AMENDED AND RESTATED LIMITED LIABILITY COMPANY AGREEMENT OF CYPRESS ARLINGTON & LEAWOOD JV, LLC A Delaware Limited Liability Company
EXHIBIT
10.4
AMENDED
AND RESTATED
OF
CYPRESS
ARLINGTON & LEAWOOD JV, LLC
A
Delaware Limited Liability Company
|
1
|
||
|
11
|
||
|
11
|
||
|
11
|
||
|
11
|
||
|
11
|
||
|
11
|
||
|
12
|
||
|
13
|
||
|
13
|
||
|
13
|
||
|
13
|
||
|
13
|
||
|
14
|
||
|
14
|
||
|
14
|
||
|
15
|
||
|
15
|
||
|
15
|
||
|
17
|
||
|
17
|
||
|
17
|
||
|
17
|
||
|
18
|
||
|
18
|
||
|
18
|
||
|
19
|
||
|
19
|
||
|
20
|
||
|
20
|
||
|
21
|
||
|
21
|
||
|
21
|
||
|
22
|
||
|
22
|
||
|
22
|
||
|
22
|
||
|
22
|
||
|
23
|
||
|
23
|
||
|
23
|
||
|
|
||
|
23
|
||
|
23
|
||
|
24
|
||
|
24
|
||
|
24
|
||
|
24
|
||
|
25
|
||
|
25
|
||
|
25
|
||
|
26
|
||
|
26
|
||
|
27
|
||
|
27
|
||
|
28
|
||
|
28
|
||
|
28
|
||
|
29
|
||
|
29
|
||
|
29
|
||
|
29
|
||
|
30
|
||
|
30
|
||
|
30
|
||
|
30
|
||
|
31
|
||
|
31
|
||
|
|
||
|
31
|
||
|
31
|
||
|
32
|
||
|
32
|
||
|
32
|
||
|
32
|
||
|
32
|
||
|
32
|
||
|
33
|
||
|
33
|
||
|
34
|
||
|
34
|
||
|
34
|
||
|
34
|
||
|
35
|
||
|
35
|
||
|
35
|
||
|
35
|
||
|
A
|
||
|
A
|
||
|
B
|
||
|
C
|
||
AMENDED
AND RESTATED
OF
CYPRESS
ARLINGTON & LEAWOOD JV, LLC
This
Amended and Restated Limited Liability Company Agreement (the “Agreement”)
of
CYPRESS
ARLINGTON & LEAWOOD JV, LLC,
a
Delaware limited liability company (the “Company”),
is
entered into as of the 28th day of February, 2006, by ARLINGTON
& LEAWOOD SENIOR HOUSING, LLC,
a
Delaware limited liability company (“CNL”),
and
ARC
CYPRESS, 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 January 26, 2006, the Company was formed
as a
limited liability company under the Delaware Limited Liability Company Act;
WHEREAS,
prior
to the date of this Agreement, ARC owned one hundred percent (100%) of the
Interests in the Company and in connection therewith entered into that certain
Limited Liability Company Agreement dated January 26, 2006 (the “Original
LLC Agreement”);
and
WHEREAS,
the
parties desire (i) for CNL to be admitted as a Member of the Company and
(ii) to
enter into this Agreement for the purpose of (a) amending and restating the
Original LLC Agreement in its entirety and (b) 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.
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:
DEFINITIONS
The
following terms used in this Agreement, unless the context otherwise requires,
shall have the following meanings:
“Acquisition
Financing Documents”
shall
mean the promissory note evidencing the Acquisition Loan and all other
agreements entered into with or for the benefit of Acquisition Lender related
to
the Acquisition Loan.
“Acquisition
Lender”
means,
collectively, the Lenders under and as defined in the Acquisition Loan
Agreement.
“Acquisition
Loan”
means
the loan provided by the Acquisition Lender to the Company and the Property
Subsidiaries in the principal amount of Thirty-Nine Million Seven Hundred
Thirty-Five Thousand Dollars ($39,735,000) for the acquisition of the
Properties.
“Acquisition
Loan Agreement”
means
the Credit and Security Agreement dated as of February 28, 2006 among Property
Subsidiaries, as borrowers, ▇▇▇▇▇▇▇ ▇▇▇▇▇, as administrative agent and as
a
lender, and the other lenders from time to time parties thereto.
“Act”
means
the Delaware Limited Liability Company Act, as the same may be amended from
time
to time.
“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:
(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.
“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 Limited Liability Company Agreement of Cypress Arlington & Leawood JV,
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.
“Arlington
Facility”
means
the senior residential living facility owned by Cypress Arlington, L.P.,
a
Delaware limited partnership and Property Subsidiary, and located on the
Arlington Property consisting of approximately two hundred sixteen (216)
residential units.
“Arlington
Property”
means
the real property and improvements located thereon owned by Cypress Arlington,
L.P., a Delaware limited partnership and Property Subsidiary, as described
on
Exhibit
A
attached
hereto.
“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.
“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 Texas.
