the Company on
Capital Demand Dates upon receipt of Capital Demand Notices, in accordance
with and subject to the limitations set forth in this Section 2.1. Except
as specified below with respect to the Initial Capital Demand Notice, on
any Capital Demand Date, each Member shall contribute to the Company in
dollars an amount equal to such portion of its Unpaid Capital Commitment as
shall be specified by the Operating Committee in a Capital Demand Notice
delivered in respect of such Capital Demand Date. The first Capital Demand
Notice (the "Initial Capital Demand Notice") shall be delivered by
facsimile at least two (2) Business Days prior to the closing of the Tender
Offer, and shall be in an amount equal to each of FRIT's and HP's Unpaid
Capital Commitments (which, in the case of HP, shall be satisfied by
transfer of the Convertible Note to the Company). All Members shall pay
their pro rata Capital Commitment on the Capital Demand Date specified in
the applicable Capital Demand Notice.
(c) For purposes of this Agreement, (i) a "Capital Demand Date"
shall mean a date on which Members are required by the Operating Committee
to contribute capital to the Company not in excess of their Capital
Commitments, which date (A) shall be specified by the Operating Committee
in a Capital Demand Notice delivered by the Managing Member to each of the
Members, and (B) shall be no less than fifteen (15) days from the date of
delivery of a Capital Demand Notice by the Managing Member; and (ii) a
"Capital Demand Notice" shall mean a written notice requiring the
contribution of capital to the Company, which notice shall (A) be delivered
by the Managing Member to each Member, (B) call for contribution to the
Company of the amount of capital not in excess of such Member's Capital
Commitment determined by the Operating Committee to be appropriate to fund
particular development projects or acquire additional assets for the
Company or meet the expenses of the Company (including the payment of the
Guaranteed Payment to the Managing Member) permitted to be paid by the
Company hereunder, and (C) call for a contribution of capital by each
Member in an amount which represents such Member's Percentage Interest of
the aggregate of the amounts payable by all Members on the relevant Capital
Demand Date. The foregoing notwithstanding, the Managing Member, by prompt
notice to each Member by telex, telecopier or cable, which shall be
delivered at least two (2) Business Days prior to the Capital Demand Date,
may postpone the Capital Demand Date one or more times for any reason to a
specific date, or to a future date to be confirmed on two (2) Business
Days' notice, in each case no later than forty-five (45) consecutive
days following the originally scheduled Capital Demand Date, or, if such
forty-fifth (45th) day shall not be a Business Day, then the next
succeeding Business Day, whereupon such rescheduled Capital Demand Date
shall thereafter be the scheduled Capital Demand Date for purposes of this
Agreement. To the extent the information contained in the Capital Demand
Notice delivered with respect to the originally scheduled Capital Demand
Date has materially changed, the notice of postponement shall notify the
Members of such changes.
(d) If at any time or times a Member shall fail to timely make
any Capital Contributions to the Company which such Member is obligated to
make under this Agreement and the Contribution Agreement (such Member is
hereinafter referred to as a "Non-Contributing Member"), then, without
limiting the rights or remedies available to the Company or the other
Members by reason of the breach by a Non-Contributing Member, the other
Members may (but shall not be obligated to), in proportion to their
respective Membership Interests (such Members are hereinafter referred to
as the "Contributing Members"), pay all or any part of the payment which a
Non-Contributing Member failed to contribute to the Company (the "Failed
Contribution") and treat such amount as a contribution to the Company, in
which case the amount contributed shall be deemed a Capital Contribution by
such Contributing Members as of the date made. If a Contributing Member or
Members shall elect to make such a Capital Contribution, the Membership
Interests of each Contributing Member shall be increased by a fraction the
numerator of which is equal to 1.25 times the portion of the Failed
Contribution contributed by such Contributing Member and the denominator of
which is equal to the total amount of Capital Contributions that all
Members have made to the Company (including the Capital Contributions by
the Contributing Members pursuant to this Section 2.1(d)) through and
including the date such Contributing Member contributed such portion. The
Membership Interests of the Non-Contributing Member shall be reduced by the
percentage by which the Contributing Members' Membership Interests were
increased pursuant to the preceding sentence; provided, however, that the
Contributing Member's Membership Interest shall not be increased beyond
that percentage represented by the Non-Contributing Member's entire
Membership Interest.
(e) Capital Contributions by the Members (other than the
initial Capital Contribution by HP) shall be made in dollars by wire
transfer of federal funds to an account or accounts of the Company
specified in the applicable Capital Demand Notice. Other than as set forth
in this Article II, no Member shall be entitled to any interest or
compensation by reason of its Capital Contributions or by reason of serving
as a Member. No Member shall be required to lend any funds to the Company.
Upon the expiration of the term hereof (the "Expiration Date"), the amount
of each Member's Unpaid Capital Commitment shall be canceled except to the
extent necessary (A) to complete investments in progress, (B) to pay the
Company's operating expenses, including the Guaranteed Payment, and (C) to
fund necessary reserves and costs related to the Company's indemnification
obligations, and the Managing Member shall have the right to deliver
Capital Demand Notices with respect thereto after the Expiration Date.
2.2 Capital Accounts. A separate capital account (each a
"Capital Account") for each Member shall be established on the books and
records of the Company in compliance with Section 704(b) of the Code and
the Regulations promulgated thereunder and such Capital Accounts shall be
maintained for each Member in accordance with the following provisions,
without duplication:
(a) to each Member's Capital Account there shall be
credited such Member's Capital Contributions, such Member's share of
Profits and items in the nature of income or gain which are specially
allocated to such Member pursuant to Section 5.2 and Section 5.3
hereof, and the amount of any Company liabilities assumed by such
Member or which are secured by any Company property distributed to
such Member;
(b) to each Member's Capital Account there shall be
debited the amount of cash and the Gross Asset Value of any Company
property distributed to such Member pursuant to any provision of this
Agreement, such Member's share of Losses and any items in the nature
of expenses or losses which are specially allocated pursuant to
Section 5.2 or Section 5.3 hereof, and the amount of any liabilities
of such Member assumed by the Company or which are secured by any
property contributed by such Member to the Company;
(c) in the event all or a portion of a Member's
Membership Interest in the Company is transferred, the transferee
shall succeed to the Capital Account of the transferor to the extent
it relates to the transferred interest;
(d) in determining the amount of any liability for
purposes of Sections 2.2(a) and 2.2(b) hereof, there shall be taken
into account Code Section 752(c) and any other applicable provisions
of the Code and Regulations; and
(e) immediately prior to the actual or deemed
distribution of property of the Company (other than the distribution
of cash) upon a dissolution and liquidation of the Company, the
Capital Accounts of the Members shall be adjusted (consistent with
the provisions hereof and Regulations under Section 704 of the Code)
upward or downward to reflect any unrealized gain or unrealized loss
attributable to property of the Company, as if such unrealized gain
or unrealized loss had been recognized upon an actual sale of each
asset immediately prior to such distribution and had been allocated
to the Members at such time. The provisions of this Section 2.2(e)
are intended to meet the requirements of Regulations Section
1.704-1(b)(2)(iv)(e).
This Section 2.2 and the other provisions of this Agreement
relating to the maintenance of Capital Accounts are intended to comply with
Regulations Section 1.704-1(b), and shall be interpreted and applied in a
manner consistent with such Regulations. Notwithstanding that a particular
adjustment is not set forth in this Section 2.2, the Capital Accounts of
the Members shall be adjusted as required by, and in accordance with, the
capital account maintenance rules of Regulations Section 1.704-1(b).
2.3 Negative Capital Account. No Member shall be required to
make up an djusted Capital Account Deficit nor pay to any Member the amount
of any such deficit in any such account.
2.4 Admission of New Members. Unless otherwise permitted under
Article IV hereof and except with respect to any Initial Co-Investors, new
Members may only be admitted to membership in the Company with the approval
of the Operating Committee. A new Member must agree in writing to be bound
by the terms and provisions of the Certificate of Formation and this
Agreement, as amended, and upon admission, the new Member shall have all
rights and duties of a Member of the Company. It is understood and agreed
that the Membership Interests offered to the Initial Co-Investors and up to
$105 million of additional Capital Commitments expected to be offered to
the Initial Members, Initial Co-Investors and new investors, shall be
offered at substantially the same Gross Asset Value as the Membership
Interests of the Initial Members.
2.5 Interest. No interest shall be paid or credited to the
Members on their Capital Accounts or upon any undistributed profits left on
deposit with the Company.
2.6 Additional Capital Contributions. Other than to the extent
of the Capital Commitments set forth on Schedule A hereto, in no event
shall any Member be required to make an additional Capital Contribution to
the Company. However, the Operating Committee may authorize the Company to
receive additional Capital Contributions and the Company may solicit such
additional Capital Contributions from the Members, in an amount authorized
by the Operating Committee (the "Amount Solicited") in accordance with the
provisions of Section 2.1 hereof. The Company shall send a notice of
solicitation to all the Members and each Member wishing to make an
additional Capital Contribution shall so notify the Company in writing
within 20 days after delivery of the notice, indicating the amount such
Member offers to contribute (the "Offer to Contribute"). If such Member
does not make an Offer to Contribute which equals or exceeds the entire
Amount Solicited, the Company may, at its option, by action of the
Operating Committee, elect to accept the Offers to Contribute it has
received or reject such Offers to Contribute and cancel the solicitation.
2.7 Capital Withdrawal Rights, Interest and Priority.
Except as expressly provided in this Agreement, no Member shall
be entitled to withdraw or reduce such Member's Capital Account in whole or
in part until the dissolution and winding-up of the Company, except as
distributions pursuant to Article VI may represent returns of capital. No
Member shall be entitled to receive or be credited with any interest on the
balance in such Member's Capital Account at any time. A Member who
withdraws or purports to withdraw as a Member of the Company without the
consent of the other Members or as otherwise allowed by this Agreement
shall be liable to the Company for any damages suffered by the Company on
account of the breach and shall not be entitled to receive any payment on
its Membership Interests or a return of its Capital Contribution until the
time otherwise provided herein for distributions to Members.
