Exhibit 10.1

 

 

OPERATING AGREEMENT

OF

1100 WEST HOLDINGS, LLC

 

Dated as of August     , 2006

 

 

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TABLE OF CONTENTS

 

 

 

Page

 

 

 

 

 

ARTICLE 1

 

DEFINITIONS

 

1

Section 1.1

 

Definitions

 

1

 

 

 

 

 

ARTICLE 2

 

COMPANY FORMATION

 

9

Section 2.1

 

Formation

 

9

Section 2.2

 

Name

 

9

Section 2.3

 

Purpose

 

9

Section 2.4

 

Place of Business

 

9

Section 2.5

 

Duration

 

9

Section 2.6

 

Management

 

9

 

 

 

 

 

ARTICLE 3

 

CAPITAL; ALLOCATIONS; DISTRIBUTIONS

 

9

Section 3.1

 

Capital Contributions

 

9

Section 3.2

 

No Withdrawal of Capital Contributions

 

11

Section 3.3

 

Return of Capital Contributions

 

12

Section 3.4

 

Liability of Members and Their Affiliates

 

12

Section 3.5

 

No Priority

 

12

Section 3.6

 

No Interest

 

12

Section 3.7

 

No Obligation to Restore Negative Balances in Capital Accounts

 

12

Section 3.8

 

Capital Accounts

 

12

Section 3.9

 

Allocation of Net Income and Net Loss

 

13

Section 3.10

 

Other Allocation Rules

 

15

Section 3.11

 

Tax Allocations

 

15

Section 3.12

 

State and Local Items

 

15

Section 3.13

 

Distributions

 

16

 

 

 

 

 

ARTICLE 4

 

MANAGEMENT

 

16

Section 4.1

 

Management of the Company

 

16

Section 4.2

 

Limitation on Member’s Authority

 

16

Section 4.3

 

Designated Representatives

 

20

Section 4.4

 

Compensation of Members

 

20

Section 4.5

 

Indemnification of Members

 

20

 

 

 

 

 

ARTICLE 5

 

DUTIES OF MEMBERS

 

20

Section 5.1

 

Specified Duties

 

20

Section 5.2

 

Books and Records

 

21

Section 5.3

 

Reports

 

21

Section 5.4

 

Tax Returns; Tax Elections

 

22

Section 5.5

 

Tax Controversies

 

22

Section 5.6

 

Budgets/Business Plans

 

23

Section 5.7

 

Notice of Suits

 

24

 

 

 

 

 

ARTICLE 6

 

CONSTRUCTION BUDGET/CAPITAL PLAN

 

24

Section 6.1

 

Construction Budget; Business Plan

 

24

Section 6.2

 

Management of the Property

 

24

Section 6.3

 

Financing

 

25

 

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Page

 

 

 

 

 

ARTICLE 7

 

TRANSFERS OF COMPANY INTERESTS

 

25

Section 7.1

 

Interests of Members

 

25

Section 7.2

 

Interests of other Members

 

26

Section 7.3

 

Buy-Sell

 

26

 

 

 

 

 

ARTICLE 8

 

DISSOLUTION AND LIQUIDATION

 

28

Section 8.1

 

Dissolution

 

28

Section 8.2

 

Winding up Affairs

 

28

Section 8.3

 

Distribution of Non-Liquid Assets

 

29

Section 8.4

 

Orderly Liquidation

 

29

Section 8.5

 

Deficit Upon Liquidation

 

29

 

 

 

 

 

ARTICLE 9

 

MEETINGS OF MEMBERS

 

29

Section 9.1

 

Meetings

 

29

Section 9.2

 

Place of Meetings

 

29

Section 9.3

 

Teleconference

 

30

Section 9.4

 

Action by Members Without a Meeting

 

30

Section 9.5

 

Waiver of Notice

 

30

 

 

 

 

 

ARTICLE 10

 

REPRESENTATIONS AND WARRANTIES

 

30

Section 10.1

 

Representations by MHG

 

30

Section 10.2

 

Representations by SWA

 

31

Section 10.3

 

Indemnity

 

31

 

 

 

 

 

ARTICLE 11

 

FEES TO MEMBERS

 

31

Section 11.1

 

Development Fee

 

31

Section 11.2

 

Marketing Fee

 

31

 

 

 

 

 

ARTICLE 12

 

MISCELLANEOUS

 

32

Section 12.1

 

Notices

 

32

Section 12.2

 

Entire Agreement

 

33

Section 12.3

 

Governing Law

 

33

Section 12.4

 

No Oral Modification

 

33

Section 12.5

 

Binding Effect

 

33

Section 12.6

 

Severability

 

33

Section 12.7

 

Captions

 

33

Section 12.8

 

Person and Gender

 

33

Section 12.9

 

Further Assurances

 

33

Section 12.10

 

Partition

 

33

Section 12.11

 

Third-Party Beneficiaries

 

33

Section 12.12

 

Broker

 

34

Section 12.13

 

WAIVER OF JURY TRIAL

 

34

Section 12.14

 

Costs

 

34

Section 12.15

 

Publicity

 

34

Section 12.16

 

Intellectual Property

 

34

 

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Page

 

 

 

 

 

Section 12.17

 

Bank Accounts

 

34

 

 

 

 

 

ARTICLE 13

 

SPECIAL PURPOSE ENTITY COVENANTS

 

35

Section 13.1

 

Special Purpose Entity Covenants

 

35

Section 13.2

 

SPE Definitions

 

36

 

 

 

 

 

ARTICLE 14

 

ARBITRATION

 

37

Section 14.1

 

Initiation

 

37

 

 

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OPERATING AGREEMENT
OF
1100 WEST HOLDINGS, LLC

THIS OPERATING AGREEMENT of 1100 WEST HOLDINGS, LLC (the ”Company”) is made as
of                     , 2006, by and between MONDRIAN MIAMI INVESTMENT LLC,
a Delaware limited liability company having an office c/o Morgans Group LLC, 475
Tenth Avenue, New York, New York, 10018 (“MHG”); and SANCTUARY WEST AVENUE, LLC,
a Delaware limited liability company having an office at c/o Hudson Capital,
4770 Biscayne Boulevard, Miami, Florida 33137, (“SWA”).  MHG and SWA are
hereinafter collectively referred to as “Members,” and individually, a “Member.”

RECITALS

WHEREAS the Members, through the Company, wish to enter into a contract (the
“Contract”) for the purchase of the land and improvements known as the Mirador,
located at 1100 West Avenue, Miami Beach, Florida (the “Property”), from 1100
West Realty LLC;

WHEREAS, the Company intends to acquire, renovate and redevelop the Property as
a 342-key condominium-ownership hotel (which will include a swimming pool,
spa/fitness center, business center, bar, restaurant(s), dock and other related
amenities); and

WHEREAS, the Members desire to form a limited liability company under and
pursuant to the Delaware Limited Liability Company Act, 6 Del. C. § 18-101, et
seq. (as amended from time to time, the “Act”), for the purposes described above
and as set forth in this Agreement;

NOW, THEREFORE, in consideration of the mutual covenants herein contained, and
other valuable consideration, the receipt and sufficiency of which are hereby
acknowledged, the parties hereto agree as follows:

ARTICLE 1

DEFINITIONS

Section 1.1                                      Definitions.  The following
terms shall have the meanings set forth below:

“Act” shall have the meaning set forth in the recitals hereto.

“Actual Capital” shall mean the sum of Capital Contributions of Required
Capital, Additional Required Capital and Additional Capital.

“Additional Capital” shall mean Capital Contributions made by a Member to the
Company pursuant to Section 3.1(b).

“Adjusted Capital” shall mean, with respect to any Member, such Member’s Actual
Capital, reduced by all distributions made to such Member under Section 3.13(b).

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“Adjusted Capital Account Deficit” shall mean, with respect to any Member, the
deficit balance, if any, in such Member’s Capital Account as of the end of the
relevant Fiscal Year or as of any other relevant determination date, after
giving effect to the following adjustments:

(i)                                     credit to such Capital Account of any
amounts which such Member is obligated to restore (pursuant to the terms of this
Agreement or otherwise) or is deemed to be obligated to restore pursuant to the
penultimate sentences of Regulations Section 1.704-2(g)(1) and Regulations
Section 1.704-2(i)(5) after taking into account any net decrease in a Member’s
share of Partnership Minimum Gain or Partner Nonrecourse Debt Minimum Gain that
has occurred as of the relevant determination date; and

(ii)                                  debit to such Capital Account of the items
described in Regulations Sections 1.704-1 (b)(2)(ii)(d)(4), (5) and (6).

The foregoing definition of Adjusted Capital Account Deficit is intended to
comply with the provisions of Regulations Section 1.704-1(b)(2)(ii)(d) and shall
be interpreted consistently therewith.

“Affiliate” shall mean, with respect to a Person, any other Person directly or
indirectly controlling, controlled by or under common control with such first
Person.  As used in this Agreement, the term “control” means the possession,
directly or indirectly, of the power to direct or cause the direction of the
management and policy and/or policies of a Person, whether through ownership of
voting securities, by contract or otherwise.

“Affiliate Agreement” shall mean the agreements with an Affiliate described in
Exhibit B annexed hereto.

“Agreement” shall mean this Operating Agreement of the Company.

“Applicable Law” shall mean, collectively, all federal, state and local laws,
statutes, codes, acts, ordinances, orders, judgments, decrees, injunctions,
rules, regulations, permits, licenses, authorizations, directions and
requirements of and agreements with all courts and governmental authorities,
foreseen and unforeseen, ordinary or extraordinary, applicable to the Company
and/or the Property.

“Building” means the improvements located at the Property.

“Building Contract” shall mean the contract or contracts entered into by the
Company, or its direct subsidiary, with the general construction contractor for
the supply of construction services in connection with the Project.

“Business Plan” shall mean a plan for the operation and management of the
Company’s assets as provided in Section 6.1.

“Capital Account” shall mean the account maintained for each Member by the
Company in accordance with Section 3.8.

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“Capital Contribution” shall mean, with respect to any Member, the amount of
money and the initial Gross Asset Value of any property (other than money)
contributed to the Company.

“Capital Transaction” shall mean any of the following: (i) a sale, exchange,
transfer, assignment or other disposition of all or a portion of the Company’s
direct or indirect interest in any Property; (ii) any financing or refinancing
of any property of the Company; (iii) any collection by the Company in respect
of condemnation or deed in lieu of condemnation or in respect of property,
hazard or casualty insurance or any damage award, relating to the Property
(other than business interruption insurance); or (iv) any other transaction of
the Company the proceeds of which arise from a capital transaction or the
proceeds of which, in accordance with generally accepted accounting principles,
are considered to be capital in nature.

“Capital Transaction Proceeds” shall mean the net proceeds of a Capital
Transaction, following reduction for (i) all indebtedness secured by or directly
related to any Property required, or intended, to be repaid out of such capital
proceeds, (ii) all other reasonable costs and expenses related to such Capital
Transaction, (iii) in the event of a sale, all costs and expenses related to any
or all of the Property being sold which are not assumed by the purchaser,
(iv) in the case of a collection or award under clause (iii) of the definition
of “Capital Transaction,” any funds used to rebuild, restore or repair any or
all of the Property, and (v) any transfer or sales related tax payable in
connection with such Capital Transaction, and less reasonable reserves and
holdbacks for contingent liabilities approved by the Members.

“Code” shall mean the Internal Revenue Code of 1986, as amended (or any
corresponding provision or provisions pf any succeeding law).

“Company” shall mean the limited liability company governed by this Agreement.

“Company Budget” shall have the meaning ascribed thereto in Section 5.6.

 “Contract” has the meaning in ascribed to such term in the recitals.

“Construction Budget”  shall have the meaning ascribed thereto in Section 6.1.

“Construction Documents” with respect to the Project, the architectural,
renovation, design, construction and supply contracts and agreements entered
into or to be entered into by the Company, or its direct subsidiary, for the
construction, renovation and design of the Project and the equipping or
furnishing of the Hotel in connection therewith, including, without limitation,
the Building Contract. For purposes hereof, each Construction Document shall be
deemed to include all modifications and amendments thereto made from time to
time, and all documents, drawings, specifications, conditions, addenda, budgets
and other matters produced in connection therewith or incorporated by reference
thereto.

