AMENDEDAND RESTATED

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

THIS AMENDED AND RESTATED LIMITED LIABILITY COMPANY AGREEMENT (the “Agreement”) of ROYAL CORNERSTONE SOUTH CAROLINA PORTFOLIO, LLC, a Delaware limited liability company, dated as of April 30, 2010 (the “Effective Date”) by and among CORNERSTONE OAKLEAF VILLAGE, LLC, a Delaware limited liability company (“Managing Member”), as the Managing Member, and RSC SOUTH CAROLINA INTERESTS, LLC, a Florida limited liability company (“Non-Managing Member”), as the Non-Managing Member.

 

 

WHEREAS, Royal Senior Care, LLC, a Florida limited liability company (“RSC” or “Royal”) formed Royal Cornerstone South Carolina Portfolio, LLC (the “Company”) as a limited liability company under the provisions of the Delaware Limited Liability Company Act, as amended from time to time (the “Delaware Act”);

 

WHEREAS, RSC executed that certain Limited Liability Company Agreement for the Company, effective as of March 26, 2010 (the “Original Agreement”);

 

WHEREAS, RSC and Managing Member have entered into that certain Membership Interests Sale and Purchase Agreement dated as of March 5, 2010 (the “Purchase Agreement”), pursuant to which, among other things, the Managing Member has purchased from RSC, and RSC has sold and assigned to Managing Member an eighty percent (80%) membership interest in the Company;

 

WHEREAS, RSC has contributed to Non-Managing Member its twenty percent (20%) membership interest in the Company;

 

WHEREAS, Managing Member and Non-Managing Member desire to amend and restate the Original Agreement in its entirety to set forth their respective rights and obligations with respect to the Company.

 

NOW, THEREFORE, in consideration of the foregoing premises and other good and valuable consideration, the receipt and sufficiency of which is hereby acknowledged, the parties hereto agree as follows:

 

 

 

Section 1.1    Formation; Changes.

The Company was formed under the Delaware Act on March 26, 2010 (the “Formation Date”) by the execution, delivery and filing with the Secretary of the State of Delaware, of the Certificate of Formation of the Company, by Roger S. Goldman, as an “authorized person” within the meaning of the Delaware Act. Upon the filing of the Certificate of Formation with the Delaware Secretary of State his powers as an “authorized person” ceased, and RSC thereupon became the sole “authorized person”. Upon execution and delivery of this Agreement,  Managing Member became the sole “authorized person” and shall continue as the designated “authorized person” within the meaning of the Delaware Act, but subject to the provisions hereof.   The Members hereby amend and restate the Original Agreement of the Company in its entirety as set forth herein.  This Agreement replaces the Original Agreement of the Company 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 administration and termination of the Company shall be governed by the Delaware Act.

 

Section 1.2    Name.

 

The business of the Company shall be conducted under the name “Royal Cornerstone South Carolina Portfolio, LLC.”

 

Section 1.3    Term.

 

The term (“Term”) of the Company shall be from the Formation Date until December 31, 2069, inclusive, unless sooner terminated as hereinafter provided. The existence of the Company as a separate legal entity shall continue until cancellation of the Company as provided in the Delaware Act.

 

Section 1.4    Business.

 

The business of the Company is solely to (a) own, hold, finance, pledge and manage the sole equity interest in each of the Operating Companies  and (b) take any and all actions and make any and all decisions (i) in its capacity as the sole member of each of the Operating Companies  which owns or leases the Property, including, without limitation, in connection with the acquisition, management, financing, refinancing, ownership, vacating, renovating, leasing, insuring, selling, assigning, transferring and prosecuting or defending any and all legal proceedings relating to the Property and (ii) in connection with the ownership, financing, refinancing, selling, assigning, transferring and prosecuting or defending any and all legal proceedings relating to the interests of the Company in each of the Operating Companies; and do any and all other acts or things that may be necessary or incidental to carry on the business of the Company as described in clauses (a) and (b) above. The Company is not authorized to, and shall not, engage in any business other than as described in this Section 1.4.

 

Section 1.5    Names and Addresses of Members.

 

The names and addresses of the Members are as follows:

 

 

 

 

Section 1.6    Registered Office and Principal Place of Business.

 

The registered office of the Company in the State of Delaware shall be 2711 Centerville Road, Suite 400, Wilmington, Delaware and its registered agent for service of process on the Company at such office shall be Corporation Service Company.  The principal place of business of the Company shall be 1920 Main Street, Suite 400, Irvine, California 92614, or such other location hereafter determined by the Managing Member.

 

Section 1.7    Certain Definitions.

 

Certain capitalized words and phrases used in this Agreement and not otherwise defined in the body hereof are defined in Exhibit A and shall have the meanings set forth therein.

 

 

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 other than a partnership 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.

 

 

Section 3.1    Capital Contributions.

 

(a)           Non-Managing Member has contributed to the Company (i) a one hundred percent (100%) membership interest in RSC Oakleaf Lexington LLC, a Florida limited liability company, and (ii) a one hundred percent (100%) membership interest in RSC Oakleaf Greenville LLC, a Florida limited liability company.

 

(b)           Pursuant to the Purchase Agreement, Managing Member has purchased from RSC, among other things, an eighty percent (80%) Membership Interest in the Company.

 

Section 3.2    Additional Capital Contributions.

 

(a)           Except as otherwise provided herein, no Member or Affiliate of any Member shall have the right or obligation to make any loan to the Company without the prior written consent of all Members. No Member shall have the right or be required to make any additional Capital Contribution to the Company unless such Capital Contribution has been approved as a Major Decision; provided, however, that Managing Member or Non-Managing Member, each in its sole and absolute discretion, may elect to make additional Capital Contributions to pay Necessary Expenses if Available Cash from Operations is not sufficient to pay for any such Necessary Expenses. If any additional Capital Contributions are approved or permitted as set forth above, then, prior to making any such contribution, one of the Members shall request in writing that the other Member fund its Membership Percentage of such additional Capital Contribution. In such event, Managing Member or Non-Managing Member shall have the right, but not the obligation, to contribute their Membership Percentage of the specified amount within thirty (30) days (or such shorter time period as may be appropriate under the circumstances, but in no event less than five (5) Business Days) after the date of receipt of notice of the request for such additional Capital Contributions.  Any amounts contributed pursuant to this Subsection 3.2(a) by any Member shall be added to the Capital Account of that Member.

 

(b)           If Managing Member or Non-Managing Member (in such instance, a “Non-Contributing Member”) does not contribute all of an additional Capital Contribution that is requested under Section 3.2(a) within the time period described in Section 3.2(a), then the contributing Member (the “Contributing Member”) shall elect either: (i) to cancel the request for the additional Capital Contribution made pursuant to Section 3.2(a) or (ii) (x) if the Non-Contributing Member does not contribute any portion of the requested additional Capital Contribution, to fund all amounts requested pursuant to Section 3.2(a) as a loan to the Company (a “Member Loan”) or (y) if the Non-Contributing Member shall have funded a portion, but not all, of the additional Capital Contribution requested from the Non-Contributing Member, to fund as an additional Capital Contribution such portion of the Capital Contribution requested from the Contributing Member the amount necessary to keep the additional Capital Contributions so made by the Members in proportion to their Membership Percentages and to fund the balance as a Member Loan to the Company. A Member Loan shall not be deemed to be a Capital Contribution for purposes of this Agreement. Each Member Loan shall bear interest at a rate equal to the lower of twelve percent (12%) per annum, compounded monthly, or the maximum rate of interest permitted by applicable law, and shall be recourse only to the assets of the Company. If a Member makes a Member Loan pursuant to this Section 3.2(b), then such Member shall receive payments with respect to such Member Loan as described in Sections 4.1 and 4.2 before any distributions are made with respect to Capital Contributions made by the Members pursuant to Sections 3.1 and 3.2(a).  The remedies provided in this Section 3.2(b) for the failure of a Member to fund its share of a requested Capital Contribution shall be the sole remedies available with respect thereto.  Nothing in this Section 3.2 shall be deemed to obligate any Member to cause any of its Affiliates to incur any Recourse Liabilities. The Company shall cause each of the Operating Companies to defer and accrue without remedy or recourse against the applicable Operators except to income actually received by such Operators, any rent and additional rent due under the Lexington Master Lease, or Greenville Master Lease, as the case may be, that is in excess of the amount of the monthly normally accruing payment of principal, interest and reserves under the Senior Loan (the “Loan Payment Excess”) and the payment or contribution by any Member of all or any portion of the Loan Payment Excess shall be a nullity and not be, or deemed or construed to be, the payment of any Necessary Expenses, or a Member Loan (nor to avoid all doubt, a Capital Contribution), and such payment or contribution shall not affect in any manner, any calculation or determination of any return on investment, annual return upon and in respect to any Unreturned Capital Contribution, or considered in determining or calculating any distributions hereunder or in determining or calculating the financial performance by the applicable RSC Manager pursuant to Section 1301.8 of the Management Agreement attached hereto as Exhibit C, or any substantially similar provisions in any subsequent RSC Management Agreement, or in any other agreement between or among the Managing Member or any one of its Affiliates, on one hand and Non-Managing Member or any one of its Affiliates, on the other hand (but does not cure or prevent what would otherwise be a event giving rise to a financial performance termination under any such RSC Management Agreement).

