MEMBERSHIP INTEREST PURCHASE AGREEMENT

 

 

 

MEMBERSHIP INTEREST PURCHASE AGREEMENT

This MEMBERSHIP INTEREST PURCHASE AGREEMENT (this "Agreement"), dated as of June 29, 2005, is by and among NW SELECT LLC, a Washington limited liability company ("NW Select"), EMERITUS CORPORATION, a Washington corporation ("Emeritus" and, together with NW Select, the "Sellers", and each individually, a "Seller"), FIT-ALT INVESTOR LLC, a Delaware limited liability company ("Buyer"), and BROOKDALE SENIOR LIVING INC., a Delaware corporation ("Newco").

 

RECITALS

WHEREAS, the Sellers and the Buyer entered into that certain Limited Liability Company Agreement of FEBC-ALT Investors LLC, a Delaware limited liability company (the "Company"), dated as of October 14, 2003 and amended as of November 17, 2003 (the “LLC Agreement”); and each capitalized term used but not otherwise defined herein has the meaning given to such term in the Amended and Restated Limited Liability Company Agreement of the Company in the form attached as Exhibit I hereto (the "Amended LLC Agreement");

 

WHEREAS, Sellers, as of the date hereof and as Class B Members, own Membership Interests of the Company representing in the aggregate a 50% Percentage Interest in the Company;

 

WHEREAS, Sellers desire to sell, assign and transfer to Buyer, and Buyer desires to purchase and acquire from Sellers, 50% of each of the Seller's Membership Interests in the Company as set forth on Schedule A hereto (collectively, the "Purchased Membership Interests"), for the consideration and upon the terms and subject to the conditions set forth in this Agreement;

 

WHEREAS, concurrently with the sale and purchase of the Purchased Membership Interests, Sellers, Buyer and the Company shall enter into the Amended LLC Agreement;

 

WHEREAS, subsequent to the consummation of the sale and purchase of the Purchased Membership Interests, it is contemplated that each of the Members shall receive securities ("Newco Shares") of Newco in connection with a Reorganization Transaction (as such term is defined in the Amended LLC Agreement);

 

WHEREAS, simultaneously with the execution of this Agreement, the parties hereto desire to enter into the Stockholders and Voting Agreement, in the form attached as Exhibit II hereto (the "Stockholders Agreement"), which sets forth certain rights and obligations of the Sellers with respect to their Newco Shares; and

 

 

 

WHEREAS, the Sellers have agreed to sell the Newco Shares to be received by them in an initial public offering (the "IPO") of Newco Shares pursuant to a registration statement (the "Registration Statement") under the Securities Act of 1933, as amended (the "Securities Act"), and, if the Sellers are unable to sell all such Newco Shares in the IPO, Sellers and Newco shall enter into a Registration Rights Agreement in the form attached as Exhibit III hereto (the "Registration Rights Agreement").

 

NOW, THEREFORE, in consideration of the foregoing premises, the mutual covenants, promises and agreements hereinafter set forth, the receipt and sufficiency of which are hereby acknowledged and accepted, the parties hereto hereby agree as follows:

 

SALE AND TRANSFER OF SHARES

Section 1.2 Consideration for the Purchased Membership Interests. The aggregate consideration for the Purchased Membership Interests is $50,000,000. Concurrently with the execution of this Agreement, Buyer shall pay in cash $23,000,000 to NW Select (the "NW Purchase Price") and $25,000,000 to Emeritus (the "Emeritus Purchase Price"), in each case by delivery of immediately available funds by wire transfer to an account designated by each of the Sellers prior to the execution hereof. The balance of $2,000,000 shall be paid to NW Select immediately after the receipt from Omega Healthcare Investors, Inc. ("Omega") of a consent waiving the net worth requirement in connection with the proposed purchase by Alterra Healthcare Corporation ("Alterra") (or a Subsidiary thereof) of the six properties currently subject to leases between Omega and Alterra (or a Subsidiary thereof), but in any event not later than 30 days following the date of this Agreement.

REPRESENTATIONS AND WARRANTIES

 

 

reorganization, fraudulent conveyance, moratorium or other similar laws and subject to general principles of equity.

(c) Information. Neither Buyer nor the Company has provided, and will not be providing, such Seller with any material or information regarding the transactions contemplated by this Agreement, except as contemplated by Section 10.8 of the Amended LLC Agreement, and such Seller acknowledges that it has had the opportunity to ask questions and receive answers from the Company, the Buyer or any persons acting on behalf of the Company or Buyer, has been furnished with all other materials that it considers relevant to its investment in the Company and has been given the opportunity fully to perform its own due diligence. Such Seller is experienced, sophisticated and knowledgeable in the trading of public and private companies and the operation of assisted living facilities and understands the disadvantage to which it is subject on account of the disparity of information regarding the Company and any Reorganization Transaction (as such term is defined in the Amended LLC Agreement) between such Seller and the Buyer.

(d) Reorganization Transaction and Initial Public Offering. Each Seller acknowledges that there can be no assurance that any Reorganization Transaction and/or the IPO will be consummated.

 

 

CLOSING

(i)  a copy of this Agreement duly executed by each of the Sellers;

(ii)  a copy of the Amended LLC Agreement duly executed by each of the Sellers;

(iii) a copy of the Stockholders Agreement duly executed by each of the Sellers;

(iv)  resignations executed by each of Daniel R. Baty and Raymond R. Brandstrom, dated the date hereof, from each board of directors, board of managers or similar governing body of the Company, Alterra and any of their respective subsidiaries, including, without limitation, the Company's Board of Managers and the Board of Directors of Alterra; and

(v) a copy of the non-foreign status affidavit in the form of Exhibit IV attached hereto, as required by Section 1445 of the Internal Revenue Code and the regulations thereunder, duly executed by the Sellers.

