EX 10.79.8
THE LIMITED LIABILITY COMPANY INTERESTS CREATED BY THIS
AGREEMENT HAVE NOT BEEN REGISTERED UNDER THE SECURITIES
ACT OF 1933; AS AMENDED, OR UNDER THE STATE BLUE SKY
STATUTES IN THE VARIOUS STATES WHERE THE INTEREST(S)
MAY BE OFFERED, AND MAY NOT BE SOLD, TRANSFERRED,
PLEDGED, OR HYPOTHECATED IN THE ABSENCE OF AN EFFECTIVE
REGISTRATION STATEMENT UNDER SAME ACT OR THE APPLICABLE
STATE BLUE SKY STATUTES OR SATISFACTORY ASSURANCE TO
THE COMPANY THAT SUCH REGISTRATION IS NOT REQUIRED. IN
ADDITION THE SALE OR TRANSFER OF ANY INTEREST(S) IN THE
COMPANY MUST BE MADE IN ACCORDANCE WITH THE PROVISIONS
OF THIS AGREEMENT. IN VIEW OF THESE RESTRICTIONS, THE
PURCHASER OF ANY INTEREST(S) IN THE COMPANY MUST BE
PREPARED TO BEAR THE ECONOMIC RISK OF THE INVESTMENT
FOR AN INDEFINITE PERIOD OF TIME.
OPERATING AGREEMENT OF AURORA BAY I,
L.L.C.
January 6,1998
This Operating Agreement (the "Agreement") is
made and entered into as of the 6th day of January,
1998, by AURORA BAY INVESTMENTS, L.L.C., a Washington
limited liability company, and ▇▇▇▇▇ INVESTORS. I,
LLC., a Washington limited liability company, as We
initial members ("Members"). The Members agree to
operate the Company (hereinafter defined) as a limited
liability company under the laws of the state of
Washington, as follows:
The parties hereto agree as follows:
1. Definitions. The following terms used in the
Agreement shall have the meanings specified below:
1.1 "Act" means the Washington limited
Liability Company Act, as amended from time to
time.
1.2 "Additional Member" means a Member who
has been admitted to all rights of membership
pursuant to Section 14.5 below.
1.3 "Adjusted Contribution Amount" with
respect to each Member means the Capital
Contributions pursuant to Sections 7.1 and 7.4
below.
1.4 "Affiliate" means, with respect to the
second person (as defined in this paragraph) (i)
any person (the "first person") who directly or
indirectly controls a second person, or owns or
controls 10% or more of the outstanding
securities of the second person; (ii) any
officer, director, partner, or member of the
immediate family of the second person; and (iii)
if the second person is an officer, director, or
partner, any company for which the second person
acts in that capacity. Control includes the terms
"controlled by"-and "under common control with"
and means the possession, direct or indirect, of
the power to direct or cause the direction of the
management and policies of a person, whether
through the ownership of voting securities, by
contract or otherwise.
1.5 "Agreement" means this Operating Agreement of the Au
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1.6 "Assignee" means a person who has
acquired a Member's interest in whole
or part and has not become a Substitute Member.
1.7 "Capital Account" means the account
maintained for each Member in accordance with
Section 7S. In the case of a transfer of an
interest, the transferee shall succeed to the
Capital Account of the transferor or, in the case
of a partial transfer, a proportionate share
thereof.
1.8 "Capital Contribution" means the total
amount of money and the fair market value of a11
property contributed to the Company by each Member
pursuant to the terms of the Agreement. Capital
Contribution shall also include any amounts paid
directly by a Member to any creditor of the
Company in respect of any guarantee or similar
obligation undertaken by such Member in connection
with the Company's operations. Any reference to
the Capital Contribution of a Member shall include
the Capital Contribution made by a predecessor
holder of the interest of such Member.
1.9 "Cash Available for Distribution" means
all cash receipts of the Company, excluding cash
available upon liquidation of the Company, in
excess of amounts reasonably required for payment
of operating expenses, repayment of current
liabilities, repayment of such amounts of Company
indebtedness as the Managers shall determine
necessary or advisable, and the establishment of
and additions to such cash reserves as the
Managers shall deem necessary or advisable,
including, but not limited to, reserves for
capital expenditures, replacements, contingent or
unforeseen liabilities, or other obligations of
the Company.
1.10 "Code" means the United States Internal
Revenue Code of 1986, as amended. References to
specific Code Sections or Treasury Regulations
shall be deemed to refer to such Code Sections or
Treasury Regulations as they may be amended from
time to time or to any successor Code Sections or
Treasury Regulations if the Code Section or
Treasury Regulation referred to is repealed.
1.11 "Company" means the Aurora Bay 1, L.L.C.
governed by the Agreement.
1.12 "Company Property" means all the real
and personal property owned by the Company.
1.13 "Credit Agreement" means that certain
Credit Agreement dated as of January 7,1998, by
and between the Company and Emeritus Corporation.
1.14 "Deemed Capital Account" means a
Member's Capital Account as calculated from time
to time, adjusted by (i) adding thereto the sum of
(A) the amount of such Member's Mandatory
Obligation, if any, and (B) each Member's share of
Minimum Gain (determined after any decreases
therein for such year) and (ii) subtracting
therefrom (A) allocations of losses and deductions
which are reasonably expected to be made as of the
end of the taxable year to the Members pursuant to
Code Section 704(e)(2), Code Section 706(d) and
Treasury Regulation Section 1.751-1(b)(2)(ii), and
(B) distributions which at the end of the taxable
year are reasonably expected to be made to the
Member to the extent that said distributions
exceed offsetting increases to the Member's
Capital Account (including allocations of the
Qualified Income Offset pursuant to Section 8.5
but excluding allocations of Minimum Gain
Chargeback pursuant to Section 8.4) that are
reasonably expected to occur during (or prior to)
the taxable years in which such distributions are
reasonably expected to be made.
1.15 "Emeritus" means Emeritus Corporation, a
Washington corporation.
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1.16 "Emeritus Corporation Loan" means a loan
from Emeritus Corporation to the Company, to be
made to the Company pursuant to the Credit
Agreement, in an amount up to $5,000,000.00, with
an option in favor of Emeritus Corporation to
convert the loan to a Company Interest with a
Percentage Interest of forty-eight percent (48%).
1.17 "Interest" or "Company Interest" means
the ownership interest of a Member in the Company
at any particular time, including the right of
such Member to any and all benefits to which such
Member may be entitled as provided in the
Agreement and in the Act, together with the
obligations of such Member to comply with all the
terms and provisions of the Agreement and the Act.
1.18 "Mandatory Obligation" means the sum of
(i) the amount of a Member's re contribution
obligation (including the amount of any Capital
Account deficit such Member is obligated to
restore upon liquidation) provided that such
contribution must be made in all events within
ninety (90) days of liquidation of the Member's
interest as determined under Treasury Regulation
Section 1.704-1(b)(2)(ii)(g) and (ii) the
additional amount, if any, such Member would be
obligated to contribute as of year end to retire
recourse indebtedness of the Company if the
Company were to liquidate as of such date and
dispose of all of its assets at book value.
1.19 "Manager(s)" means those Member(s) and
other persons who are appointed in accordance with
this Agreement to exercise the authority of
Manager under this Agreement and the Act. If at
any time a Member who is a Manager ceases to be a
Member for any reason, that Member shall
simultaneously cease to be a Manager. At all times
there shall be at least one Manager who is a
Member. The Managers of the Company as of the date
of this Agreement are ▇▇▇▇▇ ▇. ▇▇▇▇▇▇▇▇▇ and ▇▇▇▇▇
▇▇▇▇▇. .