 

Section 3.3    Recoupment for 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 Contributions, (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 except as otherwise set forth herein.

 

Section 3.4    Execution and Compliance with Senior Loan Documents.

 

The Members hereby approve and ratify (i) the Senior Loan, as obtained by the Operating Company from the Senior Lender pursuant to the Senior Loan Documents, as modified by that certain term sheet dated March 16, 2010, from the Senior Lender (as it may now or hereafter be amended from time to time, the “Term Sheet”) and (ii) execution and delivery of all documents and instruments necessary and appropriate to modify the Senior Loan Documents substantially in accordance with the provisions of the Term Sheet.  No Member shall be required to make additional Capital Contributions or loans to the Company so that the Company and the Operating Company can comply with those terms and conditions.  Managing Member will cause the Cornerstone Principal to execute and deliver customary “non-recourse” guaranties in connection with the Senior Loan, any replacement or refinancing thereof, or any other loan which shall be secured in part by a first mortgage encumbering the Property, covering matters ordinarily guaranteed in such agreements, including without limitation environmental liability of the Company (the “Recourse Liabilities”).

 

Section 4.1    Distributions of Available Cash from Operations.

 

Subject to the provisions of the Senior Loan Documents (or any other loan documents entered into in accordance with the provisions of Section 5.1(b)(ii)), the Annual Budget, the Company shall make distributions of Available Cash from Operations quarterly; provided, notwithstanding any provision to the contrary contained in this Agreement, the Company shall not be required to make a distribution to the Members if such distribution would violate Section 18-607 of the Delaware Act or any other applicable law.  Distributions of Available Cash from Operations shall be made in the following order of priority:

 

(a)           First, to the Members who have made Member Loans in accordance with Section 3.2(b) on a pro rata basis in accordance with the amounts of their respective unpaid Member Loans until each of them has received cumulative payments pursuant to this Section 4.1(a) equal to all interest due in respect of such Member Loans.

 

(b)           Second, to the Members who have made Member Loans pursuant to Section 3.2(b) on a pro rata basis in accordance with the amounts of their respective Member Loans until each of them has received cumulative payments pursuant to this Section 4.1(b) equal to the outstanding principal amounts of its respective Member Loans.

 

(c)           Third, to the Managing Member, until the Managing Member has achieved a 9% cumulative, non-compounding annual return upon and in respect to the amount of the Unreturned Capital Contribution (as hereinafter defined) of the Managing Member (the “Managing Member Preferred Return”).

 

(d)           Fourth, to the Non-Managing Member, until the Non-Managing Member has achieved a 9% cumulative, non-compounding annual return upon and in respect to the amount of the Unreturned Capital Contribution of the Non-Managing Member (the “Non-Managing Member Preferred Return”).

 

(e)           Fifth, until the Managing Member and Non-Managing Members have each achieved a 12% cumulative, non-compounding annual return upon and in respect to the amount of their respective Unreturned Capital Contribution, to the Members on a pro rata basis in accordance with their respective Membership Percentages.

 

(f)           Sixth, until the Managing Member and Managing Members have each achieved a 15% cumulative, non-compounding annual return upon and in respect to the amount of their respective Unreturned Capital Contribution, (i) 40.00% to Non-Managing Member, and (ii) 60.00% to Managing Member.

 

(g)           Seventh, thereafter:  (i) 45.00% to Non-Managing Member, and (ii) 55.00% to Managing Member.

 

Section 4.2    Distributions of Net Capital Transaction Proceeds.

 

Distributions of Net Capital Transaction Proceeds shall be made promptly following the Company’s receipt thereof.  All such distributions shall be made in the following order of priority:

 

(a)           First, to the Members who have made Member Loans in accordance with Section 3.2(b) on a pro rata basis in accordance with the amounts of their respective unpaid Member Loans until each of them has received cumulative distributions pursuant to Section 4.1(a) and this Section 4.2(a) equal to all interest due in respect of such Member Loans.

 

(b)           Second, to the Members who have made Member Loans pursuant to Section 3.2(b) on a pro rata basis in accordance with the amounts of their respective Member Loans until each of them has received cumulative distributions pursuant to Section 4.2(b) and this Section 4.2(b) equal to the outstanding principal amounts of its respective Member Loans.

 

(c)           Third, to the Managing Member, until the Managing Member has received and achieved the Managing Member Preferred Return, that is, a 9% cumulative, non-compounding annual return upon and in respect to the amount of the Unreturned Capital Contribution of Managing Member.

 

(d)           Fourth, to the Non-Managing Member, until the Non-Managing Member has received and achieved the Non-Managing Member Preferred Return, that is, a 9% cumulative, non-compounding annual return upon and in respect to the amount of the Unreturned Capital Contribution of Non-Managing Member.

 

(e)           Fifth, to the Managing Member, until the Managing Member has been repaid its entire Unreturned Capital Contribution.

 

(f)           Sixth, to the Non-Managing Member, until the Non-Managing Member has been repaid its entire Unreturned Capital Contribution, to the Non-Managing Member.

 

(g)           Seventh, until the Managing Member and Non-Managing Members have each achieved a 12% cumulative, non-compounding annual return upon and in respect to the amount of their respective Unreturned Capital Contribution, to the Members on a pro rata basis in accordance with their respective Membership Percentages.

 

(h)           Eighth, until the Managing Member and Managing Members have each achieved a 15% cumulative, non-compounding annual return upon and in respect to the amount of their respective Unreturned Capital Contribution, (i) 40.00% to Non-Managing Member, and (ii) 60.00% to Managing Member.

 

(i)           Ninth, thereafter:  (i) 45.00% to Non-Managing Member, and (ii) 55.00% to Managing Member.

 

Notwithstanding the foregoing, any distributions of Net Capital Transaction Proceeds occurring as a result of the Loan refinancing or restructuring with GECC as generally contemplated by the Term Sheet shall be distributed (i) 20.00% to Non-Managing Member, and (ii) 80.00% to Managing Member.

 

Section 4.3    Withholding Taxes with Respect to Members.

 

The Company shall comply with any withholding requirements under federal, state and local law that the Managing Member determines is required, 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 4 as having been distributed (as an advance) to those Members who received a credit for tax or other benefit 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 exceeded the affected Member’s actual share of cash available for distribution, such Member shall reimburse the Company for such excess withholding or other amounts paid (as described above). Each Member agrees to furnish the Company with such representations, forms, or other information as the Managing Member shall reasonably request to assist it in determining the extent of, and in fulfilling, the Company’s withholding obligations, if any. As soon as practicable after becoming aware that any withholding requirement may apply to a Member, the Managing Member shall advise such Member of such requirement and the anticipated effect thereof. Such Member shall pay or reimburse to the Company all identifiable costs or expenses of the Company caused by or resulting from withholding taxes (including expenses incurred to reduce withholding taxes) with respect to such Member.

 

Section 4.4    Violation of Law.

 

Notwithstanding any other provision contained in this Agreement, the Company shall not make a distribution to a Member in respect of its interest in the Company if such distribution would violate the Delaware Act or other applicable law.

 

Section 4.5    Deemed Distribution/Re-contribution of Excess Expenses and Non-Recurring Capital Expenditures.

 

Notwithstanding any other provision contained in this Agreement, the Company shall upon actual payment thereof be deemed to have made distributions of:

 

(a)           Excess Expenses; and

 

(b)           Non-Recurring Capital Expenditures funded from Available Cash From Operations.

 

These distributions shall be deemed to have been made from Available Cash From Operations to the Members in accordance with, and in the order of priority of, Section 4.1 and immediately re-contributed by the respective members as additional Capital Contributions.

