Exhibit 10.u
SECOND AMENDMENT
TO THE OPERATING AGREEMENT
OF LOUISVILLE HOTEL, LLC
THIS SECOND AMENDMENT ("Second Amendment") to the Operating Agreement of
Louisville Hotel, LLC, is entered into between Ridgewood Hotels, Inc., a
Delaware corporation ("Ridgewood") and Louisville Hotel, L.P., a Delaware
limited partnership ("Louisville") effective as of February 12, 2003.
WHEREAS, the parties hereto are parties to that certain Operating
Agreement effective May 1998 between Ridgewood and Louisville as amended by that
certain First Amendment to the Operating Agreement of Louisville Hotel, LLC
between Ridgewood and Louisville dated as of September 30, 1999 (the Operating
Agreement, as amended, is referred to herein as the "Operating Agreement"); and
WHEREAS, Ridgewood and Louisville desire to amend certain of the terms of
the Operating Agreement.
NOW, THEREFORE, for good and valuable consideration, the receipt and
sufficiency of which is hereby acknowledged, the parties hereto agree as
follows:
1. Section 7.3 of the Operating Agreement shall be amended to include the
following sentence at the end of the Section:
"Notwithstanding the foregoing, the Manager in connection with the
exercise of its rights, powers and authority under the Operating
Agreement, shall not knowingly take (or knowingly omit to take) any
action, or suffer or permit the Company to take (or knowingly omit
to take) any action that is detrimental to the Company in any
material way without the prior written consent of Louisville;
provided, however, that the foregoing limitation shall not apply to
the failure to exercise the Option."
2. Section 14.2 of the Operating Agreement is deleted in its entirety and
replaced with the following:
"14.2 Obligation to Purchase Louisville Membership Interest.
As provided in Section 14.1 above, in connection with the
execution of the Purchase Agreement, Ridgewood executed certain
Promissory Notes in favor of Louisville in the total original
cumulative principal amount of One Million Nine Hundred Thirty-Three
Thousand Dollars ($1,933,000). The promissory notes consisted of (i)
a note in the amount of $300,000 secured by property in Florida (the
"Florida Note"), (ii) a note in the amount of $300,000 secured by
property in Arizona (the "Arizona Note") and (iii) a note in the
amount of $1,333,000 secured by Ridgewood's membership interests in
the Company (the "Louisville
Note"). Contemporaneously with the execution of this Second
Amendment, (i) Ridgewood has been released from any and all
obligations under the Arizona Note, (ii) the cumulative principal
amount remaining due from Ridgewood under the Louisville Note has
been reduced to Nine Hundred Thirty-Three Thousand Dollars
($933,000), the interest rate has been reduced to ten percent (10%)
per annum and the maturity date has been extended until February 12,
2006 and (iii) the Florida Note has been amended and restated. The
amended terms of the Louisville Note are set forth in the Renewed,
Amended and Restated Promissory Note of even date herewith with
Ridgewood as Maker and Louisville as Holder (the "Amended Promissory
Note"). The amended terms of the Florida Promissory Note are set
forth in the Renewed, Amended and Restated Promissory Note (Florida)
of even date herewith with Ridgewood as Maker and Louisville as
Holder (the "Amended Florida Note"). In the event that on or before
February 12, 0000 Xxxxxxxxx has not exercised the Purchase Right set
forth in Section 14.1 and fully paid the Purchase Right Price
pursuant to the provisions of Section 14.1, then Ridgewood shall be
obligated to purchase (and Louisville shall sell) Louisville's
membership interest and to pay the full amount of the Purchase Right
Price on February 12, 2006 (the "Purchase Date"). Notwithstanding
the foregoing, Ridgewood shall have the right and option to extend
the Purchase Date until February 12, 2007; provided that, on or
before the time of such extension, Ridgewood shall have made or
cause to have been made a partial payment of no less than One
Million Dollars ($1,000,000) of the Purchase Right Price (the
"Partial Payment"). Ridgewood may exercise the option to extend the
Payment Date by providing written notice to Louisville of its
exercise of such option to extend the Purchase Date together with
the Partial Payment on or before February 12, 2006. Any Partial
Payment made by Ridgewood shall be credited against Louisville's
Capital Contribution at the time such Partial Payment is made and
shall, accordingly, reduce the total amount of the Purchase Right
Price to be paid at the time the purchase is completed. In the event
of a default by Ridgewood hereunder, the provisions of Section 14.3
below shall apply. The extension of the Purchase Date to February
12, 2006 shall not extend the due date of the Amended Promissory
Note which shall continue to be February 12, 2006 and shall not
extend or otherwise modify the principal payment schedule in the
Amended Florida Note."