“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 Net Profits and any items
in the nature of income or gain that are specially allocated pursuant to
Section
4.3,
Section
4.4
or
Section
4.5
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,
Section
4.4
or
Section
4.5
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;
(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 Committee 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 Committee 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 Committee 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 or any Property Subsidiary
financing) received by the Company from:
(a) a
Property Subsidiary’s sale, exchange or other disposition of any portion of the
Properties or the Senior Living Facilities, other than those resulting in,
or in
the course of, the liquidation and dissolution of the Company, which shall
be
governed by Article
11
hereof;
(b) any
mortgage financing or refinancing of any mortgage loans on the Properties
or the
Senior Living Facilities entered into by the Company or any Property Subsidiary
(including any permanent loan), but not including any advances borrowed by
the
Company or a Property Subsidiary under the terms of the Acquisition Loan
or any
Member Loan; or
(c) any
condemnation, casualty insurance or any other nonrecurring proceeds received
by
the Company or any Property Subsidiary not used for the restoration of the
Properties or the Senior Living Facilities.
“Capital
Transactions”
means
any transaction that produces Capital Proceeds.
“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.
“CNL
Decision”
and
“CNL
Decisions”
shall
have the meaning set forth in Section
6.2
hereof.
“Code”
means
the Internal Revenue Code of 1986, as amended (or any corresponding provision
or
provisions of succeeding law).
“Committee”
shall
have the meaning set forth in Section
6.1
hereof.
“Committee
Reduction Event”
shall
have the meaning set forth in Section
6.3
hereof.
“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).
“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 Committee.
“Effective
Date”
means
February 28, 2006.
“Event
of Bankruptcy”
shall
mean any event that causes a Member to be deemed a Bankrupt Member.
“Event
of Default”
shall
have the meaning set forth in Section
9.4(b)
hereof.
“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 any of the Properties 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:
(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 Committee, 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 Committee 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 Committee;
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
4.4(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 or to be 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, (iii)
right to a distributive share of the Company’s assets, and (iv) voting and
managerial rights, including the right to appoint and remove members of the
Committee.
“Leawood
Facility”
means
the senior residential living facility owned by Cypress Leawood, LLC, a Delaware
limited liability company and Property Subsidiary, and located on the Leawood
Property consisting of approximately two hundred nine (209) units.
“Leawood
Property”
means
the real property and improvements located thereon owned by Cypress Leawood,
LLC
a Delaware limited liability company and Subsidiary and Property Subsidiary,
as
applicable, as described on Exhibit
A-1
attached
hereto.
“Major
Condemnation”
means
an event in which all or substantially all of a 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 such Senior Living Facility shall
be
so taken, but the result is that it is unreasonable to continue to operate
such
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”
has
the
meaning given such term in Section
8.1
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).
“▇▇▇▇▇▇▇
▇▇▇▇▇”
means
▇▇▇▇▇▇▇ ▇▇▇▇▇ Capital, a Division of ▇▇▇▇▇▇▇ ▇▇▇▇▇ Business Financial Services,
Inc.
“Mezzanine
Assignment”
shall
have the meaning given to such term in Section
9.4(a)
hereof.
“Mezzanine
Financing Documents”
shall
have the meaning given to such term in Section
9.4
hereof.
“Mezzanine
Indebtedness”
shall
have the meaning given to such term in Section
9.4
hereof.
“Mezzanine
Lender”
means,
collectively, the Lenders under and as defined in the Mezzanine Loan
Agreement.
“Mezzanine
Loan”
means
the loan provided by the Mezzanine Lender to CNL in the principal amount
of
Seventeen Million Two Hundred Twenty-Six Thousand Dollars
($17,226,000).
“Mezzanine
Loan Agreement”
means
the Mezzanine Credit and Security Agreement dated February 28, 2006, among
CNL,
as borrower, ▇▇▇▇▇▇▇ ▇▇▇▇▇, as administrative agent and as a lender, and
the
other lenders from time to time party thereto.
“Net
Cash Flow”
means
the gross cash proceeds of the Company less (i) the portion thereof used
to pay
or establish reserves for all Company expenses (including any corporate
maintenance expenses), debt payments, capital improvements, replacements,
and
contingencies, all as determined by the Committee, and (ii) Capital Proceeds.
“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.
“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 Net Profits or Net 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,
Section
4.4
or
Section
4.5
below
shall not be taken into account in computing Net Profits or Net Loss;
and
(viii) The
amounts of the items of Company income, gain, loss, or deduction available
to be
specially allocated pursuant to Section
4.3,
Sections
4.4
and
4.5
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).
“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, limited
partnership, 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
any one of the Properties.
“Properties”
means
the Arlington Property and the Leawood Property.
“Property
Manager”
means
ARC
MANAGEMENT, LLC,
a
Tennessee limited liability company, in its capacity as the manager of the
Properties pursuant to the terms and conditions of the Management Agreements,
and any successor Person employed by the Property Subsidiaries as manager
of the
Properties pursuant to the terms and conditions of a property management
agreement.
“Property
Subsidiaries”
means
Cypress Arlington, L.P., a Delaware limited partnership, and Cypress Leawood,
LLC, a Delaware limited liability company.
“Property
Subsidiary”
means
any one of the Property Subsidiaries.
“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
any one of the Senior Living Facilities.
“Senior
Living Facilities”
means
the Arlington Facility and the Leawood Facility.
“Subsidiaries”
means
Cypress Arlington GP, LLC, a Delaware limited liability company and Cypress
Leawood, LLC, a Delaware limited liability company.
