LIMITED LIABILITY COMPANY AGREEMENT

 

OF

 

SENTIO-SLR BOSTON PORTFOLIO, LLC

 

a Delaware Limited Liability Company

 

Dated as of December 6th, 2013

 

THE LIMITED LIABILITY COMPANY INTERESTS REPRESENTED BY THIS AGREEMENT HAVE BEEN
ACQUIRED FOR INVESTMENT AND HAVE NOT BEEN REGISTERED WITH THE SECURITIES AND
EXCHANGE COMMISSION UNDER THE SECURITIES ACT OF 1933, AS AMENDED, OR APPLICABLE
STATE SECURITIES LAWS IN RELIANCE UPON EXEMPTIONS FROM REGISTRATION AS PROVIDED
IN THOSE STATUTES. THE SALE, ASSIGNMENT, TRANSFER, EXCHANGE, MORTGAGE, PLEDGE OR
OTHER DISPOSITION OF ANY LIMITED LIABILITY COMPANY INTEREST IS RESTRICTED IN
ACCORDANCE WITH THE PROVISIONS OF THIS AGREEMENT, AND THE EFFECTIVENESS OF ANY
SUCH SALE OR OTHER DISPOSITION MAY BE CONDITIONED UPON, AMONG OTHER THINGS,
RECEIPT BY THE COMPANY OF AN OPINION OF COUNSEL SATISFACTORY TO THE COMPANY AND
ITS COUNSEL THAT SUCH SALE OR OTHER DISPOSITION CAN BE MADE WITHOUT REGISTRATION
UNDER THE SECURITIES ACT OF 1933, AS AMENDED, AND APPLICABLE STATE SECURITIES
LAWS. BY ACQUIRING THE LIMITED LIABILITY COMPANY INTERESTS REPRESENTED BY THIS
AGREEMENT, EACH MEMBER REPRESENTS THAT IT WILL NOT SELL OR OTHERWISE DISPOSE OF
ITS LIMITED LIABILITY COMPANY INTERESTS WITHOUT REGISTRATION OR OTHER COMPLIANCE
WITH THE AFORESAID STATUTES AND RULES AND REGULATIONS THEREUNDER AND THE TERMS
AND PROVISIONS OF THIS AGREEMENT

 

 

 

 

TABLE OF CONTENTS

 

      Page       ARTICLE 1 ORGANIZATIONAL MATTERS   1         1.1 Formation and
Continuation; Filings   1 1.2 Name   2 1.3 Principal Place of Business; Other
Places of Business   2 1.4 Business Purpose   3 1.5 Powers   3 1.6 Designated
Agent for Service of Process   3 1.7 Term   3         ARTICLE 2 CAPITAL; CAPITAL
ACCOUNTS AND MEMBERS   3         2.1 Generally; Initial Capital Contributions  
3 2.2 Additional Contributions   5 2.3 Default Loans; Default Contributions; and
Reallocation of Interests   5 2.4 Capital Accounts   9 2.5 Additional Members  
9 2.6 Invested Capital   9 2.7 Liability of Members   10 2.8 Member Loans.   10
2.9 Loans by Third Parties   10 2.10 Dilution   11         ARTICLE 3
DISTRIBUTIONS   11         3.1 Distributions of Cash Available for Distribution
  11 3.2 Distributions Upon Liquidation   13 3.3 Withholding   14 3.4
Distributions in Kind   14 3.5 Limitations on Distributions   14         ARTICLE
4 ALLOCATIONS OF NET PROFITS AND NET LOSSES   14         4.1 Timing of
Allocations   14 4.2 Economic Effect of Allocations   14         ARTICLE 5
OPERATIONS   15         5.1 Management   15 5.2 Limitations on Authority of the
Managing Member   15 5.3 Reimbursement and Remuneration Generally   16 5.4
Reliance by Third Parties   16 5.5 Records and Reports   17 5.6 Indemnification
and Liability   18

 

i

 

 

      Page         5.7 Duties and Conflicts   19 5.8 REIT Protections   20 5.9
Right of First Offer   21         ARTICLE 6 INTERESTS AND TRANSFERS OF INTERESTS
  21         6.1 Transfers   21 6.2 Purchase Right/Obligation   23 6.3 Further
Restrictions   24 6.4 Rights of Assignees   25 6.5 Admissions, Withdrawals and
Removals   25 6.6 Admission of Assignees as Substitute Members.   25 6.7
Withdrawal of Members   26 6.8 Conversion of Membership Interest   26        
ARTICLE 7 DISSOLUTION, LIQUIDATION, AND TERMINATION OF THE COMPANY   26        
7.1 Limitations   26 7.2 Exclusive Causes   26 7.3 Effect of Dissolution   27
7.4 No Capital Contribution Upon Dissolution   27 7.5 Liquidation   27        
ARTICLE 8 MISCELLANEOUS   28         8.1 Amendments   28 8.2 Member
Representations and Warranties; Indemnification   29 8.3 Entire Agreement   32
8.4 Further Assurances   32 8.5 Notices   32 8.6 Tax Matters   33 8.7 Governing
Law   33 8.8 Construction   33 8.9 Captions - Pronouns   33 8.10 Binding Effect
  33 8.11 Severability   33 8.12 Confidentiality   34 8.13 Interpretation   34
8.14 No Third Party Beneficiaries   34 8.15 No Right of Setoff (Except for
Amounts Owing Under OpCo LLC Agreement)   35 8.16 Counterparts   35 8.17
Mandatory Arbitration   35 8.18 Attorney's Fees   35 8.19 Injunctive Relief and
Enforcement   36 8.20 Appointment of Managing Member as Attorney-in-Fact   36

 

ii

 

 

      Page         8.21 Force Majeure   36 8.22 Limitation On Creditors’
Interests   36 8.23 No Liability For Return of Capital   37 Section 1. 
Capitalized Terms. Capitalized words and phrases used and not otherwise defined
in this Agreement shall have the following meanings:   E-1 Section 2. 
Regulatory Allocations. Notwithstanding the provisions of Article 4, the
following special allocations shall be made in the following order of priority:
  E-5

 

Exhibit A - Capitalized Terms A-1 Exhibit B - Members, Initial Invested Capital
Balance and Percentage Interests B-1 Exhibit C - Communities and Subsidiary
Owners C-1 Exhibit D - List of Existing Competing Communities D-1 Exhibit E -
Additional Allocation Provisions E-1 Exhibit F - Call Purchase Price F-1

 

SCHEDULE 8.2.1(g) -Brokers

 

iii

 

 

LIMITED LIABILITY COMPANY AGREEMENT

OF

SENTIO-SLR BOSTON PORTFOLIO LLC

 

THIS LIMITED LIABILITY COMPANY AGREEMENT (the “Agreement”) of SENTIO-SLR BOSTON
PORTFOLIO LLC (the “Company”) is made and entered into as of December ___, 2013
(the “Effective Date”), by and between Sentio Boston LLC (“Sentio”), and Oaktree
SLR, LLC, a Massachusetts limited liability company (“SLR”). Sentio and SLR are
herein collectively referred to as “Members” and each individually referred to
as a “Member.” The Company is organized under the Delaware Limited Liability
Company Act, 6 Del.C. § 18-101, et seq. (as amended from time to time, the
“Act”). Capitalized terms used herein are defined in Exhibit A hereto or as
elsewhere provided herein.

 

RECITALS

 

A.               Sentio, SLR and certain of their Affiliates (as defined below)
are parties to that certain Purchase and Sale Agreement dated as of August 28,
2013 (as the same may have been or may hereafter be amended or modified in
accordance with the terms thereof, the “Purchase Agreement”).

 

B.               In connection with the transactions contemplated by the
Purchase Agreement, the Company has been formed under the Act for purposes of
acquiring, owning, financing, leasing, maintaining and otherwise dealing with
the Communities (as defined below) through Subsidiaries (as defined below) of
the Company. The Company was formed by filing the Certificate (as defined below)
with the Secretary of State of the State of Delaware under and pursuant to the
provisions of the Act.

 

C.               The Members desire to adopt this Agreement in accordance with
the Act. This Agreement replaces and supersedes in its entirety any existing
limited liability company agreement of the Company.

 

AGREEMENT

 

NOW, THEREFORE, in consideration of the mutual covenants and promises contained
herein and for other good and valuable consideration the receipt and adequacy of
which are hereby acknowledged, the parties hereto agree as follows:

 

ARTICLE 1
ORGANIZATIONAL MATTERS

 

1.1         Formation and Continuation; Filings.

 

1.1.1           The Company was formed under and pursuant to the provisions of
the Act and on the terms and conditions set forth in the Certificate as filed
with the Secretary of State of the State of Delaware. The Members hereby agree
to continue the Company as a limited liability company under the Act for the
purposes and upon the terms and conditions hereinafter set forth. The rights and
liabilities of the Members of the Company shall be as provided in the Act, the
Certificate and this Agreement. In the event of any inconsistency between any
terms and conditions contained in this Agreement, the Certificate and any
non-mandatory provisions of the Act, the terms and conditions contained in this
Agreement shall govern and override the provisions of the Certificate and the
Act. Each of Sentio and SLR is admitted to the Company as a member of the
Company upon its execution of this Agreement.

 

1

 

  

1.1.2           The fact that the Certificate is on file in the office of the
Secretary of State shall constitute notice that the Company is a limited
liability company pursuant to Section 18-207 of the Act.

 

1.1.3           The Certificate may be amended or restated by the Managing
Member as provided in the Act as deemed necessary or desirable by the Managing
Member; provided that, the Certificate may not be amended or restated without
the written consent of any other Member that would be materially adversely
affected thereby.

 

1.1.4           Scott Larche, as an “authorized person” within the meaning of
the Act, executed, delivered and filed the Certificate of the Company with the
Secretary of State of the State of Delaware, which filing is hereby approved and
ratified. Effective as of the Effective Date, his powers as an “authorized
person” shall cease, and the Managing Member shall become (and thereafter shall
continue as) the designated “authorized person” within the meaning of the Act.
To the extent not inconsistent with this Agreement, the Managing Member may
execute on behalf of the Company, and file and record (or cause to be filed and
recorded) and publish, if required by applicable laws, such other and further
certificates, statements or other instruments as may be necessary or desirable
under the laws of the State of Delaware or the state in which any of the Company
Assets are located in connection with the formation and continuation of the
Company and the commencement and carrying on of its business. Subject to the
terms and conditions of this Agreement, the Managing Member may also cause to be
made, on behalf of the Company, such additional filings and recordings as the
Managing Member reasonably shall deem necessary or advisable.

 

1.2         Name.     The name of the Company shall be SENTIO-SLR BOSTON
PORTFOLIO, LLC. The Company may also conduct business through Subsidiaries of
the Company or at the same time under one or more fictitious names if the
Managing Member determines that such is necessary or advisable. The Managing
Member may change the name of the Company, from time to time, in accordance with
applicable law.

 

1.3         Principal Place of Business; Other Places of Business.    The
principal place of business of the Company is located at 189 S. Orange Avenue,
St. 1700, Orlando, Florida 32801, or such other place within or outside the
State of Delaware as the Managing Member may from time to time designate. The
Company may maintain offices and places of business at such other place or
places within or outside the State of Delaware, as the Managing Member deems
necessary or advisable.

 

2

 

 

1.4         Business Purpose. The purpose and business of the Company shall be
to acquire and own the Communities (including, if applicable, through
Subsidiaries of the Company), and in connection therewith to develop, finance,
pledge, encumber, lease, maintain, repair, redevelop, renovate, construct,
improve, dispose of and otherwise deal with the Communities and Company Assets
acquired by the Company in accordance with the terms hereof and to perform all
other activities necessary, customary, convenient or incidental to the
furtherance of such purpose. As of the Effective Date, the Company owns the
Communities indirectly through those Subsidiaries as listed on Exhibit C hereto.

 

1.5         Powers. In furtherance of its purposes and business, but subject to
all of the provisions of this Agreement, the Company shall have and may exercise
all of the powers and rights that can be conferred upon limited liability
companies formed pursuant to the Act, and may also engage in such other lawful
business purposes or activity in which a limited liability company may be
engaged under applicable law (including, without limitation, the Act) and enter
into any agreement or other undertaking, in each case which the Managing Member
deems reasonably necessary or advisable in connection therewith or incidental
thereto.

 

1.6         Designated Agent for Service of Process. So long as required by the
Act, the Company shall continuously maintain a registered office and a
registered agent for service of process on the Company in the State of Delaware.
As of the Effective Date, the address of the registered office of the Company in
the State of Delaware is 2711 Centerville Road, Suite 400, Wilmington, Delaware.
The Company’s registered agent for service of process at such address is
Corporation Service Company. The agent may be changed from time to time as the
Managing Member determines. The Company may also from time to time maintain a
registered office and a registered agent for service of process on the Company
in any other state or jurisdiction as the Managing Member determines necessary
or advisable.

 

1.7         Term. The term of the Company commenced on the filing of the
Certificate with the Secretary of State of the State of Delaware, and shall
continue until the Company is dissolved in accordance with the terms of this
Agreement. Notwithstanding the dissolution of the Company, the existence of the
Company shall continue as a separate legal entity until termination pursuant to
this Agreement.

 

ARTICLE 2
CAPITAL; CAPITAL ACCOUNTS AND MEMBERS

 

2.1         Generally; Initial Capital Contributions.

 

2.1.1           The names, addresses, Capital Contributions (including
additional Capital Contributions), Capital Account balances, Invested Capital
balances and Percentage Interests of the Members shall at all times be set forth
in the books and records of the Company, which shall be supplemented from time
to time by the Managing Member to reflect the admission of Additional Members
and Substitute Members pursuant to this Agreement, as well as to reflect any
changes in the Members’ respective Capital Contributions, Capital Account
balances, Invested Capital balances and Percentage Interests pursuant to the
terms of this Agreement.

 

2.1.2           Pursuant to the terms of the Purchase Agreement, on the
Effective Date, the Company has agreed to purchase (though certain of its
subsidiaries) the Communities.

 

3

 

 

2.1.3           Concurrently upon the closing of the transactions contemplated
by the Purchase Agreement, Members have each agreed to fund the Capital
Contributions reflected in Exhibit B attached hereto in immediately available
funds (United States dollars), which initial contributions are in an amount
sufficient to (i) allow the Company to consummate the closing of the
transactions contemplated by the Purchase Agreement, and (ii) fund a reserve in
an initial amount equal to Three Hundred Fifty-Thousand and No/100 Dollars
($350,000.00) for continued maintenance and upkeep and, as deemed necessary by
the Managing Member, upgrade of the Communities.

 

2.1.4 Contribution by SLR. The parties acknowledge that the Company (which term
for the purpose of this Section shall be deemed to include any affiliate of the
Company) is entering into the Purchase Agreement with regard to the purchase of
the “Standish Facility” (as that term is defined in the Purchase Agreement).
Although the transaction contemplated by the Purchase Agreement is structured so
that the Company is purchasing a 100% ownership in the Standish Facility, the
substance of the transaction is that notwithstanding the conveyance by SLR to
the Company of the one hundred percent (100%) ownership in the Standish
Facility, SLR is retaining a five per cent (5%) ownership interest in the
Standish Facility as a result of its capital contribution to the Company
pursuant to, and subject to, the provisions of this Agreement. Accordingly, the
parties hereto acknowledge and agree that it is the intention of the parties,
and SLR’s objective, that the conveyance of the Standish Facility by SLR be
deemed for tax purposes: (a) to be a sale of only a ninety-five per cent (95%)
interest (the “Conveyed Interest”) in the Standish Facility; (b) a retention of
a five per cent (5%) interest (the “Retained Interest”) by SLR therein; and (c)
a contribution of such Retained Interest to the Company pursuant to this
Agreement so as to constitute as to such Retained Interest a tax-deferred
contribution of property to a partnership in exchange for an interest in the
partnership (i.e. SLR’s member interest in the Company) pursuant to the
requirements of Section 721 of the Internal Revenue Code of 1986, as amended.
Sentio agrees to cooperate, and to cause the Company to cooperate, with SLR, at
no additional cost or expense to Sentio or the Company, in structuring the
transaction to achieve this objective. Sentio agrees that all funds, proceeds
and other property received by SLR on account of the Conveyed Interest as well
as all other assets owned by SLR but not required to be contributed to the
Company pursuant to this Agreement (such funds, proceeds and other property as
described in this sentence to be referred to as the “Conveyed Interest
Proceeds”) may be distributed to SLR’s members and other persons without any
claim whatsoever by Sentio or by the Company as to such Conveyed Interest
Proceeds; provided, further, that the only funds and/or assets required by SLR
to be contributed to the Company are those funds and/or assets expressly
required to be contributed to the Company as specified herein. Additionally, to
the extent that the “Parking Easement” (as that term is defined in Section
2.1(a) of the Purchase Agreement) is assigned, extinguished or modified as set
forth in Section 2.1(a) of the Purchase Agreement, such Parking Easement, and
all benefits derived from the assignment, extinguishment or modification
thereof, shall be retained solely by the SLR, and neither Sentio nor the Company
Buyer shall have any rights with respect to such benefits. Sentio also
acknowledges and agrees that there will be changes in the membership of SLR,
which changes are acceptable to Sentio provided that the majority interests in
SLR are owned directly or indirectly by Robert F. Larkin and Peter G. Mullin and
that SLR is under the control of Robert F. Larkin and Peter G. Mullin.

 

4

 

 

2.2         Additional Contributions.

 

2.2.1           Except as set forth in this Section 2.2, or as otherwise
required by law, no Member or Assignee shall be required to make any additional
Capital Contributions to the Company.

 

2.2.2           Subject to the other terms of this Agreement, as and when
appropriate from time to time to satisfy the capital needs of the Company, the
Managing Member shall determine if, when and to what extent additional Capital
Contributions are necessary and shall require the Members to make additional
Capital Contributions in accordance with this Section 2.2. If the Managing
Member determines that any additional Capital Contributions are necessary in
accordance with the foregoing and are permitted by the terms of this Agreement,
the Managing Member shall give written notice to each Member indicating each
Member’s required amount thereof. In all events, the Members shall be obligated
to make such additional Capital Contributions only in proportion to their then
respective Percentage Interests. Notwithstanding anything herein to the
contrary, the Managing Member’s determination as to what extent additional
Capital Contributions are necessary shall be made in good faith, using prudent
business judgment and based the bona fide anticipated capital needs of the
Company.

 

2.2.3           The written notice described in Section 2.2.2 above shall
contain a due date, which shall not be fewer than ten (10) Business Days after
the date such notice is given (the “Due Date”), and each Member shall be
required to contribute to the Company its additional Capital Contributions in
immediately available funds (United States dollars) by such Due Date.
Notwithstanding the foregoing or any provision herein to the contrary, the
Managing Member agrees to use commercially reasonable efforts to provide as much
time as practicable between the date that such written notice is delivered and
the Due Date; provided, however, that in no event shall the foregoing be deemed
or construed to require the Managing Member to ever provide notice more than
thirty (30) days before the applicable Due Date. The Managing Member shall cause
the Company’s books and records to be updated to reflect such additional Capital
Contributions and any corresponding changes to the Members’ Capital Account
balances, Percentage Interests and Invested Capital balances as a result
thereof.

