EXHIBIT 10.117
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Title of Document
FOURTH AMENDED AND RESTATED
LIMITED LIABILITY COMPANY
OPERATING AGREEMENT
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Name of Limited Liability Company
LIBERTYVILLE SL L.L.C.
(formerly LCOR/JV Libertyville SL L.L.C.)
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Purpose
ACQUIRE, DEVELOP, CONSTRUCT AND OPERATE A SENIOR LIVING FACILITY
LOCATED AT ▇▇▇ ▇▇▇▇▇▇▇▇▇ ▇▇▇▇▇ ▇▇ ▇▇▇▇▇▇▇▇▇▇▇▇, ▇▇▇▇▇▇▇▇ AND KNOWN
AS "SPRING ▇▇▇▇▇▇▇ AT LIBERTYVILLE"
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Managing Members
CAPITAL SENIOR LIVING PROPERTIES 4, INC.
PAMI SENIOR LIVING INC.
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Date
AS OF DECEMBER 20, 2002
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TABLE OF CONTENTS
(continued)
PAGE
RECITALS .......................................................................................... 1
ARTICLE I FORMATION AND OTHER ORGANIZATIONAL MATTERS................................................ 2
Section 1.1 Continuation......................................................................... 2
Section 1.2 Name................................................................................. 3
Section 1.3 Term................................................................................. 3
Section 1.4 Business and Purpose................................................................. 3
Section 1.5 [Intentionally Omitted.]............................................................. 3
Section 1.6 Names and Addresses of Members....................................................... 3
Section 1.7 Registered Office and Principal Place of Business.................................... 3
Section 1.8 Certain Definitions.................................................................. 4
ARTICLE II CERTAIN TAX AND ACCOUNTING MATTERS........................................................ 4
ARTICLE III CONTRIBUTIONS BY MEMBERS; FINANCING....................................................... 4
Section 3.1 Capital Contributions................................................................ 4
Section 3.2 Recoupment of Capital Contributions.................................................. 5
Section 3.3 Capital and Memorandum Accounts...................................................... 5
(a) Previous............................................................................. 5
(b) Current.............................................................................. 5
(c) Preparation and Attachment........................................................... 6
Section 3.4 Senior Loan.......................................................................... 6
(a) Ratification......................................................................... 6
(b) Escrow Funds......................................................................... 6
Section 3.5 Mezzanine Loan....................................................................... 6
Section 3.6 New Member Loans..................................................................... 7
Section 3.7 Existing Member Loans................................................................ 8
Section 3.8 Purchase of Capital's Member Loans................................................... 8
ARTICLE IV DISTRIBUTIONS TO MEMBERS.................................................................. 9
Section 4.1 Distributions of Available Cash from Operations and Net Capital
Transaction Proceeds................................................................. 9
Section 4.2 Distributions of Capital............................................................. 9
Section 4.3 Withholding Taxes with Respect to Members............................................ 9
ARTICLE V POWERS, RIGHTS AND DUTIES OF MEMBERS...................................................... 10
Section 5.1 Management........................................................................... 10
(a) General.............................................................................. 10
(b) Managing Members..................................................................... 10
(c) Regular Managing Member.............................................................. 10
(d) Removal of Regular Managing Member................................................... 10
(e) "Bankruptcy Event"................................................................... 12
Section 5.2 Major Decisions...................................................................... 12
(a) Making of Major Decisions............................................................ 12
(b) No Recourse Debt Without Consent of All Members...................................... 12
(c) Definition of Major Decision......................................................... 12
(d) Major Decision Committee............................................................. 15
Section 5.3 Annual Business Plan; Capital Expenditures........................................... 16
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TABLE OF CONTENTS
(continued)
PAGE
(a) Annual Business Plan................................................................. 16
(b) Capital Expenditures................................................................. 16
Section 5.4 Authority to Expend Additional Funds................................................. 17
Section 5.5 Buy-Sell Provisions.................................................................. 17
(a) Normal............................................................................... 17
(b) Special.............................................................................. 19
Section 5.6 Sale by Member....................................................................... 21
Section 5.7 Asset Management..................................................................... 23
(a) Duties............................................................................... 23
(b) Fee.................................................................................. 24
Section 5.8 Conflicting Dispositions............................................................. 24
Section 5.9 PAMI Authority to Act for Owner...................................................... 24
(a) Dual Roles of Capital................................................................ 24
(b) Approval of Amendments............................................................... 24
(c) Action under Management Agreement.................................................... 24
(d) Replacement.......................................................................... 25
(e) Enforcement.......................................................................... 25
Section 5.10 Option to Provide Financing to Company............................................... 25
Section 5.11 Other Activities..................................................................... 25
Section 5.12 Liability of Members................................................................. 26
Section 5.13 Indemnification...................................................................... 26
ARTICLE VI STATUS OF MEMBERS......................................................................... 28
Section 6.1 Relationship of Members.............................................................. 28
Section 6.2 Liability of Members................................................................. 28
Section 6.3 Dissolution of Member................................................................ 29
Section 6.4 Access to Records.................................................................... 29
ARTICLE VII TRANSFER OF MEMBERSHIP INTERESTS.......................................................... 29
Section 7.1 Restrictions on Transfer............................................................. 29
Section 7.2 Permitted Transfers.................................................................. 30
Section 7.3 Effect of Assignment................................................................. 31
Section 7.4 Substitute Member.................................................................... 31
Section 7.5 Further Requirements................................................................. 31
ARTICLE VIII CERTAIN REMEDIES.......................................................................... 32
Section 8.1 No Partition......................................................................... 32
Section 8.2 Litigation Without Termination....................................................... 32
Section 8.3 Attorneys' Fees...................................................................... 32
Section 8.4 Cumulative Remedies.................................................................. 32
Section 8.5 No Waiver............................................................................ 32
ARTICLE IX DISSOLUTION OF COMPANY.................................................................... 32
Section 9.1 Section 9.1 Events Giving Rise to Dissolution........................................ 32
Section 9.2 Procedure............................................................................ 33
ARTICLE X REPRESENTATIONS, WARRANTIES AND COVENANTS................................................. 34
Section 10.1 Ownership of Members................................................................. 34
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TABLE OF CONTENTS
(continued)
PAGE
Section 10.2 Performance by Capital............................................................. 34
Section 10.3 Performance by PAMI................................................................ 34
Section 10.4 Compliance with Loan Terms......................................................... 35
Section 10.5 Confidentiality.................................................................... 35
Section 10.6 Limitation of Liability............................................................ 35
(a) In Favor of PAMI and Affiliates.................................................... 35
(b) In Favor of Capital and Affiliates................................................. 35
Section 10.7 Holding or Purchase of Company Debt................................................ 36
Section 10.8 Limitations on Responsibilities of PAMI and its Affiliates......................... 37
ARTICLE XI MISCELLANEOUS........................................................................... 38
Section 11.1 Notices............................................................................ 38
Section 11.2 Financial Reports.................................................................. 39
Section 11.3 Entire Agreement................................................................... 39
Section 11.4 Amendments......................................................................... 39
Section 11.5 Governing Law...................................................................... 39
Section 11.6 Arbitration........................................................................ 39
Section 11.7 Successors and Assigns............................................................. 40
Section 11.8 Captions, Etc...................................................................... 40
Section 11.9 Severability....................................................................... 40
Section 11.10 Counterparts....................................................................... 40
Section 11.11 No Deficit Restoration............................................................. 40
Section 11.12 Power of Attorney.................................................................. 40
Section 11.13 Principles of Construction......................................................... 41
Section 11.14 No Third-Party Rights.............................................................. 41
Section 11.15 Further Assurances................................................................. 42
Section 11.16 No Brokers......................................................................... 42
EXHIBITS
EXHIBIT A DEFINITIONS................................................................................. A-1
EXHIBIT B CERTAIN TAX AND ACCOUNTING MATTERS.......................................................... B-1
EXHIBIT C DESCRIPTION OF BUSINESS PROPERTY CONTRIBUTED
BY LCOR AND ASSIGNED AND ASSUMED AGREEMENTS................................................. C-1
EXHIBIT D ANNUAL BUSINESS PLAN AND BUDGET FOR FISCAL
YEAR 2002................................................................................... D-1
EXHIBIT E CAPITAL ACCOUNTS: LCOR AND PAMI - SECTION 3.3(a)............................................ E-1
EXHIBIT F CAPITAL ACCOUNTS: CAPITAL AND PAMI - SECTION 3.3(b) ........................................ F-1
EXHIBIT G FORM OF PROMISSORY NOTE EVIDENCING MEMBER LOANS............................................. G-1
EXHIBIT H MEMBER LOANS: CAPITAL AND PAMI - SECTION 3.7............................................... H-1
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THIS FOURTH AMENDED AND RESTATED LIMITED LIABILITY COMPANY OPERATING
AGREEMENT ("Agreement") of LIBERTYVILLE SL L.L.C. is made and entered into as of
December 20, 2002, between CAPITAL SENIOR LIVING PROPERTIES 4, INC., a Delaware
corporation ("Capital"), and PAMI SENIOR LIVING INC., a Delaware corporation
("PAMI"), as the Managing Members.
RECITALS
A. LCOR Incorporated formed LCOR Libertyville L.L.C. as a Delaware limited
liability company ("Company") pursuant to the Certificate of Formation filed
with the Secretary of State of Delaware on October 19, 1998 (the "Commencement
Date") and that certain Operating Agreement dated as of October 19, 1998
("Initial Agreement") under the provisions of the Delaware Limited Liability
Company Act, as amended ("Delaware Act"), with LCOR Incorporated as the sole
member.
B. Pursuant to the terms of that certain Assignment of Member Interests,
dated effective November 1, 1998, LCOR Incorporated assigned all its rights,
title and interests in and to the Company to LCOR Senior Living L.L.C., a
Delaware limited liability company ("LCOR SL"), and pursuant to the terms of
that certain Amended and Restated Operating Agreement of the Company, dated
effective November 1, 1998 (the "Amended and Restated Operating Agreement"),
LCOR Incorporated withdrew from the Company, LCOR SL was admitted as a member of
the Company, and the Company changed its name to LCOR/JV Libertyville SL L.L.C.
C. Pursuant to the terms of that certain Assignment of Member Interests,
dated effective November 19, 1998, LCOR SL assigned all its rights, title and
interests in and to the Company to LCOR Libertyville Management L.L.C., a
Delaware limited liability company ("LCOR"), and pursuant to the terms of that
certain First Amendment to the Amended and Restated Operating Agreement of the
Company, dated effective November 19, 1998 (the "First Amendment"), LCOR SL
withdrew from the Company and LCOR was admitted as the sole member of the
Company.
D. Pursuant to the terms of that certain Second Amended and Restated
Limited Liability Company Operating Agreement of the Company, dated effective
March 15, 1999 (the "Second Amended and Restated Agreement"), PAMI was admitted
as an additional Member of the Company, and LCOR and PAMI were designated as the
Managing Members of the Company.
E. Pursuant to the terms of that certain Third Amended and Restated
Limited Liability Company Operating Agreement of the Company, dated effective
May 31, 2001 (the "Third Amended and Restated Agreement"), LCOR and PAMI agreed
(1) to obtain an increase in the Mezzanine Loan in order to obtain additional
funds to pay certain operating expenses of the Company and (2) to redefine
certain rights and obligations of the Members.
F. As of December 20, 2002, Capital has acquired all the Membership
Interests in the Company owned by LCOR, which is withdrawing as a Member of the
Company, pursuant to
the Assignment and Assumption Agreement dated as of December 20, 2002
("Assignment and Assumption Agreement", which term includes all exhibits
thereto) among LCOR, Capital and other parties.
G. Capital and PAMI desire to rename the Company and, if necessary, the
Business Property to remove all references to "LCOR," to continue the Company
with Capital and PAMI as the managing members of the Company and to amend and
restate the Third Amended and Restated Agreement in its entirety as set forth
below.
H. For good and valuable consideration, the receipt and sufficiency of
which are hereby acknowledged, and in consideration of the mutual agreements set
forth herein, the parties hereto, intending to be legally bound, do hereby agree
as follows:
ARTICLE I
FORMATION AND OTHER ORGANIZATIONAL MATTERS
Section 1.1 Continuation. As of the Effective Date, (a) LCOR withdraws as
a Member of the Company, (b) Capital is admitted as a member of the Company in
place of LCOR, (c) PAMI hereby agrees to continue as a Member of the Company
(wherever this Agreement refers to "Members," it shall mean and refer to Capital
and PAMI so long as each continues as a Member of the Company and their
permitted successors and assigns), (d) Capital and PAMI hereby agree to continue
the Company as a limited liability company under the Delaware Act and (e)
Capital and PAMI hereby amend and restate the Third Amended and Restated
Agreement in its entirety as set forth herein. This Agreement replaces the Third
Amended and Restated Agreement and sets forth the ongoing rights and obligations
of the Members and certain matters related thereto. Except as expressly stated
herein to the contrary, the rights and obligations of the Members and the
operation and termination of the Company shall be governed by the Delaware Act.
All rights, benefits, duties and obligations of LCOR that accrued or arose under
the Third Amended and Restated Agreement prior to the Effective Date of this
Agreement shall remain solely the respective rights, benefits, duties and
obligations of LCOR except as otherwise provided in the Assignment and
Assumption Agreement and, except as so provided, PAMI and Capital shall have no
obligation or responsibility for any such duties or obligations of LCOR. All
rights, benefits, duties and obligations of PAMI and Capital that accrue or
arise under this Agreement on or after the Effective Date of this Agreement
shall be solely the respective rights, benefits, duties and obligations of those
Members except as otherwise provided herein or in the Assignment and Assumption
Agreement and LCOR shall have no obligation or responsibility for any such
duties or obligations of Capital or PAMI except as so provided in the Assignment
and Assumption Agreement. The existing Capital Account of PAMI shall continue as
its Capital Account without change except to the extent expressly required by or
stated in this Agreement. The Capital Account and Member Loans of LCOR shall be
transferred in full to Capital and shall become the Capital Account and Member
Loans, respectively, of Capital. The Company shall close its books and financial
statements as of the Effective Date and shall prepare (but not file) a pro forma
interim tax return reflecting all items of income, loss, deduction or credit for
the period through the Effective Date. The Members and LCOR agree that taxable
income gain and loss of the Company for the 2002 tax year shall be
2
allocated according to the "interim closing of the partnership books" method
pursuant to Treasury Regulation Section 1.706-1(c)(2)(ii).
Section 1.2 Name. From and after the Effective Date, the business of the
Company shall be conducted under the name "Libertyville SL L.L.C." or such other
name as the Members may hereafter unanimously agree.
Section 1.3 Term. The term ("Term") of the Company shall be from the
Commencement Date until December 31, 2050, inclusive, unless sooner terminated
as hereinafter provided.
Section 1.4 Business and Purpose. Subject to the terms, conditions and
provisions of this Agreement, the business and purpose of the Company shall be
solely to (a) acquire, own, hold, manage, develop, improve, finance, refinance,
sell, exchange and otherwise deal with and dispose of the parcel of real
property containing approximately 10.86 acres of land located in Florsheim
Subdivision, Libertyville, Lake County, Illinois (the "Land"); (b) construct and
contract for and supervise all work necessary or appropriate for the
construction thereon of a senior living facility and such other improvements
outlined in the Development Plan and as determined appropriate by the Major
Decision Committee (the "Improvements") (the Land, together with the
Improvements being referred to herein as the "Business Property"), (c) manage,
operate, finance, refinance, lease and further improve and renovate, sell,
exchange and otherwise deal with and dispose of the Business Property, (d)
perform marketing, leasing, tenant and resident services and other operational
aspects of such Improvements including providing quality care and services to
tenants and residents, and (e) conduct any and all other acts or things that may
be incidental or necessary to carry on the business of the Company as described
above. The Company shall not engage in any other business or activity without
the approval of the Major Decision Committee.
Section 1.5 [Intentionally Omitted.]
Section 1.6 Names and Addresses of Members. The names and addresses of the
Members are as follows:
Capital Senior Living Properties 4, Inc.
▇▇▇▇▇ ▇▇▇▇▇▇ ▇▇▇▇▇▇▇
▇▇▇▇▇ ▇▇▇
▇▇▇▇▇▇, ▇▇▇▇▇ ▇▇▇▇▇
PAMI Senior Living Inc.
c/▇ ▇▇▇▇▇▇ Brothers Holdings Inc.
▇▇▇ ▇▇▇▇ ▇▇▇▇▇▇, ▇▇▇ ▇▇▇▇▇
▇▇▇ ▇▇▇▇, ▇▇▇ ▇▇▇▇ ▇▇▇▇▇
Section 1.7 Registered Office and Principal Place of Business. The
registered office of the Company in the State of Delaware shall be ▇▇▇▇ ▇▇▇▇▇▇
▇▇▇▇, ▇▇▇▇▇▇▇▇▇▇, ▇▇▇▇▇▇▇▇ ▇▇▇▇▇, and its registered agent for service of
process on the Company at the registered office
3
shall be the Corporation Service Company. The principal place of business of the
Company shall be located at ▇▇▇ ▇▇▇▇▇▇▇▇▇ ▇▇▇▇▇, ▇▇▇▇▇▇▇▇▇▇▇▇, ▇▇▇▇▇▇▇▇ ▇▇▇▇▇ or
such other location hereafter determined jointly by PAMI and Capital.
Section 1.8 Certain Definitions. Certain words and phrases used in this
Agreement are defined in Exhibit A expressly or by reference to other documents
and shall have the meanings set forth therein.
ARTICLE II
CERTAIN TAX AND ACCOUNTING MATTERS
The Members intend that the Company shall be taxed as a partnership for
federal and state income tax purposes and shall not take any action that may
result in the Company being taxed as a corporation for such purposes. Each and
all of the provisions of Exhibit B annexed hereto and made a part hereof are
incorporated herein and shall constitute part of this Agreement. Exhibit B
provides for, among other matters, the maintenance of Capital Accounts, the
allocation of profits and losses, and the maintenance of books and records.
ARTICLE III
CONTRIBUTIONS BY MEMBERS; FINANCING
Section 3.1 Capital Contributions.
(a) Effective as of March 15, 1999, PAMI contributed to the capital
of the Company the sum of One Million Two Hundred Seventy-Two Thousand One
Hundred Sixteen Dollars ($1,272,116.00).
(b) The Members agree that LCOR, as of March 15, 1999, had expended
Seven Hundred Fifty-Three Thousand Seven Hundred Thirty-Eight Dollars ($753,738)
on the development of the Business Property. Effective as of March 15, 1999,
LCOR contributed to the capital of the Company, or caused its Affiliates to so
contribute on LCOR's behalf, all right, title and interest in and to the
Business Property and all contractual rights, assets and property owned by LCOR
and its Affiliates and relating to the Business Property, all of which are
listed in Exhibit C to this Agreement. LCOR by having contributed its interest
in the Business Property and such related rights, assets and property to the
Company was credited with having made a Capital Contribution of $753,738, which
was credited to LCOR's Capital Account and to LCOR's Memorandum Account.
(c) On the Effective Date, PAMI shall contribute to the capital of
the Company (1) cash in the amount of $309,862.01, which the Members agree the
Company shall use solely to pay a portion of the deferred development fee
payable by the Company to LCOR Operating Company, upon receipt by the Company
from LCOR Operating Company of its binding release in the Assignment and
Assumption Agreement of any obligation of the Company to pay any remaining
balance of such development fee and (2) cash in an amount, not to exceed
$31,250, by which the payment obligations of the Company pursuant to Section
2.3(a), (c) and
4
(e) of the Assignment and Assumption Agreement (the "Payment Obligations")
exceed the cash of the Company otherwise available as of Closing (as defined in
such Assignment and Assumption Agreement) to pay such Payment Obligations.