“Subsidiary”
means
any one of the Subsidiaries.
“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 a Senior Living
Facility and its contents to the extent that it would be commercially
impractical to undertake to repair and/or replace such 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
5.2(b).
“Working
Capital Advances”
means
any advances voluntarily made by a Member or an Affiliate thereof to the
Company
for the purpose of funding the working capital needs of the Company or of
a
Subsidiary or Property Subsidiary.
“Working
Capital Advances Account”
means
an account maintained by the Company for each Member that shall be credited
(increased) with the Working Capital Advances as and when made by such Member
to
the Company, credited (increased) by the Working Capital Advances Return
and
debited (decreased) by amounts distributed to such Member pursuant to
Sections
5.1(a) and 5.2(a).
“Working
Capital Advances Return”
means
an amount computed as if a Member were earning a rate of interest equal to
the
Prime Rate per annum, calculated monthly and non-compounded, on the outstanding
balance of such Member’s Working Capital Advances Account. The Working Capital
Advances Return shall be calculated from and after the date on which Working
Capital Advances are made until the date of distribution to a
Member.
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.
FORMATION
OF COMPANY, NAME, ETC.
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 ARC thereupon became the designated “authorized
person.”
The
name
of the Company shall be Cypress Arlington & Leawood JV, 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.
(a) The
Company is organized for the limited purpose of (i) owning a limited partnership
interest in Cypress Arlington, L.P., a Delaware limited partnership, and
(ii)
acting as the sole member and managing-member of the Subsidiaries.
(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 and the Subsidiaries, including, but
not
limited to, full power and authority to (i) enter into, perform and carry
out
contracts of any kind and (ii) pledge any and all interests in the Subsidiaries
and the Property Subsidiaries to secure the Acquisition Loan from the
Acquisition Lender, and to secure any refinancing of the Acquisition Loan
as
permitted under the Acquisition Loan Agreement.
The
Effective Date of this Agreement is February 28, 2006, 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.
The
Company’s principal office shall initially be located at ▇▇▇ ▇▇▇▇▇▇▇▇ ▇▇▇▇▇,
▇▇▇▇▇ ▇▇▇, ▇▇▇▇▇▇▇▇▇, ▇▇▇▇▇▇▇▇▇ ▇▇▇▇▇. The Committee 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.
The
Company and the Members 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;
(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;
(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;
(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;
(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;
(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;
(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.
CAPITAL
CONTRIBUTIONS; CAPITAL ACCOUNTS
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”)
and
are granted the Percentage Interests set forth on Exhibit
B.
The
Members shall have no right or obligation to make any further Capital
Contributions to the Company.
In
order
to satisfy its, a Subsidiary’s or a Property Subsidiary’s financial needs that
could not be satisfied through one or more Working Capital Advances, the
Company
may borrow funds from ARC or CNL or one of their Affiliates to address such
needs (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 and shall, in each case, be subject
to a
subordination agreement in the form required by the Acquisition Loan Agreement.
Any loans to the Company from ARC, CNL or one of their respective Affiliates
shall be Approved by the Members and shall bear interest at the Prime Rate.
No
Member shall be obligated to make any Member Loan.
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.
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.
The
Company shall maintain an account for each Member designated as such Member’s
Working Capital Advance Account, which account shall be credited (increased)
by
each Working Capital Advance as and when made by such Member to the Company,
credited (increased) by each Working Capital Advances Return and debited
(decreased) by amounts distributed to such Member pursuant to Sections
5.1(a)
and
5.2(a).
The
Committee shall provide monthly reconciliation statements to the Members
regarding such Working Capital Advance Account. No Member shall be obligated
to
make any Working Capital Advance.
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.
After
giving effect to the special allocations set forth in Section
4.3,
Section
4.4
and
Section
4.5
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 until the aggregate Net Loss allocated to each
Member pursuant to this Section
4.1(a)(i)
equals
the aggregate Net Profit allocated to each Member pursuant to Section
4.2,
with
Net Loss being allocated to offset such prior allocations of Net Profit in
the
reverse order in which the same were made;
(ii) The
balance, if any, to the Members in proportion to their respective Percentage
Interests.
(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.
After
giving effect to the special and curative allocations set forth in Section
4.3,
Section
4.4
and
Section
4.5,
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, proportionately until the aggregate Net Profit allocated to
each
Member pursuant to this Section
4.2(a)
equals
the aggregate Net Loss allocated to each Member pursuant to Section
4.1
(b) with
Net Profit being allocated to offset such prior allocations of Net Loss in
the
reverse order in which the same were made;
(b) The
balance, if any, to the Members in accordance with their respective Percentage
Interests.
All
realized gain or loss with respect to Capital Proceeds or other items of
gain or
loss received by the Company from the sale or refinancing of the Properties
or
any interest of the Company in the Subsidiaries or Property Subsidiaries,
for
the Fiscal Year, if any, shall be specially allocated to the Members in
proportion to the aggregate distributions each Member would receive pursuant
to
Section
5.2(c)
and
5.2(d)
as if
all such Capital Proceeds were distributed in such Fiscal Year pursuant to
Section
5.2.
Prior
to
the allocations pursuant to Section
4.1,
Section
4.2
and
Section
4.3
hereof,
items of income, gain, loss and deduction for the Year shall be allocated
in
accordance with the following provisions of this Section
4.4
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
4.4(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.
