AMENDED AND RESTATED LIMITED LIABILITY COMPANY AGREEMENT OF DENVER LOWRY JV, LLC A Delaware Limited Liability Company
Exhibit
10.78
AMENDED
AND RESTATED
OF
DENVER
▇▇▇▇▇ ▇▇, LLC
A
Delaware Limited Liability Company
AMENDED
AND RESTATED
OF
DENVER
▇▇▇▇▇ ▇▇, LLC
This
Amended and Restated Limited Liability Company Agreement (the “Agreement”) of
DENVER
▇▇▇▇▇ ▇▇, LLC,
a
Delaware limited liability company (the “Company”), is entered into as of the
14th day of October, 2005, by DENVER
▇▇▇▇▇ SENIOR HOUSING, LLC,
a
Delaware limited liability company (“CNL”), and ARC
▇▇▇▇▇, LLC,
a
Tennessee limited liability company (“ARC”), as members (CNL and ARC are
sometimes referred to herein as the “Members” or individually as a
“Member”).
Preamble:
WHEREAS,
pursuant
to the Certificate of Formation of the Company filed in the office of the
Delaware Secretary of State on October 11, 2005, the Company was formed as
a
limited liability company under the Delaware Limited Liability Company Act;
WHEREAS,
the
parties entered into that certain Limited Liability Company Agreement of
the
Company on October 14, 2005 (the “Original LLC Agreement”) for the purpose of
setting forth and agreeing upon their respective rights, duties and
responsibilities with respect to the management and affairs of the Company
and
memorializing certain other agreements between them with respect to the Company
and their interests therein; and
WHEREAS,
the
parties desire to amend and restate the Original LLC Agreement in its
entirety.
NOW,
THEREFORE,
for and
in consideration of the foregoing premises, the mutual covenants and agreements
set forth herein, the contributions to the capital of the Company made and
to be
made hereunder, and for other good and valuable considerations, the receipt
and
sufficiency of which are hereby acknowledged, the parties hereby agree as
follows:
ARTICLE
1
DEFINITIONS
The
following terms used in this Agreement, unless the context otherwise requires,
shall have the following meanings:
“Act”
means
the Delaware Limited Liability Company Act, as the same may be amended from
time
to time.
“Actual
TCCO”
means
the actual costs incurred by or on behalf of the Company until such time
as the
development and construction of the Senior Living Facility is completed and
a
certificate of occupancy is granted.
“Adjusted
Capital Account Deficit”
means,
with respect to any Member, the deficit balance, if any, in a Member’s Capital
Account, after giving effect to the following adjustments:
2
(i) Credit
to
such Capital Account any amounts such Member is deemed to be obligated to
restore pursuant to the penultimate sentences of Regulations Sections
1.704-(g)(1) and 1.704-2(i)(5); and
(ii) Debit
to
such Capital Account, the items described in Regulations Sections
1.704-1(b)(2)(ii)(d)(4), (5) and (6).
The
foregoing definition of Adjusted Capital Account Deficit is intended to comply
with the provisions of Regulations Section 1.704-1(b)(2)(ii)(d), and shall
be
interpreted consistently therewith.
“Advisor”
means
CNL Capital Corp., a Florida corporation, its successors and/or
assigns.
“Affiliate”
means,
when used with reference to any Person, (i) any Person that, directly or
indirectly, through one or more intermediaries controls, is controlled by,
or is
under common control with, or owns a greater than fifty percent (50%) interest
in the specified Person (the term “control” for this purpose, shall mean the
ability, whether by the ownership of shares or other equity interest, by
contract or otherwise, to elect a majority of the directors of a corporation,
independently to select the managing partner of a partnership or the manager
or
managers of a limited liability company, or otherwise to have the power
independently to remove and then select a majority of those Persons exercising
governing authority over an entity, and control shall be conclusively presumed
in the case of the direct or indirect ownership of fifty percent (50%) or
more
of the equity interests in the specified Person); and (ii) a spouse, parent,
sibling, or issue of such Person.
“Agreement”
or
“this
Agreement”
means
this Amended and Restated Limited Liability Company Agreement of Denver ▇▇▇▇▇
▇▇, LLC, as originally executed and as it may be amended from time to
time.
“Approval
of the Members”
and
“Approved
by the Members”
means
the unanimous written approval of all of the Members.
“ARC
TCCO Capital”
means
the funds advanced to the Company by ARC or caused to be advanced to the
Company
by ARC (irrespective of whether such funds are advanced directly from ARC,
indirectly from its ultimate parent American Retirement Corporation, a Tennessee
corporation, or indirectly from any affiliate thereof) pursuant to Section
3.2(b) to fund the amount by which Actual TCCO exceeds Budgeted TCCO.
3
“Bankrupt
Member”
means
any Member (a) that (i) makes a general assignment for the benefit of creditors;
(ii) files a voluntary bankruptcy petition; (iii) becomes the subject of
an
order for relief or is declared insolvent in any federal or state bankruptcy
or
insolvency proceedings; (iv) files a petition or answer seeking for the Member
a
reorganization, arrangement, composition, readjustment, liquidation,
dissolution, or similar relief under any law; (v) files an answer or other
pleading admitting or failing to contest the material allegations of a petition
filed against the Member in a proceeding of the type described in subclauses
(i)
through (iv) of this clause (a); or (vi) seeks, consents to, or acquiesces
in
the appointment of a trustee, receiver, or liquidator of the Member’s properties
or of all or any substantial part thereof; or (b) against which, a proceeding
seeking reorganization, arrangement, composition, readjustment, liquidation,
dissolution, or similar relief under any law has been commenced and sixty
(60)
days have expired without dismissal thereof or with respect to which, without
the Member’s consent or acquiescence, a trustee, receiver, or liquidator of the
Member or of all or any substantial part of the Member’s properties has been
appointed and sixty (60) days have expired without the appointments having
been
vacated or stayed, or sixty (60) days have expired after the date of expiration
of a stay, if the appointment has not previously been vacated.
“Budgeted
TCCO”
means
the costs budgeted by the Company (as more fully set forth on Exhibit E attached
hereto) for the development and construction of the Senior Living Facility
until
such Senior Living Facility is complete and a certificate of occupancy is
granted.
“Business
Day”
means
any day other than a Saturday, Sunday, or other day on which commercial banks
are authorized to close under the laws of, or are in fact closed in, the
State
of Colorado.
“Capital
Account”
means,
with respect to any Member, the capital account maintained for such Member
in
accordance with the following provisions:
(i) To
each
Member’s Capital Account there shall be credited (a) such Member’s Capital
Contributions, (b) such Member’s distributive share of Profits and any items in
the nature of income or gain that are specially allocated pursuant to
Section
4.3
or
Section
4.4
hereof,
and (c) the amount of any Company liabilities assumed by such Member or that
are
secured by any Property distributed to such Member. The principal amount
of a
promissory note that is not readily traded on an established securities market
and that is contributed to the Company by the maker of the note (or a Member
related to the maker of the note within the meaning of Regulations Section
1.704-1(b)(2)(ii)(c)) shall not be included in the Capital Account of any
Member
until the Company makes a taxable disposition of the note or until (and to
the
extent) principal payments are made on the note, all in accordance with
Regulations Section 1.704-1(b)(2)(iv)(d)(2);
(ii) To
each
Member’s Capital Account there shall be debited (a) the amount of money and the
Gross Asset Value of Property distributed to such Member pursuant to any
provision of this Agreement, (b) such Member’s distributive share of Losses and
any items in the nature of expenses or losses that are specially allocated
pursuant to Section 4.3 or Section 4.4 hereof, and (c) the amount of any
liabilities of such Member assumed by the Company or that are secured by
any
Property contributed by such Member to the Company;
4
(iii) In
the
event an Interest is transferred in accordance with the terms of this Agreement,
the transferee shall succeed to the Capital Account of the transferor to
the
extent it relates to the transferred Interest; and
(iv) In
determining the amount of any liability for purposes of subparagraphs (i)
and
(ii) above there shall be taken into account Code Section 752(c) and any
other
applicable provisions of the Code and Regulations.
The
foregoing provisions and the other provisions of this Agreement relating
to the
maintenance of Capital Accounts are intended to comply with Regulations Section
1.704-1(b), and shall be interpreted and applied in a manner consistent with
such Regulations. In the event the Manager determines that it is prudent
to
modify the manner in which the Capital Accounts, or any debits or credits
thereto (including, without limitation, debits or credits relating to
liabilities that are secured by contributed or distributed property or that
are
assumed by the Company or any Members), are computed in order to comply with
such Regulations, the Manager may make such modification, provided that it
is
not likely to have a material effect on the amounts distributed to any Person
pursuant to Article
11
hereof
upon the dissolution of the Company. The Manager also shall (i) make any
adjustments that are necessary or appropriate to maintain equality between
the
Capital Accounts of the Members and the amount of capital reflected on the
Company’s balance sheet, as computed for book purposes, in accordance with
Regulations Section 1.704-1(b)(2)(iv)(q) and (ii) make any appropriate
modifications in the event unanticipated events might otherwise cause this
Agreement not to comply with Regulations Section 1.704-1(b).
“Capital
Contributions”
means,
with respect to any Member, the amount of money and the initial Gross Asset
Value of any property (other than money) contributed to the Company with
respect
to the Interest in the Company held or purchased by such Member.
“Capital
Proceeds”
shall
mean the cash proceeds (net of costs, expenses, any amounts required to be
paid
into escrow and any debts required to be paid pursuant to the transaction
generating such proceeds or pursuant to any Company financing)
from:
(a) the
sale,
exchange or other disposition of any portion of the Property or the Senior
Living Facility, other than those resulting in, or in the course of, the
liquidation and dissolution of the Company, which shall be governed by Article
XI hereof;
(b) any
mortgage financing or refinancing of any mortgage loans on the Property or
the
Senior Living Facility (including any permanent loan), but not including
any
advances borrowed by the Company under the terms of the Construction Loan
or any
Member Loan; or
(c) any
condemnation, casualty insurance or any other nonrecurring proceeds not used
for
the restoration of the Property or the Senior Living Facility.
“Capital
Transactions”
means
any transaction that produces Capital Proceeds.
5
“Certificate”
means
the Certificate of Formation of the Company that was filed with the Delaware
Secretary of State, as the same may be amended from time to time.
“Code”
means
the Internal Revenue Code of 1986, as amended (or any corresponding provision
or
provisions of succeeding law).
“Company”
means
the limited liability company created by the filing of the Certificate, as
the
Company may from time to time be constituted.
“Company
Minimum Gain”
has
the
meaning given to the term “partnership minimum gain” in Regulations Sections
1.704-2(b)(2) and 1.704-2(d).
“Construction
Lender”
means
GMAC Commercial Mortgage Corporation.
“Construction
Loan”
means
the first mortgage construction/mini-perm loan provided by the Construction
Lender to the Company in an amount up to Twenty-five Million Four Hundred
Eighty
Thousand and No/100s Dollars ($25,480,000.00) for the development of the
Property and the construction of the Senior Living Facility.
“Depreciation”
means,
for each Fiscal Year or other period, an amount equal to the depreciation,
amortization or any other cost recovery deduction allowable with respect
to an
asset for such year or other period, except that if the Gross Asset Value
of an
asset differs from its adjusted basis for federal income tax purposes at
the
beginning of such Fiscal Year or other period, Depreciation shall be an amount
that bears the same ratio to such beginning Gross Asset Value as the federal
income tax depreciation, amortization or other cost recovery deduction for
such
Fiscal Year or other period bears to such beginning adjusted tax basis;
provided, however, that if the adjusted basis for federal income tax purposes
of
an asset at the beginning of such Fiscal Year or other period is zero,
Depreciation shall be determined with reference to such beginning Gross Asset
Value using any reasonable method selected by the Manager.
“Development
Fee”
shall
have the meaning set forth in Section 8.1 hereof.
“Effective
Date”
means
October 14, 2005.
“Event
of Bankruptcy”
shall
mean any event that causes a Member to be deemed a Bankrupt Member.
“Fiscal
Year”
means
the Fiscal Year of the Company, which shall be the calendar year.
“Force
Majeure”
shall
have the meaning set forth in Section 14.4 hereof.
“Governmental
Authority”
shall
mean any board, bureau, commission, department or body of any municipal,
county,
state or federal governmental or quasi-governmental unit, or any subdivision
thereof, having or acquiring jurisdiction over the Property or any portion
thereof or the management, operation, use or improvement thereof.