Capital shall have no obligation to make any capital contribution to the Company
for such purposes.
(d) PAMI alone (and not Capital) shall be obligated to contribute to
the capital of the Company any amounts that the Company is required to pay (1)
pursuant to the Assignment and Assumption Agreement that are caused by or result
from the breach by the Company of any of its representations and warranties in
the Assignment and Assumption Agreement, (2) for indemnification and related
claims by LCOR SL and its Affiliates pursuant to Section 9.3(b) of the
Assignment and Assumption Agreement, (3) to remedy or correct any problems or
issues relating to the Business Property or the Company that occurred, accrued
or arose prior to the Effective Date and (4) for any Capital Expenditure other
than for replacement or repair of capital items due to ordinary wear and tear.
(e) If PAMI has determined that a Capital Expenditure of the type
described in Section 5.3(b) should be made by the Company, PAMI shall contribute
to the Company capital in an amount necessary to pay the full cost of each such
Capital Expenditure.
(f) Unless expressly required by this Agreement or unless otherwise
agreed by all Members, no Member shall be required to make Capital Contributions
to the Company in addition to those set forth above.
Section 3.2 Recoupment of Capital Contributions. Except as expressly
provided herein, (a) no Member shall receive any recoupment or payment on
account of or with respect to the Capital Contributions made by it pursuant to
this Agreement, (b) no Member shall be entitled to interest on or with respect
to any Capital Contribution, (c) no Member shall be entitled to withdraw any
part of such Member's Capital Contributions and (d) no Member shall be entitled
to receive any distributions from the Company.
Section 3.3 Capital and Memorandum Accounts.
(a) Previous. Exhibit E attached to this Agreement sets forth,
subject to subsection (c), the Capital Accounts and Memorandum Accounts of LCOR
and PAMI immediately prior to the Effective Date.
(b) Current. Exhibit F attached to this Agreement sets forth,
subject to subsection (c), the Capital Accounts and Memorandum Accounts of
Capital and PAMI on the Effective Date after giving effect to all Capital
Contributions and other transactions described in this Agreement, the Assignment
and Assumption Agreement and all related agreements, including the allocation of
income and loss from the beginning of January 1, 2002 through the Effective Date
as provided in Section 1.3(h) of Exhibit B.
5
(c) Preparation and Attachment. Exhibits E and F attached to this
Agreement as of the Effective Date reflect reasonable estimates of Capital
Account, Memorandum Account and other relevant tax data available immediately
prior to and on the Effective Date and are preliminary only. Within ninety (90)
days after the Effective Date, tax representatives of PAMI, Capital and LCOR SL
shall prepare and agree, in good faith and in compliance with Section 1.1,
Exhibit B and other relevant portions of this Agreement, on the final forms of
Exhibits E and F and shall circulate them to all Members and their counsel for
attachment to this Agreement. It is the expectation of the parties that the
Capital Account and Memorandum Account of LCOR immediately prior to the
Effective Date and of Capital on the Effective Date after giving effect to all
Capital Contributions and other transactions described in this Agreement, the
Assignment and Assumption Agreement and all related agreements, including the
allocation of income and loss from January 1, 2002 through the Effective Date as
provided in Section 1.3(h) of Exhibit B, will be zero.
Section 3.4 Senior Loan.
(a) Ratification. The Members acknowledge and agree that the Company
has previously obtained from Guaranty Bank (formerly, Guaranty Federal Bank,
F.S.B.) (the "Senior Lender") a $19,081,744 first mortgage loan (the "Senior
Loan") upon the terms, conditions, and provisions set forth in the Senior Loan
Documents. The Members hereby ratify and approve the Senior Loan Documents and
agree that the Regular Managing Member shall have authority on behalf of the
Company to cause the Company to continue to perform in accordance with the
Senior Loan Documents, to the extent that the Company has the financial and
other resources available to do so.
(b) Escrow Funds.
(1) The Members anticipate that the Company will receive from
the escrow held by the Senior Lender to cover operating deficits amounts
which represent reimbursement for operating deficits already paid by the
Members by means of Member Loans to the Company. The Members agree that
the Company shall pay any such amounts received from this escrow to the
Members in repayment of their applicable Member Loans in proportion to the
outstanding balances of such Member Loans used to pay operating deficits.
(2) The Senior Loan Documents also provide that certain funds
held in such escrow shall be released and returned to the Company if and
when the Company has met a stated ratio for three consecutive months. The
Members agree that any such escrow funds that are so returned to the
Company shall be retained as necessary by the Company to pay future
Company Costs and Expenses.
Section 3.5 Mezzanine Loan. The Members acknowledge and agree that the
Company has previously obtained a mezzanine loan with a principal balance on the
Effective Date of $6,971,850 ("Mezzanine Loan") from ▇▇▇▇▇▇ Brothers Holdings
Inc., an affiliate of
6
PAMI ("Mezzanine Lender"), upon the terms, conditions, and provisions set forth
in the Mezzanine Loan Documents. The Members hereby ratify and approve the
Mezzanine Loan Documents and agree that the Regular Managing Member is
authorized on behalf of the Company to cause the Company to continue to perform
in accordance with the Mezzanine Loan Documents, to the extent that the Company
has the financial and other resources available to do so.
Section 3.6 New Member Loans.
(a) Capital shall give written notice to PAMI of the amount of any
Member Loan required to be made by Capital and PAMI pursuant to any Annual
Business Plan then in effect at least fifteen (15) Business Days (or such
shorter period as is necessary under the circumstances) before PAMI would make
its pro rata share of the Member Loan, shall include in such notice a statement
that Capital is prepared to make its pro rata share of such Member Loan as
described below and shall send to PAMI appropriate evidence in reasonable detail
supporting such required Member Loan in the form of estimates, invoices, bills,
cancelled checks and other data, all of which evidence shall be subject to
PAMI's reasonable approval. If Capital properly gives such notice, Capital shall
make a Member Loan of 19.02%, and PAMI shall make a Member Loan of 80.98%, of
the amount stated in such notice no later than the date specified in such
notice.
(b) If after the Effective Date PAMI reasonably determines that
Available Cash from Operations is not sufficient to pay (1) any Capital
Expenditure to replace or repair any part of the Business Property in place as
of the Effective Date due to ordinary wear and tear, (2) any other Company Costs
and Expenses (excluding any Capital Expenditure described in Section 3.1(d) or
5.3(b) and excluding any increases in insurance premiums and real estate taxes
in excess of amounts shown in the projections given to Guaranty Bank as part of
the loan restructuring to admit Capital in place of LCOR or, if after 2007, in
excess of amounts which average more than a 3% increase per year from the
amounts shown in 2007 projections), (3) normal scheduled debt service under the
Senior Loan Documents or any agreement evidencing debt of the Company (other
than the Mezzanine Loan) or (4) any other amounts that the Company is required
to pay under any lease of the Business Property (such Company Costs and Expenses
and other amounts are referred to as "Required Expenses"), after expending all
available funds that the Company has on hand or available under any existing
financing obtained by the Company, PAMI shall so notify Capital of the amount so
required by the Company, together with a calculation thereof in reasonable
detail, and request both Members to make a Member Loan to the Company with
interest at the rate of 15% per annum, compounded monthly. PAMI shall give
written notice to Capital of the amount of any Member Loans to be made under
this subsection at least fifteen (15) Business Days (or such shorter period as
is necessary under the circumstances) before Capital would make its pro rata
share of such Member Loan, shall include in such notice a statement that PAMI is
prepared to make its pro rata share of such Member Loan as described below and
shall send to Capital appropriate evidence in reasonable detail supporting such
Member Loan in the form of estimates, invoices, bills, cancelled checks and
other data, all of which evidence shall be subject to Capital's reasonable
approval. If PAMI properly gives such notice, Capital shall make a Member Loan
of 19.02%, and PAMI shall make a Member Loan of 80.98%, of the amount stated in
such notice no later than the date specified in such notice. If Capital fails to
make any Member Loan described in this subsection for any
7
reason other than non-compliance by PAMI with the notice and documentation
requirements outlined above, Capital shall not be deemed to have defaulted under
this Agreement, but PAMI shall have the right in its sole and absolute
discretion to elect by giving written notice to Capital either (1) to rescind
the request for the relevant Member Loan under this subsection or (2) in
addition to making its own Member Loan, to make the Member Loan that Capital was
supposed to make. If PAMI makes the Member Loan in place of Capital as described
in clause (2) of the preceding sentence, Capital may still make the relevant
Member Loan to the Company within the ninety (90) day period after PAMI has made
the Member Loan in place of Capital, in which case the Company shall repay to
PAMI with accrued interest the Member Loan that PAMI made in place of Capital.
If Capital has not made the relevant Member Loan at the end of such ninety (90)
day period, then PAMI may take one or more of the following actions by written
notice to Capital: (x) remove Capital as Regular Managing Member in accordance
with Section 5.1(d)(v), (y) terminate the payment to Capital of the asset
management fee described in Section 5.7(b) or (z) terminate the Management
Agreement on behalf of the Company in accordance with Section VII.C(1)(l)
thereof. Capital hereby authorizes PAMI to take one or more of the actions
described in the preceding sentence on behalf of the Company without the
consent, approval, signature or other action by or on behalf of Capital.
(c) No Member shall be obligated to make any Member Loan and the
Membership Interest of a Member who fails to make a Member Loan as so requested
shall not be diluted or otherwise reduced. Capital acknowledges, however, that
its failure to make a Member Loan to the Company after the ninety (90) day
period as specified in subsection (b) of this Section shall be grounds for
termination by the Company for cause of the Management Agreement pursuant to
Section VII.C(1)(l) thereof. All Member Loans, together with any interest
accrued thereon, shall be evidenced by a promissory note of the Company in the
form of Exhibit G to this Agreement and shall be paid by the Company prior to
any distribution pursuant to Section 4.1(a) through (c) and in accordance with
the requirements of the Modification Agreement. All payments on Member Loans
shall be applied first to accrued interest, then to unpaid principal.
Section 3.7 Existing Member Loans. Attached as Exhibit H to this
Agreement is a schedule showing all Member Loans held by PAMI and Capital as of
the Effective Date, including (a) new Member Loans being made as of the
Effective Date, (b) the Member Loans acquired by Capital from LCOR pursuant to
the Assignment and Assumption Agreement and (c) the Member Loans being acquired
by Capital from PAMI. PAMI hereby assigns to Capital as of the Effective Date
nineteen and two one-hundredths percent (19.02%) of the Member Loans that PAMI
made entirely itself to the Company (and not pro rata with LCOR) as detailed in
Exhibit H and Capital hereby agrees to pay to PAMI an amount equal to the
principal and interest accrued through the Effective Date on such portion of
PAMI's Member Loans. PAMI acknowledges that Capital has purchased from LCOR
pursuant to the Assignment and Assumption Agreement all Member Loans to the
Company by LCOR as of the Effective Date as shown in Exhibit H. PAMI and Capital
acknowledge and agree that the Company shall repay all such Member Loans in
accordance with the requirements of the Modification Agreement.
Section 3.8 Purchase of Capital's Member Loans. PAMI shall have the right
(but not the obligation) to purchase Member Loans held by Capital for a purchase
price equal to the principal amount of Capital's Member Loans plus all accrued
and unpaid interest thereon to the
8
date of closing of the purchase. PAMI may exercise this right at any time by
giving written notice to Capital that shall specify the closing date and other
material terms of the purchase. On the closing date, upon payment of the
requisite purchase price, Capital shall transfer its Member Loans to PAMI by
assignment in form and substance reasonably satisfactory to PAMI.
ARTICLE IV
DISTRIBUTIONS TO MEMBERS
Section 4.1 Distributions of Available Cash from Operations and Net
Capital Transaction Proceeds. The Company shall make distributions to its
Members only in accordance with the requirements of the Modification Agreement
and then only if and to the extent permitted by the Senior Loan Documents and
the Mezzanine Loan Documents. Distributions of Available Cash from Operations
shall be made once each calendar quarter and at such other times as is approved
as a Major Decision pursuant to Section 5.2. Distributions of Net Capital
Transaction Proceeds shall be made promptly following the Company's receipt
thereof. Such distributions shall be made in the following order of priority,
subject to the provisions of the Modification Agreement:
(a) first, to the Members on a pro rata basis (in proportion to the
relative amounts of unpaid 12% Preferred Return of each Member) until each
Member has received, for the current period and all previous periods, cumulative
distributions pursuant to this Section 4.1(a) equal to such Member's 12%
Preferred Return;
(b) second, to the Members on a pro rata basis (in proportion to the
relative amounts of each Member's unpaid or unreturned Memorandum Account) until
each Member's Memorandum Account has been reduced to zero; and
(c) thereafter, any remaining amount of Available Cash from
Operations or Net Capital Transaction Proceeds shall be distributed to the
Members in accordance with and in proportion to their respective Back-End
Percentage Interests.
Section 4.2 Distributions of Capital. Except as expressly provided
in this Agreement or as otherwise agreed by the Members, no Member shall be
entitled to withdraw capital or to receive distributions of or against capital
without the prior written consent of, and upon the terms and conditions agreed
upon by, the Members.
Section 4.3 Withholding Taxes with Respect to Members. The Company
shall comply with any withholding requirements under federal, state and local
law and shall remit any amounts withheld to, and file required forms with, the
applicable jurisdictions. All amounts withheld from Company revenues or
distributions by or for the Company pursuant to the Code or any provision of any
federal, state or local law, and any taxes, fees or assessments levied upon the
Company, shall be treated for purposes of this Article IV as having been
distributed to those Members who received tax credits with respect to the
withheld amounts, or whose identity or status caused the withholding
obligations, taxes, fees or assessments to be incurred. If the amount withheld
was not withheld from the affected Member's actual share of cash available for
distribution, the other Member on behalf of the Company may, at its option, (a)
require such
9
Member to reimburse the Company for such withholding or (b) reduce any
subsequent distributions to which such Member is entitled by the amount of such
withholding. Each Member agrees to furnish the Company with such representations
and forms as the Managing Members shall reasonably request to assist them in
determining the extent of, and in fulfilling, the Company's withholding
obligations, if any. Each Member shall pay or reimburse to the Company all
identifiable costs or expenses of the Company caused by or resulting from
withholding taxes with respect to such Member.
ARTICLE V
POWERS, RIGHTS AND DUTIES OF MEMBERS
Section 5.1 Management.
(a) General. Except as otherwise expressly provided in this
Agreement or as otherwise provided in that certain First Amended and Restated
Management and Marketing Agreement entered into as of December 20, 2002, by and
between the Company and Capital Senior Living, Inc. (the "Management
Agreement"), the business and affairs of the Company shall be vested in and
controlled by Members designated herein as "Managing Members." The Managing
Members shall act by means of and through a committee of Persons appointed in
writing pursuant to Section 5.2(d) hereof ("Major Decision Committee").
(b) Managing Members. PAMI, Capital and any other Person admitted as
a Member of the Company pursuant to the terms of this Agreement and who is
approved as a Managing Member by both PAMI and Capital shall serve as the
Managing Members of the Company. The Managing Members hereby delegate
management, control and conduct of the operations and affairs of the Company to
the Major Decision Committee and the Regular Managing Member, as set forth
below.
(c) Regular Managing Member. The Managing Members shall from time to
time appoint one of the Managing Members to act as the "Regular Managing
Member," in accordance with the terms of this Agreement. The Regular Managing
Member is hereby authorized and directed to conduct the day-to-day operations of
the Company in accordance with the applicable Development Plan or Annual
Business Plan, as the case may be. In dealing with the Regular Managing Member
acting on behalf of the Company, no Person shall be required to inquire into the
authority of such Regular Managing Member to bind the Company, and Persons
dealing with the Company shall be entitled to rely conclusively on the power and
authority of the Regular Managing Member as set forth in this Agreement. The
Managing Members hereby designate Capital as the Regular Managing Member in
place of LCOR commencing as of the Effective Date and Capital agrees to serve in
such capacity until its withdrawal or removal pursuant to the provisions set
forth below.
(d) Removal of Regular Managing Member. The Managing Member
currently serving as the Regular Managing Member may be removed as the Regular
Managing Member at any time by any other Managing Member for cause (as set forth
below) by delivering to such Regular Managing Member a written notification of
removal stating the cause for such removal. The grounds for removal with cause
shall mean any one or more of the following:
10
(i) any material misconduct or failure to exercise reasonable
care by such Regular Managing Member in the discharge of its duties and
obligations as the Regular Managing Member that the other Member
reasonably determines constitutes actionable fraud, willful misconduct or
bad faith and that continues for more than twenty (20) Business Days after
the other Member has given written notice to the Regular Managing Member
of the grounds for removal pursuant to this subsection; or
(ii) any material breach by the applicable Regular Managing
Member of a material obligation or covenant under or pursuant to this
Agreement or any provision of applicable law that the other Member
reasonably determines has caused or will cause material damage to the
Company and that continues for more than twenty (20) Business Days after
the other Member has given written notice to the Regular Managing Member
of the grounds for removal pursuant to this subsection; or
(iii) the occurrence of a Bankruptcy Event with regard to such
Regular Managing Member; or
(iv) such Regular Managing Member shall have violated the
transfer restrictions set forth in Article VII; or
(v) Capital fails for any reason to make its pro rata share of
any additional Member Loan pursuant to Section 3.6(b), after giving effect
to the ninety (90) day period described therein; or
(vi) subject to the expiration of the next succeeding
semi-annual period set forth in the proviso at the end of this subsection
(vi), the net operating income of the Company (or other comparable term
used in the Annual Business Plan and related operating budget) determined
in accordance with generally accepted accounting principles for two (2) or
more consecutive fiscal semi-annual periods beginning on January 1, 2004
has been less than 85% of the net operating income (or such comparable
term) projected for those semi-annual periods in the applicable Annual
Business Plan and related operating budget; provided, however, that if net
operating income of the Company during the semi-annual period following
such two (2) consecutive semi-annual periods during which the Company
failed to achieve such net income targets is more than 85% of such
projected net operating income, Capital shall not be subject to removal as
Regular Managing Member under this provision unless and until the Company
has failed to achieve such net income targets in future consecutive
semi-annual periods. All calculations pursuant to this subsection (vi)
shall exclude real estate taxes and insurance premiums.
In the event of withdrawal or removal of any Regular Managing Member, the
other Member shall be entitled to appoint itself as the successor Regular
Managing Member (subject to the foregoing provisions) or to appoint a
third party to act as the "Manager" of the Company, upon such terms as
determined reasonably appropriate by such other Managing Member. The
successor Regular Managing Member or such other "Manager" shall thereafter
act on behalf of the Company unless and until a court of competent
jurisdiction has finally determined that removal of the prior Regular
Managing Member
11
was not proper under this Agreement, in which case the prior Regular
Managing Member shall resume its activities as Regular Managing Member.
(e) For purposes of this Section, the term "Bankruptcy Event" with
respect to a Regular Managing Member means (1) the filing by such Regular
Managing Member of a petition for its bankruptcy or reorganization under the
U.S. Bankruptcy Code or comparable state law, (2) the commencement against such
Regular Managing Member, with or without its consent or approval, of any
proceeding seeking its bankruptcy, liquidation or reorganization, appointment of
a receiver or trustee of its assets, or comparable relief, that in each case is
not stayed or dismissed within 90 days, (3) the entry of a court of competent
jurisdiction of a final and unappealable order granting relief of the type
described in clause (1) or (2) above, (4) the admission in writing by such
Regular Managing Member of its inability to pay its debts generally as they
become due and (5) the making by such Regular Managing Member of a general
assignment for the benefit of its creditors.