 

2.3         Default Loans; Default Contributions; and Reallocation of Interests.

 

2.3.1           If a Member fails to advance in immediately available funds
(United States dollars) to the Company any additional Capital Contribution
required pursuant to Section 2.2 (with respect to each Member, a “Required
Capital Contribution”) by 5:00 p.m. local time in New York, New York, on the Due
Date therefor (a “Non-Contributing Member”), a non-defaulting Member may, so
long as such non-defaulting Member does not have an outstanding Default Loan
made to it hereunder (a “Lending Eligible Member”), deliver, at any time within
thirty (30) days after the Due Date, a notice to the Non-Contributing Member (a
“Default Contribution Notice”) which shall include the following statement set
forth in all capital letters “NOTE: YOU HAVE FAILED TO MAKE A REQUIRED CAPITAL
CONTRIBUTION TO SENTIO-SLR BOSTON PORTFOLIO LLC, IN THE AMOUNT OF $________, AND
THE UNDERSIGNED CAN ELECT TO FUND THE SAME AS A “DEFAULT LOAN” AS SUCH TERM IS
DEFINED IN SECTION 2.3 OF THE LIMITED LIABILITY COMPANY AGREEMENT OF SENTIO-SLR
BOSTON PORTFOLIO LLC, IF SUCH REQUIRED CAPITAL CONTRIBUTION IS NOT MADE BY YOU
ON OR BEFORE FIVE (5) BUSINESS DAYS FOLLOWING THE EFFECTIVE DATE OF THIS
NOTICE.” At any time after the 5th Business Day following the date on which a
Default Contribution Notice is delivered (such 5th Business Day, an “Outside
Contribution Date”), a Lending Eligible Member may (or may cause any of its
Affiliates to) (a “Lending Member”), but shall not be obligated to, make a loan
which shall be recourse only to the Non-Contributing Member’s Interest (a
“Default Loan”) to the Non-Contributing Member in an amount equal to the
Required Capital Contribution which the Non-Contributing Member is required to
make pursuant to Section 2.2, provided that such Non-Contributing Member has not
made such Required Capital Contribution on or before the date that such Lending
Member makes such Default Loan as provided below.

 

5

 

 

2.3.2           If a Default Loan(s) shall be made in accordance with this
Section 2.3, the Lending Member shall notify the Non-Contributing Member and the
Company of the amount and date of the Default Loan(s), and the Capital Account
balance and Invested Capital balance of the Non-Contributing Member shall be
credited to reflect the payment of the proceeds of the Default Loan to the
Company. Each Default Loan shall be deemed to be made to the Non-Contributing
Member, with the proceeds of each Default Loan by the Lending Member delivering
the same to the Company in immediately available funds (United States dollars)
on such Non-Contributing Member’s behalf. A Default Loan shall be deemed to have
been advanced on the date actually advanced by the Lending Member. Default Loans
shall earn interest on the outstanding principal amount thereof at a rate equal
to the Default Loan Rate from the date actually advanced by the Lending Member
until the date the same is repaid in full. If the Lending Member is a REIT
Member, then upon the request of such Lending Member, the Default Loan shall be
structured in a manner consistent with the requirements of Code Section
856(c)(4), as determined by such Lending Member in its reasonable discretion.

 

2.3.3           Default Loans shall be secured as provided in Section 2.3.4 and
shall have a term of ninety (90) days (the “Default Loan Term”) and be repayable
by and collectible from the Non-Contributing Member as set forth in this Section
2.3. A Lending Member making a Default Loan may, in the exercise of such Lending
Member’s sole and absolute discretion, extend (for a period(s) to be determined
by such Lending Member) the Default Loan Term of a Default Loan. If a Default
Loan is made, the Non-Contributing Member shall not receive any distributions
pursuant to Articles 3 and 7 while the Default Loan remains unpaid. Instead, the
Non-Contributing Member’s share of all such distributions or such other proceeds
shall (until all Default Loans plus all accrued and unpaid interest thereon, if
any, shall have been paid in full) first be paid to the Lending Member. Such
payments shall be applied first to the payment of any accrued and unpaid
interest on such Default Loans and then to the repayment of the principal
amounts thereof, but shall be considered, for all other purposes of this
Agreement, to have been distributed to the Non-Contributing Member. Such
Non-Contributing Member’s right to receive distributions shall be immediately
reinstated prospectively upon the full repayment of a Default Loan, including
all accrued and unpaid interest thereon to the Lending Member.

 

6

 

 

2.3.4           If a Default Loan is made, as security therefor, the
Non-Contributing Member hereby pledges and grants to the Lending Member a
continuing lien and first priority security interest in all of such
Non-Contributing Member’s Interest to secure the payment of the principal of,
and interest on, such Default Loan in accordance with the provisions hereof, and
for such purpose this Agreement shall constitute a security agreement. The
Non-Contributing Member hereby authorizes the Lending Member to file such
financing statements, continuation statements or other documents or other
documents and take such other actions as the Lending Member determines necessary
or desirable to grant, perfect or continue the perfection of such security
interest in such Non-Contributing Member’s Interest. In addition, the
Non-Contributing Member shall promptly execute, acknowledge and deliver such
pledges, financing statements, continuation statements or other documents and
take such other actions as the Lending Member shall request in order to more
effectively grant, perfect or continue the perfection of such security interest
in such Non-Contributing Member’s Interest. Each Lending Member is hereby
appointed the attorney-in-fact of, and is hereby authorized on behalf of, each
Non-Contributing Member, to execute, acknowledge and deliver all such documents
and to take all such other actions as may be required to grant and perfect a
security interest in such Non-Contributing Member’s Interest in favor of such
Lending Member; provided, however, that each Member agrees it shall not exercise
its power as attorney-in-fact unless it has made a Default Loan and the
Non-Contributing Member has failed to execute, acknowledge and deliver all such
documents within five (5) Business Days after demand therefor by its Lending
Member. Such appointment and authorization are coupled with an interest and
shall be irrevocable.

 

2.3.5           If a Default Loan, including all accrued and unpaid interest
thereon, has not been repaid in full on or before the expiration of the Default
Loan Term, (a) in addition to any other rights or remedies provided in this
Agreement, the Lending Member shall have all rights and remedies available at
law or in equity against the Non-Contributing Member’s Interest, (b) the Default
Loan shall from and after the expiration of the Default Loan Term continue to
accrue interest at the Default Loan Rate until repaid in full, and (c) the
Non-Contributing Member shall be liable for the reasonable fees and expenses
incurred by the Lending Member (including reasonable attorneys’ fees and
disbursements) in connection with any enforcement or foreclosure upon any
Default Loan and such costs shall, to the extent enforceable under applicable
laws, be added to the principal amount of the applicable Default Loan. At any
time during the Default Loan Term, the Non-Contributing Member shall have the
right to repay, in full, the Default Loan (including interest and any other
charges thereon).

 

2.3.6           If the Lending Eligible Member provides a Default Contribution
Notice to the Non-Contributing Member as provided in Section 2.3.1 above, the
Non-Contributing Member does not make the Required Capital Contribution on or
before the Outside Contribution Date, and a Lending Eligible Member elects not
to make (or elects not to cause any of its Affiliates to make) a Default Loan
within thirty (30) days after the Outside Contribution Date, the Lending
Eligible Member may elect, at any time within thirty (30) days after the Outside
Contribution Date by notice to the Company and the Non-Contributing Member, to
have the Company return the Required Capital Contribution contributed by the
Lending Eligible Member and, promptly following such election the Company shall
return such corresponding Required Capital Contribution to the Lending Eligible
Member (with a corresponding debit to the Non-Contributing Member’s Capital
Account balance and Invested Capital balance).

 

7

 

 

2.3.7           In lieu of exercising any other rights or remedies provided in
this Agreement, or available at law or in equity against the Non-Contributing
Member’s Interest in connection with a Default Loan, any Lending Member who made
a Default Loan shall be entitled at any time following the expiration of the
Default Loan Term and prior to repayment in full of the Default Loan (including
interest and any other charges thereon), to elect, by the delivery of a notice
to the Non-Contributing Member, (x) to have such Default Loan (plus the accrued
interest and any other charges thereon) treated as satisfied by the
Non-Contributing Member in exchange for the Non-Contributing Member’s transfer
of a corresponding portion of the Percentage Interest of the Non-Contributing
Member to the Lending Member or (y) if such Lending Member is an Affiliate of a
Lending Eligible Member, to cause such Affiliate to transfer such Default Loan
to such Lending Eligible Member and have such Default Loan (plus the accrued
interest and any other charges thereon) treated as satisfied by the
Non-Contributing Member in exchange for the Non-Contributing Member’s transfer
of a corresponding portion of the Percentage Interest of the Non-Contributing
Member to such Lending Eligible Member, in either case as provided below. Any
such election by the Lending Member pursuant to either clause (x) or (y) above
of this Section 2.3.7, shall, as of the date of any such election shall result
in the following:

 

(a)          the Percentage Interest of the Lending Member or Lending Eligible
Member, as applicable, shall be adjusted and shall be amended in order to
reflect an increase in such Member’s Percentage Interest by adding thereto a
percentage amount equal to the product of (A) 1.5 times (B) the quotient
(expressed as a percentage) of (I) the sum of the principal amount of the
applicable Default Loan plus the accrued and unpaid interest plus any other
charges owing thereon, divided by (II) the sum of the total Invested Capital
balances of all Members through and including the date that the Lending Member
made the Default Loan to the Non-Contributing Member (assuming, for purposes of
this Section 2.3.7(a)(B)(II), that a Capital Contribution in the amount of the
Default Loan plus the accrued and unpaid interest plus any other charges owing
thereon was made on such date immediately prior to such calculation);

 

(b)          the Percentage Interest of the Non-Contributing Member shall be
reduced by the percentage amount added to the Percentage Interest of the Lending
Member or Lending Eligible Member, as applicable, pursuant to clause (a) above;

 

(c)          the Lending Member or Lending Eligible Member, as applicable, shall
be treated, as applicable, as having acquired a portion of the Non-Contributing
Member’s Interests; and

 

(d)          in no event shall the Percentage Interest of any Member be greater
than 100% or less than -0-% as a result of the foregoing dilution, and in the
event that any Member’s Percentage Interest is reduced to -0-% as result of the
foregoing dilution, such Member shall automatically and without further action
be removed from, and shall be deemed to have withdrawn as a member of the
Company and from thereafter shall have no further rights or obligations as
member of the Company, except for those obligations that expressly survive a
Member’s ceasing to be a member of the Company.

 

2.3.8           Notwithstanding anything to the contrary herein, if at any time
a Member’s Percentage Interest shall be reduced to one and one-half percent
(1.5%) or less pursuant to Section 2.3.7(a) above (a “De Minimis Member”), the
consent of such De Minimis Member shall no longer be required, to the extent
applicable, in connection with a Major Decision (as hereinafter defined).

 

8

 

 

 2.3.9           After the date that a Lending Member or Lending Eligible
Member, as applicable, elects to acquire the portion of the Non-Contributing
Member’s Interest pursuant to Section 2.3.7 above, there shall be no right on
the part of the Non-Contributing Member to cure or repay the Default Loan or to
reverse the reallocation and transfer provided herein.

 

2.3.10         Any Affiliate of a Lending Eligible Member that makes a Default
Loan pursuant to this Section 2.3 shall be an express third party beneficiary of
Sections 2.3.2 through 3.3.7.

 

2.4         Capital Accounts. A Capital Account shall be established and
maintained for each Member in accordance with Code Section 704 as set forth in
this Agreement.

 

2.5         Additional Members. Subject to compliance with Section 5.2 hereof,
the Managing Member may issue new Interests directly from the Company and admit
one or more recipients of such Interests as additional Members (“Additional
Members”) from time to time, on such terms and conditions and for such Capital
Contributions as the Managing Member may determine, and the Percentage Interests
of the existing Members shall thereupon be diluted in accordance with Section
2.10; provided, however, that such Additional Members shall have at least the
same obligations hereunder as do the other Members at the time of admission. As
a condition to being admitted to the Company, each Additional Member shall
execute an agreement to be bound by the terms and conditions of this Agreement
and such other documents as the Managing Member shall deem appropriate but
consistent herewith.

 

2.6         Invested Capital.

 

2.6.1           The Company shall maintain a separate account reflecting each
Member’s invested capital, which shall be designated as such Member’s “Invested
Capital,” as and for the purposes described in this Agreement. Such account
shall initially include each Member’s initial Capital Contributions and is
reflected on Exhibit B attached hereto, and shall thereafter be (a) increased by
(i) any additional Capital Contributions by such Member to the Company, measured
by Gross Asset Value net of liabilities to which such property is subject, and
(ii) assumptions by such Member of any Company liabilities to the extent made
with the consent of the Managing Member; and (b) decreased (but not below zero)
by (i) distributions to such Member by the Company pursuant to Section 3.1.3
below, and (ii) assumptions by the Company of any of such Member’s liabilities
to the extent made with the consent of the Managing Member or by operation of
law.

 

2.6.2           Except as otherwise provided in this Agreement or with the prior
written consent of the Managing Member: (a) no Member shall demand or be
entitled to receive a return of or interest on its Capital Contributions,
Capital Account balance or Invested Capital balance, (b) no Member shall
withdraw any portion of its Capital Contributions or receive any distributions
from the Company as a return of capital on account of such Capital
Contributions, and (c) the Company shall not redeem or repurchase the Interest
of any Member.

 

9

 

  

2.7         Liability of Members. Except as otherwise required by any
non-waivable provision of the Act or other applicable law: (a) no Member shall
be personally liable in any manner whatsoever for any debt, liability or other
obligation of the Company, whether such debt, liability or other obligation
arises in contract, tort, or otherwise; and (b) no Member shall in any event
have any liability whatsoever in excess of (i) the amount of its Capital
Contributions, if any, (ii) its share of any assets and undistributed profits of
the Company, (iii) the amount of any unconditional obligation of such Member to
make additional Capital Contributions to the Company pursuant to this Agreement,
and (iv) the amount of any wrongful distribution to such Member, if, and only to
the extent, such Member has actual knowledge (at the time of the distribution)
that such distribution is made in violation of the Act. The foregoing shall not,
however, limit the personal liability of a Member for its obligations to the
Company under this Agreement or to the Company or any other Person under any
other agreement to which such Member may be a party, including, without
limitation, the liability of a Member or any Person under the Purchase
Agreement, Management Agreement, or any guaranty thereof. 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, except as expressly provided in this Agreement, the Purchase
Agreement, the Management Agreement, or any guaranty thereof.

 

2.8         Member Loans.

 

2.8.1           No Member shall be required to make any loans or otherwise lend
any funds to the Company or its Subsidiaries.

 

2.8.2           A Member or an Affiliate of any Member may make loans to the
Company or its Subsidiaries with the consent of such Member and the Managing
Member, provided that such loans made by a Member or any Affiliate thereof shall
be on commercially reasonable terms no less favorable to the Company or its
Subsidiaries than might be available from independent third parties as
reasonably determined by the Managing Member.

 

2.8.3           No loans made by any Member to the Company shall have any effect
on such Member’s Capital Account balance, Invested Capital balance, Percentage
Interest, such loans representing a debt of the Company payable or collectible
solely from the assets of the Company in accordance with the terms and
conditions upon which such loans were made.

 

2.9         Loans by Third Parties. Subject to Section 5.2.1, the Managing
Member may, from time to time, cause the Company to borrow funds or enter into
any similar credit, guarantee, financing or refinancing arrangements
(collectively, “Credit Arrangements”), or cause or permit Subsidiaries of the
Company to do the same, for any purpose consistent with the purpose of the
Company from or with any Person upon such terms as are acceptable to Managing
Member (provided that the provisions of Section 2.8.2 with respect to any Credit
Arrangements provided by the Managing Member or any Affiliate of the Managing
Member shall apply), and to pledge, enter into a negative pledge or otherwise
secure such borrowings or similar arrangements with or with respect to any
Company Assets; provided, however, that Credit Arrangements for more than
$1,000,000.00 in any one instance shall be deemed to be a “Major Decision” as
that term is hereinafter defined and subject to the provisions of Section 5.2.1
hereof. The Members shall cooperate to secure any Credit Arrangements, such
cooperation to include each Member agreeing to recourse guaranty’s if required.
The Members acknowledge that, as of the Effective Date, the Company and/or its
applicable Subsidiaries are subject to the Credit Arrangements under the Credit
Facility Documents in connection with the Credit Facility. Subject to Section
5.2.1, upon the maturity, expiration or other repayment or termination of any
Credit Arrangements (including the Credit Facility) to which the Company and/or
any of its Subsidiaries is a party: (a) the Managing Member shall use
commercially reasonable efforts to arrange replacement Credit Arrangements on
terms acceptable to the Managing Member in an amount not less than the then
outstanding principal balance of the Credit Facility, and/or (b) the Managing
Member shall have the right to provide or cause an Affiliate of the Managing
Member to provide such replacement Credit Arrangements in lieu of any such third
party replacement Credit Arrangements (provided that any such replacement Credit
Arrangements provided by the Managing Member or any Affiliate thereof shall be
on commercially reasonable terms no less favorable to the Company or its
Subsidiaries than might be available from independent third parties as
reasonably determined by the Managing Member).

 

10

 

 

2.10       Dilution.

 

2.10.1         Subject to the provisions of Section 5.2.1 hereof, the Managing
Member may at any time and from time to time, designate an additional Percentage
Interest to any new or existing Member in exchange for such consideration as the
Managing Member may determine; provided that all then-existing Percentage
Interests shall be diluted pro rata in connection therewith. For the avoidance
of doubt, no such approval shall be required in connection with any dilution
pursuant to Section 2.3.7.

 

2.10.2         All dilution under this Section 2.10 shall be effected without
compensation to the Members from whom such Percentage Interests are taken,
except as otherwise agreed in writing by all Members.

 

ARTICLE 3
DISTRIBUTIONS

 

3.1         Distributions of Cash Available for Distribution.

 

3.1.1           Generally. Except as otherwise provided in this Section 3.1 or
in Section 3.2 and Article 7, no Member shall be entitled to receive
distributions from the Company.

 

3.1.2           Distributions of Cash Available for Distribution. The Managing
Member shall cause the Company to distribute Cash Available for Distribution (if
any) (excluding distributions of Cash Available for Distribution that are
attributable to a Capital Event which shall be governed by Section 3.1.3 and/or
in conjunction with the final liquidation of the Company which shall be governed
by Section 3.2 and Article 7) to the Members from time to time to the extent the
Managing Member determines that the Company has Cash Available for Distribution
in the following order of priority:

 

(a)      First, to the Members who have made Default Loans in accordance with
Section 2.3 on a pro rata basis in accordance with the amounts of their
respective unpaid Default Loans until each of them has received cumulative
payments pursuant to this Section 3.1.2(a) equal to all interest due in respect
of such Default Loans.

 

11

 

  

(b)      Second, to the Members who have made Default Loans pursuant to Section
2.3 on a pro rata basis in accordance with the amounts of their respective
Default Loans until each of them has received cumulative payments pursuant to
this Section 3.1.2(b) equal to the outstanding principal amounts of its
respective Default Loans.

 

(c)      Third, to Sentio, until Sentio has achieved a ten percent (10%)
cumulative, non-compounding annual Rate of Return.

 

(d)      Fourth, to SLR, until SLR has achieved an ten percent (10%) cumulative,
non-compounding annual Rate of Return.

 

(e)      Fifth, until Sentio and SLR have achieved a cumulative (taking into
account distributions made pursuant to Sections 3.1.2(c) and 3.1.2(d) above)
thirteen percent (13%) cumulative, non-compounding annual Rate of Return, to the
Members on a pro rata basis in accordance with their respective Percentage
Interest.

 

(f)       Sixth, (i) unless any Management Agreement has been terminated for
cause (as defined in such Management Agreement) or as a result of any
performance termination rights provided therein as of the date of such
distribution, (x) seventy five percent (75%) to Sentio, and (y) twenty five
percent (25%) to SLR, and (ii) in the event any Management Agreement has been
terminated for cause (as defined in such Management Agreement) or as a result of
any performance termination rights provided therein as of the date of such
distribution, on a pro rata basis to the Members in accordance with their
respective Percentage Interests.

 

3.1.3           Distributions Upon Capital Event. Cash Available for
Distribution that is attributable to any Capital Event shall be distributed to
the Members after the receipt of the Cash Available for Distribution. All such
distributions shall be made in the following order of priority:

 

(a)      First, to the Members who have made Default Loans in accordance with
Section 2.3 on a pro rata basis in accordance with the amounts of their
respective unpaid Default Loans until each of them has received cumulative
payments pursuant to this Section 3.1.3(a) equal to all interest due in respect
of such Default Loans.

