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As filed with the Securities and Exchange Commission on March 3, 1997
Registration No. 333-
SECURITIES AND EXCHANGE COMMISSION
Washington, D.C. 20549
FORM S-11
REGISTRATION STATEMENT
UNDER
THE SECURITIES ACT OF 1933
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UP SEDONA, INC.
(Exact Name of Registrant as specified in its governing instruments)
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2601 E. THOMAS ROAD
SUITE 225
PHOENIX, ARIZONA 85018
(602) 955-9190
(Address of principal executive offices)
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UP Sedona, Inc.
2601 E. Thomas Road, Suite 225, Phoenix, Arizona 85018
(602) 955-9190
(Name and address of agent for service)
COPIES TO:
Jean E. Harris, Esq
O'Connor, Cavanagh, Anderson,
Killingsworth & Beshears, P.A.
One East Camelback Road, Suite 1100
Phoenix, Arizona 85012-1656
(602) 263-2400
APPROXIMATE DATE OF COMMENCEMENT OF THE PROPOSED SALE OF THE
SECURITIES TO THE PUBLIC: As soon as practicable after the
Registration Statement becomes effective.
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CALCULATION OF REGISTRATION FEE
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PROPOSED MAXIMUM
TITLE OF AGGREGATE AMOUNT OF
SECURITIES BEING REGISTERED OFFERING PRICE REGISTRATION FEE
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Condominium Units coupled with mandatory rental pool....... $42,500,000 $12,878.79(1)
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(1) Calculated pursuant to Rule 457(o) of the Rules and Regulations under the
Securities Act of 1933.
THE REGISTRANT HEREBY AMENDS THIS REGISTRATION STATEMENT ON SUCH DATE OR
DATES AS MAY BE NECESSARY TO DELAY ITS EFFECTIVE DATE UNTIL THE REGISTRANT SHALL
FILE A FURTHER AMENDMENT WHICH SPECIFICALLY STATES THAT THIS REGISTRATION
STATEMENT SHALL THEREAFTER BECOME EFFECTIVE IN ACCORDANCE WITH SECTION 8(A) OF
THE SECURITIES ACT OF 1933 OR UNTIL THE REGISTRATION STATEMENT SHALL BECOME
EFFECTIVE ON SUCH DATE AS THE COMMISSION, ACTING PURSUANT TO SAID SECTION 8(A),
MAY DETERMINE.
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PROSPECTUS Subject to Completion, dated March 3, 1997
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SEDONA GOLF RESORT AND CONFERENCE CENTER
$42,500,000
UP Sedona, Inc., is offering for sale 225 condominium units
("Units") in the Sedona Golf Resort and Conference Center as a business
investment. Each Unit is subject to a mandatory Hotel Operating and Rental Pool
Agreement wherein Delta Hotels International, Inc. will manage the Hotel on
behalf of the owners. Each owner will receive fee title to a Unit, which
includes an undivided interest in the common areas that constitute the Hotel.
The Units sell for between $159,500 and $199,850, depending on
the size and location within the Hotel. The Hotel consists of one-bedroom,
executive and studio Units. The price varies based on the location within the
Hotel.
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UNIT Number
DESCRIPTION Available Price Range
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OB 1 - One Bedroom 116 $188,850 - $196,850
OB 2 - One Bedroom 12 $191,850 - $199,850
OB 3 - One Bedroom 12 $191,850 - $199,850
OB 7 - One Bedroom 12 $191,850 - $199,850
OB 8 - One Bedroom 16 $191,850 - $199,850
OB 10 - One Bedroom 3 $194,350 - $196,850
ST 1 - Studio 44 $159,500 - $167,500
ST 2 - Studio 4 $167,300 - $169,800
EX 1 - Executive 6 $183,900
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Selling commissions of up to _____% of the gross sales price of the Unit will be
paid to broker-dealers selected by UP Sedona, Inc. to participate in the
offering.
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The Securities and Exchange Commission and state securities regulators have not
approved or disapproved these securities, or determined if this Prospectus is
truthful or complete. Any representation to the contrary is a criminal offense.
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The information in this Prospectus is not complete and may be amended. UP
Sedona, Inc. may not sell these securities until the registration statement
filed with the Securities and Exchange commission is effective. This Prospectus
is not an offer to sell nor is it seeking an offer to buy these securities in
any state where the offer or sale is not permitted.
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The date of this Prospectus is ________________, 1997
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TABLE OF CONTENTS
QUESTIONS AND ANSWERS........................................... 1
SUMMARY......................................................... 3
RISK FACTORS.................................................... 6
Negative Cash Flow......................................... 6
Dependence on the Hotel Operator........................... 6
Dependence on Golf Operator................................ 6
Competition................................................ 6
Operating Risks............................................ 7
Seasonal Fluctuations...................................... 7
Transportation/Access...................................... 7
Insurance.................................................. 7
Limited Resale............................................. 7
Environmental Laws......................................... 8
Significant Income Tax Considerations to Owners............ 8
THE HOTEL....................................................... 10
General.................................................... 10
The Units.................................................. 10
Conference Facilities...................................... 10
Other Facilities........................................... 11
Recreational Amenities..................................... 11
Additional Benefits to Owners.............................. 11
The Sedona Golf Resort..................................... 11
The Golf Course........................................ 11
Multi/Single Family Residential Development............ 11
Commercial/Retail Development.......................... 12
The Ridge Timeshare Resort............................. 12
THE HOTEL INDUSTRY.............................................. 13
General.................................................... 13
Resort Market.............................................. 13
Arizona.................................................... 15
The Sedona Market.......................................... 16
Sedona .............................................. 16
Market Overview........................................ 16
Competition............................................ 17
Resort Market Seasonality.............................. 21
Market Demand.......................................... 21
Future Demand Growth................................... 22
Prospective New Resort Supply.......................... 23
Market Penetration for the Hotel....................... 23
Average Daily Rate..................................... 24
Conclusion............................................. 24
BASIS FOR FORECASTS AND SUMMARY OF SELECTED
FINANCIAL PERFORMANCE...................................... 25
THE HOTEL OPERATOR.............................................. 27
Delta Hotels International, Inc............................ 27
MANAGEMENT OF THE HOTEL AND THE RENTAL POOL..................... 29
Management of the Rental Pool.............................. 29
Mandatory Participation in the Rental Pool............. 29
Owners' Use of Units................................... 29
Allocation of Revenue and Expenses......................... 30
Direct Expenses of Owners.................................. 31
Rental Pool Reports........................................ 31
Distributions from Rental Pool............................. 31
Reserves................................................... 32
Shortfalls................................................. 32
Hotel Operator May Rely Upon Acts of Board of Directors.... 32
Management and Maintenance of the Hotel.................... 32
Fees Paid to Hotel Operator................................ 33
Termination of Hotel Operator.............................. 33
Removal of the Hotel Operator's Brand...................... 34
Sale of a Unit by An Owner................................. 34
SUMMARY OF DECLARATION AND RELATED
DOCUMENTS.................................................. 35
The Association............................................ 35
Voting Rights.......................................... 36
Meetings .............................................. 36
Board of Directors; Officers........................... 37
Use Restrictions........................................... 37
Development Rights......................................... 38
Insurance.................................................. 39
Enforcement of the Declaration............................. 39
UP SEDONA, INC.................................................. 40
Management................................................. 40
Prior Developments of United Properties.................... 41
DETERMINATION OF PURCHASE PRICE................................. 41
USE OF PROCEEDS................................................. 42
PLAN OF DISTRIBUTION............................................ 42
HOW TO PURCHASE................................................. 42
CERTAIN FEDERAL AND STATE INCOME TAX ASPECTS.................... 43
Entity Classification of Rental Pool and Taxation of
Ownership of Units..................................... 43
Classification as a Partnership............................ 44
Tax Consequences of Rental Pool to Owners.................. 45
Administrative and Compliance Matters...................... 49
Possible Changes in Federal Tax Laws....................... 50
Investment by Foreign Persons.............................. 50
Corporate Investors........................................ 50
State and Local Taxes...................................... 50
LEGAL MATTERS................................................... 51
EXPERTS......................................................... 51
SUMMARY OF PROMOTIONAL AND SALES MATERIAL....................... 51
ADDITIONAL INFORMATION.......................................... 51
FORECASTS.......................................................F-1
FINANCIAL STATEMENTS...........................................FS-1
Annex A - Schedule of Purchase Prices of Units.....................
Annex B - Hotel Operating and Rental Pool Agreement................
Annex C - Declaration..............................................
Annex D - Articles of Incorporation................................
Annex E - Bylaws...................................................
Annex F - Purchase Contract........................................
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QUESTIONS AND ANSWERS
Q: What kind of investment is this?
A: You are acquiring a real property interest consisting of a condominium unit
("Unit") to be operated along with the other Units as a hotel. Each Unit,
which is a hotel suite together with an undivided interest in the common
areas, is subject to a mandatory rental pool agreement. The Hotel consists
of the suites, the lobby, the conference rooms, the restaurant and all
other facilities. Your purchase will close and ownership will begin when
the Hotel is complete and ready to commence operations.
Q: How well is the U.S. hotel industry doing?
A: By three key measures of financial performance (occupancy, average daily
rate and revenue per available room), the U.S. hotel industry has been on
the rise over the past five years. All indicators point to this trend
continuing in the foreseeable future.
Q: Who is going to operate the Hotel?
A: The Hotel will be professionally managed by Delta Hotels International,
Inc., a wholly-owned subsidiary of Delta Hotels Limited, which is the
Hotel Operator pursuant to the Hotel Operating and Rental Pool Agreement.
Delta Hotels Limited is Canada's largest privately owned hotel company
based in Toronto, Ontario, Canada. Delta Hotels Limited and its affiliates
have 10,853 hotel rooms under management or development in eight countries.
Most of its hotels under management are rated "four-star" by the
Canadian/American Automobile Association. Delta is not affiliated in any
way with UP Sedona, Inc.
Q: How does the Hotel Operating and Rental Pool Agreement work?
A: The Hotel Operator will use the Units as hotel rooms and rent them to hotel
guests. You will be entitled to receive your allocable share of the revenue
that result from renting the Units to hotel guests after all of the
expenses associated with running the Hotel have been paid. Your allocable
share of revenue is adjusted to take into account your personal use.
Q: What happens if the Hotel is losing money?
A: The Hotel is expected to operate at a loss in the first year, which is not
uncommon for a new hotel, and to operate at a profit thereafter. During the
first year, UP Sedona, Inc. will contribute to each Owner an amount
necessary to ensure a break even cash flow for Owners after an implied debt
service. Owners who have not financed their Units will receive a
distribution equivalent to at least the implied debt service. If the Hotel
loses money in subsequent years, you and other Unit owners will ultimately
be responsible for making up any shortfalls.
Q: Will there be any debt on the property?
A: The only debt will be that which is placed by individual Owners on their
own Units. The construction of the Hotel will be financed by UP Sedona,
Inc. The mortgage for the construction debt against each Unit will be
discharged on the closing of the sale of such Unit.
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Q: What costs are associated with a Unit in addition to hotel operating costs?
A: You will have to individually make any loan payments on any loan you
obtained to buy your Unit, pay the real property taxes on your Unit and
condominium association expenses, and pay any income and/or capital gains
taxes that may result from the sale of your Unit.
Q: How often can I use my Unit?
A: In order to deduct expenses for tax purposes, you can stay a maximum of 14
days per year. If you begin a stay on a Friday or a Saturday, you must stay
a minimum of two nights. You may not use your Unit for two or three day
stays beginning on a Friday or a Saturday more than four times per year.
The executive Units will not be available for personal use.
Q: Do I own the contents in my Unit?
A: Yes; however, you may neither alter nor remove any of the furnishings or
fixtures. To do so would violate the Declaration and Hotel Operating and
Rental Pool Agreement.
Q: How does the condominium Association work?
A: All of the owners of Units are members of the Sedona Golf Resort and
Conference Center Condominium Association. The members elect a Board of
Directors whose duties will include approving the annual operating plan and
budget for the Hotel, and monitoring the performance of the Hotel Operator.
Q: What happens if Delta quits or is removed?
A: If there is no agreement in place for a Hotel Operator, the Association
will assume the responsibility of managing the Hotel. The Board of
Directors will be responsible for selecting another Hotel Operator.
Q: What if UP Sedona Inc. gets into financial difficulty and cannot complete
construction of the Hotel?
A: All funds are held in escrow during construction and are not released to UP
Sedona, Inc. until completion of the Hotel and the closing on the sale of
the Units. In the event the Hotel is not completed, the Initial Deposits
will be returned with interest and you will have no obligation to complete
the purchase of a Unit.
Q: How can I sell my Unit?
A: You can sell your Unit at any time subject to the requirement that the
purchaser ratify and adopt the Hotel Operating and Rental Pool Agreement.
The Association will maintain the necessary securities registrations to
facilitate resales.
Q: What are the tax implications of owning a Unit?
A: An Owner will be required to report on his federal income tax return his
allocable share of operating income from the Hotel. An Owner will be able
to deduct property taxes, investment interest expense and depreciation for
his Unit to the extent such expenses would be deductible for real estate
investments in general. The Rental Pool will be taxed as a partnership for
federal income tax purposes.
Each Owner's deductions attributable to the ownership of the Unit may also
be limited by certain provisions of the Internal Revenue Code, including,
but not limited to, provisions governing vacation home rentals, passive
activity losses, and investment interest expense.
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SUMMARY
This Summary highlights selected information from this Prospectus and may
not contain all of the information that is important to you. To understand what
ownership of a Unit means and for a more complete description of the legal terms
involved, you should read carefully this entire Prospectus including the
documents appearing in the Annex.