Section 5.2 Major Decisions.
(a) Making of Major Decisions. All Major Decisions with respect to
the Company's business shall require the prior written approval of the Major
Decision Committee except to the extent that any payment or other action that
constitutes a Major Decision is authorized or described in the Annual Business
Plan or Management Agreement then in effect. Either Member can propose a Major
Decision. The Regular Managing Member shall have authority to make any
commitment or engage in any undertaking on behalf of the Company in respect of a
Major Decision only if and to the extent the same (1) has been approved in
writing as described in this subsection (a) or (2) has been authorized in the
Development Plan or any Annual Business Plan then in effect.
(b) No Recourse Debt Without Consent of All Members. Neither the
Company nor any Member shall have the right or power to create any indebtedness
for borrowed money of the Company that will permit recourse by the lender to any
Member without the prior written consent of each Member.
(c) Definition of Major Decision. The term "Major Decision" as used
in this Agreement means any decision with respect to the following matters:
(i) other than to the extent provided in Section 3.3, 3.4,
3.5, 3.6 and 3.7 hereof, approval of any construction or permanent loan or
other financing by the Company;
(ii) approval of any amendment to the Senior Loan and the
Senior Loan Documents or to the Mezzanine Loan and the Mezzanine Loan
Documents;
(iii) approval of any modification of the Development Plan and
approval of each Annual Business Plan;
12
(iv) approval of the terms and conditions of any construction,
development, leasing, management or any similar agreement relating to the
Business Property;
(v) approval of any contract between the Company and a Member
or any Affiliate of a Member;
(vi) subject to Section 5.2(d)(iv) and the provisions of
Section VI.B of the Management Agreement giving a right of first offer to
Capital Senior Living, Inc., an Affiliate of Capital, approval of the
sale, restructuring, refinancing or disposition of all or substantially
all of the Company Property, the merger or consolidation of the Company
with any other entity, or the liquidation or dissolution of the Company;
(vii) other than as contemplated or provided for in either the
Development Plan or any Annual Business Plan, acquisition or development
of any real property in addition to the Business Property or of a material
amount of other assets not intended as part of the Business Property;
(viii) acquisition of shares of capital stock of or other
equity interest in any corporation or other legal entity;
(ix) formation by the Company of any corporation, partnership,
limited liability company or other legal entity;
(x) making any loan, extending credit or acting as guarantor
or surety to, for or on behalf of any other Person;
(xi) hiring, setting the compensation for, or discharging
officers, employees, attorneys, consultants or other agents of the Company
other than as set forth or described in the Annual Business Plan;
(xii) selecting or changing the Accountants or retaining or
discharging accounting, financial or auditing specialists to assist the
Accountants;
(xiii) commencing any zoning or other legal proceeding or
litigation of any type on behalf of the Company, other than as set forth
or described in the applicable Annual Business Plan and other than with
regard to the zoning to construct the Improvements or any proceeding to
collect any delinquent rent or evict any tenants or residents;
(xiv) settling, compromising or taking any other material
action with respect to any litigation, legal proceeding or insurance claim
of any type by, against or involving the Company in excess of $25,000;
(xv) creation of any material lien, security interest or
encumbrance on any Business Property other than as described in or
contemplated by the Senior Loan or the Mezzanine Loan;
13
(xvi) issuance or sale of additional Membership Interests or
admission of a new Member other than in accordance with Article VII;
(xvii) [Intentionally Omitted];
(xviii) filing any petition in bankruptcy or reorganization or
instituting any other type of bankruptcy, reorganization or insolvency
proceeding with respect to the Company, consenting to the institution of
involuntary bankruptcy, reorganization or insolvency proceedings with
respect to the Company, the admission in writing by the Company of its
inability to pay its debts generally as they become due or the making by
the Company of a general assignment for the benefit of its creditors;
(xix) other than as provided in the Management Agreement,
taking any action that is materially inconsistent with the Development
Plan or any Annual Business Plan then in effect, or expending any funds by
or on behalf of the Company that vary materially from any budget set forth
in either the Development Plan or any Annual Business Plan then in effect,
and for purposes of this Section 5.2(c)(xix), a material variance shall be
(A) any individual expenditure in an amount in excess of the amount set
forth in the applicable budget for such expenditure by more than the
lesser of (1) 5% of such budgeted amount or $10,000, whichever is greater
or (2) $100,000, or (B) aggregate expenditures for any transaction or
series of related transactions which when taken with all prior
expenditures during the particular fiscal year related thereto exceed the
maximum expenditure amount provided in the applicable budget for such
particular transaction or series of transactions for such fiscal year by
more than the greater of (1) 5% of such maximum expenditure amount for
such particular transaction or series of transactions for such fiscal year
or $50,000 (whichever is greater) or (2) $250,000; provided, however, that
this Section 5.2(c)(xix) shall not apply to expenditures made or
obligations incurred or agreements entered into pursuant to, specified in
or contemplated under the Development Plan or any Annual Business Plan or
as set forth in Section 5.4 hereof;
(xx) the granting of material easements with respect to any
Business Property other than in connection with construction of the
Improvements;
(xxi) approval of any material amendment or modification to,
or material waiver under, the Contract of Sale or any other agreement,
plan or other document referred to above;
(xxii) approval of funding of any additional capital
contribution requirement; or
(xxiii) other than as contemplated or provided for in either
the Development Plan or any Annual Business Plan, with respect to any
action or issue not specifically described in this or another Section of
this Agreement, making any material decision or taking any material action
that is not in the ordinary course of business or that will or is
reasonably expected to affect materially the Company, any Member or the
business or operations of the Company.
14
(d) Major Decision Committee.
(i) The Managing Members hereby constitute the "Major Decision
Committee" which shall meet periodically as necessary (based upon a
schedule to be established by the Major Decision Committee) to consult
from time to time concerning the Company, to review the status of
activities of the Company and to make such Major Decisions as may be
required from time to time.
(ii) The Major Decision Committee shall consist initially of
four members, two of which shall be appointed by Capital and two of which
shall be appointed by PAMI. Until further notice, the members of the Major
Decision Committee appointed by Capital shall be ▇▇▇▇▇▇▇▇ ▇. ▇▇▇▇▇ and
▇▇▇▇▇ ▇▇▇▇▇▇▇▇▇▇▇ and the members of the Major Decision Committee
appointed by PAMI shall be ▇▇▇▇▇ ▇. ▇▇▇▇ and ▇▇▇▇▇ ▇. ▇▇▇▇▇▇▇▇▇. Each
member shall be entitled to appoint an alternative to act in his or her
place. Each member of the Major Decision Committee shall serve until his
or her resignation, death or removal by the Managing Member appointing
such member.
(iii) Except as provided in subsection (iv) below, upon two
(2) Business Days prior written notice from either of the Managing Members
given not more than once per calendar month each of the Managing Members
shall cause at least one (1) of its representatives to attend a meeting of
the Major Decision Committee called for the purpose of acting on a Major
Decision. All notices requesting a meeting shall be accompanied by an
agenda in sufficient detail to provide adequate notice of the matters to
be discussed and to permit each of the representatives to make
knowledgeable decisions. Matters discussed at any meeting shall be limited
to the items set forth in the agenda unless otherwise agreed by the
representatives in attendance at the meeting. The notice requirements for
any meeting of the Major Decision Committee may be waived if such waiver
is approved by each member.
(iv) Notwithstanding the provisions of subsection (iii),
either Member may at any time after December 20, 2004, propose a Major
Decision involving the sale, restructuring, refinancing or disposition of
all or substantially all of the Company Property pursuant to subsection
(c)(vi) above. The proposing Member shall give notice of the proposal and
the price and other material terms of the proposed Major Decision at least
fifteen (15) Business Days before the Major Decision Committee is to vote
on such Major Decision. If the proposal is not approved by the Major
Decision Committee by the end of such 15 Business Day period, a deadlock
over a Major Decision shall be deemed to exist immediately,
notwithstanding the provisions of Section 5.5(a). At any time prior to
proposing a Major Decision of the type described in this subsection, any
Member may offer the Company Property for sale to third parties on behalf
of the Company and solicit and negotiate offers to purchase the Company
Property without the consent, approval or participation by the other
Members, but shall have no right to accept any offer or to sell the
Company Property until such action has been approved as a Major Decision
pursuant to this Section.
(v) A majority (in number) of the members of the Major
Decision Committee shall constitute a quorum for transaction of business
at any meeting of the
15
Major Decision Committee, provided that if less than a majority of such
number of members of the Major Decision Committee are present at said
meeting, a majority of the members of the Major Decision Committee present
may adjourn the meeting to a future date and shall give the absent members
of the Major Decision Committee notice of the adjourned meeting date. The
act of a majority (in number) of the members of the Major Decision
Committee present at a meeting at which a quorum is present shall be the
act of the Major Decision Committee, unless the act of a greater number is
required by this Agreement; provided at least one member of the Major
Decision Committee appointed by PAMI and at least one member of the Major
Decision Committee appointed by Capital shall have consented to such
action. Each member of the Major Decision Committee shall have one (1)
vote. Each Managing Member shall cause its member on the Major Decision
Committee to use his or her best efforts to negotiate and resolve in good
faith any dispute or disagreement regarding a Major Decision. Any action
required to be taken at a meeting of the Major Decision Committee or any
other action which may be taken at a meeting of the Major Decision
Committee may be taken without a meeting, if a consent in writing, setting
forth the action so taken, shall be signed by a majority (in number) of
the members of the Major Decision Committee entitled to vote with respect
to the subject matter thereof. Any such consent signed by a majority (in
number) of the members of the Major Decision Committee shall have the same
effect as an act of a majority (in number) of the members of the Major
Decision Committee at a properly called and constituted meeting of the
Major Decision Committee at which all of the members of the Major Decision
Committee were present and voting.
(vi) Meetings of the Major Decision Committee shall be held in
New York, New York, at the offices of PAMI or at such other location as
approved by the Major Decision Committee. The Regular Managing Member
shall cause to be prepared minutes of each meeting, which shall be
promptly delivered to the Managing Members for their approval. The Major
Decision Committee may take any action without the necessity of a formal
meeting, including holding a meeting by means of conference telephone or
other communication equipment
Section 5.3 Annual Business Plan; Capital Expenditures.
(a) Annual Business Plan. Attached as Exhibit D is the Annual
Business Plan for the Fiscal Year 2002, which were approved by PAMI and LCOR and
has been ratified by Capital. By January 20, 2003 with respect to Fiscal Year
2003 and by November 15 of each year thereafter, Capital shall prepare for
approval by the Members as a Major Decision an updated Annual Business Plan of
the Company in accordance with the requirements of Section III.H of the
Management Agreement and showing revenues, operating and other expenses, Capital
Expenditures and sources and uses of funds (including additional Member Loans by
the Members) for the next Fiscal Year. Each such Annual Business Plan must be
approved in writing as a Major Decision as provided in Section 5.2 before they
shall become effective.
(b) Capital Expenditures. If PAMI determines in its sole and
absolute discretion that the Company should make a Capital Expenditure (other
than one described in Section 3.1(d) or Section 3.6(b)(1)) that (1) was not
proposed by Capital in the Annual Business Plan or otherwise or (2) was proposed
by PAMI but not approved by Capital, PAMI shall have
16
the right to cause the Company to make the capital improvement and the related
Capital Expenditure if and to the extent that PAMI contributes to the capital of
the Company an amount sufficient to pay the cost of each such Capital
Expenditure pursuant to Section 3.1(e).
Section 5.4 Authority to Expend Additional Funds. Notwithstanding anything
to the contrary in this Agreement, in the event an emergency arises by act of
God or otherwise, the Regular Managing Member shall have the right to take such
actions (including expending up to $100,000 of the funds of the Company), as the
Regular Managing Member, in its reasonable judgment, deems necessary for the
protection of life or health or preservation of assets of the Company if, by
reason of any act of God or other emergency in the good faith determination of
the Regular Managing Member, any delay would materially increase the risk to
life or health or materially increase the magnitude of such property damage;
provided, however, that the Regular Managing Member shall notify the other
Members of the emergency situation and the action the Regular Managing Member
proposes to take (including the amount of any expenditures) as soon as
reasonably practical.
Section 5.5 Buy-Sell Provisions.
(a) Normal. Subject to the provisions of Section 5.8 and except
under the circumstances described in subsection (b) below, if PAMI and Capital
have been deadlocked for more than thirty (30) days over approval of a Major
Decision at any time, either PAMI or Capital shall be permitted (but not
required) to notify the other Managing Member of its intent to invoke the
procedures described in subsections A through D below (provided, however, prior
to any disagreement over a Major Decision rising to the level of a "deadlock"
entitling either PAMI or Capital to invoke the procedures described in this
Section 5.5(a), the party intending to invoke the procedures described in this
Section 5.5(a) shall first give the other Managing Member at least 5 Business
Days notice that failure to reach agreement with regard to such Major Decision
within such 5-Business Day period will constitute a "deadlock" which if
continued for more than thirty (30) days, would entitle either PAMI or Capital
to invoke the procedures of this Section 5.5(a)).
A. The Member ("Offeror") giving notice ("Buy-Sell Notice") to the
other Member (the "Offeree") shall specify a price ("Offer Price") for the
Business Property and all other assets of the Company, and indicate a
willingness to be, at the option of the Offeree, either the "Buyer" or the
"Seller," as provided below. The Offer Price shall be the cash purchase price at
which the Offeror would be willing to purchase all the assets of the Company, as
if such assets were free and clear of all liens, claims and encumbrances. The
Buy-Sell Notice shall also disclose all liabilities and potential liabilities of
the Company known to or reasonably determinable by the Offeror and the monetary
amount of such liabilities. The Buy-Sell Notice must be delivered with the words
"Confidential/Urgent" clearly visible from the exterior of the container in
which the Buy-Sell Notice is contained and must alert the other Offeree to the
60-day limit for response as described below. Delivery of the Buy-Sell Notice
shall be in accordance with the notice provisions of this Agreement.
B. The Offeree shall have 60 days from the receipt of the Buy-Sell
Notice to elect by written notice given to the Offeror to be either the Seller
or Buyer. If the Offeree elects to be the Buyer, its notice shall constitute its
legally binding obligation to complete the purchase
17
described in Section 5.5(a)C and shall not be effective unless it also delivers
to the Offeror cash in an amount equal to five percent (5%) of the amount it
would be obligated to pay under Section 5.5(a)C ("Deposit"). In the event the
Offeree fails to respond within such 60-day period or fails to pay the Deposit,
then the Offeror shall be the Buyer, in which case, the Offeror shall deliver to
the Offeree cash in an amount equal to five percent (5%) of the amount it would
be obligated to pay under Section 5.5(a)C (also the "Deposit"), and delivery of
such Deposit shall constitute its legally binding obligation to complete the
purchase described in Section 5.5(a)C. If the Offeror fails to pay the Deposit,
then the Offeree shall (1) have the right (but not the obligation), to be
exercised and completed within 120 days after the Buy-Sell Notice was given to
be the Offeree as described above, to be the Buyer at an Offer Price equal to
90% of that stated in the Buy-Sell Notice and (2) shall be entitled to specific
performance and all other available legal and equitable remedies against the
Buyer, including (without limitation) recovery of all losses, costs and
expenses. The Offeree shall not, however, be entitled to any consequential
damages.
C. Within two hundred forty (240) days after the Buy-Sell Notice has
been given:
(1) If Capital is the Seller, PAMI shall pay to Capital in full
payment for its Membership Interest in this Company the amount Capital
would have received as a Member of the Company if the Company Property of
this Company had been sold for an amount equal to the Offer Price on the
date of such payment, and the proceeds of such sale (net of liabilities,
obligations and expenses that would have been paid out of such proceeds,
including, without limitation, any amounts due to a Member or its
Affiliates, if such sale had actually occurred) were distributed in the
order of priority described in Section 4.1 of this Agreement. If PAMI was
the Offeror and gave the Buy-Sell Notice and no amount would be payable to
Capital under Section 4.1, PAMI shall at a minimum pay or cause the
Company to pay to Capital the entire amount of all unpaid Member Loans to
the Company (plus accrued and unpaid interest thereon) made or held by
Capital. Capital shall thereupon cease to be a Member of the Company.
(2) If PAMI is the Seller, Capital shall pay to PAMI in full payment
for its Membership Interest in the Company the amount PAMI would have
received as a Member of this Company if the Company Property of this
Company had been sold for an amount equal to the Offer Price on the date
of such payment, and the proceeds of such sale (net of liabilities that
would have been paid out of such proceeds, including without limitation
any amounts due to a Member or its Affiliates, if such sale had actually
occurred) were distributed in the order of priority described in Section
4.1 of this Agreement. PAMI shall thereupon cease to be a Member of the
Company.
(3) If the Buyer fails to complete the transaction within 240 days
after the Buy-Sell Notice was given as described above for a reason other
than default by the Seller, the Seller shall retain the full amount of the
Deposit and (1) shall have the right (but not the obligation), to be
exercised and completed within 365 days after the Buy-Sell Notice was
given, to be the Buyer as described above at an Offer Price equal to 90%
of that stated in the Buy-Sell Notice and, as applicable (2) shall be
entitled to specific performance and all other available legal and
equitable remedies against the Buyer,
18
including (without limitation) recovery of all losses, costs and expenses.
Seller shall not, however, be entitled to any consequential damages.
(b) Special. Subject to the provisions of Section 5.8 and
notwithstanding the provisions of subsection (a) above, if (1) PAMI and Capital
fail to agree on a proposed Major Decision to sell the Business Property as
described in Section 5.2(d)(iv) or (2) the Regular Managing Member has been
removed for cause pursuant to Section 5.1(d), either PAMI or Capital shall be
immediately permitted (but not required) to notify the other Managing Member of
its intent to invoke the procedures described in subsections A through D below.
A. The Member ("Offeror") giving notice ("Buy-Sell Notice") to the
other Member (the "Offeree") shall specify a price ("Offer Price") for the
Business Property and all other assets of the Company, and indicate a
willingness to be, at the option of the Offeree, either the "Buyer" or the
"Seller," as provided below. The Offer Price shall be the cash purchase price at
which the Offeror would be willing to purchase all the assets of the Company, as
if such assets were free and clear of all liens, claims and encumbrances. The
Buy-Sell Notice shall also disclose all liabilities and potential liabilities of
the Company known to or reasonably determinable by the Offeror and the monetary
amount of such liabilities. The Buy-Sell Notice must be delivered with the words
"Confidential/Urgent" clearly visible from the exterior of the container in
which the Buy-Sell Notice is contained and must alert the other Offeree to the
30-day limit for response as described below. Delivery of the Buy-Sell Notice
shall be in accordance with the notice provisions of this Agreement.