(b) Member
Minimum Gain Chargeback.
Except
as otherwise provided in Regulations Section 1.704-2(i)(4), notwithstanding
any
other provision of this Article
4,
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
4.4(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
4.4(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
4.4(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
4.4(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
4.4(c)
and this
Section
4.4(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).
(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.
The
allocations set forth in Sections
4.1(b),
4.4(a),
4.4(b),
4.4(c),
4.4(d),
4.4(e),
4.4(f)
and
4.4(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
4.5.
Therefore, notwithstanding any other provision of this Article
4
(other
than the Regulatory Allocations), the Committee 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.
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.
Any
elections or other decisions relating to such allocations shall be made by
the
Committee in any manner that reasonably reflects the purpose and intention
of
this Agreement. Allocations pursuant to this Section
4.6
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.
DISTRIBUTIONS
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
the Members, to the extent and in proportion to the Working Capital Advances
Accounts of each, until the balance of their Working Capital Advances Accounts
have been reduced to zero;
(b) The
balance, if any, to the Members in accordance with their respective Percentage
Interests.
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
the Members, to the extent and in proportion to the Working Capital Advances
Accounts of each, until the balance of their Working Capital Advances Accounts
have been reduced to zero;
(b) Second,
to the Members, to the extent and in proportion to the Unreturned Capital
Contributions of each, until such Unreturned Capital Contributions have been
returned in full;
(c) Third,
to
the Members, in proportion to their respective Percentage Interests, until
such
time as the Members have received an internal rate of return of eleven percent
(11%) on their Initial Capital Contributions, reduced by prior distributions
made pursuant to Section
5.1(b),
Section
5.2(b)
and this
Section
5.2(c),
calculated per annum, compounded quarterly, to be calculated from the date
on
which such Capital Contributions, or portions thereof, are made;
and
(d) The balance,
if any, forty percent (40%) to ARC and sixty percent (60%) to CNL.
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 Committee 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.
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,
any
other applicable law or the Acquisition Loan Agreement.
MANAGEMENT
OF THE COMPANY
The
Members shall have responsibility for the management, supervision and control
of
the Company through its managing committee (the “Committee”),
which
shall be responsible for the establishment of policy and operating procedures
respecting the business affairs of the Company and the Subsidiaries in its
good-faith business judgment. No action shall be taken, nor shall obligations
be
incurred or amounts expended, by the Company without the unanimous consent
of
the members of the Committee, except to the extent expressly provided herein
or
otherwise delegated by the Committee. The day to day operations of the Senior
Living Facilities shall be managed by the Property Manager or another Property
Manager acceptable to the Committee, pursuant to the terms, conditions and
limitations set forth in the Management Agreements. Subject to Section
6.3,
the
Committee shall at all times consist of four (4) members, two (2) of whom
shall
be appointed by CNL, and two (2) by ARC.
Each
Member may appoint an alternate for each member appointed by it to the
Committee, who shall have all the powers of the Committee member in his absence
or inability to serve. Each Member shall have the power to remove any member
or
alternative member of the Committee appointed by it, with or without cause,
by
delivering written notice of such removal to the Company and to the other
Member
in the manner required by Section
14.3.
Vacancies on the Committee shall be filled by the Member that appointed the
Committee member previously holding the position which is then
vacant.
Each
Committee member shall be entitled to cast one (1) vote with respect to any
decision made by the Committee, provided that the members who are actually
present at a meeting of the Committee shall be entitled to cast the vote
of the
member not present who was appointed by the same Member as the member casting
the vote.
The
Committee shall meet at least semiannually, upon thirty (30) days’ written
notice to all members, at the offices of the Company or by conference call
with
the results confirmed in writing or by facsimile (unless such meeting shall
be
waived by all members thereof), or, in the event of an emergency, on the
call of
any two (2) Committee members upon two (2) Business Days’ notice to all
Committee members by telephone, electronic mail, telex, telecopy or telegraph.
An agenda for each meeting shall be prepared in advance by the Members in
consultation with each other. A quorum shall be present at such meetings
to
constitute a meeting of the Committee members pursuant to this Section 6.1.
Absent the occurrence of a Committee Reduction Event, three (3) members of
the
Committee shall constitute a quorum. In the event a Committee Reduction Event
shall occur, the two (2) members of the Committee appointed by CNL shall
constitute a quorum. Absent the occurrence of a Committee Reduction Event
and
except as specifically set forth herein to the contrary where certain rights
are
granted to individual Members, the casting of four (4) concurring votes shall
be
required for all actions of the Committee except adjournment (which shall
only
require the concurring vote of a majority of the members present), and four
(4)
concurring votes shall constitute the approval by the Committee of the matter
being considered and shall be binding on the Company and the Members for
all
matters, including, without limitation, financing, refinancing, sale of some
or
all of the Company’s assets and dissolution of the Company. Upon the occurrence
of a Committee Reduction Event, the casting of two (2) concurring votes shall
be
required in all instances in the preceding sentence requiring the casting
of
four (4) concurring votes. The Committee may act without a meeting if the
action
taken is unanimously approved in advance in writing by the Committee members.