Sponsor The sponsor is UP Sedona, Inc. ("UP Sedona"), which is an
indirect wholly-owned subsidiary of United Properties Ltd., a
British Columbia corporation. United Properties Ltd. is a real
estate development company incorporated in 1975 operating in
British Columbia and the Northwest United States and has
developed approximately 4,500 housing units having an
aggregate sales value of in excess of $650 million (Canadian).
Purchasers in this Offering will not be acquiring any interest
in UP Sedona or United Properties Ltd.
UP Sedona maintains its principal executive offices at 2601
East Thomas Road, Suite 225, Phoenix, Arizona 85018, and its
telephone number is (602) 955-9190.
The Hotel The Hotel, the Sedona Golf Resort and Conference Center, is
located in the Village of Oak Creek, Arizona. Construction is
anticipated to begin in April 1997 and to be completed by no
later than December 31, 1998. The Hotel contains 225 suites
(hotel rooms), a conference center, lobby, ballroom,
restaurant, parking facilities and recreational amenities.
These amenities include privileges at the Sedona Golf Resort
Golf Course and the Ridge Spa and Racquet Club. Each Unit,
which consists of a hotel suite together with an undivided
interest in the common areas, is subject to a mandatory rental
pool agreement.
The Hotel The Hotel Operating and Rental Pool Agreement requires the
Operating and pooling of all revenue and expenses generated by all of the
Rental Pool Units in the rental pool (the "Rental Pool"). A mandatory
Agreement Rental Pool provides the Hotel Operator with the hotel rooms
necessary to effectively operate the Hotel. Units will be in
the Rental Pool unless the Owner has reserved the Unit for
his own use. A Unit may be used for personal use only by the
Owner for a maximum of 14 days per year. The executive Units
will not be available for personal use. Delta Hotels
International, Inc. ("Delta") will be the Hotel Operator
pursuant to the Hotel Operating and Rental Pool Agreement.
The Hotel Delta Hotels International, Inc. is a wholly-owned subsidiary
Operator of Delta Hotels Limited, based in Toronto, Ontario, Canada.
Delta Hotels Limited is Canada's largest privately owned hotel
company, with over 6,500 guest rooms under management in
Canada. Delta Hotels Limited through its affiliates also
manages hotels in Florida, the Caribbean and in Asia. Delta is
not affiliated with UP Sedona or United Properties Ltd.
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Distributions The Hotel Operator will prepare monthly reports on the
operation of the Hotel and distributions will be made no later
than the 20th day following the end of each month. The Hotel
Operator may choose to make distributions based on an estimate
of the annual amount distributable to owners, less an amount
not to exceed 20%, and make distributions in 12 equal monthly
installments with the balance, if any, paid at the end of the
year.
Reserves An operating cash reserve will be established when the Hotel
commences operations. Each Unit Owner will be required to
contribute to the operating cash reserve an amount equal to
the percentage interest of the Unit being purchased multiplied
by $150,000 upon the closing of the purchase of each Unit (see
Annex A). This $150,000 reserve will be available to the Hotel
Operator for working capital in connection with the operation
of the Hotel commencing in the second year of operations.
Reserves will also be established for capital expenditures for
the repair and replacement of the Hotel premises and the
repair and replacement of furniture, fixtures and equipment at
the rate of 5% of gross revenue beginning in year two of
operations. These reserves are in addition to the retention of
distributable cash flow available set forth above.
Shortfalls If, from time to time, the funds from operations are not
sufficient to pay the expenses of operating the Hotel, to
maintain reserves, or to make capital expenditures in excess
of the established reserves, the Owners of Units will be
required to pay their allocable share of the shortfall. The
Hotel Operator may elect, but is not obligated, to advance
such amount and be repaid, plus interest, out of future cash
flow.
Forecasted UP Sedona forecasts, though cannot assure, that the Hotel
Results of will break even (after an implied debt service on the Unit)
Operations during the second year of operations and provide annual cash
flow distributions (after an implied debt service) in year
three at an annual rate of return on equity (assuming a 25%
downpayment) of 12.25%. UP Sedona will contribute to each
Owner an amount necessary to ensure a break even cash flow
after an implied debt service for the first year of
operations.
The The Declaration of Covenants, Conditions and Restrictions for
Condominium the Condominium (the "Declaration") provides for the creation
Association of the Sedona Golf Resort and Conference Center Condominium
Association (the "Association"). Purchasers of a Unit will
automatically become members of the Association. The
Association will be responsible for the maintenance and
management of the Units, will enter into and monitor the Hotel
Operating and Rental Pool Agreement, and will levy, collect
and enforce the assessments of the Association. The Owners
will elect a Board of Directors who will be responsible for
managing the Association and acting on behalf of the Owners.
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Prices of The initial purchase prices of Units have been established by
Units UP Sedona. UP Sedona is not required to maintain the initial
purchase price schedule. The price of any given Unit will not
be changed once a Purchase Contract has been executed for such
Unit. The schedule of initial purchase prices and the amount
of closing costs of each Unit designated by type and location,
together with the amount to be contributed to the operating
cash reserve, are set forth in Annex A. The initial purchase
price schedule for the Units determines the allocable share of
revenue and expenses for each Unit. The allocable share of
revenue is adjusted to take into account personal use.
Initial Deposit A down payment will be required upon execution of a Purchase
and Escrow Contract in the amount of 10% of the purchase price of a Unit
(the "Initial Deposit"). The Initial Deposit is non-refundable
if the purchaser fails to close on the purchase of a Unit or
otherwise breaches the Purchase Contract. The Initial Deposit
will be held in escrow for the benefit of the purchaser and
will not be available for distribution to UP Sedona until the
completion of construction (estimated to be no later than
December 31, 1998) and the Hotel is ready to commence
operations. At that time, the purchase of the Units under
contract will be completed (the "Initial Closing") and the
balance of the purchase price together with closing costs and
the operating cash reserves contribution will be due.
Additional closings will occur as Units are sold. No minimum
number of Units must be sold before UP Sedona can close on the
Units.
Financing Purchasers may procure financing from any available source. UP
Sedona may arrange referrals for financing for purchasers on
terms that will vary from time to time based on market
conditions for such financing. Each purchaser will be required
to qualify for financing based on the requirements of the
particular lender.
Tax The Owner will be entitled to any available deductions
Considerations associated with ownership of the Unit for federal income tax
purposes, including deductions for property taxes, investment
interest expense and depreciation. The Rental Pool will be
treated as a partnership for federal income tax purposes. Each
Owner must therefore report his allocable share of the Rental
Pool's taxable income and loss on his own federal income tax
return. For a more complete discussion of the tax consequences
of Unit ownership, see "Certain Federal and State Income Tax
Aspects." Each Owner is encouraged to consult his own tax
advisors concerning his particular situation and the impact
that his participation in the Hotel may have on his federal
income tax liability and any state and local income and other
tax laws liability.
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RISK FACTORS
Prospective investors should carefully consider the following
in conjunction with the other information contained in this Prospectus before
purchasing Units.
NEGATIVE CASH FLOW. There is a risk of negative cash flow if
the Hotel fails to reach the level of occupancy and average daily rate
anticipated by UP Sedona. Owners who finance the purchase of the Units are at an
even greater risk of negative cash flow. There can be no assurances that the
Rental Pool income payable to an Owner in any year will exceed the Owner's
allocable share of hotel operating costs and reserves and capital expenditures
in excess of reserves in such year. Further, as the costs of services and other
charges increase in future years, hotel operating costs may also increase;
however, there can be no assurance that revenue will increase sufficiently to
offset increases in these costs. Increases in property taxes may also increase
the risk of negative cash flow.
If a significant number of Owners default on assessments made
to cover hotel operating costs, the Association may have insufficient funds to
pay maintenance and operating costs, which could ultimately result in the loss
of the ability to operate the property as a hotel.
DEPENDENCE ON THE HOTEL OPERATOR. The Hotel Operating and
Rental Pool Agreement appoints the Hotel Operator as the exclusive agent for the
management of the Rental Pool and the bookings of the Units for a term of 10
years, unless earlier terminated. Success of the Hotel will depend to a great
extent on the efforts and abilities of the Hotel Operator. The loss of the
services of the Hotel Operator could have a material adverse effect on the
Hotel's business and results of operation. The Hotel Operator may terminate its
appointment upon 60 days' prior notice if the Owners fail to make or authorize
the Hotel Operator to make capital expenditures without which the Hotel cannot
be operated as a first class hotel (in the discretion of the Hotel Operator).
If the appointment of the Hotel Operator is terminated, it may
be difficult to secure another party to provide replacement services at
comparable costs. Termination of a Hotel Operator could result in lost bookings,
reduced maintenance, loss of operating licenses such as liquor licenses, loss of
staff and delays in transferring operations to a new hotel operator. The Hotel
could experience lower occupancy and reduced revenue during a transition. If the
Owners are required to operate the Hotel for an interim period, the Owners may
be at a disadvantage without the benefits of an advanced reservation booking
system and national advertising provided by a hotel operator.
DEPENDENCE ON GOLF OPERATOR. The ability of the Hotel to
achieve satisfactory occupancy and room rates is dependent on the access to golf
facilities, which has been arranged with the Sedona Golf Resort Golf Course.
Neither the Hotel Operator nor the Owners will have any ability to control or
direct the operations of the golf course. If the owner of the golf course fails
to properly maintain the golf course, the performance of the Hotel could be
negatively impacted.
COMPETITION. The success of the Hotel will depend upon its
ability to compete in such matters as access, location, quality of
accommodations, roomrate structure and the quality and scope of other amenities
such as food and beverage and meeting facilities. The Hotel will compete with
existing hotels, resorts and timeshares, as well as with future hotels, resorts
and timeshares that may be developed in proximity to the Hotel. The timeshare
market in Sedona is highly competitive. Significant timeshare development has
and is expected to continue taking place throughout the Sedona market, including
a timeshare resort project in the Sedona Golf Resort Community. Competition in
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the future may be affected by changes in local market conditions, changes in
regional and local population, changes in disposable income characteristics,
changes in travel patterns and preferences, and periodic over-building that can
adversely affect patronage levels.
OPERATING RISKS. The Hotel will be subject to the operating
risks common to the hotel industry. The underlying value of the Hotel and
ability to make distributions to Owners will depend on the ability of the Hotel
Operator to operate the Hotel in a manner adequate to maintain or increase gross
revenue and to generate sufficient income in excess of operating expenses.
Income from the Hotel may be adversely affected by a range of factors in
addition to increased competition as discussed above, including increases in
operating costs as a result of inflation and other factors, which may not be
possible to offset by increased revenue; strikes and other labor disturbances of
hotel employees of the Hotel; increases in energy costs and other expenses of
travel; change in demand from tour operators due to fluctuations in foreign
currency exchange rates; weather conditions; and adverse effects on general and
local economic conditions. Due to minimal commercial activity in Sedona and
limited access to the Sedona area, the Hotel is particularly dependent upon
individual leisure travelers, group bookings and tourism; occupancy by
commercial travelers is expected to be minimal. All of these factors could have
a negative impact on the Hotel's ability to generate revenue.
SEASONAL FLUCTUATIONS. The Sedona resort market is seasonal in
nature, with demand fluctuating at different levels throughout the year. This
seasonality may cause fluctuations in the gross revenue generated from the
operation of the Hotel.
TRANSPORTATION/ACCESS. The primary mode of transportation to
the Sedona area is automobile or bus, via two highways. Because Sedona is not
located along an interstate freeway, its ability to draw overnight demand is
limited. Significant improvements have been proposed for the highway to the City
of Sedona; construction is scheduled to begin by 1998. The Sedona Airport has no
control tower and is mainly utilized by small single-engine and multi-engine
propeller aircraft and helicopters. The lack of scheduled airline service from
Phoenix and other "feeder" destinations to Sedona, combined with the lack of
airport infrastructure, will continue to limit Sedona's ability to become a
national group destination. No near-term plans have been proposed to increase
airline traffic to Sedona.
INSURANCE. Included in each Owner's share of Hotel operating
costs will be a share of insurance premiums for property damage, public
liability and fire and other hazard insurance carried by the Association against
certain risks derived from the operation of the Hotel. There can be no assurance
that the amount of insurance carried will be adequate. There are certain risks
which may be uninsurable or not insurable at reasonable terms. In the event
insurance is unavailable for any reason, the Association will have to
self-insure for all or part of any loss or to seek coverage at higher rates from
alternative carriers. Each Owner may personally have joint and several liability
for tort and contract claims as a result of an ownership of Units or
participation in the Rental Pool. Although UP Sedona believes that the insurance
coverage afforded Owners will be adequate, purchasers of Units are urged to
consult an insurance advisor or attorney with respect to the nature and extent
of such personal liability and to determine what additional liability insurance
coverage, if any, may be necessary or appropriate for their particular
circumstances.
LIMITED RESALE. There can be no assurance that there will be a
resale market for the sale of Units by Owners and Owners may not be able to
liquidate their interests in the event of an emergency. Although Owners are free
to resell their Units, there are certain conditions that must be
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satisfied in connection with the sale of a Unit by an Owner, including the
requirement for the prospective purchaser to ratify the Hotel Operating and
Rental Pool Agreement. Consequently, the purchase of a Unit should be considered
only as a long-term investment.
ENVIRONMENTAL LAWS. Under various federal, state, and local
environmental laws, ordinances, regulations, and common law, a current or
previous owner or operator of real property may be liable for the costs of
removal or remediation of hazardous or toxic substances on, under, or in such
property. Such laws, ordinances and regulations often impose liability whether
or not the owner or operator knew of, or was responsible for, the presence of
such hazardous or toxic substances. UP Sedona is not aware of any material
violations of currently applicable environmental laws or regulations. However,
there can be no assurance that violations will not occur in the future or that
more stringent laws will not be enacted in the future, and that UP Sedona, the
Hotel Operator or the Owners will not suffer material adverse consequences as a
result.