“Consumer Price Index” or “CPI” mean the Consumer Price Index (all items) for
all wage earners and clerical workers in the Miami, Florida metropolitan area
(1982-1984 = 100) as published by the United States Department of Labor, Bureau
of Labor Statistics.  If the 1982-1984 base of the Consumer Price Index is
hereafter changed, then the new base as so converted

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shall be used.  In the event that the Bureau ceases to publish the Consumer
Price Index at least once every other month, then the successor or most nearly
comparable index thereto selected by the Members shall be used.

“Default Loan Interest Return” shall have the meaning ascribed thereto in
Section 3.1(c).

“Defaulting Member” shall have the meaning ascribed thereto in Section 3.1(c).

“Default Member Loan” shall have the meaning ascribed thereto in Section 3.1(c).

“Depreciation” shall mean, with respect to any asset of the Company for each
Fiscal Year or other period, the amount of depreciation, amortization or other
cost recovery deduction allowable with respect to such asset for such Fiscal
Year or other period, except that (i) if the Gross Asset Value of an asset
differs from its adjusted basis for federal income tax purposes at the beginning
of any such Fiscal Year or other period, Depreciation with respect to such asset
for such Fiscal Year or other period shall be an amount which bears the same
ratio to such beginning Gross Asset Value as the federal income tax
depreciation, amortization or other cost recovery deduction for such Fiscal Year
or period bears to such beginning adjusted tax basis, and (ii) if an asset has a
zero adjusted basis for federal income tax purposes, Depreciation shall be
determined under any reasonable method selected by the Members which is in
accord with federal income tax accounting principles applicable to assets of
similar character having a positive adjusted basis for federal income tax
purposes.

“Development Fee” shall have the meaning ascribed thereto in Section 11.1.

“Emergency Condition” shall be deemed to exist if, (i) in the reasonable opinion
of Hotel Manager or the Members, immediate action for the protection of a
Property, guests, tenants or other persons is required to remedy a condition
presenting imminent risk of injury to persons or material damage to property,
repairs or payment of premiums that are necessary to avoid the suspension of
insurance or to comply with Applicable Law, a violation of which would expose
the Company, a Member or their respective Affiliates to criminal liability; (ii)
moneys are required to cure a default by the Company, as the landlord under a
lease; (iii) real estate taxes are more than thirty (30) days past due; or (iv)
payments due to any lender are past due and within three (3) business days will
accrue at a default or penalty rate.

“FF&E Reserve” shall have the meaning ascribed to such term in Section 5.6.

“Fiscal Year” shall mean the calendar year of twelve (12) months from January 1
to December 31, except that the first fiscal year of the Company shall be the
period from the formation of the Company to December 31 of the same calendar
year, and upon any termination of the Company on a date other than December 31,
the final Fiscal Year of the Company shall be the period from the end of the
immediately preceding Fiscal Year to the date of such termination.

“Gross Asset Value” shall mean, with respect to any asset, the asset’s adjusted
basis for federal income tax purposes, subject to the following:

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(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 reasonably determined in good faith by the Members;

(b)                                 The Gross Asset Values of all Company assets
shall be adjusted to equal their respective gross fair market values, as
determined in good faith by the Members, as of the following times: (i) the
acquisition of an additional interest in the Company by any new or existing
Member in exchange for more than a de minimis Capital Contribution; (ii) the
distribution by the Company to a Member of more than a de minimis amount of
Company property as consideration for an interest in the Company, in the case of
both (i) and (ii), if the Members reasonably determine in good faith that such
adjustment is necessary or appropriate to reflect the relative economic
interests of the Members in the Company; and (iii) the liquidation of the
Company within the meaning of Regulations Section 1.704-1(b)(2)(ii)(g);

(c)                                  The Gross Asset Value of any Company asset
distributed to any Member shall be the gross fair market value of such asset on
the date of distribution, as reasonably determined by the Members in good faith;
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
Section 3.9(b)(v) hereof; provided, however, that Gross Asset Values shall not
be adjusted pursuant to this Section (d) if or to the extent that the Members
determine that an adjustment pursuant to Section (b) hereof is necessary or
appropriate in connection with a transaction that would otherwise result in an
adjustment pursuant to this Section (d).

(e)                                  If the Gross Asset Value of an asset has
been determined or adjusted pursuant to Section (a), (b) or (d) hereof, such
Gross Asset Value shall thereafter be adjusted by the Depreciation taken into
account with respect to such asset for purposes of computing Net Income and Net
Loss.

 “Hotel” shall mean the condominium hotel to be developed at the Property.

“Hotel Management Agreement” shall mean the hotel management agreement between
the Company and Morgans Hotel Group Management LLC or any successor thereto, as
operator.  The Hotel Management Agreement is an Affiliate Agreement.

“Hotel Manager” shall mean Morgans Hotel Group Management LLC or any successor
in interest thereto or replacement thereof.

“Interests” shall mean the limited liability company interests issued to the
Members pursuant to this Agreement, representing the Members’ aggregate rights
in the Company, including, without limitation, the Members’ rights to share in
profits and losses of the Company, to receive distributions from the Company and
to vote on matters subject to a vote of the Members, as provided in this
Agreement.

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“IRS” shall mean the Internal Revenue Service or any division thereof or any
succeeding or successor agency.

“Lending Member” shall have the meaning ascribed thereto in Section 3.1(c).

“Liquidation” shall mean liquidation of a Member’s interest in the Company in
accordance with Regulations Section 1.704-1(b)(2)(ii)(g).

“Major Decision” shall mean a decision with respect to the Company and its
operations listed in Section 4.2 hereof.

 “MHG” shall mean Mondrian Miami Investment LLC, a Delaware limited liability
company.

“Marketing Fee” shall have the meaning ascribed thereto in Section 11.2.

“Necessary Sums” shall mean funds owed to mortgagees of approved mortgages,
government authorities (for real estate, sales, use and similar taxes), ground
lessors, tenants under leases, brokers, insurance providers and utility
companies.

“Net Cash from Operations” shall mean, for any Fiscal Year, or portion thereof,
revenues of the Company received in cash during such taxable year, or portion
thereof, and reserves set aside out of revenues during prior periods and no
longer needed for the Company’s business, but not including Capital Transaction
Proceeds, less the sum of (i) operating and administrative expenses of the
Company (excluding amounts paid from reserves or funds provided by Actual
Capital or from Capital Transaction Proceeds (provided that the Members have
specifically approved in writing such use of the Capital Transaction Proceeds))
paid during such Fiscal Year, or portion thereof, including without limitation,
fees payable under this Agreement or the Affiliate Agreements, and (ii)
reasonable reserves for the remainder of such Fiscal Year and future periods
based on the Company Budget approved by the Members or otherwise approved by the
Members.

“Net Income or Net Loss” shall mean for each Fiscal Year or other period, an
amount equal to the Company’s taxable income or loss for such year or period
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:

(a)                                  Any income of the Company that is exempt
from federal income tax and not otherwise included (net of related expenses not
otherwise deducted) in computing Net Income or Net Loss pursuant to this
definition 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 1.704l(b)(2)(iv)(i), and not otherwise taken
into account in computing Net Income or Net Loss pursuant to this definition,
shall be subtracted from such taxable income or loss;

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(c)                                  If the Gross Asset Value of any Company
asset is adjusted pursuant to subsection (b) or (c) set forth within the
definition of Gross Asset Value, the amount of such adjustment shall be taken
into account as gain or loss from the disposition of such asset for purposes of
computing Net Income or Net Loss;

(d)                                 In lieu of the depreciation, amortization
and other cost recovery deductions taken into account in computing such taxable
income or loss, there shall be taken into account Depreciation for such Fiscal
Year or other period; and

(e)                                  Notwithstanding any other provision of this
Section, any items which are specially allocated pursuant to Section 3.9(b)
hereof shall not be taken into account in computing Net Income or Net Loss.

“Nonrecourse Deductions” shall have the meaning set forth in Regulations Section
1.704-2(c).

“Opening Date” shall mean the date upon which the Property shall be open for
business as a hotel.

“Partner Nonrecourse Debt Minimum Gain” shall mean the sum of each Member’s
share of the “minimum gain attributable to the partner nonrecourse debt” as
those quoted terms are used in Regulations Section 1.704-2(i)(2).

“Partner Nonrecourse Deductions” shall have the meaning set forth in Regulations
Section 1.704-2(i)(2).

“Partnership Minimum Gain” shall have the meaning set forth in Regulations
Section 1.704-2(b)(2).

“Percentage Interests” shall mean, initially, 50% for MHG and 50% for SWA;
provided, however, that upon the contribution of any Additional Capital to the
Company, “Percentage Interests” shall thereafter mean, for each Member, the
percentage equal to a fraction, the numerator of which is the Actual Capital of
such Member and the denominator of which is the aggregate Actual Capital of all
the Members, but subject to adjustment under Section 3.1(g) hereof.

“Person” shall mean an individual, corporation, firm, partnership, limited
liability company, trust or any other form of association or entity.

“Plans and Specifications” with respect to the Project, shall mean the plans,
drawings, specifications, renderings, studies, budgets, forecasts and schedules
developed as of the date hereof, and to be developed from and after the date
hereof, as the same may be modified from time to time.

“Project” a collective term for the acquisition, construction, rehabilitation,
renovation and design of the Building as a 348-key condominium hotel, to be
branded as a “Mondrian Hotel” to include an outdoor swimming pool, spa/fitness
center, business center, bar(s), restarurant(s) and docks.

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“Project Costs” with respect to the Project, a collective term for all direct
and indirect costs of the Project incurred through the final completion of the
Project, comprising the following costs: (i) design, including architectural,
mechanical, electrical, structural and civil engineering, including construction
of mock-up rooms (but excluding any costs which fall within (ii) below), (ii)
costs of acquisition and construction, being the sums paid by Company, or its
direct subsidiary, to the contractors pursuant to the Building Contract and any
other relevant Construction Document (but excluding any costs which fall within
(i) above), (iii) the purchase price of all furniture, furnishings and
equipment, including the transportation and the installation thereof, (iv)
financing, including fees and interest, (v) legal and accounting fees, (vi)
taxes and insurance, and (vii) subject to such other costs falling within the
parameters set out in the Construction Budget, any and all other costs
reasonably necessary for the completion of the Project.

“Project Lender” shall mean the lender(s) providing to the Company financing for
the Project.

“Project Manager” shall mean Sanctuary West Management, LLC, an affiliate of
SWA, or any successor thereto under the Project Management Agreement.

“Project Management Agreement” shall mean that certain Project Management
Agreement, to be entered into between the Company and Project Manager with
respect to the Property.  The Project Management Agreement is an Affiliate
Agreement.

“Property” shall mean those parcels of land and the improvements now or
hereafter thereon known as the “Mirador” located at 1100 West Avenue, Miami
Beach, Florida, together with all appurtenances, privileges, entitlements,
hereditaments and development rights now and hereafter associated therewith.

“Regulations” shall mean the final and temporary Income Tax Regulations
promulgated under the Code, as such regulations may be amended from time to time
(including corresponding provisions of succeeding regulations).

“Required Capital” shall mean the installments of capital to be contributed to
the Company by the Members pursuant to Section 3.1(a).

“SWA” shall mean Sanctuary West Avenue, LLC, a Delaware limited liability
company.

“Tax Returns” shall mean (a) the U.S. Partnership Return of Income filed by the
Company, whether on Form 1065 or such other form as may hereafter be prescribed
by the IRS, and (b) any return or report which the Company is required to file
with the taxing authorities of any State or political subdivision thereof.

“Tax Matters Partner” shall have the meaning ascribed thereto in Section 5.5(a).

“Transfer” shall have the meaning ascribed thereto in Section 7.1(a).

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“Unit” shall mean a condominium unit of the Hotel, established through a plan of
condominium ownership.

“Vote of the Members” shall mean the approval by the majority of the Interests
of the Members.  Wherever this Agreement refers to the consent or approval of
the Members, a Vote of the Members shall be required for such approval or
consent.

ARTICLE 2

COMPANY FORMATION

Section 2.1                                      Formation.  The Members hereby
agree to form the Company under the Act, for the purposes and upon the terms,
covenants and conditions set forth in this Agreement.

Section 2.2                                      Name.  The Company shall be
conducted under the name “1100 WEST HOLDINGS, LLC”.

