Exhibit 10 (j)
OPERATING AGREEMENT
OF
GROVE SPA, LLC
A DELAWARE LIMITED LIABILITY COMPANY
THIS OPERATING AGREEMENT (the "Agreement") is made and entered into as
of September 15, 2004, ("effective date") by and between NOBLE HOUSE ASSOCIATES,
LLC, a Delaware limited liability company (hereinafter "NHA") and CII SPA, LLC,
a Delaware limited liability company, (hereinafter "CII").
NHA and CII are the sole members, and they are sometimes herein
referred to separately as a "Member" and collectively as the "Members".
NOW, THEREFORE, for good and valuable consideration, receipt of which
is hereby acknowledged, and the mutual promises contained herein, the parties,
intending to be legally bound hereby, agree as follows:
RECITALS
A. NHA and CII intend to enter into a sublease (the "Lease") for a certain tract
of improved real property and improvements and associated intangible rights
located in Miami, Dade County, Florida more particularly described on Exhibit A
attached hereto (the "Spa Property"). The Spa Property is a portion of a larger
parcel of real estate in which affiliates of the Members hold a fee and/or
leasehold interest (the "Primary Lease"). The Members have formed a limited
liability company to sub-lease the Spa Property.
B. The Members intend to develop and operate on the Spa Property a commercial
project consisting of a first class spa, together with related improvements and
amenities (collectively, the "Spa Improvement Project").
ARTICLE I
FORMATION, PURPOSES, DURATION
Section 1.1 Formation and Name.
1.1.1 Formation. The Members have formed a limited liability company
(the "Company" or "GS" pursuant to Delaware Statutes (the "Act"), by
filing a Certificate of Formation with the Delaware Department of
State, for the limited purposes and scope set forth in this Agreement.
The Company shall at all times be governed by the Act, except to the
extent expressly provided herein to the contrary. Before conducting
business in any jurisdiction, the members shall cause the Company to
comply to the fullest extent possible under the laws of such
jurisdiction with all requirements for the qualification or formation
of the Company to conduct business as a limited liability company in
such jurisdiction.
1.1.2 Name. The name of the Company shall be "Grove Spa LLC, a Delaware
limited liability company". Except as may be approved by the Members,
the business of the Company shall be conducted solely under such name
and all assets of the Company shall be held under such name.
Section 1.2 Purposes and Scope of the Company. The limited purposes of the
Company are: (a) to enter into the Lease to lease the Spa Property and related
assets; (b) to obtain entitlements, permits, develop, construct, own, manage,
operate, lease, sublease, maintain, and improve the Spa Property; (c) to
encumber, exchange, transfer or otherwise dispose of the Spa Property or any
part thereof or interest therein; (d) to borrow money for the operation of the
Company's business, in accordance with the terms hereof, whether unsecured or
secured by the Spa Property including, without limitation, refinancing any
borrowings outstanding from time to time; and (e) to engage in such activities
as are reasonably incidental to the foregoing with respect to the Spa Property.
The Company shall not engage in any business or activity unrelated to the Spa
Improvement Project.
Section 1.3 Other Business; Non-Compete. During the term of this Agreement, the
Members and their affiliates shall not, directly or indirectly, independently or
with others, engage in or possess an interest in any other business venture
engaged or participating in a spa project using the name "Spa Terre" that is
located south of Bal Harbour, Florida in Miami-Dade County.
Section 1.4 Scope of Members' Authority. Except as otherwise expressly and
specifically provided in this Agreement, no Member shall have authority to bind
or act for, or assume any obligation or responsibility on behalf of the other
Member. Neither the Company nor any Member shall, by virtue of executing this
Agreement, be responsible or liable for any indebtedness or obligation of any
other Member or otherwise relating to the Spa Property incurred or arising
either before or after the execution of this Agreement, except as to those joint
responsibilities, liabilities, indebtedness, or obligations expressly assumed by
the Company as of the date hereof or incurred after the date hereof pursuant to
and as limited by the terms of this Agreement. Nothing herein contained shall be
considered to constitute any Member as the agent of any other Member, except as
specifically authorized and provided for herein.
Section 1.5 Principal Place of Business. The principal office and principal
place of business of the Company shall be located at Four Grove Isle Drive,
Miami, Florida, or at such other location as may be approved by the Members from
time to time.
Section 1.6 Term. The term of this Agreement shall be co-extensive with the
period of duration of the Company as provided in the Certificate of Formation,
unless extended or earlier terminated in accordance with this Agreement. No
Member shall have the right and each Member hereby agrees not to withdraw from
the Company or to dissolve, terminate or liquidate, or to petition a court for
the dissolution, termination or liquidation of the Company, except as expressly
permitted in this Agreement, approved by the Members or otherwise required by
law, and no Member at any time shall have the right to petition or to take any
action to subject the Spa Property or the Company assets to the authority of any
bankruptcy, insolvency, receivership or similar
proceeding. The Members irrevocably waive any right that they may have to
maintain any action for partition with respect to any asset of the Company.
Section 1 .7 Agent for Service of Process and Tax Matters Partner.
(a) The name and address of the registered agent for
service of process on the Company shall be set forth
in the Certificate of Formation of the Company.
(b) The name and address of the Tax Matters Partner of
the Company shall be: Noble House Associates, LLC,
▇▇▇ ▇▇▇▇▇▇▇▇ ▇▇▇, ▇▇▇▇▇▇▇▇, ▇▇▇▇▇▇▇▇▇▇ ▇▇▇▇▇.
Section 1.8 Closing Costs. Each Member shall be responsible for such Member's
actual out-of-pocket costs and expenses incurred in connection with the
formation of the Company, including, without limitation, attorneys' fees and
expenses, and all costs and expenses paid by the Company must be approved by
both Members.
Section 1.9 Designation. Each Member shall, promptly after the execution of this
Agreement, designate two (2) persons who are and shall be duly authorized to
represent, act on behalf of, and bind such Member in connection with any and all
approvals and acts of any nature whatsoever required hereunder, any and all
decisions to be made, and any and all actions to be taken hereunder. Such Member
may terminate any such appointment and the authority of any such representative
at any time by notifying the other Member in writing to that effect, but at the
same time as such notice is given, the Member giving such notice shall also
appoint and designate a representative to take the place of the representative
whose authority is then terminated. A Member may, at any time it elects to do
so, designate in the same manner additional representatives who are authorized
to act on behalf of and bind such Member, but each corporate Member expressly
agrees that it will at all times during the term of this Agreement have at least
two (2) representatives who are duly authorized to represent it as above
provided. Both Members, or their duly authorized representatives, may appoint
such committees in connection with the operation of the Company as they may deem
necessary or desirable from time to time, and establish procedures for meeting,
obtaining approvals, and making decisions that are consistent with the terms and
provisions of this Agreement. ▇▇▇▇▇▇▇ ▇▇▇▇▇▇ and ▇▇▇▇▇▇▇▇ ▇▇▇▇▇▇▇▇▇ are
appointed and designated to act for CII. ▇▇▇▇▇▇▇ ▇▇▇▇▇ and ▇▇▇▇ ▇. ▇▇▇▇▇▇▇▇ are
appointed and designated to act for NHA. Notwithstanding the number of
representatives appointed by each Member, the consent of only one representative
of each Member is necessary to conduct the business of the Company.
Section 1.l0 Approvals. Whenever either Member is requested in writing by the
other Member to evidence its approval of or agreement to any decision or action
of any nature whatsoever that requires unanimous consent of the Members
hereunder, such request shall be made to the designated representatives set
forth in Section 1.9 above, and the Member to whom such request has been made
shall respond in writing to such request for approval, action, or agreement with
reasonable promptness. The Member to whom the request is made shall advise the
requesting Member of its approval or its reasons for withholding the same. For
the purposes of this Subsection, reasonable
promptness shall mean ten (10) business days for decisions on all matters. The
failure of a Member to respond within the applicable time period shall
constitute a ratification and approval by a Member.
Section 1.11 Retirement, Death, Incompetency, or Bankruptcy of a Member. No
Member may voluntarily withdraw from the Company. Except as otherwise provided
in this Agreement, the death, retirement, incompetency or bankruptcy of one or
more of the Members shall not dissolve or terminate the Company and the business
of the Company shall be continued thereafter by and for the benefit of the
remaining Member(s).
Section 1.12 The Members. The Members of the Company shall be CII, whose
principal place of business is ▇▇▇▇ ▇▇▇▇▇ ▇▇▇▇▇▇▇▇ ▇▇▇▇▇, ▇▇▇▇▇▇▇ ▇▇▇▇▇, ▇▇
▇▇▇▇▇, and NHA, whose principal place of business is ▇▇▇ ▇▇▇▇▇▇▇▇ ▇▇▇, ▇▇▇▇▇▇▇▇,
▇▇▇▇▇▇▇▇▇▇ ▇▇▇▇▇.
ARTICLE II
CAPITAL CONTRIBUTIONS OF MEMBERS
Section 2.1 Initial Capital Contributions.
2.1.1 Initial Capital Contribution by NHA. NHA has contributed to the
Company an initial cash capital contribution with an aggregate value of
Five Hundred Thousand Dollars and 00/100 Dollars ($500,000.00).