SIGNIFICANT INCOME TAX CONSIDERATIONS TO OWNERS. The following
is a brief summary of what UP Sedona believes are the most significant tax
considerations involved in an investment in a Unit and participation in the
Rental Pool. An unfavorable outcome with respect to any tax aspect factor may
have an adverse effect on an Owner or the Rental Pool.
The tax considerations involved in an investment in a Unit
that should be significant to the Owners are discussed under "Certain Federal
and State Income Tax Aspects." Those considerations involve additional tax risks
not discussed below. Each prospective investor is strongly urged to review the
material and to discuss with his tax advisors the tax consequences to him of an
investment in a Unit and participation in the Rental Pool.
(a) Partnership Status
The federal income tax treatment contemplated for the Rental
Pool will be available only if the Rental Pool is classified as a "partnership"
for federal income tax purposes and not as an "association" taxable as a
corporation. O'Connor, Cavanagh, Anderson, Killingsworth & Beshears, P.A.,
counsel for UP Sedona ("Counsel"), has opined that, under current law and
regulations and interpretations thereof, the Rental Pool should more likely than
not be classified as a "partnership" for federal income tax purposes. Counsel's
opinion is not binding on the Internal Revenue Service (the "Service") or the
courts. If it were determined that the Partnership is taxable as a corporation
rather than as a partnership, the changes in the tax consequences to an Owner
and the Rental Pool would be significant and adverse. See "Certain Federal and
State Income Tax Aspects - Classification as a Partnership."
(b) Section 183 Hobby Loss Rules
An Owner's allocable share of any losses and deductions from
the Rental Pool may be subject to the Code's hobby loss rules, which limit the
amount of deductions from activities that are not engaged in for profit. Such
deductions are not suspended, but are permanently disallowed. UP Sedona can
provide no assurances that an Owner can expect a profit from the Rental Pool
sufficient to avoid the hobby loss rules; however, UP Sedona believes that the
Rental Pool will more likely than not be considered an activity engaged in for
profit. See "Certain Federal and State Income Tax Aspects - Tax Consequences of
Rental Pool to Owners - Section 183."
8
<PAGE>
(c) Section 280A - Vacation Home Rental Rules
An Owner's allocable share of the Rental Pool's losses and
deductions will also be limited by the vacation home rental rules in the Code.
Section 280A establishes an expense allocation formula for apportioning
deductions between personal and business use of a dwelling unit. Each Unit is
considered a dwelling unit for federal income tax purposes. In the Rental Pool
arrangement, all Owners' personal use will be aggregated in determining the
applicable expense allocation. An Owner will be permitted to deduct expenses
associated with the Rental Pool only to the extent such expenses are allocable
to business use. See "Certain Federal and State Income Tax Aspects - Tax
Consequences of Rental Pool to Owners - Section 280A."
(d) Passive Activity Rules
Any Rental Pool losses will be treated as losses generated in
a passive activity. Losses from passive activities generally may only be
deducted against income from the same or other passive activities. See "Certain
Federal and State Income Tax Aspects - Tax Consequences of Rental Pool to Owners
- - Income and Losses From Passive Activities."
(e) Partnership Audit Risk
If the Rental Pool's information return is audited and
adjusted, such audit may cause corresponding adjustments to, and may increase
the probability of an audit of, an Owner's federal income tax return. See
"Certain Federal and State Income Tax Aspects - Administrative and Compliance
Matters."
9
<PAGE>
THE HOTEL
GENERAL.
The Hotel will consist of 225 suites and will be located on a
7.43 acre site within the Sedona Golf Resort commercial/residential master
planned community. The Sedona Golf Resort is situated in the Village of Oak
Creek, a residential area located approximately five miles south of Sedona,
Arizona. (See "The Sedona Golf Resort" below.) The Hotel will be three stories
and have a grand lobby, conference center, ballroom, and recreational amenities,
including a swimming pool and jacuzzi. The Hotel will offer food and beverage
service from a lounge and full-service restaurant.
The Hotel will be located within the Sedona Golf Resort master
planned community, which includes a retail/commercial center, multi- and
single-family residential development, timeshare properties, the Sedona Golf
Resort Golf Course, the Ridge Spa and Racquet Club (see "Recreational Amenities"
below"), and the proposed Hotel. UP Sedona believes that the Hotel meets a
demand in the Sedona market for a first-class full-service hotel and that the
mix of residential, recreational and commercial uses in the Sedona Golf Resort
provides a unique setting for the Hotel.
THE UNITS.
The Hotel will be comprised of a mix of one-bedroom, executive
and studio Units. All Units include a patio or balcony and offer scenic views of
the adjacent golf course and/or the red rocks of Sedona. Six one-bedroom plans,
two studio plans and one executive plan have been designed; the plan of a Unit
will depend upon its location within the Hotel. All of the Units will have
similar furnishings depending on size, except for the executive Units. The
one-bedroom Units range from approximately 551 to 700 square feet (excluding
balcony). The studio Units are approximately 347 square feet (excluding
balcony), and resemble a typical hotel room. The executive Units will be
approximately 591 square feet. Each one-bedroom Unit will include a separate
living/sleeping area, full kitchen and fireplace and the studio Unit will have a
living/sleeping area and a kitchenette. Each of the studio Units will be
adjacent to a one-bedroom Unit, allowing a one-bedroom Unit and a studio Unit to
be rented as a two-bedroom suite. Each executive Unit will be equipped for small
meetings with a conference table and will have a murphy bed.
Currently only one of the hotel properties in the Sedona
market offers comparable suites in both size and amenity package. In response to
UP Sedona's market studies, UP Sedona has determined that a mix of 171
one-bedroom Units, six executive Units and 48 studio Units will best serve the
combination of individual and group travel.
The floor plans for the majority of the Units and the building
layouts indicating the location of the Units and other Hotel facilities are set
forth at the beginning and end of this Prospectus.
CONFERENCE FACILITIES.
UP Sedona believes that there is a significant need for
additional quality conference facilities in the Sedona market. See "The Hotel
Industry - The Sedona Market" below. Conference facilities planned for the Hotel
will comprise 10,000 square feet of meeting space, including a 5,000 square foot
ballroom, several "breakout" conference rooms and hospitality suites and
pre-function,
10
<PAGE>
storage and kitchen spaces. UP Sedona believes that the Hotel's planned meeting
space will be the largest, most flexible facility available in northern Arizona.
OTHER FACILITIES.
The Hotel will include a 125 seat full-service restaurant, a
lobby lounge, and an outdoor swimming pool and jacuzzi. The Hotel will offer
pool side food and beverages in the area surrounding the swimming pool.
RECREATIONAL AMENITIES.
UP Sedona believes that access to golf activities is an
important factor for a successful resort hotel. It has therefore entered into an
agreement with the Sedona Golf Resort (see below) pursuant to which guests of
the Hotel will receive preferential tee times and a ten percent discount on
greens fees. The agreement permits the Hotel to reserve rounds for its guests up
to 40% of the total rounds played in the previous year. In 1996, approximately
43,000 rounds were played, which would have entitled the Hotel to reserve
approximately 17,200 rounds in 1997 if it were to have been operational. In
addition, the Ridge Spa and Racquet Club, a full-service private health/fitness
facility located within a short walk from the Hotel, has agreed to allow guests
of the Hotel to use its facilities at a discounted guest fee. The services
offered by the spa include a fitness center, aerobic room, heated lap pool and
outdoor jacuzzi, three racquetball courts, three lighted tennis courts, social
lounge with courtyard seating, full service pro shop, juice and snack bar, and
sauna and steam room facilities.
ADDITIONAL BENEFITS TO OWNERS
Each Owner will have privileges with other Delta hotels in
North America managed or operated by Delta or its parent company at a 25%
discount off the rack rate, subject to availability. In addition, each Owner
will be entitled to participate in the Delta Privilege program.
THE SEDONA GOLF RESORT
The Golf Course.
The Sedona Golf Resort Golf Course, the only public golf
course in the Sedona area, is recognized as one of the premiere golf courses in
the United States and was recently rated as the second best course in Arizona by
The Arizona Republic. The course provides scenic views of Sedona's red rocks and
can be played year-round. In November 1996, the owner and developer of the golf
course opened a new 18,000 square foot clubhouse facility directly across from
the Hotel that offers a full-service restaurant and lounge, a retail facility,
men's and women's locker facilities and a small meeting room. The golf course
also includes a driving range and professional instruction.
Multi/Single Family Residential Development.
Residential development is a significant component of the
Sedona Golf Resort master plan. Currently there are approximately 50
multi-family condominium units located west of the Hotel site, adjacent to the
Ridge Spa and Racquet Club. The current master plan provides for the development
of 300 single family homes throughout the resort. Golden Heritage Homes, the
exclusive home builder in the development, intends to sell lots ranging from
6,600 square feet to 10,000 square
11
<PAGE>
feet, with finished home prices ranging from $250,000 to $310,000. Custom homes
will be available on some of the larger lots. Home construction began in
November 1996.
Commercial/Retail Development.
The master plan also includes neighborhood/tourist retail and
food and beverage development, to be located between the Hotel site and State
Route 179 in the northeastern portion of the master plan.
The Ridge Timeshare Resort.
An unaffiliated developer has begun construction of a 120-unit
timeshare resort, to be situated on a 11.5 acre parcel located southwest of the
Hotel. The first phase of construction began in October of 1996 and is expected
to include 12 units and an 11,000 square foot clubhouse and sales center. The
developer of this timeshare resort also owns and operates the Ridge Spa and
Racquet Club. All timeshare owners will have membership access to the spa
facilities.
12
<PAGE>
THE HOTEL INDUSTRY
GENERAL.
Two key measures of performance in the U.S. lodging industry
are occupancy and average daily rate ("ADR"). As of the end of 1995, the U.S.
lodging industry has experienced 50 consecutive months of increases in occupancy
and ADR. While the improved performance, commencing in 1992, was driven
primarily by increased occupancy, the past two years have witnessed steady
increases in ADR with no negative impact on occupancy levels. The following
table from Smith Travel Research outlines the growth in occupancy and average
daily rate for the total U.S. lodging industry from 1991 through 1995:
[GRAPHIC OMITTED]
In addition to increased occupancy and room rates, the hotel
industry has experienced a higher degree of operating efficiency, which, when
coupled with lower interest rates, has further contributed to the recent
improvement. All of the above factors have contributed to increased
profitability, which in turn has increased the attractiveness of hotel
investment for both current and potential owners.
RESORT MARKET.
Resort hotels showed significant improvement in both their
market and financial performance in 1995. As the economy continues its steady
pace of growth and consumer confidence slowly improves, it appears that business
and leisure travelers alike are seeking the luxurious facilities and services
offered at the nation's resorts. In 1995, resort hotels achieved the highest
average room rate of all property types according to PKF Consulting - Trends
1996. The following tables, which supports the PKF findings, sets forth
occupancy, ADR and revenue per available room ("REVPAR") as reported by Smith
Travel Research for the total U.S. full service market and the total U.S. resort
market from 1991 through 1995:
13
<PAGE>
[GRAPHIC OMITTED]
14
<PAGE>
Seasonality is a major factor affecting the performance of
hotels in the resort segment of the lodging industry. PKF Consulting reports
that resorts have softened the depressing effects of off-season demand by
attracting demand from the corporate and meetings business. Leisure travel
occupancy in resorts has declined from 62% in 1990 to 54% in 1995 while
corporate and meetings business has risen from 33% in 1990 to 44% in 1995.
ARIZONA.
Tourism is Arizona's second largest industry and plays a
significant economic role throughout the state. The growth of the tourism
industry in Arizona is based on the following:
+ Favorable climate
+ Natural beauty
+ More leisure time
+ Number and quality of resort hotels and championship
golf courses
+ Development of new tourist attractions
+ Low airfare structure
+ Expansion of sporting events
+ Shopping
+ Healthy economy
+ Aggressive tourism development
UP Sedona has obtained a report from Smith Travel Research on
the performance of a representative set of resort properties for 1995 for the
State of Arizona as set forth in the following table:
-----------------------------------------------------------
OCCUPANCY ADR REVPAR
===========================================================
76.2% $121.72 $34,977
-----------------------------------------------------------
Note: The resort properties represented include Radisson Resort,
Scottsdale; Hilton Inn, Scottsdale; Sheraton Hotel El
Conquistador, Tucson; Doubletree Resort, Scottsdale; Red Lion La
Posada, Scottsdale; Marriott Camelback Inn, Scottsdale; Marriott
Mountain Shadows, Scottsdale; Royal McCormick Ranch, Scottsdale;
Hilton The Pointe at Squaw Peak, Phoenix; Hilton The Pointe
Tapatio, Phoenix; and Loews Ventana Canyon, Tucson.
Because the representative hotels did not all report for prior
years, Smith Travel Research was not able to provide data for the same sample
for prior years comparable to the information available for U.S. full service
and U.S. resort hotels.
UP Sedona believes that the above factors contribute to a
strong tourism industry in Arizona and that unsatisfied demand allows for
additional hotel development in Arizona. UP Sedona has selected the Sedona
market as a particularly attractive location for such development.
- --------------------------------------------------------------------------------
It should be noted that Smith Travel Research has not provided any form of
consultation, advice or counsel regarding any aspects of, and is in no way
whatsoever associated with, the Offering of Units.
- --------------------------------------------------------------------------------
15
<PAGE>
THE SEDONA MARKET.
Sedona.