“Gross
Asset Value”
means,
with respect to any asset, the asset’s adjusted basis for federal income tax
purposes, except as follows:
6
(i) The
initial Gross Asset Value of any asset contributed by a Member to the Company
shall be the gross fair market value of such asset, as determined by the
Majority in Interest of the Members;
(ii) The
Gross
Asset Value of each Company asset shall be adjusted to equal its respective
gross fair market value (taking into account Code Section 7701(g)), as
determined by the Manager, as of the following times: (a) the acquisition
of an
additional Interest in the Company by any new or existing Member in exchange
for
more than a de minimis Capital Contribution; (b) the distribution by the
Company
to a Member of more than a de minimis amount of Company property as
consideration for an Interest in the Company; and (c) the liquidation of
the
Company within the meaning of Regulations Section 1.704-1(b)(2)(ii)(g);
provided, however, that an adjustment described in clauses (a) and (b) of
this
subparagraph (ii) shall be made only if the Manager reasonably determines
that
such adjustment is necessary to reflect the relative economic interests of
the
Members in the Company;
(iii) The
Gross
Asset Value of any Company asset distributed to any Member shall be adjusted
to
equal the gross fair market value (taking into account Code Section 7701(g))
of
such asset on the date of distribution as determined by the Manager;
and
(iv) The
Gross
Asset Values of Company assets shall be increased (or decreased) to reflect
any
adjustments to the adjusted basis of such assets pursuant to Code Sections
734(b) or 743(b), but only to the extent that such adjustments are taken
into
account in determining Capital Accounts pursuant to Regulations Section
1.704-1(b)(2)(iv)(m) and subparagraph (vi) of the definition of “Net Profits”
and “Net Loss” or Section 4.3(g); provided, however, that Gross Asset Values
shall not be adjusted under this subparagraph (iv) to the extent that an
adjustment pursuant to subparagraph (ii) is required in connection with a
transaction that would otherwise result in an adjustment pursuant to this
subparagraph (iv). If the Gross Asset Value of an asset has been determined
or
adjusted pursuant to subparagraph (i), (ii), or (iv), such Gross Asset Value
shall thereafter be adjusted by the Depreciation taken into account with
respect
to such asset, for purposes of computing Net Profits and Net Loss.
“Initial
Capital Contributions”
means,
with respect to each Member, the amount of money and the initial Gross Asset
Value of any property (other than money) contributed to the Company by CNL
and
ARC as reflected on Exhibit
B
attached
hereto.
“Interest”
means,
as to any Member, all of the limited liability company interest of that Member
in the Company, including, but not limited to, such Member’s (i) Capital
Account, (ii) right to allocations of items of income, gain, loss, deduction
and
credit of the Company in accordance with the terms of this Agreement, and
(iii)
right to a distributive share of the Company’s assets.
“Investment
Return”
means,
as and only to CNL, a one-time non-annualized non-compounded return equal
to the
product obtained by multiplying (i) CNL’s Initial Capital Contribution as set
forth on Exhibit
B
by (ii)
eleven and twelve one hundredths percent (11.12%).
7
“Loan
Documents”
shall
have the meaning given to such term in Section
2.3(b)(iii)
hereof.
“Major
Condemnation”
means
an
event in which all or substantially all of the Senior Living Facility shall
be
taken in an eminent domain, condemnation, compulsory acquisition or similar
proceeding by any competent authority for any public or quasi-public use
or
purpose, or an event in which a portion of the Senior Living Facility shall
be
so taken, but the result is that it is unreasonable to continue to operate
the
Senior Living Facility in accordance with the standards required under the
Management Agreement.
“Majority
in Interest of the Members”
means
Members who collectively own more than fifty percent (50%) of the Percentage
Interests. Where such term is prefaced by a modifying fraction or percentage,
which is greater than fifty percent (50%), e.g. “two-thirds,” then the modified
term means Members who collectively own at least the stated fraction or
percentage of the Percentage Interests.
“Management
Agreement”
means
that certain Management Agreement by and between the Property Manager and
the
Company regarding the management of the Property.
“Manager”
means
ARC ▇▇▇▇▇, LLC, a Tennessee limited liability company, in its capacity as
the
Manager of the Company pursuant to the terms and provisions of this Agreement,
and any other Person that becomes a Manager of the Company pursuant to Section
6.5 hereof.
“Member”
means
any one of the Members.
“Members”
means all Persons admitted to the Company as a Member, initially CNL and
ARC.
“Member
Nonrecourse Debt”
has
the
meaning given to the term “partner nonrecourse debt” in Regulations Section
1.704-2(b)(4).
“Member
Nonrecourse Debt Minimum Gain”
means
an
amount with respect to each Member Nonrecourse Debt equal to the Company
Minimum
Gain that would result if such Member Nonrecourse Debt were treated as a
Nonrecourse Liability, determined in accordance with Regulations Section
1.704-2(i)(3).
“Member
Nonrecourse Deductions”
has
the
meaning given to the term “partner nonrecourse deductions” in Regulations
Sections 1.704-2(i)(1) and 1.704-2(i)(2).
“Net
Cash Flow”
means
the gross cash proceeds of the Company less the portion thereof used to pay
or
establish reserves for all Company expenses (including any Development Fees,
Management Fees, Financing Fees and corporate maintenance expenses), debt
payments, capital improvements, replacements, and contingencies, all as
determined by the Manager. “Net Cash Flow” shall not be reduced by depreciation,
amortization, cost recovery deductions, or similar allowances, but shall
be
increased by any reductions of reserves previously established pursuant to
the
first sentence of this definition.
8
“Net
Profit”
and
“Net
Loss”
means,
for each Fiscal Year or other period, an amount equal to the Company’s taxable
income or taxable loss for such Fiscal Year or other 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 Profits or Losses pursuant to this definition shall
be
added to such taxable income or loss;
(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 Regulations Section
1.704-1(b)(2)(iv)(i), and not otherwise taken into account in computing Net
Profits or Net Loss pursuant to this definition, shall be subtracted from
such
taxable income or loss;
(iii) In
the
event the Gross Asset Value of any Company asset is adjusted pursuant to
subparagraphs (ii) or (iii) of the definition of “Gross Asset Value,” the amount
of such adjustment shall be treated as an item of gain (if the adjustment
increases the Gross Asset Value of the asset) or an item of loss (if the
adjustment decreases the Gross Asset Value of the asset) from the disposition
of
such asset and shall be taken into account for purposes of computing Profits
or
Losses;
(iv) Gain
or
loss resulting from any disposition of Company property with respect to which
gain or loss is recognized for federal income tax purposes shall be computed
by
reference to the Gross Asset Value of the property disposed of, notwithstanding
that the adjusted tax basis of such property differs from its Gross Asset
Value;
(v) In
lieu of
the depreciation, amortization, and other cost recovery deductions taken
into
account in computing such taxable income or loss, there shall be taken into
account Depreciation for such Fiscal Year or other period, computed in
accordance with the definition of “Depreciation” hereinabove; and
(vi) To
the
extent an adjustment to the adjusted tax basis of any Company asset pursuant
to
Code Section 734(b) is required, pursuant to Regulations Section
1.704-(b)(2)(iv)(m)(4), to be taken into account in determining Capital Accounts
as a result of a distribution other than in liquidation of a Member’s interest
in the Company, the amount of such adjustment shall be treated as an item
of
gain (if the adjustment increases the basis of the asset) or loss (if the
adjustment decreases such basis) from the disposition of such asset and shall
be
taken into account for purposes of computing Net Profits and Net
Loss;
(vii) Notwithstanding
any other provision of this definition, any items that are specially allocated
pursuant to Section
4.3
or
Section
4.4
below
shall not be taken into account in computing Net Profits or Net Loss;
and
9
(viii) The
amounts of the items of Company income, gain, loss, or deduction available
to be
specially allocated pursuant to Sections
4.3
and
4.4
hereof
shall be determined by applying rules analogous to those set forth in
subparagraphs (i) through (vi) above.
“Nonrecourse
Deductions”
has
the
meaning given to such term in Regulations Section 1.704-2(b)(1) and
1.704-2(c).
“Nonrecourse
Liability”
has
the
meaning given to such term in Regulations Section 1.704-2(b)(3).
“ODA
Advances”
means
the advances made by ARC or an affiliate thereof to the Company as required
by
the Operating Deficits Guaranty.
“ODA
Advances Account”
means
an
account maintained by the Company for ARC. The ODA Advances Account shall
be
credited (increased) with the ODA Advances as and when made by ARC to the
Company, credited (increased) by the ODA Advances Return and debited (decreased)
by amounts distributed to ARC pursuant to Sections
5.1(a),
5.2(a)
and
5.2(j).
“ODA
Advances Return”
means
an
amount computed as if ARC were earning a rate of interest equal to five percent
(5%) per annum, calculated monthly and non-compounded, on the outstanding
balance of ARC’s ODA Advances. The ODA Advances Return shall be calculated from
and after the date on which ODA Advances are made until the date of distribution
to ARC.
“Operating
Deficits Guaranty”
means
that certain Operating Deficits Guaranty entered into by and between American
Retirement Corporation, a Tennessee corporation, and the Construction Lender
entered into in connection with the Construction Loan.
“Percentage
Interest”
means,
with respect to any Member, the Interest of the Member in the Company expressed
as a percentage for the purposes of allocating items of income, gain, loss,
deduction and credit of the Company and making distributions of cash pursuant
to
the terms of this Agreement and determining the respective voting rights
of the
Members hereunder. The Percentage Interest of the Members are set forth on
Exhibit
B
attached
hereto.
“Person”
means
any individual, partnership, corporation, limited liability company, trust,
estate, or other entity.
“Preamble”
means
the preamble to this Agreement appearing prior to this Article 1.
“Prime
Rate”
means
the prime rate of interest as published in the “Money Rates” section of the
Eastern Edition of the Wall Street Journal.
“Property”
means
the real property described on Exhibit A attached hereto.
“Property
Manager”
means
ARC
MANAGEMENT, LLC,
a
Tennessee limited liability company, in its capacity as the manager of the
Property pursuant to the terms and conditions of the Management Agreement,
and
any successor Person employed by the Company as manager of the Property pursuant
to the terms and conditions of a property management agreement.
10
“Regulations”
means
the permanent and temporary Income Tax Regulations, and all amendments,
modifications, and supplements thereof, from time to time promulgated by
the
Department of the Treasury under the Code.
“Senior
Living Facility”
means
the senior residential facility to be developed and constructed on the Property
consisting of approximately one hundred and thirty-two (132) independent
living
units, thirty-one (31) assisted living units and sixty (60) skilled nursing
beds.
“Subsidiary”
will
mean any Person at least fifty-one percent (51%) owned, directly or indirectly,
by another Person.
“Substituted
Member”
has
the
meaning given to such term in Section
9.2.
“Total
Casualty”
will
mean any fire or other casualty which results in damage to the Senior Living
Facility and its contents to the extent that it would be commercially
impractical to undertake to repair and/or replace the Senior Living Facility
to
substantially the same condition as previously existed.
“Unreturned
Capital Contributions”
means,
with respect to each Member, as of any date, an amount equal to the aggregate
Capital Contributions made by such Member, less, as to such Member, the total
cash distributions made to such Member in return of such Capital Contributions
pursuant to Sections
5.1(c),
5.2(b),
5.2(d),
5.2(k)
and
5.2(n).
Terms
defined in the Preamble have the meaning therein specified. To the extent
that
terms bearing initial upper case letters appear in this Agreement but are
not
defined in the Preamble or in this Article, such terms shall have the meaning
set forth elsewhere in this Agreement.
ARTICLE
2
FORMATION
OF COMPANY, NAME, ETC.
2.1 Formation.
The
Company was formed by the filing of the Certificate with the Secretary of
State
of the State of Delaware (the “Secretary of State”) pursuant to the applicable
provisions of the Act. ▇▇▇▇▇ ▇▇▇▇▇, as an “authorized person” within the meaning
of the Act, executed, delivered and filed the Certificate with the Secretary
of
State. Upon the filing of the Certificate, his powers ceased and the Manager
thereupon became the designated “authorized person.”