2.1.2 Initial Capital Contribution by CII. CII has contributed to the
Company an initial cash capital contribution with an aggregate value of
Five Hundred Thousand Dollars ($500,000).
2.1.3 Borrowings. The Members shall, to the extent possible, borrow the
cash needed for the construction, development and operations of the
Company from third parties upon such terms and conditions as the
Members, in their sole discretion, deem necessary or appropriate.
Section 2.2 Additional Capital Requirements.
2.2.1 General. If additional funds are required by the Company in
excess of (i) the initial capital contributions under Section 2.1 ,
(ii) the proceeds from financing the Spa Improvement Project, and (iii)
any other proceeds received by the Company, either Member may give
notice to the other Member in the manner provided in Section 12.2. Such
notice shall specify in reasonable detail the amount and purpose of any
such additional capital requirement (the amount of any such inadequacy
is hereinafter referred to as a "Shortfall"). The Members shall
thereafter meet as soon as reasonably practicable and shall determine,
by unanimous consent, the method or methods by which the Company shall
obtain the required funds insuring compliance with any applicable
lender requirements. Such methods may include, without limitation, the
making of additional capital contributions by the Members, or the
borrowing of funds by the Company from the Members or from third-party
lenders.
2.2.2 Additional Capital Contributions. If the Members decide to fund
the Shortfall through additional capital contributions, each Member
shall, within twenty (20) days thereafter, deliver for deposit in the
Company's bank account an additional cash capital contribution in an
amount equal to its share of the Shortfall, determined according to the
Percentage Interests of the Members and the capital accounts of the
Members shall be credited and the obligations for which funds were
required shall be satisfied.
2.2.3 No Third Party Rights. The right of the Company to require any
additional contributions or payments by the Members under the terms of
this Agreement shall not be construed as conferring any rights or
benefits to or upon any person or entity not a party to this Agreement,
including, but not limited to, any tenant or purchaser of any part of
the Spa Improvement Project or any creditor of the Company.
2.2.4 Contribution Loans. In the event any Member ("Non-Contributing
Member") fails to make any additional capital contribution required of
it pursuant to and within the time specified in this Agreement, the
other Member ("Contributing Member") shall have the right, but not the
obligation, to advance directly to the Company the funds required from
the Non-Contributing Member as a loan to the Non-Contributing Member
("Contribution Loan"). Each loan shall be evidenced by a promissory
note from the Non-Contributing Member in form reasonably satisfactory
to the Contributing Member with reasonable personal guarantee(s) and
reasonable collateral to secure payment, which collateral may include a
security interest in the Non-Contributing Member's Percentage Interest
in the Company.
2.2.5 Repayment through Distributions. In the event a Contributing
Member elects to make a Contribution Loan, then the Contribution Loan
shall bear interest at a rate equal to the lesser of (a) the Prime Rate
(as announced from time to time in the Wall Street Journal), plus two
and one-half percent (2 1/2%) per annum, or (b) the maximum legal rate
of interest then permitted and, except as set forth in Section 2.2.6,
shall be repaid out of any subsequent distributions made pursuant to
this Agreement to which the Non-Contributing Member for whose account
the Contribution Loan was made would otherwise be entitled, which
amounts shall be applied first to interest and then to principal, until
the Contribution Loan is paid in full. If not sooner repaid, all
Contribution Loans shall become immediately due and payable upon the
dissolution and liquidation of the Company.
2.2.6 Remedies. In the event any Contribution Loan has not been repaid
in full within ninety (90) days of the date the Contribution Loan is
made, then in addition to any other rights or remedies available to a
Contributing Member at law or in equity or pursuant to this Agreement,
at any time thereafter a Contributing Member may elect to proceed under
subparagraph (a), (b) or (c) below.
(a) Unless and until a Contributing Member has elected
to proceed under subparagraph (b) or (c) below or
has elected to pursue any other remedy available to
it at law or in equity, each Contribution Loan shall
remain in place and shall bear interest and be
repaid as provided in Section 2.2.5 above.
(b) Upon thirty (30) days prior written notice to the
Non-Contributing Member, a Contributing Member may
elect to reduce the Percentage Interest of the
Non-Contributing Member in the Company (a
"Dilution") by a Purchase Price calculated as
follows:
(1) a Contributing Member will treat its
Contribution Loan as a paid-in additional
capital contribution for credit to the
capital account of the Contributing Member.
(2) the Percentage Interest of each Member will
then be recalculated based on all the
capital contributed by all the Members to
determine an adjusted Percentage Interest
for each Member.
(3) By way of example, if a Non-Contributing
Member fails to repay a Five Hundred
Thousand ($500,000) Dollar loan from a
Contributing Member (which would be such
Non-Contributing Member's share of a One
Million ($1,000,000) Dollar capital call),
the Percentage Interests of the Members
shall be recalculated based on total capital
contribution by the Contributing Member of
One Million Five Hundred Thousand
($1,500,000) Dollars and the Contributing
Member's Percentage Interest shall be 75%
(.75) and the Non-Contributing Member 25%
(.25). See Schedule I attached hereto for a
tabular example of the above.
(4) the Purchase Price shall be equal to and
paid by a cancellation of the promissory
note.
(5) the notice required under this Section
2.2.6(b) shall state that the option to
purchase is thereby exercised, and
specifying the place in Miami, Florida, and
the time when such purchase shall be closed.
The notice shall be signed by the Member
sending the same, shall be sent by United
States registered or certified mail, postage
prepaid, to the address of the
Non-Contributing Member set forth in Section
12.2 below. The date of such notice shall be
the date the same is deposited in the mail.
The closing of said purchase shall be within
thirty (30) days after the date of such
notice at the time and place specified in
such notice.
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(c) A Contributing Member may elect to make
written demand upon the Non-Contributing
Member for payment in full of such
Contribution Loan, including accrued
interest. Upon failure of the
Non-Contributing Member to pay the
Contribution Loan and interest in full
within ten (10) days of such demand, the
Contributing Member may elect to treat such
failure to pay as an Event of Default under
Section 9.1 hereof, and may ▇▇▇ to collect
the promissory note.
Section 2.3 No Withdrawal of Capital; No Interest. Except as otherwise provided
herein, no portion of the capital of the Company may be withdrawn at any time
without the approval of both the Members. Upon termination of the Company, the
Members' capital shall be distributed pursuant to Section 9.4 hereof. No
interest shall be paid on the initial or on any subsequent capital contribution
made by any Member to the Company, except as otherwise mutually agreed upon by
all the Members as reflected by an amendment to this Agreement.
Section 2.4 Development Financing. It is the Members' intent that the Company
seek a credit facility (the "Development Financing Loan") secured by the Spa
Property or a portion thereof to fund one-half the cost of the Spa Improvement
Project. Such credit facility shall be for approximately One Million and 00/100
Dollars ($1,000,000.00) for construction financing. Upon acceptance of the
Project Development Budget Construction Plans and Development Contract
("Development Plan"), CII will use its best efforts to arrange or facilitate Spa
Improvement Project borrowings required to fulfill the Development Plan. If
required by the lender under the Development Financing Loan, each Member shall
deliver a pro rata guaranty, from a creditworthy guarantor, of repayment of such
Development Financing Loan to such lender, and the Members shall enter into a
contribution and indemnity agreement amongst themselves. , If the Development
Financing Loan is secured by a Permitted Mortgage (as defined in the Primary
Lease), then the holder of such Permitted Mortgage shall provide (i) a
Non-Disturbance Agreement (as defined in the Primary Lease) to Westgroup Grove
Isle Associates, Ltd. as contemplated by Section 13.3 of the Primary Lease, and
(ii) a non-disturbance agreement (similar to the type of Non-Disturbance
Agreement to be provided to Westgroup Grove Isle Associates, Ltd. to the
Company, provided that the Company's non-disturbance agreement shall be
conditioned upon there being no default under the Spa Lease and the Primary
Lease.
ARTICLE III
MANAGEMENT
Section 3.1 Powers and Responsibilities of and Limitations on the Members.
3.1.1 Management by Members. The Members acting together shall have
full and complete charge of all affairs of the Company. The management
and control of the Company's business shall rest with the Members
subject to the terms and conditions of
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this Agreement and the Spa Management Agreement, referenced in Section
3.13. The Members shall not be required to devote their full time to
the Company business. Each Member shall devote to the affairs of the
Company, through its officers and other personnel, whatever time shall
reasonably be necessary to operate and manage the assets of the
Company. Except as otherwise specifically provided generally in this
Agreement, and specifically in Section 1.3 herein, nothing in this
Agreement shall be deemed to restrict in any manner the right of either
Member to engage in any other business or activity whatsoever, even if
such business or activity competes with the business of the Company.
The Members shall possess all of the powers and rights of a Member
under the Act, and all actions taken by the Company shall require the
unanimous consent of the Members acting through their herein appointed
representative(s).