The Committee shall cause written minutes to be prepared of all actions taken
by
the Committee and shall deliver a copy thereof to each member of the Committee
within seven (7) days after the date of the meeting. Such minutes shall be
prepared by one of the Committee members appointed by ARC.
Notwithstanding
any other provision hereof requiring unanimous approval of all of the Committee
members, the Committee members appointed by CNL shall have sole and absolute
authority to propose and/or approve the actions or decisions listed below
(each
a “CNL
Decision”
and
together, the “CNL
Decisions”),
and
the approval by such Committee members of any CNL Decision shall be binding
on
the Company or any Subsidiary, as applicable:
(a) entering
into any contract or agreement on behalf of a Subsidiary to sell or encumber
the
Properties; provided, however, that any such right shall not be exercised
pursuant to this Section
6.2(a)
prior to
the fourth (4th) anniversary of the Effective Date;
(b) using
the
proceeds received by a Subsidiary of an insurance claim or condemnation
proceedings or other governmental taking resulting from a Total Casualty
or
Major Condemnation;
(c) electing
whether or not to terminate a Property Manager on behalf of a Subsidiary
for
failing to meet the performance requirements set forth in Section 2.03 of
a
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 Debt Service Guaranty Agreement delivered
by
American Retirement Corporation for the benefit of Acquisition Lender, except
to
the extent that Acquisition Lender has then made a claim against American
Retirement Corporation for any of the obligations guaranteed
thereunder.
Notwithstanding
the number of Committee members provided in Section
6.1,
upon
the termination of ARC Management, LLC as the Property Manager by the two
(2)
Committee members appointed by CNL pursuant to Section
6.2(c),
(a
“Committee
Reduction Event”),
the
number of Committee members shall be reduced, without any further action,
from
four (4) members to two (2) members, each of whom shall be appointed by CNL,
and
the unanimous approval of such two (2) members of the Committee appointed
by CNL
shall thereafter be binding on the Company or its Subsidiary, as
applicable.
The
Committee may, from time to time, appoint one or more officers of the Company
(each an “Officer”
and,
collectively, the “Officers”),
and,
to the extent set forth in a writing signed by the Committee, delegate to
such
Officer or Officers any of the Committee’s rights and powers to manage and
control the business and affairs of the Company, provided that such Officers
shall remain subject to the overall supervision and control of the Committee.
The Committee 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 Committee 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
Committee, 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.
Each
Subsidiary has three (3) officers designated by the Committee. The Committee
may
remove, replace, or change the designations of any officers of any Subsidiary
at
any time, with or without cause. All the officers of each Subsidiary shall
be
entitled to execute leases, resident agreements and service contracts on
behalf
of the Subsidiary in its capacity as the general partner of a Property
Subsidiary (and/or may delegate such signing authority to the Property
Manager).
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
Committee. Any Member acting in contravention of the prohibition of the
immediately preceding sentence shall indemnify, insure and hold harmless
the
Company, each member of the Committee 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.
The
fact
that any member of the Committee or any Affiliate of a member of the Committee
is employed by, or is directly or indirectly interested in or connected with,
any Person employed or engaged by the Company or a Subsidiary to render or
perform a service, or from which the Company or a Subsidiary may purchase
any
property, shall not prohibit the Company or any Subsidiary from employing
or
engaging that Person, or from otherwise dealing with him or it, and neither
the
Company, any Subsidiary 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. Each member of the Committee, 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, any Subsidiary 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.
Subject
to Sections
6.1
and
6.2,
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 a duly authorized Officer or by a duly authorized nominee of the Company
then
holding record title to the property for the Company, and no other signatures
shall be required. Further, any deed, mortgage, lease, contract of sale,
or
other commitment purporting to convey or encumber the interest of any Subsidiary
in all or any portion of any real or personal property at any time owned
or
leased by such Subsidiary shall be signed by a duly authorized Officer on
behalf
of such Subsidiary, or, upon the written authorization of the Committee,
by an
officer or by a nominee of such Subsidiary then holding record title to the
property for such Subsidiary, 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
6.7.
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
Acquisition Loan, and neither Member (a) shall take, or fail to take, any
action
that would conflict with any material term or condition of the Acquisition
Loan
or cause a default or event of default under the Acquisition Loan, or (b)
shall
cause the Company or any Subsidiary to take, or fail to take, any action
that
would conflict with any material term or condition of the Acquisition Loan
or
cause a default or event of default under the Acquisition Loan.
MEETINGS
OF MEMBERS
In
the
event that any matter requires the approval of the Members under the
terms of
this Agreement, the Management Agreement, or the Act, then the Committee
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.
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, a member of the Committee 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
any member of the Committee 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.
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.
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.
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.
OPERATIONAL
ISSUES
The
Property Manager shall, subject to the overall supervision and control of
the
Committee, supervise the management of the Properties pursuant to the terms
of a
management agreement to be entered into with each Property Subsidiary in
the
form attached hereto as Exhibit
C
(each a
“Management
Agreement”).
The
Property Manager shall receive a management fee based on a percentage of
accounting gross revenues from the Senior Living Facilities for its contribution
to the management of the Properties, as more specifically determined in the
Management Agreement.
ARC
shall
handle and be responsible for the obligations of the Company under Article
12
below,
including the maintaining of the Company’s and each Subsidiary’s books of
account, preparation of financial statements for the Company and each Subsidiary
and preparation and filing of tax returns for the Company and each Subsidiary.