B. The Offeree shall have 30 days from the receipt of the Buy-Sell
Notice to elect by written notice given to the Offeror to be either the Seller
or Buyer. If the Offeree elects to be the Buyer, its notice shall constitute its
legally binding obligation to complete the purchase described in Section 5.5(b)C
and (i) in case PAMI is the Offeree, shall not be effective unless PAMI also
delivers to the Offeror at the same time as its response cash in an amount equal
to five percent (5%) of the amount PAMI would be obligated to pay under Section
5.5(b)C ("Deposit") and (ii) in case Capital is the Offeree, shall not be
effective unless Capital also delivers to the Offeror cash in the amount of the
Deposit within 30 days after Capital has delivered to PAMI its response to
PAMI's Buy-Sell Notice. In the event the Offeree fails to respond within such
30-day period or fails to pay the Deposit within the time period specified in
the preceding sentence, then the Offeror shall be the Buyer, in which case the
Offeror shall deliver to the Offeree cash in an amount equal to the Deposit, and
delivery of such Deposit shall constitute its legally binding obligation to
complete the purchase described in Section 5.5(b)C. If the Offeror fails to pay
the Deposit as described above, then the Offeree shall (1) have the right (but
not the obligation), to be exercised and completed within 60 days after the
Buy-Sell Notice was given to be the Offeree as described above, to be the Buyer
at an Offer Price equal to 90% of that stated in the Buy-Sell Notice and (2)
shall be entitled to specific performance and all other available legal and
equitable remedies against the Buyer, including (without limitation) recovery of
all losses, costs and expenses. The Offeree shall not, however, be entitled to
any consequential damages.
19
C. Within one hundred twenty (120) days after the Buy-Sell Notice
has been given:
(1) If Capital is the Seller, PAMI shall pay to Capital on a date
specified by PAMI within such one hundred twenty (120) days in full
payment for its Membership Interest in this Company the amount Capital
would have received as a Member of the Company if the Company Property of
this Company had been sold for an amount equal to the Offer Price on the
date of such payment, and the proceeds of such sale (net of liabilities,
obligations and expenses that would have been paid out of such proceeds,
including, without limitation, any amounts due to a Member or its
Affiliates, if such sale had actually occurred) were distributed in the
order of priority described in Section 4.1 of this Agreement. If PAMI was
the Offeror and gave the Buy-Sell Notice and no amount would be payable to
Capital under Section 4.1, PAMI shall at a minimum pay or cause the
Company to pay to Capital the entire amount of all unpaid Member Loans to
the Company (plus accrued and unpaid interest thereon) made or held by
Capital. Capital shall thereupon cease to be a Member of the Company.
(2) If PAMI is the Seller, Capital shall pay to PAMI on a date
specified by Capital within such one hundred twenty (120) days in full
payment for its Membership Interest in the Company the amount PAMI would
have received as a Member of this Company if the Company Property of this
Company had been sold for an amount equal to the Offer Price on the date
of such payment, and the proceeds of such sale (net of liabilities that
would have been paid out of such proceeds, including without limitation
any amounts due to a Member or its Affiliates, if such sale had actually
occurred) were distributed in the order of priority described in Section
4.1 of this Agreement. PAMI shall thereupon cease to be a Member of the
Company.
(3) If the Buyer fails to complete the transaction within 120 days
after the Buy-Sell Notice was given as described above for a reason other
than default by the Seller, the Seller shall retain the full amount of the
Deposit and (1) shall have the right (but not the obligation), to be
exercised and completed within 150 days after the Buy-Sell Notice was
given, to be the Buyer as described above at an Offer Price equal to 90%
of that stated in the Buy-Sell Notice and, as applicable (2) shall be
entitled to specific performance and all other available legal and
equitable remedies against the Buyer, including (without limitation)
recovery of all losses, costs and expenses. Seller shall not, however, be
entitled to any consequential damages.
D. If PAMI is the Buyer and has completed the purchase of Capital's
Membership Interest in the Company, PAMI, acting on behalf of the Company, shall
have the right at any time after completion of such purchase to terminate the
Management Agreement for cause pursuant to and only if the requirements of
Section VI.C(1)(i) thereof are met and without payment of any termination fee or
other compensation to Capital Senior Living, Inc. thereunder.
E. While the procedures described in this Section 5.5(b) are
pending, the Buyer shall have the right to offer the Company Property for sale
to third parties on behalf of the Company and to solicit and negotiate offers to
purchase the Company Property without the consent, approval or participation by
the Seller, but shall have no right to accept any offer or to
20
sell the Company Property until Buyer has completed the purchase of the Seller's
Membership Interest in the Company pursuant to this Section 5.5(b).
(c) Any Member may freely assign its rights and obligations pursuant
to this Section 5.5 to any party (including any Affiliate) by delivering notice
of such assignment to the other Members, provided that the assigning Member
shall remain liable for any and all obligations of its assignee, as if such
Member had not made such assignment.
(d) Substantially simultaneously with the delivery of the Buy-Sell
Notice by the Offeror to the Offeree pursuant to the foregoing provisions, a
copy of the Buy-Sell Notice shall be delivered to the Accountants who shall
within ten (10) calendar days determine and notify the Members of the amount
each would receive as Members on account of their respective Membership
Interests in the Company, if all the Company's assets were sold for the Offer
Price, all liabilities of the Company (including any loans by any Member or its
Affiliates to the Company) were paid in full, and the remaining proceeds
distributed to the Members in accordance with Section 4.1 hereof.
(e) Simultaneously with the closing of any sale pursuant to Section
5.5(a) or (b), the Buyer shall obtain the full and complete release of Seller
and all of its Affiliates from any liability upon, on or under or in connection
with any loan, liability or other obligations of the Company arising or accruing
after the closing of any sale pursuant to this Section and any related
guaranties from Seller or any of its Affiliates ("Future Obligations"). If the
Buyer is unable for any reason after exercising commercially reasonable efforts
to obtain the release of Seller and its Affiliates from any Future Obligation as
described in the preceding sentence, then if Seller is reasonably satisfied with
regard to the creditworthiness of Buyer or its Affiliates, as the case may be
(in Seller's reasonable discretion), Buyer may at its option satisfy this
release requirement by indemnifying Seller and its Affiliates against any such
Future Obligation in a manner reasonably approved by the Members, which
indemnity shall require that Seller or its Affiliates not take any action with
respect to such Future Obligation without the prior written consent of Buyer.
Section 5.6 Sale by Member.
(a) Subject to the provisions of Section 5.8, if a Member ("Selling
Member") wishes at any time for any reason to sell or otherwise dispose of all
(but not less than all) of its Membership Interest in this Company, then the
other Member ("Remaining Member") shall have the right (but not the obligation)
to purchase such Membership Interest on the terms and conditions described
below. The Selling Member shall give notice ("Sale Notice") to the Remaining
Member and shall specify the price and other material terms and conditions
("Sale Price") that it is seeking for sale of such Membership Interests. The
Sale Notice must be delivered with the words "Confidential/Urgent" clearly
visible from the exterior of the container in which the Sale Notice is contained
and must alert the Remaining Member to the 60-day limit for response described
below. Delivery of the Sale Notice shall be in accordance with the notice
provisions of this Agreement.
(b) The Remaining Member shall have 60 days from the receipt of the
Sale Notice to elect by written notice given to the Selling Member to purchase
at the Sale Price the Membership Interests of the Selling Member. If the
Remaining Member elects to purchase the
21
Membership Interest of the Selling Member being sold, its notice shall
constitute its legally binding obligation to complete the purchase described in
Section 5.6(d) and shall not be effective unless the Remaining Member also
delivers to the Selling Member cash in an amount equal to five percent (5%) of
the amount it would be obligated to pay under Section 5.6(d) ("Deposit"). If the
Remaining Member (i) fails to respond to the Sale Notice within such 60-day
period, (ii) fails to pay the Deposit or (iii) notifies the Selling Member that
it does not wish to purchase such Membership Interest of the Selling Member,
then the Selling Member shall be entitled to sell or otherwise dispose of such
Membership Interest in this Company to a transferee at a price and on other
material terms and conditions no less favorable to the transferee than those set
forth in the Sale Notice for a period of 240 days after the Sale Notice was
given to the Remaining Member.
(c) If the Selling Member is entitled to sell its Membership
Interest pursuant to the last sentence of Section 5.6(b), the Selling Member
shall also have the right (but not the obligation) to require the Remaining
Member to sell to the proposed transferee at the same time as the Selling Member
all (and not less than all) of the Membership Interest held by the Remaining
Member at the same price (adjusted proportionately based on the Back-End
Percentage Interest of the Remaining Member) and on the same terms and
conditions as those applicable to the sale of the Selling Member's Membership
Interest to the proposed transferee. The Selling Member shall exercise this
right by giving written notice thereof to the Remaining Member no less than ten
(10) Business Days prior to the closing of the sale of Membership Interests to
the proposed transferee. Simultaneously with the closing of the sale of the
Membership Interest of the Remaining Member, the Selling Member shall be
required to obtain the full and complete release of the Remaining Member and its
Affiliates from any liability upon, on or under or in connection with any Future
Obligations. If the Selling Member is unable for any reason after exercising
commercially reasonable efforts to obtain the release of the Remaining Member
and its Affiliates from any Future Obligation as described in the preceding
sentence, then if Remaining Member is reasonably satisfied with regard to the
creditworthiness of Selling Member or its Affiliates, as the case may be (in
Remaining Member's reasonable discretion), the Selling Member may at its option
satisfy this release requirement by indemnifying the Remaining Member and its
Affiliates against any such Future Obligation in a manner reasonably approved by
the Members, which indemnity shall require that the Remaining Member or its
Affiliates not take any action with respect to such Future Obligation without
the prior written consent of the Selling Member. If (1) PAMI is the Selling
Member and has required Capital to sell its Membership Interests in the Company
to the proposed transferee at the same time as PAMI, but (2) no amount would be
payable to Capital as the Remaining Member for its Membership Interests in the
Company, PAMI shall pay or cause the Company or the proposed transferee to pay
to Capital the entire amount of all unpaid Member Loans to the Company (plus
accrued and unpaid interest thereon) made or held by Capital.
(d) If the Remaining Member elects to purchase the Membership
Interest of the Selling Member, the Remaining Member shall within 240 days after
Sale Notice was given pay to the Selling Member the Sale Price stated in the
Sale Notice. Simultaneously with the closing of the purchase of the Membership
Interest of the Selling Member, the Remaining Member shall be required to obtain
the full and complete release of the Selling Member and its Affiliates from any
liability upon, on or under or in connection with any Future Obligations. If the
Remaining Member is unable for any reason after exercising commercially
reasonable efforts
22
to obtain the release of the Selling Member and its Affiliates from any Future
Obligation as described in the preceding sentence, then if Selling Member is
reasonably satisfied with regard to the creditworthiness of Remaining Member or
its Affiliates, as the case may be (in Selling Member's reasonable discretion),
the Remaining Member may at its option satisfy this release requirement by
indemnifying the Selling Member and its Affiliates against any such Future
Obligation in a manner reasonably approved by the Members, which indemnity shall
require that the Selling Member or its Affiliates not take any action with
respect to such Future Obligation without the prior written consent of the
Remaining Member.
(e) If the Remaining Member elects to purchase such Membership
Interest of the Selling Member, but fails for any reason to complete the
transaction within 240 days after the Sale Notice was given as described above,
the Selling Member (i) shall retain the full amount of the Deposit, (ii) shall
have the right to sell such Membership Interest within a period of 360 days
after the Sale Notice was given at a Sale Price equal to 90% of that stated in
the Sale Notice and on other terms no less favorable to the Selling Member than
those of the Sale Price stated in the Sale Notice and (iii) as applicable, shall
be entitled to specific performance and all other available legal and equitable
remedies against the Remaining Member, including (without limitation) recovery
of all losses, costs and expenses. The Selling Member shall not, however, be
entitled to any consequential damages.
Section 5.7 Asset Management.
(a) Duties. In addition to its responsibilities as Regular Managing
Member under this Agreement (for which Capital receives no separate
compensation), Capital shall perform the following asset management services and
duties with respect to the Business Property:
(1) Budget Review. Capital shall review and advise the Company
regarding the Annual Business Plan to be prepared by Capital Senior
Living, Inc. or any successor thereto retained by the Company in
connection with the operation and management of the Business Property.
(2) Establish Procedures. Capital shall establish policies and
procedures for the overall mission and philosophy of the Business Property
and advise the Company in connection with the adoption of such policies
and procedures.
(3) Promotional Services. Capital shall develop marketing and
promotional materials for the Business Property, including the creation of
trademarks and logos.
(4) Management Oversight. Capital shall oversee any material
community operating issues which may arise, and shall oversee and enforce
on behalf of the Company the management agreement between the Company and
Capital Senior Living, Inc., or any successor thereto retained by the
Company in connection with the operation and management of the Company.
23
(b) Fee. So long as Capital has not been removed as Regular Managing
Member and is fully providing the services described in subsection (a)
(which services Capital may subcontract to Capital Senior Living, Inc.
except for the oversight by Capital of Capital Senior Living, Inc.), the
Company shall pay to Capital Senior Living Inc. as long as designated by
Capital as its subcontractor for such services on a monthly basis an asset
management fee equal to three-quarters of one percent (0.75%) of Gross
Revenues as defined in Section VIII.B of the Management Agreement, which
shall be paid to Capital at the same time and under the same conditions as
the Base Management Fee is payable to an Affiliate of Capital under
Section VIII.A of the Management Agreement. Payment of this asset
management fee by the Company to Capital is subject to termination as
stated in Section 3.6(b), in which case Capital shall no longer be
required to provide services set forth in Section 5.7(a).
Section 5.8 Conflicting Dispositions. Notwithstanding anything contained
herein, no Member shall have the right to initiate the procedures described in
Section 5.5 or 5.6, while (1) a default by such Member under this Agreement has
occurred and is continuing, (2) the buy-sell procedures described in Section 5.5
or the Membership Interest sale procedures described in Section 5.6 have been
previously initiated by a Member and are continuing and have not yet been
completed or terminated in accordance with the applicable provisions of this
Agreement, (3) Capital Senior Living, Inc. has initiated the right of first
offer procedures described in Section VI.B of the Management Agreement and such
procedures are continuing and have not yet been completed or terminated in
accordance with the applicable provisions of the Management Agreement, (4) the
Company has contracted to sell the Business Property to a third party pursuant
to a legally-binding agreement that has not been terminated or (5) the transfer
procedures described in Section 5.6 previously initiated by PAMI or Capital are
continuing and have not yet been completed or terminated in accordance with that
Section. In addition, if at any time while the buy-sell or sale of Membership
Interest procedures described in Section 5.5 or 5.6 are pending Capital Senior
Living, Inc. initiates the right of first offer procedures described in Section
VI.B of the Management Agreement, such right of first offer procedures shall
take precedence and the buy-sell or sale of Membership Interest procedures
described in Section 5.5 or 5.6 shall be suspended (including relevant time
periods) and shall resume only if Capital Senior Living, Inc. has not purchased
the Business Property from the Company and such right of first offer procedures
have been completed or terminated in accordance with the applicable provisions
of the Management Agreement.
Section 5.9 PAMI Authority to Act for Owner.
(a) Dual Roles of Capital. PAMI and Capital recognize that Capital
is Manager under the Management Agreement and also is one of the two Managing
Members of the Company.
(b) Approval of Amendments. Any amendment or modification of or
waiver of any provision or right arising under the Management Agreement shall be
approved by PAMI acting alone on behalf of the Company prior to such amendment,
modification or waiver thereof being effective or binding upon the Company.
(c) Action under Management Agreement. Any approval, consent,
decision, waiver, notice of default or termination, or other action by or on
behalf of the Company under
24
the Management Agreement shall be approved by PAMI acting alone on behalf of the
Company. PAMI in its sole and absolute discretion may on behalf of the Company
or in its own name implement, enforce or take any termination or other
enforcement action that arises under the Management Agreement, without the
participation, consent, approval or signature of Capital as a Member of the
Company.
(d) Replacement. If Capital is removed as the Regular Managing
Member of the Company pursuant to Section 5.1(d), PAMI acting alone on behalf of
the Company shall have the sole right and authority to act on behalf of the
Company without the participation, consent, approval or signature of Capital as
Member of the Company (a) to terminate the Management Agreement with Capital
(with no termination or any other type or form of penalty, fee or other
compensation being paid to Capital) upon written notice to Capital and (b) to
replace it with an agreement with another Person who is not an Affiliate of any
member of Owner.
(e) Enforcement. PAMI, in its own name or through or on behalf of
the Company and at the expense of the Company, shall have the sole right and
authority to enforce the provisions of the Management Agreement against Capital
by all appropriate methods, including the commencement of legal or other
proceedings against Capital, without the participation, consent, approval or
signature of Capital as a Member of the Company.
Section 5.10 Option to Provide Financing to Company. Whenever Capital on
behalf of the Company proposes to obtain new or replacement financing of any
type (whether senior or junior debt or equity) for any purpose (other than in
connection with any of Section 5.5 or Section 5.6) following approval of such
action by both Managing Members or the Major Decision Committee, Capital shall
on behalf of the Company offer, in writing and describing all material terms, to
PAMI the right of the first offer (but not the obligation) to cause one of its
Affiliates to commit to provide such financing on terms no less favorable to the
Company than those that are proposed by Capital. If the Affiliate of PAMI agrees
to accept such offer, the Company will accept such financing from the Affiliate
of PAMI. PAMI shall respond within fifteen (15) days to any offer so made by the
Company and if PAMI does not elect within such 15-day period to have one of its
Affiliates provide such financing, it shall be deemed to have waived its right
to do so and Capital, on behalf of the Company, shall be authorized to obtain
financing, on terms no less favorable to the Company than those proposed by
Capital to PAMI, without requiring further consent or approval by PAMI. If PAMI
shall cause one of its Affiliates to commit to provide such financing, such
commitment shall be subject to standard mortgage loan documentation, reasonably
acceptable to Capital and to PAMI's Affiliate, including, without limitation,
title, survey, environmental, legal opinions and customary capital markets
lending requirements reasonably acceptable to Capital and to PAMI's Affiliate.
Section 5.11 Other Activities. Except to the extent expressly prohibited
or restricted in Article X hereof or by any other agreement, the Members shall
not be required to manage the Company as their sole and exclusive function and
they and their Affiliates may have other business interests and may engage in
other activities in addition to those relating to the Company, including,
without limitation, the making or management of other investments or the
acquisition, development, ownership and management of senior living and other
real estate projects. Without limitation on the generality of the foregoing,
each Member recognizes that the
25
other Members and their Affiliates each have an interest in investing in,
owning, operating, transferring and otherwise using real property and interests
therein for profit, and engaging in any and all activities related or incidental
thereto and that each will make other investments consistent with such interests
and the requirements of Article X hereof or any other agreement to which they or
their Affiliates are a party. Neither the Company nor any Member shall have any
right by virtue of this Agreement in or to any other ventures or activities in
which any Member or its Affiliates are involved or to the income or proceeds
derived therefrom. The pursuit of other ventures and activities by each Member
or its Affiliates, even if competitive with the business of the Company, is
hereby consented to by all other Members and shall not be deemed wrongful or
improper under this Agreement to the extent permitted hereby or another
agreement to which a Member is a party. Unless required by this Agreement or
another agreement to which a Member is a party, no Member or Affiliate shall be
obligated to present any particular investment opportunity to the Company, even
if such opportunity is of a character which, if presented to the Company, could
be taken by the Company, and each Member and each Affiliate shall have the right
to take for its own account, or to recommend to others, any such particular
investment opportunity.
Section 5.12 Liability of Members. Except as otherwise provided in this
Agreement and subject to the terms of the Assignment and Assumption Agreement,
no Member, former member of the Company or Affiliate thereof shall be liable,
responsible or accountable in damages or otherwise to the Company or any Member
for any action taken or failure to act on behalf of the Company within the
scope of the authority conferred on such Member, former member or Affiliate
thereof by this Agreement or by law unless such action or omission was caused
by, resulted from or arose out of its fraud, bad faith or willful misconduct.
Section 5.13 Indemnification.
