Exhibit 10.14
LIMITED LIABILITY COMPANY AGREEMENT
of
JER/NHP SENIOR HOUSING, LLC,
a Delaware limited liability company
by and among
NATIONWIDE HEALTH PROPERTIES, INC.,
a Maryland corporation
(as "NHP"),
and
JER SENIOR HOUSING, LLC,
a Delaware limited liability company
(as "JER")
ARTICLE I - ORGANIZATION
Section 1.1 Formation of Company ............................................................ 1
Section 1.2 Name ............................................................................ 1
Section 1.3 Term ............................................................................ 1
Section 1.4 Purpose ......................................................................... 1
Section 1.5 Names and Addresses of Members .................................................. 1
Section 1.6 Principal Place of Business ..................................................... 1
Section 1.7 Registered Office and Registered Agent .......................................... 1
Section 1.8 Certain Definitions ............................................................. 2
ARTICLE II - MEMBERS
Section 2.1 Admission of Members ............................................................ 2
Section 2.2 Limitation on Liability ......................................................... 2
Section 2.3 Return of Capital ............................................................... 2
Section 2.4 Ownership; Ownership of the Projects ............................................ 2
Section 2.5 Waiver of Partition; Nature of Interests in the Company ......................... 3
ARTICLE III - CONTRIBUTIONS AND FUNDING OF PROJECT COSTS
Section 3.1 Financing ....................................................................... 3
Section 3.2 Capital Contributions ........................................................... 4
Section 3.3 Procedure ....................................................................... 4
Section 3.4 Capital Contributions and Remedies .............................................. 6
Section 3.5 Capital Accounts ................................................................ 8
Section 3.6 Member Loans and Other Advances ................................................. 8
ARTICLE IV - MANAGEMENT AND OPERATION OF THE COMPANY AND THE PROJECTS
Section 4.1 Member Management; NHP as Managing Member ....................................... 8
Section 4.2 Certain Obligations of the Managing Member ...................................... 13
Section 4.3 Termination of Managing Member .................................................. 14
Section 4.4 Authority to Sign ............................................................... 16
Section 4.5 No Company Employees ............................................................ 16
Section 4.6 Company Expenses ................................................................ 16
Section 4.7 Company Funds .................................................................... 16
ARTICLE V - COMPENSATION TO MEMBERS
Section 5.1 Sole Right to Compensation For Services ......................................... 17
Section 5.2 Management Fee .................................................................. 17
ARTICLE VI - ACQUISITIONS AND MANAGEMENT OF PROJECTS AND EXCLUSIVITY
Section 6.1 Role of the Members in Acquisition of Projects .................................. 17
Section 6.2 Acquisition of Projects ......................................................... 18
Section 6.3 Exclusivity; JER Right of First Refusal ......................................... 18
Section 6.4 Management of Projects .......................................................... 20
Section 6.5 Property in Default ............................................................. 20
Section 6.6 Sale of Projects ................................................................ 21
Section 6.7 Member Rights ................................................................... 22
ARTICLE VII - REPORTS
Section 7.1 Books and Records ............................................................... 22
Section 7.2 Accounting and Fiscal Year ...................................................... 22
Section 7.3 Financial Reports ............................................................... 23
Section 7.4 Business Plans and Budgets ...................................................... 23
ARTICLE VIII - INDEMNIFICATION
Section 8.1 Indemnification by the Members .................................................. 24
Section 8.2 Indemnification by the Company .................................................. 24
Section 8.3 General Indemnity Provisions .................................................... 25
ARTICLE IX - DISTRIBUTIONS
Section 9.1 Payments and Distributions of Available Cash .................................... 25
Section 9.2 Withdrawal of Capital ........................................................... 26
ARTICLE X - TRANSFER AND CERTAIN OTHER RESTRICTIONS
Section 10.1 No Transfers of Membership Rights or Member Economic Interests .................. 26
Section 10.2 Change in Control of a Member ................................................... 27
ARTICLE XI - BUY/SELL RIGHTS
Section 11.1 Exercise ........................................................................ 28
Section 11.2 Breach; Enforcement ............................................................. 30
ARTICLE XII - DEFAULT; REMEDIES
Section 12.1 Events of Default ............................................................... 31
Section 12.2 Remedies ........................................................................ 32
Section 12.3 Cumulative Remedies ............................................................. 32
Section 12.4 Litigation Without Termination .................................................. 32
Section 12.5 No Waiver ....................................................................... 33
ARTICLE XIII - DISSOLUTION OF THE COMPANY
Section 13.1 Events Giving Rise to Dissolution ............................................... 33
Section 13.2 Winding Up ...................................................................... 33
ARTICLE XIV - MISCELLANEOUS
Section 14.1 Notices ......................................................................... 34
Section 14.2 Entire Agreement ................................................................ 35
Section 14.3 Arbitration; Governing Law ...................................................... 35
Section 14.4 Successors and Assigns .......................................................... 36
Section 14.5 Captions ........................................................................ 36
Section 14.6 Severability .................................................................... 36
Section 14.7 Counterparts .................................................................... 37
Section 14.8 Further Assurances .............................................................. 37
Section 14.9 Right to Specific Performance ................................................... 37
Section 14.10 Relationship of Parties ......................................................... 37
Section 14.11 Waiver of Jury Trial ............................................................ 37
Section 14.12 Creditors Not Benefited ......................................................... 37
Section 14.13 No Third Party Rights ........................................................... 37
Section 14.14 Survival ........................................................................ 38
Section 14.15 Usury ........................................................................... 38
Section 14.16 Attorneys' Fees ................................................................. 38
Section 14.17 Time of the Essence ............................................................. 38
Section 14.18 Incorporation of Exhibits ....................................................... 38
Section 14.19 Certain Terminology ............................................................. 38
Section 14.20 Business Days ................................................................... 39
Section 14.21 Member Estoppel Certificates .................................................... 39
Section 14.22 Construction .................................................................... 39
Section 14.23 Exculpation ..................................................................... 39
Section 14.24 Publicity and Confidentiality ................................................... 39
EXHIBITS:
Exhibit A Defined Terms
Exhibit B Certain Tax Matters
Exhibit C Arbitration of Disputes
Exhibit D List of Approved Professionals
Exhibit E Internal Rate of Return Explanation and Sample
Calculation
Exhibit F Form of Acquisition Memorandum
LIMITED LIABILITY COMPANY AGREEMENT
OF JER/NHP SENIOR HOUSING, LLC
THIS LIMITED LIABILITY COMPANY AGREEMENT (this "Agreement") is made
and entered into as of August 28, 2001 by and among NATIONWIDE HEALTH
PROPERTIES, INC., a Maryland Corporation ("NHP"), and JER SENIOR HOUSING, LLC, a
Delaware limited liability company ("JER"), as Members.
ARTICLE I
ORGANIZATION
Section 1.1 Formation of Company. The Members hereby enter into a
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limited liability company (the "Company") pursuant to the provisions of the
Delaware Limited Liability Company Act, Delaware Code Annotated Title 6,
Sections 18-101 through 18-1109, as amended from time to time (the "Act"), upon
the terms and conditions contained in this Agreement. NHP and JER are hereby
admitted as Members of the Company and shall be shown as such on the books and
records of the Company.
Section 1.2 Name. The business of the Company shall be conducted
----
under the name of "JER/NHP Senior Housing, LLC."
Section 1.3 Term. The term ("Term") of the Company shall commence on
----
the date hereof and shall continue (unless the Company is sooner dissolved as
provided herein) until the tenth (10th) anniversary of the date hereof, unless
extended by written agreement of the Members.
Section 1.4 Purpose. The purpose of the business of the Company is to
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purchase, hold, refurbish, operate, maintain, market, lease, finance, sell and
otherwise use, as applicable, the Projects for profit and engage in all
activities reasonably related thereto in accordance with the Budgets and the
Business Plans. Without limiting the generality of the foregoing or any other
provision of this Agreement, including without limitation Section 4.1 or Section
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6.2, NHP has informed JER of its intent to typically operate the Projects in
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which Company or a Subsidiary Company has a fee or leasehold interest such that
it will be leased or subleased to third party operators on an absolute net basis
in accordance with the Budgets.
Section 1.5 Names and Addresses of Members. The names of the Members
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are as shown above. The addresses of the Members are set forth in Section 14.1.
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Section 1.6 Principal Place of Business. The principal place of
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business of the Company shall be located at ▇▇▇ ▇▇▇▇▇▇▇ ▇▇▇▇▇▇ ▇▇▇▇▇, ▇▇▇▇▇
▇▇▇▇, ▇▇▇▇▇▇▇ ▇▇▇▇▇, ▇▇▇▇▇▇▇▇▇▇ ▇▇▇▇▇, which is the business address of the
Company, or such other location as hereafter determined by the Members.
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Section 1.7 Registered Office and Registered Agent.
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(a) For purposes of Section 18-104(a)(1) of the Act, the registered
office of the Company is c/o The Corporation Trust Company, ▇▇▇▇ ▇▇▇▇▇▇ ▇▇▇▇▇▇,
▇▇▇▇▇▇▇▇▇▇, ▇▇▇▇▇▇▇▇ ▇▇▇▇▇. The Company may change the registered office of the
Company from time to time as permitted under the Act.
(b) For purposes of Section 18-104(a)(2) of the Act, the Company's
registered agent for service of process is The Corporation Trust Company, whose
address is ▇▇▇▇ ▇▇▇▇▇▇ ▇▇▇▇▇▇, in the City of Wilmington, County of ▇▇▇ ▇▇▇▇▇▇,
▇▇▇▇▇ ▇▇ ▇▇▇▇▇▇▇▇ ▇▇▇▇▇. The Company may change the Company's registered agent
from time to time as permitted under the Act.
Section 1.8 Certain Definitions. Initially capitalized terms that are
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not otherwise defined in this Agreement shall have the meaning ascribed to them
in Exhibit A attached hereto.
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ARTICLE II
MEMBERS
Section 2.1 Admission of Members. NHP and JER shall be the Members of
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the Company. Except as expressly permitted by this Agreement, no other Person
shall be admitted as a member of the Company. The Members agree to execute all
documents and to undertake all other acts, as reasonably may be deemed necessary
in order to comply with all applicable laws for the formation, continuation,
registration, qualification and operation of a limited liability company. NHP
and JER and their respective permitted successors and assigns as members in the
Company are sometimes herein together referred to as the "Members" and each as a
"Member."
Section 2.2 Limitation on Liability. Except as otherwise expressly
-----------------------
provided in the Act, the debts, obligations and liabilities of the Company,
whether arising in contract, tort or otherwise, shall be solely the debts,
obligations and liabilities of the Company, and no Member shall be obligated
personally for any such debt, obligation or liability of the Company solely by
reason of being a member of the Company. Except as otherwise expressly provided
in the Act, except in connection with a breach under ARTICLE VI or ARTICLE XI,
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and except in the event a Member commits any act or omission that constitutes
fraud, dishonesty, bad faith, gross negligence or willful misconduct, the
liability of each Member to each other Member shall be limited to Fifty Million
Dollars ($50,000,000) in the aggregate.
Section 2.3 Return of Capital. No Member shall be liable for the
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return of the Capital Contributions (or any portion thereof) of any other
Member, it being expressly understood that any such return shall be made solely
from the assets of the Company. No Member shall be entitled to withdraw or
receive a return of any part of its Capital Contributions or Capital Account, to
receive interest on its Capital Contributions or Capital Account or to receive
any distributions from the Company, except as expressly provided for in this
Agreement or under applicable law. No Member shall have any obligation to
restore any negative or deficit balance in its Capital Account upon liquidation
or dissolution of the Company.
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Section 2.4 Ownership; Ownership of the Projects. All assets of the
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Company shall be owned by the Company subject to the terms and provisions of
this Agreement. It is further contemplated and agreed by the Members that title
to each of the Projects will be acquired and held by separate special purpose
entities, each of which shall be one hundred percent (100%) owned by the Company
(each, a "Subsidiary Company").
Section 2.5 Waiver of Partition; Nature of Interests in the Company.
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Except as otherwise expressly provided for in this Agreement, each of the
Members hereby irrevocably waives any right or power that such Member might
have:
(a) to cause the Company or any of its assets to be partitioned;
(b) to cause the appointment of a receiver for all or any portion of
the assets of the Company;
(c) to compel any sale of all or any portion of the assets of the
Company pursuant to any applicable law; or
(d) to file a complaint, or to institute any proceeding at law or in
equity, to cause the termination, dissolution or liquidation of the Company.
Each of the Members has been induced to enter into this Agreement in reliance
upon the waivers set forth in this Section 2.5, and without such waivers no
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Member would have entered into this Agreement. No Member shall have any interest
in any specific assets of the Company (including any Target Asset acquired by
the Company). The interests of all Members in this Company are personal
property.
ARTICLE III
CONTRIBUTIONS AND FUNDING OF PROJECT COSTS
Section 3.1 Financing.
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(a) To the extent nonrecourse third party financing is available in
connection with the acquisition of a Project, the Company will use commercially
reasonable efforts to obtain prudent amounts of such third-party financing to
facilitate the acquisition of Projects by the Company with aggregate purchase
prices of not less than One Hundred Thirty Million Dollars ($130,000,000).
(b) To the extent the Members decide as a Major Decision to refinance
any existing third party financing in connection with any Project, the Company
will use commercially reasonable efforts to obtain such refinancing in
accordance with the parameters then set by the Members pursuant to such Major
Decision.
(c) The primary terms of any third party financing and/or refinancing
with respect to the acquisition of a Target Asset or, thereafter, any material
amendment or modification thereto, shall be a Major Decision.
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(d) To the extent a nonrecourse carveout guaranty or similar
indemnity agreement is required in relation to any such third party financing
and/or refinancing with respect to the acquisition of a Target Asset, Managing
Member agrees to execute and deliver the same; provided, however, that JER shall
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indemnify and hold Managing Member harmless, as an additional indemnifiable
Claim pursuant to Section 8.1, for its portion, based on its then Member
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Percentage, of any liability incurred by Managing Member thereunder to the
extent the act or failure to act giving rise to liability thereunder was taken
at the direction of JER as a Major Decision hereunder or otherwise with the
consent of JER; provided, that Managing Member pr any Affiliate did not commit
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gross negligence, fraud, willful misconduct or a material breach of this
Agreement or any Ancillary Agreement in its implementation of such JER-approved
or consented to act or omission.
(e) If third party financing is not available on a nonrecourse basis
in prudent amounts, unless the Members agree to recourse financing, the
acquisition of a Project shall be funded one hundred percent (100%) by Capital
Contributions.
Section 3.2 Capital Contributions. Subject to Section 4.1(b)(ii):
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(a) Each Member shall be obligated to make cash capital contributions
pursuant to this Section 3.2(a) ("Base Capital Contributions"). Subject to the
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conditions and procedures set forth in Section 3.3 and Section 4.1, Base Capital
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Contributions shall be made by each Member pro rata in accordance with its
Member Percentage in the amounts necessary (i) to acquire and operate the Target
Assets as approved by the Members; (ii) for all capital expenditures identified
in connection with such Target Asset in accordance with the applicable Capital
Budget; and (iii) to fund all operating expenditures of the Company in
accordance with the Operating Budgets to the extent of negative cash flow. JER
shall have the right, but not the obligation, to notify Managing Member of
anticipated capital requirements of the Company, in which event such capital
requirement shall be considered by the Members as a Major Decision. The
obligation contained in this Section 3.2(a) to make Base Capital Contributions
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with respect to the acquisition of any Target Assets shall terminate upon the
expiration of the Exclusivity Period unless extended pursuant to the unanimous
consent of the Members.
(b) Notwithstanding anything to the contrary in the foregoing, in no
event is NHP required to make aggregate Base Capital Contributions in excess of
the NHP Initial Capital Allocation and in no event is JER required to make
aggregate Base Capital Contributions in excess of the JER Initial Capital
Allocation. If, after funding all of the NHP Initial Capital Allocation and the
JER Initial Capital Allocation, the Company requires additional capital for any
reason as determined by the Managing Member and approved by the Members, the
Members shall contribute such additional capital to the Company (each, an
"Additional Contribution") pro rata in accordance with their respective Member
Percentages.
Section 3.3 Procedure. Subject to Section 4.1(b)(ii):
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(a) With respect to all Capital Contributions to be made by the
Members hereunder, if Managing Member reasonably anticipates that there will be
capital requirements, then, at least fifteen (15) business days prior to the
date such capital requirement is due, Managing Member shall submit a written
Capital Contribution request to the Members
4
describing such Capital Contribution in a form and substance previously approved
by the Members as a Major Decision ("Contribution Request"). Each Contribution
Request shall constitute Managing Member's representation and warranty to JER
and the Company that all Capital Contributions made to date, as well as those
being currently requested, were and will be utilized in compliance with the
applicable Contribution Requests and in compliance with the Budgets (as
applicable) or as otherwise provided in this Agreement, unless Managing Member
has notified JER in writing to the contrary and JER has approved such deviation
in writing.
(b) With respect to Capital Contributions to be made by the Members
hereunder for the initial acquisition of any Target Asset, the Members shall be
obligated to make Base Capital Contributions in accordance in such amounts
necessary to fund the acquisition and initial operation of such Target Assets as
approved by the Members pursuant to Section 6.2(c).
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(c) With respect to Capital Contributions to be made by the Members
hereunder for capital improvements for any Project, the Members shall be
obligated to make Base Capital Contributions in such amounts set forth in the
applicable Capital Budget as approved by the Members pursuant to Section 6.2(c).
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(d) With respect to Capital Contributions to be made by the Members
hereunder to fund the operation of the business of the Company and/or working
capital for any Project other than as set forth in Section 3.3(b) and (c) above,
-------------- ---
the Members shall be obligated to make Base Capital Contributions in such
amounts set forth in the applicable Operating Budget.
(e) However, the following additional conditions must be satisfied
before JER shall be obligated to make its share of any Capital Contribution:
(i) there is no breach, default or violation by the Company
in connection with any third party Project financing;
(ii) there shall be no Event of Default or any condition or
event that after notice or lapse of time or both, would constitute an Event of
Default, by Managing Member or an Affiliate under this Agreement or any
Ancillary Agreement (including without limitation with respect to Managing
Member's management and reporting obligations pursuant to Section 4.2 and
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ARTICLE VII, respectively); and
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(iii) JER shall have received a Contribution Request for such
Capital Contribution meeting the requirements and within the time period set
forth in Section 3.3(a).
Any waiver by JER of a condition of a Capital Contribution under this Section
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3.3(e) must be expressly made by JER in writing. If JER makes a Capital
------
Contribution before fulfillment of one or more of such required conditions, such
Capital Contribution shall not be a waiver of such condition(s) except in that
instance, and JER reserves the right to require their fulfillment before making
its share of any further Capital Contributions pursuant to this Section 3.3(e).
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If any such condition is not satisfied, JER, acting in its reasonable judgment
and without waiving any rights or conditions as to any other or further Capital
Contributions pursuant to this Section 3.3(e), may disburse selectively as to
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certain items or categories of costs and not others.
5
(f) Capital Contributions must be approved by the Members as a Major
Decision at the time Managing Member requests funding pursuant to Section
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3.3(a). Without limitation of the foregoing, approval of the Business Plans or
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the Budgets shall not be deemed an approval of the Capital Contributions.
However, subject to Section 3.3(e), Major Decision approval of a Capital
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Contribution at the time Managing Member requests funding pursuant to Section
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3.3(a) shall not be required if each of the following conditions is then
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satisfied: (i) such Capital Contribution is contemplated by the then approved
applicable Project Budget (i.e., the then approved Budget contemplates that
----
revenues from the applicable Project and other available cash of the Company are
not sufficient to pay an amount equal to such Capital Contribution for expenses
specified by such Budget); (ii) such Capital Contribution is required to fund an
outstanding contractual obligation of the Company to an unrelated third party
under an approved contract; (iii) all contractual conditions precedent to the
Company's obligation to the applicable third party have been satisfied pursuant
to the applicable contractual documentation previously approved by JER
evidencing such obligation; (iv) subject to the Budget deviation permitted
pursuant to Section 4.1(b)(iii), the expenditures under the applicable Project
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Budget to date with respect to the applicable line item(s), plus the anticipated
expenditures with respect to such line item, do not exceed the amount specified
in the applicable Project Budget for such line item; and (v) the aggregate
revenues then received with respect to such Project are not less than
ninety-five percent (95%) of the aggregate revenues budgeted for such period
under the applicable Project Budget.
(g) JER's approval of any matter in connection with this Agreement,
including without limitation, any site visit, observation or examination by JER,
shall be for the sole purpose of protecting JER's investment in the Company, and
shall not constitute a (i) waiver of any Event of Default by Managing Member or
its Affiliates under this Agreement or any Ancillary Agreement (unless such
waiver is expressly made by JER in writing with specific reference to such Event
of Default and agreement) or (ii) representation by JER of any kind with regard
to the matter being approved. JER is under no duty to visit any portion of the
Property or to supervise or observe construction or to examine any books or
records. Managing Member shall not rely on any site visit, observation or
examination by JER. JER shall have the right to contact representatives of the
local, state and other governmental authorities having jurisdiction over any
part of the Property, or engineers, architects, contractors, suppliers or other
third parties involved with the Property, in order to verify compliance by
Managing Member with this Agreement (including satisfaction of the conditions
set forth in Section 3.3(e) above).