120 "Member(s)" means those persons and/or
entities that execute a counterpart of this
Agreement and those persons and/or entities that
are hereafter admitted as members under Section
14.4 below.
121 "Minimum Gain" means the amount
determined by computing, with respect to each
nonrecourse liability of the Company, the amount
of gain, if any, that would be realized by the
Company if it disposed of the Company Property
subject to such nonrecourse liability in full
satisfaction thereof in a taxable transaction and
then by aggregating the amounts so determined.
Such gain shall be determined in accordance with
Treasury Regulation Section 1.704-2(d). Each
Member's share of Minimum Gain at the end of a
taxable year of the Company shall be determined in
accordance with Treasury Regulation Section 1.704-
2(g)(1).
1.22 "Net Income" or "Net Loss" means taxable
income or loss (including items requiring separate
computation under Section 702 of the Code) of the
Company as determined using the method of
accounting chosen by the Managers and used by the
Company for federal income tax purposes, adjusted
in accordance with Treasury Regulation Section
1.704-1(b)(2)(iv)(g), for any property with
differing tax and book values, to take into
account depreciation, depletion, amortization, and
gain or loss as computed for book purposes.
1.23 "Partnership" means Lubbock Group, Ltd.,
a Texas limited partnership, for which the Company
will serve as its sole general partner.
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1.24 "Percentage Interest" means the percent
interest of each Member as set forth on Appendix
A.
1.25 "Project" means the senior housing
facility owned and developed by the Company.
1.26 "Project Loan" means the loan to be made by Aurora
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L.L.C. to the Partnership from proceeds of the
Emeritus Corporation Loan, as contemplated by the
Credit Agreement, and from its available cash,
which loan is to be evidenced by the terms of the
"Project Promissory Note", a copy of which is
attached hereto as Exhibit "A".
1.27 "Senior Debt" means the construction and
short-term permanent financing arranged by the
Company to construct and develop a Project as
described in Section 7.7 hereof including Take-out
Commitments.
1.28 "Subsidiary Loan" means a loan made by
Aurora Bay Investments, I, L.L.C. to the
Partnership from proceeds of loans made to Aurora
Bay Investments, LLC. by its Managers.
129 "Substitute Member" means an Assignee
who has been admitted to all of the rights of
membership pursuant to Section 14.4 below.
2. Formation. The Members hereby agree to operate
the Company under the terms and conditions set forth
herein. Except as otherwise provided herein, the rights
and liabilities of the Members shall be governed by the
Act.
2.1 Defects as to Formalities. A failure to
observe any formalities or requirements of this
Agreement, the certificate of formation for the
Company, or the Act shall not be grounds for
imposing personal liability on the Members for
liabilities of the Company.
2.2 No Partnership Intended for Nontax
Purposes. The Members have formed the Company
under the Act and expressly do not intend hereby
to form a partnership under either the Washington
Uniform Partnership Act or the Washington Uniform
I Limited Partnership Act or a corporation under
the Washington Business Corporation Act. The
Members do not intend to be partners one to
another or partners as to any third party. The
Members hereto agree and acknowledge that the
Company is to be treated as a partnership for
federal income tax purposes.
2.3 Rights of Creditors and Third Parties.
This Agreement is entered into among the Company
and the Members for the exclusive benefit of the
Company, its Members, their successors, and
assigns. The Agreement is expressly not intended
for the benefit of a creditor of the Company or
any other person. Except, and only to the extent
provided by applicable statute, no such creditor
or third party shall have all rights under the
Agreement or any agreement between the Company and
any Member with respect to any Contribution or
otherwise.
2.4 Title to Property. All Company Properly
shall be owned by the Company as an entity, and no
Member shall have any ownership interest in such
Company Properly in the Member's individual name
or right. Each Member's interest in the Company
shall be
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personal property for all purposes. Except as
otherwise provided in this Agreement, the Company
shall hold all Company Property in the name of the
Company and not in the name or names of any Member
or Members.
2.5 Payments of Individual Obligations. The
Company's credit and assets shall be used solely
for the benefit of the Company, and no asset of
the Company shall be transferred or encumbered
for, or in payment of any individual obligation of
any Member unless otherwise provided for herein.
3. Name. The name of the Company shall be AURORA
BAY I, L.L.C. The Managers may from time to time change
the name of the Company or adopt such trade or
fictitious names as they may determine to be
appropriate.
4. Office; Agent for Service of Process. The
principal office of the Company shall be at ▇▇▇ ▇▇▇▇
▇▇▇▇▇▇, ▇▇▇▇▇▇▇, ▇▇▇▇▇▇▇▇▇▇ ▇▇▇▇▇. The Company may
maintain such other offices at such other places as the
Managers may determine to be appropriate. The agent for
service of process for the Company shall be CT
Corporation System at the above address.
5. Purposes. The primary purpose and general
character of the business of the Company is to serve as
the general partner of Lubbock Group, Ltd., a Texas
limited partnership, specially formed to acquire,
develop, construct, operate, hold, and invest in
certain real property located in Lubbock, Texas, and to
engage in any lawful act or activity for which a
limited liability company may be organized under the
laws of the State of Washington, incident, necessary,
advisable, or desirable to carry out the purpose of the
Company.
6. Term. The term of the Company commenced upon
the filing of the Articles of Organization for the
Company in the office of the Washington Secretary of
State and shall continue until January l, 2027, unless
sooner dissolved, wound up, and terminated in
accordance with the provisions of this Agreement and
the Act.
7. Percentage Interest and Capital Contributions.
7.1 Initial Capital Contributions; Percentage
Interests . The Members made initial Capital
Contributions to the Company in the amounts set
forth on Appendix A for the Percentage Interests
in the Company as shown on Appendix A.
7.2 No Interest on Capital. No Member shall
be entitled to receive interest on such Member's
Capital Contributions or such Member's Capital
Account.
7.3 No Withdrawal of Capital. Except as
otherwise provided in this Agreement, no Member
shall have the right to withdraw or demand a
return of any or all of such Member's Capital
Contribution. It is the intent of the Members that
no distribution (or any part of any distribution)
made to any Member pursuant to Section 10 hereof
shall be deemed a return or withdrawal of Capital
Contributions, even if such distribution
represents (in full or in part) a distribution of
revenue offset by depreciation or any other
noncash item accounted for as an expense, loss, or
deduction from, or offset to, the Company's income
and that no Member shall be obligated to pay any
such amount to or for the account of the Company
or any creditor of the Company. However, if any
court of competent jurisdiction holds that,
notwithstanding the provisions of this Agreement,
any Member is obligated to make any such payment,
such obligation shall be the obligation of such
Member and not of any other Member, including
Managers.
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7.4 Additional Capital. Except as otherwise
provided for herein or mutually agreed upon by the
Members, no Member shall be obligated to make an
additional capital contribution to the Company.