Section 2.3                                      Purpose.  The purpose of the
Company shall be, subject to the limitations set forth in this Agreement, (i)
directly or indirectly acquiring, owning, holding, selling, transferring and
exchanging interests in 1100 West Properties, LLC a Delaware limited liability
company, (ii) directly or indirectly owning, holding, selling, transferring,
hypothecating and exchanging interests in the Property and to otherwise
construct, reconstruct, renovate, expand, develop, redevelop, refurbish,
improve, operate, finance, refinance, sell, lease, maintain and/or manage the
Property, (iii) engaging in any other lawful act or activity agreed upon by the
Members, and (iv) engaging in any other lawful act or activity for which limited
liability companies may be formed under the Act that are necessary, convenient,
incidental or appropriate to the foregoing.

Section 2.4                                      Place of Business.  The Company
shall maintain a registered office in the City of Miami Beach, at the Property.

Section 2.5                                      Duration.  The Company has
commenced and shall continue in perpetuity unless terminated in accordance with
the provisions of this Agreement or as otherwise provided by Applicable Law.

Section 2.6                                      Management.  Subject to
provisions of this Agreement, including Article IV, the management of the
business and affairs of the Company shall be vested in the Members.

ARTICLE 3

CAPITAL; ALLOCATIONS; DISTRIBUTIONS

Section 3.1                                      Capital Contributions.  (a) 
Upon execution of this Agreement, the Members have contributed to the Company
the sums set forth opposite their names on Exhibit A annexed hereto.  It is
anticipated that the budget for the Project shall provide capitalization of the
Company of $30,000,000 for the acquisition and redevelopment of the Property
(such amount being the “Required Capital”), covering all hard and soft costs,
including all permits and fees, all furnishing, fixtures and equipment, and
contingencies.  In accordance with the Construction

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Budget approved by the Members, the Members shall contribute, on a 50-50 basis,
their respective shares of the Required Capital.  Either Member may, at any time
Required Capital is required to pay for (i) costs and expenses approved in the
Construction Budget or Company Budget, or (ii) for Project Costs, call for an
advance by the Members of their respective shares of Required Capital to the
extent not already advanced by such Members.

(b)                                 To the extent that at any time the Members
determine that additional capital (exclusive of any amounts to be contributed
pursuant to Section 3.1(a)) is required by the Company (“Additional Capital”),
the same shall be advanced by the Members, in equal portions, (50%-50%)
(provided that following a reallocation as provided in Section 3.1(g) hereof,
such Additional Capital shall be contributed by the Members, pro rata, in
proportion to their respective Percentage Interests).  Notwithstanding the
foregoing, either Member may, acting alone, make a call for Additional Capital
(i) up to $10,000,000 for the completion of the construction and development of
the Project as provided under Paragraph 6.1 of this Agreement, (ii) to the
extent required to cure any Emergency Condition, (iii) to the extent required to
pay debt service on any approved financing of the Company (or the Property),
(iv) to the extent required to pay real estate taxes, (v) to the extent required
to pay insurance premiums, or (vi) otherwise for any expense set forth in either
the Construction Budget or an approved Company Budget.

(c)                                  If any Member (hereinafter a “Defaulting
Member”) shall fail to contribute all or any portion of its Required Capital or
Additional Capital called for pursuant to Section 3.1(a) or 3.1(b) within ten
(10) days (or in the event that the Additional Capital is required by virtue of
an Emergency Condition, then within three (3) business days), then the
non-Defaulting Member shall be entitled, but not required, to loan to the
Defaulting Member the amount of the Additional Capital which the Defaulting
Member failed to contribute by funding to the Company the amount of the
Additional Capital so failed to be contributed.  Any Additional Capital so
funded pursuant to this Section 3.1 (hereinafter a “Default Member Loan” and the
contributing Member making such Default Member Loan, hereinafter, the “Lending
Member”) shall be deemed to be a loan to the Defaulting Member and shall bear
interest at a rate equal to fifteen (15%) percent per annum, but in no event to
exceed the highest permissible legal rate of interest (interest due on any such
Default Member Loan shall be payable monthly and shall be hereinafter referred
to as the “Default Loan Interest Return”).  Interest shall accrue on Default
Member Loans from the date the funds are actually received by the Company until
the date that the Default Member Loans are repaid in full.

(d)                                 Notwithstanding anything to the contrary
contained in this Agreement, at any time when any portion of a Default Member
Loan (including accrued and unpaid Default Loan Interest Return) shall remain
outstanding, any distributions otherwise payable to or on account of a
Defaulting Member shall be paid to the Lending Members who have funded the
applicable Default Member Loan as provided for in Section 3.1(c) of this
Agreement, and such distribution shall be applied first to the Default Loan
Interest Return and then in reduction of the Default Member Loan.  In this
regard, such Defaulting Member hereby assigns its right to receive all
distributions from the Company to the Lending Members until such time as the
Default Loan Interest Return and Default Member Loan have been paid in full.  If
more than one Default Member Loan is outstanding, the Default Member Loans
senior in time shall be paid in

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full prior to any other Default Member Loans.  A Default Member Loan may be
prepaid at any time without penalty or premium but with interest to date of
payment.

(e)                                  Notwithstanding the provisions of this
Section 3.1, a Defaulting Member shall not have any personal liability to the
Company or to the Members for repayment of a Default Member Loan or Default Loan
Interest Return, except to the extent of its Interest in the Company.

(f)                                    In the event a Default Member Loan is not
paid within one hundred fifty (150) days after it is made, the Lending Members
may, at any time thereafter, send a notice to the Company and the Defaulting
Member stating that the Lending Members have elected to exercise a reallocation
right (the “Reallocation Notice”).

(g)                                 If a Defaulting Member shall fail to repay
the Default Member Loan (including all accrued and unpaid Default Loan Interest
Return) within thirty (30) business days of receipt of the Reallocation Notice,
then the Percentage Interest of the Defaulting Member shall automatically and
without further act on the part of any party, be reduced and the Percentage
Interest of the Lending Member(s) (pro rata if there be more than one Lending
Member) shall automatically and without further act on the part of any party be
increased by the product of 1.5 times the percentage equal to a fraction, the
numerator of which is the principal amount of the Default Member Loan (together
with all accrued and unpaid Default Loan Interest Return) and the denominator of
which is the sum of the Default Member Loan (together with all accrued and
unpaid Default Loan Interest Return) and all other Capital Contributions made
(and not repaid) to the Company, which reallocation shall discharge the
obligation under the Default Member Loan.  The outstanding amount of the Default
Member Loan funded by the Lending Member and all interest thereon shall, from
and after the increase in the Lending Members Percentage Interest provided in
this Section 3.1(g), be deemed a contribution of Additional Capital by the
Lending Member and shall no longer be treated as a Default Member Loan.

(h)                                 In reference to the first $5,000,000 of the
Additional Capital to be advanced by the Members under Section 3.1 (b)(i) (or
such portion thereof as required to advanced by them), in the event a Member
fails to contribute such Member’s pro rata share of such Additional Capital
within ten (10) days following a call for such advance, such Member shall not
have the right to vote on any matters for which such Member’s vote or consent is
required hereunder for so long as such Member’s share of such Additional Capital
has not been funded by them.  In reference to the remaining $5,000,000 or any
other sum required to be advanced by the Members under 3.1(b)(ii) through
3.1(b)(vi), the failure of a Member to advance such amount shall not result in
the loss of any voting or consent rights unless a reallocation of the Members’
interests shall occur as provided above.

Section 3.2                                      No Withdrawal of Capital
Contributions.  Except upon dissolution and liquidation of the Company or as
otherwise set forth herein, no Member shall have the right to withdraw, reduce
or demand the return of its Capital Contributions, or any part thereof, or any
distribution thereon.  Except as otherwise provided herein, no Member shall have
the right to receive assets other than cash in connection with a distribution or
return of capital.

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Section 3.3                                      Return of Capital
Contributions.

(a)                                  No Fixed Time.  Except as specifically
provided for herein and upon dissolution and liquidation of the Company, there
is no agreement, nor time set, for the return of any Capital Contribution to any
Member.

(b)                                 No Personal Liability of Member.  Except as
otherwise required by the Act, the Members shall not be personally liable for
the return or repayment of any Capital Contribution.

Section 3.4                                      Liability of Members and Their
Affiliates.  Except as otherwise provided by Applicable Law, 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; no Member or Affiliate of a Member shall be obligated personally for
any such debt, obligation or liability of the Company solely by reason of being
a Member or being an Affiliate of a Member.

Section 3.5                                      No Priority.  Except as
otherwise expressly provided for in this Agreement, no Member shall have
priority over another Member as to return of Capital Contributions, loans or
allocations of income, gain, profits, losses, credits or deductions or as to
distributions.

Section 3.6                                      No Interest.  Except as
expressly provided for in this Agreement, no interest shall be paid on all or
any part of a Member’s Capital Contributions.

Section 3.7                                      No Obligation to Restore
Negative Balances in Capital Accounts.  No Member shall have an obligation, at
any time during the term of the Company or upon its liquidation, to pay to the
Company or any other Member or third party an amount equal to the negative
balance in such Member’s Capital Account.

Section 3.8                                      Capital Accounts.  (a)  The
Company shall maintain a separate capital account (“Capital Account”) for each
Member.

(b)                                 The Capital Account of each Member shall be
maintained in accordance with Section 1.704-1(b) of the Regulations as in effect
on the date of this Agreement and shall be interpreted and applied in a manner
consistent with such Regulations.

(c)                                  Each Member’s Capital Account shall be
adjusted in accordance with the following provisions:

(i)                                     To each Member’s Capital Account there
shall be credited (A) the amount of any cash Capital Contributions made, and the
Gross Asset Value of any property contributed (net of liabilities secured by
such property), by such Member to the Company, and (B) such Member’s allocable
share of Net Income; and

(ii)                                  To each Member’s Capital Account there
shall be debited (A) the amount of cash and the Gross Asset Value of any Company
property distributed

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to such Member pursuant to any provision of this Agreement (net of any
liabilities secured by such property), and (B) such Member’s allocable share of
Net Loss.

(d)                                 In the event of a transfer of a Member’s
Interests or any portion thereof in accordance with the terms of this Agreement,
whether or not the purchaser, assignee or successor-in-interest is then a
Member, the Person so acquiring such Interest or any portion thereof shall
acquire the Capital Account or portion thereof of the Member formerly owning
such Interest, adjusted for distributions of Net Cash From Operating Income made
pursuant to Section 3.13 hereof and allocations of Net Profits and Net Losses
made pursuant to Section 3.9 hereof.

Section 3.9                                      Allocation of Net Income and
Net Loss.  (a)  Except as provided in Section 3.9(b), items of Net Income and
Net Loss in each Fiscal Year shall be allocated among the Members in a manner
such that the Capital Account of each Member, immediately after giving effect to
such allocation, is, as nearly as possible, equal (proportionately) to the
amount of the distribution that would be made to such Member if (i) the Company
were dissolved and terminated, (ii) the affairs of the Company were wound up and
each Company asset was sold for cash equal to its fair market value (except that
any Company asset actually sold during the current year shall be treated as sold
for the actual proceeds of the sale), (iii) all Company liabilities were
satisfied and (iv) the net assets of the Company were distributed to the Members
in accordance with Section 3.13 immediately after giving effect to such
allocation.  To the extent that any loss or deduction otherwise allocable to a
Member would cause such Member to have an Adjusted Capital Account Deficit as of
the end of the Fiscal Year to which such loss or deduction relates, such loss or
deduction shall instead be allocated to the other Member(s) in proportion to
positive Capital Account balances, until their Capital Accounts are all reduced
to zero, then the remainder shall be allocated by Percentage Interest.

(b)                                 Prior to making any allocations pursuant to
Section 3.9(b), items of Company income and loss shall be allocated in the
following order and priority:

(i)                                     if there is a net decrease in
Partnership Minimum Gain during any Fiscal Year, there shall be allocated to
each Member (before any other allocation provided by this Article 3 is made)
items of Company income and gain for such year (and, if necessary, subsequent
years) in an amount equal to such Member’s share of the net decrease in
Partnership Minimum Gain, determined in accordance with regulations Sections
1.704-2(g)(1) and (2).  The items to be so allocated shall be determined in
accordance with Regulations Section 1.704-2(f).  This Section 3.9(b)(i) is
intended to comply with the minimum gain chargeback requirement in Regulations
Section 1.704-2(f) and shall be interpreted consistently therewith.