ARTICLE III
MANAGEMENT OF THE COMPANY
3.1 Managing Member.
(a) The Managing Member shall have exclusive power and
authority, in the name of and on behalf of the Company, to perform all acts
and do all things which the Operating Committee has expressly delegated to
it and which the Operating Committee deems necessary or desirable to
conduct the business of the Company. No Member other than the Managing
Member shall have the power to sign for or bind the Company to any
agreement or document in its capacity as Member.
(b) Unless otherwise restricted by the Operating Committee, the
Managing Member shall, subject to all applicable provisions of this
Agreement, be authorized in the name of and on behalf of the Company:
(i) to enter into, execute, amend, supplement,
acknowledge and deliver any and all contracts, agreements, or other
instruments for the operation of the Company;
(ii) in general to do all things and execute all
documents necessary or appropriate to conduct the business of the
Company as set forth in Section 1.3 hereof, or to protect and
preserve the Company's assets. The Managing Member may delegate any
or all of the foregoing powers;
(iii) upon the closing of the Tender Offer, to cause the
Company (or its applicable Subsidiary) to vote the stock of Brookdale
or otherwise agree with Brookdale to (1) elect three (3) individuals
nominated by FRIT, one of whom shall be Wesley R. Edens, and two (2)
individuals nominated by HP, one of whom shall be Paul H. Warren, to
serve on the Board and the Other Committees in accordance with the
provisions of Section 3.11 hereof, (2) elect Wesley R. Edens as
Chairman of the Board and (3) elect three (3) individuals as the sole
members of the Executive Committee of the Board, one to be nominated
by FRIT, one to be nominated by HP, which nominee shall be Paul H.
Warren, and one nominee who shall be selected by unanimous decision
of FRIT and HP, which nominee shall initially be Mark Schulte.
(iv) at least thirty (30) days before the commencement of
each fiscal year of Brookdale, to cause the Company (or its
applicable Subsidiary) to propose each Annual Business Plan to the
Operating Committee;
(v) to cause the Company to pay to the Managing Member the
Guaranteed Payment; and
(vi) to cause the Company to (1) enter into, or cause one
or more of the Company's Subsidiaries to enter into, an agreement and
plan of merger with Brookdale and (2) make all filings required by
law, including, without limitation, filings under the 1934 Act, the
1933 Act and the HSR Act.
(c) The Managing Member is required to be a Member, and shall
hold office until its resignation or removal in accordance with the
provisions hereof. The Managing Member is a "manager" of the Company
(within the meaning of the Act). The Managing Member shall devote such time
to the business and affairs of the Company as it deems necessary, in its
sole discretion, for the performance of its duties, but in any event, shall
not be required to devote full time to the performance of such duties and
may delegate its duties and responsibilities as provided in this Agreement.
(d) Any action taken by the Managing Member, and the signature
of the Managing Member (or an authorized representative thereof) on any
agreement, contract, instrument or other document on behalf of the Company,
shall be sufficient to bind the Company and shall conclusively evidence the
authorization and approval of the Company and its Members with respect
thereto.
(e) Any Person dealing with the Company, the Managing Member or
any Member may rely upon a certificate signed by the Managing Member as to
(i) the identity of the Managing Member or any Member, (ii) any factual
matters relevant to the affairs of the Company, (iii) the Persons who are
authorized to execute and deliver any document on behalf of the Company or
(iv) any action taken or omitted by the Company or the Managing Member.
(f) In addition to its other duties hereunder, the Managing
Member shall provide the following services for the Company: (i) asset
underwriting; (ii) acquisition assessment and advice; (iii) financing
analysis and advice; and (iv) structured finance assistance and advice.
3.2 Other Ventures. It is expressly agreed that the Members and
any Affiliates, officers, directors, managers, stockholders, partners or
employees of such Members, may engage in other business ventures of every
nature and description, whether or not in competition with the Company,
independently or with others, and neither the Company nor the Members shall
have any rights in and to any independent venture or activity or the income
or profits derived therefrom.
3.3 Actions by the Members. Except as specifically set forth
herein, no Member other than the Managing Member shall be entitled to vote
on actions of the Company. All Major Decisions shall be made in accordance
with the terms of Section 3.9 hereof, provided, however, that the Chairman
shall be advised and consulted regarding any Major Decision within five (5)
Business Days prior to the meeting at which such Major Decision is to be
considered.
3.4 Meetings, Quorum; Voting. Meetings of the Members, for any
purpose or purposes whatsoever, may be called at any time by any Members.
The Members may vote, approve a matter or take any action permitted to be
taken by the Members pursuant to this Article III, by the vote of two
thirds of the Members at a meeting, in person or by proxy, or without a
meeting by written consent or otherwise. For any meeting of Members, the
presence in person or by proxy of Members owning two thirds of the
Membership Interests entitled to vote at the time of the action taken
constitutes a quorum for the transaction of business.
3.5 Waiver of Notice. The actions taken at any meeting of the
Members entitled to vote, however called and noticed or wherever held,
shall be as valid as though taken at a meeting duly held after regular call
and notice, if a quorum be present and if, either before or after the
meeting, each of the Members entitled to vote not present receives notice
of such actions.
3.6 Action by Consent. Any action may be taken by the Members
entitled to vote without a meeting if authorized by the consent of two
thirds of Members entitled to vote. In no instance where action is
authorized by consent need a meeting of Members be called or noticed.
However, a copy of the action taken to be by such consent must be promptly
sent to all Members entitled to vote.
3.7 Officers; Designation; Term; Qualifications.
(a) The Operating Committee may, from time to time, designate
one or more Persons to be Officers of the Company. The names of the Persons
initially designated as the Officers of the Company are set forth in
Schedule B hereto, such Persons to serve in such offices until resignation
or removal. Any Officer so designated shall have such authority and perform
such duties as the Operating Committee may, from time to time, delegate to
such Person. The Operating Committee may assign titles to particular
Officers, and unless the Operating Committee decides otherwise, the
assignment of such title shall constitute the delegation to such Officer of
the authority and duties that are normally associated with that office,
subject to any specific delegation of authority and duties made to such
Officer by the Operating Committee pursuant to this Section 3.7. Each
Officer shall hold office for the term for which such Officer is designated
and until his or her successor shall be duly designated and shall qualify
or until his or her death, resignation or removal (with or without cause)
by the Operating Committee or as otherwise provided in this Agreement. Any
Person may hold any number of offices. No Officer need be a manager, a
Member, a Delaware resident, or a United States citizen. Designation of
such a Person as an Officer of the Company shall not of itself create any
contract rights.
(b) The Officers shall include a chairman (the "Chairman"), a
President (the "President"), a chief financial officer (the "CFO") and a
secretary (the "Secretary") and, in the sole discretion of the Operating
Committee, an assistant secretary (the "Assistant Secretary").
(c) Any Officer of the Company may be removed as such, with or
without cause, by the Operating Committee; provided, however, that such
removal shall be without prejudice to the contract rights, if any, of the
Person so removed. Any Officer of the Company may resign as such at any
time upon written notice to the Chairman. Such resignation shall be made in
writing and shall take effect at the time specified therein, or if no time
is specified therein, at the time of its receipt by the Chairman. The
acceptance of a resignation shall not be necessary to make it effective
unless expressly so provided in the resignation.
(d) Any vacancy occurring in any office of the Company may be
filled by the person designated by the Operating Committee.
(e) The compensation, if any, of the Officers of the Company
shall be fixed from time to time by the Operating Committee.
(f) Each Officer of the Company is an agent of the Company for
the purpose of the business of the Company, and the act of each Officer for
apparently carrying on in the usual the business of the Company binds the
Company, unless (i) the Officer so acting has in fact no authority to act
for the Company in the particular matter and (ii) the Person with whom such
Officer is dealing has knowledge of the fact that such officer has no such
authority. An act of an Officer which is not apparently for the carrying on
of the business of the Company in the usual way does not bind the Company
unless authorized by the Operating Committee.
3.8 Guaranteed Payment.
(a) The Company shall make a Guaranteed Payment to the Managing
Member, within the meaning of Section 707(c) of the Code, for the use of
capital contributed to the Company by the Managing Member, in an amount
equal to One Million Dollars ($1,000,000) per annum, for the period between
the date hereof and the fifth anniversary hereof for a total of Five
Million Dollars ($5,000,000).
(b) If any Guaranteed Payment is not paid on the due date
thereof (other than by reason of the Managing Member's failure to cause the
Company to pay it notwithstanding the availability of sufficient funds
therefor), the amount of such Guaranteed Payment shall accrue interest at
the prime rate of interest charged by Bank of America, N.A. to its most
creditworthy customers, compounded annually, from the due date thereof to
the date same is actually paid.
(c) All payments required under this Section 3.8 shall be made
in dollars by wire transfer of federal funds to an account designated by
the Managing Member or by certified or official bank check or checks in New
York Clearing House or similar next day funds payable to the order of the
Managing Member.
(d) If the Managing Member shall cease to be the Managing
Member under this Agreement, then, from and after the date of such
cessation, the Guaranteed Payment shall cease accruing to the Managing
Member hereunder.
3.9 Operating Committee. The Members will establish an
Operating Committee (the "Operating Committee") which shall be responsible
for all actions not specifically delegated to the Managing Member,
including but not limited to those defined as Major Decisions, and shall
oversee and review the operations of the Company and Brookdale. The members
(collectively, "OC Members" and each individually, an "OC Member") of the
Operating Committee shall initially be those persons whose names are set
forth on Schedule C attached hereto. All OC Members shall serve until
voluntary resignation or retirement, or removal with or without cause by
the Member appointing such OC Member. Approval of Major Decisions and all
other matters required to be submitted by law or otherwise for vote or
action by the Operating Committee shall require approval of two thirds of
the entire Operating Committee (the "Required Majority"). At least two
thirds of the entire Operating Committee must be present for there to be a
quorum at a meeting of the Operating Committee (a "Quorum") or acting by
written consent. Each OC Member may invite one or more designees to
accompany him or her to a meeting of the Operating Committee or attend a
meeting in his or her absence (each, an "Observer"). However, an Observer
shall not be counted for purposes of determining whether a Quorum existed
or whether a matter was approved by a Required Majority.