3. Section 14.3 shall be amended to change the references therein from
"Promissory Notes" to "Amended Promissory Note."
4. Section 14.4 of the Operating Agreement shall be amended to include the
following after the last sentence:
"Upon any default set forth in subsections 14.3(i), 14.3(ii) or
14.3(iii) hereof, or any event of default under the terms of the
Amended Promissory Note, then in any such event, Louisville, without
limiting the right of
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Louisville to exercise any other remedies to which it is entitled,
may, at its option, replace Ridgewood as Manager of the Company
under the Operating Agreement and as Property Manager under the
Property Management Agreement. In the event that Louisville elects
to replace Ridgewood as Manager of the Company, Louisville shall
become the Manager of the Company. In the event that Louisville
elects to replace Ridgewood as the Property Manager, Louisville
shall become the Property Manager under the Property Management
Agreement and shall be entitled to receive all management fees
payable to the Property Manager. In addition, at any time after such
default, all amounts due and payable to Ridgewood under the
Operating Agreement shall be paid over to Louisville and applied on
account of and set off against any amounts owed by Ridgewood to
Louisville under the Amended Promissory Note or the Operating
Agreement.
If Louisville shall elect not to replace Ridgewood as Property
Manager under the Property Management Agreement, then 100% of the
management fees payable to Ridgewood under the Property Management
Agreement will be subordinated to all amounts owed by Ridgewood to
Louisville under the Amended Promissory Note or the Operating
Agreement and all such amounts shall be paid to Louisville and
applied on account of and setoff against such amounts owed by
Ridgewood to Louisville. Notwithstanding the foregoing, with respect
to any period during which Ridgewood is the Property Manager,
Ridgewood shall be entitled to reimbursement of expenses in
accordance with the Property Management Agreement and shall have all
other rights under the Property Management Agreement."
5. The Definition of Preferred Return is deleted in its entirety and
replaced with the following:
"Preferred Return" shall mean for each fiscal year or portion
thereof, an amount equal to the Agreed Percent (cumulative, but not
compounded and prorated for any partial fiscal year) return on the
average Net Capital Contribution of a Member during such year or
portion thereof. For purposes hereof, Agreed Percentage shall mean
thirteen percent (13%) for the period prior to February 12, 2003 and
ten percent (10%) for the period on or after February 12, 2003.
6. Any reference to Promissory Notes in the Operating Agreement shall be
deemed to be a reference to the Amended Promissory Note. Any reference to Loan
Documents in the Operating Agreement shall be deemed to be a reference to the
Amended Membership Interest Security Agreement between Ridgewood and Louisville
of even date herewith.
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7. Section 19.5 is hereby amended to provide as follows:
"19.5 Manager's Address. The name and address of the Manager is as
follows:
Ridgewood Hotels, Inc.
000 Xxx Xxxxxxxxxxx
Xxxxxxxxx, XX 00000
Attn: Xx. Xxxx Xxxxx"
8. Section 4.3(a) is hereby amended to delete the phrase "Except as
provided in Section 4.3(b)" and to replace it with the phrase "Except as
provided in Section 4.3(c)."
9. Section 14.1 is hereby amended to delete the phrase "In addition to all
other rights as set forth in this Amendment" with the phrase "In addition to all
other rights as set forth in the Operating Agreement (as amended)".
10. Louisville shall be entitled to receive, and Ridgewood shall provide
within 30 days after the end of each month, copies of monthly financial
statements of the Hotel including (i) a statement of the determination of the
asset management fee payable to Louisville and (ii) a statement showing cash
flow participation of the Members.
11. Notwithstanding anything in the Operating Agreement to the contrary,
no amount will be distributed to the Members at any time that the Hotel has a
payment default under the terms of the Hotel's senior indebtedness that is
secured by a mortgage on the Hotel's property.
12. Section 10.1 is amended by adding a new subsection 10.1.5 as follows:
"10.5.1 Notwithstanding anything herein to the contrary, no
assignment or transfer of membership interests shall be
allowed to the extent that it is prohibited by or would
cause a default in the Loan."