2.2 Name.
The name
of the Company shall be Denver ▇▇▇▇▇ ▇▇, LLC and the business and affairs
of the
Company shall be conducted under that name or such other name as may be Approved
by the Members from time to time.
2.3 Limited
Purpose of Company.
(a) The
Company is organized for the limited purpose of acquiring, owning, and managing
certain real property located in Denver, Colorado, more particularly described
on Exhibit
A
attached
hereto (the “Property”), and developing and constructing the Senior Living
Facility.
11
(b) Subject
to
Section
6.2,
the
Company is empowered to do any and all acts and things necessary, appropriate,
proper, advisable, incidental to or convenient for the furtherance and
accomplishment of the purposes and business described herein and for the
protection and benefit of the Company, including, but not limited to, full
power
and authority to:
(i) enter
into, perform and carry out contracts of any kind;
(ii) acquire,
own, manage, improve and develop the Property and the Senior Living Facility,
and lease, exchange, sell, transfer and dispose of the Property and the Senior
Living Facility;
(iii) finance
the acquisition of the Property and the development of the Senior Living
Facility by executing the necessary Loan documentation (the “Loan Documents”),
and effecting the transactions contemplated therein and, in connection with
any
such financing arrangement, to pledge as security all or substantially all
of
its assets including, without limitation, all of its right, title and interest
in and to the Property and the Senior Living Facility;
(iv) to
repay
such financing through any lawful means, including, without limitation, the
sale
or transfer of the Property and the Senior Living Facility in connection
with a
tax-free like kind exchange under Section 1031 of the Code; and
(v) to
engage
in any lawful act or activity, to enter into any agreement or other undertaking
and to exercise any powers permitted to limited liability companies organized
under the Act that, in any such case, are incidental to and necessary or
convenient for the accomplishment of the above mentioned purposes.
2.4 Term.
The
Effective Date of this Agreement is October __, 2005, and the term of the
Company shall be perpetual, unless earlier dissolved and terminated (and
not
reconstituted by at least a Majority in Interest of the remaining Members,
as
provided for in this Agreement) pursuant to the Act or any provision of this
Agreement.
2.5 Principal
Office.
The
Company’s principal office shall initially be located at ▇▇▇ ▇▇▇▇▇▇▇▇ ▇▇▇▇▇,
▇▇▇▇▇ ▇▇▇, ▇▇▇▇▇▇▇▇▇, ▇▇▇▇▇▇▇▇▇ ▇▇▇▇▇. The Manager may change the location
of
the Company’s principal office from time to time or establish and maintain
additional places of business for the Company, and shall make any filing
and
take any other action required by applicable law in connection with the
change.
2.6 Separateness
from Affiliates.
The
Company shall, and the Members and the Manager also shall cause the Company
to:
(a) be
legally
and in fact separate from any other Person;
(b) conduct
its business in its own name and to use its own name for the purposes of
obtaining required registrations, licenses and permits (whether governmental,
administrative or otherwise) necessary to the conduct of its
business;
12
(c) correct
any known misunderstandings regarding its separate identity;
(d) maintain
its books and records separate from those of any other Person and, if required
by law to file tax returns, file its tax returns separate from those of any
other Person;
(e) maintain
its funds and accounts separate from those of any other Person;
(f) not
commingle its assets with those of the Members or any other Person (except
as
contemplated by the Loan Documents);
(g) maintain
its financial statements separate from the financial statements of any other
Person; provided, however, that nothing contained herein shall prohibit the
inclusion of the Company in consolidated financial statements with other
entities as long as the Company’s separate existence is noted in any such
statements;
(h) use
stationery, invoices and checks separate from those of any other
Person;
(i) pay
its
liabilities out of its own funds, provided, however, the foregoing shall
not
require the Members to make any additional Capital Contributions to the Company,
except as otherwise required by this Agreement;
(j) not
acquire obligations or securities of the Members or its Affiliates;
(k) pay
the
salaries of its employees, if any, and maintain a sufficient number of employees
in light of its contemplated business operations, provided, however, the
foregoing shall not require the Members to make any additional Capital
Contributions to the Company, except as otherwise required by this
Agreement;
(l) allocate
fairly and reasonably any overhead for shared office space;
(m) maintain
adequate capital in light of its contemplated business operations and purpose,
provided, however, the foregoing shall not require the Members to make any
additional Capital Contributions to the Company, except as otherwise required
by
this Agreement;
(n) limit
the
debt of the Company to the debt incurred in the ordinary course of business
and
debt incurred as described in Section
2.3
hereof;
(o) not
guarantee or become obligated for the debts of any other Person or hold out
its
credit as being available to satisfy the obligations of others or, except
as
provided in Section 2.3 hereof, allow others to guarantee or become liable
on
the debts of the Company;
(p) except
as
described in Section
2.3
hereof,
not pledge its assets for the benefit of any other Person or make any loans
or
advances to any Person;
13
(q) not
make
loans to any other Person or buy or hold evidence of indebtedness issued
by any
other Person (except for cash and investment-grade securities);
(r) observe
all Delaware limited liability company formalities;
(s) maintain
an arm’s-length relationship with its Affiliates; and
(t) not
take
any action if, as a result of such action, the Company would be required
to
register as an investment company under the Investment Company Act of 1940,
as
amended.
ARTICLE
3
CAPITAL
CONTRIBUTIONS;CAPITAL ACCOUNTS
3.1 Initial
Capital Contributions.
The
Members shall contribute the amount of capital opposite their names as set
forth
on Exhibit
B
attached
hereto (the contributions set forth on Exhibit
B
shall be
referred to herein as the “Initial Capital Contributions”). The Members
acknowledge and agree that such Initial Capital Contributions may be made
at any
time, but in any event, shall be made at such times and in such amounts as
are
needed to fund costs and expenses for the development and construction of
the
Property and the Senior Living Facility and that the full funding of such
Initial Capital Contributions is required by the Construction Lender as a
condition precedent to any draws being made by the Company under the
Construction Loan. Within five (5) business days following the date upon
which
the Members receive a notice to fund from the Manager, the Members shall
contribute to the Company, an amount determined by multiplying that Member’s
Percentage Interest by the funding required in the Manager’s notice. In the
event that either Member, for whatever reason (other than a payment timing
delay
due to an event of Force Majeure; provided, however, that in no event shall
a
payment be delayed for more than thirty (30) days), fails to fully contribute
the aggregate amount of its Initial Capital Contribution as set forth on
Exhibit
B
pursuant
to this Section
3.1,
(i) such
Member’s Interest in the Company shall be forfeited and any and all rights with
respect to such Interest, including without limitation, such Member’s right to
vote and receive distributions, shall immediately terminate and (ii) any
amounts
previously contributed to the Company by such Member shall be retained by
the
Company and its members as liquidated damages for such Member’s breach its
funding obligation. The Members hereby agree and acknowledge that, in the
event
of a failure of a Member to fully fund its Initial Capital Contribution as
set
forth on Exhibit B, actual damages will be difficult to ascertain and, as
such,
the forfeiture of such Member’s Interests as liquidated damages is an
appropriate remedy.
14
3.2 Member
Loans.
(a) In
General. In order to satisfy its financial needs, the Company may borrow
funds
from ARC or CNL or one of their Affiliates (each a “Member Loan”). Unless
otherwise designated in the loan agreements or accompanying documents, repayment
of principal and interest on such loans will be solely the obligation of
the
Company and not of the Members. Any loans to the Company from ARC, CNL or
one of
their respective Affiliates shall be Approved by the Members and, except
as
provided in Sections
3.2(b)
and
(c)
below,
shall bear interest at the Prime Rate.
(b) ARC
TCCO Advances.
In the
event that Actual TCCO exceeds the Budgeted TCCO prior to such time as the
Senior Living Facility obtains a certificate of occupancy and such excess
is a
result of events not constituting Force Majeure, ARC shall advance the cost
of
such overruns by (i) first, providing up to Seven Hundred Fifty Thousand
Dollars
($750,000) of its own funds (which advances shall not be repaid and shall
not be
deemed a Member Loan or any other type of loan) and (ii) second, advancing
ARC
TCCO Capital. Any ARC TCCO Capital advanced by ARC pursuant to this Section
3.2(b)
shall not
be treated as a Capital Contribution, but instead, shall be treated as a
Member
Loan that shall be repaid by the Company pursuant to Sections
5.2(f)
and
5.2(p)
hereof,
which Sections establish only the priority of repayment of such Member Loan
and
shall not cause the repayments to be treated as “distributions” for purposes of
maintaining Capital Accounts.
(c) ARC
ODA
Advances.
Following receipt of a certificate of occupancy for the Senior Living Facility,
ARC shall make ODA Advances as and when required pursuant to the Operating
Deficit Guaranty. Any ODA Advances advanced by ARC pursuant to this Section
3.2(c)
shall not
be treated as a Capital Contribution, but instead, shall be treated as a
Member
Loan that shall be repaid by the Company pursuant to Sections
5.1(a),
5.2(a)
and
5.2(j)
hereof,
which Sections establish only the priority of repayment of such Member Loan
and
shall not cause the repayments to be treated as “distributions” for purposes of
maintaining Capital Accounts. The Manager shall provide monthly reconciliation
statements to the Members regarding the ODA Advances Account pursuant to
Section
3.5
hereof.
(d) No
Default.
If ARC
has met its obligations to advance ARC TCCO Capital and/or ARC ODA Advances
pursuant to this Section
3.2
and, in
spite of these advances, the Company is still without sufficient funds to
meet
its needs, ARC will not be in default of this Agreement. Further, it shall
not
be a default under this Agreement if ARC does not make an ODA Advance as
a
result of an ongoing material breach or violation of this Agreement by CNL,
CNL’s unreasonable and/or bad faith refusal to grant a requested consent or
approval under the Management Agreement which results in an increased ODA
Advance, or the Manager’s unreasonable and/or bad faith refusal to grant a
requested consent or approval under the Management Agreement which results
in an
increased operating cost, if the Manager is not an Affiliate of
ARC.
15
3.3 Return
of Capital.
No
Member shall have any liability for the return of any Member’s Capital
Contributions. A Member shall not receive out of the Company’s property all or
any part of such Member’s Capital Contributions except as provided in
Sections
5.1
and
5.2
hereof.
3.4 Capital
Accounts.
The
Company shall maintain for each Member an account designated as such Member’s
Capital Account. The Capital Accounts shall be maintained in accordance with
Section 1.704-1(b)(2)(iv) of the Regulations, and the items of income, profit,
gain, expenditures, deductions and losses which increase or decrease such
capital accounts shall be those items which, pursuant to such Regulations,
affect the balance of capital accounts.
3.5 ODA
Advance Account.
The
Company shall maintain an account designated as ARC’s ODA Advance Account, which
account shall be credited (increased) by each ODA Advance as and when made
by
ARC to the Company, credited (increased) by each ODA Advances Return and
debited
(decreased) by amounts distributed to ARC pursuant to Sections
5.1(a),
5.2(a)
and
5.2(j).
The
Manager shall provide monthly reconciliation statements to the Members regarding
such ODA Advance Account.
ARTICLE
4
ALLOCATIONS
OF PROFITS AND LOSSES
As
of the
end of each Fiscal Year, the Company’s Net Profit or Net Loss and each item of
income, gain, loss and deduction related thereto, as well as other items
of
income, gain, loss or deduction which are subject to special allocation
provisions, shall be allocated to the Capital Accounts of the Members and
for
federal income tax purposes pursuant to the following Sections of this Article
4.
4.1 Allocation
of Net Loss.
After
giving effect to the special allocations set forth in Section
4.3
and
Section
4.4
hereof,
if there is a Net Loss for any Fiscal Year, such Net Loss shall be allocated
as
set forth in Section
4.1(a)
below,
subject to the limitations in Section
4.1(b)
below:
(a) Net
Loss
for any Fiscal Year shall be allocated in the following order and
priority:
(i) First,
to
the Members, proportionately in accordance with their respective Percentage
Interests, in an amount equal to the excess, if any, of (A) the cumulative
Net
Profits allocated pursuant to Section
4.2(c)
hereof
for all prior Fiscal Years, over (B) the cumulative Net Losses allocated
pursuant to this Section
4.1(a)(i)
for all
prior Fiscal Years;
(ii) Second,
one hundred percent (100%) to CNL, in an amount equal to the excess, if any,
of
(A) the cumulative Net Profits allocated pursuant to Section
4.2(b)
hereof
for all prior Fiscal Years, over (B) the cumulative Net Losses allocated
pursuant to this Section
4.1(a)(ii)
for all
prior Fiscal Years;
(iii) The
balance, if any, to the Members in proportion to their respective Percentage
Interests.