Sedona is located in the central portion of the State of
Arizona in a mountainous area known for its majestic red rocks, some of the most
spectacular geological formations in the United States, and recreational and
cultural activities. Sedona is approximately 120 miles north of Phoenix and 30
miles south of Flagstaff, Arizona. While Sedona has four distinct seasons, it is
known for its mild climate, with an average daily maximum temperature of 74.7
degrees. Approximately 3.5 million visitors travel through Sedona annually to
view the rock formations and to take advantage of the recreational
opportunities. Sedona is well located as a base for day trip activities and as a
hub for visitors to northern Arizona. Sedona's numerous scenic attractions
include Oak Creek Canyon, Slide Rock State Park, Grand Canyon National Park,
Sunset Crater, Walnut Canyon and Montezuma's Castle. The Sedona market includes
the Village of Oak Creek.
Market Overview.
According to the Sedona Chamber of Commerce, there are
approximately 1,800 hotel/motel rooms and 100 bed and breakfast rooms in the
greater Sedona market and an estimated 3.5 million visitors annually. Only five
properties offer over 80 rooms. There was no significant new hotel development
in the Sedona market from 1988 through 1994. In response to this pent-up demand,
certain existing hotels have begun expansion projects and a number of new
properties have recently opened or are currently under construction. According
to Warnick & Company, a hotel consulting firm, a total of 491 rooms have been
added to the Sedona lodging market since 1995. An additional 355 rooms are
expected to be available within the next two to three years. The new hotel
construction is primarily of the "limited-service" variety except for the
proposed The Cliffs at Oak Creek, the expansion at Bell Rock Inn and the
expansion at Poco Diablo Resort, which are all "full-service" hotels. The
Holiday Inn Express, the Desert Quail Inn and the expansion at Bell Rock Inn
represent development in the Village of Oak Creek.
SEDONA HOTEL DEVELOPMENT ACTIVITY
================================================================================
PROPERTY DEVELOPMENT STATUS NO. OF ROOMS
================================================================================
NEW HOTELS
Desert Quail Inn: Opened 1995 21 rooms
Village of Oak Creek
Comfort Inn: Sedona Opened 1995 53 rooms
Southwest Inn: West Sedona Opened 1995 28 rooms
Best Western Inn at Sedona: Opened 1996 110 rooms
West Sedona
Holiday Inn Express: Opened 1996 102 rooms
Village of Oak Creek
Comfort Suites: West Sedona Opened 1996 37 rooms
16
<PAGE>
================================================================================
PROPERTY DEVELOPMENT STATUS NO. OF ROOMS
================================================================================
Hampton Inn: Central Sedona Under Construction 52 rooms
Sedona Real: West Sedona Under Construction 47 rooms
Homewood Suites: Approved for Construction 70 rooms
Central Sedona
Sleep Inn: West Sedona Preliminary Planning Process 60 rooms
The Cliffs at Oak Creek: Preliminary Planning Process 70 rooms
Central Sedona
Unnamed Motel: West Preliminary Planning Process 56 rooms
Sedona
EXPANSION
Bell Rock Inn: Expanded 1995 52 rooms
Village of Oak Creek
Quality Inn King's Ransom: Expanded 1995 60 rooms
Sedona
Poco Diablo Resort: Sedona Expanded 1996 28 rooms
--------
Total New Rooms 846 ROOMS
================================================================================
Source: Sedona Planning Department
Competition.
UP Sedona believes that six properties in the Sedona market are directly
competitive with the Hotel. These are the Enchantment Resort, L'Auberge de
Sedona, Los Abrigados Resort, Poco Diablo Resort, Junipine Resort and Best
Western Arroyo Roble. The following chart sets forth the characteristics of
these properties:
<TABLE>
<CAPTION>
COMPETITIVE RESORT SUPPLY
================================================================================
YEAR NO. OF
PROPERTY OPENED ROOMS FACILITIES / AMENITIES
================================================================================
<S> <C> <C> <C>
The Enchantment Resort 1987 165 Restaurant, lounge, 4 pools,
West Sedona/Boynton Canyon whirlpool spas, spa and fitness
center, tennis center, pitch and putt
golf course, full kitchens in some
units, rental facilities
L'Auberge de Sedona 1985 97 Two restaurants, lounge, pool,
Cental Sedona/creekside location whirlpool spa, villa units located
along Oak Creek
</TABLE>
17
<PAGE>
<TABLE>
<CAPTION>
=============================================================================================
YEAR NO. OF
PROPERTY OPENED ROOMS FACILITIES / AMENITIES
=============================================================================================
<S> <C> <C> <C>
Los Abrigados 1986 50(1) Multiple restaurants, lounge, spa and
Cental Sedona/creekside location fitness center, pool, whirlpool spa,
tennis courts, indoor/outdoor
meetings/ conference and function
space, guest rooms have a suite
orientation
Poco Diablo Resort 1978 137 Restaurant, lounge, pool, whirlpool
Southern Sedona/proximate to spas, par 3 golf course, tennis and
Oak Creek racquetball courts, 6,000 square feet
of conference space, each room
equipped with wet-bar and
refrigerator, suites available
Junipine Resort 1986 50 Restaurant, all units are one/two
Upper Oak Creek Canyon/ bedroom fully equipped
Creekside Location condominiums
Best Western Arroyo Roble 1983 60 Pool, whirlpool spa, tennis courts, a
Central Sedona 15,000 square foot clubhouse with a
variety of recreational/ fitness
amenities, fully equipped suites
--- available
559
===
- ----------
(1) Los Abrigados currently has 50 of its total 172 suites available for use by
the resort as hotel rooms. It also has been involved with a timeshare
conversion for the past several years. The remaining inventory will be
reduced by approximately 25 units per year during the sell-out of timeshare
units.
================================================================================
Source: Warnick & Company
</TABLE>
The factors considered in determining this competitive supply
included: (i) the number of rooms and amount and quality of meeting space, (ii)
quality and value of overall facilities and amenities, (iii) character and style
of the Hotel, (iv) rate structure and market position, and (v) location factors
such as surrounding land uses.
With the exception of Poco Diablo Resort, all of the
properties in the competitive resort supply were developed in the early to
mid-1980's. According to Warnick & Company, the upper end of these hotels is
represented by Enchantment Resort and L'Auberge de Sedona and to a lesser
degree, by Los Abrigados and the Junipine Resort. These properties generally
offer higher quality facilities and amenities and capture the highest average
rates in the Sedona marketplace. Poco Diablo and Arroyo Roble represent the
lower end of the competitive continuum, primarily due to rate structure and, in
the case of Arroyo Roble, inferior facilities and amenities.
18
<PAGE>
Of the competitive supply, Los Abrigados and Enchantment offer
suite amenities. A portion of the units at Enchantment have full kitchens. As
noted above, Los Abrigados is being converted to timeshare and should no longer
represent a competitive property.
The Bell Rock Inn and the Best Western at Sedona are not
included in the competitive supply. The Bell Rock Inn has a lower rate structure
and virtually no meeting facilities. The Best Western Inn at Sedona has recently
opened and represents a limited service hotel with a lower rate structure.
UP Sedona obtained a survey from Warnick & Company regarding
the historical performance of the competitive supply as follows:
HISTORICAL PERFORMANCE OF COMPETITIVE RESORT SUPPLY
1992 THROUGH 1996
===============================================================
NO. OF AVERAGE REVPAR
YEAR ROOMS OCCUPANCY ROOM RATE
===============================================================
1992 598 65.6% $124.50 $29,810
1993 574 71.4% $132.00 $34,401
1994 550 77.2% $138.70 $39,083
1995 528 79.0% $146.80 $42,330
1996 503 76.0% $160.00 $44,384
===============================================================
Source: Warnick & Company, PKF Consulting, and individual properties
The average rate indicated in the previous table does not
reflect the rate disparity between properties representing the upper and lower
end of the competitive resort market. According to Warnick & Company, the four
properties in the upper resort tier (Los Abrigados, L'Auberge, Enchantment
Resort, and the Junipine Resort) had average annual room rates ranging between
$160 and $180 during 1995. Conversely, average room rates at the Best Western
Arroyo Roble and the Poco Diablo Resort during 1995 averaged between $100 and
$110. The average rate at Poco Diablo will likely be enhanced as a result of the
recent opening of 28 suites and renovation efforts. Every property in the
competitive supply has experienced solid rate growth over the past few years.
The above table indicates that the Sedona market has
experienced solid growth in occupancy and average room rates over the past few
years. UP Sedona believes this growth has been attributed to improved economic
conditions, the favorable national exposure of Sedona as a destination area,
improved marketing efforts by the individual properties and the community and
the lack of new supply.
Since 1992, the Sedona competitive supply has substantially
out-performed the U.S. full service and U.S. resort markets as measured by
occupancy, ADR and REVPAR, with the exception of 1992, where occupancy was
slightly below those markets. The following tables compare these performance
measures with those of the U.S. full service and U.S. resort markets for the
years 1992 through 1995:
19
<PAGE>
[GRAPHIC OMITTED]
20
<PAGE>
- --------------------------------------------------------------------------------
Warnick & Company obtained its information as discussed in
this Prospectus from third party sources, including the properties reported on,
and does not guarantee or warrant the reliability or accuracy of such
information. No audit of the information has been conducted by Warnick & Company
or by UP Sedona.
- --------------------------------------------------------------------------------
Resort Market Seasonality.
The Sedona resort market is affected by seasonality with
demand fluctuating at different levels throughout the year. UP Sedona believes
that the severity of demand fluctuation has lessened in recent years as a result
of the increasing popularity of the area. Peak season in demand occurs in
Spring, Summer and Fall. Specifically, the peak season extends from April
through August and includes the month of October. During peak periods, occupancy
in Sedona ranges from 80% - 90% and there is less disparity between weekend and
weekday demand.
The "shoulder" season includes February and March, September
and early November. Occupancy percentages generally range from the 60s to the
70s during this period. Group meetings and group tour demand bolsters mid-week
occupancies and individual tour demand is mainly oriented to the weekends. As a
result, the resort market experiences numerous fill nights (periods in which the
market is at capacity) on the weekends during the shoulder season.
The low season is represented by the later part of November
and the months of December and January. The Red Rock Fantasy, as well as other
events held in the area during this period have helped to increase demand
activity during this low season. Market occupancy ranges from 50-60% during this
period.
UP Sedona believes that there remains a misconception that the
weather in Sedona is similar to the extreme cold of other northern areas of the
State such as Flagstaff. However, much of the area outdoor recreational activity
(golf, hiking, etc.) is available on a year around basis. The two main golf
courses in Sedona each recorded less then 10 "no play" days on average over the
past two years as a result of poor weather.
Solid occupancy growth has been present throughout 1996,
particularly during the shoulder and slow seasons. The properties that UP Sedona
believes are directly competitive with the Hotel achieved an occupancy rate of
79% in 1995, which is higher than the occupancy rate achieved by the Sedona
lodging market as a whole.
Market Demand.
The overall demand for resort lodging accommodations in the
Sedona area is generated primarily by three market segments: individual leisure,
group meetings and group tours. According to Warnick & Company, the commercial
demand segment comprises only approximately 3% of the total number of rooms
rented in Sedona in 1995 due to the minimal commercial activity in Sedona and
was primarily satisfied by properties in the downtown area of the City of
Sedona. UP Sedona does not expect a substantial amount of business from
commercial travelers.
21
<PAGE>
Individual Leisure. The "individual leisure" market segment
consists of tours requiring accommodations in the area for general sightseeing,
weekend "get-aways", cultural activities and a variety of recreational and
special events throughout the year. This demand segment is strongest in the
Spring, Summer and Fall. Individual leisure demand is characterized by multiple
occupancy. According to Warnick & Company, this market segment accounted for
approximately 77% of the total rooms rented in the competitive supply in Sedona
in 1995. UP Sedona believes that individual leisure travelers generally select
accommodations based on the following factors:
+ Aesthetic appeal of surrounding area
+ Proximity to area attractions
+ Overall quality of the facilities
+ Quality and variety of recreational facilities
+ Value offered
+ Name identity/affiliation and/or reputation
Group Market. Group meeting demand is typically comprised of
smaller regional/state associations, state corporations and state government.
Corporate meeting business consists primarily of executive/incentive retreats
and conferences. Group demand in Sedona typically peaks during March-April and
September-October. According to Warnick & Company, group meeting demand
accounted for approximately 20% of the total rooms rented in Sedona in 1995 by
the hotels in the competitive supply.
UP Sedona believes there has been support from the group
market in the past in Sedona and that, with the loss of the meeting space at Los
Abrigados, there is a significant opportunity for new group-oriented resort
hotel business in the Sedona market. Currently, only a few of the properties
competitive with the Hotel specifically cater to the group demand segment. The
design of the Hotel has specifically taken into consideration the requirements
to meet this demand. It believes that certain factors that contribute to group
use of a particular facility include the following:
+ Image and reputation
+ Quality, flexibility, and size of meeting facilities
+ Quality of support services provided to group meeting
planners and their attendees
+ Distance/travel time to airport
+ Convenience of access to shopping, restaurants
services, attractions and recreational facilities
(especially golf)
+ Quality, variety, and size of food and beverage
outlets
+ Quality and consistence of service in all areas of
the hotel
+ Pricing
Future Demand Growth.
UP Sedona estimates that demand will increase at approximately
3 percent annually starting in 1998, the point in which new supply is expected
to enter the competitive marketplace. This growth is consistent with the demand
growth experienced by the competitive supply between 1992 and 1994.
22
<PAGE>
In addition to normal demand growth, UP Sedona estimates that
currently unsatisfied demand will be satisfied by the opening of the Homewood
Suites, the Hotel, and The Cliffs at Oak Creek. UP Sedona also anticipates that
the new additions to the competitive supply, specifically the Hotel, will induce
demand into the market. Induced demand is new demand that enters a market as a
direct result of the introduction of a new hotel product. This demand is over
and above the normal demand growth experienced by the marketplace. The
introduction of these properties will allow the market to attract additional
demand which is not able to be accommodated in the market because of facility
size or capacity constraints. As a result of their more unique physical
attributes, variety of amenities, and ability to cater to all demand segments,
resort oriented hotels, more than any other lodging type, possess the ability to
induce new demand into a marketplace.
