OPERATING AGREEMENT OF WO GRAND HOTEL, LLC (A New Jersey Limited Liability Company) Dated as of June 2, 2005
Exhibit
10.1
WO
GRAND HOTEL, LLC
(A
New
Jersey Limited Liability Company)
Dated
as
of June 2, 2005
TABLE
OF CONTENTS
|
Article
I
|
PURPOSES,
POWERS AND FORMATION OF THE COMPANY
|
6
|
||
|
Section
1.01
|
Formation
|
6
|
||
|
Section
1.02
|
Purposes
and Powers
|
6
|
||
|
Section
1.03
|
Designation
of Authorized Persons
|
6
|
||
|
Section
1.04
|
Principal
Place of Business
|
6
|
||
|
Section
1.05
|
Registered
Office
|
6
|
||
|
Section
1.06
|
Term
|
6
|
||
|
Section
1.07
|
Agent
for Service of Process
|
6
|
||
|
Section
1.08
|
Liability
to Third Parties
|
6
|
||
|
Article
II
|
MEMBERS;
CAPITAL CONTRIBUTIONS
|
6
|
||
|
Section
2.01
|
Member’s
Interests.
|
6
|
||
|
Section
2.02
|
Capital
Contributions.
|
6
|
||
|
Section
2.03
|
Required
Funds; Loans by Members.
|
6
|
||
|
Section
2.04
|
Capital,
Profits, Losses and Distributions
|
6
|
||
|
Section
2.05
|
Status
of Interests
|
6
|
||
|
Section
2.06
|
No
Issuance of Certificates
|
6
|
||
|
Section
2.07
|
Register
|
6
|
||
|
Section
2.08
|
Registered
Owner
|
6
|
||
|
Section
2.09
|
Capital
Contributions.
|
6
|
||
|
Section
2.10
|
Additional
Contributions to Capital.
|
6
|
TABLE
OF CONTENTS
(continued)
|
Article
III
|
Representations
and Warranties.
|
6
|
||
|
Section
3.01
|
Representations
and Warranties of Wilshire
|
6
|
||
|
Section
3.02
|
Representations
and Warranties of Proud Three
|
6
|
||
|
Section
3.03
|
Further
Representations and Warranties
|
6
|
||
| Article IV |
|
MANAGEMENT
OF THE COMPANY; CONDUCT OF BUSINESS; POWERS; OTHER
ACTIVITIES
|
6
|
|
|
Section
4.01
|
Management
by the Managing Member
|
6
|
||
|
Section
4.02
|
Termination
of the Loans
|
6
|
||
|
Article
V
|
DUTIES
OF MEMBERS; RESTRICTIONS ON MEMBERS
|
6
|
||
|
Section
5.01
|
Confidentiality
|
6
|
||
|
Section
5.02
|
Company
Property
|
6
|
||
|
Section
5.03
|
Engaging
In Other Activities
|
6
|
||
| Article VI |
|
ACCOUNTING
PROVISIONS
|
6
|
|
|
Section
6.01
|
Fiscal
Year
|
6
|
||
|
Section
6.02
|
Books
and Accounts.
|
6
|
||
|
Section
6.03
|
Financial
Reports.
|
6
|
||
|
Section
6.04
|
Tax
Elections
|
6
|
||
|
Section
6.05
|
Tax
Audits.
|
6
|
||
|
Article
VII
|
TRANSFER
OF INTERESTS
|
6
|
||
|
Section
7.01
|
Admission
of Substitute Members
|
6
|
||
|
Section
7.02
|
Restrictions
on Transfers
|
6
|
||
|
Article
VIII
|
DISTRIBUTIONS
AND ALLOCATIONS
|
6
|
||
|
Section
8.01
|
Distributions
of Net Cash Flow and Net Proceeds.
|
6
|
||
|
Section
8.02
|
Allocation
of Net Profits
|
6
|
||
|
Section
8.03
|
Allocation
of Net Losses
|
6
|
||
|
Section
8.04
|
Allocation
of Net Profits and Net Losses from Net Proceeds or upon
liquidation.
|
6
|
||
|
Section
8.05
|
No
Return of Distributions
|
6
|
||
|
Section
8.06
|
Allocations
between Assignor and Assignee Members
|
6
|
||
|
Section
8.07
|
Deficit
Capital Accounts
|
6
|
||
|
Section
8.08
|
Amounts
Withheld
|
6
|
TABLE
OF CONTENTS
(continued)
|
Article
IX
|
LIQUIDATION
AND TERMINATION OF THE COMPANY
|
6
|
||
|
Section
9.01
|
General.
|
6
|
||
|
Section
9.02
|
Statements
on Termination
|
6
|
||
|
Section
9.03
|
Priority
on Liquidation
|
6
|
||
|
Section
9.04
|
Distribution
of Non-Liquid Assets.
|
6
|
||
|
Section
9.05
|
Deficit
upon Liquidation
|
6
|
||
|
Section
9.06
|
Source
of Distributions
|
6
|
||
|
Article
X
|
EXCULPATION
AND INDEMNIFICATION OF MEMBERS
|
6
|
||
|
Section
10.01
|
Exculpation.
|
6
|
||
|
Section
10.02
|
Indemnification
|
6
|
||
|
Article
XI
|
MISCELLANEOUS
PROVISIONS
|
6
|
||
|
Section
11.01
|
Right
of First Refusal.
|
6
|
||
|
Section
11.02
|
Call
Option.
|
6
|
||
|
Section
11.03
|
Dispute
Resolution.
|
6
|
||
|
Section
11.04
|
Applicable
Law
|
6
|
||
|
Section
11.05
|
Modification
|
6
|
||
|
Section
11.06
|
Notices
|
6
|
||
|
Section
11.07
|
Captions
|
6
|
||
|
Section
11.08
|
Construction
|
6
|
||
|
Section
11.09
|
Pronouns
|
6
|
||
|
Section
11.10
|
Amendments
|
6
|
||
|
Section
11.11
|
Binding
Effect
|
6
|
||
|
Section
11.12
|
Separability
|
6
|
||
|
Section
11.13
|
Further
Assurances
|
6
|
||
|
Section
11.14
|
Counterparts
|
6
|
||
|
Section
11.15
|
Consent
to Jurisdiction
|
6
|
Exhibits
|
Exhibit
A
|
Description
of the Property
|
|
|
Exhibit
B
|
Description
of the Loans and Mortgages
|
|
|
Exhibit
C
|
Definitions
|
|
|
Exhibit
D
|
Certificate
of Formation
|
|
|
Exhibit
E
|
Bargain
and Sale Deed with Covenants Against Grantor’s Acts
|
|
|
Exhibit
F
|
Assignment
of the Loans and Loan Documents
|
|
|
Exhibit
G
|
General
Assignment and ▇▇▇▇ of Sale
|
|
|
Exhibit
H
|
Allonge
to the Notes
|
|
|
Exhibit
I
|
Assignment
of Mortgages
|
|
|
Exhibit
J
|
Permitted
Encumbrances
|
OF
WO
GRAND HOTEL, LLC
OPERATING
AGREEMENT of WO GRAND HOTEL, LLC
dated as
of June 2, 2005, by and among (i) WO GRAND HOTEL, LLC, a New Jersey limited
liability company, with offices at ▇▇▇ ▇▇▇▇▇▇▇▇ ▇▇▇▇▇▇ ▇▇▇, ▇▇▇▇ ▇▇▇▇▇▇, ▇▇▇
▇▇▇▇▇▇ ▇▇▇▇▇ (the “Company”);
(ii)
WILSHIRE ENTERPRISES, INC., a Delaware corporation, with offices at ▇ ▇▇▇▇▇▇▇
▇▇▇▇▇▇, ▇▇▇▇▇▇, ▇▇▇ ▇▇▇▇▇▇ ▇▇▇▇▇ (“Wilshire”
or
“Managing
Member”);
and
(iii) PROUD THREE, LLC, a New Jersey limited liability company, with offices
at
c/o Herrick, ▇▇▇▇▇▇▇▇▇ LLP, ▇ ▇▇▇▇ ▇▇▇▇▇, ▇▇▇▇▇▇, ▇▇▇ ▇▇▇▇▇▇ ▇▇▇▇▇, attn: ▇▇▇▇▇▇
▇. ▇▇▇▇▇, Esq. (“Proud
Three”).
RECITALS
WHEREAS,
the
Company was formed as a limited liability company pursuant to the New Jersey
Limited Liability Company Act, as amended (the “Act”)
on May
2, 2005;
WHEREAS,
the
Company has been formed to own and operate the real property (and improvements
located thereon) located at ▇▇▇ ▇▇▇▇▇▇▇▇ ▇▇▇▇▇▇ ▇▇▇, ▇▇▇▇▇▇▇▇ of West Orange,
Essex County, New Jersey, Lot 1428, Block 152.22, as more fully described on
Exhibit
A
attached
hereto (such real property and improvements, the “Property”)
and to
manage and further its interests in the Property (the “Business”);
and
WHEREAS,
Wilshire
desires to assign, transfer and convey to the Company all if its right, title
and interest in and to the Property in consideration for its ownership interest
in the Company pursuant to the terms of this Agreement; and
WHEREAS,
Wilshire
has entered into a certain lease dated March 8, 2001 between Wilshire, as
lessor, and West Orange Hotel Associates, L.L.C. (“WOHA”),
as
lessee, covering certain space in the improvements located on the Property
(the
“Hotel
Lease”);
and
WHEREAS,
Wilshire
has entered into a certain lease dated September 11, 2002 between Wilshire,
as
lessor, and West Orange Catering Associates, L.L.C. (“WOCA”),
as
lessee, covering certain space in the improvements located on the Property
(the
“Catering
Lease”);
and
WHEREAS,
Proud
Three is the maker of certain loans to WOHA and WOCA as more fully described
on
Exhibit
B
(the
“Loans”),
which
loans are secured by certain leasehold mortgages and assignment of leases as
more fully described on Exhibit
B
(the
“Mortgages”);
and
WHEREAS,
pursuant
to that certain Forbearance and Settlement Agreement dated as of June 2, 2005
by
and among Proud Three, WOHA, WOCA, et al. (the “Settlement
Agreement”)
and
effective as of the date of the Settlement Agreement, WOHA and Wilshire are
terminating the Hotel Lease; and
WHEREAS,
pursuant
to the Settlement Agreement and effective as of the date of the Settlement
Agreement, WOCA and Wilshire are terminating the Catering Lease;
and
WHEREAS,
Proud
Three desires to assign, transfer and convey to the Company all of its rights,
title, interests and obligations in, to and under the Loans and the Mortgages
as
consideration for its ownership interest in the Company pursuant to the terms
of
this Agreement; and
WHEREAS,
the
Members and the Company desire to enter into this Agreement in order to state
the terms and conditions of the ongoing operation and management of the Company
and the Business; and
WHEREAS,
any
capitalized terms used herein and not otherwise defined, shall have the meaning
ascribed thereto in Exhibit
C
attached
hereto.
NOW,
THEREFORE,
in
consideration of the premises, the parties hereby agree as follows:
PURPOSES,
POWERS AND FORMATION OF THE COMPANY
Section
1.01 Formation. The
Company was formed pursuant to the Act, upon the filing of Certificate of
Formation with the Treasurer of the State of New Jersey on May 2, 2005 under
the
name of “WO GRAND HOTEL, LLC”. A copy of the Certificate of Formation is
attached hereto as Exhibit
D.
Section
1.02 Purposes and Powers. The Company was formed to conduct the Business. In
connection with the Business, the Company shall have the powers to engage in
all
legal activities as shall be necessary or desirable in connection with or
incidental to operating the Business.
The
Company shall also have the power to (i) engage in any lawful act or activity
for which limited liability companies may be formed under the Act; (ii)
accomplish any lawful business whatsoever or which shall at any time appear
conducive to or expedient for the protection or benefit of the Company and
its
assets; and (iii) engage in all activities necessary, customary, convenient
or
incident to any of the foregoing.
Section
1.03 Designation of Authorized Persons. The Members shall, from time to
time, designate one or more “Authorized Persons” as defined in the Act (an
“Authorized Person”), to execute, deliver and file any amendments, restatements,
corrections or cancellation of the Company’s Certificate of Formation and to
perform such other actions on behalf of the Company as authorized by the
Managing Member, all in accordance with the provisions of this
Agreement.
Section
1.04 Principal Place of Business.The
principal place of business of the Company shall be located at ▇▇▇ ▇▇▇▇▇▇▇▇
▇▇▇▇▇▇ ▇▇▇, ▇▇▇▇ ▇▇▇▇▇▇, ▇▇▇ ▇▇▇▇▇▇ ▇▇▇▇▇, or at any other place or places
as
the Managing Member may from time to time determine.
Section
1.05 Registered Office.The
Company’s initial registered office in the State of New Jersey shall be at ▇/▇
▇▇▇▇▇▇▇▇▇, ▇▇▇▇, ▇▇▇▇▇ & ▇▇▇▇▇ ▇▇▇, ▇▇▇▇▇ ▇▇▇▇▇▇▇▇▇ Campus I, ▇▇▇▇▇▇▇▇▇▇,
▇▇▇ ▇▇▇▇▇▇ ▇▇▇▇▇. The registered office may be changed from time to time by
the
Managing Member by filing the address of the new registered office with the
Treasurer of the State of New Jersey pursuant to the Act.