16
(b) Notwithstanding
the allocations set forth in Section 4.1(a), no amount of Net Loss shall
be
allocated to any Member if such allocation would cause such Member to have
an
Adjusted Capital Account Deficit. The amount of the allocation of Net Loss
which
would otherwise have caused a Member to have an Adjusted Capital Account
Deficit
shall instead be allocated to those Members who would not have an Adjusted
Capital Account Deficit as a result of the allocation in proportion to their
Percentage Interests. If no Member may be allocated a Net Loss without creating
or increasing an Adjusted Capital Account Deficit, then all further Net Loss
shall be allocated among the Members in accordance with their Percentage
Interests.
4.2 Allocation
of Net Profits.
After
giving effect to the special and curative allocations set forth in Section
4.3
and
Section
4.4,
Net
Profit for each Fiscal Year or part thereof shall be allocated to the Members
in
the following manner and order of priority:
(a) First,
to
the Members, in proportion to their respective Percentage Interests, in an
amount equal to the excess, if any, of (i) the cumulative Net Losses allocated
pursuant to Section
4.1(a)(iii)
hereof
for all prior Fiscal Years, over (ii) the cumulative Net Profits allocated
pursuant to this Section
4.2(a)
for all
prior Fiscal Years;
(b) Second,
to
CNL in an amount equal to the excess, if any, of (i) the sum of (A) CNL’s
Investment Return and (B) the cumulative Net Losses allocated pursuant to
Section
4.1(a)(ii)
for all
prior Fiscal Years, over (ii) the cumulative Net Profits allocated pursuant
to
this Section
4.2(b)
for all
prior Fiscal Years; and
(c) The
balance, if any, to the Members in accordance with their respective Percentage
Interests.
4.3 Special
Allocations.
Prior to
the allocations pursuant to Section
4.1
and
Section
4.2
hereof,
items of income, gain, loss and deduction for the Year shall be allocated
in
accordance with the following provisions of this Section
4.3
to the
extent such provisions are applicable in determining Net Profit or Net
Loss.
(a) Minimum
Gain Chargeback.
Except
as otherwise provided in Regulations Section 1.704.2(f), notwithstanding
any
other provision of this Article
4,
if there
is a net decrease in Company Minimum Gain during any taxable year, each Member
shall be specially allocated items of Company income and gain for such taxable
year (and, if necessary, subsequent taxable years) in an amount equal to
such
Member’s share of the net decrease in Company Minimum Gain, determined in
accordance with Regulations Section 1.704-2(g). Allocations pursuant to the
previous sentence shall be made in proportion to the respective amounts required
to be allocated to each Member pursuant thereto. The items to be so allocated
shall be determined in accordance with Regulations Sections 1.704-2(f)(6)
and
1.704-2(j)(2). This Section
4.3(a)
is
intended to comply with the minimum gain chargeback requirement set forth
in
Regulations Section 1.704-2(f) and shall be interpreted consistently
therewith.
17
(b) Member
Minimum Gain Chargeback.
Except
as otherwise provided in Regulations Section 1.704-2(i)(4), notwithstanding
any
other provision of this Article
5,
if there
is a net decrease in Member Nonrecourse Debt Minimum Gain attributable to
a
Member Nonrecourse Debt during any taxable year, each Member who has a share
of
the Member Nonrecourse Debt Minimum Gain attributable to such Member Nonrecourse
Debt, determined in accordance with Regulations Section 1.704-2(i)(5), shall
be
specially allocated items of Company income and gain for such taxable year
(and,
if necessary, subsequent taxable years) in an amount equal to such Member’s
share of the net decrease in Member Nonrecourse Debt, determined in accordance
with Regulations Section 1.704-2(i)(4). Allocations pursuant to the previous
sentence shall be made in proportion to the respective amounts required to
be
allocated to each Member pursuant thereto. The items to be so allocated shall
be
determined in accordance with Regulations Sections 1.704-2(i)(4) and
1.704-2(j)(2). This Section
4.3(b)
is
intended to comply with the minimum gain chargeback requirement set forth
in
Regulations Section 1.704-2(i)(4) and shall be interpreted consistently
therewith.
(c) Qualified
Income Offset.
In the
event any Member unexpectedly receives any adjustments, allocations or
distributions described in Regulations Sections 1.704-1(b)(2)(ii)(d)(4),
(5) or
(6), items of Company income and gain shall be specially allocated to each
such
Member in an amount sufficient to eliminate, to the extent required by the
Treasury Regulations, the Adjusted Capital Account Deficit of such Member
as
quickly as possible; provided, however, that an allocation pursuant to this
Section
4.3(c)
shall be
made only if and to the extent that such Member would have an Adjusted Capital
Account Deficit after all other allocations provided for in this Article
4
have been
tentatively made as if this Section
4.3(c)
were not
in the Agreement.
(d) Gross
Income Allocation.
In the
event any Member has a deficit Capital Account at the end of any taxable
year
which is in excess of the sum of (i) the amount such Member is obligated
to
restore pursuant to the penultimate sentences of Regulations Sections
1.704-2(g)(1) and 1.704-2(i)(5), each such Member shall be specially allocated
items of Company income and gain in the amount of such excess as quickly
as
possible; provided that an allocation pursuant to this Section
4.3(d)
shall be
made only if and to the extent that such Member would have a deficit Capital
Account in excess of such sum after all other allocations provided for in
this
Article
4
have been
made as if Section
4.3(c)
and this
Section
4.3(d)
were not
in this Agreement.
(e) Nonrecourse
Deductions.
Nonrecourse Deductions for any taxable year or other period shall be allocated
to the Members in proportion to their respective Percentage
Interests.
(f) Member
Nonrecourse Deductions.
Any
Member Nonrecourse Deductions for any taxable year shall be allocated to
the
Member who bears the economic risk of loss with respect to the Member
Nonrecourse Debt to which such Member Nonrecourse Deductions are attributable
in
accordance with Regulations Section 1.704-2(i)(1).
18
(g) Section
754 Adjustment.
To the
extent an adjustment to the adjusted tax basis of any Company asset pursuant
to
Code Sections 734(b) or 743(b) is required, pursuant to Regulations Section
1.704-1(b)(2)(iv)(m)(2) or Section 1.704-1(b)(2)(iv) (m)(4), to be taken
into
account in determining Capital Accounts as the result of a distribution to
a
Member in complete liquidation of such Member’s Interest in the Company, the
amount of such adjustment to the Capital Accounts shall be treated as an
item of
gain (if the adjustment increases the basis of the asset) or loss (if the
adjustment decreases such basis), and such gain or loss shall be specially
allocated to the Members in accordance with their interests in the Company
in
the event Regulations Section 1.704-1(b)(2)(iv)(m)(2) applies, or to the
Member
to whom such distribution was made in the event Regulations Section
1.704-1(b)(2)(iv)(m)(4) applies.
(h) Capital
Items.
All or a
portion of the remaining items of Company income or gain for the Fiscal Year,
if
any, shall be specially allocated to the Members in proportion to and to
the
extent of the excess, if any, of (i) the aggregate distributions each Member
has
received pursuant to Sections
5.2(c),
5.2(e),
5.2(g),
5.2(h),
5.2(i),
5.2(l),
5.2(m),
5.2(o),
5.2(q),
5.2(r),
and
5.2(s)
over (ii)
the cumulative items of income and gain allocated to such Member pursuant
to
this Section 4.3(h) for all prior Fiscal Years.
4.4 Curative
Allocations.
The
allocations set forth in Sections
4.1(b),
4.3(a),
4.3(b),
4.3(c),
4.3(d),
4.3(e),
4.3(f)
and
4.3(g),
(the
“Regulatory Allocations”) are intended to comply with certain requirements of
the Regulations. 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 4.4. Therefore, notwithstanding
any
other provision of this Article
4
(other
than the Regulatory Allocations), the Manager 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
4.1
and
4.2.
4.5 Tax
Allocations: Code Section 704(c).
In
accordance with Code Section 704(c), and the Regulations promulgated thereunder,
income, gain, loss and deduction with respect to any property contributed
to the
capital of the Company shall, solely for tax purposes, be allocated among
the
Members so as to take account of any variation between the adjusted basis
of
such property to the Company for federal income tax purposes and its initial
Gross Asset Value (computed in accordance with the definition of Gross Asset
Value) using the traditional method as set forth in Regulations Section
1.704-3(b), unless some other method is agreed upon by the Members.
In
the
event the Gross Asset Value of any Company asset is adjusted pursuant to
subparagraph (ii) of the definition of Gross Asset Value, subsequent allocations
of income, gain, loss, and deduction with respect to such asset shall take
account of any variation between the adjusted basis of such asset for federal
income tax purposes and its Gross Asset Value in the same manner as under
Code
Section 704(c) and the Regulations thereunder.
19
Any
elections or other decisions relating to such allocations shall be made by
the
Manager in any manner that reasonably reflects the purpose and intention
of this
Agreement. Allocations pursuant to this Section
4.5
are
solely for purposes of federal, state, and local taxes and shall not affect,
or
in any way be taken into account in computing, any Member’s Capital Account or
share of Net Profit, Net Loss, other items, or distributions pursuant to
any
provision of this Agreement.
4.6 Allocations
for Year of Liquidation.
After
giving effect to the special allocations set forth in Sections
4.3
and
4.4
hereof,
the amount of Net Profit or Net Loss for the Fiscal Year in which the Company
is
dissolved, and each item of income, gain, loss and deduction related thereto,
shall be allocated to the Members in an manner so that the distributions
to each
Member pursuant to Article
11
shall, to
the greatest extent possible, be equal to that amount that each such Member
would receive under Section 5.2 if the amounts to be distributed by the Company
in connection with such dissolution were instead distribute under such
Section
5.2.
ARTICLE
5
DISTRIBUTIONS
5.1 Distribution
of Net Cash Flow.
Except
as otherwise provided in Section
5.4
hereof,
distributions of Net Cash Flow, if any, shall, unless otherwise Approved
by the
Members, be distributed to the Members within fifteen (15) days after the
end of
each Fiscal Year quarter and shall be apportioned among the Members as
follows:
(a) First,
to
ARC until the balance of its ODA Advances Account has been reduced to
zero;
(b) Next,
to
CNL to the extent of its unpaid Investment Return until its Investment Return
has been paid in full;
(c) Next,
to
the Members, to the extent of and in proportion to the Unreturned Capital
Contributions of each, until such Unreturned Capital Contributions have been
returned in full; and
(d) The
balance, if any, to the Members in accordance with their respective Percentage
Interests.
Notwithstanding
the foregoing, during any period in which ARC or one of its Affiliates is
not
serving as the Property Manager, all Net Cash Flow remaining after the repayment
of ARC’s ODA Advances Account in accordance with Section 5.1(a) shall be
distributed to CNL.
5.2 Distribution
of Capital Proceeds.
Except
as provided in Section
5.4
hereof,
distributions of all or any portion of Capital Proceeds shall be made within
thirty (30) days of the event giving rise to the Capital Proceeds, and shall
be
apportioned among the Members as follows:
(a) First,
to
ARC until the balance of its ODA Advances Account has been reduced to
zero;
20
(b) Next,
to
CNL until its Unreturned Capital Contribution has been returned in full;
(c) Next,
to
CNL to the extent of its unpaid Investment Return until its Investment Return
has been paid in full;
(d) Next,
to
ARC until its Unreturned Capital Contribution has been returned in
full;
(e) Next,
to
CNL until it has received a thirteen and one-half percent (13.5%) return
on its
Initial Capital Contribution, calculated per annum, compounded quarterly,
to be
calculated from the date on which such Initial Capital Contributions, or
portions thereof, are made;
(f) Next,
to
ARC until its ARC TCCO Capital has been repaid in full;
(g) Next,
to
ARC until it has received a thirteen and one-half percent (13.5%) return
on its
Initial Capital Contribution, calculated per annum, compounded quarterly,
to be
calculated from the date on which such Initial Capital Contributions, or
portions thereof, are made;
(h) Next,
eighty percent (80%) to CNL and twenty percent (20%) to ARC until such time
as
CNL has received a total return of twenty percent (20%) on its Initial Capital
Contribution, calculated with per annum, compounded quarterly, to be calculated
from the date on which such Initial Capital Contributions, or portions thereof,
are made; and
(i) The
balance, if any, seventy percent (70%) to ARC and thirty percent (30%) to
CNL.
