OPERATING AGREEMENT
OF
RW LOUISVILLE HOTEL INVESTORS, LLC
THE SECURITIES OFFERED HEREBY HAVE NOT BEEN REGISTERED
UNDER THE SECURITIES ACT OF 1933 NOR APPROVED OR DIS
APPROVED BY THE UNITED STATES SECURITIES AND EXCHANGE
COMMISSION NOR BY THE SECURITIES REGULATORY AUTHORITY
OF ANY STATE, NOR HAS ANY COMMISSION OR AUTHORITY
PASSED UPON OR ENDORSED THE MERITS OF THIS OFFERING OR
THE ACCURACY OR ADEQUACY OF ANY DISCLOSURE MADE IN
CONNECTION THEREWITH. ANY REPRESENTATION TO THE
CONTRARY IS A CRIMINAL OFFENSE. THE SECURITIES OFFERED
HEREBY MAY NOT BE RESOLD WITHOUT REGISTRATION UNDER THE
SECURITIES ACT OF 1933 AND APPLICABLE STATE SECURITIES
LAWS OR EXEMPTION THEREFROM.
TABLE OF CONTENTS
Page
1. Organization 1
1.1 Formation 1
1.2 Name and Place of Business 1
1.3 Business and Purpose of the Company 1
1.4 Term 1
1.5 Required Filings 1
1.6 Registered Office and Registered Agent 1
1.7 Certain Transactions 1
2. Definitions 1
3. Capitalization and Financing 2
3.1 Hurstbourne's Capital Contribution 2
3.2 Investors' Capital Contribution 2
3.3 Additional Capital Contributions 2
3.4 Liabilities of Members 2
3.5 Interest By Member 2
4. Allocation of Tax Items 2
4.1 Allocation of Net Income and Net Loss 2
4.1.1 Net Income Allocations 2
4.1.2 Net Loss Allocations 2
4.2 Special Allocations. 3
4.3 Curative Allocations 4
4.4 Contributed Property 4
4.5 Recapture Income 4
4.6 Allocation of Company Items 4
4.7 Assignment 4
4.8 Power of Manager to Vary Allocations 5
5. Distributions 5
5.1 Cash from Operations 5
5.2 Cash From Sale or Refinancing 5
6. Compensation to the Manager and Affiliates 5
6.1 Manager's and Affiliates' Compensation 5
6.2 Company Expenses 5
6.2.1 Operating Expenses 5
6.2.2 Overhead of Members 5
7. Authority, and Responsibilities of the Manager 5
7.1 Management 5
7.2 Number, Tenure and Qualifications 5
7.3 Manager Authority 6
7.4 Limitation on the Company's and the Manager's
Authority 7
7.5 Obligations of the Company and Manager 7
7.6 Voting Rights of Member 8
7.7 Special Purpose Corporation 9
7.8 Administration of Company 9
7.9 Tax Matters Member 9
7.10 Indemnification of Manager 9
7.11 No Personal Liability for Return of Capital 9
7.12 Authority as to Third Persons 9
8. Rights, Authority and Voting of the 10
8.1 Members Are Not Agents. 10
8.2 Voting by a Member 10
8.3 Member Vote; Consent of Manager 10
8.4 Meetings of the Members 10
8.5 Action Without Meeting 10
8.6 Rights of Members 10
8.7 Return of Capital of Member 11
9. Resignation, Withdrawal or Insolvency of Members 11
9.1 Resignation or Withdrawal of the Members 11
9.2 Purchase of Member's Interest; Conversion to
Economic Interest 11
9.3 Purchase Price of a Withdrawing Member's Interest 11
9.4 Damages 11
10. Assignment of Membership Interest 12
10.1 Permitted Assignments 12
10.2 Substitute Manager 12
10.3 Substituted Member 12
10.3.1 Conditions to be Satisfied 12
10.3.2 Consent of Manager 13
10.3.3 Consent of Member 13
10.3.4 Loss of Rights 13
10.3.5 Removal of Member 13
10.4 Rights of Economic Interest Owner 13
10.5 Right to Inspect Books 13
10.6 Transfer Subject to Law 14
10.7 Transfer in Violation Not Xxxxxxxxxx 00
00. Books, Records, Accounting and Reports 14
11.1 Records, Audits and Reports 14
11.2 Delivery to Members and Inspection 14
11.3 Quarterly Report 15
11.4 Tax Information 15
12. Termination and Dissolution of the Company 15
12.1 Termination of Company 15
12.2 Certificate of Cancellation. 15
12.3 Liquidation of Assets 15
12.4 Distributions Upon Dissolution 16
12.5 Liquidation of Member's Interest 16
12.6 Dissassociation of Manager 16
12.7 Continuation of Company 16
13. Miscellaneous 16
13.1 Counterparts 16
13.2 Successors and Assigns 16
13.3 Severability 16
13.4 Notices 16
13.5 Manager's Address 17
13.6 Governing Law 17
13.7 Captions 17
13.8 Gender 17
13.9 Time 17
13.10 Additional Documents 17
13.11 Descriptions 17
13.12 Advice of Counsel 17
13.13 Partition 17
13.14 Integrated and Binding Agreement 18
OPERATING AGREEMENT
OF
RW LOUISVILLE HOTEL ASSOCIATES, LLC
This Operating Agreement, effective this 13th day of May,
1998, is entered into by and among RW Hurstbourne Hotel, Inc., a
Delaware corporation ("Hurstbourne"), and RW Louisville Hotel
Investors, L.L.C. a Delaware limited liability company
("Investors"), pursuant to the Act on the following terms and
conditions.
1. Organization.
1.1 Formation. On May 13, 1998 a Certificate of Formation was
filed in the office of the Secretary of State of Delaware in
accordance with and pursuant to the Act.
1.2 Name and Place of Business. The name of the Company shall
be RW Louisville Hotel Associates, LLC, and its principal place
of business shall be is 0000 Xxxxx Xxxxx Xxxx, Xxxxx 000,
Xxxxxxx, Xxxxxxx 00000. The Manager may change such name, change
such place of business or establish additional places of business
of the Company as the Manager may determine to be necessary or
desirable.
1.3 Business and Purpose of the Company. The purpose for which
the Company is organized is limited solely to: (a) owning,
holding, selling, leasing, transferring, exchanging, operating
and managing that 268 room hotel known as the Holiday Inn located
at 0000 Xxxxxxxxxxx Xxxx, Xxxxxxxxxx, Xxxxxxxx ("Mortgaged
Premises"); (b) entering into the Loan Documents with the Lender;
(c) refinancing the Mortgaged Premises in connection with a
permitted repayment of the Mortgage Loan; and (d) transacting any
and all lawful business for which the limited liability company
may be organized under the laws of the State of Delaware that is
incident, necessary and appropriate to accomplishing the
foregoing.
1.4 Term. The term of this Agreement shall be the period of
duration of the Company provided in the Certificate of Formation,
unless the Company is sooner dissolved as provided in this
Agreement.
1.5 Required Filings. The Manager shall execute, acknowledge,
file, record and/or publish such certificates and documents, as
may be required by this Agreement or by law in connection with
the formation and operation of the Company.
1.6 Registered Office and Registered Agent. The Company's
initial registered office and initial registered agent shall be
as provided in the Certificate of Formation. The registered
office and registered agent may be changed from time to time by
the Manager by filing the address of the new registered office
and/or the name of the new registered agent pursuant to the Act.
1.7 Certain Transactions. Any Manager, Owner, or any Affiliate,
or any shareholder, officer, director, employee, partner, member
or any person owning an interest therein, may engage in or
possess an interest in any other business or venture of any
nature or description, whether or not competitive with the
Company including, but not limited to, the acquisition, syndica
tion, ownership, financing, leasing, operation, maintenance,
management, brokerage, construction and development of property
similar to the Mortgaged Premises and no Manager, Owner or other
person or entity shall have any interest in such other business
or venture by reason of their interest in the Company.