7.5 Capital Accounts. The Company shall
establish and maintain a Capital Account for each
Member in accordance with Treasury Regulations
issued under Section 704. The initial Capital
Account balance for each Member shall be the
amount of initial Capital Contributions made by
each Member under Section 7.1 above. The Capital
Account of each Member shall be increased to
reflect (i) such Member's cash contributions, (ii)
the fair market value of property contributed by
such Member (net of liabilities securing such
contributed property that the Company is
considered to assume or take subject to Code
Section 752), (iii) such Member's share of Net
Income (including all gain as calculated pursuant
to Section 1001 of the Code) of the Company and
(iv) such Member's share of income and gain exempt
from tax. The Capital Account of each Member shall
be reduced to reflect (a) the amount of money and
the fair market value of property distributed to
such Member (net of liabilities securing such
distributed property that the Member is considered
to assume or take subject to under Section 752),
(b) such Member's share of noncapitalized
expenditures not deductible by the Company in
computing its taxable income as determined under
Code Section 705(a)(2)(B), (c) such Member's share
of Net Loss of the Company and (d) such Member's
share of amounts paid or incurred to organize the
Company or to promote the sale of Company
Interests to the extent that an election under
Code Section 709(b) has not properly been made for
such amounts. The Managers shall determine the
fair market value of all property which is
distributed in kind, and the Capital Accounts of
the Members shall be adjusted as though the
property had been sold for its fair market value
and the gain or loss attributable to such sale
allocated among the Members in accordance with
Section 8, as applicable. In the event of a
contribution of property with a fair market value
which is not equal to its adjusted basis (as
determined for federal income tax purposes), a
revaluation of the Members' Capital Amounts upon
the admission of new members to the Company, or in
other appropriate situations as permitted by
Treasury Regulations issued under Code Section
704, the Company shall separately maintain "tax"
Capital Accounts solely for purposes of taking
into account the variation between the adjusted
tax basis and book value of Company Property in
tax allocations to the Members consistent with the
principles of Code Section 704(c) in accordance
with the rules prescribed in Treasury Regulations
promulgated under Code Section 704.
7.6 Default. In the event any Member shall
fail to contribute any cash or property when due
hereunder, such Member shall remain liable
therefor to the Company, which may institute
proceedings in any court of competent jurisdiction
in connection with which such Member shall pay the
costs of such collection, including reasonable
attorneys' fees. Any compromise or settlement with
a Member failing to contribute cash or properly
due hereunder may be approved by a majority by
Percentage Interest of the other Members.
7.7 Financing. The Company shall manage
Senior Debt financing for the development and
lease-up of its Project in accordance with its
development budget.
8. Allocations.
8.1 Allocation of Net Income and Net Loss.
Except as otherwise provided in this Section 8,
Net Income and Net Loss for each fiscal year shall
be allocated to the Members in proportion to each
Member's Percentage Interest.
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8.2 Special Allocation. Notwithstanding
Section 8.1, depreciation, depletion,
amortization, and gain or loss for tax purposes
with respect to contributed property or with
respect to property which has been revalued under
Code Section 7.5(b) shall be allocated consistent
with the principal of Section 704(c) and the
regulations thereunder and Treasury Regulation
Section 1.704-1(b)(4)(i).
8.3 Limitation on Net Loss Allocations.
Notwithstanding anything contained in this Section
8, no Member shall be allocated Net Loss to the
extent such allocation would cause a negative
balance in such Member's Deemed Capital Account as
of the end of the taxable year to which such
allocation relates.
8.4 Minimum Gain Chargeback If there is a net
decrease in Minimum Gain during a taxable year of
the Company, then notwithstanding any other
provision of this Section 8 or Section 16.3, each
Member must be allocated items of income and gain
for such year and succeeding taxable years to the
extent necessary (the
"Minimum Gain Chargeback"), in proportion to, and
to the extent of an amount
required under Treasury Regulation Section 1.704-
2(f).
85 Qualified Income Offset. If at the end of
any taxable year and after operation of Section
8.4, any Member shall have a negative balance in
such Members Deemed Capital Account, then
notwithstanding anything contained in this Section
8, there shall be reallocated to each Member with
a negative balance in such Member's Deemed Capital
Account (determined after the allocation of
income, gain, or loss under this Section 8 for
such year), each item of Company gross income
(unreduced by any deductions) and gain in
proportion to such negative balances until the
Deemed Capital Account for each such Member is
increased to zero.
8.6 Curative Allocations. The allocations set
forth in Sections 83, 8.4, and 8S (the "Regulatory
Allocations") are intended to comply with certain
requirements of the Treasury Regulations issued
pursuant to Code Section 704(b). It is the intent
of the Members that, to the extent possible, all
Regulatory Allocations shall be offset either with
other Regulatory Allocations or with special
allocations of other items of Company income,
gain, loss, or deduction pursuant to this Section
8.6. Therefore, notwithstanding any other
provision of this Section 8 (other than the
Regulatory Allocations), the Managers shall make
such offsetting special allocations of Company
income, gain, loss, or deduction in whatever
manner they determine appropriate so that, after
such offsetting allocations are made, each
Member's Capital Account balance is, to the extent
possible, equal to the Capital Account balance
such Member would have had if the Regulatory
Allocations were not part of the Agreement and all
Company items were allocated pursuant to Sections
8.1 and 8.2. .
8.7 Modification of Company Allocations. It
is the intent of the Members that each Member's
distributive share of income, gain, loss,
deduction, or credit (or items thereof) shall be
determined and allocated in accordance with this
Section 8 to the fullest extent permitted by
Section 704(b) of the Code. In order to preserve
and protect the determinations and allocations
provided for in this Section 8, the Managers
shall be, and hereby are, authorized and directed
to allocate income gain, loss, deduction, or
credit (or items thereof) arising in any year
differently from the manner otherwise provided
for in this Section 8 if, and to the extent that,
allocation of income, gain, loss, deduction, or
credit (or items thereof) arising in any year
different from the manner otherwise provided for
in this Section 8 if, and to the extent that,
allocation of income, gain, loss, deduction, or
credit (or items thereof) in the manner provided
for in this
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Section 8 would cause the determination and
allocation of each Member's distributive share of
income, gain, loss, deduction, or credit (or
items thereof) not to be permitted by Section
704(b) of the Code and Treasury Regulations
promulgated thereunder. Any allocation made
pursuant to this Section 8.7 shall be made only
after the Managers have secured an opinion of
counsel that such modification is the minimum
modification required to comply with Code Section
704(b) and shall be deemed to be a complete
substitute for any allocation otherwise provided
for in this Section 8, and no amendment of this
Agreement or approval of any Member shall be
required. The Members shall be given notice of
the modification within thirty (30) days of the
effective date thereof such notice to include the
text of the modification and a statement of the
circumstances requiring the modification to be
made.
8.8 Deficit Capital Accounts at Liquidation.
It is understood and agreed that one purpose of
the provisions of this Section 8 is to insure
that none of the Members has a deficit Capital
Account balance after liquidation and to insure
that all allocations under this Section 8 will be
respected by the Internal Revenue Service. The
Members and the Company neither intend nor expect
that any Member will have a deficit Capital
Account balance after liquidation; and,
notwithstanding any thing to the contrary in this
Agreement, the provisions of this Agreement shall
be construed and interpreted to give effect to
such intention. However, if following a
liquidation of a Member's interest as determined
under Treasury Regulation Section 1.704-
1(b)92)(ii)(g), a Member has a deficit balance in
such Member's Capital Account after the
allocation of Net Income pursuant to this Section
8 and Section 16.3 and all other adjustments have
been made to such Member's Capital Account for
Company operations and liquidation, no Member
shall have any obligation to restore such deficit
balance.