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(h) Notwithstanding anything to the contrary contained herein, JER
shall not be required to make a Capital Contribution pursuant to an Operating
Budget for the Company for any expenses of the Company in its evaluation of any
Target Assets or for any other operating expenses of the Company, prior to the
closing of the Company's acquisition of its first Project; provided, however,
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that, this Section 3.3(h) shall not prohibit NHP from pursuing any of its
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available right or remedies hereunder against JER in the event any controversy,
claim or dispute arises between the Members prior to the Company's acquisition
of its first Project.
Section 3.4 Capital Contributions and Remedies.
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(a) All Capital Contributions required by or provided for in this
ARTICLE III shall be made by wire transfer of funds to the Company bank account
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designated by the
6
Managing Member as the "Equity Account", from which withdrawals may be made only
upon signature of the Managing Member or officers of the Company as designated
by the Members.
(b) If any Member fails to timely make any Capital Contribution (or
any portion thereof) required by Section 3.2, the other Member (the
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"Contributing Member") has made such Capital Contribution, and such failure
continues for more than three (3) business days after written notice from the
Company or the Contributing Member (after the passage of such three (3) business
day period, such non-contributing Member being referred to herein as the
"Non-Contributing Member"), then the Contributing Member shall select one of the
following remedies:
(i) The Contributing Member may contribute the Non-Contributing
Member's pro rata share of such required Capital Contributions, and the
Contributing Member that does so may designate all of the Capital Contributions
made by such Contributing Member in respect of the required Capital Contribution
(including both the Contributing Member's and the Non-Contributing Member's pro
rata portion thereof) as a Priority Loan to the Company; or
(ii) The Contributing Member may withdraw its share of such
required Capital Contribution.
(c) To the extent that the remedies set forth in Section 3.4(b) are
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unenforceable or otherwise unavailable, (i) the Company or the Contributing
Member(s) on behalf of the Company, may exercise any rights or remedies
permitted by applicable law to enforce the Company's security interest in the
Membership Rights of the Non-Contributing Member granted pursuant to Section
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3.4(d); or (ii) the Contributing Member may exercise any and all other rights
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and remedies available at law or in equity to enforce the Non-Contributing
Member's obligation to make such Capital Contributions.
(d) In order to allow for the exercise of remedies to the extent
permitted under Section 3.4 against a Non-Contributing Member, each Member
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hereby grants to the Company, as secured party, a security interest in such
Member's Membership Rights in the Company to secure its obligation to contribute
its Capital Contributions to the Company under this ARTICLE III, and the Company
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shall have rights available to a secured party under the Delaware Uniform
Commercial Code and the laws of the state of organization of such Member. Either
Member becoming a Non-Contributing Member hereunder shall be an Event of Default
with respect to such Member, and, to the extent permitted under Section 3.4(c),
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the Company or the Contributing Member on behalf of the Company may exercise any
rights or remedies permitted by applicable law to enforce the Company's security
interests.
(e) Each Member acknowledges and agrees that the other Member would
not be entering into this Agreement were it not for (i) the Members agreeing to
make the Capital Contributions provided for in Section 3.2 of this Agreement,
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and (ii) the remedy provisions above in this Section 3.4. The parties hereto
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acknowledge and agree that the remedies provisions provided for herein could
result in a Member completely forfeiting its Membership Rights in the Company.
Each Member acknowledges and agrees that in the event any Member fails to make
its Capital Contributions pursuant to this Agreement, the other Member shall
suffer substantial damages and the remedy provisions set forth above are fair,
just and equitable in all respects and
7
administratively superior to any other method for determining such damages. Each
Member hereby agrees that in the event its Membership Rights in the Company are
reduced or forfeited as described above, it shall execute and deliver such
conveyances, agreements, instruments or other documents which may be reasonably
necessary in the judgment of any of the other Member to confirm and render fully
effective the remedy provisions set forth above, including, an assignment of all
or a portion of its Membership Rights in the Company and any amendments to this
Agreement and to any Certificate of Formation.
Section 3.5 Capital Accounts. A separate Capital Account will be
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maintained for each Member in accordance with Exhibit B.
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Section 3.6 Member Loans and Other Advances.
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(a) Except as expressly authorized or required in this Agreement,
no Member shall be obligated or authorized to lend money to the Company. If,
without the prior written consent of the Members, a loan not otherwise provided
for herein is made to the Company by a Member, no such loan or advance shall
entitle the lending Member to any increase in its interest in Company profits,
losses or distributions or to the payment of any interest charge or other
consideration for the use of such funds.
(b) Any loan by a Member to the Company made pursuant to this
Agreement shall be a recourse obligation of the Company to the lending Member
and shall be repayable solely out of available cash as provided in ARTICLE IX
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and Section 13.2. In no event shall any Member be personally liable for loans
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made to the Company and the sole recourse of the creditor under such loans shall
be to the assets of the Company.
ARTICLE IV
MANAGEMENT AND OPERATION OF THE COMPANY AND THE PROJECTS
Section 4.1 Member Management; NHP as Managing Member.
-----------------------------------------
(a) Except as otherwise expressly provided for in this Agreement,
the business and affairs of the Company shall be vested in and controlled by the
Members. All decisions made with respect to the management and control of the
Company and approved by the Members shall be binding on the Company and the
Subsidiary Companies. Except with respect to Major Decisions set forth in
Section 4.1(b), the Members hereby delegate the day-to-day managerial and
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operational decisions with respect to the Company and each of the Projects to
NHP as the "Managing Member," including the implementation of the Budgets and
Business Plans. Managing Member shall have authority to manage and conduct the
day-to-day operations of the Company in accordance with the applicable Business
Plans, Budgets and any other guidelines or policies approved by the Members
subject to applicable laws, third party agreements and this Agreement, including
the Major Decisions.
(b) Managing Member shall use diligent efforts to keep JER fully
informed regarding all material matters relating to the Company and any
Subsidiary Company and their respective operations and assets (and such other
specific matters as JER may reasonably request from time to time) and shall so
consult on a monthly basis and at all reasonable times requested by JER, and
without limitation on the foregoing, shall promptly inform JER with respect to
any
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major or significant Company matters, including Major Decisions, so that JER may
exercise its rights under this Agreement. The Managing Member shall not take any
of the following actions (in each case, a "Major Decision") without first
obtaining the written pre-approval of the Members:
(i) the adoption of, and any supplement to, or revision of, any
Budget, Business Plan, and, except as otherwise permitted under this Agreement,
any activity by the Company or any Subsidiary Company which is inconsistent with
the Budgets or the Business Plans in any material respect;
(ii) the making of any Capital Contributions except as otherwise
provided in Section 3.3(f);
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(iii) any deviation from or expenditure inconsistent with any
Operating Budget or the Capital Budget with respect to any Project (or the entry
into any agreement requiring such deviation or expenditure). Notwithstanding the
foregoing, the consent of JER to an expenditure payable to a third party
exceeding the amount specified for such expenditure in the Budgets shall not be
required in any of the following circumstances: (A) Managing Member, in its
reasonable judgment, deems there to be an emergency requiring such expenditures
to effectuate immediate action necessary for the protection of Company assets or
to avoid property damage or personal injury; (B) such expenditure would not (1)
cause the line item in the applicable Budget to which such expenditure relates
to exceed one hundred and ten percent (110%) of the budgeted amount of such line
item in said Budget (taking into account the amounts expended to date and
reasonably anticipated expenses in connection with such line item), or (2) cause
the aggregate amount of the expenses (excluding the expenses described in clause
(C) below) within the applicable Budget to exceed one hundred and five percent
(105%) of the entire amount of budgeted expenses (excluding the expenses
described in clause (C) below) in said Budget, respectively (taking into account
the amounts expended to date and reasonably anticipated expenses); or (C)
expenditures for real property taxes and assessments and utilities. The
provisions of clause (B) above are intended to be in lieu of any contingency
category that covers, in whole or in part, costs of the types described in any
of the other categories under the applicable Budget (so that excess costs in a
specific category might be covered by such contingency category) and
accordingly, there shall be no such contingency line item in the Budgets; the
provisions of clause (B) above are not intended, however, to be in lieu of a
contingency category for unanticipated costs that are not of the types described
in other categories under the Budgets. Managing Member shall promptly notify the
Members, both by telephone and in writing, of each expenditure made pursuant to
this Section 4.1(b)(iii) and shall promptly supply the Members with such
-------------------
information with respect thereto as the Members may reasonably request;
(iv) the entry by the Company or any Subsidiary Company into any
agreement which provides for a term greater than three (3) months (unless
terminable without cause or penalty upon ninety (90) days notice to the other
party) or contemplates an aggregate amount to be spent by the Company under such
agreement in excess of $150,000 (and a series of related agreements for amounts
less than such amount shall be construed as a single agreement for purposes of
this Section 4.1(b)(iv)), or any termination or material modification to any of
-------------------
the foregoing;
9
(v) the terms of any transaction or matter that is not in the
ordinary course of the business of the Company or any Subsidiary Company
relating to the Property, including (A) any capital transaction (including any
sale, financing or refinancing of the assets of the Company or any Subsidiary
Company or any portion thereof); (B) pledging, mortgaging, encumbering, leasing
or granting a security interest in, any assets of the Company or any Subsidiary
Company; and (C) the documentation evidencing the same or any termination or
material change to such documentation;
(vi) any agreement, compensation or reimbursement to, or other
transaction by the Company or any Subsidiary Company with Managing Member, any
Affiliate of Managing Member or any other person or entity with which Managing
Member or any of its Affiliates has a significant business relationship;
(vii) the establishment, maintenance and replenishment of cash
reserves ("Reserve Accounts") and contributions thereto for the Company or any
of the Subsidiary Companies in excess of the amount(s) set forth in Section
-------
4.2(c);
------
(viii) any uninsured litigation, arbitration or settlement
involving the Company or any Subsidiary Company or its assets with a total
amount in controversy in excess of fifty thousand dollars ($50,000);
(ix) all income tax elections, tax returns and tax audits for
the Company or any Subsidiary Company;
(x) any construction within the Property, including the
establishment of and any material amendment or supplement to the plans and
specifications for such construction work by the Company or any Subsidiary
Company;
(xi) the engagement of attorneys, accountants, consultants,
title companies and other professionals by the Company or any Subsidiary
Company; provided, however, that it shall not be a Major Decision for Managing
-------- -------
Member to engage any professionals identified on Exhibit D hereto on behalf of
---------
the Company or any Subsidiary Company for transactional matters; provided,
---------
further, that the engagement of any law firms (whether or not shown on Exhibit
------- -------
D) in any Company litigation, arbitration or other adversarial proceeding shall
-
constitute a Major Decision; provided, further, that Managing Member agrees to
-------- -------
consult with JER in the event JER reasonably objects to the performance of any
of the law firms engaged by Managing Member on behalf of the Company or any
Subsidiary Company pursuant to this Section 4.1(b)(xi); provided, further, that
------------------ -------- -------
any law firm engaged by Managing Member on behalf of the Company without JER's
consent (pursuant to the provisions of this Section 4.1(b)(xi)) must expressly
------------------
confirm in writing that they are representing the Company and neither Member
individually with respect to the matter so engaged and that such engagement
shall be treated as an approved Affiliate contract in accordance with the
provisions of Section 6.8;
-----------
(xii) any material concessions by or restrictions on the Company
or any Subsidiary Company or the Property in connection with obtaining zoning,
variances, map approval, entitlements, permits or other governmental approvals;
10
(xiii) extension of the Term of the Company or any of the
Subsidiary Companies;
(xiv) any act in contravention of this Agreement or which
would make it impossible to carry on the business of the Company or any
Subsidiary Company;
(xv) possession of any Company or any Subsidiary Company
assets or assignment of the rights of the Company or any Subsidiary Company in
specific Company or any Subsidiary Company assets for other than a Company or
any Subsidiary Company purpose;
(xvi) admission of a person or entity as a Member of the
Company except as provided in this Agreement, or as a member of any of the
Subsidiary Companies except as provided in the respective Subsidiary Company
constituent documents;
(xvii) the merger or consolidation of the Company or any of the
Subsidiary Companies with any other entity;
(xviii) any assignment by the Company or any of the Subsidiary
Companies for the benefit of creditors or any guarantee, indemnity bond or
surety bond by the Company or any of the Subsidiary Companies;
(xix) a loan by the Company or any of the Subsidiary Companies
to any Member or third party or the extension of credit to any person, firm or
corporation, on behalf of the Company or any of the Subsidiary Companies except
for any forbearance or similar concession granted in accordance with Section
-------
6.5;
----
(xx) confession, compromise or settlement of any claim made
by or against the Company or any Subsidiary Company or affecting any Project in
which the amount in controversy exceeds fifty thousand dollars ($50,000);
(xxi) the filing on behalf of the Company or any Subsidiary
Company of any petition, or consent to the appointment of a trustee or receiver
or any judgment or order, under state or federal bankruptcy laws;
(xxii) distribution of any property in kind of the Company or
any Subsidiary Company to any Member;
(xxiii) the employment of employees of the Company or any of the
Subsidiary Companies (it being understood that Managing Member is to have its
own employees);
(xxiv) any other decision or action not otherwise provided for
in this Agreement or the Budgets which is reasonably likely to have a material
adverse affect on the Company or any Subsidiary Company;
(xxv) the form of the Subsidiary Company constituent documents
and any decision thereunder with respect to which any member other than the
Company may participate (whether through a veto right, approval, note or
otherwise); or
11
(xxvi) any other decision or action which requires the approval
of JER or the Members as provided elsewhere in this Agreement.
Any matter covered by any clause above, under this Section 4.1(b) shall
constitute a Major Decision even though it may not be covered by (or may be
excluded from) another clause under this Section 4.1(b). Without limitation of
--------------
the foregoing, nothing set forth in the Business Plan shall be deemed an
approval of a Major Decision.
(c) Except as expressly provided herein, any agreement, approval,
consent, judgment or other determination to be made by a Member under this
Agreement shall not be effective unless it is in writing and shall be in the
good faith discretion of such Member and within a reasonable time period given
the circumstances. For purposes of the preceding sentence, the exercise of "good
faith discretion" shall mean that at the time of making the decision the Member
believed it was the right decision for the interests of such Member and that the
decision was not arbitrary or malicious. Notwithstanding anything to the
contrary contained herein, either Member shall have the right to propose a Major
Decision. In the event any Member rejects or conditions any proposed Major
Decision or any other request for its consent or approval hereunder, such Member
shall, upon request, timely notify the other Member and indicate the reason
therefore with reasonable specificity.
(d) Managing Member shall call regular monthly meetings with JER to
discuss the business and affairs of the Company. Any such meeting shall be held
at such time and at such place as the Managing Member and JER shall mutually
agree. Special meetings shall be held on the call of either of the Members by
reasonable oral or written notice to the other. Any meeting held between the
Members may be held either in person or by telephone. The Members may reach
decisions regarding any matter which requires the approval of all Members with
or without a meeting if the decision is approved in writing by all of the
Members.
(e) Each Member shall designate in writing to the other Member certain
representatives, any one of which shall be authorized to act under this
Agreement for and on behalf of such Member (each, a "Designated
Representative"). Neither the Managing Member nor the Company shall take any
action that constitutes a Major Decision until such time as one of the
Designated Representatives for both NHP and JER have executed a writing
describing in detail the action proposed to be taken. Any Designated
Representative(s) may be replaced by the Member designating such Designated
Representative(s) by giving written notice to the other Member. Until further
notice, the Designated Representatives of the Members shall be as follows:
For NHP: R. ▇▇▇▇▇ ▇▇▇▇▇▇▇
T. ▇▇▇▇▇▇ ▇▇▇▇▇▇
▇▇▇▇ ▇▇▇▇▇▇▇
▇▇▇▇▇▇ ▇. ▇▇▇▇▇▇▇
12
For JER: ▇▇▇▇ ▇. ▇▇▇▇▇▇▇
Cia ▇▇▇▇▇▇▇
▇▇▇▇▇ ▇. ▇▇▇▇▇▇▇▇.
Section 4.2 Certain Obligations of the Managing Member.
-------------------------------------------
(a) Managing Member shall fully and faithfully discharge its obligations
and responsibilities, shall devote such time and attention to Company affairs as
may be reasonably necessary for the proper management and supervision of the
business of the Company and the discharge of its duties under this Agreement and
the Company's duties under the Subsidiary Company constituent documents.
Managing Member shall, at all times, exercise good faith and shall use diligent
and professional efforts to promote and protect the best interests of the
Property, the Company and the Subsidiary Companies. Managing Member shall
diligently and continuously pursue the purpose of the Company as set forth in
the Business Plans in accordance with all applicable laws, third party
agreements, the Budgets and this Agreement and shall make its personnel and the
personnel of its Affiliates available to the Company to the extent necessary in
order that its obligations may be fully discharged in a timely manner.
(b) Without limitation on the foregoing or other provisions of this
ARTICLE IV, Managing Member shall use commercially reasonable efforts to
----------
coordinate and manage the operation, leasing, refurbishment, marketing and sale
of the Property within the time schedules set forth in, and in full compliance
with, this Agreement, the Business Plans and the Budgets.
(c) Managing Member shall establish, maintain and replenish reasonable
Reserve Accounts as set forth in the Budgets for future costs, expenses and
payments or for substantial costs (including capital repairs, improvements and
replacements), to the extent the payment of such costs is not contemplated by
other reserves maintained by or on behalf of the Company. The amount of such
Reserve Accounts in excess of the amount set forth in the preceding sentence
shall be approved by the Members as a Major Decision.
(d) All funds of the Company shall be deposited by Managing Member into a
federally insured operating account ("Operating Account"). In addition, Managing
Member shall transfer portions of the balance of the Operating Account which it
determines are not immediately needed to pay for Company operations from time to
time to a federally insured money market account in accordance with sound cash
management principles ("Money Market Account"). The Operating Account and Money
Market Account (collectively, the "Accounts") shall be maintained in the name of
the Company with a money center financial institution approved by JER. The funds
within the Accounts shall be segregated from, and not commingled with any
accounts of any Member or Affiliate thereof, or any other accounts that the
Members may hereafter establish for the Company or the Subsidiary Companies from
time to time. The investment of the funds within the Accounts shall be directed
by Managing Member, subject to the approval by JER. Withdrawals from the
Accounts shall be made upon such signature or signatures as Managing Member may
designate (provided that such signatories are approved by JER), and shall be
made only in connection with expenses related to the assets of the Company
13
or the Subsidiary Companies, as applicable, which are either approved as a Major
Decision or otherwise in conformance with the Budgets, Business Plans and/or
this Agreement.
(e) NHP will comply with such supplemental obligations as may be
expressly agreed to by JER and NHP in connection with each new Project.
Section 4.3 Termination of Managing Member.
------------------------------------------
(a) JER may deliver a termination notice to NHP ("Termination Notice")
removing NHP as Managing Member upon the occurrence of any of the following
events:
(i) any act or omission that constitutes fraud, dishonesty, bad
faith, gross negligence or willful misconduct by NHP or any of its Affiliates
with respect to this Agreement or any Ancillary Agreement or the Property;
(ii) NHP becoming a Non-Contributing Member or any other Event
of Default resulting from a material breach of this Agreement or any Ancillary
Agreement by NHP or any of its Affiliates which is not cured within the
applicable cure periods set forth in Section 12.1;
------------
(iii) a Bankruptcy/Dissolution Event with respect to Managing
Member; or
(iv) in the event JER becomes the Purchasing Member hereunder
pursuant to the provisions of ARTICLE XI.
----------
(b) The Termination Notice shall set forth with reasonable particularity
the basis for the same and shall become effective upon the later of the date of
the Termination Notice, or, if applicable, after the expiration without cure of
the applicable cure period; provided, however, that a Termination Notice shall
-------- -------
become effective immediately in connection with a termination described in
Section 4.3(a)(iii). NHP may dispute the existence of grounds for the
-------------------
termination described in Section 4.3(a)(i) or (ii), but not Section 4.3(a)(iii),
----------------- ---- -------------------
by written notice ("Arbitration Notice") to JER within ten (10) days after its
receipt of the Termination Notice. If NHP fails to provide an Arbitration Notice
within such ten (10) day period, then notwithstanding anything to the contrary
herein, NHP shall have no right to dispute the correctness of the Termination
Notice, which shall be conclusive. Whether or not an Arbitration Notice is given
within the period set forth above, NHP shall be removed as Managing Member upon
the date such Termination Notice becomes effective; provided, however, if NHP
-------- -------
has delivered an Arbitration Notice then the effectiveness of the applicable
Termination Notice may be set aside by the arbitrator in the Arbitration
Proceeding pursuant to Section 14.3. If, pursuant to such Arbitration
------------
Proceeding, the arbitrator does set aside the applicable Termination Notice,
then, notwithstanding anything to the contrary contained herein and in addition
to any damages or rights to reimbursement NHP may be entitled to hereunder, (x)
NHP shall be entitled to receive the Management Fee with respect to the period
it was wrongfully removed as the Managing Member, and (y) NHP shall be entitled
to resume its position as Managing Member hereunder. Further, in addition to the
provisions of the preceding sentence, if, pursuant to such Arbitration
Proceeding, the arbitrator finds that JER delivered such Termination Notice in
bad faith, then NHP shall be entitled to receive additional damages from JER in
an amount equal to
14
its actual damages arising from such wrongful Termination Notice.