 

Section 4.6    Performance Termination of RSC Manager under RSC Management Agreement.

    

If any RSC Management Agreement shall terminate by reason of the exercise by Lexington Operator or Greenville Operator, as the case may be, of their right to terminate for financial non-performance by the applicable RSC Manager pursuant to Section 1301.8 of the Management Agreement attached hereto as Exhibit C, or any substantially similar provisions in any subsequent RSC Management Agreement, then the distributions to Non-Managing Member hereunder in Sections 4.1(f) and (g) and Sections 4.2 (h) and (i) shall be automatically redetermined and adjusted to reduce the proportion of such distributions to Non-Managing Member in Sections 4.1 (f) and Section 4.2 (h) from 40.00% to 20.00% and in Sections 4.1 (g) and Section 4.2 (i) from 45.00% to 20.00% and increase the proportion of such distributions to Managing Member in Sections 4.1 (f) and Section 4.2 (h) from 60.00% to 80.00% and in Sections 4.1 (g) and Section 4.2 (i) from 55.00% to 80.00%.

 

 

Section 5.1    Authority of Managing Member.

(a)           The Managing Member shall have the sole and exclusive authority to manage and implement the policies, operations and affairs of the Company and to make all decisions regarding the major policy decisions and over-all direction of the Company and the Operating Company and their respective businesses, including, without limitation causing the Operating Company to take any action in furtherance thereof; provided, however, that the Managing Member shall not have the authority to make any Major Decisions with respect to the Company or the Operating Company without the prior written consent of Non-Managing Member.

 

 

(b)          Each of the following matters (each a “Major Decision” and collectively, the “Major Decisions”) shall require the prior written approval of the Managing Member and Non-Managing Member:

 

(i)           acquisition by the Company or the Operating Company of any additional property, assets, business or project, either directly or indirectly, other than the acquisition or replacement of personal property in the ordinary course of business;

 

(ii)          causing or permitting the Company or any of the Operating Companies to incur any indebtedness whatsoever other than trade payables and other indebtedness in an amount less than $100,000.00, whether recourse or non-recourse, and securing the same with mortgages, deeds of trust and/or other assignments of assets of the Company; except that the Members acknowledge and agree that the Company is authorized and directed, on behalf of the Company and each of the Operating Companies, to comply with the provisions of the documents securing or governing the indebtedness which has been defined herein as, and constitutes, the Senior Loan from General Electric Credit Corporation, Agent for itself and one or more lenders (together with its successors and/or assigns, the “Senior Lender”), as the same may be modified substantially in accordance with the Term Sheet (to avoid all doubt, any additional amendments, modifications or extensions of the Senior Loan or any other loan is a Major Decision);

 

(iii)         the sale or other disposition of all or any material portion of the Company Property or the Property other than the sale or disposition of personal property being replaced in the ordinary course of business (the parties confirm that this Major Decision shall always be deemed to be above the Major Decision Materiality Threshold, regardless of the amount in dispute);

 

(iv)         the merger or consolidation of the Company or Operating Company with or into any other Person, any reorganization of the Company, the liquidation or dissolution of the Company or Operating Company, or the change or organization of the Company or Operating Company into any other legal form;

 

(v)          causing or permitting the Company or Operating Company to make any loan to any Person (for the purpose of this clause, accounts receivable from tenants or other occupants of the Property shall not be deemed to be a loan),  or to act as guarantor or surety to, for or on behalf of any other Person;

 

(vi)         issuance or sale of additional Membership Interests or admission of a new member in the Company or Operating Company other than in accordance with Article 8;

 

(vii)        filing or commencement of any Bankruptcy proceeding by or on behalf of the Company or Operating Company; consenting to the institution or continuation of any involuntary Bankruptcy proceeding against the Company or Operating Company or the conversion of an involuntary proceeding into a voluntary proceeding; the admission in writing by the Company or the Operating Company of its inability to pay its debts generally as they become due; or the making by the Company or Operating Company of a general assignment for the benefit of its creditors;

 

(viii)       the making of any additional Capital Contributions other than for Necessary Expenses in accordance with Section 3.2;

 

(ix)         entering into, modifying or exercising any rights or remedies under any contract (an “Affiliate Contract”) between the Company or Operating Company, on the one hand, and any Person in which any Member, Affiliate of any Member or any Family Member thereof,  or in which any partner, shareholder, member, director or officer, manager, or employee of any Member, Affiliate of any Member, or any Family Member thereof, directly or indirectly, owns or Controls more than five percent (5%) of the beneficial interest, on the other hand;

 

(x)           renewing, extending or modifying an Affiliate Contract or terminating an Affiliate Contract, provided however, that an RSC Management Agreement may be terminated in accordance with its terms without the consent of the Non-Managing Member;

 

(xi)         any amendment or modification of this Agreement, the Certificate of Formation of the Company, the Limited Liability Company Agreement, the Operating Company Limited Liability Company Agreement or Certificate of Formation of each of the Operating Companies ;

 

(xii)         commencing or threatening any legal proceeding or litigation of any type on behalf of the Company or Operating Company or settling, compromising or taking any other material action with respect to any litigation or legal proceeding of any type by, against or involving the Company if the amount in controversy shall exceed Fifty Thousand Dollars ($50,000.00);

 

(xiii)        causing or permitting the Company or Operating Company to distribute any Company Property or Operating Company Property in kind to any Member;

 

(xiv)       causing or permitting the Company or Operating Company to refinance, amend, modify or extend any loan obligation of the Company or Operating Company;

 

(xv)        the engagement of, or otherwise entering into any agreement with, any real estate broker or investment banker to market or list the Property for sale and the terms and conditions of any such brokerage, listing or similar agreement;

 

(xvi)       subject to the provisions of Section 5.3, the engagement of, or otherwise entering into any agreement with, an accountant or accounting firm to provide auditing services to the Company, except that the Members agree that Moore Stephens Lovelace, P.A. shall be the Company’s initial auditors (the “Auditors”) provided that Managing Member shall have the right to engage any reputable  accounting firm for auditing services at its sole cost and expense (and expressly not a Company cost or expense);

 

(xvii)      any action outside the purposes specified in Section 1.4;

 

(xviii)     the engagement of, or otherwise entering into any agreement with, any real estate broker with respect to leasing the Property and the terms and conditions of any such brokerage, listing or similar agreement;

 

(xix)        the hiring of any employees by the Company and the setting and increasing of their compensation, whether by salary, bonus, or otherwise;

 

(xx)         the hiring of any employees by the Operating Company for an annual salary or other compensation in excess of an aggregate of $50,000.00 and the setting and increasing of their compensation, whether by salary, bonus, or otherwise;

 

(xxi)        entering into or causing or permitting the Operating Company to enter into any lease for (Y) an potential aggregate term in excess of three (3) years (including all renewal and extension terms), (Z) or more than 2,000 rentable square feet, whether a commercial or residential lease.

 

(xxii)       the amendment, modification or revocation of the Lexington Master Lease or the Greenville Master Lease.

 

(xxiii)      without limiting the generality of the foregoing, indirectly or directly causing the Operating Company to take any of the foregoing actions;

 

(xxiv)      the adoption of the Annual Budget or any amendment or revision thereto; and

 

(xxv)       the amendment, modification or revocation of any Major Decision previously approved in accordance with this Agreement; and

 

(xxvi)      entering into, terminating or causing or permitting the termination of a Management Agreement, except if the same is a RSC Management Agreement, (to avoid all doubt, the Members acknowledge and agree that, if applicable, subject to its terms or as otherwise provided herein, Managing Member may terminate or cause or permit an RSC Management Agreement to be terminated without the consent of the Non-Managing Member and the engagement of the initial replacement manager in such event is not a Major Decision, all pursuant to the provisions of Section 5.2 hereof).

 

(c)          Each of the Managing Member and Non-Managing Member may propose to adopt, modify or revoke a Major Decision at any time.  Whenever a Member proposes to adopt, modify or revoke a Major Decision, it shall deliver a written notice (a “Major Decision Notice”) to the other Member (i) describing the proposal in sufficient detail and (ii) containing sufficient information to permit the other Member to make an informed decision on the proposal and shall subsequently provide to the other Member such additional information as the other Member may reasonably request.