Prospective New Resort Supply.
UP Sedona estimates that 440 new resort/hotel units (including
the Hotel) will be constructed within the next three years. These new rooms,
combined with a 50 room reduction at a competitive hotel, result in a net
increase of 390 rooms. The recent addition of 28 rooms at Poco Diablo, the
proposed 70 room The Cliffs at Oak Creek (lodging and timeshare), and the 47
room Sedona Real are the only additions to the competitive supply as other
recent additions and proposed additions have been in the limited-service
category.
Market Penetration for the Hotel.
Individual Tourist/Leisure Demand. As discussed under "Market
Demand," individual leisure demand for the competitive supply accounted for
approximately 77% of the total occupied rooms. UP Sedona estimates that the
leisure market will account for approximately 55% of the occupied rooms in the
Hotel in the first year of stabilized operations, which is more than 20% less
than that experienced by the competitive supply. The remaining demand will be
filled by the group market.
Factors that contribute to the Hotel's ability to attract
leisure travelers include the following:
+ Unsatisfied demand within the competitive supply
during the peak season
+ The Hotel's suite orientation
+ The fact that it is the only hotel located on an 18
hole golf course in Sedona/Oak Creek offering
preferential tee times and discounted green fees
+ The competitive rate structure + The guest privileges
at the Ridge Spa + The full service nature of the Hotel
Group Demand. Of the competitive supply, only Poco Diablo,
Enchantment and Arroyo Roble offer group-oriented facilities. Poco Diablo offers
the largest meeting space (6,000 square feet). UP Sedona believes that the
removal from the market of the Los Abrigados meeting space (10,000 square feet)
has created significant unsatisfied demand for meeting facilities. The group
market is estimated to account for 45% of the occupied rooms in the Hotel in the
first year of stabilized operations. Although this is significantly higher than
the 20% experienced by the competitive supply in 1995, UP Sedona believes that
it is well positioned to capture this proportion of the group demand for the
following reasons:
23
<PAGE>
+ The Hotel will provide modern meeting facilities that
will be superior to those offered by any of the
properties in the competitive supply
+ The Hotel's suite orientation
+ The Hotel will provide a variety of resort oriented
facilities and recreational amenities, including
on-site golf and spa privileges. This will provide
the Hotel with a significant competitive advantage
when considering groups that emphasize golf as an
important component of their itinerary
+ The Hotel's location provides a more remote and
resort oriented atmosphere, yet is convenient to all
the facilities and attractions recognized throughout
the city of Sedona and the surrounding region
Based on the above factors, the Hotel is positioned to
generate leisure and group business by meeting unsatisfied demand even though
the market supply is expected to increase. The following table sets forth
estimated market penetration for the Hotel:
ESTIMATED OCCUPIED ROOMS AND OCCUPANCY FOR THE HOTEL
================================================================================
ESTIMATED ESTIMATED
OCCUPIED ROOM OCCUPIED ROOM TOTAL ESTIMATED ESTIMATED
NIGHTS: LEISURE NIGHTS: GROUP OCCUPIED ROOM OCCUPANCY RATE
YEAR SECTOR SECTOR NIGHTS FOR THE HOTEL
================================================================================
Year 1 31,284 17,170 48,454 59%
- --------------------------------------------------------------------------------
Year 2 33,878 23,610 57,488 70%
- --------------------------------------------------------------------------------
Year 3(1) 34,329 27,265 61,594 75%
================================================================================
(1) Forecasted first year of stabilized operating performance
Average Daily Rate.
The ADR in the competitive supply has escalated at a
consistent pace since 1992 as set forth in the table entitled "Historical
Performance of Competitive Resort Supply" on page 19. Properties in the upper
tier achieved an ADR in the $160 to $180 range and properties in the lower tier
achieved an ADR in the $100 to $110 range. The average ADR for all properties in
the competitive supply was $160.00 in 1996. UP Sedona estimates that the ADR for
the Hotel will be $155 (1998 dollars) upon entering the market, which is below
the average ADR achieved in 1996 when adjusted for an approximate 3% inflation
factor.
Conclusion.
UP Sedona believes that the Sedona lodging market will
experience continued growth into the foreseeable future. Factors contributing to
the strength of the market and its overall potential growth are:
+ Projected growth of tourism throughout the northern
Arizona region;
+ Increased desirability of locations within Arizona as
destinations for group meeting planners;
24
<PAGE>
+ Local municipal commitment to aggressive tourism
marketing;
+ Positive economic trends within the State of Arizona;
+ Enhanced interest in Arizona as a premiere resort and
golf destination;
+ Proposed expansion projects at Sky Harbor
International Airport (Phoenix); and
+ Continued growth in the slow season demand.
UP Sedona believes that the Hotel, with its larger one-bedroom Units
with full kitchens, will provide an attractive alternative to the more standard
guest rooms offered by the majority of the competitive hotels. The Hotel's
conference facilities will be the largest of any of the competitive hotels.
Further, the Hotel will be the only property offering on-site championship golf
facilities. UP Sedona believes that the Hotel's anticipated quality, proposed
meeting space, recreational amenities and golf and spa affiliations will
position the Hotel to attract individual leisure and group travelers and create
additional demand for lodgings in the Sedona market. The Hotel will represent
the newest full service hotel addition to the competitive supply since
Enchantment was built in 1987. UP Sedona anticipates that the Hotel will be
positioned below both the midpoint rate range and the market leaders and
anticipates that it will achieve occupancy levels above the competitive supply.
Based on all of the factors discussed above, UP Sedona believes the
Hotel is well positioned to perform as indicated in the Forecasts appearing at
page F-1.
BASIS FOR FORECASTS AND SUMMARY OF SELECTED FINANCIAL PERFORMANCE
The following represents a summary of selected financial performance of
a typical one-bedroom Unit and studio Unit from the first forecasted stabilized
year of operations and is derived from the Forecasts appearing on page F-1. This
summary of selected financial performance should be read in conjunction with the
Forecasts, which includes the assumptions underlying the Forecasts and related
notes.
The Forecasts include a five year forecast of the financial performance
of the Hotel and, by applying the allocable percentage to a typical one-bedroom
Unit and typical studio Unit, a five year forecast of financial performance for
the Owner's of each of the typical Units illustrated. UP Sedona has prepared the
Forecasts based upon its inquiry as set forth and based upon the stated
assumptions, which it believes are reasonable. While UP Sedona believes it has
taken into consideration all factors that can affect the overall economic
performance of the Hotel, there are a number of critical factors that can cause
actual performance, especially when related to the hotel industry, to vary with
that of a forecast. These factors include, but are not limited to: (a) projected
occupancy rate; (b) projected average daily room rate; (c) projected restaurant
performance; (d) the effect of competition; (e) general economic environment;
(f) strength of the tourist sector of the economy; and (g) assumptions regarding
the effects of inflation on both revenue and expenses.
Investors should recognize that there can be no assurance that the
assumptions will prove correct or that actual results will not differ from the
results forecasted. Actual results may vary materially because events and
circumstances frequently do not occur as expected. Investors are encouraged to
consult with their own advisors with respect to the assumptions upon which the
forecasts are based and are encouraged to review the discussion of risk factors
regarding the Hotel and its operations set forth under the heading "Risk
Factors" on page 6.
25
<PAGE>
<TABLE>
<CAPTION>
------------------------------------------------------------------------------------------
YEAR 3 YEAR 4 YEAR 5
------------------------------------------------------------------------------------------
(Year Ended Dec. 31, 2001) (Year Ended Dec. 31, 2002) (Year Ended Dec. 31, 2003)
------------------------------------------------------------------------------------------
1-BEDROOM STUDIO 1-BEDROOM STUDIO 1-BEDROOM STUDIO
- --------------------------------------------------------------------------------------------------------------
<S> <C> <C> <C> <C> <C> <C>
AVERAGE OCCUPANCY 75% 75% 75% 75% 75% 75%
- --------------------------------------------------------------------------------------------------------------
ADR $ 181 $ 156 $ 186 $ 161 $ 192 $ 165
- --------------------------------------------------------------------------------------------------------------
REVPAR $49,519 $42,700 $51,005 $43,981 $52,535 $45,300
- --------------------------------------------------------------------------------------------------------------
NET DISTRIBUTABLE
CASH FLOW $18,658 $16,089 $19,222 $16,756 $19,663 $16,955
- --------------------------------------------------------------------------------------------------------------
NET AFTER DEBT
SERVICE CASH FLOW $ 6,177 $ 5,327 $ 6,741 $ 5,814 $ 7,182 $ 6,193
- --------------------------------------------------------------------------------------------------------------
RATE OF CASH ON
CASH RETURN 12.25% 12.25% 13.37% 13.37% 14.24% 14.24%
- --------------------------------------------------------------------------------------------------------------
</TABLE>
NOTE 1: Assumes purchase price of $191,350 for one-bedroom Unit and $165,000 for
studio Unit.
NOTE 2: Assumes debt service based on 75% adjustable rate mortgage at 8% with a
five year term and 30 year amortization.
NOTE 3: Assumes Owners equity, after above financing of $50,432 for one-bedroom
Unit and $43,488 for studio Unit.
NOTE 4: Assumes no personal use of the Owner's Unit.
26
<PAGE>
THE HOTEL OPERATOR
DELTA HOTELS INTERNATIONAL, INC.
Delta Hotels International, Inc., a wholly-owned subsidiary of
Delta Hotels Limited, will serve as the hotel operator pursuant to the Hotel
Operating and Rental Pool Agreement. Delta Hotels Limited is Canada's largest
privately owned hotel company. Delta Hotels Limited and its affiliates are not
affiliated in any way with UP Sedona or United Properties Ltd. Delta Hotels
Limited opened its first hotel in 1962 in Vancouver, British Columbia. Based in
Toronto, Ontario, Delta Hotels Limited has grown to become a leader in the
Canadian hospitality market, with representation in every major city in Canada.
Significant development of the Delta chain and brand has occurred under its
present ownership by RH Corporation and Transtrend-Canada Ltd., affiliates of
Realstar Group of Toronto and Lai Sun Group of Hong Kong. Delta Hotels Limited
has expanded from 14 hotel properties under management in Canada in 1987 to a
present portfolio of 21 Canadian hotel properties under management totalling
6,886 guest rooms. An additional four Canadian hotel properties are presently
under development, which will add another 1,000 guest rooms to the existing
portfolio.
From its strong Canadian base, Delta Hotels Limited has expanded
its international presence in recent years to destinations frequented by
Canadian travellers. Through its affiliates, Delta Hotels Limited manages two
Delta branded hotel properties totalling 266 guest rooms in the Caribbean, one
800 room Delta branded property in Florida and one additional 290 room property
under development in the Caribbean. Through Delta Asia Limited, an affiliate of
Delta Hotels Limited, the Delta brand has also been expanded into Thailand,
Vietnam, Malaysia and the Philippines, with four Delta branded hotel properties
under management totalling 765 rooms, and an additional three properties under
development totalling 846 rooms.
Hotels within Delta Hotel Limited's Canadian portfolio have
reported a steady history of growth in occupancy, average rate and revenue per
available room as indicated in the following table:
[GRAPHIC OMITTED]
27
<PAGE>
Delta Hotels Limited has consistently delivered higher net income
per available room (which excludes management fees, franchise royalty fees,
rent, depreciation and interest) than the hotel industry average in Canada.
Compared with other major first class hotel brands, including Doubletree,
Sheraton, Hilton, Westin, Radisson and Marriott, Delta is a much lower cost
operator when comparing similar brand costs including franchise fees, national
advertising and marketing and reservation fees. The net income per available
room for 1991 through 1996 for Delta Hotels Limited and for the hotel industry
in Canada is set forth in the following table:
[GRAPHIC OMITTED]
Delta hotels are positioned in the first class category of the
hospitality sector with most hotels rated "four-star" by the Canadian/American
Automobile Association. Delta hotels have a solid reputation amongst business
and leisure travellers, and enjoy very high guest loyalty. An independent
research study of Canadian frequent business travellers recently conducted by
the Angus Reid Group reported that Delta hotels achieved a higher guest
satisfaction rating in 1996 than their competitors, and their guest satisfaction
rating increased substantially over the 1995 rating. Delta Hotels Limited has
been innovative in introducing new products and service to the hospitality
industry. Delta Hotels Limited's guest recognition program, Delta Privilege, is
the largest program of its kind in Canada. Delta Hotels Limited was also the
first chain in Canada to introduce an in-room office program.
- --------------------------------------------------------------------------------
Delta Hotels Limited has not endorsed or approved the
offering. The execution of the Hotel Operating and Rental Pool Agreement is not
intended as, and should not be interpreted as, an express or implied approval or
endorsement by Delta Hotels Limited (or any of its affiliates, subsidiaries or
divisions) of the Hotel or the Units offered hereby.
- --------------------------------------------------------------------------------
28
<PAGE>
MANAGEMENT OF THE HOTEL AND THE RENTAL POOL
The Hotel Operator will manage the Hotel and the Rental Pool, and
maintain the Hotel on behalf of the Owners pursuant to the Hotel Operating and
Rental Pool Agreement. The following discussion of the Hotel Operating and
Rental Pool Agreement does not purport to be complete and is qualified in its
entirety by reference to the Hotel Operating and Rental Pool Agreement together
with all attachments and exhibits to the Hotel Operating and Rental Pool
Agreement, which are set forth in Annex B hereto.