2. Definitions. Definitions for this Agreement are set forth
on Exhibit A and are incorporated herein.
3. Capitalization and Financing.
3.1 Hurstbourne's Capital Contribution. Upon execution of this
Agreement, Hurstbourne shall contribute $1 and a 1% undivided
interest in the Mortgaged Premises subject to the existing
indebtedness in favor of GECC Capital Corporation, which is to be
refinanced in full by the Mortgage Loan.
3.2 Investor's Capital Contribution. Upon execution of this
Agreement, Investors shall contribute $99 and a 99% undivided
interest in the Mortgaged Premises subject to the existing
indebtedness in favor of GECC Capital Corporation, which is to be
refinanced in full by the Mortgage Loan.
3.3 Additional Capital Contributions. If the Manager determines
that the Company requires cash in addition to the initial Capital
Contributions in order to carry out the purposes of this
Agreement or to carry on the business of the Company, no more
than 30 days after the written request of the Manager, each Owner
shall contribute to the Company his pro rata share, based on
Percentage Interests, of the additional capital required. The
requirement to make additional Capital Contributions shall not be
required with respect to any cost, expense or liability
involuntarily incurred by the Company.
3.4 Liabilities of Members. Except as specifically provided in
this Agreement, neither the Manager nor any Member shall be
required to make any additional contributions to the Company and
no Manager or Member shall be liable for the debts, liabilities,
contracts, or any other obligations of the Company, nor shall the
Manager or the Members be required to lend any funds to the
Company or to repay to the Company, any Member, or any creditor
of the Company any portion or all of any deficit balance in a
Member's Capital Account.
3.5 Interest By Member. Notwithstanding any other provision in
this Agreement, the Members, other than the Manager, shall
maintain a 1% interest in Net Income, Net Loss, Distribution and
Capital Accounts.
4. Allocation of Tax Items.
4.1 Allocation of Net Income and Net Loss. For each fiscal
year, the Net Income and Net Loss of the Company shall be
allocated as follows:
4.1.1 Net Income Allocations. After giving effect to the
special allocations set forth in Sections 4.2 and 4.3, Net Income
for any fiscal year shall be allocated as follows:
(1) First, between the Members in proportion to and to the
extent of Net Loss allocated to the Members pursuant to
Section 4.1.2(b) until the aggregate Net Income allocated to the
Members pursuant to this Section 4.1.1(a) for such fiscal year
and all previous fiscal years is equal to the aggregate Net Loss
allocated to the Members pursuant to Section 4.1.2(b) for all
previous fiscal years;
(2) Thereafter, 1% to Hurstbourne and 99% to Investors.
4.1.2 Net Loss Allocations. After giving effect to the
special allocations set forth in Sections 4.2 and 4.3, Net Loss
for any fiscal year shall be allocated as follows:
(1) First, among the Members in proportion to and to the
extent of Net Income allocated to the Members under Section 4.1.1(b)
until the aggregate Net Loss allocated pursuant to this Section
4.1.2(a) for such fiscal year and all previous fiscal years equals the
aggregate Net Income allocated to the Members pursuant to Section
4.1.1(b) for all previous fiscal years; provided that Net Loss shall
not be allocated to any Member to the extent such allocation would cause
such Member to have an Adjusted Capital Account Deficit at the end of a
fiscal year;
(2) Thereafter, 1% to Hurstbourne and 99% to Investors.
4.2 Special Allocations.
(1) Qualified Income Offset. Except as provided in Section
4.2(c), in the event any Member unexpectedly receives any
adjustments, allocations, or distributions described in Treasury
Regulations Sections 1.704-1(b)(2)(ii)(d)(4), 1.704-
1(b)(2)(ii)(d)(5), or 1.704-1(b)(2)(ii)(d)(6), items of Company
income and gain shall be specially allocated to such Member in an
amount and manner sufficient to eliminate, to the extent required
by the Treasury Regulations, the Adjusted Capital Account Deficit
created by such adjustment, allocation or distribution as quickly
as possible.
(2) Gross Income Allocation. Net Loss shall not be allocated to
any Member to the extent such allocation would cause any Member
to have an Adjusted Capital Account Deficit at the end of a
fiscal year. In the event any Member has an Adjusted Capital
Account Deficit at the end of any fiscal year, each such Member
shall be specially allocated items of Company gross income and
gain in the amount of such Adjusted Capital Account Deficit as
quickly as possible.
(3) Company Minimum Gain Chargeback. Notwithstanding
any other provision of this Section 4, if there is a net decrease in
Company Minimum Gain during any Company fiscal year, each Member shall
be specially allocated items of Company income and gain for such year
(and, if necessary, subsequent years) in an amount equal to such
Member's share of the net decrease in Company Minimum Gain, determined
in accordance with Treasury Regulations Section 1.704-2(g)(2). This
Section 4.2(c) is intended to comply with the partnership minimum gain
chargeback requirement in the Treasury Regulations and shall be
interpreted consistently therewith. This provisions shall not apply to
the extent the Member's share of net decrease in Company Minimum Gain is
caused by a guaranty, refinancing, or other change in the debt
instrument causing it to become partially or wholly recourse debt or
Member Nonrecourse Debt, and such Member bears the economic risk of loss
(within the meaning of Treasury Regulations Section 1.752-2) for the
newly guaranteed, refinanced or otherwise changed debt or to the extent
the Member contributes cash to the capital of the Company that is used
to repay the Nonrecourse Debt, and the Member's share of the net
decrease in Company Minimum Gain results from the repayment.
(4) Member Minimum Gain Chargeback. Notwithstanding any other
provision of this Section 4, except Section 4.2(c), if there is a
net decrease in Member Minimum Gain, any Member with a share of
that Member Minimum Gain (as determined under Treasury
Regulations Section 704-2(i)(5)) as of the beginning of the year
shall be allocated items of Company income and gain for such year
(and, if necessary, subsequent years) in an amount equal to such
Member's share of the net decrease in Member Minimum Gain,
determined in accordance with Treasury Regulations Section 1.704-
2(g)(2). This Section shall not apply to the extent the net
decrease in Member Minimum Gain arises because the liability
ceases to be Member Nonrecourse Debt due to conversion,
refinancing or other change in a debt instrument that causes it
to become partially or wholly a Nonrecourse Debt. This Section
is intended to comply with the partner minimum gain chargeback
requirements in the Treasury Regulations and shall be interpreted
consistently therewith and applied with the restrictions
attributable thereto.
(1)
(5) Nonrecourse Deductions. Nonrecourse Deductions for any
fiscal year or other period shall be allocated 1% to Hurstbourne
and 99% to Investors, and each Member's share of excess
Nonrecourse Debt shall be in the same proportion.
(6) Member Nonrecourse Deductions. Member Nonrecourse
Deductions for any fiscal year shall be allocated to the Member
who bears the economic risk of loss as set forth in Treasury
Regulations Section 1.752-2 with respect to the Member
Nonrecourse Debt. If more than one Member bears the economic
risk of loss for a Member Nonrecourse Debt, any Member
Nonrecourse Deductions attributable to that Member Nonrecourse
Debt shall be allocated among the Members according to the ratio
in which they bear the economic risk of loss.
(7) Code Section 754 Adjustments. To the extent 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
Treasury Regulations Section 1.704-1(b)(2)(iv)(m), to be taken
into account in determining Capital Accounts, 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 a manner
consistent with the manner in which their Capital Accounts are
required to be adjusted pursuant to such section of the Treasury
Regulations.
4.3 Curative Allocations. Notwithstanding any other provision
of this Agreement, the Regulatory Allocations shall be taken into
account in allocating items of income, gain, loss and deduction
among the Members so that, to the extent possible, the net amount
of such allocations of other items and the Regulatory Allocations
to each Member shall be equal to the net amount that would have
been allocated to each such Member if the Regulatory Allocations
had not occurred.