 

(b)      Second, to the Members who have made Default Loans pursuant to Section
2.3 on a pro rata basis in accordance with the amounts of their respective
Default Loans until each of them has received cumulative payments pursuant to
this Section 3.1.3(b) equal to the outstanding principal amounts of its
respective Default Loans.

 

(c)      Third, to Sentio, until Sentio has achieved a ten percent (10%)
cumulative Rate of Return.

 

(d)      Fourth, to SLR, until SLR has achieved a ten percent (10%) cumulative
Rate of Return.

 

12

 

  

(e)       Fifth, to Sentio to the extent of its Invested Capital balance.

 

(f)       Sixth, to SLR to the extent of its Invested Capital balance.

 

(g)      Seventh, until Sentio and SLR have achieved a cumulative (taking into
account distributions made pursuant to Sections 3.1.2(c) and 3.1.2(d) above)
thirteen percent (13%) cumulative, non-compounding annual Rate of Return, to the
Members on a pro rata basis in accordance with their respective Percentage
Interest.

 

(h)      Eighth, (i) unless any Management Agreement has been terminated for
cause (as defined in such Management Agreement) or as a result of any
performance termination rights provided therein as of the date of such
distribution, (x) seventy five percent (75%) to Sentio, and (y) twenty five
percent (25%) to SLR, and (ii) in the event any Management Agreement has been
terminated for cause (as defined in such Management Agreement) or as a result of
any performance termination rights provided therein as of the date of such
distribution, on a pro rata basis to the Members in accordance with their
respective Percentage Interests.

 

3.1.4           Distributions shall be Aggregated with those of OpCo LLC. In
determining and calculating the cumulative Rate of Return at any given point in
time in connection with Section 3.1.2 and Section 3.1.3 herein, the
distributions of Cash Available for Distribution and Cash Available for
Distribution that is attributable to any Capital Event (as each such term is
defined in the OpCo LLC Agreement) at such given point in time, to (a) Sentio
under the provisions of this Agreement shall be aggregated with such
distributions to Sentio Boston TRS, LLC under the provisions of the OpCo LLC
Agreement, and (ii) to SLR under the provisions of this Agreement shall be
aggregated with such distributions to Oaktree SLR, LLC under the provisions of
the OpCo LLC Agreement. For purposes hereof, distributions hereunder shall be
made in accordance with the order of priority contained in Section 3.1.2 and
Section 3.1.3 hereof, as applicable, as if such distributions were distributions
of additional Cash Available for Distribution and Cash Available for
Distribution that is attributable to any Capital Event, as applicable, for the
same measurement period pursuant to the OpCo LLC Agreement after all
distributions of actual Cash Available for Distribution and Cash Available for
Distribution that is attributable to any Capital Event have been made pursuant
to the OpCo LLC Agreement for such measurement period.

 

3.1.5           Shortfall in Rate of Return. For purposes of Section 3.1.2 and
Section 3.1.3, if the Members shall fail to achieve their respective Rate of
Return, as applicable, in any given year, such shortfall must be made up in
future years if and to the extent that the Company then has sufficient Cash
Available for Distribution. However, if, in any given year, the Members achieve
a return in excess of their respective Rate of Return, as applicable, such
excess shall not be taken into account for purposes of determining whether or
not the Members achieved the Rate of Return, as applicable, in any subsequent
year.

 

3.2         Distributions Upon Liquidation. Distributions made in conjunction
with the final liquidation of the Company shall be applied or distributed as
provided in Article 7.

 

13

 

 

3.3         Withholding. The Company may withhold distributions or portions
thereof if it is required to do so by any applicable rule, regulation or law,
and each Member hereby authorizes the Company to withhold from or pay on behalf
of or with respect to such Member any amount of federal, state, local or foreign
taxes that the Managing Member in good faith determines the Company is required
to withhold or pay with respect to any amount distributable or allocable to such
Member pursuant to this Agreement. Any amount paid on behalf of or with respect
to a Member pursuant to this Section 3.3 shall be treated as having been
distributed to such Member as an advance against the next distributions that
would otherwise be made to such Member, and such amount shall be satisfied by
offset from such next distributions. Each Member will furnish the Managing
Member with such information as may reasonably be requested by the Managing
Member from time to time to determine whether withholding is required, and each
Member will promptly notify the Managing Member if such Member determines at any
time that it is subject to withholding.

 

3.4         Distributions in Kind. No right is given to any Member to demand or
receive property other than cash as provided in this Agreement. The Managing
Member may determine to make a distribution in kind of Company Assets to the
Members, and such Company Assets shall be distributed in such a fashion as to
ensure that the fair market value thereof is distributed and allocated in
accordance with this Article 3 and Articles 4 and 7 hereof; provided, however,
that, except upon a dissolution and winding up of the Company, no Member shall
be compelled to accept a distribution consisting, in whole or in part, of any
Company Assets in kind unless the ratio that the fair market value of such
distribution-in-kind bears to such Member’s total distribution does not exceed
the ratio that the fair market value of similar distributions-in-kind bears to
the total distributions of other Members receiving distributions concurrently
therewith (if any).

 

3.5         Limitations on Distributions. Notwithstanding any provision to the
contrary contained in this Agreement, neither the Company nor the Managing
Member, on behalf of the Company, shall make a distribution to any Person in
violation of the Act or other applicable law.

 

ARTICLE 4
ALLOCATIONS OF NET PROFITS AND NET LOSSES

 

4.1         Timing of Allocations. Net Profits and Net Losses shall be
determined and allocated with respect to each fiscal year or other period of the
Company: (a) as of the end of such fiscal year, (b) at such times as the Gross
Asset Value of any Company Asset is adjusted pursuant to the definition thereof,
and (c) at such other times as may be required or permitted pursuant to this
Agreement or otherwise under the Code. Subject to the other provisions of this
Agreement, an allocation to a Member of a share of Net Profits or Net Losses
shall be treated as an allocation of the same share of each item of income,
gain, loss or deduction that is taken into account in computing Net Profits or
Net Losses.

 

4.2         Economic Effect of Allocations. After giving effect to the
allocations set forth in Section 2 of Exhibit E, for purposes of adjusting the
Capital Accounts of the Members, Net Profits and Net Losses and, to the extent
necessary, individual items of income, gain, loss, credit and deduction, for any
fiscal year or other period shall be allocated among the Capital Accounts of the
Members in a manner that as closely as possible gives economic effect to the
provisions of Articles 3 and 7 and the other relevant provisions of this
Agreement as determined by the Managing Member in its good faith discretion.

 

14

 

 

ARTICLE 5
OPERATIONS

 

5.1         Management.

 

5.1.1           Except for Major Decisions, (i) the business activities of the
Company shall be managed solely by the Managing Member and the policies and
decisions of the Company shall be determined by the Managing Member, (ii) the
Managing Member, on behalf of the Company may enter into, and perform the duties
and obligations under, any and all contracts, agreements or instruments
contemplated or permitted under this Agreement or deemed reasonably necessary by
the Managing Member, in all cases without the consent or approval of the other
Members, including, without limitation, any agreements or instruments to
mortgage, pledge, encumber, finance, sell, convey, or otherwise transfer the
Communities, and (iii) the Managing Member may authorize any Person (including
any Member) to enter into, and perform the duties and obligations under, any
contract, agreement or instrument on behalf of the Company. Except as may be
specifically authorized by the Managing Member in advance in writing, no other
Member shall have the right to bind the Company or act for or on behalf of the
Company.

 

5.1.2           Except as otherwise provided in this Agreement, the Managing
Member shall have the sole power and authority to bind the Company, except and
to the extent that such power is expressly delegated in writing to any other
Person by the Managing Member (including, without limitation, through the
appointment of officers of the Company).

 

5.1.3           Except as otherwise expressly provided in this Agreement or as
the Managing Member may delegate, the other Members shall not participate in the
management of the Company, and shall have no right, power or authority to act
for or on behalf of, or otherwise bind, the Company. Except as expressly
provided in this Agreement or required by any non-waivable provisions of
applicable law, Members shall have no right to vote on or consent to any other
matter, act, decision, or document involving the Company or its business. No
Member shall take any action in the name of or on behalf of the Company,
including, without limitation, assuming any obligation or responsibility on
behalf of the Company, unless such action, and the taking thereof by such
Member, shall have been expressly authorized by the Managing Member or shall be
expressly and specifically authorized by this Agreement.

 

5.2         Limitations on Authority of the Managing Member.

 

5.2.1           Notwithstanding any contrary provision of this Agreement,
without SLR Consent in each instance (except to the extent that SLR is a De
Minimis Member at such time) (a “Major Decision”), the Company shall not and
shall not permit any of its Subsidiaries to:

 

(a)          change the primary business purpose of the Company as set forth in
Section 1.4;

 

15

 

 

(b)          appoint any new Manager and/or terminate any Management Agreement
for any Community, except (i) in connection with a sale or other transfer of the
applicable Community to the extent such sale or other transfer has been
consented to by SLR as provided herein, (ii) upon the occurrence of any breach
or default by Manager in accordance with the applicable Management Agreement for
such Community, or (iv) upon the occurrence of any other termination of the
applicable Management Agreement pursuant to the terms thereof or pursuant to any
pooling agreement related to such Management Agreement; or

 

(c)          sell or refinance one (1) or more Communities (except in connection
with a Sentio Portfolio Sale, in which case no SLR Consent shall be required);
or

 

(d)          the admission to the Company of Additional Members pursuant to
Section 2.5 hereof; or

 

(e)          make Credit Arrangements for more than $1,000,000.00 in any one
instance as set forth in Section 2.9 hereof; or

 

(f)           cause there to be any dilution of any Member’s Percentage Interest
pursuant to Section 2.10; provided, however, that no SLR Consent shall be
required in connection with any dilution pursuant to Section 2.3.7; or

 

(h)          dissolution, liquidation or termination of the Company pursuant to
Section 7.2 (a) (except in connection with a Sentio Portfolio Sale, in which
case no SLR Consent shall be required).

 

5.2.2           Notwithstanding any contrary provision of this Agreement, the
Managing Member shall have no authority to: (a) do any act in contravention of
this Agreement or (b) knowingly perform any act that would subject any Member to
liability for the debts, liabilities or obligations of the Company or another
Member.

 

5.3         Reimbursement and Remuneration Generally. The Managing Member shall
not be compensated for acting in such capacity, but shall be entitled to
reimbursement for actual and commercially reasonable third party expenses
incurred in furtherance of the business or management of the Company.
Distributions received by the Members pursuant to Articles 3 and 7 are not, and
shall not be deemed to be, remuneration within the meaning of this Section 5.3.

 

5.4         Reliance by Third Parties. Any Person dealing with the Company or
the Managing Member may rely upon a certificate signed by the Managing Member
(or any one or more of its agents designated by the Managing Member for such
purpose or given such authority) as to:

 

5.4.1           The identity of the Managing Member, any Member of the Company
or any Officer;

  

16

 

 

5.4.2           The existence or non-existence of any facts which constitute a
condition precedent to acts by the Managing Member or in any other manner
germane to the affairs of the Company;

 

5.4.3           The Persons who are authorized to execute and deliver any
instrument or document for or on behalf of the Company; or

 

5.4.4           Any act or failure to act by the Company or as to any other
matter whatsoever involving the Company or any Member.

 

5.5         Records and Reports.

 

5.5.1           The Managing Member shall cause to be kept (and made available
to each Member), at the principal place of business of the Company, or at such
other location as the Managing Member shall reasonably deem appropriate, full
and proper ledgers, other books of account, and records of all receipts and
disbursements, other financial activities, and the internal affairs of the
Company for at least the current and past three (3) fiscal years.

 

5.5.2           The Members agree that the books of the Company shall be kept
for accounting purposes in accordance with U.S. generally accepted accounting
principles, consistently applied, and shall be kept for tax reporting purposes
in accordance with applicable provisions of the Code. Subject to Code Section
448, the books of the Company may be kept on such other methods of accounting
for tax and financial reporting purposes as may be determined by the Managing
Member. The fiscal year of the Company shall end on December 31 of each year.

 

5.5.3           The Managing Member shall also:

 

(a)          provide to each Member within ninety (90) days following the end of
each fiscal year of the Company or as soon as reasonably practicable thereafter,
a report that shall include all necessary information required by the Members
for preparation of their federal, state and local income or franchise tax or
information returns, including each Member’s allocable share of Net Profits, Net
Losses and any other items of income, gain, loss, deduction and credit for such
fiscal year;

 

(b)          provide to each Member within forty-five (45) days following the
end of each fiscal quarter of the Company or as soon as reasonably practicable
thereafter, a copy of an unaudited balance sheet of the Company as of the end of
such fiscal quarter, and the related unaudited statement of income and changes
in the financial position of the Company for such fiscal quarter; and

 

(c)          make available to each Member a copy of the Company’s federal,
state and local income tax or information returns for each fiscal year or
portion thereof, concurrent with the filing of such returns.

 

5.5.4           Members (personally or through an authorized representative)
may, for purposes reasonably related to their Interests, examine and copy (at
their own cost and expense) the books and records of the Company at all
reasonable business hours.

  

17

 

 

5.6         Indemnification and Liability.

 

5.6.1           The Company shall indemnify and hold harmless the Managing
Member, each of its members, managers, officers and agents, each of the Members
and their members, managers, officers and agents and all officers and agents of
the Company (each an “Indemnitee”) to the full extent permitted by law from and
against any and all losses, claims, demands, costs, damages, liabilities,
expenses of any nature (including reasonable attorneys’ fees and disbursements
and other costs of litigation, whether pending or threatened), judgments, fines,
settlements and other amounts, of any nature whatsoever, known or unknown,
liquid or unliquid (collectively, “Liabilities”) arising from any and all
claims, demands, actions, suits or proceedings, whether civil, criminal,
administrative or investigative, in which the Indemnitee may be involved, or
threatened to be involved as a party or otherwise, arising out of or incident to
the business of the Company, if (a) the Indemnitee acted in good faith in a
manner such Person believed to be within the scope of such Indemnitee’s
authority and in, or not contrary to, the best interests of the Company, and (b)
the Indemnitee’s conduct did not constitute fraud, bad faith, willful
misconduct, gross negligence or material breach of this Agreement.
Notwithstanding anything to the contrary herein, the foregoing indemnity shall
not extend to any Liabilities arising from a Member’s breach of its
representations, warranties, covenants or acknowledgements in Section 8.2.

 

5.6.2           Expenses incurred by an Indemnitee in defending any claim,
demand, action, suit or proceeding subject to this Section 5.6 shall be advanced
by the Company prior to the final disposition of such claim, demand, action,
suit or proceeding upon receipt by the Company of a satisfactory written
commitment by or on behalf of the Indemnitee to repay such amount if it shall be
determined that such Indemnitee is not entitled to be indemnified as authorized
in this Section 5.6.

 

5.6.3           The indemnification provided by this Section 5.6 shall be in
addition to any other rights to which an Indemnitee may be entitled under any
agreement, as a matter of law or equity or otherwise, and shall inure to the
benefit of the heirs, successors, assigns and administrators of the Indemnitee.

 

5.6.4           Any indemnification provided hereunder shall be satisfied solely
out of the Company Assets. No Member, or owner of any Member, shall be subject
to personal liability by reason of these indemnification provisions.

 

5.6.5           No Indemnitee shall be denied indemnification in whole or in
part under this Section 5.6 by reason of the fact that the Indemnitee had an
interest in the transaction with respect to which the indemnification applies if
the transaction was otherwise permitted by the terms of this Agreement.

 

5.6.6           Except as set forth in Section 5.6.3, the provisions of this
Section 5.6 are for the benefit of the Indemnitees only and shall not be deemed
to create any rights for the benefit of any other Person.

 

18

 

  

5.6.7           None of the officers of the Company, the Managing Member or any
Member (except as provided in Section 8.2) shall be liable to the Company or to
any other Member for any Liabilities sustained or incurred as a result of any
act or omission of such Person if (a) such Person acted in good faith in a
manner such Person believed to be within the scope of such Person’s authority
and in, or not contrary to, the best interests of the Company, and (b) such
Person’s conduct did not constitute fraud, bad faith, willful misconduct or a
material breach of this Agreement.

 

5.6.8           The Managing Member is hereby authorized on behalf of the
Company to cause the Company to indemnify, hold harmless and release any agents
and/or advisors of the Company, the Managing Member and the Company’s
Affiliates, to the same extent provided with respect to the Indemnitees in this
Section 5.6.

 

5.7         Duties and Conflicts.

 

5.7.1           The Members, in connection with their respective duties,
responsibilities, rights and obligations hereunder, shall at all times have a
duty to act in good faith, but recognizing that each Member may act in its own
economic self-interest and in accordance with such tax and business objectives
as it deems appropriate or desirable for such Member and shall not have any
fiduciary duties to the Company, any other Member or any other Person bound by
this Agreement. So long as a Member acts in good faith and in accordance with
the express provisions of this Agreement, such Member shall not be in breach of
any duties (including any fiduciary duties that may otherwise be imposed by law)
or have any Liabilities to the Company, any other Member or any other Person
bound by this Agreement, whether at law or in equity. The provisions of this
Agreement, to the extent that they expand, restrict or eliminate the duties and
Liabilities of a Member otherwise existing at law or in equity, are agreed by
the Members to replace fully and completely such other duties and Liabilities of
each Member. Subject to the foregoing, but notwithstanding anything else in this
Agreement to the contrary or otherwise applicable law, whenever a Member or the
Members are required or permitted to make a decision, take or approve an action,
or omit to do any of the foregoing: (a) “in its discretion,” under a similar
grant of authority or latitude, or without an express standard of behavior
(including, without limitation, standards such as “reasonable”), then each
Member shall be entitled to consider only such interests and factors, including
its own, as it desires, and shall, to the fullest extent permitted by law, have
no duty or obligation to consider any other interests or factors whatsoever
(other than the duty to act in good faith), or (b) with an express standard of
behavior (including, without limitation, standards such as “reasonable”), then
each Member shall comply with such express standard but shall not be subject to
any other, different or additional standard (other than the standard of good
faith).

 

5.7.2           Notwithstanding the provisions of Section 5.7.1, but subject to
the provisions of Section 5.7.3, each Member and its Affiliates may engage or
invest in, and devote its and their time to, any other business venture or
activity of any nature and description, whether or not such activities are
considered competitive with the Company, its Subsidiaries or the businesses of
any of them (the “Right to Compete”), and neither the Company nor any other
Member shall have any right by virtue of this Agreement or the relationship
created hereby in or to such other venture or activity of any Member (or to the
income or proceeds derived therefrom), and the pursuit of such other venture or
activity shall not be deemed wrongful or improper. The Right to Compete of each
Member and its Affiliates does not require the notice to, approval from, or
other sharing with, any of the other Members or the Company. The legal doctrines
of “corporate opportunity,” “business opportunity” and similar doctrines shall
not be applied to any such competitive venture or activity of a Member or its
Affiliates. No Member or its Affiliates shall have any obligation to the Company
or its other Members with respect to any opportunity.

 

19

 

  

5.7.3        Notwithstanding anything to the contrary in this Agreement, unless
approved by the Managing Member in its sole and absolute discretion, neither SLR
nor any of its Affiliates, directly or indirectly, shall at any time during
which SLR is a Member, and for a period of two (2) years thereafter:

 

(a)    participate in the de novo development or construction of any Competing
Community;

 

(b)    acquire any fee, leasehold, management or other interest in any Competing
Community (other than the Competing Communities identified on Exhibit D); or

 

(c)    if SLR or any of its Affiliates operates or manages a Competing Community
(including the Competing Communities identified on Exhibit D hereto), transfer
any executive director or sales and marketing director of any Community to such
Competing Community or, except as reasonably necessary to provide residents or
patients with an alternative level of care not provided at a Community,
recommend the removal or transfer of a resident or patient from such Community
to such Competing Community; provided, however, that the foregoing restriction
shall not apply to any recommendation of the removal or transfer of a resident
or patient if it is in the best interest of the care of the resident or patient.