3.1.2 Deadlock. If at any time the Members reach an impasse on any
issue or decision and they are unable to resolve the issue or decide
upon an alternative course of action within three (3) days thereafter
(such state of affairs being hereafter referred to as a "Deadlock"),
either of such Members may declare that a Deadlock has occurred by
giving notice thereof to the other Member in the manner notices are to
be given under this Agreement, in which case the Members and their
respective advisors shall negotiate in good faith for a period of five
(5) days or such shorter or longer period as they are able to agree
upon. If after the end of such time period, the Deadlock is still not
resolved, the matter shall be resolved in accordance with the buy/sell
procedure described in Section 3.4.
3.1.3 Spa Management Agreement; Development Agreement. The Members
hereby authorize the Company to enter into the spa management agreement
(the "Spa Management Agreement"), attached hereto as Exhibit B, and the
development agreement (the "Development Agreement"), attached hereto as
Exhibit C, with an affiliate of NHA. In the event of a material default
of the terms of this Agreement by either party, including without
limitation, a failure to make a herein required capital contribution,
subject to the notice and cure provisions contained herein, then, the
non-defaulting Member shall have the right, in such non-defaulting
Member's sole and absolute discretion, to cancel the Spa Management
Agreement.
3.1.4 Development Plan; Annual Plan. The developer under the
Development Agreement shall prepare a proposed development plan for the
overall site plan covering such issues over such period of time as the
Members deem reasonably appropriate. Once approved by the Members, the
development plan shall thereafter be deemed to be the "Development
Plan" until amended as approved by the Members. The Members shall
review the Development Plan at least monthly and update it as needed or
as may be directed by the Members. In accordance with the Spa
Management Agreement, the manager acting thereunder shall prepare and
submit to the Members for their unanimous approval the following items
(collectively, the "Annual Plan") on an annual basis: (i) an operating
budget (the "Operating Budget") setting forth the
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estimated revenues and expenses of the Company (including, without
limitation, the estimated expenses of the Spa Improvement Project),
with a reserve for contingencies, (ii) a marketing plan, (iii) a
capital budget setting forth the proposed capital expenditures of the
Company relating to the development initiative, and sources of funds in
connection therewith, including the projected time for, and amount of,
any required additional capital contributions by the Members during the
period covered by such budget, (iv) a Development Plan, and following
the approval of the initial Development Plan, a monthly update of such
Development Plan including a description of milestone events or
conditions that affect the Company's ability to achieve its financial
objective and minimum sales and revenue projections, (v) such narrative
description as may be necessary to explain key elements of the Annual
Plan or Development Plan, and (vi) an analysis of the market in which
the Spa Improvement Project is located and competing projects. The
Annual Plan for each subsequent fiscal year of the Company shall be
submitted for the approval of CII not more than ninety (90) days and
not less than sixty (60) days prior to the first day of the fiscal year
covered thereby. References herein to the "Annual Plan" shall mean the
approved Annual Plan then in effect for the period then in question,
unless the reference expressly otherwise provides. The Members shall
review the proposed Annual Plan (including the initial Annual Plan
proposed pursuant to this Section) and either approve or disapprove it
within thirty (30) days after receipt thereof (in the latter event,
specifying its objections thereto). The Members shall thereupon meet
immediately to resolve any conflicts created by the Annual Plan.
3.1.5 Limitation on Liability; Indemnification by Company. Neither
Member shall be liable, responsible or accountable in damages or
otherwise to the Company for any act performed or failure to act by
such Member done or not done in good faith and within the scope of this
Agreement unless such act or failure to act is attributable to gross
negligence, willful misconduct, fraud or breach of fiduciary duty. The
Company shall, at its own cost and expense, indemnify, defend and hold
harmless the Members from and against any liabilities, obligations,
claims, demands, losses, damages, lawsuits or other proceedings,
judgments and awards, and costs and expenses (including but not limited
to, attorneys' fees and expenses) arising directly or indirectly, in
whole or in part, out of this Agreement or at law.
Section 3.3 Agreements with Affiliates. Except as provided herein, the Company
shall not enter into any agreement or other arrangement for the furnishing to or
by the Company of goods or services with itself or any individual, corporation,
company, joint venture, association, firm, joint stock company, trust,
unincorporated association or other entity (a "Person") that is a Member or
Affiliate of a Member unless such agreement or arrangement is approved by both
the Members. As used in this Agreement, an "Affiliate" of a Member shall mean
any of the following Persons:
(a) Any "Owning Person," which shall mean a Person owning directly or
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indirectly more than five percent (5%) of the issued and outstanding
stock of or more than a five percent (5%) beneficial interest in a
Member.
(b) Any "Owned Person," which shall mean a Person owning more than five
percent (5%) of the issued and outstanding stock of which or more than
a five percent (5%) beneficial interest in which is owned directly or
indirectly by a Member.
(c) Any "Affiliated Person," which shall mean (i) a Person owning more
than five percent (5%) of the issued and outstanding stock of which, or
more than a five percent (5%) beneficial interest in which, is owned by
an Owning Person or an Owned Person, and (ii) a Person which owns more
than five percent (5%) of the issued and outstanding stock of, or more
than a five percent (5%) beneficial interest in, any Owning Person or
any Owned Person.
(d) Any member of the family, agent, officer, director, employee or
partner (or any member of the family of any agent, officer, director,
employee or partner) of a Member, any Owning Person, any Owned Person
or any Affiliated Person.
(e) The Members acknowledge and approve the appointment of Noble House
Grove Isle, Ltd., an Affiliate of NHA, as the initial manager of the
Spa Improvement Project pursuant to the Spa Management Agreement and
Noble House Hotels and Resorts, Ltd. as the developer under the
Development Agreement.
Section 3.4 Buy/Sell
(a) From the date hereof pursuant to Section 7.2 and at any time after
the second anniversary of the effective date of this Agreement, either
Member (the "Proposer") may seek to acquire the entire Percentage
Interest of the other Member (the "Responder") by giving written notice
(the "Proposal Notice") to the Responder in accordance with the notice
provisions in Section 12.2. The Proposal Notice shall contain a firm
price (the "Proposal Price") for all cash above any company liabilities
other than the Development Financing Loan which will be discharged in
accordance with Section 3.4(d), to purchase all of the Company assets
subject to all the Company liabilities. The Responder shall have thirty
(30) days after the giving of the Proposal Notice in which to accept or
reject the Proposer's Offer, by counter-notice in writing. If the
Responder rejects the Proposer's Offer, the Responder shall be deemed
to have offered to purchase the Proposer's Percentage Interest for the
Proposer's Share (the "Proposer's Share") at the Proposal Price (and
the Proposer shall be deemed to have accepted such offer. If the
Responder fails to respond within thirty (30) days to the Proposer's
Offer, the Responder shall be deemed to have accepted the Proposer's
Offer.
(b) In the case of a Member that is a corporation, every offer or
acceptance provided by this Section shall be in writing, be fully
executed, and be
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accompanied by a copy of a resolution by the Board of Directors of the
offering or accepting corporate Member authorizing such act. Such copy
shall be certified to be true and correct by the secretary or an
assistant secretary of the corporate Member and by at least a majority
of the members of the Board of Directors of the corporate Member. A
Member receiving an offer or acceptance not conforming with these
formalities may elect to waive them.
(c) The Closing shall take place sixty (60) days after the giving of
the Proposer's Offer. The Closing shall be at the office of the
Proposer, at the hour and location designated in the written notice of
Proposer's Offer.
(d) At settlement:
i. The selling Member shall convey its interest in the Company
to the buying Member, by an assignment in the form attached
hereto as Exhibit B, and shall acknowledge that it is no
longer a Member of the Company and execute such other
documents as shall be appropriate in conjunction with its
withdrawal from the Company.
ii. The transfer shall be free and clear of any liens or
encumbrances as against the seller Member that are not liens
against either the Company or both Members. The proceeds of
the sale shall be applied to satisfy any liens or encumbrances
that are exclusively those of the selling Member. The buying
Member shall indemnify and hold the selling Member harmless
from all Company obligations, including attorneys' fees. The
buying Member shall indemnify, defend, and hold harmless the
selling Member from and against any and all claims, demands,
losses, damages, liabilities, lawsuits and other proceedings,
judgments and awards, and costs and expenses (including but
not limited to attorneys' fees and expenses) incurred in, or
arising directly or indirectly, in whole or in part, out of
operation of the business of the Company before the date of
such transfer. At closing, the seller Member will deliver to
the buying Member cash collateral in the amount of one-half of
the remaining outstanding balance on the Development Financing
Loan, and buying Member will deliver to selling Member a
complete release and waiver of any selling Member guaranty and
lien rights held by the lender under the Development Financing
Loan, or appropriate indemnity and hold harmless agreements
indemnifying selling Member from any obligations under the
Development Financing Loan.
iii. The purchase consideration shall at settlement be paid in
cash, or by a wire transfer to, cashier's check of, or
certified check of, a bank doing business in Miami, Florida.
iv. At Closing, the Company shall have the right, but not the
obligation to cancel the Spa Management Agreement and the
Development Agreement.
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(e) Any breach by a Member of an obligation arising under this Section
3.4 shall constitute an Event of Default under Section 9.1 of this
Agreement.
ARTICLE IV
BOOKS AND RECORDS; BANK ACCOUNTS; REPORTS
Section 4.1 Books and Records.