(a) The Company ("Indemnitor") shall indemnify, defend and hold
harmless to the extent provided below the Members, former members of the Company
and their respective directors, officers, constituent partners or members,
employees, shareholders and other Affiliates (individually, an "Indemnitee")
against all claims, suits, actions, losses, liabilities, reasonable fees of
attorneys, accountants and other professionals, judgments, fines, penalties,
including excise and similar taxes, settlements, and reasonable expenses
("Losses") actually incurred by such Indemnitee in connection with the defense
and/or settlement of such action, suit or proceeding. Subject to the provisions
of the Assignment and Assumption Agreement, the Company shall also indemnify,
defend and hold harmless LCOR Libertyville Management L.L.C. as a former Member
of the Company and its Affiliates from and against certain Losses to the extent
described in Section 9.3(b) of the Assignment and Assumption Agreement.
(b) Each Member ("Indemnitor") shall indemnify, defend and hold
harmless to the extent provided below the Company, the other Member and each
former member of the Company and their respective directors, officers,
constituent partners or members, employees, shareholders and other Affiliates
(individually, an "Indemnitee") against all Losses caused by, resulting from or
arising out of its fraud, willful misconduct or bad faith. Subject to the
provisions of the Assignment and Assumption Agreement, LCOR Libertyville
Management L.L.C. as a former member of the Company and an Indemnitor shall
indemnify, defend and hold harmless the Company, each current Member of the
Company and their respective Indemnitees
26
against all Losses caused by, resulting from or arising out of its fraud,
willful misconduct or bad faith.
(c) In no event, however, shall indemnification ever be made to the
extent that (i) the Indemnitee has been found liable for fraud, willful
misconduct or bad faith or (ii) a Loss arises out of a breach by the Indemnitee
of the terms and provisions of this Agreement that is found to be fraud, willful
misconduct or bad faith.
(d) If a claim or assertion of liability is made or asserted by a
third party against an Indemnitee that, if prevailed upon by any such third
party, may result in such Indemnitee being entitled to indemnification pursuant
to this Section, such Indemnitee will forthwith give to the Indemnitor written
notice of the claims or assertion of liability and request the Indemnitor to
defend the same. Failure to so notify the Indemnitor will not relieve the
Indemnitor of any liability which the Indemnitor might have to such Indemnitee
except to the extent that such failure actually prejudices the Indemnitor's
legal position. The Indemnitor will have the obligation to defend the Indemnitee
against such claim or assertion (if such Indemnitee is entitled to
indemnification pursuant to this Section) and the Indemnitor will give written
notice to the Indemnitee of acceptance of the defense of such claim and the name
of the counsel selected by the Indemnitor to defend such claim. The Indemnitee
will be entitled to participate with the Indemnitor in such defense and also
will be entitled at its option (and expense) to employ separate counsel for such
defense. The Indemnitor and the Indemnitee will cooperate with each other in the
defense of any such action and the relevant records of each will be made
available to the other with respect to such defense.
(e) No Indemnitee will be entitled to indemnification under this
Section if it has entered into any settlement or compromise of any claim giving
rise to any indemnifiable loss without the written consent of the Indemnitor. If
a bona fide settlement offer is made with respect to a claim and the Indemnitor
desires to accept and agree to such offer, the Indemnitor will give written
notice to the Indemnitee to that effect (the "Settlement Notice"). If the
settlement offer includes a full release of the Indemnitee and the Indemnitee
fails to consent to the settlement offer within ten calendar days after receipt
of the Settlement Notice, then the Indemnitee will be deemed to have rejected
such settlement offer and will be responsible for continuing the defense of such
claim and, in such event, the maximum liability of the Indemnitor as to such
claim will not exceed the amount of such settlement offer plus any and all
reasonable costs and expenses paid or incurred by the Indemnitee up to the date
of the Settlement Notice and which are otherwise the responsibility of the
Indemnitor pursuant to this Section. If the settlement offer does not include a
full release of the Indemnitee and the Indemnitee fails to consent to the
settlement offer, the Indemnitor shall continue to remain liable to the
Indemnitee to the full extent set forth in this Section 5.13.
(f) Any indemnification permitted under subsection (a) shall be made
only out of the assets of the Company, and no Member shall be obligated to
contribute to the capital of, or loan funds to, the Company to enable the
Company to provide such indemnification.
(g) The indemnification provided by this Section shall be in
addition to any other rights to which each Indemnitee may be entitled under any
agreement or vote of the Members, as a matter of law or otherwise, as to action
in the Indemnitee's capacity as a Member,
27
as a director, officer, employee, constituent partner, shareholder or other
Affiliate of a Member and shall continue as to an Indemnitee who has ceased to
serve in such capacity and shall inure to the benefit of the heirs, successors,
assigns, administrators and personal representatives of the Indemnitee.
(h) Except as otherwise provided in this Agreement, the Company may
purchase and maintain insurance on behalf of any one or more Indemnitees if
approved as a Major Decision in accordance with Section 5.2. If insurance is
obtained for any Indemnitee, it shall be obtained on the same basis for all
other Indemnitees who have comparable risks.
(i) In no event may an Indemnitee subject a Member to personal
liability by reason of the indemnification provisions of this Agreement.
(j) The provisions of this Section are for the benefit of the
Indemnitees and the heirs, successors, assigns, administrators and personal
representatives of the Indemnitees and shall not be deemed to create any rights
for the benefit of any other Persons.
ARTICLE VI
STATUS OF MEMBERS
Section 6.1 Relationship of Members. Each Member agrees that, to the
fullest extent permitted by Section 18-1101 and other provisions of the Delaware
Act and except to the extent expressly stated in this Agreement or in any other
agreement to which a Member is a party:
(a) Except as expressly provided in this Agreement, the Development
Plan or in any Annual Business Plan, no Member shall have any authority to bind
or act for, or assume any obligation or responsibility on behalf of, any other
Member or the Company.
(b) Except to the extent expressly provided in such subsection (c)
below or elsewhere in this Agreement, the Members shall have the same duties and
obligations to each other that general partners of a limited partnership formed
under Delaware law have to each other.
(c) Any consent, approval, determination or other action by a Member
shall be given or taken in the sole and absolute discretion of that Member in
its own best interests and without regard to the best interests of another
Member or the Company or the financial, tax or other effect on another Member or
the Company.
(d) No Member is authorized to act as the agent, representative or
attorney-in-fact for any other Member.
(e) The Membership Interests shall be governed by Chapter 8 of the
applicable Uniform Commercial Code.
Section 6.2 Liability of Members. Except as otherwise expressly provided
in the Delaware Act, the debts, obligations and liabilities of the Company,
whether arising in contract,
28
tort or otherwise, shall be solely the debts, obligations and liabilities of the
Company, and no Member shall be obligated personally for any such debt,
obligation or liability of the Company solely by reason of being a Member of the
Company. Except as otherwise expressly provided in the Delaware Act, the
liability of each Member shall be limited to the amount of Capital Contributions
required to be made by such Member in accordance with the provisions of this
Agreement, but only when and to the extent the same shall become due and payable
pursuant to the terms, conditions and provisions of this Agreement. Further, no
member of the Major Decision Committee, general or limited partner of any
Member, shareholder or member or other holder of any equity interest of any
Member, or any officer, director or employee of any of the foregoing or any of
their Affiliates shall be obligated personally for any debt, obligation or other
liability of the Company solely by reason of their being a member of the Major
Decision Committee, general or limited partner of any Member, shareholder or
member or other holder of an equity interest of any Member, or officer, director
or employee of any of the foregoing or any of their Affiliates. Further, failure
of the Company to observe any corporate or other formality or requirements
relating to the exercise of its powers or the management of its business and
affairs under this Agreement or the Delaware Act shall not be grounds for any
Member, member of the Major Decision Committee, general or limited partner of
any Member, shareholder or member or other holder of an equity interest of any
Member or any officer, director or employee of any of the foregoing or any of
their Affiliates to be held liable or obligated for any debt, obligation or
other liability of the Company. The foregoing shall not, however, limit the
personal liability of a Member for its obligations to the Company or another
Member under this Agreement or to the Company or other Member under any other
agreement to which such Member may be a party.
Section 6.3 Dissolution of Member. The dissolution of a Member shall not
cause a dissolution of the Company, but the rights of such Member to share in
the profits and losses of the Company and to receive distributions of Company
funds shall, on the happening of such an event, devolve upon its trustee or
successor, subject to the terms and conditions of this Agreement, and the
Company shall continue as a limited liability company. The successor of such
Member shall be liable for all of the obligations of such Member under this
Agreement. However, in no event shall such trustee or successor become a
substitute Member, except with the prior written consent of the other Members.
Section 6.4 Access to Records. The Members shall, upon reasonable notice,
be provided with access to all tax, financial and other books and records of the
Company.
ARTICLE VII
TRANSFER OF MEMBERSHIP INTERESTS
Section 7.1 Restrictions on Transfer.
A. Except as provided in Sections 5.5, 5.6, 5.7 and 7.2 hereof, no
Member shall make a sale, assignment, transfer, encumbrance or hypothecation,
directly or indirectly, of the whole or any part of its Membership Interest
(including, but not limited to, its rights in the capital, profits, losses,
gains, distributions or other economic interests of any type in or from the
Company) without the prior unanimous written consent of all Members, which
consent shall not be unreasonably withheld. The direct or indirect sale,
assignment, transfer, encumbrance or
29
hypothecation of the equity interest in a Member shall be deemed to constitute a
proportionate sale, assignment, transfer, encumbrance or hypothecation of that
Member's Membership Interest. Notwithstanding any other Section of this
Agreement, a Member making a transfer pursuant to Sections 5.5, 5.6, 5.7, 7.2
and this Section shall continue to be responsible for payment and performance
under any completion or other guarantees that such Member signed in connection
with the construction of the Improvements included in the Business Property and
for the making of all Capital Contributions required under Article III necessary
to complete such construction unless the Member making the transfer obtains the
prior written consent (which shall not be unreasonably withheld) of the other
Members to a modification or reduction of those obligations.
B. No sale, assignment, transfer, encumbrance, hypothecation or
issuance in violation of the provisions hereof shall be valid or effective for
any purpose, and no consent to one transaction shall apply to any other.
C. Upon the transfer of its entire Membership Interest in the
Company and the admission of such Member's transferee(s) as a substitute Member
pursuant to Section 7.4, a Member shall be deemed to have withdrawn from the
Company.
Section 7.2 Permitted Transfers.
A. Notwithstanding the provisions of Section 7.1 but subject to the
limitations set forth in Sections 7.4 and 7.5, each Member shall be entitled
directly or indirectly (through one or more intermediaries), without the consent
of the other Members, to transfer all or any portion of its interest in the
Company or any interest in any Member to any Permitted Affiliate (as hereinafter
defined) of such Member; provided, however, that no such transfer shall be
effective (without the consent required in Section 7.1A) if it is part of a
series of transactions designed to effect a direct or indirect transfer to a
Person not described in this sentence.
B. "Permitted Affiliate" means, with respect to a Member (including
Capital and PAMI): (a) any Person directly or indirectly (through one or more
intermediaries) owning, controlling or holding 100% of the outstanding
securities of or equity or beneficial interests in such Member, (b) any Person
100% of whose outstanding securities and equity or beneficial interests are
directly or indirectly (through one or more intermediaries) owned, controlled or
held by such Member or (c) any Person 100% of whose outstanding securities and
equity or other beneficial interests are directly or indirectly (through one or
more intermediaries) owned, controlled or held by a Person or Persons directly
or indirectly (through one or more intermediaries) owning, controlling or
holding 100% of the outstanding securities or equity or other beneficial
interests of such Member with whom affiliate status is being tested.
C. In addition, "Permitted Affiliate" means, with respect to PAMI
and its Affiliates, ▇▇▇▇▇▇ Brothers Holdings Inc. ("LBHI") or any Affiliate of
LBHI or PAMI.
D. If a Member transfers its Membership Interest to a Permitted
Affiliate in connection with a securitization or similar financing vehicle for
which such Member or an Affiliate of such Member retains the right prior to
default to exercise discretionary decision-making authority and other consent
rights regarding Major Decisions (including, without limitation, the right to
appoint members of the Major Decision Committee as set forth in this
30
Agreement), the Permitted Affiliate may pledge or hypothecate such Membership
Interest directly or indirectly to a trustee or other Person who is not a
Permitted Affiliate to secure notes or other evidences of indebtedness issued by
the securitization or similar financing vehicle.
Section 7.3 Effect of Assignment. In the event of any sale, assignment or
transfer permitted hereunder, the Company shall not be dissolved or wound up,
but shall continue. No such sale, assignment or transfer shall relieve the
assignor from any of its obligations under this Agreement accruing prior to such
sale, assignment or transfer.
Section 7.4 Substitute Member. The transferee of a Member's Membership
Interest in the Company may be admitted to the Company as a substitute Member
only if such transfer is made in compliance with Section 7.1 or 7.2. Unless a
transferee of a Membership Interest is admitted as a substitute Member under
this Section 7.4, it shall have none of the powers of a Member hereunder and
shall have only such rights of an assignee under the Delaware Act as are
consistent with the other terms and provisions of this Agreement.
Section 7.5 Further Requirements.
A. In addition to the other requirements of Sections 7.1, 7.2 and
7.4, and unless waived in whole or in part by the other Members, no transfer of
all or any portion of a Membership Interest may be made unless the following
conditions are met:
(1) The delivery to the Company of a fully executed copy of
all transfer documents relating to the transfer, including, the agreement
in writing of the transferee to (a) be bound by the terms of this
Agreement, (b) pay all costs and expenses of the Company incident to the
transfer, and (c) assume all obligations of the transferor under this
Agreement relating to the Membership Interest that is the subject of such
transfer; provided, however, that (i) if less than the entire Membership
Interest of the transferor is to be acquired, then the assumption need
only be as to a share of the transferor's obligations in proportion to the
portion of the transferor's Membership Interest so acquired, and (ii) no
assumption shall be required unless the transferee is being substituted as
a Member.
(2) The representation of the transferring Member and the
transferee, and the delivery of an opinion of counsel reasonably
acceptable to the non-transferring Member, that (a) the transfer will not
cause the Company to be treated as a "publicly traded partnership" within
the meaning of Section 7704 of the Code and (b) the transfer will not
violate the Securities Act of 1933, as amended, or any other applicable
federal or state securities laws, rules or regulations.
(3) No non-transferring Member shall unreasonably withhold or
delay any waiver permitted under this Section 7.5.
31
ARTICLE VIII
CERTAIN REMEDIES
Section 8.1 No Partition. Each Member hereby irrevocably waives any and
all rights that it may have to maintain any action for partition of Company
Property.
Section 8.2 Litigation Without Termination. Each Member shall be entitled
to maintain, on its own behalf or on behalf of the Company, any action or
proceeding against any other Member or the Company (including, without
limitation, any action for damages, specific performance or declaratory relief)
for or by reason of the breach by such party of this Agreement or any other
agreement entered into in connection with this Agreement, notwithstanding the
fact that any or all of the parties to such proceeding may then be Members in
the Company, and without dissolving the Company as a limited liability company.
Section 8.3 Attorneys' Fees. If the Company or any Member obtains a
judgment against any other Member by reason of breach of this Agreement or
failure to comply with the provisions hereof, a reasonable attorneys' fee as
fixed by the court shall be included in such judgment.
Section 8.4 Cumulative Remedies. No remedy conferred upon the Company or
any Member pursuant to this Agreement is intended to be exclusive of any other
remedy herein or by law provided or permitted, but each shall be cumulative and
shall be in addition to every other remedy given hereunder or now or hereafter
existing at law, in equity or by statute (subject, however, to the limitations
expressly herein set forth).
Section 8.5 No Waiver. No waiver by a Member or the Company of any breach
of this Agreement shall be deemed to be a waiver of any other breach of any kind
or nature, and no acceptance of payment or performance by a Member or the
Company after any such breach shall be deemed to be a waiver of any breach of
this Agreement, whether or not such Member or the Company knows of such breach
at the time it accepts such payment or performance. Subject to any applicable
statutes of limitation and any provisions in this Agreement to the contrary, no
failure or delay on the part of a Member or the Company to exercise any right it
may have under this Agreement shall prevent the exercise thereof by such Member
or the Company, and no such failure or delay shall operate as a waiver of any
breach of, or default under, this Agreement.
ARTICLE IX
DISSOLUTION OF COMPANY
Section 9.1 Section 9.1 Events Giving Rise to Dissolution. No act, thing,
occurrence, event or circumstance shall cause or result in the dissolution of
the Company, except that the happening of any one of the following events shall
work an immediate dissolution of the Company:
(a) The sale of all or substantially all of the Company Property;
32
(b) The unanimous agreement in writing by the Members to dissolve
the Company;
(c) The expiration of the Term of the Company;
(d) The voluntary or involuntary dissolution of all Members; or
(e) Any other event that, under the Delaware Act, requires the
Company's dissolution.
Without limitation on the other provisions hereof, neither the assignment
of all or any part of a Membership Interest permitted hereunder nor the
admission of a substitute Member shall cause the dissolution of the Company.
Except as otherwise provided in this Agreement, each Member agrees that, without
the consent of the other Members, such Member may not withdraw from or cause a
voluntary dissolution of the Company.
Section 9.2 Procedure.
(a) Upon the dissolution of the Company, PAMI shall wind up the
affairs of the Company. The Members shall continue to receive allocation of Net
Income and Net Losses and distributions of Available Cash from Operations and
Net Capital Transaction Proceeds during the period of liquidation in the same
manner and proportion as though the Company had not dissolved. PAMI shall have
full right and unlimited discretion to determine in good faith the time, manner
and terms of any sale or sales of Company Property pursuant to such liquidation,
having due regard to the activity and condition of the relevant market and
general financial and economic conditions.
(b) Following the payment of all debts and liabilities of the
Company and all expenses of liquidation, and subject to the right of PAMI to set
up such cash reserves as and for so long as it may deem reasonably necessary in
good faith for any contingent or unforeseen liabilities or obligations of the
Company, the proceeds of the liquidation and any other funds of the Company
shall be distributed in accordance with Section 4.1. Any reserves referred to in
this Section 9.2(b) shall be released and distributed as soon as practicable
after the date that corresponding liabilities reserved against are satisfied,
discharged or otherwise terminated.
(c) Within a reasonable time following the completion of the
liquidation of the Company Property, PAMI shall supply to each of the Members a
statement audited by the Accountants, which shall set forth the assets and
liabilities of the Company as of the date of complete liquidation and each
Member's portion of distributions pursuant to this Section 9.2.
(d) Each Member shall look solely to the assets of the Company for
all distributions that such Member may be entitled to under this Agreement,
including the return of such Member's Capital Contributions thereto and share of
profits or losses thereof and shall have no recourse therefor (in the event of
any deficit in a Member's Capital Account or otherwise) against any other
Member; provided that nothing herein contained shall relieve any Member of such
Member's obligation to make the Capital Contributions herein provided or to pay
any liability or indebtedness owing the Company by such Member, and the Company
and the
33
Managing Members shall be entitled at all times to enforce such obligations of
such Member. No Member shall have any right to demand or receive property other
than cash upon dissolution and termination of the Company.
(e) Upon the completion of the liquidation of the Company and the
distribution of all Company funds, the Company shall terminate and PAMI shall
have the authority to execute and record a certificate of cancellation of the
Company, as well as any and all other documents required to effectuate the
dissolution and termination of the Company.