 

Any violation of this Section 5.7.3 by SLR or any of its Affiliates shall be
deemed a Material Default by SLR, and Sentio shall have all the rights and
remedies available to it under this Agreement and under applicable law or in
equity. Notwithstanding anything to the contrary in this Agreement, the
provisions of this Section 5.7.3 shall survive: (a) SLR’s ceasing to be a member
of the Company for any reason, and (b) the expiration or sooner termination of
this Agreement.

 

5.8         REIT Protections.

 

5.8.1        Notwithstanding anything to the contrary in this Agreement, for so
long as any Member is a REIT Member, unless the REIT Member shall otherwise
consent in writing (which consent may be withheld in such REIT Member’s sole and
absolute discretion), the Company shall not (and shall not permit any Subsidiary
of the Company to) take any action, or refrain from taking any action that, in
the judgment of such REIT Member, in its sole and absolute discretion, could
adversely affect the ability such REIT Member (or any Affiliate thereof) to
continue to qualify as a REIT under the Code.

 

5.8.2        So long as SLR is a Member of the Company, SLR covenants and agrees
that SLR shall not be the Manager (or treated as the Manager for U.S. federal
income tax purposes), become a Subsidiary of Manager or merge or consolidate
with Manager.

 

20

 

 

5.9         Right of First Offer. For so long as SLR is a Member of the Company
and/or SLR or any of its Affiliates remains the manager of one or more
Communities, Sentio shall have a right of first offer (“ROFO”) to invest or
otherwise participate in all joint ventured investments of the SLR Parties with
any Real Estate Investment Trust (REIT) which also involve the ownership or
operation of assisted living, memory care, senior apartments, or other senior
housing facilities (an “Investment Opportunity”). SLR shall deliver written
notice to Sentio of any Investment Opportunity, which details the terms and
conditions of the Investment Opportunity. Sentio shall have fifteen (15)
Business Days from receipt of such notice to notify SLR of Sentio’s intent to
exercise the ROFO with respect to the Investment Opportunity. If Sentio fails to
respond to SLR within the fifteen (15) Business Day period referenced in the
immediately preceding sentence, or if Sentio and the SLR Parties do not execute
a written agreement for the Investment Opportunity within sixty (60) days of the
initial written notice delivered by SLR, Sentio’s ROFO with respect to that
Investment Opportunity shall terminate, at which point the SLR Parties shall be
entitled to offer the Investment Opportunity to any and all third parties on
terms and conditions substantially similar to those presented to Sentio.

 

Notwithstanding the failure of Sentio to exercise the ROFO with respect to an
Investment Opportunity, in no event shall the SLR Parties be entitled to pursue
an Investment Opportunity which otherwise violates the non-compete provisions of
Section 5.7.3 of this Agreement.

 

ARTICLE 6
INTERESTS AND TRANSFERS OF INTERESTS

 

6.1         Transfers.

 

6.1.1        Generally.

 

(a)          Except as permitted in this Article 6 or pursuant to Section 2.3.7,
no Member shall Transfer all or any part of its Interest. Each Member agrees
that to the extent it desires that all or any portion of its Interest be at any
time held by any other Person, such Member will Transfer its Interest, or part
thereof, to such Person only through a direct Transfer in the manner
contemplated in this Article 6, and that, except as expressly authorized in
Section 6.1.2, no Transfer or other disposition of any stock, partnership,
limited liability company or other beneficial interest in any Member or its
Controlling Person(s), will be effected, directly or indirectly, unless approved
by the other Members in their sole and absolute discretion. The approval by any
Member to Transfer in any one or more instances shall not limit or waive the
requirement to obtain approval in any other or future instance. Any Transfer of
an Interest in contravention of this Article 6 shall be null and void and shall
be deemed a Material Default, and the other Members shall have all the rights
and remedies available under this Agreement and applicable law or in equity.
Notwithstanding anything set forth in this Agreement to the contrary, the public
issuance of common stock, convertible debt, equity or other similar securities
by Sentio, its Subsidiaries or Affiliates, and the Transfer of such securities,
whenever issued, will not constitute a prohibited Transfer under this Article 6.

 

21

 

  

(b)          As a condition to the effectiveness of a Transfer that is permitted
under this Section 6.1.1 or under Section 6.1.2, the transferor shall bear and
pay all related fees and costs including any Company Expenses.

 

(c)          Except as otherwise expressly provided in this Article 6, the
recipient of any Interest (or part thereof) Transferred in accordance with this
Article 6 shall be an Assignee only, with only the rights provided in Section
6.4, unless and until admitted as a Substitute Member pursuant to Section 6.6.

 

(d)          Notwithstanding anything in this Agreement to the contrary, except
as expressly provided in Section 2.3.4, no Member or its Affiliates may,
directly or indirectly, mortgage, pledge or hypothecate its Interest (or part
thereof) in the Company except to the extent permitted hereunder or by the
Managing Member in its sole and absolute discretion.

 

(e)          No Member may Transfer more than 49% of the total Interests of the
Company unless such Member Transfers all of such Member’s Interests in the
Company.

 

6.1.2        Permitted Transfers. Notwithstanding anything in this Agreement to
the contrary, but subject to the conditions set forth in this Article 6, the
following Transfers of Interests shall be permitted:

 

(a)          Transfers by Sentio of all or any portion of its Interest to any
Person, including any Affiliate (i) in connection with a merger, consolidation,
share exchange, existing (as of the date hereof) equity investment agreement, or
reorganization to which Sentio (or any parent or Affiliate thereof) is a party,
or (ii) that acquires all or substantially all of the assets or stock of Sentio
(or any parent thereof);

 

(b)          Transfers by either SLR or Sentio to their respective Affiliates,
subject to the limitations of Section 5.8.2;

 

(c)          Except for Transfers otherwise expressly permitted pursuant to
Sections 6.1.2(b) above, Transfers by SLR of all or any portion of its Interest
to any other Person with the prior written consent of Sentio, which consent may
be given or withheld in Sentio’s sole and absolute discretion;

 

(d)          Transfers of ownership interests in SLR among current SLR Members
and to: a trust controlled by current SLR Members for estate planning purposes;
or upon the death of an owner of an interest in SLR; provided, however, that no
Transfer shall be permitted in the event such Transfer could, as determined by
Managing Member, in its sole discretion, adversely affect the ability of the
REIT Member (or any Affiliate thereof) to continue to qualify as a REIT under
the Code.

 

In the event that Sentio Transfers all its Interest in accordance with any of
the provisions of this Section 6.1.2, such transferee shall automatically become
a Substitute Member pursuant to Section 6.6 and shall become the Managing
Member.

 

22

 

  

6.2         Purchase Right/Obligation.

 

6.2.1        Sentio shall have the right (the “Call Right”) to purchase, or
cause the Company to purchase, all but not less than all of the Interest of SLR,
together with all of SLR’s or its Affiliate’s “Interest” (as defined in the OpCo
LLC Agreement) in the OpCo LLC, when any of the following conditions exists
(each, a “Call Right Trigger Event”):

 

(a)          any time after the occurrence, and during the continuance of a
Material Default by SLR;

 

(b)          any time within sixty (60) days after Sentio has actual knowledge
of the occurrence of any SLR Change of Control or Material SLR Transaction;

 

(c)          at any time within sixty (60) days after the expiration or earlier
termination of the last of the Management Agreement[s];

 

(d)          at any time within sixty (60) days after SLR has failed to consent
to any Major Decision requiring its consent pursuant to Section 5.2 hereof
provided that Sentio has requested such consent in writing and SLR has either
expressly denied such consent or has failed to respond to such request with ten
(10) days; or

 

(e)          a “Call Right Trigger Event” (as defined in the OpCo LLC Agreement)
has occurred under the OpCo LLC Agreement.

 

6.2.2        The procedure by which the Call Right may be exercised and the
determination of the purchase price of the interests purchased pursuant thereto,
are set forth in Exhibit F hereto.

 

6.2.3        Additionally, without limiting any other provision or restriction
upon Transfer contained herein, in the event SLR receives a bona fide written
offer (“Offer”) to purchase SLR’s Interest which SLR wishes to accept, SLR shall
first offer to sell all of its Interest covered by the Offer to Sentio, and
Sentio shall have the first option to acquire such Interest at the price and
upon the terms and conditions set forth in the Offer. This option is hereinafter
referred to as the “Right of First Refusal.” Such Right of First Refusal is
subject to the following additional terms:

 

(a)          Notice of any Offer shall be given by SLR in writing to the Company
and Sentio. Such notice shall state the Interests being offered and the basis
upon which the proposed Transfer would otherwise be permitted pursuant to this
Agreement, and shall contain a copy of the Offer. The Right of First Refusal
period of Sentio shall commence upon the date of the proper delivery of the
notice and shall terminate, unless exercised, fifteen (15) days thereafter,
unless sooner terminated by written refusal of the Sentio delivered to SLR. An
election to exercise a Right of First Refusal shall be made in writing and
transmitted to SLR. If Sentio and SLR do not complete a transaction for the
purchase of SLR’s Interests within sixty (60) days of the initial written notice
delivered by SLR, Sentio’s Right of First Refusal with respect to the Offer
shall terminate.

  

23

 

 

(b)          Upon the failure or neglect of Sentio to exercise its Right of
First Refusal, SLR, for a period of ninety (90) days from the date when Sentio’s
Right of First Refusal expired, have the right to sell the Interests covered by
the Offer to the person or entity making such Offer upon the exact terms and
conditions set forth in such Offer; provided, however, no other provision of
this Agreement is intended to be waived or modified by this provision and such
Transfer must otherwise comply with all other restrictions and conditions upon
Transfer contained herein. If SLR fails to so sell such Interests within such
ninety (90) day period, or if any material term of the Offer is changed,
modified or supplemented, then Interests may not be sold without first again
giving Sentio a Right of First Refusal with respect thereto.

 

6.3         Further Restrictions. Notwithstanding any contrary provision in this
Agreement, any otherwise permitted Transfer to any Person shall be null and void
if:

 

(a)          such Transfer may cause a termination of the Company for federal or
state, if applicable, income tax purposes (unless otherwise waived by the
Managing Member or unless such Transfer is made pursuant to Section 2.3.7 or
6.2);

 

(b)          such Transfer may cause the Company to cease to be classified as a
partnership for federal or state income tax purposes, provided, however, that if
as a result of such Transfer one Member (for purposes of this Section 6.3(b),
the “Acquiring Member”) would own one hundred percent (100%) of the outstanding
Interests, and following such Transfer the Company would constitute a
disregarded entity for United States federal income tax purposes with respect to
the Acquiring Member, such Transfer shall be a permitted Transfer;

 

(c)          such Transfer may require the registration of such Transferred
Interest pursuant to any applicable federal or state securities laws;

 

(d)          such Transfer may cause the Company to become a “Publicly Traded
Partnership,” as such term is defined in Sections 469(k)(2) or 7704(b) of the
Code;

 

(e)          such Transfer may subject the Company, the Managing Member or its
or their Affiliates to regulation under the Investment Company Act of 1940, the
Investment Advisers Act of 1940 or the Employee Retirement Income Security Act
of 1974, each as amended;

 

(f)          such Transfer may result in a violation of any applicable law;

 

(g)          such Transfer is made to any Person who lacks the legal right,
power or capacity to own such Interest; or

 

(h)          the Company does not receive written instruments (including,
without limitation, copies of any instruments of Transfer and such Assignee’s
consent to be bound by this Agreement as an Assignee) that are in a form
satisfactory to the Managing Member (in its reasonable discretion).

 

24

 

 

6.4         Rights of Assignees. Until such time, if any, as the transferee in
any permitted Transfer pursuant to this Article 6 is admitted to the Company as
a Substitute Member pursuant to Section 6.6: (a) such transferee shall be an
Assignee only, and only shall receive, to the extent Transferred, the
distributions and allocations of income, gain, loss, deduction, credit, or
similar items to which the Member that Transferred its Interest would be
entitled, and (b) such Assignee shall not be entitled or enabled to exercise any
other rights or powers of a Member, such other rights remaining with the
transferring Member. In such a case, the transferring Member shall remain a
Member, and shall remain liable for the satisfaction of all obligations
contained herein as a Member, even if such transferring Member has Transferred
its entire Economic Interest to one or more Assignees (subject to Section 6.5);
but this sentence does not apply to a Transfer under Section 6.2 (which is
deemed to be a Transfer to a Substitute Member). In the event any Assignee
desires to make a further assignment of any Economic Interest, such Assignee
shall be subject to all of the provisions of this Agreement relating to
restrictions on Transfer to the same extent as any Member desiring to make such
an assignment.

 

6.5         Admissions, Withdrawals and Removals. No Person shall be admitted to
the Company as a Member except in accordance with Section 2.5 (in the case of
Persons obtaining an Interest directly from the Company) or Section 6.6 (in the
case of transferees of a permitted Transfer of an Interest from another Person).
No Member shall be entitled to retire or withdraw from being a Member of the
Company except (a) in accordance with Section 6.7, or (b) with the consent of
each other Member, which consent may be given or withheld in each such Member’s
sole and absolute discretion. No Member shall be subject to removal except in
accordance with Sections 2.3.7 or 6.2. No admission, withdrawal or removal of a
Member shall cause the dissolution of the Company. Any purported admission,
withdrawal or removal which is not in accordance with this Agreement shall be
null and void.

 

6.6         Admission of Assignees as Substitute Members.

 

6.6.1        An Assignee shall become a Substitute Member only if and when each
of the following conditions are satisfied:

 

(a)          The assignor of the Interest Transferred sends written notice to
the Managing Member requesting the admission of the Assignee as a Substitute
Member and setting forth the name and address of the Assignee, the Capital
Account transferred, the Percentage Interest transferred, and the effective date
of the Transfer;

 

(b)          Each Member consents in writing to the admission of such Assignee
as a Substitute Member, which consent shall not be unreasonably withheld or
delayed; and

 

(c)          The Managing Member receives from the Assignee (i) such information
concerning the Assignee’s financial capacities and investment experience as the
Managing Member may reasonably request, and (ii) written instruments (including,
without limitation, copies of any instruments of Transfer and such Assignee’s
consent to be bound by this Agreement as a Substitute Member) that are in a form
satisfactory to the Managing Member (as determined in the Managing Member’s
reasonable discretion).

 

25

 

  

Notwithstanding the foregoing, upon the Transfer by Sentio of all or any portion
of its Interest in accordance with Section 6.1.2, the transferee shall
automatically become a Substitute Member without having to comply with Sections
6.6.1(a)-(c).

 

6.6.2        Upon the admission of any Substitute Member, the books and records
of the Company shall be amended by the Managing Member to reflect the name,
address, Capital Contributions, Capital Account balance, Invested Capital
balance and Percentage Interest of such Substitute Member and to eliminate or
adjust, if necessary, the name, address, Capital Contributions, Capital Account
balance, Invested Capital balance and Percentage Interest of the predecessor of
such Substitute Member.

 

6.7         Withdrawal of Members. If a Member has transferred all of its
Interest to one or more Assignees, then such Member shall withdraw from the
Company if and when all such Assignees have been admitted as Substitute Members
in accordance with this Agreement.

 

6.8         Conversion of Membership Interest. Upon the Incapacity of a Member,
such Incapacitated Member’s Membership Interest shall automatically be converted
to an Economic Interest only, and such Incapacitated Member (or its executor,
administrator, trustee, or receiver, as applicable) shall thereafter be deemed
an Assignee for all purposes hereunder, with the same Economic Interest as was
held by such Incapacitated Member prior to its Incapacity, but without any other
rights of a Member unless the holder of such Economic Interest is admitted as a
Substitute Member pursuant to Section 6.6 above.

 

ARTICLE 7
DISSOLUTION, LIQUIDATION, AND TERMINATION OF THE COMPANY

 

7.1         Limitations. The Company may be dissolved, liquidated, and
terminated only pursuant to the provisions of this Article 7, and the parties
hereto do hereby irrevocably waive any and all other rights they may have to
cause a dissolution of the Company or a sale or partition of any or all of the
Company Assets.

 

7.2         Exclusive Causes. Notwithstanding the Act, the following and only
the following events shall cause the Company to be dissolved, liquidated, and
terminated:

 

(a)          Subject to compliance with Section 5.2.1 hereof, the written
consent of the Managing Member;

 

(b)          The Transfer of all or substantially all of the Company Assets and
the receipt of all consideration therefor, except that if non-monetary
consideration is received upon such disposition the Company shall not be
dissolved pursuant to this clause until such consideration is converted into
United States dollars or a money equivalent;

 

(c)          Judicial dissolution; or

  

26

 

 

(d)          At any time that there are no Members, unless the business of the
Company is continued in accordance with the Act.

 

To the fullest extent permitted by law, any dissolution of the Company other
than as provided in this Section 7.2 shall be a dissolution in contravention of
this Agreement.

 

7.3         Effect of Dissolution. The dissolution of the Company shall be
effective on the day on which the event occurs giving rise to the dissolution,
but the Company shall not terminate until it has been wound up and its assets
have been distributed as provided in Section 7.5 of this Agreement and the
Certificate has been cancelled by the filing of a certificate of cancellation
with the office of the Delaware Secretary of State. Notwithstanding the
dissolution of the Company, prior to the termination of the Company, the
business of the Company and the affairs of the Members, as such, shall continue
to be governed by this Agreement.

 

7.4         No Capital Contribution Upon Dissolution. Each Member shall look
solely to the assets of the Company for all distributions with respect to the
Company, its Capital Contributions thereto, its Capital Account, its Invested
Capital and its share of Net Profits or Net Losses, and shall have no recourse
therefor (upon dissolution or otherwise) against any other Member, except to a
Non-Contributing Member pursuant to Section 2.3 on account of any Default Loan.
Accordingly, if any Member has a deficit balance in its Capital Account (after
giving effect to all contributions, distributions and allocations for all
taxable years, including the year during which the liquidation occurs), then
such Member shall have no obligation to make any Capital Contribution with
respect to such deficit, and such deficit shall not be considered a debt owed to
the Company or to any other Person for any purpose whatsoever.

 

7.5         Liquidation.

 

7.5.1        Upon dissolution of the Company, the Company shall thereafter
engage in no further business other than that which is necessary to wind up the
business, and the Managing Member (or such other Person as the Managing Member
may determine) shall act as the “Liquidator” of the Company. A reasonable time
shall be allowed for the winding up of the affairs of the Company in order to
minimize any losses attendant upon such a winding up. In the event the
Liquidator reasonably believes that it is prudent to do so, cash or other assets
held in reserve may be placed in a liquidating trust or other escrow immediately
prior to the termination of the Company in order to ensure that any and all
obligations of the Company are satisfied. After allocating (pursuant to Article
4 of this Agreement) all income, gain, loss, deductions and credit resulting
from the liquidation of the Company Assets, the Liquidator shall apply and
distribute the cash proceeds thereof as follows (it being understood that any
amounts to be paid to a Lending Member pursuant to Section 2.3 shall be paid to
such Lending Member out of the following distributions that would otherwise be
made to the Non-Contributing Member, but that such amounts shall be deemed to
have been distributed to the Non-Contributing Member and immediately repaid by
the Non-Contributing Member to the Lending Member):

 

(a)          First, to the payment of (i) the debts and liabilities of the
Company (including any outstanding amounts due under any Credit Arrangements
encumbering the Company Assets (or any part thereof) and, to the extent
permitted by law, to Members who are creditors) and (ii) the expenses of
liquidation; then

  

27

 

 

(b)          Second, to the establishment of any Reserves which the Liquidator
shall determine in its commercially reasonable judgment to be reasonably
necessary for contingent, unliquidated or unforeseen Liabilities or obligations
of the Company or its Subsidiaries or the Members arising out of or in
connection with the Company or its Subsidiaries. Such Reserves may, in the
commercially reasonable discretion of the Liquidator, be paid over to a national
bank or national trust company selected by the Liquidator and authorized to
conduct business as an escrowee to be held by such bank or trust company as
escrowee for a period as reasonably determined by the Liquidator for the
purposes of disbursing such Reserves to satisfy the Liabilities and obligations
described above, and at the expiration of such period distributing any remaining
balance as provided hereinafter in this Section 7.5.1; then

 

(c)          Third, subject to Section 2.3, to the Members in accordance with
Section 3.1.3.