4.4 Contributed Property. Notwithstanding any other provision
of this Agreement, the Members shall cause depreciation and or
cost recovery deductions and gain or loss attributable to
Property contributed by a Member or revalued by the Company to be
allocated among the Members for income tax purposes in accordance
with Section 704(c) of the Code and the Treasury Regulations
promulgated thereunder.
4.5 Recapture Income. The portion of each Member's distributive
share of Company Net Income that is characterized as ordinary
income pursuant to Section 1245 or 1250 of the Code shall be
proportionate to the amount of Net Income or Net Loss which
included the corresponding depreciation deductions that were
allocated to such Member as compared with the amount of
depreciation deductions allocated to all Members.
4.6 Allocation of Company Items. Except as otherwise provided
herein, whenever a proportionate part of Net Income or Net Loss
is allocated to a Member, every item of income, gain, loss or
deduction entering into the computation of such Net Income or Net
Loss, and every item of credit or tax preference related to such
allocation and applicable to the period during which such Net
Income or Net Loss was realized shall be allocated to the Owner
in the same proportion.
4.7 Assignment.
4.7.1 In the event of the assignment of an Interest, the Net
Income and Net Loss arising from other than a sale or refinancing
of Company Property shall be allocated as between the Owner and
the assignee based upon the number of months of their respective
ownership during the year in which the assignment occurs, without
regard to the results of the Company's operations during the
period before or after such assignment. Distributions shall be
made to the Owner or the assignee as of the date of the
Distribution. An assignee who receives an Interest during the
first 15 days of a month will receive any allocations relative to
such month. An assignee who acquires an Interest on or after the
sixteenth day of a month will be treated as acquiring the
Interest on the first day of the following month. Net Income and
Net Loss from a sale or refinancing of Property will be allocated
between the Owner and its assignee as of the date of any such
transaction.
4.7.2 In the event of the assignment of the Manager's
Interest, the allocations of Net Income or Net Loss shall be as
agreed between the Manager and its assignee. In the absence of
an agreement, the Net Income, Net Loss and Distributions shall be
allocated in a manner similar to that provided in Section 4.7.1.
4.8 Power of Manager to Vary Allocations. It is the intent of
the Members that each Member's share of Net Income and Net Loss
be determined and allocated in accordance with Section 704(b) of
the Code and the provisions of this Agreement shall be so
interpreted. Therefore, if the Company is advised by the
Company's legal counsel that the allocations provided in this
Section 4 are unlikely to be respected for federal income tax
purposes, the Manager is hereby granted the power to amend the
allocation provisions of this Agreement to the minimum extent
necessary to comply with Section 704(b) of the Code and effect
the plan of allocations and distributions provided for in this
Agreement.
5. Distributions.
5.1 Cash from Operations. Except as otherwise provided in
Section 12, Distributable Cash with respect to each fiscal year
shall be distributed 1% to Hurstbourne and 99% to Investors.
5.2 Cash From Sale or Refinancing. Except as otherwise provided
in Section 12, Cash From Sale or Refinancing shall be distributed
to the Members in the following order of priority:
5.2.1 First, to repay the Mortgage Loan or any other
outstanding debt; and
5.2.2 Second, 1% to Hurstbourne and 99% to Investors.
6. Compensation to the Manager and Affiliates.
6.1 Manager's and Affiliates' Compensation. No Manager, Owner
or any Affiliates shall receive any compensation from the Company
for services rendered or to be rendered to the Company.
6.2 Company Expenses.
6.2.1 Operating Expenses. The Company shall pay directly, or
reimburse the Manager as the case may be, for all of the costs
and expenses of the Company's operations.
6.2.2 Overhead of Members. No Member nor any Affiliate shall
be reimbursed for overhead expenses incurred in connection with
the business of the Company.
7. Authority, and Responsibilities of the Manager.
7.1 Management. The business and affairs of the Company shall
be managed by its Manager. Except as otherwise set forth in this
Agreement, the Manager shall have full and complete authority,
power and discretion to manage and control the business, affairs
and properties of the Company, to make all decisions regarding
those matters and to perform any and all other acts or activities
customary or incident to the management of the Company's
business.
7.2 Number, Tenure and Qualifications. The Company shall have
one Manager which shall be Hurstbourne. The Manager shall hold
office until such Manager withdraws or resigns.
7.3 Manager Authority. The Manager shall have all authority,
rights and powers conferred by law (subject only to Section 7.4)
and those required or appropriate to the management of the
Company's business, which, by way of illustration but not by way
of limitation, shall include the right, authority and power to
cause the Company to:
7.3.1 Acquire, hold, develop, lease, rent, operate, sell,
exchange, subdivide and otherwise dispose of Property including
the Mortgaged Premises;
7.3.2 Borrow money, and, if security is required therefor, to
pledge or mortgage or subject Property to any security device, to
obtain replacements of any mortgage or other security device and
to prepay, in whole or in part, refinance, increase, modify, con
solidate, or extend any mortgage or other security device. All
of the foregoing shall be on such terms and in such amounts as
the Manager, in its sole discretion, deems to be in the best
interest of the Company;
7.3.3 Enter into such contracts and agreements as the Manager
determines to be reasonably necessary or appropriate in
connection with the Company's business and purpose;
7.3.4 Employ persons in the operation and management of the
business of the Company;
7.3.5 Prepare or cause to be prepared reports, statements,
and other relevant information for distribution to the Members;
7.3.6 Open accounts and deposits and maintain funds in the
name of the Company in banks, savings and loan associations,
"money market" mutual funds and other instruments as the Manager
may deem in its discretion to be necessary or desirable;
7.3.7 Cause the Company to make or revoke any of the
elections referred to in the Code (the Manager shall have no
obligation to make any such elections);
7.3.8 Select as its accounting year a calendar or fiscal year
as may be approved by the Internal Revenue Service (the Company
initially intends to adopt the calendar year);
7.3.9 Determine the appropriate accounting method or methods
to be used by the Company;
7.3.10 Require in any Company contract that the Manager shall
not have any personal liability, but that the person or entity
contracting with the Company is to look solely to the Company and
its assets for satisfaction;
7.3.11 Lease personal property for use by the Company;
7.3.12 Establish reserves from income in such amounts as the
Manager may deem appropriate;
7.3.13 Represent the Company and the Members as "tax matters
partner" within the meaning of the Code in discussions with the
Internal Revenue Service regarding the tax treatment of items of
Company income, loss, deduction or credit, or any other matter
reflected in the Company's returns, and, if deemed in the best
interest of the Members, to agree to final Company administrative
adjustments or file a petition for a readjustment of the Company
items in question with the applicable court;
7.3.14 Hold an election for a successor Manager before the
resignation, expulsion or dissolution of the Manager;
7.3.15 Initiate legal actions, settle legal actions and defend
legal actions on behalf of the Company;
7.3.16 Perform any and all other acts which the Manager is
obligated to perform hereunder; and
7.3.17 Execute, acknowledge and deliver any and all
instruments to effectuate the foregoing and take all such actions
in connection therewith as the Manager may deem necessary or
appropriate. Any and all documents or instruments may be
executed on behalf and in the name of the Company by the Manager.
7.4 Limitation on the Company's and the Manager's Authority.
Notwithstanding any provision contained herein to the contrary
and for as long as the Mortgage Loan is outstanding neither the
Company, the Manager, nor any Affiliate shall have any authority
or power to take any of the following actions:
7.4.1 The Company shall not incur indebtedness other than the
Mortgage Loan except for liabilities incurred in the ordinary
course of its business that are related to the ownership and
operation of the Mortgaged Premises;
7.4.2 The Company shall not engage in any dissolution,
liquidation, consolidation, merger or sale of all or
substantially all of its assets;
7.4.3 The Company shall not enter into a transaction with
Affiliates except for transactions on an arms length basis and on
commercially reasonable terms.