Notwithstanding anything contained herein to the contrary, NHP shall be entitled
to arbitrate the basis of a Termination Notice as provided above, regardless of
the triggering of either Member's buy/sell rights pursuant to ARTICLE XI in
----------
relation thereto.
(c) If a Termination Notice becomes effective pursuant to Section 4.3(b),
--------------
then:
(i) JER or its designee shall be entitled to become the
Managing Member hereunder with all the power and authority previously possessed
by NHP as Managing Member and with the right to receive the Management Fee
payable to Managing Member hereunder; and NHP shall remain a Member in the
Company, but with no power, authority or right to vote, approve or act for or
bind the Company or any Subsidiary Company with respect to any matter in
connection with the Company or any of the Subsidiary Companies or their
respective operations;
(ii) Notwithstanding the provisions of ARTICLE IX, all Company
----------
distributions will thereafter be made in accordance with the Member Percentages;
provided, however, that, in the event NHP is subsequently reinstated as the
-------- -------
Managing Member, all such Company distributions will again be made in accordance
with the provisions of ARTICLE IX and JER shall be obligated to immediately pay
----------
to NHP the amount of any distributions it received as a result of this Section
-------
4.3(c)(ii) that would otherwise have been made to NHP with respect to the period
----------
it was wrongfully removed as the Managing Member;
(iii) any sums distributable or payable to NHP or its Affiliates
shall be offset against any damages which are established to be the direct
result of NHP's or an Affiliate's fraud, dishonesty, bad faith, gross negligence
or willful misconduct or breach of this Agreement or any Ancillary Agreement, or
a bankruptcy or dissolution event with respect to NHP due the Company or JER
from NHP or its Affiliates and shall be paid instead to the Company or JER in
such order as JER shall determine (but shall be deemed to have been distributed
or paid to NHP or its Affiliates and then paid over to the Company or JER, as
the case may be, until such damages have been fully offset);
(iv) NHP shall, upon written request from JER, execute and
acknowledge any required amendments to this Agreement reflecting the foregoing,
in such form and content as JER may reasonably prescribe;
(v) NHP shall not be responsible for any obligation of the
Managing Member first accruing after the Termination Notice becomes effective
(other than obligations that would apply to NHP under this Agreement regardless
of its status as Managing Member, including Capital Contribution obligations);
(vi) NHP shall forthwith: (w) deliver to JER a final accounting
upon JER's request; (x) surrender and deliver to JER all rents and income,
including tenant security deposits, of the Property and other monies of the
Company held by, or under the control of NHP; (y) deliver to JER, as received,
any monies due the Company and supplies, keys, leases, contracts and documents,
all other accounting papers and records of the company or the Subsidiary
Companies, and all books and records, contracts, leases, receipts for deposits,
bills
15
and other materials in NHP's possession that relate to the Property; and (z)
execute and deliver to JER a notice to third parties directly involved with the
Property in form reasonably satisfactory to JER and NHP to the effect that NHP
is no longer Managing Member; and
(vii) NHP shall allow the Company to continue its
development, leasing, operation and other business activities.
Section 4.4 Authority to Sign. JER's signature (or a written
-----------------
consent granting Managing Member sole authority to sign) shall be required for
all contracts, agreements, instruments or other documents to which the Company
will be a party or bound (including documents related to the acquisition, sale,
financing, leasing or transfer of any portion of the Property) entered into by
or on behalf of the Company or any of the Subsidiary Companies; provided
--------
however, that Managing Member, acting alone, shall have the authority to execute
-------
and deliver on behalf of the Company all contracts, agreements, instruments or
other documents to which the Company will be a party or bound to the extent such
agreement would not constitute a Major Decision.
Section 4.5 No Company Employees. The Company shall not
--------------------
have employees.
Section 4.6 Company Expenses. Managing Member shall be
----------------
responsible for the payment of all of its general administrative and overhead
expenses incurred in the management, maintenance and operation of the Company in
accordance with the Budgets. Each Member (or any Affiliate thereof) shall be
responsible for its own internal costs and expenses incurred in the
identification, evaluation and acquisition of the Target Assets. To the extent
set forth in the Budgets and the Business Plans, the Company shall be
responsible for paying, and shall pay, all direct third party costs and expenses
incurred by the Members and related to the management, maintenance and/or
operation of the business of the Company and the Subsidiary Companies, including
without limitation, the third party costs and expenses incurred by Managing
Member in performing its due diligence, market, financial and other evaluation
of the Target Assets and of acquiring, holding, owning, developing, renovating,
operating, developing and implementing Workout Plans and disposing of the
Property, including costs of financing, third party fees and disbursements of
attorneys, financial advisors, accountants, appraisers, environmental
consultants, brokers, engineers, travel, marketing, title, and all other fees,
costs and expenses directly attributable to the management, maintenance and/or
operation of the business of the Company and the Subsidiary Companies in
accordance with the Budgets. If any such costs and expenses are or have been
paid by any Member, officer or employee of the Company, such Member, officer or
employee shall be entitled to be reimbursed for such payment so long as such
payment is reasonably necessary for Company business and either set forth in the
Budgets, expressly authorized in this Agreement or otherwise approved by the
Members.
Section 4.7 Company Funds. No Company funds, assets, credit
-------------
or other resources of any kind or description shall be paid to, or used for, the
benefit of any Member or officer of the Company, except as specifically provided
in this Agreement or in accordance with the Budgets.
16
ARTICLE V
COMPENSATION TO MEMBERS
Section 5.1 Sole Right to Compensation For Services. Except
---------------------------------------
as otherwise provided in this Agreement or as otherwise agreed by the Members,
neither any Member, nor any member, partner, shareholder, officer, director,
employee, agent or representative of a Member shall receive any salary, fees,
compensation, overhead expenses or other remuneration in connection with its
activities as a Member or for its services rendered pursuant to this Agreement.
Neither NHP nor JER shall receive any brokerage commissions, fees or other
compensation in connection with the acquisition of any Target Asset by the
Company.
Section 5.2 Management Fee. The Management Fee shall be paid
--------------
by the Company, as a Company expense, to Managing Member on the last day of each
calendar month of the next succeeding calendar month during which the applicable
Gross Revenue was received. In the event the Company does not then have
sufficient cash available to pay the Management Fee, any unpaid portion shall
accrue interest at the rate of Prime plus two percent (2%). The payment of the
Management Fee shall be considered to be a guaranteed payment as defined in
Section 707(c) of the Code.
ARTICLE VI
ACQUISITIONS AND MANAGEMENT OF PROJECTS AND EXCLUSIVITY
Section 6.1 Role of the Members in Acquisition of Projects.
----------------------------------------------
(a) The Members shall work together to identify, evaluate and
acquire the Target Assets.
(b) The Company will seek third party financing opportunities
with respect to the acquisition of the Target Assets to the extent prudent with
a target weighted average portfolio leverage ratio of not more than fifty
percent (50%) on a loan-to-cost basis.
(c) NHP shall be primarily responsible for sourcing,
structuring, negotiating and executing any Target Asset purchase transactions
and nonrecourse financing for the acquisition of the Target Assets; provided,
--------
however, that JER shall also use its diligent and professional efforts to
-------
sourcing nonrecourse financing for the Target Assets and Projects. Managing
Member shall have primary responsibility for the performance of all due
diligence on the Target Assets (including site inspections) and provide cash
flow projections based on various valuation methodologies/approaches (including
the preparation of an acquisition plan and an initial Capital Budget and
Operating Budget with respect to such Target Assets).
(d) Managing Member shall keep JER informed of all material
developments with respect to any pending approved Target Asset acquisition by
the Company and shall provide JER with copies or all materially modified
transaction and financing documentation with respect to the same. As provided in
Section 4.4, the final form of all such transaction and financing documentation
-----------
must be approved by JER before being entered into by or on behalf of the
Company. JER shall use its diligent and professional efforts to review and
comment on all such developments and documentation in order to facilitate an
expeditious Major Decision by the Members with respect to the same.
17
(e) Notwithstanding the foregoing, at any time prior to closing
an acquisition of a Target Asset, either Member shall have the right to change
its Major Decision (by written notice to the other Member) with respect to the
acquisition of such previously-approved Target Asset, in which event the
terminating Member will no longer be required to use diligent and professional
efforts with respect to such Target Asset. If either Member elects to proceed
with the acquisition of such Target Asset separate from the Company despite the
other Member's rejection, then the proceeding Member shall reimburse the Company
for all costs incurred by it in connection with such acquisition. In the event
neither Member elects to proceed with the acquisition of such Target Asset
separate from the Company, the amounts necessary to fund any due diligence costs
and deposits (i.e., dead deal costs), if any, shall be funded by each Member pro
rata in accordance with its Member Percentage.
Section 6.2 Acquisition of Projects. The terms of any
-----------------------
acquisition of a Target Asset by the Company and the correlative Business Plan,
Capital Budget and Operating Budget with respect thereto must first be approved
by the Members as a Major Decision as follows:
(a) the Managing Member shall prepare and the Members must
approve the Target Asset Offer Notice, which shall be delivered pursuant to
Section 6.3(a), at which time the Members shall also review and approve a
--------------
preliminary Operating Budget with respect to any due diligence, market,
financial and other evaluation, documentation and other anticipated costs to be
incurred by or on behalf of the Company in its evaluation and pursuit of the
possible acquisition of such Target Asset;
(b) if applicable, the Members must review and approve any
subsequent material changes to the terms of the acquisition of such Target Asset
pursuant to Section 6.3(c); and
--------------
(c) thereafter, upon the completion of the foregoing approved
due diligence, evaluation, documentation and other activities approved by the
Members, the Managing Member shall prepare and the Members must approve an
Acquisition Memorandum with respect to the contemplated acquisition of such
Target Assets, substantially in the form attached hereto as Exhibit F, which
shall include without limitation the final proposed Business Plan, Budgets
(including the contemplated Capital Contributions), acquisition documentation
and any additional information reasonably requested by JER to facilitate its
final review and approval of the Company's acquisition of such Target Asset. In
addition, NHP shall deliver to JER a true and complete copy of the investment
information provided to the Board of Directors or the Investment Committee of
the Board of Directors of NHP (as applicable) in its approval of such
acquisition.
Section 6.3 Exclusivity; JER Right of First Refusal.
---------------------------------------
(a) Throughout the Exclusivity Period, NHP shall be obligated
to present all Target Assets considered suitable for acquisition by NHP or its
Affiliates for potential acquisition by the Company. Throughout the Exclusivity
Period, NHP shall not acquire a Target Asset without first providing written
notice to JER of the opportunity for the Company to participate in the same as
described in this Agreement (the "Target Asset Offer Notice"). The Target Asset
Offer Notice shall include all of the documentation and information specified in
Section 6.3(b). JER shall have thirty (30) days following the receipt of such
-------------
Target Asset Offer
18
Notice within which to approve the evaluation and pursuit of the possible
acquisition by the Company of such Target Asset in writing to NHP.
(b) With respect to each proposed Target Asset, NHP shall
present in writing to JER a Target Asset Offer Notice which shall include: (i)
the identity and description of the Target Asset; (ii) a preliminary letter of
intent, including the then proposed or contemplated material terms of the
acquisition and any proposed third-party nonrecourse financing for the
applicable Target Asset (if any); and (iii) any other matter or information that
JER may reasonably request with respect to the proposed Target Asset and/or the
applicable valuation or financing related thereto.
(c) If JER does not so elect to approve the participation by the
Company in the evaluation and pursuit of the possible acquisition of such Target
Asset within such thirty (30) day period, NHP or any of its Affiliates may,
participate in the acquisition of such Target Asset for its own account with its
own capital or third party debt financing; provided, that all material terms of
--------
the acquisition of such Target Asset (excluding financing), when considered as a
whole, (i) are not materially more favorable to NHP than those described to JER
in the Target Asset Offer Notice; and (ii) were disclosed to JER in the Target
Asset Offer Notice. For purposes of verifying NHP's compliance with the
provisions of this Section 6.3 with respect to the acquisition of any Target
-----------
Asset that JER declines to approve, NHP shall deliVer to JER certified complete
copies of the applicable purchase agreement and all other material documentation
pertaining to the acquisition of such Target Asset within thirty (30) days of
its consummation of such acquisition. In the event NHP has breached its
obligations to JER under this Section 6.3, then JER shall be entitled to pursue
-----------
all of its rights and remedies under this Agreement, including without
limitation, its right to seek specific performance of such obligations pursuant
to the provisions of Section 14.3 and Section 14.9.
------------ ------------
(d) Notwithstanding anything to the contrary contained herein,
(i) NHP shall not be entitled to participate in the acquisition of such Target
Asset through a separate joint venture, partnership or similar equity capital
arrangement with a Person other than JER throughout the Exclusivity Period;
provided, however, that in the event the Exclusivity Period is terminated as a
-------- -------
result of NHP's triggering of its buy/sell rights pursuant to ARTICLE XI prior
----------
to the date that is twelve (12) months from the date of this Agreement, then the
restriction contained in this clause (i) of this Section 6.3(d) shall continue
--------------
until the date that is twelve (12) months from the date of this Agreement, and
(ii) NHP shall in no way be restricted or prohibited from raising capital, in
relation to the acquisition of a Target Asset or otherwise, through the issuance
of its own common stock or debt securities through a marketed public or private
offering.
(e) If JER declines to approve the participation of the Company
in the evaluation and pursuit of the possible acquisition of any Target Asset
offered by NHP pursuant to Section 6.3(a) and if, before such Target Asset
--------------
acquisition is then separately consummated by NHP or its Affiliate, the terms of
such acquisition change materially from those previously set forth in the
applicable Target Asset Acquisition Notice (including, without limitation, a
reduction in the purchase price), NHP or its Affiliate shall not consummate the
proposed acquisition on such materially changed terms unless and until such
Target Asset is again offered to JER in accordance with Section 6.3(a), except
--------------
that, in the event of such subsequent notice, JER shall have fifteen (15) days
following the receipt of such notice within which to approve of the
19
participation of the Company in the evaluation and pursuit of the possible
acquisition of such Target Asset in writing to NHP or such notice shall be
automatically deemed rejected by JER. In the event JER elects to approve the
participation of the Company in the evaluation and pursuit of the possible
acquisition of any Target Asset offered by NHP pursuant to Section 6.3(a) and
--------------
if, before such acquisition is consummated by the Company, the terms of such
acquisition change materially from those previously approved by the Members
pursuant to Section 6.2(a), such materially changed terms shall require the
--------------
further approval of the Members, except that, in the event JER does not approve
of such materially changed terms within fifteen (15) days of written notice of
the same from NHP, NHP shall then be entitled to separately consummate the
acquisition of such Target Asset separate from the Company; provided such
--------
acquisition is on terms not materially more favorable to NHP than those
described to JER.
(f) Notwithstanding anything to the contrary contained in this
Section 6.3, during the pendency of JER's Target Asset review periods set forth
-----------
in Section 6.3(a) or Section 6.3(e) or in the event the Members have approved of
-------------- --------------
the material terms of the acquisition of a Target Asset pursuant to Section 6.2,
-----------
but the Members are not yet obligated to make their Capital Contributions
pursuant to the provisions of Section 3.3, NHP shall be in no way prohibited
-----------
from then contracting to acquire or acquiring any then subject Target Asset
separate from the Company, so long as NHP shall then be obligated, upon JER's
(i) timely approval of such Target Asset, (ii) funding of its applicable Capital
Contribution, and (iii) satisfaction of all other applicable terms and
conditions under this Agreement, to transfer such Target Asset to the Company on
the same economic terms and conditions pursuant to which it acquired the same
and to make reasonable representations and warranties relating to the
documentation pertaining to such acquisition.
(g) (i) Notwithstanding anything to the contrary contained in
this Agreement, NHP shall have no obligation to offer JER any participation in
the acquisition or ownership of the NHP Excluded Assets at any time; (ii) except
as provided in Section 6.3(e) above with respect to material modifications and
--------------
Section 6.3(f) with respect to contracts entered into or consummated
--------------
acquisitions during the Exclusivity Period, upon the expiration of the
Exclusivity Period or upon the removal of NHP, NHP shall have no obligation to
offer JER any participation in the acquisition or ownership of any Target
Assets, and (iii) NHP shall have no obligation to offer JER any participation in
the acquisition or ownership of any Target Assets while any material breach by
JER of its obligations under this Agreement remains uncured after notice from
NHP and the expiration of any applicable cure period.
Section 6.4 Management of Projects. Managing Member will be
----------------------
responsible for the daily management and operation of each Project, including
implementation of any development or capital improvement activity approved by
the Company prior to acquisition of such Project and as otherwise set forth in
the Budgets and Business Plans. It is contemplated that the Projects shall
consist of Target Assets acquired by the Company which are, in turn, either
owned or operated by third party health care operators on an absolute net basis
to the Company. In the ordinary course of business, such third party operators
shall be responsible for all aspects of the actual operation of the Projects and
Managing Member's management obligations shall consist of collecting regular
periodic payments of rent or interest and verifying compliance by such third
party operators under the applicable Project operating documentation. In the
event of a material default by any such third party operators, the provisions of
Section 6.5 shall apply.
-----------
20
Section 6.5 Property in Default.
-------------------
(a) Notwithstanding anything to the contrary contained herein,
it shall not constitute a Major Decision for Managing Member to cause the
Company to forbear the collection of any rental or similar payment obligations
with respect to any third party operator of a Project that is less than two (2)
months and less than twenty-five thousand ($25,000) in arrears; provided, that
--------
such forbearance will not result in a default under any of Company's then
outstanding third party financing with respect to such Project. If the Managing
Member obtains actual knowledge of the occurrence of a material default by any
of the third party operators of the Projects beyond the limitations set forth in
the preceding sentence, the Managing Member shall notify the Members of such
occurrence and send notice to such third party operator of such default and
requiring compliance under such Project operating documentation within the
applicable cure period. If such default is not cured within the applicable cure
period, Managing Member shall then send such third party operator (each, a
"Defaulting Operator") a declaration of default under the applicable Project
operating documentation (each, a "Declared Default").
(b) With respect to each Declared Default, Managing Member shall
prepare a recommended course of action for the exercise of remedies by the
Company against the Defaulting Operator under such Project operating
documentation (a "Workout Plan"). The Workout Plan shall contain recommendations
and pro forma budgets regarding (i) the manner that all rights under the Project
operating documentation shall be exercised and whether all or any portion of the
collateral thereunder shall be exercised or realized upon; (ii) the range of
concessions, rental reductions, restructurings and/or any other forgiveness that
the Company should be willing to accept in negotiations with such Defaulting
Operator; (iii) the suspension of any funding obligations by the Company under
such Project operating documentation; (iv) the acceleration of any outstanding
obligations owed to the Company by the Defaulting Operator; (v) entering into
any interim management arrangements; (vi) the extension of credit or additional
funding for capital improvements to such Defaulting operator; (vii) the
increased Management Fee to be paid to the Managing Member with respect to each
Workout Plan approved by the Members; and (viii) any other information that JER
may reasonably request at such time.
(c) The approval of a Workout Plan shall constitute a Major
Decision requiring the approval of the Members pursuant to Section 4.1(b).
--------------
Managing Member shall, as applicable, manage, operate, repair, administer,
complete, construct, restore or otherwise deal with the Projects after a
Declared Default in accordance with the final approved Workout Plan and the
budgets set forth therein.
Section 6.6 Sale of Projects. If neither Member has
----------------
exercised the buy/sell provisions pursuant to ARTICLE XI, on the fifth (5/th/)
----------
anniversary of the date hereof, the Members shall cause the Company to begin to
actively identify and review disposition opportunities for the Projects. The
material terms of any sale, conveyance, lease, hypothecation, assignment,
transfer or other disposition of all or any portion of a Project must first be
approved by the Members as a Major Decision; provided, however, that, except for
-------- -------
a disposition under ARTICLE XIII, no Project disposition shall be permitted
------------
hereunder if in the written opinion of counsel to NHP, which counsel shall be
reasonably approved by JER, such disposition would cause NHP to be subject to
the one hundred percent (100%) tax on net income from "prohibited transactions"
pursuant to Code Section 857(b)(6).