13. A new Section 7.9 shall be added to the Operating Agreement as
follows:
"7.9 Obligations of Company. The Company shall:
7.9.1 Maintain books and records separate from any other
person or entity;
7.9.2 Maintain its bank account separate from any other
person or entity;
7.9.3 Not commingle its assets with those of any other
person or entity and hold all of its assets in its own
name;
7.9.4 Conduct its own business in its own name;
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7.9.5 Maintain separate financial statements, showing its
assets and liabilities separate and apart from those
of any other person or entity;
7.9.6 File its tax returns separate from those of any other
entity;
7.9.7 Pay its own liabilities out of its own funds;
7.9.8 Observe all limited liability company and other
organizational formalities;
7.9.9 Maintain an arm's length relationship with its
Affiliates and enter into a transaction with
Affiliates only on commercially reasonable terms
(provided that it is agreed that the Loan and the
Property Management Agreement are on commercially
reasonable terms;
7.9.10 Pay the salaries of its own employees, if any, from
its own funds;
7.9.11 Not guaranty or become obligated for the debts of any
other entity;
7.9.12 Not hold out its credit as being available to satisfy
the obligations of any other person or entity;
7.9.13 Not acquire the obligations or securities of its
Affiliates or owners, including partners, members or
shareholders as appropriate, except for the Loan;
7.9.14 Not make loans to any other person or entity or buy or
hold evidences of indebtedness issued by any other
person or entity (other than cash and investment grade
securities), except for the Loan;
7.9.15 Allocate fairly and reasonably any overhead expenses
that are shared with an Affiliate, including paying
for office space and services performed by any
employee of an Affiliate;
7.9.16 Use separate stationery, invoices and checks bearing
its own name;
7.9.17 Not pledge its assets for the benefit of any other
person or entity;
7.9.18 Hold itself out as a separate entity;
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7.9.19 Correct any known misunderstandings regarding its
separate identity;
7.9.20 Not identify itself as a division of any other person
or entity; and
7.9.21 Maintain adequate capital in light of its contemplated
business operations."
14. A new Section 7.10 shall be added to the Operating Agreement as
follows:
"7.10 Limitation on Company's and Manager's Authority.
Notwithstanding anything herein to the contrary, until such
time as Ridgewood purchases Louisville's membership interest
pursuant to Section 14.2, neither the Company nor the Manager,
nor any Affiliate shall have any authority or power to take
any of the following actions without the consent of all
Members.
7.10.1 The Company shall not incur indebtedness other than
the Loan except for liabilities incurred in the
ordinary course of its business;
7.10.2 The Company shall not engage in any dissolution,
liquidation, consolidation, merger or sale of all or
substantially all of its assets; and
7.10.3 The Company shall not enter into a transaction with
Affiliates except for transactions on commercially
reasonable terms (provided that it is agreed that the
Loan and the Property Management Agreement are on
commercially reasonable terms)."
15. Any notice which a party is required or may desire to give the other
shall be in writing and may be sent by personal delivery or by mail (either (i)
by United States registered or certified mail, return receipt requested, postage
prepaid, or (ii) by Federal Express or similar generally recognized overnight
carrier regularly providing proof of delivery), addressed as follows (subject to
the right of a party to designate a different address for itself by notice
similarly given):
To Maker: Ridgewood Hotels, Inc.
000 Xxx Xxxxxxxxxxx
Xxxxxxxxx, XX 00000
Attn: Xx. Xxxx Xxxxx
Telephone: (000) 000-0000
Facsimile: (000) 000-0000
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To Holder: Louisville Hotel, L.P.
c/o Sterling Centrecorp, Inc.
One North Clematis Street - Suite 000
Xxxx Xxxx Xxxxx, XX 00000
Attn: Xxxxx Xxxxx
Telephone: (000) 000-0000
Facsimile: (000) 000-0000
Any notice so given by mail shall be deemed to have been given as of delivery
(whether accepted or refused) established by U.S. Post Office return receipt or
the overnight carrier's proof of delivery, as the case may be. Any such notice
not so give shall be deemed given upon receipt of the same by the party to whom
the same is to be given.
16. Except as modified by the terms hereof, the provisions of the
Operating Agreement shall remain in full force and effect.
17. This Second Amendment shall be governed by Delaware law.
18. The terms and provisions of this Second Amendment shall be binding
upon and inure to the benefit of the successors and assigns of the respective
Members.
19. This Second Amendment may be executed by facsimile and in one or more
counterparts and each such counterpart shall constitute one agreement.
[Signature Page Follows]
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IN WITNESS WHEREOF, this Second Amendment is executed and effective as of
the date first set forth above.
RIDGEWOOD HOTELS, INC. (Seal)
By:_____________________________
Xxxx Xxxxx
President
LOUISVILLE HOTEL, L.P.,
a Delaware limited partnership
By: Louisville Hotel, Inc., a (Seal)
a Delaware corporation
By: _______________________
Its: _______________________
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