Notwithstanding
the foregoing, if ARC or one of its Affiliates is not serving as the Property
Manager, distributions of all or any portion of Capital Proceeds shall be
made
within sixty (60) days of the event giving rise to the Capital Proceeds,
and
shall be apportioned among the Members as follows:
(j) First,
to
ARC until the balance of its ODA Advances Account has been reduced to
zero;
(k) Next,
to
CNL until its Unreturned Capital Contribution has been returned in full;
(l) Next,
to
CNL to the extent of its unpaid Investment Return until its Investment Return
has been paid in full;
(m) Next,
to
CNL until it has received an eight percent (8%) return on its Initial Capital
Contribution, calculated per annum, compounded quarterly, to be calculated
from
the date on which such Initial Capital Contributions, or portions thereof,
are
made;
21
(n) Next,
to
ARC until its Unreturned Capital Contribution has been returned in full;
(o) Next,
to
CNL until it has received a thirteen and one-half percent (13.5%) return
on its
Initial Capital Contribution, calculated per annum, compounded quarterly,
to be
calculated from the date on which such Initial Capital Contributions, or
portions thereof, are made;
(p) Next,
to
ARC until its ARC TCCO Capital has been repaid in full;
(q) Next,
to
ARC until it has received a thirteen and one-half percent (13.5%) return
on its
Initial Capital Contribution, calculated per annum, compounded quarterly,
to be
calculated from the date on which such Initial Capital Contributions, or
portions thereof, are made;
(r) Next,
eighty percent (80%) to CNL and twenty percent (20%) to ARC until such time
as
CNL has received a total return of twenty percent (20%) on its Initial Capital
Contribution, calculated per annum, compounded quarterly, to be calculated
from
the date on which such Initial Capital Contributions, or portions thereof,
are
made; and
(s) The
balance, if any, seventy percent (70%) to ARC and thirty percent (30%) to
CNL.
5.3 Distributions
in Kind.
If any
of the Company’s assets are to be distributed in kind rather than sold, such
assets shall be distributed on the basis of the fair market value thereof
and
any Member entitled to any interest in such assets pursuant to this Section
5.3
shall
receive such interest therein as a tenant-in-common with all other Members
so
entitled. Unless otherwise agreed by all of the Members, the fair market
value
of such assets shall be equal to an appraisal or appraisals prepared by one
or
more appraisers selected by the Manager and paid for by the Company. Such
appraiser(s) must have a “MAI” designation or its equivalent and substantial
experience appraising commercial real estate in the counties and states in
which
the assets to be appraised are located.
5.4 Limitation
on Distributions.
Notwithstanding any provision to the contrary contained in this Agreement,
the
Company shall not be required to make a distribution to any Member on account
of
its interest in the Company if such distribution would violate Section 18-607
of
the Act or any other applicable law.
ARTICLE
6
MANAGEMENT
OF THE COMPANY
6.1 Management
by Manager.
The
Members hereby appoint ARC ▇▇▇▇▇, LLC as the initial Manager of the Company.
The
overall management and control of the business and affairs of the Company
shall
be vested in the Manager, who shall have all powers permitted under the Act
as
well as all other powers necessary or desirable for the performance by it
of all
of its duties and obligations as the Manager of the Company. The Manager
shall
devote such time to the Company as shall be reasonably required for its welfare
and success. By way of illustration, but not in limitation, the powers and
duties of the Manager shall include the following:
22
(a) Protect
and preserve the titles and interests of the Company in the Company’s
assets;
(b) Subject
to
Sections
6.2 and 6.3,
purchase
real property and any other assets necessary or appropriate for the conduct
of
the Company’s business;
(c) Subject
to
Sections
6.2 and 6.3,
borrow
money on behalf of the Company for Company purposes and encumber the Company’s
assets to secure the Loan;
(d) To
the
extent Company funds are available, pay all taxes, assessments, and other
impositions applicable to the Company and the Company’s assets;
(e) Subject
to
Sections
6.2 and 6.3,
sell,
lease, exchange, mortgage, or otherwise dispose of the Company’s assets or any
interest therein in the ordinary course of the Company’s business;
(f) Retain,
discharge and replace the Company’s accountants and attorneys, and hire and fire
employees of the Company and other persons necessary or appropriate to carry
out
the business of the Company;
(g) To
the
extent that funds of the Company are available from time to time, pay all
current debts and other obligations of the Company, and invest funds that
are
temporarily not required for Company purposes in any short-term, highly liquid
investments with appropriate safety of principal;
(h) Maintain
all funds of the Company in one or more bank accounts in such bank or banks
as
the Manager may from time to time select; provided, however that any such
account will bear interest at market rates;
(i) Procure
and maintain, at the expense of the Company, insurance policies covering
the
assets and operations of the Company; and
(j) Perform
other normal business functions and otherwise operate and manage the business
and affairs of the Company.
6.2 Unanimous
Major Decisions.
Notwithstanding any other provision hereof and in addition to those matters
which pursuant to any other provisions of this Agreement require the approval
of
one or more of the Members, the Company may not take any action or incur
any
obligation binding on the Company within the scope of any of the actions
or
decisions listed below (each a “Unanimous Major Decision” and together, the
“Unanimous Major Decisions”) unless and until the Unanimous Major Decision has
been Approved by the Members, provided that in the event that ARC Management,
LLC is no longer the Property Manager pursuant to the Management Agreement,
Unanimous Major Decisions shall be approved by a Majority in Interest of
the
Members:
(a) entering
into any single contract, agreement or transaction in excess of two hundred
fifty thousand dollars ($250,000.00), provided that such contract, agreement
or
transaction is terminable without penalty upon thirty (30) days
notice;
23
(b) except
for
the Management Agreement attached hereto as Exhibit C and the Development
Agreement attached hereto as Exhibit D, entering into any contract, agreement
or
transaction with any Member or any Affiliate of any Member;
(c) engaging
in any activity that is substantially unrelated to the objects and purposes
of
the Company as set forth in Section 2.3 above;
(d) amending
the Certificate or any of the terms of this Agreement;
(e) doing
any
act that would make it impossible to carry on the ordinary business of the
Company;
(f) borrowing
money or incurring or refinancing indebtedness in the name of the Company,
or
guaranteeing the obligations of any other Person, other than equipment and
vehicle financing entered into in the ordinary course of business;
(g) except
for
accounts receivable or pursuant to the terms of any residency agreement,
lending
money or extending credit to anyone;
(h) establish
any reserves deemed necessary or advisable by the Manager other than any
reserves that are contemplated by Budgeted TCCO;
(i) using
the
proceeds of an insurance claim or condemnation proceedings or other governmental
taking for casualties which are less than a Total Casualty or Major
Condemnation;
(j) issuing
or
assigning any Interests or permitting the transfer of any Interests in the
Company except in accordance with the terms of this Agreement;
(k) except
as
provided in Section
2.3
hereof,
reorganizing the Company, causing the Company to merge or consolidate with
or
into another Person or sell all or substantially all of its assets to another
Person, or acquiring another Person or substantially all the assets of another
Person;
(l) to
the
fullest extent permitted by law, dissolving or liquidating the Company, in
whole
or in part, or instituting proceedings to be adjudicated bankrupt or insolvent
or taking any action that might cause the Company to become insolvent;
(m) consenting
to the institution of bankruptcy or insolvency proceedings against
it;
(n) filing
a
petition seeking or consenting to reorganization or relief under any applicable
federal or state law relating to bankruptcy or insolvency;
(o) consenting
to the appointment of a receiver, liquidator, assignee, trustee, sequestrator
(or other similar official) of the Company or a substantial part of its
property;
24
(p) making
a
general assignment for the benefit of creditors; and
(q) making
any
admission in writing to creditors that it is unable to pay its debts generally
as they become due;
(r) except
as
set forth in Section
6.3(e),
making
any decisions on behalf of the Company with respect to the Company’s rights
under the Management Agreement or Development Agreement;
(s) removing
the Manager of the Company, provided the Manager of the Company has performed
its duties under this Agreement, has acted in good faith, and has otherwise
dealt fairly with the Company and its Members; and
(t) appointing
a new Manager of the Company, provided the immediate prior Manager of the
Company was removed pursuant to Section
6.2(s).
6.3 Majority
Major Decisions.
Notwithstanding any other provision hereof and in addition to those matters
which pursuant to any other provisions of this Agreement require the approval
of
one or more of the Members, the Company may not take any action or incur
any
obligation binding on the Company within the scope of any of the actions
or
decisions listed below (each a “Majority Major Decision” and together, the
“Majority Major Decisions”) unless and until the Majority Major Decision has
been approved by a Majority in Interest of the Members:
(a) entering
into any contract or agreement to purchase or sell or encumber the Property
or
any other real property;
(b) using
the
proceeds of an insurance claim or condemnation proceedings or other governmental
taking resulting from a Total Casualty or Major Condemnation;
(c) removing
the Manager of the Company, provided the Manager of the Company has failed
to
perform its duties under this Agreement, has failed to act in good faith,
or has
otherwise failed to deal fairly with the Company or any Member;
(d) appointing
a new Manager of the Company, provided the immediate prior Manager of the
Company was removed pursuant to Section 6.3(c);
(e) electing
whether or not to terminate the Property Manager for failing to meet the
performance requirements set forth in Section 2.03 of the Management Agreement;
provided, however, that the Property Manager shall not be removed under the
Management Agreement unless and until American Retirement Corporation, a
Tennessee corporation, has been fully released from any and all obligations
under that certain Exceptions to Nonrecourse Guaranty delivered by American
Retirement Corporation for the benefit of Construction Lender, except to
the
extent that Construction Lender has then made a claim against American
Retirement Corporation for any of the obligations guaranteed
thereunder.
25
6.4 Resignation
of a Manager.
The
Manager of the Company may resign by providing written notice to all Members.
Unless otherwise Approved by the Members, any such resignation shall take
effect
thirty (30) days after the date such Manager gives notice to all Members,
or at
a later date stated in the notice of resignation. Notwithstanding the foregoing,
the Manager shall not be permitted to resign pursuant to this Section
6.4
unless
and until another Manager has been designated and approved by the affirmative
vote of a seventy-five percent (75%) Majority in Interest of the Members,
as
provided in Section
6.5.
6.5 (Intentionally
omitted).
6.6 Officers.
The
Manager may, from time to time, appoint one or more officers of the Company
(each an “Officer” and, collectively, the “Officers”), and delegate to such
Officer or Officers any of the Manager’s rights and powers to manage and control
the business and affairs of the Company. The Manager may remove and replace
any
such Officer or Officers, with or without cause, in its sole and absolute
discretion. An Officer shall serve until his successor is chosen by the Manager
or until his earlier removal, resignation or death. Any two or more offices
may
be held by the same person. No Officer shall receive any compensation for
his or
her service as an officer of the Company. An Officer may resign at any time
by
giving written notice to the Manager, and no such resignation need be accepted
to be effective. Any Officer appointed will have the same fiduciary duties
with
respect to the Company as a Manager has under the Act.
6.7 Authority
of the Members.
No
Member may act for, obligate, or in any manner legally bind, the Company
or any
other Member, unless such Member has been authorized to do so, in writing,
by
the Manager. Any Member acting in contravention of the prohibition of the
immediately preceding sentence shall indemnify, insure and hold harmless
the
Company, the Manager and each other Member from and against, and reimburse
each
such Person for, any and all liability, loss, cost, expense or damage incurred
or sustained by reason thereof, including, but not limited to, court costs
and
reasonable attorney and paralegal fees through any and all negotiations,
trials
and appeals and through all settlement and collection proceedings.
6.8 Other
Activities.
The fact
that a Manager or any Affiliate of a Manager is employed by, or is directly
or
indirectly interested in or connected with, any Person employed or engaged
by
the Company to render or perform a service, or from which the Company may
purchase any property, shall not prohibit the Company from employing or engaging
that Person, or from otherwise dealing with him or it, and neither the Company
nor any of the Members shall have any rights in or to any income or profits
derived therefrom as a consequence of the relationships created in this
Agreement. The Manager, each Member and each of their respective Affiliates
may
engage in or possess an interest in other business ventures of every nature
and
description, including the purchase, development or sale of real estate,
independently or with others, and neither the Company nor any of the Members
shall have any rights, by virtue of this Agreement, in and to the independent
ventures or the income or profits derived from them.