2
Section
1.06 Term.The
term
of the Company commenced on the date its Certificate of Formation was filed
in
the office of the Treasurer of the State of New Jersey, and shall continue
until
the winding up and liquidation of the Company and its business is completed
as
provided in Article IX.
Section
1.07 Agent for Service of Process.The
registered agent for service of process on the Company in the State of New
Jersey shall be W. ▇▇▇▇▇▇▇ ▇▇▇▇▇▇, or any successor as appointed by the Managing
Member.
Section
1.08 Liability to Third Parties. The debts, obligations and liabilities of
the Company, whether arising in contract, tort or otherwise, shall be solely
the
debts, obligations and liabilities of the Company and no Member shall be
obligated personally for any such debt, obligation or liability of the Company
solely by reason of being a Member of the Company. Except as otherwise provided
in this Agreement, the liability of the Members, as such, shall be limited
to
the amount of capital contributions that the Members have made to the
Company.
ARTICLE
II
MEMBERS;
CAPITAL CONTRIBUTIONS
Section
2.01 Member’s Interests.
(a)
Subject
to the terms of this Agreement, the Managing Member may from time to time create
such classes of Units in the Company, to be designated as the Managing Member
shall determine. The holders of record of such Units shall have such rights
and
obligations associated with such Units as are provided herein and in the
resolution, if any, of the Managing Member creating such Units.
(b)
Until
the Managing Member determines otherwise, the interest of each Member in the
Company shall be the number of each class of Units set forth opposite its name
in the chart below, as the same may be adjusted from time to time in accordance
with the terms of this Agreement:
|
MEMBER
|
CLASS
A UNITS
|
CLASS
B UNITS
|
||
|
Wilshire
|
750
|
|||
|
Proud
Three
|
750
|
Section
2.02 Capital Contributions.
(a)
In
consideration of its initial 750 Class A Units set forth in Section 2.01(b)
above, on the date hereof, Wilshire shall contribute the Property to the capital
of the Company, free and clear of all Encumbrances other than Permitted
Encumbrances (“Wilshire’s
Capital Contribution”).
In
order to properly effect the transfer of the Property to the Company, Wilshire
shall execute and deliver to the Company, simultaneously with the execution
and
delivery of this Agreement, a Bargain and Sale Deed with Covenants Against
Grantor’s Acts, in the form attached hereto as Exhibit E, and such other
instruments of transfer and conveyance in form and substance satisfactory to
the
Company, as may be required to vest good and marketable title to the Property
in
the Company. Wilshire shall take any further actions (including the execution
and delivery of such further instruments and documents) which are necessary
or
desirable to effectuate the transfer of the Property to the Company as the
Company or any other Member may reasonably request.
3
(b)
In
consideration of its initial 750 Class B Units set forth in Section 2.01(b)
above, Proud Three shall contribute the
Loans
and the Mortgages to the capital of the Company, free and clear of all
Encumbrances (“Proud
Three’s Capital Contribution”).
In
order to properly effect the transfer of the Loans and the Mortgages to the
Company, Proud Three shall execute and deliver to the Company, simultaneously
with the execution and delivery of this Agreement, an Assignment of the Loans
and Loan Documents, a General Assignment and ▇▇▇▇ of Sale, an Allonge to the
Notes and an Assignment of Mortgage, in the forms attached hereto as Exhibits
F,
G, H and I respectively, and such other instruments of transfer and conveyance
in form and substance satisfactory to the Company, as may be required to vest
in
the Company all right and privileges arising under the Loans and the Mortgages.
Proud Three shall take any further actions (including the execution and delivery
of such further instruments and documents) which are necessary or desirable
to
effectuate the transfer of the Loans and the Mortgages to the Company as the
Company or any other Member may reasonably request.
(c)
A
Capital Account shall be established for each Member on the books of the
Company. It is understood and agreed that: (i) Wilshire’s initial Capital
Account shall be $7,500,000; and (ii) Proud Three’s initial Capital Account
shall be $7,500,000. The initial amount credited to each Member’s Capital
Account shall be referred to as its “Capital
Investment”.
Section
2.03 Required
Funds; Loans by Members.
(a)
The
Members acknowledge that funds will be required by the Company to complete
the
construction at the Property and to fund certain operating expenses of the
Company (the “Required
Funds”).
The
Members agree that the Managing Member shall first use reasonable efforts to
borrow the Required Funds from a lending institution on market
terms.
(b)
In
the event that: (i) the Managing Member is unable to borrow the Required Funds
in accordance with Section 2.03(a), or (ii) the Managing Member determines,
at
any time that additional cash is needed or reasonably required to enable the
Company to conduct its business and affairs, then any such Required Funds or
additional cash may be provided in the nature of a loan to the Company from
any
of the Members (“Member
Loans”).
If
the Managing Member in unable to borrow the Required Funds in accordance with
Section 2.03(a) or determines that any such loan is otherwise needed or
reasonably required, the Managing Member shall offer all of the Members the
opportunity to make such a loan by providing written notice thereof, including
all of the terms of such loan to each of the Members (the “Loan
Notice”).
If
more than one Member desires to make such loan, such Members shall be entitled
to fund up to a portion of such loan pro rata in accordance with the number
of
Units owned by the Members (unless the other Members also desiring to make
such
loan agree otherwise). Each Member electing to make such loan shall give written
notice of such election to the Managing Member not later than ten (10) days
after receipt of a Loan Notice. Interest shall accrue and be payable on all
Member Loans at a per annum rate as shall be established by the Managing Member
and set forth in the Loan Notice. All Member Loans shall constitute an
obligation and liability of the Company. Unless otherwise agreed to in writing
between the Members and the Company, the Members shall not have personal
obligation or liability for the repayment of Member Loans and the same shall
be
collectible only from Company assets. No Member Loan shall be deemed a
contribution to the capital of the Company and Member Loans shall not in any
respect increase a Member’s equity interest or Units in the Company. Member
Loans and any interest accrued thereon shall be repaid pari-passu to the
Member(s) making such loans prior to any distributions being made to Members
under Section 8.01 or Article IX.
4
Section
2.04 Capital,
Profits, Losses and Distributions. Each Unit shall have such interests in
the capital, profits and losses, and distributions of the Company as provided
in
this Agreement.
Section
2.05 Status of Interests. The
Units
issued pursuant to this Agreement (including additional Units hereafter
authorized and issued) shall be deemed to be fully paid and non-assessable
if
the entire amount of consideration therefore has been received by the
Company.
Section
2.06 No Issuance of Certificates. A Unit shall not be represented by a
certificate unless otherwise provided by the Managing Member; provided, however,
if the Managing Member elects to certificate any Units, all the Units shall
be
so certificated. Any certificate representing a Unit shall have a legend
endorsed thereon and be in the form approved by the Managing Member.
Section
2.07 Register. The Company shall keep a register that shall provide for the
registration and transfer of Units, if the Managing Member reasonably determines
that such register is necessary. In such event, an Authorized Person shall
act
as registrar and transfer agent for the purpose of registering Units and
transferring Units.
Section
2.08 Registered Owner. The Company shall be entitled to treat the record
holder of any Unit as the Member holding such Unit. The Company shall not be
bound to recognize any equitable or other claim to or interest in such Unit
on
the part of any other Person, whether or not the Company shall have actual
or
other notice hereof.
Section
2.09 Capital Contributions.
(a)
Uses
of Capital Contributions.
Any
funds received by the Company pursuant to this Article II shall be utilized
by
the Company for Company purposes and for perpetuating the Business.
(b)
Withdrawal of Capital.
Unless
the prior written consent of all of the Members shall have been obtained and
except as provided in Article VIII, no Member shall have the right to
withdraw any part of such Member’s Capital Account prior to the liquidation and
termination of the Company pursuant to Article IX. This Section shall not in
any
way limit the ability of the Company to distribute any or all the Members’
Capital Accounts in accordance with Article VIII.
(c)
Source of Distributions of Capital Contributions.
No
Member nor any of their respective Affiliates, shall be personally liable for
the return of the Capital Contributions of any other Member, or any portion
thereof, it being expressly understood that any such return shall be made solely
from the Company’s assets.
5
Section
2.10 Additional Contributions to Capital.
(a)
The
Managing Member may, at any time, or from time to time, determine that
additional capital in excess of prior capital contributions is necessary for
the
operation of the Company (a “Capital
Call”).
In
the event of a Capital Call, the Managing Member shall serve written notice
(the
“Capital
Call Notice”)
of
such Capital Call upon each Member. The Capital Call Notice shall set forth:
(i)
the amount of additional capital required (the “Capital
Call Amount”);
(ii)
the specific purpose for the Capital Call Amount; (iii) the number and class
of
Units to be issued for the Capital Call Amount; (iv) the preferred return,
if
any, on the Units, whether the return shall be cumulative, and, if so, from
which date or dates, and the relative rights of priority, if any, of payment
of
the preferred return; (v) whether the Units shall have voting rights, in
addition to the voting rights provided by law, and, if so, the terms of such
voting rights; (vi) the rights of the Units to distributions, whether before
or
in connection with the liquidation, dissolution or winding up of the Company,
and the relative rights of priority, if any, of any such payments on Units;
and
(vii) any other relative rights, preferences and limitations of the Units.
Each
Member may contribute, within thirty (30) days following receipt of the Capital
Call Notice (the “Capital
Call Period”),
a pro
rata amount of the Capital Call Amount based on the number of Units owned by
the
Members (as to each Member, the “Additional
Capital”).
(b)
Within thirty (30) days after the date of the giving of any such Capital Call
Notice, each Member electing to contribute to the Capital Call Amount shall
pay
to the Company its pro rata portion of the Capital Call Amount in the manner
directed in the Capital Call Notice as a Capital Contribution. Any Member who
shall fail to make any Capital Contribution to the Company pursuant to this
Section within said thirty (30) day period is herein referred to as a
“Non-Contributing
Member”;
and
any Member who shall make the required Additional Capital Contribution within
said thirty (30) day period is herein called a “Contributing
Member.”
(c)
If
within such thirty (30) timeframe referred to Section 2.10(b) any Member fails
to make its Capital Contribution pursuant to this Section, the Managing Member
shall give notice to all the Members, setting forth (i) the name of the
Non-Contributing Member(s); and (ii) the total of the Capital Contribution
which
the Non-Contributing Member(s) failed to contribute to the Company pursuant
to
such Capital Call Notice (herein called the “Capital
Call Deficit”).
Within fifteen (15) days after the giving of such notice, each Contributing
Member shall have the right (but not the obligation) to contribute a pro rata
portion of the Capital Call Deficit (as same exists at the time of such
contribution) as a Capital Contribution to the Company based upon the number
of
Units owned by the Contributing Members (as to each Contributing Member, the
“Additional
Capital”).
ARTICLE
III
REPRESENTATINS
AND WARRANTIES.
Section
3.01 Representations
and Warranties of Wilshire. Wilshire hereby represents and warrants to the
Company and each other Member that:
(a)
Wilshire
is duly organized, validly existing and in good standing under the laws of
the
jurisdiction of its organization, and it is registered or qualified to conduct
business in all other jurisdictions in which the failure to be so registered
or
qualified would materially and adversely affect the ability of Wilshire to
perform its obligations hereunder.
6
(b)
Wilshire has taken all necessary action to authorize the execution, delivery
and
performance of this Agreement by Wilshire. This Agreement and all the
obligations of Wilshire hereunder are the legal, valid and binging obligations
of Wilshire enforceable in accordance with the terms of this Agreement, except
as such enforcement may be limited by bankruptcy, insolvency, reorganization
or
other laws affecting the enforcement of creditors’ rights generally and by
general principals of equity (regardless of whether such enforceability is
considered in a proceeding in equity or at law).
(c)
The
execution and delivery of this Agreement and the performance by Wilshire of
it
obligations hereunder will not conflict with or be in breach by Wilshire of
any
material provisions of any law, regulation, judgment, order, decree, writ,
injunction, contract, agreement or instrument to which Wilshire is subject;
and
Wilshire has obtained any consent, approval, authorization or order of any
court
or governmental agency, if any, required for the execution, delivery and
performance by Wilshire of this Agreement.
(d)
There
is no commenced, or to the Knowledge of Wilshire, threatened litigation against
Wilshire which prohibits Wilshire from contributing the Property to the Company.
(e)
Wilshire has good, marketable and insurable (at regular rates) title to the
Property, free and clear of all Encumbrances, other than Permitted
Encumbrances.
(f)
To
the Knowledge of Wilshire, there are no lawsuits, claims, suits, proceedings
or
investigations pending relating to the Property. To the Knowledge of Wilshire,
there are no injunctions, orders, awards or decrees of any Governmental Body
currently in effect with respect to the Property.
(g)
To
the Knowledge of Wilshire, the buildings and improvements located on the
Property are in compliance with all applicable laws.
Section
3.02 Representations
and Warranties of Proud Three. Proud Three hereby represents and warrants to
the Company and each other Member that:
(a)
Proud
Three is duly formed, validly existing and in good standing under the laws
of
the jurisdiction of its formation, and it is registered or qualified to conduct
business in all other jurisdictions in which the failure to be so registered
or
qualified would materially and adversely affect the ability of Proud Three
to
perform its obligations hereunder.
