Page 30 - New Empire Affinitas Life Senior Housing Division

it disposed of the property subject to such liability in a taxable transaction in full satisfaction thereof,
determined in accordance with Treasury Regulation section 1.704-2(d).

1.13. “Company Non-Recourse Deductions” means the excess, if any, of the net increase, if any,
in the amount of Company Minimum Gain during a fiscal year over the aggregate amount of any
distributions during that fiscal year of proceeds of a non-recourse liability as defined in Treasury
Regulation section 1.704-2(c).

1.14. “Depreciation” means for each fiscal year or part thereof, an amount equal to the depreciation,
amortization, or other cost recovery deduction allowable for federal income tax purposes with
respect to an asset for such fiscal year or other period, except that if the Book Value of an asset
differs from its adjusted basis for federal income tax purposes, Depreciation will be an amount which
bears the same ratio to such Book Value as the federal income tax depreciation, amortization or other
cost recovery deduction for such fiscal year bears to such adjusted tax basis.

1.15. “Economic Interest” shall mean a Member’s share of one or more of the Company’s Net
Profits, Net Losses and distributions of the Company’s assets pursuant to this Operating Agreement,
but shall not include any right to participate in the management or affairs of the Company, including,
the right to vote on, consent to or otherwise participate in any decision of the Members. As of the
date hereof, the Economic Interests of the Members are as set forth in Exhibit A attached hereto.
Economic Interests shall be adjusted by the Manager to reflect future transactions among the
Company, the Members and the Economic Interest Owners, if any.

1.16. “Economic Interest Owner” shall mean the owner of an Economic Interest who is not a
Member.

1.17. “Fair Market Value” means their value as determined by the Company in its reasonable discretion.
In the event of a dispute between a Member and the Company in the determination of Fair Market
Value, it shall be determined by an appraiser mutually acceptable to all relevant parties as of the date
for which a Valuation is required or triggered under this Agreement. If the Parties are unable to agree
on a single appraiser, either Party, by written Notice to the other, may designate one appraiser, the
other Party shall then designate one appraiser, and the two appraisers so designated shall promptly
designate a third appraiser mutually acceptable to all Parties. The chosen appraisers, shall, thereafter,
promptly determine the Fair Market Value as of the date for which valuation is required and shall
deliver copies of such appraisals to the Company. The Fair Market Value shall be, as applicable, the
appraisal of the individual mutually agreed upon by the Parties or, in the event that three appraisers are
utilized, the average of the two (2) appraised values that are closest to each other, in which case, the
third appraisal shall be ignored for all purposes. Any appraiser or appraisers so designated shall have

Re-LIFE-Ment: Reinventing Past Notions of Retirement
- 5 -

30