21
Section 6.7 Member Rights. The Company recognizes that the
-------------
Members and their members, partners, shareholders, officers, directors,
employees, agents, representatives and Affiliates (collectively, the "Member
Parties"), have or may in the future have other business interests, activities
and investments, some of which may be in conflict or competition with the
business of the Company and that subject to the restrictions in Section 6.3 in
-----------
connection with NHP, the Member Parties are entitled to carry on such other
business interests, activities and investments. Subject to the restrictions in
Section 6.3 in connection with NHP, the Member Parties may engage in or possess
-----------
an interest in any other business or venture of any kind, independently or with
others, including owning, financing, acquiring, leasing, promoting, developing,
improving, operating, managing and servicing real property on their own behalf
or on behalf of other entities with which they are affiliated or otherwise, and
each of the Member Parties may engage in any such activities, whether or not
competitive with the Company, without any obligation to offer any interest in
such activities to the Company. Except as hereinafter provided, neither the
Company nor the other Member shall have any right, by virtue of this Agreement,
in or to such activities, or the income or profits derived there from, and the
pursuit of such activities, even if competitive with the business of the
Company, shall not be deemed wrongful or improper. Notwithstanding the foregoing
provisions of this Section 6.7, no Member, without the other's prior written
-----------
consent, shall actively solicit or negotiate with any existing resident of any
Company Property that is not then leased to an independent third party operator
for relocation from such Company Property to any other property owned, directly
or indirectly, by such Member or any of its Affiliates that is of the same
primary designated healthcare use (e.g., skilled nursing facility, assisted
----
living facility, etc.).
Section 6.8 Affiliate Transactions. Notwithstanding anything
----------------------
to the contrary contained herein (but without limitation on the Major Decision
approval rights of the Members), if there is a contract between the Company and
a Member or an Affiliate of a Member, then the other Member shall have the right
unilaterally (but not the obligation) to make any decision by the Company to
terminate or to exercise any right (including any right to approve or any right
to receive documents) or remedy under such contract on behalf of Company. If any
such contract with an Affiliate is terminated, any substitute contract shall be
with a third party reasonably satisfactory to the Members.
ARTICLE VII
REPORTS
Section 7.1 Books and Records. Managing Member shall cause
-----------------
to be kept proper and complete records and books of account in which shall be
entered fully and accurately all transactions and other matters relating to the
business of the Company as are usually entered into such records and books of
account kept for businesses of a like character. Such records and books shall be
kept on an accrual basis, except as the Members may otherwise determine. At all
times, such books and records shall be available at the Company's principal
place of business for inspection, examination, photocopying or audit by any
Member, or the duly authorized representative thereof, during reasonable
business hours and upon reasonable advance notice for any purpose reasonably
related to such Member's interest as a Member.
Section 7.2 Accounting and Fiscal Year. The Company shall
--------------------------
retain Ernst & Young LLP as the regular accountant and auditor for the Company
(the "Company
22
Accountant"). Any termination or replacement of the Company Accountant shall
constitute a Major Decision. The fees and expenses of the Company Accountant
shall be a Company expense. The Company shall report its operations for tax
purposes on the accrual method. The taxable year of the Company shall end on
December 31 of each year, unless a different taxable year shall be required by
the Code. Managing Member shall cause the Company Accountant to prepare and
submit to the Members for their review and approval the Company's federal, state
and local tax returns no later than ninety (90) days after the most recent
fiscal year.
Section 7.3 Financial Reports. Managing Member shall prepare
-----------------
or cause to be prepared at Company expense for the Members reports in form and
substance reasonably acceptable to JER as follows:
(a) an annual report of all income and all expenses of the
Company and the Subsidiary Companies within ninety (90) days of the end of the
calendar year, audited by an independent nationally recognized accounting firm
reasonably satisfactory to the Members;
(b) to the extent required for tax purposes, copies of the
Company's and the Subsidiary Companies' annual federal and state income tax
returns together with a copy of that certain IRS form commonly referred to as a
"Schedule K-1," plus a copy of its Virginia and Delaware equivalents, within
ninety (90) days following the end of each calendar year;
(c) a monthly report for each calendar month, certified by
Managing Member to be true, accurate and complete in all material respects, and
submitted to JER within thirty (30) days of the end of each such calendar month
(the "Periodic Report"). Each Periodic Report shall include the following: (i)
an operating statement and report of financial condition of the Company for such
period; (ii) if applicable, a Contribution Request containing Managing Member's
estimate of the amount needed to be contributed by the Members pursuant to
ARTICLE III for the succeeding month; (iii) all reports required under the
-----------
constituent documents for the Subsidiary Companies; (iv) copies of all reports
and information required to be provided to the Company by the third party
operators of the Projects; (v) general ledger income statements for each of the
Subsidiary Companies; and (vi) if applicable, a calculation by Managing Member
of the amount of all distributable cash for the preceding calendar month and a
calculation by Managing Member of the respective distributions if any, to
Members pursuant to ARTICLE IV; and
----------
(d) such other reports as may be required by the Company's or
any of the Subsidiary Companies' lenders or reasonably requested by JER.
Section 7.4 Business Plans and Budgets. A Business Plan and
--------------------------
Operating Budget for the Company shall be approved by the Members as a Major
Decision prior to the Company's acquisition of its first Project and an
Operating Budget, Capital Budget and Business Plan for each Project shall be
approved by the Members as a Major Decision prior to the Company's acquisition
thereof as set forth in Section 6.2(c). No less than thirty (30) days prior to
--------------
the expiration of each Company fiscal year thereafter or from time to time as
determined appropriate by the Managing Member, the Operating Budgets shall be
updated in proposed form by Managing Member with respect to the next fiscal year
and be made available for review and approval by the Members. Each proposed form
of Operating Budget shall set forth on a monthly
23
basis all anticipated income, operating expenses, proposed and/or actual debt
service terms and payments and capital and other costs and expenses of the
Property and/or for the Company (as applicable). In the event the Members have
not approved an updated Operating Budget with respect to the then current fiscal
year of the Company, the immediately prior version of the applicable Operating
Budget shall remain in full force and effect.
ARTICLE VIII
INDEMNIFICATION
Section 8.1 Indemnification by the Members. Each Member
------------------------------
hereby agrees to indemnify, defend and hold harmless the other Member and the
Company (and their respective direct and indirect agents, employees,
representatives, officers, directors, shareholders, members and partners) from
and against all claims, losses, damages, cost, expense, demands, liabilities,
obligations, liens, encumbrances, rights of action or attorneys' fees ("Claims")
which may arise as a result of any of the following on the part of such
indemnifying Member, its agents, employees or other representatives: a default
under or breach of this Agreement or any act or omission that constitutes fraud,
bad faith, gross negligence or willful misconduct on the part of the
indemnifying Member. Such indemnity shall survive the termination or expiration
of the Term, the sale of all of the Property and the transfer or sale of the
Membership Rights of the indemnifying Member.
Section 8.2 Indemnification by the Company. No Member or its
------------------------------
direct or indirect agents, employees, representatives, officers, directors,
shareholders or members, nor any officer or employee of the Company, shall be
liable to the Company or to any Member for any act performed, or omitted to be
performed, by it in the conduct of its duties as a Member or Company officer or
employee, if such act or omission is performed or omitted in good faith and was
reasonably believed to be in the best interests of the Company and was within
the scope of authority granted to such Member or Company officer and is
performed or omitted without fraud, bad faith, gross negligence or willful
misconduct on the part of such Member or Company officer or employee, except for
breaches by such Member of its obligations under this Agreement. The Company
shall defend, indemnify and save harmless each Member, and their direct or
indirect agents, employees, representatives, officers, directors, shareholders,
members or partners, and each Company officer, employee from any Claim sustained
by such Member, employee or officer by reason of any act performed, or omitted
to be performed, in good faith and was reasonably believed to be in the best
interests of the Company and was within the scope of authority granted to such
Member, employee or officer and without fraud, bad faith, gross negligence or
willful misconduct in the conduct of their duties, except for breaches by such
Member of its obligations under this Agreement. Such indemnity shall not be
construed to limit or diminish the coverage of any Member or Company officer
under any insurance obtained by the Company and any such insurance policies
obtained by the Company shall contain endorsements waiving any right of
subrogation which the insurer may otherwise have against any Member or other
indemnified Persons. Payment shall not be a condition precedent to any
indemnification provided in this Agreement. The indemnification and agreement to
hold harmless from the Company contained in this Section 8.2 shall be
-----------
recoverable only out of assets of the Company and not from any Member.
24
Section 8.3 General Indemnity Provisions. Each indemnity
----------------------------
provided for under this Agreement shall be subject to the following provisions:
(a) The indemnity shall cover the costs and expenses of the
indemnitee, including reasonable attorneys' fees and court costs, related to any
actions, suits or judgments incident to any of the matters covered by such
indemnity.
(b) The indemnitee shall notify the indemnitor of any Claim
against the indemnitee covered by the indemnity within forty-five (45) days
after the indemnitee has notice of such Claim, but failure to notify the
indemnitor shall in no case prejudice the rights of the indemnitee under this
Agreement unless the indemnitor shall be prejudiced by such failure and then
only to the extent the indemnitor shall be prejudiced by such failure. Should
the indemnitor fail to discharge or undertake to defend the indemnitee against
such liability with counsel reasonably acceptable to the indemnified party upon
learning of the same, then the indemnitee may reasonably settle such liability,
and the liability of the indemnitor hereunder shall be conclusively established
by such reasonable settlement, which amount of such liability shall include both
the settlement consideration and the reasonable costs and expenses, including
attorneys' fees, incurred by the indemnitee in effecting such settlement.
ARTICLE IX
DISTRIBUTIONS
Section 9.1 Payments and Distributions of Available Cash.
--------------------------------------------
(a) Managing Member shall cause the Company to make payments of
or distribute all available cash in excess of Reserve Accounts (as are approved
by the Members) and only after the payment or reasonable provision for all
Company expenses in accordance with the Budgets (including, without limitation,
the Management Fee) to the Members, on the last day of each calendar month next
succeeding the calendar month during which such cash was received (except in the
case of a sale or refinancing of any Property, whereupon distributions shall be
made at the time of such sale or refinancing or as soon as reasonably
practicable thereafter), in the following order of priority:
(i) First, to the Members in an aggregate amount equal to
-----
the aggregate interest (for the current period and all previous periods) and
principal outstanding under its Priority Loans (amounts distributable under this
Section 9.1(a)(i) shall be distributed to the Members pro rata based on the then
-----------------
outstanding amounts of accrued interest and then principal; all distributions
which would otherwise be made to the Non-Contributing Member under this Section
9.1(a) shall until the outstanding balance of principal and interest under any
such Priority Loan(s) is satisfied in full, be made instead, to the Contributing
Member with respect to such Priority Loan. Any such payment from distributions
shall be deemed to have been received by the Non-Contributing Member and turned
over in payment of such Priority Loan);
(ii) Second, to the Members in proportion to their
------
then-current Member Percentages at the time of such distribution, until such
time as the Members shall have received aggregate distributions pursuant to this
Section 9.1(a)(ii) equal to an amount which
------------------
25
provides each Member with a twenty percent (20%) Internal Rate of Return on
their aggregate Capital Contributions;
(iii) Third, (x) ninety percent (90%) to the Members in
-----
proportion to their then-current Member Percentages at the time of such
distribution, and (y) ten percent (10%) to NHP, until such time as JER shall
have received aggregate distributions pursuant to Section 9.1(a)(ii) and this
------------------
Section 9.1(a)(iii) equal to an amount which provides each Member with a thirty
-------------------
percent (30%) Internal Rate of Return on their aggregate Capital Contributions;
and
(iv) Thereafter, (x) eighty percent (80%) to the Members in
----------
proportion to their then-current Member Percentages at the time of such
distribution, and (y) twenty percent (20%) to NHP.
(b) It is not intended that JER will be in a worse position by reason
of the fact that the Projects may be sold separately. Accordingly,
notwithstanding the provisions of this Section 9.1, if at the time (the
-----------
"Applicable Time") a Project is sold, (i) the aggregate amount of distributions
then or previously received by JER under this Section 9.1, with each such
-----------
distribution increased, for purposes of this clause (i) by twenty percent (20%)
per annum, compounded monthly (the "Rate of Return"), from the date received to
the Applicable Time, is less than (ii) what JER would have received pursuant to
the provisions of this Section 9.1 had all distributions then or theretofore
-----------
received been made simultaneously in a single distribution at the Applicable
Time, with each prior distribution increased, for purposes of calculating the
amount of such single distribution under this clause (ii) by the Rate of Return
from the date each such prior distribution was made to the Applicable Time, then
NHP shall immediately pay to JER the amount of such deficiency, regardless of
whether NHP's share of the distributions from such sale are sufficient to pay
the same; provided, however, that in no event shall any amounts payable to JER
-------- -------
from NHP pursuant to this Section 9.1(b) exceed the actual distributions that
--------------
NHP received pursuant to the provisions of Section 9.1(a)(iii)(y) and Section
---------------------- -------
9.1(a)(iv)(y), with each such prior distribution increased for this purpose by
-------------
the Rate of Return from the date each such prior distribution was made to the
Applicable Time. To the extent necessary, the Managing Member will make
appropriate adjustments to the Members' Capital Accounts and allocations (as set
forth in Exhibit B hereto) if any such payments are made pursuant to this
---------
Section 9.1(b).
--------------
Section 9.2 Withdrawal of Capital. Except as expressly provided in
---------------------
this Agreement or as otherwise approved by the Members, no Member shall be
entitled to withdraw capital or to receive distributions of or against capital
without the prior approval of, and upon the terms and conditions agreed upon, by
all Members.
ARTICLE X
TRANSFER AND CERTAIN OTHER RESTRICTIONS
Section 10.1 No Transfers of Membership Rights or Member Economic
----------------------------------------------------
Interests.
---------
(a) Neither Member shall have the right or power to Transfer its
Membership Rights or Member Economic Interest, or any portion thereof or any
interest therein, nor shall it have the right to substitute another person or
party in its place or stead as a Member hereof, in
26
each case without the prior written approval of all of the other Members. Any
purported Transfer in violation of the terms hereof shall be null and void.
Notwithstanding the foregoing, JER shall have the right to Transfer its
respective Membership Rights to its Affiliate without the consent of NHP;
provided, that (i) the transferee shall have assumed any and all of the
--------
obligations under this Agreement with respect to the Membership Rights to which
the Transfer relates; (ii) all reasonable expenses incurred in connection with
the Transfer shall have been paid by or for the account of such transferee
(including, without limitation, all Company and NHP costs and expenses incurred
in its review and documentation of such Transfer); and (iii) all agreements,
articles, minutes, written consents and all other necessary documents and
instruments shall have been executed and filed and all other acts shall have
been performed which NHP reasonably deems necessary to make the transferee a
"Substitute Member" of the Company and to preserve the status of the Company as
a limited liability company.
(b) Any permitted transferee may become a Substitute Member of the
Company. All references to NHP contained herein shall be deemed to refer to NHP
and all permitted transferees. All references to JER contained herein shall be
deemed to refer to JER and all permitted transferees. Any such Substitute Member
shall expressly assume and be bound by all of the terms and conditions of this
Agreement from and after the effective date of the admission of such Substitute
Member. A transferee of a Member's Member Economic Interest shall be entitled to
be an Assignee of Record. "Assignee of Record" as used herein means a person who
has acquired a beneficial interest in all or a portion of the Member Economic
Interest of a Member as evidenced by a written instrument of assignment, the
effective date of which has passed, and whose Member Economic Interest has been
reflected on the books of the Company, but who has not been admitted to the
Company as a Substituted Member.
Section 10.2 Change in Control of a Member. Without limiting the
-----------------------------
generality of the provisions of Section 11.1(a), upon the occurrence of a Change
---------------
of Control Event with respect to either Member, the sole remedy of the other
Member shall be to trigger its buy/sell rights pursuant to ARTICLE XI. A "Change
----------
of Control Event" shall mean a transaction or a series of related transactions
(voluntary or involuntary, by operation of law or otherwise) resulting in (i) a
merger of (or other business combination with respect to) such Member, where the
Person(s) owning such Member prior to such event constitute less than fifty
percent (50%) of the Person(s) owning such Member after such event or where the
Person(s) owning such Member prior to such event do not retain possession,
directly or indirectly, of the right to direct or cause the direction of the
management and policies of such Member, whether through the ownership of voting
securities, by contract or otherwise, (ii) a change in the beneficial ownership
of more than fifty percent (50%) of the outstanding voting securities of such
Member, or (iii) a sale of all or substantially all of the assets of such
Member; provided, however, that a Transfer permitted pursuant to Section 10.1
-------- ------- ------------
shall not constitute a Change of Control Event for purposes of the foregoing.
27
ARTICLE XI
BUY/SELL RIGHTS
Section 11.1 Exercise.
--------
(a) Each Member shall have the right to purchase or sell its
respective Membership Rights in the Company to the other Member in the manner
set forth in this Section 11.1 at any time without restriction.
------------
(b) Either Member (the "Offeror") may serve upon the other Member (the
"Offeree") a notice in writing (the "Offering Notice") which shall contain the
following terms:
(i) a statement of intent to rely on this Section 11.1; and
------------
(ii) a valuation stating the aggregate dollar amount (the
"Property Valuation Amount") which the Offeror, as a third party, would be
willing to pay for all of the Property as of the date of the Offering Notice
(the "Offering Notice Date") free and clear of all liabilities on such Property
and the amount (the "Buy/Sell Distribution Amount") that each Member would have
been entitled to receive if the Company had sold all of the Property to a third
party for the Property Valuation Amount and paid all Company liabilities (and
liabilities secured by the Property) and distributed the net proceeds of such
sale to the Members in accordance with this Agreement on the Offering Notice
Date.
(c) The Offeree shall then have the obligation either:
(i) to sell all, but not less than all, of its Membership
Rights in the Company to the Offeror for an amount equal to its respective
Buy/Sell Distribution Amount; or
(ii) to purchase all, but not less than all, of the Membership
Rights in the Company of the Offeror for an amount equal to the Offeror's
respective Buy/Sell Distribution Amount.
If the Offeree disagrees with any Buy/Sell Distribution Amount set forth in an
Offering Notice, then the Offeree shall have the right to challenge the
determination thereof by delivering a written notice to the Offeror within ten
(10) days of the Offering Notice Date. Failure to give such notice of challenge
within such period shall be deemed approval of such determination by the
Offeree. If the Offeree timely delivers such notice of challenge, and if within
ten (10) days of the Offeror's receipt of such notice, the Members have not
agreed in writing on the determination of the Buy/Sell Distribution Amount in
dispute, then the Members shall jointly select a certified public accounting
firm (the "Selected Accountant") to determine the proper Buy/Sell Distribution
Amount in dispute. If the Members are unable to agree upon the Selected
Accountant, the Offeror shall deliver to the Offeree a list of three (3) of the
"big five" (or then commonly referred to equivalent thereof) accounting firms.
The Offeree shall within three (3) business days of its receipt of such list
choose one (1) of the firms on the list to be the Selected Accountant. If the
Offeree does not make a timely selection, the Offeror shall choose the Selected
Accountant from the list and such determination shall be binding upon the
Offeree. Each of the Members shall cooperate fully with the Selected Accountant
to assist in such determination, including, without limitation, providing copies
of all books and records of the
28
Company and such other information requested by the Selected Accountant. The
Selected Accountant shall make its determination of the Buy/Sell Distribution
Amount in dispute within sixty (60) days from the Offering Notice Date and the
results thereof shall be binding on the Members for the sole purpose of
determining the Buy/Sell Distribution Amount in dispute. Each of the Members
shall bear equally the costs and fees of the Selected Accountant in making its
determinations. Each of the Members hereby agree that the Selected Accountant
shall have no liability to any of the Members for its determination of the
Buy/Sell Distribution Amount in dispute, unless in making such determination the
Selected Accountant has committed gross negligence or willful misconduct. In
connection therewith, each Member hereby indemnifies and holds harmless the
Selected Accountant from any liabilities, damages, costs or expenses (including,
without limitation, actual attorneys' fees) arising from any claim asserted by
such Member against the Selected Accountant in connection with making the
determination required by this Section 11.1(c), provided that the Selected
------------ --------
Accountant has not committed gross negligence or willful misconduct.
(d) Within forty-five (45) days after the date on which the Buy/Sell
Distribution Amounts for each of the Members are determined in accordance with
Section 11.1(c) (the "Buy/Sell Option Period"), the Offeree shall notify the
------------
Offeror as to whether the Offeree will elect to purchase the Membership Rights
of the Offeror (a "Purchase Notice") or will elect to sell its Membership Rights
in the Company to the Offeror (a "Sale Notice"). If the Offeree does not notify
the Offeror of its election prior to expiration of the Buy/Sell Option Period,
the Offeree shall for all purposes be conclusively deemed to have elected to
sell its Membership Rights in the Company to the Offeror as provided in this
Section 11.1. To be effective, a Purchase Notice shall be accompanied by a
------------
deposit (in the form of a certified or cashier's check payable to the Offeror)
by the Offeree (the "Offeree Deposit") in an amount equal to ten percent (10%)
of the applicable Buy/Sell Distribution Amount. If the Offeree either delivers a
Sale Notice to the Offeror, as set forth above, or is deemed to have elected to
sell its Membership Rights in the Company to the Offeror, the Offeror shall have
ten (10) business days after the date of its receipt of the Sale Notice or the
date of such deemed election, as applicable, to deliver a deposit (in the form
of a certified or cashier's check payable to the Offeree) by the Offeror (the
"Offeror Deposit"; the Offeree Deposit or the Offeror Deposit, as applicable,
the "Deposit") in an amount equal to ten percent (10%) of the Offeree's Buy/Sell
Distribution Amount.