4.1.1 General. At all times during the term hereof, the manager under
the Spa Management Agreement, without additional fee, shall cause
accurate books and records of account to be maintained in which shall
be entered all matters relating to the Company, including all income,
expenditures, assets and liabilities.
4.1.2 Accrual Basis. Such books and records of account shall be
maintained on an accrual basis in accordance with generally accepted
accounting principles (unless another method is approved by the
Members) or tax accounting principles, as appropriate, and shall be
adequate to provide each Member with all financial and tax information
as may be needed by each Member or any Affiliate of each Member for
purposes of satisfying the financial and tax reporting obligations of
each Member or its Affiliates.
4.1.3 Information to Members. Each Member shall be entitled to any
additional information necessary for the Member to adjust its financial
basis statement to a tax basis as the Member's individual needs may
dictate.
Section 4.2 Location and Rights of Inspection.
4.2.1 Location. NHA, at the Company's expense, shall keep, or cause to
be kept, full and accurate records of all transactions of the Company,
at the principal place of business of the Company as specified in
Article I hereof.
4.2.2 Inspection of Records. Each Member or such Member's duly
authorized representative shall have the right, upon reasonable
request, to do each of the following:
(a) Inspect and copy, upon paying the reasonable cost thereof,
during normal business hours any of the Company records
required to be maintained under Section 4.1; and
(b) Obtain from NHA, promptly after their becoming available,
a copy of the Company's federal, state and local income tax or
information returns for each year.
NHA shall send to CII within ninety (90) days after the end of each tax
year the information necessary for CII to complete its federal and state income
tax or information returns, and a copy of the Company's federal, state and local
income tax or
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information returns for the year.
Section 4.3 Fiscal Year. The tax and fiscal year of the Company shall end on
December 31 of each year unless another fiscal year is required by the Internal
Revenue Code of 1986, as amended (the "Code") or the Treasury Regulations
("Regulations").
Section 4.4 Statements of Financial Condition. NHA shall prepare a balance sheet
and income statement of the Company as of the last day of each month and deliver
same to CII within twenty (20) days after the end of each year. Each balance
sheet and income statement shall be prepared in accordance with generally
accepted accounting principles and shall be certified to be true and correct to
the best of NHA's knowledge and belief. Copies shall be furnished to CII, an
annual income statement and an annual statement of cash flow (unaudited) shall
be furnished by NHA to CII within ninety (90) days after the close of the fiscal
year.
Section 4.5 Audit. The independent certified public accounting firm to audit the
records and render an opinion will be chosen at the first meeting of the
Members. The Company shall, at the Company's expense, engage the accounting firm
on an annual basis to perform an annual audit of Spa Improvement Project
finances. The accounting firm shall (a) audit the records and accounts of the
Company, (b) render their opinion on the statement of financial condition of the
Company as of the end of the last fiscal year through the latest month, and of
the results of its operations, the changes in its financial condition and its
income for each fiscal year and to date, as prepared by NHA, and (c) render
their opinion on the annual computations of cash flow for each fiscal year as to
whether distributions thereof are in accordance with this Agreement. The
accountants shall determine if the records were substantially correct.
Section 4.6 Bank Accounts. Funds of the Company shall be deposited in an account
or accounts of a type, in form and name and in a bank or banks approved by the
Members. Neither Member shall commingle the Company's funds with those of any
other person or employ or permit another to employ these funds or assets in any
manner except for the exclusive benefit of the Company (except to the extent
that funds are temporarily retained by agents of the Company).
Section 4.7 Development Reports. NHA shall prepare current schedules and
development status reports for the Spa Improvement Project for each calendar
month of each fiscal year, which reports shall contain sufficient information to
enable each Member to determine the status of the Spa Improvement Project,
including, without limitation, a narrative report on construction, expenditures,
any deviations or expected deviations from the project budget and the
construction schedule, status of permits, and other factors of significance to
the Company. Copies shall be furnished to CII within ten (10) business days
after the end of each calendar month.
Section 4.8 Information from Members. Each Member shall furnish to the Company
in a timely manner such information as the Company may require to comply with
its tax or other reporting requirements under federal, state, local or foreign
law.
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ARTICLE V
DISTRIBUTIONS; ALLOCATIONS OF
PROFITS AND LOSSES TO THE MEMBERS
Section 5.1 Percentage Interests; Distributions. Each Member's initial
percentage interest in the Company ("Percentage Interest") shall be as follows:
NHA 50%
CII 50%
TOTAL 100%
No adjustment to the initial Percentage Interest of any Member shall be made
except as provided in Section 2.2.6 or as a result of a transfer of a Member's
interest or a portion thereof pursuant to Article VII or IX hereof.
All distributions shall be made according to these Percentage Interests as
adjusted from time to time.
Section 5.2 Allocations; Compliance. Subject to Section 5.3, all profits and
losses shall be allocated to the Members in accordance with their Percentage
Interests. Each Member shall be at risk with respect to Company obligations in
accordance with such Member's Percentage Interest. This Agreement shall comply
with Code Section 704 and the Regulations thereunder.
Section 5.3 Account for Dilution. For purposes of applying the provisions of
this Article V, the Company's books shall be closed as of the close of business
on the day prior to the date on which a Dilution occurs in accordance with
Section 2.2.6(b). All distributable income and profits and losses attributable
to the period prior to the date on which the Dilution occurs, as reasonably
determined by the Members, shall be distributed and/or allocated, as applicable,
with reference to the Percentage Interests of the Members prior to any
adjustment pursuant to Section 2.2.6(b). All distributable income and profits
and losses attributable to the period beginning on the date the Dilution occurs,
as reasonably determined by the Members, shall be distributed and/or allocated,
as applicable, with reference to the Percentage Interests of the Members
subsequent to any adjustment pursuant to Section 2.2.6(b).
ARTICLE VI
INCOME TAX RETURNS, TAX ACCOUNTING, TAX ELECTIONS
Section 6.1 Preparation of Tax Returns. Federal, state and local income tax
returns of the Company, as required, shall be prepared, reviewed and signed by
NHA. Within 90 days after the end of each fiscal year, NHA shall send to CII
such tax information as shall be necessary for the preparation by CII of its
federal income tax return, and any state income and other tax returns with
regard to the jurisdiction in which the Company is formed.
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Section 6.2 Section 754 Election. The Company shall, if requested by either
Member, make the election under Section 754 of the Code.
Section 6.3 Tax Decisions Not Specified. Federal, state, local, foreign, and
other tax decisions and elections for the Company not expressly provided for
herein must be approved by both Members. Notwithstanding that NHA is the Tax
Matters Partner ("TMP"), all non ministerial decisions regarding tax elections,
audit, tax litigation, settlement and other tax matters shall be subject to the
approval of the Members. The TMP shall promptly take such action as may be
necessary to cause each Member to become a "notice partner" within the meaning
of Section 6231(a)(8) of the Code. The TMP shall furnish to each Member a copy
of all notices or other written communications received by the TMP from the IRS.
The TMP shall notify CII of all communications it has had with the IRS and shall
keep CII informed of all matters which may come to its attention in its capacity
as TMP by giving them written notice thereof within five (5) business days after
the TMP becomes informed of any such matter or within such shorter period as may
be required by the appropriate statutory or regulatory provisions.
Section 6.4 Notice of Tax Audit. Prompt notice shall be given to the Members
upon receipt of advice that the IRS or any other tax authority intends to
examine Company income tax returns or books and records for any year.
ARTICLE VII
SALE, TRANSFER OR MORTGAGE OF 1NTERESTS
Section 7.1 No Third Party Sale or Transfer. Except as provided in Section 7.3,
neither Member may sell, transfer, convey or offer to sell its Percentage
Interest to any third party, and any attempt to sell shall be an event of
default and any attempted transfer shall be void.
Section 7.2 Change in Control of a Member. At any time, a "Change in Control" of
a Member shall be deemed to be a sale, transfer or conveyance of such Member's
Percentage Interest and shall trigger the right of the other Member to purchase
such Member's Percentage Interest pursuant to Section 9.2 as if this change in
control was a default by the changed member. For purposes of this Agreement
"Change in Control" of a Member shall mean a change in the possession, direct or
indirect, of the power to direct or cause the direction of the management and
policies of such Member, whether through the ownership of voting securities, by
contract or otherwise, and shall be construed as such term is used in the rules
promulgated under the Securities and Exchange Act of 1934.
Section 7.3 Sale of Percentage Interest in the Company in conjunction with the
Sale of Fee/Leasehold Interest. For purposes of this Section 7.3, references to
NHA shall include Westgroup Grove Isle Associates, Ltd., in its capacity as
Lessee under the Primary Lease and affiliates. References to CII shall include
Grove Isle Associates, Ltd., in its capacity as Lessor under the Primary Lease,
and HMG/Courtland Properties, Inc. and their affiliates.
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Notwithstanding any provision contained in this Agreement prohibiting
the sale or transfer of a Member's Percentage Interest to a third party, a sale
or transfer of a Member's Percentage Interest in the Company to a third party
may take place only in conjunction with a sale or transfer of NHA's leasehold
estate in the Primary Lease to a third party or the sale or transfer of CII's
fee interest in the real property constituting the Primary Lease if and only if
the following conditions are met.