3.10 Election of Operating Committee and Meetings.
(a) FRIT shall have the right to appoint three (3) OC Members
to the Operating Committee and HP shall have the right to appoint two (2)
OC Members to the Operating Committee.
(b) In the event that a vacancy among the OC Members shall
occur at any time, the Member (which shall be either FRIT or HP) making the
original appointment shall appoint another person to fill the vacancy.
(c) The Operating Committee shall meet quarterly and at such
other times as at least one OC Member appointed by FRIT (or its successor
or assign) and one OC Member appointed by HP (or its successor or assign)
shall agree.
(d) Any action required or permitted to be taken by the
Operating Committee at a meeting may be taken without a meeting if a
consent in writing, setting forth the action so taken, shall be signed
(facsimile signatures acceptable) by two thirds of the OC Members.
(e) The OC Members may also participate in a meeting by means
of a conference telephone or other standard forms of telecommunication
equipment by means of which all persons participating in the meeting can
hear each other at the same time and participation by such means shall
constitute presence in person at a meeting, except where a person
participates in a meeting for the express purpose of objecting to the
transaction of any business on the ground that the meeting is not lawfully
called or convened.
3.11 Board of Directors of Brookdale and Committees. Each of
FRIT and HP shall have the right to appoint the individuals to serve on the
Board of Directors of Brookdale (the "Board") and, if established, any
management, executive, administrative or similar committee of Brookdale
(collectively, the "Other Committees") as set forth in Section 3.12 hereof.
All members of the Board and the Other Committees shall serve until
voluntary resignation or retirement, or removal with or without cause by
the Member appointing such member. The procedures governing decision-making
by the Board and the Other Committees shall be the same as those of the
Operating Committee. Except for Major Decisions expressly retained by the
Operating Committee, the Board shall have all powers and duties and the
full discretion to manage and conduct the business and affairs of
Brookdale, all in accordance with the By-Laws and Articles of Incorporation
of Brookdale.
3.12 Election of Board of Directors and Meetings.
(a) FRIT shall have the right to appoint three (3) directors to
the Board and HP shall have the right to appoint two (2) directors to the
Board.
(b) In the event that a vacancy among the directors shall occur
at any time, the Member (which shall be either FRIT or HP) making the
original appointment shall appoint another person to fill the vacancy.
(c) The Board shall meet quarterly and at such other times as
at least one director appointed by FRIT (or its successor or assign) and
one director appointed by HP (or its successor or assign) shall agree.
(d) Any action required or permitted to be taken by the Board
at a meeting may be taken without a meeting if a consent in writing,
setting forth the action so taken, shall be signed (facsimile signatures
acceptable) by two thirds of the directors.
(e) The directors may also participate in a meeting by means of
a conference telephone or other standard forms of telecommunication
equipment by means of which all persons participating in the meeting can
hear each other at the same time and participation by such means shall
constitute presence in person at a meeting, except where a person
participates in a meeting for the express purpose of objecting to the
transaction of any business on the ground that the meeting is not lawfully
called or convened.
3.13 Audit Committee. The Operating Committee shall establish
an Audit Committee (the "Audit Committee") which periodically will review
with the Company's and Brookdale's independent public accountants, its
accounting methods, practices and policies. The Audit Committee shall be
comprised of an equal number of individuals appointed by each Member.
3.14 Officers of Subsidiaries. All officers of Subsidiaries
(other than Brookdale) of the Company shall be selected by the Operating
Committee in its sole discretion. Officers of Brookdale shall be appointed
by the Board in its sole discretion.
3.15 Investment. Nothing in this Agreement shall be construed
so as to prohibit any Member or its respective Affiliates from owning,
operating or investing in any business of any nature and description,
independently or with others, regardless of whether such business is
competitive with the Company or Brookdale, and no Member need disclose its
intention to make any such investment to the other, nor advise the Company
of the opportunity presented by any such prospective investment.
3.16 Confidentiality. The Members agree that for the term of
this Agreement and for a period of one year after the termination hereof,
(i) each shall use its best efforts to cause its directors, officers and
employees and Affiliates to keep confidential all intellectual property and
other proprietary information of the Company and Brookdale, including all
information concerning pricing and terms of sale of products, and (ii) each
Member shall hold and shall cause their consultants and advisors to hold in
strict confidence, unless compelled to disclose by judicial or
administrative process or, in the opinion of its counsel, by other
requirements of law, all documents and information concerning any other
party hereto furnished it by such other party or its representatives in
connection with the transactions contemplated by this Agreement, except to
the extent that any other information referred to in clause (i) or (ii)
above can be shown to have been (x) previously known by the party to which
it is furnished, (y) in the public domain through no fault of such party or
(z) later lawfully acquired from other sources by the party to which it was
furnished.
ARTICLE IV
TRANSFERS OF MEMBERSHIP INTERESTS
4.1 Restrictions on Transfer.
(a) No Member, nor any assignee or successor in interest of any
Member, including a Permitted Transferee, shall (voluntarily or
involuntarily) directly or indirectly, transfer, assign or otherwise
dispose of (each, a "Transfer") its Membership Interests or any economic
benefit therein (including a Transfer pursuant to a foreclosure sale of any
of the assets of a Member), or in any part thereof, or in all or any part
of the assets of the Company, without the prior written consent of the
Operating Committee (which may be withheld for any or no reason) except to
a Permitted Transferee, except as provided in Sections 4.3, 4.4, 4.5 and
4.6 hereof and except in connection with a transfer by FRIT of its
Membership Interests to any Initial Co-Investors. Subject to the other
restrictions on Transfers contained herein, any Member intending to
Transfer its Membership Interests under this Agreement may Transfer any
percentage of its Membership Interests up to 20% of such Member's initial
Membership Interest (or if such Member shall acquire additional Membership
Interests, 20% of such higher Percentage Interest). Any Member intending to
Transfer its Membership Interests in excess of 20% shall Transfer 100% of
its remaining Membership Interests. The rights to appoint OC Members to the
Operating Committee and to appoint individuals to serve on the Board and
Other Committees pursuant to Sections 3.10, 3.11 and 3.12 hereunder shall
be transferred to such transferee as shall acquire 80% or more of an
Initial Member's initial Membership Interest; provided, however, that for
purposes of this section, it is understood that the initial Membership
Interest for FRIT shall be determined after giving effect to the Transfer
of the $50,000,000 to the Initial Co-Investors by FRIT.
(b) Any transferee of a Membership Interest shall become a
substitute Member upon: (i) the transferee agreeing to be bound by all the
terms and conditions of the Certificate of Formation and this Agreement as
then in effect; (ii) compliance with applicable federal and state
securities laws; and (iii) receipt of any necessary regulatory approvals.
Unless and until a transferee is admitted as a substitute Member, the
transferee shall have no right to exercise any of the powers, rights and
privileges of a Member hereunder. A Member who has transferred its
Membership Interests shall cease to be a Member upon Transfer of all of the
Member's Membership Interests and thereafter shall have no powers, rights
and privileges as a Member hereunder except as otherwise expressly provided
herein.
(c) The Company, each Member, the Operating Committee, the
Managing Member, the Officers of the Company and any other Person or
Persons having business with the Company need only deal with Members who
are admitted as Members or as substitute Members of the Company, and they
shall not be required to deal with any other Person by reason of a Transfer
by a Member, except as otherwise provided in this Agreement. In the absence
of the substitution (as provided herein) of a Member for a transferring
Member, any payment to a Member shall acquit the Company, the Operating
Committee and the Managing Member of all liability to any other Persons who
may be interested in such payment by reason of an assignment by such
Member.
(d) Notwithstanding anything in this Article IV to the
contrary, no Transfer of a Membership Interest by a Member, shall be
effective unless and until such Member has fulfilled all of its obligations
under Section 2.1 hereof.
4.2 Non-Permitted Transfers.
(a) Any purported Transfer of Membership Interests or any
economic interest therein not in compliance with Section 4.1, 4.3, 4.4, 4.5
or 4.6 hereof shall be null and void ab initio, regardless of any notice
provided to the Company, and shall not create any obligation or liability
of the Company to the purported transferee, and any Person purportedly
acquiring any Membership Interests or any economic interest therein
purportedly transferred not in compliance with Section 4.1, 4.3, 4.4, 4.5
or 4.6 hereof shall not be entitled to admission to the Company as a
substitute Member.
(b) In the case of an attempted Transfer of any Membership
Interests or any economic benefit therein that is not in compliance with
Section 4.1, 4.3, 4.4, 4.5 or 4.6 hereof, the parties engaging or
attempting to engage in such Transfer shall indemnify and hold harmless
the Company, the Operating Committee and the other Members from all cost,
liability and damage that any of such indemnified persons may incur
(including, without limitation, incremental tax liability and attorneys'
fees and expenses) as a result of such Transfer or attempted Transfer and
the enforcement of this indemnity.
(c) No Member, nor any assignee or successor in interest of any
member, including a Permitted Transferee, shall Transfer its Membership
Interests or any economic benefit therein if such Transfer would cause the
Company to be treated as a "publicly traded partnership" within the meaning
of Code Section 7704 and the regulations promulgated thereunder.
4.3 Right of First Offer.
(a) If a Member proposes to Transfer (each, a "Proposed
Transfer") any of its Membership Interests (the "Offered Interests") to any
Person (each, a "Third Party") other than to a Permitted Transferee, such
Member (the "Proposing Member") shall submit a written notice (a "Notice of
Proposed Transfer") to the other Members (the "Remaining Members")
describing the material terms and conditions of the Proposed Transfer in
reasonable detail, including, without limitation, the proposed purchase
price (which shall be for cash only) (the "Offer Price").