(b)
Proud
Three has taken all necessary action to authorize the execution, delivery and
performance of this Agreement by Proud Three. This Agreement and all the
obligations of Proud Three hereunder are the legal, valid and binging
obligations of Proud Three enforceable in accordance with the terms of this
Agreement, except as such enforcement may be limited by bankruptcy, insolvency,
reorganization or other laws affecting the enforcement of creditors’ rights
generally and by general principals of equity (regardless of whether such
enforceability is considered in a proceeding in equity or at law).
(c)
The
execution and delivery of this Agreement and the performance by Proud Three
of
it obligations hereunder will not conflict with or be in breach by Proud Three
of any material provisions of any law, regulation, judgment, order, decree,
writ, injunction, contract, agreement or instrument to which Proud Three is
subject; and Proud Three has obtained any consent, approval, authorization
or
order of any court or governmental agency, if any, required for the execution,
delivery and performance by Proud Three of this Agreement.
7
(d)
There
is no commenced, or to the Knowledge of Proud Three, threatened litigation
against Proud Three which prohibits Proud Three from contributing the Loans
and
the Mortgages to the Company.
(e)
Proud
Three is the owner and holder of the Loans, the Mortgages and the Loan Documents
and Proud Three has not previously assigned, transferred or conveyed the Loans
or the Mortgages, or any portion thereof or any interest therein, to any other
Person.
(f)
To
the Knowledge of Proud Three, Exhibit B accurately sets forth (i) a description
of each Note including its principal amount and execution date, (ii) the Obligor
of each Note,
and
(iii) the outstanding amount of the Loans as of the date hereof.
(g)
To
the Knowledge of Proud Three, the Notes and the other Loan Documents delivered
by Proud Three to the Company prior to the execution of this Agreement are
true,
complete and correct copies of the documents they purport to be and have not
been superseded, amended, modified, canceled or otherwise changed. To the
Knowledge of Proud Three, Exhibit B is a true, correct and complete list and
description of all Loan Documents, including, notes (and modifications thereto),
mortgages (and modifications thereto) assignments of leases and rents,
guarantees and UCC-1 financing statements evidencing or securing the
Loans.
(h)
To
the Knowledge of Proud Three, the Notes and the other Loan Documents are the
legal, valid and binding obligations of the Obligor thereof, enforceable against
such Obligor in accordance with their terms (a) except as such enforcement
may
be limited by bankruptcy, insolvency, reorganization or other similar laws
affecting the enforcement of creditors’ rights generally and by general equity
principals (regardless of whether such enforcement is considered in a proceeding
in equity or at law) and (b) except to the extent that the inability to enforce
any particular provision or provisions does not affect the ability of the holder
thereof to foreclose the Loan Documents for any payment default by the maker
or
Obligor thereunder or the practical realization of the intended benefits of
the
Loan Documents.
(i)
Proud
Three acknowledges that Wilshire is conveying the Property to the Company:
(i)
without any representations as to the physical conditions of the Property,
including any improvements thereon, (ii) except as otherwise provided in this
Agreement, without any representations as to the environmental condition of
the
Property, including the presence or absence of hazardous materials, or (iii)
without any representations as to the value of the Property. Proud Three
acknowledges that the Company is acquiring the Property as is and that the
Company may be required to incur significant costs in order to improve the
Property to make it suitable for its intended business purpose.
Section
3.03 Further
Representations and Warranties. Each Member hereby represents and warrants
to the Company that: (a) such Member is acquiring its interest in the Company
for the Member’s own account as an investment and without an intent to
distribute the interest; and (b) such Member acknowledges that the interests
have not been registered under the Securities Act of 1933, as amended, or any
state securities laws, and may not be resold or transferred by the Member
without appropriate registration or the availability of exemption from such
requirements.
8
ARTICLE
IV
MANAGEMENT
OF THE COMPANY;
CONDUCT
OF BUSINESS; POWERS; OTHER ACTIVITIES
Section
4.01 Management
by the Managing Member. Wilshire shall have the right and power to make, and
only the affirmative vote or consent of Wilshire (the “Managing Member”) shall
be required for, all significant decisions (being a decision which may have
important ramifications for the Company and the value of its assets) concerning
the Business or the Company, including, but not limited to, the
following:
(a)
commencing
any business or line of business which is inconsistent with the Business or
making any fundamental changes to the nature of the Business;
(b)
requesting that the Members make additional capital contributions pursuant
to
Section 2.10 hereof and amending this Agreement to take account of any
additional Units issued in connection with such additional capital
contributions;
(c)
incurring any indebtedness or otherwise borrowing any money;
(d)
loaning any money, guaranteeing the payment of any money or debt of another
Person, guaranteeing the performance of any other obligation of another Person
or indemnifying any other Person against any losses or damages or costs except
as incurred in the ordinary course of the Company’s business;
(e)
filing a voluntary petition by the Company pursuant to Title11 of the U.S.
Code;
(f)
admitting a new member or otherwise issuing or selling additional Units in
the
Company or any security, warrant, option or right (whether contingent or
otherwise) to purchase or acquire any Unit in the Company (collectively,
“Subsequent
Securities”)
to any
Person and amending this Agreement to take account of Subsequent Securities
issued in connection with such admission, issuance or sale; provided, however
that the Members shall have the right, pro rata in accordance with the number
of
Units owned by the Members, to subscribe (within a thirty (30) day period
following receipt of notice of such issuance or sale from the Managing Member)
for such Subsequent Securities on the same terms and conditions as proposed
to
be sold or issued by the Managing Member;
(g)
making capital expenditures;
(h)
retaining or discharging any manager which performs day-to-day operations,
asset
management services and/or construction management services to the Company
and
amending or terminating any agreement relating thereto to which the Company
is a
party;
(i)
changing the accounting principles used by the Company or adopting any material
changes to the Company's financial reporting practices, procedures or standards,
except to the extent required by generally accepted accounting
principles;
9
(j)
retaining an accounting firm and any other professional advisors;
(k)
entering into any transactions between the Company and its Members or their
Affiliates;
(l)
acquiring all or substantially all of the assets of, or acquiring a controlling
interest in, any other Person;
(m)
amending the Certificate of Formation;
(n)
entering into any contract or arrangement or executing any document involving
payments by the Company, or the terminating or amending such contract or
arrangement;
(o)
entering into any material agreements not in the ordinary course including,
without limitation, any non-compete or non-solicitation agreement, or any
confidentiality agreement which directly or indirectly binds or affects any
Member;
(p)
settling or defending any legal or regulatory action, or commencing any legal
action, on behalf of the Company, or releasing, compromising, assigning or
transferring any material claims or material rights of the Company;
(q)
making capital contributions and/or loans to any other Person;
(r)
subject to Section 11.02(e), selling, transferring, conveying, leasing,
mortgaging, refinancing, pledging or otherwise disposing or encumbering the
Property or any portion thereof;
(s)
merging, consolidating or reorganizing the Company with any other
Person;
(t)
entering into any joint venture, partnership or similar arrangement with any
other Person;
(u)
voluntarily liquidating or dissolving the Company; or
(v)
any
other decisions reserved to the Managing Member pursuant to this Agreement.
Section
4.02 Termination
of the Loans. Simultaneously with, or promptly following, the contribution
of the initial Capital Investments to the Company, the Company shall: (i) cancel
the Loans, (ii) cause the Mortgages to be discharged, (iii) cause the UCCs
set
forth on Exhibit B to be terminated, and (iv) cause the guarantees set forth
on
Exhibit B to be terminated.
ARTICLE
V
DUTIES
OF MEMBERS; RESTRICTIONS ON MEMBERS
Section
5.01 Confidentiality.
Each
Member, on behalf of such Member and such Member’s Affiliates, covenants and
agrees that such Member and such Member’s Affiliates shall retain in strict
confidence, and shall not use for any purpose whatsoever, or divulge,
disseminate or disclose to any third party (other than in furtherance of the
business purposes of the Company or as may be required by law, including without
limitation any securities law applicable to such Member or Member’s Affiliate)
all proprietary or confidential information relating to the Company’s Business
or the Company’s investments or activities. The provisions of this Section 5.01
shall survive and continue to bind the Company’s Members notwithstanding any
Member ceasing to be a Member of, or otherwise affiliated with, the
Company.
10
Section
5.02 Company Property. All confidential and proprietary information of the
Company shall be the exclusive property and proprietary rights of the Company,
and to the extent any Member has participated in the development thereof, such
Member shall assign all such rights to the Company and such Member’s work effort
shall be considered “works for hire” for the Company.
Section
5.03 Engaging In Other Activities. Notwithstanding any provision contained
in this Agreement to the contrary, each Member may engage in, invest in,
participate in or otherwise enter into other business ventures of any kind,
nature and description, alone or with others, including, without limitation,
the
acquisition, ownership, financing, leasing, operation, management or development
of any interests in any business or asset, and neither the Company nor any
other
Member shall have any right in or to any such activities or the income or
profits derived therefrom.
ARTICLE
VI
ACCOUNTING
PROVISIONS
Section
6.01 Fiscal
Year. The fiscal and taxable year of the Company shall end on December 31 of
each calendar year, unless otherwise determined by the Managing Member (“Fiscal
Year”).
Section
6.02 Books and Accounts.
(a)
Books
and
accounts shall be kept and maintained by the Company at the principal place
of
business of the Company or such other place as the Managing Member may
determine. Such books and accounts shall be kept in accordance with generally
accepted accounting principals and shall include a separate Capital Account
for
each Member. The Company’s books and records shall also include a list of the
name and address of each Member, the number and class of Units held by each
Member, which information shall be updated by the Company to reflect all
issuances, redemptions and transfers of Units. Each Member or its duly
authorized representative, at its own expense, may at all reasonable times
by
appointment during business hours upon reasonable notice have access to, and
may
inspect and make copies of, such books and accounts of the Company.
(b)
All
funds received by the Company shall be deposited in the name of the Company
or a
designee or agent of the Company in such bank account or other accounts as
the
Managing Member may designate from time to time, and withdrawals therefrom
shall
be made upon the signature of an Authorized Person of the Company as the Members
may designate from time to time.
Section
6.03 Financial
Reports.
11
(a)
The
Company shall cause to be prepared at the Company’s expense, and shall deliver
to each Member the following reports:
(i)
Within
the period required by the Code after each Fiscal Year, all information required
to be provided to each Member for the preparation of such Member’s federal
income tax returns (i.e., Form K-1 or a reasonable substitute
therefore);
(ii)
Within 60 days after March 31, June 30, September 30 and December 31,
the
Company shall provide to each Member an unaudited balance sheet, income
statement and statement of cash flow as of the end of and for the immediately
preceding three month period;
(iii)
Within 90 days after the end of each Fiscal Year, the Company shall provide
to
each Member a balance sheet, income statement and statement of cash flows,
each
prepared in accordance with generally accepted accounting principals as of
and
for the annual period ending the last day of the immediately preceding Fiscal
Year.
No
cause
of action may be maintained against the Company or any Member for any delay
in
provision of reports and returns referred to in this Section 6.03 due to the
delay of the Company’s independent public accountants or any other reason not
under the control of the Company.
Section
6.04 Tax
Elections. The Company, at the request of any Member, shall make an election
pursuant to the provisions of Code Section 754. Any other elections required
or
permitted to be made by the Company under the Code shall be made by
Wilshire.
Section
6.05 Tax Audits.
(a)
Wilshire
(or such other Person designated by the Members) shall serve as the tax matters
partner for the Company pursuant to Code Section 6231 and the Treasury
Regulations promulgated thereunder (the “Tax
Matters Partner”).
Each
Member by the execution hereof consents to Wilshire serving as the Tax Matters
Partner and agrees to execute, certify, acknowledge, deliver, swear to, file
and
record at the appropriate public offices such documents as may be necessary
or
appropriate to evidence such consent. To the extent and in the manner provided
by applicable law and regulations, the Tax Matters Partner shall furnish the
name, address, profits interest, and taxpayer identification number of each
Member to the Secretary of the Treasury or his delegate (the “Secretary”).
The
Tax Matters Partner shall keep the Members informed of any final administrative
or judicial determination regarding the adjustment at the Company level of
any
item required to be taken into account by a Member for income tax purposes
(such
administrative determination referred to hereinafter as a “tax
audit”
and
such judicial determination referred to hereinafter as “judicial
review”).
(b)
The
Tax Matters Partner may take any of the following actions:
(i)
to
enter into any settlement with the Internal Revenue Service or the Secretary
with respect to any tax audit or judicial review, in which the Tax Matters
Partner may expressly state that such agreement binds the Members;
12
(ii)
in
the event that a notice of a final partnership administrative adjustment at
the
Company level of any item required to be taken into account by a Member for
tax
purposes (a “final adjustment”) is mailed to the Tax Matters Partner, to seek
judicial review of such final adjustment, including the filing of a petition
for
readjustment with the Tax Court, the District Court of the United States for
the
district in which the Company’s principal place of business is located, or the
United States Court of Federal Claims;
(iii)
to
intervene in any action brought by any Member for judicial review of a final
adjustment (for purposes of this clause (iii), the consent of all Members other
than the Member that brought such action shall be required for the Tax Matters
Partner to intervene in such action);
(iv)
to
file a request for an administrative adjustment with the Secretary at any time
and, if any part of such request is not allowed by the Secretary, to file a
petition for judicial review with respect to such request;
(v)
to
enter into an agreement with the Internal Revenue Service to extend the period
for assessing any tax which is attributable to any item required to be taken
into account by a Member for tax purposes, or an item affected by such item;
and
(vi)
to
take any other action on behalf of the Members of the Company in connection
with
any administrative or judicial tax proceeding to the extent permitted by
applicable law or regulations.