ARC shall not be compensated for providing such services to the
Company.
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
8.3
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.
The
Members hereby acknowledge, consent, and agree that in the event the Company
has
not sold the Properties within seven (7) years of the date of closing on
the
Properties, then the Company shall sell such Property or Properties subject
to
the Management Agreement, which shall remain in full force and effect provided
that the Property Manager is not in default thereunder, and the profits derived
from such sale or sales shall be distributed to the Members in accordance
with
Section
5.2
hereof.
Notwithstanding the foregoing, the Company may extend such period with the
Approval of the Members.
Upon
the
Company’s decision to sell or to seek to sell any or all of the
Properties:
(a) The
Company shall first offer such Property or Properties for sale to the Property
Manager pursuant to the terms and conditions of the Management
Agreement.
(b) In
the
event Property Manager does not exercise within the period of time set forth
in
the Management Agreement (the “Property
Manager’s Election Period”)
or
does not have the right to exercise the right of first offer set forth in
Section
8.5(a)
above,
CNL Retirement Properties, Inc., a Maryland corporation (“CRP”),
shall
have the next right of offer to purchase such Property or Properties from
the
Company. CRP shall have thirty (30) days from the expiration of the Property
Manager’s Election Period (or thirty (30) days from the date of CRP’s receipt of
notice of the Company’s decision to sell in the event that Property Manager does
not have the right to exercise the right of first offer) to elect, in its
sole
discretion, to purchase the Property or Properties by delivering a written
notice of such election (a “CRP
Notice”)
to the
Company specifying the cash purchase price which CRP would be willing to pay
for
the Property or Properties (“CRP’s
Price”).
If
CRP does not deliver a CRP Notice within such thirty (30) day period, then
it
shall be deemed to have waived any right to purchase the Property or Properties
under this Section
8.5(b)
and the
Company may proceed to cause a sale of the Property or Properties without
the
further participation of CRP. If CRP does deliver a CRP Notice within such
thirty (30) day period, the Company shall have thirty (30) days from its
receipt
of such CRP Notice to either accept or reject, in writing, CRP’s Price. If the
Company accepts CRP’s Price, then it shall sell the Property or Properties to
CRP and the closing of such sale shall be no later than sixty (60) days from
the
date of the Company’s acceptance of CRP’s Price. If the Company rejects CRP’s
Price, then the Company shall be entitled to cause a sale of the Property
or
Properties (directly or indirectly) to any third-party for a price at least
equal to CRP’s Price, provided that the Management Agreement shall remain in
full force and effect.
(c) The
rights set forth in Sections
8.5(a)
and
8.5(b)
are
hereby made subject and subordinate to the rights and liens of ▇▇▇▇▇▇▇ ▇▇▇▇▇
as
agent for Acquisition Lender under the Acquisition Financing
Documents.
TRANSFER
OF A MEMBER’S INTEREST; MEZZANINE LOAN COVENANTS
Except
as
otherwise specifically set forth in this Agreement, including, without
limitation Section
9.4,
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 Committee, which consent may be withheld
in the sole and absolute discretion of any other Member(s) or the Committee.
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 Committee 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.
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. Notwithstanding the preceding
two
sentences, a Mezzanine Assignee, as a Substituted Member or as an assignor,
shall be released from its obligations and liabilities under the preceding
two
sentences to the extent permitted under applicable law, including, without
limitation, Chapters 5 and 6 of 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 Committee. If any Interest
is transferred other than in accordance with the provisions of Section
9.1
or
Section
9.4
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.
With
the
Approval of the Members, and ▇▇▇▇▇▇▇ ▇▇▇▇▇ or its successor as agent for
the
Mezzanine Lender so long as any Mezzanine Indebtedness remains outstanding,
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.
The
Members, on behalf of themselves and on behalf of the Company, do hereby
agree
that until such time as all of CNL’s indebtedness to Mezzanine Lender (the
"Mezzanine
Indebtedness")
and
all obligations related thereto arising from and related to the Mezzanine
Loan,
the promissory note evidencing such loan, and all other agreements entered
into
with or for the benefit of Mezzanine Lender related to such loan (the
"Mezzanine
Financing Documents")
are
satisfied in full, or, if Mezzanine Lender, Mezzanine Lender's designee(s),
and/or any other person(s) or entity(ies) acquires all or any portion of
the
collateral in which the security interest was granted in the Mezzanine
Assignment (hereinafter defined) and succeeds to all or any portion of CNL’s
rights and interests (including voting or managerial rights) in the Company,
the
following provisions shall be included in this Agreement and shall control
over
any provisions of this Agreement to the contrary:
(a) Assignment
to Mezzanine Lender.
The
Members hereby recognize and acknowledge that CNL is executing and delivering
an
Ownership Pledge, Assignment and Security Agreement to ▇▇▇▇▇▇▇ ▇▇▇▇▇ as agent
for the Mezzanine Lender as additional collateral for the Mezzanine Indebtedness
(the “Mezzanine Assignment”), which Mezzanine Assignment, among other things,
grants a security interest in all of CNL’s Interest.
(b) Consent
by the Members.