MANAGEMENT OF THE RENTAL POOL
Mandatory Participation in the Rental Pool
Participation for all Unit Owners in the Rental Pool in accordance
with the Hotel Operating and Rental Pool Agreement is mandatory. In addition,
any Units that have not been sold by UP Sedona will be placed in the Rental
Pool. A Unit will automatically be placed in the Rental Pool when the Unit is
not reserved for use by the Owner. Each Owner appoints the Hotel Operator as his
exclusive agent for management of the Rental Pool and the bookings of the
Owner's Unit and agrees to honor and be bound by the rental booking of his Unit
made by the Hotel Operator in accordance with the Hotel Operating and Rental
Pool Agreement. Units may not be used for any purpose other than as hotel suites
in accordance with the Hotel Operating and Rental Pool Agreement, the
Declaration and other condominium documents governing the Hotel. The Hotel
Operator has complete discretion to establish Unit rental rates including
offering the use of Units at low promotional rental rates and offering Units on
a complimentary basis from time to time to guests of the Hotel.
The initial operating period of the Rental Pool will commence on
the date that the Hotel is opened by the Hotel Operator for business as a hotel
in the Hotel Operator's hotel system and will conclude on December 31 in that
year. Thereafter, operating periods for the Rental Pool will run 12 months based
on the calendar year.
Owners' Use of Units
Because United States tax laws permit an Owner to deduct the
Owner's expenses associated with owning a Unit only if the Owner uses the Unit
no more than 14 days per year, AN OWNER MAY ONLY USE HIS UNIT FOR A TOTAL OF 14
DAYS PER CALENDAR YEAR. See "Certain Federal and State Income Tax Aspects - Tax
Consequences of Rental Pool to Owners - Section 280A." The executive Units will
not be available for personal use. If an Owner reserves the use of his Unit for
a stay which commences at or after 2:00 p.m. on a Friday or a Saturday, the
Owner must reserve the Unit for a minimum two night stay. An Owner may use his
Unit no more than four times a year with respect to two or three night stays
that commence at or after 2:00 p.m. on a Friday or a Saturday. The Owner must
reserve the use of his Unit by written notice to the Hotel Operator no less than
six months prior to the date the Owner intends to use the Unit. If an Owner does
not use all of his allotted days in a calendar year, the Owner will not be
entitled to accumulate the unused days for use in any subsequent year.
Furthermore, if an Owner reserves the use of his Unit, but does not use the Unit
at the reserved time, unless the Unit is made available for rental to the public
and the Owner has canceled the reservation with the approval of the Hotel
Operator no less than 30 days prior to the Owner's scheduled use, the Owner will
nonetheless be deemed to have used the Unit, and the Unit will not be deemed to
be in the Rental Pool for the benefit of such non-cancelling Owner for the
29
<PAGE>
reserved time. An Owner will be required to pay a mandatory room cleaning charge
in connection with the Owner's use of his Unit. In addition, an Owner will pay
the standard charges established by the Hotel Operator for, among other
amenities, long distance telephone calls, movie rentals, room service and
restaurant usage, and the purchase of other goods and services at the Hotel. All
of the furniture, fixtures and equipment located in and around the Hotel
(excluding any such items located in a Unit) will be owned collectively by the
Owners. Any furniture, fixtures and equipment located within a Unit will be
owned by the Owner of the Unit but cannot be removed or changed except as set
forth in the Hotel Operating and Rental Pool Agreement.
ALLOCATION OF REVENUE AND EXPENSES
The Hotel Operating and Rental Pool Agreement describes the manner
in which income from Unit rentals is divided among the Owners. For each day that
a Unit is in the Rental Pool, the Owner of that Unit will be entitled to share
in the gross revenue from the operation of the Hotel, including revenue received
from the restaurant and conference facilities, regardless of whether the Owner's
Unit generated rental income on that particular date. An Owner's allocable share
of the gross revenue will be determined based on the percentage interest of the
Unit. The percentage interest of a Unit will be determined according to the
following formula as provided in the Declaration:
Initial Purchase Price of a Unit as established by UP
Sedona
Percentage Interest =
of a Unit ------------------------------------------------------
Sum of the Initial Purchase Prices of all Units
An Owner's allocable share of revenue for a day in which the Owner's Unit is in
the Rental Pool (not reserved for use by the Owner) will be determined according
to the following formula:
Percentage Interest of the Owner
Gross revenues from
the operation of the X ------------------------------------------------------
Hotel Sum of Percentage Interests of all Owners whose
Units are in the Rental Pool on that day
Each Owner will be responsible for his allocable share (as determined under the
Declaration) of all hotel expenses and other costs attributable to the Owners
under the Hotel Operating and Rental Pool Agreement. An Owner will be
responsible for his allocable share of the costs attributable to the Owners for
each day that the Hotel is operating, regardless of whether the Owner's Unit is
in the Rental Pool on any particular day. The Owners bear all of the costs and
expenses of operating, maintaining and repairing the Hotel, the Hotel grounds
and the contents of the Hotel. These costs include, for example: (i) repair and
maintenance of Hotel buildings, grounds, furniture, fixtures and equipment
located at the Hotel; (ii) purchasing all supplies including food, beverages,
linens, and cleaning products necessary for the operation of the Hotel; (iii)
costs associated with hiring, firing and compensating employees necessary to
staff the Hotel; (iv) fees paid to the Hotel Operator; (v) utilities and
insurance; and (vi) marketing and promotion expenses, reservation fees and
travel agent commissions.
30
<PAGE>
DIRECT EXPENSES OF OWNERS
Each Owner will be personally responsible for the payment of all taxes
applicable to the Owner arising out of the ownership of a Unit, amounts owed
under any financing of the Unit, and all assessments made by the Association.
The amount of property taxes to be paid by each Owner will be determined
annually by the Yavapai County Assessor's Office. Property taxes will be
assessed against each Owner as of the date the Unit is purchased by the Owner.
UP Sedona's estimate of taxes is based on application of 1996 tax rates to such
property. The actual tax may differ from the projected amount when actually
assessed. Subsequent transfers of one or more Units may cause further
reassessments of one or more Units and tax increases. Property taxes may
increase for all Owners even in years in which no reassessment from any sale or
transfer occurs.
RENTAL POOL REPORTS
For each calendar month, the Hotel Operator will prepare detailed
statements of operations that describe, among other things, the gross revenue
from the Hotel, hotel operating expenses, capital expenditures, reserves, and
the amount, if any, distributable to an Owner for that month. A summary of these
statements of operations will be mailed to each Owner no later than the 20th day
following the end of each calendar month. The Hotel Operator will also prepare
and mail to each Owner within 75 days after the end of an operating year
statements of operations for the entire operating year and individual statements
relative to each Owner's Unit. The individual statements will serve as the basis
for reporting to the Internal Revenue Service and other appropriate taxing
authorities.
DISTRIBUTIONS FROM RENTAL POOL
The amount distributable to an Owner will be computed each month by
subtracting the following amounts from the Owner's share of gross revenue from
Hotel operations: (i) the Owner's share of Hotel operating expenses; (ii) the
Owner's share of amounts necessary to fund or replenish operating and capital
expenditure reserves, make capital lease payments and pay the Hotel Operator's
Incentive Fee; (iii) the Owner's share of capital expenditures exceeding amounts
paid out of the appropriate reserve; (iv) the Owner's share of repayment
expenses in connection with a previous operating shortfall, if any, (see
"Shortfalls" below) after depletion of reserves (see "Reserves" below); (v) any
assessment payable by the Owner pursuant to the Declaration; (vi) expenses
associated with an Owner's personal use of the Hotel (for example, the cleaning
charge); (vii) bed taxes and other similar taxes imposed or collected in
connection with the use of the Hotel by the Hotel patrons; (viii) withholding
taxes, if applicable; (ix) and any other amounts payable by the Owner to Delta
pursuant to the Hotel Operating and Rental Pool Agreement.
The amount distributable to an Owner, if any, will be sent to the
Owners with the monthly financial summary (see, "Rental Pool Reports" above).
Alternatively, the Hotel Operator may prepare a reasonable estimate of the
amount distributable to the Owners on an annual basis and distribute to the
Owners the estimated amount, less an amount (not to exceed 20%) established by
the Hotel Operator for seasonal working capital requirements, in 12 equal
monthly installments. If the Hotel Operator elects to distribute an estimated
amount, at the end of the operating year the Hotel Operator will calculate the
actual amount distributable to each Owner and pay to each Owner the balance of
the amount, if any, distributable for that operating year. This last payment
will be sent at the end of the operating year with the annual financial
statements.
31
<PAGE>
RESERVES
An operating cash reserve in the amount of $150,000 will be
established when the Hotel commences operations. Upon the closing of the
purchase of a Unit, the Unit Owner will be required to contribute to the
operating cash reserve an amount equal to the percentage interest of the Unit
being purchased multiplied by $150,000 (see Annex A). This reserve will be
available to the Hotel Operator for working capital in connection with the
operation of the Hotel commencing in the second year of operations. Reserves
will be established for capital expenditures for repair and replacement of the
Hotel premises and repair and replacement of furniture, fixtures and equipment
at the rate of 5% of gross revenue beginning in year two of operations.
SHORTFALLS
If at any time the funds derived from the operations of the Hotel
(including established reserves) are not sufficient to pay when due all expenses
incurred in connection with the operation of the Hotel, capital expenditures and
other amounts for which the Owners are liable (such as may occur from time to
time as a result of, among other causes, seasonal fluctuations in the use of the
Hotel by Owners and other patrons), the Hotel Operator may require each Owner to
remit to the Hotel Operator the Owner's allocable share of the shortfall. The
Hotel Operator may elect, but is not obligated, to advance the shortfall and
obtain repayment of the shortfall, plus interest accruing at the designated
prime rate plus 2%, out of the cash flow from the operations of the Hotel.
Payment of the shortfall by the Owner may be obtained by, among other methods,
enforcement by the Association of an assessment lien against the Units. See
"Summary of Declaration and Related Documents - Enforcement of the Declaration."
HOTEL OPERATOR MAY RELY UPON ACTS OF BOARD OF DIRECTORS
The Board of Directors of the Association elected in accordance with
the provisions of the Declaration will represent the Owners in all respects
concerning the Hotel Operator. See "Summary of Declaration and Related Documents
- - The Association - Board of Directors". All of the Owners will be bound by the
acts of the Board of Directors on behalf of the Owners and the Hotel Operator
will be entitled to rely upon the acts of the Board of Directors as the
authorized acts of the Owners. The Board of Directors and the Hotel Operator
will meet not less than frequently than quarterly.
MANAGEMENT AND MAINTENANCE OF THE HOTEL
The Hotel Operator will perform, on an exclusive basis, all duties and
obligations within the scope of the management, maintenance, and marketing of
the Hotel, including the restaurant and conference facilities. The Hotel
Operator will, among other things, use all reasonable efforts to maintain and
operate the Hotel as a first-class resort hotel, market and sell the rental use
of the Units and other facilities of the Hotel, furnish bookkeeping, inventory
control, reservations, marketing and advertising services, direct, in
consultation with the Board of Directors, litigation in respect of the Hotel,
supervise the use of the Hotel by guests and Owners, hire, train, terminate and
perform other managerial functions with respect to the staff necessary to the
operation of the Hotel, and obtain for itself or on behalf of the Owners all
insurance, licenses and permits necessary to the operation of the Hotel. The
Hotel Operator may make, at the Owners' expense, but subject to the then current
approved operating plan and budget and other limitations, reasonable changes to
the Hotel.
32
<PAGE>
The Hotel Operator will prepare, on or before December 1 of each year,
an annual operating plan and budget for the operation of the Hotel during the
following operating year. The annual operating plan and budget will be subject
to the reasonable approval of the Board of Directors of the Association and a
summary of the operating plan and budget will be sent to all of the Owners after
it has been approved by the Board of Directors. Either the Hotel Operator or the
Board of Directors may elect to have disputes regarding the operating plan and
budget resolved by arbitration.
The Hotel Operator will obtain and maintain, as an operating expense of
the Hotel, public liability, fire and casualty, business interruption, workmen's
compensation and other insurance reasonably necessary to the operation of the
Hotel, naming the Owners, the Hotel Operator and the Association as insureds.
With regard to the possible liability of the Owners, see "Risk Factors
Insurance."
Under the Hotel Operating and Rental Pool Agreement, the Hotel Operator
may, in its discretion, assign all or a portion of its rights and obligations
under the Hotel Operating and Rental Pool Agreement to an affiliate of the Hotel
Operator or any successor in interest to the Hotel Operator.
FEES PAID TO HOTEL OPERATOR
As a compensation for its services provided under the Hotel Operating
and Rental Pool Agreement, the Hotel Operator will be paid various fees. The
Hotel Operator's fees will be paid out of the gross revenues of the Hotel. The
Hotel Operator will receive a Base Fee of $10,000 per month for the 12 month
period following the opening of the Hotel and 3.0% of gross revenues thereafter
payable in monthly installments. In addition, if the Hotel Operator achieves
certain performance standards in respect of the operations of the Hotel based on
operating income realized from the operation of the Hotel net of all expenses
associated with the operation of the Hotel, the Hotel Operator will be paid an
Incentive Fee based on a tiered scale. Depending upon the performance of the
Hotel, the Incentive Fee payable to the Hotel Operator may range from 0% of net
hotel return (if net hotel return is less than $3.2 million) to 30% of the
amount by which net hotel return exceeds $4.2 million in the first full
operating year, decreasing to 10% of the amount by which net hotel return
exceeds $4.2 million in the sixth and subsequent operating years. The Hotel
Operator will also receive reimbursement for marketing and reservations system
costs incurred in connection with the operation of the Hotel. The Hotel Operator
will also be paid a monthly Administration Fee in the amount of $5 per month per
Unit. In addition, the Hotel Operator will be entitled to be reimbursed for
costs incurred by the Hotel Operator in connection with special promotional
programs, training materials, travel by head office personnel and others on
matters directly involving the Hotel, and other similar expenses. The Hotel
Operator may retain an affiliate or division as a consultant to perform
technical services in connection with any substantial remodeling, repairs,
construction or other capital improvements to the Hotel and the Hotel Operator
and its affiliate will be entitled to be compensated by the Owners for their
services.