26
6.9 Conveyances.
Any
deed, mortgage, lease, contract of sale, or other commitment purporting to
convey or encumber the interest of the Company in all or any portion of any
real
or personal property at any time owned or leased by the Company shall be
signed
by the Manager, or, upon the written authorization of the Manager, by an
Officer
or by a nominee of the Company then holding record title to the property
for the
Company, and no other signatures shall be required. No person shall be required
to inquire into the authority of any individual to sign any documents pursuant
to the provisions of this Section
6.9.
6.10 Construction
Loan.
Notwithstanding anything to the contrary in this Agreement, each Member’s rights
under the Agreement shall at all times be subject to the terms and conditions
of
the Construction Loan, and neither Member (a) shall take, or fail to take,
any
action that would conflict with any material term or condition of the
Construction Loan or cause a default or event of default under the Construction
Loan, or (b) shall cause the Company to take, or fail to take, any action
that
would conflict with any material term or condition of the Construction Loan
or
cause of default or event of default under the Construction Loan.
ARTICLE
7
MEETINGS
OF MEMBERS
7.1 Member
Meetings.
In the
event that any matter requires the approval of the Members under the terms
of
this Agreement or the Act, then the Manager shall call a meeting of the Members
by providing the Members with written notice of such meeting at least two
(2)
days and not more than ten (10) days prior to the date of the meeting. Such
notice shall state the date, time, place and purpose or purposes of the meeting.
The business transacted at a meeting of the Members shall be limited to the
purpose(s) stated in the notice of the meeting.
7.2 Location,
Conduct and Adjournments.
Each
meeting of the Members will be held at the Company’s principal place of business
unless otherwise Approved by the Members. Unless otherwise Approved by the
Members, the Manager shall act as chairman of such meeting. Any meeting of
the
Members may be adjourned from time to time to another date and time and,
subject
to the first sentence of this Section
7.2,
to
another place. If at the time of adjournment the person chairing the meeting
announces the date, time, and place at which the meeting will be reconvened,
it
is not necessary to give any further notice of the reconvening. Any Member
or
Manager may participate in any meeting of the Members by means of telephone
conference or similar communications equipment that allows all persons
participating in the meeting to hear each other, and such participation in
a
meeting will constitute presence in person at the meeting. If all the
participants are participating by telephone conference or similar communications
equipment, the meeting will be deemed to be held at the principal place of
business of the Company.
7.3 Waiver
of Notice.
A Member
may waive notice of the date, time, place and purpose or purposes of a meeting
of the Members. A waiver may be made before, at, or after the meeting, in
writing, orally, or by attendance. Attendance by a Member at a meeting is
a
waiver of notice of that meeting, unless the Member objects at the beginning
of
the meeting to the transaction of business because the meeting is not properly
called or convened, or objects before a vote on an item of business because
the
item may not properly be considered at that meeting and does not participate
in
the consideration of the item at that meeting.
27
7.4 Member
Quorum and Voting.
A
Majority in Interest of the Members shall constitute a quorum at a meeting
of
the Members. If a quorum is present, the affirmative vote of a Majority in
Interest of the Members shall be the act of the Members unless a greater
affirmative vote is expressly required by the Certificate, this Agreement
or by
applicable law. Voting by proxy is not permitted. Members may participate
in a
meeting by means of a conference telephone or similar communication equipment
by
means of which all persons participating in the meeting can hear each other
at
the same time. Participation by such means shall constitute presence in person
at a meeting.
7.5 Action
by Members Without a Meeting.
The
Members may take any action without a meeting that could be taken at a meeting,
without prior notice and without a vote, if a consent in writing, setting
forth
the action so taken, is signed by Members that are necessary to authorize
or
take such action. Within ten (10) days after obtaining such authorization
by
written consent, written notice of the action taken shall be given to those
Members who have not consented in writing. The notice shall fairly summarize
the
material features of the authorized action. Failure to provide the notice
shall
not invalidate the written consent.
ARTICLE
8
OPERATIONAL
ISSUES; RELATED PARTY TRANSACTIONS;
COMPENSATION
OF MEMBERS
8.1 Development
Services.
ARC
▇▇▇▇▇, LLC, a Tennessee limited liability company (the “Developer”) shall
supervise the development of the Property pursuant to the terms of a separate
development agreement between the Company and the Developer attached hereto
as
Exhibit D. The Developer shall receive a development fee of One Million Five
Hundred Thousand Dollars ($1,500,000) for its contribution to the development
of
the Property, and the Advisor shall receive a development fee of One Hundred
Fifty Thousand Dollars ($150,000) for its contribution to the development
of the
Property (each respectively a “Development Fee”).
8.2 Management
Services.
The
Property Manager shall supervise the management of the Property concurrently
with the development of the Property and thereafter pursuant to the terms
of the
Management Agreement attached hereto as Exhibit C. The Property Manager shall
receive a management fee based on five percent (5%) of accounting gross revenues
from the Senior Living Facility for its contribution to the management of
the
Property, and the Advisor or an affiliate thereof shall receive a management
fee
of one-half of one percent (0.5%) of accounting gross revenues from the Senior
Living Facility for its contribution to the management of the Senior Living
Facility, each as more specifically determined in the Management Agreement.
8.3 Financing
Fee.
The
Company shall pay Advisor a financing fee of one-half of one percent (0.5%)
of
the principal authorized amount of (i) the Construction Loan funded in
connection with the development of the Property and the construction of the
Senior Living Facility, which fee shall be paid at the closing of the
Construction Loan, and (ii) the permanent financing involving the Property
or
the Senior Living Facility, which fee shall be paid at the closing of such
loan,
provided that Advisor shall be limited to one (1) financing fee from permanent
financing.
28
8.4 Disposition
Fee.
Upon the
sale of the Property, the Company shall pay Advisor a disposition fee equal
to
three percent (3%) of gross sales price of the Property, which fee shall
be paid
at the closing of such sale.
8.5 Accounting
and Administrative Services.
The
Manager shall handle and be responsible for the obligations of the Company
under
Article
12
below,
including the maintaining of the Company’s books of account, preparation of
financial statements for the Company and preparation and filing of tax returns
for the Company. The Manager shall not be compensated for its role as manager
of
the Company.
8.6 Guaranteed
Payments.
The
Company may, from time to time, engage one or more Members to provide services
to the Company as provided above and on such other terms and in such other
instances as may be Approved by the Members. The Members intend the payments
of
such compensation to be guaranteed payments without regard to the income
of the
Company as contemplated by Code Section 707(c). The payment of any compensation
to a Member pursuant to this Section
8.6
will not
affect the right of such Member to allocations of income, gain, loss, deduction
or credit or distributions of cash pursuant to the terms of this
Agreement.
8.7 CNL
Representative.
The
parties acknowledge that CNL is an investment entity created by the Advisor,
for
the purpose of investing in the Company. The parties further acknowledge
that
CNL Senior Housing, Inc. is the managing member of CNL with the authority
to
represent CNL in all matters related to this Agreement, the Management
Agreement, the Development Agreement and any other matter relating to the
organization and operation of the Company. CNL and Advisor represent and
warrant
to ARC that the Advisor shall be the sole and exclusive agent and
attorney-in-fact to act on behalf of CNL, in connection with and to facilitate
any and all matters relating to this Agreement, the Management Agreement,
the
Development Agreement and any other matter relating to the organization and
operation of the Company.
29
ARTICLE
9
TRANSFER
OF A MEMBER’S INTEREST
9.1 Restrictions
on Transfer.
Except
as otherwise specifically set forth in this Agreement and to the fullest
extent
permitted by law, no Member may transfer all or any part of its Interest
to any
Person, other than an Affiliate of such Member, whether voluntarily,
involuntarily or by operation of law, without the prior written consent of
the
other Member(s) and the Manager, which consent may be withheld in the sole
and
absolute discretion of any other Member(s) or the Manager. For purposes of
this
Section
9.1,
“transfer” includes the sale, exchange, pledge, encumbrance or other transfer or
disposition by a Member of any part of its Interest, whether for a valuable
consideration or as a gift, and whether voluntarily or involuntarily. In
addition to the required consents to any transfer, as a condition to any
such
consent, a Member or the Manager may require that the Member desiring to
make
the transfer provide to the Company a reasonably acceptable opinion of counsel,
in form and substance reasonably acceptable, that the proposed transfer does
not
result in a violation of the Securities Act of 1933, as amended, or any
applicable state securities laws. The attorney fees and costs for such opinion
and the attorney fees and costs incurred by the Company in connection with
any
such transfer shall be paid by the Member who is transferring all or part
of its
Interest.
9.2 Substituted
Members.
Any
Person, not then a Member, to whom an Interest is transferred in accordance
with
the provisions of Section
9.1
shall
agree in writing to be subject to the terms of this Agreement and shall,
thereupon, become a substituted Member (“Substituted Member”) hereunder. Such
admission as a Substitute Member shall be deemed effective immediately prior
to
such Transfer. A Substituted Member has, to the extent assigned, the rights
and
powers and is subject to the restrictions and liabilities, of a Member under
this Agreement and the Act. A Substituted Member also is liable for the
obligations of its assignor to make and return contributions as provided
in the
Act, and for certain other liabilities of the assignor as provided in the
Act.
If an assignee of an Interest becomes a Substituted Member, the assignor
is not
released from its liability to the Company to the extent provided in the
Act.
The Substituted Member shall pay all reasonable expenses in connection with
its
admission to the Company, including, but not limited to, legal fees and other
costs of preparing any amendment to this Agreement deemed necessary or desirable
by the Manager. If any Interest is transferred other than in accordance with
the
provisions of Section
9.1
and the
transferee is not admitted as a Substituted Member, then such transferee
will
have the sole right to share in such profits and losses, to receive such
distribution or distributions, and to receive such allocation of income,
gain,
loss, deduction or credit or similar item to which the assignor was entitled,
to
the extent assigned, and will not have any of the rights, power or authority
of
a Member hereunder or under the Act; and the transferor of such Interest
shall
thereafter be considered to have no further rights or interest in the Company
with respect to the transferred Interest, but shall remain subject to any
obligations under this Agreement and the Act with respect to such
Interest.
30
9.3 Admission
of Additional Members.
With the
Approval of the Members, any Person may be admitted to the Company as an
additional Member upon making such contributions to the capital of the Company
in exchange for such Percentage Interests as may be Approved by the Members.
In
the event that the Members admit any additional Member to the Company, this
Agreement shall be amended or amended and restated as appropriate. The dilution
resulting from the admission of any new Member shall be borne by the other
Members in proportion to their respective Percentage Interests immediately
prior
to the admission of the new Member.
9.4 ARC
Purchase Right During Construction.
In the
event that, prior to the completion of construction of the Senior Living
Facility, a Majority in Interest of the Members exercises its right pursuant
to
Section
6.3(b)
to use
the proceeds of an insurance claim resulting from a Total Casualty or
condemnation proceeds from a Major Condemnation in any manner other than
the
rebuilding of the Senior Living Facility, ARC shall have the right to acquire
the other Members’ interest in the Company at an amount equal to the sum of
their Capital Contributions.
ARTICLE
10
PURCHASE
OPTION UPON BANKRUPTCY/BUY-SELL PROVISIONS
10.1 Option
Rights.
If a
Member becomes a Bankrupt Member, then the other Member(s) shall thereupon
have
the right and option to purchase the entire Interest of the Bankrupt Member
pursuant to the terms of Sections
10.1, 10.2, 10.3,
and
10.4
of this
Agreement. The Bankrupt Member shall send notice of the applicable Event
of
Bankruptcy to the other Member(s) within ten (10) days after the occurrence
thereof. To exercise its option, a Member must provide written notice thereof
to
the other Member(s) within ninety (90) days after the first to occur of the
following: (i) the effective date of the Bankrupt Member’s notice, and (ii) the
date upon which such Member otherwise becomes aware of the applicable Event
of
Bankruptcy. Such notice must indicate the portion of the Bankrupt Member’s
Interest that such Member desires to purchase; provided, however, that if
there
is more than one Member with such purchase right, then such Members will
have
the right to purchase the Bankrupt Member’s Interest pro rata in accordance with
their respective Percentage Interests.