(c)
The
Company shall indemnify and reimburse the Tax Matters Partner for all expenses,
including legal and accounting fees, claims, liabilities, losses, and damages
incurred in connection with any administrative or judicial proceeding with
respect to the tax liability of the Members. The payment of all such expenses
shall be made before any distributions are made to Members or any discretionary
reserves are set aside by the Members. The taking of any action and the
incurring of any expense by the Tax Matters Partner in connection with any
such
proceeding, except to the extent required by law, is a matter in the sole
discretion of the Tax Matters Partner and the provisions on limitations of
liability and indemnification set forth herein shall be fully applicable to
the
Tax Matters Partner in its capacity as such.
ARTICLE
VII
TRANSFER
OF INTERESTS
Section
7.01 Admission of Substitute Members.
Any Person who shall have acquired all or any portion of the Units of one or
more Members pursuant to a written assignment shall be admitted to the Company
as a substitute member (provided that the provisions of this Article VII shall
have been complied with) and shall be deemed, and have all the right and
obligations of, a “Member” under this Agreement, except as otherwise expressly
provided in this Agreement.
Section
7.02 Restrictions on Transfers.
No
Member shall sell, transfer, assign, gift, pledge, hypothecate, grant a security
interest in or otherwise encumber, or transfer (a “Transfer”) all or any portion
of such Member’s Units, except upon receipt by such Member of the written
consent to such Transfer from all other Members, which consent may be granted
or
withheld by a Member, in such Member’s sole and absolute discretion.
Notwithstanding the foregoing, Proud Three may transfer its Units to the Siggi
▇. ▇▇▇▇▇▇ Trust without the consent of any other Member.
Nothing
in this Section 7.02 shall be deemed to prohibit the Transfer of all or any
portion of the issued and outstanding shares of stock of Wilshire.
13
ARTICLE
VIII
DISTRIBUTIONS
AND ALLOCATIONS
Section
8.01 Distributions
of Net Cash Flow and Net Proceeds.
(a)
Except
as
otherwise required by this Agreement (including, without limitation Section
2.03) and subject to the making of the Tax Distributions pursuant to Section
8.01(b) below, Net Cash Flow and Net Proceeds shall be distributed at such
times
as the Managing Member shall determine, as follows:
(i)
First, to the Member owning Class A Units, until such Member shall have received
payment of an amount equal to such Member’s unreturned Capital
Investment.
(ii)
Second, to the Member owning Class B Units, until such Member shall have
received payment of an amount equal to such Member’s unreturned Capital
Investment.
(iii)
Third, pari passu (equal in priority) as follows:
fifty
percent (50%) to the Member owning Class A Units; and
fifty
percent (50%) to the Member owning Class B Units.
(b)
In
preference to any other distributions pursuant to this Section 8.01, the
Managing Member shall cause the Company to distribute cash of the Company to
the
Members holding Class A Units and Class B Units, on a quarterly (or other
reasonable) basis, at least sufficient for each such Member to meet such
Member's required federal, state and local income tax payments in respect of
such Member's allocable share of the Company’s taxable income for the current or
the prior fiscal year calculated at the marginal tax rates applicable to the
Member with the highest marginal tax rate (which tax payments shall include
(i)
estimated tax payments in respect of the current fiscal year and (ii) any
remaining payments of income tax on account of the prior fiscal year not funded
out of Tax Distributions in respect of estimated payments for such prior fiscal
year) (the “Tax
Distributions”).
For
purposes hereof, if a Member is a “pass-through” entity for income tax purposes,
the Tax Distributions required hereby shall be calculated by deeming the owners
of such Member to be the Member hereunder.
(c)
Notwithstanding Section 8.01(a) to the contrary, in
the
event that prior to the exercise of the Call Option by Proud Three pursuant
to
Section 11.02 of this Agreement and the occurrence of the Call Option Closing,
▇▇▇▇▇▇▇ ▇. ▇▇▇▇▇▇▇ (“▇▇▇▇▇▇▇”)
exercises the ▇▇▇▇▇▇▇ Call Option pursuant to the terms and conditions of that
certain Agreement dated the date of this Agreement by and among the Members,
the
Company and ▇▇▇▇▇▇▇ (the “▇▇▇▇▇▇▇
Rights Agreement”)
and
the ▇▇▇▇▇▇▇ Call Option Closing (as defined in the ▇▇▇▇▇▇▇ Rights Agreement)
occurs, then: (i) fifty percent (50%) of the Base Purchase Price (as defined
in
the ▇▇▇▇▇▇▇ Rights Agreement) shall be allocated and distributed to Wilshire;
(ii) fifty percent (50%) of the Base Purchase Price shall be allocated and
distributed to Proud Three; (iii) the Wilshire Additional Capital (as defined
in
the ▇▇▇▇▇▇▇ Rights Agreement shall be allocated and distributed to Wilshire;
and
(iv) the Proud Three Additional Capital (as defined in the ▇▇▇▇▇▇▇ Rights
Agreement) shall be allocated and distributed to Proud Three.
14
(d)
In
the event that ▇▇▇▇▇▇▇ exercises the Call Option pursuant to the terms and
conditions of the ▇▇▇▇▇▇▇ Rights Agreement and the ▇▇▇▇▇▇▇ Call Option Closing
occurs after the occurrence of the Call Option Closing pursuant to Section
11.02
of this Agreement, then the Company agrees to pay to Wilshire the sum of
$1,125,000.
(e)
In
the event that Proud Three exercises the Call Option pursuant to Section 11.02
during the First Year (as defined in Section 11.02) and: (i) during the period
commencing on the date of the Call Option Closing and the date that is one
(1)
year thereafter, the Company enters into a binding contract to sell the Property
(a “Binding
Contract”),
and
(ii) the amount of the Net Distributions (as hereinafter defined) from the
closing of the sale of the Property pursuant to the Binding Contract is greater
than $10,500,000 (the “Target
Net Distributions”),
then
the Company agrees to pay to Wilshire at the closing of the sale of the
Property, an amount equal to fifty percent (50%) of the Net Distributions in
excess of the Target Net Distributions. For purposes of this Section 8.01(e),
the term “Net
Distributions”
means:
(i) the Net Proceeds of such sale, minus (ii) the aggregate amount of all
additional capital contributions made by Proud Three (or any Affiliate of Proud
Three) to the Company.
(f)
In
the event that the Company sells the Property during the Black Out Period for
an
amount equal to or greater than the Release Price, then the Company agrees
to
pay over and distribute the Net Proceeds thereof to the Members as follows:
(i)
fifty percent (50%) of the Base Release Price shall be allocated and distributed
to Wilshire; (ii) fifty percent (50%) of the Base Release Price shall be
allocated and distributed to Proud Three; (iii) the Wilshire Additional
Contributions shall be allocated and distributed to Wilshire; and (iv) the
Proud
Three Additional Contributions shall be allocated and distributed to Proud
Three.
Section
8.02 Allocation
of Net Profits. Net Profits (other than from Net Proceeds or upon
liquidation) shall be allocated to
the
Members owning Class A Units and Class B Units, pari passu (equal in priority),
pro rata in accordance with the number of Units owned by such
Members.
Section
8.03 Allocation of Net Losses. Net Losses (other than from Net Proceeds or
upon liquidation) shall be allocated to
the
Members owning Class A Units and Class B Units, pari passu (equal in priority),
pro rata in accordance with the number of Units owned by such
Members.
Section
8.04 Allocation of Net Profits and Net Losses from Net Proceeds or upon
liquidation.
Net
Profits and Net Losses from Net Proceeds or upon liquidation
shall be
allocated among the persons who were Members during such period in a manner
that
will reduce,
proportionately, the differences between their respective Partially-adjusted
Capital Accounts and Target Capital Accounts for such period. No portion of
the
Net Losses for any fiscal year shall be allocated to a Member whose Target
Capital Account is greater than or equal to its Partially-adjusted Capital
Account for such fiscal year. No portion of the Net Profits for any period
shall
be allocated to any Member whose Partially-adjusted Capital Account is greater
than or equal to its Target Capital Account for such period. For the purpose
hereof, “Partially-adjusted
Capital Account”
means,
with respect to any Member for any period, the Capital Account of such Member
at
the beginning of such period, adjusted for all contributions and distributions
made during such period and all special allocations pursuant to Section 8.04
with respect to such period, but before giving effect to any allocations of
Net
Profits or Net Losses for such period made pursuant to this Section 8.04. For
the purpose hereof, the “Target
Capital Account”
of a
Member for a period shall be an amount (which may be either a positive or a
deficit balance) equal to:
15
(i)
the
amount of the hypothetical distribution (if any) that such Member would receive
if, on the last day of such fiscal year, (A) all assets of the Company,
including cash, were sold for cash equal to their book values, taking into
account any adjustments thereto for such fiscal year, (B) all liabilities of
the
Company were satisfied by the payment of cash according to their terms (limited,
with respect to each nonrecourse liability, to the book values of the assets
securing such liability), and (C) the net proceeds thereof (after satisfaction
of such liabilities) were distributed in full pursuant to Section 9.03,
less
(ii)
the
sum of (A) the amount, if any, without duplication, that such Member would
be
obligated to contribute to the capital of the Company pursuant to any provision
of this Agreement, (B) such Member’s share of Company Minimum Gain determined
pursuant to Section 1.704-2(g), and (C) such Member’s share of Member
Nonrecourse Debt Minimum Gain determined pursuant to Regulations Section
1.704-2(j), all calculated immediately prior to the hypothetical sale described
in Section 8.04(a)(i) hereof.
(b)
Determination
of Items Comprising Allocations of Net Profits and Net Loss:
(i)
If
the Company has Net Profits for a period,
(A)
for
any
Member whose Capital Account balance should be reduced by reason of the
application of Section 8.04(a) above, the allocation required by Section 8.04(a)
shall consist of a proportionate share (based upon the relative amounts of
the
reductions in the Capital Account balances of all Members whose Capital Account
balances then should be reduced by reason of the application of Section 8.04(a)
of each of the Company’s items of expense or loss entering into the computation
of Net Profits for such period
to
the
extent necessary to eliminate to the maximum extent possible for the
period
in
question, the difference between the Partially-adjusted Capital Account and
the
Target Capital Account of such Member; and
(B)
the
allocation pursuant to Section 8.04(a) hereof in respect of each Member (other
than a Member referred to in Section 8.04(b)(i) above) shall consist of a
proportionate share (based upon the relative amounts of the increases of the
Capital Account balances of all Members (other than Members referred to in
Section 8.04(b)(i) above) of each item of income, gain, expense and loss
entering into the computation of Net Profits for such period
(other
than the portion of each item of expense or loss, if any, that is allocated
pursuant to Section 8.04(a)).
(ii)
If
the Company has Net Loss for a period,
(A)
for
any
Member whose Capital Account balance needs to be increased pursuant to Section
8.04(a) hereof, the allocation required by Section 8.04(a) shall consist of
a
proportionate share (based upon the relative amounts of the increases in the
Capital Account balances of all Members whose Capital Account balances then
should be reduced by reason of the application of Section 8.04(a)) of each
of
the Company’s items of income and gain entering into the computation of Net Loss
for such period
to
the
extent necessary to eliminate to the maximum extent possible for the
period
in
question, the difference between the Partially-adjusted Capital Account and
the
Target Capital Account of such Member; and
16
(B)
the
allocation pursuant to Section 8.04(a) hereof in respect of each Member (other
than a Member referred to in Section 8.04(b)(ii)(A) above) shall consist of
a
proportionate share (based upon the relative amounts of the reductions of the
Capital Account balances of all Members (other than Members referred to in
Section 8.04(b)(ii)(A)) of each Company item of income, gain, expense and loss
entering into the computation of Net Loss for such period
(other
than the portion of each Company item of income and gain, if any, that is
allocated pursuant to Section 8.04(a)).
(c)
To
the
maximum extent possible in each fiscal
year,
the
items of taxable income and gain that are required to be specially allocated
among any Members who should be allocated items
of
expense and loss entering into the computation of Net Profit under
Section 8.04(a) shall be allocated among them in the same proportion as the
total of all items
of
expense or loss entering into the computation of Net Profit that
should be allocated among them under Section 8.04(a). Correspondingly, to the
maximum extent possible in each period, the items of tax-deductible items of
expense and loss that are required to be specially allocated among all Members
who need to be allocated items
of
expense and loss entering into the computation of Net Loss under
Section 8.04(a) shall be allocated among them in the same proportion as the
total of all items
of
income or gain entering into the computation of Net Loss that
should be allocated among them under Section 8.04(a). The purpose of this
subsection is to assure that such taxable and tax-deductible items are fairly
allocated among the Members in each period.
(d)
Notwithstanding anything to the contrary contained in this Section 8.04, in
the
event that the
▇▇▇▇▇▇▇ Call Option Closing occurs and the Net Proceeds are distributed to
the
Members pursuant to Section 8.01(c) hereof or in the event that the Property
is
sold during the Black Out Period and the Net Proceeds are distributed to the
Members pursuant to Section 8.01(f) hereof, then Net Profits shall be
allocated:
(i)
Fifty
percent (50%) to Wilshire; and
(ii)
Fifty percent (50%) to Proud Three.