TERMINATION OF HOTEL OPERATOR
The appointment of the Hotel Operator under the Hotel Operating and
Rental Pool Agreement will run continuously from the date that the Hotel is
opened by the Hotel Operator for business as a hotel in the Hotel Operator's
hotel system until December 31, 2008, unless earlier terminated. The appointment
of the Hotel Operator may be renewed for two additional terms of 5 years each if
certain conditions are satisfied or by agreement of the Owners and the Hotel
Operator. The Hotel Operator
33
<PAGE>
may terminate its appointment under the Hotel Operating and Rental Pool
Agreement at any time upon 60 days' prior notice to the Board of Directors of
the Association if the Owners fail to make or authorize the Hotel Operator to
make capital expenditures without which the Hotel cannot be operated as a first
class hotel (in the discretion of the Hotel Operator) or if the number of Units
subject to the Hotel Operating and Rental Pool Agreement is less than 200. The
appointment of the Hotel Operator under the Hotel Operating and Rental Pool
Agreement may be terminated by a vote of 75% of the Units entitled to vote on
the matter if the Hotel Operator is in default under the Hotel Operating and
Rental Pool Agreement and the Hotel Operator fails to cure the breach within the
required time.
The appointment of the Hotel Operator under the Hotel Operating and
Rental Pool Agreement may also be terminated by a vote of 75% of the Units
entitled to vote thereon if, commencing in the ninth operating year, the Hotel
Operator fails to achieve minimum performance standards. These minimum
performance standards will not be met if in two consecutive operating years the
REVPAR for the Hotel is not at least a minimum percentage of the average REVPAR
of a sample of competitors of the Hotel, or if in two consecutive operating
years the Hotel fails to produce a minimum net return greater than a specific
amount. The competitors of the Hotel for purposes of the REVPAR test and the
percentage of the average REVPAR of those competitors that must be achieved will
be determined approximately five months prior to the opening of the Hotel.
However, if the Hotel Operator fails to achieve such minimum performance
standards, the Hotel Operator has the option to contribute an amount necessary
to be deemed to have achieved the minimum performance standards in lieu of being
terminated.
To the extent the Hotel Operator or its Affiliates own Units, with
respect to any vote of the Owners to terminate the Hotel Operator, the Hotel
Operator for itself and on behalf of its Affiliates irrevocably appoints the
president of the Association as its proxy for the limited purpose of casting the
Hotel Operator's and its Affiliates votes as abstentions on such matters.
Furthermore, for purpose of determining whether the required number of Units
have voted to terminate the Hotel Operator, votes recorded as abstentions shall
not be counted toward a quorum or as having been entitled to vote on such
matters.
REMOVAL OF THE HOTEL OPERATOR'S BRAND
If at any time five or more Units are not subject to the Hotel
Operating and Rental Pool Agreement (except for temporary removal as a result of
a fire or other casualty), the Hotel Operator may cease to operate or identify
the Hotel as a hotel in the Delta Group. If the Hotel is no longer operated as
part of the Delta group, the Hotel Operator may carry out its duties through a
subsidiary or assign its rights under the Hotel Operating and Rental Pool
Agreement to a subsidiary. In addition, the name of the Hotel will be changed to
remove references to "Delta" and alternate reservation and marketing services
will be provided by the Hotel Operator and its subsidiary at a cost to be agreed
upon with the Board of Directors.
SALE OF A UNIT BY AN OWNER
There are certain conditions that must be satisfied in connection with
the sale of a Unit by an Owner. Prior to entering into an agreement for the sale
of a Unit, the selling Owner must provide the proposed purchaser with a copy of
the Hotel Operating and Rental Pool Agreement and must notify the proposed
purchaser of any proposed bookings of the Unit by the selling Owner. In
addition, the purchaser must, as a condition of the purchase, ratify the Hotel
Operating and Rental Pool Agreement,
34
<PAGE>
appoint the Hotel Operator as its exclusive agent for the management and rental
of the Hotel and the Unit, and expressly assume the obligations of an Owner
pursuant to a form acceptable to the Hotel Operator. The Hotel Operating and
Rental Pool Agreement does not terminate upon the death or the attempted
withdrawal of an Owner or upon the sale or transfer of a Unit by an Owner.
SUMMARY OF DECLARATION AND RELATED DOCUMENTS
The Declaration, Articles of Incorporation and Bylaws of the
Association impose certain covenants, conditions and restrictions on the Units
and Owners. The following discussion of these documents does not purport to be
complete and is qualified in its entirely by reference to such documents and
instruments, which are attached hereto as Annex C, D, and E.
THE ASSOCIATION
The Association will be formed as an Arizona non-profit corporation to
perform various management and supervision functions at the Hotel on behalf of
the Owners pursuant to the Declaration. The Declaration, established by UP
Sedona as Declarant, is recorded against title to the property. An Owner of a
Unit automatically becomes a member of the Association. Membership in the
Association may not be transferred or retained separately from any Unit.
The Association will supervise and assure the performance of all
appropriate maintenance, management, repair, and administration of the Hotel,
including the Common Elements, the Units, and all of the furnishings, fixtures,
equipment and other items located in and around the Hotel. Actual operation of
the Hotel will be the responsibility of a Hotel Operator, pursuant to the terms
of a Hotel Operating and Rental Pool Agreement. The Association shall be
responsible for negotiating with the Hotel Operator on behalf of the Owners;
reviewing, and approving proposed annual operating budgets prepared by the Hotel
Operator; and coordinating with and reviewing the performances of the Hotel
Operator. If a Hotel Operator defaults in its obligations under a Hotel
Operating and Rental Pool Agreement or if a Hotel Operating and Rental Pool
Agreement terminates and is not concurrently replaced with a new Hotel Operator
and Hotel Operating and Rental Pool Agreement, the Association shall be
responsible for managing and operating the Hotel.
Based upon annual operating budgets to be provided by the Hotel
Operator, and taking into consideration projected Hotel revenues and expenses
and estimating the cost to operate the Association and perform its obligations
under the Declaration, the Association will levy annual Assessments against each
Unit. The Assessment against each Unit shall consist of the total estimated
Common Expenses set forth in the budget adopted by the Board of Directors of the
Association (after taking into account the amounts proposed to be paid from
operating revenue by the Hotel Operator pursuant to the approved Hotel budget)
multiplied times the allocable share attributable to each Unit. If the Board of
Directors determines during any fiscal year that available Association funds are
or will become inadequate to meet Common Expenses of the Association for any
reason, the Board of Directors may increase and reallocate Common Expense
Assessments for that fiscal year.
In addition to Common Expense Assessments, the Association may levy
special assessments for the purposes of defraying the cost of any construction,
reconstruction, repair or replacement of capital improvements to any one or more
Units and/or the Common Elements.
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If any Common Expenses are caused by the negligence or other misconduct
of any Owner, the Association shall assess that Common Expense exclusively
against such Owner, to the extent not covered by insurance.
Assessments shall either be payable in whole or in installments, as
established by the Board of Directors. The Association is responsible for
enforcement and collection of the Assessments. Delinquent Assessments accrue
interest and may be subject to other late fees. The Association may request the
Hotel Operator to offset Assessments from amounts otherwise due to the Owners
pursuant to the Hotel Operating and Rental Pool Agreement. The Association also
has the right to enforce all other rights and remedies to collect Assessments,
including but not limited to foreclosing any assessment lien against a
defaulting Owner's Unit.
Voting Rights
All voting rights are vested exclusively in the members of the
Association. The Declaration provides that there will be a period of control of
the Association by the Declarant until the earlier to occur of: (i) 90 days
after the conveyance of 75% of the Units to Owners other than Declarant; (ii) 4
years after all Declarants have ceased to offer Units for sale in the ordinary
course of business; or (iii) the date Declarant records an instrument with the
County Recorder of Yavapai County relinquishing its right to appoint and remove
officers and members of the Board of Directors of the Association. During the
period of Declarant control, only the Declarant will have the right to appoint
and remove the members of the Board of Directors and the officers of the
Association. Such board members and officers are not required to be Owners
during the period of Declarant control. After termination of the period of
Declarant control, each member will be entitled to cast 1 equal vote for each
Unit owned by such member in all meetings of the members of the Association;
however, the voting rights of a member may be suspended if an Owner fails to pay
any assessments or other amounts due the Association within 15 days after such
payment is due or if any Owner violates any other provision of the Declaration
or other documents pertaining to the condominium and such violation is not cured
within 15 days after notice to the member. Only a single vote may be cast for
each Unit, regardless of how title is held. If a Unit is owned by more than one
person and such Owners are unable to agree among themselves as to how their vote
or votes shall be cast, they will lose their right to vote on the matter in
question.
Under the Declaration, a special assessment may be levied upon an
affirmative vote of two-thirds of the members entitled to vote on such matters.
In addition, the Declaration provides the members of the Association with the
right to vote to approve by a majority-in-interest of members whether to finance
capital improvements in the condominium by encumbering future assessments. The
Declaration may only be amended or modified by an affirmative vote of 67% of the
members entitled to vote thereon, except where applicable law otherwise requires
or in cases involving the exercise of development rights by the Declarant,
eminent domain, relocation of limited common elements or boundaries between
Units, subdivision of Units, or termination of the condominium. In addition, the
approval of two-thirds of the holders of first priority mortgage or deed of
trust liens with respect to the Units is required in connection with certain
acts of the Association.
Meetings
The Association is required to hold annual meetings. Special meetings
of the Association may be called at any time by the President of the
Association, by a majority of the Board of Directors, or
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by written request of the Owners holding at least 25% of the votes entitled to
be cast at such meeting. All Association meetings will be held pursuant to
notice given to the members not less than 10 nor more than 50 days prior to the
date of the meeting. Members of the Association entitled to cast one-tenth of
the total authorized votes of members will constitute a quorum. If a quorum is
not present at any meeting, the members entitled to vote who are present at such
meeting will have the power to adjourn the meeting without notice other than
announcement at the meeting and the members present at the time and place
announced in the prior adjourned meeting will constitute a quorum.
Board of Directors; Officers
Unless the Declaration and other condominium documents or applicable
law require a vote of the members, approvals or actions to be given or taken by
the Association will be valid if given or taken by the Board of Directors. The
Board of Directors will consist of five directors, who, except during the period
of Declarant control, must be members of the Association. Following the period
of Declarant control, directors will be elected for staggered year terms. Except
with respect to directors appointed by the Declarant, any director may be
removed with or without cause by members having more than two-thirds of the
votes entitled to be cast on such matter.
The Board of Directors is responsible for the control and management of
the Association and the disposition of its funds and properties. The
responsibilities of the Board of Directors include, but are not limited to:
opening bank accounts on behalf of the Association; approve or disapprove
additions to, improvements to, or alterations to the Hotel; enforcing by legal
means the provisions of the Declaration and other condominium documents;
following receipt of a proposed annual operating budget from the Hotel Operator,
preparing and adopting an annual budget and operating plan for the Hotel and
Association prior to the commencement of each fiscal year; exercising for the
Association all powers, duties and authority vested in or delegated to the
Association and not reserved to the membership by other provisions of the
Declaration or other condominium documents; supervising all officers, agents and
employees of the Association and seeing that their duties are properly
performed; levying, collecting and enforcing the payment of Assessments in
accordance with the provisions of the Declaration; causing to be procured and
maintained adequate property liability and other insurance as required by the
Declaration; negotiating with the Hotel Operator; and engaging providers of
professional services including attorneys, accountants and property managers, to
render services to the Association.
Officers of the Association will include a president, vice-president,
secretary and treasurer, to be appointed by the Board of Directors for one year
terms. The Board of Directors may appoint other officers for such terms and with
such authority as is determined by the Board of Directors.
USE RESTRICTIONS
Restrictions on the use of Units appear in the Declaration and other
documents. The use restrictions include, but are not limited to, the following:
i. The Units must be used only for commercial rental by the Hotel
Operator to the public for tourist, visitor and transient traveller
accommodation.
ii. An Owner may not individually lease his Unit or directly or
indirectly charge rent or any form of consideration for the use of the Owner's
Unit except in accordance with the terms of the Hotel Operating and Rental Pool
Agreement.
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iii. The use of the Units is subject to the requirements of,
among other documents, the Hotel Operating and Rental Pool Agreement and the
Declaration.
iv. The rights of an Owner to make use of the common elements at
the Hotel are limited to those times when the Owner has the right to occupy his
Unit in accordance with the terms of the Hotel Operating and Rental Pool
Agreement.
v. The Hotel Operator is authorized to designate certain areas of
the Hotel for the exclusive use of the Hotel Operator and the Owners may not
interfere with that exclusive use.
vi. An Owner may use his Unit for not more than 14 days in any
year, subject to additional restrictions contained in the Hotel Operating and
Rental Pool Agreement. An Owner of an executive Unit may not use or occupy his
Unit other than to make the executive Unit subject to the rental use in
accordance with the Hotel Operating and Rental Pool Agreement.
vii. No animals are allowed in the Units or in other areas of the
Hotel except for physical impairment assistive animals to the extent that they
are required by persons at the Hotel.
viii. Except for signs incidental to the operation of the Hotel, and
any other advertising signs that Declarant elects to post in connection with the
development of the Hotel, no signs are permitted on the exterior of any Unit or
any other portion of the Hotel without the prior written approval of the Board
of Directors.
ix. No Owner may remove, replace, substitute, alter, repair or
add to any part of the Hotel (including the Owner's Unit) or any of the
furniture, fixtures or equipment located in and around the Hotel (including in
any Unit) without the prior written approval of the Association and, if
required, architects and engineers.