31
10.2 Obligations
of Bankrupt Member.
To the
fullest extent permitted by law, the Bankrupt Member or its personal
representative, as the case may be, shall, within ten (10) days after the
last
notice given pursuant to the terms of Section
10.1,
execute
and deliver such assignments and other instruments as shall reasonably be
requested by the purchaser(s) to effect the conveyance and transfer of the
Bankrupt Member’s Interest to the purchaser(s) free and clear of any and all
liens, claims and encumbrances of any kind or nature whatsoever, and shall,
to
the extent requested by the purchaser(s), cooperate to effect a smooth and
efficient continuation of the Company’s business and affairs. If the Bankrupt
Member disputes the right of the purchaser(s) to purchase and succeed to
the
Bankrupt Member’s entire Interest, then the Bankrupt Member shall nevertheless
execute instruments and cooperate with the purchaser(s) pursuant to the
immediately preceding sentence, without, however, being deemed to have waived
its rights to damages if the purchaser(s) shall have purchased and succeeded
to
the Bankrupt Member’s Interest under this Article
10
without
having the right to do so. To the fullest extent permitted by law, the Bankrupt
Member shall indemnify, insure and hold each of the purchaser(s) harmless
from
and against all loss, liability, cost or expense (including reasonable attorney
fees) suffered or incurred by the purchaser(s) if the Bankrupt Member fails
to
properly execute instruments and cooperate with the purchaser(s) pursuant
to, or
shall otherwise fail to perform, its obligations under this Article
10.
10.3 Payment
of Fair Value.
Upon
compliance by the Bankrupt Member with the provisions of Section
10.2,
the
purchaser(s) shall pay to the Bankrupt Member the “Fair Value” of the Bankrupt
Member’s Interest (such value to be determined as of the date of the applicable
Event of Bankruptcy) within thirty (30) days thereafter by delivering to
the
Bankrupt Member an amount equal to twenty percent (20%) of such Fair Value
by
official bank check, wire transfer or other immediately available funds,
and a
promissory note in an original principal amount equal to eighty percent (80%)
of
such Fair Value. Such promissory note will provide for a per annum interest
rate
equal to the Prime Rate as of the date of the applicable Event of Bankruptcy,
will provide for four (4) equal annual payments commencing one (1) year after
the date of the purchase, and shall otherwise have terms that are reasonable
and
customary. The “Fair Value” of the Bankrupt Member’s Interest shall be
determined pursuant to the terms of Section
10.4
below.
32
10.4 Determination
of Fair Value.
For
purposes of Section
10.3,
the
“Fair Value” of the Bankrupt Member’s Interest shall be the amount such Member
would receive if the assets of the Company were sold for their fair market
value, the Company’s liabilities were paid in full, gain or loss from the sale
was allocated in accordance with the applicable terms of this Agreement,
and the
sales proceeds were distributed in accordance with the applicable terms of
this
Agreement. For purposes of this Section
10.4,
the
“Fair Value” of the Company shall be determined, as of the effective date of the
applicable Event of Bankruptcy, by the average of two independent appraisals
conducted by state certified appraisers, with the first appraiser chosen
by the
purchasing Member(s), and the other to be chosen by the Bankrupt Member or
its
personal representative, as the case may be, within fifteen (15) days after
the
effective date of notice of the appointment of the first appraiser, provided
that if the Bankrupt Member or its personal representative, as the case may
be,
fails to timely appoint the second appraiser, then the determination of the
first appraiser of the Fair Value of the Company shall be binding on all
interested Persons. In the event the Non-Bankrupt Member should exercise
the
Option provided in Section 10.1 hereof, the Non-Bankrupt Member shall receive
a
credit towards the Fair Value of the Bankrupt Member’s Interest in the amount of
the cost of such appraisal(s).
ARTICLE
11
DISSOLUTION,
REFORMATION,
LIQUIDATION,
ETC.
11.1 Termination
of Membership.
Except
for withdrawals expressly permitted by provisions contained in Article
10
or
11,
no
Member shall have the right to withdraw from the Company and all Members
hereby
agree not to withdraw from the Company, and any attempt to do so, whether
voluntary or involuntary, shall be null and void. Each of the Members agrees
not
to voluntarily resign from the Company or to default with respect to any
obligation or undertaking contained in this Agreement or the Act.
11.2 Dissolution.
The
Company shall be dissolved and its affairs wound up and terminated upon the
first to occur of the following events (each, a “Dissolution
Event”):
(a) The
determination in writing to dissolve the Company by all Members;
(b) At
any
time when there are no Members;
(c) The
sale
or other disposition of all or substantially all of the assets of the Company
in
one transaction or a series of related transactions and the distribution
of such
proceeds pursuant to Section
5.4
hereof;
(d) The
occurrence of a Continuation Event followed within ninety (90) days by a
determination of the requisite Percentage Interests to dissolve the Company
as
described in Section
11.3
hereof;
or
(e) The
entry
of a decree of judicial dissolution under Section 18-802 of the
Act.
Upon
the
occurrence of a Dissolution Event, the Company shall be wound up and liquidated
pursuant to Section
11.4
hereof.
33
11.3 Continuation
Event.
Neither
the resignation, expulsion, bankruptcy or dissolution of any Member, nor
the
occurrence of any other event that terminates the continued membership of
any
Member (each, a “Continuation Event”), shall cause the Company to be dissolved
or its affairs to be wound up, and upon the occurrence of any such Continuation
Event, the Company shall be continued without dissolution, unless within
ninety
(90) days following such Continuation Event, a Majority in Interest of the
Members (excluding the Member which has been the subject of the Continuation
Event) agrees in writing to dissolve the Company.
11.4 Winding
Up of the Company.
Upon
dissolution of the Company pursuant to Section 11.2 hereof, the Manager or
if
the Manager is a Member and the Continuation Event occurred with respect
to such
Member, such person as is designated by a Majority in Interest of the Members
not subject to the Continuation Event (such person being herein referred
to as
the “Liquidator”), shall proceed to wind up the business and affairs of the
Company upon such terms, price and conditions as are determined by the
Liquidator in accordance with this Agreement and the requirements of the
Act.
This Agreement shall remain in full force and effect and continue to govern
the
rights and obligations of the Members and the conduct of the Company during
the
period of winding up the Company’s affairs. The Liquidator shall have and may
exercise, without further authorization or consent of the Members, all of
the
powers conferred upon the Members under the terms of this Agreement to the
extent necessary or desirable in the good faith judgment of the Liquidator
to
carry out the duties and functions of the Liquidator hereunder for and during
such period of time as shall be reasonably required in the good faith judgment
of the Liquidator to complete the winding up and liquidation of the Company.
The
Liquidator shall liquidate the assets of the Company, collect the debts and
obligations due to the Company, and pay or provide for payment of all
liabilities and obligations of the Company, including payment of every Member
Loan with interest thereon and payment of any real estate commission due
and
payable to the Advisor pursuant to Section
8.4
hereof,
after which the Liquidator shall distribute the remaining assets of the Company
to the Members in accordance with their respective Capital Accounts, after
giving effect to all contributions, distributions and allocations for all
periods, by the end of the Fiscal Year in which such liquidation occurs or,
if
later, within sixty (60) days after the date of the dissolution. The Liquidator
may distribute assets in kind; provided, however, that the Liquidator shall
determine the fair market value by appraisal or other reasonable means of
all
assets so distributed in kind.
34
ARTICLE
12
ACCOUNTING
AND ADMINISTRATIVE MATTERS
12.1 Books
and Records.
The
Company shall maintain true, complete and correct books of account of the
Company, all in accordance with generally accepted accounting principles,
or
such other accounting method as may be selected by the Manager, applied on
a
consistent basis. The books of account shall contain particulars of all monies,
goods or effects belonging to or owing to or by the Company, or paid, received,
sold or purchased in the course of the business, and all of such other
transactions, matters and things relating to the business as are usually
entered
in books of accounts kept by persons engaged in a business of a like kind
and
character. In addition, the Company shall keep all records required to be
kept
pursuant to the Act. A Member shall, upon prior written notice and during
normal
business hours, have access to the books and records of the Company, for
the
purpose of inspecting or, at the expense of such Member, copying such books
and
records. Any Member reviewing the books and records of the Company pursuant
to
the preceding sentence shall do so in a manner which does not unduly interfere
with the conduct of the Company’s business.
12.2 Financial
Statements.
The
Company shall, within twenty (20) days following the end of each Fiscal Year
month, furnish to each Member monthly financial statements for the Company,
prepared in accordance with generally accepted accounting principles.
Additionally, the Company shall furnish to each Person who was a Member during
the immediately prior Fiscal Year (i) audited financial statements for the
preceding Fiscal Year prepared in accordance with generally accepted accounting
principles within ninety (90) days after the close of each Fiscal Year, and
(ii)
a Schedule K-1 or such other form as is necessary to provide the Members
with
the information that is needed by them in order to file their respective
federal, state or local income tax returns within forty-five (45) days after
the
close of each Fiscal Year.
12.3 Tax
Matters Partner.
The
initial Manager shall be the Company’s “tax matters partner,” as such term is
defined in Code Section 6231(a)(7) (the “Tax Matters Partner”). In connection
therewith and in addition to all other powers given thereunto, the Tax Matters
Partner shall have all other powers necessary or appropriate to fully perform
such role, including, but not limited to, the power to retain all attorneys
and
accountants of its choice. Notwithstanding the foregoing, the Tax Matters
Partner shall not settle any audits for or on behalf of the Company or its
Members without the written approval of a Majority in Interest of the
Members.
35
ARTICLE
13
INDEMNIFICATION
13.1 Indemnification.
Each
Member hereby agrees to defend, indemnify and hold harmless the other member,
the Manager and any Officer of the Company, and each of their respective
officers, directors, partners, members, shareholders, employees and agents,
from
and against any and all liability, loss, cost, expense or damage, including,
but
not limited to, court costs, expenses and reasonable attorney and paralegal
fees
through any and all negotiations, trials and appeals and through all settlement
and collection proceedings, incurred or sustained by such member, Manager,
or
Officer by reason of the indemnifying Member’s fraud, bad faith, willful
misconduct, gross negligence, unauthorized acts or breach of this Agreement.
The
Company, to the fullest extent permitted by law, hereby agrees to defend,
indemnify and hold harmless each Member, Manager and Officer of the Company,
and
each of their respective officers, directors, partners, members, shareholders,
employees and agents, from and against any and all liability, loss, cost,
expense or damage incurred or sustained by reason of any act or omission
in the
conduct of the business of the Company, including, but not limited to, court
costs, expenses and reasonable attorney and paralegal fees through any and
all
negotiations, trials and appeals and through all settlement and collection
proceedings; provided, however, that the Company will not indemnify any Member,
Manager or Officer of the Company or any officer, director, partner, member,
shareholder, employee or agent of any Member or hold any of them harmless
with
respect to any of the foregoing that is incurred by them as the result of
conduct which constitutes fraud, willful misconduct, gross negligence or
breach
of fiduciary duty of the party who would otherwise be entitled to be indemnified
and held harmless under this Section
13.1.
The
provisions of this Section
13.1
shall
survive the termination of this Agreement.
13.2 Advancement
of Legal Costs and Expenses.
The
Company shall advance Company funds to any Person who is entitled to
indemnification pursuant to the terms of Section
13.1
for legal
expenses and other costs incurred as a result of any legal action if the
following conditions are satisfied: (a) the legal action relates to acts
or
omissions with respect to the performance of duties or services on behalf
of the
Company; (b) the legal action is initiated by a third party who is not a
Member,
or the legal action is initiated by a Member and a court of competent
jurisdiction specifically approves such advancement; and (c) such Person
undertakes to repay the advanced funds to the Company in cases in which such
Person is not entitled to indemnification pursuant to the terms of Section
13.1.
13.3 Provisions
Not Exclusive.
The
indemnification provided by this Article shall not be deemed exclusive of
any
other rights to which those seeking indemnification may be entitled under
any
statute, agreement, vote of the Members or otherwise.
13.4 Insurance.
The
Company may purchase insurance to insure against the liabilities contemplated
by
this Article
13.
36
ARTICLE
14
MISCELLANEOUS
MATTERS
14.1 Governing
Laws.