(a)Any sale or transfer of a Members' Percentage Interest in
the Company may only be made to the same party that is also
acquiring such Member's leasehold or fee interest in the
Primary Lease.
(b)If NHA, after compliance with the Right of First offer
provisions of the Primary Lease elects to sell its entire
leasehold estate in the Primary Lease and its interest in
the Company to a third party, NHA shall advise CII in
writing of the name of the prospective purchaser and the
proposed closing date and whether or not the prospective
purchaser chooses to purchase CII's Percentage Interest in
the Company at a price to be established pursuant to
Article X of this Agreement. If such an election is made
under the Primary Lease, CII agrees to sell and assign its
Percentage Interest at the appraised value established
under Article X, with the closing to occur simultaneously
with the closing of the sale of the leasehold estate.
(c)If CII, after compliance with the Right of First Offer
provisions of the Primary Lease, elects to sell its fee
interest in the Primary Lease and its Percentage Interest
in the Company to a third party, CII shall advise NHA in
writing of the name of the prospective purchaser and the
proposed closing date. NHA shall have fourteen (14) days
after receipt of such notice to elect to purchase CII's
Percentage Interest in the Company at a price to be
determined in accordance with the appraisal procedures set
forth in Article X of this Agreement, with the closing to
occur simultaneously with the closing of the fee interest.
(d)The transfer of a Member's Percentage Interest in the
Company shall be by assignment and shall be on the same
basis and confer the same rights as a transfer made
pursuant to the Buy/Sell provisions of Section 3.4.
Notwithstanding anything in this Agreement, the affiliates of CII and
NHA may sell or transfer their respective interests in the Primary Lease,
subject to any restrictions in the Primary Lease or otherwise in effect, while
CII and NHA retain their Percentage Interests in the Company.
ARTICLE VIII
MEETINGS
Section 8.1 Place of Meetings. Monthly meetings shall be held until the Members
agree otherwise. Any meetings called pursuant to this Article VIII shall be held
at the principal place of business of the Company or at such other place
approved by the Members when called in accordance with the provisions of this
Article VIII.
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Section 8.2 Meetings of the Members. A meeting of the Members may be called by
either of the Members for the purpose of discussing and deciding any major
decision upon notice given as required by the Act. At any Members meeting a
quorum shall be present only if the designated representative or alternate of
each Member is present at such meeting.
Section 8.3 Actions by Members Without a Meeting. With respect to any matter
requiring or contemplating any action or approval by the Members, pursuant to
this Agreement or pursuant to law, such action or approval will be deemed to
have been accomplished without a meeting if consents in writing setting forth
the action to be taken are signed by the Members.
Section 8.4 Participation at Meetings by Means of Communications Equipment.
Either of the Members may participate in any meeting by means of conference
telephone or similar communications equipment by means of which all persons
participating in the meeting can hear each other. Participation by such means
shall be deemed to constitute presence in person at such meeting.
ARTICLE IX
DEFAULT AND DISSOLUTION
Section 9.1 Events of Default.
9.1.1 Events of Default and Cure Periods. The occurrence of any of the
following events shall constitute an event of default ("Event of
Default") hereunder on the part of a Member if within thirty (30) days
following notice of such default from any other Member (twenty (20)
days if the default is due solely to the nonpayment of monies), such
Member (i) fails to pay such monies, or (ii) in the case of
non-monetary defaults, fails to substantially cure such default, or, if
such default cannot reasonably be substantially cured within such
thirty (30) day period, thereafter fails within a reasonable time to
prosecute to completion with diligence and continuity the curing of
such default, or, (iii) in the case of a breach of a representation or
warranty as to which the underlying factual circumstance making the
representation or warranty not true when made can be corrected such
that the representation or warranty would be true, fails to
substantially correct such factual circumstance and to remedy any
damage that may have resulted from such breach of such representation
or warranty, or, if such default cannot reasonably be substantially
cured within such thirty (30) day period, thereafter fails to prosecute
to completion with diligence and continuity the correction of such
factual circumstance and remedy of damage resulting from the breach of
representation or warranty; provided, however, that the occurrence of
any of the events described in subparagraphs (b)-(h) below shall
constitute an Event of Default immediately upon such occurrence without
any requirements of notice or passage of time except as specifically
set forth in any such subparagraph:
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(a) the failure of a Member to make any agreed upon capital
contribution to the Company as and when required pursuant to
this Agreement.
(b) a general assignment by a Member for the benefit of
creditors.
(c) the institution by a Member of a case or other proceeding
under any section or chapter of the federal or any state
bankruptcy act as now existing or hereafter amended or
becoming effective, or under any other similar laws relating
to the relief of debtors or the rights of creditors generally.
(d) the institution against a Member of a case or other
proceeding under any section or chapter of the federal or any
state bankruptcy Act as now existing or hereafter amended or
becoming effective, or under any other similar laws relating
to the relief of debtors or the rights of creditors generally,
which proceeding is not dismissed, stayed or discharged,
within a period of sixty (60) days after the filing thereof or
if stayed, which stay is thereafter lifted without a
contemporaneous discharge or dismissal of such proceeding.
(e) a proposed plan of arrangement or other action taken by a
Member with its creditors.
(f) the appointment of a receiver, custodian, trustee or like
officer, to take possession of the assets of a Member if the
pendency of said receivership would reasonably tend to have a
materially adverse effect upon the performance by such Member
of its obligations under this Agreement, which receivership
remains undischarged for a period of sixty (60) days from the
date of its imposition.
(g) admission by a Member in writing of its inability to pay
its debt as they mature.
(h) attachment, execution or other judicial seizure of all or
any substantial part of a Member's assets or its interest, or
any part thereof, not dismissed or discharged for a period of
thirty (30) days after the levy thereof, if the occurrence of
such attachment, execution or other judicial seizure would
reasonably tend to have a materially adverse effect upon the
performance by such Member of its obligations under this
Agreement; provided, however, that said attachment, execution
or seizure shall not constitute an Event of Default hereunder
if such Member posts a bond sufficient to fully satisfy the
amount of such claim or judgment within thirty (30) days after
the levy thereof and such Member's assets are thereby released
from the lien of such attachment.
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(i) the violation of or failure to comply with the provisions
of Article VII above.
(j) material default in performance of or failure to comply
with any other agreements, obligations or undertakings of such
Member contained herein or a material default by NHA's
Affiliate in the Spa Management Agreement or Development
Agreement.
(k) a materially adverse misrepresentation by either Member
set forth herein on any other agreement executed by the
Members.
Upon the occurrence of an Event of Default of a Member, the
Non-Defaulting Member may enforce the Defaulting Member's obligations hereunder
with respect to the payment of money by charging the same against any
distributions or other amounts which the Defaulting Member would be entitled to
receive hereunder. In addition, the Non-Defaulting Member shall have all other
remedies available at law or in equity or under this Agreement, provided that
the Non-Defaulting Member shall not be entitled to recover any consequential or
punitive damages alleged to have been incurred by the Non-Defaulting Member,
including but not limited to lost profits or lost opportunity.
9.1.2 Acts of Insolvency. The occurrence of any events described in
subparagraphs (b)-(h) of Section 9.1.1 shall also constitute an "Act of
Insolvency", as said term is used in this Agreement.
Section 9.2 Purchase of the Defaulting Member's Interest.
(a) Upon the occurrence of an Event of Default of a Member (the
"Defaulting Member"), the Member who is not then the Defaulting Member
(the "Non-Defaulting Member") shall have the right to acquire the
interest of the Defaulting Member for cash. In furtherance of such
right, the Non-Defaulting Member may notify the Defaulting Member at
any time following an Event of Default of its election to institute the
appraisal procedure set forth in Article X. The purchase price the
Defaulting Member would be entitled to receive pursuant to this Section
9.2 shall be based on the amount the Defaulting Member would have been
entitled to receive upon dissolution of the Company pursuant to the
liquidation distribution formula set forth in Article IX if the Company
had sold the Company assets for cash to a third party, based on the net
fair market value of the Company assets as determined by an appraisal
conducted pursuant to Article X. Within fifteen (15) days of receipt of
notice of determination of the adjusted purchase price to be paid for
the Defaulting Member's interest, the Non-Defaulting Member may notify
the Defaulting Member of its election to purchase the interest of the
Defaulting Member for that adjusted purchase price.