(ii)                                  if there is a net decrease in Partner
Nonrecourse Debt Minimum Gain during any Fiscal Year, there shall be allocated
to each Member (before any other allocation provided by this Article 3 is made,
other than an allocation made pursuant to Section 3.9(b)(i) above) items of
Company income and gain for such year (and, if necessary, subsequent years) in
an amount equal to such Member’s share of the net decrease in Partner
Nonrecourse Debt Minimum Gain attributable to such Partner Nonrecourse Debt (as
defined in the Regulations), determined in accordance with Regulations Section
1.704-2(i).  The items to be so allocated

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shall be determined in accordance with Regulations Section 1.704-2(i).  This
Section 3.9(b)(ii) is intended to comply with the minimum gain chargeback
requirement in Regulations Section 1.704-2(i) and shall be interpreted
consistently therewith.

(iii)                               In the event in any Fiscal Year any Member
has an Adjusted Capital Account Deficit resulting from an unexpected adjustment,
allocation or distribution described in Section 1.704-1(b)(2)(ii)(d)(4), (5) or
(6) of the Regulations, items of Company income and gain (consisting of a pro
rata portion of each item of Company income, including gross income, and gain
for such Fiscal Year) shall be specially allocated to such Member in an amount
and manner sufficient to eliminate as quickly as possible such Member’s Adjusted
Capital Account Deficit without creating or increasing an Adjusted Capital
Account Deficit of any other Member.  If more than one of the Members has an
Adjusted Capital Account Deficit resulting from such unexpected adjustment,
allocation or distribution described in Section 1.704-1(b)(2)(ii)(d)(4), (5) or
(6) of the Regulations, items of Company income and gain shall be allocated to
the Members having Adjusted Capital Account Deficits in proportion to their
respective Adjusted Capital Account Deficits.  This Section 3.9(b)(iii) is
intended to constitute a “qualified income offset” under Regulations Section
1.704I(b)(2)(ii)(d).

(iv)                              In the event any Member has a deficit Capital
Account at the end of any Company Fiscal Year which is in excess of the sum of
(i) the amount such Member is obligated to restore pursuant to any provision of
this Agreement and (ii) the amount such Member is deemed to be obligated to
restore pursuant to the penultimate sentences of Regulations Sections
1.704-2(g)(1) and 1.704-2(i)(5), each such Member shall be specially allocated
items of Company gross income and gain in an amount and manner sufficient to
eliminate such excess as quickly as possible.

(v)                                 To the extent that 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), to be taken into account in determining Capital Accounts,
the amount of such adjustment to the Capital Accounts shall be treated as an
item of gain (if the adjustment increases the basis of the asset) or loss (if
the adjustment decreases such basis) and such gain or loss shall be allocated to
the Members in a manner consistent with the manner in which their Capital
Accounts are required to be adjusted pursuant to such Regulations Section.

(vi)                              Nonrecourse Deductions for any Fiscal Year or
other period shall be allocated to the Members in the same ratio as Net Income
for such Fiscal Year or other period is allocated among the Members.

(vii)                           Partner Nonrecourse Deductions for any Fiscal
Year or other period shall be allocated to the Members who bear the economic
risk of loss with

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respect to the loan to which such item of deduction is attributable.  This
Section 3.9(b)(vii) is intended to comply with the provisions of Regulations
Section 1.704-2(i) and shall be interpreted in accordance therewith.

(viii)                        To the extent that any Company expenditure,
including, but not limited to, any management or other fee paid to an Affiliate
of MHG or SWA, is disallowed as a deduction for purposes of computing the
Company’s taxable income under Code Section 704 and instead is treated as a
distribution to the payee pursuant to Code Section 731(a), then there shall be a
special allocation of Company items of income to the payee (of an Affiliate
thereof) in an amount equal to the amount of the payments received so treated as
a distribution pursuant to Section 731(a).

Section 3.10                                Other Allocation Rules.  (a)  For
purposes of determining the Net Income, Net Loss or any other items allocable to
any period, Net Income, Net Loss and other items shall be determined on a daily,
monthly, or other basis, as determined by the Members, using any permissible
method under Code Section 706 and the Regulations thereunder.

(b)                                 Credits, or income resulting from the
recapture of Credits, shall be allocated among the Members in accordance with
the Code, Regulations and Applicable Law.

(c)                                  Whenever items of income or loss of the
Company allocable hereunder consist of items of different character for tax
purposes i.e., ordinary income, long-term capital gain, depreciation recapture,
interest expense, etc.), the items of income or loss of the Company allocable to
each Member shall include, to the extent possible, his pro rata share of each
such item.

(d)                                 The Members are aware of the income tax
consequences of the allocations made by this Article 3 and hereby agree to be
bound by the provisions of this Article 3 in reporting their shares of Company
income and loss for income tax purposes.

Section 3.11                                Tax Allocations.  In accordance with
Code Section 704(c) and the Regulations thereunder, income, gain, loss and
deduction with respect to any property contributed to the capital of the Company
shall, solely for tax purposes, be allocated among the Members so as to take
account of any variation between the adjusted basis of such property to the
Company for federal income tax purposes and its initial Gross Asset Value.

If the Gross Asset Value of any Company asset is adjusted as provided in the
definition thereof, subsequent allocations of income, gain, loss and deduction
with respect to such asset shall, solely for federal income tax purposes and
pursuant to Regulations Section 1.704-1(b), take account of any variation
between the adjusted basis of such asset for federal income tax purposes and its
Gross Asset Value in the same manner as under Code Section 704(c) and the
Regulations thereunder.

Section 3.12                                State and Local Items.  Items of
income, gain, loss, deduction, credit and tax preference for state and local
income tax purposes shall be allocated to and among the Members in a manner
consistent with the allocation of such items for federal income tax

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purposes in accordance with the foregoing provisions of this Article 3 unless
otherwise required by Applicable Law.

Section 3.13                                Distributions.  (a)  The Company
shall distribute all available Net Cash from Operations and Capital Transaction
Proceeds in accordance with this Section 3.13.

Subject to Sections 3.1(c) and (d), Net Cash from Operations and Capital
Transactions Proceeds of the Company shall be distributed monthly to the Members
in accordance with their Percentage Interests.

(b)                                 The Members intend that the Company Budgets
for the Company shall include as an expense item reserves to be fixed by the
Members from time to time, and the Members agree that distributions to the
Members according to this Agreement will not be made if such distributions have
the effect of impairing reserves.

(c)                                  Notwithstanding any other provision to the
contrary, the Company may withhold from any distribution otherwise payable to a
Member, any taxes payable by the Company with respect to amounts allocable or
distributable to such Member.  Any amounts so withheld shall be paid by the
Company to the appropriate taxing authority and shall be treated as amounts
distributed to the Member.

(d)                                 In accordance with Section 3.1(d) hereof and
notwithstanding anything in this Section 3.13 to the contrary, any amounts
distributable pursuant to Section 3.13(a) to a Member who is a Defaulting Member
shall not be paid to such Defaulting Member, but shall instead be paid to the
Lending Member in payment of accrued and unpaid Default Loan Interest Return, if
any, and in repayment of the principal of the Default Member Loan.  Any such
amounts paid to the Lending Member shall be treated for all purposes of this
Agreement as if distributed to the Defaulting Member pursuant to Section 3.13(a)
hereof, and then paid by the Defaulting Member to the Lending Member pursuant to
the terms of the Default Member Loan.  In the event of more than one Lending
Member with respect to a particular Default Member Loan, such amounts shall be
paid to the Lending Members pro rata in accordance with their Percentage
Interests.

ARTICLE 4

MANAGEMENT

Section 4.1                                      Management of the Company. 
Subject to the provisions of this Agreement (including this Section 4.1 and
Section 4.2), the management of the company shall be by the Members.  MHG and
SWA shall each use their respective best efforts to carry out the business of
the Company as set forth in Section 2.3.  Simultaneously with the execution of
this Agreement, the Company shall consent to or shall enter into the Hotel
Management Agreement with the Hotel Manager, an Affiliate of MHG, for the
management and operation of the Hotel.

Section 4.2                                      Limitation on Member’s
Authority.  Except as otherwise expressly set forth herein, SWA and MHG shall
jointly act for and bind the Company, and third persons dealing with the Company
may fully rely upon any action taken or instrument executed on behalf of the
Company jointly by SWA and MHG.

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In furtherance and not in limitation of the foregoing, before the Company, or
any Member on behalf of the Company, undertakes any of the following (a “Major
Decision”), a Vote of the Members must approve the same in writing:

(a)                                  The changing of the capital structure of
the Company, including, without limitation, the creation, issuance or allotment
by the Company of any membership interests or any right or instrument
convertible into membership interests in the Company, or the creation of options
for new membership interests;

(b)                                 The modifying of this Agreement or any
formation documents of the Company;

(c)                                  The appointing of or changing of auditors
or investments bankers of the Company;

(d)                                 The obtaining or modifying of any
borrowings, financings or refinancings by the Company;

(e)                                  The entering into of any joint venture or
partnership by the Company or any subsidiary of the Company;

(f)                                    The purchasing, selling, leasing or
disposing of any fee or leasehold real property (other than the sale of Units in
accordance with the Business Plan);

(g)                                 The approving of the Construction Budget and
the Business Plan and any modifications thereto;

(h)                                 The approving of any Company Budget
subsequent to the Construction Budget;

(i)                                     Any voluntary bankruptcy filing, winding
up, dissolution or receivership of the Company or any subsidiary of the Company;

(j)                                     The creating of any indebtedness for
borrowed money or any other financing by the Company;

(k)                                  The voluntary creation of any lien on the
Property not contemplated by financing approved by the Members or contesting the
validity, amount or enforceability of any lien;

(l)                                     Subject to Section 5.7, the commencing
or threatening of any litigation, legal proceeding, casualty or condemnation of
any type on behalf of the Company and the direction of any such proceeding,
including, without limitation, the settling, compromising or taking any other
material action with respect to any litigation, legal proceeding, casualty or
condemnation of any type by, against, or involving the Company or the Property;

(m)                               The mortgaging, pledging or other
hypothecation of any assets of the Company, including the Property;

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(n)                                 The causing of the Company, or any Member to
be obligated as a surety, guarantor or accommodation party (except with regard
to SWA, as applicable, under the Completion Guaranty);

(o)                                 The lending of funds belonging to the
Company to any Person, or the extension of credit to any Person on behalf of the
Company;

(p)                                 The confessing of judgment on behalf of the
Company or any Member;

(q)                                 The changing of the purpose of the Company;

(r)                                    The merging or consolidating of the
Company with another entity; or the incorporating or other changing of the
nature of the Company from a limited liability company formed under Delaware
law;

(s)                                  The hiring of, or transacting of any
business with or entering into any Occupancy Agreements with, any Person in
which either Member owns, directly or indirectly, an economic or beneficial
interest (other than public companies), provided that the Members hereby approve
the Affiliate Agreements;

(t)                                    The modifying or terminating of any
Affiliate Agreement;

(u)                                 The agreeing to the settlement of any
condemnation proceeding or insurance claim;

(v)                                 The selling, leasing or other disposing of
all or substantially all of any Property or all or substantially all of the
assets of the Company;

(w)                               The deciding whether to repair or rebuild in
case of a material damage to the Property arising out of a casualty or
condemnation, subject to the terms of existing mortgages, leases and other
agreements previously approved by the Members;

(x)                                   The admitting of additional Members;

(y)                                 The selection and hiring of any architect,
engineer or other professional to provide professional services to the Company
in connection with the Project;

(z)                                   The selection and hiring of general
contractors, construction managers and subcontractors with contracts worth in
excess of $100,000, in connection with the renovation of the Building;

(aa)                            The selection and hiring on behalf of the
Company of accountants, attorneys, auditors and other consultants;

(bb)                          The approval and filing of a plan of condominium
ownership for the Property;

(cc)                            The approval, amendment or termination of the
Construction Documents;

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(dd)                          The approval of the Plans and Specifications, and
any modifications or amendments thereto;

(ee)                            The commencement of any legal action or
proceedings, arbitration, and real estate tax certiorari proceedings challenging
over-assessment of the Property;

(ff)                                Notwithstanding the above, any decisions
with respect to an Affiliate Agreement or any matter pertaining to an Affiliate,
shall be made solely by the “non-affiliated” Member, and all action pursued
pursuant to such decision shall be directed and controlled by said Member;

(gg)                          Any Member shall promptly give the other Members
notice of any Major Decision that is proposed to be undertaken.  The other
Member shall have ten (10) business days to approve or disapprove of any Major
Decision (other than approval of the Construction Budget and Business Plan,
which are to be approved as provided below, and pursuant to Section 6.1, for the
initial Construction Budget and Business Plan, and Section 5.6 as to any
modifications to the Construction Budget or subsequent Business Plan). 
Notwithstanding the foregoing time periods for response to a notice of Major
Decision, if the notifying Member shall, in such notice for a Major Decision,
state that such Major Decision is needed to handle or resolve an Emergency
Condition, the other Members shall approve or disapprove the Major Decision
proposed by such Member within three (3) business days.  If a Member shall fail
to disapprove a request for approval or shall fail to give its consent during
the appropriate time period, that Member shall be deemed to have approved of the
proposed action.  Any notice of disapproval shall set forth with reasonable
specificity the reasons therefor.  Notwithstanding the foregoing, with respect
to leasing matters, the Members may grant or withhold their consent to any
proposed lease, license or concession agreement in their absolute and sole
discretion.