ARTICLE X
REPRESENTATIONS, WARRANTIES AND COVENANTS
Section 10.1 Ownership of Members. As of the date of this Agreement,
Capital Senior Living Corporation ("CSLC") and Capital (each, a "Capital Party")
represent and warrant jointly and severally to PAMI that (a) CSLC owns of record
and beneficially all of the outstanding capital stock of Capital and (b) CSLC
owns of record and beneficially all of the outstanding capital stock of Capital
Senior Living, Inc. Each Capital Party agrees that, unless PAMI has given its
prior written consent, no Person other than a Permitted Affiliate will own
capital stock of Capital or be granted any option or other contractual right to
acquire any capital stock of Capital or the right to vote or take other action
with respect to the capital stock of Capital. PAMI represents and warrants to
Capital that all of its capital stock is owned of record and beneficially by
Property Asset Management Inc., a wholly-owned indirect subsidiary of ▇▇▇▇▇▇
Brothers Holdings Inc. PAMI agrees that, unless Capital has given its prior
written consent, no Person other than a Permitted Affiliate of PAMI will own
capital stock of PAMI or be granted any option or other contractual right to
acquire any capital stock of PAMI or the right to vote or take other action with
respect to the capital stock of PAMI.
Section 10.2 Performance by Capital. CSLC agrees, for the benefit of PAMI
and its Affiliates, that it will take whatever reasonable actions are necessary
(other than any actions which would require the expenditure of any of its own
funds) to cause Capital to make all payments, sign all documents and take all
other actions reasonably required pursuant to the terms of this Agreement, it
being understood that this Section shall not require CSLC to incur any expenses
or spend, contribute or loan any funds to or for the benefit of Capital and the
terms and conditions of this Section shall not be interpreted as any type of
financial or economic guarantee of the obligations of Capital by CSLC or its
other Affiliates or any other Person.
Section 10.3 Performance by PAMI. Property Asset Management Inc. agrees,
for the benefit of Capital and its Affiliates, that it will take whatever
reasonable actions are necessary (other than any actions which would require the
expenditure of any of its own funds) to cause PAMI to make all payments, sign
all documents and take all other actions reasonably required pursuant to the
terms of this Agreement, it being understood that this Section shall not require
Property Asset Management Inc. to incur any expenses or spend, contribute or
loan any funds to or for the benefit of PAMI and the terms and conditions of
this Section shall not be interpreted as any type of financial or economic
guarantee of the obligations of PAMI by Property Asset Management Inc. or its
other Affiliates or any other Person.
34
Section 10.4 Compliance with Loan Terms. During the Term of this Agreement
and in accordance with the terms, conditions and provisions of this Agreement,
the Regular Managing Member (on behalf of the Company and at the expense of the
Company) shall use reasonable efforts subject to the provisions of Sections 3.4
and 3.5 hereof, to cause the Company to comply with the terms and conditions of
the Senior Loan Documents and Mezzanine Loan Documents, it being understood that
this Section shall not require the Regular Managing Member to incur any expenses
or spend any moneys or to contribute or loan any funds to or for the benefit of
the Company and the terms and conditions of this Section shall not be
interpreted as any type of financial or economic guarantee of the obligations of
the Company by the Regular Managing Member or its Affiliates or any other
Person.
Section 10.5 Confidentiality. No Member or Capital Party shall disclose
the terms of this Agreement without the consent of the other Members except (i)
to its attorneys, accountants and other advisors, (ii) to the extent required by
law, including without limitation required by applicable securities laws, (iii)
to prospective assignees of Membership Interests who agree to maintain the
confidentiality of the provisions of this Agreement, or (iv) to prospective
lenders to the Company. Capital shall not disclose the fact that PAMI or its
Affiliates are lenders to or investors in the Company in advertising, press
releases or other comparable statements to the public without the prior written
consent of PAMI. PAMI shall not disclose the fact that Capital or its Affiliates
are lenders to or investors in the Company in advertising, press releases or
other comparable statements to the public without the prior written consent of
Capital.
Section 10.6 Limitation of Liability.
(a) In Favor of PAMI and Affiliates. Capital and each Capital Party,
for themselves and on behalf of their Affiliates (collectively, "Capital
Claiming Parties"), hereby agree that if the Capital Claiming Parties, together
or individually, make any claim of any nature whatsoever, whether legal or
equitable, including (without limitation) claims based on federal or state law,
against PAMI or its Affiliates arising out of or relating to (1) this Agreement,
(2) the formation or operation of the Company, (3) any loans made to the
Company, (4) the negotiations and representations of the parties preceding or
following the execution of this Agreement, (5) any alleged breach of this
Agreement or (6) the proposed transactions described in this Agreement, then the
following limitations on the liability of PAMI and its Affiliates, and on the
relief available to the Capital Claiming Parties, shall apply: (a) under no
circumstances shall the Capital Claiming Parties be entitled to any form of
equitable relief (including injunctive relief) except to the extent expressly
stated in this Agreement, lost profits or consequential, special or punitive
damages and (b) any judgment against PAMI or its Affiliates shall be enforceable
against them only to the extent of the Membership Interest of PAMI in the
Company.
(b) In Favor of Capital and Affiliates. PAMI, for itself and on
behalf of its Affiliates (collectively, "PAMI Claiming Parties"), hereby agrees
that if the PAMI Claiming Parties, together or individually, make any claim of
any nature whatsoever, whether legal or equitable, including (without
limitation) claims based on federal or state law, against Capital or its
Affiliates arising out of or relating to (1) this Agreement, (2) the formation
or operation of the Company, (3) any loans made to the Company, (4) the
negotiations and representations of the parties preceding or following the
execution of this Agreement, (5) any alleged breach of this Agreement or (6) the
proposed transactions described in this Agreement, then the following
35
limitations on the liability of Capital and its Affiliates, and on the relief
available to the PAMI Claiming Parties, shall apply: (a) under no circumstances
shall the PAMI Claiming Parties be entitled to any form of equitable relief
(including injunctive relief) except to the extent expressly stated in this
Agreement, lost profits or consequential, special or punitive damages and (b)
since there may be little or no economic value to the Membership Interest of
Capital in the Company, any judgment against Capital or its Affiliates shall be
enforceable against them only to the extent of the value of the Membership
Interest of PAMI in the Company.
Section 10.7 Holding or Purchase of Company Debt. The Company, Capital and
the Capital Parties acknowledge and agree that:
(a) an Affiliate of PAMI (which for the purpose of this Section 10.7
shall include any syndicate, managed fund, managed account, or similar group or
vehicle on behalf of which an Affiliate of PAMI is acting as custodian, agent or
manager) may hold the Mezzanine Loan or purchase or acquire all or a portion of
the existing indebtedness of the Company (collectively, "Existing Financing"),
including a participation interest therein, at any time and from time to time
and without notice to or approval by the Company or any of its Members or such
Member's Affiliates and whether or not the Existing Financing or any other
indebtedness of the Company is in default,
(b) such purchase or acquisition may be on any terms and conditions
that are negotiated between the seller of such indebtedness and the Affiliate of
PAMI, as the purchaser, as determined in the sole and absolute discretion of the
Affiliate of PAMI,
(c) none of them shall have the right to participate in any such
purchase or acquisition,
(d) any Existing Financing purchased in whole or in part by an
Affiliate of PAMI shall continue to be fully enforceable in accordance with its
terms, if and to the extent so enforceable by the prior holder, while owned or
held by the Affiliate of PAMI; provided, however, that upon such purchase by an
Affiliate of PAMI, any liability of Capital and of any of its Affiliates with
respect to the portion of such Existing Financing purchased shall be deemed
automatically extinguished and released (and such Affiliate of PAMI shall
execute and/or deliver such documents, including return of any guarantee,
indemnity or other written undertaking if the entirety of such Existing
Financing was purchased, as may be reasonably necessary to reflect such
extinguishment and release; provided, that failure of such Affiliate of PAMI to
do so shall not abrogate such extinguishment and release),
(e) the Affiliate of PAMI shall be fully entitled to enforce all
rights and remedies against the Company and the Business Property under the
terms and conditions of the Existing Financing or other indebtedness of the
Company, if and to the extent so enforceable by the prior holder, as though the
Affiliate of PAMI was not affiliated with PAMI, including, if such rights are
provided for under such terms and conditions, the right to institute foreclosure
proceedings with respect to the Business Property or to purchase the Business
Property at any foreclosure sale or acquire the Business Property through a deed
in lieu of foreclosure, without the approval or participation of Capital or any
Capital Party,
36
(f) notwithstanding (i) anything expressed or implied elsewhere in
this Agreement, (ii) the final terms and conditions of the purchase or
acquisition of such Existing Financing, (iii) any adverse effect suffered or
sustained by Capital, any Capital Party or the Company resulting from such
purchase or acquisition by the Affiliate of PAMI, and (iv) any other impact or
effect resulting from or arising from such purchase or acquisition by the
Affiliate of PAMI, there shall be no fiduciary duty or other relationship (other
than debtor and creditor) between such Affiliate of PAMI as the holder of such
indebtedness and the Company, any Member or any Affiliate of a Member, and
(g) the terms, conditions and limitations described in Section 10.8
on the obligations of PAMI with respect to the providing of Financing to the
Company by an Affiliate of PAMI shall be fully applicable and controlling with
respect to the obligations of PAMI or any other Affiliate of PAMI in connection
with the holding of the Mezzanine Loan or the purchase or acquisition of
Existing Financing by PAMI or any other Affiliate of PAMI, and deemed
incorporated into this Section 10.7 by this reference with all necessary
modifications.
Section 10.8 Limitations on Responsibilities of PAMI and its Affiliates.
Capital and the Capital Parties each expressly (a) acknowledge that they (1) may
in the future request that an Affiliate of PAMI provide financing to the Company
as provided in Section 5.10 (collectively "Financing") and (2) do not object to
the acquisition or purchase of all or part of any indebtedness of the Company
(including any Existing Financing) by an Affiliate of PAMI or the enforcement of
the obligations of the Company under such loan documents, if and to the extent
so enforceable by the prior holder, and (b) agree that, notwithstanding any
other provision of this Agreement, any other agreement or applicable law: (1)
PAMI and any Affiliate of PAMI who provide Financing to the Company or purchase
any Company debt are separate and distinct legal entities with different
investment goals and objectives, (2) the documents to which the Company and,
where applicable, Capital and the Capital Parties, is or are a party or parties,
evidencing any such Financing provided by an Affiliate of PAMI or existing
Company debt (including the Existing Financing) held by any Affiliate of PAMI
are legal, valid and binding obligations of the Company (3) the Affiliate of
PAMI who provides Financing to the Company or purchases any Company debt
(including the Existing Financing) may exercise all its rights, privileges and
benefits and enforce all remedies and other provisions under the applicable
documents evidencing such Financing or existing Company debt (including the
Existing Financing), if and to the extent so enforceable by the prior holder,
without regard to the fact that PAMI is a Member of the Company or that Capital
or the Capital Parties are Members or Affiliates of the Company, (4) no act or
failure to act by the Affiliate of PAMI who provides Financing to the Company or
purchases the Company debt shall be attributed to PAMI or considered or deemed
to be the act or failure to act of PAMI or a breach or failure by PAMI of any
provision of this Agreement or of any fiduciary, contractual, good faith, fair
dealing or other express or implied covenant or other obligation of PAMI to the
Company, any Member, any Affiliate of a Member or third party, (5) no act or
failure to act by PAMI shall be attributed to the Affiliate of PAMI who provides
Financing to the Company or purchases any Company debt, or considered or deemed
to be the act or failure to act of that Affiliate, (6) PAMI shall have no duty
or other obligation to cause or permit the Company to default or fail to comply
with any provision of the documents evidencing such Financing or existing
Company debt, and (7) neither the Company nor any Member, Capital Party or
Affiliate of any of them shall assert any claim, counterclaim, defense
allegation, offset, action or liability against PAMI, the Affiliate of PAMI, who
provides
37
Financing to the Company or purchases or holds any Company debt or any of their
Affiliates based on or involving the relationship of PAMI and the Affiliate of
PAMI who provides Financing to the Company or purchases the Company debt or
arising or based upon any other matter whatsoever relating to the matters set
forth in this Section 10.8.
ARTICLE XI
MISCELLANEOUS
Section 11.1 Notices. Unless otherwise specified herein, all notices,
requests, consents, approvals, demands or other communications to or from the
parties hereto shall be in writing and shall be sent by Federal Express or other
nationally recognized courier, expenses prepaid or charged to the sender, or by
telecopier (provided such telecopied material is also sent by mail or courier in
the manner set forth herein) or by mail, postage prepaid. All such
communications shall be deemed delivered when received; provided that telecopied
messages shall not be effective unless such messages are also sent by mail or
courier as set forth herein; and provided further, that mail sent via Certified
Mail - Return Receipt Requested, certified fee and normal postage prepaid, shall
be deemed to have been received on the earlier of actual receipt thereof or the
date of refusal or inability to deliver, indicated on the Receipt for Certified
Mail. Any such notice, request, demand or other communication shall be delivered
or addressed as follows:
If to the Company, to its address set forth in Section 1.7 hereof:
To Capital: Capital Senior Living Properties 4, Inc.
▇▇▇▇▇ ▇▇▇▇▇▇ ▇▇▇▇▇▇▇
▇▇▇▇▇ ▇▇▇
▇▇▇▇▇▇, ▇▇▇▇▇ ▇▇▇▇▇
Attention: ▇▇▇▇▇ ▇. ▇▇▇▇▇▇▇▇, Esq.
Telephone: ▇▇▇-▇▇▇-▇▇▇▇
Facsimile: ▇▇▇-▇▇▇-▇▇▇▇
with copy to: Jenkens & ▇▇▇▇▇▇▇▇▇
▇▇▇▇ ▇▇▇▇ ▇▇▇▇▇▇, ▇▇▇▇▇ ▇▇▇▇
▇▇▇▇▇▇, ▇▇ ▇▇▇▇▇-▇▇▇▇
Attention: ▇▇▇▇▇▇▇ ▇. ▇▇▇▇ ▇▇
Telephone: (▇▇▇) ▇▇▇-▇▇▇▇
Facsimile: (▇▇▇) ▇▇▇-▇▇▇▇
To PAMI: c/▇ ▇▇▇▇▇▇ Brothers Holdings Inc.
▇▇▇ ▇▇▇▇ ▇▇▇▇▇▇, ▇▇▇ ▇▇▇▇▇
▇▇▇ ▇▇▇▇, ▇▇▇ ▇▇▇▇ ▇▇▇▇▇
Attention: ▇▇▇▇▇ ▇. ▇▇▇▇
Telephone: (▇▇▇) ▇▇▇-▇▇▇▇
Facsimile: (▇▇▇) ▇▇▇-▇▇▇▇
38
with copy to: ▇▇▇▇▇▇▇ ▇▇▇▇ ▇▇▇▇ & ▇▇▇▇▇▇▇▇▇▇, LLP
▇▇▇ ▇▇▇▇ ▇▇▇▇ ▇▇▇▇▇▇
▇▇▇ ▇▇▇▇, ▇▇▇ ▇▇▇▇ ▇▇▇▇▇
Attention: ▇▇▇▇▇▇ F.X. ▇▇▇▇▇
Telephone: (▇▇▇) ▇▇▇-▇▇▇▇
Facsimile: (▇▇▇) ▇▇▇-▇▇▇▇
with a copy to: ▇▇▇▇▇▇▇▇ Philips, Inc.
▇▇▇ ▇▇▇▇▇▇▇▇▇ ▇▇▇▇▇▇ ▇▇▇▇▇▇
▇▇▇▇▇▇▇ ▇▇▇ ▇▇▇▇▇, ▇▇▇▇▇ ▇▇▇▇
▇▇▇▇▇▇▇, ▇▇▇▇▇▇▇ ▇▇▇▇▇
Attention: ▇▇▇▇ ▇▇▇▇
Telephone: (▇▇▇) ▇▇▇-▇▇▇▇
Facsimile: (▇▇▇) ▇▇▇-▇▇▇▇
or at such other addresses as the parties hereto may designate by written notice
to the other parties hereto.
Section 11.2 Financial Reports. Within 30 days after the end of each
month, the Regular Managing Member shall cause the Company to send to each
Member an unaudited balance sheet, statement of income and other financial
reports of the Company in a format approved by the Members. As soon as
practicable after the end of each Fiscal Year of the Company, commencing for
Fiscal Year 2002, the Regular Managing Member shall cause the Company to send to
each Person who was a Member at any time during such Fiscal Year (i) financial
statements (which shall be prepared in accordance with generally accepted
accounting principles and audited by the Accountants), including a balance sheet
and statements of income and changes in financial position showing the cash
distributed in such year, (ii) a report of the activities of the Company during
such year and (iii) a Schedule K-1 and such other tax information, prepared on
an estimated basis, as may reasonably be needed by the Members for the
computation of their respective liabilities for federal, state and local tax
payments due before the preparation of their final returns for the year.
Section 11.3 Entire Agreement. This Agreement constitutes the entire
agreement between the parties pertaining to the subject matter hereof. This
Agreement supersedes any prior agreement or understanding between the parties
with respect to the subject matter hereof.
Section 11.4 Amendments. This Agreement may be amended only by written
agreement of amendment executed by the Managing Members. No such amendment,
however, may reduce or impair the rights of LCOR or its Affiliates pursuant to
Section 5.12 or 5.13 hereof, without LCOR's consent in writing.
Section 11.5 Governing Law. This Agreement and the rights of the parties
hereunder shall be governed by and interpreted in accordance with the laws of
the State of Delaware, without regard to its conflict of law provisions.
Section 11.6 Arbitration. In the event of any dispute, claim or
controversy of any kind between the parties, concerning this Agreement or the
termination of this Agreement, the matter
39
shall be submitted to binding arbitration in accordance with the commercial
arbitration rules of the American Arbitration Association. The parties jointly
shall agree on an arbitrator. If the parties are unable to agree, in good faith,
on the selection of an arbitrator within 30 days, either party may request
appointment of an arbitrator chosen by the American Arbitration Association who
shall be the selected arbitrator. Such arbitrator shall be limited in his
decision to a choice between the final position as requested by each party. Said
arbitration shall be held in New York City or such other place as is mutually
agreeable. The arbitration decision shall be final and binding on both parties
unless the arbitration is fraudulent or so grossly erroneous as to necessarily
imply bad faith. Costs of arbitration are to be shared by both parties equally,
provided that the arbitrator may choose to award the fees, costs and expenses of
arbitration against the losing party if the arbitrator determines that the final
position urged by the losing party was not reasonable.
Section 11.7 Successors and Assigns. Except as herein otherwise
specifically provided, this Agreement shall be binding upon and inure to the
benefit of the parties and their legal representatives, successors and assigns.
Section 11.8 Captions, Etc. The cover page and table of contents to this
Agreement and the Section captions in this Agreement are included for
convenience only and shall not affect in any way the interpretation or
enforcement of this Agreement.
Section 11.9 Severability. If any provision of this Agreement, or the
application of such provision to any Person or circumstance, shall be held
invalid, the remainder of this Agreement, or the application of such provision
to other Persons or circumstances, shall not be affected thereby.
Section 11.10 Counterparts. This Agreement may be executed in several
facsimile or original counterparts, each of which shall be deemed an original,
but all of which shall constitute one and the same document.
Section 11.11 No Deficit Restoration. Notwithstanding any other provision
of this Agreement to the contrary, upon liquidation of a Member's Membership
Interest (whether or not in connection with a liquidation of the Company), no
Member shall have any liability to restore any deficit in its Memorandum or
Capital Account. In addition, no allocation to any Member of any loss, whether
attributable to depreciation or otherwise, shall create any asset of or
obligation to the Company, even if such allocation reduces a Member's Memorandum
or Capital Account or creates or increases a deficit in such Member's Memorandum
or Capital Account; it is also the intent of the Members that no Member shall be
obligated to pay any such amount to or for the account of the Company or any
creditor of the Company. The obligations of the Members to make contributions
pursuant to Article III are for the exclusive benefit of the Company and not of
any creditor of the Company; and no such creditor is intended as a third party
beneficiary of this Agreement nor shall any such creditor have any rights
hereunder, including, but without limitation, the right to enforce any Capital
Contribution or other obligations of the Members.