(b) Upon receipt of the Notice of Proposed Transfer, each of
the Remaining Members shall have the primary right, but not the obligation,
for a period (the "Primary Option Period") of ten (10) Business Days
following receipt of the Notice of Proposed Transfer, to elect to purchase
at the Offer Price a portion of the Offered Interests equal to such
Remaining Member's pro rata portion which portion shall be equal to a
fraction the numerator of which is the Membership Interests owned by the
Remaining Members electing to purchase Offered Interests and the
denominator of which is the total Membership Interests as of the date of
the Notice of Proposed Transfer owned by all of the Members (other than the
Proposing Member), on the same terms and conditions as are set forth in the
Notice of Proposed Transfer. Each Remaining Member shall also have a
secondary right, on the same terms as are set forth in the Notice of
Proposed Transfer, for a period of ten (10) Business Days from the
expiration of the Primary Option Period, to purchase any or all of the
remaining portion of the Offered Interests not purchased by any other
Remaining Member in the exercise of his or its primary right. If, however,
there is more than one Remaining Member desiring to exercise secondary
rights to purchase any such remaining Offered Interests and they do not
agree on the number of such Offered Interests to be purchased by each
within five (5) Business Days from the expiration of the Primary Option
Period, then each such Remaining Member shall be entitled to purchase such
proportion of those Offered Interests which remain undisposed of as the
Membership Interests owned by such Remaining Member bears to the total
Membership Interests held by all of the Members desiring to purchase such
Offered Interests. The primary and secondary rights of the Remaining
Members set forth herein are exercisable in each case by delivery of one
notice to the Company and the Proposing Member (a "Notice of Exercise")
within the time periods specified herein, which Notice of Exercise shall
specify a time and place of closing, which closing shall Occur not less
than thirty (30) days and not more than sixty (60) days from the date of
delivery of the Notice of Exercise.
(c) In the event that the Remaining Members exercise their
rights to purchase all but not less than all of the Offered Interests in
accordance with Section 4.3(b), then the Proposing Member must sell the
Offered Interests elected to be purchased by the Remaining Members to such
Remaining Members at the closing specified in Section 4.3(b) hereof. The
Proposing Member shall notify each such Remaining Member of the portion of
Offered Interests to be sold to such Remaining Members. At such closing,
the Proposing Member shall, and hereby covenants to, Transfer the Offered
Interests to such Remaining Members free and clear of any and all liens,
mortgages, pledges, security interests or other restrictions or
encumbrances against payment of the Offer Price in accordance with the
notices specified in Sections 4.3(a) and (b) hereof.
(d) If (i) all notices required to be given pursuant to
Sections 4.3(a) and (b) hereof have been duly given and (ii) all of the
Offered Interests are not purchased by the Remaining Members in accordance
with Sections 4.3(b) and (c) hereof, then the Proposing Member shall have
the right, for a period of ninety (90) days from the earlier of (i) the
expiration of the last applicable option period pursuant to Section 4.3 (b)
hereof with respect to such Notice of Proposed Transfer and (ii) the date
on which such Proposing Member receives notice from all of the Remaining
Members that they will not exercise the options granted pursuant to
Sections 4.3(b) and (c) hereof to sell, subject to Section 4.4 hereof, to
any Third Party the Offered Interests at a price not less than the Offer
Price and on terms and conditions as favorable as offered to the Remaining
Members.
(e) In the event that the Remaining Members do not exercise
their options to purchase all of the Offered Interests, and the Proposing
Member shall not have sold the Offered Interests as to which such options
shall not have been exercised, to a Third Party for any reason before the
expiration, as applicable, of the ninety (90)-day period described in
Section 4.3(d) hereof, or such Proposing Member withdraws the Notice of
Proposed Transfer, then such Proposing Member shall not give another Notice
of Proposed Transfer pursuant to Section 4.3(a) hereof for a period of one
hundred twenty (120) days from the last day of such ninety (90)-day period.
(f) If any Member does not purchase any of the Offered
Interests under this Section 4.3 but wishes to sell Membership Interests
under Section 4.4 hereof, such Member must deliver a Tag-Along Notice
pursuant to Section 4.4(b) hereof simultaneously with declining such
Member's right to purchase under this Section 4.3 hereof.
4.4 Tag-Along Rights.
(a) Except for Transfers permitted by the express terms of
Sections 4.3, 4.5 and 4.6 hereof, if a Member (each, a "Transferring
Member") intends to Transfer any or all of the Membership Interests then
owned by or in the name of such Transferring Member to a Third Party (each,
a "Third Party Offer"), the Transferring Member shall promptly, acting in
good faith (i) cause the Third Party Offer to be reduced to writing, which
shall identify the Third Party, the Membership Interests proposed to be
transferred to the Third Party by the Transferring Member,
the price to be paid in cash by the Third Party and all other material
terms and conditions of the Third Party Offer and (ii) provide written
notice (the "Third Party Notice") of such Third Party Offer to each of the
other Members (the Members receiving a Third Party Notice pursuant to this
sentence being collectively referred to herein as the "Other Members"),
which Third Party Notice shall (x) contain an offer by such Third Party to
purchase or otherwise acquire from each Other Member such Other Member's
Membership Interests (to the extent such Third Party Offer shall be
allocable to such Other Member pursuant to Section 4.4(c) hereof) on the
same terms and conditions as the Third Party Offer (except that the only
representation and warranty that such Other Member shall be required to
make in connection with any such Transfer is a warranty with respect to his
or its own ownership of the Membership Interests to be sold by him or it
and his or its ability to convey title thereto free and clear of any and
all liens, mortgages, pledges, security interests or other restrictions or
encumbrances), (y) be accompanied by a true and correct copy of the Third
Party Offer and (z) specify the total Membership Interests then owned by
the Transferring Member.
(b) Each Other Member desiring to accept the offer (each, a
"Participating Member") set forth in the Third Party Notice shall, within
ten (10) Business Days after the date the Third Party Notice is received by
such Other Member (as such period may be extended pursuant to Section
4.4(d) hereof, (each, a "Tag-Along Notice Period"), deliver a written
notice to the Transferring Member (each, a "Tag-Along Notice"), which
notice shall (i) specify the percentage of Membership Interests which such
Participating Member wishes to Transfer pursuant to the Third Party Offer
and the Membership Interests then owned by such Participating Member and
(ii) constitute a firm acceptance by such Other Member of the Third Party
Offer, except as otherwise provided in Section 4.4(c) and (d) hereof.
(c) If one or more Other Members give the Transferring Member a
timely Tag-Along Notice, then the Transferring Member shall use all
reasonable efforts to cause the Third Party to agree to acquire all
Membership Interests identified in all Tag-Along Notices that are timely
given to the Transferring Member, upon the same terms and conditions as are
applicable to the Transferring Member's Membership Interests. If such Third
Party is unwilling or unable to acquire all of such additional Membership
Interests upon such terms, then the Transferring Member may elect to either
cancel such proposed Transfer or allocate the maximum Membership Interests
that such Third Party is willing to purchase among the Transferring Member
and the Participating Members, with (i) each Participating Member permitted
to sell Membership Interests corresponding to the percentage of all
Membership Interests held by such Participating Member and (ii) the
Transferring Member permitted to sell Membership Interests equal to the
remaining Membership Interests that such Third Party is willing to purchase
(e.g., if the Third Party Notice contemplated a Transfer of a 10%
Membership Interest by the Transferring Member, and if the Transferring
Member at such time owns a 30% Membership Interest and one Other Member who
owns a 20% Membership Interest elects to participate, then the Transferring
Member would be entitled to sell a 6% Membership Interest and the Other
Member would be entitled to sell a 4% Membership Interest).
(d) In the event that the terms and conditions of any Third
Party Offer shall be modified in any way prior to the consummation of the
respective Transfers of Membership Interests contemplated by such Third
Party Offer, the Transferring Member shall send a copy of the amended Third
Party Offer to each of the Participating or Other Members. Any Other Member
desiring to Transfer Membership Interests pursuant to the amended Third
Party Offer, or any Participating Member desiring to amend or withdraw its
Tag-Along Notice may do so by delivering notice within three (3) Business
Days after receipt of such amended Third Party Offer to the Transferring
Member. If such notice is not timely delivered, such Other Member shall be
deemed to have elected not to participate in the Third Party Offer, or such
Participating Member, as the case may be, shall be deemed to have elected
to participate in such Third Party Offer under the same terms and
conditions that such Participating Member shall have originally elected to
Transfer its Membership Interests.
(e) Within three (3) Business Days after the termination of the
Tag-Along Notice Period (including any extension thereof) with respect to
any Third Party Offer, (i) the Transferring Member, after review of the
Tag-Along Notices received, and notices of withdrawal, if any, shall give
written notice to each Participating Member of (A) such Participating
Member's Membership Interests to be purchased pursuant to the Third Party
Offer, showing the basis for the calculation thereof, and (B) the time and
place of the closing, which shall occur not fewer than two (2) Business
Days and not more than fifteen (15) Business Days from the date such notice
is given. At the closing, each Participating Member shall, and hereby
covenants to, Transfer such Participating Member's Membership Interests to
be sold to such Third Party free and clear of any and all liens, mortgages,
pledges, security interests or other restrictions or encumbrances against
payment of the purchase price for such Membership Interests. If any
Participating Member fails to deliver any Membership Interests to the Third
Party, each of the other Participating Members (and the Transferring
Member) shall be entitled to increase the Membership Interests that it may
Transfer in connection with the Third Party Offer by allocating such
Participating Member's Membership Interests in the manner set forth in
Section 4.4(c). If such Third Party does not purchase such Membership
Interests from all Participating Members on the same terms and conditions
applicable to the Transferring Member, then the entire proposed Transfer by
the Transferring Member to such Third Party shall be invalid.
(f) If at the termination of the Tag-Along Notice Period (and
any extension thereof) any Other Member shall not have accepted the offer
contained in the Third Party Notice, such other Member shall be deemed to
have waived any and all of his or its rights under this Section 4.4 to
Transfer his or its Membership Interests to such Third Party on the terms
specified in the Third Party Offer.
4.5 Buy/Sell Right.
Upon the occurrence of a Buy/Sell Event, each Initial Member
shall have the right (each, a "Buy/Sell Right") to buy all of the
Membership Interests in the Company held by the other Initial Member or to
sell all of its Membership Interests in the Company to such other Initial
Member. The Buy/Sell Right shall be exercised in accordance with the
following provisions:
(a) Upon the occurrence of a Buy/Sell Event in connection
with an irreconcilable dispute concerning a Major Decision, an
Initial Member shall notify the other Initial Member (the Initial
Member first giving notice pursuant to this Section 4.5 is referred
to hereinafter as a "Notifying Party", and the other Initial Member
so receiving notice from the Notifying Party is referred to
hereinafter as the "Notified Party") in writing, with a copy to the
Operating Committee, that it intends to exercise its Buy/Sell Right
(each, a "Buy/Sell Notice"). Once the Notifying Party delivers the
Buy/Sell Notice, the Notified Party may not exercise its Buy/Sell
Right until the procedure established in this Section 4.5 is
concluded with respect to such Buy/Sell Notice or until the Notifying
Party breaches any provision established in this Section 4.5.