(b) Closing of the purchase pursuant to this Section 9.2 shall take
place as provided below:
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i. The closing of any sale pursuant to this Section 9.2 (the
"Closing") shall be held at the principal offices of the
Company, unless otherwise mutually agreed, on a mutually
acceptable date not more than sixty (60) days after receipt by
the Defaulting Member of the written notice of election to
purchase provided in Section 9.2(a).
ii. At the Closing, any closing adjustments which are then
usual and customary in Dade County, Florida, shall be made
between the purchasing party or parties and the selling party
or parties as of the date of Closing. The price to be paid
pursuant to Section 9.2 for the interest of the Defaulting
Member also shall be adjusted as of the date of the Closing to
account for any additional capital contributions and
contribution loans made by the Defaulting Member pursuant to
Article II and any distributions between the date as of which
the price for such interest was established and the date of
the Closing to the extent such amounts alter the amounts that
would be distributed to the Members in a liquidation
distribution. Any Member transferring its interest shall
transfer such interest free and clear of any liens,
encumbrances or any interests of any third party and shall
execute or cause to be executed any and all documents required
to fully transfer such interest to the purchasing Member,
including, but not limited to, any documents necessary to
evidence such transfer, and all documents required to release
any interest of a Member's spouse or any other party who may
claim an interest in such Member's interest. Any monetary
default by the Defaulting Member must be cured out of the
proceeds from such sale at the Closing.
iii. As of the effective date of any transfer permitted
hereunder by a Member of its entire interest in the Company,
such Member's rights and obligations hereunder shall terminate
except as to items accrued as of such date, any indemnity
obligations of such Member attributable to acts or events
occurring prior to such date, and liabilities to third parties
or otherwise arising prior to such date; provided that no
removed Member shall remain responsible for any liabilities
taken into account in determining the value of the Spa
Property or the interest under Section 9.2(a). Thereupon,
except as limited by the preceding sentence, this Agreement
shall terminate as to the transferring Member, but at the
non-transferring Member's election, shall remain in effect as
to the non-transferring Member(s) and the Company. Following
the date of Closing, a transferring Member shall have no
further rights to any distributions of cash flow or other
Company income and all such rights shall vest in such
transferring Member's transferee. In the event of a transfer
of a Member's entire interest to another Member, the Member to
whom such interest is transferred shall indemnify, defend and
hold harmless the Member so transferring its interest from and
against any and all claims, demands, losses, damages,
liabilities, lawsuits and other proceedings, judgments and
awards, and costs and expenses (including but not limited to
attorneys' fees and expenses) incurred in, or arising directly
or indirectly,
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in whole or in part, out of operation of the business of the
Company after the date of such transfer except as provided
above.
Section 9.3 Dissolution. The Company shall be dissolved and terminated upon the
earliest to occur of the following:
(a) at the option of the solvent Member upon the occurrence of an Act
of Insolvency (as defined in Section 9.1.2) of any Member or the breach
by any Member of its covenant not to withdraw pursuant to Section 1.6;
(b) the Members mutually agree in writing to terminate the Company;
(c) at the option of the non-defaulting Member upon the default by a
Member hereunder which is not cured by the Defaulting Member or which
is not waived by the Non-Defaulting Member;
(d) the sale or other disposition of all the Property and all other
Company assets by the Company, or of substantially all of the Property;
or
(e) entry of a decree of judicial dissolution under the Act.
(f) the termination or expiration of the lease of the Spa Property.
Section 9.4 Procedure in Dissolution and Liquidation.
9.4.1 Winding Up. Upon dissolution of the Company pursuant to Section
9.3 hereof, the Company shall immediately commence to wind up its
affairs and the Members shall proceed with reasonable promptness to
liquidate the business of the Company. The Members (hereafter the
"Liquidator") shall commence to wind up the affairs of the Company and
to liquidate the Company's assets. The Members shall continue to share
profits and losses during the period of liquidation in the same
proportion as before the dissolution. The Liquidator shall have full
right and unlimited discretion to determine the time, manner and terms
of any sale or sales of Company property pursuant to this liquidation,
giving due regard to the activity and condition of the relevant market
and general financial and economic conditions, and may liquidate the
assets for cash, securities, or such other consideration as it deems
appropriate and distribute those assets in kind. Any Member or an
Affiliate may purchase Company property upon liquidation, but any such
purchase shall be at the property's fair market value as determined by
independent appraisal. If assets are to be distributed to the Members,
all such assets shall be valued at their then fair market value as
determined by the Liquidator. The fair market value shall be used for
purposes of determining the amount of any distribution to a Member
pursuant to Section 9.4.4.
9.4.2 Management Rights During Winding Up. Except as otherwise
described in this Section 9.4, during the period of the winding up of
the affairs of
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the Company, the rights and obligations of the Members set forth herein
with respect to the management of the Company shall continue.
9.4.3 Work in Progress. If the Company is dissolved for any reason
while there is work in progress on the development or construction of
the Project or otherwise with respect to the Property, winding up of
the affairs and termination of the business of the Company may include
completion of the work in progress as the Members may determine to be
necessary to bring the matters under construction to a state of
completion convenient to permit a sale of the Company's interest in
such work.
9.4.4 Distributions in Liquidation. The assets of the Company shall be
applied or distributed in liquidation in the following order of
priority:
(a) In payment of debts and obligations of the Company owed to
third parties in the order of priority as provided by law,
which shall include a Member as the holder of any secured
loan.
(b) To the setting up of any reserves that the Members may
deem reasonably necessary for any contingent or unforeseen
liabilities or obligations of the Company or of any Member
arising out of or in connection with the Company. Such
reserves shall be paid over to any attorney of the State of
Florida, or trust company, selected by the Members, as
escrowee, to be held for a period not longer than three years,
for the purpose of disbursing such reserves in payment of the
aforementioned contingencies, and at the expiration of such
period, to distribute the balance remaining, as provided in
this provision.
(c) Repayment on a pro rata basis of any outstanding loans or
advances made by the Members to the Company.
(d) Distribution among all the Members according to Section
5.1.
Notwithstanding the foregoing, in the event there are any outstanding
Contribution Loans at the time of any distribution pursuant to this Section
9.4.4, then the Member to whom such Contribution Loan is owed shall be entitled
to payment of the Contribution Loan on a priority basis out of the distributions
to which the Member for whose benefit the Contribution Loans were made is
entitled, to be applied to the Contribution Loans in order of priority based on
the chronological order in which they were made, the earliest to be paid first
in full, and to each Contribution Loan in payment first of interest and then of
principal.
9.4.5 Final Reports. Within a reasonable time following the completion
of the liquidation of the Company's properties, the Liquidator shall
supply to each of the Members a statement that shall set forth the
assets and liabilities of the Company as of the date of complete
liquidation, each Member's portion of distributions pursuant to
Section 9.4.4 and the amounts paid to the Member
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pursuant to Section 9.4.4.
9.4.6 Termination. Upon the completion of the distribution of Company
assets as provided in this Section, the Member conducting the winding
up of the business of the Company as provided in Section 9.4.1 shall
take over such other actions as may be necessary to terminate
completely the Company.
9.4.7 Expenses. Expenses of dissolution and liquidation shall be
charged to the capital accounts of the Members in proportion to each
Member's respective Percentage Interest.
9.4.8 Deficit Capital Account Restoration. If, upon the dissolution and
liquidation of the Company, after crediting all income upon sale of the
Company's assets that have been sold, and after making the allocations
provided for in Section 9.4.1 , any Member has a negative capital
account, such Member shall not be obligated to contribute to the
Company an amount equal to the negative capital account.
Section 9.5 Disposition of Documents and Records. All documents and records of
the Company, including, without limitation, all financial records, vouchers,
cancelled checks and bank statements, shall be held as agreed to by the Members.
Unless otherwise approved by the Members, NHA shall retain such documents and
records for a period of not less than seven (7) years at the Company's main
offices.
ARTICLE X
APPRAISAL
Section 10.1 General. Whenever this Agreement provides for the valuation of the
assets of the Company or an interest in the Company to be purchased or sold,
including, without limitation, pursuant to Section 9.2, the value of such
interest in the Company shall be determined as follows. The parties shall first
attempt to agree upon the "net fair market value" of the Company assets. The
"net fair market value" of the Company assets shall mean the cash price which a
sophisticated purchaser would pay on the effective date of the appraisal for all
tangible assets owned by the Company as if the Company were owned free and clear
of any encumbrances and is a going concern.
Section 10.2 Appraisal Procedure. In the event the parties are unable to
mutually agree upon the net fair market value of the Company assets within ten
(10) days of the date the appraisal procedure of this Article X is instituted as
provided in this Agreement, they shall each select one appraiser to determine
the net fair market value of the Company assets as of the date the appraisal
procedure of this Article X is instituted as provided in this Agreement. Each
appraiser so selected shall furnish the Members and the certified public
accountants for the Company, or hired for purposes of the subject determination
only, with a written appraisal within thirty (30) days of his or her selection,
setting forth his or her determination of the net fair market value. If only one
appraisal is submitted within the requisite time period, the determination of
the fair market value
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of the Company pursuant to such appraisal shall be final and binding on the
Members. If both appraisals are submitted within such time period, and if the
two appraisals so submitted differ by less than five percent (5%) of the lower
of the two, the average of the two shall be the determination of fair market
value and shall be final and binding on the Members. If the two appraisals
differ by more than five percent (5%) of the lower of the two, then the two
appraisers shall immediately select a third appraiser who shall within sixty
(60) days after his or her selection make a determination of the fair market
value of the Company assets and submit such determination to the Members and
such certified public accountants. The third appraisal will then be averaged
with the closer of the two previous appraisals and the result shall be the
determination of fair market value and shall be final and binding on the
Members, unless the first two appraisals differ from the third appraisal by the
same amount, in which case the determination of the fair market value pursuant
to the third appraisal shall be final and binding on the Members. All appraisers
appointed pursuant to this Article X shall be members of the American Institute
of Real Estate Appraisers with not less than ten (10) years experience
appraising projects similar to the Project. The cost of the appraisals shall be
an expense of the Company, except that if the appraisal procedure is instituted
pursuant to Section 9.2, the cost shall be an expense of the Defaulting Member.