(e) The Member obligated to purchase under this Section 11.1 (the
------------
"Purchasing Member") shall fix a date (the "Buy/Sell Closing Date") upon which
the closing of such purchase (the "Buy/Sell Closing") shall occur not later than
ninety (90) days following the stated expiration of the Buy/Sell Option Period.
The Member which is obligated to sell its Membership Rights pursuant to this
Section 11.1 shall be referred to herein as the "Selling Member." The Buy/Sell
------------
Closing shall take place at a location in the United States as designated by the
Purchasing Member. The Deposit shall be credited toward the purchase price of
the Membership Rights in the Company being sold at the Buy/Sell Closing. The
costs of the Buy/Sell Closing shall be borne equally between the Members.
(f) At the Buy/Sell Closing, the Selling Member shall execute and
deliver to the Purchasing Member assignments of interest, deeds, bills of sale,
instruments of conveyance, and other instruments as the Purchasing Member may
reasonably require (collectively, the "Transfer Documents"), to give it title to
all of the selling Member's Membership Rights in the Company,
29
and of the Company's right, title and interest in and to the Property, and the
Selling Member hereby irrevocably constitutes and appoints the Purchasing Member
its attorney-in-fact to execute, acknowledge and deliver such instruments as may
be necessary or appropriate to carry out and enforce the provisions of this
Section 11.1(f). The Transfer Documents shall contain no representations or
---------------
warranties other than customary representations and warranties as to authority
and representations and warranties regarding the Selling Member's Membership
Rights being transferred. The Purchasing Member shall deliver to the Selling
Member cash for the full amount of the consideration for such Membership Rights,
and shall deliver any other documents necessary from the Purchasing Member to
conclude the Buy/Sell Closing. The Selling Member shall transfer its Membership
Rights free of all liens or encumbrances. Any loans made to the Company by the
Selling Member and/or its Affiliates shall be repaid in full by the Company at
the Buy/Sell Closing. Further, upon the Buy/Sell Closing, the Selling Member and
its Affiliates shall be released from its liability under any loans to the
Company (including, without limitation, any Priority Loans) and any guarantees
made in connection therewith. If a Company creditor refuses to so release the
Selling Member and its Affiliates, the Purchasing Member shall indemnify the
Selling Member and its Affiliates from liability under such loans and
guarantees.
(g) Unless otherwise agreed by the Members prior to Buy/Sell Closing,
payment of the amount due at the Buy/Sell Closing to the Selling Member shall be
by wire transfer of federal funds (United States dollars) to accounts at a bank
or other financial institution designated by the Selling Member. Distributions
with respect to all Company income and expenses shall be prorated as of midnight
on the day preceding the Buy/Sell Closing. For purposes of calculating such
prorations, Purchasing Member shall be deemed to be in title to the Company and
the Property as of the date of the Buy/Sell Closing. Within sixty (60) days
following the Buy/Sell Closing, the Company Accountant shall deliver to the
Selling Member a final audit setting forth the final determination of all such
Company income and expenses to be prorated as of the Buy/Sell Closing along with
any remaining distributions with respect thereto. Any disputes between the
Members over such final report and distributions shall be resolved pursuant to
the arbitration provisions set forth in Section 14.3.
------------
Section 11.2 Breach; Enforcement.
-------------------
(a) Subject to the provisions of this Section 11.2 and Section 14.3,
------------ ------------
the remedies available for the breach of a Member's obligations under Section
-------
11.1 shall be all those available under law and equity, including specific
----
performance since the Members understand and acknowledge that damages alone
would be inadequate. If the Purchasing Member defaults in its obligation to
purchase under Section 11.1, the same shall be deemed an Event of Default
------------
hereunder by the Purchasing Member and (i) all actions requiring the consent of
both Members under this Agreement from and after the date of such default shall
require only the consent of the Selling Member, and (ii) the Selling Member
shall be entitled to retain the Deposit as liquidated damages and shall not be
entitled to other damages for such breach, but the foregoing shall not limit any
rights of the Members under Section 14.16.
-------------
(b) The Members acknowledge and agree that each Member's Interest is
extraordinary and unique, and the provisions of this ARTICLE XI relating to a
----------
purchase and sale of its Membership Rights shall be specifically enforceable as
if such Member's Membership Rights were an interest in real property.
30
(c) The Members hereby agree that the provisions contained in this
ARTICLE XI shall remain in full force and effect until the Company has been
----------
completely wound up and all of the Property has been liquidated and otherwise
distributed among the Members pursuant to the provisions of Section 13.2.
------------
ARTICLE XII
DEFAULT; REMEDIES
Section 12.1 Events of Default. The occurrence of any of the following
-----------------
events by or with respect to a Member (the "Defaulting Member"; and the other
Member shall be referred to herein as the "Non-Defaulting Member"), shall be
defaults under this Agreement and if not cured within the applicable notice and
cure period provided below, if any, with respect to such default shall
constitute an "Event of Default" hereunder:
(a) The (i) failure of a Member to make a required Capital
Contribution pursuant to Section 3.2 within the time period set forth in Section
----------- -------
3.4(b), (ii) occurrence of any Transfer prohibited under ARTICLE X or (iii)
------ ---------
failure to timely comply with the purchase and/or sale obligations pursuant to
ARTICLE XI.
----------
(b) Other than as set forth in Section 12.1(a), the failure of a
---------------
Member (or any Affiliate thereof) to make any contribution, advance or other
payment as required pursuant to this Agreement or any Ancillary Agreement that
is not cured within five (5) business days (or any other applicable cure period
specified herein or therein) of written notice to the Defaulting Member.
(c) Other than as set forth in Section 12.1(a) and (b), the failure of
--------------- ---
a Member (or any Affiliate thereof) to perform any of its other obligations
under this Agreement or any Ancillary Agreement or the breach by a Member of any
of the terms, conditions, representations, warranties or covenants of this
Agreement or any Ancillary Agreement and a continuation of such failure or
breach for more than thirty (30) days after notice by a Non-Defaulting Member to
the Defaulting Member that such Member has failed to perform any of its
obligations under, or has breached, this Agreement or any Ancillary Agreement;
provided, that if such failure or breach is of the nature that it can be cured
--------
but cannot reasonably be cured within such thirty (30) day period, such period
shall be extended for up to an additional one hundred eighty (180) days so long
as the Defaulting Member in good faith commences all reasonable curative efforts
within thirty (30) days of its receipt of such notice from the Non-Defaulting
Member and diligently and expeditiously continues its curative efforts to
completion; provided, further, that such thirty (30) day cure period shall not
-------- -------
be applicable to the breach of any representations or warranties by a Member
under this Agreement or any Ancillary Agreement that are actually known to be
false by such Member at the time they are made.
(d) As to any Member or any Affiliate thereof (a
"Bankruptcy/Dissolution Event"): a case or proceeding shall be commenced by any
Member seeking relief under the federal Bankruptcy Code or any other federal or
state law relating to insolvency, bankruptcy or reorganization; an adjudication
that any Member is insolvent or bankrupt; the entry of an order for relief under
the federal Bankruptcy Code with respect to any Member; the filing of any such
petition or the commencement of any such case or proceeding against any Member,
unless such
31
petition and the case or proceeding initiated thereby are dismissed within
ninety (90) days from the date of such filing; the filing of an answer by any
Member admitting or failing to contest the allegations of any such petition; the
appointment of (or seeking, consenting to or acquiescing in the appointment of)
a trustee, receiver or custodian for all or substantially all of the assets of
any Member unless such appointment is vacated or dismissed within ninety (90)
days from the date of such appointment but not less than five (5) days before
the proposed sale of any assets of any Member (or if such appointment is stayed
within such ninety (90) day period, such appointment is not vacated within
ninety (90) days of the expiration of such stay); the insolvency of any Member
or the execution by any Member of a general assignment for the benefit of
creditors; the convening by any Member of a meeting of its creditors, or any
class thereof, for purposes of effecting a moratorium upon or extension or
composition of its debts; or the failure generally of any Member to pay its
debts as they become due; any Member's failure to prevent the levy and
attachment (other than mechanic's liens that are removed in the ordinary cause
of business) or execution or other seizure of the Property or any portion
thereof where the same is not discharged within thirty (30) days thereafter; the
levy, attachment, execution or other seizure of all or substantially all of the
assets or the Member Economic Interest of any Member where such seizure is not
discharged within thirty (30) days thereafter; the admission by any Member in
writing of its inability to pay its debts as they mature or that it is generally
not paying its debts as they become due; provided, with respect to an Affiliate
--------
of a Member, in each case, such event could reasonably affect such Member's
ability to perform its obligations under this Agreement.
Section 12.2 Remedies. Upon the occurrence of any Event of Default,
--------
the Non-Defaulting Member(s) may elect to do one or more of the following:
(a) if as a result of the failure of the Defaulting Member to make a
required Capital Contribution, to elect one of its remedies pursuant to Section
-------
3.4;
---
(b) enforce any covenant by the Defaulting Member to advance money or
to take or forbear from any other action hereunder; or
(c) except as otherwise expressly provided herein, pursue any other
remedy permitted by this Agreement or at law or in equity, including without
limitation, to trigger its buy/sell rights pursuant to ARTICLE XI.
----------
Section 12.3 Cumulative Remedies. Except as otherwise expressly
-------------------
provided herein, no remedy conferred upon the Company or any Member in this
Agreement is intended to be exclusive of any other remedy herein or by law
provided or permitted, but rather each shall be cumulative and shall be in
addition to every other remedy given hereunder or now or hereafter existing at
law, in equity or by statute.
Section 12.4 Litigation Without Termination. Any action or proceeding
------------------------------
brought by any Member or the Company against any Member or the Company
(including any action for damages, specific performance or declaratory relief)
for or by reason of a breach by such party of this Agreement or any other
agreement entered into in connection with the same, shall not, in and of itself,
result in a termination of the Company (other than an action to terminate the
Company that is successful).
32
Section 12.5 No Waiver. No waiver by a Member or the Company of any
---------
breach of or default under this Agreement shall be deemed to be a waiver of any
other breach or default of any kind or nature, and no acceptance of payment or
performance by a Member or the Company after any such breach or default shall be
deemed to be a waiver of any breach or default of this Agreement, whether or not
such Member or the Company knows of such breach or default at the time it
accepts such payment or performance. No failure or delay on the part of a Member
or the Company to exercise any right it may have shall prevent the exercise
thereof by such Member or the Company at any time such other may continue to be
so in default, and no such failure or delay shall operate as a waiver of any
default.
ARTICLE XIII
DISSOLUTION OF THE COMPANY
Section 13.1 Events Giving Rise to Dissolution. No act, thing,
---------------------------------
occurrence, event or circumstance shall cause or result in the dissolution of
the Company, except that the happening of any one of the following events shall
cause a dissolution of the Company:
(a) the sale or other disposition of all or substantially all of the
Property of the Company and the receipt of the proceeds therefore;
(b) the unanimous agreement in writing by the Members to dissolve the
Company;
(c) the occurrence of a Bankruptcy/Dissolution event with respect to
any Member if the other Member so elects;
(d) the expiration of the Term pursuant to Section 1.3; or
-----------
(e) any other event which is deemed to cause dissolution of the
Company under the Act.
Except as otherwise provided in this Agreement, each Member agrees
that, without the prior written consent of the Members, (i) a Member shall not
have the right to resign or withdraw from the Company, and (ii) a withdrawing
Member shall not be entitled to receive any Company distributions and shall not
otherwise be entitled to receive the fair value of its Membership Rights in the
Company.
Section 13.2 Winding Up. Upon the dissolution of the Company as herein
----------
provided, the Company shall engage in no further business thereafter other than
that necessary to wind up the business and distribute the assets. In the event
of a dissolution of the Company, Managing Member shall be the "Liquidating
Member" hereunder and shall wind up the affairs of the Company and liquidate its
assets; provided, however, that if Section 13.1(c) applies with respect to the
-------- ------- ---------------
Managing Member, then JER shall be the Liquidating Member hereunder. Cash (other
than proceeds from the liquidation of the assets of the Company) shall continue
to be applied and distributed during the winding-up period in the same manner as
provided for in ARTICLE IX (subject, however, to the provisions of Section 3.2
---------- -----------
and Section 3.4). The Liquidating Member shall have the right and unlimited
------------
discretion to determine, in good faith, the time, manner and terms of any sale
or sales of the assets of the Company pursuant to such
33
liquidation, subject to the Major Decision approval rights of the Members
hereunder; provided, however, that such decisions shall not constitute Major
-------- -------
Decisions requiring the approval of the Members in the event such dissolution
arises pursuant to Section 13.1(c). The proceeds from the liquidation of the
---------------
assets of the Company shall be applied as follows:
(a) First, to the payment of third party financing and liabilities of
-----
the Company (including any outstanding amounts due on any indebtedness
encumbering the Property, or any part thereof) and the Company's expenses of
liquidation;
(b) Second, to any reserves which the Liquidating Member shall
------
reasonably determine to be necessary for contingent, unliquidated or unforeseen
liabilities of the Company; and
(c) Third, not later than the latest time specified for such
-----
distributions pursuant to Treasury Regulation Section 1.704-1(b)(2)(ii)(b)(2) to
the Members in accordance with their respective positive Capital Account
balances (after adjustment to reflect the allocations pursuant to Exhibit B).
----------
With the approval of the Members, a pro rata portion of the distributions that
would otherwise be made to the Members under the preceding sentence may be
distributed to a trust established for the benefit of the Members for the
purposes of liquidating Company assets, collecting amounts owed to the Company,
and paying any contingent or unforeseen liabilities or obligations of the
Company arising out of or in connection with the Company. The assets of any
trust established under this Section 13.2(c) shall be distributed to the Members
---------------
from time to time by the trustee of the trust upon approval of the Members in
the same proportions as the amount distributed to the trust by the Company would
otherwise have been distributed to the Members under this Agreement.
ARTICLE XIV
MISCELLANEOUS
Section 14.1 Notices. Any notice with a Member is required or may
-------
desire to give the other Member shall be in writing and may be delivered (a)
personally, (b) by United States registered or certified mail, postage prepaid,
(c) by Federal Express or other reputable courier service regularly providing
evidence of delivery (with charges paid by the party sending the notice), or (d)
by telecopy; provided, that such telecopy shall be immediately followed by
--------
delivery of such notice pursuant to clause (a), (b) or (c) above. Any such
notice to a Member shall be addressed at the address set forth below (subject to
the right of a Member to designate a different address for itself by notice
similarly given):
If to NHP: Nationwide Health Properties, Inc.
▇▇▇ ▇▇▇▇▇▇▇ ▇▇▇▇▇▇ ▇▇▇▇▇, ▇▇▇▇▇ ▇▇▇▇
▇▇▇▇▇▇▇ ▇▇▇▇▇, ▇▇▇▇▇▇▇▇▇▇ ▇▇▇▇▇
Attn: Chief Executive Officer
with a copy to General Counsel
Telecopy No.: (▇▇▇) ▇▇▇-▇▇▇▇
34
With copies to: O'Melveny & ▇▇▇▇▇ LLP
▇▇▇ ▇▇▇▇▇▇▇ ▇▇▇▇▇▇ ▇▇▇▇▇, ▇▇/▇▇/ ▇▇▇▇▇
▇▇▇▇▇▇▇ ▇▇▇▇▇, ▇▇▇▇▇▇▇▇▇▇ ▇▇▇▇▇-▇▇▇▇
Attn: ▇▇▇▇▇▇ ▇. ▇▇▇▇▇▇▇, Esq.
Telecopy No.: (▇▇▇) ▇▇▇-▇▇▇▇
If to JER: JER Partners
▇▇▇▇ ▇▇▇▇▇▇ ▇▇▇▇▇▇▇▇▇
▇▇▇▇▇ ▇▇▇▇
▇▇▇▇▇▇, ▇▇▇▇▇▇▇▇ ▇▇▇▇▇
Attn: ▇▇. ▇▇▇▇ ▇. ▇▇▇▇▇▇▇
Telecopy No.: (▇▇▇) ▇▇▇-▇▇▇▇
With copies to: JER Partners
▇▇▇▇ ▇▇▇▇▇▇ ▇▇▇▇▇▇▇▇▇
▇▇▇▇▇ ▇▇▇▇
▇▇▇▇▇▇, ▇▇▇▇▇▇▇▇ ▇▇▇▇▇
Attn: ▇▇▇▇▇ ▇. ▇▇▇▇▇▇▇▇, Esq.
Telecopy No.: (▇▇▇) ▇▇▇-▇▇▇▇
Service of any such notice or other communications so made shall be deemed
effective on the day of actual delivery (whether accepted or refused) as
evidenced by confirmed answerback if by facsimile; provided, that if any notice
--------
or other communication to be delivered by facsimile is unable to be transmitted
because of a problem affecting the receiving party's facsimile machine, the
deadline for receiving such notice or other communication shall be extended
through the next business day, as shown by the addressee's return receipt if by
certified mail, and as confirmed by the courier service if by courier; provided,
--------
however, that if such actual delivery occurs after 5:00 p.m. (local time where
-------
received) or on a non-business day, then such notice or demand so made shall be
deemed effective on the first business day after the day of actual delivery. No
communications via electronic mail shall be effective to give any notice,
request, direction, demand, consent, waiver, approval or other communications
hereunder.
Section 14.2 Entire Agreement. This Agreement, together with the
----------------
Exhibits hereto, represent the entire agreement of the parties with respect to
the subject matter hereof and supersedes any and all prior agreements, writings
or understandings between the parties with respect to the subject matter hereof.
Except as otherwise expressly provided herein, no amendment or modification to
this Agreement shall be binding unless same shall be in writing and signed by
all Members.
Section 14.3 Arbitration; Governing Law.
--------------------------
(a) Except as set forth in Section 14.3(b) below and except to the
---------------
extent another dispute resolution procedure is set forth in this Agreement, any
controversy, claim or dispute between the Members arising out of or related to
this Agreement or the rights of the parties hereunder shall be resolved pursuant
to an arbitration proceeding ("Arbitration Proceeding") in accordance with the
terms set forth on Exhibit C attached hereto.
---------
35
(b) Each Member shall have the right to apply to any court of
competent jurisdiction and/or to the arbitrator(s) for an order or award of
interim, provisional or conservatory measures in order to maintain the status
quo or to protect its rights or property pending arbitration pursuant to this
Agreement, and any such application shall not be deemed incompatible with, or a
waiver of, the Members' agreement to arbitrate.
(c) Nothing herein shall in any way limit the right of any Member to
exercise self-help remedies or to obtain provisional or ancillary remedies from
a court of competent jurisdiction before, after or during the pendency of any
Arbitration Proceeding. The award rendered by the arbitrator(s) shall be final
and binding between the parties and not subject to appeal or other recourse.
Recognition and enforcement of any award rendered by the arbitrator(s) may be
sought in any court of competent jurisdiction.
(d) The Members and any of their permitted transferees hereby waive
all rights to (i) bring any derivative action pursuant to Sections 18-1001
through 18-1004 of the Act, or (ii) apply to a Delaware Court of Chancery to
hear and determine any matter related to managers, contested votes, or any other
matter under Section 18-110 of the Act, or to interpret, apply or enforce the
provisions of this Agreement or to take any other action described in Section
18-111 of the Act.
(e) Notwithstanding the commencement of an Arbitration Proceeding
pursuant to this Section 14.3 and under the terms of Exhibit C, the Members
------------ ---------
shall be required to continue to perform such obligations and to take such
actions as are necessary to continue to the operations and business of the
Company unless an order or direction to the contrary is issued by a court of
competent jurisdiction or the arbitrator(s).
(f) Subject to the provisions of Section 14.3(d), the laws of the
--------------
State of Delaware, including, without limitation, the Act, shall govern the
organization and internal affairs of the Company and the liability of the
Members. Nevertheless, to the extent that reference need be made to the law of
any state to enforce the decision made in any Arbitration Proceeding or any
legal proceeding brought pursuant to, or to apply or interpret the procedural
rules applicable to any Arbitration Proceeding or any legal proceeding brought
pursuant to Section 14.3(b), the internal laws of the State of New York (without
--------------
reference to the rules regarding conflict or choice of laws of such State) shall
be utilized for such purpose.
Section 14.4 Successors and Assigns. Except as herein otherwise
----------------------
specifically provided, this Agreement shall be binding upon and inure to the
benefit of the Members and their permitted successors and assigns.
Section 14.5 Captions. Captions contained in this Agreement in no way
--------
define, limit or extend the scope or intent of this Agreement.
Section 14.6 Severability. If any provision of this Agreement,
------------
including the arbitration provisions, or the application of such provision to
any person or circumstance, shall be held invalid, the remainder of this
Agreement, or the application of such provision to the persons or circumstances,
shall not be affected thereby.