 

(d)          A “Deadlock” shall be deemed to exist if, after receiving a Major Decision Notice:  (i) the Managing Member and Non-Managing Member have failed for any reason to mutually agree on accepting or rejecting the Major Decision for at least thirty (30) days after the Major Decision Notice was given and (ii) one such Member has delivered a notice (a “Deadlock Notice”) to the other Member in writing, given at any time before or after the end of such 30-day period that continuing failure to agree on the proposed Major Decision will constitute a Deadlock for purposes of this Agreement unless the Major Decision is agreed upon by the later of (A) five (5) days after the other Member’s receipt of the Deadlock Notice or (B) the end of the 30-day period described above.  As provided herein, if a Deadlock shall exist, then Managing Member or Non-Managing Member may initiate the Buy/Sell Procedures as provided in Article 6.

 

(e)           Subject to the provisions of the Senior Loan Documents (or any other loan documents (or any other loan documents entered into in accordance with the provisions of Section 5.1(b)(ii)), and the Annual Budget, the Managing Member shall cause the Operating Company to make quarterly distributions of Operating Company Available Cash to the Company.  Notwithstanding the foregoing, the Managing Member shall not be required to cause the Operating Company to make a distribution to the Company if such distribution would violate Section 18-607 of the Delaware Act or any other applicable law.

 

(f)           During the period of time ending two (2) years after the Effective Date (the “Major Decision Threshold Period”), the Members shall only have the right to initiate the Buy/Sell Procedures as provided in Article 6 if the Major Decision which is the subject of the Deadlock Notice shall involve a sum or value equal to, or in excess of, the Major Decision Materiality Threshold.  If during the period of time ending two years after the Effective Date, the Major Decision which is the subject of the Deadlock Notice shall involve a sum or value which is equal to or less than the Major Decision Materiality Threshold, then either Member shall have the right to submit the same to arbitration pursuant to the provisions of Section 5.1 (g) hereof.  After the Major Decision Threshold Period, such Major Decision Materiality Threshold shall not apply and the Buy/Sell Procedures may be initiated with respect to any Deadlock or for any or no reason.

 

(g)           During the period of time ending two (2) years after the Effective Date, each Member, as its sole recourse with respect to the resolution of any dispute or controversy arising out of a Deadlock with respect to a Major Decision involving a sum or value which is equal to or less than the Major Decision Materiality Threshold, may submit the same to settlement by binding arbitration administered by the American Arbitration Association under its then current Commercial Arbitration Rules. The judgment or award rendered by the arbitrator(s) shall be final and judgment may be entered upon it in accordance with applicable law in any court having jurisdiction thereof. Notice of demand for arbitration shall be filed by either Member in writing with the other Member and the American Arbitration Association.  The demand for arbitration shall be made within sixty (60) days after the Deadlock Notice. After the Major Decision Threshold Period, the arbitration requirements provided in this Section 5.1(g) shall not apply.

 

Section 5.2    Management Agreements.

 

(a)           The Members acknowledge and agree that from time to time, Lexington Operator and Greenville Operator shall enter into management agreements with property managers with respect to the applicable Property (each, a “Management Agreement”). The Members do not object to and hereby authorize to the extent applicable, RSC-LSC Management Company, LLC, a Florida limited liability company (“RSC-LSC”) being engaged as property manager of the Lexington Property and RSC-GSC Management Company, LLC, a Florida limited liability company (“RSC-GSC”) being engaged as property manager of the Greenville Property pursuant to Management Agreements substantially in the from attached hereto and incorporated by reference as Exhibit C.  RSC-LSC and RSC-GSC, and any other Affiliate of RSC or a Royal Principal (each an “RSC Manager”), may serve as the property manager for the Property; subject to the applicable termination provisions of the Management Agreement, as long as the Non-Managing Member is Controlled by one or more Royal Principals, Royal or an entity Controlled by one or more Royal Principals. Each of the Management Agreements attached hereto as Exhibit C and any other Management Agreement with RSC-LSC, RSC-GSC, or any other Affiliate of RSC or a Royal Principal is referred to a “RSC Management Agreement”).   In the event that RSC-LSC and RSC-GSC, or any other Affiliate of RSC or a Royal Principal is removed or otherwise ceases to serve as the property manager for the Property (other than by reason of an event of default by the applicable RSC Manager), the Managing Member shall choose the initial replacement property manager, subject to the consent of the Non-Managing Member, which consent shall not be unreasonably withheld.

 

(b)           In the event that any of the RSC Management Agreements shall be terminated or expire for any reason other than by reason of an event  of default thereunder by the RSC Manager or termination for convenience by the applicable RSC Manager under the applicable RSC Management Agreement by RSC-LSC, RSC-GSC, and any other Affiliate of RSC or a Royal Principal that is then currently serving as the property manager for the Lexington Property or Greenville Property, then the Non-Managing Member shall at any time thereafter have the right to initiate the Buy-Sell Procedures hereunder (except as limited by subclauses 6.1(a)(A) and (B)).

 

Section 5.3    Selection of Auditors.

 

At any time after December 31, 2011, either Member (the “Member Electing Removal of Auditor”) may elect to change the Auditors by providing written notice of such election (an “Auditor Removal Notice”) to the other Member (the “Member Responding to Auditor Removal Notice”).  In the Auditor Removal Notice, the Member Electing Removal of Auditor shall propose to the Member Responding to Auditor Removal Notice a list of three (3) possible accounting firms acceptable to the Member Electing Removal of Auditor. The Member Responding to Auditor Removal Notice shall select one (1) accounting firm from the list, and shall give the Member Electing Removal of Auditor written notice of the selected accounting firm within ten (10) days after receipt of the Auditor Removal Notice.

 

Section 5.4    Limited Reimbursement of Expenses.

 

The Company shall, or shall cause the Operating Company to reimburse the Members and their respective agents or representatives for all direct, actual, reasonable, verifiable, out-of-pocket incidental costs and expenses incurred by them with Third Parties which are incurred by the Members in connection with the acquisition and financing of the Property and the preparation and negotiation of this Agreement and the documents required hereunder (which costs and expenses shall expressly not include, the structuring of the investment by the Members and their respective Affiliates), which shall not exceed _________ for Managing Member and _____________ for Non-Managing Member, or (b) are directly attributable to the business of the Company and/or the Operating Company and are incurred for and on behalf of the Company and/or the Operating Company, in accordance with an Approved Budget.  It is expressly understood that the Company shall not be responsible for, or reimburse any of, the salaries or other compensation of such Member’s employees, or any general or administrative overhead of any Member, including, but not limited to, rent.  Without waiving the effect of the foregoing provisions, the Members hereby authorize and direct the Company to cause the following to be paid or reimbursed, as costs and expenses of the Company:  (i) the fees and costs of the law firms of Foley & Lardner LLP, and DLA Piper and the accounting firm of Deloitte and Touche LLP, which represented the interest of Managing Member in connection with this transaction; (ii) the fees and costs of the law firms of Carlton Fields, P.A. and Womble Carlyle Sandridge & Rice, PLLC, which represented the interests of the Non-Managing Member in connection with this transaction.

 

 

Section 6.1    Buy-Sell Procedures.