Section
8.,05 No
Return of Distributions. No Member shall have any obligation to refund to
the Company any amount that shall have been distributed to such Member pursuant
to this Agreement, subject, however, to applicable law.
Section
8.06 Allocations between Assignor and Assignee Members. In the case of a
Transfer, the assignor and assignee shall each be entitled to receive
distributions of Net Cash Flow and allocations of Net Profits or Net Losses
and
Nonrecourse Deductions as follows:
(a)
Unless
the assignor and assignee agree to the contrary and shall so provide in the
instrument effecting the Transfer, distributions shall be made to the Person
owning the Units on the date of the distribution; and
(b)
Net
Profits or Net Losses and Nonrecourse Deductions shall be allocated by the
number of days of the periods each Person held the Units; provided that Net
Profits or Net Losses attributable to a Capital Transaction shall be allocated
to the member owning the Units when a recognition event occurred for federal
income tax purposes.
17
Section
8.07 Deficit
Capital Accounts. Except as otherwise provided herein or under the Act, no
Member shall be required at any time to make up any deficit in such Member’s
Capital Account.
Section
8.08 Amounts Withheld. All amounts withheld pursuant to the Code or any
provisions of state or local tax law with respect to any payment or distribution
to the Company or to the Members or any allocation of taxable income to the
Company or the Members shall be treated as amounts distributed to the Members
pursuant to this Article for all purposes under this Agreement. The Company
is
authorized to withhold from distributions, or with respect to allocations,
to
the Members and to pay over any federal, state or local government any amounts
required to be withheld pursuant to the Code or any provisions of any other
federal, state or local law and shall allocate such amounts to the Members
with
respect to whom such amounts were withheld. If the amount required to be
withheld with respect to a Member exceeds the amount which otherwise would
have
been distributed to such Member, such Member shall pay to the Company the amount
of such excess within five days after the giving of written demand therefore
by
the other Member(s). If such Member (herein called a “Delinquent Member”) shall
fail to pay such excess within said five day period, then (i) interest shall
accrue thereon at or equal to the lesser of 24% per annum or the maximum rate
permitted by law, (ii) such excess amount together with interest accrued thereon
as aforesaid shall be a lien upon the Units of the Delinquent Member in favor
of
the Company and may be recovered from the first distributions to which the
Delinquent Member would otherwise have been entitled from the Company until
such
excess amount is fully repaid together with interest thereon as aforesaid,
and
(iii) the Company, in addition to and without limiting any of its other rights
and remedies, may institute an action against the Delinquent Member for
collection of such excess amount and interest; in any such action, the Company
shall be entitled to recover, in addition to such excess amount and interest,
all reasonable attorneys’ fees, disbursements and court costs incurred by the
Company in connection with its efforts to collect the amounts due from such
Delinquent Member. In addition, such Delinquent Member shall indemnify and
hold
harmless the Company and each of the other Members and the employees of the
Company from all liabilities, losses, costs and expenses, including, without
limitation, penalties imposed by the Internal Revenue Service or any state
or
local taxing authority, for failure to remit the required amount of taxes to
the
appropriate governmental authority.
ARTICLE
IX
LIQUIDATION
AND TERMINATION OF THE COMPANY
Section
9.01 General.
(a)
The
Company shall be dissolved and its affairs shall be wound up upon the first
to
occur of any of the following (the “Termination
Date”):
(i)
The
vote or written consent of Wilshire;
(ii)
The
entry of a decree of judicial dissolution under Section 42:2B-49 of the Act;
or
(iii)
Any
other event requiring the dissolution of the Company pursuant to applicable
law.
18
(b)
From
and
after the Termination Date, the Company shall be dissolved and its affairs
shall
be wound up in accordance with this Article and the Act. The dissolution and
the
winding up of the Company’s affairs shall be conducted and supervised by the
Managing Member, or if the Managing Member is unable to conduct and supervise
the dissolution and winding up of the Company, by an Authorized Person (such
Authorized Agent being herein referred to as the “Liquidating
Agent”).
The
Liquidating Agent shall have all the rights and powers with respect to the
assets and liabilities of the Company in connection with the dissolution,
winding up and termination of the Company that the Members have with respect
to
the assets and liabilities of the Company. Without limiting the foregoing,
the
Liquidating Agent is hereby expressly authorized and empowered to execute and
deliver any and all documents necessary or desirable to effectuate the
liquidation and termination of the Company and to transfer any asset or
liability of the Company. The Liquidating Agent shall have the right from time
to time, by revocable powers of attorney, to delegate to one or more Persons
any
or all of such rights and powers and such authority and power to execute and
deliver documents, and, in connection therewith, to fix the reasonable
compensation of each such Person, which compensation shall be charged as an
expense of liquidation. The Liquidating Agent is also expressly authorized
to
distribute the Company’s property to the Members, which property may be subject
to liens.
Section
9.02 Statements
on Termination. Each Member shall be furnished with a statement prepared by
the Company’s independent certified public accountant setting forth the assets
and liabilities of the Company as of the date of the complete liquidation of
the
Company, and each Member’s share thereof or interest therein. Upon compliance
with the distribution plan of the Company adopted by the Members, the Units
in
the Company shall represent only an unsecured right to receive the net proceeds
of liquidation in accordance with this Article, and the Liquidating Agent shall
cause to be filed with the Treasurer of the State of New Jersey the Certificate
of Cancellation of the Company or any applicable form with similar effect in
each state in which the Company is qualified to do business.
Section
9.03 Priority on Liquidation. The Liquidating Agent shall, to the extent
feasible, liquidate the marketable assets of the Company as promptly as
practicable. To the extent the proceeds are sufficient therefore, as the
Liquidating Agent shall deem appropriate, the proceeds of such liquidation
shall
be applied in the following order of priority:
(a)
To
pay
the reasonable costs and expenses of the liquidation and
termination;
(b)
To
pay the matured or fixed debts and liabilities of the Company (including,
without limitation, all Member Loans);
(c)
To
establish any reserve that the Liquidating Agent may deem necessary for any
contingent, unmatured or unforeseen liability of the Company; and
(d)
The
balance, if any, shall be distributed to the Members in the same manner that
Net
Proceeds are distributable pursuant to Section 8.01.
19
Section
9.04 Distribution of Non-Liquid Assets.
(a)
If
after
the Termination Date the Liquidating Agent shall determine that it is not
practicable to liquidate all the assets of the Company (pursuant to the exercise
of its discretion in accordance with Section 9.03 with respect to assets that
are illiquid or are not marketable, or otherwise), then the Liquidating Agent
shall distribute such assets as follows:
(i)
The
Liquidating Agent shall cause the Company to retain assets having a fair market
value equal to the amount, if any, by which the net proceeds of liquidated
assets are insufficient to satisfy the debts and liabilities of the Company
(other than any debt or liability for which neither the Company nor any Member
is personally liable), to pay the costs and expenses of the dissolution and
liquidation, and to establish reserves, all subject to the provisions of Section
9.03. The foregoing shall not be construed, however, to prohibit the Liquidating
Agent from distributing, pursuant to Section 9.04(b), property subject to
liens.
(ii)
The
remaining assets shall be distributed to the Members by way of undivided
interests therein in such proportions as shall be equal to the respective
amounts to which each Member is entitled pursuant to Section 9.03(d). If, in
the
judgment of the Liquidating Agent, it shall not be practicable to distribute
to
each Member an undivided share of each asset, the Liquidating Agent may allocate
and distribute specific assets to one or more Members as tenants-in-common
as
the Liquidating Agent shall determine to be fair and equitable, taking into
consideration, inter alia, the basis for tax purposes of each asset distributed.
Without limiting the foregoing the Liquidating Agent may transfer assets to
a
liquidating trust in which each Member shall receive an interest with rights
to
distributions equivalent to its rights pursuant to Section 9.03.
(b)
Nothing
contained in this Article or elsewhere in this Agreement is intended to cause
any in-kind distributions to be treated as sales for value.
Section
9.05 Deficit upon Liquidation. Upon liquidation, no Member shall be liable
to the Company for any deficit in its Capital Account, nor shall such deficit
be
deemed an asset of the Company, other than to the extent required by
law.
Section
9.06 Source of Distributions. No Member shall be personally liable for the
return of the capital contributions of any other Member, or any portion thereof,
it being expressly understood that any such return shall be made solely from
Company assets.
20
ARTICLE
X
EXCULPATION
AND INDEMNIFICATION OF MEMBERS
Section
10.01 Exculpation.
(a)
No
Member
nor any Affiliate of any Member (collectively, the “Related
Group”)
shall
have any personal liability to the Company or the Members for damages for any
breach of duty in such capacity, provided that nothing in this Section 10.01
shall eliminate or limit the liability of any person within the Related Group
if
a judgment or other final adjudication adverse to such person establishes:
(i)
that such acts were the result of active and deliberate dishonesty and were
material to the cause of action so adjudicated; or (ii) that such person
personally gained in fact a financial profit or other advantage to which such
person was not legally entitled. The termination of a proceeding by judgment,
order, settlement, conviction or upon a plea of nolo contendere or its
equivalent, shall not, of itself, create a presumption that: (x) such acts
were
committed in bad faith or were the result of active and deliberate dishonesty
and were material to the cause of action so adjudicated; or (y) such Person
personally gained in fact a financial profit or other advantage to which such
Person was not legally entitled (unless there has been a final adjudication
in
the proceeding that such is the case).
(b)
Notwithstanding any of the foregoing to the contrary, the provisions of this
Section 10.01 shall not be construed so as to relieve (or attempt to relieve)
any Person within the Related Group from or against any liability, to the extent
(but only to the extent) that such liability may not be waived, modified or
limited under applicable law, but shall be construed so as to effectuate the
provisions of this Section 10.01 to the fullest extent permitted by
law.
Section
10.02 Indemnification. The Company shall indemnify each Person within the
Related Group thereof made or threatened to be made a party in any civil or
criminal action or proceeding, including actions under federal and state
securities laws, by reason of the fact that such Person or such Person’s
Affiliate is or was a Member of the Company, against judgments, fines, amounts
paid in settlement and reasonable expenses, including without limitation, court
costs, attorneys’ fees and disbursements and those of accountants, appraisers
and other experts and consultants incurred as a result of such action or
proceeding or any appeal therein, all of which expenses as incurred shall be
advanced by the Company pending the final disposition of such action or
proceeding. Such required indemnification shall be subject only to the exception
that no indemnification may be made to or on behalf of any of the Related Group
in the event and to the extent that a judgment or other final adjudication
adverse to the such indemnitee establishes that: (i) such acts were committed
in
bad faith or were the result of active and deliberate dishonesty and were
material to the cause of action so adjudicated, or (ii) such Person personally
gained in fact a financial profit or other advantage to which such Person was
not legally entitled; provided that indemnification shall be made upon any
successful appeal of any such adverse judgment or final adjudication. The
foregoing right of indemnification shall not be deemed exclusive of any other
rights to which any such Person in the Related Group may be entitled apart
from
this provision, including, without limitation, indemnification provisions
included in the certificate of organization of any subsidiary or the directors
and officers, errors and omissions insurance.
21
ARTICLE
XI
MISCELLANEOUS
PROVISIONS
Section
11.01 Right of First Refusal.
(a)
If:
(i)
the Company shall receive any bona fide offer (an “Offer”)
from
any Person to purchase, or enter into any other capital transaction with respect
to, the Property at any time (the “Option
Period”);
and
(ii) the Company were to sell, or enter into any such other capital transaction
with respect to, the Property pursuant to such Offer, upon distribution of
the
Net Proceeds thereof following such sale or such other capital transaction,
Proud Three would not receive greater than the amount that is One Million
Dollars ($1,000,000) less than its then unreturned Capital Investment, then
the
Managing Member shall notify Proud Three, in writing of the Offer (the
“Offer
Notice”).
The
Offer Notice shall contain a copy of the Offer and all other applicable terms
and conditions. Proud Three shall then have the right to purchase, or otherwise
enter into such other capital transaction with respect to, the Property at
the
price (the “Offer
Price”)
and on
the other terms and conditions set forth in Offer Notice. Proud Three’s right
under this Section 11.01 is referred to as the “Right
of First Refusal”.
(b)
Proud
Three shall exercise the Right of First Refusal, if at all, by providing the
Managing Member with written notice (the “Notice
of Exercise”)
within
thirty (30) days after receipt by Proud Three of the Offer Notice. If Proud
Three does not timely provide the Managing Member with the Notice of Exercise,
the Company may sell the Property to, or enter into any such other capital
transaction with, a third party at the Offer Price or any amount in excess
of
the Offer Price, on the terms set forth in Offer Notice, and the Right of First
Refusal shall thereupon terminate, provided that if the Property is not
conveyed, or such other capital transaction is not entered into, at the Offer
Price or any amount in excess of the Offer Price, on the terms set forth in
the
Offer Notice within ninety (90) days after the date of the Offer Notice with
respect to that Offer, then the Right of First Refusal shall again be
applicable.