9. Company Expenses. In addition to the costs to
be reimbursed to the Managers pursuant to the
provisions of Section 11.8 hereof but subject to the
limitations set forth therein, the Company shall pay,
and the Managers shall be reimbursed for, all costs and
expenses of the Company, which may include, but are not
limited to:
(a) All organizational expenses incurred
in the formation of the Company and the
selling of interests in the Company;
(b) All costs of personnel employed by
the Company;
(c) All costs reasonably related to the
conduct of the Company's day-to-day business
affairs, including, but without limitation,
the cost of supplies, utilities, taxes,
licenses, fees, and services contracted from
third parties;
(d) All costs of borrowed money, taxes,
and assessments on Company Property and other
taxes applicable to the Company;
(e) Legal, audit, accounting, brokerage,
and other fees;
(f) Printing and other expenses and
taxes incurred in connection with the
issuance, distribution, transfer,
registration, and recording of documents
evidencing ownership of an interest in the
Company or in connection with the business of
the Company;
(g) Fees and expenses paid to
contractors, mortgage bankers, brokers
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and services, leasing agents, consultants,
onsite managers, real estate brokers,
insurance brokers, and other agents,
including affiliates of the Managers;
(h) Expenses in connection with the
acquisition, preparation, design, planning,
construction, development, disposition,
replacement, alteration, repair, remodeling,
refurbishment, leasing, financing, and
refinancing and operation of Company Property
(including the costs and expenses of legal
and accounting fees, insurance premiums, real
estate brokerage, leasing commissions, and
maintenance of such property);
(i) The cost of insurance obtained in
connection with the business of the Company;
(j) Expenses of revising, amending,
converting, modifying, or terminating the
Company;
(k) Expenses in connection with
distributions made by the Company to, and
communications and bookkeeping and clerical
work necessary in maintaining relations with,
Members;
(1) Expenses in connection with
preparing and making reports required to be
furnished to Members for investment, tax
reporting, or other purposes that the
Managers deem appropriate;
(m) Costs incurred in connection with
any litigation, including any examinations or
audits by regulatory agencies; and
(n) Costs of preparation and
dissemination of informational material and
documentation relating to potential sale,
refinancing, or other disposition of Company
properties.
10. Distributions of Cash Available for
Distribution. At such times and in such amounts as
the Managers in their discretion determine
appropriate, and subject to a11 restrictions
concerning distribution contained in any agreement
with a third party, Cash Available for Distribution
shall be distributed in the following order of
priority:
(a) First, among the Members in
proportion to their Adjusted Contribution
Amounts until such balances are reduced to
zero; and
(b) Thereafter, among the Members in
proportion to their Percentage Interests.
As long as there are any amounts due and
owing to Emeritus under the Emeritus Corporation Loan,
or Emeritus is a member of Aurora Bay Investments,
L.L.C., the Managers shall cause the Company to make
quarterly distributions of Cash Available for
Distribution, no later than 45 days after the end of
each calendar quarter. In computing Cash Available for
Distribution, the Managers may set aside reasonable
amounts as reserves for capital expenditures,
replacements, contingent or unforeseen liability, or
other obligations of the Company, but the amounts of
such reserves shall be reassessed at the end of each
quarter to determine whether such balances are adequate
in amount, should be increased or decreased, and if
decreased the excess reserves will be available for
distribution to the Members. Moreover, Cash
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Available for Distribution may not be used by the
Company to make investments in new Projects without the
prior consent of Emeritus. It is the intent of the
Parties to make periodic distributions of Cash
Available for Distribution if and when such excess cash
is available and not to hold such funds to build up
reserves beyond reasonable amounts or to make
investments in new Projects.
11. Powers, Rights, and Obligations of
Managers.
11.1 General Authority and Powers of
Managers. Except as provided in Section 11.7
and elsewhere in the Agreement, the Managers
shall have the exclusive right and power to
manage, operate, and control the Company and to
do all things and make all decisions necessary
or appropriate to carry on the business and
affairs of the Company. All decisions required
to be made by the Managers shall require the
approval of all Managers, except as the
Managers shall otherwise agree. In the event
the Managers shall be unable to agree upon any
matter described in this Section 11.1, then the
Managers shall provide written notice of the
proposed action to all Members, and the
decision of Members holding a majority of the
Percentage Interests in the Company shall be
binding upon the Managers. The authority of the
Managers shall include, but shall not be
limited to, the following:
(a) To spend the capital and revenues of
the Company;
(b) To manage, sell, develop, improve,
operate, and dispose of any Company
properties and assets, including to act on
behalf of the Company with respect to any
partnership or joint venture in which the
Company participates;
(c) To employ persons, firms, and/or
corporations for the operation and management
of the Company's business and for the
operation and development of the properties
and assets of the Company, including, but not
limited to, sales agents, management agents,
architects, engineers, contractors,
attorneys, and accountants;
(d) To acquire, lease, and sell personal
and/or real property, hire and fire
employees, and to do all other acts
necessary, appropriate, or helpful for the
operation of the Company business;
(e) To execute, acknowledge, and deliver
any and all instruments to effectuate any of
the foregoing powers and any other powers
granted the Managers under the laws of the
state of Washington or other provisions of
this Agreement;
(f) To enter into and to execute
agreements for employment or services, as
well as any other agreements and all other
instruments the Managers deem necessary or
appropriate to operate the Company's business
and to operate and dispose of Company
properties and assets or to effectively and
properly perform its duties or exercise its
powers hereunder;
(g) To borrow money on a secured or
unsecured basis from individuals, banks, and
other lending institutions to finance its
Subsidiaries in the construction of a Project
or refinance Company assets, to meet other
Company obligations, provide Company working
capital and for any other Company purpose,
and to execute promissory notes, mortgages,
deeds of trust, and
10
assignments of Company's property and assets,
and such other security instruments as a
lender of funds may require, to secure
repayment of such borrowings; provided, that
no individual, entity, bank, or other lending
institution to which the Managers apply for a
loan shall be required to inquire as to the
purpose for which such loan is sought, and as
between the Company and such individual,
entity, bank, or other lending institution,
it shall be conclusively presumed that the
proceeds of such loan are to be, and will be,
used for purposes authorized under the terms
of this Agreement;
(h) To enter into such agreements and
contracts and to give such receipts,
releases, and discharges, with respect to the
business of the Company, as the Managers deem
advisable or appropriate;
(i) To purchase, at the expense of the
Company, such liability and other insurance
as the Managers, in their sole discretion,
deem advisable to protect the Company's
assets and business; however, the Managers -
shall not be liable to the Company or the
other Members for failure to purchase any
insurance; and
(j) To ▇▇▇ and be sued, complain,
defend, settle, and/or compromise with
respect to any claim in favor of or against
the Company, in the name and on behalf of the
Company.
(k) To lend money to the Company to pay
Company operating costs, including, without
limitation, all start-up costs, upon such
terms and conditions as the Managers shall
reasonably determine.
11.2 Time Devoted to company; Other Ventures.
The Managers shall
devote so much of their time to the business of
the Company as in their judgment the conduct of
the Company's business reasonably requires. The
Managers may engage in business ventures and
activities of any nature and description
independently or with others, whether or not in
competition with the business of the Company, and
shall have no obligation to disclose business
opportunities available to it, and neither the
Company nor any of the other Members shall have
any rights in and to such independent ventures and
activities or the income or profits derived
therefrom by reason of its acquisition of
interests in the Company. This Section 11.2 is
intended to modify any provisions or obligations
of the Act to the contrary, and each Manager and
the Company hereby waives and releases any claims
they may have under the Act with respect to any
such activities or ventures of the Managers or
other Members.