(a)           Managing Member or Non-Managing Member shall each have the right to initiate and complete the buy-sell procedures described in this Article (collectively, the “Buy-Sell Procedures”) at any time: (i) during the continuance of a Deadlock with respect to a Major Decision, but during the period of time expiring two (2) years after the Effective Date, only if such continuing Deadlock shall pertain to a Major Decision involving a sum or value which shall exceed the “Major Decision Materiality Threshold”, (ii) in any event, for any or no reason, after two (2) years from the Effective Date, or (iii) if any RSC Management Agreement shall (1) terminate, (2) expire or (3) the applicable Operator shall reenter or retake possession of any portion of any Facility, in respect to any of subclauses (1), (2) or (3) of this Section 6.1(a)(iii), for any reason other than a termination by the applicable RSC Manager by convenience pursuant to Section 1301.6 of the Management Agreement attached hereto as Exhibit C, or any substantially similar provisions in any subsequent RSC Management Agreement, or a termination or retaking of possession of any portion of any Facility by the applicable Operator by reason of an event of default by the applicable RSC Manager pursuant to Section 1301.3, of the Management Agreement attached hereto as Exhibit C, or any substantially similar provisions in any subsequent RSC Management Agreement, provided however that the termination of any RSC Management Agreement or retaking of possession of any portion of any Facility by the applicable Operator by reason of an event of default by the applicable RSC Manager shall be deemed to be a termination by the applicable Operator for convenience (to avoid all doubt, there shall be no termination or other fee payable in such event) and permit the initiation of the Buy-Sell Procedures by Non-Managing Member unless the applicable RSC Manager failed to use reasonable commercial efforts to prevent such event of default. Notwithstanding the foregoing or anything else in this Agreement to the contrary: (A) to the extent the Company has agreed, in accordance with the terms of this Agreement, to sell the Property to a Third Party pursuant to a legally binding agreement that has not been terminated, the Buy-Sell Procedures specified in this Article 6 shall not be initiated; (B) no Member shall have the right to initiate the Buy-Sell Procedures while the Buy-Sell Procedures previously initiated by a Member are continuing and have not yet been completed or terminated in accordance with the applicable provisions of this Agreement; and (C) Managing Member shall not have the right to initiate the Buy-Sell Procedures if any of the transfers contemplated thereby would be prohibited by the terms of the Senior Loan Documents (unless the only transfer so prohibited would be the transfer to the initiating Member and such Member pays off the Senior Loan or obtains the consent of the Senior Lender thereto and indicates its intention to so pay off the Senior Loan or that it intends to obtain such consent in the Buy-Sell Notice). The Buy-Sell Procedures shall also govern and control the Membership Interests in Tenant Portfolio so that the initiating of the Buy-Sell Procedures hereunder shall automatically include, at no additional charge or expense, the purchase of the entire Membership Interest of the Seller, or its Affiliate, if applicable, in Tenant Portfolio. The Members acknowledge and agree that the Tenant Portfolio Agreement does not contain comparable buy-sell provisions as the intent of the Members is that the initiating of the Buy-Sell Procedures under this Agreement shall govern and control in each instance, the applicable membership interests in Tenant Portfolio. Cornerstone Oakleaf Village TRS, and RSC South Carolina Interests, LLC shall join in the execution of this Agreement to evidence that its, and their respective successors’ and assigns’, entire membership interest in Tenant Portfolio shall be subject to, and governed by, the Buy-Sell Procedures.

 

 

(b)           The Member who elects to initiate the Buy-Sell Procedures (the “Offeror”) shall give written notice (the “Buy-Sell Notice”, and the date on which the Buy-Sell Notice is given shall be referred to herein as the “Buy-Sell Notice Date”) to the other Member (the “Offeree”), which notice shall:

 

(i)           specify an amount (the “Gross Price”) representing a gross sales price for the Company Property;

 

(ii)          specify the aggregate amounts that each Member would be entitled to receive (including as a result of the repayment of any Member Loans) if all of the Property were sold for such Gross Price (but without taking any reductions or credits from the Gross Price on account of transfer taxes, closing costs or other general transaction expenses that would have been incurred in connection with an actual sale for the Gross Price), all loans or indebtedness owed by the Company and/or the Operating Company were repaid, the Operating Company and the Company were immediately dissolved and the net proceeds of such sale were distributed in liquidation in accordance with Article 4 (the amount so payable to the Offeree being referred to herein as the “Offeree Price” and the amount so payable to the Offeror being referred to herein as the “Offeror Price”; the Offeror Price or the Offeree Price, as applicable are sometimes referred to herein as the “Purchase Price”);

 

(iii)         specify that the Offeror desires to purchase the Membership Interest of the Offeree for the Offeree Price or to sell the Membership Interest of the Offeror to the Offeree for the Offeror Price; and

 

(iv)         specifically request Offeree to respond to the Buy-Sell Notice as required under Section 6.1(c).

 

The Offeror’s delivery of the Buy-Sell Notice to the Offeree shall constitute its legally binding and irrevocable offer to complete the purchase as described in this Article, and the delivery of the Buy-Sell Notice shall constitute the Offeror’s irrevocable offer to sell its Membership Interest as described in this Article.  Together with the Buy-Sell Notice, the Offeror shall also deliver to the Offeree copies of any written offers or communications delivered to the Offeror (whether addressed to the Offeror or the Company or others) regarding the sale of all or any portion of the Property or the interests in the Company received by the Offeror within the preceding one (1) year, without limiting the obligations of the Offeror with respect to such notices.

 

(c)           The Offeree shall have thirty (30) days from the Buy-Sell Notice Date to send a written response (“Response Notice”) to the Offeror, which Response Notice shall set forth Offeree’s election (i) to be the “Purchaser” under the Buy-Sell Procedures (the “Purchaser”) and to purchase the entire Membership Interest in the Company owned by the Offeror for the Offeror Price or (ii) to be the “Seller” under the Buy-Sell Procedures (the “Seller”) and to sell its entire Membership Interest in the Company to the Offeror for the Offeree Price.  The Response Notice may not contain any conditions or qualifications to such election and must contain one of the following statements:

 

(i)           In response to the Buy-Sell Notice, [Insert name of Offeree] hereby irrevocably elects to sell its (and any Affiliate’s) Membership Interests to [Insert name of Offeror]; or

 

(ii)           In response to the Buy-Sell Notice, [Insert name of Offeree] hereby irrevocably elects to purchase the Membership Interests of [Insert name of Offeror and any Affiliate].

 

If the Offeree elects to be Purchaser, its Response Notice shall constitute its legally binding and irrevocable obligation to complete the purchase described in this Article and shall not be effective unless accompanied by a bank cashier’s check in an amount (if applicable, the “Deposit”) equal to the greater of two percent (2%) of the Offeror Price or $500,000.00.  The Offeror shall hold the Deposit in an interest-bearing, segregated account at a federally insured financial institution.

 

If the Offeree elects in its Response Notice to be the Seller or does not comply with any applicable requirement of Section 6.1(c) in a timely manner, then the Offeree shall be designated the Seller and the Offeror shall be designated the Purchaser. Within ten (10) days after the Response Notice or the expiration of the time to give the Response Notice in the event of the Offeree’s failure to give the Response Notice, as applicable, the Offeror, as Purchaser, shall deliver to the Offeree a bank cashier’s check in an amount (if applicable, the “Deposit”) equal to the greater of two percent (2%) of the Offeree Price or $500,000.00. The Offeree shall hold the Deposit in an interest-bearing, segregated account at a federally insured financial institution.

 

The designation of the Offeree as the Seller as described above shall constitute the Offeree’s irrevocable obligation to sell its Membership Interest as described in this Article 6.

 

(d)           If all or any portion of a Member’s Membership Interest has been assigned to any other Person, whether or not an Affiliate of such Member, then all references in this Article to a Member, whether specifically or as the Offeror, Offeree, Seller or Purchaser, shall be deemed to mean and include a reference to all such Member’s successors and assigns hereunder (collectively, and together with such Member, such Member’s “Group”).  Notwithstanding the foregoing to the contrary, only the original Member (or the permitted successor to the entire Membership Interest of such original Member) shall be authorized or permitted to give a Buy-Sell Notice or a Response Notice, and any such notice shall be binding upon all members of such Member’s Group, jointly and severally, to purchase, sell and/or cooperate as required herein with respect to such Member.

 

Section 6.2    Buy-Sell Procedures for the Purchase and Sale of Membership Interests.

 

If the Membership Interests of a Member are to be sold pursuant to Section 6.1, then the following provisions and the provisions of Section 6.3 shall apply:

 

(a)           The Purchaser shall fix a date (“Buy-Sell Closing Date”) for the closing of the purchase and sale of the Seller’s Membership Interest (the “Buy-Sell Closing”), which must be a Business Day not later than seventy-five (75) days following the Buy-Sell Notice Date.  The Purchaser shall notify the Seller in writing of the Buy-Sell Closing Date not less than ten (10) days prior thereto.  If the Purchaser does not fix the Buy-Sell Closing Date within ten (10) days prior to last day to close days following the Buy-Sell Notice Date, then the Buy-Sell Closing Date shall automatically be the seventy-fifth (75th) day following the Buy-Sell Notice Date; provided, however, that if that date is not a Business Day, then the Buy-Sell Closing Date shall be the next Business Day.  The Buy-Sell Closing Date shall be postponed for not more that sixty (60) days, (i) if Non-Managing Member shall be the Purchaser, to obtain the South Carolina Department of Health and Environmental Control, or the applicable agency body or authority thereof (collectively, “DHEC”) consent to the change in control of Lexington Operator and Greenville Operator, the holders of the Community Residential Care licenses for the community residential care facilities operated on the Lexington Property and Greenville Property, and if applicable, effectuate the transfer of the applicable Community Residential Care licenses, or (ii) if Non-Managing Member shall be the Purchaser and if such transfer is prohibited by the provisions of the Senior Loan Documents, to obtain the consent of Senior Lender to the transfer of the applicable Membership Interests. The Buy-Sell Closing shall take place on the Buy-Sell Closing Date in Florida at a location designated by the Purchaser.