Section
11.02 Call Option.
(a)
Proud
Three shall have the option (the “Call
Option”)
to
purchase all of the Units owned by Wilshire provided that Proud Three exercises
the Call Option by giving Wilshire written notice of its exercise of the Call
Option on or prior to the date that is ninety (90) days prior to the date that
is five (5) years after the date of this Agreement (the “Call
Option Notice”).
In
the event that Proud Three exercises the Call Option, then the total purchase
price for all of the Units owned by Wilshire shall be:
(i)
In
the event that the Call Option Closing is deemed to occur for purposes of this
Section 11.02(a) during the period commencing on the date hereof and ending
on
the date that is one (1) year after the date hereof (the “First Year”) -
$5,250,000;
(ii)
In
the event that the Call Option Closing is deemed to occur for purposes of this
Section 11.02(a) during the period commencing on the date immediately following
the end of the First Year and ending on the date that is one (1) year thereafter
(the “Second Year”) - $6,250,000;
22
(iii)
In
the event that the Call Option Closing is deemed to occur for purposes of this
Section 11.02(a) during the period commencing on the date immediately following
the end of the Second Year and ending on the date that is one (1) year
thereafter (the “Third Year”) - $7,500,000;
(iv)
In
the event that the Call Option Closing is deemed to occur for purposes of this
Section 11.02(a) during the period commencing on the date immediately following
the end of the Third Year and ending on the date that is one (1) year thereafter
(the “Fourth Year”) - $8,100,000; and
(v)
In
the event that the Call Option Closing is deemed to occur for purposes of this
Section 11.02(a) on or after the date immediately following the end of the
Fourth Year - $8,748,000.
For
purposes of this Section 11.02(a), the Call Option Closing is deemed to occur
on
the date that the Call Option Closing is to occur pursuant to Section 11.02(b);
provided, however, if the Call Option Closing fails to occur on the date
specified in Section 11.02(b) as a result of a delay caused by Proud Three’s
default, then the Call Option Closing is deemed to occur for purposes of this
Section 11.02(a) on the actual date of the Call Option Closing; and further
provided, however, in the event that Proud Three exercises the Call Option
by
providing Wilshire with the Call Option Notice on or prior to the date that
is
one (1) year after the date of this Agreement, then, notwithstanding that the
Call Option Closing shall occur after the date that is one (1) year after the
date of this Agreement, the Call Option Closing shall be deemed to occur during
the First Year.
(b)
If
Proud
Three exercises the Call Option, the closing of the transaction of purchase
and
sale of all of the Units owned by Wilshire (the “Call
Option Closing”)
shall
take place at 10 o’clock in the forenoon at the principal place of business of
the Company (or such other location as Proud Three and Wilshire shall agree),
on
a date ninety (90) days after Wilshire receives the Call Option Notice (or
if
such date shall be a Sunday or holiday, then on the first business day
immediately succeeding such date).
(c)
At
the Call Option Closing:
(i)
Wilshire shall assign and convey to Proud Three all of its Units, free and
clear
of all Encumbrances and shall execute and deliver to Proud Three any agreements
and/or documents that may be reasonably requested by Proud Three to effectuate
such assignment and conveyance and ensure that Wilshire’s Units are being
transferred free and clear of all Encumbrances, including, without limitation
an
agreement executed and delivered by Wilshire pursuant to which it represents
and
warrants to Proud Three that it owns the Units free and clear of all
Encumbrances;
(ii)
any
deed, documentary, stamp, transfer or similar taxes or fees due in connection
with the sale shall be paid by Wilshire; and
23
(iii)
Proud Three shall cause any guarantees for debts or other obligations of the
Company that had been made by Wilshire or any of its affiliates to be released
or otherwise discharged, with no further liability to such guarantor(s)
thereunder.
(d)
In
the
event that Wilshire defaults in its obligation to complete the transaction
on or
prior to the date specified in Section 11.02(b) hereof, then: (i) Proud
Three shall be entitled to all available legal and equitable remedies against
Wilshire, including, without limitation, specific performance of Wilshire’s
obligation to complete the transaction and recovery of all losses of Proud
Three
caused by Wilshire’s default (including attorney’s fees and costs paid or
incurred in any legal or equitable action); and (ii) Wilshire shall immediately
cease to be, and to serve as, the Managing Member, and Proud Three shall be
the
Managing Member, and for all purposes under this Agreement, the term “Managing
Member” shall mean Proud Three.
(e)
Notwithstanding anything contained hereinabove to the contrary, but subject
to
the following provisions of this Section 11.02(e), during the period commencing
on the date hereof and ending on the later to occur of: (i) six (6) months
and
twenty (20) days after the date of this Agreement (the “Marketing
Period”),
and
(ii) in the event that the Company enters into a binding contract to sell the
Property during the Marketing Period, the date of termination of such binding
contract, Proud Three shall not have the right to exercise the Call Option
(the
“Black
Out Period”).
During the Black Out Period, the Managing Member, on behalf of the Company,
shall have the right to sell the Property for an amount equal to or greater
than
the sum of: (i) $12,750,000 (the “Base
Release Price”);
(ii)
the aggregate amount of all additional capital contributions made by Wilshire
(or any Affiliate of Wilshire) to the Company on or after the date of this
Agreement (the “Wilshire
Additional Contributions”);
(iii)
the aggregate amount of all additional capital contributions made by Proud
Three
(or any Affiliate of Proud Three) to the Company on or after the date of this
Agreement (the “Proud
Three Additional Contributions”);
and
(iv) the aggregate amount of all indebtedness for borrowed money of the Company
(including, without limitation, any and all amounts due to trade creditors)
(the
“Release
Price”).
During the Black Out Period, the consent of all Members shall be required to
sell the Property for an amount less than the Release Price. In the event that
the Property is sold during the Black Out Period, any and all right of Proud
Three to exercise the Call Option shall terminate and expire.
(f)
Notwithstanding anything contained hereinabove to the contrary, but subject
to
the following provisions of this Section 11.02(f), at any time after the date
that is one (1) year after the date of this Agreement and prior to Proud Three
exercising the Call Option, Wilshire shall have the right to provide written
notice to Proud Three that it desires to offer the Property for sale (a
“Proposed
Sale Notice”),
whereupon Proud Three shall not have the right to exercise the Call Option
at
any time during the period commencing on the date that is forty-five (45) days
following receipt by Proud Three of a Proposed Sale Notice (a “Start
Date”)
and
ending on the date that is eight (8) months after such Start Date (a
“Subsequent
Black Out Period”).
In
the event that the Property is not sold during a Subsequent Black Out Period,
Wilshire shall not have the right to provide another Proposed Sale Notice to
Proud Three until after the date that is six (6) months after the last date
of
such Subsequent Black Out Period.
Section
11.03 Dispute Resolution.
(a)
In
the
event of a dispute between or among any two or more of the Members relating
to
this Agreement, such dispute shall be finally determined by arbitration
conducted in Newark, New Jersey, in accordance with the Commercial Arbitration
Rules of the American Arbitration Association then existing or any successor
body of similar function, by a panel of three (3) arbitrators selected as
hereinafter described. The party desiring arbitration shall appoint an
individual person as arbitrator on its behalf and give notice thereof to the
other party who shall, within ten (10) business days after receipt of said
notice, appoint a second individual as arbitrator on its behalf and give notice
thereof to the first party. The arbitrators thus appointed shall appoint a
disinterested third individual, and said three (3) arbitrators shall, as
promptly as possible, determine the matter which is the subject of the
arbitration. If the second arbitrator shall not timely be appointed as
aforesaid, the first arbitrator shall proceed to determine the matter in
dispute.
24
(b)
If,
within fifteen (15) days after the appointment of the second arbitrator, the
two
(2) arbitrators appointed by the parties shall be unable to agree upon the
appointment of a third arbitrator, they shall give notice to the parties of
such
failure to agree. If the parties fail to agree upon the selection of such third
arbitrator within five (5) business days after receipt of such notice from
the
appointed arbitrators, then within five (5) business days thereafter either
of
the parties upon notice to the other party may request such appointment by
the
American Arbitration Association (or any organization successor thereto), or
in
its absence, refusal, failure or inability to act, may apply to any court of
competent jurisdiction to appoint such arbitrator.
(c)
The
majority of the arbitrators shall render their decision and award within thirty
(30) days after the appointment of the third arbitrator. Such decision and
award
shall be in writing and shall be conclusive and binding on the parties, and
counterpart copies thereof shall be delivered to each of the parties. Judgment
on the award may be entered in a court of competent jurisdiction.
(d)
Each
party shall pay (i) the fees and expenses of the original arbitrator appointed
by or for such party and (ii) the fees and disbursements of its own attorneys
and the expenses of its proof. The fees and expenses of the third arbitrator
and
all other expenses of the arbitration shall be borne equally by the
parties.
Section
11.04 Applicable Law. This Agreement shall be governed by and construed in
accordance with the laws of the State of New Jersey governing agreements made
wholly within such State (without regard to principles of conflicts of
laws).
Section
11.05 Modification. This Agreement constitutes the entire understanding
among the parties hereto with respect to the subject matter hereof. No waiver
or
modification of the provisions hereof shall be valid unless it is in writing
and, except as otherwise expressly permitted by Section 11.10 below, signed
by
the party to be charged and then only to the extent therein set
forth.
Section
11.06 Notices. All notices, demands, solicitations of consent or approval,
consents and other communications permitted or required to be given hereunder
shall be in writing and shall be made by hand-delivery, first-class mail
(registered or certified, return receipt requested), telecopier, or overnight
air courier guaranteeing next business day delivery to the address set forth
below or at such other address as any of the parties may designate in writing
in
conformity herewith:
25
(a)
if
to the
Company, to:
WO
GRAND
HOTEL, LLC
▇▇▇
▇▇▇▇▇▇▇▇ ▇▇▇▇▇▇ ▇▇▇
▇▇▇▇
▇▇▇▇▇▇, ▇▇▇ ▇▇▇▇▇▇ ▇▇▇▇▇
with
a
copy to all of the parties set forth in Sections 11.06(b) and 11.06(c)
below.
(b)
if to
Wilshire, to:
Wilshire
Enterprises, Inc.
▇
▇▇▇▇▇▇▇
▇▇▇▇▇▇
▇▇▇▇▇▇,
▇▇▇ ▇▇▇▇▇▇ ▇▇▇▇▇
Attn:
▇▇▇▇▇▇ ▇. ▇▇▇▇▇
Facsimile:
(▇▇▇) ▇▇▇-▇▇▇▇
with
a
copy to:
Greenbaum,
Rowe, ▇▇▇▇▇ & ▇▇▇▇▇ LLP
Metro
Corporate Campus One
P.
O. ▇▇▇
▇▇▇▇
▇▇▇▇▇▇▇▇▇▇,
▇▇▇ ▇▇▇▇▇▇ ▇▇▇▇▇-▇▇▇▇
Attn:
W.
▇▇▇▇▇▇▇ ▇▇▇▇▇▇, Esq.
Facsimile:
(▇▇▇) ▇▇▇-▇▇▇▇
(c)
if to
Proud Three, to:
Proud
Three, LLC
c/o
Herrick, ▇▇▇▇▇▇▇▇▇ LLP
▇
▇▇▇▇
▇▇▇▇▇, ▇▇▇▇
▇▇▇▇▇
▇▇▇▇▇▇,
▇▇▇ ▇▇▇▇▇▇ ▇▇▇▇▇
Attn:
▇▇▇▇▇▇ ▇. ▇▇▇▇▇, Esq.
Facsimile:
(▇▇▇) ▇▇▇-▇▇▇▇
with
a
copy to:
▇▇▇▇▇▇▇,
▇▇▇▇▇▇▇▇▇ LLP
▇
▇▇▇▇
▇▇▇▇▇, ▇▇▇▇
▇▇▇▇▇
▇▇▇▇▇▇,
▇▇▇ ▇▇▇▇▇▇ ▇▇▇▇▇
Attn:
▇▇▇▇▇▇ ▇. ▇▇▇▇▇, Esq.
Facsimile:
(▇▇▇) ▇▇▇-▇▇▇▇
Except
as
otherwise provided in this Agreement, each such notice shall be deemed given
at
the time delivered by hand, if personally delivered; five business days after
being deposited in the mail, postage prepaid, if mailed; when receipt
acknowledged, if telecopied; and the next business day after timely delivery
to
the courier, if sent by overnight air courier guaranteeing next business day
delivery.
26
Section
11.07 Captions. The captions used herein are intended for convenience of
reference only, shall not constitute any part of this Agreement and shall not
modify or affect in any manner the meaning or interpretation of any of the
provisions of this Agreement.
Section
11.08 Construction. Any word or term used in this Agreement in any form
shall be masculine, feminine, neuter, singular or plural, as proper reading
requires. The words “herein”, “hereof”, “hereby” or “hereto” shall refer to this
Agreement unless otherwise expressly provided. Any reference herein to a Section
or any exhibit or schedule shall be a reference to a Section of, and an exhibit
or schedule to, this Agreement unless the context otherwise requires. Any
reference herein to a “business day” shall mean a day in which the New York
branch of the Federal Reserve Bank is open for business during its normal hours
of operation.
Section
11.09 Pronouns. All pronouns and any variation thereof shall be deemed to
refer to the masculine, feminine or neuter, singular or plural, as the identity
of the Person or Persons may require.