ARTICLE Xl
(RESERVED FOR FUTURE USE)
ARTICLEXII
GENERAL PROVISIONS
Section 12.1 Complete Agreement; Amendment. This Agreement constitutes the
entire agreement between the parties and supersedes all agreements,
representations, warranties, statements, promises and understandings, whether
oral or written, with respect to the subject matter hereof, and neither party
hereto shall be bound by or charged with any oral or written agreements,
representations, warranties, statements, promises, or understandings not
specifically set forth in this Agreement or the exhibits hereto. The Members
may, without prior written consent from any other Member, amend any provision of
this Agreement from time to time to (i) add to the Agreement any further
covenants, restrictions, deletions, or provisions for the protection of the
Members; (ii) to cure an ambiguity or to correct or supplement any provisions
contained herein; or (iii) to make such other provision in regard to matters or
questions arising under this Agreement which will not adversely affect the
interests of the Members. No amendment to this Agreement shall be effective if,
in the opinion of counsel to the Company such amendment could result in the
Company's not being taxed as a "partnership" for federal income tax purposes or
the Company's being terminated for tax purposes.
Section 12.2 Notices. Any notice, consent, demand or other communication
required or permitted to be given under this Agreement shall be in writing and
shall be delivered by hand, sent by reputable air courier, sent by prepaid
registered or certified United States mail with return receipt requested or sent
by facsimile (with a confirmation copy by mail), and shall be deemed to have
been given upon the date of receipt. Rejection
24
of other refusal to accept or the inability to deliver because of changed
address of which no notice was given shall be deemed to be received. Such
notices, consents, demands or other communications shall be addressed as
follows:
TO : CII Spa, LLC
c/o ▇▇▇▇▇▇▇ ▇▇▇▇▇▇
▇▇▇▇ ▇▇▇▇▇ ▇▇▇▇▇▇▇▇ ▇▇▇▇▇
▇▇▇▇▇▇▇ ▇▇▇▇▇, ▇▇ ▇▇▇▇▇
Fax No. (▇▇▇) ▇▇▇-▇▇▇▇
TO: Noble House Associates, LLC
do ▇▇▇▇▇▇▇ ▇. ▇▇▇▇▇
▇▇▇ ▇▇▇▇▇▇▇▇ ▇▇▇
▇▇▇▇▇▇▇▇, ▇▇▇▇▇▇▇▇▇▇ ▇▇▇▇▇
Fax No. (▇▇▇) ▇▇▇-▇▇▇▇
Notwithstanding the foregoing, the failure to provide copies of any such
notices, consents, demands or other communications to any attorneys as provided
above shall not render any such notice, consent, demand or other communication
ineffective.
Whenever a notice, offer, acceptance, rejection, or a copy is required or
provided for to be sent to more than one person, all such communications shall,
whenever reasonably possible, be sent within a single twenty-four (24) hour
period. Whenever any party gives a notice, makes an offer, or tenders an
acceptance to any other party, the party giving such notice, making such offer,
or tendering such notice shall use its best efforts to send a copy of such
communication to all Members.
Section 12.3 Attorneys' Fees. Should any litigation be commenced between the
parties hereto or their representatives or should any party institute any
proceeding in a bankruptcy or similar court which has jurisdiction over any
other party hereto or any or all of such party's or parties property or assets
concerning any provision of this Agreement or the rights and duties of any
person or entity in relation thereto, the party or parties prevailing in such
litigation shall be entitled, in addition to such other relief as may be
granted, to a reasonable sum as and for such party's or parties' attorneys'
fees, and court costs in such litigation which shall be determined by the court
in such litigation or in a separate action brought for that purpose. In
addition, any prevailing party shall be entitled to recover costs of enforcing a
judgment, including attorneys' fees, and any ultimately prevailing party shall
be entitled to recover costs of appeal, including attorneys' fees.
Section 12.4 Survival of Rights. Except as provided herein to the contrary, this
Agreement shall be binding upon and inure to the benefit of the parties
signatory hereto, their respective heirs, executors and legal representatives
and permitted successors and assigns.
Section 12.5 Governing Law. All questions with respect to this Agreement and the
rights and liabilities of the parties hereto shall be governed by the laws of
that State of
25
Delaware. Each of the parties agrees to submit to the jurisdiction of the state
chancery court in Wilmington, Delaware in any action, claim, or other proceeding
arising out of any dispute in connection with this Agreement.
Section 12.6 Waiver. No consent or waiver, express or implied, by a Member to or
of any breach or default by the other Member in the performance by such other
Member of its obligations hereunder shall be deemed or construed to be a consent
or waiver to or of any other breach or default in the performance by such other
Member of the same or any other obligations of such other Member hereunder.
Failure on the part of a Member to complain of any act or failure to act of the
other Member or to declare the other Member in default, irrespective of how long
such failure continues, shall not constitute a waiver by such Member of such
default or its rights hereunder. The giving of consent by a Member in any one
instance shall not limit or waive the necessity to obtain such Member's consent
in any future instance.
Section 12.7 Remedies in Equity. The rights and remedies of any of the Members
hereunder shall not be mutually exclusive, except as specifically provided
herein to the contrary, i.e., the exercise of one or more of the provisions
hereof shall not preclude the exercise of any other provisions hereof. Each of
the Members confirms that damages at law will be an inadequate remedy for a
breach or threatened breach of this Agreement and agree that, in the event of a
breach or threatened breach of any provision hereof, the respective rights and
obligations hereunder shall be enforceable by specific performance, injunction
or other equitable remedy, but nothing herein contained is intended to, nor
shall it, limit or affect any rights at law or by statute or otherwise of any
party aggrieved as against the other for a breach or threatened breach of any
provision hereof, it being the intention by this Section to make clear the
agreement of the Members that the respective rights and obligations of the
Members hereunder shall be enforceable in equity as well as at law or otherwise.
Nothing herein contained shall have the effect, or be construed to have the
effect, of giving to, or vesting in, any persons not a party to this Agreement
any rights or remedies of any kind whatsoever for a breach or threatened breach
of this Agreement.
Section 12.8 Terminology. All personal pronouns used in this Agreement, whether
used in the masculine, feminine or neuter gender, shall include all other
genders, and the singular shall include the plural and vice versa. Titles of
Articles and Sections are for convenience only, and neither limit nor amplify
the provisions of this Agreement itself. The use herein of the work "including",
when following any general statement, term or matter, shall not be construed to
limit such statement, term or matter to the specific items or matters set forth
immediately following such word or to similar items or matters, whether or not
non-limiting language (such as "without limitation" or "but not limited to" or
words of similar import) is used with reference thereto, but rather shall be
deemed to refer to all other items or matters that could reasonably fall within
the broadest possible scope of such general statement, term or matter.
Section 12.9 Counterparts. This Agreement may be executed in any number of
counterparts, each of which shall be deemed to be an original and all of which
shall constitute one and the same agreement.
26
Section 12.10 Survival of Indemnity Obligations. Any and all indemnity
obligations of either party hereto shall survive any termination of this
Agreement or to the Company.
Section 12.11 Fees and Commissions. Each Member hereby represents and warrants
that as of the date of this Agreement there are no known claims for brokerage or
other commissions or finder's or similar fees in connection with the
transactions covered by this Agreement insofar as such claims shall be based on
actions, arrangements or agreements taken or made by or on its behalf, and each
Member hereby agrees to indemnify and hold harmless the other Member from and
against any liabilities, costs, damages and expenses from any party making any
such claims through such Member.
Section 12.12 Good Faith and Fair Dealing; Further Assurances. In carrying out
the terms of this Agreement, each Member agrees to deal with the other Member in
good faith and in a manner of fair dealing. Each party hereto agrees to do all
acts and things and to make, execute and deliver such written instruments, as
shall from time to time be reasonably required to carry but the terms and
provisions of this Agreement.
Section 12.13 Time is of the Essence. Time is of the essence of this Agreement.
Section 12.14 Representations, Warranties and Covenants of CII. CII hereby
represents and warrants to NHA all of the items set forth in this Section 12.14
and, to the extent any such items are not yet required to be and are not fully
performed, covenants to perform all such items following the formation of the
Company in connection with the development and management of the Project. To the
extent provided herein, such performance shall be at the expense of CII.
12.14.1 Valid Formation, Execution.
(a) CII is a Delaware limited liability company duly formed, validly
existing and in good standing under the laws of Delaware.
(b) This Agreement and the other agreements or instruments to be
delivered in connection herewith (collectively, "related documents") by
CII and its Affiliates, as applicable, have been duly authorized and
validly executed and constitute the binding obligations of and are
enforceable against CII and its Affiliates, as applicable, in
accordance with their respective terms. CII and its Affiliates, as
applicable, have full power, authority and capacity to enter into this
Agreement and the related documents, as applicable, and to carry out
their respective obligations as described in this Agreement and the
related documents, as applicable. Each Company or corporate Affiliate
of CII is duly formed, validly existing and in good standing in the
State of Delaware.