7.4.4 The Company shall not amend Sections 1.3, 7.3, 7.4,
7.5, 7.6, 10.1.5, 12.1 and 14.2 of this Agreement without (a) the
consent of the Lender, or (b) after the securitization of the
Mortgage Loan only if the Company receives (i) confirmation from
each of the applicable rating agencies that such amendment would
not result in the qualification, withdrawal or downgrade of any
securities rating and (ii) approval of the amendment by the
Lender or its assigns.
7.5 Obligations of the Company and Manager. The Company and the
Manager shall each:
7.5.1 Maintain books and records separate from any other
person or entity;
7.5.2 Maintain its bank account separate from any other
person or entity;
7.5.3 Not commingle its assets with those of any other person
or entity and hold all of its assets in its own name;
7.5.4 Conduct its own business in its own name;
1.1.1
7.5.5 Maintain separate financial statements, showing its
assets and liabilities separate and apart from those of any other
person or entity;
7.5.6 File its tax returns separate from those of any other
entity and not file a consolidated tax return with any other
entity;
7.5.7 Pay its own liabilities and expenses only out of its
own funds (except that the Company may acquire the Mortgaged
Premises with proceeds from the Mortgage Loan);
7.5.8 Observe all Company or corporate, as appropriate, and
other organizational formalities;
7.5.9 Maintain an arm's length relationship with its
Affiliates and enter into a transaction with Affiliates only on
commercially reasonable terms;
7.5.10 Pay the salaries of its own employees from its own
funds;
7.5.11 Maintain a sufficient number of employees in light of
its contemplated business operations;
7.5.12 Not guaranty or become obligated for the debts of any
other entity or person (except as provided or permitted in the
Loan Documents);
7.5.13 Not hold out its credit as being available to satisfy
the obligations of any other person or entity (except as provided
or permitted in the Loan Documents);
7.5.14 Not acquire the obligations or securities of its
Affiliates or owners, including partners, members or shareholders
as appropriate;
7.5.15 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);
7.5.16 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;
7.5.17 Use separate stationery, invoices and checks bearing
its own name;
7.5.18 Not pledge its assets for the benefit of any other
person or entity (except as provided or permitted in the Loan
Documents);
7.5.19 Hold itself out as a separate entity;
7.5.20 Correct any known misunderstandings regarding its
separate identity;
7.5.21 Not identify itself as a division of any other person
or entity; and
7.5.22 Maintain adequate capital in light of its contemplated
business operations.
7.6 Voting Rights of Member. Notwithstanding any other
provision of this Agreement, the Company shall not without the
prior written unanimous consent of all of the members of the
Company do any of the following:
7.6.1 File or consent to the filing of any bankruptcy,
insolvency or reorganizational case or proceeding; institute any
proceedings under any applicable insolvency law or otherwise seek
any relief under any laws relating to the relief from debts or
the protections of debtors generally;
7.6.2 Seek or consent to the appointment of a receiver,
liquidator, assignee, trustee, sequestrator, custodian or any
similar official for the Company or a substantial portion of its
properties;
7.6.3 Make any assignment for the benefit of the creditors of
the Company;
7.6.4 Take any action in furtherance of any of the foregoing;
7.6.5 Amend the Certificate of Formation of this Agreement
with respect to any provisions the amendment of which is not
prohibited by the Certificate of Formation.
7.7 Special Purpose Corporation. For so long as the Mortgage
Loan is outstanding, Hurstbourne shall be a Special Purpose
Corporation as required by the Lender under the Mortgage Loan and
Hurstbourne shall own at least a 1% Interest in the Company.
7.8 Administration of Company. So long as it is the Manager and
the provisions of this Agreement for compensation and
reimbursement of expenses of the Manager are observed, the
Manager shall have the responsibility of providing continuing
management support, including decisions regarding the sale or
refinancing or other disposition of Property.
7.9 Tax Matters Member. The Members hereby appoint Hurstbourne
to act as the "tax matters partner."
7.10 Indemnification of Manager. The Manager, its shareholders,
Affiliates, officers, directors, partners, employees, agents and
assigns, shall not be liable for, and shall be indemnified and
held harmless (to the extent of the Company's assets) from, any
loss or damage incurred by them, the Company or the Members in
connection with the business of the Company, including costs and
reasonable attorneys' fees and any amounts expended in the
settlement of any claims of loss or damage resulting from any act
or omission performed or omitted in good faith, which shall not
constitute gross negligence or willful malfeasance, pursuant to
the authority granted, to promote the interests of the Company.
7.11 No Personal Liability for Return of Capital. The Manager
shall not be personally liable or responsible for the return or
repayment of all or any portion of the Capital Contribution of
any Member of any loan made by any Member to the Company, it
being expressly understood that any such return of capital or
repayment of any loan shall be made solely from the assets (which
shall not include any right of contribution from any Member) of
the Company.
7.12 Authority as to Third Persons.
7.12.1 No third party dealing with the Company shall be
required to investigate the authority of the Manager or secure
the approval or confirmation by any Member of any act of the
Manager in connection with the Company business. No purchaser of
any property or interest owned by the Company shall be required
to determine the right to sell or the authority of the Manager to
sign and deliver any instrument of transfer on behalf of the
Company, or to see to the application or distribution of revenues
or proceeds paid or credited in connection therewith.
7.12.2 The Manager shall have full authority to execute on
behalf of the Company any and all agreements, contracts,
conveyances, deeds, mortgages and other instruments, and the
execution thereof by one or more officers of Hurstbourne
executing on behalf of the Company shall be the only execution
necessary to bind the Company thereto. No signature of any
Member shall be required.
7.12.3 The Manager shall have the right by separate instrument
or document to authorize one or more individuals or entities to
execute leases and lease-related documents on behalf of the
Company and any leases and documents executed by such agent shall
be binding upon the Company as if executed by the Manager.
8. Rights, Authority and Voting of the Member.
8.1 Members Are Not Agents. Pursuant to Section 7 and the
Certificate of Formation, the management of the Company is vested
in the Manager. No Member, acting solely in the capacity of a
Member, is an agent of the Company nor can any Member in such
capacity bind nor execute any instrument on behalf of the
Company.
8.2 Voting by a Member. Members shall be entitled to cast one
vote for each Percentage Interest attributable to their
Membership Interest. Except as otherwise specifically provided
in this Agreement, Members shall have the right to vote only upon
the following matters:
8.2.1 Admission of the Manager or election to continue the
business of the Company after the Manager ceases to be the
Manager when there is no remaining Manager;
8.2.2 Amendment of this Agreement;
8.2.3 Any merger or combination of the Company or roll-up of
the Company.
8.2.4 Dissolution and winding up of the Company as set forth
in Section 12.1; and
8.2.5 Election to continue the business of the Company as set
forth in Section 12.1.3 when there is a Dissolution Event.
8.3 Member Vote; Consent of Manager. Except as specifically
provided in this Agreement, matters upon which the Members may
vote shall require a Majority Vote of the Members and the consent
of the Manager to pass and become effective. Any amendment to
this Agreement shall require the unanimous consent of the
Members.
8.4 Meetings of the Members. Meetings of Members shall be
called by Manager at its discretion.
8.5 Action Without Meeting. Except as otherwise provided in
this Agreement, any action which may be taken at any meeting of
the Members may be taken without a meeting if a consent in
writing, setting forth the action so taken, is signed by all of
the Member.
8.6 Rights of Members. No Member or Owner shall have the right
or power to: (i) withdraw or reduce its Capital Contribution to
the Company, except as a result of the dissolution and
termination of the Company or as otherwise provided in this
Agreement or by law; (ii) bring an action for partition against
the Company; or (iii) demand or receive property other than cash
in return for his Capital Contribution. Except as provided in
this Agreement, no Member or Owner shall have priority over any
other Member or Owner either as to the return of Capital Contribu
tions or as to allocations of the Net Income, Net Loss or
Distributions of the Company. Other than upon the termination
and dissolution of the Company as provided by this Agreement,
there has been no time agreed upon when the contribution of each
Member is to be returned.