Section 11.12 Power of Attorney. Each Member hereby irrevocably
constitutes and appoints the Regular Managing Member, as its true and lawful
attorney-in-fact, with full power
40
of substitution, in its name, place and stead to make, execute, sign,
acknowledge (including swearing to), record and file, on behalf of it and on
behalf of the Company, the following:
(a) A Certificate of Formation, a Certificate of Doing Business
Under an Assumed Name, and any other certificates or instruments which may be
required to be filed by the Company or any of the Members under the law of the
State of Delaware and any other jurisdiction whose laws may be applicable;
(b) A Certificate of Cancellation of the Company and such other
instruments as may be deemed necessary or desirable by the holder of such power
upon the termination of the Company; and
(c) Any and all amendments of the instruments described in
subsections (a) and (b) hereof, provided such amendments are either required by
law to be filed or have been authorized by the particular Member or Members
whose authorization is required.
The foregoing grant of authority:
(1) shall survive the delivery of an assignment by a Member of
the whole or any portion of its Membership Interest;
(2) is a special power of attorney coupled with an interest,
is irrevocable and shall survive the bankruptcy or liquidation of the
Member granting the power; and
(3) may be exercised by the holder on behalf of each Member by
a facsimile signature or by listing all of the Members executing any
instrument with a single signature as attorney-in-fact for all of them.
Section 11.13 Principles of Construction. All references to Sections,
Schedules and Exhibits are to Sections, Schedules and Exhibits in or to this
Agreement, unless otherwise specified. Unless otherwise specified, the words
"hereof," "herein" and "hereunder" and words of similar import when used in this
Agreement shall refer to this Agreement as a whole and not to any particular
provision of this Agreement. Unless otherwise specified, all meanings attributed
to defined terms herein shall be equally applicable to both the singular and the
plural forms of the term so defined and "including" means including without
limitation. Whenever the context requires, each gender shall include all other
genders.
Section 11.14 No Third-Party Rights. None of the provisions contained in
this Agreement shall be for the benefit of or enforceable by any third parties,
including creditors of the Company. The right or obligation of any Member or the
Major Decision Committee to call for any capital contribution or of any Member
to make a capital contribution or otherwise to perform, satisfy or discharge any
liability or obligation of any Member hereunder or to pursue any other right or
remedy hereunder, at law or in equity, shall not confer any right or claim upon
or otherwise inure to the benefit of any creditor or other third party having
dealings with the Company, it being understood and agreed that the provisions of
this Agreement shall be solely
41
for the benefit of, and may be enforced solely by, the parties hereto and their
respective successors and assigns.
Section 11.15 Further Assurances. Each Member shall execute and deliver
any additional documents and instruments and perform any additional acts that
may be reasonably necessary or appropriate to effectuate and perform the
provisions of this Agreement and the transactions contemplated herein.
Section 11.16 No Brokers. Each of the Members represents and warrants to
each other that there are no brokerage commissions or finder's fee (or any basis
therefor) resulting from any action taken by such Member or any Person acting or
purporting to act on its behalf upon entering into this Agreement. Each Member
agrees to indemnify and hold harmless each other Member for all costs, damage,
and other expenses arising out of any misrepresentation made in this Section.
[SIGNATURE PAGES FOLLOW]
42
SIGNATURE PAGE TO FOURTH AMENDED AND RESTATED
LIMITED LIABILITY COMPANY OPERATING
AGREEMENT OF LIBERTYVILLE SL L.L.C.
MEMBERS:
CAPITAL SENIOR LIVING PROPERTIES 4, INC.,
a Delaware corporation
By:_________________________________________
Name:____________________________________
Title:___________________________________
PAMI SENIOR LIVING INC.,
a Delaware corporation
By:_________________________________________
Name:____________________________________
Title:___________________________________
WITHDRAWING MEMBER:
LCOR Libertyville Management L.L.C., as withdrawing Member, executes below for
the sole purpose of consenting to Sections 1.1, 5.12, 5.13 and 11.6 hereof.
LCOR LIBERTYVILLE MANAGEMENT L.L.C.,
a Delaware limited liability company
By: LCOR Senior Living L.L.C.
a Delaware limited liability company
its sole Member and sole Managing Member
By:____________________________________
Name:__________________________________
Title:_________________________________
ADDITIONAL LIMITED SIGNATORIES TO
LLC AGREEMENT OF LIBERTYVILLE SL L.L.C.
Capital Senior Living Corporation joins in the execution of this Fourth
Amended and Restated Limited Liability Company Operating Agreement for the
limited purpose of agreeing to the provisions of Sections 10.1, 10.2, 10.5,
10.6(a), 10.7, 10.8 and 11.6 hereof.
CAPITAL SENIOR LIVING CORPORATION
By:_________________________________
Name:
Title:
Property Asset Management Inc. joins in the execution of this Fourth
Amended and Restated Limited Liability Company Operating Agreement for the
limited purpose of agreeing to the provisions of Sections 10.3, 10.5, 10.6 and
11.6 hereof.
PROPERTY ASSET MANAGEMENT INC.
By:_________________________________
Name:
Title:
41
EXHIBIT A
DEFINITIONS
"Accountants" shall mean one of the "Big Four" firms of independent
certified public accountants selected by the Regular Managing Member, approved
by the Major Decision Committee and engaged by the Company for the purposes of
(a) auditing the annual financial statements required under Section 11.2; (b)
assisting in the preparation of all federal, state and local income tax returns
of the Company; (c) auditing the statement required under Section 9.2(c) in
connection with the liquidation of the Company; and (d) determining the amounts
required under Section 5.5F in connection with a sale described therein.
"Affiliate" of a Person means (1) any officer, director, employee,
shareholder, member or partner of that Person; (2) any corporation, partnership,
limited liability company, trust or other entity controlling, controlled by or
under common control with that Person; and (3) any officer, director, employee,
shareholder, member or partner of any entity described in clause (2) above.
"Annual Business Plan" means, for each Fiscal Year, the operating budget,
the capital budget and the marketing plan for the Business Property adopted by
the Members as a Major Decision pursuant to Section 5.2.
"Assignment and Assumption Agreement" has the meaning set forth in Recital
F.
"Available Cash from Operations" means all cash funds of the Company from
operations held by or on behalf of the Company from time to time after: (a)
payment of all Company Costs and Expenses that are due and payable as of such
date; (b) provision for the payment of all Company Costs and Expenses that the
Company is obligated to pay within 90 days of such date; (c) provision for
Reserve Additions approved by the Members as a Major Decision; and (d) to the
extent there are remaining cash funds on hand after all permissible Reserve
Additions have been made, provision for payments of principal on Company
indebtedness in such amounts as may be approved as a Major Decision pursuant to
Section 5.2. Available Cash from Operations shall not include Capital
Contributions, Net Capital Transaction Proceeds, proceeds of the Construction
Loan, the Mezzanine Loan or other loans made to the Company or any amount
released from escrow and returned to the Company by the Senior Lender pursuant
to the Senior Loan Documents. No deduction shall be made in calculating
Available Cash from Operations for any expenditure properly attributable to a
transaction generating Net Capital Transaction Proceeds or to the extent an
expenditure is paid out of any Company reserve account.
"Back-End Percentage Interest" means the percentage interest of a Member
in certain allocations and distributions as set forth in this Agreement. As of
the Effective Date, the Back-End Percentage Interest of PAMI is 80.98% and of
Capital is 19.02%.
"Business Day" means Monday through Friday of each week, except that a
legal holiday recognized as such by the Government of the United States, the
State of New York or the State of Delaware shall not be regarded as a Business
Day.
"Business Property" has the meaning set forth in Section 1.4.
A-1
"Capital Account" has the meaning set forth in Section 1.1(b) of Exhibit B
hereto.
"Capital Contributions" means the capital contributions of the Members
required under Section 3.1.
"Capital Expenditure" means any cost or expense of the Company that is or
would constitute a capital expense under generally accepted accounting
principles.
"Code" has the meaning set forth in Section 1.1(d) of Exhibit B hereto.
"Company" means the limited liability company formed and existing pursuant
to the Certificate of Formation of the Company and this Agreement.
"Company Costs and Expenses" means all of the expenditures of any kind
made or to be made with respect to the operations of the Company and permitted
by the Development Plan or the Annual Business Plan then in effect or otherwise
permitted under the terms of this Agreement other than those paid or required to
be paid out of Capital Contributions or loans to the Company, including, without
limitation, all required normal scheduled debt service payments (other than at
maturity or upon acceleration) under the Senior Loan Documents, any other loan
or financing agreements (other than the Mezzanine Loan Documents), all amounts
payable pursuant to any management agreement relating to the Business Property,
costs of repairs to be made with respect to the Business Property, ad valorem
taxes, federal, state and local taxes, assessment and school fees, insurance
premiums, repair and maintenance costs, engineering fees, advertising and other
marketing expenses, professional fees, utilities costs, overhead costs, general
and administrative costs, and all other types of costs, expenses, charges,
liabilities and obligations of the Company.
"Company Property" means the Business Property and all other property of
whatever kind or nature owned by the Company from time to time.
"Contract of Sale" means the Real Estate Purchase Agreement dated as of
June 12, 1997, as amended September 9, 1997, between ▇▇▇▇▇▇ Red Top, Inc., as
the seller, and LCOR Incorporated, as the purchaser, whose rights thereunder
have been assigned to the Company.
"Delaware Act" means the Delaware Limited Liability Company Act, as it may
be amended from time to time, and any successor to such Act.
"Development Plan" has the meaning set forth in Section 5.3.
"Effective Date" means December 20, 2002.
"Fiscal Year" means the taxable year of the Company for federal income tax
purposes, which shall be the 12-month period ending on December 31 of each year,
unless otherwise required by the Code; provided that the initial Fiscal Year
shall be the period beginning on the Commencement Date and ending December 31,
1998, and the last Fiscal Year shall be the period beginning on January 1 of the
calendar year in which the final liquidation and termination of the Company is
completed and ending on the date such final liquidation and termination is
A-2
completed. To the extent any computation or other provision hereof provides for
an action to be taken on a Fiscal Year basis, an appropriate proration or other
adjustment shall be made in respect of the initial and final Fiscal Years to
reflect that such periods are less than full calendar year periods.
"Future Obligations" has the meaning set forth in Section 5.5G.
"Improvements" has the meaning set forth in Section 1.4.
"Major Decision" has the meaning set forth in Section 5.2 of the
Agreement.
"Major Decision Committee" has the meaning set forth in Section 5.1(a).
"Management Agreement" has the meaning set forth in Section 5.1(a).
"Managing Member" or "Member" means Capital and PAMI and their successors
and assigns in their capacities as Managing Members in the Company.
"Member Loan" means any loan to the Company made or required to be made by
one or more Members as provided in Section 3.6 and 3.7.
"Membership Interest" means the interest of a Member in the Company and
its rights in the capital, profits, losses, gains, distributions or other
economic interests of any type in or from the Company including, without
limitation, such Member's right: (a) to allocations of items of income, gain,
loss, deduction, and credit of the Company as set forth in Exhibit B hereto; (b)
to a distributive share of the assets of the Company as set forth in Article IV
and Article IX; (c) to inspect the books and records of the Company as provided
in Section 6.4; and (d) to participate in the management and operation of the
Company in accordance with the terms set forth in Article V.
"Memorandum Account" means a memorandum account, which shall be maintained
by the Company with respect to each Member for accounting purposes only,
determined as follows: (a) the initial balance of the Memorandum Accounts of
each Member shall be zero; (b) the balance of such Account shall be increased as
of the date of each contribution made by such Member under Section 3.1 by the
amount of such contribution; and (c) the balance of such Account shall be
decreased (but not below zero) as of each date that a distribution is made to
such Member pursuant to Section 4.1(b) by the amount of such distribution.
"Mezzanine Lender" means ▇▇▇▇▇▇ Brothers Holdings Inc., an Affiliate of
PAMI, and its successors and assigns.
"Mezzanine Loan" means the mezzanine loan made by the Mezzanine Lender to
the Company as described in Section 3.4.
"Mezzanine Loan Documents" means any note, loan agreement, mortgage or
deed of trust, and other document or collateral evidencing or securing the
Mezzanine Loan.
A-3
"Modification Agreement" means the Modification and Extension Agreement
(▇▇▇▇▇▇ Brothers Holdings Inc.) dated as of December 20, 2002 among the Company,
▇▇▇▇▇▇ Brothers Holdings Inc., as mezzanine lender, and other parties.
"Net Capital Transaction Proceeds" means the proceeds from (a) any
financing or refinancing of the Company Property or any part thereof (excluding
the Senior Loan and the Mezzanine Loan), and (b) any sale, disposition, taking
or loss (including, but not limited to, the proceeds from any eminent domain
proceeding or conveyance in lieu thereof or from title insurance or casualty
insurance, other than rental income insurance) of the Company Property or any
part thereof, less payment of all debt being refinanced or repaid and all costs
and other expenses related thereto, any amounts expended to repair or replace
any part of the Business Property taken or destroyed, and all remaining Company
Costs and Expenses and any other obligations of the Company not already paid or
provided for.
"Net Income" and "Net Losses" have the meaning set forth in Section 1.1(e)
of Exhibit B hereto.
"Operating Agreement" or this "Agreement" means this Fourth Amended and
Restated Limited Liability Company Operating Agreement, as amended, modified or
supplemented from time to time in accordance with its terms.
"Person" means an individual, corporation, partnership, limited liability
company, trust, estate, unincorporated organization, association or other
legally recognized entity.
"Priorities Agreement" has the meaning set forth in Section 4.1.
"Regular Managing Member" means the Managing Member so designated in
accordance with Section 5.1.
"Required Expenses" has the meaning set forth in Section 3.6(c).
"Reserve Additions" for the applicable period means all reserves
reasonably established during such period for future Company Costs and Expenses
if approved as a Major Decision in accordance with Section 5.2.
"Senior Lender" means Guaranty Bank and its successors and assigns.
"Senior Loan" means the secured construction loan made to the Company
pursuant to Section 3.3.
"Senior Loan Documents" means any note, loan agreement, mortgage or deed
of trust, and other document or collateral evidencing or securing the Senior
Loan.
"12% Preferred Return" means, at any date, an amount equal to a cumulative
annual return of 12%, compounded quarterly, on each dollar credited to the
Memorandum Account of each Member from the first day after March 15, 1999, that
such dollar is contributed to the
A-4
Company or credited to such Memorandum Account until the date that such dollar
is returned to that Member pursuant to Section 4.1(b).
A-5
EXHIBIT B
CERTAIN TAX AND ACCOUNTING MATTERS
ARTICLE I
ALLOCATION OF INCOME AND LOSSES
Section 1.1 Certain Definitions. As used herein, the following terms have
the following meanings:
(a) "Adjusted Capital Account" has the meaning set forth in Section
1.3(b) of this Exhibit.
(b) "Capital Account" means, with respect to each Member, the
account established and maintained for the Member on the books of the
Company in compliance with Regulation Section s 1.704-1(b)(2)(iv) and
1.704-2, as amended. Subject to the preceding sentence, each Member's
Capital Account will initially equal the amount of cash and fair market
value of property contributed by such Member to the Company (net of
liabilities secured by the property that the Company is considered to
assume or take subject to), and throughout the term of the Company will be
(i) increased by the amount of (A) income and gains allocated to such
Member pursuant to the following provisions of this Exhibit, and (B) the
amount of any cash and the fair market value of any property (net of
liabilities secured by the property that the Company is considered to
assume or take subject to) subsequently contributed by such Member to the
Company, and (ii) decreased by the amount of (A) losses and deductions
allocated to such Member pursuant to the following provisions of this
Exhibit, and (B) the amount of distributions in cash and the value of
distributions of property (net of liabilities secured by the property that
the Member is considered to assume or take subject to) distributed to such
Member.
(c) "Capital Contributions" means, as to each Member, the aggregate
amounts then and thereafter contributed by such Member to the Company
pursuant to Article III of this Agreement.
(d) "Code" means the Internal Revenue Code of 1986, as amended from
time to time (or any succeeding law) and "Regulations" means all
regulations promulgated under the Code.
(e) "Net Income" and "Net Losses", respectively, mean the income or
losses of the Company as determined in accordance with the method of
accounting followed by the Company for federal income tax purposes,
including for all purposes: (i) any income exempt from tax; (ii) any
expenditures of the Company which are described in Section 705(a)(2)(B) of
the Code or are treated as Section 705(a)(2)(B) expenditures under
Regulation Section 1.704-1(b)(2)(iv)(i); and (iii) any adjustments to the
book value of any Company asset pursuant to the Regulations; provided,
however, that if any property is carried on the books of the Company at a
value that differs from that property's adjusted basis for tax purposes,
then gain, loss, depreciation and amortization with respect to such
property shall be computed with reference to the book basis of such
B-1
property, consistently with the requirement of Regulation Section
1.704-1(b)(2)(iv)(g); and provided, further, that any item allocated under
Section 1.3 and 1.4 of this Exhibit shall be excluded from the computation
of Net Income and Net Losses.
Section 1.2 Allocations of Net Income and Net Losses.
(a) Allocation of Net Income. After giving effect to Section 1.3 of
this Exhibit, Net Income for any Fiscal Year of the Company shall be
allocated as follows:
(i) First, to the Members who have previously been allocated
Net Losses pursuant to Section 1.2(b)(iii) of this Exhibit, in proportion
to the amount of Net Losses so allocated, until the aggregate Net Income
allocated to each such Member pursuant to this Section 1.2(a)(i) is equal
to the aggregate Net Losses allocated to that Member pursuant to said
Section 1.2(b)(iii);
(ii) Second, to the Members who have previously been allocated
Net Losses pursuant to Section 1.2(b)(ii) of this Exhibit, in proportion
to the amount of Net Losses so allocated, until the aggregate Net Income
allocated to each such Member pursuant to this Section 1.2(a)(ii) is equal
to the aggregate Net Losses allocated to that Member pursuant to said
Section 1.2(b)(ii);
(iii) Third, to the Members pro rata (in proportion to their
Memorandum Accounts, if any) until the aggregate Net Income allocated to
each Member pursuant to this Section 1.2(a)(iii) is equal to the sum of:
(A) the 12% Preferred Return accrued with respect to that Member's
Memorandum Account through the end of the Fiscal Year for which the
allocation under this Section 1.2(a)(iii) is being made and (B) any
allocations of Net Losses allocated to that Member pursuant to Section
1.3(b)(i) of this Exhibit, that are attributable to the reversal of
allocations of Net Income pursuant to this Section 1.2(a)(iii);
(iv) Fourth, to the Members to the extent of and in the amount
of cumulative distributions made to them pursuant to Section 4.1(c) of
this Agreement, until the aggregate Net Income allocated to each such
Member pursuant to this Section 1.2(a)(iv) is equal to the distributions
made to that Member pursuant to said Section 4.1(c);
(v) Fifth, to the Members on a pro rata basis in accordance
with their then current Back-End Percentage Interests.