 

(b)           At the Buy-Sell Closing:

 

(i)           the Purchaser shall deliver the Purchase Price (less any required withholding) in U.S. dollars in immediately available funds and paid through wire transfer to the Seller and/or its designee(s); and

(ii)           the Seller shall convey to the Purchaser good and marketable title to its Membership Interests free and clear of all Liens (other than any Liens relating to any mezzanine loans made to both Members and secured by Liens on the Membership Interests of both Members to the extent that the same is acceptable to the Purchaser and lender thereof consents to the transfer of such Membership Interests) and the Purchaser shall accept the conveyance of Membership Interests from the Seller and assume all obligations with respect to those Membership Interests accruing or arising after the date of the conveyance, and the Seller and the Purchaser shall execute and deliver such assignments of interest, deeds, bills of sale, instruments of conveyance, amendments to this Agreement and the Certificate of Formation (if and to the extent required), and other instruments as the Purchaser may reasonably require to evidence such conveyance.

 

(c)           The Purchaser shall be required at its expense on the Buy-Sell Closing Date to either (i) obtain the release and/or return, as appropriate, of the Seller and its Affiliates and other related parties from any personal undertakings, guarantees, letters of credit, bonds or indemnities or other security or Recourse Liabilities provided by the Seller or any such other party on behalf or for the benefit of the Company and/or the Operating Company (whether through the provision of substitute security acceptable to the beneficiaries of such obligations or otherwise); or (ii) if obtaining such release is not reasonably feasible prior to the Buy-Sell Closing Date, provide an indemnity to the Seller and/or such other parties, as applicable, in connection with the obligations described in clause (i) above in form and substance reasonably acceptable to the Seller and secured by net worth or other collateral reasonably satisfactory to the Seller (it being understood that for the purposes of this Agreement an indemnity given by a Member or the Company shall  not be satisfactory).

 

(d)           The Company shall distribute to its Members in accordance with Section 4.1 the amount of any Available Cash from Operations that it holds one (1) Business Day prior to the Buy-Sell Closing Date.  If the Company and/or the Operating Company is prohibited by the terms of any loan or any other agreement of the Company and/or the Operating Company from making such a distribution, the Purchaser shall pay to the Seller on the Buy-Sell Closing Date (in addition to the other amounts payable under this Article) the amount that would have been distributed to the Seller under Article 4 had such distribution been permitted.

 

(e)           Any risk of casualty, condemnation or loss prior to the Buy-Sell Closing Date shall be borne by the Purchaser, who shall succeed to all rights to insurance proceeds (other than loss of rent proceeds allocable to any period prior to the Buy-Sell Closing Date) or condemnation awards, without credit or offset against any amounts owed by the Purchaser to the Seller.

 

(f)           If the Purchaser defaults in its obligation to complete the Buy-Sell Closing by the Buy-Sell Closing Date, then the Seller shall (i) have the right, to be exercised by notice to the Purchaser and completed within sixty (60) days of the original Buy-Sell Closing Date determined under Section 6.2(a), to become the Purchaser at a price equal to 95% of the applicable original Purchase Price that Purchaser would have paid to Seller if the Buy-Sell Closing was completed, in which case Purchaser shall have the right to the return of the Deposit (together with the interest thereon), (ii) have the right to market and sell the Company Property to a Third Party for not less than 90% of the Gross Price, in which event Purchaser and Seller shall cooperate in the efforts to market and sell the Property and Purchaser shall have the right to the return of the Deposit (together with the interest thereon) or (iii) be entitled to retain the Deposit (together with the interest thereon) as liquidated damages, which the Members acknowledge to be a fair calculation of the damages suffered as a result of the Purchaser’s default, in lieu of any other legal and equitable remedies other than such other remedies as may be expressly set forth herein.

 

(g)           If the Seller defaults in its obligation to complete the Buy-Sell Closing by the Buy-Sell Closing Date, then the Purchaser shall (i) have the right to the immediate return of the Deposit (together with the interest thereon) and (ii) be entitled to all available legal and equitable remedies against the Seller, including specific performance of the Seller’s obligation to complete the Buy-Sell Closing and recovery of all Losses of Purchaser caused by Seller’s default (including without limitation attorney’s fees and costs paid or incurred in any legal or equitable action).

 

(h)           Each Member shall be responsible for all costs and expenses incurred by such Member in connection with any Buy-Sell Closing.

 

Section 6.3    Other Buy-Sell Requirements.

 

(a)           Each Member expressly agrees and acknowledges that TIME IS OF THE ESSENCE with respect to all time requirements, delivery and payment dates and other deadlines set forth in this Article; provided, however, that the applicable closing shall be postponed for up to ten (10) days in order to obtain any necessary Third Party consents to the transaction. In that regard, all payments and other actions or documents required to be paid, delivered, received or taken on or prior to a specified date shall be so paid, delivered, received or taken on or prior to the specified or required date unless such date is extended in writing by the Member entitled to such performance or payment and failure to make such payment or performance by such date shall be a default under this Agreement by such party.  The Members shall use their good faith efforts to obtain all Third Party consents to the transaction on or before the scheduled closing date.

 

(b)           After the Buy-Sell Closing, upon reasonable notice, the Purchaser and the Seller shall reasonably cooperate with each other and make available to each other and their representatives, employees, counsel and accountants the documents, books and records relating to activities of the Company or with respect to the Property as may reasonably be required after the Buy-Sell Closing in connection (i) with any contractual obligations to third parties, (ii) the transfer of  the community residential care licenses issued by South Carolina Department of Health and Environmental Control with respect to the community residential care facilities operated pursuant to the Master Leases, if applicable or (iii) to defend or prepare for the defense of any claim or assessment relating to the Company or the Property or to prosecute or prepare for the prosecution of claims against third parties relating to the conduct of the Company or with respect to the Property or in connection with any governmental investigation; provided, however, that such access and assistance does not unreasonably disrupt the normal operations of the Purchaser, in the case of access and assistance given to Seller, or the Seller, in the case of access and assistance given to the Purchaser.

 

(c)           Between the Buy-Sell Notice Date and the Buy-Sell Closing Date under this Article, the Managing Member shall conduct the business, operations and financial affairs of the Company and the Operating Company only in the ordinary course and consistent with the prior practices of the Company in accordance with this Agreement and all other applicable Major Decisions of the Members.

 

(d)           The cost of any fees or expenses incurred in connection with obtaining the consent of a lender under any applicable loan documents or amending any applicable loan documents to ensure compliance with all applicable requirements and conditions of any loan documents in effect at the time of the Buy-Sell Closing shall be paid by the Purchaser.  Except as set forth above, each Member shall bear its own closing costs and expenses incurred in the purchase or sale of Membership Interests, including the payment of any transfer or similar taxes, in accordance with the provisions of this Article 6.

 

(e)           Each Member agrees to cooperate and to take all reasonable actions and execute all documents reasonably necessary or appropriate to facilitate and accomplish the transactions described in or contemplated under this Article 6.

 

(f)           Each Party agrees that specific performance shall be available to ensure compliance with the provisions of this Article 6 (except with respect to a default by a Purchaser in its obligation to purchase).  The Members each agree that any court having jurisdiction over the specific performance remedy shall be entitled to order the appropriate Member or other Person to execute all necessary documents and to further appoint an appropriate Person to be authorized to execute such documents on behalf of the defaulting Member or other Person. If the Purchaser shall have satisfied the conditions for the completion of the Buy-Sell Closing as set forth herein, including payment of the applicable amounts due on the Buy-Sell Closing Date, and the Seller for any reason does not take any action necessary to transfer the Membership Interests in accordance with the applicable provisions of this Agreement, such Membership Interests shall at such time be deemed to have been sold, assigned, transferred, and conveyed to the Purchaser, the Seller shall have no further right or interest in or to such Membership Interests, and the Company shall record the transfer in its records.

 

(g)           Notwithstanding anything to the contrary, nothing contained in the Senior Loan Documents, or any other document or instrument now or hereafter executed, shall in any way supersede, modify, amend or rescind (i) the right, without obligation or liability except as set forth herein, of Non-Managing Member to initiate the Buy-Sell Procedures and (ii) the right of Non-Managing Member to sell, and the obligation of Managing Member to purchase, the Membership Interest of Non-Managing Member, pursuant to the provisions this Agreement.

 

 

Section 7.1    Role of Non-Managing Members.