8.7 Return of Capital of Member. In accordance with the Act, an
Owner may, under certain circumstances, be required to return to
the Company, for the benefit of the Company's creditors, amounts
previously distributed to the Owner. If any court of competent
jurisdiction holds that any Owner is obligated to make any such
payment, such obligation shall be the obligation of such Owner
and not of the Company, the Manager or any other Owner.
9. Resignation, Withdrawal or Insolvency of Members.
9.1 Resignation or Withdrawal of the Members. Subject to
Section 10, a Member shall not resign or withdraw as a Member or
do any act that would require its resignation or withdrawal.
9.2 Purchase of Member's Interest; Conversion to Economic
Interest. Upon the occurrence of any event that would cause a
person to cease to be a Member under the Act, including a
Dissolution Event when the remaining Members elect to continue
the business of the Company, the remaining Member shall, subject
to the provisions of the Act, elect one of the two following
provisions:
9.2.1 The disassociated Member's interest in the
Distributions and allocations of Net Income and Net Loss set
forth in this Agreement shall be purchased by the Company for a
purchase price equal to the aggregate fair market value of the
Member's Interest determined according to the provisions of
Section 9.3. The purchase price of such interest shall be paid
by the Company to the Member in cash within 60 days of
determination of the aggregate fair market value or, at the
Company's option, said debt may be evidenced by a promissory note
bearing interest at the Prime Rate, which shall be due and
payable upon the earlier of (i) expiration of five years or
(ii) the sale or other disposition of all of the Property in the
normal and ordinary course as contemplated herein; or
9.2.2 The Member's interest in the Net Income, Net Loss and
Distributions, and assets of the Company will be converted into
an Economic Interest which will entitle such Member to its share
of Net Income, Net Loss and Distributions in accordance with this
Agreement, but no voting or other rights with respect to
management or operation of the Company other than those granted
to an Economic Interest Owner.
9.3 Purchase Price of a Withdrawing Member's Interest. The fair
market value of a Member's Interest to be purchased by the
Company pursuant to Section 9.2 shall be determined by agreement
between the Member and the Company, which agreement is subject to
approval by a unanimous vote of the Members. For this purpose,
the fair market value of the interest of the terminated Member
shall be computed as the amount which could reasonably be
expected to be realized by such Member upon the sale of the
Mortgaged Premises in the ordinary course of business at the time
of the event specified in Section 9.2. If the Member and the
Company cannot agree upon the fair market value of such
Membership Interest within 30 days, the fair market value thereof
shall be determined by appraisal, the Company and the terminated
Member each to choose one appraiser and the two appraisers so
chosen to choose a third appraiser. In the event that one Member
does not select an appraiser within 30 days after the end of the
30-day period indicated above, then the only appraiser shall be
the one selected by the Member who selected the appraiser. The
appraisers shall make their decision within 60 days and the
decision of a majority of the appraisers (or the one appraiser in
the event both Members do not select an appraiser) as to the fair
market value of such Membership Interest shall be final and
binding and may be enforced by legal proceedings. The terminated
Member and the Company shall each compensate the appraiser
appointed by it and the compensation of the third appraiser shall
be borne equally by such parties.
9.4 Damages. The provision set forth herein shall not affect
any claim for damages the Company may have against the
withdrawing Member (or Manager) if such withdrawal or resignation
is in violation of this Agreement. The Company shall have the
right to offset against any payments due under this Section 9 any
damages that the Company may incur as a result of a withdrawal or
resignation of a Member (or Manager) in contravention of this
Agreement.
10. Assignment of Membership Interest.
10.1 Permitted Assignments. Except as otherwise provided in this
Agreement, an Owner may not sell, assign, hypothecate, encumber
or otherwise transfer any part or all of its interest in the
Company except with the consent of a Majority Vote of the
Members, which consent may be withheld by such Members in their
sole and absolute discretion and without reason or for any reason
whatsoever. If the Members consent to the transfer, the interest
may only be transferred to the proposed transferee within the
time period approved by the Members, or within 90 days of such
consent on the proposed terms and price, if later. All costs of
the transfer, including reasonable attorneys' fees (if any),
shall be borne by the transferring Owner.
10.1.1 Any assignment or transfer of a Member's interest
provided for by this Agreement can be an assignment or transfer
of all of its interest or any portion or part of its interest.
10.1.2 Any transfer of all or a part of any Member's interest
may be made only pursuant to the terms and conditions contained
in this Section 10.
10.1.3 Any such assignment shall be by a written instrument of
assignment, the terms of which are not in contravention of any of
the provisions of this Agreement, and which has been duly
executed by the assignor of such Member's interest and accepted
by the Members pursuant to a Majority Vote.
10.1.4 The assignor and assignee shall have executed,
acknowledged, and delivered such other instruments as the Members
pursuant to a Majority Vote, may deem necessary or desirable to
effect such substitution.
10.1.5 Notwithstanding the above, no assignment or transfer
shall be allowed to the extent it is prohibited or would cause a
default under the Loan Documents.
10.1.6 Notwithstanding the above, no direct or indirect
transfer may be made in the event the transferee will own more
than 49% of the Membership Interests, either directly or
indirectly, unless such transfer is conditioned upon the delivery
of an acceptable non-consolidation opinion to the holder of the
Mortgage Loan and to any applicable rating agency concerning, as
applicable, the Company, the new transferee and/or their
respective owners.
10.2 Substitute Manager. Upon acceptance by the Members of an
assignment by the Manager, any assignee of such Manager's
interest in compliance with this Section 10 shall be substituted
as the Manager.
10.3 Substituted Member.
10.3.1 Conditions to be Satisfied. No Economic Interest Owner
shall have the right to become a Substituted Member unless the
Manager shall consent thereto in accordance with Section 10.3.2
and all of the following conditions are satisfied:
(1) A duly executed and acknowledged written instrument of
assignment shall have been filed with the Company, which
instrument shall specify the Membership Interest being assigned
and set forth the intention of the assignor that the assignee
succeed to the assignor's interest as a Substituted Member in his
place;
(2) The assignor and assignee shall have executed, acknowledged
and delivered such other instruments as the Manager may deem
necessary or desirable to effect such substitution, which may
include an opinion of counsel regarding the effect and legality
of any such proposed transfer, and which shall include the
written acceptance and adoption by the Economic Interest Owner of
the provisions of this Agreement; and
(3) A transfer fee sufficient to cover all reasonable expenses
connected with such substitution shall have been paid to the
Company.
10.3.2 Consent of Manager. The consent of the Manager shall
be required to admit an Economic Interest Owner as a Substituted
Member. The granting or withholding of such consent shall be
within the sole and absolute discretion of the Manager.
10.3.3 Consent of Member. By executing or adopting this
Agreement, each Member hereby consents to the admission of
additional or Substituted Members, and to any Economic Interest
Owner becoming a Substituted Member upon consent of the Manager
and in compliance with this Agreement.
10.3.4 Loss of Rights. A Member shall cease to have the power
to exercise any rights with respect to that portion of the
assigning Member's Membership Interest that is assigned to a
Substituted Member. In the event that Member has assigned all of
the Member's Membership Interest when the assignee becomes a
Substituted Member, the assigning member shall cease to be a
Member and shall cease to have the power to exercise any rights
of a Member.
10.3.5 Removal of Member. In the event a Member assigns all of
its Economic Interest upon the sole determination by the other
Member, the Company may purchase from such Member and the Member
shall transfer to the Company for the consideration of $100, all
of the Member's remaining rights in the Company, and the
assigning Member shall cease to be a Member. Each Member
acknowledges and agrees that the right of the Company to purchase
such remaining rights and interest from a Member who transfers a
Membership Interest in violation of this Section 10 is not
unreasonable under the circumstances existing as of the date
hereof. No such purchase by the Company of the remaining rights
and interest of the Member shall operate to make a Member's
assignee a Substituted Member. An Economic Interest Owner shall
only become a Substituted Member in accordance with Section
10.3.3.
10.4 Rights of Economic Interest Owner. An Economic Interest
Owner shall be entitled to receive Distributions from the Company
attributable to the interest acquired by reason of such
assignment from and after the effective date of the assignment;
provided, however, that notwithstanding anything herein to the
contrary, the Company shall be entitled to treat the assignor of
such interest as the absolute owner thereof in all respects, and
shall incur no liability for allocations of Net Income and Net
Loss or Distributions, or for the transmittal of reports or
accounting until the written instrument of assignment has been
received by the Company and recorded on its books. The effective
date of such assignment shall be the date on which all of the
requirements of this Section have been complied with, subject to
Section 4.7.
10.5 Right to Inspect Books. Economic Interest Owners shall have
no right to inspect the Company's books or records, to vote on
Company matters, or to exercise any other right or privilege as
Members, until they are admitted to the Company as Substituted
Members except as provided in the Act.
10.6 Transfer Subject to Law. No assignment, sale, transfer,
exchange or other disposition of any Membership Interest may be
made except in compliance with the applicable governmental laws
and regulations, including state and federal securities laws.
10.7 Transfer in Violation Not Recognized. Any assignment, sale,
exchange or other transfer in contravention of the provisions of
this Section 10 shall be void and ineffectual and shall not bind
or be recognized by the Company.
11. Books, Records, Accounting and Reports.
11.1 Records, Audits and Reports. The Company shall maintain at
its principal office the Company's records and accounts of all
operations and expenditures of the Company including the
following:
11.1.1 A current list in alphabetical order of the full name
and last known business or resident address of each Owner and
Manager, together with the Capital Contribution and the share in
profits and losses of each Owner;
11.1.2 A copy of the Certificate of Formation and all
amendments thereto, together with any powers of attorney pursuant
to which the Certificate of Formation or any amendments thereto
were executed;
11.1.3 Copies of the Company's Federal, state, and local
income tax or information returns and reports, if any, for the
six most recent taxable years;
11.1.4 Copies of this Agreement and any amendments thereto
together with any powers of attorney pursuant to which any
written accounting or any amendments thereto were executed;
11.1.5 Copies of any financial statements of the Company, if
any, for the six most recent years; and
11.1.6 The Company's books and records as they relate to the
internal affairs of the Company for at least the current and past
four fiscal years.
11.2 Delivery to Members and Inspection.
11.2.1 Each Member has the right, upon reasonable written
request for purposes related to the interest of that person as a
member, to receive from the Company:
(1) True and full information regarding the status of the
business and financial condition of the Company;
(2) Promptly after becoming available, a copy of the Company's
federal, state and local income tax returns for each year;
(3) A current list of the name and last known business,
residence or mailing address of each Member and Manager;
(4) A copy of this Agreement and the Certificate of Formation
and all amendments thereto, together with executed copies of any
written powers of attorney pursuant to which this Agreement and
any certificate and all amendments thereto have been executed;
and
(5) True and full information regarding the amount of cash and
description and statement of the agreed value of any property or
services contributed by each Member and which each Member has
agreed to contribute in the future, and the date on which each
became a Member.
11.3 Quarterly Report. The Manager will cause the Company, at
the Company's expense, to prepare a quarterly reports containing
a balance sheet and an income statement. Copies of such state
ments shall be distributed to each Member within 30 days after
the close of each quater.
11.4 Tax Information. The Manager shall cause the Company, at
the Company's expense, to prepare and timely file income tax
returns for the Company with the appropriate authorities, and
shall cause all Company information necessary in the preparation
of the Owners' individual income tax returns to be distributed to
the Owners not later than 75 days after the end of the Company's
fiscal year.
12. Termination and Dissolution of the Company.
12.1 Termination of Company. Subject to the provisions of the
Loan Documents while the Mortgage Loan is outstanding and to the
provisions of Section 7.4 the Company shall be dissolved, shall
terminate and its assets shall be disposed of, and its affairs
wound up upon the earliest to occur of the following:
12.1.1 Upon the happening of any event of dissolution
specified in the Certificate of Formation;
12.1.2 A determination by the Manager, with a Majority Vote,
to terminate the Company;
12.1.3 The occurrence of a Dissolution Event with respect to
the Manager; or
12.1.4 The expiration of the term of the Company.
Notwithstanding the foregoing, while the Mortgage Loan is
outstanding, the Company shall not dissolve for so long as one
solvent Member exists and upon the occurrence of any Dissolution
Event the remaining Members shall vote to continue the Company
and the consent of a majority of the remaining Members shall be
sufficient to continue the Company.
12.2 Certificate of Cancellation. As soon as possible following
the occurrence of any of the events specified in Section 12.1,
the Manager who has not wrongfully dissolved the Company or, if
none, the Members, shall execute a Certificate of Cancellation in
such form as shall be required by the Act.
12.3 Liquidation of Assets. Upon a dissolution and termination
of the Company, the Manager (or in case there is no Manager, the
Members or person designated by a Majority Vote) shall take full
account of the Company assets and liabilities, shall liquidate
the assets as promptly as is consistent with obtaining the fair
market value thereof, and shall apply and distribute the proceeds
therefrom in the following order:
12.3.1 To the payment of creditors of the Company, including
Members who are creditors to the extent permitted by law, but
excluding secured creditors whose obligations will be assumed or
otherwise transferred on the liquidation of Company assets;
12.3.2 To the setting up of any reserves as required by law
for any contingent liabilities or obligations of the Company;
provided, however, that said reserves shall be deposited with a
bank or trust company in escrow at interest for the purpose of
disbursing such reserves for the payment of any of the
aforementioned contingencies and, at the expiration of a
reasonable period, for the purpose of distributing the balance
remaining in accordance with remaining provisions of this
Section 12.3; and
12.3.3 To the Owners in proportion as set forth in Section
5.1, after giving effect to all Capital Contributions,
Distributions and allocations for all periods, including the
period during which such Distribution occurs.
12.4 Distributions Upon Dissolution. Each Member shall look
solely to the assets of the Company for all Distributions and its
Capital Contributions, and shall have no recourse therefor (upon
dissolution or otherwise) against any Manager or any Member.
12.5 Liquidation of Member's Interest. If there is a Liquidation
of a Member's interest in the Company, any liquidating
Distribution pursuant to such Liquidation shall be made only to
the extent of the positive Capital Account balance, if any, of
such Member for the taxable year during which such Liquidation
occurs after proper adjustments for allocations and Distributions
for such taxable year up to the time of Liquidation. Such
Distributions shall be made by the end of the taxable year of the
Company during which such Liquidation occurs, or if later, within
90 days after such Liquidation.
12.6 Dissassociation of Manager. Notwithstanding Section 12.1,
in the event of a Dissolution Event or other dissassociation of
the Manager from the Company, the Company shall appoint a new
Special Purpose Corporation as the Manager and deliver an
acceptable non-consolidation opinion to the holder of the
Mortgage Loan and to any applicable rating agency concerning, as
applicable, the Company, the new Manager Special Purpose
Corporation and its owners.
12.7 Continuation of Company. The Company shall continue and not
dissolve in the event of a Dissolution Event or other
disassociation of a Member other than the Manager.
13. Miscellaneous.
13.1 Counterparts. This Agreement may be executed in several
counterparts, and all so executed shall constitute one Agreement,
binding on all of the parties hereto, notwithstanding that all of
the parties are not signatory to the original or the same
counterpart.
13.2 Successors and Assigns. The terms and provisions of this
Agreement shall be binding upon and shall inure to the benefit of
the successors and assigns of the respective Members.
13.3 Severability. In the event any sentence or Section of this
Agreement is declared by a court of competent jurisdiction to be
void, such sentence or Section shall be deemed severed from the
remainder of this Agreement and the balance of this Agreement
shall remain in full force and effect.
1.1
13.4 Notices. All notices under this Agreement shall be in
writing and shall be given to the Member or Economic Interest
Owner entitled thereto, by personal service or by mail, posted to
the address maintained by the Company for such person or at such
other address as he may specify in writing.