36
Section 14.7 Counterparts. This Agreement may be executed in several
------------
counterparts, each of which shall be deemed an original, but all of which shall
constitute one and the same document. Any signature page of this Agreement may
be detached from any counterpart of this Agreement and re-attached to any other
counterpart of this Agreement identical in form hereto but having attached to it
one or more additional signature pages.
Section 14.8 Further Assurances. Each Member covenants and agrees
------------------
that it shall at any time and from time to time do, execute, acknowledge and
deliver, or shall cause to be done, executed, acknowledged and delivered, all
such further acts, documents and instruments as may reasonably be required by
any other Member in order to carry out and effectuate fully the transactions
herein contemplated in accordance with this Agreement.
Section 14.9 Right to Specific Performance. The failure or refusal by
-----------------------------
a Member to comply with any or all of the provisions of this Agreement shall
entitle any other Member to specific performance of the terms, covenants and
conditions of this Agreement or any part hereof in addition to any and all other
remedies available to such Member at law or in equity.
Section 14.10 Relationship of Parties. The relationships between the
-----------------------
Members under this Agreement shall be that of a limited liability company, for
the sole and limited purpose of carrying on the business of the Company. Except
insofar as otherwise provided in this Agreement, nothing herein shall be deemed
to create a limited liability company between the Members for the carrying on of
business outside the scope of this Agreement, nor shall any Member have the
ability to act as agent for any other Member.
Section 14.11 Waiver of Jury Trial. THE MEMBERS HEREBY WAIVE TRIAL BY
--------------------
JURY IN ANY ACTION, PROCEEDING OR COUNTERCLAIM BROUGHT BY EITHER OF THE MEMBERS
AGAINST THE OTHER OR THE COMPANY IN CONNECTION WITH ANY MATTER WHATSOEVER
ARISING OUT OF OR IN ANY WAY CONNECTED WITH THIS AGREEMENT, THE RELATIONSHIP OF
THE MEMBERS OR ANY CLAIM OF INJURY OR DAMAGE RELATING TO ANY OF THE FOREGOING,
OR THE ENFORCEMENT OF ANY REMEDY UNDER ANY STATUTE WITH RESPECT THERETO.
Section 14.12 Creditors Not Benefited. Nothing contained in this
-----------------------
Agreement is intended or shall be deemed to benefit any creditor of the Company
or any Member, and no creditor of the Company shall be entitled to require the
Company or the Members to solicit or accept any Additional Contribution for the
Company or to enforce any right which the Company or any Member may have against
any Member under this Agreement or otherwise.
Section 14.13 No Third Party Rights. Except as expressly provided
---------------------
herein or in the Act, this Agreement is for the sole benefit of the Members and
their respective permitted successors and assignees, and shall not confer, nor
shall be construed as conferring, directly, indirectly, contingently or
otherwise, any rights or benefits on any person or party other than the Members
and their permitted successors and assignees. Without limiting the generality of
the foregoing, a deficit Capital Account of a Member shall not be deemed to be a
liability of such Member nor an asset or property of the Company.
37
Section 14.14 Survival. The indemnifications provided herein and any
--------
other provisions hereof which state that they expressly survive the Term or the
termination hereof shall survive the termination or expiration of this
Agreement.
Section 14.15 Usury. If any applicable law is ever judicially
-----
interpreted so as to deem any distribution, contribution, payment or other
amount received by any Member or the Company under this Agreement as interest
and so as to render any such amount in excess of the maximum rate or amount of
interest permitted by applicable law, then it is the express intent of the
Members and the Company that all amounts in excess of the highest lawful rate or
amount theretofore collected be credited against any other distributions,
contributions, payments or other amounts to be paid by the recipient of the
excess amount or refunded to the appropriate Person, and the provisions of this
Agreement immediately be deemed reformed, without the necessity of the execution
of any new document, so as to comply with the applicable law, but so as to
permit the payment of the fullest amount otherwise required hereunder. All sums
paid or agreed to be paid that are judicially determined to be interest shall,
to the extent permitted by applicable law, be amortized, prorated, allocated and
spread throughout the term of such obligation so that the rate or amount of
interest on account of such obligation does not exceed the maximum rate or
amount of interest permitted under applicable law.
Section 14.16 Attorneys' Fees. In the event of any litigation between
---------------
the Members to enforce or interpret any provision or right hereunder, the
unsuccessful party to such litigation covenants and agrees to pay the successful
party or parties all costs and expenses reasonably incurred, including
reasonable attorneys' fees. For the purpose of this Agreement, the term
"attorneys' fees" shall mean expert expenses and fees and the fees and expenses
of counsel to the Members, which may include printing, Photostating, duplicating
and other expenses, air freight charges and fees billed for law clerks,
paralegals, librarians and others not admitted to the bar but performing
services under the supervision of an attorney. Such term shall also include all
such fees and expenses incurred with respect to appeals, arbitrations, reference
out and bankruptcy proceedings, and whether or not any action or proceeding is
brought with respect to the matter for which said fees and expenses were
incurred.
Section 14.17 Time of the Essence. Time is of the essence of this
-------------------
Agreement.
Section 14.18 Incorporation of Exhibits. All exhibits, schedules and
-------------------------
appendices attached and referred to in this Agreement are incorporated herein as
if fully set forth in this Agreement.
Section 14.19 Certain Terminology.
-------------------
(a) Whenever the words "including", "include" or "includes" are used
in this Agreement, they should be interpreted in a non-exclusive manner as
though the words "but [is] not limited to" immediately followed the same.
(b) Except as otherwise indicated herein, all Article and Section
references in this Agreement shall be deemed to refer to the corresponding
Articles and Sections of this Agreement.
38
Section 14.20 Business Days. Any reference in this Agreement to
-------------
"business days" shall mean all calendar days except Saturdays, Sundays and New
York and federal legal holidays. Any other reference to "days" shall mean
calendar days.
Section 14.21 Member Estoppel Certificates. Upon the written request
----------------------------
of a Member, the other Member shall, within fifteen (15) days of its receipt of
such request, execute and deliver a written statement certifying: (A) that this
Agreement is unmodified and in full force and effect (or, if modified, that this
Agreement is in full force and effect as modified and stating any and all
modifications), (B) that such Member is not in default hereunder and, to its
actual knowledge, the requesting Member is not in default hereunder, in each
case except as specified in such statement, (C) that to its actual knowledge, no
event has occurred which with the passage of time or the giving of notice, or
both, would ripen into a default hereunder, except as specified in such
statement and (D) as to the then current balances of its accounts provided under
ARTICLE III. Such written statement may be relied upon by a Member's prospective
-----------
purchasers, investors or lenders.
Section 14.22 Construction. The Members have each been represented by
------------
counsel of their respective choice in connection with this Agreement, the terms
of which have been fully and fairly negotiated. The language in all parts of
this Agreement shall in all cases be construed simply according to the fair
meaning thereof and not strictly against the party which drafted such language.
Section 14.23 Exculpation. Notwithstanding anything to the contrary
-----------
contained herein, no direct or indirect partner, shareholder, member, officer,
director, trustee or employee in or of either Member (collectively, the
"Nonrecourse Parties") shall be personally liable in any manner or to any extent
under or in connection with this Agreement, and neither any Member nor the
Company shall have any recourse to any assets of a Nonrecourse Party other than
such party's Membership Rights to satisfy any liability, judgment or claim that
may be obtained or made against any such Nonrecourse Party under this Agreement.
The limitation of liability provided in this Section 14.23 is in addition to,
-------------
and not in limitation of, any limitation on liability applicable to a
Nonrecourse Party provided by law or by this Agreement or any other contract,
agreement or instrument.
Section 14.24 Publicity and Confidentiality. JER acknowledges that NHP
-----------------------------
is a publicly traded company and, as such, is subject to extensive reporting and
disclosure requirements under statutory and common law duties owed to its
shareholders and in accordance with applicable securities laws. These
requirements include, but are not limited to: (A) filing a copy of this
Agreement with the Securities and Exchange Commissions, (B) reporting on the
results of the Company in NHP's filings and/or reports under the Securities Act
of 1933, as amended, or the Securities Exchange Act of 1934, as amended, and
related press releases; and (C) describing the Company and its activities
consistent with this Agreement in such filings, reports and/or releases (the
"NHP's Unrestricted Disclosures"). "NHP's Unrestricted Disclosures" also
includes disclosures of information about the Company by representatives of NHP
in the ordinary course of business to The New York Stock Exchange, financial
analysts, rating agencies, banks and other similar Persons or institutions,
which information is of the same general nature as that disclosed about NHP to
such Persons or institutions in its ordinary course of business. Except for
NHP's Unrestricted Disclosures, no Member or any of its advisors shall
39
issue any press release or otherwise publicize or disclose the terms of this
Agreement, the identity of any Person with whom the Company may be holding
discussions with respect to any Target Asset or Project and all other business,
financial or other information relating directly to the conduct of the business
and affairs of the Company or the relative or absolute rights or interests of
any of the Members (collectively, the "Confidential Information") that has not
been publicly disclosed pursuant to the provisions of this Section 14.24 or the
-------------
express authorization by the Members; provided, however, that "Confidential
-------- -------
Information" shall not include any such information that the disclosing Member
can establish to have (i) been publicly known prior to disclosure by the other
Member, (ii) become publicly known, without fault on the part of the disclosing
Member subsequent to disclosure by the other Member, (iii) been received by the
disclosing Member at any time from a source other than the other Member lawfully
having possession of and the right to disclose such information, or (iv) been
otherwise known by the disclosing Member prior to disclosure by the other
Member. Each Member represents that it has not and agrees that it shall not (and
shall direct its members, shareholders, partners, directors, officers, agents,
advisors and Affiliates not to) disclose to any Person any Confidential
Information or confirm any statement made by third Persons regarding
Confidential Information until the Company has publicly disclosed the
Confidential Information in accordance with this Section 14.24. Notwithstanding
-------------
the foregoing provisions of this Section 14.24, (x) any Member may disclose the
-------------
fact that such Member is a participant in the Company and/or that the Company or
any Subsidiary Company owns the Property; (y) either Member may disclose such
Confidential Information in the course of its normal reporting practices to its
members, shareholders, advisors, partners directors, officers, agents,
Affiliates, or prospective buyers, operators and lenders with respect to the
Projects or the acquisition or financing of any Target Assets, and (z) any such
press release or other disclosure of Confidential Information may be made as
required by any applicable law (as reasonably interpreted by such Member). In
case of a disclosure pursuant to clause (y) or (z) above, to the extent
determined reasonably possible by the disclosing Member, the disclosing Member
shall notify the other Member prior to such disclosure and provide it with a
copy of the proposed disclosure and an up to twenty-four (24) hour period to
comment on such disclosure before the disclosure is made).
[Signatures on next page]
40
IN WITNESS WHEREOF, the undersigned have executed this Agreement as of the date
first above written.
NHP:
NATIONWIDE HEALTH PROPERTIES, INC.,
a Maryland corporation
By: ________________________________
Name: _______________________________
Title: ______________________________
JER:
JER SENIOR HOUSING, LLC,
a Delaware limited liability company
By: ________________________________
Name: _______________________________
Its: ________________________________
By: ________________________________
Name: _______________________________
Its: ________________________________
41
EXHIBIT A
---------
DEFINED TERMS
"Act" has the meaning given such term in Section 1.1.
--- -----------
"Accounts" has the meaning given such term in Section 4.2(d).
-------- --------------
"Additional Contribution" has the meaning given such term in Section
----------------------- -------
3.2(b).
------
"Adjusted Capital Account Balance" means, with respect to any Member
--------------------------------
for any period, the balance, if any, in such Member's Capital Account as of the
end of such period, after giving effect to the following adjustments:
(i) Credit to such Capital Account any amounts that such Member
is obligated to restore or is deemed obligated to restore as described in the
penultimate sentence of Treasury Regulation Section 1.704-2(g)(1) and in
Treasury Regulation Section 1.704-2(i)(5); and
(ii) Debit to such Capital Account the items described in
Treasury Regulation Sections 1.704-1(b)(2)(ii)(d)(4), (5) and (6).
"Affiliate" means, with respect to any Person, (a) any other Person
---------
directly or indirectly controlling, controlled by, or under common control with
such Person, or (b) any other Person owning or controlling fifty-one percent
(51%) or more of the outstanding voting interests of such Person, or (c) any
officer, director, general partner or managing member of such Person, or (d) any
other Person which is an officer, director, general partner, managing member or
holder of fifty-one percent (51%) or more of the voting interests of any other
Person described in clauses (a) through (c) of this definition.
"Agreement" has the meaning given such term in the preamble.
---------
"Ancillary Agreement" means any agreement, instrument, guaranty,
-------------------
document or covenant made or entered into under, pursuant to, or in connection
or concurrently with the acquisition or financing of a Project and any amendment
or amendments made at any time or times heretofore or hereafter to any of the
same.
"Applicable Time" has the meaning given such term in Section 9.1(b).
--------------- --------------
"Arbitration Notice" has the meaning given such term in Section
------------------ -------
4.3(b).
------
"Arbitration Proceeding" has the meaning given such term in Section
---------------------- -------
14.3(a).
-------
"Bankruptcy/Dissolution Event" has the meaning given such term in
----------------------------
Section 12.1(d).
---------------
"Base Capital Contribution" has the meaning given such term in Section
------------------------- -------
3.2(a).
------
"Book Basis" means, with respect to any asset of the Company, the
----------
adjusted basis of such asset for federal income tax purposes; provided, however,
-------- -------
that (i) if any asset is
42
contributed to the Company, the initial Book Basis of such asset shall equal its
fair market value on the date of contribution (as agreed to by all of the
Members), (ii) the Book Basis of all Company assets shall be adjusted in
accordance with Section 1.4 of Exhibit B, and (iii) the Book Basis of any
---------
Company assets shall be adjusted each fiscal year by the Depreciation with
respect to such asset taken into account for purposes of computing Net Profits
or Net Losses for such year.
"Budgets" means, collectively, the Operating Budgets and the Capital
-------
Budgets.
"Business Plan" means, with respect to each Project acquired by the
-------------
Company, an overall plan and pro forma budget for the acquisition, improvement,
financing, operation and sale of such Project, approved by the Members pursuant
to Section 6.2(c).
--------------
"Buy/Sell Closing" has the meaning given such term in Section 11.1(e).
---------------- ---------------
"Buy/Sell Closing Date" has the meaning given such term in Section
--------------------- -------
11.1(e).
-------
"Buy/Sell Distribution Amount" has the meaning given such term in
----------------------------
Section 11.1(b)(ii).
-------------------
"Buy/Sell Option Period" has the meaning given such term in Section
---------------------- -------
11.1(d).
-------
"Capital Account" means the separate account maintained for each
---------------
Member under Section 3.5.
-----------
"Capital Budget" means, with respect to each Project acquired by the
--------------
Company, a capital improvements budget, approved by the Members pursuant to
Section 6.2, for the operation of such Project after acquisition by the Company,
-----------
including furniture, fixtures, equipment, demolition/renovation and Project
improvements.
"Capital Contribution" means, with respect to any Member, any Base
--------------------
Capital Contribution or Additional Contribution made by such Member to the
Company pursuant to the Agreement.
"Certificate of Formation" means the certificate referred to in
------------------------
Section 18-201 of the Act.
"Change of Control Event" has the meaning given such term in Section
----------------------- -------
10.2.
----
"Claims" has the meaning given such term in Section 8.1.
------ -----------
"Code" means the Internal Revenue Code, Title 26 of the United States
----
Code, as such may be now or hereafter amended.
"Company" has the meaning given such term in Section 1.1.
------- -----------
"Company Accountant" has the meaning given such term in Section 7.2.
------------------ -----------
"Confidential Information" has the meaning given such term in Section
------------------------ -------
14.24.
-----
43
"Contribution Request" has the meaning given such term in Section
-------------------- -------
3.3(a).
------
"Contributing Member" has the meaning given such term in Section
------------------- -------
3.4(b).
------
"Declared Default" has the meaning given such term in Section 6.5(a).
---------------- --------------
"Defaulting Member" has the meaning given such term in Section 12.1.
----------------- ------------
"Defaulting Operator" has the meaning given such term in Section
------------------- -------
6.5(a).
------
"Deposit" has the meaning given such term in Section 11.1(d).
------- ---------------
"Depreciation" means, for each fiscal year, an amount equal to the
------------
depreciation, amortization, or other cost recovery deduction allowable with
respect to an asset for such fiscal year, except that if the Book Basis of an
asset differs from its adjusted basis for federal income tax purposes at the
beginning of such fiscal year, Depreciation shall be an amount which bears the
same ratio to such beginning Book Basis as the federal income tax depreciation,
amortization or other cost recovery deduction for such fiscal year 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 year is
zero, Depreciation shall be determined with reference to such beginning Book
Basis using any reasonable method selected by the Managing Member.
"Designated Representative" has the meaning given such term in Section
------------------------- -------
4.1(e).
------
"Equity Account" has the meaning given such term in Section 3.4(a).
-------------- --------------
"Event of Default" has the meaning given such term in Section 12.1.
---------------- ------------
"Exclusivity Period" means the period from the date of the Agreement
------------------
until the earlier of the date: (i) the Company has entered into binding
commitments for the acquisition of Target Assets with aggregate purchase prices
of not less than One Hundred and Thirty Million Dollars ($130,000,000) and
received aggregate Capital Contributions by the Members of not less than
Sixty-five Million Dollars ($65,000,000); (ii) which is twelve (12) months from
the date of the Agreement; (iii) the removal of NHP as the Managing Member of
the Company; (iv) of the termination of the Agreement in accordance with the
terms thereof; or (v) upon the Offering Notice Date in the event either Member
elects to trigger its buy/sell rights pursuant to ARTICLE XI.
----------
"Gross Revenue" means all revenue or income derived from a Project;
-------------
provided, however, that Gross Revenues shall include only those actually
-------- -------
received from tenants at the Properties in the normal course of business. This
includes all gross rental receipts (but not any sums which, under normal
accounting practice, are attributable to capital) derived from the operation of
the Properties, including all rent, and all other sums and charges received from
tenants, including expense reimbursements and amounts actually recovered through
litigation for nonpayment of rent (net of the cost incurred in recovering the
same). Gross Revenues, for purposes of calculating the Management Fee, shall not
include: any allowance or compensation for any tenant improvement allowances or
other concessions; any monies paid by tenants (whether or not characterized as
rent) for capital expenses, sums collected through litigation for
44
other than nonpayment of rent; security deposits prior to forfeiture thereof;
capital improvements; security fees; insurance proceeds; proceeds from the sale
or financing of assets; fees paid to Managing Member; interest earned on funds
from time to time on deposits; proceeds from condemnation; and other
nonrecurring items. If the Company is required to refund to a tenant any amount
paid by the tenant, Managing Member shall promptly pay to the Company, or
subtract from the next Management Fee, all Management Fees originally paid to
Managing Member on the amount of such refund.
"Internal Rate of Return" means the annualized discount rate,
-----------------------
determined by iterative process on a cumulative basis, which results in a net
present value of zero, calculated and compounded on a monthly basis (as
calculated using the XIRR function using Excel or equivalent accounting
program), when such discount rate is applied to specified Capital Contributions
from the date when such contributions were made and to specified distributions
to the date such distributions were initially made, but exclusive of any
distributions applied against the payment of principal or interest under any
Priority Loans or Management Fees. A further explanation and sample Internal
Rate of Return calculation is attached hereto as Exhibit E.
---------
"JER" has the meaning given such term in the preamble.
---
"JER Initial Capital Allocation" means the sum of Forty-Eight Million
------------------------------
Seven Hundred Fifty Thousand Dollars ($48,750,000).
"Laws" means all federal, state and local laws, moratoria,
----
initiatives, referenda, ordinances, rules, regulations, standards, orders,
judicial decisions, common law and other governmental requirements (including
those relating to the environment, health and safety or handicapped persons).
"Liquidating Member" has the meaning given such term in Section 13.2.
------------------ ------------
"Major Decision" has the meaning given such term in Section 4.1(b).
-------------- --------------
"Managing Member" has the meaning given such term in Section 4.1(a).
--------------- --------------
Except as otherwise provided in this Agreement, NHP shall act as the Managing
Member and shall have the duty and authority, on behalf of the Company, to do
all things appropriate for the accomplishment of the purposes of the Company
subject to and in accordance with the Budgets.
"Management Fee" means a fee equal to two and one-half percent (2.50%)
--------------
of all Gross Revenue received by the Company.
"Member" has the meaning given such term in Section 2.1.
------ -----------
"Member Economic Interest" means all of the right, title and interest
------------------------
of a Member in and to Net Profits, Net Losses, capital and distributions of and
from the Company. The foregoing definition of "Member Economic Interest" is
intended to comply with the definition of "limited liability company interest"
as set forth in Section 18-101 of the Act, and shall be interpreted consistently
therewith.
"Member Parties" has the meaning given such term in Section 6.7.