Section
11.10 Amendments. This Agreement may only be amended by the affirmative vote
of all of the Members. Any amendment made pursuant to this Section 11.10 shall
become effective as of the date such amendment is approved, except that, at
the
option of the Members, such amendment may provide that it shall be made
effective as of a later date.
Section
11.11 Binding Effect. Except as otherwise provided herein, this Agreement
shall be binding upon and shall inure to the benefit of the respective heirs,
executors, administrators, legal representatives, and permitted successors
and
assigns of the parties hereto.
Section
11.12 Separability. In case any one or more of the provisions contained in
this Agreement or any application thereof shall be deemed invalid, illegal
or
unenforceable in any respect, such affected provisions shall be construed and
deemed rewritten so as to be enforceable to the maximum extent permitted by
law,
thereby implementing to the maximum extent possible, the intent of the parties
hereto, and the validity, legality and enforceability of the remaining
provisions contained herein shall not in any way be affected or impaired
thereby.
Section
11.13 Further Assurances. The Members shall execute and deliver such further
instruments and documents and do such further acts and things as may be required
to carry out the intent and purposes of this Agreement.
Section
11.14 Counterparts. This Agreement may be executed in any number of
counterparts, each of which shall be an original, and all of which shall
together constitute one agreement.
27
Section
11.15 Consent to Jurisdiction. All actions and proceedings arising out of,
or relating to, this Agreement shall be heard and determined in any state or
federal court sitting in New Jersey. The parties hereto, by execution and
delivery of this Agreement, expressly and irrevocably consent and submit to
the
personal jurisdiction of any of such courts in any such action or proceeding;
(ii) consent to the service of any complaint, summons, notice or other process
relating to any such action or proceeding by delivery thereof to such party
by
hand or by certified mail, delivered or addressed as set forth in Section 11.06;
and (iii) waive any claim or defense in any such action or proceeding based
on
any alleged lack of personal jurisdiction, improper venue or forum non
conveniens or any similar basis.
[SIGNATURE
PAGE FOLLOWS]
28
IN
WITNESS WHEREOF, the parties have executed this Agreement as of the date first
above written.
|
WO
GRAND HOTEL, LLC
|
||
| |
|
|
| By: | ||
|
Name: |
||
| Title: Authorized Person | ||
|
WILSHIRE
ENTERPRISES, INC.
|
||
| |
|
|
| By: | ||
|
Name: |
||
| Title: | ||
|
PROUD
THREE, LLC
|
||
| |
|
|
| By: | ||
|
Name: |
||
| Title: | ||
29
Exhibit
A
Description
of the Property
That
certain lot, piece or parcel of land, with the buildings and improvements
thereon erected, situate, lying and being in the Township of West Orange, County
of Essex and State of New Jersey, as follows:
Beginning
at a point at the intersection of the southeasterly sideline of Pleasant Valley
Way with the northeasterly sideline of Kenz Terrace, said sideline of Pleasant
Valley Way having been established by the Essex County Highway Department,
and
shown on Acquisition Map 6-E-6; thence
| (1) |
Northeasterly
along said sideline of Pleasant Valley Way, along a curve to the
right
having a radius of 915.37 feet, an arc distance of 42.12 feet to
a point
of tangency; thence
|
| (2) |
Still
along said sideline North 37 degrees 13 minutes 10 seconds East,
a
distance of 826.17 feet to a point on the rear line of lots fronting
on
▇▇▇▇▇▇ Terrace, said point being 137.93 feet southwesterly from the
southwesterly sideline of ▇▇▇▇▇▇ Terrace; thence
|
| (3) |
South
50 degrees 29 minutes 50 seconds East a distance of 99.97 feet to
a point;
thence
|
| (4) |
South
51 degrees 56 minutes 18 seconds East a distance of 737.40 feet to
a
point; thence
|
| (5) |
South
36 degrees 34 minutes 36 seconds West a distance of 501.16 feet to
a
point; thence
|
| (6) |
North
69 degrees 08 minutes 50 seconds West a distance of 359.64 feet to
a
point; thence
|
| (7) |
North
60 degrees 23 minutes 50 seconds West a distance of 367.40 feet to
a
point; thence
|
| (8) |
South
37 degrees 13 minutes 10 seconds West 148.55 feet to a point;
thence
|
| (9) |
South
31 degrees 38 minutes 31 seconds West 35.70 feet to a point on the
northwesterly sideline of Kenz Terrace;
thence
|
| (10) |
North
60 degrees 23 minutes 50 seconds West 137.32 feet to a point on the
southeasterly sideline of Pleasant Valley Way and the point and place
of
beginning.
|
BEING
commonly known as ▇▇▇ ▇▇▇▇▇▇▇▇ ▇▇▇▇▇▇ ▇▇▇, ▇▇▇▇ ▇▇▇▇▇▇, ▇▇▇ ▇▇▇▇▇▇.
BEING
also known as Lot 1428 in Block 152.22 on the current tax map of the Township
of
West Orange.
30
Exhibit
B
Description
of the Loans and Mortgages
WEST
ORANGE LOAN DOCUMENTS
| 1. |
Commercial
Mortgage Note dated April 10, 2001, executed and delivered by Hotel
to The
Trust Company of New Jersey (“TCNJ”) in the original principal amount of
$6,900,000.00.
|
| 2. |
Commercial
Mortgage dated April 10, 2001, executed and delivered by Hotel to
TCNJ in
the original principal amount of $6,900,000.00, which was recorded
in the
Essex County Register’s Office on April 30, 2001 in Mortgage Book 7743 at
Page 0016, et seq.
|
| 3. |
Guaranty
dated April 10, 2001, executed and delivered by ▇.▇. ▇▇▇▇ and ▇▇▇▇▇▇▇
▇▇▇▇▇▇▇ to TCNJ.
|
| 4. |
Uniform
Commercial Code Financing Statement No. 092244, filed in the Essex
County
Register’s Office on April 30, 2001, and naming Hotel as the Debtor and
TCNJ as the Secured Party.
|
| 5. |
Uniform
Commercial Code Financing Statement No. 2037223, filed with the State
of
New Jersey on April 19, 2001, and naming Hotel as the Debtor and
TCNJ as
the Secured Party.
|
| 6. |
Absolute
Assignment of Leases, Rentals and Profits dated April 10, 2001, executed
and delivered by Hotel to TCNJ, which was recorded in the Essex County
Register’s Office on April 30, 2001 in Mortgage Book 7743 at Page 0050,
et seq.
|
| 7. |
Note
and Mortgage Modification and Extension Agreement dated October 21,
2002,
made by and between TCNJ, Hotel, ▇▇▇▇▇▇▇ ▇▇▇▇▇▇▇ and ▇.▇. ▇▇▇▇, which
was
recorded in the Essex County Register’s Office on October 25, 2002 in Book
452 at Page 536, et seq.
|
| 8. |
Amended
and Restated Commercial Mortgage Note dated June 25, 2003, executed
and
delivered by Hotel and Catering to TCNJ in the amount of
$11,900,000.00.
|
| 9. |
Commercial
Mortgage dated June 25, 2003, executed and delivered by Catering
to TCNJ
in the original principal amount of $11,900,000.00, which was recorded
in
the Essex County Register’s Office on July 1, 2003 in Mortgage Book 8973
at Page 695, et seq.
|
| 10. |
Mortgage
Modification and Extension Agreement dated June 25, 2003, made by
and
between Hotel and TCNJ, which was recorded in the Essex County Register’s
Office on July 1, 2003 in Book 461 at Page 22, et seq.
|
31
| 11. |
Uniform
Commercial Code Financing Statement No. 802388, filed in the Essex
County
Register’s Office on July 1, 2003, and naming Catering as the Debtor and
TCNJ as the Secured Party.
|
| 12. |
Uniform
Commercial Code Financing Statement No. 21672606, filed with the
State of
New Jersey on July 1, 2003, and naming Catering as the Debtor and
TCNJ as
the Secured Party.
|
| 13. |
Absolute
Assignment of Leases, Rentals and Profits dated June 25, 2003, executed
and delivered by Catering to TCNJ, which was recorded in the Essex
County
Register’s Office on July 1, 2003 in Mortgage Book 8973 at Page 725,
et seq.
|
| 14. |
Guaranty
dated June 25, 2003, executed and delivered by ▇.▇. ▇▇▇▇, Denville
Nites,
Inn at Rockaway, ▇.▇. ▇▇▇▇ Properties and ▇▇▇▇▇▇▇ ▇▇▇▇▇▇▇ to
TCNJ.
|
| 15. |
Commercial
Mortgage dated June 25, 2003, executed and delivered by Denville
Nites to
TCNJ in the original principal amount of $11,900,000.00, which was
recorded in the ▇▇▇▇▇▇ County Clerk’s Office on June 27, 2003 in Mortgage
Book 14734 at Page 117, et seq.
|
| 16. |
Uniform
Commercial Code Financing Statement No. 2003-107347, filed in the
▇▇▇▇▇▇
County Clerk’s Office on June 27, 2003, and naming Denville Nites as the
Debtor and TCNJ as the Secured
Party.
|
| 17. |
Uniform
Commercial Code Financing Statement No. 2167259-0, filed with the
State of
New Jersey on July 1, 2003, and naming Denville Nites as the Debtor
and
TCNJ as the Secured Party.
|
| 18. |
Absolute
Assignment of Leases, Rentals and Profits dated June 25, 2003, executed
and delivered by Denville Nites to TCNJ, which was recorded in the
▇▇▇▇▇▇
County Clerk’s Office on June 27, 2003 in Mortgage Book 14734 at Page 133,
et seq.
|
| 19. |
Commercial
Mortgage dated June 25, 2003, executed and delivered by the Inn at
Rockaway to TCNJ in the original principal amount of $11,900,000.00,
which
was recorded in the ▇▇▇▇▇▇ County Clerk’s Office on June 27, 2003 in
Mortgage Book 14735 at Page 038, et seq.
|
| 20. |
Uniform
Commercial Code Financing Statement No. 2003-107384, filed in the
▇▇▇▇▇▇
County Clerk’s Office on June 27, 2003, and naming the Inn at Rockaway as
the Debtor and TCNJ as the Secured
Party.
|
| 21. |
Uniform
Commercial Code Financing Statement No. 2167103-6, filed with the
State of
New Jersey on July 1, 2003, and naming the Inn at Rockaway as the
Debtor
and TCNJ as the Secured Party.
|
32
| 22. |
Absolute
Assignment of Leases, Rentals and Profits dated June 25, 2003, executed
and delivered by the Inn at Rockaway to TCNJ, which was recorded
in the
▇▇▇▇▇▇ County Clerk’s Office on June 27, 2003 in Mortgage Book 14735 at
Page 055, et seq.
|
33
Exhibit
C
Definitions
As
used
in the Operating Agreement of WO GRAND HOTEL, LLC, the following terms shall
have the following meanings:
| 1. |
“Affiliates”
means, with respect to any Person, its officers, directors, stockholders,
members and managers, and any Person controlling, controlled by,
or under
common control with, the Person in question. The term “control” (as used
in the terms “controlling”, “controlled” and “common control” means (a)
holding 51% or more of the outstanding equity securities of an issuer,
(b)
holding 51% or more of the outstanding voting securities of an issuer,
or
(c) holding the power to direct or cause the direction of the management
and policies of a Person, whether by contract or otherwise.
|
| 2. |
“Capital
Account”
means, with respect to any Member, the Capital Account maintained
for such
Member in accordance with the following
provisions:
|
| a. |
To
each Member’s Capital Account there shall be credited (A) an amount equal
to such Member’s Capital Investment and all additional Capital
Contributions made by such Member (in the aggregate, the “Capital
Contribution Amount”),
(C) such Member’s distributive share of Net Profits and any items in the
nature of income or gain which are specially allocated pursuant to
the
Regulations, and (D) the amount of any Company liabilities assumed
by such
Member or which are secured by any property distributed to such
Member;
|
| b. |
To
each Member’s Capital Account there shall be debited (A) the amount of
money and the Gross Asset Value of any property distributed to such
Member
pursuant to any provision of this Agreement, (B) such Member’s
distributive share of Net Losses and any items in the nature of expenses
or losses which are specially allocated pursuant to the Regulations,
and
(C) the amount of any liabilities of such Member assumed by the Company
or
which are secured by any property contributed by such Member to the
Company;
|
| c. |
In
the event of a Transfer of Units in accordance with the terms of
this
Agreement, the transferee or assignee, if admitted as a Member, shall
succeed to the Capital Account of the transferring Member to the
extent it
relates to the Transfer of Units;
and
|
| d. |
In
determining the amount of any liability for purposes of subparagraphs
(a)
and (b) above there shall be taken into account Code Section 752(c)
and
any other applicable provisions of the Code and
Regulations.
|
| e. |
The
foregoing provisions and the other provisions of this Agreement relating
to the maintenance of Capital Accounts are intended to comply with
Regulations Section 1.704-1(b), and shall be interpreted and applied
in a
manner consistent with such Regulations, including without limitation
those Regulations relating to qualified income offset and minimum
gain
chargeback. In the event the Members shall determine that it is prudent
to
modify the manner in which the Capital Accounts, or any debits or
credits
thereto (including, without limitation, debits or credits relating
to
liabilities which are secured by contributed or distributed property
or
which are assumed by the Company or any Members, are computed in
order to
comply with such Regulations), the Members may make such modification,
provided that it is not likely to have a material effect on the amounts
distributed to any Person pursuant to Article IX upon the dissolution
of
the Company. The Members also shall: (i) make any adjustments that
are
necessary or appropriate to maintain equality between the Capital
Accounts
of the Members and the amount of capital reflected on the Company’s
balance sheet, as computed for book purposes, in accordance with
Regulations Section 1.704-1(b)(2)(iv)(g); and (ii) make any appropriate
modifications in the event unanticipated events might otherwise cause
this
Agreement not to comply with Regulations Section
1.704-1(b).