(b) The Buy/Sell Notice shall contain an unconditional
promise by the Notifying Party, at the election of the Notified
Party, to either (i) sell all of its Membership Interests in the
Company to the Notified Party, or (ii) acquire all of the Membership
Interests in the Company of the Notified Party, in either case at a
cash price (specified as a cash dollar price per 1% Membership
Interest equal to the price stated in the Buy/Sell Notice (the
"Buy/Sell Price")) and within the time periods specified in this
Section 4.5.
(c) Within fifteen (15) days after receipt of the
Buy/Sell Notice by the Notified Party (each, a "Response Period"),
the Notified Party shall notify the Operating Committee of the
Notified Party's election to either: (i) accept the Notifying Party's
offer to purchase the Notified Party's Membership Interests in the
Company at the Buy/Sell Price (each, a "Sale Election"), or (ii)
accept the Notifying Party's offer to sell all of its Membership
Interests in the Company at the Buy/Sell Price (each, a "Purchase
Election").
(d) Within two (2) Business Days from the earlier of the
expiration of the Response Period or receipt by the Operating
Committee of the election of the Notified Party contemplated to be
delivered by Section 4.5(c), the Operating Committee shall send a
written notice to all Members, informing them with respect to the
Notified Party whether it made a Sale Election or a Purchase
Election.
(e) If the Notified Party fails to notify the Operating
Committee within the Response Period it shall be deemed to have made
a Sale Election.
(f) If the Notified Party makes a Purchase Election, then
the Notified Party shall purchase such part of the Notifying Party's
Membership Interests in the Company as represents the Notified
Party's pro rata portion of all of the Membership Interests in the
Company at the Buy/Sell Price.
(g) If the Notified Party makes a Sale Election, then the
Notifying Party shall purchase for cash at the Buy/Sell Price the
Notified Party's Membership Interests in the Company.
(h) The closing on any Transfer of Membership Interests
pursuant to this Section 4.5 shall occur on or prior to the date
which is forty five (45) days after the date on which the notice
described in Section 4.5(d) is mailed and each of the parties agrees
to execute all documents and do all things necessary to close the
Transfer.
(i) (i) If the Notified Party fails to purchase the
Membership Interests of a Notifying Party pursuant to the exercise of
a Purchase Election at the closing in accordance with Section 4.5(i),
then the Notifying Party shall have the right, for a period of thirty
(30) days from the date originally scheduled for the closing pursuant
to Section 4.5(i), to purchase the Notified Party's Membership
Interests at a cash price equal to 80% of the Buy/Sell Price; and
(ii) if the Notifying Party fails to purchase the Membership
Interests of the Notified Party pursuant to the exercise of a Sale
Election at the closing in accordance with Section 4.5(i), then the
Notified Party shall have the right, for a period of thirty (30) days
from the date originally scheduled for the closing pursuant to
Section 8.05(i), to purchase the Notifying Party's Membership
Interests at a cash price equal to 80% of the Buy/Sell Price.
(j) Any Membership Interests transferred pursuant to this
Section 4.5 shall be transferred free and clear of any and all liens,
mortgages, pledges, interests or other restrictions or encumbrances.
(k) No Initial Member shall be entitled to exercise a
Buy/Sell Right during the pendency of a Proposed Transfer by the
other Initial Member under Section 4.3 hereof or a Third Party Offer
under Section 4.4 hereof.
4.6 Drag-Along Rights.
(a) If the Operating Committee approves a sale of the Company
or substantially all of its assets to a Third Party (an "Approved Sale"),
whether by way of merger, consolidation, sale of interests or assets, or
otherwise, all Members shall consent to and raise no objections against the
Approved Sale, and if the Approved Sale is structured as (i) a merger or
consolidation of the Company, or a sale of all or substantially all of the
Company's assets, each Member shall waive any dissenters rights, appraisal
rights or similar rights in connection with such merger, consolidation or
asset sale, or (ii) a sale of the Membership Interests of the Company, the
Members shall agree to sell their Membership Interests on the terms and
conditions approved by the Operating Committee in accordance with the terms
hereof. The Members shall take all necessary and desirable actions approved
by the Operating Committee in connection with the consummation of the
Approved Sale, including the execution of such agreements and such
instruments and other actions reasonably necessary (i) to provide the
representations, warranties, indemnities, covenants, conditions, escrow
agreements and other provisions and agreements relating to such Approved
Sale, to the extent reasonably customary in similar transactions, and (ii)
to effectuate the allocation and distribution of the aggregate
consideration upon the Approved Sale as set forth below.
(b) The obligations of the Members pursuant to this Section 4.6
are subject to the following conditions:
(i) upon consummation of the Approved Sale, each Member
shall receive the same proportion of the aggregate consideration from
the Approved Sale with respect to its Membership Interests that such
Member would have received if such aggregate consideration had been
distributed by the Company in complete liquidation pursuant to this
Agreement (giving effect to applicable orders of priority);
(ii) if any Members are given an option as to the form
and amount of consideration to be received, all Members will be given
the same option;
(iii) no Member shall be obligated to make any
out-of-pocket expenditure prior to the consummation of the Approved
Sale (excluding modest expenditures for postage, copies, etc.) and no
Member shall be obligated to pay more than his or its pro rata share
(based upon the amount of consideration received) of reasonable
expenses incurred in connection with a consummated Approved Sale to
the extent such costs are incurred for the benefit of all Members and
are not otherwise paid by the Company or the acquiring party,
provided that a Member's liability for such expenses shall be capped
at the total purchase price received by such Member for his or its
Membership Interests; and
(iv) in the event that the Members are required to
provide any representations or indemnities in connection with the
Approved Sale (other than representations and indemnities concerning
each Member's valid ownership of his or its Membership Interests,
free and clear of any and all liens, mortgages, pledges, security
interests or other restrictions or encumbrances, each Member's
authority, power and right to enter into and consummate such purchase
or merger agreement without violating any other agreement and other
representations and indemnities which are individual to each Member),
then no Member shall be liable for more than his or its pro rata
share (based upon the Membership Interests held and not the amount of
consideration received) of any liability for misrepresentation or
indemnity and such liability shall not exceed the total purchase
price received by such Member for his or its Membership Interests.
ARTICLE V
ALLOCATIONS
5.1 Allocations of Profits and Losses. This Section 5.1 sets
forth the general rules for both the book allocations to reflect the
economic arrangements of the Members and for the tax allocations for U.S.
Federal income tax purposes pursuant to Section 704(b) of the Code and the
Regulations promulgated thereunder. The Profits and Losses of the Company
(including each item of income, gain, loss and deduction) shall be
allocated with respect to each Fiscal Period as of the end of such Fiscal
Period as follows:
(a) Profits. After giving effect to the special
allocations set forth in Sections 5.2 and 5.3 hereof, Profits for any
Fiscal Period shall be allocated among Members in accordance with
their respective Percentage Interests.
(b) Losses. After giving effect to the special
allocations set forth in Sections 5.2 and 5.3 hereof and subject to
Section 5.4, Losses for any Fiscal Period shall be allocated to the
Members in accordance with their respective Percentage Interests.
5.2 Adjustments and Special Allocations. Any allocation
pursuant to Section 5.1 hereof will, however, be subject to any adjustment
required to comply with Regulations Sections 1.704-1 and 1.704-2,
including, without limitation, the following adjustments and special
allocations which shall be made in the following order of priority and
prior to any allocation under Section 5.1 hereof:
(a) Minimum Gain Chargeback. Except as otherwise provided
in Regulations Section 1.704-2(f), notwithstanding any other
provision of this Article V, if there is a net decrease in Company
Minimum Gain during any Fiscal Period, each Member shall be
specifically allocated items of Company income and gain for such
Fiscal Period (and, if necessary, subsequent Fiscal Periods) in an
amount equal to such Member's share of the net decrease in Company
Minimum Gain, determined in accordance with Regulations Section
1.704-2(g). Allocations pursuant to the previous sentence shall be
made in proportion to the respective amounts required to be allocated
to each Member in accordance with Regulations Sections 1.704-2(f)(6)
and 1.704-2(j)(2). This Section 5.2(a) is intended to comply with the
minimum gain chargeback requirements in Regulations Section
1.704-2(f) and shall be interpreted consistently therewith.
(b) Member Minimum Gain Chargeback. Except as otherwise
provided in Regulations Section 1.704-2(i)(4), notwithstanding any
other provision of this Article V, if there is a net decrease in
Member Nonrecourse Debt Minimum Gain attributable to a Member
Nonrecourse Debt during any Fiscal Period, each Member who has a
share of the Member Nonrecourse Debt Minimum Gain attributable to
such Member Nonrecourse Debt, determined in accordance with
Regulations Section 1.704- 2(i)(5), shall be specifically allocated
items of Company income and gain for such Fiscal Period (and, if
necessary, subsequent Fiscal Periods) in an amount equal to such
Member's share of the net decrease in Member Nonrecourse Debt,
determined in accordance with Regulations Section 1.704-2(i)(4).
Allocations pursuant to the previous sentence shall be made in
proportion to the respective amounts required to be allocated to each
Member pursuant thereto. The items to be allocated shall be
determined in accordance with Regulations Sections 1.704-2(i)(4) and
1.704-2(j)(2). This Section 5.2(b) is intended to comply with the
minimum gain chargeback requirement in Regulations Section
1.704-2(i)(4) and shall be interpreted consistently therewith.