 

7.5.2        Notwithstanding Section 7.5.1, in the event that the Liquidator
determines that an immediate sale of all or any portion of the Company Assets
would cause undue loss to the Members, the Liquidator, in order to avoid such
loss to the extent not then prohibited by the Act, may either defer liquidation
of and withhold from distribution for a reasonable time any Company Assets
except those necessary to satisfy, including the provision of reasonable
Reserves for, the Company’s debts and obligations, or distribute the Company
Assets to the Members in kind in a manner otherwise in accordance with the
distribution procedure of Section 7.5.1.

 

ARTICLE 8
MISCELLANEOUS

 

8.1         Amendments.

 

8.1.1        Each Additional Member and Substitute Member shall become a
signatory hereto by signing a counterpart signature page to this Agreement, and
such other instruments, in such manner, as the Managing Member shall determine.
By so signing, each Additional Member and Substitute Member, as the case may be,
shall be deemed to have adopted and to have agreed to be bound by all of the
provisions of this Agreement.

 

8.1.2        In addition to amendments specifically authorized herein,
amendments may be made to this Agreement from time to time by the Managing
Member, without the consent of any other Member: (a) to delete or add any
provision of this Agreement required to be so deleted or added by any federal or
state law, rule or regulation (provided that any such amendment may not
adversely affect the Economic Interest or other material rights of any Member
without such Member’s consent); (b) to take such actions as may be necessary (if
any) to insure that the Company will be treated as a partnership for federal
income tax purposes (provided that any such amendment may not adversely affect
the Economic Interest of any Member without such Member’s consent); and (c) to
reflect the admission of any Additional Member pursuant to Section 2.5 or
Substitute Member pursuant to Section 6.6. Notwithstanding the foregoing, no
such amendment may be made without the consent of all Members to be adversely
affected to the extent that such amendment would: (i) adversely modify the
limited liability of a Member, or (ii) cause a disproportionate reduction in the
Percentage Interest of any Member relative to other similarly situated Members
except as otherwise expressly provided in this Agreement. All other amendments
shall require the approval of each Member.

  

28

 

 

8.1.3         In making any amendments, there shall be prepared and filed by, or
for, the Managing Member such documents and certificates as may be required
under the Act and under the laws of any other jurisdiction applicable to the
Company.

 

8.2         Member Representations and Warranties; Indemnification.

 

8.2.1        Representations and Warranties. Each Member (solely on behalf of
itself and not with respect to any other Member) hereby represents, warrants,
covenants and acknowledges as follows to the Company and the other Member(s):

 

(a)          Such Member is duly incorporated, organized or formed (in the event
such Member is not a corporation), validly existing and in good standing under
the laws of its state of incorporation, organization or formation (as the case
may be). Such Member has the requisite power and authority to own its property
and to carry on its business as now conducted, to the extent material to its
rights and obligations under this Agreement. Such member is in compliance with
all Requirements of Law to the extent material to its rights and obligations
under this Agreement.

 

(b)          Such Member has all requisite power and authority, and the legal
right, to enter into this Agreement, to consummate the transactions contemplated
hereby and to perform its obligations hereunder in accordance with the terms and
provisions hereof.

 

(c)          All acts and other proceedings required to be taken by such Member
to authorize the execution, delivery and performance of this Agreement and the
consummation of the transactions contemplated hereby have been duly and properly
taken.

 

(d)          This Agreement has been duly executed and delivered by such Member
and constitutes the valid and binding obligation of such Member, enforceable
against it in accordance with its terms, except as enforceability may be
affected by (i) the effect of bankruptcy, insolvency, reorganization, moratorium
or other similar laws relating to or affecting the rights of creditors; (ii) the
effect of general principles of equity and the limitation of certain remedies by
certain equitable principles of general applicability; and (iii) the fact that
the rights to indemnification hereunder may be limited by applicable laws,
including federal or state securities laws.

 

(e)          The execution, delivery and performance by such Member of this
Agreement and the transactions contemplated hereby will not constitute a
material breach of any term or provision of, or a material default under (i) any
outstanding indenture, mortgage, loan agreement or other similar contract or
agreement to which such Member or any of its Affiliates is a party or by which
it or any of its Affiliates or its or their property is bound; (ii) its
certificate or articles of incorporation or bylaws or other governing documents;
(iii) any material applicable law; or (iv) any material order, writ, judgment or
decree having applicability to it.

 

29

 

 

(f)          Such Member has obtained all approvals and consents required to be
obtained by it in connection with the execution and delivery of this Agreement
and the consummation of the transactions contemplated to occur on the Effective
Date from all Persons having approval or consent rights, and has made all
material filings and registrations, required from or by any governmental body,
authority, bureau or agency in connection with the execution and delivery of
this Agreement and the consummation of the transactions contemplated hereby.

 

(g)          Except as set forth on Schedule 8.2.1(g) hereto, such Member has
not incurred any obligation to a broker or finder for payment of any commission
or fee in connection with the execution and delivery of this Agreement and the
consummation of the transactions contemplated hereby, including its admission as
a Member, for which the Company or any other Member may become liable.

 

(h)          To the extent applicable to such Member, to such Member’s actual
knowledge, such Member has complied in all material respects with the
International Money Laundering Abatement and Anti-Terrorist Financing Act of
2001, which comprises Title III of the Uniting and Strengthening America by
Providing Appropriate Tools Required to Intercept and Obstruct Terrorism Act of
2001 (the “Patriot Act”) and the regulations promulgated thereunder, and the
rules and regulations administered by the U.S. Treasury Department’s Office of
Foreign Assets Control (“OFAC”). Neither such Member nor any of its Affiliates
is included on the List of Specially Designated Nationals and Blocked Persons
maintained by OFAC, or a resident in, or organized or chartered under the laws
of, (A) a jurisdiction that has been designated by the U.S. Secretary of the
Treasury under Section 311 or 312 of the Patriot Act as warranting special
measures due to money laundering concerns or (B) any foreign country that has
been designated as non-cooperative with international anti-money laundering
principles or procedures by an intergovernmental group or organization, such as
the Financial Action Task Force on Money Laundering, of which the United States
is a member and with which designation the United States representative to the
group or organization continues to concur.

 

(i)          Such Member is acquiring its Interest for its own account and not
for the account of any other Person. Such Member is acquiring its Interest
solely for investment and not with a view to, or for resale in connection with,
the distribution or other disposition thereof either currently or after the
passage of a fixed or determinable period of time or upon the occurrence or
non-occurrence of any predetermined event or circumstance in violation of the
Securities Act. Such Member understands that the sale and issuance of the
Interests has not been registered under the Securities Act, applicable state
securities laws or the securities or similar law of any other jurisdiction
whatsoever, and, therefore, the Interests cannot be Transferred or otherwise
disposed of unless they are subsequently registered under the securities and
similar laws of each applicable jurisdiction, or unless exemptions from such
registration requirements are available. Such Member understands that Transfers
and dispositions of its Interest can be made only (i) as explicitly permitted or
contemplated under the terms of this Agreement and (ii) in compliance with the
Securities Act and the rules and regulations of the Securities and Exchange
Commission promulgated thereunder and all applicable state securities and “blue
sky” laws; and such Member understands that the Company is under no obligation
to register the offer or sale of any Interests in any jurisdiction whatsoever or
to assist such Member in complying with any exemption from registration under
the securities or similar laws of any jurisdiction whatsoever.

 

30

 

 

(j)          Such Member understands and is able to bear the economic risk of an
investment in the Company and can afford to sustain a total loss on such
investment. Such Member further acknowledges that there are substantial risks in
the investment (including loss of the entire amount of such investment), that
such Member is capable of evaluating the merits and risks of the investment in
the Company and such Member has evaluated such risks and determined that the
Interest is a suitable investment for such Member. Such Member has such
knowledge and experience in business, financial and tax matters, including
experience in investing in non-listed and non-registered securities, and is a
sophisticated investor capable of utilizing the information made available to it
in connection with its investment in the Interest to evaluate the merits and
risks of its investment in the Company, to make an informed investment decision
with respect thereto and to protect its interests in connection with such
investment.

 

(k)          Such Member, or each beneficial owner (within the meaning of Rule
501 of Regulation D promulgated under the Securities Act (“Regulation D”)) of
such Member, (i) is an “accredited investor” as such term is defined in Rule 501
of Regulation D and (ii) has not been formed for the specific purpose of
acquiring the Interest unless each beneficial owner of such entity is qualified
as an accredited investor within the meaning of Rule 501 of Regulation D.

 

(l)          Such Member and its legal, tax, accounting and financial advisers
have been provided an opportunity to ask questions of and receive information
from a Person or Persons acting on behalf of the Company concerning the
investment in the Company, the Company Assets, the Company, and such other
matters as such Member and any of its advisors have deemed necessary or
desirable. All such questions have been answered to the full satisfaction of
such Member and any such advisors, and such Member has received all such
information requested, but such Member has in all events relied upon its own due
diligence in evaluating this Agreement, the Interests, the Communities and the
other Company Assets.

 

(m)          Such Member has consulted and been advised by its own legal counsel
and tax advisor in connection with, and acknowledges that no representations as
to potential profit, tax consequences of any sort (including the tax
consequences resulting from forming or operating the Company, conducting the
business of the Company, executing this Agreement, consummating the transactions
provided for herein, making Capital Contributions, being admitted to the
Company, receiving or not receiving distributions from the Company, or being
allocated Net Profits and Net Losses), cash flows or funds from operations or
yield, if any, with respect to the Company, have been made by the Company, any
Member or any Affiliate of any Member or any employee or representative thereof,
and that projections and any other financial information and documentation that
may have been in any manner submitted to such Member from any source shall not
constitute any representation or warranty of any kind or nature, express or
implied and such Member is not relying on any representations or warranties of
any other Person in connection therewith, including the Company or any other
Member.

 

31

 

 

8.2.2        Member Indemnity. Each Member agrees to indemnify, defend and hold
harmless the Company, the other Member, each officer, director, agent and
Affiliate of the Company and each other Member from and against any and all
Liabilities arising out of or based upon any false representation or warranty
made by such Member herein or in any other document or certificate delivered to
the Company by such Member in connection with such Member’s acquisition of its
Interest.

 

8.2.3        Survival. Notwithstanding anything to the contrary in this
Agreement, the provisions of this Section 8.2 shall survive: (a) a Member’s
ceasing to be a member of the Company for any reason, and (b) expiration or
sooner termination of this Agreement.

 

8.3         Entire Agreement. This Agreement, the OpCo LLC Agreement and the
other Transaction Documents constitute the entire agreement between the parties
hereto pertaining to the subject matter hereof and thereof and fully supersede
any and all prior or contemporaneous agreements or understandings between the
parties hereto pertaining to the subject matter hereof and thereof.

 

8.4         Further Assurances. Each of the parties hereto does hereby covenant
and agree on behalf of itself, its successors, and its assigns, without further
consideration, to prepare, execute, acknowledge, file, record, publish, and
deliver such other instruments, documents and statements, and to take such other
action as may be required by law or reasonably necessary to effectively carry
out the purposes of this Agreement.

 

8.5         Notices. Any notice, consent, payment, demand, or communication
required or permitted to be given by any provision of this Agreement shall be in
writing and shall be (a) delivered personally to the Person or to an officer of
the Person to whom the same is directed, or (b) sent by electronic mail,
facsimile or registered or certified mail, return receipt requested, postage
prepaid, addressed as follows: if to the Company, to the Company at the address
set forth in Section 1.3 hereof, or to such other address as the Company may
from time to time specify by notice to the Members; if to a Member, to such
Member at the address set forth in Exhibit B, or to such other address as such
Member may from time to time specify by notice to the Company. Any such notice
shall be deemed to be delivered, given and received for all purposes as of: (i)
the date so delivered, if delivered personally, (ii) upon confirmed receipt, if
sent by facsimile or electronic mail, or (iii) on the date of receipt or refusal
indicated on the return receipt, if sent by registered or certified mail, return
receipt requested, postage and charges prepaid and properly addressed.

 

32

 

  

8.6         Tax Matters.

 

8.6.1        Sentio shall be designated and shall serve as “Tax Matters Partner”
(as defined in Code Section 6231), to oversee or handle matters relating to the
taxation of the Company.

 

8.6.2        The Member designated as “Tax Matters Partner” may make all
elections for federal income and all other tax purposes (including, without
limitation, pursuant to Section 754 of the Code) in accordance with this
Agreement, and as the Tax Matters Partner, such Member shall have the right and
obligation to take all actions authorized and required, respectively, by the
Code for the Tax Matter Partner.

 

8.6.3        Preparation of the income tax returns of the Company shall be the
responsibility of the Managing Member. If the Managing Member engages a
certified public accountant for the preparation and or review of any or all of
the income tax returns, the expense shall be a Company Expense.

 

8.7         Governing Law. This Agreement, including its existence, validity,
construction, and operating effect, and the rights of each of the parties
hereto, shall be governed by and construed in accordance with the laws of the
State of Delaware without regard to otherwise governing principles of choice of
law or conflicts of law.

 

8.8         Construction. The Members intend that this Agreement shall be
construed as if all parties prepared this Agreement.

 

8.9         Captions - Pronouns. Any titles or captions contained in this
Agreement are for convenience only and shall not be deemed part of the text of
this Agreement. All pronouns and any variations thereof shall be deemed to refer
to the masculine, feminine, neuter, singular or plural as appropriate.

 

8.10       Binding Effect. Except as otherwise expressly provided herein, this
Agreement shall be binding on and inure to the benefit of the Members, their
heirs, executors, administrators, successors and all other Persons hereafter
holding, having or receiving a Membership Interest or Economic Interest, whether
as Assignees, Substitute Members or otherwise.

 

8.11       Severability. In the event that any provision of this Agreement as
applied to any party or to any circumstance, shall be adjudged by a court to be
void, unenforceable or inoperative as a matter of law, then the same shall in no
way affect any other provision in this Agreement, the application of such
provision in any other circumstance or with respect to any other party, or the
validity or enforceability of the Agreement as a whole.

 

33

 

  

8.12       Confidentiality. Each Party hereto agrees that the provisions of this
Agreement, all understandings, agreements and other arrangements between and
among the parties, and all other non-public information received from or
otherwise relating to, the Company and the Company Assets shall be confidential,
and shall not be disclosed or otherwise released to any other Person (other than
another party hereto) without the written consent of the Managing Member. The
obligations of the parties hereunder shall not apply to: (a) the extent that the
disclosure of information otherwise determined to be confidential is required by
applicable law, or by any regulations or securities exchange listing rules
applicable to such party or its Affiliates, provided that (i) prior to
disclosing such confidential information, a party shall notify the Company
thereof, which notice shall include the basis upon which such party believes the
information is required to be disclosed; and (ii) such party shall, if requested
by the Company, provide reasonable cooperation with the Company to protect the
continued confidentiality thereof; (b) the disclosure of confidential
information to any financial advisors, attorneys, accountants, other
professional advisors, investors and Lenders of a Member who agree to hold
confidential such information substantially in accordance with this Section 8.12
or who are otherwise bound by a duty of confidentiality to such Member; (c) the
disclosure of the fact that SLR and Sentio are the owners of the Company; (d)
the disclosure of the fact that Sentio is the Managing Member and SLR is not;
and (e) such disclosures as may be contained in any public announcement approved
by both Sentio and SLR. Notwithstanding anything to the contrary in this
Agreement, the provisions of this Section 8.12 shall survive: (x) a Member’s
ceasing to be a member of the Company for any reason, and (y) the dissolution
and/or termination of the Company.

 

8.13       Interpretation. All references herein to Articles, Sections,
subparagraphs, Exhibits and addenda shall be deemed to be references to
Articles, Sections and subparagraphs of, and Exhibits and addenda to, this
Agreement unless the context shall otherwise require. All Exhibits and addenda
attached hereto shall be deemed incorporated herein as if set forth in full
herein. The words “include,” “includes” and “including” shall be deemed to be
followed by the phrase “without limitation.” The term “or” is not exclusive. The
word “extent” in the phrase “to the extent” shall mean the degree to which a
subject or other thing extends, and such phrase shall not mean simply “if.” The
words “date hereof” shall refer to the date set forth on the cover page of this
Agreement. All accounting terms not defined in this Agreement shall have the
meanings determined by United States generally accepted accounting principles as
in effect from time to time. 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 expressly provided herein, any agreement, instrument or statute
defined or referred to herein or in any agreement or instrument that is referred
to herein means such agreement, instrument or statute as from time to time
amended, modified or supplemented, including (in the case of agreements or
instruments) by waiver or consent and (in the case of statutes) by succession of
comparable successor statutes and references to all attachments thereto and
instruments incorporated therein. Time is of the essence of the provisions
hereof.

 

8.14       No Third Party Beneficiaries. None of the provisions of this
Agreement shall be for the benefit of or be enforceable by any creditor of the
Company or by any creditor of any Member except as expressly provided in Section
2.3 with respect to an Affiliate of a Member that is a Lending Member. This
Agreement is not intended to confer any rights or remedies hereunder upon, and
shall not be enforceable by, any Person other than the parties hereto and,
solely with respect to the provisions of (a) Sections 5.6 and 8.2.2 each
Indemnitee and each other indemnified Person addressed therein, and (b) Section
2.3 any Affiliate of a Member that is a Lending Member.

 

34

 

 

8.15       No Right of Setoff (Except for Amounts Owing Under OpCo LLC
Agreement). No Member will assert (or will permit its Affiliates to assert) any
right of setoff against any other Member or such other Member’s Affiliates for
any normal trade activity except to the extent otherwise specifically permitted
herein. Notwithstanding the foregoing or anything in this Agreement to the
contrary, Sentio shall have the right to, or cause the Company to, offset any
amounts otherwise owing to SLR for the Purchase Price upon exercise of a Call
Right pursuant to Section 6.2 hereof against any amounts owing by SLR or any
Affiliate of SLR to Sentio or any Affiliate of Sentio under the OpCo LLC upon
the exercise of a “Call Right” (as defined in the OpCo LLC Agreement).

 

8.16       Counterparts. This Agreement may be executed in any number of
multiple counterparts, each of which shall be deemed to be an original copy and
all of which shall constitute one agreement, binding on all parties hereto.
Delivery of an executed counterpart of a signature page to this Agreement by
facsimile or other electronic means (including in “PDF” format) shall be
effective as delivery of a manually executed counterpart of this Agreement.