(hh)                          In the event the Members have not approved the
Construction Budget, the Business Plan, any subsequent Company Budget, or any
modification thereto that requires the approval of Members within (x) 30 days
from the date of the initial submission for the approval of the Members in the
case of the initial Construction Budget or Business Plan or (y) 15 days for any
subsequent Company Budget or modification to an approved Construction Budget or
Business Plan, any Member may submit such dispute to arbitration as provided in
Article 13 hereof.  Until such time as such dispute is resolved (either by
consensus or arbitration) the following shall control:

(i)                                     With respect to any Company Budget
subsequent to the Company Budget for the first fiscal year of the Company, each
line item shall be increased by the greater of the increase in Consumer Price
Index over the prior year or four percent (4%) over the prior year Company
Budget except with respect to line items for Necessary Sums which line items may
be increased without the Members’ consent by the actual amount of any increase;

(ii)                                  With respect to any mid-year modification
to a subsequent Company Budget which requires the approval of the Members, there
shall be no increase above 1 % of such budget; and

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(iii)                               With respect to the approval of the
Construction Budget, the initial Business Plan, or any modifications thereto no
such budget or plan shall be approved until resolved by the Members or by
arbitration pursuant to Article 13.

Section 4.3                                      Designated Representatives. 
SWA hereby designates Abraham A. Galbut as its authorized representative with
whom MHG and its representative may deal in connection with any decisions or
actions requiring input or approval from SWA.  MHG hereby designates Marc Gordon
as its authorized representatives with whom SWA and its representatives may deal
in connection with any decisions or actions requiring input or approval from
MHG.  Either Member may change its designated representatives upon written
notice to the other Member.

Section 4.4                                      Compensation of Members. 
Except as expressly provided herein, the Members, as such, shall not receive any
compensation for their services to the Company; provided, however, that to the
extent approved by the Members in the Construction Budget, any Company Budget or
the Members and the appointed officers, if any, may charge to the Company and
pay out of Company funds, as and when available, all reasonable, actually
incurred, direct out-of-pocket expenses incurred by them in performing such
Member’s duties hereunder; and provided, further, that nothing herein contained
shall affect the right of the Hotel Manager to receive fees and reimbursements
provided for under the Hotel Management Agreement.

Section 4.5                                      Indemnification of Members.  No
Member shall be liable, in damages or otherwise, to the Company or to any of the
Members for any act or omission performed or omitted by such Member pursuant to
authority granted by this Agreement, except to the extent such act or omission
results from the Member’s willful misconduct or bad faith or gross negligence. 
The Company shall indemnify, defend and hold harmless the Members and their
respective officers, directors, partners, members, agents, representatives and
Affiliates, and each of them, from and against any claim or liability of any
nature whatsoever, including, without limitation, reasonable attorneys’ fees and
expenses, arising out of or in connection with the assets or business of the
Company, except where attributable to the willful misconduct or bad faith or
gross negligence of such Member.  Each of the Members shall be entitled to rely
on the advice of counsel or certified public accountants, and any act or
omission of a Member in good faith reliance on such advice shall in no event
subject such Member to liability to the Company or any Member.

ARTICLE 5

DUTIES OF MEMBERS

Section 5.1                                      Specified Duties.

(a)                                  MHG shall, in conformance with Section 4.1,
and to the extent not delegated to the Hotel Manager pursuant to the Hotel
Management Agreement, or otherwise provided in this Article 5, from and after
the Opening Date oversee day-to-day operations of the Property;

(b)                                 SWA shall, in conformance with Section 4.1,
and to the extent not delegated to or performed by the Project Manager under the
Project Management Agreement or

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otherwise provided in this Article 5, oversee the day-to-day operation of the
Property prior to the Opening Date.

(c)                                  Notwithstanding anything contained in this
Agreement to the contrary, SWA, without the approval of MHG, shall have the sole
right to act for and on behalf of the Company in connection with enforcing
compliance by the Hotel Manager with the terms of the Hotel Management
Agreement, and is authorized to exercise remedies, including, without
limitation, the right of termination pursuant to the applicable terms of the
Hotel Management Agreement.

(d)                                 Notwithstanding anything contained in this
Agreement to the contrary, MHG, without the approval of SWA, shall have the sole
right to act for and on behalf of the Company in connection with enforcing
compliance by the Project Manager with the terms of the Development Agreement. 
MHG is authorized to exercise remedies of the Company as against the Project
Manager, including, without limitation, the right of termination pursuant to the
applicable terms of the Development Agreement.

Section 5.2                                      Books and Records.  The Members
hereby designate MHG to perform, or cause to be performed, all general and
administrative services on behalf of the Company and in pursuance thereof MHG
shall maintain complete and accurate books of the Company with respect to its
operations at the Company’s principal office at the Project showing the
interests of the Members, all receipts and expenditures, assets and liabilities,
profits and losses, and all other records necessary for recording the Company’s
business and affairs, including the maintenance of a Capital Account for each
Member.  No Member shall be entitled to any fee for performing any such general
and administrative services.  The books of the Company and the Owner shall be
kept on the cash basis in accordance with generally accepted accounting
principles, consistently applied, and shall be open to inspection and
examination by each Member at all reasonable times.  SWA shall provide to MHG
financial information for the Property with respect to the period prior to the
Opening Date necessary for the preparation of the above described books of the
Company.

Section 5.3                                      Reports.  The Members hereby
designate MHG, to, provide:

(a)                                  as promptly as practicable and in any event
within twenty (20) days after the close of each month, a balance sheet, a
statement of profit and loss of the Company, a statement of Net Cash from
Operations of the Company, and a statement of each Member’s Capital Account,
Adjusted Capital and Actual Capital, all for such period;

(b)                                 as promptly as practicable and in any event
within thirty (45) days after the close of each quarter, a balance sheet, a
statement of profit and loss of the Company, a statement of Net Cash from
Operations of the Company, and a statement of each Member’s Capital Account,
Adjusted Capital and Actual Capital, all for such period;

(c)                                  as promptly as practicable and in any event
within ninety (90) days after the end of each Fiscal Year, a balance sheet of
the Company as of the end of such year showing its net worth and containing a
statement of each Member’s Capital Account, Adjusted Capital and Actual Capital
and statements of profit and loss, Net Cash from Operations, of the net and

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distributable proceeds received from each Capital Transaction, and the sources
and applications of funds of the Company for such year;

(d)                                 promptly upon receipt thereof, one copy of
each other report submitted to the Company by the Company’s accountants in
connection with any annual, interim or special audit made by them of the books
or records of the Company;

(e)                                  as promptly as possible following the end
of each Fiscal Year (but no later than April 1 of such Fiscal Year), a copy of
the Company’s federal, state and local (if any) returns of income for said
Fiscal Year, with Schedule K-1 attached to the federal return, prepared by the
Company’s accountants, together with a statement of such accountants showing the
amount of Net Income, Net Loss, capital gain and other items allocable to each
Member for federal, state and local income tax purposes; and

(f)                                    from time to time and with reasonable
promptness, such further information in respect of the business, affairs and
financial condition of the Company as any of the Members may reasonably request.

SWA shall provide to MHG financial information for the Property (and the
Project) with respect to the period prior to the Opening Date necessary for the
timely preparation of the above-described financial reports and returns.

No Member shall be entitled to any fee for performing any of the duties set
forth in this Section 5.3.

Section 5.4                                      Tax Returns; Tax Elections. 
MHG shall cause to be prepared and filed, at the expense of the Company, all
required state and federal informational tax returns for the Company on or
before the date that such returns are due, and shall cause to be prepared and
delivered to the other Member, by March 15 of each year, all completed
informational returns due to the Members, including without limitation, K-1
forms.  All expenses incurred in connection with the above shall be borne by the
Company.  Except as otherwise expressly provided herein, MHG, subject to the
consent of SWA (which consent shall not be unreasonably withheld) shall make all
applicable elections, determinations and other decisions under the Code (or any
other federal or state law), including without limitation, the deductibility of
a Company’s tax return, and shall approve, subject to the consent of SWA (which
consent shall not be unreasonably withheld) the settlement or compromise of all
audit matters raised by the Internal Revenue Service or other taxing authority
affecting the Members generally.  The Members each shall take reporting
positions on their respective federal, state and local income tax returns
consistent with the positions determined for the Company in accordance with the
foregoing consent requirements.

Section 5.5                                      Tax Controversies.  (a)  The
Members hereby designate MHG as tax matters partner (the “Tax Matters Partner”)
as defined in Section 6231(a)(7) of the Code, and the Members will take such
actions as may be necessary, appropriate, or convenient to effect the
designation of such Tax Matters Partner.  The Tax Matters Partner and the other
Members shall use their best efforts to comply with the responsibilities
outlined in this section and in Section 6231 of the Code (including any
Regulations promulgated thereunder).

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(b)                                 The Members shall furnish the Tax Matters
Partner with such information as the Tax Matters Partner may reasonably request.

(c)                                  The Tax Matters Partner shall not enter
into an agreement with the IRS to extend the period of assessment regarding
Company and the Owner items (as defined in Section 6231(a)(3) of the Code, but
substituting the term “Company” and the term “Owner” for the term “partnership”)
without the written consent of the Members.

(d)                                 No Member shall file, pursuant to Section
6227 of the Code, a request for an administrative adjustment of Company items
for any taxable year of the Company and the Owner without first notifying the
other Members.  If the other Member agrees with the requested adjustment, the
Tax Matters Partner shall file the request for administrative adjustment on
behalf of the Company and the Owner.  If the Members do not reach agreement
within thirty days or within the period required to timely file the request for
administrative adjustment, if shorter, any Member may file a request for
administrative adjustment on its own behalf.  If, under Section 6227 of the
Code, a request for administrative adjustment which is to be made by the Tax
Matters Partner must be filed on behalf of the Company and the Owner, the Tax
Matters Partner shall also file such a request on behalf of the Company and the
Owner under the circumstances set forth in the preceding sentence.

(e)                                  If an audit of any of the Company’s or
Owner’s Tax Returns shall occur, the Tax Matters Partner shall, at the expense
of the Company or Owner, as applicable, notify the Members thereof, participate
in the audit and subject to paragraph (g) of this Section 5.5, contest, settle
or otherwise compromise assertions of the auditing agent which may be adverse to
the Company or the Owner.  The Tax Matters Partner may, if it determines that
the retention of accountants and/or other professionals would be in the best
interests of the Company or the Owner, as applicable, retain such accountants
and/or other professionals to assist in such audits.

(f)                                    If any Member intends to file a petition
under Sections 6226 or 6228 of the Code with respect to any Company item or
Owner or other tax matter involving the Company or the Owner, the Member so
intending shall notify the other Members of such intention and the nature of the
contemplated proceeding.  Such notice shall be given in a reasonable time to
allow the other Members to participate in the choosing of the forum in which
such petition will be filed.  If the Members do not agree on the appropriate
forum, the petition shall be filed with the United States Tax Court.  If any
Member intends to seek review of any court decision rendered as a result of the
proceeding instituted under the preceding part of this subsection, such party
shall notify the others of such intended action.