11.3 Liability of Managers to Members and to
the Company. In carrying out its duties and
exercising the powers hereunder, the Managers
shall exercise reasonable skill, care, and
business judgment. The Managers shall not be
liable to the Company or other Members for any act
or omission performed or omitted by it in good
faith pursuant to the authority granted to it by
this Agreement as a Manager or Tax Matters Partner
(as defined in the Code) unless such act or
omission constitutes negligence or willful
misconduct by such Manager.
11.4 Indemnification. The Company shall
indemnify and hold harmless the Managers from any
loss or damage, including attorneys' fees actually
and reasonably incurred by it, by reason of any
act or omission performed or omitted by it on
behalf of the Company or in furtherance of the
Company's interests or as Tax Matters Partner;
11
however, such indemnification or agreement to hold
harmless shall be recoverable only out of the
assets of the Company and not from the Members.
11.5 Fiduciary Responsibility. The Managers
shall have a fiduciary responsibility for the
safekeeping and use of all funds and assets of the
Company, and all such funds and assets shall be
used in accordance with the terms of this
Agreement.
11.6 Contract with the Manager.
(a) Without limitation upon the other
powers set forth herein, the Managers are
expressly authorized for, in the name and on
behalf of the Company to:
(i) Cause the Company Members for
expenses incurred accordance with
Section 11.8; to reimburse the Managers
and on behalf of the Company in
(ii) Permit the Partnership to
borrow monies from the Managers in
connection with the development,
construction, and operations of the
Projects as contemplated and permitted
by the Credit Agreement;
(iii) Permit the Partnership to
engage South Bay Partners, Inc., an
Affiliate of ▇▇▇▇▇ ▇. ▇▇▇▇▇▇▇▇▇, to
provide certain development services to
the Partnership to develop the Project
pursuant to the terms and conditions of
a Development Services Agreement, the
form and substance of which is set forth
in Exhibit "B" attached hereto;
(iv) Permit the Partnership to
engage ▇▇▇▇▇ ▇▇▇▇▇ Associates, Inc., an
Affiliate of ▇▇▇▇▇ ▇▇▇▇▇, to manage the
Project pursuant to the terms and
conditions or a Property Management
Agreement, the form and substance of
which is set forth in Exhibit "C"
attached hereto.
(b) The Company may not enter into, nor
may the Managers permit the Partnership to
enter into, any other agreement, contract, or
arrangement with a Manager, Member, or aa
Affiliate thereof or provide for an amendment
for any of the pre-authorized transactions,
pursuant to which such person may profit or
benefit, unless and until each of the
following conditions is satisfied:
(i) Such agreement, contract, or
arrangement or amendment is embodied
in a written contract that described
the goods to be provided, the services
to be rendered or the property to be
sold, transferred, assigned, or
conveyed, and all compensation,
payments, remuneration, or other
consideration to be paid;
(ii) Such agreement, contract, or
arrangement is promptly disclosed and
its terms summarized in the reports to
the Members and to Emeritus;
(iii) Such agreement, contract,
or arrangement is approved
12
or ratified by a majority vote of the
Member (excluding for this purpose the
Interests held by the interested
Member) and by Emeritus; and
(iv) Once approved, such
agreement, contract, or arrangement
may not be amended, modified, or
supplemented without the prior
approval of a majority of the Members
(excluding for this purpose the
Interests held by the interested
Member) and by Emeritus.
(c) The foregoing provisions are
specifically included herein for the benefit
of the Company and all the Members to enable
the Company to operate efficiently and
expeditiously, consistent with the standard
set forth, and the Members hereby waive and
release any claims they may have under the
Act for any contracts of agreements entered
into by the Managers which are consistent
with the provisions of this Section 11.6.
11.7 Restrictions on Authority of Managers
The Company will not take any of the
acts enumerated below or cause or permit
the Partnership to take similar acts,
unless proposed by the Managers and
approved by Emeritus or unless requested
by Emeritus and approved by Emeritus and
Members holding a majority of the
outstanding Interests, with or without the
concurrence of the Managers:
(i) The sale, exchange, or other
disposition of entity assets having a
fair market value of $50,000.00 or
more;
(ii) The sale, exchange, or
other disposition of any real estate
assets;
(iii) The incurrence of any
indebtedness by the entity, whether
secured or unsecured, recourse or
nonrecourse, in an amount of
$100,000.00 or more (standing
authorization may be given for
certain accounts receivable financing
or a permanent line of credit for the
benefit of the entity);(iv) Any
decision to expand or broaden the
scope of the entity's business beyond
that specifically authorized in the
entity's organizational documents;
(v) Any expenditures for capital
improvements or assets in excess of
$50,000.00;
(vi) The approval of an annual
budget for the entity, with the Managers
being authorized to expend funds
consistent with the annual budget as
long as such expenditures do not exceed
5% of the budgeted amounts;
(vii) Decisions regarding any
claims made by or against the entity,
including, but not limited to, decisions
regarding the prosecution, settlement,
or other disposition of such claims;
13
(viii) The response to any
governmental investigation, inquiry,
action, or the like affecting the
business and affairs of the entity;
(ix) Entering into a joint venture,
partnership, limited partnership, or
other business arrangement with any
third party to conduct the entity's
business;
(x) The admission of any new Member
to the entity (except to the extent that
such admission is expressly authorized
under this Agreement);
(xi) Any encumbrance, mortgage,
pledge, or granting of a security
interest or lien in any real or personal
property owned or to be owned by the
entity, except to the extent such
security interest or lien is granted to
secure entity financing permitted by the
terms of the Credit Agreement;
(xii) The execution of any
guaranty by the entity of another's
obligations;
(xiii) The dissolution and winding
up of the Company;
(xiv) Approval of the withdrawal of
a Manager;
(xv) Appointment of a new Manager;
(xvi) Continuation of the Company
in accordance with Section 16.1(d); .
(xvii) The acquisition of any real
property;
(xviii) Developing a Project other
than an Alzheimer's facility;
(xix) The engagement of the Manager
or any Affiliate thereof to enter into a
transaction with, or to provide goods,
materials, or services to the entity
(except to the extent that such
transaction is expressly permitted by
the terms of this Agreement or the
written contracts contemplated hereby);
and
(xx) The issuance of any equity
securities by the Company or the
Partnership.
11.8 Reimbursement and Compensation. Except
as otherwise provided herein, the Managers will be
entitled to be reimbursed for direct payment of
all reasonable and necessary business expenses
incurred in the administration of the Company.
Notwithstanding anything in this Agreement to the
contrary, the Company shall not pay nor reimburse
either of the Managers for:
(a) any compensation, salary or salary-
related expenses, or other remuneration,
however designated, paid to, or incurred by
▇▇▇▇▇ ▇. ▇▇▇▇▇▇▇▇▇, ▇▇▇▇▇ ▇▇▇▇▇, or Thilo
Best, in rendering any services to and on
behalf of the
14
Company under this Agreement.
(b) the Manager's overhead, such as rent
or depreciation, utilities, and capital
expenditures, or any other indirect costs
incurred by the Manager in maintaining its
corporate offices;
(c) any services rendered by the Manager
or its Affiliates pursuant to a separate
agreement between such persons and the
Company, providing separately for payment for
such services; or
(d) any compensation, salary or salary-
related expenses, or other remuneration,
however designated, paid to, or incurred by,
the employees of the Manager or any Affiliate
thereof in rendering services to or on behalf
of the Company (exclusive of services covered
by subparagraph (c) above, which are to be
handled as provided for therein) or any
goods, services, or products not purchased
for the exclusive use of the Company, except
to the extent that such arrangements are
disclosed to Emeritus in advance and approved
by it.