 

8.17       Mandatory Arbitration. Any controversy, dispute or claim of
whatsoever nature arising out of, in connection with, or in relation to the
interpretation, performance or breach of this Agreement (other than any
controversy, dispute or claim arising out of, in connection with, or in relation
to Section 5 of Exhibit F), including any claim based on contract, tort or
statute, shall be determined by final and binding, confidential arbitration by
the AAA in accordance with its then-existing Commercial Arbitration Rules, and
the sole arbitrator shall be selected in accordance with such AAA rules. Any
arbitration hereunder shall be governed by the United States Arbitration Act, 9
U.S.C. §§ 1-16 (or any successor legislation thereto), and judgment upon the
award rendered by the arbitrator may be entered by any state or federal court
having jurisdiction thereof. Neither the Members nor the arbitrator shall
disclose the existence, content or results of any arbitration hereunder without
the prior written consent of all Members except to the extent necessary to
enforce the award or required by applicable law; provided, however, that either
Member may disclose the existence, content or results of any such arbitration to
its partners, officers, directors, employees, agents, attorneys and accountants
and to any other Person to whom disclosure is required by applicable law,
including pursuant to an order of a court of competent jurisdiction, or by any
regulations or securities exchange listing rules applicable to such party or its
Affiliates. Unless otherwise agreed by the parties, any arbitration hereunder
shall be held at a neutral location selected by the arbitrator in the
metropolitan area of Boston, Massachusetts. The cost of the arbitrator and the
expenses relating to the arbitration (exclusive of legal fees) shall be borne
equally by both Members unless otherwise specified in the award of the
arbitrator. Such fees and costs paid or payable to the arbitrator shall be
included in costs and reasonable attorneys’ fees for purposes of Section 8.18
and the arbitrator shall specifically have the power to award to the prevailing
party pursuant to such Section such party’s costs and expenses incurred in such
arbitration, including fees and costs paid to the arbitrator. Each Member’s
obligation under this Section 8.17 will survive the dissolution, liquidation and
winding up of the Company.

 

8.18       Attorney's Fees. If any action at law or in equity is necessary to
enforce or interpret the terms of this Agreement or to resolve any dispute under
this Agreement, the losing party shall pay the attorney’s fees, costs and
necessary disbursements of the prevailing party in addition to any other relief
to which such prevailing party may be entitled.

 

35

 

 

8.19       Injunctive Relief and Enforcement. In the event of a breach by a
Member of the terms of this Agreement, the Company or the other Members shall be
entitled to institute, legal proceedings to obtain damages for any such breach
(in accordance with Section 8.17), or to enforce the specific performance of
this Agreement by such Member and to enjoin such Member from any further
violation of this Agreement and to exercise such remedies cumulatively or in
conjunction with all other rights and remedies provided by law. Each Member
acknowledges that money damages for any breach by such Member of the provisions
of this Agreement would not be a sufficient remedy for any breach of this
Agreement by such Member and that in addition to all other remedies the Company
and the non-breaching Members shall be entitled to specific performance and
injunctive or other equitable relief for any such breach.

 

8.20       Appointment of Managing Member as Attorney-in-Fact.

 

8.20.1      Each Member, including each Additional Member and Substitute Member,
by its execution of this Agreement, irrevocably constitutes and appoints the
Managing Member as its true and lawful attorney-in-fact with full power and
authority in its name, place, and stead to execute, acknowledge, deliver, swear
to, file, and record at the appropriate public offices such certificates and
other instruments, and all amendments thereto, which the Managing Member deems
appropriate to form, qualify or continue the Company as a limited liability
company (or other entity in which the Members will have limited liability
comparable to that provided in the Act), in the jurisdictions in which the
Company may conduct business or in which such formation, qualification, or
continuation is, in the opinion of the Managing Member, necessary or desirable
to protect the limited liability of the Members or operate the Company.

 

8.20.2      The appointment by all Members of the Managing Member as
attorney-in-fact shall be deemed to be a power coupled with an interest, in
recognition of the fact that each of the Members under this Agreement will be
relying upon the power of the Managing Member to act as contemplated by this
Agreement in any filing and other action by it on behalf of the Company, shall
survive the Incapacity of any Person hereby giving such power, and the transfer
or assignment of all or any portion of the Interest of such Person in the
Company, and shall not be affected by the subsequent Incapacity of the
principal; provided, however, that in the event of the assignment by a Member of
all of its Interest in the Company, the foregoing power of attorney of an
assignor Member shall survive such assignment only until such time as the
Assignee shall have been admitted to the Company as a Substitute Member and all
required documents and instruments shall have been duly executed, filed, and
recorded to effect such substitution.

 

8.21       Force Majeure. The parties to this Agreement shall be excused from
performance of their obligations (other than any obligation to pay money under
this Agreement) where they are prevented from so performing by revolutions,
terrorism or similar disorders, wars, acts of enemies, strikes, fires, floods,
acts of God, or, without limiting the foregoing, by any cause not within the
control of the party whose performance is interfered with, and which, by the
exercise of commercially reasonable diligence, the party is unable to prevent.
All parties shall perform such parts or aspects of their obligations as are not
interfered with by these causes.

 

8.22       Limitation On Creditors’ Interests. No creditor who makes a
non-recourse loan to the Company shall have or acquire at any time, as a result
of making such loan, any direct or indirect interest in the profits, capital, or
property of the Company, other than as a secured creditor.

 

36

 

 

8.23       No Liability For Return of Capital. No Member shall be personally
liable for the return of all or any part of the Capital Contributions of the
other Members. Any such return shall be made solely from Company Assets.

 

(Signature Page Follows)

 

37

 

 

IN WITNESS WHEREOF, the parties hereto have duly executed this Agreement as of
Effective Date set forth above.

 

Sentio:       SENTIO BOSTON, LLC,   a Delaware limited liability company      
By: /s/ John Mark Ramsey       Name: John Mark Ramsey       Title: Authorized
Signatory       SLR:       OAKTREE SLR, LLC   a Massachusetts limited liability
company       By: /s/ Robert F. Larkin       Name: Robert F. Larkin       Title:
Manager  

 

 

 

 

EXHIBIT A

 

CAPITALIZED TERMS

 

Capitalized words and phrases used and not otherwise defined in this Agreement
shall have the following meanings:

 

“Acquiring Member” is defined in Section 6.3(b).

 

“Act” is defined in the Preamble.

 

“Additional Members” is defined in Section 2.5.

 

“Affiliate”

 

means, with reference to a specified Person, any Person which, directly or
indirectly (including through one or more intermediaries), controls or is
controlled by or is under common control with any other Person, including any
Subsidiary of a Person. For purposes of this definition and the definition of
“Controlling Person” below, the term “control” (including the correlative
meanings of the terms “controlled by” and “under common control with”), as used
with respect to any Person, shall mean the possession, directly or indirectly
(including through one or more intermediaries), of the power to direct or cause
the direction of the management and policies of such Person, through the
ownership or control of voting securities, partnership interests or other equity
interests, by contract or otherwise.

 

“Agreement” is defined in the Preamble.

 

“Assignee” means any Person (a) to whom a Member (or Assignee thereof) Transfers
all or any part of its Interest in accordance with the terms of this Agreement,
and (b) that has not been admitted to the Company as a Substitute Member
pursuant to Section 6.6.

 

“Bankruptcy Event” means, with respect to any Member, (a) such Member commences
a voluntary proceeding seeking liquidation, reorganization or other relief of or
against such Member under any bankruptcy, insolvency or other similar law now or
hereafter in effect, (b) such Member is adjudged as bankrupt or insolvent, or a
final and non-appealable order for relief under any bankruptcy, insolvency or
similar law now or hereafter in effect has been entered against such Member, (c)
such Member executes and delivers a general assignment for the benefit of the
Member’s creditors, (d) such Member files an answer or other pleading admitting
or failing to contest the material allegations of a petition filed against such
Member in any proceeding of the nature described in clause (b) above, (e) such
Member seeks, consents to or acquiesces in the appointment of a trustee,
receiver or liquidator for such Member or for all or any substantial part of
such Member’s properties or assets, (f) any proceeding seeking liquidation,
reorganization or other relief under any bankruptcy, insolvency or other similar
law now or hereafter in effect that has not been dismissed within one hundred
twenty (120) days after the commencement thereof with respect to such Member,
(g) the appointment without such Member’s consent or acquiescence of a trustee,
receiver or liquidator has not been vacated or stayed within ninety (90) days of
such appointment with respect to such Member, or (h) an appointment referred to
in clause (g) above is not vacated within 90 days after the expiration of any
such stay.

 

A-1

 

 

“Business Day” means each Monday, Tuesday, Wednesday, Thursday and Friday which
is not a day on which national banks in the City of New York, New York are
authorized or obligated, by law or executive order, to close.

 

“Call Right” is defined in Section 6.2.1.

 

“Call Right Trigger Event” is defined in Section 6.2.1.

 

“Capital Contributions” means with respect to any Member at any time, the
aggregate amount of money and the initial Gross Asset Value of any property
(other than money) contributed, or deemed contributed, by such Member to the
Company as of such time, including any initial Capital Contribution and
additional Capital Contribution.

 

“Capital Event” means any sale, exchange, condemnation, insurance recovery, or
other disposition of Company Assets, or a loan or a refinancing of a loan to the
extent the proceeds of such loan are made available to the Company, but excludes
incidental sales occurring in the ordinary course of business.

 

“Cash Available for Distribution” means at the date of determination, all
Company cash receipts (excluding the proceeds from Capital Contributions or
Default Loans by any Member), after deducting payments for Company Expenses,
payments required to repay any debts or other obligations of the Company,
capital expenditures, deferred amortization and any other amounts set aside for
the restoration, increase or creation of Reserves, as determined by the Managing
Member, in its sole discretion.

 

“Certificate” means the Certificate of Formation for the Company filed with the
Secretary of State of the State of Delaware, pursuant to Section 18-201 of the
Act, as the same has been or may hereafter be amended and restated.

 

“Code” means the Internal Revenue Code of 1986, as amended, or any corresponding
provision or provisions of prior or succeeding law. Any reference herein to a
specific section or sections of the Code shall be deemed to include a reference
to any corresponding provision of future law.

 

“Community” means each independent living, congregate care, skilled nursing,
assisted living and/or Alzheimer’s care facility/community identified on Exhibit
C hereto, including the real property and improvements thereon and relating
thereto and associated personal property owned directly or indirectly by the
Company, including through the applicable Subsidiary of the Company
(collectively, the “Communities”).

 

“Company” is defined in the Preamble.

 

“Company Assets” means all direct and indirect assets and property, whether
tangible or intangible (including monies) and whether real, personal, or mixed,
from time to time owned by or held for the benefit of the Company, including all
direct or indirect interests in the Communities.

 

A-2

 

 

“Company Expenses” means, with respect to any fiscal period, the amount of
expenses accrued or paid by or on behalf of the Company in the ordinary course
of business during the period, including without limitation, all fees to
Manager[s] pursuant to Management Agreement[s], cash expenses, such as insurance
premiums, legal, accounting, and bookkeeping. Company Expenses shall include the
actual cost of goods, materials, and administrative services used for or by the
Company, whether incurred by the Managing Member, any Affiliate thereof, or any
non-Affiliate in performing functions set forth in this Agreement reasonably
requiring the use of such goods, materials, or administrative services.

 

“Competing Community” means any assisted living facility/community, senior
independent living facility/community or memory care facility/community
operating or under construction or development within a five (5) mile radius
outward from the outside boundary of any Community.

 

“Controlling Person” means, with respect to any Person, (a) any other Person(s)
which, directly or indirectly (including through one or more intermediaries),
controls such Person, including any partners, shareholders, principals, members,
trustees and/or beneficiaries of any such Person(s) to the extent the same
control such Person, and (b) any other Person(s) which controls, directly or
indirectly (including through one or more intermediaries), any other Controlling
Person(s).

 

“Credit Arrangements” is defined in Section 2.9.

 

“Credit Facility” means the loan made to the “Borrowers” under the Credit
Facility Agreement in the original principal amount of $10,885,000, which loan
is secured in part by the Communities or pursuant to which one or more of the
Communities is subject to a negative pledge in accordance with the Credit
Facility Documents.

 

“Credit Facility Agreement” means that certain Loan Agreement dated as of
December ___, 2013 by and among (i) the “Borrower” thereunder, and (ii) CBRE
Capital Markets, Inc., as the same may have been or may from and after the
Effective Date be further amended, restated, modified or supplemented from time
to time.

 

“Credit Facility Documents” means, collectively, the Credit Facility Agreement
and the other documents and instruments executed in connection with the Credit
Facility Agreement and the Credit Facility.

 

“Default Contribution Notice” is defined in Section 2.3.1.

 

“Default Loan” is defined in Section 2.3.1.

 

A-3

 

 

“Default Loan Term” is defined in Section 2.3.3.

 

“Default Loan Rate” means the then applicable Prime Rate plus 10% per annum;
provided, however, that in no event shall the Default Loan Rate exceed the
highest lawful rate of interest allowable under applicable law.

 

“De Minimis Member” is defined in Section 2.3.8.

 

“Due Date” is defined in Section 2.2.3.

 

“Economic Interest” means a Person’s right to share in the Net Profits, Net
Losses, or similar items of, and to receive distributions from, the Company, but
does not include any other rights of a Member including, without limitation, the
right to vote or to participate in the management of the Company, or, except as
specifically provided in this Agreement or required under the Act, any right to
information concerning the business and affairs of the Company.

 

“Effective Date” is defined in the Preamble.

 

“Fair Market Value” means, with respect to the Company Assets, the fair market
value thereof determined in accordance with the procedures set forth in Exhibit
F and this definition. The Fair Market Value of the Company Assets shall in all
events be obtained and determined by (i) assuming that the Communities are
unencumbered by any lease (including the applicable OpCo Lease) or management
agreements (including the applicable Management Agreement), but imputing for
purposes of such determination a fair market value management fee that would be
paid to a third party manager to manage each such Community, and (ii) taking
into account the positive or negative effect on the value of the Company Assets
attributable to such factors as the interest rate, amortization schedule,
maturity date, prepayment penalty and other terms and conditions of any
encumbrance placed thereon by the Company or the applicable Subsidiary of the
Company at the time of such determination.

 

“Gross Revenues” shall mean and include all revenue and income of any kind
received or collected from the operation of the Communities, and received as
rent, or other charges for use or occupancy of space or facilities or services
in the Communities in a specific period, net of bad debt/write offs,
(a) including but not limited to, (to the extent applicable to the Communities)
Medicare, Medicaid (however denominated under State law); CHAMPUS/Tricare, Blue
Cross and/or Blue Shield, managed care plans, or other private insurance plans
or employee assistance programs; parking revenues; income from vending machines
photocopy machines, and other such devices; late charges; interest on past due
rentals; payments under any licenses, concessions, or other agreements for
advertising signs, telecommunications services, antennas, or like devices; all
lease modification, amendment, surrender, or cancellation payments; all proceeds
in lieu of rental revenues from any business interruptions insurance policies;
all escalation payments; and all payments made by residents, or other users of
the Communities for extra services, including, without limitation, the use of
any personal property used in connection with the Communities and the provision
of any healthcare or other personal services; but (b) excluding any and all
investment income, insurance proceeds (other than business interruption proceeds
as set forth in (a) above), litigation proceeds (other than relating to
collection actions), eminent domain awards or condemnation proceeds, proceeds
from the sale or disposition of capital assets, excise or sales or use taxes or
similar taxes imposed at the point of sale and collected directly from residents
or guests of the Communities, any cash refunds, rebates or discounts to
residents, security or resident fee deposits until such time as the same are
applied to current fees and other charges due and payable, gratuities to
employees of the Communities, proceeds of any sale of the Communities or any
financing transaction affecting the Communities, and dividends on insurance
policies.

 

A-4

 

 

“Imputed Closing Costs” means, with respect to the determination of the Purchase
Price pursuant to Exhibit F, an amount equal to six percent (6)% of the Fair
Market Value of the Company Assets, representing the estimated closing costs
that would normally be incurred by the Company or its Subsidiaries for title
insurance premiums, survey costs, brokerage commissions, and other customary
closing costs if the Company Assets were sold.

 

“Incapacity” means, (a) as to any Member who is an individual, the death, total
physical disability or entry by a court of competent jurisdiction adjudicating
such Member incompetent to manage his or her person or his or her estate; (b) as
to any Member that is a corporation or limited liability company, the filing of
a certificate of dissolution, or its equivalent, for the corporation or limited
liability company or the revocation of its charter; (c) as to any Member that is
a partnership, the dissolution and commencement of winding up of the
partnership; (d) as to any Member that is an estate, the distribution by the
fiduciary of the estate’s entire interest in the Company; (e) as to any trustee
of a trust that is a Member, the termination of the trust (but not the
substitution of a new trustee); or (f) as to any Member, a Bankruptcy Event
occurs with respect to such Member.

 

“Indemnitee” is defined in Section 5.6.1.

 

“Invested Capital” is defined in Section 2.6.1.

 

“Lender” means any third party lender extending credit to the Company or any of
its Subsidiaries.

 

“Lending Eligible Member” is defined in Section 2.3.1.

 

“Lending Member” is defined in Section 2.3.1.

 

“Liabilities” is defined in Section 5.6.1.

 

“Liquidator” is defined in Section 7.5.1.

 

“Major Decision” is defined in Section 5.2.1.

 

“Management Agreement” means, with respect to each Community, the Management
Agreement dated of even date with the Effective Date between the applicable
Subsidiary of OpCo LLC, as lessee, and Manager, as manager, with respect to the
management and operations of such Community, as the same may be amended,
modified or supplemented from time to time in accordance with the terms thereof.

 

“Manager” means Senior Living Residences, LLC, a Massachusetts limited liability
company.

 

A-5

 

 

“Managing Member” means, initially, Sentio, and any other Person that succeeds
to Sentio in such capacity.

 

“Material SLR Transaction” means the SLR Parties, or any of them, become a party
to, or participate in, or directly or indirectly consent to or approve, any
transaction or arrangement involving the direct or indirect investment in any
SLR Party by any Sentio Competitor; provided, however, that the following
transactions shall not be deemed a Material SLR Transaction to the extent they
are entered into by a SLR Party(ies) in the ordinary course of its (their)
business:

 

(a)          sale(s) of real property or other real estate assets, or leasehold
or joint venture interests held by the SLR Parties in such assets, or interests
of any SLR Party(ies) as a manager under a management agreement(s) relating to
such assets, provided that any such interests do not include, directly or
indirectly, corporate or other voting rights in, or other rights to participate
in the management of or otherwise control, any SLR Party (except as the
parenthetical clause in subparagraph (b) below permits);

 

(b)          entry into a joint venture agreement or management agreement with a
Sentio Competitor, provided that such joint venture agreement or management
agreement relates only to a particular property or properties and does not
include, directly or indirectly, corporate or other voting rights in, or other
rights to participate in the management of or otherwise control, any SLR Party
(other than, in the case of a joint venture agreement, any such voting rights
in, or any such rights to participate in the management of or otherwise control,
the joint venture that is governed by such joint venture agreement); or

 

(c)          obtaining customary mortgage or other financing from, or entering
into a lease with, a Sentio Competitor; provided that such financing arrangement
or lease relates only to a particular property or properties and does not
include, directly or indirectly, including as result of the exercise of any
remedies thereunder, corporate or other voting rights in, or other rights to
participate in the management of or otherwise control, any SLR Party (other than
as security for applicable financing, the pledge of the equity or similar
interest of the SLR Party that owns directly the particular property or
properties that are the subject of such financing).

 

Notwithstanding the foregoing, but subject to Sentio’s rights upon the
occurrence of a SLR Change of Control, the Members hereby acknowledge and agree
that the purchase by a Sentio Competitor of securities of a SLR Party in a
widely marketed underwritten public offering of such securities pursuant to an
effective registration statement filed with the Securities and Exchange
Commission shall not be considered a Material SLR Transaction.