(g)                                 The Tax Matters Partner shall not bind any
Member to a settlement agreement without the approval of such Member.  If any
Member enters into a settlement agreement with the Secretary of the Treasury
with respect to any partnership items, as defined by Section 6231(a)(3) of the
Code, it shall notify the other Members of such settlement agreement and its
terms within thirty days from the date of settlement.

Section 5.6                                      Budgets/Business Plans.  (a) 
The Construction Budget shall be prepared in accordance with Section 6.1 hereof.

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(b)                                 The budget for the operations of the Company
(the “Company Budget”) shall be prepared jointly by the Members no later than
sixty (60) days prior to the start of each Fiscal Year, except that the Company
Budget for the initial Fiscal Year shall be prepared within thirty (30) days
from the date hereof.

Section 5.7                                      Notice of Suits.  Any Member
obtaining knowledge of the commencement of any suit or legal proceeding against
the Company, Owner or a Property shall promptly notify the other Members
thereof, and will forward with such notice copies of the summons, complaints and
other pertinent documents relating to such action or proceeding, including a
copy of all pleadings.  The Members shall thereafter control the defense of all
suits and proceedings that are covered by insurance or are of the type that
would customarily arise in the hospitality industry in the ordinary course of
operating a hotel open to the general public (the “Ordinary Course
Litigation”).  The control and management of any suits and proceedings that are
not Ordinary Course Litigation shall be determined on a case by case basis by
the Members.

ARTICLE 6

CONSTRUCTION BUDGET/CAPITAL PLAN

Section 6.1                                      Construction Budget; Business
Plan.  Following acquisition of the Property, the Members shall cooperate in
preparing an initial plan (the “Business Plan”) and budget for the financing and
development of the Property (the “Construction Budget”).  SWA shall within 120
days of the date hereof prepare and submit for the Members’ review and approval
a preliminary Construction Budget, which shall include a renovation and
development schedule identifying the projected dates for the commencement and
completion of the improvements to the Property at various stages of renovation
and development, and shall set forth all revenues and expenses, including,
without limitation, all costs, fees and expenses required for the construction
and renovation of the Property.  The Members shall jointly prepare a Business
Plan, which shall be prepared in a manner consistent with a market standards
applicable to facilities similar to the Project, and shall set forth the
parameters, guidelines and assumptions pursuant to which the Company will
effectuate the performance of the purposes of the Company, including, without
limitation, the proposed terms and timing of the condominium conversion, the
proposed terms of any condominium unit sale price, preparation and release of
promotional and advertising materials relating to the Project (subject to
Section 12.15 hereof) and financing of the costs and expenses to be incurred by
the Company in connection with the Project.  The Members shall cooperate in
providing to each other such supporting documentation, reports and other
supporting documents as may be reasonably requested by them for review of the
proposed Construction Budget and Business Plan, including projected gross
income, projected gross and net proceeds from the sale of Units, operating
expenses, projected reserves of working capital, replacements and other cash
requirements. Following approval of the Construction Budget, SWA shall be
primarily responsible for implementation and development of the Property
consistent with the budgetary limitations of the Construction Budget and the
terms of the Project Management Agreement.

Section 6.2                                      Management of the Property. 
Commencing on the Opening Date, Hotel Manager, an affiliate of MHG, will manage
the Property pursuant to the Hotel Management Agreement.

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Section 6.3                                      Financing.  The Company intends
to obtain construction financing in connection with the redevelopment of the
Property.  The Members will each use their best efforts to satisfy, or cause to
be satisfied, all the conditions to such financing which are within its control
and shall use good faith, diligent, reasonable efforts to satisfy, or cause to
be satisfied, all conditions to such financing which are not within its control.

ARTICLE 7

TRANSFERS OF COMPANY INTERESTS

Section 7.1                                      Interests of Members.  (a) 
Without the prior written consent of a the Members, (i) no Member shall sell,
assign, pledge, encumber, otherwise dispose of or hypothecate, by operation of
law or otherwise (collectively referred to as a “Transfer”), its Interests in
the Company or any part thereof, or withdraw from or seek to terminate the
Company; and (ii) except as expressly permitted below, no Person which is, or
which holds, directly or indirectly, an interest in any entity which is, one of
the Persons comprising the Members shall Transfer all or any portion of such
indirect Company interest.

Notwithstanding the foregoing, but subject to any agreements of the Company or
its Members in connection with the financing of the Project, a Member may at any
time Transfer 100% (but not less than 100%) of its Interests in the Company to a
Person that is wholly-owned by such Member (or the parent of such Member).

(b)                                 Notwithstanding Section 7.1 (a) or anything
contained in this Agreement to the contrary, the prior written consent of the
Members shall not be required for the following Transfers (each, a “Permitted
Transfer”) provided the same shall not be or cause a default under the terms of
any financing obtained by the Company in connection with the Project:

(i)                                     a Transfer by the initial ultimate
beneficial owners of an initial Member, directly or indirectly, to a transferee
so long as at all times (a) with respect to SWA, Abraham Galbut and his family
members (or a transferee(s) pursuant to clause (ii) below) owns and holds,
directly or indirectly, 51% of the ultimate beneficial ownership of SWA and
Abraham Galbut controls the day to day operations and management of SWA and
makes all decisions for SWA, and (b) with respect to MHG, Morgans Group LLC (or
a transferee(s) pursuant to clause (ii) below) own and hold, directly or
indirectly 51% of the ultimate beneficial ownership of MHG and control the
day-to-day operations and management of MHG; provided, however, that, with
respect to SWA (or a transferee(s) pursuant hereto or to clause (ii) below), any
transferee of such an interest shall not be a Person who engages, through itself
or through an Affiliate, as its principal business, in the ownership, operation
or management of hotels or other hospitality facilities and with respect to both
SWA and MHG, no such transferee shall impair the ability of the Company, the
Hotel Manager or its Affiliates to obtain or retain a liquor license for the
hotel or any restaurant, bar or lounge in the Property;

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(ii)                  any Transfer by any Person which holds, directly or
indirectly, a beneficial interest in a Member, to a trust, family partnership or
other similar device established by or for the benefit of immediate family
members of the ultimate beneficial owners of the Members as of the date hereof;
provided, however, that any transferee of such an interest shall not be a Person
who would impair the ability of the Company, the Hotel Manager or its Affiliates
to obtain or retain a liquor license for the hotel or any restaurant, bar or
lounge in the Property.

(c)                                  Any Transfer permitted by this Article 7
shall be effected only by a written instrument of assignment and assumption,
provided that for any Transfer the instrument of transfer provides for the
assumption of the assignor’s liabilities and obligations hereunder and has been
duly executed by the assignor of such interest and by the assignee/transferee
(or any party having an interest therein).  The Member making a Transfer shall
notify the other Members of any permitted Transfer of any beneficial interest in
a Member which occurs without a transfer of record ownership.  No Transfer of a
Member’s Interests in the Company (including the transfer of any rights to
receive or share in profits, losses, income or the return of contributions)
shall be effective unless and until written notice (including the name and
address of the proposed purchaser, transferee, or assignee and the date of such
transfer) has been provided to the Members.  In addition, in the event of the
death of any person owning a direct or indirect beneficial interest in the
Company, such interest may be sold, transferred or assigned pursuant to the
decedent’s will.

(d)                                 At no time may a Member Transfer less than
100% of its respective direct Interests in the Company.  No permitted transferee
of any indirect interest in a Member shall have any rights to vote or
participate in any management of the Company.

(e)                                  Notwithstanding anything in this Agreement
to the contrary, no Transfer of any Interest shall be made if counsel for the
Company shall be of the opinion that such transfer or assignment would (i) be in
violation of the Securities Act of 1933 Act, as amended, or any securities or
“blue sky” laws of any applicable state, or (ii) cause the Company to be treated
as a corporation for federal income tax purposes.

(f)                                    Any Transfer in contravention of any of
the provisions of this Article 7 hereof shall be void and ineffective and shall
not bind or be recognized by the Company.

Section 7.2                                      Interests of other Members. 
The Company shall not be dissolved by the bankruptcy of any Member, or by the
liquidation, dissolution, other cessation to exist as a legal entity or
bankruptcy of any Members, but the representative or successor of such Member
may be admitted to the Company as a substitute Member upon executing such
documents as the remaining Members may reasonably require to evidence such
person’s agreement to be bound by this Agreement.

Section 7.3                                      Buy-Sell.  (a)  From and after
the date that is the earlier of (i) three (3) years from the Opening Date or
(ii) five (5) years from the date hereof, SWA, on the one hand, or MHG, on the
other hand, may, subject to the provisions of the documents underlying or
securing a financing of the Property, elect to make a purchase offer pursuant to
the provisions of

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this Section 7.3.  The Member desiring to exercise such right (the “Offeror”)
shall do so by giving written notice of such election (the “Notice of Election”)
to the other Member (the “Offeree”).  The Notice of Election shall state the
aggregate dollar amount (the “Valuation Amount”) which the Offeror would be
willing to pay for the assets of the Company as of the Closing Date (hereinafter
defined), free and clear of all liabilities, and shall set forth a calculation
of the amounts which the Offeror and the Offeree would receive, respectively,
from the sale of their Interests, after applying the subsequent provisions of
this Section 7.3.  The provisions of this Section 7.3 shall apply
notwithstanding anything to the contrary contained elsewhere in this Agreement.

(b)                                 After receipt of the Notice of Election, the
Offeree shall either (i) sell all of its Interests to the Offeror for an amount
equal to the amount which the Offeree would have been entitled to receive if the
Company had sold all of its assets for the Valuation Amount on the Closing Date
and the Company had immediately paid all Company liabilities and the Company
distributed the net proceeds of sale it would be entitled to receive to the
Members in satisfaction of their Interests in the Company pursuant to Article 8,
or (ii) purchase all of the Interests of the Offeror for an amount equal to the
amount which the Offeror would have been entitled to receive if the Company had
sold all of its assets for the Valuation Amount on the Closing Date and the
Company had immediately paid all Company liabilities and the Company distributed
the net proceeds of sale it would be entitled to receive to the Members in
satisfaction of their Interests in the Company pursuant to Article 8, but
without reserves for contingent liabilities.  The Offeree shall have sixty (60)
days after the receipt by the Offeree of the Notice of Election in which to
exercise either of the foregoing options by giving written notice (the “Exercise
Notice”) of such election to the Offeror.  If the Offeree does not exercise the
option to purchase set forth in clause (b) above by giving written notice of
such election within such time period, then the Offeree shall be deemed to have
elected to sell its Interests to the Offeror.  Within sixty (60) Business Days
after the Offeree has exercised its option, the Member thereafter obligated to
acquire the Interests of the selling Member shall deposit in escrow with such
selling Member a non-refundable (except in the event of the selling Member’s
failure to consummate the transaction other than due to a default by the
acquiring Member) earnest money deposit equal to ten percent (10%) of the amount
which the selling Member is entitled to receive for its Interests pursuant to
this Section 7.3, which amount shall be applied to the purchase price at
closing.  If the acquiring Member should thereafter fail to consummate the
transaction, such amount shall be retained by the selling Member, free of all
claims of the acquiring Member, as the selling Member’s sole and exclusive
remedy and as liquidated damages for such failure, provided, however, that the
selling Member shall also have the option, exercisable by written notice to the
defaulting acquiring Member within thirty (30) days of such default to acquire
the Interest of the defaulting acquiring Member at ninety-five percent (95%) of
the amount the defaulting acquiring Member would receive at the Valuation Price.

(c)                                  The closing of an acquisition pursuant to
this Section 7.3 shall be held at the principal place of business of the Company
on a mutually acceptable date (the “Closing Date”) not later than ninety (90)
days after the date of the Offeree’s Exercise Notice (whether deemed or
otherwise) or after the exercise of the selling Member’s option to purchase the
defaulting acquiring Member’s Interest, as the case may be, under this Section
7.3.  At the closing, the following shall occur:

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(i)                                     The selling Member shall transfer and
assign to the acquiring Member, free and clear of all liens, claim and
encumbrances, with covenants of general warranty, the Interests being disposed
of, and shall execute and deliver to the acquiring Member all documents which
may be reasonably required to give effect to the acquisition of such Interests;

(ii)                                  The acquiring Member shall pay to the
selling Member the consideration therefore in cash;

(iii)                               If any selling Member (or any Affiliate
thereof) is personally liable (whether by virtue of being a guarantor or
otherwise) for any liabilities or obligations of the Company, the obligation of
the selling Member to deliver the documents of transfer referred to in clause
(i) of this Section 7.3(c) shall be subject to the condition precedent that the
selling Member (and any such Affiliate with personal liability) shall have
received (x) a written release with respect to all such liabilities and
obligations, in form and substance reasonably satisfactory to the selling Member
(and any such Affiliate), from the party or parties to whom such liabilities and
obligations are owed, or (y) an indemnification with respect to all such
liabilities and obligations, in form and substance satisfactory to the selling
Member (and any such Affiliate) in its sole discretion (acting reasonably), from
the acquiring Member or a creditworthy Affiliate; and

(iv)                              Any and all required consents to such
transaction from the Company’s lenders shall have been obtained and delivered by
the Offeror to the Offeree.