12. Status of Members.
12.1 No Participation in Management. Except
as specifically provided in Section 11.7 above, no
Member shall take part in the conduct or control
of the Company's business or the management of the
Company or have any right or authority to act for
or on the behalf of or otherwise bind, the Company
(except a Member who may also be a Manager and
then only in such Member's capacity as a Manager
within the scope of such Member's authority
hereunder).
12.2 Limitation of Liability. No Member shall
have, solely by virtue of such Member's status as
a Member in the Company, any personal liability
whatever, whether to the Company, to any Members,
or to the creditors of the Company, for the debts
or obligations of the Company or any of its losses
beyond the amount committed by such Member to the
capital of the Company, except as otherwise
required by the Act.
12.3 Death or Incapacity of Non-Manager
Member. The death, incompetence, withdrawal,
expulsion, bankruptcy, or dissolution of a Member,
or the occurrence of any other event which
terminates the continued membership of a Member in
the Company, shall not cause a dissolution of the
Company. Upon the occurrence of such event, the
rights of such Member to share in the Net Income
and Net Loss of the Company, to receive
distributions from the Company, and to assign an
interest in the Company pursuant to Section 14.3
below shall, on the happening of such an event,
devolve upon such Member's executor,
administrator, guardian, conservator, or other
legal representative or successor as the case may
be, subject to the terms and conditions of this
Agreement, and the Company shall continue as a
limited liability company. However, in any such
event, such legal representative or successor, or
any assignee of such legal representative or
successor, shall be admitted to the Company as a
Member only in accordance with and pursuant to all
of the terms and conditions of Section 14.4 hereof
12.4 Recourse of Members. Each Member shall
look solely to the assets of the Company for all
distributions with respect to the Company and such
Member's Capital
15
Contribution thereto and share of Net Income and
Net Loss thereof and shall have no recourse
therefor, upon dissolution or otherwise, against
any Manager or any other Member.
12.5 No Right to Proper r. No Member,
regardless of the nature of such Member's
contributions to the capital of the Company, shall
have any right to demand or receive any
distribution from the Company in any form other
than cash, upon dissolution or otherwise.
13. Books and Records, Accounting,
Reports and Statements, and Tax Matters.
13.1 Books and Records. The Managers shall,
at the expense of the Company, keep and
maintain, or cause to be kept and maintained,
the books and records of the Company on the same
method of accounting as utilized for federal
income tax purposes.
132 Annual Accounting Period. All books and
records of the Company shall be kept on the
basis of an annual accounting period ending
December 31 of each year, except for the final
accounting period which shall end on the date of
termination of the Company. All references
herein to the "fiscal year of the
Company" are to the annual accounting period
described in the preceding sentence, whether the
same shall consist of twelve months or less.
133 Managers' Reports to Members. The
Managers shall send, at Company expense, to each
Member the following:
(a) Within seventy-five (75) days
after the end of each fiscal year of the
Company, such information as shall be
necessary for the preparation by such
Member of such Member's federal income tax
return which shall include a computation of
the distributions to such Member and the
allocation to such Member of profits or
losses as the case may be; and
(b) Within forty-five (45) days after
the end of each fiscal quarter of the
Company, a quarterly report, which shall
include:
(i) A balance sheet;
(ii) A statement of income and
expenses;
(iii) A statement of changes in
Member's capital; and
(iv) A statement of the
balances in the Capital Accounts of
the Members.
13.4 Right to Examine Records. Members
shall be entitled, upon written request directed
to the Company, to review and copy at such
Members' expense the records of the Company at
all reasonable times and at the location where
such records are kept by the Company.
13.5 Tax Matters Partner. Should there be
any controversy with the Internal Revenue
Service or any other taxing authority involving
the Company, the Managers
16
may expend such funds as they deem necessary and
advisable in the interest of the Company to
resolve such controversy satisfactorily,
including, without being limited thereto,
attorneys' and accounting fees. Aurora Bay
Investments, L.L.C. is hereby designated as the
'Tax Matters Partner" as referred to in Section
6231(a)(7)(A) of the Code and is specially
authorized to exercise all of the rights and
powers now or hereafter granted to the Tax
Matters Partner under the Code.
Any cost incurred in the audit by any
governmental authority of the income tax returns of
a Member (as opposed to the company) shall not be a
Company expense. The Managers agree to consult with
and keep the Members advised with respect to (i)
any income tax audit of a Company income tax
return, and (ii) any elections made by the Company
for federal, state, or local income tax purposes.
13.6 Tax Returns. The Managers shall, at
Company expense, cause the Company to prepare and
file a United States Partnership Return of Income
and all other tax returns required to be filed by
the Company for each fiscal year of the Company.
13.7 Tax Elections. The Managers shall be
permitted in its discretion to determine whether
the Company should make an election pursuant to
Section 754 of the Code to adjust the basis of the
assets of the Company. Each of the Members shall,
upon request, supply any information necessary to
properly give effect to any such election. In
addition, the Manager, in its sole discretion,
shall be authorized to cause the Company to make
and revoke any other elections for federal income
tax purposes as they deem appropriate, necessary,
or advisable.
14. Transfers of Company Interests; Withdrawal and
Admission of Members
14.1 General Provision. No Member may
voluntarily or involuntarily, directly or
indirectly, sell, transfer, assign, pledge, or
otherwise dispose of or mortgage, pledge,
hypothecate, or otherwise encumber, or permit or
suffer any encumbrance of all or any part of such
Member's interest in the Company, except as
provided in this Section 14. Any other purported
sale, transfer, assignment, pledge, or encumbrance
shall be null and void and of no force or effect
whatsoever. Notwithstanding anything in this
agreement to the contrary, each of the Members is
authorized to grant to Emeritus a first priority
and exclusive security interest in such Members
Interest in the Company to secure the Company's
performance under the Credit Agreement and related
documents.
14.2 Withdrawal of Member. A Member shall
have no power to withdraw voluntarily from the
Company, except that a Member may withdraw upon
written approval of a majority of the non-
withdrawing Members voting by Percentage
Interests, which approval shall include the terms
for redemption by the Company of the Interest of
such Member.
14.3 Transfer by Members.
(a) Subject to any restrictions on
transferability required by law or
contained elsewhere in this Agreement, a
Member may transfer such Member's entire
interest in the Company upon satisfaction
of the following conditions:
(i) The transfer shall be
approved in writing by the
17
Members and Emeritus, which approvals
may be granted or denied in their sole
discretion.
(ii) The transferor and
transferee shall have executed and
acknowledged such reasonable and
customary instruments as the Members
may deem necessary or desirable to
effect such transfer; and
(iii) The transfer does not
violate any applicable law or
governmental rule or regulation,
including, without limitation, any
federal or state securities laws.
(b) At the time of a transfer of any
Member's interest, whether or not such
transfer is made in accordance with this
Section 14.3, all the rights possessed as a
Member in connection with the transferred
interest, which rights otherwise would be
held either by the transferor or the
transferee, shall terminate against the
Company unless the transferee is admitted
to the Company as a Substitute Member
pursuant to the provisions of Section 14.4
hereof; provided, however, that if the
transfer is made in accordance with this
Section 143, such transferee shall be
entitled to receive distributions to which
his transferor would otherwise be entitled
from and after the effective date of such
transfer, which date shall be specified by
the Managers and shall be no later than the
last day of the calendar month following
the first calendar month during which the
Managers have received notice of the
transfer and all conditions precedent to
such transfer provided for in this
Agreement have been satisfied. 'The Company
and the Managers shall be entitled to treat
the transferor as the recognized owner of
such interests until such effective date
and shall incur no liability for
distributions made in good faith to the
transferor prior to the effective date.