The
Members hereby consent to (i) the Mezzanine Assignment, and (ii) following
an
"Event
of Default"
as
defined in each such Mezzanine Assignment, Mezzanine Lender, Mezzanine Lender's
designee(s), and/or any other person(s) or entity(ies) acquiring all or a
portion of the collateral in which the security interest was granted in such
Mezzanine Assignment (each, a “Mezzanine
Assignee”),
and
succeeding to all or any portion of CNL’s Interest.
(c) Agreement
of the Members.
The
Members hereby agree that following an event of default under any of the
Mezzanine Financing Documents: (i) Mezzanine Lender, Mezzanine Lender's
designee(s), and/or any other person(s) or entity(ies) acquiring the collateral
in which the security interest was granted in the Mezzanine Assignment shall
have the right, but not the obligation, to accede to one hundred percent
(100%)
of all of the rights and interests of CNL in this Company, as set forth in
Section
9.2;
and
(ii) Mezzanine Lender's, Mezzanine Lender's designee(s), and/or any other
person(s) or entity(ies) acquiring all or any portion of CNL’s rights and
interests (including voting and managerial rights) in the Company shall not
cause a dissolution, winding-up or termination of the Company.
(d) Release.
Effective upon the exercise by Mezzanine Lender of its rights and remedies
under
the Mezzanine Assignment, the Company shall be fully released and discharged
from any and all obligations and liabilities to CNL under this Agreement,
except
that any obligation to reimburse CNL for any amounts loaned by CNL to or
on
behalf of the Company or otherwise and any obligation to indemnify CNL under
any
provision of this Agreement or under applicable law shall be deemed assigned
and
payable to and shall benefit Mezzanine Assignee(s).
(e) This
Agreement is subject to (and each Member shall be bound by) the terms of
that
certain Consent and Acknowledgement Regarding Pledge of Membership Interest
executed by ARC and CNL in favor of ▇▇▇▇▇▇▇ ▇▇▇▇▇, Acquisition Lender and
Mezzanine Lender.
PURCHASE
OPTION UPON BANKRUPTCY
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.
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.
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.
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).
Until
the
Mezzanine Indebtedness is paid in full, if CNL is the Bankrupt Member, then
the
rights of the other Member(s) under this Article
10
shall be
deemed suspended and shall in all events be subject and subordinate to the
rights of ▇▇▇▇▇▇▇ ▇▇▇▇▇ or its successor as agent for the Mezzanine Lender
to
CNL’s Interest, unless ▇▇▇▇▇▇▇ ▇▇▇▇▇ or its successor has waived in writing its
rights under the Mezzanine Assignment.
DISSOLUTION,
REFORMATION, LIQUIDATION, ETC.
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.
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, provided
that
prior to or concurrently therewith the Acquisition Loan Indebtedness and
the
Mezzanine Indebtedness shall have been or will be repaid in full;
(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
11.4
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.
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.
Upon
dissolution of the Company pursuant to Section
11.2
hereof,
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,
after which the Liquidator shall distribute the remaining assets of the Company
to the Members in accordance with Sections
5.1 and 5.2,
as
applicable, 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.
ACCOUNTING
AND ADMINISTRATIVE MATTERS
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 Committee, 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.
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.
ARC
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.
INDEMNIFICATION
Each
Member hereby agrees to defend, indemnify and hold harmless the other Member,
any member of the Committee 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,
member of the Committee, 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, member
of the
Committee 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, any member of the Committee 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.
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.
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.
The
Company may purchase insurance to insure against the liabilities contemplated
by
this Article
13.
MISCELLANEOUS
MATTERS
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.
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.
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
(3rd)
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:
Arlington
& Leawood Senior Housing, LLC
CNL
Center at City Commons
▇▇▇
▇▇▇▇▇
▇▇▇▇▇▇ ▇▇▇▇▇▇
▇▇▇▇▇▇▇,
▇▇▇▇▇▇▇ ▇▇▇▇▇
Attn: ▇▇▇▇
▇▇▇▇▇▇▇
With
copies to:
Lowndes,
Drosdick, Doster, ▇▇▇▇▇▇ & ▇▇▇▇, P.A.
▇▇▇
▇.
▇▇▇▇▇▇ ▇▇▇▇▇▇, ▇▇▇▇▇ ▇▇▇
▇▇▇▇▇▇▇,
▇▇▇▇▇▇▇ ▇▇▇▇▇
Attn: ▇▇▇▇▇▇
▇.
▇▇▇▇▇▇▇▇, Esquire
To
ARC:
ARC
Cypress, 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.
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.
This
Agreement contains the entire agreement between the parties hereto with respect
to the Company and supersedes 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. Until the Mezzanine Indebtedness is paid in full, the consent of ▇▇▇▇▇▇▇
▇▇▇▇▇ or its successor as agent for the Mezzanine Lender to any amendment
of
this Agreement shall be required, which consent by ▇▇▇▇▇▇▇ ▇▇▇▇▇ shall not
be
unreasonably withheld if the rights of Mezzanine Lender will not be materially
or adversely affected by such amendment.
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.
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.
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.
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 Circuit Court in and for Dallas County, Texas. To the fullest extent
permitted by law, each Member, by executing this Agreement, consents and
submits
itself to the personal jurisdiction of such court.
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.
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.