This
Agreement and the rights, powers, duties and obligations of the Members
hereunder shall be interpreted, construed and enforced in accordance with
the
laws of the State of Delaware.
14.2 Acknowledgment.
The
parties acknowledge that each party to this Agreement has had equal input
as to
the drafting and construction of this Agreement and, accordingly, the parties
intend that a court construing this Agreement shall not construe it more
strictly against any of the parties hereto. Each of the Members has had this
Agreement reviewed on its behalf by independent legal counsel of its choosing,
or has waived its right to do so.
14.3 Notices.
All
notices, demands, consents, approvals, requests, offers or other communications
which are to be given pursuant to the terms of this Agreement shall be in
writing and shall be given (a) by registered or certified mail, return receipt
requested, (b) by personal delivery, or (c) by delivery via nationally
recognized overnight delivery service, and the cost and expense of any such
delivery shall be borne by the sending party. Any notice sent in compliance
with
the above provisions shall be deemed delivered and received on the third
Business Day after the day on which it was sent, or, if sooner, on the actual
date received. All notices sent pursuant to this Section 14.3 shall be addressed
as herein provided:
| To CNL: | Denver ▇▇▇▇▇ Senior Housing, LLC | |
| CNL Center at City Commons | ||
| ▇▇▇ ▇▇▇▇▇ ▇▇▇▇▇▇ ▇▇▇▇▇▇ | ||
| ▇▇▇▇▇▇▇, ▇▇▇▇▇▇▇ ▇▇▇▇▇ | ||
| Attn: ▇▇▇▇ ▇▇▇▇▇▇▇ | ||
| With copies to: | Lowndes, Drosdick, Doster, ▇▇▇▇▇▇ & ▇▇▇▇, P.A. | |
| ▇▇▇ ▇. ▇▇▇▇▇▇ ▇▇▇▇▇▇, ▇▇▇▇▇ ▇▇▇ | ||
| ▇▇▇▇▇▇▇, ▇▇▇▇▇▇▇ ▇▇▇▇▇ | ||
| Attn: ▇▇▇▇▇▇ ▇. ▇▇▇▇▇▇▇▇, Esquire | ||
| To ARC: | ARC ▇▇▇▇▇, LLC | |
| ▇▇▇ ▇▇▇▇▇▇▇▇ ▇▇▇▇▇, ▇▇▇▇▇ ▇▇▇ | ||
| ▇▇▇▇▇▇▇▇▇, ▇▇▇▇▇▇▇▇▇ ▇▇▇▇▇ | ||
| Attn: Chief Financial Officer | ||
| With copies to: | Bass, ▇▇▇▇▇ & ▇▇▇▇ PLC | |
| ▇▇▇ ▇▇▇▇▇▇▇▇▇ ▇▇▇▇▇▇, ▇▇▇▇▇ ▇▇▇▇ | ||
| ▇▇▇▇▇▇▇▇▇, ▇▇▇▇▇▇▇▇▇ ▇▇▇▇▇ | ||
| Attn: T. ▇▇▇▇▇▇ ▇▇▇▇▇, Esquire |
Or
at such
other address as is from time to time designated by the party receiving the
notice. A notice shall be deemed to have been given upon delivery, evidenced
by
appropriate signature, pursuant to the methods described above.
37
14.4 Force
Majeure.
Notwithstanding anything herein to the contrary, no party shall be liable
or
responsible for, or shall be subject to any right or remedy as a result of,
any
loss, cost, damage, delay or circumstance, and shall be relieved of any adverse
consequence, that arises, directly or indirectly, from any event or circumstance
of Force Majeure. As used herein, “Force
Majeure”
means
any event, fact, circumstance, delay, failure, loss or damage that, directly
or
indirectly, arises from, or as a result of, or that fails to occur because
of,
occurrences that are beyond, or outside of, the reasonable control of any
Person
or entity, including but not limited to: Acts of God; the taking, confiscation
or expropriation of any property or asset; the occurrence of any casualty
event;
compliance with any order or directive of any governmental authority; acts
of
declared or undeclared war; the occurrence of any military or terrorist attack;
public disorders; rebellion; sabotage; revolution; earthquakes; floods; riots;
strikes; significant disruptions of the labor or employment markets; and
changes
in laws, rules, regulations, orders or directives of any Governmental Authority.
14.5 Entire
Agreement.
This
Agreement contains the entire agreement between the parties hereto with respect
to the Company and supercedes and replaces any prior agreements between the
parties with respect to the Company. No variations from, modifications of,
amendments to or changes in this Agreement shall be binding upon any party
hereto unless set forth in a document duly executed by or on behalf of such
party.
14.6 Severability.
If any
provision of this Agreement or the application thereof to any Person or
circumstance shall be invalid or unenforceable to any extent, the remainder
of
this Agreement and the application of such provisions to other Persons or
circumstances shall not be affected thereby and shall be enforced to the
greatest extent permitted by law.
14.7 Construction
Rules.
All
personal pronouns used in this Agreement, whether used in the masculine,
feminine, or neuter gender, shall include all other genders, the singular
shall
include the plural, and vice versa, as the context may require. Titles of
Sections and Articles are for convenience of reference only, and shall neither
limit nor amplify the provisions of this Agreement itself. References in
this
Agreement to particular Sections or Articles are references to Sections or
Articles of this Agreement unless otherwise specifically provided. The words
“hereof,” “herein,” “hereto” and “hereunder” shall refer to this Agreement as a
whole and not to any particular provision of this Agreement unless otherwise
specifically provided.
14.8 Binding
Effect.
Subject
to the restrictions on transfers and encumbrances set forth herein, this
Agreement shall inure to the benefit of and be binding upon the undersigned
Members and their respective heirs, executors, personal and legal
representatives, successors and permitted assigns. Whenever, in this instrument,
a reference to any Member is made, such reference shall be deemed to include
a
reference to the heirs, executors, personal and legal representatives,
successors and permitted assigns of such Member.
14.9 Jurisdiction
and Venue.
If any
Member or the Company institutes any lawsuit or other action or proceeding
pertaining to the Company, any right or obligation of any Member hereunder,
or
any breach of this Agreement, then the nonexclusive venue and jurisdiction
for
filing and maintaining any such lawsuit or other action or proceeding shall
be
in the County Court for Denver County, Colorado. To the fullest extent permitted
by law, each Member, by executing this Agreement, consents and submits itself
to
the personal jurisdiction of such court.
38
14.10 Attorney
Fees.
In any
action or proceeding between the parties concerning this Agreement or its
enforcement, the prevailing party or parties in such action or proceeding
shall
be entitled to collect in such action or proceeding from the non-prevailing
party or parties all costs of such litigation incurred by such prevailing
party
or parties, including, but not limited to, reasonable attorney fees and costs,
through all levels of proceedings.
14.11 Counterparts.
This
Agreement may be executed in counterparts and any of such counterparts may
be
transmitted by facsimile transmission, and each of such counterparts, whether
an
original or a facsimile of an original, will be deemed to be an original
and all
of such counterparts together will constitute a single agreement.
IN
WITNESS WHEREOF,
the
undersigned Members have executed this Agreement as of the date stated
above.
Witnesses:
| DENVER ▇▇▇▇▇ SENIOR HOUSING, | |||||
| LLC, a Delaware limited liability company | |||||
| By: | CNL Senior Housing, Inc., a Florida | ||||
| corporation | |||||
| By: | |||||
| Name: | Name: | ||||
| Title: | |||||
|
Name:
|
|
Address:
|
|
▇▇▇
▇. ▇▇▇▇▇▇ ▇▇▇.
|
|
|
|
|
|
|
▇▇▇▇▇▇▇,
▇▇▇▇▇▇▇ ▇▇▇▇▇
|
|
39
| ARC
▇▇▇▇▇, LLC,
a
Tennessee limited
|
||||||
| liability company | ||||||
| Name: | By: | |||||
| Name: | ||||||
| Title: | ||||||
| Name: | Address: | ▇▇▇ ▇▇▇▇▇▇▇▇ ▇▇▇▇▇, ▇▇▇▇▇ ▇▇▇ | ||||
| ▇▇▇▇▇▇▇▇▇, ▇▇▇▇▇▇▇▇▇ ▇▇▇▇▇ | ||||||
40
Exhibit
“A”
(Property)
A
parcel
of land in the Southeast quarter of Section 16, Township 4 South, Range 67
West
of the Sixth Principal Meridian, City and County of Denver, State of Colorado/
being more particularly described as follows:
For
the
purpose of this description the bearings are based on the Southerly line
of the
Southeast quarter of said Section 16, as marked by a 3-1/4" aluminum cap,
PSL
29036 in Range Box at the South quarter corner and by a 3-1/4" aluminum cap
in
Range Box at the Southeast corner bearing South 89 degrees 31 minutes 31
seconds
East.
Commencing
at the South quarter corner of said Section 16;
Thence
North 00 degrees 07 minutes 58 seconds East along the Westerly line of the
Southeast quarter of said Section 16 a distance of 60.00 feet to a point
on the
Northerly right of way line of Mississippi Avenue as recorded under Reception
No. 00029954 on October 2, 1986 in the City and County of Denver Clerk and
Recorders Office and the Point of Beginning/¬Thence North 00 degrees 07 minutes
58 seconds East continuing along said Westerly line a distance of 561.14
feet to
a point on the Southerly line of a private road as shown on the Breaker's
Single
Family Subdivision Plat as recorded in said Clerk and Recorders Office under
Reception No. 9400092452 dated June 6, 1994:
| Thence along said Southerly line the following four (4) courses; | |
| 1. | South 89 degrees 56 minutes 18 seconds East along said Southerly line a distance of 555.38 feet to a point of non-tangent curvature; |
| 2. | Thence along the arc of a curve to the right having a central angle of 90 degrees 00 minutes 16 seconds, radius of 60.00 feet, arc length of 94.25 feet (chord bears South 44 degrees 31 minutes 39 seconds East, 84.86 feet) to a point; |
| 3. | Thence South 00 degrees 28 minutes 29 seconds West a distance of 10.00 feet to a point |
| 4. | Thence South 89 degrees 31 minutes 31 seconds East a distance of 18.00 feet to a point on the Westerly line of S. Valentina St. Subdivision as recorded in said Clerk and Recorders Office Reception No. 16388 dated February 2, 1992; |
|
Thence
along said Westerly line the following four (4)
courses:
|
|
| 1. | South 00 degrees 28 minutes 29 seconds West a distance of 185.44 feet to a point; |
| 2. | Thence South 01 degrees 37 minutes 14 seconds West a distance of 150.03 feet to a point; |
| 3. |
Thence
South 00 degrees 28 minutes 29 seconds West a distance of 120.00
feet to a
point of curvature;
|
| 4. | Thence along the arc of a curve to the right having a central angle of 90 degrees 00 minutes 00 seconds, radius of 30.00 feet, arc length o 47.13 feet (chord bears South 45 degrees 28 minutes 29 seconds West, 42.43 feet; to a point on said Northerly right of way line of Mississippi Avenue; |
41
| Thence
North 89 degrees 31 minutes 31 seconds West along said Northerly
right of
way line a distance of 597.01 feet to the Point of Beginning.
City
and County of Denver, State of
Colorado.
|
42
Exhibit
B
|
Member’s
Name and Address
|
Initial
Capital Contributions
|
Percentage
Interests
|
|
Denver
▇▇▇▇▇ Senior Housing,
LLC
CNL
Center at City Commons
▇▇▇
▇▇▇▇▇ ▇▇▇▇▇▇ ▇▇▇▇▇▇
▇▇▇▇▇▇▇,
▇▇▇▇▇▇▇ ▇▇▇▇▇
|
$10,000,000
|
80%
|
|
ARC
▇▇▇▇▇▇, LLC
▇▇▇
▇▇▇▇▇▇▇▇ ▇▇▇▇▇, ▇▇▇▇▇ ▇▇▇
▇▇▇▇▇▇▇▇▇,
▇▇▇▇▇▇▇▇▇ ▇▇▇▇▇
|
$2,500,000
|
20%
|
|
Total
|
$12,500,000
|
100%
|
43
Exhibit
C
Management
Agreement
(See
attached)
44
Exhibit
D
Development
Agreement
(See
attached)
45
Exhibit
E
Budgeted
TCCO
(See
attached)
46