(c) Notwithstanding any other
provision of this Agreement, a Member may
not transfer such Member's interest in any
case if such a transfer, when aggregated
with all other transfers within a twelve
(12)-month period, would cause the
termination of the Company as a
partnership for federal income tax
purposes pursuant to Section 708 of the
Code, unless such transfer has been
previously approved by the Manager.
14.4 Admission of Transferees as Members
(a) No transferee of a Member shall be
admitted as a Member unless a11 of the
following conditions have been satisfied: .
(i) The transfer complies with
Section 14.3;
(ii) The prospective transferee has
executed an instrument, in form and
substance satisfactory to the Manager,
accepting and agreeing to be bound by
all the terms and conditions of this
Agreement, including the power of
attorney set forth in Section 17 hereof
and has paid all expenses of the Company
in effecting the transfer;
(iii) All requirements of the Act
regarding the admission of a
18
transferee Member have been complied
with by the transferee, the transferring
Member, and the Company; and
(iv) Such transfer is effective in
compliance with all applicable state and
federal securities laws.
(b) In the event of a transfer complying
with all the requirements of Section 14.3
hereof. and the transferee being admitted as a
Member pursuant to this Section 14.4, the
Manager, for itself and for each Member
pursuant to the Power of Attorney granted by
each Member, shall execute an amendment to
this Agreement and file any necessary
amendments to the articles of organization for
the Company. Unless named in this Agreement,
as amended from time to time, no person shall
be considered a Member.
14.5 Admission of Additional Members.
Additional Members of the Company may be admitted
if a proposed additional Member desires to
purchase an Interest from the Company, such
purchase may be made and the admission of the
additional Member shall become effective only if
approved by unanimous vote of the existing Members
and Emeritus and compliance with the provisions of
this Section 14.5 and 14.4(a)(ii), (iii), and (iv)
hereof. Notwithstanding anything in this Agreement
to the contrary, Emeritus will be admitted,
without requiring additional consents or approvals
of the Members or the Managers or the taking of
any other action, as substitute or additional
Member, should it exercise its rights to acquire
the Interest of a Member pursuant to the pledge
given to Emeritus to secure performance under the
Credit Agreement. There are no additional
conditions to Emeritus' admission to the Company
under those circumstances. The Company will,
however, cause an amendment to this Agreement to
be promptly prepared to evidence Emeritus'
decision to acquire such equity interest in the
Company. Emeritus' rights as a new Member are,
however, not contingent upon the Company's
preparing such an amendment;
15. Resignation and Admission of Manager.
15.1 Resignation of Manager. A Manager shall
not be entitled to resign as Manager. Moreover, if
a Manager resigns in contradiction to this
prohibition, such resigning Manager shall be
liable to the Company for any and all damages,
liabilities, costs, and expenses incurred by the
Company or the other Members as a result of such
resignation.
15.2 Death or Incompetency of Manager. A
Manager shall cease to be a Manager upon the
death, incompetency, bankruptcy, or dissolution of
such Manager.
15.3 Removal of a Manager. A Manager that is
a Member may be removed as a Manager upon the
unanimous written approval of the remaining
Members. A Manager that is not a Member may be
removed as a Manager upon the unanimous written
approval of Members, provided any Member which is
owned in whole or in part by the Manager sought to
be removed shall not be entitled to vote on such
Manager's removal, and the unanimous written
approval of the remaining Members shall be
necessary and sufficient to remove such Manager.
Removal of a Manager who is a Member of the
Company, pursuant to this Section 15.3, shall not
affect such Manager's interest as a Member of the
Company, if any.
19
15.4 Appointment of a New or Replacement
Manager. A new or replacement Manager may be
appointed with the written approval of Members
holding a majority of the Percentage Interests of
the Company and by Emeritus, provided, however,
that at all times there must be at least one
Manager in the Company.
15.5 Automatic Removal of a Manager. In the
event ▇▇▇▇▇ ▇. ▇▇▇▇▇▇▇▇▇ ceases to be a Member of
Aurora Bay Investments, L.L.C. for any reason, he
shall simultaneously cease to be a Manager. In the
event ▇▇▇▇▇ Investors I, L.L.C. ceases to be a
Member of Aurora Bay Investments, L.L.C. for any
reason, ▇▇▇▇▇ ▇▇▇▇▇ shall simultaneously cease to
be a Manager.
16. Dissolution, Winding Up, and Termination
16.1 Events Causing Dissolution. The Company
shall be dissolved and its affairs shall be wound
up upon the happening of the first to occur of any
of the following events:
(aj Expiration of the term of the
Company stated in Section 6 hereof;
(b) Entry of a decree of administrative
or judicial dissolution pursuant to the Act;
(c) The sale or other disposition of all
or substantially all of the assets of the
Company;
(d) The death, incompetence, withdrawal,
expulsion, resignation, removal, bankruptcy,
or dissolution of the last remaining Manager
of the Company, unless (i) within 120 days of
such occurrence, Members owning at least a
majority of Percentage Interests in the
Company, consent to the appointment of a new
Manager(s) in accordance with Section 15.4,
in which case the business of the Company
shall be carried on by the newly appointed
Manager(s);
(e) The unanimous written approval of
the Members to dissolve.
16.2 Winding Up.
(a) Upon dissolution of the Company for
any reason, the Managers shall commence to
wind up the affairs of the Company and to
liquidate its assets. In the event the
Company has terminated because the Company
lacks a Manager, then the remaining Members
shall appoint a new Manager solely for the
purpose of winding up the affairs of the
Company. The Managers shall have the full
right and unlimited discretion to determine
the time, manner, and terms of any sale or
sales of Company Property pursuant to such
liquidation. Pending such sales., the
Managers shall have the right to continue to
operate or otherwise deal with the assets of
the Company. A reasonable time shall be
allowed for the orderly winding up of the
business of the Company and the liquidation
of its assets and the discharge of its
liabilities to creditors so as to enable the
Managers to minimal the normal losses
attendant upon a liquidation, having due
regard to the activity and condition of the
relevant markets for the Company properties
and general financial and economic
conditions. .
20
(b) The Managers shall cause the
proceeds from the sale and liquidation of the
Company's property to be applied and
distributed in the following order:
(i) First to the payment and
discharge of all of the Company's debt
and liabilities to creditors, including
payments of any Project Loans and
Subsidiary Loans and other loans from
Members and their affiliates, and all
expenses of liquidation;
(ii) Second, after giving effect to
all the allocations required to be made
under this Agreement, to Members in
proportion to their Capital Account
balances; and
(iii) Thereafter, the balance, if
any, to the Members in proportion to
their Percentage Interests.
(c) It is intended and anticipated that
the amount of case distributed upon a
termination or dissolution of the Company
should equal the sum of the Members' Capital
Accounts after adjustments of such balance
in accordance with Sections 7 and 8 hereof.
16.3 Certificate of Cancellation; Report;
Termination. Upon the dissolution and completion
of winding up of the Company, the Managers shall
execute and file a certificate of cancellation
for the Company. Within a reasonable time
following the completion of the liquidation of
the Company's assets, the Managers shall prepare
and furnish to each Member, at the expense of the
Company, a statement which shall set for the
assets and liabilities of the Company as of the
date of complete liquidation and the amount of
each Member's distribution pursuant to Section
162 hereof Upon completion of the liquidation and
distribution of all Company funds, the Company
shall terminate, and the Managers shall have the
authority to execute and file all documents
required to effectuate the termination of the
Company.