 

Except as expressly provided herein, the Non-Managing Member shall not participate in the management or control of the Company’s business, nor shall it transact any business for the Company, but such Member’s consent shall be required whenever this Agreement provides for the consent or approval of all Members or such Member.

 

 

Section 7.2    Liability of Members.

Except as otherwise expressly required by law, each Member shall have no personal liability whatsoever, whether to the Company, to the other Members or to the creditors of the Company, for the debts of the Company or any of its losses. The foregoing shall not, however, limit the personal liability of a Member for its obligations to the Company or any Indemnitee under this Agreement or to the Company or any other Person under any other agreement to which such Member may be a party. In no event shall any partner, member, manager, officer, director, stockholder, shareholder or owner of either Member or any affiliate thereof be liable for the obligations of the Members hereunder.

 

Section 7.3    Bankruptcy of Member.

 

Notwithstanding any other provision of this Agreement, the Bankruptcy of any Member shall not cause such Member to cease to be a member of the Company and upon the occurrence of such an event, the Company shall continue without dissolution.  In the event of the Bankruptcy of Managing Member, Non-Managing Member shall have the right, but not the obligation, to be Managing Member upon written notice of such election.  If Non-Managing Member does not so elect to become Managing Member within ninety (90) days after the Bankruptcy of Managing Member, or if Non-Managing Member does elect to become Managing Member and in the event of a Bankruptcy of Non-Managing Member, then the Company may only act with the joint consent of Managing Member and Non-Managing Member.

 

Section 7.4    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, no Member shall have any authority to bind or act for, or assume any obligation or responsibility on behalf of, any other Member, the Company or to act as the agent, representative or attorney-in-fact for any other Member.

 

(b)           Except as expressly provided herein, 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, the Company or the financial, tax or other effect on another Member or the Company. Each Member acknowledges and agrees that (i) to the extent a Member is acting or proposing to act on behalf of the Company, such Member shall be acting in the capacity as a fiduciary of the Company and the other Members (subject to the provisions of Section 7.5) and (ii) to the extent a Member is determining whether to initiate or approve a Major Decision or in connection with a Buy-Sell under Article 6 hereof, such Member is entitled to act in a manner deemed by such Member to be in its own best interest.

 

 

Section 7.5    Other Activities; Affiliates.

The Company and each Member expressly acknowledge and agree that Non-Managing Member and Affiliates of Non-Managing Member and other Persons related to Non-Managing Member or Affiliates of Non-Managing Member, on the one hand (collectively “Non-Managing Member Related Persons”) and Managing Member and Affiliates of Managing Member and other Persons related to Managing Member and Affiliates of Managing Member (collectively the “Managing Member Related Persons”), on the other hand (the Non-Managing Member Related Persons and the Managing Member Related Persons being hereinafter collectively referred to as “Related Persons”) have direct and/or indirect interests in investing in, owning, operating, transferring, managing, leasing and otherwise using, real property and interests therein for profit, and engaging in any and all activities related or incidental thereto and/or that such Related Persons will make other investments consistent with such interests. Except to the extent expressly provided herein or in other agreements among one or more of the parties hereto: (i) neither the Company nor any Member shall have any right by virtue of this Agreement or the Company relationship created hereby in or to any other ventures or activities in which any Related Person is involved or to the income or proceeds derived therefrom; (ii) the pursuit of other ventures and activities by any Related Person, even if competitive with the business of the Company, is hereby consented to by the Company and all Members and shall not be deemed wrongful or improper under this Agreement; and (iii) no Related Person shall be obligated to present any particular investment opportunity to the Company or to any Member, even if such opportunity is of a character which, if presented to the Company, could be taken by the Company.

 

Section 7.6    Indemnification.

 

(a)           The Company shall indemnify and hold each Member and its Affiliates, and each of the direct and indirect members, partners, principals, officers, directors, managers and employees of each of the Members and each of their Affiliates (each, an “Indemnitee”), harmless from and against any Losses (including without limitation Losses arising from Recourse Liabilities) suffered or sustained by it by reason of the Recourse Liabilities or by reason of any acts, omissions or alleged acts or omissions by such Indemnitee on behalf of the Company within the scope of authority conferred on it by this Agreement, including, any judgment, award, settlement, reasonable attorneys’ fees and other costs and expenses incurred in connection with the defense of any actual or threatened action, proceeding or claim; provided that no Person shall be entitled to indemnification hereunder to the extent that the Losses incurred by such Person arose out of or were the result of such Person’s fraud, gross negligence or willful misconduct, the failure of such Person to comply with the provisions of this Agreement (other than the failure to make any additional Capital Contribution pursuant to Section 3.2), or such Person’s obligations to indemnify any other Person pursuant to the provisions of the Purchase Agreement.

 

(b)           No Indemnitee 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 unless such action or omission constituted fraud, gross negligence or willful misconduct or the failure of such Indemnitee to comply with the provisions of this Agreement (other than the failure to make any additional Capital Contribution pursuant to Section 3.2).  Each Member shall indemnify, protect, defend and hold the Company, each other Member and each such other Member’s related Indemnitees harmless from and against any and all Losses suffered or sustained by it by reason of any act or omission constituting fraud, gross negligence or willful misconduct by such Member or any related Indemnitee of such Member or failure of such Member to comply with the provisions of this Agreement (other than the failure to make any additional Capital Contribution pursuant to Section 3.2); provided, however, that no Person shall be entitled to indemnification hereunder to the extent that the Losses incurred by such Person arose out of or were the result of such Person’s fraud, gross negligence or willful misconduct or the failure of such Person to comply with the provisions of this Agreement (other than the failure to make any additional Capital Contribution pursuant to Section 3.2).

 

(c)           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, would result in such Indemnitee being entitled to indemnification pursuant to this Section 7.6, such Indemnitee will forthwith give to the applicable 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 that 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 (who shall be reasonably acceptable to the Indemnitee) selected by the indemnitor to defend such claim.  The Indemnitee will be entitled to participate with the indemnitor at the expense of the indemnitor in such defense and also will be entitled at its option (and at the expense of the Company) to employ separate counsel for such defense; provided, however, that if and to the proportionate extent the Indemnitee is found (by a final judgment of a court of competent jurisdiction) not to be entitled to indemnification hereunder, the Indemnitee shall reimburse the indemnitor for such expense). 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.

 

(d)           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.

 

(e)           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.

 

(f)           The indemnification provided by this Section shall be in addition to any other rights to which each Indemnitee may be entitled as a matter of law or otherwise, as to action in the Indemnitee’s capacity as a Managing Member, Member, 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.

 

(g)           To the extent provided in the Annual Budget, the Company may purchase and maintain insurance on behalf of any one or more Indemnitees. If insurance is obtained for any Indemnitee, it shall be obtained on the same basis for all other Indemnitees who have comparable risks.

 

(h)           In no event may an Indemnitee subject an Affiliate or other related Indemnitee of a Member to personal liability by reason of the indemnification provisions of this Agreement.

 

(i)           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. The indemnification obligations under this Section shall survive the sale of the Membership Interests by any Member, the sale of the Property by the Company or the dissolution of the Company.

 

(j)           Notwithstanding anything to the contrary contained herein, all indemnification obligations of the Company are fully subordinated to any obligations relative to the Senior Loan or respecting the Property and such indemnification obligations shall in no event constitute a claim against the Company if cash flow in excess of amounts necessary to pay obligations under the Senior Loan is insufficient to pay such indemnification obligations.

 

 

Section 8.1    General.

 

No Member may Transfer or permit the Transfer of all or any portion of its Membership Interest or any direct or indirect interest in such Member without the prior written consent of the other Member, which consent may be withheld at the sole and absolute discretion of such other Member, unless the Transfer is to either a Permitted Managing Member Transferee or a Permitted Non-Managing Member Transferee and unless and until all requirements and conditions stated in this Article, which shall be read and construed as a whole, have been satisfied in full or have been waived by the non-transferring Member.  Any Transfer in violation of this Article shall be invalid, ineffective and not enforceable for any purpose.  No authorization, consent or waiver applicable to one Transfer shall apply or be deemed to apply to any other Transfer or requested Transfer.

 

Section 8.2    Permitted Transferees.

 

(a)           A “Permitted Managing Member Transferee” means any Person Controlling, Controlled by or under common Control with Managing Member.

 

(b)           A “Permitted Non-Managing Member Transferee” means any Person Controlling, Controlled by or under common Control with Non-Managing Member.

 

Section 8.3    Right of First Refusal.