-------------- -----------
45
"Member Percentage" means, with respect to each Member, the
-----------------
applicable percentage interests of the Members as set forth below:
NHP 25%
JER 75%
"Membership Rights" means all of the right, title and interest of
-----------------
a Member in, to and against the Company, the Property and Company Net Profits,
Net Losses, capital and distributions, all in accordance with the terms of the
Agreement, including a Member's:
(i) Member Economic Interest;
(ii) right to inspect the Company's books and records;
(iii) right to participate in the business and affairs and
management of and vote on matters coming before the Company;
(iv) unless the Agreement or the Certificate of Formation
provide to the contrary, right to act as an agent of the Company; and
(v) any other rights or powers of a Member under the
Act.
"Money Market Account" has the meaning given such term in Section
-------------------- -------
4.2(d).
------
"NHP" has the meaning given such term in the preamble.
---
"NHP Excluded Target Assets" means any assets (i) which currently
--------------------------
exist in NHP's portfolio, including, without limitation, the assets specified in
NHP's Annual Report on Form 10-K for the year ending December 31, 2000, and (ii)
the ten (10) assets currently owned by MediTrust Companies and operated by
Balanced Care Corporation.
"NHP Initial Capital Allocation" means the sum of Sixteen Million
------------------------------
Two Hundred Fifty Thousand Dollars ($16,250,000).
"NHP's Unrestricted Disclosures" has the meaning given such term
------------------------------
in Section 14.24.
-------------
"Net Profits" or "Net Losses" means for each fiscal year or other
----------- ----------
period, an amount equal to the Company's taxable income or loss for such year or
period, determined in accordance with Code Section 703(a) (for this purpose, all
items of income, gain, loss, or deduction required to be stated separately
pursuant to Code Section 703(a)(1) shall be included in taxable income or loss),
with the following adjustments:
(i) any income of the Company that is exempt from federal
income tax and not otherwise taken into account in computing Net Profits or Net
Losses shall be added to such taxable income or loss;
46
(ii) 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 Treasury Regulation Section
1.704-1(b)(2)(iv)(1), and not otherwise taken into account either in
computing Net Profits or Net Losses or under clause (iii) below shall
be subtracted from such taxable income or loss;
(iii) in lieu of the depreciation, amortization and other cost
recovery deductions taken into account in computing such taxable income
or loss, there shall be taken into account Depreciation for the
relevant fiscal year;
(iv) in the event the Book Basis of any Company asset is
adjusted pursuant to Section 1.4 of Exhibit B, the amount of such
---------
adjustment shall be taken into account as gain or loss from the
disposition of such asset for purposes of computing Net Profits or Net
Losses;
(v) gain or loss resulting from any disposition of Company
assets where such gain or loss is recognized for federal income tax
purposes shall be computed by reference to the Book Basis of the
applicable Company assets, notwithstanding that the adjusted tax basis
of such Company assets differs from its Book Basis;
(vi) if the Book Basis of any Company asset is adjusted in
accordance with Section 1.4 of Exhibit B, the amount of such adjustment
---------
shall be taken into account in the taxable year of such adjustment as
gain or loss from the disposition of such asset for purposes of
computing Net Profits or Net Losses; and
(vii) any income, gain, losses and expenses specially
allocated pursuant to the Agreement shall not be taken into account in
computing Net Profits or Net Losses.
"Non-Contributing Member" has the meaning given such term in
-----------------------
Section 3.4(b).
--------------
"Non-Defaulting Member" has the meaning given such term in
---------------------
Section 12.1.
------------
"Nonrecourse Parties" has the meaning given such term in
-------------------
Section 14.23.
-------------
"Offering Notice" has the meaning given such term in Section
---------------
11.1(b).
-------
"Offering Notice Date" has the meaning given such term in
--------------------
Section 11.1(b)(ii).
-------------------
"Offeree" has the meaning given such term in Section 11.1(b).
------- ---------------
"Offeree Deposit" has the meaning given such term in Section
--------------- -------
11.1(d).
-------
"Offeror" has the meaning given such term in Section 11.1(b).
------- ---------------
"Offeror Deposit" has the meaning given such term in Section
--------------- -------
11.1(d).
-------
"Operating Account" has the meaning given such term in Section
----------------- -------
4.2(d).
------
47
"Operating Budget" means, with respect to the business of the
----------------
Company and with respect to each Project acquired by the Company, an overall
operating budget approved by the Members and updated at least annually or from
time to time pursuant to Section 7.4. All references to the "Operating Budgets"
-----------
hereunder, shall be to the then current and approved Operating Budgets, as
applicable.
"Ownership Interests" means controlling ownership interests in
-------------------
Persons that own as a material part of their assets, loans and/or fee or ground
leasehold interests in Target Assets.
"Periodic Report" has the meaning given such term in Section
--------------- -------
7.3(c).
------
"Person" means any individual, partnership, corporation,
------
limited liability company, trust or other entity.
"Prime" means the "prime rate" then in effect as published
-----
from time to time in The Wall Street Journal.
-----------------------
"Priority Loan" means, with respect to any Member, any Capital
-------------
Contribution made by such Member pursuant to Section 3.2(a) or Section 3.2(b)
-------------- --------------
and designated by such Member as a Priority Loan pursuant to Section 3.4(b)(i),
-----------------
including both the Non-Contributing Member's share of such Capital Contribution
(contributed by the Contributing Member pursuant to Section 3.4(b)(i)) and the
------------------
Contributing Member's share of such Capital Contribution (contributed by the
Contributing Member pursuant to Section 3.2(a) or Section 3.2(b)), which
-------------- ---------------
Priority Loan shall bear interest at a rate of twenty-five percent (25%) per
annum (but not more than the maximum amount allowable under applicable law)
compounded monthly, and shall be due and payable on the sixty (60) calendar days
after the making of such Priority Loan.
"Project" or "Projects" means one or more Target Assets owned
------- --------
by the Company or the Subsidiary Companies.
"Property" means all real or personal property from time to
--------
time owned by the Company or the Subsidiary Companies.
"Property Valuation Amount" has the meaning given such term in
-------------------------
Section 11.1(b)(ii).
-------------------
"Purchase Notice" has the meaning given such term in Section
--------------- --------
11.1(d).
-------
"Purchasing Member" has the meaning given such term in Section
----------------- -------
11.1(e).
-------
"Rate of Return" has the meaning given such term in Section
-------------- -------
9.1(b).
------
"Reserve Accounts" has the meaning given such term in Section
---------------- -------
4.1(b)(vii).
-----------
"Sale Notice" has the meaning given such term in Section
----------- -------
11.1(d).
-------
"Selected Accountant" has the meaning given such term in
-------------------
Section 11.1(c).
---------------
48
"Selling Member" has the meaning given such term in Section
-------------- -------
11.1(e).
-------
"Substitute Member" has the meaning given such term in Section
----------------- -------
10.1(a).
-------
"Subsidiary Company" has the meaning given such term in
------------------
Section 2.4. Except as expressly provided to the contrary, all references to the
-----------
business, assets or ownership of the "Company" hereunder shall mean and include
the business, assets or ownership of each Subsidiary Company.
"Target Asset Offer Notice" has the meaning given such term in
-------------------------
Section 6.3(a).
--------------
"Target Assets" means any fee or ground leasehold interests,
-------------
Ownership Interests, loans or other instruments for the provision of capital to
continuing care retirement communities, assisted living facilities, independent
living facilities, skilled nursing facilities and any other form of senior
housing properties; provided, however, the NHP Excluded Target Assets are
-------- -------
expressly deemed not to be Target Assets hereunder. If the Company acquires a
Target Asset, from and after such acquisition, the terms "Project" and
"Property" shall include such Target Asset.
"Term" has the meaning given such term in Section 1.3.
---- -----------
"Termination Notice" has the meaning given such term in
------------------
Section 4.3(a).
--------------
"Transfer" means any sale, mortgage, encumbrance, pledge,
--------
hypothecation, assignment or other transfer, whether directly or indirectly, by
operation of law or otherwise.
"Transfer Documents" has the meaning given such term in
------------------
Section 11.1(f).
---------------
"Treasury Regulation" means, with respect to any referenced
-------------------
provision, such provision of the regulations of the United States Department of
the Treasury or any successor provision.
"Workout Plan" has the meaning given such term in Section
------------ -------
6.5(b).
------
49
EXHIBIT B
---------
CERTAIN TAX MATTERS
Section 1.1 - Certain Definitions Relating to Tax Issues. For purposes of the
------------------------------------------
Agreement, the following terms shall have the meanings ascribed to them in this
Section 1.1 of this Exhibit B:
---------
"Adjusted Capital Account Deficit" means, with respect to any
--------------------------------
Member for any taxable year of the Company, the deficit balance, if any, in such
Member's Adjusted Capital Account Balance as of the end of such taxable year.
"Company Minimum Gain" shall have the meaning ascribed to
--------------------
"partnership minimum gain" in Treasury Regulation Section 1.704-2(d).
------------------
"Member Minimum Gain" shall have the meaning ascribed to
-------------------
"partner nonrecourse debt minimum gain" in Treasury Regulation Section
1.704-2(i)(2).
"Member Nonrecourse Debt" shall have the meaning ascribed to
-----------------------
"partner nonrecourse debt" in Treasury Regulation Section 1.704-2(b)(4).
"Member Nonrecourse Deductions" shall have the meaning
-----------------------------
ascribed to "partner nonrecourse deductions" in Treasury Regulation Section
1.704-2(i)(2).
"Nonrecourse Deductions" has the meaning set forth in Treasury
----------------------
Regulation 1.704-2(b)(1).
"Target Account" means, with respect to any Member for any
--------------
taxable year of the Company, the difference (which difference may be a positive
or negative number) between (i) an amount (which may be either a positive
balance or a negative balance) equal to the hypothetical distribution (or
contribution) such Member would receive (or contribute) if all assets of the
Company, including cash, were sold for cash equal to their Book Basis (taking
into account any adjustments to Book Basis for such year), all liabilities
allocable to such assets were then satisfied according to their terms (except
that if the nonrecourse liabilities secured by an asset exceed the Book Basis of
such asset, such calculation shall be made assuming that the asset were
transferred to the lender in satisfaction of the debt) and all remaining
proceeds from such sale were distributed pursuant to Section 9.1(a) of the
--------------
Agreement, minus (ii) such Member's share of Company Minimum Gain and Member
Minimum Gain immediately prior to such hypothetical sale.
"Unrealized Gain" means, with respect to any Company asset as
---------------
of any particular date, the excess of (i) the gross fair market value of such
asset on such date as determined in accordance with Section 1.4 of this Exhibit
-------
B, over (ii) the Book Basis of such asset to the Company on such date.
-
"Unrealized Loss" means, with respect to any Company asset as
---------------
of any particular date, the excess of (i) the Book Basis of such asset to the
Company on such date, over (ii) the gross fair market value of such asset on
such date, as determined in accordance with Section 1.4 of this Exhibit B as of
---------
such date.
50
Section 1.2 - Maintenance of Capital Accounts. The Company shall establish and
-------------------------------
maintain for each Member a separate account ("Capital Account") in accordance
with the rules of Regulations Section 1.704-1(b)(2)(iv) and this Exhibit B. The
---------
Capital Account of each Member shall be increased by (i) the amount of all
Capital Contributions made by such Member to the Company pursuant to the
Agreement, (ii) the amount of Net Profits allocated to such Member pursuant to
Section 1.5 of this Exhibit B, and (iii) the amount of any other items of income
---------
or gain specially allocated to such Member pursuant to Section 1.6 of this
Exhibit B. The Capital Account of each Member shall be decreased by (x) the
---------
amount of cash or Book Basis of any assets distributed to such Member (net of
any liabilities assumed by the receiving Member or to which such property is
subject) pursuant to the Agreement, (y) the amount of Net Losses allocated to
such Member pursuant to Section 1.5 of this Exhibit B, and (z) the amount of any
---------
other items of deduction or loss specially allocated to such Member pursuant to
Section 1.6 of this Exhibit B. The Capital Accounts of each Member shall be
---------
increased or decreased to reflect the revaluation of Company property under
Section 1.4 of this Exhibit B.
---------
Section 1.3 - Transferees. A transferee (including any assignee) of a Member
-----------
Economic Interest shall succeed to a pro rata portion of the Capital Account of
the transferor corresponding to the percentage of the transferor's Member
Economic Interest acquired by such transferee.
Section 1.4 - Revaluations of Company Assets.
------------------------------
(a) Consistent with the provisions of Regulations Section
1.704-1(b)(2)(iv)(f), and as provided in this Section 1.4 of this
Exhibit B, the Book Basis of all Company assets shall be adjusted
---------
upward or downward to reflect any Unrealized Gain or Unrealized Loss
attributable to such Company assets, as of the times of the adjustments
provided in Section 1.4(b) of this Exhibit B, as if such Unrealized
---------
Gain or Unrealized Loss had been recognized on an actual sale of such
assets and allocated pursuant to this Exhibit B.
---------
(b) Adjustments to the Book Basis of the Company's assets shall be
made as of the following times: (i) immediately prior to the
acquisition of an additional ownership interest in the Company by any
new or existing Member in exchange for more than a de minimis Capital
----------
Contribution (including without limitation pursuant to Section
-------
3.4(b)(i) of the Agreement); (ii) immediately prior to the distribution
---------
by the Company to a Member of more than a de minimis amount of property
----------
as consideration for an ownership interest in the Company; and (iii)
immediately prior to the liquidation of the Company within the meaning
of Regulations Section 1.704-1(b)(2)(ii)(g).
(c) In accordance with Regulations Section 1.704-1(b)(2)(iv)(e),
the Book Basis of Company assets distributed in kind shall be adjusted
upward or downward to reflect any Unrealized Gain or Unrealized Loss
attributable to such Company assets, as of the time any such asset is
distributed.
(d) In determining Unrealized Gain or Unrealized Loss for purposes
of this Exhibit B, the aggregate cash amount and fair market value of
---------
all Company assets (including cash or cash equivalents) shall be
determined by the Company using such reasonable method of valuation as
the Company may adopt, or in the case of a liquidating
51
distribution pursuant to ARTICLE XIII of the Agreement, be determined
------------
and allocated by the Liquidating Member using such reasonable methods
of valuation as it may adopt.
Section 1.5 - General Allocations. Except as otherwise provided in this Exhibit
------------------- -------
B, all items of income, gain, loss and deduction comprising the Net Profits or
-
Net Losses of the Company for any fiscal year will be allocated among the
Members so that the balance in the Member's Capital Account, immediately after
making all allocations required for the relevant fiscal year is, as nearly as
possible, equal (proportionately) to the Member's Target Account.
Section 1.6 - Regulatory Allocations.
----------------------
(a) Subject to the exceptions stated in Treasury Regulation
Sections 1.704-2(f) and 1.704-2(i)(4), if there is a net decrease in
Company Minimum Gain or Member Minimum Gain during a fiscal year, each
Member will be specially allocated items of income and gain for the
year (and, if necessary, for subsequent years) in an amount equal to
the Member's share of the net decrease during the year (which share of
the net decrease will be determined under Treasury Regulation Sections
1.704-2(g)(2) and 1.704-2(i)(5), respectively). The Members intend that
this Section 1.6(a) complies with the "minimum gain chargeback"
requirements in Treasury Regulation Sections 1.704-2(f) and 1.704-2(i)
and will be interpreted consistently therewith.
(b) Any Nonrecourse Deductions will be specially allocated to the
Members in accordance with the Members' Member Percentages.
(c) Any Member Nonrecourse Deductions will be specially allocated
to the Members as provided in Treasury Regulation Section
1.704-2(i)(1).
(d) If any Member unexpectedly receives any adjustments,
allocations or distributions described in Treasury Regulation Sections
1.704-1(b)(2)(ii)(d)(4),(5) or (6) (modified as appropriate, by
Regulations Section 1.704-2(g)(1) and 1.704-2(i)(5)), items of Company
income and gain for the fiscal year will be specially allocated to the
Member in an amount and manner sufficient to eliminate, to the extent
required by the Treasury Regulations, any Adjusted Capital Account
Deficit of the Member as quickly as possible, provided, that an
allocation pursuant to this Section 1.6(d) of this Exhibit B will be
---------
made if and only to the extent that the Member would have an Adjusted
Capital Account Deficit after all other allocations provided for in
this Exhibit B have been tentatively made as if this Section 1.6(d) of
---------
this Exhibit B were not in the Agreement.
---------
(e) To the extent any 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 Treasury Regulation Section 1.704-1(b)(2)(iv)(m),
to be taken into account in determining Capital Accounts, appropriate
adjustments to the Capital Accounts will be made in accordance with the
Treasury Regulations.
(f) The allocations provided for in this Section 1.6 of this
Exhibit B (the "Regulatory Allocations"), are intended to comply with
---------
certain requirements of the Treasury Regulations. The Company can take
the Regulatory Allocations into account in allocating other items of
income, gain, loss and deduction among the Members so that, to
52
the extent possible, the net amount of the allocations of other items
and the Regulatory Allocations to each Member will be equal to the net
amount that would have been allocated to each the Member if the
Regulatory Allocations had not occurred.
Section 1.7 - Tax Allocations. All items of income, gain, loss or deduction will
---------------
be allocated in the same manner as the corresponding "book" items are allocated
under Sections 1.5 and 1.6 of this Exhibit B; provided, however, in the case of
--------- -------- -------
any Company asset the Book Basis of which differs from its adjusted tax basis,
income, gain, loss and deduction with respect to the asset will be allocated
among the Members so as to take account of any variation between the adjusted
basis of the asset and its Book Basis in accordance with the principles of
Section 704(c) of the Code (in any permissible manner determined by the
Company).
Section 1.8 - Tax Matters. The Members intend for the Company to be treated as a
-----------
partnership under the Code. The Company shall make all applicable elections,
determinations and other decisions under the Code, including the deductibility
of a particular item of expense and the positions to be taken on the Company's
tax return, and shall approve the settlement or compromise of all audit matters
raised by the Internal Revenue Service affecting the Members generally. The
Members shall each take reporting positions on their respective federal, state
and local income tax returns consistent with the positions taken by the Company.
Section 1.9 - Tax Matters Partner. Managing Member shall be the tax matters
-------------------
partner within the meaning of Section 6231(a)(7) of the Code and, subject to
Section 4.1(b) of the Agreement and Section 1.8 of this Exhibit B, shall
-------------- ---------
exercise all rights, obligations and duties of a tax matters partner under the
Code.
Section 1.10 - Compliance with Section 514(c)(9)(E) of the Code. Notwithstanding
------------------------------------------------
anything to the contrary contained in the Agreement or this Exhibit B:
---------
(a) Under no circumstance shall JER be allocated in any fiscal
year more than its Member Percentage of the "overall partnership
income" of the Company (within the meaning of Section
514(c)(9)(E)(i)(I) of the Code and Treasury Regulation Section
1.514(c)-2(c)(1)) or less than its Member Percentage of the "overall
partnership loss" of the Company (within the meaning of Section
514(c)(9)(E)(i)(I) of the Code and Treasury Regulation Section
1.514-2(c)(1)).
(b) If any item of income shall be allocated to a Member other
than JER solely by application of Section 1.10(a) of this Exhibit B,
---------
items of deduction or loss of the Company shall be allocated to such
other Member as soon as possible in a manner that is consistent with
the provisions of Section 514(c)(9)(E)(ii)(I) of the Code and Treasury
Regulation Section 1.514(c)-2(e) to chargeback and offset the effects
of such prior allocation of income to such other Member. If any item of
deduction or loss shall be allocated to JER solely by application of
Section 1.10(a) of this Exhibit B, items of income or gain of the
---------
Company shall be allocated to JER as soon as possible in a manner that
is consistent with the provisions of Section 514(c)(9)(E)(ii)(I) of the
Code and Treasury Regulation Section 1.514(c)-2(e) to chargeback and
offset the effects of such prior allocation of deduction or loss to
JER.
53
(c) The provisions of the Agreement and this Exhibit B shall be
---------
interpreted consistent with the Members' intent that the allocations
contained herein are "permitted allocations" under Section 514(c)(9)(E)
of the Code and the Treasury Regulations thereunder. Managing Member
agrees to make such amendments or changes to the Agreement and this
Exhibit B as are reasonably requested by JER to effectuate this intent.
---------
54
EXHIBIT C
---------
ARBITRATION OF DISPUTES
Except as set forth in Section 14.3(b) of the Agreement and except to
---------------
the extent another dispute resolution procedure is set forth in the Agreement,
any controversy, claim or dispute between the Members arising out of or related
to the Agreement or arising out of or related to the rights of the Members
thereunder ("Arbitrable Dispute"), shall be submitted to arbitration pursuant to
the applicable laws of the State of New York and the terms and provisions of
this Exhibit C.
---------
1. Location. Subject to the last sentence of this Section, all
--------
Arbitration Proceedings shall be held and conducted in the City and County of
New York (the "Arbitration County"). The location for an Arbitration Proceeding
within the Arbitration County shall be as mutually agreed by the Members, but
failing such agreement within ten (10) days of a written request by any Member,
the Arbitration Proceeding shall be conducted in the regional office of the AAA
in the Arbitration County (or if no such office exists in such County, then in
the AAA regional office closest to the Arbitration County).