(c) Qualified Income Offset. If any Member unexpectedly
receives any adjustments, allocations or distributions described in
Regulations Sections 1.704- 1(b)(2)(ii)(d)(4), (5) or (6), items of
Company income and gain shall be specially allocated to each such
Member in an amount and manner sufficient to eliminate, to the extent
required by the Regulations, the Adjusted Capital Account Deficit of
such Member as quickly as possible, provided that an allocation
pursuant to this Section 5.2(c) shall be made only if and to the
extent that such Member would have an Adjusted Capital Account
Deficit after all other allocations provided for in this Article V
have been tentatively made as if this Section 5.2(c) were not in this
Agreement.
(d) Gross Income Allocation. In addition, if any Member
has an Adjusted Capital Account Deficit in its Capital Account at the
end of any Fiscal Period or portion thereof that is in excess of the
sum of (i) the amount such Member is obligated to restore pursuant to
any provision of this Agreement, and (ii) the amount such Member is
deemed to be obligated to restore pursuant to the penultimate
sentences of Regulations Sections 1.704-2(g)(1) and 1.704-2(i)(5),
each such Member shall be specially allocated items of Company income
and gain in the amount of such excess as quickly as possible,
provided that an allocation pursuant to this Section 5.2(d) shall be
made only if and to the extent that such Member would have an
Adjusted Capital Account Deficit in excess of such sum after all
other allocations provided for in this Article V have been made as if
this Section 5.2(d) were not in this Agreement.
(e) Nonrecourse Deductions. Nonrecourse Deductions for
any Fiscal Period shall be specially allocated under Regulations
Section 1.704-2(e) among the Members in accordance with their
respective Percentage Interests.
(f) Member Nonrecourse Deductions. In accordance with the
principles set forth in Regulations Section 1.704-2(i), any Member
Nonrecourse Deductions for any Fiscal Period shall be specially
allocated to the Members in accordance with the ratios in which they
potentially bear the economic risk of loss with respect to such
Member Nonrecourse Debt to which such Member Nonrecourse Deductions
are attributable in accordance with the Regulations Section
1.704-2(i).
(g) Section 754 Adjustments. To the extent an adjustment
to the adjusted tax basis of any Company asset, pursuant to Section
734(b) of the Code or Section 743(b) of the Code is required,
pursuant to Regulations Section 1.704- 1(b)(2)(iv)(m)(2) or
1.704-1(b)(2)(iv)(m)(4), to be taken into account in determining
Capital Accounts as a result of a distribution to a Member in
complete liquidation of such Member's interest in the Company, the
amount of such adjustment to Capital Accounts shall be treated as an
item of gain (if the adjustment increases the basis of the assets) or
loss (if the item decreases such basis) and such gain or loss shall
be specifically allocated to the Members in accordance with their
Percentage Interests in the Company in the event Regulations Section
1.704-1(b)(2)(iv)(m)(2) applies, or to the Member to whom such
distribution was made in the event that Regulations Section
1.704-1(b)(2)(iv)(m)(4) applies.
5.3 Curative Allocations. The allocations set forth in Sections
5.2(a), 5.2(b), 5.2(c), 5.2(d), 5.2(e), 5.2(f) and 5.4 hereof
(collectively, the "Regulatory Allocations") are intended to comply with
certain requirements of the Regulations. It is the intent of the parties to
this Agreement that, to the extent possible, all Regulatory Allocations may
be offset either with other Regulatory Allocations or with special
allocations of other items of Company income, gain, loss or deduction
pursuant to this Section 5.3 hereof. Therefore, notwithstanding any other
provision of this Article V (other than the Regulatory Allocations) to the
contrary, the Tax Matters Member may in its discretion make such offsetting
special allocations of Company income, gain, loss or deduction in whatever
manner it determines appropriate so that, after such offsetting allocations
are made, each Member's Capital Account balance is, to the extent possible,
equal to the Capital Account balance such Member would have had the
Regulatory Allocations not been part of this Agreement and all Company
items were allocated pursuant to Sections 5.1 hereof.
5.4 Loss Limitation. Notwithstanding the foregoing provisions
of Section 5.1 hereof, the Losses allocated pursuant to Section 5.1 hereof
shall not exceed the maximum amount of Losses that can be so allocated
without causing any Member to have an Adjusted Capital Account Deficit at
the end of any Fiscal Period. In the event some but not all of the Members
would have Adjusted Capital Account Deficits as a consequence of an
allocation of Losses pursuant to Section 5.1 hereof, the limitation set
forth in this Section 5.4 shall be applied on a Member by Member basis so
as to allocate the maximum permissible Losses to each Member under
Regulations Section 1.704-1(b)(2)(ii)(d). All Losses in excess of the
limitation set forth in this Section 5.4 shall be allocated to other
Members in accordance with the positive balances in such Member's capital
accounts so as to allocate the maximum permissible Losses to each Member
under Regulations Section 1.704-1(b)(2)(ii)(d).
5.5 Other Allocation Rules.
(a) For purposes of determining the Profits, Losses or other
items allocable to any period, Profits, Losses and such other items shall
be determined on a daily, monthly or other basis as determined by the Tax
Matters Member using any permissible method under Section 706 of the Code
and the Regulations thereunder.
(b) The Members are aware of the United States Federal income
tax consequences of the allocations made by this Article V and hereby agree
to be bound by the provisions of this Article V in reporting their shares
of Company income and loss for income tax purposes.
(c) Solely for purposes of determining a Member's proportionate
share of the "excess nonrecourse liabilities" of the Company within the
meaning of Regulations Section 1.752-3(a)(3), the Member's Membership
Interests in the Company profits are in proportion to their Percentage
Interests.
5.6 Tax Allocations: Code Section 704(c).
(a) In accordance with Code Section 704(c) and the Regulations
thereunder, items of income, gain, loss and deduction with respect to any
property contributed to the capital of the Company shall, solely for income
tax purposes, be allocated among the Members so as to take account of any
variation between the adjusted tax basis of such property at the time of
contribution to the Company for federal income tax purposes and its initial
Gross Asset Value at the time of contribution using an allocation method in
accordance with applicable Regulations determined by the Tax Matters
Member.
(b) In the event the Gross Asset Value of any Company asset is
adjusted in accordance with the definition of Gross Asset Value hereof,
subsequent allocations of items of income, gain, loss, and deductions with
respect to such asset shall take account of any variation between the
adjusted tax basis of such asset for federal income tax purposes and its
adjusted Gross Asset Value in a manner consistent with the principles of
Code Section 704(c) and the Regulations thereunder.
(c) Any elections or other decisions relating to such
allocations shall be made by the Tax Matters Member in any manner that
reasonably reflects the purpose and intention of this Agreement.
Allocations pursuant to this Section 5.6 are solely for purposes of
Federal, state, and local income taxes and shall not affect, or in any way
be taken into account in computing, any Member's Capital Account or share
of Profits or Losses, other items, or distributions pursuant to any
provision of this Agreement.
ARTICLE VI
DISTRIBUTIONS AND EXPENSES
6.1 Distributions of Net Cash Flow. Net Cash Flow shall be
determined by the Operating Committee. At such time as is determined by the
Operating Committee, the Managing Member shall distribute the Net Cash Flow
in such amounts and in such proportions to the Members in accordance with
their respective Membership Interests.
6.2 Amounts Withheld. All amounts withheld pursuant to the Code
or any provisions of state, local or foreign tax law with respect to any
payment, distribution, allocation or other consideration paid to the
Members, including in connection with a contribution of assets to the
Company by a Member, shall be treated as amounts paid or distributed, as
the case may be, to the Members with respect to which such amount was
withheld pursuant to this Section 6.2 for all purposes under this
Agreement. The Company is authorized to withhold from payments,
distributions, or other consideration paid to Members, and with respect to
allocations to the Members, and to pay over to any Federal, state or local
government or any foreign government, any amounts required to be so
withheld pursuant to the Code or any provisions of any other Federal, state
or local law or any foreign law, and shall allocate any such amounts to the
Members with respect to which such amounts were withheld.
6.3 Expenses. Except as otherwise provided in this Agreement,
the Company will be responsible for all expenses including, without
limitation:
(a) all expenses incurred by the Members or their
Affiliates in organizing the Company;
(b) all expenses related to the business of the Company
including, without limitation, administrative expenses of the
Company, including the maintenance of books and records of the
Company, the preparation and dispatch to the Members of checks,
financial reports, tax returns and notices required pursuant to this
Agreement or in connection with the holding of any meetings of the
Members;
(c) all expenses incurred by the Managing Member on
behalf of the Company and the Members;
(d) all expenses incurred in connection with any
indebtedness or guarantees of the Company or any proposed or
definitive credit facility or other credit arrangement;
(e) all expenses incurred in connection with any
litigation or arbitration involving the Company (including the cost
of any investigation and preparation) and the amount of any judgment
or settlement paid in connection therewith;
(f) all expenses for indemnity or contribution payable by
the Company to any Person;
(g) all expenses incurred in connection with the
collection of amounts due to the Company from any Person;
(h) all expenses incurred in connection with the
preparation of amendments to this Agreement;
(i) all expenses incurred in connection with the
liquidation, dissolution and winding up of the Company;
(j) all expenses otherwise allocated in good faith to the
Company by the Managing Member; and
(k) payment of the Guaranteed Payment to the Managing
Member.
ARTICLE VII
OTHER TAX MATTERS
7.1 Filing of Tax Returns. The Tax Matters Member shall prepare
and file, or cause the Company to prepare and file, a United States Federal
information tax return in compliance with Section 6031 of the Code and any
other required state and local income tax and other information returns for
each Fiscal Year of the Company.
7.2 Tax Matters Member. The Managing Member shall be designated
on the Company's annual federal information return as the Tax matters
Member of the Company (the "Tax Matters Member") as provided in Section
6231(a)(7) of the Code.
7.3 Records and Accounting. The books and records of the
Company shall reflect all Company transactions and shall be appropriate and
adequate for the Company's business. The Fiscal Year of the Company for
financial reporting and for federal income tax purposes shall be the
calendar year.
7.4 Access to Accounting Records. All books and records of the
Company shall be maintained at any office of the Company or at the
Company's principal place of business, and each Member, and any duly
authorized representative, shall have access to them at such office of the
Company and the right to inspect and copy them at reasonable times.