12.14.2 No Litigation. No litigation or proceedings, including without
limitation, arbitration proceedings are pending or threatened relating
to CII or any of its
27
Affiliates or to the best knowledge of CII, relating to the Spa
Property which, if adversely determined, could individually or in the
aggregate have an adverse effect on title to or the use and enjoyment
or value of the Spa Property, or which could interfere with the
consummation and performance of this Agreement or the related
documents.
12.14.3 Obligations and Liabilities Relating to the Spa Property. At
all times prior to the acquisition of the Spa Property by the Company,
CII and its Affiliates will perform or caused to be performed (i) all
contractual obligations imposed upon such parties relating to the Spa
Property, and (ii) all obligations imposed upon such parties relating
to the Spa Property under all applicable laws. CII shall not transfer
any of its interest in the Company in any manner that would constitute
a default under, or to otherwise be in violation of, a loan to the
Company. Neither CII nor any of its Affiliates has incurred any
obligations or liabilities which, except for liabilities expressly
permitted by this Agreement, would become obligations or liabilities of
NHA, a Member or the Company.
12.14.4 Not Foreign Person. CII is not a "foreign person" within the
meaning of the Foreign Investment in Real Property Tax Act of 1980, as
amended (FIRPTA).
12.14.5 Full Disclosure Neither this Agreement nor any other written
communication by or on behalf of CII or its Affiliates in connection
with this transaction contains, as of the time made, an untrue
statement of a fact or omits a fact necessary to make the statements
contained therein or herein not materially misleading. There is no
other fact (which shall exclude general market or economic projections)
known to CII which CII has not disclosed to NHA in writing which
materially adversely affects, or to the best knowledge of CII, will
materially and adversely affect, the Spa Property or the use or
enjoyment of the value thereof, or the ability of the parties hereto
perform the transactions contemplated by this Agreement.
12.14.6 Survival. The representations and warranties in this Section
12.14 shall survive the formation and the termination of the Company,
provided that these representations shall only continue after the
termination of the Company to the extent that a notice of breach
thereof is given to CII within one year after termination of the
Company.
12.14.7 Indemnity. CII shall indemnify, defend and hold harmless NHA
and its Affiliates and the Company from and against any and all claims,
demands, losses, damages, liabilities, lawsuits and other proceedings,
judgments and awards, and costs and expenses (including but not limited
to attorneys' fees and expenses) arising directly or indirectly, in
whole or in part, out of any misrepresentation or any breach of any of
the representations or warranties or breach of covenant made by CII or
any of its Affiliates in this Agreement or in any document,
certificate, exhibit or schedule given or delivered to the other
Members by such parties pursuant to or in connection with this
Agreement. Notwithstanding the foregoing provisions, the
indemnification set forth above
28
shall exclude any punitive or consequential damages which NHA may claim
to have incurred by reason of such indemnified matters, including, but
not limited to lost profits or lost opportunity, but shall include
indemnification for punitive or consequential damages claims by third
parties.
12.14.8 Risk. CII recognizes that real estate investments involve
certain risks, CII has taken full cognizance of and understands such
risks and acknowledges that neither NHA nor any Affiliate thereof has
guaranteed the return of CII's investment or any profit thereon.
Section 12.15 Representations, Warranties and Covenants of NHA. NHA
hereby represents and warrants to CII and the Members all of the items set forth
in this Section 12.15 and, to the extent any such items are not yet required to
be and are not fully performed, covenants to perform all such items following
the formation of the Company in connection with the development and management
of the Project. To the extent provided herein, such performance shall be at the
expense of NHA.
12.15.1 Valid Formation, Execution.
(a) NHA is a Delaware limited liability company, duly formed, validly
existing and in good standing under the laws of Delaware.
(b) This Agreement and the other agreements or instruments to be
delivered in connection herewith (collectively, "related documents") by
NHA and any of its Affiliates, as applicable, have been duly authorized
and validly executed and constitute the binding obligations of and are
enforceable against NHA and its Affiliates, as applicable, in
accordance with their respective terms. NHA and its Affiliates, as
applicable, have full power, authority, and capacity to enter into this
Agreement and the related documents, as applicable, and to carry out
their respective obligations as described in this Agreement and the
related documents, as applicable. No community property or other
similar interest exists with respect to any Company asset on the part
of any Person that is not a party to this Agreement. Each Company or
corporate Affiliate of NHA is duly formed, validly existing and in good
standing in the State of Delaware.
12.15.2 No Litigation. No litigation or proceedings, including, without
limitation arbitration proceedings, are pending or threatened relating
to NHA or any of its Affiliates or to the best knowledge of NHA,
relating to the Spa Property which, if adversely determined, could
individually or in the aggregate have an adverse effect on title to or
the use and enjoyment or value of the Spa Property, or which could
interfere with the consummation and performance of this Agreement or
the related documents.
12.15.3 Obligations and Liabilities Relating to the Property. At all
times prior to the date of this Agreement, NHA and its Affiliates have
performed or caused to be performed (i) all contractual obligations
imposed upon such parties relating to the Spa Property, and (ii) all
obligations imposed upon such parties
29
relating to the Spa Property under all applicable laws. NHA shall not
transfer any of its interest in the Company in any manner that would
constitute a default under, or to otherwise be in violation of a loan
to the Company. Neither NHA nor any of its Affiliates has incurred any
obligations or liabilities which would become obligations or
liabilities of CII or the Company.
12.15.4 Not Foreign Person. NHA is not a "foreign person" without the
meaning of the Foreign Investment in Real Property Act of 1980, as
amended ("FIRPTA").
12.15.5 Full Disclosure. Neither this Agreement nor any other written
communication by or on behalf of NHA or its Affiliates in connection
with this transaction contains, as of the time made, an untrue
statement of a fact or omits a fact necessary to make the statements
contained therein or herein not materially misleading. There is no
other fact (which shall exclude general market or economic projections)
known to NHA which NHA has not disclosed to CII in writing which
materially adversely affects, or to the best knowledge of NHA will
materially and adversely affect the Spa Property or the use or
enjoyment or the value thereof, or the ability of the parties hereto to
perform the transactions contemplated by this Agreement.
12.15.6 Survival. The representations and warranties in this Section
12.15 shall survive the formation and the termination of the Company,
provided that these representations shall only continue after the
termination of the Company to the extent that a notice of breach
thereof is given to NHA within one year after termination of the
Company.
12.15.7 Indemnity. NHA shall indemnify, defend and hold harmless CII
and its Affiliates and the Company from and against any and all claims,
demands, losses, damages, liabilities, lawsuits and other proceedings,
judgments and awards, and costs and expenses (including but not limited
to attorneys' fees and expenses) arising directly or indirectly, in
whole or in part, out of any misrepresentation or any breach of any of
the representations or warranties or breach of covenant made by NHA or
any of its Affiliates in this Agreement or in any document,
certificate, exhibit or schedule given or delivered to the other
Members by such parties pursuant to or in connection with this
Agreement. Notwithstanding the foregoing provisions, the
indemnification set forth above shall exclude any punitive or
consequential damages which CII may claim to have incurred by reason of
such indemnified matters, including but not limited to, lost profits or
lost opportunity, but shall include indemnification for punitive or
consequential damages claims by third parties.
12.15.8 Risk. NHA recognizes that real estate investments involve
certain risks, NHA has taken full cognizance of and understands such
risks and acknowledges that neither CII nor any Affiliate thereof has
guaranteed the return of NHA's
30
investment or any profit thereon.
Section 12.16 Partial Enforceability. If any provision of this Agreement, or the
application of the provision to any person or circumstance shall be held
invalid, the remainder of this Agreement, or the application of that provision
to persons or circumstances other than those with respect to which it is held
invalid, shall not be affected thereby.
Section 12.17 Partition. No Member shall have the right of partition of the
Company, or assets of the Company, which rights are hereby waived.
IN WITNESS WHEREOF, the parties have executed this Agreement as of the
day and year first above set forth.
"NHA"
Noble House Associates, LLC
a Delaware limited liability company
By: ▇▇▇▇▇ Family Trust
Managing Member
By: /s/ ▇▇▇▇▇▇▇ ▇. ▇▇▇▇▇
------------------------
▇▇▇▇▇▇▇ ▇. ▇▇▇▇▇ Trustee
Managing Member
"CII"
CII Spa, LLC
a Delaware limited liability company
by /s/ ▇▇▇▇▇ ▇▇▇▇▇▇▇▇▇
----------------------
Print: Courtland Investments, Inc.
Its Member and Manager
▇▇▇▇▇ ▇▇▇▇▇▇▇▇▇, President
31
Schedule I
----------
Dilution Pursuant to Section 2.2.6(b)
(assumes $1,000,000 capital call)
Total Member A Member B
----- -------- --------
Initial capital contribution 1,000,000 500,000 500,000
Capital contribution from 500,000 500,000
contributing member
Member loan for non contributing 500,000 500,000
member
Total 2,000,000 1,500,000 500,000
Recalculated Percentage Interest 100.00% 75.00% 25.00%
32