(b) Allocation of Net Losses. After giving effect to Section 1.3 of
this Exhibit, Net Losses for any Fiscal Year shall be allocated as
follows:
(i) First, to the Members who have previously been allocated
Net Income pursuant to Sections 1.2(a)(iii) and (v) of this Exhibit, in
proportion to the amount of Net Income so allocated, until the aggregate
Net Losses allocated to each such Member pursuant to this Section
1.2(b)(i) are equal to the aggregate Net Income allocated to that Member
pursuant to said Sections 1.2(a)(iii) and (v) since the Commencement Date;
B-2
(ii) Second, to the Members in proportion to their then
positive Adjusted Capital Account balances;
(iii) Third, to the Members in proportion to their then
current Back-End Percentage Interests.
Section 1.3 Other Allocation Provisions.
(a) (1) Minimum Gain Chargeback. If there is a net decrease in
"partnership minimum gain" (within the meaning of Regulation Section
1.704-2(d)) for a Fiscal Year, then there shall be allocated to each
Member items of income and gain for that year equal to that Member's share
of the net decrease in partnership minimum gain (without the meaning of
Regulation Section 1.704-2(f)(2), (3) and (5), provided, that if the
Company has any discretion as to an exception set forth pursuant to
Regulation Section 1.704-2(f)(5), PAMI may exercise such discretion on
behalf of the Company). In the event that the application of the minimum
gain chargeback requirement would cause a distortion in the economic
arrangement among the Members, PAMI may, as determined in its sole and
absolute discretion, request that the Commissioner waive the minimum gain
chargeback requirement pursuant to Regulation Section 1.704-2(f)(4). The
foregoing is intended to be a "minimum gain chargeback" provision as
described in Regulation Section 1.704-2(f) and shall be interpreted and
applied in all respects in accordance with that Regulation.
(2) Member Minimum Gain Chargeback. If during a Fiscal Year
there is a net decrease in partner nonrecourse debt minimum gain (as
determined in accordance with Regulation Section 1.704-2(i)(3)), then, in
addition to the amounts, if any, allocated pursuant to the preceding
paragraph, any Member with a share of that partner nonrecourse debt
minimum gain (determined in accordance with Regulation Section
1.704-2(i)(5)) as of the beginning of the Fiscal Year shall, subject to
the exceptions in Regulation Section 1.704-2(i)(4) (including the
exceptions analogous to those in Regulation Section 1.704-2(f)(2), (3) and
(5), provided, that if the Company has any discretion as to the exception
set forth pursuant to Regulation Section 1.704-2(f)(5) as made applicable
by Regulation Section 1.704-2(i)(4), PAMI may exercise such discretion on
behalf of the Company), be allocated items of income and gain for the year
(and, if necessary, for succeeding years) equal to that Member's share of
the net decrease in the partner recourse debt minimum gain. In the event
that the application of the partner recourse debt minimum gain chargeback
requirement would cause a distortion in the economic arrangement among the
Members, PAMI may, as determined in its sole and absolute discretion,
request that the Commissioner waive the minimum gain chargeback
requirement pursuant to Regulation Sections 1.704-2(f)(4) and
1.704-2(i)(4). The foregoing is intended to be the "chargeback of partner
recourse debt minimum gain" required by Regulation Section 1.704-2(i)(4)
and shall be interpreted and applied in all respects in accordance with
that Regulation.
(b) Qualified Income Offset. If, during any Fiscal Year, a Member
unexpectedly receives an adjustment, allocation or distribution described
in Regulation Section 1.704-1(b)(2)(ii)(d)(4), (5) or (6), which causes or
increases a deficit balance in the Member's Adjusted Capital Account,
there shall be allocated to the Member items of income and gain
(consisting of a pro rata portion of each item of Company income
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(including gross income, and gain for such year), in an amount and manner
sufficient to eliminate such deficit. The foregoing is intended to be a
"qualified income offset" provision as described in Regulation Section
1.704-2(b)(2)(ii)(d) and shall be interpreted and applied in all respects
in accordance with that Regulation.
A Member's "Adjusted Capital Account," at any time, shall
equal the Member's Capital Account at such time (i) increased by the sum
of (A) the amount of the Member's share of partnership minimum gain (as
defined in Regulation Section 1.704-2(g)(1) and (3)), (B) the amount of
the Member's share of partner nonrecourse debt minimum gain (as defined in
Regulation Section 1.704-2(i)(5)), and (C) any amount of the deficit
balance in its Capital Account the Member is obligated to restore on
liquidation of the Company, if any, and (ii) decreased by reasonably
expected adjustments, allocations and distributions described in
Regulation Sections 1.704-1(b)(2)(ii)(d)(4), (5) or (6).
(c) Nonrecourse Deductions and Member Nonrecourse Deductions.
Notwithstanding anything to the contrary in this Exhibit, Company losses,
deductions, or Section 705(a)(2) expenditures that are attributable to a
particular Member nonrecourse liability shall be allocated to the Member
that bears the economic risk of loss for the liability in accordance with
Regulation Section 1.704-2(i). All nonrecourse deductions within the
meaning of Regulation Section 1.704-2(c) shall be allocated to the Members
in proportion to their Back-End Percentage Interests.
(d) Loss Limitation. Notwithstanding Section 1.2(b)(i) through
Section 1.2(b)(iii) of this Exhibit,
(i) The Net Losses allocated pursuant to Section 1.2(b)(i)
through Section 1.2(b)(iii) of this Exhibit to any Member for any Fiscal
Year shall not exceed the maximum amount of Net Losses that may be
allocated to such Member without causing such Member to have a negative
balance in its Adjusted Capital Account at the end of such Fiscal Year.
(ii) If some but not all of the Members would have deficits in
their Adjusted Capital Accounts as a consequence of allocations of Net
Losses pursuant to Section 1.2(b)(i) through Section 1.2(b)(iii) of this
Exhibit, the limitations set forth in this Section 1.3(d) shall be applied
by allocating Net Losses pursuant to this Section 1.3(d)(ii) only to those
Members who would not have a deficit in their Adjusted Capital Account as
a consequence of receiving such an allocation of Net Losses (the
allocation of such Net Losses among those Members to be in proportion of
their Back-End Percentage Interests).
(iii) If no other Member may receive an additional allocation
of Net Losses pursuant to Section 1.3(d)(ii) of this Exhibit, such
additional Net Losses not allocated pursuant to said Section 1.3(d)(ii)
shall be allocated solely to those Members who bear the economic risks for
such additional Net Losses within the meaning of Section 704(b) of the
Code and the Regulations thereunder.
(e) Reversal of Regulatory Allocations. To the extent that any item
of income, gain, loss or deduction has been specially allocated pursuant
to paragraphs
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(a) through (c) of this Section 1.3 and such allocation is inconsistent
with the way in which the same amount otherwise would have been allocated
under Section 1.2 of this Exhibit, subsequent allocations under said
Section 1.2 shall be made, to the extent possible and without duplication
pursuant to a manner consistent with Treasury Regulations under Code
Section 704(b), which negate as rapidly as possible the effect of all such
inconsistent allocations under said paragraphs (a) through (c). In
addition, allocations made pursuant to said paragraphs (a) through (c) are
intended to comply with Section 704(b) of the Code and the Treasury
Regulations promulgated thereunder. It is the intent of the Members that
the Regulatory Allocations be offset with other items of Company income,
gain, loss and deduction so that after such 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 of
income, gain, loss and deduction had been allocated pursuant to said
Section 1.2.
(f) Distributions of Property. Solely for the purpose of adjusting
the Capital Accounts of the Members, and not for tax purposes, if any
property is distributed in kind to any Member, the difference between its
fair market value (as determined in the reasonable judgment of the
Managing Member) and its book value at the time of distribution shall be
treated as gain or loss recognized by the Company and allocated pursuant
to the provisions of Section 1.2 of this Exhibit.
(g) [Intentionally Omitted.]
(h) Transfer of Membership Interest. Except to the extent otherwise
required by the Code and Regulations, if a Membership Interest or part
thereof is transferred in any Fiscal Year, the items of income, gain,
loss, deduction and credit allocable to such Membership Interest for such
Fiscal Year shall be apportioned between the transferor and the transferee
in proportion to the number of days in such Fiscal Year the Membership
Interest is held by each of them, except that, if they agree between
themselves and so notify the Company within thirty days after the
transfer, then at their option, (i) all items or (ii) extraordinary items,
including capital gains and losses, may be allocated to the person who
held the interest on the date such items were realized or incurred by the
Company. At the request of the transferee, PAMI shall make the election
provided for in Code Section 754.
(i) Order of Allocations. Any allocations made pursuant to this
Exhibit shall be made in the following order:
(i) Section 1.3(a)
(ii) Section 1.3(b)
(iii) Section 1.3(c)
(iv) Section 1.3(e); and
(v) Section 1.2, as modified by Section 1.3(d).
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These provisions shall be applied as if all distributions and allocations
were made at the end of the Fiscal Year. Where any provision depends on
the Capital Account of any Member, that Capital Account shall be
determined after the operation of all preceding provisions for the year.
Section 1.4 Allocations for Income Tax Purposes. The income, gains,
losses, deductions and credits of the Company for federal, state and local
income tax purposes shall be allocated in the same manner as the corresponding
items entering into the computation of Net Income and Net Losses were allocated
pursuant to Sections 1.2 and 1.3 of this Exhibit; provided that solely for
federal, local and state income and franchise tax purposes and not for book or
Capital Account purposes, income, gain, loss and deduction shall be allocated,
other than with respect to the tax basis of property, as follows: in the case of
property contributed in kind, and other property, to the extent applicable, in
accordance with the principles of Code Section 704(c) and the Regulations
thereunder as incorporated among the requirements of the relevant provisions of
the Regulations under Code Section 704(b). Any decisions regarding this Section
1.4 shall be a Major Decision.
ARTICLE II
MISCELLANEOUS MATTERS
Section 2.1 Preparation of Records and Returns; Tax Matters Partner. All
financial and accounting books and records of the Company shall be prepared
under the direction of the Regular Managing Member and shall be subject to
PAMI's approval, which shall not be unreasonably withheld. All federal, state
and local income tax returns and all tax audits and litigation shall be
conducted under the direction of the Regular Managing Member and shall be
subject to PAMI's approval which shall not be unreasonably withheld. The
determination of whether the Company shall make available elections for
accounting or federal, state or local income tax purposes or shall settle any
tax audit or litigation shall be made by the Major Decision Committee. PAMI is
hereby designated as the "tax matters partner" for the Company (as such term is
defined in Section 6231(a)(7) of the Code). The tax matters partner shall
promptly notify Members who do not qualify as "notice partners" within the
meaning of Code Section 6231(a)(8) (i) at the beginning and completion of an
administrative proceeding at the Company level promptly upon such notice being
received by the tax matters partner and (ii) of all significant matters that
come to its attention in its capacity as tax matters partner.
Section 2.2 Method of Making Contributions. References to contributions of
property appearing in Article I of this Exhibit are included for the purpose of
conforming to the requirements set forth in the Regulations and shall not give
rise to an inference that contributions may be made in a form other than cash
except as set forth in the Agreement or any other written agreement of the
Members.
B-6
EXHIBIT C
DESCRIPTION OF BUSINESS PROPERTY CONTRIBUTED BY LCOR
The Contract of Sale.
Any and all rights, title and interest of LCOR or its Affiliates, if any,
in and to the following assets and properties, to the extent they relate to the
Business Property, owned by LCOR or its Affiliates and to the extent
transferable:
(a) any and all tangible personal property relating thereto;
(b) any and all existing and assignable bonds, warranties and
guaranties;
(c) all rights to the use of the name of the Business Property and all
promotional material utilizing such name, all registrations of such
name and all business and goodwill acquired in connection with the
Business Property and symbolized by the use of such name;
(d) all interests in service contracts, maintenance contracts or
management agreements, and any and all site plans, surveys, soil and
substrata studies, architectural renderings, plans and
specifications, engineering plans and studies, floor plans,
landscape plans, and other plans, diagrams and studies of any kind,
if any.
C-1
EXHIBIT D
ANNUAL BUSINESS PLAN FOR FISCAL YEAR 2002
SEE ATTACHED PAGES.
D-1
EXHIBIT E
CAPITAL ACCOUNTS OF LCOR AND PAMI
PRIOR TO EFFECTIVE DATE PURSUANT TO SECTION 3.3(A)
SEE ATTACHED PAGES.
E-1
EXHIBIT F
CAPITAL ACCOUNTS OF CAPITAL AND PAMI ON
AND AFTER EFFECTIVE DATE PURSUANT TO SECTION 3.3(B)
SEE ATTACHED PAGES.
F-1
EXHIBIT G
FORM OF PROMISSORY NOTE EVIDENCING MEMBER LOANS
$[AMOUNT] [PLACE OF SIGNING]
As of [DATE]
FOR VALUE RECEIVED, LIBERTYVILLE SL L.L.C., a Delaware limited liability
company having its principal office at ▇▇▇ ▇▇▇▇▇▇▇▇▇ ▇▇▇▇▇, ▇▇▇▇▇▇▇▇▇▇▇▇,
▇▇▇▇▇▇▇▇ ▇▇▇▇▇ ("Borrower"), promises to pay on the Maturity Date (as defined in
paragraph 1 below) to [NAME AND ADDRESS OF MEMBER] ("Lender"), or order, at said
office, or at such other place as may be designated, from time to time, in
writing by Lender, the principal sum of [AMOUNT OF MEMBER LOAN IN WORDS AND
NUMBERS] in lawful money of the United States of America, with interest thereon
from the date of this Note to and including the date this Note is paid in full
calculated in the manner hereinafter set forth ("Loan").
1. Borrower shall pay in full all principal, accrued interest and
all other amounts due on or under this Note to Lender as soon as repayment
of this Loan is permitted under the terms and conditions of (1) the Second
Omnibus Extension and Modification Agreement dated as of December 20, 2002
among the Borrower, the Lender and the other parties thereto and (2) the
documents evidencing loans to Borrower by banks and other financial
institutions but in no event later than [INSERT DATE OF FINAL MATURITY OF
GUARANTY BANK LOAN TO COMPANY IN LOAN DOCUMENTS, WITHOUT REGARD TO ANY
LATER EXTENSION OF THE MATURITY OF THE GUARANTY BANK LOAN.]. The date on
which this Note is payable in full by Borrower to Lender is sometimes
referred to herein as the "Maturity Date."
2. Subject to the provisions of this Note hereinafter set forth, the
entire Principal Balance shall bear interest at the Fixed Rate. The term
"Principal Balance" shall mean the outstanding principal balance of this
Note from time to time. The term "Fixed Rate" shall mean a rate per annum
equal to 15%. The Fixed Rate shall be calculated on the basis of the
actual number of days elapsed over a 360-day year.
3. If this Note is not paid in full within three (3) business days
following the Maturity Date, Borrower shall thereafter pay interest on the
Principal Balance from the date of demand until the date the Principal
Balance is paid in full at a rate per annum equal to 18%; provided,
however, that such interest rate shall in no event exceed the maximum
interest rate which Borrower may by law pay.
4. Borrower hereby agrees that the Loan shall be used solely for one
or more of the purposes required or permitted by the Fourth Amended and
Restated Limited Liability Company Agreement of Borrower dated as of
December 20, 2002, as it may be amended or supplemented in accordance with
its terms.
5. Borrower hereby waives presentment and demand for payment other
than as provided in paragraph 1 above, notice of dishonor, protest and
notice of protest of this
G-1
Note and agrees to pay all costs of collection when incurred, including
reasonable attorneys' fees (which costs may be added to the amount due
under this Note and be receivable therewith) and to perform and comply
with each of the terms, covenants and provisions contained in this Note,
on the part of Borrower to be observed or performed. No release of
security, if any, for the principal sum due under this Note or extension
of time for payment of this Note, or any installment hereof, and no
alteration, amendment or waiver of any provision of this Note made by
agreement between Lender and any other person or party shall release,
discharge, modify, change or affect the liability of Borrower under this
Note.
6. This Note is subject to the express condition that at no time
shall Borrower be obligated or required to pay interest on the Principal
Balance at a rate which could subject Lender to either civil or criminal
liability as a result of being in excess of the maximum rate which
Borrower is permitted by law to contract or agree to pay. If by the terms
of this Note Borrower is at any time required or obligated to pay interest
on the Principal Balance at a rate in excess of such maximum rate, the
rate of interest under this Note shall be deemed to be immediately reduced
to such maximum rate and interest payable hereunder shall be computed at
such maximum rate and the portion of all prior interest payments in excess
of such maximum rate shall be applied and shall be deemed to have been
paid in reduction of the Principal Balance
7. In the event of any dispute, claim or controversy of any kind
between the parties concerning this Note, the matter shall be submitted to
binding arbitration in accordance with the commercial arbitration rules of
the American Arbitration Association. The parties jointly shall agree on
an arbitrator. If the parties are unable to agree, in good faith, on the
selection of an arbitrator within 30 days, either party may request
appointment of an arbitrator chosen by the American Arbitration
Association who shall be the selected arbitrator. Such arbitrator shall be
limited in his decision on each issue to a choice between the final
position on that issue as requested by each party. Said arbitration shall
be held in New York City or such other place as is mutually agreeable. The
arbitration decision shall be final and binding on both parties unless the
arbitration is fraudulent or so grossly erroneous as to necessarily imply
bad faith. Costs of arbitration are to be shared by both parties equally,
provided that the arbitrator may choose to award the fees, costs and
expenses of arbitration against the losing party if the arbitrator
determines that the final position urged by the losing party was not
reasonable.
8. The terms of this Note shall be governed and construed under the
laws of the State of New York.
9. This Note may not be changed or terminated orally, but only by an
agreement in writing signed by the party against whom enforcement of such
change or termination is sought.
10. Borrower represents that Borrower has full power, authority and
legal right to execute and deliver this Note and that the debt hereunder
constitutes a valid and binding obligation of Borrower.
G-2
11. Whenever used, the singular number shall include the plural, the
plural the singular, and the words "Lender" and "Borrower" shall include
their respective successors and assigns.
12. Notices hereunder shall be given to the addresses stated in the
first paragraph of this Note.
IN WITNESS WHEREOF, Borrower has duly executed this Note the day and year
first above written.
LIBERTYVILLE SL L.L.C.,
a Delaware limited liability company
By: CAPITAL SENIOR LIVING PROPERTIES 4, INC.,
authorized Member
By:____________________________________________
Name:
Title: Authorized Signatory
By: PAMI SENIOR LIVING INC., authorized Member
By:____________________________________________
Name:
Title: Authorized Signatory
G-3
STATE OF )
) Section
COUNTY OF )
On the _____ day of _________, 200_, before me personally came
________________, to me known to be the person who executed the foregoing
instrument, and who, being duly sworn by me did depose and say that he is an
Authorized Signatory of Capital Senior Living Properties 4, Inc., a Delaware
corporation that is an authorized signatory for Libertyville SL L.L.C., and that
he executed the foregoing instrument on behalf of said corporation and that he
had the authority to sign the same, and he acknowledged to me that he executed
the same as the act and deed of said corporation for the uses and purposes
therein mentioned.
_______________________________________
Notary Public
STATE OF )
)Section
COUNTY OF )
On the _____ day of _________, 200_, before me personally came
________________, to me known to be the person who executed the foregoing
instrument, and who, being duly sworn by me did depose and say that he is an
Authorized Signatory of PAMI Senior Living Inc., a Delaware corporation that is
an authorized signatory for Libertyville SL L.L.C., and that he executed the
foregoing instrument on behalf of said corporation and that he had the authority
to sign the same, and he acknowledged to me that he executed the same as the act
and deed of said corporation for the uses and purposes therein mentioned.
_______________________________________
Notary Public
G-4
EXHIBIT H
MEMBER LOANS OF CAPITAL AND PAMI
AS OF EFFECTIVE DATE PURSUANT TO SECTION 3.7
H-1