7.5 Tax Elections. The Tax Matters Member shall make the
following elections on behalf of the Company:
(a) to elect the calendar year as the Company's Fiscal
Year if permitted by applicable law;
(b) to elect the accrual method of accounting;
(c) in the event any Membership Interest is transferred
in accordance with this Agreement or any of the Company's property is
distributed to any Member, at the request of the Member, to elect, in
accordance with Sections 734, 743 and 754 of the Code and applicable
Regulations and comparable state law provisions, to adjust basis;
(d) to elect to treat all organization and start-up costs
of the Company as deferred expenses amortizable over 60 months under
Sections 195 and 709 of the Code; and
(e) to elect with respect to such other federal, state
and local tax matters as the Tax Matters Member shall determine from
time to time.
ARTICLE VIII
TERM
8.1 Term. The term of the Company shall begin on the date the
Certificate of Formation is filed with the Delaware Secretary of State and
shall continue indefinitely, unless terminated prior thereto in accordance
with the provisions hereof or pursuant to the Act.
ARTICLE IX
DISSOLUTION AND TERMINATION OF THE COMPANY
9.1 Voluntary Dissolution by the Members. The Company must be
dissolved and its affairs shall be wound up upon: (a) the two thirds vote
of the Members or (b) the sale or transfer by the Company or its wholly
owned Subsidiaries of all of the securities of Brookdale beneficially owned
by the Company or its wholly owned Subsidiaries to any Person other than a
wholly owned Subsidiary of the Company.
9.2 Continuation of Interest of Member's Representative. Upon
the expulsion, receivership, dissolution or Bankruptcy of a Member, the
personal representative, trustee-in- bankruptcy, debtor-in-possession,
receiver, other representative, successor, heirs or legatee (each a
"Representative") of such a Member shall immediately succeed to the
Membership Interests of such Member in the Company. Such Representative
shall appoint an individual (which may be such Representative) who will
represent the Representative's voting interest in the Company (the "Voting
Representative"). The Voting Representative is subject to the two thirds
approval of the remaining Members, which approval shall not be unreasonably
withheld. If the Voting Representative is not approved by the remaining
Members, the Representative may select another Voting Representative
subject to the approval by the remaining Members.
9.3 Dissolution, Winding Up and Liquidation. Upon a dissolution
of the Company, the Company shall continue solely for purposes of winding
up its affairs in an orderly manner, liquidating its assets, and satisfying
claims of its creditors. The liquidator of the Company shall take full
account of the Company's liabilities and property and shall cause the
property or the proceeds from the sale thereof, to the extent sufficient
therefor, to be applied and distributed, to the maximum extent permitted by
law, in the following order:
(a) first, to creditors (including Members who are
creditors) in satisfaction of all of the Company's debts and other
liabilities; and
(b) second, to the Members in accordance with the
positive balance in their Capital Accounts, after giving effect to
all contributions, distributions and allocations for all periods.
9.4 Compliance With Certain Requirements of the Treasury
Regulations; Deficit Capital Accounts. In the event that the Company is
"liquidated" within the meaning of Regulations Section
1.704-1(b)(2)(ii)(g), distributions shall be made pursuant to this Article
IX to the Members who have positive Capital Account balances in compliance
with the Regulations Section 1.704-1(b)(2)(ii)(b)(2). In the event that any
Member has a deficit balance in his Capital Account (after giving effect to
all contributions, distributions and allocations for all Fiscal Periods),
such Member shall have no obligation to make any contribution to the
capital of the Company with respect to such deficit, and such deficit shall
not be considered a debt owned to the Company or to any other Person for
any purposes whatsoever.
ARTICLE X
INDEMNIFICATION
10.1 Indemnity. Subject to the provisions of Section 10.4
hereof, the Company shall indemnify any Person who was or is a party or is
threatened to be made a party to any threatened, pending or completed
action, suit or proceeding, whether civil, criminal, administrative or
investigative, except an action by or in the right of the Company, by
reason of the fact that such Person is or was a Managing Member, Member,
Officer, director, controlling person, employee, legal representative or
agent of the Company, or is or was serving at the request of the Company as
manager, director, officer, partner, shareholder, controlling person,
employee, legal representative or agent of another limited liability
company, partnership, corporation, joint venture, trust or other
enterprise, against expenses, including attorneys' fees, judgment, fines
and amounts paid in settlement actually and reasonably incurred by such
person in connection with the action, suit or proceeding if such person
acted in good faith and in a manner which such person reasonably believed
to be in or not opposed to the best interests of the Company, and, with
respect to a criminal action or proceeding, had no reasonable cause to
believe such person's conduct was unlawful.
10.2 Indemnity for Actions by or in the Right of the Company.
In accordance with the provisions of Section 10.4 hereof, the Company shall
indemnify any Person who was or is a party or is threatened to be made a
party to any threatened, pending or completed action or suit by or in the
right of the Company to procure a judgment in its favor by reason of the
fact that such Person is or was a Managing Member, Member, director,
Officer, controlling person, employee, legal representative or agent of the
Company, or is or was serving at the request of the Company as a Managing
Member, member, director, officer, partner, shareholder, controlling
person, employee, legal representative or agent of another limited
liability company, corporation, partnership, joint venture, trust or other
enterprise, against expenses, including amounts paid in settlement and
attorneys' fees actually and reasonably incurred by such Person in
connection with the defense or settlement of the actions or suit if such
person acted in good faith and in a manner which such person reasonably
believed to be in or not opposed to the best interests of the Company.
10.3 Indemnity if Successful. The Company shall indemnify a
Managing Member, Member, Officer, director, controlling person, employee,
legal representative or agent of the Company against expenses, including
attorneys' fees, actually and reasonably incurred by such party in
connection with the defense of any action, suit or proceeding referred to
in Sections 10.1 and 10.2 hereof or in defense of any claim, issue or
matter therein, to the extent that such person or entity has been
successful on the merits.
10.4 Expenses. Any indemnification under Sections 10.1 and 10.2
hereof, as well as the advance payment of expenses permitted under Section
10.5 hereof shall be made by the Company to the fullest extent permitted
under the Act.
10.5 Advance Payment of Expenses. The expenses of the Managing
Member and Members incurred in defending a civil or criminal action, suit
or proceeding may be paid by the Company as they are incurred and in
advance of the final disposition of the action, suit or proceeding, upon
receipt of an undertaking by or on behalf of the Managing Member or
Members, as the case may be, to repay the amount if it is ultimately
determined by a court of competent jurisdiction that such Managing Member
or Member is not entitled to be indemnified by the Company. The provisions
of this subsection do not affect any rights to advancement of expenses to
which personnel other than Managing Member or Members may be entitled under
any contract or otherwise by law.
10.6 Other Arrangements Not Excluded. The indemnification and
advancement of expenses authorized in or ordered by a court pursuant to
this Article X:
(a) does not exclude any other rights to which a Person
seeking indemnification or advancement of expenses may be entitled
under the Certificate of Formation or any agreement, vote of Members
entitled to vote or otherwise, for either an action in such Person's
official capacity or an action in another capacity while holding
office, except that indemnification, unless ordered by a court
pursuant to Section 10.5 above, may not be made to or on behalf of
the Managing Member or any Member if a final adjudication established
that the acts or omissions involved intentional misconduct, fraud or
a knowing violation of the law and was material to the cause of
action; and
(b) continues for a Person who has ceased to be a
Managing Member, Member, employee or agent and inures to the benefit
of the heirs, executors and administrators of such a Person.
ARTICLE XI
MISCELLANEOUS PROVISIONS
11.1 Entire Agreement. This Agreement and the Certificate of
Formation constitute the complete and exclusive statement of the agreement
among the Members with respect to the subject matter contained therein.
This Agreement and the Certificate of Formation replace and supersede all
prior agreements by and among the Members with respect to the subject
matter contained herein.
11.2 Amendments. This Agreement may be amended by (a) the two
thirds vote of the Membership Interests or (b) by action of the Operating
Committee if notice is mailed by the Managing Member to each Member and
such amendment is not objected to by any Member within thirty (30) days of
mailing to Members.
11.3 Applicable Law. The Certificate of Formation and this
Agreement, and its application, shall be governed exclusively by its terms
and the laws of the State of Delaware.
11.4 Reserved.
11.5 Headings. The headings in this Agreement are inserted for
convenience only and are in no way intended to describe, interpret, define,
or limit the scope, extent or intent of this Agreement or any provisions
contained herein.
11.6 Severability. If any provision of this Agreement or the
application thereof to any Person or circumstance shall be deemed invalid,
illegal or unenforceable to any extent, the remainder of this Agreement and
the application thereof shall not be affected and shall be enforceable to
the fullest extent permitted by law.
11.7 Heirs, Successors and Assigns. Each and all of the
covenants, terms, provisions and agreements contained in this Agreement
shall be binding upon and inure to the benefit of the existing Members, all
new and substituted Members, and their respective assignees (whether
permitted by this Agreement or not), heirs, legal representatives,
successors and assigns.
11.8 Tax Reports and Financial Statements. After the end of
each Fiscal Year, the Officers, under the supervision and control of the
Managing Member, shall, as promptly as possible and in any event within
sixty (60) days after the close of the Fiscal Year, cause to be prepared
and transmitted to each Member federal income tax form K-1 and all
information necessary for the preparation of such Member's federal income
tax return.
11.9 Counterparts. This Agreement may be executed in several
counterparts with the same effect as if the parties executing the several
counterparts had all executed one counterpart.
11.10 Filings. Following the execution and delivery of this
Agreement, the Officers or their designee, under the supervision and
control of the Managing Member shall promptly prepare any documents
required to be filed and recorded under the Act, and the Officers or such
designee shall promptly cause each such document to be filed and recorded
in accordance with the Act and, to the extent required by local law, to be
filed and recorded or notice thereof to be published in the appropriate
place in each jurisdiction in which the Company may hereafter establish a
place of business. The Officers or such designee, under the supervision and
control of the Managing Member, shall also promptly cause to be filed,
recorded and published such statements of fictitious business name and any
other notices, certificates, statements or other instruments required by
any provision of any applicable law of the United States or any state or
other jurisdiction which governs the conduct of its business from time to
time.