 

(a)                      Third Party Offer.  Any Member ("Selling Member") who has received a Bona Fide Offer from a Third Party prospective purchaser ("Qualified Purchaser"), to purchase all (but not less than all) of the Selling Member's Membership Interest, before selling any of its Membership Interest, shall first offer the sale thereof to the other Member (the “Remaining Member”) upon the same terms and conditions stated in such Bona Fide Offer ("Right of First Refusal"). To avoid all doubt, any sale of less than all of the Membership Interest of a Member is subject to the prior written consent of the other Member (which may be withheld at the sole and absolute discretion of such other Member), except to the extent any exception contained in Section 8.2 applies, that is, the Transfer is to either a Permitted Managing Member Transferee or a Permitted Non-Managing Member Transferee. Notwithstanding the foregoing or anything else in this Agreement to the contrary: (A) to the extent the Company has agreed, in accordance with the terms of this Agreement, to sell the Property to a Third Party pursuant to a legally binding agreement that has not been terminated, no Member may Transfer or permit the Transfer of all or any portion of its Membership Interest or any direct or indirect interest in such Member while the Buy-Sell Procedures specified in Article 6 previously initiated by a Member are continuing and have not yet been completed or terminated in accordance with the applicable provisions of this Agreement; (B) no Member may Transfer or permit the Transfer of all or any portion of its Membership Interest or any direct or indirect interest in such Member while any such Transfer previously initiated by another Member is continuing and have not yet been completed or terminated in accordance with the applicable provisions of this Agreement.

 

(b)           Remaining Member’s Right to Purchase.  The Remaining Member shall have the right to purchase all, but not part, of the Membership Interest of the Selling Member. If the Remaining Member does not exercise its right by written notice forwarded no later than thirty (30) days after receipt of such offer, then: a) the Selling Member may sell all (but not less than all) or its Membership Interest to the Qualified Purchaser under the same terms and conditions as are set forth in the original Bona Fide Offer and b) the Qualified Purchaser’s  Unreturned Capital Contribution shall be the same as the Unreturned Capital Contribution of the Selling Member immediately before the sale.  The sale to the Qualified Purchaser must be consummated within thirty (30) days from the last date on which the Remaining Member had the right to accept the offer to purchase, subject to reasonable extensions (not to exceed ninety (90) days) to (i) obtain an agreement with the holder(s) of any mortgage encumbering the Property and/or any mezzanine loan encumbering the Membership Interest to permit the Qualified Purchaser (and its designees, if applicable) to assume such loan(s), and release the Selling Member (and its designees, if applicable) from all liability with respect to such loan(s) arising from and after the closing with the Qualified Purchaser, and (ii) if applicable, transfer the community residential care licenses issued by South Carolina Department of Health and Environmental Control with respect to the community residential care facilities operated pursuant to the Master Leases. Evidence that the sale has been so consummated shall be supplied in writing by the Selling Member and the Qualified Purchaser to the Company and the Remaining Member.  If the sale has not been consummated within said thirty (30) day period, as it may be extended, the rights of the Remaining Members to purchase shall again attach to the Membership Interest of the Selling Member and no sale may be made to any purchaser without again complying with the provisions of this Section 8.3 and the remainder of Article 8.

 

(c)           Closing.  The purchase referred to in Section 8.3 shall be closed (the "ROFR Closing") within forty-five (45) days following acceptance by the Remaining Member (the "ROFR Closing Date"), subject to reasonable extensions (not to exceed ninety (90) days) to (i) obtain an agreement with the holder(s) of any mortgage encumbering the Property and/or any mezzanine loan encumbering the Membership Interest to if applicable, to permit the Remaining Member (and its designees, if applicable) to assume such loan(s), release the Selling Member (and its designees, if applicable) from all liability with respect to such loan(s) arising from and after the ROFR Closing Date, and (iii) if applicable, transfer the community residential care licenses issued by South Carolina Department of Health and Environmental Control with respect to the company residential care facilities operated pursuant to the Master Leases.  The ROFR Closing shall be held at the offices of Carlton Fields, P.A., 100 S.E. Second Street, 42nd Floor, Miami, Florida 33131, at 10:00 a.m. on the ROFR Closing Date, or at such other time or place as parties may agree.  At the ROFR Closing: (i) the Selling Member shall deliver (A) an assignment of Membership Interest representing the Membership Interest sold by the Selling Member, subject to no pledge, lien or other encumbrance and (B) any and all other documents that may be reasonably required by the purchaser thereof, and (ii) the Remaining Member shall pay the agreed upon consideration.

 

Section 8.4    Tag-Along Rights.

 

If Managing Member desires to sell all or any portion of its Membership Interests to a Qualified Purchaser, upon the notice of the Non-Managing Member declining to exercise its Right of First Refusal under Section 8.3, the Non-Managing Member shall have the right to require the Managing Member to cause the Qualified Purchaser to purchase all of the Membership Interest of the Non-Managing Member owned by the Non-Managing Member in accordance with the terms and conditions of the Bona Fide Offer and this Section 8.4 (the "Tag-Along Right").  The Tag-Along Right shall be exercisable only by written notice provided to the Managing Member prior to the expiration of the thirty (30) day period governing the exercise of the Right of First Refusal.  If exercised as provided herein, the Tag-Along Right shall require the Managing Member to require the Qualified Purchaser to purchase from Non-Managing Member all of the Membership Interest of the Non-Managing Member, and if that not be the case, Managing Member shall not be permitted to sell any of its Membership Interest to the  Qualified Purchaser.

 

Section 8.5    Effect of Assignment.

 

(a)           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. Notwithstanding the foregoing, as a condition to any sale, transfer or assignment by a Member, the transferee or assignee must execute this Agreement (as amended) and agree to be bound by all of its terms and provisions.

 

(b)           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 this Article, a Member shall be deemed to have withdrawn from the Company.

(c)           If a Member Transfers less than all of its Membership Interest in the Company or if all or part of the direct or indirect ownership or other interests in a Member are Transferred such Member shall continue to have the sole and exclusive right to approve Major Decisions and to take other actions required or permitted under this Agreement, to the extent such Member had such right prior to the Transfer.

 

Section 8.6    Substitute Member.

 

The transferee of a Membership Interest shall be automatically admitted to the Company as a substitute Member, upon its compliance with this Article. Unless a transferee of a Membership Interest is admitted as a substitute Member under this Section 8.6, 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 8.7    Further Requirements.

    

In addition to the other requirements of this Article, and unless waived or modified in whole or in part by Non-Managing Member (if the transfer is by Managing Member or one of its transferees) or Managing Member (if the transfer is by Non-Managing Member or one of its transferees), no transfer of all or any portion of a Membership Interest may be made unless the following conditions are met:

 

(a)           The delivery to the Company of a fully executed copy of all transfer documents relating to the transfer, including (but without limitation) this Agreement, an instrument of transfer and the agreement in writing of the transferee to (i) be bound by the terms of this Agreement and (ii) pay all costs and expenses of the Company incident to the transfer.

 

(b)           The representation of the transferring Member and the transferee, and the delivery of an opinion of counsel reasonably acceptable to the non-transferring Members, that (i) the transfer will not cause the Company to be treated as an association taxable as a corporation for Federal income tax purposes, (ii) the transfer will not cause the Company to be treated as a “publicly traded Company” within the meaning of Section 7704 of the Code and (iii) the transfer will not violate the Securities Act of 1933, as amended, or any other applicable Federal or state securities laws, rules or regulations.

 

Section 8.8    Transfer Taxes.

 

The transferor of any Membership Interest shall be responsible for the payment of any transfer taxes payable in connection therewith unless the transferee shall otherwise agree.

 

 

Section 9.1    No Partition.

 

Each Member hereby irrevocably waives any and all rights that it may have to maintain any action for partition of the Company Property.

 

Section 9.2    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.

 

Section 9.3    Attorneys’ Fees.

 

In the event of any dispute hereunder, or in connection with the execution of this Agreement, or otherwise relating to the relationship of the Members contemplated hereby, the prevailing party in any legal proceeding brought to resolve such dispute shall be entitled to recover from the non-prevailing party in any such proceeding, all of such prevailing party’s reasonable attorneys’ fees and disbursements, at both trial and appellate levels and in any administrative proceeding or bankruptcy proceeding.  The provisions of this Section shall survive the sale of the Membership Interests by any Member, the sale of the Property by the Company or the dissolution of the Company.

 

Section 9.4    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 9.5    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.

 

 

Section 10.1          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: