OPERATING AGREEMENT
OF
GRAND TUSAYAN, LLC,
A DELAWARE LIMITED LIABILITY COMPANY
October 8, 1998
TABLE OF CONTENTS
ARTICLE PAGE
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1 Definitions............................................... 1
2 Organizational Matters.................................... 12
3 Capital Contributions..................................... 13
4 Development Loan; Permanent Loan; Project Obligations..... 14
5 Additional Capital Contribution........................... 17
6 Allocation of Profits and Losses.......................... 20
7 Distributions............................................. 24
8 Management and Control of the Company..................... 26
9 Rights, Powers and Approval Rights of the Members......... 33
10 Sale, Assignment or Transfer of Membership Interests...... 38
11 Dissolution Events........................................ 41
12 Accounting, Records, Reporting by Members................. 41
13 Right of First Refusal.................................... 43
14 Option to Purchase Membership Interests................... 44
15 Dissolution and Winding Up................................ 47
16 Indemnification and Insurance............................. 49
17 Miscellaneous............................................. 49
EXHIBITS
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A Legal Description of the Leased Premises
B Assignment of Development Property
C Assignment of Lease Agreement
D Development Plan and Budget
E Operating Plan and Budget
F Management Agreement
SCHEDULES
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1 Names and Addresses of Members
OPERATING AGREEMENT
OF
GRAND TUSAYAN, LLC,
A DELAWARE LIMITED LIABILITY COMPANY
THIS OPERATING AGREEMENT OF GRAND TUSAYAN, LLC, a Delaware limited
liability company (the "Agreement"), is entered into this 8th day of October,
1998, and is to be effective as of the 4th day of November, 1997 ("Effective
Date") by and between CANYON VENTURES, LLC, an Arizona limited liability
company ("CV"), and EXCEL LEGACY CORPORATION, a Delaware corporation
("Legacy") (hereinafter collectively referred to as the "Members" or
individually as the "Member").
ARTICLE 1
DEFINITIONS
The Members acknowledge and agree that EDV previously assigned,
transferred and conveyed all of its right, title and interest in and to the
Master Lease, the Project, the Company Property and the Company to Legacy and
that such assignment, transfer and conveyance took place subsequent to the
date the Master Lease was entered into and executed and prior to the date of
this Agreement. Notwithstanding the foregoing, It is the intention of the
Members that this Agreement be deemed effective for all purposes as of
November 4, 1997. Accordingly, for purposes of determining the Capital
Contributions of Legacy, any sums expended by EDV shall be deemed to have
been expended by Legacy. For example, (a) the Purchase Price and Closing
Costs paid or satisfied by EDV on behalf of the Company shall be deemed to
have been paid by Legacy; and (b) all Demolition Costs paid or satisfied by
EDV on behalf of the Company shall be deemed to have been paid or satisfied
by Legacy.
When used in this Agreement, the following terms shall have the meanings
set forth below:
"ACC Deficit Amount" shall have the meaning ascribed to such term in
Section 5.4 hereof.
"ACC Priority Distribution" shall mean a Distribution equal to
twenty-five percent (25%) of the ACC Deficit Amount contributed to the
Company by an Electing Contributing Member pursuant to Article 5 hereof.
"ACC Priority Return" shall mean a twenty percent (20%) per annum
compounded rate of return calculated on the ACC Deficit Amount contributed to
the Company by an Electing Contributing Member pursuant to Article 5 hereof.
"Act" shall mean the Delaware Limited Liability Company Act, codified at
Title 6, Delaware Code, Sections 18-101, et seq., as the same may be amended
from time to time.
"Additional Capital Contribution" shall mean the total amount of cash
and the agreed upon fair market value of any property contributed to the
Company by any Member as such Member's Additional Capital Contribution
pursuant to Article 5 hereof.
"Additional Project Capital Improvements" shall mean any capital
improvements, enhancements or additions to the Project which: (a) were not
included within the Development Plan and Budget submitted to and approved by
the lender under the Development Loan; (b) are approved by the Unanimous Vote
of the Members; (c) do not constitute routine or normal repairs to or
maintenance of existing capital improvements; and (d) are not replacements of
existing capital improvements.
"Adjusted Capital Account Deficit" means, with respect to any Member,
the deficit balance, if any, in such Member's Capital Account at the end of
each Fiscal Year of the Company, after giving effect to the following
adjustments:
(a) Credit to such Capital Account any amounts which such
Member is deemed obligated to restore in accordance with the penultimate
sentences of Treasury Regulation Sections 1.704-2(g)(1) and 1.704-2(i)(5); and
(b) Debit to such Capital Account the items described in
Treasury Regulation Sections 1.704-1(b)(2)(ii)(d)(4), (5) and (6).
The foregoing definition of Adjusted Capital Account Deficit is intended
to comply with the provisions of Section 1.704-1(b)(2)(ii)(d) of the Treasury
Regulations, and shall be interpreted consistently therewith.
"Affiliate" shall mean any Person that, directly or indirectly, controls
or is controlled by or is under common control with any other Person.
"Agreement" or "Operating Agreement" shall mean this Operating Agreement
of Grand Tusayan, LLC, as originally executed and as amended from time to
time.
"Apartments" shall mean the multi-family dwelling units located on the
Leased Premises and used primarily as housing for employees of the Hotel,
together with all other real and personal property, tangible and intangible,
owned or leased by the Company and utilized in conjunction therewith.
"Articles" shall mean the Articles of Organization for the Company
originally filed with the Delaware Secretary of State, as amended from time
to time.
"Assignee" shall mean a Person who has acquired a beneficial interest
(including, but not limited to, an Economic Interest), in one or more
Membership Interests (or any permitted fractional interest therein), but who
is not a Substituted Member.
"Assignment of Development Property" shall mean that certain Assignment
of Development Property, in the form attached hereto as Exhibit "B," and
incorporated herein by reference. Pursuant to the Assignment of Development
Property, all right, title and interest of CV, Xxxxxxx X. Xxxx, Xx., and S.
Xxxxxxx Xxxxxx in and to the Development Property shall be assigned to the
Company free and clear of any and all liens, liabilities and encumbrances.
"Assignment of Lease Agreement" shall mean that certain Assignment of
Lease Agreement, in the form of Exhibit "C," attached hereto and incorporated
herein by reference.
"Bona Fide Offer" shall mean an offer to purchase the Hotel received by
the Company from an Unaffiliated Third Party.
"Budgeted Development Costs" shall mean all Development Costs of the
Company which are authorized pursuant to the Development Plan and Budget.
"Budgeted Pre-Development Expenses" shall mean all Pre-Development
Expenses of the Company which are authorized pursuant to the Development Plan
and Budget.
"Capital Account" shall mean, with respect to any Member, the account
maintained for such Member in accordance with the following provisions:
(a) Each Member's Capital Account shall be increased by such
Member's Capital Contribution, such Member's distributive share of Profits,
and the amount of any liabilities of the Company that are assumed by such
Member or that are secured by any Property distributed to such Member and
such Member is considered to have assumed or taken subject to under Section
752 of the Code;
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(b) Each Member's Capital Account shall be decreased by the
amount of cash and the agreed upon fair market value of any Property
distributed to such Member pursuant to the provisions of this Agreement, such
Member's distributive share of Losses, and the amount of any liabilities of
such Member that the Company is considered to have assumed or taken subject
to pursuant to Section 752 of the Code;
(c) In the event any Membership Interests in the Company are
transferred in accordance with the terms of this Agreement, the Assignee
shall succeed to the Capital Account of the Assignor, to the extent it
relates to the transferred Membership Interests; and
(d) In all other respects, the Company shall determine and
maintain each Capital Account in accordance with Treasury Regulations Section
1.704-1(b)(2)(iv).
"Capital Contribution" shall mean the total amount of cash and the
initial Gross Asset Value of any property (other than money) contributed to
the Company by any Member as such Member's Original Capital Contribution
and/or Additional Capital Contribution.
"Certificate" shall have the meaning ascribed to such term in Subsection
9.5.1.
"Code" shall mean the Internal Revenue Code of 1986, as amended, or
corresponding provisions of subsequent federal revenue laws.
"Company" shall mean Grand Tusayan, LLC, a Delaware limited liability
company.
"Company Minimum Gain" shall have the meaning given such term in Section
1.704-2(b)(2) and 1.704-2(d) of the Treasury Regulations.
"Contributing Members" shall have the meaning ascribed to such term in
Section 5.4 hereof.
"CV Purchase Notice" shall have the meaning ascribed to such term in
Section 14.5 hereof.
"CV Purchase Price" shall have the meaning ascribed to such term in
Section 14.5 hereof.
"Demolition Costs" shall mean any and all costs, fees and expenses
incurred by Legacy and/or EDV on behalf of the Company and/or by the Company
arising out of and in connection with tearing down, demolishing, leveling,
removing, clearing and disposing of the improvements existing on the Leased
Premises as of the Effective Date, subject to and in accordance with the
Development Plan and Budget.
"Depreciation" shall mean, for each Fiscal Year, an amount equal to the
depreciation, amortization or other cost recovery deduction allowable with
respect to an asset for such Fiscal Year, except that if the Gross Asset
Value of an asset differs from its adjusted basis for federal income tax
purposes at the beginning of such Fiscal Year, Depreciation shall be an
amount which bears the same ratio to such beginning Gross Asset Value as the
federal income tax depreciation, amortization or other cost recovery
deduction for such Fiscal Year bears to such beginning adjusted tax basis;
provided, however, that if the adjusted basis for federal income tax purposes
of an asset at the beginning of such Fiscal Year is zero, Depreciation shall
be determined with reference to such beginning Gross Asset Value using any
reasonable method selected by the Managers.
"Development Approvals" shall mean any and all land use and development
entitlements, permits and authorizations relating to the construction,
development, improvement and operation of the Project.
"Development Costs" shall mean any and all costs, fees and expenses
incurred by Legacy and/or EDV on behalf of the Company and/or by the Company
during the Development Stage arising out of and in
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connection with the planning, design, architecture construction and
development of the Project which do not constitute Additional Project Capital
Improvements.
"Development Loan" shall have the meaning ascribed to such term in
Section 4.1(a) hereof.
"Development Plan and Budget" shall have the meaning ascribed to such
term in Section 8.8 hereof. Following the approval by the Majority Interest
of the Members of any Revised Development Plan and Budget, with respect to
the applicable time period in question, all references in this Agreement to
the Development Plan and Budget shall mean the Revised Development Plan and
Budget.
"Development Property" shall mean: (a) any and all land use and
development entitlements, permits and authorizations, whether approved or in
process, relating to the Leased Premises, including, without limitation, the
Development Approvals; (b) utility hook-up rights, utility deposits and
prepayments, water allocations, water rights, sewer capacity, density
allocations and other similar rights or approvals regarding the Leased
Premises and/or the Project; (c) all plans and specifications regarding the
Project, whether finalized or in process; (d) all studies and reports
regarding the Leased Premises, including, without limitation, all soils
reports, environmental studies and reports, water studies and reports; all
conditions of approval, maps, surveys and other related documents regarding
the Leased Premises, whether finalized or in process; (e) any and all
appraisals or other market studies concerning the Leased Premises and/or the
Project, whether finalized or in process; (f) the Water Agreement; and (g)
all other information regarding the Leased Premises and/or the Project in the
possession or control of Xxxxxxx X. Xxxx, Xx., S. Xxxxxxx Xxxxxx and/or CV,
whether finalized or in process.
"Development Stage" shall mean the period of time commencing on the
earlier of: (a) the date of recordation of the mortgage or deed of trust
evidencing the Development Loan; or (b) the date of commencement of grading
of the Leased Premises in connection with the development and construction of
the Project pursuant to a grading permit issued by the applicable
governmental authorities, and terminating upon the Project Completion Date.
"Dissolution Event" shall have the meaning ascribed to such term in
Article 11 hereof.
"Distribution" shall mean any cash or other property distributed,
without consideration, to any or all of the Members with respect to their
Membership Interests in the Company including, but not limited to,
distributions of Net Cash, but shall not include the Management Fee or any
other payments to the Members, the Managers or their Affiliates, for services
rendered pursuant to the terms and conditions of this Agreement.
"Economic Interest" shall mean a Member's or Economic Interest Owner's
Percentage Interest in the Profits, Losses and Distributions of the Company
pursuant to this Agreement and the Act, but shall not include any other
rights of a Member including, without limitation, the right to vote or
participate in management and/or any right to receive information concerning
the business and affairs of the Company.
"Economic Interest Owner" shall mean the owner/holder of an Economic
Interest and who is not a Member.
"EDV" shall mean ERT Development Corporation, a Delaware corporation,
its successors and assigns.
"Effective Date" shall mean November 4, 1997.
"Electing Contributing Member" shall have the meaning ascribed to such
term in Section 5.4 hereof.
"Event of Default" shall have the meaning ascribed to such term in
Section 4.2 hereof.
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"Excess Development Costs" shall mean those Development Costs which: (i)
are in excess of the aggregate amounts allocated to such items in the
Development Plan and Budget; or (ii) were neither included nor contemplated
in the Development Plan and Budget.
"Excess Pre-Development Expenses" shall mean those Pre-Development
Expenses which: (i) are in excess of the aggregate amounts allocated to such
items in the Development Plan and Budget; (ii) were neither included nor
contemplated in the Development Plan and Budget.
"Fiscal Year" shall mean the Company's fiscal year, which shall be the
calendar year.
"Formation Costs" shall mean all costs, fees and expenses (including
legal fees) paid or incurred by Legacy, EDV and/or the Company in connection
with the formation of the Company, including, without limitation, all legal
fees and expenses incurred in connection with the preparation and execution
of this Agreement and all other documents, agreements and instruments to be
entered into and executed in connection herewith.
"Gross Asset Value" means with respect to any asset, the asset's
adjusted basis for federal income tax purposes, except as follows:
(a) The initial Gross Asset Value of any asset contributed
by a Member to the Company shall be the gross fair market value of such
asset, as determined by the Managers, provided that the initial Gross Asset
Values of the assets contributed to the Company pursuant to Section 3.1
hereof shall be as set forth in such section;
(b) The Gross Asset Values of all Company Property shall be
adjusted to equal their respective gross fair market values (taking Code
Section 7701(g) into account, as determined by the Managers as of the
following times: (i) the acquisition of an additional interest in the Company
by any new or existing Member in exchange for more than a DE MINIMIS Capital
Contribution; (ii) the distribution by the Company to a Member of more than a
DE MINIMIS amount of Company Property as consideration for an interest in the
Company; and (iii) the liquidation of the Company within the meaning of
Treasury Regulations Section 1.704-1(b)(2)(ii)(g), provided that an
adjustment described in clauses (i) and (ii) of this subsection shall be made
only if the Managers reasonably determine that such adjustment is necessary
to reflect the relative economic interests of the Members in the Company;
(c) The Gross Asset Value of any item of Company Property
distributed to any Member shall be adjusted to equal the gross fair market
value (taking Code Section 7701(g) into account) of such Asset on the date of
distribution as determined by the Managers; and
(d) The Gross Asset Values of Company Property shall be
increased (or decreased) to reflect any adjustments to the adjusted basis of
such assets pursuant to Code Section 734(b) or Code Section 743(b), but only
to the extent that such adjustments are taken into account in determining
Capital Accounts pursuant to Treasury Regulations Section
1.704-1(b)(2)(iv)(m) and subparagraph (f) of the definition of "Profits" and
"Losses" or Section 6.2.3 hereof; provided, however, that Gross Asset Values
shall not be adjusted pursuant to this subsection (d) to the extent that an
adjustment pursuant to subsection (b) is required in connection with a
transaction that would otherwise result in an adjustment pursuant to this
subsection (d).
If the Gross Asset Value of an asset has been determined or adjusted
pursuant to subsection (b) or (d), such Gross Asset Value shall thereafter be
adjusted by the Depreciation taken into account with respect to such asset,
for purposes of computing Profits and Losses.
"Guaranty Fee" shall have the meaning ascribed to such term in Section
8.13.2 hereof.
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"Hotel" shall mean the Leased Premises, Phase I, Phase II, the
Apartments, the Development Property, the Personal Property, and all other
real and personal property, tangible and intangible, owned or leased by the
Company and utilized in conjunction therewith.
"Hotel Manager" shall mean the Person designated to manage the day to
day operations of the Hotel. The initial Hotel Manager shall be Starship
Management.
"Improvements" means all buildings, structures, fixtures and other
improvements now or hereafter located on the Leased Premises including,
without limitation, all water control systems, utility lines and related
fixtures and improvements, drainage facilities, landscaping, improvements,
common areas, fencing, signs, lockers, restrooms, showers, roadways, walkways
and parking facilities.
"Insolvency" shall mean either: (a) when the Company, a Manager or a
Member, as applicable: (i) has an order for relief entered with respect to
it under Chapter 7 or Chapter 11 of the Federal Bankruptcy Law; (ii) makes a
general assignment for the benefit of creditors; (iii) files a voluntary
petition under the Federal Bankruptcy Laws; (iv) files a petition or answer
seeking for the Company or that Mangers or Member, as applicable, any
reorganization, arrangement, composition, readjustment, liquidation,
dissolution or similar relief under the Bankruptcy Code, any statute, law or
regulation; (v) files an answer or other pleading admitting or failing to
contest the material allegations of a petition filed against the Company or
that Manager or Member, as applicable, in any proceeding of this nature; (vi)
seeks, consents to or acquiesces the appointment of a trustee, receiver or
liquidator of the Company or that Manager or Member, as applicable, or of all
or any substantial part of the Company's or that Manager's or Member's, as
applicable, properties; or (b) (i) ninety (90) days after the commencement of
any proceeding seeking reorganization, arrangement, composition,
readjustment, liquidation, dissolution or similar relief under the Bankruptcy
Code, any statute, law or regulation, the proceeding has not been dismissed;
or (ii) if, within ninety (90) days after the appointment without the
Company's or that Manager's or Member's, as applicable, consent or
acquiescence of a trustee, receiver or liquidator of the Company or that
Manager or Member, as applicable, or of all or any substantial part of the
property or estate of the Company or that Manger or Member, as applicable,
the appointment is not vacated or stayed or within ninety (90) days after the
expiration of any such stay, the appointment if not vacated.
"Leased Premises" means that certain parcel of real property located in
Maricopa County, State of Arizona, the legal description of which is set
forth on Exhibit "A" attached hereto and incorporated herein by reference,
which the Company will lease from Red Feather Properties Limited Partnership,
an Arizona limited partnership, pursuant to the terms of the Master Lease.
"Leasehold Interest" means the leasehold interest created under the
Master Lease, including all right, title and interest in and to the Leased
Premises and the Improvements thereon, together with: (a) all easements,
rights-of-way, development rights, entitlements, air rights and appurtenances
relating or appertaining to the Leased Premises and/or the Improvements, if
any; (b) all water rights applicable to the Leased Premises, if any; and (c)
all sewer, septic and waste disposal rights and interests applicable or
appurtenant to and/or used in connection with the operation of the
Improvements.
"Legacy" shall mean Excel Legacy Corporation, a Delaware corporation.
"Legacy Affiliate" shall mean Excel Realty Trust, Inc., a Maryland
corporation, ERT Development Corporation, a Delaware corporation, or any
other Affiliate of Legacy now or in the future.
"Legacy Purchase Price" shall have the meaning ascribed to such term in
Section 14.4 hereof.
"Lender" shall have the meaning ascribed to such term in Section 4.1(a)
hereof.
"Majority Interest of the Members" shall mean the vote or written
consent of Legacy.
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"Manager" or "Managers" shall mean the manager or managers appointed by
the Members to manage the affairs and operations of the Company, in
accordance with the terms and conditions of this Agreement. The initial
Managers of the Company shall be Xxxxxxx X. Xxxx, Xx., S. Xxxxxxx Xxxxxx,
Xxxxx X. Xxxx, Xxxxx X. Xxxxxx and S. Xxxx Xxxxxxx.
"Management Agreement" shall have the meaning ascribed to such term in
Section 8.13.1 hereof.
"Management Fee" shall have the meaning ascribed to such term in Section
8.13.1 hereof.
"Master Lease" shall mean that certain Lease Agreement, dated November
4, 1997, by and between Red Feather Properties Limited Partnership, an
Arizona limited partnership, as the Lessor, and Legacy as the Lessee, which
was assigned by EDV to Legacy pursuant to that certain Assignment of Ground
Lease, dated March 12, 1998, by and between EDV, as the Assignor, and Legacy,
as the Assignee, which Assignment of Ground Lease was recorded on March 30,
1998, as Instrument No. 98-09565.
"Members" shall mean those Persons: (a) whose names appear on the
signatory pages to this Agreement and those Persons who are subsequently
admitted as Substituted Members in accordance with the terms and conditions
of this Agreement; and (b) who have not subsequently died, resigned,
withdrawn, been removed, become Insolvent, or if other than an individual,
dissolved. "Member" shall refer to any one of the Members unless the context
otherwise requires.
"Member Non-Recourse Debt" shall have the meaning set forth in Section
1.704-2(b)(4) of the Treasury Regulations.
"Member Non-Recourse Debt Minimum Gain" means an amount, with respect to
each Member Non-Recourse Debt, equal to the Company Minimum Gain that would
result if such Member Non-Recourse Debt were treated as a Non-Recourse
Liability, determined in accordance with Section 1.704-2(i)(3) of the
Treasury Regulations.
"Member Non-Recourse Deductions" shall have the meaning given such term
in Sections 1.704-2(i)(1) and 1.704-2(i)(2) of the Treasury Regulations.
"Membership Interests" shall mean a Member's entire interest in the
Company including, but not limited to, the Member's Economic Interest in the
Company, the Member's right, if any, to vote on Company matters and/or
participate in the management of the Company, the Member's right to receive
information concerning the business and affairs of the Company, and all other
rights, privileges, preferences and obligations granted to the Member.
"Net Cash" shall mean, with respect to any fiscal period, all cash
receipts of the Company from any source whatsoever, after deducting payments
for Operating Expenses and any amounts set aside for the restoration,
increase or creation of Reserves. "Net Cash" shall also include any amounts
which the Managers designate (subject to the approval by the Majority
Interest of the Members), as no longer necessary for the maintenance of
Reserves. "Net Cash" shall also mean the surplus net proceeds (as may be
determined by the Managers and subject to the approval by the Majority
Interest of the Members), of any Development Loan, any Permanent Loan and/or
any other loans obtained by the Company from time to time. There shall be
excluded from the definition of Net Cash any portion of the Management Fee
which is accrued and which is not paid to CV pursuant to the terms and
conditions of Section 8.13.1(ii) hereof.
"Non-Contributing Member" shall have the meaning ascribed to such term
in Section 5.4 hereof.
"Non-Contributing Member Deduction" shall have the meaning ascribed to
such term in Section 6.1 hereof.
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"Non-Recourse Deductions" shall have the meaning set forth in Section
1.704-2(b)(1) of the Treasury Regulations.
"Non-Recourse Liability" shall have the meaning set forth in Section
1.704-2(b)(3) of the Treasury Regulations.
"Non-Transferring Member" shall have the meaning ascribed to such term
in Section 10.7 hereof.
"Notice" shall have the meaning ascribed to such term in Section 17.6
hereof.
"Notice of Election Not to Close" shall have the meaning ascribed to
such term in Section 14.4 hereof.
"Occupancy Stabilization" shall mean the date which corresponds to three
(3) years following the Project Completion Date.
"Operating Expenses" shall mean, with respect to any fiscal period, the
amount of cash disbursed or expended by the Company in the ordinary course of
operations during such period including, without limitation, all costs, fees
and expenses incurred for advertising, marketing, promotion, property
management, debt service payments, real and personal property taxes and
assessments, capital improvements or replacements, insurance premiums, taxes,
utilities, repairs and maintenance, legal, accounting, bookkeeping, audit,
equipment use, telephone expenses, salaries and consulting fees, and direct
expenses of Company employees, if any, and agents while engaged in Company
matters. Operating Expenses shall include fees paid by the Company to any of
the Members, or their Affiliates, permitted by this Agreement, including,
without limitation, the Management Fee and the actual cost of goods,
materials and administrative services used for or by the Company. Operating
Expenses shall also include expenses in connection with preparing and mailing
reports furnished to the Members for investor, tax reporting, federal
security or other purposes; costs incurred in connection with any litigation
in which the Company is involved, as well as the examination, investigation
or other proceedings of a regulatory agency with jurisdiction over the
Company, including legal and accounting costs, fees and expenses incurred in
connection therewith.
"Operating Losses" shall mean, with respect to any fiscal period during
the Operations Stage, the amount determined by subtracting the Operating
Expenses of the Company during such fiscal period from the Operating Revenue
of the Company during such fiscal period. The Operating Losses, if any, of
the Company shall be determined on a cash flow basis. For purposes of
determining the amount of Operating Losses pursuant hereto, there shall be
excluded from the definition of Operating Expenses: (a) any expenditures
during the Operations Stage using proceeds from any insurance policy as a
result of any claim filed by the Company (exclusive of amounts constituting
business interruption and similar insurance); and (b) any expenditures during
the Operations Stage utilizing proceeds from any Development Loan and/or any
Permanent Loan.
"Operating Plan and Budget" shall have the meaning ascribed to such term
in Section 8.10 hereof. Following the approval by the Majority Interest of
the Members of any Revised Operating Plan and Budget, with respect to the
applicable time period in question, all references in this Agreement to the
Operating Plan and Budget shall mean the Revised Operating Plan and Budget.
"Operating Revenue" shall mean, with respect to any fiscal period during
the Operations Stage, all revenue of the Company derived from operations of
the Hotel, other than: (a) proceeds from any insurance policy as a result of
any claim filed by the Company (exclusive of amounts constituting business
interruption and similar insurance); and (b) proceeds from any Development
Loan and/or any Permanent Loan.
"Operations Stage" shall mean the period commencing on the date of
termination of the Development Stage and continuing so long as the Company is
the owner of the Hotel.
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"Option Notice" shall have the meaning ascribed to such term in Section
10.8 hereof.
"Option to Purchase" shall have the meaning ascribed to such term in
Section 14.1 hereof.
"Original Capital Contribution" shall mean the total amount of cash and
the agreed upon fair market value of any property contributed to the Company
by each Member as such Member's Original Capital Contribution pursuant to
Article 3 hereof.
"OS Calendar Year(s)" shall have the meaning ascribed to such term in
Section 8.13.1(ii) hereof.
"Parcel 3C Lease" shall mean that certain lease agreement that preceded
the Master Lease, and which as originally executed between Red Feather Lodge,
Inc., as Lessor, and Circle 4 Theaters, as Lessee, dated as of February 18,
1986.
"Percentage Interest" shall mean the percentage of a Member set forth
opposite each Member's name on Schedule "1" attached hereto and incorporated
herein by reference, as the same may be modified from time to time pursuant
to the terms and conditions of this Agreement.
"Permanent Loan" shall have the meaning ascribed to such term in Section
4.1(b) hereof.
"Person" shall mean any individual, partnership, trust, corporation,
limited liability company, association or other legal entity.
"Personal Property" shall mean: (a) any and all items of tangible
personal property and fixtures owned or leased by the Company and/or used in
conjunction with the Hotel, including, without limitation, machinery,
equipment, furniture, furnishings, moveable walls or partitions, phone
systems, computers or trade fixtures, maintenance equipment, office equipment
or machines, and all other furniture, fixtures or equipment of every kind or
nature located on or used in conjunction with the operation and/or
maintenance of the Hotel, whether on or off-site, together with all
warranties and guarantees associated therewith; and (b) all intangible
personal property owned or possessed by the Company and used in conjunction
with the ownership, operation, leasing, maintenance or management of the
Hotel or the tangible personal property, including, without limitation, all
goodwill attributable to the Hotel, any and all trade names, trademarks and
copyrights, guarantees, general intangibles, business records, licenses,
permits and approvals with respect to the ownership, operation or maintenance
of the Hotel.
"Phase I" shall mean the approximately one hundred twenty (120) room
hotel, restaurant, entertainment center and related facilities to be
constructed and developed by the Company on the Leased Premises pursuant to
the Development Plan and Budget.
"Phase II" shall mean the expansion of the hotel from one hundred twenty
(120) rooms to approximately two hundred twenty (220) rooms, together with
the expansion of the restaurant, entertainment center and related facilities,
subject to the approval by the Unanimous Vote of the Members.
"Pre-Development Expenses" shall mean all costs, fees and expenses
incurred by Legacy and/or EDV on behalf of the Company and/or by the Company
during the Pre-Development Stage arising out of the normal day-to-day
operations of the Company and in connection with securing the Development
Approvals and the Development Loan, including, without limitation, all
engineering, architectural, land planning, legal, accounting and other
professional costs, fees and expenses incurred in connection with the
foregoing.
"Pre-Development Stage" shall mean the period of time commencing as of
the Effective Date of this Agreement and terminating on the date of
commencement of the Development Stage.
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"Priority Return" shall mean a twelve percent (12%) per annum compounded
rate of return calculated based on the outstanding balance of the amount of
any Original Capital Contribution and Additional Capital Contribution
contributed by any Member to the Company from time to time. The Priority
Return payable to each Member shall be calculated commencing as of the
Effective Date and on the basis of a three hundred sixty-five (365) day year.
Notwithstanding any provision in this Agreement to the contrary: (a) a
Priority Return shall not accrue on any portion of the Original Capital
Contribution of CV pursuant to Section 3.1(a) hereof; and (b) a Priority
Return shall not accrue on any portion of the ACC Deficit Amount contributed
by a Member to the Company pursuant to Section 5.4 hereof.
"Profits and Losses" mean, for each taxable year or other period, an
amount equal to the Company's taxable income or loss for such year or period,
determined in accordance with Section 703(a) of the Code (for this purpose,
all items of income, gain, loss or deduction required to be stated separately
pursuant to Section 703(a)(i) of the Code shall be included in taxable income
or loss), with the following adjustments:
(a) Any income of the Company that is exempt from federal
income tax and not otherwise taken into account in computing Profits or
Losses shall be added to such taxable income or shall reduce such taxable
loss;
(b) Any expenditures of the Company described in Section
705(a)(2)(B) of the Code or treated as Section 705(a)(2)(B) expenditures
pursuant to Treasury Regulations Section 1.704-1(b)(2)(iv)(i)] and not
otherwise taken into account in computing Profits or Losses, shall be
subtracted from such taxable income or shall reduce such loss;
(c) In the event the Gross Asset Value of any Company asset
is adjusted pursuant to subsections (b) or (c) of the definition of Gross
Asset Value, the amount of such adjustment shall be treated as an item of
gain (if the adjustment increases the Gross Asset Value of the asset) or an
item of loss (if the adjustment decreases the Gross Asset Value of the asset)
from the disposition of such asset and shall be taken into account for
purposes of computing Profits or Losses;
(d) Gain or loss resulting from any disposition of Property
with respect to which gain or loss is recognized for federal income tax
purposes shall be computed by reference to the Gross Asset Value of the
Property disposed of, notwithstanding that the adjusted tax basis of such
Property differs from its Gross Asset Value;
(e) In lieu of the depreciation, amortization, and other
cost recovery deductions taken into account in computing such taxable income
or loss, there shall be taken into account Depreciation for such Fiscal Year,
computed in accordance with the definition of Depreciation;
(f) To the extent an adjustment to the adjusted tax basis of
any Company asset pursuant to Code Section 734(b) is required, pursuant to
Treasury Regulations Section 1.704-(b)(2)(iv)(m)(4), to be taken into account
in determining Capital Accounts as a result of a distribution other than in
liquidation of a Member's Interest in the Company, the amount of such
adjustment shall be treated as an item of gain (if the adjustment increases
the basis of the asset) or loss (if the adjustment decreases such basis) from
the disposition of such asset and shall be taken into account for purposes of
computing Profits or Losses; and
(g) Notwithstanding any other provision of this definition,
any items which are specially allocated pursuant to Section 6.2 or Section
6.3 hereof shall not be taken into account in computing Profits or Losses.
The amounts of the items of Company income, gain, loss or deduction
available to be specially allocated pursuant to Sections 6.2 and 6.3 hereof
shall be determined by applying rules analogous to those set forth in
subsections (a) through (g) above.
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"Project" shall mean the construction and development of Phase I by the
Company on the Leased Premises.
"Project Completion Date" shall mean the date which corresponds to the
last to occur of the following events: (a) the substantial completion of the
construction and development of the Project in accordance with the
Development Plan and Budget; and (b) the issuance of a certificate of
occupancy or similar governmental approval for the Project.
"Project Obligations" shall have the meaning ascribed to such term in
Section 4.2 hereof.
"Property" shall mean the Leased Premises, the Project, the Development
Property, the Personal Property, and all other real and personal property,
tangible or intangible, acquired by the Company from time to time.
"Purchase Price and Closing Costs" shall mean the purchase price and
related closing costs, fees and expenses (including legal fees), paid or
incurred by Legacy, EDV and/or the Company in connection with acquiring the
Parcel 3C Lease and in connection with negotiating and entering into the
Master Lease.
"Regulatory Allocations" shall have the meaning ascribed to such term in
Section 6.3 hereof.
"Remaining Members" shall have the meaning ascribed to such term in
Article 11 hereof.
"Reserves" shall mean payments made or amounts allocated during any
period to reserves which shall be maintained in amounts deemed sufficient by
the Managers, subject to the approval by the Majority Interest of the
Members, for Operating Expenses and for the Distributions to be made to the
Members pursuant to Section 7.2 hereof.
"Revised Development Plan and Budget" shall have the meaning ascribed to
such term in Section 8.9 hereof.
"Revised Operating Plan and Budget" shall have the meaning ascribed to
such term in Section 8.11 hereof.
"Right of First Refusal" shall have the meaning ascribed to such term in
Section 13.1 hereof.
"Rules" shall have the meaning ascribed to such term in Section 17.12
hereof.
"SEC Information" shall have the meaning ascribed to such term in
Section 4.2 hereof.
"Starship Management" shall mean Starship Management, L.L.C., an Arizona
limited liability company.
"Substituted Member" shall mean any Person admitted to the Company as a
Member pursuant to the provisions of this Agreement.
"Tax Allocation" shall have the meaning ascribed to such term in Section
7.2.5 hereof.
"Transfer" shall have the meaning ascribed to such term in Section 10.1
hereof.
"Transferring Member" shall have the meaning ascribed to such term in
Section 10.7 hereof.
"Treasury Regulations" shall mean the Regulations of the United States
Department of the Treasury promulgated under the Code.
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"Unaffiliated Third Party" shall mean any Person who/that is not an
Affiliate of any Member or Manager. Without limiting the foregoing, in no
event shall any Legacy Affiliate be included within the definition of an
Unaffiliated Third Party.
"Unanimous Vote of the Members" shall mean the unanimous vote or written
consent of all of the Members.
"Water Agreement" shall mean that certain Hydro Resources Inc. Water
System Connection, Access, and Purchase License Agreement, dated January 20,
1998, by and between Xxx Xxxx dba The Grand Tusayan L.L.C. and
Hydro-Resources, Inc., an Arizona corporation, as the same may be amended
from time to time.
ARTICLE 2
ORGANIZATIONAL MATTERS
2.1 FORMATION; CONVERSION. Pursuant to the Act, the Members have
formed a Delaware limited liability company under the laws of the State of
Delaware by filing the Articles with the Delaware Secretary of State and by
entering into this Agreement. To the extent the rights or obligations of any
Member are different by reason of any provision of this Agreement than they
would be in the absence of any such provision, this Agreement shall, to the
extent permitted by the Act, control. The Managers shall execute such
further documents and take such further action as shall be appropriate or
necessary to comply with the requirements of law for the formation and
operation of a limited liability company.
2.2 NAME. The name of the Company is Grand Tusayan, LLC.
2.3 CERTIFICATES. The Managers shall cause any fictitious name
certificates and similar filings, and any amendments thereto, to be duly and
promptly filed in the applicable public offices whenever necessary to comply
with applicable law or when the Managers deem such action to be appropriate
or advisable.
2.4 TERM. The term of this Agreement shall be coterminous with the
period of duration of the Company, as specified in the Articles, unless
extended or sooner terminated as hereinafter provided.
2.5 AGENT FOR SERVICE OF PROCESS/OFFICE LOCATION.
(a) DELAWARE. The Company shall continuously maintain an
office and registered agent in the State of Delaware, as required by the Act.
The agent for service of process for the Company is CorpAmerica, Inc., or
such other person or entity as the Managers may hereafter designate. The
address of the principal office of the Company and the principal office for
its registered agent in the State of Delaware shall initially be 00 Xxx
Xxxxxxx Xxxx, Xxxxx, Xxxxxxxx 00000, or such other place as the Managers may
hereinafter designate.
(b) ARIZONA. The Company shall continuously maintain an
office and registered agent in the State of Arizona. The initial agent for
service of process for the Company in the State of Arizona is Xxxxxxx X.
Xxxx, Xx., or such other Person as the Managers may hereafter designate. The
address of the principal office of the Company in the State of Arizona and
the address of the Company's registered agent in the State of Arizona shall
initially be 000 Xxxx Xxxxxxxx Xxxxxx, Xxxxx 000, Xxxxx, Xxxxxxx 00000, or
such other place as the Managers may hereinafter designate.
2.6 COMPANY PURPOSES. The Company has been formed for the following
purposes: (a) to acquire, by way of assignment and contribution, the Master
Lease with regard to the Leased Premises; (b) to secure all necessary
Development Approvals in connection with the Project; (c) to construct and
develop the Project on the Leased Premises in accordance with the Development
Plan and Budget; (d) to operate the Hotel in accordance with the Operating
Plan and Budget; (e) to hold the Hotel as a long-term capital
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investment; (f) to sell, lease, convey, transfer, exchange or otherwise
dispose of the Hotel or portions thereof in accordance with the Operating
Plan and Budget; and (g) to undertake all of the foregoing with the intention
of deriving a profit therefrom.
ARTICLE 3
CAPITAL CONTRIBUTIONS
3.1 ORIGINAL CAPITAL CONTRIBUTION. The original capital contribution
("Original Capital Contribution") of each of the Members to the Company shall
be as follows:
(a) CV. As its Original Capital Contribution to the
Company, CV shall: (i) concurrently with the execution of this Agreement,
deliver to the Company two (2) counterpart originals of the Assignment of
Development Property, duly executed by CV, Xxxxxxx X. Xxxx, Xx. and S.
Xxxxxxx Xxxxxx, together with originals and copies of all items constituting
the Development Property, free and clear of any and all liens, liabilities
and encumbrances; (ii) undertake all actions necessary on behalf of the
Company to secure all Development Approvals in connection with the Project;
and (iii) oversee, supervise and manage the construction and development of
the Project on behalf of the Company. In consideration for the Original
Capital Contribution of CV as set forth in this Section 3.1(a), CV's Capital
Account in the Company shall initially be credited with the sum of Three
Hundred Fifty Thousand Dollars ($350,000.00).
In consideration for the contribution by CV to the Company as set forth
above, and undertaking all other obligations herein set forth, CV shall
receive the Membership Interest in the Company allocated to CV pursuant to
this Agreement.
(b) LEGACY. As its Original Capital Contribution to the
Company, Legacy shall concurrently with the execution of this Agreement,
deliver to the Company two (2) counterpart originals of the Assignment of
Lease Agreement, duly executed by Legacy. In addition to the foregoing, as
part of its Original Capital Contribution to the Company, Legacy and/or EDV
have previously paid or satisfied, on behalf of the Company, all of the
Formation Costs of the Company. All Formation Costs paid or satisfied by
Legacy and/or EDV on behalf of the Company shall be deemed to constitute a
portion of Legacy's Original Capital Contribution to the Company. In
consideration for the Original Capital Contribution of Legacy, Legacy's
Capital Account in the Company shall initially be credited with: (i) the sum
of Two Million Nine Hundred Ten Dollars ($2,000,910.00), which sum equals
the Purchase Price and Closing Costs paid or incurred by Legacy and/or EDV on
behalf of the Company; and (ii) the amount of all Formation Costs paid or
satisfied by Legacy and/or EDV on behalf of the Company. The Priority Return
with respect to Legacy's (and EDV's) Original Capital Contribution to the
Company (the assignment of the Master Lease pursuant to the Assignment of
Lease Agreement), shall be deemed to commence to accrue as of the Effective
Date. The Priority Return with respect to the Formation Costs shall be
deemed to accrue as of the date such Formation Costs were paid or satisfied
by Legacy and/or EDV.
In consideration for the contribution by Legacy to the Company as set
forth above, and undertaking all other obligations herein set forth, Legacy
shall receive the Membership Interest in the Company allocated to Legacy
pursuant to this Agreement.
It is the intention of the Members that the Original Capital
Contributions of the Members to the Company shall have been deemed to be made
in accordance with the provisions of Section 721 of the Code.
3.2 CAPITAL ACCOUNTS. There shall be established for each Member a
single Capital Account, regardless of the class or classes of Membership
Interests held or owned by such Member or when or how such Membership
Interests were obtained, which Capital Account shall be maintained and
adjusted in accordance with the provisions of Article 1 of this Agreement.
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3.3 INTEREST/NO RIGHT TO WITHDRAW CAPITAL. Other than the ACC
Priority Return and the Priority Return, no Member shall be entitled to
receive interest on such Member's Capital Contribution. Although the
Managers may cause the Company to make Distributions to the Members from time
to time, no Member shall have the right to demand a return of all or any
portion of such Member's Capital Contribution.
ARTICLE 4
DEVELOPMENT LOAN; PERMANENT LOAN; PROJECT OBLIGATIONS
4.1 DEVELOPMENT LOAN AND PERMANENT LOAN.
(a) DEVELOPMENT LOAN. It is the intention of the Members
and the Company to secure a Development Loan which will cover all or
substantially all of the anticipated Budgeted Development Costs ("Development
Loan"). The Development Loan may take the form of traditional bank
construction financing, a "mini-perm" construction/permanent loan, or other
comparable financing. It will be the responsibility of Legacy to take the
lead role in connection with locating the Development Loan for the Project
and it will be the responsibility of CV to assist Legacy in the preparation
of all loan packages and submissions in connection therewith. In conjunction
with securing the Development Loan, to the extent required by the applicable
lender under the Development Loan ("Lender"): (i) Legacy hereby agrees to and
shall execute and deliver to the Lender any and all guarantees of the
financial obligations of the Company under the Development Loan; and (ii) CV
hereby agrees to and shall execute and deliver, and shall also cause Xxxxxxx
X. Xxxx, Xx., and S. Xxxxxxx Xxxxxx to execute and deliver, to the Lender,
any and all completion guarantees required by Lender in conjunction with the
Development Loan. Notwithstanding the foregoing: (A) in no event shall
Legacy or any Legacy Affiliate be required to furnish any completion
guarantees required in conjunction with the Development Loan, other than the
financial guarantees contemplated in Section 4.1(i) above; and (B) in no
event shall CV, Xxxxxxx X. Xxxx, Xx., nor S. Xxxxxxx Xxxxxx be required to
furnish any guarantees of the financial obligations of the Company under the
Development Loan, other than the completion guarantees contemplated in
Section 4.1(ii) above. In the event Legacy is required to furnish any
guaranty with respect to the financial obligations of the Company under the
Development Loan, Legacy shall be entitled to receive the Guaranty Fee set
forth in Section 8.13.2 hereof.
The Members acknowledge and agree that: (Y) as of the date of this
Agreement, Phase I has been substantially completed and is generally open for
business; (Z) in lieu of a Development Loan, the Members elected to construct
and develop Phase I and Legacy agreed to pay all Demolition Costs,
Pre-Development Expenses and Development Costs incurred in connection
therewith, as more fully described in Sections 5.1 and 5.2 below. Based on
the foregoing, with respect to Phase I only, neither CV, Xxxxxxx X. Xxxx,
Xx., nor S. Xxxxxxx Xxxxxx shall have any obligation to furnish the
completion guarantees contemplated in Section 4.1(ii) above.
(b) PERMANENT LOAN. Following the Project Completion Date, it is
the intention of the Members and the Company to secure one or more permanent
loans (the "Permanent Loan") with respect to the Hotel. It will be the
responsibility of Legacy to take the lead role in connection with locating
the Permanent Loan and it will be the responsibility of CV to assist Legacy
in the preparation of all loan packages and submissions in connection
therewith. In conjunction with securing the Permanent Loan, to the extent
required by the applicable Lender under the Permanent Loan, Legacy hereby
agrees to and shall execute and deliver to the Lender any and all guarantees
of the financial obligations of the Company under the Permanent Loan. In the
event Legacy is required to furnish any guaranty with respect to the
financial obligations of the Company under any Permanent Loan, Legacy shall
be entitled to receive the Guaranty Fee set forth in Section 8.13.2 hereof.
4.2 PROJECT OBLIGATIONS. Pursuant to Section 3.1(a) hereof, CV is
hereby obligated to: (i) undertake all actions necessary on behalf of the
Company to secure all Development Approvals in connection with the Project;
(ii) oversee, supervise and manage the construction and development of the
Project on behalf of the Company; and (iii) perform all other duties and
obligations to be performed by CV in
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accordance with the terms and conditions of this Agreement, the Development
Plan and Budget and the Operating Plan and Budget (collectively, the "Project
Obligations").
CV hereby acknowledges that Legacy is required to file various reports
and other information with the Securities and Exchange Commission and other
regulatory agencies. Accordingly, CV hereby acknowledges and agrees that the
duties and obligations of Starship Management, in its capacity as the Hotel
Manager pursuant to the Management Agreement, shall include the obligation to
timely provide to Legacy any and all books of account, records, balance
sheets, income statements, finance statements and all other reports and
information that may be requested from time to time by Legacy, all of which
shall be in form and content satisfactory to Legacy ("SEC Information"). All
SEC Information requested by Legacy shall be delivered by Starship
Management, in its capacity as Hotel Manager, to Legacy on or before the
twelfth (12th) calendar day of each month during the term of the Management
Agreement.
CV hereby acknowledges and agrees that a material part of the
consideration for Legacy entering into this Agreement and undertaking the
obligations of Legacy hereunder is the covenant and agreement of CV to
perform the Project Obligations on behalf of the Company in a timely manner.
CV further acknowledges and agrees that the failure of CV to timely perform
each and every one of the Project Obligations may or will have a material
adverse impact on Legacy and the Company. CV further acknowledges and agrees
that the failure of Starship Management, in its capacity as Hotel Manager, to
timely deliver to Legacy the SEC Information will have a material adverse
impact on Legacy. Accordingly, the occurrence of one or more of the following
events shall constitute an event of default by CV under this Agreement
("Event of Default"):
(a) The failure of the Company to secure all of the
necessary Development Approvals for the Project on or before the expiration
of nine (9) months after the Effective Date of this Agreement.
(b) The failure of the Company to substantially complete the
construction and development of the Project on or before the expiration of
one (1) year after the date the Company secures all of the Development
Approvals for the Project.
(c) The failure of CV to timely perform and satisfy any of
the other Project Obligations (including, without limitation, the duty and
obligation of the Managers designated and appointed by CV pursuant to Section
8.2 hereof to prepare the Revised Development Plan & Budget and the Revised
Operating Plan and Budget pursuant to Sections 8.9 and 8.11, respectively),
other than those obligations specifically identified in clauses (a) and (b)
above, in accordance with this Agreement, the Development Plan and Budget
and/or the Operating Plan and Budget; provided, however, CV shall not be
deemed to be in default of this Agreement if: (i) in the event the default
is a monetary default and CV cure such monetary default within five (5)
calendar days after receipt of written notice from the Company of such
monetary default; or (ii) in the event the default is a non-monetary default
and CV cure such non-monetary default within thirty (30) calendar days after
receipt of written notice from the Company of such non-monetary default;
provided, however if such non-monetary default cannot reasonably be cured
within such thirty (30) calendar day period, CV shall not be deemed to be in
default of this Agreement, the Development Plan and Budget, and/or the
Operating Plan and Budget if CV commences to cure such non-monetary default
within such thirty (30) calendar day period, and thereafter diligently
pursues the same to completion.
(d) The death or permanent disability of Xxxxxxx X. Xxxx,
Xx., prior to the Project Completion Date; provided, however, the death or
permanent disability of Xxxxxxx X. Xxxx, Xx., shall not constitute an Event
of Default pursuant to this Section 4.2(d) in the event Xxxxxxx X. Xxxx, Xx.
(the son of Xxxxxxx X. Xxxx, Xx.): (i) becomes the owner and successor of
the Membership Interests of Xxxxxxx X. Xxxx, Xx., in CV; and (ii) covenants
and agrees in writing with the Company to perform all of the duties and
obligations which Xxxxxxx X. Xxxx, Xx., would have performed on behalf of CV
for the benefit of the Company.
(e) The dissolution of CV.
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(f) The commission of any act of fraud, intentional deceit
or moral turpitude by CV, Starship Management, Xxxxxxx X. Xxxx, Xx. and/or S.
Xxxxxxx Xxxxxx, arising out of, relating to and/or in connection with, the
Company, the Project and/or the Hotel.
(g) During the time period in which Starship Management is
serving as the Hotel Manager, the failure of Starship Management, in its
capacity as the Hotel Manager, to timely prepare and deliver to Legacy full,
complete and accurate SEC Information requested by Legacy on or before the
twelfth (12th) calendar day of each month during the term of the Management
Agreement.
Upon the occurrence of one or more Events of Default as described in
Sections 4.2(a) through (f) hereof, the following events shall automatically
take place: (A) Xxxxxxx X. Xxxx, Xx., and S. Xxxxxxx Xxxxxx (or the Persons
nominated to serve as Managers by Xxxxxxx X. Xxxx, Xx., and/or Xxxxxxx Xxxxxx
pursuant to Section 8.2 hereof) shall be removed as Managers of the Company
pursuant to Section 8.4(e) hereof, and Legacy shall thereafter at all times
have the right to appoint successor Managers pursuant to Section 8.7 hereof;
and (B) the Management Agreement shall automatically terminate. In
connection with any termination of the Management Agreement, Starship
Management shall be removed as the Hotel Manager under the Management
Agreement and Starship Management shall have no further right to receive any
portion of the Management Fee. Thereafter, Legacy shall have the right to
appoint itself, any Legacy Affiliate or any other Person as the successor
Hotel Manager and such Person (including Legacy or any Legacy Affiliate)
shall be entitled to receive the Management Fee.
Upon the occurrence of an Event of Default as described in Section
4.2(g) hereof, as its sole and exclusive remedy, the following monetary
penalties will automatically be imposed upon CV (without the requirement of
any notice or other action on the part of the Company or Legacy): (i) in the
event the SEC Information is not delivered to Legacy on or before the
fifteenth (15th) day of the applicable calendar month, a penalty of Ten
Thousand Dollars ($10,000.00) shall be imposed against CV with respect to
such occurrence; and (ii) for each day after the fifteenth (15th) day of the
month in which the SEC Information is not delivered to Legacy (including,
without limitation, the day upon which the SEC Information is actually
delivered to Legacy), an additional late penalty of One Thousand Dollars
($1,000.00) per day shall be imposed against CV.
CV hereby acknowledges and agrees that it would be extremely difficult
or impossible to estimate the damages to be suffered by Legacy in the event
Starship Management, in its capacity as Hotel Manager, fails to timely
deliver to Legacy the required SEC Information. CV further acknowledges and
agrees that Starship Management is an Affiliate of CV and that CV directs and
controls the operations of Starship Management. Accordingly, CV hereby
acknowledges and agrees that the late penalties set forth in this Section
4.2(g) are a reasonable estimate of the damages to be incurred by Legacy as a
result of Starship Management's failure to timely deliver to Legacy the
required SEC Information. The late penalties contemplated in this Section
4.2(g) are due and payable by CV to Legacy on the date incurred. In the
event CV fails to timely pay to Legacy the entire amount of any late
penalties imposed pursuant to this Section 4.2(g), all such unpaid amounts
shall bear interest at the rate of twelve percent (12%) per annum compounded
annually. Without in any way constituting a limitation on the remedies
available to Legacy, in the event CV fails to timely pay to Legacy the entire
amount of any late penalties imposed pursuant to this Section 4.2(g),
together with any interest accrued thereon, following the receipt of written
notice from Legacy, the Managers shall cause all Distributions of Net Cash
(which would have otherwise been distributed to CV in accordance with the
terms and conditions set forth in this Agreement), to be paid to Legacy until
such time as Legacy has received all amounts owing to Legacy pursuant to this
Section 4.2(g).
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ARTICLE 5
ADDITIONAL CAPITAL CONTRIBUTIONS
5.1 ADDITIONAL CAPITAL CONTRIBUTIONS -- PRE-DEVELOPMENT STAGE. In
the event additional funds are required during the Pre-Development Stage to
pay or otherwise satisfy the Pre-Development Expenses of the Company, the
provisions of this Section 5.1 shall govern.
5.1.1 BUDGETED PRE-DEVELOPMENT EXPENSES. During the
Pre-Development Stage, Legacy shall be obligated to contribute to the Company
the amount of additional capital required to pay or otherwise satisfy all
Budgeted Pre-Development Expenses of the Company; provided, however, in no
event shall Legacy be required to contribute to the Company an amount of
additional capital in excess of the Budgeted Pre-Development Expenses set
forth in the Development Plan and Budget.
5.1.2 EXCESS PRE-DEVELOPMENT EXPENSES. In the event
additional capital is required by the Company during the Pre-Development
Stage to pay or otherwise satisfy any Excess Pre-Development Expenses of the
Company, then CV shall be obligated to contribute to the Company the amount
of additional capital necessary to pay or satisfy such Excess Pre-Development
Expenses. CV shall contribute to the Company the amount of such additional
capital required pursuant to this Section 5.1.2 within thirty (30) calendar
days following the receipt by CV of written notice from the Managers
specifying the need for the additional capital to pay or otherwise satisfy
such Excess Pre-Development Expenses. In the event CV fails to contribute to
the Company the amount of such Excess Pre-Development Expenses within such
thirty (30) calendar day period as its sole and exclusive remedy, Legacy may
elect to characterize such Excess Pre-Development Expenses as an ACC Deficit
Amount and contribute then same to the Company pursuant to Section 5.4 hereof
and, in such a case, CV shall be subject to the Non-Contributing Member
Deduction set forth in Section 6.1 hereof.
5.1.3 DEMOLITION COSTS. During the Pre-Development State,
Legacy shall be obligated to contribute to the Company the amount of
additional capital required to pay or otherwise satisfy all Demolition Costs
of the Company; provided, however, in no event shall Legacy be required to
contribute to the Company an amount of additional capital in excess of the
budgeted amount of Demolition Costs set forth in the Development Plan and
Budget.
The Members acknowledge and agree that: (a) as of the date of this
Agreement, Phase I has been substantially completed and is generally open for
business; (b) in lieu of a Development Loan, all Pre-Development Expenses
with respect to Phase I and all Demolition Costs were paid or satisfied by
Legacy; (c) all such Pre-Development Expenses and all Demolition Costs paid
or satisfied by Legacy shall be deemed to constitute a portion of Legacy's
Additional Capital Contribution to the Company pursuant to this Section 5.1;
(d) the Priority Return with respect to such Pre-Development Expenses and
Demolition Costs shall be deemed to commence to accrue as of the date such
Pre-Development Expenses and Demolition Costs were paid or satisfied by
Legacy; and (e) based on the foregoing, with respect to Phase I only, CV
shall have no obligation to contribute to the Company any Additional Capital
Contribution pursuant to this Section 5.1.2.
5.2 ADDITIONAL CAPITAL CONTRIBUTIONS -- DEVELOPMENT STAGE. In the
event additional funds are required during the Development Stage to carry on
the business of the Company pursuant to the Development Plan and Budget,
pursuant to the Operating Plan and Budget and/or pursuant to the terms and
conditions of this Agreement, the provisions of this Section 5.2 shall govern.
5.2.1 BUDGETED DEVELOPMENT COSTS. During the Development
Stage, the Company shall use the proceeds from the Development Loan to pay or
otherwise satisfy all Budgeted Development Costs of the Company. In the event
there is no Development Loan, or if there is a Development Loan but there are
insufficient funds from the Development Loan to pay or otherwise satisfy all
Budgeted for Development Costs and additional capital is required by the
Company to pay or otherwise satisfy such Budgeted Development Costs, the
Managers shall: (i) first, negotiate with the Lender for an amendment to the
applicable loan
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documents to secure an increase in the amount of the Development Loan,
subject to the approval of the Majority Interest of the Members; (ii) second,
seek additional financing from alternate construction lenders, subject to the
approval of the Majority Interest of the Members; and/or (iii) third, give
written notice to Legacy, setting forth the Manager's determination of the
need for additional capital to pay or otherwise satisfy the remaining
Budgeted Development Costs. Within thirty (30) calendar days following
receipt by Legacy of such notice, Legacy shall contribute to the Company the
amount of additional capital required pursuant to this Section 5.2.1.
Notwithstanding the foregoing, in conjunction with, or in lieu
of, the Development Loan, Legacy may elect, in its sole and absolute
discretion, to advance or contribute to the Company additional capital in an
amount equal to all or any portion of the Budgeted Development Costs for the
Project. In the event Legacy elects, in its sole and absolute discretion, to
advance or contribute to the Company all or any portion of the Budgeted
Development Costs for the Project, all such amounts advanced or contributed
by Legacy to the Company shall be deemed to constitute an Additional Capital
Contribution by Legacy to the Company pursuant to this Section 5.2.1.
5.2.2 EXCESS DEVELOPMENT COSTS. In the event there are any
Excess Development Costs, then CV shall be obligated to contribute to the
Company the amount of additional capital necessary to pay or satisfy such
Excess Development Costs. CV shall contribute to the Company the amount of
such additional capital required pursuant to this Section 5.2.2 within thirty
(30) calendar days following the receipt by CV of written notice from the
Managers specifying the need for the additional capital. In the event CV
fails to contribute to the Company the amount of additional capital required
pursuant to this Section 5.2.2 within such thirty (30) calendar day period,
as its sole and exclusive remedy, Legacy may elect to characterize such
additional capital as an ACC Deficit Amount and contribute the same to the
Company pursuant to Section 5.4 hereof and, in such a case, CV shall be
subject to the Non-Contributing Member Deduction set forth in Section 6.1
hereof.
5.2.3 ADDITIONAL PROJECT CAPITAL IMPROVEMENTS. In the event
any additional capital is required by the Company during the Development
Stage for the construction, development and/or installation of any Additional
Project Capital Improvements, then Legacy shall be required to contribute to
the Company the amount of the additional capital required pursuant to this
Section 5.2.2. Legacy shall contribute to the Company the amount of
additional capital required pursuant to this Section 5.2.2 within thirty (30)
calendar days following the receipt by Legacy of written notice from Managers
specifying the approval of such Additional Project Capital Improvements by
the Unanimous Vote of the Members.
The Members acknowledge and agree that: (a) as of the date of this
Agreement, Phase I has been substantially completed and is generally open for
business; (b) in lieu of a Development Loan, all Development Costs with
respect to Phase I were paid or satisfied by Legacy; (c) all such Development
Costs paid or satisfied by Legacy shall be deemed to constitute a portion of
Legacy's Additional Capital Contribution to the Company pursuant to this
Section 5.2; (d) the Priority Return with respect to such Development Costs
shall be deemed to commence to accrue as of the date such Development Costs
were paid or satisfied by Legacy; and (e) based on the foregoing, with
respect to Phase I only, CV shall have no obligation to contribute to the
Company any Additional Capital Contribution pursuant to this Section 5.2.3.
5.3 ADDITIONAL CAPITAL CONTRIBUTIONS -- OPERATIONS STAGE. In the
event additional funds are required during the Operations Stage to carry on
the business of the Company pursuant to the Development Plan and Budget,
pursuant to the Operating Plan and Budget and/or pursuant to the terms and
conditions of this Agreement, the provisions of this Section 5.3 shall govern.
5.3.1 OPERATING LOSSES -- PRE-OCCUPANCY STABILIZATION. In the
event any additional capital is required to pay or otherwise satisfy any
Operating Losses of the Company incurred during the period of the Operations
Stage beginning on the commencement of the Operations Stage and expiring on
the date of
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Occupancy Stabilization, Legacy shall be obligated to contribute to the
Company the amount of any such additional capital required pursuant to this
Section 5.3.1
5.3.2 OPERATING LOSSES -- POST OCCUPANCY STABILIZATION. In
the event additional capital is required to pay or otherwise satisfy any
Operating Losses of the Company incurred during the period of the Operations
Stage that is subsequent to the date of Occupancy Stabilization, the Managers
shall give written notice to the Members setting forth the Managers'
determination of the need for additional capital to pay or otherwise satisfy
such Operating Losses. Within thirty (30) calendar days following receipt by
the Members of such notice, each of the Members shall contribute to the
Company such Member's proportionate share of the amount of the additional
capital required, which proportionate share shall be determined in accordance
with the ratio in which the Percentage Interest held by each Member bears to
the total Percentage Interests held by all of the Members as of the date of
such notice. In the event any Member fails to contribute to the Company such
Member's proportionate share of the amount of the additional capital required
for such Operating Losses pursuant to this Section 5.3.2 within such thirty
(30) calendar day period, as its sole and exclusive remedy, the other Members
may elect to characterize the Non-Contributing Member's proportionate share
of the additional capital required for such Operating Losses as an ACC
Deficit Amount and contribute the same to the Company pursuant to Section 5.4
hereof and, in such a case, the Non-Contributing Member shall be subject to
the Non-Contributing Member Deduction set forth in Section 6.1 hereof.
5.3.3 ADDITIONAL CAPITAL CONTRIBUTIONS -- OPERATIONS STAGE.
In the event additional capital is required by the Company in order to carry
on the business of the Company pursuant to the Development Plan and Budget,
pursuant to the Operating Plan and Budget and/or pursuant to the terms and
conditions of this Agreement (other than for Operating Losses pursuant to
Sections 5.3.1 and 5.3.2 hereof), the Managers shall give written notice to
the Members, setting forth the Managers' determination of the need for
additional capital and the amount and purpose of the additional capital
required. Within thirty (30) calendar days following receipt by the Members
of such notice, each of the Members shall contribute to the Company such
Member's proportionate share of the amount of any additional capital
required, which proportionate share shall be determined in accordance with
the ratio in which the Percentage Interest held by each Member bears to the
total Percentage Interests held by all of the Members as of the date of such
notice. In the event any Member fails to contribute to the Company such
Member's proportionate share of the amount of the additional capital required
pursuant to this Section 5.3.3 within such thirty (30) calendar day period,
as its sole and exclusive remedy, the other Member may elect to characterize
the Non-Contributing Member's proportionate share of the additional capital
required as an ACC Deficit Amount and contribute the same to the Company
pursuant to Section 5.4 hereof and, in such a case, the Non-Contributing
Member shall be subject to the Non-Contributing Member Deduction set forth in
Section 6.1 hereof.
5.4 FAILURE TO MAKE ADDITIONAL CAPITAL CONTRIBUTION. In the event
any Member ("Non-Contributing Member") fails to contribute to the Company
such Member's share of any Additional Capital Contribution pursuant to
Sections 5.1.2, 5.2.2, 5.3.2 and 5.3.3 hereof ("ACC Deficit Amount"), such
Non-Contributing Member shall not be in default under this Agreement.
However, in such a case, the Managers shall deliver written notice to the
Non-Contributing Member as well as to the other Member who timely contributes
to the Company its share of the Additional Capital Contribution
("Contributing Member"), which written notice shall inform all of the Members
of the Non-Contributing Member's failure to contribute to the Company such
member's share of any Additional Capital Contribution required pursuant to
Sections 5.1.2, 5.2.2, 5.3.2 and/or 5.3.3 hereof. During the thirty (30)
calendar day period following the receipt of such written notice, as its sole
and exclusive remedy, the Contributing Member shall be entitled to elect, by
delivering written notice to the Company within such thirty (30) calendar day
period, to advance to the Company the ACC Deficit Amount. Each Contributing
Member who elects to contribute the ACC Deficit Amount to the Company shall
be referred to herein as an "Electing Contributing Member." The ACC Deficit
Amount shall be deemed to constitute an Additional Capital Contribution by
the Electing Contributing Member. As an incentive for the Electing
Contributing Member to contribute the ACC Deficit Amount to the Company, the
Electing Contributing Member will be entitled to receive the ACC Priority
Return and the ACC Priority Distribution with respect to the ACC Deficit
Amount in accordance with the terms and conditions set forth in this
Agreement. Additionally, in such
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a case, the Non-Contributing Member shall be subject to the Non-Contributing
Member Deduction set forth in Section 6.1 hereof.
Notwithstanding the foregoing, in the event the Contributing Member does
not elect to contribute, or the Contributing Member elects to contribute but
thereafter fails to timely contribute, the ACC Deficit Amount to the Company
pursuant to this Section 5.4, and the aggregate Additional Capital
Contributions actually contributed by the Members are less than the full
Additional Capital Contributions required to be contributed by the Members
pursuant to Sections 5.1.2, 5.2.2, 5.3.2 and 5.3.3 hereof, the Managers shall
take such actions and steps as the Managers deem reasonably necessary to
sustain and continue the operations of the Company consistent with the terms
and conditions of the Development Plan and Budget, the Operating Plan and
Budget, and this Agreement.
ARTICLE 6
ALLOCATION OF PROFITS AND LOSSES
6.1 PROFITS AND LOSSES. All Profits and Losses of the Company shall
be allocated at the end of each Fiscal Year of the Company with respect to
such Fiscal Year, among the Members in the following order and priority:
6.1.1 PROFITS. After giving effect to the special allocations
set forth in Sections 6.2 and 6.3 hereof, all Profits of the Company shall be
allocated as follows:
(a) First, to the Members, until the aggregate Profits
allocated pursuant to this Section 6.1.1(a) for such Fiscal Year and all
prior Fiscal Years are equal to (and have been allocated in proportion to and
to the extent of) the aggregate Losses allocated to the Members pursuant to
Section 6.1.2(c) hereof for all previous Fiscal Years;
(b) Second, to the Members, until the aggregate
Profits allocated pursuant to this Section 6.1.1(b) for such Fiscal Year and
all prior Fiscal Years are equal to (and have been allocated in proportion to
and to the extent of) all Losses allocated to the Members pursuant to Section
6.1.2(b) hereof for all previous Fiscal Years;
(c) Third, to the Electing Contributing Members, until
the aggregate Profits allocated pursuant to this Section 6.1.1(c) for such
Fiscal Year and all prior Fiscal Years are equal to (and have been allocated
in proportion to) the aggregate accrued ACC Priority Return payable to the
Electing Contributing Members pursuant to Section 5.4 hereof;
(d) Fourth, to the Electing Contributing Members,
until the aggregate Profits allocated pursuant to this Section 6.1.1(d) for
such Fiscal Year and all prior Fiscal Years are equal to (and have been
allocated in proportion to) the aggregate accrued ACC Priority Distribution
payable to the Electing Contributing Members pursuant to Section 5.4 hereof;
(e) Fifth, to the Members, until the aggregate Profits
allocated to the Members pursuant to this Section 6.1.1(e) for such Fiscal
Year and all prior Fiscal Years are equal to (and have been allocated in
proportion to) the aggregate accrued Priority Return payable to the Members
pursuant hereto;
(f) Sixth, to the Members, in proportion to the
Percentage Interests held by the Members from time to time.
All Profits to be allocated to the Electing Contributing Members
pursuant to Sections 6.1.1(c) and (d) hereof shall be derived and deducted
SOLELY from the Profits which would otherwise be allocated (assuming there
were no special allocations to be made pursuant to Sections 6.1.1(c) and
6.1.1(d) hereof), to the applicable Non-Contributing Members pursuant to this
Section 6.1 and shall NOT reduce proportionately the
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total Profits to be allocated to all of the Members (including the applicable
Electing Contributing Member(s)) pursuant to this Section 6.1.
Notwithstanding the foregoing, upon the dissolution of the Company, if there
have been insufficient Profits allocated to the Electing Contributing Members
pursuant to Sections 6.1.1(c) and (d) hereof during such Fiscal Year and all
prior Fiscal Years (which Profits were to be derived and deducted SOLELY from
the Profits which would have otherwise been allocated to the Non-Contributing
Members), then a special allocation of Profits equal to such deficit amount
shall be made to the Electing Contributing Members, which special allocation
shall reduce the total Profits to be allocated to all of the Members pursuant
to Section 6.1 hereof ("Non-Contributing Member Deduction").
6.1.2 LOSSES. After giving effect to the special allocations
set forth in Sections 6.2 and 6.3 hereof, all Losses of the Company shall be
allocated as follows:
(a) First, to the Members, until the aggregate Losses
allocated pursuant to this Section 6.1.2(a) for such Fiscal Year and all
prior Fiscal Years are equal to (and have been allocated in proportion to, to
the extend of, and in the reverse order of), all Profits allocated to the
Members pursuant to Section 6.1.1(c), (d), (e) and (f) hereof for all
previous Fiscal Years;
(b) Second, to the Members, in proportion to, and to
the extent of, each Member's positive Capital Account balance; and
(c) Third, to the Members, in proportion to the
Percentage Interests held by the Members from time to time.
6.2 SPECIAL ALLOCATIONS. The following special allocations shall be
made in the following order and priority:
6.2.1 MINIMUM GAIN CHARGEBACK. Except as otherwise provided
in Section 1.704-2(f) of the Treasury Regulations, and notwithstanding any
other provision of this Article 6, 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 Fiscal Year (and, if
necessary, subsequent Fiscal 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). Allocations pursuant to the
prior sentence shall be made in proportion to the respective amounts required
to be allocated to each Member pursuant thereto. The items to be so
allocated shall be determined in accordance with Treasury Regulations
Sections 1.704-2(f)(6) and 1.704-2(j)(2). This Section 6.2.1 is intended to
comply with the minimum gain chargeback requirement set forth in Section
1.704-2(f) of the Treasury Regulations and shall be interpreted consistently
therewith.
6.2.2 MEMBER MINIMUM GAIN CHARGEBACK. Except as otherwise
provided in Section 1.704-2(i)(4) of the Treasury Regulations,
notwithstanding any other provision of this Article 6, if there is a net
decrease in Member Non-Recourse Debt Minimum Gain attributable to Member
Non-Recourse Debt during any Company Fiscal Year, each Member who has a share
of the Member Non-Recourse Debt Minimum Gain attributable to such Member
Non-Recourse Debt, determined in accordance with Treasury Regulations Section
1.704-2(i)(5), shall be specially allocated items of Company income and gain
for such Fiscal Year (and, if necessary, subsequent Fiscal Years) in an
amount equal to such Member's share of the net decrease in Member
Non-Recourse Debt Minimum Gain attributable to such Member Non-Recourse Debt,
determined in accordance with Treasury Regulations Section 1.704-2(i)(4).
Allocations pursuant to the previous sentence shall be made in proportion to
the respective amounts required to be allocated to each Member pursuant
thereto. The items to be so allocated shall be determined in accordance with
Treasury Regulations Section 1.704-2(i)(4) and 1.704-2(j)(2). This Section
6.2.2 is intended to comply with the minimum gain chargeback requirements set
forth in Treasury Regulations Section 1.704-2(i)(4) and shall be interpreted
consistently therewith.
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6.2.3 QUALIFIED INCOME OFFSET. Notwithstanding the provisions
of Section 6.1 hereof, if a Member unexpectedly receives any adjustments,
allocations or distributions described in Treasury Regulations Section
1.704-1(b)(2)(ii)(d) or any other event creates an Adjusted Capital Account
Deficit, items of Company gain and income shall be specially allocated to
such Member in an amount and manner sufficient to eliminate the Adjusted
Capital Account Deficient as quickly as possible. Any special allocation of
Profits pursuant to this Section 6.2 shall be taken into account in computing
subsequent allocations of Profits pursuant to Section 6.1, so that the net
amount of any Profits allocated to each Member pursuant to this Article 6 to
the extent possible, shall be equal to the net amount that would have been
allocated to each such Member pursuant to this Section 6.2.3 if such
unexpected adjustments, allocations or distributions had not occurred.
6.2.4 GROSS INCOME ALLOCATION. In the event any Member has a
deficit Capital Account at the end of any Fiscal Year which is in excess of
the sum of: (a) the amount such Member is obligated to restore; and (b) the
amount such Member is deemed to be obligated to restore pursuant to the
penultimate sentences of Treasury Regulations Section 1.704-2(g)(1) and
1.704-2(i)(5), each such Member shall be specially allocated items of Company
income and gain in the amount of such excess as quickly as possible, provided
that an allocation pursuant to this Section 6.2.4 shall be made if and only
to the extent that such Member would have a deficit Capital Account in excess
of such sum after all other allocations provided for in this Section 6 have
been tentatively made as if this Section 6.2.4 and Section 6.2.3 hereof were
not in the Agreement.
6.2.5 NON-RECOURSE DEDUCTIONS. Any Non-Recourse Deductions
for any Fiscal Year shall be specially allocated to the Members in proportion
to their Percentage Interests.
6.2.6 MEMBER NON-RECOURSE DEDUCTIONS. Any Member Non-Recourse
Deductions for any Fiscal Year shall be specially allocated to the Member who
bears the economic risk of loss with respect to the Member Non-Recourse Debt
to which such Member Non-Recourse Deductions are attributable in accordance
with Treasury Regulations Section 1.704-2(i)(1).
6.2.7 BASIS REDUCTION. Any reduction in the adjusted tax
basis of any Property pursuant to Section 734(b) or Section 743(b) of the
Code 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.
6.3 CURATIVE ALLOCATIONS. The allocations set forth in Sections
6.2.1 through 6.2.7, inclusive, hereof (the "Regulatory Allocations"), are
intended to comply with certain requirements of the Treasury Regulations. It
is the intent of the Members that, to the extent possible, all Regulatory
Allocations shall be offset either with other Regulatory Allocations or with
special allocations of other items of Company income, gain, loss or deduction
pursuant to this Section 6.3. Therefore, notwithstanding any other provision
of this Article 6 (other than the Regulatory Allocations), the Managers shall
make such offsetting special allocations of Membership income, gain, loss or
deduction in whatever manner it determines reasonably appropriate so that,
after such offsetting allocations are made, each Member's Capital Account
balance is, to the extent possible, equal to the Capital Account balance such
Member would have had if the Regulatory Allocations were not a part of this
Agreement and all Company items were allocated pursuant to Section 6.1
hereof. In exercising its discretion under this Section 6.3, the Managers
shall take into account future Regulatory Allocations under Sections 6.2.1
and 6.2.2 that, although not yet made, are likely to offset other Regulatory
Allocations previously made under Sections 6.2.5 and 6.2.6.
6.4 OTHER ALLOCATION RULES.
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(a) Profits, Losses and any other items of income, gain,
loss or deduction shall be allocated to the Members pursuant to this Article
6 as of the last day of each Fiscal Year; provided that Profits, Losses and
such other items shall also be allocated at such times as the Gross Asset
Values of Company Property are adjusted pursuant to this Operating Agreement.
(b) The Members are aware of the income tax consequences of
the allocations made by this Section 6 and hereby agree to be bound by the
provisions of this Article 6 in reporting their shares of Company income and
loss for income tax purposes.
(c) For purposes of determining the Profits, Losses, or any
other items allocable to any period, Profits, Losses, and any such other
items shall be determined on a daily, monthly, or other basis, as determined
by the Managers using any permissible method under Code Section 706 and the
Treasury Regulations thereunder.
(d) Solely for purposes of determining a Member's
proportionate share of the "excess nonrecourse liabilities" of the Company,
within the meaning of Treasury Regulations Section 1.752-3(a)(3), the
Member's interests in the Company's Profits are in proportion to their
respective Percentage Interests.
(e) To the extent permitted by Section 1.704-2(h)(3) of the
Treasury Regulations, the Managers shall endeavor not to treat distributions
of Net Cash as having been made from the proceeds of a Nonrecourse Liability
or a Member Nonrecourse Debt.
6.5 ALLOCATION UPON ASSIGNMENT OR TRANSFER OF A MEMBERSHIP INTEREST.
In the event of the assignment or transfer of all or any part of the
Membership Interest of a Member, the allocable share, with respect to the
Membership Interest so assigned, of Profits, Losses and Distributions shall
be allocated between the assignor and the assignee to take into account their
varying interests in the Company during the year in which the assignment
occurred, based upon the number of days during such year that each was the
record owner of the Membership Interest on the books of the Company (without
regard to actual operating results of the Company); provided, however, that
if under Section 706 of the Code and applicable Treasury Regulations other
methods of allocations will be recognized for federal income tax purposes,
including, without limitation, allocations based upon actual operating
results accompanied by a closing of the Company's books as of the date of
assignment or the use of a fifteen (15) day monthly convention, such other
method may be used in the discretion of the Managers.
6.6 SECTION 704(c) ALLOCATIONS. Pursuant to Section 704(c) of the
Code and the Treasury Regulations promulgated thereunder, income, gain, loss
and deduction with respect to any property contributed to the capital of the
Company shall, solely for tax purposes, be allocated among the Members so as
to take into account any variation between the adjusted basis of such
property to the Company for federal income tax purposes and its fair market
value on the date of contribution. Allocations pursuant to this Section 6.6
are solely for purposes of computing the amount of federal, state and local
taxes payable by a Member and in no way shall such allocations be taken into
account in computing the amount of the Distributions payable to any Member
pursuant to the terms and conditions of this Agreement.
6.7 ORGANIZATIONAL EXPENSES. The Company shall elect to deduct
expenses incurred in connection with organizing the Company ratably over a
sixty (60) month period as provided in Section 709 of the Code.
6.8 POWER OF MANAGERS TO VARY ALLOCATIONS OF PROFITS AND LOSSES.
This Agreement has been drafted in a manner which is intended to comply with
the principles of Sections 704, 706 and 752 of the Code. Therefore, if the
Company is advised that the allocations provided in this Article 6 are
unlikely to be respected for federal income tax purposes, otherwise do not
have substantial economic effect and/or otherwise create disparities in the
economic results intended by the Members, the Managers are hereby granted the
power to amend the allocation provisions of this Agreement, including making
any special allocations of Profits or
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Losses on advice of accountants and legal counsel, to the minimum extent
necessary to achieve the foregoing results; provided, however, that no such
amendment shall have any materially adverse effect upon any Member.
6.9 TAXATION AS A COMPANY. No election shall be made by the Company
or any Member for the Company to be excluded from the application of any
provisions of Subchapter K, Chapter 1 of Subtitle A of the Code or from any
similar provisions of any state tax laws.
ARTICLE 7
DISTRIBUTIONS
7.1 GENERALLY. Subject to the approval by the Majority Interest of
the Members, the Company shall make periodic Distributions of Net Cash to the
Members, subject to the payment of Operating Expenses and to the maintenance
of reasonable Reserves for payment of Company obligations, including payment
of sums due to any Member.
7.2 DISTRIBUTIONS OF NET CASH. All Distributions of Net Cash shall
be made to the Members as follows:
7.2.1 First, to the Electing Contributing Members, until the
aggregate Distributions of Net Cash pursuant to this Section 7.2.1 for such
Fiscal Year and all prior Fiscal Years are equal to (and have been
distributed in proportion to, and to the extent of), the aggregate accrued
ACC Priority Return payable to the Electing Contributing Members pursuant to
the terms and conditions of this Agreement;
7.2.2 Second, to the Electing Contributing Members, until the
aggregate Distributions of Net Cash pursuant to this Section 7.2.2 for such
Fiscal Year and all prior Fiscal Years are equal to (and have been
distributed in proportion to, and to the extent of), the aggregate accrued
ACC Priority Distribution payable to the Electing Contributing Members
pursuant to the terms and conditions of this Agreement;
7.2.3 Third, to the Electing Contributing Members, until the
aggregate Distributions of Net Cash pursuant to this Section 7.2.3 for such
Fiscal Year and all prior Fiscal Years are equal to (and have been
distributed in proportion to, and to the extent of), the ACC Deficit Amount
previously contributed to the Company by the Electing Contributing Members;
7.2.4 Fourth, to the Members, until the aggregate
Distributions of Net Cash pursuant to this Section 7.2.4 for such Fiscal Year
and all prior Fiscal Years are equal to (and have been distributed in
proportion to, and to the extent of), the aggregate accrued Priority Return
payable to the Members pursuant hereto;
7.2.5 Fifth, to the Members, until the aggregate Distributions
of Net Cash pursuant to this Section 7.2.5 during such Fiscal Year and all
prior Fiscal Years are equal to (and have been distributed in proportion to)
each Member's "Tax Allocation." For purposes of this Section 7.2.5, "Tax
Allocation" shall mean, with respect to any Member, the excess, if any, of
the following: (A) forty percent (40%) of the Profits allocated to such
Member during such Fiscal Year and all prior Fiscal Years pursuant to
Sections 6.1.1(c), (d), (e) and (f), less (B) the amount of Net Cash
distributed or to be distributed to such Member with respect to such Fiscal
Year and all prior Fiscal Years pursuant to Sections 7.2.1, 7.2.2, 7.2.4,
7.2.5, 7.2.8 and 7.2.9 hereof;
7.2.6 Sixth, to Legacy, until the aggregate Distributions of
Net Cash pursuant to this Section 7.2.6 during such Fiscal Year and all prior
Fiscal Years are equal to (and have been distributed in proportion to, and to
the extent of), the amount of Legacy's Original Capital Contribution to the
Company and Legacy's Additional Capital Contribution to the Company pursuant
to the terms and conditions of this Agreement; provided, however, the
aggregate amount of Distributions to be paid to Legacy pursuant to this
Section 7.2.6
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shall be reduced, in proportion to, and to the extent of, the aggregate
amount of Distributions paid to Legacy pursuant to Section 7.2.3 hereof
during such Fiscal Year and all prior Fiscal Years;
7.2.7 Seventh, to CV, until the aggregate Distributions of Net
Cash pursuant to this Section 7.2.7 during such Fiscal Year and all prior
Fiscal Years are equal to (and have been distributed in proportion to, and to
the extent of), the amount of the Original Capital Contribution of CV to the
Company and the Additional Capital Contribution of CV to the Company pursuant
to the terms and conditions of this Agreement; provided, however, the
aggregate amount of Distributions to be paid to CV pursuant to this Section
7.2.7 shall be reduced, in proportion to, and to the extent of, the aggregate
amount of Distributions paid to CV pursuant to Section 7.2.3 hereof during
such Fiscal Year and all prior Fiscal Years; and
7.2.8 Eighth, to the Members, until the aggregate
Distributions of Net Cash pursuant to Section 7.2.5 hereof and this Section
7.2.8 for such Fiscal Year and all prior Fiscal Years have been distributed
in proportion to the Percentage Interests held by the Members from time to
time; and
7.2.9 Ninth, to the Members, in proportion to the Percentage
Interests held by the Members from time to time.
All Distributions of Net Cash pursuant to Sections 7.2.1 and 7.2.2
hereof shall be accomplished in a manner which is consistent with the method
in which Profits were allocated pursuant to the Non-Contributing Member
Deduction set forth in Section 6.1.1 hereof.
7.3 IN-KIND DISTRIBUTIONS. Company Property (other than cash) shall
not be distributed in kind to the Members without the approval by the
Majority Interest of the Members. If any Company Property is distributed to
the Members in kind, any Member entitled to receive any interest in such
Company Property shall receive such interest as a tenant-in-common with such
other Member or Members so entitled. The amount of such Distribution shall
be the fair market value of such property as of the date of the Distribution,
which fair market value shall be subject to the approval by the Majority
Interest of the Members. The Capital Accounts of the Members shall be
adjusted to reflect the amount of Profits or Losses that would have been
realized by the Company pursuant to the terms of this Agreement had the
Company sold the property being distributed for the agreed fair market value
immediately prior to such Distribution.
7.4 RESTRICTION ON DISTRIBUTIONS. Notwithstanding any provisions to
the contrary in this Article 7, no Distributions may be made by the Company
if, after giving effect to the Distribution: (a) the Company has previously
incurred any expenses which have not been paid or satisfied in full and/or
the Managers reasonably determine that the Company will incur expenses in the
foreseeable future; (b) the Company would not be able to pay its secured and
unsecured debt obligations as they become due in the usual course of
business; and/or (c) the Company's total assets would be less than the sum of
its total liabilities plus the amount that would be needed, if the Company
were to be dissolved at the time of the Distribution, to satisfy the
preferential rights of other Members, if any, upon dissolution that are
superior to the rights of the Member receiving the Distribution.
A Member or Manager who approves a Distribution in violation of this
Agreement or the Act is personally liable to the Company for the amount of
the Distribution that exceeds what could have been distributed without
violating this Agreement or the Act, if it is established that the Member or
Manager did not act in compliance with this Section 7.4. Any Member or
Manager who is so liable shall be entitled to compel contribution from: (a)
each other Member or Manager who also is so liable; and (b) each Member for
the amount the Member received with knowledge of facts indicating that the
Distribution was made in violation of this Agreement or the Act.
7.5 RETURN OF DISTRIBUTIONS. Except as required by the Act and
except for Distributions made in violation of this Agreement, no Member shall
be obligated to return to the Company any Distribution previously made or pay
the amount of any Distribution for the account of the Company or to any
creditor of the Company.
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The amount of any Distribution returned to the Company by a Member or paid by
a Member for the account of the Company or to a creditor of the Company shall
be added to the account or accounts from which it was subtracted and when it
was distributed to the Member.
7.6 SECTION 754 ELECTION. Upon the transfer of Membership Interests
in the Company by a Member, at the request of such transferring Member, and
subject to the approval by the Managers, the Company will make the election
provided for in Section 754 of the Code, provided such election is approved
by the Managers. The expense of making such election, including the
additional accounting expenses, shall be borne by the Company. Such election
shall be filed with the Company tax information return for the first fiscal
year in which the election takes effect.
ARTICLE 8
MANAGEMENT AND CONTROL OF THE COMPANY
8.1 RIGHTS, POWERS, DUTIES AND OBLIGATIONS OF MANAGERS; MEETINGS OF
THE MANAGERS.
8.1.1 RIGHTS, POWERS, DUTIES AND OBLIGATIONS OF MANAGERS. The
management of the Company shall be vested in the Managers. Except as to
those matters in which the approval of the Majority Interest of the Members
or the Unanimous Vote of the Members is expressly required by this Agreement,
and subject to the provisions of the Development Plan and Budget and the
Operating Plan and Budget, the Managers shall have all of the rights, powers
and authority generally conferred by law or otherwise necessary, advisable or
consistent with accomplishing the purposes of the Company. Without limiting
the foregoing, it shall be the responsibility and duty of the Managers to do
the following: (a) carry out the purposes of the Company as set forth in
Section 2.6 hereof; (b) carry out and implement all decisions which are
authorized by the Majority Interest of the Members pursuant to Section 9.2
hereof and/or by the Unanimous Vote of the Members pursuant to Section 9.3
hereof; and (c) conduct the ordinary and usual business and affairs of the
Company.
8.1.2 MEETINGS OF THE MANAGERS. Meetings of the Managers may
be called by any Manager. All meetings shall be held upon four (4) calendar
days' notice by mail or twenty-four (24)hours' notice (or upon such shorter
notice period if necessary under the circumstances), delivered personally or
by telephone, telegraph or facsimile. A notice need not specify the purpose
of any meeting. Meetings of the Managers may be held at any place within or
without the State of California or the State of Arizona which has been
designated in the notice of the meeting or at such place as may be approved
by three (3) or more of the Managers. Managers may participate in a meeting
through use of conference telephone or similar communications equipment, so
long as all Managers participating in such meeting can hear one another.
Participation in a meeting in such manner constitutes a presence in person at
such meeting. A majority of the authorized number of Managers constitutes a
quorum of the Managers for the transaction of business.
No action of the Managers shall be valid unless: (a)(i) each of the
three (3) Managers nominated by Legacy are present, in person or by
telephone, during any meeting of the Managers in which the action or matter
is proposed to be taken; and (ii) the action or matter in question is
authorized by three (3) or more of the Managers present at any such meeting;
or (b) the action or matter in question is authorized and approved by the
written consent of the three (3) Managers nominated by Legacy.
All documents, agreements, and instruments which have been authorized in
connection with this Section 8.1 may be executed on behalf of the Company by
any one (1) of the Managers.
8.2 ELECTION OF MANAGER. The Company shall have five (5) Managers.
The Managers shall continue to hold office until the occurrence of one or
more of the events described in Sections 8.3 through 8.5, inclusive, below,
and a successor Manager shall have been duly elected and qualified. The
Managers shall be elected by the Majority Interest of the Members. A Manager
is not required to be a Member, an individual, and/or a resident of the State
of Delaware and/or the State of Arizona.
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Notwithstanding any provision in this Agreement to the contrary, subject
to the provisions of Section 4.2A, the Members hereby agree that, in
connection with the appointment of the Managers of the Company, they will
vote their Membership Interests in favor of: (a) the three (3) Persons
nominated by Legacy; and (b) two (2) Persons nominated by CV to serve as the
Managers of the Company.
8.3 RESIGNATION. A Manager may resign at any time by giving written
notice to the other Manager and Members. Unless otherwise specified in the
notice, the resignation shall take effect upon receipt by the other Managers
and the Members, and the acceptance of the resignation shall not be necessary
to make it effective. The resignation of a Manager who is also a Member
shall not affect the Manager's rights as a Member and shall not constitute a
withdrawal of a Member.
8.4 REMOVAL. A Manager may only be removed from the Company for
"cause" upon the approval by the Majority Interest of the Members. In no
event may a Manager be removed without "cause." Without limiting the
foregoing, each Manager nominated by Legacy may be removed with or without
cause at any time by Legacy. Each Manager nominated by CV may be removed with
or without cause at any time by CV. For purposes of this Section 8.4,
"cause" shall be defined as:
(a) A material breach by a Manager of any obligation of such
Manager set forth in this Agreement (other than a material breach
constituting gross negligence, fraud or an act of moral turpitude), and the
failure of Manager to cure such breach within five (5) calendar days after
receipt of written notice specifying the same; provided, however, if the
nature of such breach is such that it cannot reasonably be cured within such
five (5) calendar day period, the Manager shall not be deemed to have
materially breached this Agreement if the Manager commences to cure the
breach during such five (5) calendar day period and cures the same within
thirty (30) calendar days thereafter;
(b) The performance by a Manager of his/her/its duties and
obligations as the Manager of the Company, as set forth in this Agreement, in
a grossly negligent manner.
(c) The commission by the Manager of any act constituting
fraud or intentional deceit;
(d) In the case of any individual serving as a Manager, the
conviction of such individual of any felony and/or any lesser crime involving
moral turpitude;
(e) The occurrence of an Event of Default by CV. In such a
case, the two (2) Managers nominated by CV shall be deemed automatically
removed pursuant to this Section 8.4.
Upon the occurrence of any of the events described in Section 8.4(a)
through (e) hereof, inclusive, written notice of the removal of the Manager
shall be served on the Members either by certified or registered mail, return
receipt requested, or by personal service. Such notice shall set forth the
date upon which the removal was to become effective, and on such effective
date, the Manager shall cease to be the Manager of the Company.
8.5 DEATH, DISABILITY, DISSOLUTION OR INSOLVENCY. A Manager shall
cease to be the Manager of the Company upon the occurrence of the first to
occur of the following events:
(a) In the case of any individual serving as a Manager, the
death or permanent disability of such individual;
(b) The dissolution of a Manager; or
(c) The Insolvency of a Manager.
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8.6 EFFECT OF CEASING TO BE THE MANAGER. Subject to the provisions
of Section 4.2 hereof, in the event a Manager ceases to be a Manager of the
Company as a result of the occurrence of one or more of the events described
in Sections 8.3 through 8.5, inclusive, of this Agreement, and in the event
the Members elect to continue the Company in effect and elect a successor
Manager pursuant to Section 8.7 hereof, the following shall take place: (a)
in the event the former Manager is a Member of the Company at the time of
removal, the former Manager will continue to be a Member of the Company with
the same Membership Interests (including the same share of Profits, Losses
and Distributions) as the former Manager held prior to the occurrence of such
event; and (b) thereafter, the former Manager will have the right to
participate in the business and operations of the Company solely in its
capacity as a Member, in accordance with the terms and conditions of this
Agreement.
8.7 ELECTION TO CONTINUE THE COMPANY/REPLACEMENT OF THE MANAGER. If
a Manager ceases to be a Manager of the Company for any reason and there are
no remaining Managers, the Company shall dissolve unless the Members elect to
continue the Company in effect and appoint a new Manager in accordance with
the provisions of this Section 8.7. If a Manager ceases to be a Manager of
the Company for any reason and there are remaining Managers, the Company
shall not dissolve and the Members may elect a new Manager in accordance with
the provisions of this Section 8.7.
Notwithstanding any provision in this Agreement to the contrary: (a)
the Members hereby agree that they will vote their Membership Interests in
favor of a Person nominated by Legacy to fill a vacancy caused by the
resignation, death, disability, dissolution, Insolvency or removal of a
Manager previously nominated by Legacy and elected as Manager; and (b) except
as otherwise provided in Section 4.2(A) hereof, the Members hereby agree that
they will vote their Membership Interests in favor of a Person nominated by
CV to fill a vacancy caused by the resignation, death, disability,
dissolution, Insolvency or removal of a Manager previously nominated by CV
and elected as Manager.
8.8 DEVELOPMENT PLAN AND BUDGET. The initial development plan and
budget for the Project is attached hereto as Exhibit "D," and incorporated
herein by reference ("Development Plan and Budget"). The Development Plan
and Budget is comprised of a comprehensive plan for the construction and
development of the Project and currently includes, or will in the future
include, without limitation, the following: (a) all proposed site plans and
plot plans for the Project; (b) all proposed architectural plans, landscaping
plans, signage plans, exterior elevations, common area plans and other
proposed plans and specifications for the Project; (c) all proposed
construction plans and specifications (including working drawings) for the
Project; (d) the proposed construction budget for the Project; (e) all
proposed dedications, rights-of-way, easements, licenses and similar rights
or privileges to be granted in conjunction with the development of the
Project; (f) all proposed off-site improvements required by any governmental
agency or as a condition of approval pursuant to any entitlements for the
Project; (g) the proposed architect, civil engineer and general contractor
for the Project, and the terms and conditions of the professional service
contracts to be entered into with such persons or entities; (h) the proposed
terms and conditions of any Development Loan for the construction and
development of the Project; and (i) such other matters pertaining to the
construction and development of the Project as the Managers deem appropriate
to be included within the Development Plan and Budget.
8.9 REVISIONS TO DEVELOPMENT PLAN AND BUDGET. During the
Pre-Development Stage and the Development Stage, the Managers shall use
commercially reasonable efforts to comply with the terms and conditions of
the Development Plan and Budget. If at any time during such period there are
changes in conditions, circumstances or otherwise, which cause the Managers
to be in a position where the Managers cannot comply with the terms and
conditions of the Development Plan and Budget, and/or the Managers determine
that it is in the best interests of the Company and the Members to modify or
amend the Development Plan and Budget, the Managers shall give written notice
to the Members and provide in narrative form an explanation of the changes in
condition, circumstances or otherwise. In conjunction with such notice, the
Managers shall also submit to the Members, for its review and approval, a
revised Development Plan and Budget ("Revised Development Plan and Budget").
Notwithstanding the foregoing, the Mangers nominated by CV are responsible
for preparing the Revised Development Plan and Budget, including, without
limitation,
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assembling and compiling the information necessary to prepare such Revised
Development Plan and Budget. Thereafter, the other Managers of the Company
shall approve the final form of the Revised Development Plan and Budget and
participate in submitting and presenting such Revised Development Plan and
Budget to the Members.
The approval by the Majority Interest of the Members shall be required
for the adoption and implementation of the Revised Development Plan and
Budget. In the event Members representing the Majority Interest of the
Members object to any portion of the Revised Development Plan and Budget,
such Members shall, contemporaneously with the delivery of their objections,
submit to the Managers counter-proposals as to the matters to which they
object. Notwithstanding the foregoing, until such time as the Revised
Development Plan and Budget has been finalized by the Managers and approved
by the Majority Interest of the Members in accordance with the terms and
conditions of this Section 8.9, the Managers shall perform their duties in
accordance with the Development Plan and Budget currently then in effect.
Following the approval by the Majority Interest of the Members of the Revised
Development Plan and Budget, with respect to the period of time in question,
all references in this Agreement to the Development Plan and Budget shall
mean the Revised Development Plan and Budget.
8.10 OPERATING PLAN AND BUDGET. The initial operating plan and budget
for the Hotel is attached hereto as Exhibit "E," and incorporated herein by
reference ("Operating Plan and Budget"). The Operating Plan and Budget
consists of a comprehensive plan for the marketing, management, maintenance
and operation of the Hotel, and currently includes, or will include, without
limitation, the following items: (a) a detailed cash flow projection and
departmental forecast of operations; (b) a detailed operating budget for the
Hotel; (c) a detailed capital expenditures budget for the Hotel; (d) a
detailed business plan for the Hotel, including, without limitation, business
strategies, marketing strategies, departmental strategies, revenue
enhancement strategies, cost containment strategies and contingency plans;
(e) the Hotel Annual Business Plan, as such term is defined in the Management
Agreement; and (f) any other matters pertaining to the ownership, marketing,
management, operation and business of the Hotel deemed necessary or
appropriate by the Managers to be included within the Operating Plan and
Budget.
8.11 REVISIONS TO OPERATING PLAN AND BUDGET. During the
Pre-Development Stage, the Development Stage and the Operations Stage, the
Managers shall use commercially reasonable efforts to comply with the terms
and conditions of the Operating Plan and Budget. If at any time during such
period there are changes in conditions, circumstances or otherwise, which
cause the Managers to be in a position where the Managers cannot comply with
the terms and conditions of the Operating Plan and Budget, and/or the Mangers
determine that it is in the best interests of the Company and the Members to
modify or amend the Operating Plan and Budget, the Managers shall give
written notice to the Members and provide in narrative form an explanation of
the changes in condition, circumstances or otherwise. In conjunction with
such notice, the Managers shall also submit to the Members, for its review
and approval, a revised Operating Plan and Budget ("Revised Operating Plan
and Budget"). Notwithstanding the foregoing, the Managers nominated by CV
are responsible for preparing the Revised Operating Plan and Budget,
including, without limitation, assembling and compiling the information
necessary to prepare such Revised Operating Plan and Budget. Thereafter, the
other Managers of the Company shall approve the final form of the Revised
Operating Plan and Budget and participate in submitting and presenting such
Revised Operating Plan and Budget to the Members.
The approval by the Majority Interest of the Members shall be required
for the adoption and implementation of the Revised Operating Plan and Budget.
In the event Members representing the Majority Interest of the Members
object to any portion of the Revised Operating Plan and Budget, such Members
shall, contemporaneously with the delivery of their objections, submit to the
Managers counter-proposals as to the matters to which such Members object.
Notwithstanding the foregoing, until such time as the Revised Operating Plan
and Budget has been finalized by the Managers and approved by the Majority
Interest of the Members in accordance with the terms and conditions of this
Section 8.11, the Managers shall perform their duties in accordance with the
Operating Plan and Budget currently then in effect. Following the approval
by
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the Majority Interest of the Members of the Revised Operating Plan and
Budget, with respect to the period of time in question, all references in
this Agreement to the Operating Plan and Budget shall mean the Revised
Operating Plan and Budget.
8.12 EMERGENCIES. Notwithstanding anything contained in this
Agreement to the contrary, in the event of any emergency affecting the safety
of persons or property, or which is likely to result in a substantial injury,
damage or loss to the Company and/or the Members, the Managers are hereby
authorized to act in a manner intended to mitigate or prevent threatened
damage, injury or loss and, in connection therewith, if deemed prudent by the
Managers, the Managers shall be entitled to make expenditures in excess of
the limitations set forth in the Development Plan and Budget and/or the
Operating Plan and Budget without the necessity of securing the approval by
the Majority Interest of the Members prior to such expenditure.
8.13 COMPENSATION TO THE MEMBERS, MANAGERS AND THEIR AFFILIATES.
Neither of the Members nor any of their respective Affiliates shall be
entitled to receive any payments or distributions from the Company except as
expressly provided in this Section 8.13 or as otherwise expressly provided
for in this Agreement.
8.13.1 MANAGEMENT OF THE HOTEL; MANAGEMENT FEE. During the
Operations Stage, Starship Management shall initially be designated as the
Hotel Manager and, in such capacity, shall manage the Hotel pursuant to the
terms and conditions of the management agreement ("Management Agreement"), in
the form of Exhibit "F," attached hereto and incorporated herein by
reference, to be entered into by and between the Company and Starship
Management. In consideration for the services to be performed as the Hotel
Manager, Starship Management shall be entitled to receive the management fee
set forth in the Management Agreement ("Management Fee"). Notwithstanding
any provision to the contrary contained in the Management Agreement, the
Management Fee shall be paid by the Company to the Hotel Manager as follows:
(i) Prior to the date of Occupancy Stabilization, the
Management Fee shall be payable by the Company on a monthly basis, in
arrears, based on the prior month's operation; and
(ii) During the calendar year in which the Occupancy
Stabilization takes place, and during each calendar year thereafter
(separately an "OS Calendar Year" and collectively the "OS Calendar Years"),
the Management Fee shall not be paid by the Company to Starship Management on
a monthly or other periodic basis but, rather, shall be accrued by the
Company and the payment thereof shall be deferred until such time as Legacy
has received aggregate Distributions of Net Cash pursuant to Section 7.2.4
hereof during such OS Calendar Year and during all prior OS Calendar Years in
an amount equal to the Priority Return on the outstanding balance of the
amount of any Original Capital Contribution and Additional Capital
Contribution contributed by Legacy to the Company during such OS Calendar
Year and during all prior OS Calendar Years.
The Members acknowledge and agree that the provisions of this Section
8.13.1(ii) are intended only to operate as conditions precedent for the
payment of the Management Fee to Starship Management and are not intended to
alter or modify the provisions of Section 7.2 hereof. In this regard, the
Members acknowledge and agree that the Distributions of Net Cash which Legacy
may receive pursuant to Section 7.2.4 hereof during an OS Calendar Year may,
in whole or in part, be attributable to the Priority Return which accrued
during the time period prior to Occupancy Stabilization. Nevertheless, for
purposes of determining whether or not the conditions precedent set forth in
this Section 8.13.1(ii) have been satisfied: (A) the Distributions of Net
Cash which Legacy receives during any OS Calendar Year may be attributable to
the Priority Return which accrues prior to or subsequent to the date of
Occupancy Stabilization; and (B) it shall not be necessary for Legacy to have
received the entire amount of the accrued and unpaid Priority Return owing to
Legacy with respect to all time periods prior to the date of Occupancy
Stabilization, in order for Starship Management to qualify for the receipt of
the Management Fee pursuant to this Section 8.13.1(ii).
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In connection with the foregoing, within fifteen (15) calendar days
following the close of each calendar month, the Company shall prepare an
accounting with respect to the operations of the Company during such prior
calendar month and make payments in the following order and priority:
(a) Subject to the provisions of Section 7.2
hereof, Legacy receives all Distributions of Net Cash pursuant to Section
7.2.4 hereof which Legacy is entitled to receive as required pursuant to this
Section 8.13.1(ii); and
(b) Following the payment by the Company to
Legacy of all Distributions of Net Cash as contemplated in Section
8.13.1(ii)(a) hereof, to the extent the Company has sufficient available cash
proceeds, the Hotel Manager shall be entitled to receive from the Company
payments representing all accrued but unpaid Management Fees.
In the event the Management Agreement with Starship Management is
terminated, the Company shall select a new Hotel Manager for the Hotel,
subject to the approval of the Majority Interest of the Members. Following
the selection and appointment of the successor Hotel Manager, the Company and
the Hotel Manager shall enter into a new Management Agreement, the form and
substance of which shall be subject to the approval by the Majority Interest
of the Members. Pursuant to Section 4.2(B) hereof, following the occurrence
of an Event of Default, Legacy shall have the right to appoint itself, any
Legacy Affiliate or any other Person as the successor Hotel Manager and, in
such a case, the Person so designated by Legacy (including itself or any
Legacy Affiliate) shall have the right to receive the Management Fee.
8.13.2 GUARANTY FEE. In the event Legacy is required to
guaranty any Development Loan or any Permanent Loan, the Company shall pay to
Legacy an annual guaranty fee ("Guaranty Fee"), which Guaranty Fee shall be
determined and payable in accordance with the provisions of this Section
8.13.2. For each twelve (12) month period or portion thereof in which the
applicable Development Loan or Permanent Loan is outstanding and Legacy's
guaranty with respect to such Development Loan or Permanent Loan is in
effect, the Guaranty Fee shall be an amount equal to one percent (1%) of the
principal balance of such Development Loan or Permanent Loan, as applicable.
The Guaranty Fee will be paid by the Company to Legacy concurrently with the
execution of the guaranty by Legacy and the delivery of the same to the
Lender under the applicable Development Loan or Permanent Loan, as
applicable, and at the commencement of each twelve (12) month period
thereafter. The Guaranty Fee shall be deemed fully earned at the time of
payment. In this regard, in the event the applicable Development Loan or
Permanent Loan is pre-paid in whole or in part at any time during the twelve
(12) month period following the payment by the Company to Legacy of the
applicable Guaranty Fee, the Company shall not be entitled to any rebate or
refund of the Guaranty Fee previously paid to Legacy.
8.13.3 REIMBURSEMENT OF EXPENSES. The Company shall reimburse
the Managers for certain reasonable costs, fees and expenses incurred by the
Managers in connection with the performance of their respective duties and
responsibilities as Managers of the Company; provided: (a) such expenditures
were authorized or contemplated in the Development Plan and Budget and/or in
the Operating Plan and Budget; and (b) the Manager requesting reimbursement
provides appropriate documentation to the Company evidencing the payment of
such expenditure.
8.13.4 DISTRIBUTIONS. The Members are entitled to receive
certain Distributions from the Company as set forth in Articles 7 and 15 of
this Agreement.
8.13.5 NO OTHER FEES OR PAYMENTS. Except as expressly provided
for in this Section 8.13 or otherwise expressly provided for in this
Agreement, none of the Members, Managers, nor any of their respective
Affiliates shall be entitled to receive any payments or distributions from
the Company.
8.14 PERFORMANCE OF DUTIES; LIABILITY OF MANAGERS. The Managers shall
not be liable to the Company or to any Member for any loss or damage
sustained by the Company or any Member, unless the
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loss or damage shall have been the result of fraud, deceit, gross negligence,
reckless or intentional misconduct, or a knowing violation of law by the
Manager. The Managers shall perform their managerial duties in good faith,
in a manner it reasonably believes to be in the best interests of the Company
and its Members, and with such care, including reasonable inquiry, as an
ordinarily prudent person in a like position would use under similar
circumstances. A Manager who so performs the duties of Manager shall not
have any liability by reason of being or having been the Manager of the
Company.
In performing their duties, the Managers shall be entitled to rely on
information, opinions, reports or statements, including financial statements
and other financial data, of the following persons or groups (unless it has
knowledge concerning the matter in question that would cause such reliance to
be unwarranted); provided that the Managers act in good faith and after
reasonable inquiry when the need therefor is indicated by the circumstances:
(a) One or more officers, employees or other agents of the
Company whom the Managers reasonably believe to be reliable and competent in
the matters presented;
(b) Any attorney, independent accountant, or other person as
to matters which the Managers reasonably believe to be within such person's
professional or expert competence; or
(c) A committee upon which the Managers do not serve, duly
designated in accordance with a provision of the Articles or this Agreement,
as to matters within its designated authority, which committee the Managers
reasonably believe so merit competence.
8.15 RIGHT TO RELY ON AUTHORITY OF MANAGERS/ACTS OF MANAGER AS
CONCLUSIVE EVIDENCE OF AUTHORITY. All decisions made for and on behalf of
the Company by the Managers in the ordinary course of business of the
Company, or pursuant to this Agreement, shall be binding upon the Company.
No Person dealing with the Managers shall be required to determine their
authority to bind or act on behalf of the Company, nor to determine any facts
or circumstances bearing upon the existence of such authority.
Any note, mortgage, evidence of indebtedness, contract, agreement,
certificate, statement, conveyance, or other instrument in writing, and any
assignment or endorsement thereof, executed or entered into between the
Company and any other Person, when signed by the Managers is not invalidated
as to the Company by any lack of authority of the signing person in the
absence of actual knowledge on the part of the other Person that the Managers
had no authority to execute the same.
8.16 INSURANCE. The Company shall maintain for the protection of the
Company and all of its Members such insurance as the Managers, in their sole
discretion, deem necessary for the operations being conducted.
8.17 COMPANY EXPENSES. Subject to any limitations set forth in this
Agreement, and except as otherwise provided in this Agreement, the Company
shall pay all expenses of the Company which may include, but are not limited
to, the Operating Expenses.
8.18 DEVOTION OF TIME/COMPETING ACTIVITIES. The Managers are not
obligated to devote all of their business time or business efforts to the
affairs of the Company. Notwithstanding the foregoing, the Managers are
required to devote whatever time, effort and skill is reasonably necessary or
appropriate for the efficient management and operation of the Company. The
Managers and the Members may engage in or invest in, independently or with
others, any business activity of any type or description, and neither the
Company nor any other Member or Manager shall have the right in or to such
other ventures or activities, or to the income or proceeds derived therefrom.
The Managers and the Members shall have the right to hold any investment
opportunity or prospective economic advantage for his/her/its own account or
direct such opportunity to persons other than the Company.
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8.19 LIMITED LIABILITY. No Person who is a Manager of the Company
shall be personally liable under any judgment of a court, or in any other
manner, for any debt, obligation or liability of the Company, whether that
liability or obligation arises in contract, tort, or otherwise, solely by
reason of being a Manager of the Company.
8.20 MEMBERS/MANAGER. Pursuant to Section 8.2 hereof, Legacy has the
sole right to designate and appoint the majority of the Managers of the
Company and pursuant to Section 9.2 hereof, the term "Majority Interest of
the Members" means the vote or written consent of Legacy. As a result of the
foregoing provisions, together with other similar provisions contained in
this Agreement, Legacy has a substantial degree of control over the
management and operation of the Company. CV acknowledges and agrees that
many of the matters which will fall within the scope of Legacy's decision
making authority may involve Legacy and/or a Legacy Affiliate (example:
removal of a Manager), and, as a result, a conflict of interest may exist.
Notwithstanding the foregoing, CV acknowledges and agrees that a material
part of the consideration for Legacy entering into this Agreement is Legacy's
control over the management and operations of the Company in accordance with
the provisions of this Agreement. Accordingly, CV hereby acknowledges and
agrees that Legacy shall have the right to exercise all of its rights and
privileges as set forth in this Agreement, regardless of whether or not the
matters involve Legacy and/or a Legacy Affiliate, and CV hereby waives and
relinquishes any claims that CV may have that Legacy has a fiduciary or
similar duty to CV or that Legacy has breached any other duties or
obligations to CV as a result of the exercise by Legacy of any of its rights
or privileges as set forth in this Agreement.
ARTICLE 9
RIGHTS, POWERS AND APPROVAL RIGHTS OF THE MEMBERS
9.1 LIMITED LIABILITY. Except as required under the Act or as
expressly set forth in this Agreement, no Member shall be personally liable
for any debt, obligation or liability of the Company, whether that liability
or obligation arises in contract, tort or otherwise.
9.2 RESTRICTIONS ON THE POWER AND AUTHORITY OF THE MANAGERS --
APPROVAL BY THE MAJORITY INTEREST OF THE MEMBERS. Except to the extent
expressly authorized pursuant to this Agreement, the Development Plan and
Budget, or the Operating Plan and Budget, the Managers shall have no power or
authority, on behalf of the Company, to undertake any of the following
without the approval by the Majority Interest of the Members:
9.2.1 Enter into an agreement with, deal with or otherwise
engage in business with, the Members, or any Affiliate of the Members;
9.2.2 Permit or cause the funds of the Company to be
commingled with any other Person;
9.2.3 Permit or cause the Company to make a loan to any Member
or any Affiliate of any Member;
9.2.4 Enter into and execute the Master Lease and/or make any
modifications or amendments thereto;
9.2.5 Modify or amend the Development Plan and Budget;
9.2.6 Modify or amend the Operating Plan and Budget;
9.2.7 Enter into any contracts or agreements not expressly
authorized or contemplated in the Development Plan and Budget or the
Operating Plan and Budget;
9.2.8 Except as otherwise expressly provided in Section 8.7
hereof, admit any Person as a Manager to the Company;
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9.2.9 Modify, amend or terminate the Management Agreement in
accordance with the terms thereof, and/or select, appoint, remove and
terminate the Hotel Manager;
9.2.10 Establish, change or modify the Management Fee payable
to the Hotel Manager pursuant to the Management Agreement;
9.2.11 Cause the Company to enter into a joint venture or other
similar business relationship with any other Person;
9.2.12 Bring or defend, pay, collect, compromise, arbitrate,
resort to legal action or otherwise adjust claims or demands of or against
the Company;
9.2.13 Create, incur, assume, guarantee or cause the Company to
be liable for any indebtedness including, without limitation, any Development
Loan and/or any Permanent Loan;
9.2.14 Mortgage, pledge, hypothecate or encumber any Company
Property;
9.2.15 Guarantee or otherwise collateralize or secure the
obligations of any other Person;
9.2.16 Refinance, prepay, modify, consolidate or extend any
indebtedness of the Company;
9.2.17 Cause the Company to incur any expenditures other than
those expressly authorized within the Development Plan and Budget or within
the Operating Plan and Budget. Notwithstanding the foregoing, with respect
to each such authorized expenditure, the Managers may exceed the line item
amount allocable to any such expenditure as set forth in the Development Plan
and Budget or the Operating Plan and Budget, as applicable, without the
approval by the Majority Interest of the Members, provided the following
conditions are satisfied: (a) such expenditure does not exceed the
applicable line item by more than two percent (2%); (b) the Managers have
recognized cost savings in other categories of the applicable budget of equal
or greater amounts thereby resulting in no net overall increase in the
applicable Development Plan and Budget or Operating Plan and Budget; and (c)
any such expenditure or cost savings which results in a change in the
Development Plan and Budget and/or the Operating Plan and Budget will require
the approval by the Majority Interest of the Members pursuant to this Section
9.2;
9.2.18 Sell, transfer, lease, convey, exchange or otherwise
dispose of any item of Property other than upon terms and conditions which
are authorized in the Operating Plan and Budget;
9.2.19 Make any election, if permitted by applicable law, to
adjust the basis of Property pursuant to Sections 754, 734(b) and 743(b) of
the Code, or comparable provisions of state and local law;
9.2.20 Determine the amount of any Reserves to be maintained by
the Company;
9.2.21 Determine the amount and the timing of any proposed
Distributions of Net Cash by the Company;
9.2.22 Make any Distributions of Property in kind to any Member
and/or determine the fair market value of such Property;
9.2.23 Amend this Agreement except an amendment authorized to
be accomplished by the Managers pursuant to Section 6.8 hereof;
9.2.24 Dissolve and wind up the Company pursuant to Section
15.1.3 hereof;
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9.2.25 Issue any press releases or other public dissemination
of information concerning the Company, the Project, the Hotel and/or the
Members; and
9.2.26 Undertake any other action which requires the approval
by the Majority Interest of the Members pursuant to this Agreement and not
otherwise set forth above.
9.3 UNANIMOUS VOTE OF THE MEMBERS. Except to the extent expressly
authorized pursuant to this Agreement, the Development Plan and Budget or the
Operating Plan and Budget, the Managers shall not have any power or
authority, on behalf of the Company, to undertake any of the following
actions without the Unanimous Vote of the Members:
9.3.1 Undertake any action which is expressly prohibited by
law or this Agreement;
9.3.2 Any Additional Project Capital Improvements;
9.3.3 The election to proceed with the construction and
development of Phase II. In connection with the foregoing, and as a
condition precedent to any such approval, the Members shall enter into and
execute an amendment to this Agreement setting forth all of the terms and
conditions upon which the Company will undertake the construction and
development of Phase II including, without limitation, the terms and
conditions of any development loan for Phase II, any Additional Capital
Contribution required of the Members for Phase II, the allocation of duties
and obligations with respect to the construction and development of Phase II,
and such other matters pertaining to the construction, development,
maintenance and management of Phase II as the Members deem relevant or
appropriate. Notwithstanding the foregoing, in the event the Members elect
to proceed with the construction and development of Phase II, it is the
intention of the Members that the duties and obligations of the Members with
respect to the construction and development of Phase II shall be
substantially similar to the duties and obligations of the Members with
regard to Phase I pursuant to this Agreement, unless otherwise agreed by the
Unanimous Vote of the Members.
9.3.4 The Transfer of a Company Interest pursuant to Section
10.1 hereof;
9.3.5 The admission of any Person as a Member or a Substitute
Member of the Company;
9.3.6 Undertake any other action which requires the approval
by the Unanimous Vote of the Members pursuant to this Agreement and not
otherwise set forth above.
9.4 MEETINGS OF MEMBERS.
9.4.1 DATE, TIME AND PLACE OF MEETINGS OF MEMBERS; SECRETARY.
Meetings of Members may be held at such date, time and place within or
without the State of Delaware and/or the State of Arizona as the Managers may
fix from time to time. No annual or regular meeting of Members is required.
At any Members' meeting, the Managers shall preside at the meeting. The
Managers shall prepare minutes of the meeting which shall be placed in the
minute books of the Company.
9.4.2 POWER TO CALL MEETINGS. Unless otherwise prescribed by
the Act or by the Articles, meetings of the Members may be called by any one
of the Managers, or upon written demand of Members holding more than ten
percent (10%) of the Percentage Interests, for the purpose of addressing any
matters on which the Members may vote.
9.4.3 NOTICE OF MEETING. Written notice of a meeting of Members
shall be sent or otherwise given to each Member in accordance with Section
9.4.4 not less than thirty (30) nor more than sixty (60) days before the date
of the meeting. The notice shall specify the place, date and hour of the
meeting and the general nature of the business to be transacted. No other
business may be transacted at this meeting. Upon written request to the
Managers by any person entitled to call a meeting of Members, the Managers
shall
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immediately cause notice to be given to the Members entitled to vote that a
meeting will be held at a time requested by the person calling the meeting,
not less than thirty (30) days nor more than sixty (60) days after the
receipt of the request, the person entitled to call the meeting may give the
notice.
9.4.4 MANNER OF GIVING NOTICE; AFFIDAVIT OF NOTICE. Notice of
any meeting of Members shall be given either personally or by first class
mail, facsimile or other written communication, charges prepaid, addressed to
the Member at the address of that Member appearing on the books of the
Company or given by the Member to the Company for the purpose of notice.
Notice shall be deemed to have been given when received by the Member.
9.4.5 VALIDITY OF ACTION. The approval by the Majority
Interests of the Members of any matter requiring their approval shall be the
act of the Members, unless the approval by the Unanimous Vote of the Members
is otherwise required by this Agreement or the Act. Unless otherwise
expressly provided in this Agreement or required under the Act, Members who
have an interest (economic or otherwise) in the outcome of any particular
matter upon which the Members vote or consent, may vote or consent upon any
such matter and their Percentage Interests, vote or consent, as the case may
be, shall be counted in the determination of whether the requisite matter was
approved by the Majority Interests of the Members or the Unanimous Vote of
the Members, as applicable.
9.4.6 QUORUM. During the term of this Agreement, the presence
in person or by proxy of Legacy shall constitute a quorum at a meeting of the
Members. The Members present at a duly called or held meeting at which a
quorum is present may continue to do business until adjournment,
notwithstanding the loss of a quorum, if any action taken after loss of a
quorum (other than adjournment) is approved by those Members representing a
Majority Interest of the Members.
9.4.7 ADJOURNED MEETING; NOTICE. Any Members' meeting, whether
or not a quorum is present, may be adjourned from time to time by the vote of
the majority of the Percentage Interests represented at that meeting, either
in person or by proxy, but in the absence of a quorum, no other business may
be transacted at that meeting, except as provided in Section 9.4.6. When any
meeting of Members is adjourned to another time or place, notice need not be
given of the adjourned meeting if the time and place are announced at a
meeting at which the adjournment is taken, unless a new record date for the
adjourned meeting is subsequently fixed, or unless the adjournment is for
more than forty-five (45) days from the date set for the original meeting, in
which case the Managers shall set a new record date. At any adjourned
meeting the Company may transact any business which might have been
transacted at the original meeting.
9.4.8 WAIVER OF NOTICE OR CONSENT. The actions taken at any
meeting of Members however called and noticed, and wherever held, have the
same validity as if taken at a meeting duly held after regular call and
notice, if a quorum is present either in person or by proxy, and if, either
before or after the meeting, each of the Members entitled to vote, who was
not present in person or by proxy, signs a written waiver of notice or
consents to the holding of the meeting or approves the minutes of the
meeting. All such waivers, consents or approvals shall be filed with the
Company records or made a part of the minutes of the meeting.
Attendance of a person at a meeting shall constitute a waiver of notice
of that meeting, except when the person objects, at the beginning of the
meeting, to the transaction of any business because the meeting is not
lawfully called or convened, and except that attendance at a meeting is not a
waiver of any right to object to the consideration of matters not included in
the notice of the meeting if that objection is expressly made at the meeting.
Neither the business to be transacted nor the purpose of any meeting of
Members need be specified in any written waiver of notice except as provided
in Section 9.4.5.
9.4.9 ACTION BY WRITTEN CONSENT WITHOUT A MEETING. Any action
that may be taken at a meeting of Members may be taken without a meeting, if
a consent in writing setting forth the action so taken, is signed and
delivered to the Company within sixty (60) days of the record date for that
action by Members having not less than the minimum number of votes that would
be necessary to authorize or take that action
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at a meeting at which all Members entitled to vote on that action at a
meeting were present and voted. All such consents shall be filed with the
Managers or the Secretary of the Company and shall be maintained in the
Company records. Any Member giving a written consent, or the Member's proxy
holders, may revoke the consent by a writing received by the Managers or
Secretary of the Company before written consents of the number of votes
required to authorize the proposed action have been filed.
Unless the consents of all Members entitled to vote have been solicited
in writing: (i) notice of any Member approval of an amendment to the
Articles or this Agreement, a dissolution of the Company, or a merger of the
Company, without a meeting by less than unanimous written consent, shall be
given at least ten (10) days before the consummation of the action authorized
by such approval; and (ii) prompt notice shall be given of the taking of any
other action approved by Members without a meeting by less than unanimous
written consent, to those Members entitled to vote who have not consented in
writing.
9.4.10 TELEPHONIC PARTICIPATION BY MEMBER AT MEETINGS. Members
may participate in any Members' meeting through the use of any means of
conference telephones or similar communications equipment as long as all
Members participating can hear one another. A Member so participating is
deemed to be present in person at the meeting.
9.4.11 PROXIES. Every Member entitled to vote shall have the
right to do so either in person or by one or more agents authorized by a
written proxy signed by the person and filed with the Managers or Secretary
of the Company. A proxy shall be deemed signed if the Member's name is
placed on the proxy (whether by manual signature, typewriting, telegraphic
transmission, electronic transmission or otherwise) by the Member or the
Member's attorney-in-fact. A proxy may be transmitted by an oral telephonic
transmission if it is submitted with information from which it may be
determined that the proxy was authorized by the Member or the Member's
attorney-in-fact. A validly executed proxy which does not state that it is
irrevocable shall continue in full force and effect unless: (i) revoked by
the person executing it, before the vote pursuant to that proxy, by a writing
delivered to the Company stating that the proxy is revoked, or by a
subsequent proxy executed by, or attendance at the meeting and voting in
person by, the person executing the proxy; or (ii) written notice of the
death or incapacity of the maker of that proxy is received by the Company
before the vote pursuant to that proxy is counted; provided, however, that no
proxy shall be valid after the expiration of eleven (11) months from the date
of the proxy, unless otherwise provided in the proxy.
9.5 CERTIFICATE OF COMPANY INTEREST.
9.5.1 CERTIFICATE. A Membership Interest may be represented by
a certificate of membership ("Certificate"). The exact contents of a
Certificate may be determined by action of the Managers but shall be issued
substantially in conformity with the following requirements. The
Certificates shall be respectively numbered serially, as they are issued,
shall be impressed with the Company seal or a facsimile thereof, if any, and
shall be signed by the Managers or Officers of the Company. Each Certificate
shall state the name of the Company, the fact that the Company is organized
under the laws of the State of Delaware as a limited liability company, the
name of the person to whom issued, the date of issue, and the Percentage
Interests represented thereby. A statement of the designations, preferences,
qualifications, limitations, restrictions, and special or relative rights of
the Membership Interest, if any, shall be set forth in full or summarized on
the face or back of the certificates which the Company shall issue, or in
lieu thereof, the certificate may set forth that such a statement or summary
will be furnished to any holder of a Membership Interest upon request without
charge. Each Certificate shall be otherwise in such form as may be
determined by the Managers.
9.5.2 CANCELLATION OF CERTIFICATE. All Certificates surrendered
to the Company for transfer shall be canceled and no new certificates of
membership shall be issued in lieu thereof until the former Certificates for
a like number of Membership Interests shall have been surrendered and
canceled, except as herein provided with respect to lost, stolen or destroyed
Certificates.
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9.5.3 REPLACEMENT OF LOST, STOLEN OR DESTROYED CERTIFICATE. Any
Member claiming that his or her Certificate is lost, stolen or destroyed may
make an affidavit or affirmation of that fact and request a new Certificate.
Upon the giving of a satisfactory indemnity to the Company as reasonably as
required by the Managers, a new certificate may be issued of the same tenor
and representing the same Percentage Interest of membership as was
represented by the Certificate alleged to be lost, stolen or destroyed.
ARTICLE 10
SALE, ASSIGNMENT OR TRANSFER OF MEMBERSHIP INTERESTS
10.1 SALE, ASSIGNMENT OR TRANSFER OF A COMPANY. Except as otherwise
provided in this Agreement, and subject to the provisions of Sections 10.7
and 10.8 hereof, no Member shall be entitled to sell, transfer, exchange,
convey, assign, encumber or in any way alienate ("Transfer"), all or any part
of such Member's Membership Interest in the Company except upon the Unanimous
Vote of the Members, which approval may be granted or withheld in the sole
and absolute discretion of the Members. Without limiting the foregoing, the
sale, transfer, exchange, conveyance, assignment or encumbrance (or the
occurrence of any other event which has the effect of the foregoing, ex:
admission of additional shareholders, members or partners of a Member), of
fifty percent (50%) or more of: (a) the voting stock of a Member (if the
Member is a corporation); (b) the membership interests of a Member (if the
Member is a limited liability company); or (c) the partnership interests of a
Member (if the Member is a general or limited partnership), whether in one
transaction, or in a series of related or unrelated transactions, shall be
deemed to constitute a "Transfer" for purposes of this Section 10.1. Subject
to the approval of any such Transfer by the Unanimous Vote of the Members,
upon the consummation of any such Transfer, the Membership Interest so
transferred shall continue to be subject to the terms and conditions of this
Agreement and any further Transfers of all or any portion of the applicable
Membership Interest shall be subject to the terms and conditions of this
Agreement.
10.2 EXCEPTIONS. Notwithstanding the terms and conditions of Sections
10.1, 10.7 and 10.8 hereof, a Member may Transfer his/her Membership Interest
(or any portion thereof) under one or more of the circumstances described
below; provided, however, that such Membership Interest shall remain subject
to all of the terms and conditions of this Agreement:
(a) Each Member may Transfer all or any portion of
his/her/its Membership Interest to any other Member or Members;
(b) Legacy may transfer its Membership Interests to an
Legacy Affiliate, at any time in its sole and absolute discretion. In
connection with any such transfer of Legacy's Membership Interests, the
Legacy Affiliate will be required to assume all duties and obligations of
Legacy pursuant to this Agreement including. Concurrently with any such
transfer, Legacy shall provide to the Company reasonable evidence of the
designated Legacy Affiliate's financial capacity to perform and fulfill all
of Legacy's duties and obligations set forth in this Agreement.
10.3 FURTHER RESTRICTIONS ON TRANSFERS. In addition to the other
restrictions on Transfers contained in this Agreement, no Membership
Interest, or any portion thereof, may be transferred unless and until the
following conditions have been satisfied, as determined by the Managers:
10.3.1 Such Transfer will not result in the violation of any
applicable federal or state securities laws or regulations;
10.3.2 Such Transfer will not require registration of any
securities under federal or state securities laws or regulations and/or will
not require the consent of or a permit from the governing agencies pursuant
to any applicable federal or state securities laws or regulations;
10.3.3 Other than in the case of a Transfer authorized pursuant
to Section 10.2(b) hereof, such Transfer will not result in the termination
of the Company under the Code; and/or
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10.3.4 Such Transfer will not result in the release of the
Member transferring the Membership Interest from any liability that such
Member may have to the Company as of the date of such Transfer.
As a condition to approving any proposed Transfer, the Managers may
require that the transferor furnish the Company with a written opinion of
legal counsel, in form and substance reasonably satisfactory to the Managers,
that the proposed Transfer will satisfy and not violate the conditions
described in this Section 10.3.
The Transfer by a Member of a Membership Interest shall become effective
on the first day of the month following satisfaction of the requirements set
forth in Section 10.1 and this Section 10.3, and receipt by the Managers of
evidence of such Transfer, in form and substance reasonably satisfactory to
the Managers.
10.4 RIGHTS OF LEGAL REPRESENTATIVES. Subject to the provisions of
this Article 10, in the event of the death or permanent disability of a
Member, the Member's executor, administrator, guardian, conservator or other
legal representative may exercise all of the Member's rights for the purpose
of settling the Member's estate or administering the Member's property,
including any power the Member is entitled to exercise under this Agreement.
Subject to the provisions of this Article 10, in the event of the dissolution
or liquidation of a Member, the powers of that Member may be exercised by its
legal representative or successor-in-interest.
10.5 NO EFFECT TO TRANSFERS IN VIOLATION OF AGREEMENT. Upon any
Transfer of a Membership Interest in violation of this Article 10, the
Assignee shall have no right to vote or participate in the management of the
business, property and affairs of the Company or to exercise any rights of a
Member. Such Assignee shall only be entitled to become an Economic Interest
Owner and thereafter shall only receive the Profits, Losses and Distributions
to which the transferor of such Economic Interest would otherwise be
entitled. Notwithstanding the immediately preceding sentences, if, in the
determination of the Managers, a transfer in violation of this Article 10
would cause the termination of the Company under the Code (other than in the
case of a Transfer authorized pursuant to Section 10.2(b) hereof), in the
sole discretion of the Managers, the Transfer shall be null and void and the
Assignee shall not become either a Member or an Economic Interest Owner.
10.6 REQUIREMENTS FOR SUBSTITUTION OF A NEW MEMBER. No Assignee of
the whole or a portion of a Membership Interest shall have the right to
become a Substituted Member, in place of his/her/its transferor, unless and
until all of the following conditions are satisfied:
(a) The Assignee has been approved to become a Substituted
Member by the Unanimous Vote of the Members. Notwithstanding the foregoing,
in the event Legacy transfers its Membership Interests to an Legacy Affiliate
pursuant to Section 10.2(e) hereof, the Members hereby approve such Legacy
Affiliate becoming a Substituted Member pursuant to this Section 10.6;
(b) A duly executed and acknowledged written instrument of
transfer approved by the Managers shall have been filed with the Company
setting forth the intention of the transferor that transferee become a
Substituted Member in its place;
(c) The transferor and Assignee shall have executed and
acknowledged, and caused such other persons to execute and acknowledge, such
other instruments as the Managers may reasonably deem necessary or desirable
to effect such substitution, including, without limitation, the written
acceptance and adoption by the Assignee of the provisions of the Articles and
this Agreement;
(d) The requirements set forth in Section 10.3 have been
satisfied.
10.7 RIGHT OF FIRST NEGOTIATION. Notwithstanding the provisions of
Section 10.1 hereof, if any Member ("Transferring Member") desires to
transfer all or any part of his or her Membership Interest (other
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than pursuant to Section 10.2 hereof), such Member shall notify the Company
and the other Member ("Non-Transferring Member") in writing of such desire
and, for a period of thirty (30) calendar days thereafter, the Transferring
Member and the Non-Transferring Member shall negotiate with respect to the
purchase of such Transferring Member's Membership Interest. During such
period, the Transferring Member may not solicit a transferee for such
Membership Interest.
10.8 RIGHT OF FIRST REFUSAL. If the period described in Section 10.7
expires without an agreement being reached as to the purchase of the
Membership Interest referred to therein, the Transferring Member may solicit
transferees. In such event, each time a Transferring Member proposes to
transfer all or any part of his/her/its Membership Interest (or as required
by operation of law or other involuntary transfer to do so), other than
pursuant to Section 10.2 hereof, such Member shall first offer such
Membership Interest to the Non-Transferring Member in accordance with the
following provisions:
(a) The Transferring Member shall deliver a written notice
("Option Notice") to the Non-Transferring Member stating: (i) the
Transferring Member's bona fide intention to transfer such Membership
Interest; (ii) the Membership Interest to be transferred; (iii) the purchase
price and terms of payment for which the Transferring Member proposes to
transfer such Membership Interest; and (iv) the name and address of the
proposed transferee. The Option Notice shall include a copy of the executed
agreement between the Transferring Member and the proposed transferee.
(b) The Non-Transferring Member shall have the right, but
not the obligation, to elect to purchase the Membership Interest upon the
price and terms of payment designated in the Option Notice. If the Option
Notice provides for the payment of non-cash consideration, such
Non-Transferring Member may elect to pay the consideration in cash equal to
the good faith estimate of the present fair market value of the non-cash
consideration offered as determined by the Managers. Within sixty (60)
calendar days after receipt of the Option Notice, the Non-Transferring Member
shall notify the Managers in writing of his/her/its desire to purchase the
Membership Interest proposed to be so transferred. The failure of the
Non-Transferring Member to submit a notice within the applicable period shall
constitute an election on the part of the Non-Transferring Member not to
purchase the Membership Interest which may be so transferred. The
Non-Transferring Member electing to purchase shall be required to purchase
the entire Membership Interest.
(c) If the Non-Transferring Member elects to purchase the
Membership Interest designated in the Option Notice, then the closing of such
purchase shall occur within ninety (90) calendar days after receipt of such
notice and the Transferring Member and the Non-Transferring Member shall
execute such documents and instruments and make such deliveries as may be
reasonably required to consummate such purchase.
(d) If the Non-Transferring Member elects not to purchase or
obtain, or defaults in its obligation to purchase or obtain, the Membership
Interest designated in the Option Notice, then the Transferring Member may
transfer the Membership Interest described in the Option Notice to the
proposed transferee provided such transfer: (i) is completed within thirty
(30) calendar days after the expiration of the Non-Transferring Member's
right to purchase such Membership Interest; (ii) is made on terms no less
favorable to the Transferring Member than as designated in the Option Notice;
and (iii) complies with Sections 10.1, 10.3, 10.4 and 10.5 hereof, it being
acknowledged by the Members that compliance with Sections 10.7 and 10.8 does
not modify any of the transfer restrictions in Article 10 or otherwise
entitle a Member to transfer his/her/its Membership Interest other than in
the manner prescribed by Article 10. If such Membership Interest is not so
transferred, the transferring Member must give notice in accordance with this
Section 10.8 prior to any other or subsequent transfer of such Membership
Interest.
10.9 LEGEND RESTRICTION. Each Member hereby agrees that a legend to
the effect of the following may be placed upon all documents evidencing the
Membership Interests to which such Member has subscribed:
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The Membership Interests evidenced by this Operating
Agreement have not been registered under the Securities
Act of 1933, as amended, nor registered nor qualified
under any state securities laws. No assignments,
sales, pledges, hypothecations, or other transfers of
the Membership Interests evidenced by this Operating
Agreement shall be made at any time whatsoever, except
upon the issuance of a favorable opinion of counsel to
the Company to the effect that the sale, pledge,
hypothecation or other transfer of such Membership
Interests will not be in violation of the Securities
Act of 1933, as amended, and/or in violation of any
applicable securities laws of the State of Delaware, or
under any rules or regulations promulgated pursuant to
the foregoing.
ARTICLE 11
DISSOLUTION EVENTS
The Insolvency, death, permanent disability, dissolution or liquidation
of a Member, or the occurrence of any other event which terminates the
continued membership of any Member in the Company (collectively a
"Dissolution Event"), shall dissolve the Company unless the remaining Members
("Remaining Members"), pursuant to the affirmative vote or written consent of
the Remaining Members, elect in writing to continue the business and
operations of the Company. In the event the Remaining Members elect to
continue the business and operations of the Company in effect, the legal
representative of the Member whose conduct or action caused or triggered the
Dissolution Event shall automatically become the Assignee of the Economic
Interest associated with the former Member's Membership Interest in the
Company and, in such capacity, shall be entitled to receive all Profits,
Losses and Distributions associated therewith. Additionally, in such a case,
the legal representative of the former Member shall have the right to become
a Substituted Member upon the satisfaction of the conditions set forth in
Section 10.6 hereof.
ARTICLE 12
ACCOUNTING, RECORDS, REPORTING BY MEMBERS
12.1 BOOKS AND RECORDS. The books and records of the Company shall be
kept, and the financial position and the results of its operations recorded,
in accordance with the accounting methods followed for federal income tax
purposes. The books and records of the Company shall reflect all the Company
transactions and shall be appropriate and adequate for the Company's
business. The Company shall maintain at its principal office in Arizona all
of the following:
12.1.1 A current list of the full name and last known business
or residence address of each Member set forth in alphabetical order, together
with the Capital Contributions, Capital Account and Percentage Interests of
each Member;
12.1.2 A current list of the full name and business or
residence address of each Manager;
12.1.3 A copy of the Articles and any and all amendments
thereto, together with executed copies of any powers of attorney pursuant to
which the Articles or any amendments thereto have been executed;
12.1.4 Copies of the Company's federal, state and local income
tax or information returns and reports;
12.1.5 A copy of this Agreement and any and all amendments
thereto, together with executed copies of any powers of attorney pursuant to
which this Agreement or any amendments thereto have been executed;
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12.1.6 Copies of the financial statements of the Company; and
12.1.7 The Company's books and records as they relate to the
internal affairs of the Company.
12.2 DELIVERY TO MEMBERS AND INSPECTION.
12.2.1 Upon the request of any Member for purposes reasonably
related to the interest of that Person as a Member, the Managers shall
promptly deliver to the requesting Member, at the expense of the Company, a
copy of the information required to be maintained by Sections 12.1.1 through
12.1.4, and a copy of this Agreement.
12.2.2 Each Member and Manager has the right, upon reasonable
request for purposes reasonably related to the interest of the Person as
Member or Manager, to: (i) inspect and copy during normal business hours any
of the Company records described in Sections 12.1.1 through 12.1.7,
inclusive; and (ii) obtain from the Managers, promptly after their becoming
available, a copy of the Company's federal, state and local income tax or
information returns for each fiscal year.
12.2.3 Any request, inspection or copying by a Member under
this Section 12.2 may be made by that Person or that Person's agent or
attorney.
12.2.4 The Managers shall promptly furnish to a Member a copy
of any amendment to the Articles or this Agreement executed by the Managers
pursuant to a power of attorney from the Member.
12.3 ANNUAL STATEMENTS.
12.3.1 The Managers shall cause an annual report to be sent to
each of the Members not later than ninety (90) calendar days after the close
of the fiscal year. The report shall contain a balance sheet as of the end
of the fiscal year and an income statement and statement of changes in
financial position for the fiscal year. Such financial statements shall be
accompanied by the report thereon, if any, of the independent accountants
engaged by the Company or, if there is no report, the certificate of the
Managers that the financial statements were prepared without audit from the
books and records of the Company.
12.3.2 The Managers shall cause to be prepared at least
annually, at Company expense, information necessary for the preparation of
each Member's federal and state income tax returns. The Managers shall send
or cause to be sent to each Member within ninety (90) calendar days after the
end of each taxable year such information as is necessary to complete federal
and state income tax or information returns, and a copy of the Company's
federal, state and local income tax or information returns for that year.
12.4 FINANCIAL AND OTHER INFORMATION. The Managers shall provide such
financial and other information relating to the Company or any other Person
in which the Company owns, directly or indirectly, an equity interest, as a
Member may reasonably request.
12.5 FILINGS. The Managers, at the Company's expense, shall cause the
income tax returns for the Company to be prepared and timely filed with the
appropriate authorities. The Managers, at the Company's expense, shall also
cause to be prepared and timely filed, with appropriate federal and state
regulatory and administrative bodies, amendments to, or restatements of, the
Articles and all reports required to be filed by the Company with those
entities under the Act or other then current applicable laws, rules and
regulations. If the Managers are required by the Act to execute or file any
document and thereafter fails, after demand, to do so within a reasonable
period of time or refuses to do so, any Member may prepare, execute and file
that document with the Delaware Secretary of State.
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12.6 BANK ACCOUNTS. The Managers shall cause to be established
appropriate bank accounts in the name of the Company and all financial
transactions relevant to the Company shall be handled exclusively through
said bank accounts. The bank accounts shall be solely for the operations of
the Company and shall require for disbursements the signature of two (2)
Managers (at least one (1) of whom shall be a Manager appointed by Legacy).
Notwithstanding the foregoing, pursuant to the Management Agreement, the
Hotel Manager will have limited authority to cause payments and disbursements
to be made from certain designated bank accounts of the Company, subject to
and in accordance with the terms and conditions of the Management Agreement.
12.7 TAX MATTERS FOR THE COMPANY HANDLED BY MANAGERS AND TAX MATTERS
PARTNER. The Tax Matters Partner, as defined in Section 6231 of the Code,
shall be Legacy. Legacy shall from time to time cause the Company to make
such tax elections as it deems to be in the best interests of the Company and
the Members. The Tax Matter Partner shall represent the Company (at the
Company's expense) in connection with all examinations of the Company's
affairs by tax authorities, including resulting judicial and administrative
proceedings, and shall expend the Company funds for professional services and
costs associated therewith. The Tax Matters Partner shall oversee the
Company tax affairs in the overall best interests of the Company. If for any
reason the Tax Matters Partner can no longer serve in that capacity or ceases
to be a Member, as the case may be, may designate another to be the Tax
Matters Partner.
ARTICLE 13
RIGHT OF FIRST REFUSAL
13.1 GRANT OF RIGHT OF FIRST REFUSAL. In the event the Company
receives a Bona Fide Offer to purchase the Hotel upon terms and conditions
which are approved by the Majority Interest of the Members, CV shall have the
right to purchase and acquire Legacy's Membership Interest in the Company
subject to and in accordance with the terms and conditions set forth in this
Article 13 ("Right of First Refusal").
13.2 EXERCISE OF RIGHT OF FIRST REFUSAL. Immediately following the
last to occur of the following events: (a) the receipt by the Company of a
Bona Fide Offer to purchase and acquire the Hotel; and (b) the terms and
conditions of such Bona Fide Offer are approved by the Majority Interest of
the Members, then the Managers shall deliver written notice to CV of the
receipt by the Company of such Bona Fide Offer and the approval of the terms
and conditions of the Bona Fide Offer by the Majority Interest of the
Members. Such written notice shall include a copy of the Bona Fide Offer.
Within five (5) business days following the date of receipt of the Managers'
written notice and accompanying Bona Fide Offer, CV shall have the right, but
not the obligation, to exercise its Right of First Refusal and to purchase
and acquire Legacy's Membership Interest in the Company upon the terms and
conditions set forth in the Bona Fide Offer provided, however: (a) in the
event CV desires to exercise its Right of First Refusal, CV must deliver
written notice of exercise to Legacy within such five (5) business day
period; and (b) the purchase price for Legacy's Membership Interest in the
Company shall be an amount which corresponds to the amount which Legacy would
have received in the event the Company consummated the sale of the Hotel in
accordance with the terms and conditions set forth in the Bona Fide Offer,
the Company was liquidated and the proceeds thereof were distributed to the
Members in accordance with the terms and conditions of this Agreement.
In the event CV timely exercises its Right of First Refusal in
accordance with the provisions of this Section 13.2, not later than two (2)
business days after CV delivers to Legacy written notice of exercise of its
Right of First Refusal, CV and Legacy shall enter into and execute a
definitive purchase agreement incorporating the terms and conditions for the
purchase and sale of Legacy's Membership Interest in the Company as
determined pursuant to this Section 13.2. In connection with the foregoing,
the purchase agreement will provide: (i) for the payment by CV to Legacy of a
Two Hundred Fifty Thousand Dollar ($250,000.00) nonrefundable deposit
concurrently with the execution of the definitive purchase and sale agreement
by CV and Legacy; (ii) that the purchase price for Legacy's Membership
Interest in the Company shall be paid by CV to Legacy in the form of cash,
cashier's check, certified funds or by wire transfer; (iii) the closing for
the purchase of Legacy's Membership Interest in the Company shall be handled
through an escrow
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with a title insurance company mutually approved by Legacy and CV; (iv) all
closing costs incurred in connection with any such transaction shall be
allocated between Legacy and CV in the manner in which such closing costs are
customarily allocated between a seller and buyer in other commercial real
estate transactions in the geographic area in which the Hotel is located; (v)
Legacy shall not be responsible for the payment of any brokerage fees or
similar commissions as a result of CV's purchase of Legacy's Membership
Interest in the Company in accordance with the provisions of this Article 13;
(vi) there shall be no due diligence or similar investigation period and the
closing for the purchase by CV of Legacy's Membership Interest in the Company
shall take place not later than thirty (30) calendar days following the date
of delivery by CV of its written notice of exercise of its Right of First
Refusal as described in this Section 13.2; and (vii) if for any reason CV
fails to complete its acquisition of Legacy's Membership Interest in the
Company in accordance with the terms and conditions set forth in this Section
13.2, the Two Hundred Fifty Thousand Dollar ($250,000.00) deposit shall serve
as liquidated damages, the Right of First Refusal granted to CV pursuant to
this Article 13 shall immediately terminate and the Company may thereafter
consummate the sale of the Hotel pursuant to the terms and conditions set
forth in the Bona Fide Offer or pursuant to any other terms and conditions
approved by the Majority Interest of the Members, or may otherwise sell,
transfer or dispose of the Hotel upon terms and conditions approved by the
Majority Interest of the Members.
In the event CV fails to timely exercise its Right of First Refusal
pursuant to the provisions of this Section 13.2, the Company may thereafter
consummate the sale of the Hotel pursuant to the terms and conditions set
forth in the Bona Fide Offer provided, however, in the event of any material
change in the terms and conditions set forth in the Bona Fide Offer, the
Company will be required to advise CV of such material change and CV will
then have the right to exercise its Right of First Refusal with respect to
such revised terms and conditions in accordance with the provisions of this
Article 13.
13.3 CONDITIONS PRECEDENT TO EXERCISE OF RIGHT OF FIRST REFUSAL. The
following are conditions precedent to the exercise by CV of the Right of
First Refusal granted to CV pursuant to the terms and conditions of this
Article 13:
(a) CV shall not have previously exercised its Right of
First Refusal pursuant to this Article 13 and thereafter defaulted in its
obligation to purchase and acquire Legacy's Membership Interest in the
Company in accordance with the terms and conditions set forth in this Article
13;
(b) An Event of Default shall not have previously occurred;
or
Occupancy Stabilization shall not have previously occurred.
If for any reason all of the foregoing conditions precedent have not
been satisfied at the time CV exercises its Right of First Refusal, such
exercise shall be of no force and effect and the Company may elect to
consummate the sale of the Hotel pursuant to the terms and conditions set
forth in the Bona Fide Offer.
ARTICLE 14
OPTION TO PURCHASE MEMBERSHIP INTERESTS
14.1 OPTION TO PURCHASE. As a material part of the consideration for
Legacy entering into this Agreement, CV hereby grants to Legacy the right and
option to purchase CV's Membership Interest in the Company upon the terms and
conditions set forth in this Article 14 ("Option to Purchase").
14.2 CONDITIONS PRECEDENT TO EXERCISE OF OPTION TO PURCHASE. The
following are conditions precedent to the exercise of the Option to Purchase
by Legacy:
(a) Legacy may only exercise its Option to Purchase
pursuant to this Article 14 following the occurrence of one or more of the
following events:
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(i) The expiration of two (2) years from the date of
Occupancy Stabilization; provided, however, in the event the construction and
development of Phase II has been approved by the Unanimous Vote of the
Members pursuant to Section 9.3.3 hereof prior to the date of exercise by
Legacy of its Option to Purchase pursuant to this Article 14, such exercise
by Legacy shall be deemed ineffective and Legacy shall not be entitled to
exercise its Option to Purchase pursuant to this Article 14 until the
expiration of one (1) year from the date of the issuance of the final
certificate of occupancy with respect to Phase II;
(ii) The dissolution of CV;
(iii) The abandonment of the Project by CV.
(iv) The commencement of foreclosure proceedings by
the lender under any Development Loan, any Permanent Loan or any other
secured financing of the Company and the failure of the Company to cure any
default and terminate such foreclosure proceedings within thirty (30)
calendar days after the commencement of such foreclosure proceedings; or
(v) The Insolvency of the Company.
(b) Legacy shall not be in default in the performance of any
of its obligations under this Agreement.
14.3 EXERCISE OF OPTION TO PURCHASE. Following the occurrence of one
or more of the events described in Section 14.2(a)(i) through (v) above,
Legacy may exercise its Option to Purchase the Membership Interests held by
the CV by delivering written notice to CV of its election to exercise its
Option to Purchase pursuant to this Section 14.3.
14.4 PURCHASE PRICE; TERMS OF PAYMENT. The purchase price for CV's
Membership Interest shall be the purchase price agreed upon by Legacy and CV
("Legacy Purchase Price"). In the event Legacy and CV are not able to agree
upon a purchase price for CV's Membership Interest within thirty (30)
calendar days after the date of Legacy's written notice of election to
exercise its Option to Purchase, then Legacy and CV shall each appoint an
appraiser to prepare an appraisal establishing the fair market value and
corresponding purchase price for CV's Membership Interest, taking into
account all facts and circumstances as of the date of such appraisals. Each
such appraisal referred to above shall be completed on or before thirty (30)
calendar days after the date the matter is required to be submitted to the
appraisers pursuant to this Section 14.4. If the fair market values and
corresponding purchase prices for CV's Membership Interest, as reflected in
each of the two appraisals, are within five percent (5%) of each other, then
the average of the two appraisals shall be utilized as the fair market value
and corresponding purchase price of CV's Membership Interest for purposes of
this Section 14.4, and such amount shall be deemed to constitute the "Legacy
Purchase Price". On the other hand, if the fair market values and
corresponding purchase prices for CV's Membership Interest set forth in the
two (2) appraisals are not within five percent (5%) of each other, then the
two appraisers shall select a third appraiser, who shall conduct an appraisal
of CV's Membership Interest, taking into account all facts and circumstances
as of the date of such appraisal. The designation of the third appraiser
shall be subject to the approval of both Legacy and CV. Following the
completion of the third appraisal, the average of the two (2) appraisals
closest in value shall then be utilized for purposes of determining the fair
market value and corresponding purchase price for CV's Membership Interest,
and such amount shall be deemed to constitute the "Legacy Purchase Price".
Legacy and CV shall each pay the cost of any appraiser selected by such
party, and Legacy and CV shall equally pay the cost of the third appraiser,
if required pursuant to the provisions of this Section 14.4. Each appraiser
shall be an MAI certified appraiser with at least seven (7) years' experience
appraising hotel and restaurant facilities in Arizona. For purposes of
Section 14.5 hereof, Legacy and CV hereby agree to instruct the appraisers to
include in their respective appraisals, the corresponding purchase price for
Legacy's Membership Interest in the Company in the event Section 14.5 hereof
becomes applicable.
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The Legacy Purchase Price for CV's Membership Interest shall be paid by
Legacy to CV in the form of cash, cashier's check, certified funds, shares of
Legacy common stock, or by wire transfer. The closing of the purchase of
CV's Membership Interest shall be handled through an escrow with a title
insurance company mutually approved by Legacy and CV. All closing costs
incurred in connection with any such transaction shall be allocated equally
between Legacy and CV. Neither Legacy nor CV shall be responsible for the
payment of any brokerage fees or similar commissions as a result of Legacy's
purchase of CV's Membership Interest in accordance with the provisions of
this Section 14.4.
The closing for the purchase of CV's Membership Interest by Legacy
pursuant to this Section 14.4 shall take place not later than ten (10)
calendar days following the determination of the Legacy Purchase Price for
CV's Membership Interest pursuant to this Section 14.4. Legacy and CV hereby
agree to and shall execute, deliver and acknowledge, where applicable, all
documents, agreements and instruments necessary to accomplish the sale of
CV's Membership Interest to Legacy pursuant to this Section 14.4.
Notwithstanding anything to the contrary in this Section 14.4, Legacy
shall be under no obligation to purchase and acquire the Membership Interest
of CV and Legacy may at any time, following the exercise of its Option to
Purchase, elect not to purchase and acquire the Membership Interest of CV by
providing written notice of its election to CV ("Notice of Election Not to
Close"). In the case Legacy delivers its Notice of Election Not to Close
following a final determination of the Legacy Purchase Price by the third
party appraisers pursuant to this Section 14.4, CV shall have the option to
purchase and acquire the Membership Interest of Legacy pursuant to Section
14.5 hereof.
14.5 CV PURCHASE OPTION. In the event Legacy delivers its Notice of
Election Not to Close following a final determination of the Legacy Purchase
Price by third party appraisers pursuant to Section 14.4 hereof, CV shall
have the right and option to purchase and acquire Legacy's Membership
Interest in the Company by delivering written notice of its election (the "CV
Purchase Notice"), to Legacy within ten (10) calendar days after the date of
Legacy's Notice of Election Not to Close. In such a case, the purchase price
("CV Purchase Price") for the Membership Interest of Legacy shall be the
amount established by the appraisers as the fair market value and
corresponding purchase price for Legacy's Membership Interest as contemplated
in Section 14.4 hereof.
The CV Purchase Price for Legacy's Membership Interest in the Company
shall be paid by CV to Legacy in the form of cash, cashier's check, certified
funds or by wire transfer. The closing of the purchase of Legacy's
Membership Interest in the Company shall be handled through an escrow with
the a title insurance company mutually approved by Legacy and CV. All
closing costs incurred in connection with any such transaction shall be
allocated equally between Legacy and CV. Neither Legacy nor CV shall be
responsible for the payment of any brokerage fees or similar commissions as a
result of the purchase of Legacy's Membership Interest in the Company by CV
in accordance with the provisions of this Section 14.5.
The closing for the purchase of Legacy's Membership Interest in the
Company pursuant to this Section 14.5 shall take place no later than sixty
(60) calendar days following the date of the written notice of CV electing to
purchase Legacy's Membership Interest in the Company pursuant to this Section
14.5. Legacy and CV hereby agree to and shall execute, deliver and
acknowledge, where applicable, all documents, agreements and instruments
necessary to accomplish the purchase and sale of Legacy's Membership Interest
in the Company to CV pursuant to this Section 14.5.
In the event CV elects not to purchase Legacy's Membership Interest in
the Company pursuant to this Section 14.5, Legacy's Option to Purchase
pursuant to this Article 14 shall be restored, and Legacy may thereafter
exercise such Option to Purchase at any time pursuant to the terms and
conditions of this Article 14.
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ARTICLE 15
DISSOLUTION AND WINDING UP
15.1 DISSOLUTION. The Company shall be dissolved, its assets shall be
disposed of, and its affairs wound up on the first to occur of the following:
15.1.1 Upon the occurrence of any event of dissolution
specified in the Articles;
15.1.2 Upon the entry of a decree of judicial dissolution
pursuant to the Code;
15.1.3 Upon the approval by the Majority Interest of the
Members;
15.1.4 Upon the sale or other disposition of all or
substantially all of the Property and receipt by the Company of all proceeds
of such sale or other disposition.
15.1.5 Upon the occurrence of a Dissolution Event, unless the
Remaining Members elect to continue the business and operations of the
Company.
15.2 CERTIFICATE OF DISSOLUTION. As soon as possible following the
occurrence of any of the events specified in Section 15.1, the Managers who
have not wrongfully dissolved the Company or, if none, the Members, shall
execute a Certificate of Dissolution in such form as shall be prescribed by
the Delaware Secretary of State and file the Certificate as required by the
Act.
15.3 WINDING UP. Upon the occurrence of any event specified in
Section 15.1, the Company shall continue solely for the purpose of winding up
its affairs in an orderly manner, liquidating its assets, and satisfying the
claims of its creditors. The Managers (or the Members, if the Managers are
in default) shall be responsible for overseeing the winding up and
liquidation of the Company, shall take full account of the liabilities of the
Company and assets, shall either cause its assets to be sold or distributed,
and if sold as promptly as is consistent with obtaining the fair market value
thereof, shall cause the proceeds therefrom, to the extent sufficient
therefor, to be applied and distributed as provided in Section 15.5. The
Persons winding up the affairs of the Company shall give written notice of
the commencement of winding up by mail to all known creditors and claimants
whose addresses appear on the records of the Company. The Managers (or
Members) winding up the affairs of the Company shall be entitled to
reasonable compensation for such services.
15.4 DISTRIBUTIONS IN KIND. Any non-cash Property distributed to one
or more Members shall first be valued at its fair market value to determine
the Profit or Loss that would have resulted if such Property were sold for
such value, such Profit or Loss shall then be allocated pursuant to Article 6
and the Members' Capital Accounts shall be adjusted to reflect such
allocations. The amount distributed and charged to the Capital Account of
each Member receiving an interest in such distributed asset shall be the fair
market value of such interest (net of any liability secured by such asset
that such Member assumes or takes subject to). The fair market value of such
asset shall be determined by the Managers and by the approval of the Majority
Interest of the Members.
15.5 ORDER OF PAYMENT OF LIABILITIES UPON DISSOLUTION.
15.5.1 After determining that all known debts and liabilities
of the Company in the process of winding up, including, without limitation,
debts and liabilities to Members who are creditors of the Company, have been
paid or adequately provided for, the remaining Property shall be distributed
to the Members in accordance with their positive Capital Account balances,
after taking into account Profit and Loss allocations for the Company's
taxable year during which liquidation occurs. Such liquidating distributions
shall be made by the end of the Company's taxable year in which the Company
is liquidated, or if later, within ninety (90) days after the date of such
liquidation.
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15.5.2 The payment of a debt or liability, whether the
whereabouts of the creditor is known or unknown, has been adequately provided
for if the payment has been provided for by either of the following means:
(i) Payment thereof has been assumed or guaranteed
in good faith by one or more financially responsible persons or by the United
States government or any agency thereof, and the provision, including the
financial responsibility of the Person, was determined in good faith and with
reasonable care by the Members or Managers to be adequate at the time of any
distribution of the assets pursuant to this Section.
(ii) The amount of the debt or liability has been
deposited as provided in the Act.
15.5.3 In the event the Company is "liquidated" within the
meaning of Treasury Regulations Section 1.704-1(b)(2)(ii)(g), Distributions
shall be made pursuant to this Section 15 to those Members who have positive
Capital Account balances in compliance with Treasury Regulations Section
1.704-1(b)(2)(ii)(b)(2). If any Member has a deficit balance in his/her/its
Capital Account (after giving effect to all contributions, distributions and
allocations for all Fiscal Years including the Fiscal Year during which such
liquidation occurs), such Member shall have no obligation to make any
contribution to the capital of the Company with respect to such deficit, and
such deficit shall not be considered a debt owed to the Company or to any
other Person for any purpose whatsoever.
This Section 15.5 shall not prescribe the exclusive means of making
adequate provision for debts and liabilities.
15.6 COMPLIANCE WITH REGULATIONS. All payments to the Members upon
the winding up and dissolution of the Company shall be strictly in accordance
with the positive capital account balance limitation and other requirements
of Regulations Section 1.704-1(b)(2)(ii)(d).
15.7 LIMITATIONS ON PAYMENTS MADE IN DISSOLUTION. Except as otherwise
specifically provided in this Agreement, each Member shall only be entitled
to look solely at the assets of the Company for the return of his/her/its
positive Capital Account balance and shall have no recourse for his/her/its
Capital Contributions and/or share of Profits (upon dissolution or otherwise)
against the Managers or any other Member except as provided in Article 7.
15.8 CERTIFICATE OF CANCELLATION. The Manager or Members who filed
the Certificate of Dissolution shall cause to be filed in the office of, and
on a form prescribed by, the Delaware Secretary of State, a certificate of
cancellation of the Articles upon the completion of the winding up of the
affairs of the Company.
15.9 NO ACTION FOR DISSOLUTION. Except as expressly permitted in this
Agreement, a Member shall not take any voluntary action that directly causes
a Dissolution Event. The Members acknowledge that irreparable damage would
be done to the goodwill and reputation of the Company if any Member should
bring an action in court to dissolve the Company under circumstances where
dissolution is not required by Section 15.1. This Agreement has been drawn
carefully to provide fair treatment of all parties and equitable payment in
liquidation of the Membership Interests. Accordingly, except where the
Managers have failed to liquidate the Company as required by this Article 15,
each Member hereby waives and renounces his/her/its right to initiate legal
action to seek the appointment of a receive or trustee to liquidate the
Company or to seek a decree of judicial dissolution of the Company on the
ground that: (a) it is not reasonably practicable to carry on the business
of the Company in conformity with the Articles or this Agreement; or (b)
dissolution is reasonably necessary for the protection of the rights or
interests of the complaining Member. Damages for breach of this Section 15.9
shall be monetary damages only (and not specific performance), and the
damages may be offset against distributions by the Company to which such
Member would otherwise be entitled.
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ARTICLE 16
INDEMNIFICATION AND INSURANCE
16.1 INDEMNIFICATION OF AGENTS. The Company shall indemnify any
Person who was or is a party or is threatened to be made a party to any
threatened, pending or completed action, suit or proceeding by reason of the
fact that he or she is or was a Member, Manager, employee or other agent of
the Company or that, being or having been such a Member, Manager, employee or
agent, he or she is or was serving at the request of the Company as a
Manager, director, employee or other agent of another limited liability
company, corporation, partnership, joint venture, trust or other enterprise
(all such persons being referred to herein as an "agent"), to the fullest
extent permitted by applicable law in effect on the date hereof and to such
grater extent as applicable law may hereafter from time to time permit,
except in those instances involving fraud, intentional misconduct or gross
negligence of the Person seeking indemnification. The Managers shall be
authorized, on behalf of the Company, to enter into indemnity agreements from
time to time with any Person entitled to be indemnified by the Company
hereunder, upon such terms and conditions as the Managers deem appropriate in
its business judgment.
16.2 INSURANCE. The Company shall have the power to purchase and
maintain insurance on behalf of any Person who is or was an agent of the
Company against any liability asserted against such Person and incurred by
such Person in any such capacity, or arising out of such Person's status as
an agent, whether or not the Company would have the power to indemnify such
Person against such liability under the provisions of Section 16.1 or under
applicable law.
ARTICLE 17
MISCELLANEOUS
17.1 COUNTERPARTS. This Agreement may be executed in several
counterparts, and all so executed shall constitute one Agreement, binding on
all parties hereto, notwithstanding that all of the parties are not
signatories to the original or the same counterpart.
17.2 CAPACITY TO SIGN. All Members covenant that they possess all
necessary capacity and authority to sign and enter this Agreement. All
individuals signing this Agreement for a Member who is a corporation, a
partnership, or other legal entity, or signing under a power of attorney or
as a trustee, guardian, conservator, or in any other legal capacity, covenant
that they have the necessary capacity and authority to act for, sign, and
bind the respective entity or principal on whose behalf they are signing.
17.3 ENTIRE AGREEMENT. This Agreement, which includes the Exhibits,
contains all representations and the entire understanding and agreement among
the parties. Correspondence, memorandums, and oral or written agreements
that originated before the date of the Agreement are replaced in total by the
Agreement unless otherwise expressly stated in the Agreement.
17.4 BINDING EFFECT. Subject to the restrictions on transferability
contained in this Agreement, the terms and provisions of this Agreement shall
be binding upon and shall inure to the benefit of the heirs, executors,
administrators, successors and assigns of the respective Members.
17.5 SEVERANCE. In the event any sentence or Section of this
Agreement is declared by a court of competent jurisdiction to be void,
illegal or unenforceable, such sentence or Section shall be deemed severed
from the remainder of the Agreement and the balance of the Agreement shall
remain in full force and effect.
17.6 NOTICES. Any tender, delivery, notice, demand or other
communication ("Notice") required or permitted under this Agreement shall be
in writing, and shall be personally delivered, sent by registered or
certified mail, postage prepaid, return receipt requested, overnight mailed,
or delivered or sent by facsimile and shall be deemed delivered, given and
received upon the earlier of: (a) if personally served, the date of
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delivery to the person to receive such notice; (b) if given by telecopier or
facsimile when sent, provided confirmation of the receipt of the transmission
is received and a hard copy of the notice is sent by United States Mail,
postage prepaid, as of the date of the transmission of the telecopier or the
facsimile; (c) if mailed, upon actual receipt; or (d) if sent by Federal
Express or other comparable overnight delivery service, within one (1)
business day after mailing, to the addresses shown on Schedule "1" attached
hereto and incorporated herein by reference. Any party may change the
address specified in this section by giving the other party notice of such
new address in the manner set forth herein.
17.7 HEADINGS. Section titles or captions contained in this Agreement
are inserted only as a matter of convenience and for reference. Such titles
and captions in no way define, limit, extend or describe the scope of this
Agreement nor the intent of any provision hereof.
17.8 GOVERNING LAW. Notwithstanding the place where this Agreement
may be executed by any of the parties hereto, the parties expressly agree
that all the terms and provisions hereof shall be construed under the laws of
the State of Delaware.
17.9 ADDITIONAL DOCUMENTS. Each Member, upon the request of a
Manager, agrees to perform any further acts and to execute and deliver any
documents which may be reasonably necessary or expedient to carry out the
provisions of this Agreement.
17.10 ARBITRATION. In the event of any dispute between the Members or
Managers concerning this Agreement, the interpretation hereof, and/or the
subject matter hereof, the parties shall submit the controversy in question
to arbitration in Maricopa County, Arizona, judgment upon the award rendered
may be entered in any court having jurisdiction thereof. Except as
specifically provided herein, the arbitration shall proceed in accordance
with the laws governing arbitration in the State of Arizona. The party
requesting arbitration shall give a written demand for arbitration to the
other party by registered or certified mail. The demand shall set forth a
statement of the nature of the dispute, the amount involved and the remedies
sought. No later than twenty (20) calendar days after the demand for
arbitration is served, the parties shall jointly select and appoint a retired
judge of the Maricopa County Superior Court to act as the arbitrator. In the
event the parties do not agree on the selection of an arbitrator, the party
seeking arbitration shall apply to the Maricopa County Superior Court for the
appointment of a retired judge of that court to serve as arbitrator. No
later than ten (10) calendar days after the arbitrator is appointed, the
arbitrator shall schedule the arbitration for a hearing to commence on a
mutually convenient date. The hearing shall commence no later than one
hundred twenty (120) calendar days after the arbitrator is appointed and
shall continue from day to day until completed. All discovery shall be
completed no later than the commencement of the arbitration hearing or one
hundred twenty (120) calendar days after the date that a proper demand for
arbitration is served, whichever occurs earlier, unless upon a showing of
good cause the arbitrator extends or shortens that period. The arbitrator
shall issue his or her award in writing no later than twenty (20) calendar
days after the conclusion of the hearing. The arbitration award shall be
final and binding regardless of whether one of the parties fails or refuses
to participate in the arbitration. The arbitrator is empowered to hear all
disputes between the parties concerning the subject matter hereof, and the
arbitrator may award monetary damages, specific performance, injunctive
relief, rescission, restitution, costs and attorneys' fees. The results of
such arbitration shall be conclusive and binding.
17.11 ATTORNEYS' FEES. In any dispute between the Members, whether or
not resulting in litigation, the party substantially prevailing shall be
entitled to recover from the other party all reasonable costs, including,
without limitation, reasonable attorneys' fees.
17.12 LEGAL REPRESENTATION. This Agreement was prepared by Xxxxxx,
Xxxxx and Xxxx, counsel to the Company. Xxxxxx, Xxxxx and Xxxx is also
counsel to Legacy and certain of the Legacy Affiliates. Any Manager may
execute on behalf of the Company and the Members any consent to the
representation of the Company that Xxxxxx, Xxxxx and Xxxx may request
pursuant to the California Rules of Professional Conduct or similar rules in
any other jurisdiction ("Rules"). CV hereby acknowledges that Xxxxxx, Xxxxx
and Xxxx does
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not represent it in connection with this Agreement and further acknowledges
that it has consulted with its own independent legal counsel concerning their
rights, duties and obligations under this Agreement. CV further acknowledges
that it has not relied upon Xxxxxx, Xxxxx and Xxxx to represent it in
connection with this Agreement and that Xxxxxx, Xxxxx and Xxxx shall owe no
duties directly to CV. In the event any dispute or controversy arises between
CV and the Company, Xxxxxx, Xxxxx and Xxxx may represent either the Company
or Legacy (or any Legacy Affiliates), or both, in any such dispute or
controversy to the extent permitted by the Rules, and each Member hereby
consents to such representation.
17.13 NO WAIVER. The failure of a Member to insist on the strict
performance of any covenant or duty required by this Agreement or to pursue
any remedy under the Agreement, shall not constitute a waiver of the breach
or the remedy.
17.14 REMEDIES CUMULATIVE. The remedies of the Members under this
Agreement are cumulative and shall not exclude any other remedies to which
the Member may be lawfully entitled.
17.15 EXHIBITS. This Agreement includes Exhibits "A" through "F,"
inclusive, which are attached hereto and incorporated herein by reference.
To the extent any of such Exhibits are not attached hereto as of the date
hereof, such Exhibits shall be subsequently prepared by the Member designated
thereon and the form and content thereof shall be subject to the approval by
the Majority Interest of the Members. Without limiting the foregoing, the
Members acknowledge and agree that, as of the date hereof, the final form of
the Management Agreement has not been approved by the Majority Interest of
the Members and Starship Management. Notwithstanding the foregoing, the
Members desire to enter into and execute this Agreement and all exhibits
attached hereto (other than the Management Agreement) as of the date hereof
and to finalize and enter into the Management Agreement subsequent to the
date hereof provided, however, the final form of the Management Agreement
shall be subject to the approval by the Majority Interest of the Members.
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Following the approval of any such Exhibit by the Majority Interest of the
Members pursuant hereto, the Managers are hereby authorized to attach such
Exhibit to this Agreement and such Exhibit shall thereafter become a part of
this Agreement as if the same were attached hereto as of the date of this
Agreement.
IN WITNESS WHEREOF, the parties hereto have executed this Operating
Agreement as of the day and year first set forth above.
CV:
CANYON VENTURES, LLC,
an Arizona limited liability company
By
----------------------------------------
Xxxxxxx X. Xxxx, Xx., Manager and Member
By
----------------------------------------
S. Xxxxxxx Xxxxxx, Manager and Member
LEGACY:
EXCEL LEGACY CORPORATION,
a Delaware corporation
By
----------------------------------------
Title
-------------------------------------
By
----------------------------------------
Title
-------------------------------------
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EXHIBIT "A"
LEGAL DESCRIPTION OF THE LEASED PREMISES
EXHIBIT "B"
ASSIGNMENT OF DEVELOPMENT PROPERTY
THIS ASSIGNMENT OF DEVELOPMENT PROPERTY ("Assignment"), is executed as
of the 8th day of October, 1998, by and between CANYON VENTURES, LLC, an
Arizona limited liability company ("CV"), XXXXXXX X. XXXX, XX., an individual
("Xxxx"), and S. XXXXXXX XXXXXX, an individual ("Xxxxxx"), on the one part
(collectively "Assignor"), and GRAND TUSAYAN, LLC, a Delaware limited
liability company, on the other part ("Assignee"), and is based upon the
following facts:
RECITALS
A. CV is a member of Assignee. Xxxx and Xxxxxx are Members of CV.
Assignee was formed pursuant to that certain Operating Agreement of Grand
Tusayan, LLC, a Delaware limited liability company, dated as of October 8,
1998 ("Operating Agreement"). Capitalized terms used herein without
definition shall have the meanings ascribed to such terms in the Operating
Agreement.
B. Pursuant to Section 3.1(a) of the Operating Agreement, Assignor
is required to execute and deliver to Assignee this Assignment concurrently
with the execution of the Operating Agreement by Assignor.
NOW, THEREFORE, for good and valuable consideration, the receipt of
which is hereby acknowledged, Assignor and Assignee hereby agree as follows:
1. ASSIGNMENT. Assignor hereby unconditionally assigns, transfers
and delivers to Assignee all of Assignor's right, title and interest in and
to all items constituting the Development Property, free and clear of any and
all liens, liabilities and encumbrances, and Assignee hereby accepts such
assignment.
2. DELIVERIES. Concurrently with the execution of this Assignment
by Assignor, Assignor hereby agrees to and shall deliver to Assignee
originals and copies of all documents, agreements, instruments, maps,
surveys, reports, studies and other items constituting the Development
Property, together with all amendments, substitutions and replacements
thereof.
3. FURTHER ASSURANCES. Assignor, upon the request of the Company,
agrees to perform any further acts and to execute and deliver any documents
which may be reasonably necessary or expedient to carry out the provisions of
this Assignment.
4. GOVERNING LAW. Notwithstanding the place where this Assignment
may be executed by any of the parties hereto, the parties expressly agree
that all the terms and provisions hereof shall be construed under the laws of
the State of Delaware.
5. ATTORNEYS' FEES. In any dispute between Assignor and Assignee,
whether or not resulting in litigation, the party substantially prevailing
shall be entitled to recover from the other party all reasonable costs,
including, without limitation, reasonable attorneys' fees.
6. SUCCESSORS AND ASSIGNS. The terms and provisions of this
Assignment shall be binding upon and shall inure to the benefit of the heirs,
executors, administrators, successors and assigns of Assignor and Assignee.
ASSIGNOR:
CV:
CANYON VENTURES, LLC,
an Arizona limited liability company
By
----------------------------------------
Xxxxxxx X. Xxxx, Xx., Manager and Member
By
----------------------------------------
S. Xxxxxxx Xxxxxx, Manager and Member
XXXX:
----------------------------------------
Xxxxxxx X. Xxxx, Xx.
XXXXXX:
----------------------------------------
S. Xxxxxxx Xxxxxx
ASSIGNEE:
GRAND TUSAYAN, LLC
a Delaware limited liability company
By
--------------------------------------------
Manager
EXHIBIT "C"
RECORDING REQUESTED BY
AND WHEN RECORDED MAIL TO:
Excel Legacy Corporation
00000 Xxx Xxx Xxxxx, Xxxxx 000
Xxx Xxxxx, Xxxxxxxxxx 00000
-------------------------------------------------------------------------------
ASSIGNMENT OF LEASE AGREEMENT
Tusayan, South Rim, Grand Canyon, Arizona
THIS ASSIGNMENT OF LEASE AGREEMENT ("Assignment") is executed this 8th
day of October, 1998, is made by and between EXCEL Legacy CORPORATION, a
Delaware corporation ("Assignor") and GRAND TUSAYAN, LLC, a Delaware limited
liability company ("Assignee"), both of whom shall sometimes collectively be
referred to herein as the "parties," with reference to the facts set forth
below.
RECITALS
A. Red Feather Properties Limited Partnership, an Arizona limited
partnership, as the lessor, and ERT Development Corporation, as the lessee,
are parties to that certain Lease Agreement, dated November 4, 1997, as
amended ("Lease"), with respect to that certain real property and
improvements thereon located in Coconino County, Arizona, the legal
description of which is set forth on Exhibit "A," attached hereto and
incorporated herein by reference (the "Property"). ERT Development
Corporation, a Delaware corporation, previously assigned all of its right,
title and interest in and to the Lease to Assignor pursuant to that certain
Assignment of Ground Lease, dated March 12, 1998, and recorded on March 30,
1998, as Instrument No. 98-09565, Official Records of Coconino County,
Arizona.
B. Assignee was formed pursuant to that certain Operating Agreement
of Grand Tusayan, LLC, a Delaware limited liability company, dated October 8,
1998, as amended ("Operating Agreement"). Assignor is a member of Assignee.
C. As a part of Assignor's original capital contribution to
Assignee, pursuant to the Operating Agreement, Assignor is required to
assign, transfer and convey to Assignee all of Assignor's right, title and
interest in and to the Lease.
NOW, THEREFORE, for good and valuable consideration, the receipt and
sufficiency of which are hereby acknowledged, the parties agree as set forth
below.
1. ASSIGNMENT OF LEASE. Assignor hereby assigns and transfer to
Assignee, without representation or warranty, all of its right, title and
interest in and to the Lease and tenancy in existence with respect to the
Property, together with all of Assignor's right, title and interest in and to
all deposits, prepayments and similar amounts paid by ERT Development
Corporation and/or Assignor pursuant to the Lease.
2. ACCEPTANCE OF ASSIGNMENT. Assignee hereby accepts the assignment
of the Lease and agrees to assume all Assignor's obligations under the Lease
accruing from and after the date of this Assignment.
3. INDEMNIFICATION BY ASSIGNOR. Assignor hereby agrees to
indemnify, defend and hold harmless Assignee from and against any and all
claims, demands, liabilities, causes of action, losses, damages, costs, fees
and expenses (including, without limitation, reasonable attorneys' fees),
arising out of or relating to the breach by Assignor of any of the duties,
liabilities and obligations of Assignor pursuant to the Lease, which duties,
liabilities and obligations arise or accrue prior to the date of this
Agreement.
4. INDEMNIFICATION BY ASSIGNEE. Assignee hereby agrees to
indemnify, defend and hold harmless Assignor from and against any and all
claims, demands, liabilities, causes of action, losses, damages, costs, fees
and expenses (including, without limitation, reasonable attorneys' fees),
arising out of or relating to the breach by Assignee of any of the duties,
liabilities and obligations of Assignee (in its capacity as Lessee under the
Lease), pursuant to the Lease, which duties, liabilities and obligations
accrue subsequent to the date of this Agreement.
5. SUCCESSORS AND ASSIGNS. This Assignment shall be binding upon
and inure to the benefit of the successors, assigns, personal
representatives, heirs and legatees of the respective parties hereto.
6. GOVERNING LAW. This Assignment shall be construed under and
enforced in accordance with the laws of the State of Delaware.
7. COUNTERPARTS. This Assignment may be executed in several
counterparts, all of which shall constitute one agreement binding on all of
the parties hereto, notwithstanding that all of the parties are not
signatories to the original or same counterpart.
IN WITNESS WHEREOF, the parties hereto have executed this Assignment as
of the date set forth above.
ASSIGNOR:
EXCEL Legacy CORPORATION,
a Delaware corporation
By
-----------------------------------
Title
--------------------------------
ASSIGNEE:
GRAND TUSAYAN, LLC, a Delaware
limited liability company
By
-----------------------------------
Title
--------------------------------
THE FOREGOING ASSIGNMENT OF LEASE AGREEMENT IS ACCEPTED AND APPROVED THIS 8TH
DAY OF OCTOBER, 1998. EDV AND LEGACY ARE HEREBY RELEASED AND DISCHARGED FROM
ANY AND ALL LIABILITIES OR OBLIGATIONS THAT ARISE OR ACCRUE UNDER THE LEASE
SUBSEQUENT TO THE EFFECTIVE DATE OF THIS ASSIGNMENT.
RED FEATHER PROPERTIES LIMITED PARTNERSHIP,
an Arizona limited partnership
By: RED FEATHER, INC., an Arizona
corporation, General Partner
By
--------------------------------
Xxxxxx Xxxxxxx, President
STATE OF )
) ss.
COUNTY OF )
On __________________, 1998, before me, _____________________________,
the undersigned Notary Public in and for the said County and State,
personally appeared Xxxxxxx X. Xxxx, Xx., personally known to me (or proved
to me on the basis of satisfactory evidence) to be the person whose name is
subscribed to the within instrument and acknowledged to me that he executed
the same in his authorized capacity, and that by his signature on the
instrument the person, or entity upon behalf of which the person acted,
executed the instrument.
WITNESS my hand and official seal.
--------------------------------
(Signature)
(Seal)
STATE OF )
) ss.
COUNTY OF )
On __________________, 1998, before me, _____________________________,
the undersigned Notary Public in and for the said County and State,
personally appeared S. Xxxxxxx Xxxxxx, personally known to me (or proved to
me on the basis of satisfactory evidence) to be the person whose name is
subscribed to the within instrument and acknowledged to me that he executed
the same in his authorized capacity, and that by his signature on the
instrument the person, or entity upon behalf of which the person acted,
executed the instrument.
WITNESS my hand and official seal.
--------------------------------
(Signature)
(Seal)
STATE OF )
) ss.
COUNTY OF )
On __________________, 1998, before me, _____________________________,
the undersigned Notary Public in and for the said County and State,
personally appeared ______________ ____________________, personally known to
me (or proved to me on the basis of satisfactory evidence) to be the person
whose name is subscribed to the within instrument and acknowledged to me that
he executed the same in his authorized capacity, and that by his signature on
the instrument the person, or entity upon behalf of which the person acted,
executed the instrument.
WITNESS my hand and official seal.
--------------------------------
(Signature)
(Seal)
STATE OF )
) ss.
COUNTY OF )
On __________________, 1998, before me, _____________________________,
the undersigned Notary Public in and for the said County and State,
personally appeared ______________ ____________________, personally known to
me (or proved to me on the basis of satisfactory evidence) to be the person
whose name is subscribed to the within instrument and acknowledged to me that
he executed the same in his authorized capacity, and that by his signature on
the instrument the person, or entity upon behalf of which the person acted,
executed the instrument.
WITNESS my hand and official seal.
--------------------------------
(Signature)
(Seal)
EXHIBIT "A"
TO ASSIGNMENT OF LEASE AGREEMENT
LEGAL DESCRIPTION OF THE LEASED PREMISES
EXHIBIT "D"
DEVELOPMENT PLAN AND BUDGET
[To be prepared by CV]
EXHIBIT "E"
OPERATING PLAN AND BUDGET
[To be prepared by CV]
EXHIBIT "F"
MANAGEMENT AGREEMENT
[To be attached]
SCHEDULE "1"
NAMES, CAPITAL CONTRIBUTIONS
PERCENTAGE INTERESTS AND ADDRESSES OF MEMBERS
Members Original Capital Contribution Percentage Interests
------- ----------------------------- --------------------
CV $ 350,000.00 35%
Legacy $2,000,910.00 65%
together with all Formation Costs
ADDRESSES:
CV
000 Xxxx Xxxxxxxx Xxxxxx, Xxxxx 000
Xxxxx, Xxxxxxx 00000
Telephone: (000) 000-0000
Fax: (000) 000-0000
LEGACY
00000 Xxx Xxx Xxxxx, Xxxxx 000
Xxx Xxxxx, Xxxxxxxxxx 00000
Telephone: (000) 000-0000
Fax: (000) 000-0000
FIRST AMENDMENT TO
OPERATING AGREEMENT OF
GRAND TUSAYAN, LLC,
a Delaware Limited Liability Company
THIS FIRST AMENDMENT TO OPERATING AGREEMENT OF GRAND TUSAYAN, LLC, a
Delaware limited liability company ("First Amendment"), is entered into this
20th day of October, 1998, by and between CANYON VENTURES, LLC, an Arizona
limited liability company ("CV"), and EXCEL LEGACY CORPORATION, a Delaware
corporation ("Legacy"), and constitutes an amendment to that certain
Operating Agreement of Grand Tusayan, LLC, a Delaware limited liability
company, dated October 8, 1998 ("Operating Agreement"). Capitalized terms
used in this First Amendment without definition shall have the meanings
ascribed to such terms in the Operating Agreement.
1. Section 9.2.17 of the Operating Agreement is hereby deleted in its
entirety and the following substituted in lieu thereof:
9.2.17 During the Development Stage, cause
the Company to incur any expenditures other than those
expressly authorized within the Development Plan and
Budget. Notwithstanding the foregoing, the Managers
may exceed the line item amount allocable to any such
expenditure as set forth in the Development Plan and
Budget without the approval by the Majority Interest of
the Members, provided the following conditions are
satisfied: (a) such expenditure does not exceed the
applicable line item by more than two percent (2%); (b)
the Managers have recognized cost savings in other
categories of the Development Plan and Budget of equal
or greater amounts thereby resulting in no net overall
increase in the Development Plan and Budget; and (c)
any such expenditure or cost savings which results in a
change in the Development Plan and Budget will require
the approval by the Majority Interest of the Members
pursuant to this Section 9.2.
During the Operations Stage, cause the Company
to incur any expenditures other than those expressly
authorized within the Operating Plan and Budget.
Notwithstanding the foregoing, the Managers may exceed
the line item amount allocable to any such expenditure
as set forth in the Operating Plan and Budget without
the approval by the Majority Interest of the Members
under the following circumstances: (A) with respect to
the overnight accommodations of the Hotel, the excess
expenditure is properly characterized as a variable
expense pursuant to the Operating Plan and Budget, and
such excess expenditure is necessary directly as a
result of: (i) an increase in the occupancy level of
the Hotel; and/or (ii) an increase in the average daily
rate of the rooms in the Hotel, in either case in
excess of the levels set forth in the Operating Plan
and Budget; provided, however, such excess expenditure,
when combined with all other excess expenditures during
the applicable time period, do not result in a decrease
in the projected net profit (EBIDTA) for the Hotel as
set forth in the Operating Plan and Budget; or (B) with
respect to the food and beverage and/or retail
operations of the Hotel, the excess expenditure is
properly characterized as a variable expense pursuant
to the Operating Plan and Budget, and such excess
expenditure is necessary directly as a result of: (i)
an increase in the occupancy level of the Hotel; and/or
(ii) an increase in the banquets and other special
events held at the Hotel, in either case in excess of
the levels set forth in the Operating Plan and Budget;
provided, however, such excess
-1-
expenditure, when combined with all other excess
expenditures during the applicable time period, do not
result in a decrease in the projected net profit
(EBIDTA) for the Hotel as set forth in the Operating
Plan and Budget.
2. All references to the "Agreement" in the Operating Agreement shall
mean the Operating Agreement, as amended by this First Amendment.
3. Except as otherwise set forth in this First Amendment, all other
terms and conditions of the Operating Agreement shall remain in full force
and effect.
4. This First Amendment may be executed in counterparts, each of which
shall be deemed an original, and all of which when taken together shall
constitute one and the same document.
IN WITNESS WHEREOF, the parties have executed this First Amendment as of
the date first above written.
CV:
CANYON VENTURES, LLC,
an Arizona limited liability company
By
----------------------------------------
Xxxxxxx X. Xxxx, Xx., Manager and Member
By
----------------------------------------
S. Xxxxxxx Xxxxxx, Manager and Member
LEGACY:
EXCEL LEGACY CORPORATION,
a Delaware corporation
By
----------------------------------------
Title
-------------------------------------
By
----------------------------------------
Title
-------------------------------------
-2-