ARTICLE 8

DISSOLUTION AND LIQUIDATION

Section 8.1                                      Dissolution.  The Company shall
be dissolved and its affairs wound up upon the occurrence of any of the
following events:

(a)                                  The sale, transfer or other disposition of
the Property;

(b)                                 The written agreement of all of the Members
to dissolve the Company; or

(c)                                  The entry of a decree of judicial
dissolution under the Act.

Section 8.2                                      Winding up Affairs.  Upon
dissolution of the Company, the assets of the Company shall be distributed in
the following order of priority:  (a) the debts and liabilities, if any, of the
Company other than debts and liabilities to Members shall be paid in the order
of priority provided by law; (b) then there shall be set aside such sum as is
necessary as a reserve for contingent liabilities of the Company, including,
without limitation, expenses for dissolution (which sum, if not needed or used,
shall be added to the balance to be distributed as hereinafter provided); (c)
then the remaining debts and liabilities, if any, of the Company to the Members
shall be paid in the order of priority provided by law; (d) then to the Members
in accordance with the provisions of Section 3.13.  In the, event such
liquidation constitutes a dissolution of the

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Company, in the discretion of the Members, by unanimous agreement, a pro rata
portion of the distributions that would otherwise be made to the Members
pursuant to this Section 8.2 may be distributed to a trust established for the
benefit of the Members, by unanimous agreement, for the purposes of liquidating
Company assets, collecting amounts owed to the Company, and paying any
contingent or unforeseen liabilities or obligations of the Company or of the
Members arising out of or in connection with the Company.  The assets of any
such trust shall be distributed to the Members from time to time, in the
reasonable discretion of the Members, in the same proportions as the amount
distributed to such trust by the Company would otherwise have been distributed
to the Members pursuant to this Agreement.  The Members shall cause final
accounting reports and income tax filings on the Company and each Member’s
interest to be prepared after audit, and in accordance with generally accepted
accounting principles, consistently applied, and to be delivered to each
Member.  Such accounting reports shall be prepared as promptly as practicable
and shall include at least the reports and materials required under Section 5.3
for the Company’s annual reports.

Section 8.3                                      Distribution of Non-Liquid
Assets.  If any assets of the Company are to be distributed in kind, such assets
shall be distributed on the basis of the Gross Asset Value thereof and any
Member entitled to an interest in such assets shall receive such interest
therein as a tenant-in-common with all other Members so entitled after the
Capital Accounts of the Members have been adjusted to reflect the manner in
which the unrealized income, gain, loss, and deduction inherent in such assets
(that has not previously been reflected in the Capital Accounts of the Members)
would have been allocated among the Members if there were a taxable disposition
of such assets for their fair market value (taking into account Section 7701(g)
of the Code) on the date of distribution.  The Gross Asset Value of such assets
shall be determined by an appraiser selected by a the Members.  If there then be
more than one Member and if, in the judgment of the Members, unanimously
exercised, it shall not be feasible to distribute to each Member an adequate
share of each asset, the Members may allocate and distribute specific assets to
one or more Members as tenants-in-common as the Members shall determine to be
fair and equitable.

Section 8.4                                      Orderly Liquidation.  A
reasonable time shall be allowed for the orderly liquidation of the assets of
the Company and the discharge of liabilities to creditors so as to minimize the
losses normally attendant upon a liquidation.

Section 8.5                                      Deficit Upon Liquidation.  Upon
liquidation no Member shall be liable to the Company for any deficit in such
Member’s Capital Account.

ARTICLE 9

MEETINGS OF MEMBERS

Section 9.1                                      Meetings.  The Company shall
not be required to hold meetings of the Members annually.  Meetings of the
Members, for any purpose or purposes, unless otherwise prescribed by statute,
may be called by the Members at any time.

Section 9.2                                      Place of Meetings.  The Members
may designate any place, either within or without Florida, as the place for any
meeting of the Members.  If no designation is made, or if

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a special meeting be otherwise called, the place of meeting shall be the
principal office of the Company.

Section 9.3                                      Teleconference.  Members may
participate in any Members’ meeting through the use of any means of conference
telephones or similar communications equipment as long as all Members
participating can hear one another.  A Member so participating shall be deemed
to be present in person at the meeting.

Section 9.4                                      Action by Members Without a
Meeting.

(a)                                  Action required or permitted to be taken at
a meeting of Members may be taken without a meeting, without prior notice and
without a vote of the Members if the action is evidenced by one or more written
consents describing the action taken, signed by Members whose Interests
represent the percentage required for the taking of such action.

(b)                                 In the event that the action that is
consented to is such as would have required the filing of articles or a
certificate under any Section of the Act, if such action had been voted on by
Members at a meeting thereof, such articles or certificate filed under such
Section shall state, in lieu of any statement required by such Section
concerning any vote of Members, that written consent has been given as provided
in the Act.

Section 9.5                                      Waiver of Notice.  When any
notice is required to be given to any Member, a waiver of the notice in writing
signed by the person entitled to the notice, whether before, at, or after the
time stated therein, shall be equivalent to the giving of the notice.  The
attendance by any Member at any meeting of Members, in person or by proxy,
without protesting prior to the conclusion of the meeting the lack of notice of
the meeting, shall constitute a waiver of notice by such Member of such meeting.

ARTICLE 10

REPRESENTATIONS AND WARRANTIES

Section 10.1                                Representations by MHG.  MHG
represents and warrants that (a) MHG is duly organized, validly existing and
qualified and empowered to conduct its business, and has full power and
authority to enter into and fully perform and comply with the terms of this
Agreement; (b) MHG has the legal authority and ability to execute this Agreement
and all documents in connection herewith; (c) neither the execution and delivery
of this Agreement nor its performance by MHG will conflict with or result in the
breach of any contract, agreement, law, rule or regulation to which it or any of
its members is a party or by which it is bound; and (d) this Agreement is valid
and enforceable against MHG in accordance with its terms and each instrument to
be executed by MHG pursuant to this Agreement or in connection herewith will,
when executed and delivered, be valid and enforceable against MHG in accordance
with its terms, subject to the effect of (i) bankruptcy, insolvency,
reorganization, moratorium or other similar laws relating to or affecting the
rights of creditors generally, and (ii) the application of general principles of
equity (regardless of whether enforcement is considered in proceedings at law or
in equity).

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Section 10.2                                Representations by SWA.  SWA
represents and warrants that (a) SWA is duly organized, validly existing and
qualified and empowered to conduct its business, and has full power and
authority to enter into and fully perform and comply with the terms of this
Agreement; (b) SWA has the legal authority and ability to execute this Agreement
and all documents in connection herewith; (c) neither the execution and delivery
of this Agreement nor its performance by SWA will conflict with or result in the
breach of any contract, agreement, law, rule or regulation to which it or any of
its members is a party or by which it is bound; (d) this Agreement is valid and
enforceable against SWA in accordance with its terms and each instrument to be
executed by SWA pursuant to this Agreement or in connection herewith will, when
executed and delivered, be valid and enforceable against SWA in accordance with
its terms, subject to the effect of (i) bankruptcy, insolvency, reorganization,
moratorium or other similar laws relating to or affecting the rights of
creditors generally, and (ii) the application of general principles of equity
(regardless of whether enforcement is considered in proceedings at law or in
equity).

Section 10.3                                Indemnity.  Each of the Members
hereby agrees to indemnify and hold the other harmless from and against any and
all losses, liabilities, costs, claims, suits, actions, damages, penalties,
charges and expenses, including reasonable attorneys’ fees and disbursements,
arising in connection with any representation or warranty contained herein being
untrue in any material respect.

ARTICLE 11

FEES TO MEMBERS

Section 11.1                                Project Management Fee.  SWA shall
be paid a project management fee pursuant to and on the terms set forth in a
separate project management agreement (the “Project Management Agreement”)
between SWA and 1100 West Properties, LLC.

Section 11.2                                Marketing Fee.  From the proceeds
realized by the Company from the sales of each Unit:

(a)                                  Project Manager shall receive a marketing
fee as provided in the Project Management Agreement for the supervising of the
sales and marketing of the Units.  The aforesaid marketing fee consists of a
Base Marketing Fee and an Incentive Marketing Fee (as both such terms are
defined in the Project Management Agreement).

(b)                                 Hotel Manager shall receve a franchise fee
as provided in the Hotel Management Agreement.  The aforesaid franchise fee
consists of a Base Franchise Fee and an Incentive Franchise Fee (both as defined
in the Hotel Management Agreement).

The fees described above shall be payable as each Unit closing occurs.  In the
event that the Project Lender shall not permit sufficient closing proceeds to be
retained by the Company to pay all of the Incentive Marketing Fee or the
Incentive Franchise, the same shall be paid to parties pro rata to extent of
available sales proceeds. Any fees deferred hereunder shall be paid from
available funds when payment of the same is no longer prohibited by the Project
Lender.

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ARTICLE 12

MISCELLANEOUS

 

Section 12.1                                Notices.  All notices, requests,
approvals, consents, statements and other communications required or permitted
to be given or furnished hereunder to any Member (collectively, a “notice”)
shall be made in writing and shall be deemed to have been properly given or made
if (a) delivered personally or (b) sent by reputable overnight courier prepaid,
addressed to the Member to receive same at his or its address set forth below or
at such other address as such Member may from time to time designate by notice
to the other Members given in accordance with this Section 11.1, which courier
notice shall be deemed sufficiently given or made three business days after the
time the same is delivered to a respectable overnight courier.  The current
addresses of the Members are:

MHG:

 

c/o Morgan Hotel Group Co.

475 Tenth Avenue

New York, New York 10018

Attention:  Marc Gordon

Telephone:  212-277-4140

Facsimile:  212-277-4270

 

 

 

With a copy to:

 

McDermott Will & Emery LLP
340 Madison Avenue
New York, New York 10017
Attention:  Keith M. Pattiz, Esq.

Telephone:  212-547-5379

Facsimile:  212-547-5444

 

 

 

SWA:

 

c/o Sanctuary Holdings

4770 Biscayne Boulevard

Miami, Florida 33137

Attention: Abraham Galbut

Telephone:  305-674-4848

Facsimile: 305-531-6987

 

 

 

With a copy to:

 

Greenberg Traurig, P.A.

1221 Brickell Avenue

Miami, Florida 33131

Attention:  Steven E. Goldman

Telephone:  305-579-0561

Facsimile:   305-961-5561

 

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Section 12.2                                Entire Agreement.  This Agreement
contains the entire understanding and agreement among the Members with respect
to the subject matter hereof and supersedes any prior written or oral
understandings or agreements between them with respect thereto.

Section 12.3                                Governing Law.  This Agreement shall
be governed by and construed in accordance with the laws of the State of
Delaware and the Act.  In the event of any conflict between any provisions of
this Agreement and any non-mandatory provisions of the Act, the provisions of
this Agreement shall control and take precedence.  Venue for any action arising
under this Agreement shall be in Miami-Dade County, Florida and the parties
submit to the jurisdiction of the state and (to the extent permitted by Florida
law) federal courts in the State of Florida, situated in Miami-Dade County,
Florida, for purposes of any such action.

Section 12.4                                No Oral Modification.  This
Agreement may not be changed, terminated, amended or modified orally or in any
manner other than by a writing signed by the Member to be charged.

Section 12.5                                Binding Effect.  This Agreement
shall be binding upon and inure to the benefit of the Members, their respective
permitted successors and assigns, and their respective heirs, executors and
representatives.

Section 12.6                                Severability.  Each provision of
this Agreement is intended to be severable and the invalidity or illegality of
any portion of this Agreement shall not affect the validity or legality of the
remainder hereof.