 

A-6

 

 

“Material Default” means, with respect to any Member, any of (a) a default by
such Member specifically designated as a Material Default in Sections 5.7.3 or
6.1.1(a) of this Agreement, (b) the occurrence of a “Material Default” with
respect to any Affiliate of such Member under the OpCo LLC Agreement, (c) other
than defaults covered by clause (a) or (b), a default by such Member in the
performance or observance of any of its covenants or obligations under this
Agreement with respect to the payment of money (including, without limitation,
Required Capital Contributions) due hereunder which such default continues
beyond any applicable grace and cure periods, or if no such grace and cure
period shall be contained herein, which such default continues uncured for a
period of ten (10) days after written notice of the default is given by the
non-defaulting Member to the defaulting Member, (d) other than defaults covered
by clauses (a), (b) or (c) above, a default by such Member in the performance or
observance of any of its material covenants or obligations under this Agreement,
which such default continues beyond any applicable grace and cure periods, or if
no such grace and cure period shall be contained herein, which such default
continues uncured for a period of thirty (30) days after written notice of the
default is given by the non-defaulting Member to the defaulting Member, (e) any
act or omission by such Member that shall constitute fraud, willful misconduct
or gross negligence or the willful misapplication or misappropriation of funds
by a Member, (f) a Bankruptcy Event occurs with respect to such Member, or (g) a
material representation or warranty of such Member contained in this Agreement
being untrue in any material respect when made.

 

“Members” means the Persons owning Membership Interests, any Substitute Members
and any Additional Members, with each Member being referred to, individually, as
a “Member.”

 

“Membership Interest” or “Interest” means the entire ownership interest of a
Member in the Company at any particular time, including without limitation, the
Member’s Economic Interest, any and all rights to vote and otherwise participate
in the Company’s affairs, and the rights to any and all benefits to which a
Member may be entitled as provided in this Agreement, together with the
obligations of such Member to comply with all of the terms and provisions of
this Agreement.

 

“Non-Contributing Member” is defined in Section 2.3.1.

 

“OFAC” is defined in Section 8.2.1.

 

“OpCo LLC” means Sentio-SLR Boston TRS Portfolio LLC, a Delaware limited
liability company.

 

“OpCo LLC Agreement” means that certain Limited Liability Company Agreement of
OpCo LLC of even date with the Effective Date by and between Sentio Boston TRS
LLC, a Delaware limited liability company and Oaktree SLR, LLC, as members
thereof, as the same may be amended, modified or supplemented from time to time
in accordance with the terms thereof.

 

“OpCo Lease” means, with respect to each Community, the Lease of even date with
the Effective Date between the applicable Subsidiary of the Company, as lessor,
and the applicable Subsidiary of OpCo LLC, as lessee, for the lease of such
Community, as the same may be amended, modified or supplemented from time to
time in accordance with the terms thereof.

 

“Outside Agreement Date” is defined in Section 5 of Exhibit F.

 

“Outside Contribution Date” is defined in Section 2.3.1.

 

A-7

 

 

“Patriot Act” is defined in Section 8.2.1.

 

“Percentage Interest” means, with respect to each Member, initially the
percentage set forth opposite such Member’s name on Exhibit B attached hereto,
as the same may be amended or otherwise modified from time to time.

 

“Person” means and includes an individual, a corporation, a partnership, a
limited liability company, a trust, an unincorporated organization, a government
or any department or agency thereof, or any entity similar to any of the
foregoing.

 

“Portfolio Sale” means a sale of seventy-five percent (75%) or more of the
assets in the senior housing portfolio of Sentio Healthcare Properties, Inc.

 

“Prime Rate” means a rate equal to the annual rate on such date announced by the
Bank of New York to be its prime, base or reference rate for 90-day unsecured
loans to its corporate borrowers of the highest credit standing but in no event
greater than the maximum rate then permitted under applicable law. If the Bank
of New York discontinues its use of such prime, base or reference rate or ceases
to exist, the Managing Member shall designate the prime, base or reference rate
of another state or federally chartered bank based in New York to be used for
the purpose of calculating the Prime Rate hereunder.

 

“Purchase Agreement” is defined in the Recitals.

 

“Purchase Notice” is defined in Section 1 of Exhibit F.

 

“Purchase Price” is defined in Section 2 of Exhibit F.

 

“Qualified Appraiser” is defined in Section 5 of Exhibit F.

 

“Rate of Return” means, with respect to a Member as of a specified moment, the
annualized rate of return (calculated as provided below) achieved, with respect
to all Capital Contributions made by that Member, as a consequence of all
distributions made to that Member as of such moment (as the same may be
calculated by the Managing Member, in its reasonable discretion).

 

In determining the Rate of Return, the following shall apply:

 

(a)          All calculations shall assume that (i) the pertinent Capital
Contributions were made by the Member effective as of the last day of the
calendar month within which the member’s funds were made available to the
Company in immediately available funds or, in the case of SLR’s contribution of
the Communities pursuant to Section 2.1.2, the last day of the calendar month
within which the Effective Date occurred and (ii) the pertinent distributions
were made to the Member as of the last day of the calendar month within which
such distributions were treated as paid pursuant to this Agreement.

 

A-8

 

 

(b)          All distribution amounts shall be based on the amount of the
distribution prior to the application of any federal, state or local income tax
laws (including any laws requiring withholding or deductions).

 

(c)          The rate of return shall be expressed as an annual rate, but all
amounts shall be calculated to reflect the return that would be achieved were
such interest to compound on the last day of each calendar month. In other
words, a particular rate of return shall be deemed to be achieved only if the
distributions are sufficient to provide sums equal to the returns that would be
achieved by applying a monthly rate equal to 1/12 of the annual rate, with
interest compounding on the last day of each calendar month.

 

(d)          Neither the allocation of Net Profits or Net Losses, nor the
payment of any taxes by a Member, shall affect the calculation of the Rate of
Return.

 

(e)          The Managing Member shall apply such other principles as it
reasonably determines to be appropriate for calculating the Rate of Return in a
manner consistent with the intent of the foregoing. For example, for such
purpose the Managing Member may use the “XIRR” function in the most recent
version of Microsoft Excel software.

 

“REIT” means a real estate investment trust within the meaning of Sections 856
through 860 of the Code.

 

“REIT Member” means any Member that has elected and remains qualified to be
taxed as a REIT or who is an Affiliate of a Person who has elected and remains
qualified to be taxed as a REIT.

 

“Regulation D” is defined in Section 8.2.1.

 

“Regulations” means temporary and final Treasury Regulations promulgated under
the Code, as such regulations may be amended from time to time (including
corresponding provisions of succeeding Treasury Regulations).

 

“Reserves” means funds set aside or amounts allocated to reserves that shall be
maintained in amounts reasonably deemed sufficient by the Managing Member for
working capital, and to pay taxes, insurance, debt service, and other
liabilities, costs or expenses incident to the existence of the Company or its
Subsidiaries or the conduct of business by the Company or its Subsidiaries as
contemplated hereunder.

 

“Required Capital Contribution” is defined in Section 2.3.1.

 

“Requirement of Law” means, as to any Person, any law, treaty, rule or
regulation or determination of an arbitrator or a court or other governmental
authority, in each case applicable to or binding upon such Person or any of its
property or to which such Person or any of its property is subject.

 

“ROFO” is defined in Section 5.9.

 

A-9

 

 

“Right to Compete” is defined in Section 5.7.

 

“Securities Act” means the United States Securities Act of 1933, as amended, and
the rules and regulations promulgated thereunder.

 

“Sentio” is defined in the Preamble, and shall include its successors and
assigns.

 

“Sentio Competitor” means any (a) healthcare REIT (i.e., a REIT that principally
owns or provides financing for health care related properties (including
hospitals, out-patient centers and/or clinics, senior housing, senior apartments
or care facilities and/or medical office buildings)), (c) any Affiliate of such
healthcare REIT or (d) any other Person as to which, at the time of any Material
SLR Transaction of the type described in clause (a) of the definition thereof,
or the commencement of any arrangement of the type described in clause (b) of
the definition thereof, forty percent (40%) or more of the consolidated gross
revenues or consolidated net operating income of such Person and its
consolidated Affiliates (in each case, as determined in accordance with GAAP and
for the current fiscal year and/or the fiscal year preceding such current fiscal
year and/or the fiscal year following such current fiscal year of such Person
and its consolidated Affiliates) has historically been generated or received, or
on a pro forma basis (taking into account pending, announced and completed
transactions) is expected to be generated or received, in either case directly
or indirectly, from facilities or properties owned or controlled by a healthcare
REIT and/or its Affiliates.

 

“SLR” is defined in the Preamble, and shall include, subject to the provisions
of Article 6, its successors and assigns.

 

“SLR Change of Control” means with respect to any of SLR, Manager or its
Controlling Person(s), the occurrence of any of the following (whether directly
or indirectly, or in a single transaction or a series of transactions), as
applicable:

 

(a)          the sale of all or substantially all of such Person’s assets,
stock, membership or partnership interests other than to an Affiliate of such
Person but expressly excluding Transfers of ownership interests in SLR among
current SLR Members and to: a trust controlled by current SLR Members for estate
planning purposes; or upon the death of an owner of an interest in SLR; or

 

(b)          the merger, reorganization, share exchange, recapitalization,
restructuring or consolidation of such Person with any other Person, other than
(i) with an Affiliate of such Person or (ii) in connection with a transaction
that would result in the voting securities of such Person outstanding
immediately prior thereto to continue to represent (either by remaining
outstanding or by being converted into voting securities of the surviving
entity) at least 51% of the combined voting power of the voting securities of
such Person or such surviving entity outstanding immediately after such
transaction.

 

With respect to SLR, an “SLR Change of Control” shall also occur if neither
Robert Larkin nor Peter Mullin possess, directly or indirectly, the power to
direct or cause the direction of the management and policies of SLR, whether
through membership, ownership of voting securities, by contract or otherwise.

 

A-10

 

 

With respect to Manager, an an “SLR Change of Control” shall also occur if
neither Robert Larkin nor Peter Mullin oversee and manage the day-to-day
operations of the Manager.

 

“SLR Consent” means the express written consent of SLR.

 

“SLR Party” means SLR or any Affiliate of SLR (collectively, the “SLR Parties”).

 

“Subsidiary” means, with respect to any Person, any Affiliate of such Person
which is directly or indirectly, through one or more intermediaries, controlled
by such Person. Without limiting the foregoing, with respect to the Company,
“Subsidiary” includes those initial Subsidiaries of the Company set forth on
Exhibit C hereto.

 

“Substitute Member” means any Person (a) to whom a Member (or Assignee thereof)
Transfers all or any part of its Interest, and (b) which has been admitted to
the Company as a Substitute Member pursuant to Section 6.6.

 

“Transaction Documents” means the “Documents” as set forth in the Purchase
Agreement.

 

“Transfer” means sale, exchange, assignment, pledge, transfer, gift,
hypothecation, mortgage, encumbrance or other form of disposition, directly or
indirectly, by operation of law or otherwise. The term “Transferred” shall have
a correlative meaning.

 

“Treasury Regulations” means proposed, temporary and final Treasury Regulations
promulgated under the Code, as such regulations may be amended from time to time
(including corresponding provisions of succeeding Treasury Regulations).

 

A-11

 

 

EXHIBIT B

 

MEMBERS, INITIAL INVESTED CAPITAL BALANCE AND PERCENTAGE INTERESTS

 

Name and Address of Members  Initial
Invested
Capital
Balance   Percentage
Interest  SENTIO BOSTON LLC
Attn: John Mark Ramsey
Attn: Scott Larche
189 S. Orange Ave., Suite 1700
Orlando, Florida 32801
Telephone: 407-999-2426
Fax: (407) 999-5210   $[__________]    95%             OAKTREE SLR, LLC
c/o Robert F. Larkin and
Peter G. Mullin
Senior Living Residences, LLC
388 East Eighth Street
South Boston, MA 02127
Telephone: 617-269-3757
Fax: 617.268.1380   $[__________]    5%

 

B-1

 

 

EXHIBIT C

 

COMMUNITIES AND SUBSIDIARY OWNERS

 

Community Name  Address  Description  Subsidiary Fee Owner Compass on the Bay 
1380 Columbia Road, Boston MA  39 unit assisted living and memory care
residence  Compass Landlord, LLC Standish Village  1190 Adams Street Dorchester,
MA  85 unit assisted living and memory care residence  Standish Village
Landlord, LLC

 

C-1

 

 

EXHIBIT D

 

LIST OF EXISTING COMPETING COMMUNITIES

 

None.

 

D-1

 

 

EXHIBIT E

 

ADDITIONAL ALLOCATION PROVISIONS

 

Section 1. Capitalized Terms. Capitalized words and phrases used and not
otherwise defined in this Agreement shall have the following meanings:

 

“Adjusted Capital Account” means, with respect to any Member, the balance, if
any, in such Member’s Capital Account as of the end of the relevant fiscal year,
after giving effect to the following adjustments:

 

(a)          Add to such Capital Account the following items:

 

(i)          The amount, if any, that such Member is obligated to contribute to
the Company within ninety (90) days after liquidation of such Member’s Interest;
and

 

(ii)         The amount that such Member is obligated to restore or is deemed to
be obligated to restore pursuant to Regulations Section 1.704-1(b)(2)(ii)(c) or
the penultimate sentence of each of Regulations Sections 1.704-2(g)(1) and
1.704-2(i)(5); and

 

(b)          Subtract from such Capital Account such Member’s share of the items
described in Regulations Sections 1.704-1(b)(2)(ii)(d)(4), (5) and (6).

 

The foregoing definition of Adjusted Capital Account is intended to comply with
the provisions of Regulations Section 1.704-1(b)(2)(ii)(d) and shall be
interpreted consistently therewith.

 

“Adjusted Capital Account Deficit” means, with respect to any Member, the
deficit balance, if any, in such Member’s Adjusted Capital Account.

 

“Capital Account” means the Capital Account maintained for each Member on the
Company’s books and records in accordance with the following provisions:

 

(a)          To each Member’s Capital Account there shall be added (i) such
Member’s Capital Contributions, (ii) such Member’s allocable share of Net
Profits and any items in the nature of income or gain that are specially
allocated to such Member pursuant to Exhibit E or other provisions of this
Agreement, and (iii) the amount of any Company liabilities assumed by such
Member or which are secured by any property distributed to such Member.

 

(b)          From each Member’s Capital Account there shall be subtracted (i)
the amount of (A) cash and (B) the Gross Asset Value of any Company Assets
(other than cash) distributed to such Member (other than any payment of
principal and/or interest to such Member pursuant to the terms of a loan made by
the Member to the Company or any fees paid to a Member) pursuant to any
provision of this Agreement, (ii) such Member’s allocable share of Net Losses
and any other items in the nature of expenses or losses that are specially
allocated to such Member pursuant to Exhibit E or other provisions of this
Agreement, and (iii) liabilities of such Member assumed by the Company or which
are secured by any property contributed by such Member to the Company.

 

E-1

 

 

(c)          In the event any Interest is Transferred in accordance with the
terms of this Agreement, the transferee shall succeed to the Capital Account of
the transferor to the extent it relates to the Interest so Transferred.

 

(d)          In determining the amount of any liability for purposes of
subparagraphs (a) and (b) above, there shall be taken into account Code Section
752(c) and any other applicable provisions of the Code and Regulations.

 

(e)          The foregoing provisions and the other provisions of this Agreement
relating to the maintenance of Capital Accounts are intended to comply with
Regulations Sections 1.704-1(b) and 1.704-2 and shall be interpreted and applied
in a manner consistent with such Regulations. In the event that the Managing
Member shall determine that it is prudent to modify the manner in which the
Capital Accounts, or any additions or subtractions thereto, are computed in
order to comply with such Regulations, the Managing Member may make such
modification, provided that it is not likely to have a material effect on the
amounts distributable to any Member pursuant to Article 7 upon the dissolution
of the Company. The Managing Member shall also make (i) any adjustments that are
necessary or appropriate to maintain equality between the Capital Accounts of
the Members and the amount of Company capital reflected on the Company’s balance
sheet, as computed for book purposes, in accordance with Regulations Section
1.704-1(b)(2)(iv)(q), and (ii) any appropriate modifications in the event that
unanticipated events might otherwise cause this Agreement not to comply with
Regulations Sections 1.704-1(b) and 1.704-2.

 

“Company Minimum Gain” has the meaning set forth in Regulations Sections
1.704-2(b)(2) and 1.704-2(d)(1) for the phrase “partnership minimum gain.”

 

“Depreciation” means, for each fiscal year or other period, an amount equal to
the federal income tax depreciation, amortization or other cost recovery
deduction allowable with respect to an asset for such year or other period,
except that if the Gross Asset Value of an asset differs from its adjusted basis
for federal income tax purposes at the beginning of such year or other period,
Depreciation shall be an amount that bears the same ratio to such beginning
Gross Asset Value as the federal income tax depreciation, amortization or other
cost recovery deduction for such year or other period bears to such beginning
adjusted tax basis; provided, however, that if the federal income tax
depreciation, amortization or other cost recovery deduction for such year or
other period is zero, Depreciation shall be determined with reference to such
beginning Gross Asset Value using any reasonable method selected by the Managing
Member.

 

“Gross Asset Value” means, with respect to any asset, the asset’s adjusted basis
for federal income tax purposes, except as follows:

 

E-2

 

 

 (a)          The initial Gross Asset Value of any asset contributed by a Member
to the Company shall be the gross fair market value of such asset, as reasonably
determined and agreed to by the Managing Member and the contributing Member.

 

(b)          The Gross Asset Values of all Company Assets immediately prior to
the occurrence of any event described in subparagraph (i), subparagraph (ii),
subparagraph (iii) or subparagraph (iv) below shall be adjusted to equal their
respective gross fair market values, as reasonably determined by the Managing
Member using such reasonable method of valuation as it may adopt, as of the
following times:

 

(i)          the acquisition of an additional Interest (other than in connection
with the execution of this Agreement) by a new or existing Member in exchange
for more than a de minimis Capital Contribution, if the Managing Member
reasonably determines that such adjustment is necessary or appropriate to
reflect the relative interests of the Members in the Company;

 

(ii)         the distribution by the Company to a Member of more than a de
minimis amount of Company Assets as consideration for an Interest, if the
Managing Member reasonably determines that such adjustment is necessary or
appropriate to reflect the relative interests of the Members in the Company;

 

(iii)        the liquidation of the Company within the meaning of Regulations
Section 1.704-1(b)(2)(ii)(g); and

 

(iv)        at such other times as the Managing Member shall reasonably
determine necessary or advisable in order to comply with Regulations Sections
1.704-1(b) and 1.704-2.

 

(c)          The Gross Asset Value of any Company Asset distributed to a Member
shall be the gross fair market value of such asset on the date of distribution
as reasonably determined by the Managing Member.

 

(d)          The Gross Asset Values of Company Assets shall be increased (or
decreased) to reflect any adjustments to the adjusted basis of such assets
pursuant to Code Section 734(b) or Code Section 743(b), but only to the extent
that such adjustments are taken into account in determining Capital Accounts
pursuant to Regulations Section 1.704-1(b)(2)(iv)(m); provided, however, that
Gross Asset Values shall not be adjusted pursuant to this subparagraph (d) to
the extent that an adjustment pursuant to subparagraph (b) above is made in
connection with a transaction that would otherwise result in an adjustment
pursuant to this subparagraph (d).

 

(e)          If the Gross Asset Value of a Company Asset has been determined or
adjusted pursuant to subparagraph (a), subparagraph (b) or subparagraph (d)
above, such Gross Asset Value shall thereafter be adjusted by the Depreciation
taken into account with respect to such Company Asset for purposes of computing
Net Profits and Net Losses.

 

E-3

 

 

“Member Minimum Gain” means an amount, with respect to each Member Nonrecourse
Debt, equal to the Company Minimum Gain that would result if such Member
Nonrecourse Debt were treated as a Nonrecourse Liability, determined in
accordance with Regulations Section 1.704-2(i) with respect to “partner minimum
gain.”

 

“Member Nonrecourse Debt” has the meaning set forth in Regulations Section
1.704-2(b)(4) for the phrase “partner nonrecourse debt.”

 

“Member Nonrecourse Deductions” has the meaning set forth in Regulations Section
1.704-2(i) for the phrase “partner nonrecourse deductions.”