13.5 Manager's Address. The name and address of the Manager is
as follows:
RW Hurstbourne Hotel, Inc.
0000 Xxxxx Xxxxx Xxxx, Xxxxx 000
Xxxxxxxx, Xxxxxxx 00000
13.6 Governing Law. This Agreement shall be governed by and
construed in accordance with the laws of the State of Delaware.
13.7 Captions. Section titles or captions contained in this
Agreement are inserted only as a matter of convenience and
reference. Such titles and captions in no way define, limit,
extend or describe the scope of this Agreement nor the intent of
any provisions hereof.
13.8 Gender. Whenever required by the context hereof, the
singular shall include the plural, and vice versa, the masculine
gender shall include the feminine and neuter genders, and vice
versa.
13.9 Time. Time is of the essence with respect to this
Agreement.
13.10 Additional Documents. Each Member, upon the request of
the Manager, shall perform any further acts and execute and
deliver any documents which may be reasonably necessary to carry
out the provisions of this Agreement, including, but not limited
to, providing acknowledgment before a Notary Public of any
signature made by a Member.
13.11 Descriptions. All descriptions referred to in this
Agreement are expressly incorporated herein by reference as if
set forth in full, whether or not attached hereto.
13.12 Advice of Counsel. Each Member represents and warrants
that it has received the advice of independent counsel of its own
choosing with respect to the meaning and effect of this
Agreement. No provision of this Agreement shall be construed in
favor of or against any party on the ground that such party or
its counsel drafted the provision. Each Member shall be
responsible for its own attorneys' fees in the preparation of
this Agreement and formation of the Company.
13.13 Partition. The Members agree that the assets of the
Company are not and will not be suitable for partition.
Accordingly, each of the Members hereby irrevocably waives any
and all rights that he may have, or may obtain, to maintain any
action for partition of any of the assets of the Company.
13.14 Integrated and Binding Agreement. This Agreement
contains the entire understanding and agreement among the Members
with respect to the subject matter hereof, and there are no other
agreements,understandings, representations or warranties among
the Members other than those set forth herein except the
Subscription Documents. This Agreement may be amended only as
provided in this Agreement.
IN WITNESS WHEREOF, the undersigned have set their hands to
this Agreement as of the date first set forth in the preamble.
RW HURSTBOURNE HOTEL, INC., a
Delaware corporation
By:
Its:
RW LOUISVILLE HOTEL INVESTORS,
L.L.C., a Delaware limited
liability company
By:
Its:
Exhibit A
Definitions
"Act" shall mean the Delaware Limited Liability Company Act,
as the same may be amended from time to time.
"Adjusted Capital Account Deficit" shall mean, with respect
to any Member, the deficit 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:
(i) Credit to such Capital Account any amounts which
the Member is obligated to restore and the Member's share of
Member Minimum Gain and Company Minimum Gain and;
(ii) Debit to such Capital Account the items described
in Treasury Regulations Sections 1.704-1(b)(2)(ii)(d)(4),
1.704-1(b)(2)(ii)(d)(5), and 1.704-1(b)(2)(ii)(d)(6).
"Affiliate" shall mean (i) any person directly or indirectly
controlling, controlled by or under common control with another
person; (ii) a person owning or controlling 10% or more of the
outstanding voting securities of such other person; (iii) any
officer, director or partner of such other person; and (iv) if
such other person is an officer, director or partner, any company
for which such person acts in any capacity. The term "person"
shall include any natural person, corporation, partnership,
trust, unincorporated association or other legal entity.
"Agreement" shall mean this Operating Agreement, as amended
from time to time.
"Book Gain" shall mean the excess, if any, of the fair
market value of the Property over its adjusted basis for federal
income tax purposes at the time a valuation of the Property is
required under this Agreement or Treasury Regulations
Section 1.704-1(b) for purposes of making adjustments to the
Capital Accounts.
"Book Loss" shall mean the excess, if any, of the adjusted
basis of Property for federal income tax purposes over its fair
market value at the time a valuation of the Property is required
under this Agreement or Treasury Regulations Section 1.704-1(b)
for purposes of making adjustments to the Capital Accounts.
"Book Value" shall mean the adjusted basis of Property for
federal income tax purposes increased or decreased by Book Gain,
Book Loss, Built-In Gain and Built-In Loss as reduced by depre
ciation, amortization or other cost recovery deductions, or
otherwise, based on such Book Value.
"Built-In Gain (or Loss)" shall mean the amount, if any, by
which the agreed value of contributed Property exceeds (or is
lesser than) the adjusted basis of Property contributed to the
Company by a Member immediately after its contribution by the
Member to the capital of the Company.
"Capital Account" with respect to any Member (or such
Member's assignee) shall mean such Member's initial Capital
Contribution adjusted as follows:
(i) A Member's Capital Account shall be increased by:
(a) such Member's share of Net Income;
(b) any income or gain specially allocated to a
Member and not included in Net Income or Net Loss;
(c) any additional cash Capital Contribution made
by such Member to the Company; and
(d) the fair market value of any additional
Capital Contribution consisting of property contributed by
such Member to the capital of the Company reduced by any
liabilities assumed by the Company in connection with such
contribution or to which the property is subject.
(ii) A Member's Capital Account shall be reduced by:
(a) such Member's share of Net Loss;
(b) any deduction specially allocated to a Member
and not included in Net Income or Net Loss;
(c) any cash Distribution made to such Member;
and
(d) the fair market value, as agreed to by the
Manager and the Members pursuant to a Majority Vote, of any
Property (reduced by any liabilities assumed by the Member
in connection with the Distribution or to which the
distributed Property is subject) distributed to such Member;
provided that, upon liquidation and winding up of the
Company, unsold Property will be valued for Distribution at
its fair market value and the Capital Account of each Member
before such Distribution shall be adjusted to reflect the
allocation of gain or loss that would have been realized had
the Company then sold the Property for its fair market
value. Such fair market value shall not be less than the
amount of any nonrecourse indebtedness that is secured by
the Property.
Property other than money may not be contributed to the
Company except as specifically provided in this Agreement.
Property of the Company may not be revalued for purposes of
calculating Capital Accounts unless the Manager and the Members
pursuant to a Majority Vote agree on the fair market value of the
Property and Company complies with the requirements of Treasury
Regulations Section 1.704-1(b)(2)(iv)(f) and (g); provided,
however, for purposes of calculating Book Gain or Book Loss (but
not for purposes of adjusting Capital Accounts to reflect the
contribution and distribution of such Property), the fair market
value of Property shall be deemed to be no less than the
outstanding balance of any nonrecourse indebtedness secured by
such Property.
The Capital Account of a Substituted Member shall include
the Capital Account of his transferor. Notwithstanding anything
to the contrary in this Agreement, the Capital Accounts shall be
maintained in accordance with Treasury Regulations Section
1.704-1(b). References in this Agreement to the Treasury
Regulations shall include corresponding subsequent provisions.
"Capital Contribution" shall mean the gross amount of cash
actually contributed by a Member to the capital of the Company
pursuant to Section 3 and the agreed upon fair market value of a
contributing Members equity in any property actually contributed
pursuant Section 3. In the plural, "Capital Contributions" shall
mean the aggregate amount contributed by all of the Members in
the Company.
"Cash From Operations" shall mean the net cash realized by
the Company from the operations of the Company (exclusive of Cash
From Sale or Refinancing) after payment of all cash expenditures
of the Company, including, but not limited to, operating
expenses, including all fees payable to the Manager or
Affiliates, all payments of principal and interest on
indebtedness, expenses for repairs and maintenance, capital
improvements and replacements, and such reserves and retentions
as the Manager reasonably determines to be necessary and
desirable in connection with Company operations with its then
existing assets and any anticipated acquisitions any proceeds.