2. Rules and Selection of Arbitrator(s). Each Arbitration Proceeding
------------------------------------
shall be conducted under the Commercial Arbitration Rules of the American
Arbitration Association ("AAA") then in effect (provided that in the event of
--------
any conflict between such Rules and this Exhibit C, the terms of this Exhibit C
--------- ---------
shall control). In no event shall a demand for arbitration be made after the
date when institution of legal or equitable proceedings based on the Arbitrable
Dispute in question would be barred by any applicable statute of limitations.
The arbitrator(s) shall be selected as follows:
(a) Any Arbitration Proceeding involving an amount in controversy
less than One Million Dollars ($1,000,000) shall be heard by a single
neutral arbitrator. The arbitrator appointed must be (i) a former or
retired justice of the Supreme Court, New York County, or of the
Appellate Division (First or Second Departments), or former or retired
judge of the U.S. District Court for Southern District of New York or
the U.S. Court of Appeals for the Second Circuit, or (ii) an attorney
with at least fifteen (15) years experience with real estate
development and/or real estate investment joint ventures. If agreement
is not reached by the Members on the selection of the arbitrator
within one (1) month after commencement of an Arbitration Proceeding
by (x) submission of a matter to the AAA in accordance with its
Commercial Arbitration Rules and (y) notice to the other Member of the
initiating Member's intention to arbitrate, then such arbitrator shall
be appointed by the AAA in accordance with its Commercial Arbitration
Rules.
(b) Any Arbitration Proceeding involving an amount in controversy
equal to or greater than One Million Dollars ($1,000,000) shall be
heard by a panel of three (3) neutral arbitrators. Each arbitrator
appointed must be (i) a former or retired justice of the Supreme
Court, New York County, or of the Appellate Division (First or Second
Departments), or former or retired judge of the U.S. District Court
for Southern District of New York or the U.S. Court of Appeals for the
Second Circuit, or (ii) an attorney with
55
at least fifteen (15) years experience with real estate development and/or
real estate investment joint ventures. If agreement is not reached by the
Members on the selection of the three arbitrators within one (1) month
after commencement of an Arbitration Proceeding by (x) submission of a
matter to the AAA in accordance with its Commercial Arbitration Rules and
(y) notice to the other Member of the initiating Member's intention to
arbitrate, then such arbitrators shall be appointed by the AAA in
accordance with its Commercial Arbitration Rules.
(c) For purposes of determining whether an Arbitration Proceeding
shall be heard by one arbitrator or by three, the term "amount in
controversy" shall mean the dollar amount sought by either the Member
initiating the Arbitration Proceeding or the Member responding to the
Arbitration Proceeding, whichever is greater.
3. Powers of Arbitrator(s). The arbitrator(s) shall have the power to
-----------------------
grant all appropriate legal and equitable relief, including without limitation
specific performance of contract (both by way of interim relief and as a part of
its final award), other than punitive damages, as may be granted by any court of
the State of New York, to carry out the terms of the Agreement (e.g.,
declaratory and injunctive relief and damages). The Members expressly waive any
right to punitive damages arising out of any Arbitrable Dispute. All awards and
orders of the arbitrator(s) (including, but not limited to interim relief) shall
be final and binding.
4. Discovery and Rules of Evidence. It is the intention of the Members
-------------------------------
that all Arbitration Proceedings be conducted as expeditiously as reasonably
possible in keeping with fairness and with a minimum of legal formalities.
Therefore, the Members have agreed that the rules of evidence shall not apply to
any Arbitration Proceeding, except that notwithstanding the foregoing the
attorney/client privilege and work product protection shall be applicable in all
Arbitration Proceedings. The Members agree that only limited discovery should be
allowed in an Arbitration Proceeding and incorporate the applicable laws of the
State of New York for this purpose. Unless otherwise ordered by the
arbitrator(s) on a showing of substantial need, each side shall be limited to
one document production request and one deposition and such discovery shall be
complete within sixty (60) days following appointment of the arbitrator(s). In
addition the parties shall exchange the names, qualifications and a narrative
report stating the opinion and basis therefor of any expert who may be called
fifteen (15) days prior to the start of the arbitration.
5. Timing. In furtherance of the intent of the Members expressed in the
------
first sentence of Section 4 of this Exhibit C, and unless modified by the
---------
arbitrator(s) upon a showing of good cause, all Arbitration Proceedings shall
proceed upon the following schedule: (a) within one (1) month from the service
of the notice of the request to arbitrate, the parties shall select the
arbitrator(s); (b) within fifteen (15) days after selection of the
arbitrator(s), the parties shall conduct a pre-arbitration conference at which a
schedule of pre-arbitration discovery shall be set, all pre-arbitration motions
scheduled and any other necessary pre-arbitration matters decided; (c) all
discovery allowed by the arbitrator(s) shall be completed within forty-five (45)
days following the pre-arbitration conference; (d) all pre-arbitration motions
shall be filed and briefed so that they may be heard no later than one (1) month
following the discovery cut-off; (e) the arbitration shall be scheduled to
commence no later than one (1) month after the decision on all pre-arbitration
motions but in any event no later than five (5) months following the service of
the
56
notice of arbitration; and (f) the arbitrator(s) shall render his or her or
their written decision (including without limitation any and all findings of
fact and conclusions of law) within one (1) month following the submission of
the matter. The Members intend the foregoing schedule to be an outside maximum
timetable, and nothing herein shall prevent the arbitrator(s) from ordering a
shorter timetable if the arbitrator(s) conclude(s) that the same is warranted by
the circumstances of any particular Arbitration Proceeding.
6. Transcript. All proceedings involving the Members in an Arbitration
----------
Proceeding shall be reported by a certified shorthand court reporter and written
transcripts of the proceedings shall be prepared and made available to the
Members.
7. Costs. The prevailing party shall be awarded reasonable attorneys'
-----
fees, expert and non-expert witness costs and expenses, and other costs and
expenses incurred in connection with the arbitration unless the arbitrator(s),
for good cause, determine(s) otherwise. A post-arbitration proceeding to
determine costs, if needed, shall be held within ten (10) days of notice of the
award. Costs and fees of the arbitrator(s) (including the cost of the record of
transcripts of the arbitration) shall be borne by the non-prevailing party,
unless the arbitrator(s) for good cause determine(s) otherwise. Costs and fees
payable in advance shall be advanced equally by the Members, subject to ultimate
payment by the non-prevailing party in accordance with the preceding sentence.
8. Reconsideration. Upon receipt of the written opinion of the
---------------
arbitrator(s), any Member shall have the right within ten (10) days to file with
the arbitrator(s) a motion to reconsider, and the arbitrator(s) shall then
reconsider the issues raised by the motion, may allow the other Member an
opportunity to respond thereto, and shall either confirm or change the decision
within ten (10) days after such filing. Such revised or confirmed decision shall
then be final and conclusive upon the Members. The costs (other than the
attorneys' fees of the respective parties) of a motion for reconsideration and
related proceedings shall be borne by the moving Member.
9. Specific Enforcement. The terms of this Exhibit C shall be
-------------------- ---------
specifically enforceable under applicable law in any court of competent
jurisdiction. The award rendered by the arbitrator(s) shall be final and binding
and judgment may be entered in accordance with applicable law and in any court
having jurisdiction thereof.
10. Interest on Award. Any monetary award of the arbitrator(s) may include
-----------------
interest at Prime plus five percent (5%), which interest shall accrue from the
date the claim, dispute or other matter in question was rightfully due and
payable under the Agreement until the date the award is paid to the prevailing
party.
11. Extraordinary Remedies. No provision of this Exhibit C shall limit the
---------------------- ---------
right of any Member to obtain provisional or ancillary remedies from a court of
competent jurisdiction in accordance with Section 14.3(b) of the Agreement.
---------------
NOTICE: BY INITIALING IN THE SPACE BELOW YOU ARE AGREEING TO HAVE ANY
DISPUTE ARISING OUT OF THE MATTERS INCLUDED IN THE "ARBITRATION OF DISPUTES"
PROVISION DECIDED BY NEUTRAL
57
ARBITRATION AS PROVIDED BY NEW YORK LAW AND YOU ARE GIVING UP ANY RIGHTS YOU
MIGHT POSSESS TO HAVE THE DISPUTE LITIGATED IN A COURT OR JURY TRIAL AND ANY
RIGHT YOU MAY HAVE TO RECOVER PUNITIVE DAMAGES ARISING OUT OF AN ARBITRABLE
DISPUTE. BY INITIALING IN THE SPACE BELOW YOU ARE GIVING UP YOUR JUDICIAL RIGHTS
TO DISCOVERY AND APPEAL, UNLESS THOSE RIGHTS ARE SPECIFICALLY INCLUDED IN THE
"ARBITRATION OF DISPUTES" PROVISION. IF YOU REFUSE TO SUBMIT TO ARBITRATION
AFTER AGREEING TO THIS PROVISION, YOU MAY BE COMPELLED TO ARBITRATE UNDER THE
AUTHORITY OF APPLICABLE LAW. YOUR AGREEMENT TO THIS ARBITRATION PROVISION IS
VOLUNTARY. WE HAVE READ AND UNDERSTAND THE FOREGOING AND AGREE TO SUBMIT
DISPUTES ARISING OUT OF THE MATTERS INCLUDED IN THE "ARBITRATION OF DISPUTES"
PROVISION TO NEUTRAL ARBITRATION.
_______________________ _______________________
NHP JER
Initials Initials
58
EXHIBIT D
---------
LIST OF APPROVED PROFESSIONALS
Primary Law Firms*
O'Melveny & ▇▇▇▇▇ LLP ▇▇▇▇▇▇▇ & ▇▇▇▇▇▇▇▇ - Houston, TX
▇▇▇▇▇▇ & ▇▇▇▇▇▇▇▇▇, LLP - Newport Beach, CA ▇▇▇▇▇ & ▇▇▇▇▇▇
Other Transactional/Healthcare Law Firms*
Alabama Michigan
------- --------
Johnston, Barton, ▇▇▇▇▇▇▇ & ▇▇▇▇▇▇ ▇▇▇▇▇ ▇▇▇▇, PLC
Haskill, Slaughter, ▇▇▇▇▇, ▇▇▇▇▇
Arizona Minnesota
------- ---------
▇▇▇▇▇▇▇▇▇ & ▇▇▇▇▇ ▇▇▇▇▇▇▇▇▇▇▇, ▇▇▇▇ & ▇▇▇▇▇▇▇▇ LLP
Arkansas Mississippi
-------- -----------
▇▇▇▇▇▇ & Bonds Baker, Donelson, Bearman & ▇▇▇▇▇▇▇▇
Connecticut Missouri
----------- --------
▇▇▇▇▇▇ & ▇▇▇▇ ▇▇▇▇▇▇▇ & ▇▇▇▇
Florida Nevada
------- ------
▇▇▇▇▇ ▇▇▇▇▇▇▇▇ ▇▇▇▇▇▇ & Bartlett
Illinois Ohio
-------- ----
▇▇▇▇▇▇▇▇ & Desjardines Ltd. Buckingham, ▇▇▇▇▇▇▇▇▇ & ▇▇▇▇▇▇▇▇▇
▇▇▇▇▇▇▇, ▇▇▇▇▇, ▇▇▇▇▇▇▇ & ▇▇▇▇▇
Indiana Oregon
------- ------
▇▇▇▇▇▇, ▇▇▇▇ & ▇▇▇▇▇ Saalfeld, Griggs, ▇▇▇▇▇▇▇,
▇▇▇▇▇▇▇▇▇ & ▇▇▇▇▇▇▇
Louisiana Pennsylvania
--------- ------------
▇▇▇▇▇, Liddell & ▇▇▇▇, LLP ▇▇▇▇▇▇ ▇▇▇▇ ▇▇▇▇▇ & ▇▇▇▇▇, LLP
▇▇▇▇▇ Rooney ▇▇▇▇▇▇ & ▇▇▇▇▇▇▇▇▇, a
Professional Corporation
Maryland South Carolina
-------- --------------
Miles & Stockbridge ▇▇▇▇▇▇ Law Firm, P.A.
Massachusetts South Dakota
------------- ------------
Posternak, ▇▇▇▇▇▇▇▇▇▇ & ▇▇▇▇ ▇▇▇▇▇▇▇, Main & ▇▇▇▇▇▇▇▇▇▇▇▇ P.C.
▇▇▇▇ & ▇▇▇▇
▇▇▇▇▇▇, ▇▇▇▇▇▇▇▇▇ & Fish, LLP
59
Tennessee
---------
Boult, Cummings, ▇▇▇▇▇▇▇ & ▇▇▇▇▇
Texas
-----
Akin, Gump, Strauss, ▇▇▇▇▇ & ▇▇▇▇, LLP
Washington
----------
▇▇▇▇▇▇, Cournage, MacAulay & ▇▇▇▇▇▇▇
▇▇▇▇▇▇, Best, Doezie & ▇▇▇▇▇ ▇▇
West ▇▇▇▇▇▇▇▇
-------------
▇▇▇▇▇▇▇ & ▇▇▇▇▇
Accountants
BDO ▇▇▇▇▇▇▇ LLP
Deloitte & Touche LLP
Ernst & Young LLP
▇▇▇▇▇ ▇▇▇▇▇▇▇▇ LLP
KPMG Peat Marwick LLP
McGladrey & ▇▇▇▇▇▇
▇▇▇▇ ▇▇▇▇▇
PricewaterhouseCoopers LLP
Environmental Consultants
Jones, Hill, ▇▇▇▇▇▇▇▇▇ & ▇▇▇▇▇
ENSR Corporation - Houston, TX
Surveyors
Jones, Hill, ▇▇▇▇▇▇▇▇▇ & ▇▇▇▇▇
U.S. Surveyor/AES Group Incorporated
Title Companies
First American Title Insurance Company Partners Title
Company - Houston, TX
* - As set forth in Section 4.1(b)(xi), all law firms are only approved with
------------------
respect to Company transactional matters.
60
EXHIBIT E
---------
INTERNAL RATE OF RETURN EXPLANATION AND SAMPLE CALCULATION
XIRR
Returns the internal rate of return for a schedule of cash flows that is not
necessarily periodic. To calculate the internal rate of return for a series of
periodic cash flows, use the IRR function.
XIRR (Values, Dates, Guess)
* Values is a series of cash flows that corresponds to a schedule of
payments in dates. The first payment is optional and corresponds to a cost or
payment that occurs at the beginning of the investment. If the first value is a
cost or payment, it must be a negative value. All succeeding payments are
discounted based on a 365-day year. The series of values must contain at least
one positive and one negative value.
* Dates is a schedule of payment dates that corresponds to the cash flow
payments. The first payment date indicates the beginning of the schedule of
payments. All other dates must be later than this date, but they may occur in
any order.
* Guess is a number that you guess is close to the result of XIRR.
REMARKS
* Microsoft Excel stores dates as sequential serial numbers so that it
can perform calculations on them. Excel stores January 1, 1900, as serial number
1 if your workbook uses the 1900 date system. If your workbook uses the 1904
date system, Excel stores January 1, 1904, as serial number 0 (January 2, 1904,
is serial number 1). For example, in the 1900 date system, Excel stores January
1, 1998, as serial number 35796 because it is 35,795 days after January 1, 1900.
* Numbers in dates are truncated to integers.
* XIRR expects at least one positive cash flow and one negative cash
flow; otherwise, XIRR returns the #NUM! error value.
* If any number in dates is not a valid date, XIRR returns the #NUM!
error value.
* If any number in dates precedes the starting date, XIRR returns the
#NUM! error value.
* If values and dates contain a different number of values, XIRR returns
the #NUM! error value.
* In most cases you do not need to provide guess for the XIRR
calculation. If omitted, guess is assumed to be 0.1 (10 percent).
* XIRR is closely related to XNPV, the net present value function. The
rate of return calculated by XIRR is the interest rate corresponding to XNPV =
0.
61
* Excel uses an iterative technique for calculating XIRR. Using a changing
rate (starting with guess), XIRR cycles through the calculation until the result
is accurate within 0.000001 percent. If XIRR can't find a result that works
after 100 tries, the #NUM! error value is returned. The rate is changed until:
(OLE_Obj...) (OLE_Obj...)
where:
di = the ith, or last, payment date.
d1 = the 0th payment date.
Pi = the ith, or last, payment.
EXAMPLE
Consider an investment that requires a $10,000 cash payment on January 1, 1998,
and returns $2,750 on March 1, 1998, $4,250 on October 30, 1998, $3,250 on
February 15, 1999, and $2,750 on April 1, 1999. The internal rate of return (in
the 1900 date system) is:
XIRR({-10000,2750,4250,3250,2750},
{"1/1/1998","3/1/1998","10/30/1998","2/15/1999","4/1/1999"},0.1)
equals:
0.374859 or 37.4859 percent
62
EXHIBIT F
---------
FORM OF ACQUISITION MEMORANDUM
THIS ACQUISITION MEMORANDUM is made and entered into as of the ___ day of
___________, 200_, by NATIONWIDE HEALTH PROPERTIES, INC., a Maryland corporation
("NHP"), in favor of JER SENIOR HOUSING, LLC, a Delaware limited liability
company ("JER"), ___________________, a ______________("Subsidiary Company"),
and JER/NHP SENIOR HOUSING, LLC, a Delaware limited liability company (the
"Company"), with reference to the following facts:
RECITALS:
A. NHP and JER are parties to that certain limited liability company
agreement (the "Agreement") captioned "Limited Liability Company Agreement of
JER/NHP Senior Housing, LLC" dated as of August 28, 2001. Except as otherwise
indicated, each capitalized term used herein shall have the meaning set forth
for the same in the Agreement.
B. The Agreement requires the delivery of this Memorandum with respect to
the contemplated acquisition by the Subsidiary Company of the ____________
facility commonly known as __________ located at ________________ (the
"Property") .
IN LIGHT OF THE FOREGOING FACTS, NHP hereby represents and warrants to JER,
Subsidiary Company and the Company, and each of them, as follows:
1. Letter of Intent. The Letter of Intent (the "LOI") attached hereto as
Attachment "1" is a true, complete and correct copy of the same and all
amendments, supplements and other modifications thereto. There are no oral
modifications or understandings with respect to the LOI.
2. Purchase Agreement. The proposed Purchase Agreement (the "Purchase
Agreement") attached hereto as Attachment "2" is a true, complete and correct
copy of the same and all amendments, supplements, extensions and other
modifications thereto. There are no oral modifications or understandings with
respect to the Purchase Agreement, and, without limitation, the "Buyer" or
"Purchaser" thereunder has not delivered to the "Seller" thereunder, and has not
received from Seller, any notice or demand under or in connection with the
Purchase Agreement that is not included in Attachment "2" hereto. There is no
material breach or default by the Buyer under the Purchase Agreement and to the
actual knowledge of NHP, there is no material breach or default by Seller under
the Purchase Agreement. The Company is the holder of all right, title and
interest to the Buyer's interest under the Purchase Agreement and, upon the
Closing Date, the Company will acquire all such right, title and interest.
3. Lease With Operator. The Lease attached hereto as Attachment "3" is a
true, complete and correct copy of the lease with the operator and all
amendments, supplements,
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extensions and other modifications thereto. There are no oral modifications or
understandings with respect to the Lease.
4. Actions Previously Taken Under the LOI.
(a) Title. Attached as Attachment "4" is a preliminary title report or
title commitment for the Property. The Buyer is required to accept (by specific
written approvals or deemed approvals under the Purchase Agreement) only those
matters specifically identified in Attachment "4" as the Permitted Exceptions.
(b) Leases. To the actual knowledge of NHP, no leases affect the Property,
except as follows: ____________________________________________________________
(c) Contracts. The Buyer is required to accept (by reason of specific
written approvals or deemed approvals under the Purchase Agreement) the
Permitted Exceptions and only those agreements specifically identified in
Attachment "5" (the "Contracts"). To the actual knowledge of NHP, there are no
matters which will affect the Property on the Closing Date other than the
Permitted Exceptions, the Contracts and Laws.
(d) Due Diligence. To the actual knowledge of NHP, there is no basis for
any Claim by Seller for indemnification under the LOI or the Purchase Agreement
(including any Claim based on Buyer's due diligence activities).
(e) Environmental and Soils Reports. A Phase I Environmental Report and
Soils Report for the Property are attached as Attachment "6".
(f) Survey. An ALTA Survey of the Property is attached as Attachment "7".
(g) Proposed Business Plan. Attachment "8" is a proposed business plan for
the property, which contains the following:
(i) a proposed Operating Budget, which shall include a NOI and
sensitivity analysis;
(ii) a proposed Capital Budget;
(iii) a market analysis of the Property and its immediate marketing
area; and
(iv) information acquired from Due Diligence.
(h) Investment Presentation. The investment information provided to the
Board of Directors or the Investment Committee of the Board of Directors of NHP
(as applicable) in its approval of such acquisition.
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Except as disclosed by this Acquisition Memorandum and its Attachments,
neither NHP nor any of its Affiliates has any actual knowledge of any
circumstances affecting the Property which would have a material and adverse
affect on the Property contemplated by this Acquisition Memorandum.
NATIONWIDE HEALTH PROPERTIES, INC.,
a Maryland corporation
By: _______________________
Name:
.....................................................
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