Notwithstanding
any provision in this Agreement to the contrary, (i) at such time as all
of the
Company’s indebtedness (the “Acquisition
Indebtedness”)
to
Acquisition Lender and all obligations related thereto arising from and related
to the Acquisition Loan are satisfied in full, any and all terms, provisions
or
Covenants relating to the Acquisition Indebtedness shall be null and void
and
shall have no further force or effect and (ii) at such time as all of the
Mezzanine Indebtedness is satisfied in full, any and all terms, provisions
or
covenants in this Agreement related to the Mezzanine Loan shall be null and
void
and shall have no further force or effect.
[The
following page is the signature page.]
IN
WITNESS WHEREOF,
the
undersigned Members have executed this Agreement as of the date stated
above.
Witnesses:
| ARLINGTON & LEAWOOD SENIOR HOUSING, LLC, a Delaware limited liability company | ||
| |
|
|
| By: | CNL Senior Housing III Member, LLC, a Florida limited liability company, as sole managing member | |
|
By:
|
CNL
Real Estate
Advisors Company, a Florida corporation, as sole
manager
|
||
| __________________________________ | |||
| Name:__________________________________ |
By:_________________________________
Name:_______________________________
Title:________________________________ |
||
| __________________________________ |
Address:
▇▇▇ ▇. ▇▇▇▇▇▇ ▇▇▇.
▇▇▇▇▇▇▇,
▇▇▇▇▇▇▇ ▇▇▇▇▇
|
||
| Name:__________________________________ |
| ARC CYPRESS, LLC, a Tennessee limited liability company | ||
| __________________________________ | |||
| Name:__________________________________ |
By:_________________________________
Name:_______________________________
Title:________________________________ |
||
| __________________________________ |
Address:
▇▇▇ ▇▇▇▇▇▇▇▇ ▇▇▇▇▇, ▇▇▇▇▇ ▇▇▇
▇▇▇▇▇▇▇▇▇, ▇▇▇▇▇▇▇▇▇ ▇▇▇▇▇
|
||
| Name:__________________________________ | |||
(Arlington
Property)
Being
a
part of the ▇. ▇▇▇▇▇▇▇▇ Survey, Abstract No. 1428, being all of the ▇. ▇▇▇▇▇▇▇▇
Addition, Lot 43, an addition to the City of Arlington, Texas, of record
in
Cabinet A, Slide 5230, of the Plat Records, Tarrant County, Texas, and being
more particularly described as follows:
Beginning
at a 5/8" steel rod found in the north right-of-way line of West Arkansas
Lane
at the southeast corner of Lot 41, as shown on Plat Revision of Lot 29-R
and 41,
▇▇▇▇ ▇▇▇▇▇▇▇▇ Addition, of record in Cabinet A, Slide 1673, of said Plat
Records.
Thence
North 00°03'00" West with the east line of said Lot 41, a distance of 789.17
feet to a 1/2" steel rod found in the south right-of-way line of Pioneer
Parkway
(Spur 303), said rod being the northeast corner of said Lot 41, the northwest
corner of said Lot 43;
Thence
South 89º37'07” East with said south right-of-way line, a distance of 559.16
feet to a 5/8" steel rod found at the northwest corner of Lot 33 as shown
on
Plat of Lots 32 and 33 ▇▇▇▇ ▇▇▇▇▇▇▇▇ Addition, of record in Volume 388-186,
Page
19, of said Plat Records, said rod being the northeast corner of said ▇▇▇
▇▇;
▇▇▇▇▇▇
▇▇▇▇▇ ▇▇▇▇▇'▇▇" ▇▇▇▇ with the east line of said Lot 43, a distance of 787.87
feet to a l/2" steel rod set in the north right-of-way line of said Arkansas
Lane at the southwest corner of Lot 1, of the Pirie Addition, an addition
to the
City of Arlington, of record in Volume 388-15, Page 207, of said Plat Records,
said rod also being the southeast corner of said Lot 43;
Thence
North 89°45'05" West with the said north right-of-way line, a distance of 559.18
feet to the Point-of-Beginning and containing 10.122 acres (440,894 Sq. Ft.)
of
land.
(Leawood
Property)
Being
All
of Lot 1 of TOWN VILLAGE LEAWOOD, an Addition to the City of Leawood, ▇▇▇▇▇▇▇
County, Kansas, as shown per plat recorded in Book 113, Page 11, Real Property
Records, ▇▇▇▇▇▇▇ County, Kansas.
|
Member’s
Name and Address
|
Initial
Capital Contributions
|
Percentage
Interests
|
|
Arlington
& Leawood Senior Housing, LLC
CNL
Center at City Commons
▇▇▇
▇▇▇▇▇ ▇▇▇▇▇▇ ▇▇▇▇▇▇
▇▇▇▇▇▇▇,
▇▇▇▇▇▇▇ ▇▇▇▇▇
|
$18,104,015.47
|
80%
|
|
ARC
Cypress, LLC
▇▇▇
▇▇▇▇▇▇▇▇ ▇▇▇▇▇, ▇▇▇▇▇ ▇▇▇
▇▇▇▇▇▇▇▇▇,
▇▇▇▇▇▇▇▇▇ ▇▇▇▇▇
|
$4,526003.87
|
20%
|
|
Total
|
$22,630,019.34
|
100%
|
(Form
of Management Agreement)
C