17. Special and Limited Powers of Attorney
(a) The Managers shall at all times
during the existence of the Company have a
special and limited power of attorney as the
authority to act
in the name and on the behalf of each Member
to make, execute, swear to, verify,
acknowledge, and file the following documents
and any other .documents deemed by the
Managers to be necessary for the business of
the Company;
(b) This Agreement, any separate
certificate of formation, fictitious business
name statements, as well as any amendments to
the foregoing which under the laws of any
state are required to be fled or which the
Managers deem it advisable to file;
(c) Any other instrument or document
which may be required to be filed by the
Company under the laws of any state or by
any governmental agency or which the
Managers deem advisable to file; and
(d) The special and limited power of
attorney granted to the Manager hereby:
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(i) Is a special and limited power
of attorney coupled with an interest,
is irrevocable, shall survive the
dissolution or incompetency of the
granting Members and is limited to
those matters herein set forth;
(ii) May be exercised by the
Managers(or by any authorized officer of
the Manager, if not a natural person)
for each Member by referencing the list
of Members on Appendix A and executing
any instrument with a single signature
acting as attorney-in-fact for all of
them;
(iii) Shall survive a transfer by a
Member of such Member's interest in the
Company pursuant to Section 14.3 hereof
for the sole purpose of enabling the
Managers to execute, acknowledge, and
file any instrument or document
necessary or appropriate to admit a
transferee as a Member; and
(iv) Notwithstanding the foregoing,
in the event that a Manager ceases to be
a Manager in the Company, the power of
attorney granted by this Section 17 to
such Manager shall terminate
immediately; but any such termination
shall not affect the validity of
any documents executed prior to such
termination or any other actions
previously taken pursuant to this power
of attorney or in reliance upon its
validity, all of which shall continue to
be valid and binding upon the Members in
accordance with their terms.
18. Amendments. Except as otherwise provided by
law, this Agreement may be amended in any respect by
the unanimous written approval of the Members and
Emeritus.
19. Miscellaneous.
19.1 Notices. Any notices or communications
required or permitted to be delivered hereunder
must be in writing and shall be deemed to be
delivered (i) upon receipt if delivered personally
or (ii) upon deposit in the United States Mail,
certified, return receipt requested, postage
prepaid, addressed to the Members, as the case may
be, or (iii) upon receipt of a facsimile
transmission, at the following addresses and/or
facsimile numbers:
Aurora Bay I, L.L.C.
Attention: ▇▇▇▇▇ ▇. ▇▇▇▇▇▇▇▇▇
▇▇▇▇ ▇▇▇ ▇▇▇▇▇▇▇
▇▇▇▇▇ ▇▇▇, ▇▇▇▇ ▇▇▇ ▇▇
▇▇▇▇▇▇, ▇▇▇▇▇ ▇▇▇▇▇
Phone: ▇▇▇-▇▇▇-▇▇▇▇
Fax #: ▇▇▇-▇▇▇-▇▇▇▇
Aurora Bay Investments, L.L.C.
Attention: ▇▇▇▇▇ ▇. ▇▇▇▇▇▇▇▇▇
▇▇▇▇ ▇▇▇ ▇▇▇▇▇▇▇
▇▇▇▇▇ ▇▇▇, ▇▇▇▇ ▇▇▇ ▇▇
▇▇▇▇▇▇, ▇▇▇▇▇ ▇▇▇▇▇
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Phone: ▇▇▇-▇▇▇-▇▇▇▇
Fax #: ▇▇▇-▇▇▇-▇▇▇▇
▇▇▇▇▇ Investors I, L.L.C.
Attention: ▇▇▇▇▇ ▇▇▇▇▇
▇▇▇▇ ▇.▇. ▇▇▇▇ ▇▇▇▇▇▇
▇▇▇▇▇▇▇▇▇, ▇▇▇▇▇▇▇▇▇▇ ▇▇▇▇▇
Phone: ▇▇▇-▇▇▇-▇▇▇▇
Fax #: ▇▇▇-▇▇▇-▇▇▇▇
▇▇. ▇▇▇▇▇ ▇. ▇▇▇▇▇▇▇▇▇
5720 LBJ Freeway
▇▇▇▇▇ ▇▇▇, ▇▇▇▇ ▇▇▇ ▇▇
▇▇▇▇▇▇, ▇▇▇▇▇ ▇▇▇▇▇
Phone: ▇▇▇-▇▇▇-▇▇▇▇
Fax #: ▇▇▇-▇▇▇-▇▇▇▇
▇▇. ▇▇▇▇▇ ▇▇▇▇▇
▇▇▇▇ ▇.▇. ▇▇▇▇ ▇▇▇▇▇▇
▇▇▇▇▇▇▇▇▇, ▇▇▇▇▇▇▇▇▇▇ ▇▇▇▇▇
Phone: ▇▇▇-▇▇▇-▇▇▇▇
Fax #: ▇▇▇-▇▇▇-▇▇▇▇
19.2 Entire Agreement. This Agreement
constitutes the entire agreement
among the parties and supersedes any prior
agreement or understandings among them, oral or
written, all of which are hereby cancelled. This
Agreement may not be modified or amended other
than pursuant to Section 18 hereof.
19.3 Captions: Pronouns. The paragraph and
section titles or captions contained in this
Agreement are inserted only as a matter of
convenience of reference. Such titles and
captions in no way define, limit, extend, or
describe the scope of this Agreement nor the
intent of any provision hereof All pronouns and
any variation thereof shall be deemed to refer to
the masculine, feminine, or neuter, singular or
plural, as the identify of the person or persons
may require.
19.4 Counterparts. This Agreement may be
executed in any number of counterparts and by
different parties hereto in separate
counterparts, each of which when so executed
shall be deemed to be an original and all of
which when taken together shall constitute one
and that same agreement. Delivery of any executed
counterpart of a signature page to this Agreement
by facsimile shall be effective as delivery of an
executed original counterpart of this Agreement.
19.5 Governing Law. This Agreement shall be
governed by and construed in accordance with the
internal laws of the State of Washington.
19.6 Expiration of Emeritus' Rights. The
rights granted to Emeritus will expire and be of
no further force and effect if the following
conditions is satisfied: (i) Emeritus does not
exercise its right to convert the Emeritus
Corporation Loan into an equity interest in the
Company prior to the expiration of such right
under the Convertible Promissory Note, and (ii)
the Managers discharge, and each of the Members
discharges, in full any and all obligations it
owes to Emeritus under the Credit Agreement, the
Convertible Promissory Note, and any and all other
documents executed in connection
23
therewith.
IN WITTINESS WHEREOF the parties have executed
this Agreement as of the date first hereinabove
written.
MEMBERS:
Aurora Bay Investments,
L.L.C., a
Washington limited
liability company
By: /s/ ▇▇▇▇▇ ▇.
▇▇▇▇▇▇▇▇▇
------------------
-------------------
▇▇▇▇▇ ▇.
▇▇▇▇▇▇▇▇▇, Manager
By: /s/ ▇▇▇▇▇ ▇▇▇▇▇
-----------------
------------------
▇▇▇▇▇ ▇▇▇▇▇,
Manager
▇▇▇▇▇ INVESTORS I,
L.L.C., a Washington
limited liability company
By: /s/ ▇▇▇▇▇ ▇▇▇▇▇
-----------------
---------------
▇▇▇▇▇ ▇▇▇▇▇,
Manager
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