(i) a copy of this Agreement duly executed by the Buyer;

(ii)  a copy of the Amended LLC Agreement duly executed by the Buyer;

(iii) a copy of the Stockholders Agreement, duly executed by the Buyer; and

(iv) the NW Purchase Price or the Emeritus Purchase Price, as applicable.

 

 

SALE IN INITIAL PUBLIC OFFERING AND ADDITIONAL AGREEMENTS

Section 4.1 Election to Participate in the IPO; Sale in the IPO.

(a) At least 10 days prior to the initial filing of the Registration Statement with the Securities and Exchange Commission, Newco shall deliver to Sellers a draft of such Registration Statement and a written notice stating the anticipated date of such initial filing (the "Filing Date Notice"). At Sellers' sole option, Sellers may elect, by delivery of an irrevocable written notice to Buyer not for than five days after receipt of the Filing Date Notice, to sell as a "selling stockholder" pursuant to the Registration Statement the Newco Shares received, or to be received, by the Sellers in a Reorganization Transaction (the "Election Notice"). If the Sellers deliver an Election Notice, each Seller shall promptly furnish to Newco in writing such information regarding it and its Newco Shares as Newco may from time to time reasonably request to complete or amend the information required by such Registration Statement (including, without limitation, information regarding such Seller's ownership of Newco Shares), shall promptly execute and deliver, or cause to be executed and delivered, customary agreements and take such other actions as Newco or an underwriter reasonably requests in connection with the IPO, including, without limitation, (i) the execution and delivery of any underwriting agreement, power of attorney, custody agreement, stock power or medallion guarantee, (ii) the delivery of a reasonable and customary opinion of counsel and officers' certificate to the underwriters with respect to any Newco Shares to be sold in the IPO by the Sellers and (iii) the execution and delivery of an agreement restricting the Transfer (as such term is defined in the Stockholders Agreement) of any Newco Shares owned by the Sellers as may be required by underwriters to facilitate the marketing of the securities in the IPO (so long as such restrictions on Transfer are no greater than the restrictions contained in a similar agreement with the underwriters with respect to the Newco Shares of the Fortress Entity (as such term is defined in the Stockholders Agreement). Each of the Sellers hereby elects to sell as a "selling stockholder" all of the Newco Shares received or to be received by it in a Reorganization Transaction in the IPO, and this sentence shall be deemed to be an Election Notice under this Section 4.1(a) for purposes of the IPO; provided, however, that this election shall be effective only if the IPO is completed on or before December 31, 2005. If the IPO is not completed on or before December 31, 2005, then the Sellers' rights to elect to sell Newco Shares under this Section 4.1(b) shall be reinstated and Newco shall be required to deliver an Election Date Notice to the Sellers with respect to and IPO thereafter.

(b) Each Seller shall pay its portion of all underwriting discounts and commissions and transfer taxes, if any, relating to the sale of such Seller's Newco Shares pursuant to the IPO.

(c) If, in connection with the IPO, any managing underwriter advises Newco in writing that, in its opinion, the inclusion of all the equity securities sought to be included in the IPO by (i) Newco, (ii) the Sellers pursuant to Section 4.1(a), and (iii) any other proposed seller of equity securities of Newco which is an Affiliate of Buyer (other than Newco) (such persons being "Other Proposed Sellers"), would adversely affect the marketability of the

 

 

equity securities sought to be sold in the IPO (an "IPO Reduction"), then Buyer shall cause Newco to include in the Registration Statement only such equity securities as Newco is so advised by such underwriter can be sold without such an effect, as follows and in the following order of priority: (i) first, such number of equity securities to be sold by Newco as Newco, in its reasonable judgment and acting in good faith and in accordance with sound financial practice, shall have determined and (B) second, that number of Newco Shares to be sold by the Sellers (allocated on a pro rata basis amongst each Seller) and (C) third, other equity securities held by any Other Proposed Sellers. As used herein, "Affiliate" shall have the meaning set forth in Rule 12b-2 promulgated under the Securities Exchange Act of 1934, as amended; provided that no person shall be deemed an Affiliate of any other person solely by reason of any investment in Newco .

Section 4.2 Indemnification.

(a)(i) Newco shall indemnify and hold harmless, to the fullest extent permitted by law, each Seller, its officers, directors, employees, managers, partners and agents and each person who controls (within the meaning of Section 15 of the Securities Act and Section 20 of the Securities Exchange Act of 1934, as amended (the "Exchange Act")) such Seller or such other indemnified person from and against all losses, claims, damages, liabilities and expenses (including reasonable expenses of investigation and reasonable attorneys' fees and expenses) (collectively, the "Losses") caused by, resulting from or relating to any untrue statement (or alleged untrue statement) of a material fact contained in any registration statement (including, without limitation, the Registration Statement), prospectus or preliminary prospectus or any amendment thereof or supplement thereto or any omission (or alleged omission) of a material fact required to be stated therein or necessary to make the statements therein, in light of the circumstances under which they were made, not misleading, except insofar as the same are caused by any information furnished in writing to Newco by such Seller expressly for use therein or by such Seller's failure to deliver a copy of a current prospectus or any amendments or supplements thereto (which does not contain any such material misstatements or omissions) after Newco has furnished such holder with a sufficient number of copies of the same.

(ii) To the extent permitted by law, each Seller shall, severally and not jointly, indemnify Newco, its directors, officers, employees and agents and each Person who controls (within the meaning of Section 15 of the Securities Act and Section 20 of the Exchange Act) Newco or such other indemnified Person against all Losses caused by any untrue statement of material fact contained in any registration statement (including, w