"Cash From Sale or Refinancing" shall mean the net cash
realized by the Company from the sale, financing, refinancing or
other disposition of the Property after retirement of any debt
secured by the Property and payments of all cash expenditures
related to the transaction (and after establishing any reserves
the Manager may deem reasonably necessary), and cash from any
source other than Cash From Operations. Cash From Sale or
Refinancing shall include, but not be limited to, the net
proceeds from the sale of all or a portion of the Property
(including any interest on deferred proceeds), from the
disposition of the Property following a dissolution of the
Company, from hazard or casualty insurance payments in excess of
amounts expended in the restoration or repair of the Property or
applied to Company obligations, from the condemnation of the
Property, or any part thereof, in excess of the amount expended
in replacement or restoration of the Property affected by the
condemnation or applied to Company obligations, and from any
other voluntary or involuntary conversion of the Property, and
from any financing or refinancing of the Property.
"Certificate of Formation" shall mean the Certificate of
Formation of the Company as filed with the Secretary of State of
Delaware as the same may be amended or restated from time to
time.
"Code" shall mean the Internal Revenue Code of 1986, as
amended, or corresponding provisions of subsequently enacted
federal revenue laws.
"Company" shall refer to RW Louisville Hotel Associates,
LLC.
"Company Minimum Gain" shall meaning "partnership minimum
gain" as set forth in Treasury Regulations Sections 1.704-2(d).
"Dissolution Event" shall mean with respect to any Manager
one or more of the following: the death, insanity, withdrawal,
resignation, expulsion, Event of Insolvency, dissolution or
occurrence of any other event which terminates the continued
membership of any Member unless the Members consent to continue
the business of the Company pursuant to Section 8.2.
"Distributable Cash" shall mean Cash From Operations, Cash
From Sale or Exchange and Capital Contributions determined by the
Manager to be available for Distribution to the Members.
"Distribution" shall refer to any money or other property
transferred without consideration to Owners with respect to their
interests in the Company, but shall not include any payments to
the Manager pursuant to Section 6.
"Economic Interest" shall mean an interest in the Net
Income, Net Loss and Distributions of the Company but shall not
include any right to vote or to participate in the management of
the Company.
"Economic Interest Owner" shall mean the owner of an
Economic Interest who is not a Member.
"Event of Insolvency" shall occur when an order for relief
against the Member is entered under Chapter 7 of the federal
bankruptcy law, or (A) the Member: (1) makes a general
assignment for the benefit of creditors, (2) files a voluntary
petition under the federal bankruptcy law, (3) files a petition
or answer seeking for that Member a reorganization, arrangement,
composition, readjustment, liquidation, dissolution or similar
relief under any statute, law or regulation, (4) files an answer
or other pleading admitting or failing to contest the material
allegations of a petition filed against the Member in any
proceeding of this nature, or (5) seeks, consents to, or
acquiesces in the appointment of a trustee, receiver, or
liquidator of that Member or of all or a substantial part of that
Member's properties, or (B) the expiration of 60 days after
either (1) the commencement of any proceeding against the Member
seeking reorganization, arrangement, composition, readjustment,
liquidation, dissolution or similar relief under any statute,
law, or regulation, if the proceeding has not been dismissed, or
(2) the appointment without the Member's consent or acquiescence
of a trustee, receiver, or liquidator of the Member or of all or
any substantial part of the Member's properties, if the
appointment has not been vacated or stayed (or if within 60 days
after the expiration of any such stay, the appointment is not
vacated).
"Interest" shall mean a Membership Interest or an Economic
Interest.
"Lender" shall mean Column Financial, Inc., its successors
and assigns.
"Liquidation" means in respect to the Company the earlier of
the date upon which the Company is terminated under
Section 708(b)(1) of the Code or the date upon which the Company
ceases to be a going concern (even though it may exist for
purposes of winding up its affairs, paying its debts and
distributing any remaining balance to its Members), and in
respect to a Member where the Company is not in Liquidation means
the date upon which occurs the termination of the Member's entire
interest in the Company by means of a distribution or the making
of the last of a series of Distributions (whether or not made in
more than one year) to the Member by the Company.
"Loan Documents" shall mean the Promissory Note dated
________, 1998 by the Company in favor of Lender in the principal
amount of Eighteen Million Five Hundred Thousand and No/100
($18,500,000), the Senior Deed of Trust and Security Agreement of
even date securing said Note and encumbering the Mortgaged
Premises and all documents executed and delivered by or on behalf
of the Company in connection therewith.
"Majority Vote" shall mean the vote of Members (including
the Manager) holding more than fifty percent (50%) of the
Percentage Interests in the Company.
"Manager" shall refer to RW Hurstbourne Hotel, Inc., a
Delaware corporation. The term "Manager" shall also refer to any
successor or additional Manager who is admitted to the Company as
the Manager.
"Member" shall mean any person or entity who is admitted to
the Company as a Member or Substitute Member and who has not
ceased to be a Member.
"Member Minimum Gain" shall mean "partner nonrecourse debt
minimum gain" as determined under Treasury Regulations Section
1.704-2(i)(3).
"Member Nonrecourse Debt" shall mean "partner nonrecourse
debt" as set forth in Treasury Regulations Section 1.704-2(b)(4).
"Member Nonrecourse Deductions" shall mean of "partner
nonrecourse deductions," and the amount thereof shall be, as set
forth in Treasury Regulations Section 1.704-2(i).
"Membership Interest" shall mean a Member's entire interest
in the Company including such Member's Economic Interest and such
voting and other rights and privileges that the Member may enjoy
by being a Member.
"Mortgage Loan" shall mean the loan made to the Company by
the Lender pursuant to the Loan Documents.
"Mortgaged Premises" shall have the meaning as set forth in
Section 1.3.
"Net Income" or "Net Loss" shall mean, respectively, for
each taxable year of the Company the taxable income and taxable
loss (exclusive of Built-In Gain or Loss) of the Company as
determined for federal income tax purposes in accordance with
Section 703(a) or the Code (including all items of income, gain,
loss, or deduction required to be separately stated pursuant to
Section 703(a)(1) of the Code) (other than any specific item of
income, gain (exclusive of Built-In Gain), loss (exclusive of
Built-In Loss), deduction or credit subject to special allocation
under this Agreement), with the following modifications:
(a) The amount determined above shall be increased by
any income exempt from federal income tax;
(b) The amount determined above shall be reduced by
any expenditures described in Section 705(a)(2)(B) of the
Code or expenditures treated as such pursuant to Treasury
Regulations Section 1.704-1(b)(2)(iv)(i);
(c) Depreciation, amortization and other cost recovery
deductions shall be computed based on Book Value instead of
on the amount determined in computing taxable income or
loss. Any item of deduction, amortization or cost recovery
specially allocated to a Member and not included in Net
Income or Net Loss shall be determined for Capital Account
purposes in a similar manner; and
(d) For purposes of this Agreement, Book Gain and Book
Loss attributable to a revaluation of Property attributable
to unrealized gain or loss in such Property shall be treated
as Net Income and Net Loss.
"Nonrecourse Debt" shall have the meaning set forth in
Treasury Regulations Section 1.704-2(b)(3).
"Nonrecourse Deductions" shall have the meaning, and the
amount thereof shall be, as set forth in Treasury Regulations
Section 1.704-2(c).
"Owner" shall mean a Member or the holder of an Economic
Interest.
"Percentage Interest" shall be one percent (1%) for
Hurstbourne, and ninety-nine percent (99%) for Investors.
"Prime Rate" shall mean the reference rate announced from
time-to-time by the Wall Street Journal, and changes in the Prime
Rate shall be deemed to occur on the date that changes in such
rate are announced.
"Property" shall refer to any or all of such real and
tangible or intangible personal property or properties as may be
acquired by the Company including the Mortgaged Premises.
"Regulatory Allocations" shall mean the allocations set
forth in Sections 4.2(a) through (g).
"Special Purpose Corporation" shall mean a special purpose
corporation that meets the requirements of the Lender. The
initial Special Purpose Corporation member shall be Hurstbourne.
"Substituted Member" shall mean any person admitted as a sub
stituted Member pursuant to this Agreement.