Section 12.7                                Captions.  Sections and paragraph
captions contained in this Agreement are inserted only as a matter of
convenience and for reference and in no way define, limit, extend or describe
the scope of this Agreement or the intent of any provision hereof.

Section 12.8                                Person and Gender.  As used in this
Agreement, the neuter gender shall include the masculine and feminine genders
and the masculine gender shall include the feminine and neuter genders, and the
singular shall include the plural.

Section 12.9                                Further Assurances.  Each Member
agrees to do all acts and things, and to make, execute and deliver such written
instruments, as shall from time to time be reasonably required to carry out the
terms and provisions of this Agreement.

Section 12.10                          Partition.  Each Member does hereby waive
any right to partition or the right to take any other action that might
otherwise be available to such Member outside of the provisions of this
Agreement for the purpose of severing his or her relationship with the Company
or such Member’s interest in the property held by the Company from the interests
of the other Members until the dissolution and completion of the liquidation of
the Company.

Section 12.11                          Third-Party Beneficiaries.  None of the
provisions of this Agreement shall be for the benefit of or enforceable by any
of the creditors (other than persons entitled to exculpation or indemnification
hereunder), of the Company or any creditors of any Member or any other Person
not a party hereto.  No creditor that makes a non-recourse loan to the Company
shall have or acquire, at any time as a result of making the loan, any direct or
indirect interest in the profits, capital or property of the Company other than
as a secured creditor.

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Section 12.12                          Broker.  Each Member, represents to the
other that it has had no dealings, negotiations, or consultations with any
broker, representative, employee, agent or other intermediary in connection with
this Agreement, the acquisition of the Company’s interest in the Owner or the
acquisition of the Property.  Each Member agrees that each will indemnify,
defend and hold the other and the Company free and harmless from the claims of
any broker(s), representative(s), employee(s), agent(s) or other
intermediary(ies) claiming to have represented such Member respectively, or
otherwise to be entitled to compensation in connection with this Agreement or in
connection with the conveyance of the Project, which indemnities shall survive
the date hereof.

Section 12.13                          WAIVER OF JURY TRIAL.  EACH OF THE
MEMBERS HEREBY WAIVES TRIAL BY JURY IN ANY ACTION ARISING OUT OF MATTERS RELATED
TO THIS AGREEMENT, WHICH WAIVER IS INFORMED AND VOLUNTARY.

Section 12.14                          Costs.  Except as otherwise provided in
this Agreement, or in an approved Business Plan then in effect, the Company
shall be responsible for paying, and shall pay, whether incurred before or after
the date hereof, all costs and expenses related to the organization of the
Company (including legal fees and expenses of the Members in connection with the
preparation and negotiation of this Agreement), all costs and expenses related
to the business of the Company, and of acquiring, holding, owning, developing,
serving, collecting upon and operating the Property (including, without
limitation, the cost of obtaining any reports of engineers, environmental
engineers, architects and similar reports obtained in connection with the
acquisition of the Property and any financing obtained for such acquisition, and
legal fees incurred in connection with the negotiation and execution of the
Contract, the Development Agreement, the Hotel Management Agreement and all fees
and expenses incurred in connection with any financing obtained for the
acquisition and/or redevelopment of the Property).  In no event, however, shall
the Company have any obligation to pay or reimburse a Member for any general
overhead expense of such Member.

Section 12.15                          Publicity.  MHG and SWA shall agree on
all publicity with respect to the announcement of this Agreement and the
transactions contemplated hereby.  All subsequent press releases, marketing and
related materials shall be produced at the direction of MHG and be subject to
the approval of SWA.

Section 12.16                          Intellectual Property.  Notwithstanding
any contrary provision of this Agreement, MHG and its affiliates shall retain
all rights to all service names, trade names, trade marks and copyrights used in
connection with the Hotel, any such use being permitted by a separate written
license agreement, which agreement shall be revocable at any time by Morgans
Hotel Management LLC upon (i) the termination of the Hotel Management Agreement
or (ii) the consent of the Members.  Notwithstanding any contrary provision of
this Agreement, SWA and its affiliates shall retain all rights to all service
names, trade names, trademarks and copyrights, if any, that is owned by SWA or
its affiliates and used in connection with the Project.

Section 12.17                          Bank Accounts.  Subject to the terms of
any agreements for the financing of the acquisition and redevelopment of the
Property and the Hotel Management Agreement, the Company may, from time to time,
establish one or more accounts (collectively, the “Company Accounts”) into which
funds collected or received under this Agreement, which are not required

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to be held (whether as a reserve or otherwise) in an operating account
maintained by the Hotel Manager, shall be deposited.  MHG and SWA shall each
designate signatures and each account shall require two signatures, one from MHG
and the other from SWA.  Furthermore, the Members may establish specific
operating accounts that may only require a single signature.

ARTICLE 13

SPECIAL PURPOSE ENTITY COVENANTS

Section 13.1                                Special Purpose Entity Covenants. 
Notwithstanding any provision hereof or of any other document governing the
formation, management or operation of the Company to the contrary, the following
shall govern: For so long as any mortgage lien exists on the Property, in order
to preserve and ensure its separate and distinct identity, in addition to the
other provisions set forth in this Agreement, the Company shall conduct its
affairs in accordance with the following provisions:

(i)                                     maintain its own separate books and
records and bank accounts;

(ii)                                  at all times hold itself out to the public
and all other Persons as a legal entity separate from any Member and any other
Person;

(iii)                               file its own tax returns, if any, as may be
required under applicable law, to the extent (1) not part of a consolidated
group filing a consolidated return or returns or (2) not treated as a division
for tax purposes of another taxpayer, and pay any taxes so required to be paid
under applicable law;

(iv)                              not commingle its assets with assets of any
other Person;

(v)                                 conduct its business in its own name and
strictly comply with all organizational formalities to maintain its separate
existence;

(vi)                              maintain separate financial statements;

(vii)                           pay its own liabilities only out of its own
funds;

(viii)                        maintain an arm’s-length relationship with its
affiliates and each Member;

(ix)                                pay the salaries of its own employees, if
any;

(x)                                   not hold out its credit or assets as being
available to satisfy the obligations of others;

(xi)                                allocate fairly and reasonably any overhead
for shared office space;

(xii)                             use separate stationery, invoices and checks;

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(xiii)                          not pledge its assets for the benefit of any
other Person;

(xiv)                         correct any known misunderstanding regarding its
separate identity;

(xv)                            maintain adequate capital in light of its
contemplated business purpose, transactions and liabilities;

(xvi)                         observe all Delaware limited liability company
formalities;

(xvii)                      not acquire any securities of any Member;

(xviii)                   cause the agents and other representatives of the
Company to act at all times with respect to the Company consistently and in
furtherance of the foregoing and in the best interests of the Company;

(xix)                           guarantee any obligation of any Person,
including any affiliate;

(xx)                              engage, directly or indirectly, in any
business other than the actions required or permitted to be performed under
Section 2.3, or this Section 12;

(xxi)                           incur, create or assume any indebtedness;

(xxii)                        make or permit to remain outstanding any loan or
advance to, or own or acquire any stock or securities of, any Person;

(xxiii)                     to the fullest extent permitted by law, engage in
any dissolution, liquidation, consolidation, merger, asset sale or transfer of
ownership interests; or

(xxiv)                    form, acquire or hold any subsidiary (whether
corporate, partnership, limited liability company or other);

provided that failure of the Company, or the Member on behalf of the Company, to
comply with any of the foregoing covenants or any other covenants contained in
this Agreement shall not affect the status of the Company as a separate legal
entity or the limited liability of the Member.

Section 13.2                                SPE Definitions.

For purpose of this Article 12, the following terms shall have the following
meanings:

“affiliate” means any person controlling or controlled by or under common
control with the Company including, without limitation (i) any person who has a
familial relationship, by blood, marriage or otherwise with any partner or
employee of the Company, or any affiliate thereof and (ii) any person which
receives compensation for administrative, legal or accounting services from this
limited liability company, or any affiliate.  For purposes of this definition,
“control” when used with respect to any

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specified person, means the power to direct the management and policies of such
person, directly or indirectly, whether through the ownership of voting
securities, by contract or otherwise; and the terms “controlling” and
“controlled” have meanings correlative to the foregoing.

“person” means any individual, corporation, partnership, limited liability
company, joint venture, association, joint stock company, trust (including any
beneficiary thereof), unincorporated organization, or government or any agency
or political subdivision thereof.

ARTICLE 14

ARBITRATION

Section 14.1                                Initiation.  Except as provided in
Article 13, whenever this Agreement provides for the determination of any matter
by arbitration, the same shall be settled and finally determined by arbitration
in accordance with the Commercial Arbitration Rules of the American Arbitration
Association (“AAA”) (which by this reference are incorporated herein), subject
to provisions of this Article 13.  In the event of a dispute required or
permitted to be submitted to arbitration pursuant to the terms of this
Agreement, upon the expiration of such other time period provided herein for the
resolution of any dispute, the Members shall have fifteen (15) days from the day
which immediately follows the expiration of the applicable period to appoint a
neutral and independent arbitrator, who shall have no less than ten years
experience in the hotel market in which the Property is located, to serve as
arbitrator.  If any party fails to timely appoint an arbitrator, the dispute
shall be determined by the single arbitrator who is timely appointed.  If both
parties select the same arbitrator, both parties shall have an additional five
(5) days to select a different arbitrator.  If neither party elects to select a
different arbitrator, then the single arbitrator selected by both parties shall
resolve the dispute.  If each party has selected a different arbitrator, then
within ten (10) days of the appointment of the second arbitrator, the two
arbitrators shall agree on a third arbitrator who shall serve as chairperson of
the arbitrators.  Failing agreement as to such third arbitrator within twenty
(20) days after the appointment of the second arbitrator, then, at the request
of any party, such arbitrator shall be appointed by the AAA.  If there is one
arbitrator, such arbitrator shall issue a written determination of its
resolution of the dispute within fifteen (15) days of its appointment.  Such
determination shall be final and binding on the parties.  If there are three
arbitrators, then within fifteen (15) days of the appointment of the third
arbitrator, each arbitrator shall issue such a written determination.  The
determination of the arbitrator most different from the other two shall be
discarded and the determination calculated as the average of the determinations
of the remaining two arbitrators shall be binding on the parties.  The fees and
expenses of the Arbitrators shall be shared equally by the parties.  All
arbitration, proceedings hereunder shall be conducted at the Project or at such
other location as the Members may agree.  If the AAA shall cease to provide
arbitration for commercial disputes in the State of Florida, the second or third
arbitrator, as the case may be, shall be appointed by any successor organization
providing substantially the same services, and in the absence of such an
organization, by a court of competent jurisdiction.  The judgment upon the award
rendered in any such arbitration shall be final and binding upon the parties and
may be entered in any court having jurisdiction thereof.  All fees and expenses
of the arbitrators and all

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other expenses of the arbitration shall be shared by the Members in proportion
to their respective Percentage Interests.

The arbitrators shall be compensated in accordance with the standards
recommended by the Miami-Dade office of the AAA, or, any successor organization.

[Remainder of Page Intentionally Blank]

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IN WITNESS WHEREOF, the Members have duly executed this Agreement the day and
year first above written.

Members:

 

 

 

MONDRIAN MIAMI INVESTMENT LLC

 

 

 

 

 

By: MORGANS GROUP LLC

 

 

 

 

 

By:

 

 

 

 

  Name:

 

 

  Title:

 

 

 

 

 

SANCTUARY WEST AVENUE LLC

 

 

 

 

 

By:

 

 

 

 

  Name:

 

 

  Title:

 

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EXHIBIT A

Name and Address of Member

 

Initial
Percentage
Interest

 

Capital
Contribution

 

 

 

 

 

 

 

MHG: 475 Tenth Avenue, New York, New York 10018

 

50

%

$

15,000,000

 

 

 

 

 

 

 

SWA: 4770 Biscayne Boulevard Miami, Florida 33137

 

50

%

$

15,000,000

 

 

 

 

 

 

 

Total

 

100

%

$

30,000,000

 

 

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EXHIBIT B

AGREEMENTS WITH AFFILIATES

Hotel Management Agreement between 1100 West Properties LLC, as owner, and
Morgan Hotel Group Management LLC, as operator.

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