|
34
| 3. |
“Capital
Transaction”
means any capital transaction with respect to any capital asset of
the
Company including: (i) any sale, exchange, condemnation (other than
a
temporary taking) or other disposition of all or any portion of any
capital asset or any interest therein; (ii) any recovery of damages
or
insurance proceeds (other than rental interruption insurance) as
a result
of damage to or destruction of all or any portion of the improvements
on a
real property or other capital assets of the Company or the loss
of title
thereto (all to the extent not applied to the costs of repairing
or
replacing the assets damaged or destroyed); (iii) any financing or
refinancing by debt, sale and leaseback or any other form of financing
of
all or any portion of any capital asset or any indebtedness or the
Company; and (iv) any other transaction, the proceeds of which, in
accordance with generally accepted accounting principles, are considered
to be capital in nature.
|
| 4. |
“Class
A Unit”
means the interest of a Member in the Company having such rights,
powers
and preferences as specified in this Agreement and the Act.
|
| 5. |
“Class
B Unit”
means the interest of a Member in the Company having such rights,
powers
and preferences as specified in this Agreement and the Act.
|
| 6. |
“Code”
means the Internal Revenue Code of 1986, as
amended.
|
| 7. |
“Collateral”
means any and all real personal property mortgaged, pledged or otherwise
encumbered to secure the Loans.
|
| 8. |
“Company
Minimum Gain”
means the amount determined pursuant to the definition of “partnership
minimum gain” set forth in Regulation Sections 1.704-2(b)(2) and 1.704-
2(d).
|
| 9. |
“Depreciation”
means, for each taxable year, an amount equal to the depreciation,
amortization, or other cost recovery deduction allowable with respect
to
an asset for such taxable year, except that (A) with respect to any
asset
whose Gross Asset Value differs from its adjusted basis for federal
income
tax purposes and the difference is being eliminated by use of the
“remedial method” defined by Section 1.704-3T(d) of the Regulations,
Depreciation for such year shall be the amount of book basis recovered
for
such taxable year under the rule described by Section 1.704-3T(d)(2)
of
the Regulations; and (B) with respect to any other asset whose Gross
Asset
Value differs from its adjusted basis for federal income tax purposes
at
the beginning of such taxable 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 taxable year bears to such beginning adjusted tax basis;
provided
that if the adjusted basis for federal income tax purposes of an
asset at
the beginning of such taxable year is zero, Depreciation shall be
determined with reference to such beginning Gross Asset value using
any
reasonable method selected by the
Members.
|
35
| 10. |
“Encumbrances”
means all liens, claims, security interests, mortgages, pledges,
easements, defects in title or other
encumbrances.
|
| 11. |
“Governmental
Body”
means any court, government (federal, state, local or foreign),
department, commission, board, agency, bureau, official or other
regulatory, administrative or governmental
authority.
|
| 12. |
“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 Members.
|
| b. |
The
Gross Asset Values of all Company assets shall be adjusted to equal
their
respective gross fair market values (taking Code Section 7701(g)
into
account), as determined by the Members as of the following times:
(A) 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; (B) 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 (C) the liquidation of the Company within the meaning
of
Regulations Section 1.704- 1(b)(2)(ii)(g), provided that an adjustment
described in clauses (A) and (B) of this paragraph shall be made
only if
the Members reasonably determine that such adjustment is necessary
to
reflect the relative economic interests of the Members in the
Company;
|
36
| c. |
The
Gross Asset Value of any item of Company assets distributed to
a 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 Members;
and
|
| d. |
The
Gross Asset Values of Company assets 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 Regulations Section 1.704-1(b)(2)(iv)(m) and subparagraph
(vi)
of the definition of “Net Profits” and “Net Losses”; provided that Gross
Asset Values shall not be adjusted pursuant to this subparagraph
(iv) to
the extent that an adjustment pursuant to subparagraph (ii) is required
in
connection with a transaction that would otherwise result in an adjustment
pursuant to this subparagraph (iv).
|
| e. |
If
the Gross Asset Value of an asset has been determined or adjusted
pursuant
to subparagraph (ii) or (iv), such Gross Asset Value shall thereafter
be
adjusted by the Depreciation taken into account with respect to such
asset, for purposes of computing Net Profits and Net
Losses.
|
| 13. |
“Knowledge”
means, with respect to any individual, the actual knowledge of such
individual, and, with respect to any entity, the actual knowledge
of any
directors, managers or officers of such
entity.
|
| 14. |
“Loan
Document”
means each promissory note, mortgage, assignment of leases and rents,
security agreement, financing statement, personal, corporate or other
guaranty, pledge agreement, subordination agreement, collateral agreement,
loan agreement, escrow agreement, non-disturbance agreement, agency
agreement or other agreement or document, whether an original or
a copy
and whether or not similar to those enumerated, evidencing, securing,
guarantying or otherwise documenting or giving notice of any Loan
and any
performance or payment obligations with respect thereto. The term
“Loan
Documents” shall also include each policy of title insurance, if any,
insuring the lien of any deed of trust or mortgage securing the Loans
and
each Loan File. The term “Loan Document” shall include, without
limitation, the documents set forth on Exhibit
B.
|
| 15. |
“Loan
File”
means all instrument and documents in the files of Proud Three pertaining
to the Loans, including, without limitation, the Notes and any Loan
Documents.
|
| 16. |
“Member”
and “Members”
means Wilshire, Proud Three, and any Person that acquires Units after
the
date of this Agreement and signs a counterpart signature page or
other
instrument to become a part to this Agreement.
|
| 17. |
“Member
Nonrecourse Debt”
shall have the meaning ascribed to “partner nonrecourse debt” in
Regulation Section 1.704-2(b)(4).
|
| 18. |
“Member
Nonrecourse Debt Minimum Gain”
means an amount, with respect to each Member Nonrecourse Debt, equal
to
the Company Minimum Gain that would result if such Member Nonrecourse
Debt
were treated as a Nonrecourse Liability, determined in accordance
with
Section 1.704-2(i)(3) of the
Regulations.
|
37
| 19. |
“Net
Cash Flow”
means all cash receipts of the Company, plus any reserves released
by the
Members, and the fair market value of any property received in connection
therewith, in any Fiscal Year from whatever source derived (other
than
proceeds from borrowings or other Company indebtedness, Net Proceeds
and
contributions to the capital of the Company such as the aggregate
Capital
Contribution Amount of the Members), less
payment of all the Company’s expenses, including without limitation, debt
service payments (including in connection with any Member Loans)
and
Reserves, if any, as the Members shall elect to
establish.
|
| 20. |
“Net
Proceeds”
means, with respect to any Capital Transaction or any part
thereof,
|
| a. |
the
cash proceeds of any sale or other disposition of all or any part
of a
capital asset, less all costs and expenses of such sale or disposition,
which shall include all commissions, finder fees, “points” in a loan
transaction, and all other transaction fees and expenses, including
due
diligence, legal and accounting
costs;
|
| b. |
the
proceeds of any financing or refinancing, by debt, sale or lease
assignment and leaseback or any other form of financing, of all or
any
part of any capital asset, or any obligation or debt related to a
capital
asset, less the aggregate cost of such capital asset and all costs
and
expenses thereof, including amounts paid to discharge or obtain
assignments of any mortgages or debts that are being refinanced;
|
| c. |
the
proceeds of insurance received by the Company with respect to damage
or
destruction to any capital asset (including title insurance proceeds
payable to the Company), less the costs and expenses incurred in
connection therewith and any amounts applied or held to be applied
for
restoration or repair or to be deployed to purchase a capital asset
within
12 months after the date such proceeds are received by the Company;
|
| d. |
the
proceeds of any award as compensation for the taking of all or any
portion
of a capital asset by exercise of the power of eminent domain or
a
transfer in lieu thereof, less the costs and expenses incurred in
connection therewith and any amounts applied or held to be applied
for
restoration or replacement of improvements on any capital asset or
to be
deployed to purchase a capital asset within 12 months after the date
such
proceeds are received by the Company; and
|
| e. |
the
proceeds of any other Capital Transaction, less all expenses incurred
in
connection with obtaining or collecting such proceeds in all cases.
|
The
foregoing amounts shall be reduced by: (i) the amount required to pay the
matured or fixed debts, liabilities and expenses of the Company (including,
without limitation, all Member Loans), and (ii) such Realized and Unrealized
Losses, and Reserves, if any, as the Members shall elect to establish from
such
proceeds.
| 21. |
“Net
Profits”
or “Net
Losses”
shall mean an amount equal to the Company’s taxable income or loss for any
taxable year, determined in accordance with code Section 703(a) (for
this
purpose, all items of income, gain, loss or deduction required to
be
stated separately pursuant to Code Section 703(a)(1) shall be included
in
taxable income or loss) with the following
adjustments:
|
38
| a. |
Any
income of the Company that is exempt from federal income tax and
not
otherwise taken into account in computing Net Profits or Net Losses
pursuant to this definition of “Net Profits” and “Net Losses” shall be
added to such taxable income or
loss;
|
| b. |
Any
expenditures of the Company described in Code Section 705(a)(2)(B)
or
treated as Code Section 705(a)(2)(B) expenditures pursuant to Regulations
Section 1.704-1(b)(2)(iv)(i) and not otherwise taken into account
in
computing Net Profits or Net Losses pursuant to this definition of
“Net
Profits” or “Net Losses” shall be subtracted from such taxable income or
loss;
|
| c. |
In
the event the Gross Asset Value of any Company asset is adjusted
pursuant
to subparagraphs (a) or (b) 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 Net Profits or Net
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 of such taxable 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) or Code Section 743(b) is required
pursuant to Regulations Section 1.704-1(b)(2)(iv)(m)(4) to be taken
into
account in determining Capital Accounts as a result of a distribution
other than a complete 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 the basis of the asset) from the disposition of the asset
and
shall be taken into account for purposes of computing Net Profits
or Net
Losses; and
|
| g. |
Notwithstanding
any other provision of this definition, any items which are specially
allocated pursuant to the Regulations shall not be taken into account
in
computing Net Profits or Net
Losses.
|
| h. |
The
amounts of the items of Company income, gain, loss or deduction available
to be specially allocated pursuant to the Regulations shall be determined
by applying rules analogous to those set forth in clauses (a) through
(f)
above.
|
| 22. |
“Nonrecourse
Deductions”
shall have the meaning set forth in Regulation
§1.704-2(b)(1).
|
| 23. |
“Nonrecourse
Liability”
has the meaning set forth in Section 1.704-2(b)(3) of the
Regulations.
|
39
| 24. |
“Notes”
means those certain promissory notes as set forth in Exhibit
B,
evidencing the original principal indebtedness with respect to the
Loans,
together with all amendments, modification and renewals
thereof.
|
| 25. |
“Obligor”
means the make and co-maker of any Note and any guarantor, surety
or other
primary, secondary or other party obligated with respect to the Loans
or
any performance or payment obligation in connection therewith, and
any
other party who has granted Collateral for or whose property or any
part
thereof is subject to any encumbrance securing the Loans or any
performance or payment obligation in connection
therewith.
|
| 26. |
“Permitted
Encumbrances”
means those Encumbrances on the Property set forth on Exhibit
J
attached hereto.
|
| 27. |
“Person”
means an individual, partnership, corporation, trust, unincorporated
organization or other entity.
|
| 28. |
“Realized
and Unrealized Losses”
means amounts determined by the Members, at the time of any distribution
of Net Cash Flow, or Net Proceeds to reflect realized losses incurred
by
the Company with respect to capital assets previously sold or otherwise
disposed of by the Company and/or unrealized losses incurred by the
Company with respect to capital assets held by the Company at the
time of
such determination.
|
| 29. |
“Regulation”
means the income tax regulations promulgated from time to time by
the U.S.
Department of the Treasury.
|
| 30. |
“Reserves”
means the aggregate amount of reserves that the Managing Member determines
to establish from time to time for future expenses of operating the
Company or liabilities in connection therewith as of the applicable
date
of determination.
|
| 31. |
“Tax
Return”
means any return (including any information return), report, statement,
schedule, notice, form, estimate, or declaration of estimated tax
relating
to or required to be filed with any Governmental Body in connection
with
the determination, assessment, collection or payment of any
tax.
|
| 32. |
“Unit”
means a Class A Unit, a Class B Unit, or any other class of unit
designated and authorized by the Members.
|
40
Exhibit
D
Certificate
of Formation
41
Exhibit
E
Bargain
and Sale Deed with Covenants Against Grantor’s Acts
42
Exhibit
F
Assignment
of the Loans and Loan Documents
N/A
43
Exhibit
G
General
Assignment and ▇▇▇▇ of Sale
44
Exhibit
H
Allonge
to the Notes
45
Exhibit
I
Assignment
of Mortgages
46
Exhibit
J
Permitted
Encumbrances
47