 

“Net Profits” or “Net Losses” means, for each fiscal year or other period, an
amount equal to the Company’s taxable income or loss for such year or period
determined in accordance with Code Section 703(a) (for this purpose, all items
of income, gain, loss or deduction required to be stated separately pursuant to
Code Section 703(a)(1) shall be included in taxable income or loss), with the
following adjustments:

 

(a)          Any income of the Company that is exempt from federal income tax
and not otherwise taken into account in computing Net Profits or Net Losses
pursuant to this definition of Net Profits and Net Losses shall be added to such
taxable income or loss;

 

(b)          Any expenditure of the Company described in Code Section
705(a)(2)(B) or treated as Code Section 705(a)(2)(B) expenditures pursuant to
Regulations Section 1.704-1(b)(2)(iv)(i), and not otherwise taken into account
in computing Net Profits or Net Losses pursuant to this definition of Net
Profits and Net Losses, shall be subtracted from such taxable income or loss;

 

(c)          Gain or loss resulting from any disposition of Company Assets where
such gain or loss is recognized for federal income tax purposes shall be
computed by reference to the Gross Asset Value of the Company Assets disposed
of, notwithstanding that the adjusted tax basis of such Company Assets differs
from its Gross Asset Value;

 

(d)          In lieu of the depreciation, amortization and other cost recovery
deductions taken into account in computing such taxable income or loss, there
shall be taken into account Depreciation for such fiscal year or other period;

 

(e)          To the extent an adjustment to the adjusted tax basis of any asset
included in Company Assets pursuant to Code Section 734(b) or Code Section
743(b) is required pursuant to Regulations Section 1.704-1(b)(2)(iv)(m)(4) to be
taken into account in determining Capital Accounts as a result of a distribution
other than in liquidation of a Member’s Interest, the amount of such adjustment
shall be treated as an item of gain (if the adjustment increases the basis of
the asset) or loss (if the adjustment decreases the basis of the asset) from the
disposition of the asset and shall be taken into account for the purposes of
computing Net Profits and Net Losses;

 

(f)          If the Gross Asset Value of any Company Asset is adjusted in
accordance with subparagraph (b) or subparagraph (c) of the definition of Gross
Asset Value, the amount of such adjustment shall be taken into account in the
taxable year of such adjustment as gain or loss from the disposition of such
asset for purposes of computing Net Profits or Net Losses; and

 

E-4

 

  

(g)          Notwithstanding any other provision of this definition of Net
Profits and Net Losses, any items that are specially allocated pursuant to
Exhibit E hereof shall not be taken into account in computing Net Profits or Net
Losses. The amounts of the items of Company income, gain, loss or deduction
available to be specially allocated pursuant to Exhibit E shall be determined by
applying rules analogous to those set forth in this definition of Net Profits
and Net Losses.

 

“Nonrecourse Deductions” has the meaning set forth in Regulations Sections
1.704-2(b)(1) and 1.704-2(c).

 

“Nonrecourse Liability” has the meaning set forth in Regulations Sections
1.704-2(b)(3) and 1.752-1(a)(2).

 

“Regulatory Allocations” is defined in Section 2.8 of this Exhibit E.

 

Section 2 Regulatory Allocations. Notwithstanding the provisions of Article 4,
the following special allocations shall be made in the following order of
priority:

 

2.1.          If there is a net decrease in Company Minimum Gain during a
Company taxable year, then each Member shall be allocated items of Company
income and gain for such taxable year (and, if necessary, for subsequent years)
in an amount equal to such Member’s share of the net decrease in Company Minimum
Gain, determined in accordance with Regulations Section 1.704-2(g)(2). This
Section 2.1 of this Exhibit E is intended to comply with the minimum gain
chargeback requirement of Regulations Section 1.704-2(f) and shall be
interpreted consistently therewith.

 

2.2.          If there is a net decrease in Member Minimum Gain attributable to
a Member Nonrecourse Debt during any Company taxable year, then each Member who
has a share of the Member Minimum Gain attributable to such Member Nonrecourse
Debt, determined in accordance with Regulations Section 1.704-2(i)(5), shall be
specially allocated items of Company income and gain for such taxable year (and,
if necessary, subsequent years) in an amount equal to such Member’s share of the
net decrease in Member Minimum Gain attributable to such Member Nonrecourse
Debt, determined in a manner consistent with the provisions of Regulations
Section 1.704-2(g)(2). This Section 2.2 of this Exhibit E is intended to comply
with the partner nonrecourse debt minimum gain chargeback requirement of
Regulations Section 1.704-2(i)(4) and shall be interpreted consistently
therewith.

 

2.3.          If any Member unexpectedly receives an adjustment, allocation, or
distribution of the type contemplated by Regulations
Section 1.704-1(b)(2)(ii)(d)(4), (5) or (6), then items of income and gain shall
be allocated to all such Members (in proportion to the amounts of their
respective Adjusted Capital Account Deficits) in an amount and manner sufficient
to eliminate the Adjusted Capital Account Deficit of such Member as quickly as
possible. It is intended that this Section 2.3 of this Exhibit E qualify and be
construed as a “qualified income offset” within the meaning of Regulations
Section 1.704-1(b)(2)(ii)(d) and shall be interpreted consistently therewith.

 

E-5

 

 

2.4.          If the allocation of any item of Net Losses to a Member as
provided in Section 4.1 would create or increase an Adjusted Capital Account
Deficit, there shall be allocated to such Member only that amount of such items
of Net Losses as will not create or increase an Adjusted Capital Account
Deficit. The allocated item that would, absent the application of the preceding
sentence, otherwise be allocated to such Member shall be allocated to the other
Members in accordance with their relative Percentage Interests, subject to the
limitations of this Section 2.4 of this Exhibit E.

 

2.5.          To the extent that an adjustment to the adjusted tax basis of any
Company Asset pursuant to Code Section 734(b) or Code Section 743(b) is
required, pursuant to Regulations Section 1.704-1(b)(2)(iv)(m)(2) or Regulations
Section 1.704-1(b)(2)(iv)(m)(4), to be taken into account in determining Capital
Accounts as the result of a distribution to a Member in complete liquidation of
its Interest, the amount of such adjustment to the Capital Accounts shall be
treated as an item of gain (if the adjustment increases the basis of the asset)
or loss (if the adjustment decreases such basis), and such gain or loss shall be
specially allocated to the Members in accordance with their interests in the
Company in the event that Regulations Section 1.704-1(b)(2)(iv)(m)(2) applies,
or to the Members to whom such distribution was made in the event that
Regulations Section 1.704-1(b)(2)(iv)(m)(4) applies.

 

2.6.          The Nonrecourse Deductions for each taxable year of the Company
shall be allocated to the Members in accordance with their respective Percentage
Interests.

 

2.7.          The Member Nonrecourse Deductions shall be allocated each year to
the Member that bears the economic risk of loss (within the meaning of
Regulations Section 1.752-2) for the Member Nonrecourse Debt to which such
Member Nonrecourse Deductions are attributable.

 

2.8.          The allocations set forth in this Section 2 of this Exhibit E (the
“Regulatory Allocations”) are intended to comply with certain requirements of
Regulations Sections 1.704-1(b) and 1.704-2(i).

 

Section 3. Tax Allocations.

 

3.1.          Except as provided in Section 3.2 of this Exhibit E, for income
tax purposes under the Code and the Regulations each Company item of income,
gain, loss, deduction and credit shall be allocated between the Members as its
correlative item of “book” income, gain, loss, deduction or credit is allocated
pursuant to Article 4 and this Exhibit E.

 

E-6

 

 

3.2.          Tax items with respect to Company Assets that are contributed to
the Company with a Gross Asset Value that varies from their basis in the hands
of the contributing Member immediately preceding the date of contribution shall
be allocated between the Members for income tax purposes pursuant to Regulations
promulgated under Code Section 704(c) so as to take into account such variation.
With respect to the Members’ initial Capital Contributions, the Company shall
account for such variation under any method approved under Code Section 704(c)
and the applicable Regulations as chosen by the Managing Member, including,
without limitation, the “traditional method” as described in Regulations Section
1.704-3(b). If the Gross Asset Value of any Company Asset, whenever acquired, is
later determined or adjusted pursuant to subparagraph (a), subparagraph (b) or
subparagraph (c) of the definition of “Gross Asset Value” in Section 1 of this
Exhibit E, subsequent allocations of income, gain, loss, deduction and credit
with respect to such Company Asset shall take account of any variation between
the adjusted basis of such Company Asset for federal income tax purposes and its
Gross Asset Value in the same manner as under Code Section 704(c) and the
Regulations promulgated thereunder under any method approved under Code Section
704(c) and the applicable Regulations as chosen by the Managing Member.
Allocations pursuant to this Section 3.2 of this Exhibit E are solely for
purposes of federal, state and local taxes and shall not affect, or in any way
be taken into account in computing, any Member’s Capital Account or share of Net
Profits, Net Losses and any other items or distributions pursuant to any
provision of this Agreement.

 

Section 4. Other Provisions.

 

4.1.          For any fiscal year or other period during which any part of a
Membership Interest or Economic Interest is Transferred between the Members or
to another Person, the portion of the Net Profits, Net Losses and other items of
income, gain, loss, deduction and credit that are allocable with respect to such
part of a Membership Interest or Economic Interest shall be apportioned between
the transferor and the transferee under any method allowed pursuant to Section
706 of the Code and the applicable Regulations as determined by the Managing
Member.

 

4.2.          In the event that the Code or any Regulations require allocations
of items of income, gain, loss, deduction or credit different from those set
forth in Article 4 or this Exhibit E, the Managing Member is hereby authorized
to make new allocations in reliance on the Code and such Regulations, and no
such new allocation shall give rise to any claim or cause of action by any
Member.

 

4.3.          The Members acknowledge and are aware of the income tax
consequences of the allocations made by Article 4 and this Exhibit E and hereby
agree to be bound by the provisions of Article 4 and this Exhibit E in reporting
their shares of Net Profits, Net Losses and other items of income, gain, loss,
deduction and credit for federal, state and local income tax purposes.

 

4.4.          All matters concerning the allocations and other determinations
provided for in Article 4 and this Exhibit E and any accounting procedures not
expressly provided for in this Agreement shall be determined by the Managing
Member in a manner consistent with the terms and intent of this Agreement.

  

E-7

 

 

EXHIBIT F

 

CALL PURCHASE PRICE

 

Section 1. Purchase Notice. Sentio may exercise its Call Right at any time after
a Call Right Trigger Event by providing written notice to SLR of Sentio’s desire
to do so (the “Purchase Notice”); provided that Sentio or its applicable
Affiliate concurrently therewith exercises its “Call Right” (as defined in the
OpCo LLC Agreement) in accordance with the terms of the OpCo LLC Agreement.

 

Section 2. Purchase Price. If Sentio is entitled to and delivers to SLR a
Purchase Notice, Sentio shall be obligated to purchase (or, at Sentio’s sole
election, to cause the Company to purchase), and SLR shall be obligated to sell,
all of the Interest of SLR for an amount equal to the Purchase Price. For the
purposes hereof, the “Purchase Price” shall be equal to that amount that SLR
would receive if, as of the effective date of the Purchase Notice, all of the
Company Assets were sold at their Fair Market Value, the Company had immediately
paid all Company debts and liabilities (including all amounts due and owing
under any Credit Arrangements, but specifically excluding any so-called
prepayment premiums or defeasance costs that would be due and payable in
connection with the prepayment of any such debts and liabilities prior to the
stated maturity therefor) and Imputed Closing Costs and distributed the net
proceeds of the sale and any other liquid assets of the Company among the
Members in accordance with the provisions of Sections 3.2 and 7.5 (without
regard to any other costs of liquidation or the establishment of any Reserves,
but assuming for such purposes that the ); provided in each case (regardless of
whether or not any Management Agreements remain in place) that the provisions of
Sections 3.1.3(h)(ii) (and not 3.1.3(h)(i)) shall apply.

 

Section 3. Escrow Arrangements. Upon delivery of a valid Purchase Notice, (a) a
binding contract shall be deemed to exist between SLR and Sentio with respect to
the sale and purchase of SLR’s Interest, and (b) the closing shall be held
pursuant to an escrow arrangement acceptable to SLR and Sentio in the exercise
of their reasonable judgment on a Business Day selected by Sentio not less than
twenty (20) days and not more than sixty (60) days after the determination of
the Fair Market Value of all of the Company Assets pursuant to Section 5 of this
Exhibit F. At the closing, (i) subject to the provisions of Section 8.15, Sentio
shall pay (or, at Sentio’s sole election, cause the Company to pay, provided
that Sentio shall be solely responsible for any Required Capital Contribution to
the Company in connection therewith) the Purchase Price by wire transfer of
immediately available funds (United States dollars) to an account designated in
writing by SLR; (ii) SLR shall deliver to Sentio or its designee (including, at
Sentio’s sole election, the Company) an assignment of all of SLR’s Interest,
which such assignment shall be free and clear of all legal and equitable claims
(other than the legal and equitable claims, if any, of Sentio pursuant to this
Agreement) and all liens and encumbrances; (iii) SLR and Sentio each shall (or,
at Sentio’s sole election, Sentio shall cause the Company to) execute an
agreement acceptable to such Members in the exercise of their reasonable
judgment whereby (x) each Member shall (or, at Sentio’s sole election, Sentio
shall cause the Company to) represent and warrant to the other that each is duly
organized, validly existing, has the necessary power and authority to consummate
the subject transactions and that the consummation of the subject transactions
requires no consents or approvals which have not been obtained, and (y) SLR
shall represent to Sentio (or, at Sentio’s sole election, the Company) that SLR
is the owner of its Interest free and clear of all liens and encumbrances and
that the Transfer is being made free and clear of all legal and equitable claims
(other than the legal and equitable claims of Sentio pursuant to this
Agreement); (iv) the purchase price to be paid by Sentio (or, at Sentio’s sole
election, the Company) shall be adjusted to account for, and fully repay, any
outstanding Default Loans (and any unpaid interest and any charges thereon)
owing by SLR; and (v) if applicable, the Members shall execute all amendments to
fictitious name, limited liability company or similar certificates necessary to
effect the withdrawal of SLR from the Company. The closing of the purchase by
Sentio (or, at Sentio’s sole election, the Company) of SLR’s Interest hereunder
shall occur concurrently with, and shall be conditioned upon the concurrent
closing of the purchase by Sentio or an Affiliate of Sentio, of SLR’s or its
Affiliate’s “Interest” in the OpCo LLC pursuant to the terms of the OpCo LLC
Agreement. Each party shall pay its own costs and expenses in connection with
the conveyance of SLR’s Interest to Sentio (or, at Sentio’s sole election, the
Company).

 

F-1

 

 

Section 4. Survival. Sentio’s Call Right provided in Section 6.2 and this
Exhibit F shall survive any Transfer or purported Transfer of SLR’s Interest.

 

Section 5. Fair Market Value Determination. Following the delivery of the
Purchase Notice, Sentio and SLR shall negotiate in good faith for a period of up
to fifteen (15) days (the “Outside Agreement Date”) to determine the Fair Market
Value of all of the Company Assets as of the effective date of such Purchase
Notice. If Sentio and SLR reach an agreement with respect to such Fair Market
Value on or before the Outside Agreement Date, then the same shall be confirmed
in writing and the amount so agreed upon shall be used by the parties to
determine the Purchase Price in accordance with the definition thereof. If
Sentio and SLR are unable to mutually agree upon such Fair Market Value for the
Company Assets on or before the Outside Agreement Date, then the determination
thereof shall be submitted to appraisal arbitration as follows:

 

5.1.          SLR and Sentio shall each by notice to the other appoint one
appraiser who shall by profession be an independent MAI certified appraiser who
shall have been active over the five (5) year period ending on the date of such
appointment in the appraisal of similar properties to the Communities (herein, a
“Qualified Appraiser”). Each such Qualified Appraiser shall be appointed within
fifteen (15) days after the Outside Agreement Date.

 

5.2.          Each such Qualified Appraiser shall determine the Fair Market
Value of the Company Assets as of the effective date of the Purchase Notice and
consistent with the definition thereof set forth in this Agreement and, to the
extent consistent with sound appraisal practice as then existing at the time of
any such appraisal, take into account and shall give appropriate consideration
to all three customary methods of appraisal (i.e., the cost approach, the sales
comparison approach and the income approach), and no one method or approach
shall be deemed conclusive simply by reason of the nature of the Company’s or
its Subsidiaries’ businesses or because such approach may have been used for
purposes of determining the Fair Market Value at the time of acquisition thereof
by the Company or its Subsidiaries. Each such Qualified Appraiser’s
determination shall be made within sixty (60) days after the Outside Agreement
Date, and shall be set forth in a written report delivered to each of Sentio and
SLR on or before such date; provided, however, that if either Sentio or SLR
fails to appoint its Qualified Appraiser within the time permitted, or if two
(2) Qualified Appraisers shall have been so appointed but only one such
Qualified Appraiser shall have made such determination and delivered its written
report within such sixty (60) day period, then the determination of such sole
Qualified Appraiser shall be final and binding upon Sentio and SLR.

 

F-2

 

 

5.3.          If the two (2) Qualified Appraisers shall have been appointed and
shall have made their determinations within the respective requisite periods set
forth above and if the difference between the amounts so determined shall not
exceed five percent (5%) of the lesser of such amounts then the Fair Market
Value of the Company Assets shall be an amount equal to fifty percent (50%) of
the sum of the amounts so determined. If the difference between the amounts so
determined shall exceed five percent (5%) of the lesser of such amounts, then
Sentio and SLR shall again negotiate in good faith for a period of up to fifteen
(15) days to determine the Fair Market Value and if they are unable to agree
upon a Fair Market Value within such time period (the “Second Outside Agreement
Date”), then they shall jointly select a third (3rd) Qualified Appraiser meeting
the above requirements within ten (10) days of the Second Outside Agreement
Date. In the event Sentio and SLR fail to agree upon Fair Market Value by the
Second Outside Agreement Date and to appoint a third (3rd) Qualified Appraiser
within ten (10) days of the Second Outside Approval Date, the two (2) Qualified
Appraisers initially appointed by the parties shall mutually select the third
(3rd) Qualified Appraiser.

 

5.4.          Any third (3rd) Qualified Appraiser appointed by the two (2)
initial Qualified Appraisers or by mutual agreement of Sentio and SLR, as
applicable, shall be instructed to determine the Fair Market Value of the
Company Assets within thirty (30) days after appointment of such third (3rd)
Qualified Appraiser and consistent with the provisions of Section 5.2 of this
Exhibit F above applicable to the two (2) initial Qualified Appraisers.

 

5.5.          If a third (3rd) Qualified Appraiser is thus appointed, then the
determination of the three (3) Qualified Appraisers which differs most in terms
of dollar amount from the determinations of the other two (2) Qualified
Appraisers shall be excluded, and fifty percent (50%) of the sum of the
remaining two determinations shall be final and binding upon Sentio and SLR as
the Fair Market Value of the Company Assets as of the effective date of the
Purchase Notice.

 

5.6.          Sentio and SLR shall each pay one-half (1/2) of the fees and
expenses of each Qualified Appraiser appointed hereunder (whether or not
selected by such party).

 

This provision for determination of Fair Market Value of the Company Assets
shall be specifically enforceable to the extent such remedy is available under
applicable law, and any determination hereunder shall be final and binding upon
the parties except as otherwise provided by applicable law.

 

F-3

 

 

SCHEDULE 8.2.1(g)

 

BROKERS INVOLVED IN TRANSACTION

 

Senior Living Residences, LLC has engaged The Seniors Group, 1333 W. McDermott
Dr., Suite 200, Allen, Texas 75013 as their broker, pursuant to that certain
letter agreement dated April 30, 2013, pursuant to which Senior Living
Residences, LLC has agreed to pay TSG a commission on the purchase price of the
Communities. The requirement to pay TSG shall be the sole and exclusive
obligation of Senior Living Residences, LLC.

 

F-4