11.11 Power of Attorney. Except for any requirement for the
consent or power of the Members pursuant to Article III hereof, each Member
does hereby constitute and appoint each Officer and the Managing Member as
its true and lawful representative and attorney-in-fact, in its name, place
and stead, to make, execute, sign, deliver and file (a) any amendment to
the Certificate of Formation of the Company, any amendment thereof required
because of an amendment to this Agreement or in order to effectuate any
change in the membership of the Company, (b) this Agreement, (c) any
amendments to this Agreement and (d) all such other instruments, documents
and certificates which may from time to time be required by the laws of the
United States of America, the State of Delaware or any other jurisdiction,
or any political subdivision or agency thereof, to effectuate, implement
and continue the valid and subsisting existence of the Company or to
dissolve the Company or for any other purpose consistent with this
Agreement and the transactions contemplated hereby. The power of attorney
granted hereby is coupled with an interest and shall (i) survive and not be
affected by the subsequent death, incapacity, disability, dissolution,
termination or bankruptcy of the Member granting the same or the transfer
of all or any portion of such Member's Interest and (ii) extend to such
Member's successors, assigns and legal representatives.
11.12 Additional Documents. Each Member, upon the request of
the Managing Member, agrees to perform all further acts and execute,
acknowledge and deliver any documents that may be reasonably necessary to
carry out the provisions of this Agreement.
11.13 Notices. All notices, requests and other communications
to any party hereunder shall be in writing (including facsimile or similar
writing) and shall be given to such party (and any other Person designated
by such party) at its address or facsimile number set forth in a schedule
filed with the records of the Company or such other address or facsimile
number as such party may hereafter specify to the Managing Member or
Officers of the Company. Each such notice, request or other communication
shall be effective (a) if given by facsimile, when transmitted to the
number specified pursuant to this Section and the appropriate confirmation
is received, (b) if given by mail, seventy-two (72) hours after such
communication is deposited in the mails with first class postage prepaid,
addressed as aforesaid, (c) if given by reputable overnight courier, on the
next Business Day or (d) if given by any other means, when delivered at the
address specified pursuant to this Section 11.13.
11.14 Waiver of Right to Partition and Bill of Accounting. To
the fullest extent permitted by applicable law, each of the Members
covenants that it will not, and hereby waives any right to, file a bill for
partnership accounting. Each of the Members irrevocably waives any right
that it may have to maintain any action for dissolution of the Company or
partition with respect to any of the Company's assets.
11.15 DISCLOSURES.
(a) THE INTERESTS OFFERED HEREBY HAVE NOT BEEN REGISTERED UNDER
THE SECURITIES EXCHANGE ACT OF 1933, AS AMENDED (THE "1933 ACT"), OR THE
SECURITIES LAWS OF CERTAIN STATES AND ARE BEING OFFERED AND SOLD IN
RELIANCE ON EXEMPTIONS FROM THE REGISTRATION REQUIREMENTS OF THE 1933 ACT
AND SUCH LAWS. THE INTERESTS ARE SUBJECT TO RESTRICTIONS ON TRANSFERABILITY
AND RESALE AND MAY NOT BE TRANSFERRED OR RESOLD EXCEPT AS PERMITTED UNDER
THE 1933 ACT AND SUCH LAWS PURSUANT TO REGISTRATION OR EXEMPTION THEREFROM.
(b) THERE WILL NOT BE ANY PUBLIC MARKET FOR THE INTERESTS. THE
LIMITED LIABILITY COMPANY AGREEMENT GENERALLY PROHIBITS TRANSFERS OF
INTERESTS WITHOUT THE CONSENT OF THE OPERATING COMMITTEE IN ITS SOLE
DISCRETION AND FEDERAL AND STATE SECURITIES LAWS ALSO RESTRICT TRANSFERS OF
INTERESTS.
IN WITNESS WHEREOF, this Limited Liability Company Agreement
was adopted by a unanimous vote of all of the Members at the organizational
meeting thereof held as of July 26, 2000.
MANAGING MEMBER:
FORTRESS REGISTERED INVESTMENT TRUST, a
Delaware business trust, as Managing
Member and a Member
By: /s/ Wesley R. Edens
-----------------------------------
Name: Wesley R. Edens
Title: Chief Executive Officer
MEMBERS:
HEALTH PARTNERS, a Bermuda exempted partnership,
as a Member
By: Capital Z Financial Services Fund II, L.P.,
its general partner
By: Capital Z Partners, Ltd., its general partner
By: Capital Z Partners, L.P.,
its general partner
By: /s/ Paul H. Warren
----------------------------------
Name: Paul H. Warren
Title: Senior Vice President
SCHEDULE A
Schedule of Capital Commitments and Contributions of Members
PRIOR CAPITAL CAPITAL MEMBERSHIP INTEREST
MEMBER'S NAME CONTRIBUTION COMMITMENT PERCENTAGE
------------- ------------ ---------- ----------
Fortress Registered $ 61,066,3381(1) $ 160,000,000 59.3%
Investment Trust
Health Partners 0 $ 110,000,0002(2) 40.7%
--------
(1) Representing 4,004,350 shares of Common Stock of Brookdale at $15.25
per share.
(2) In the form of the Convertible Note
SCHEDULE B
Initial Officers
Position
--------
Wesley R. Edens Chairman
Paul H. Warren President
Gregory F. Hughes CFO
Randal A. Nardone Secretary
SCHEDULE C
Initial OC Members
FRIT:
-----
1. Wesley R. Edens
2. William B. Doniger
3. Randal A. Nardone
HP
--
1. Paul H. Warren
2. Mark H. Tabak
TABLE OF CONTENTS
PAGE
ARTICLE I
GENERAL PROVISIONS
1.1 Registered Office. ..............................................2
1.2 Other Offices. ..................................................2
1.3 Purpose; Nature of Business Permitted; Powers. ..................2
1.4 Limited Liability of Members......................................2
1.5 Definitions.......................................................2
1.6 Certificates.....................................................15
ARTICLE II
CAPITAL CONTRIBUTIONS AND CAPITAL ACCOUNTS
2.1 Capital Contributions............................................15
2.2 Capital Accounts.................................................17
2.3 Negative Capital Account. ......................................18
2.4 Admission of New Members. ......................................18
2.5 Interest. ......................................................18
2.6 Additional Capital Contributions.................................18
2.7 Capital Withdrawal Rights, Interest and Priority.................19
ARTICLE III
MANAGEMENT OF THE COMPANY
3.1 Managing Member. ...............................................19
3.2 Other Ventures. ................................................21
3.3 Actions by the Members. ........................................21
3.4 Meetings, Quorum; Voting. ......................................21
3.5 Waiver of Notice. ..............................................21
3.6 Action by Consent. .............................................21
3.7 Officers; Designation; Term; Qualifications......................21
3.8 Guaranteed Payment...............................................22
3.9 Operating Committee..............................................23
3.10 Election of Operating Committee and Meetings.....................23
3.11 Board of Directors of Brookdale and Committees...................24
3.12 Election of Board of Directors and Meetings......................24
3.13 Audit Committee..................................................25
3.14 Officers of Subsidiaries.........................................25
3.15 Investment.......................................................25
3.16 Confidentiality..................................................25
ARTICLE IV
TRANSFERS OF MEMBERSHIP INTERESTS
4.1 Restrictions on Transfer.........................................26
4.2 Non-Permitted Transfers..........................................27
4.3 Right of First Offer.............................................27
4.4 Tag-Along Rights.................................................29
4.5 Buy/Sell Right...................................................31
4.6 Drag-Along Rights................................................33
ARTICLE V
ALLOCATIONS
5.1 Allocations of Profits and Losses. .............................34
5.2 Adjustments and Special Allocations. ...........................34
5.3 Curative Allocations. ..........................................36
5.4 Loss Limitation. ...............................................37
5.5 Other Allocation Rules...........................................37
5.6 Tax Allocations: Code Section 704(c). ..........................37
ARTICLE VI
DISTRIBUTIONS AND EXPENSES
6.1 Distributions of Net Cash Flow. ...............................38
6.2 Amounts Withheld. ..............................................38
6.3 Expenses. ......................................................38
ARTICLE VII
OTHER TAX MATTERS
7.1 Filing of Tax Returns. .........................................39
7.2 Tax Matters Member. ............................................40
7.3 Records and Accounting. ........................................40
7.4 Access to Accounting Records. ..................................40
7.5 Tax Elections. .................................................40
7.6 Annual Tax Information. ........................................40
ARTICLE VIII
TERM
8.1 Term.............................................................41
ARTICLE IX
DISSOLUTION AND TERMINATION OF THE COMPANY
9.1 Voluntary Dissolution by the Members. ..........................41
9.2 Continuation of Interest of Member's Representative. ...........41
9.3 Dissolution, Winding Up and Liquidation. .......................41
9.4 Compliance With Certain Requirements of the Treasury
Regulations;Deficit Capital Accounts.............................42
ARTICLE X
INDEMNIFICATION
10.1 Indemnity. .....................................................42
10.2 Indemnity for Actions By or In the Right of the Company. ........42
10.3 Indemnity If Successful. .......................................43
10.4 Expenses. ......................................................43
10.5 Advance Payment of Expenses. ...................................43
10.6 Other Arrangements Not Excluded. ...............................43
ARTICLE XI
MISCELLANEOUS PROVISIONS
11.1 Entire Agreement. ..............................................44
11.2 Amendments. ....................................................44
11.3 Applicable Law. ................................................44
11.4 Reserved.........................................................44
11.5 Headings. ......................................................44
11.6 Severability. ..................................................44
11.7 Heirs, Successors and Assigns. .................................44
11.8 Tax Reports and Financial Statements.............................44
11.9 Counterparts.....................................................45
11.10 Filings..........................................................45
11.11 Power of Attorney................................................45
11.12 Additional Documents.............................................45
11.13 Notices..........................................................45
11.14 Waiver of Right to Partition and Bill of Accounting..............46
11.15 DISCLOSURES......................................................46
AMENDED AND RESTATED
LIMITED LIABILITY COMPANY AGREEMENT
OF
FORTRESS BROOKDALE ACQUISITION LLC
dated as of July 26, 2000