DEVELOPMENT RIGHTS
During the period of Declarant control, the Declarant retains certain
development rights that enable the Declarant to do, among other things, the
following:
(1) add real property to the Hotel;
(2) create Units, easements, common elements, or limited common
elements, including, without limitation, the right to enclose the
patio allocated to any Unit;
(3) subdivide Units, convert Units into common elements, or convert
common elements into Units;
(4) make the Hotel part of a larger condominium or master planned
community; and
(5) amend the Declaration to correct errors or to comply with
applicable law provided that the amendment does not adversely
affect the rights of any Owner and to comply with the rules and
requirements of certain governmental and quasi-governmental
agencies.
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INSURANCE
The Association will be required to assure that property damage,
public liability, fire and other hazard insurance coverage with respect to the
Hotel is maintained. The amount of such insurance will be based on full
replacement cost. In addition, the Association will be required to have
insurance against loss or liability due to property damage, personal injury or
death of persons while located at the Hotel, which policy will have limits
determined by the Board of Directors, but in no event less than a combined
single limit of $1,000,000 per occurrence. The Association will also be required
to maintain worker's compensation insurance to the extent necessary to meet
applicable legal requirements, and director's and officer's liability insurance
in such amounts as may be determined by the Board of Directors. The Association
may maintain other insurance affording such coverages and with such limits as
the Board of Directors may determine. All insurance policies will name the
Owners, the Hotel Operator and the Association as insureds.
The Association will also obtain fidelity blanket bonds for all
officers, directors, trustees, and employees of the Association. The amount of
the bonds maintained by the Association will be determined in the discretion of
the Board of Directors.
Each Owner may personally have joint and several liability for tort and
contract claims as a result of an ownership of Units or participation in the
Rental Pool. Although the Declarant believes that the insurance coverage
afforded Owners will be adequate, purchasers of Units are urged to consult an
insurance advisor or attorney with respect to the nature and extent of such
personal liability and to determine what additional insurance coverage if any,
may be necessary or appropriate for their particular circumstances.
ENFORCEMENT OF THE DECLARATION
The Association will do all things necessary to enforce each Owner's
obligations under the Declaration, including, without limitation, with respect
to non-payment of Assessments, the filing and foreclosure of liens, the
suspension of an Owner's right to vote on Association matters, and the bringing
of an action at law against the Owner personally. Furthermore, the Association
may direct the Hotel Operator to deduct the amount of unpaid Assessments from
any sum distributable to the Owner under the Hotel Operating and Rental Pool
Agreement. All unpaid assessments will constitute a lien on a Unit superior to
all other liens except for tax and special assessment liens and unpaid sums
under a first mortgage or deed of trust.
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UP SEDONA, INC.
MANAGEMENT.
UP Sedona, Inc. is an indirect wholly owned subsidiary of United
Properties Ltd., a British Columbia company ("United Properties"). The
management of UP Sedona and United Properties are as follows:
UP Sedona United Properties
--------- ------------------
Victor D. Setton Chairman and Director President and Director
William Oliver President -----
Elias D. Setton Vice President Manager, Land Development
Raymond J. Langrish Secretary, Treasurer Vice President, Finance
Roger L. Moors --- Vice President, Development
Terry E. Forbes --- Vice President, Marketing
Jennifer A. Silvera --- Vice President, Administration
VICTOR D. SETTON, age 51, has been President and Director since 1975 of
United Properties, which specializes in the development, construction and
marketing of multi-family residential projects in the Lower Mainland of
Vancouver, B.C. and in the Pacific Northwest United States and Arizona, and
Chairman and Director of UP Sedona since 1996. He was elected President of the
Urban Development Institute in 1986, was re-elected for a two year term in 1987,
and in 1988 received its Highest Honour Award for his outstanding contribution
to professionalism, leadership, and commitment to excellence in urban
environment. Mr. Setton has been a participant in the Urban Design Advisory
Panel for the City of Vancouver.
WILLIAM OLIVER, age 63, has served as President of UP Sedona since July
1996. From 1993 to June 1996 he was President of Rio Rico Properties, a real
estate development company. Prior thereto he was President of his own
development company in Arizona from 1973 to 1993. He has extensive experience in
the building industry, specifically in recreation/resort development and
construction and has also developed residential and commercial properties for
major development companies in the United States.
ELIAS D. SETTON, age 39, has served as Manager, Land Development since
1990 of United Properties and as Vice President of UP Sedona since 1996. During
the past two years his primary role has been overseeing the development of
hotels within Canada and the United States. Mr. Setton holds a Diploma in Urban
Land Economics in both Appraisal and Real Estate Management from the University
of British Columbia. He is currently a Director of the Urban Development
Institute.
RAYMOND J. LANGRISH, age 52, has served as Vice President, Finance
since joining United Properties in 1987 and Secretary, Treasurer of UP Sedona
since 1996. Prior to joining United Properties, Mr. Langrish held similar
positions over the previous 20 years with various real estate development
companies, both public and private. He qualified as a Certified Management
Accountant in 1972 and is a former member of the Accounting Standards Committee
of the Canadian Institute of Public Real Estate Companies.
ROGER L. MOORS, age 53, has served as Vice President, Development for
United Properties since 1990. He joined the company in 1989 and prior thereto
had several years of construction and
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development experienced gained from senior management positions with prominent
development companies which have completed numerous projects in British Columbia
and the United States. Mr. Moors also represents United Properties as Director
on the Board of the Greater Vancouver Home Builders' Association. Mr. Moors
graduated with a B.Sc degree from University in the U.K. in 1965.
TERRY E. FORBES, age 63, has been Vice President, Marketing for United
Properties since 1988. He joined United Properties in 1982 and prior thereto, he
had 19 years of experience marketing residential projects for many recognized
developers and builders in British Columbia and Alberta. He has worked with the
Housing Corporation of B.C. and the B.C. Government in various areas such as
land acquisition and merchandising.
JENNIFER A. SILVERA, age 53, has been Vice President, Administration
for United Properties since 1988. She has been with the Company since 1979 and
brought to the organization 18 years of previous experience within the airline
industry in planning, administration and corporate organization.
PRIOR DEVELOPMENTS OF UNITED PROPERTIES.
United Properties was incorporated in 1975. United Properties is
currently one of the largest residential real estate developers in British
Columbia. It has also developed projects in the states of Washington, California
and Arizona. Since its incorporation, United Properties has developed
approximately 4,500 residential units including townhomes, apartment
condominiums (both high-rise and garden) and single family lot subdivisions.
United Properties's gross sales from completed projects in Canada to date are
approximately $590 million (Canadian). Gross sales of completed projects in the
United States are approximately $72 million (Canadian). Projects currently under
development in Canada include Terravita, an 88-unit townhome development, The
Balmoral, an 85-unit luxury high-rise condominium development, and Whistler Mont
Blanc, a 279 hotel condominium unit development with 38,300 square feet of
commercial space. Total gross sales from projects under development in Canada
are projected to be $129 million (Canadian).
The construction of Whistler Mont Blanc, a Delta Suites Hotel, is 50%
complete. United Properties expects occupancy for the commercial properties by
July 1997 and commencement of operations of the hotel by November 1997. The
commercial properties are 60% leased. The commercial properties also include
plans for a spa and a nightclub to be operated by independent parties. The
residential condominium units are fully sold for an aggregate of $44.5 million
(Canadian). Delta Hotels Limited has entered into a Hotel Management and Rental
Pool Agreement for the operation of the residential condominium units as a Delta
hotel.
DETERMINATION OF PURCHASE PRICE
The initial purchase price of the Units has been determined by UP
Sedona solely on the basis of its subjective evaluation of marketing
considerations. No independent valuations have been obtained for purposes of
determining the value of the Units. There can be no assurance that Units can be
resold at or in excess of the purchase price. No organized market for the
trading of Units is expected to develop as a result of this Offering.
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USE OF PROCEEDS
Assuming that the maximum number of Units offered hereby are sold, the
gross proceeds from the sale of Units will be approximately $42.5 million
exclusive of Offering expenses (estimated at $____________, and sales
commissions of $_________). All of the net proceeds of this Offering will be
paid to UP Sedona except for amounts paid in addition to the purchase price for
closing costs that are payable to third parties and for the contribution to the
operating cash reserve for the Hotel. UP Sedona will deliver the Units free and
clear of any and all liens.
PLAN OF DISTRIBUTION
The Units are being offered on a best efforts basis by UP Sedona and by
broker-dealers selected by UP Sedona who are members of the National Association
of Securities Dealers, Inc. UP Sedona may elect to form or acquire an affiliated
broker-dealer to participate in the Offering. The minimum subscription is one
Unit. Broker-dealers will receive a commission of up to ___% of the gross sales
price of a Unit. UP Sedona will not receive any sales commissions.
The closing on the sale of Units will not occur until the Hotel is
ready for operation (the "Initial Closing"). Initial Deposits will be held in an
escrow account for the benefit of purchasers until the Initial Closing. No
minimum number of Units must be sold before UP Sedona can close on the Units.
Subsequent closings will occur upon the sale of each Unit. The offering will
terminate two years from the effective date of this Prospectus.
UP Sedona and each broker-dealer participating in the offering have
agreed to indemnify each other against certain liabilities including liabilities
under the Securities Act of 1933, as amended, the Securities Exchange Act of
1934, as amended, and the Arizona Securities Act.
HOW TO PURCHASE
To purchase a Unit, a prospective owner must execute a Purchase
Contract in the form appearing in Annex F and agree to be bound to its terms and
the terms of the Hotel Operating and Rental Pool Agreement, the Condominium
Declaration and Association Bylaws. All purchasers are subject to the review,
approval and acceptance by UP Sedona, whose decision shall be final. Retirement
plans and individual retirement accounts may not purchase Units. UP Sedona does
not intend to impose any minimum suitability standards. Upon purchase, an
Initial Deposit must be paid of at least 10% of the purchase price of the Unit
acquired. Upon the close of the purchase of a Unit, the Owner will be required
to pay the balance of the purchase price and closing costs (exclusive of
financing costs) in an amount not to exceed 1% of the purchase price and to
contribute an amount equal to the percentage interest of the Unit being
purchased multiplied by $150,000 to the operating cash reserve of the Hotel. See
Annex A. All Units will be completed within two years of the date a Purchase
Contract is executed.
Purchasers may procure financing from any available source and will be
required to qualify for financing based on the requirements of the particular
lender. All financing costs will be the obligation of individual purchasers who
elect to finance the purchase of a Unit.
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CERTAIN FEDERAL AND STATE INCOME TAX ASPECTS
Set forth below is a summary of certain federal income tax
considerations related to the offering. This summary of the tax aspects is based
on the Internal Revenue Code of 1986, as amended (the "Code"), on existing
Treasury Department regulations ("Regulations"), and on administrative rulings
and judicial decisions interpreting the Code. Legislative amendments,
administrative changes and judicial decisions could modify or change completely
statements and opinions expressed below about the federal income tax
consequences of the purchase of a Unit and participation in the Rental Pool.
Additionally, the interpretation of existing law and regulations described here
may be challenged by the Service during an audit of the Rental Pool's
information return or an Owner's individual return. Moreover, a successful
challenge of the Rental Pool's information return would likely result in an
adjustment to an Owner's individual return.
The following summary of tax aspects generally assumes that the
investor is an individual and is a United States citizen or resident. The
following discussion is only a summary and is limited to those areas of federal
income tax law that are considered to be most important to individual investors
owning interests in rental pools. Although the Hotel will furnish the Owners
with such information regarding the Hotel as is required for income tax
purposes, each Owner will be responsible for preparing and filing his own tax
returns. Accordingly, prospective investors are urged to consult, and must
depend upon, their tax advisors regarding their individual circumstances
(especially if the prospective investor is not an individual) and the federal,
state, local and other tax consequences arising out of their participation as
Owners.
Unless otherwise noted, the discussion in this section represents the
opinion of O'Connor, Cavanagh, Anderson, Killingsworth & Beshears, P.A.,
Phoenix, Arizona ("Counsel"), which is counsel for UP Sedona. Counsel's opinions
expressed in the following discussion are only opinions that the tax law results
described are more likely than not to be the tax law results that should occur,
subject to any conditions stated in the particular section of this discussion
which states such tax law conclusions. Although Counsel's opinions represent its
best judgment as of the date of this Prospectus and are based on legal
authorities published (and available in Phoenix, Arizona) as of that date, those
opinions do not bind the Service or in any way constitute an assurance that the
Service will agree with the federal income tax consequences described. Further,
no rulings have been requested from the IRS with respect to the matters
discussed in this section. UP Sedona does not intend to obtain any such rulings.
ENTITY CLASSIFICATION OF RENTAL POOL AND TAXATION OF OWNERSHIP OF UNITS
Under Section 301.7701-2 of the Regulations, an arrangement is
classified as an organization if there are (1) associates, and (2) an objective
to carry on business for joint profit. Pursuant to the provisions of the Rental
Pool Agreement, the Hotel Operator will rent the Unit of each Owner on behalf of
such Owner. Profits from the rental of Units will be shared proportionately by
the Owners of the Units. Counsel believes that the sum of the relationships
created by the Rental Pool Agreement causes the Owners to be associates.
Furthermore, Counsel believes that there is a common profit motive between the
Owners because net profits are shared proportionately by the Owners. Therefore,
although each Owner will be the legal owner of a separate Unit, because of
provisions in the Rental Pool Agreement relating to the sharing of income and
expenses of the property, the Owners likely will be treated as participants in
an association taxable as either a partnership or a corporation for federal
income tax purposes.
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If, consistent with tax counsel's opinion, an association is created
by the sum of the contractual relationships between the Owners of the Units, the
federal income tax consequences to the Owner of a Unit will depend upon the
association's classification for federal income tax purposes. If the association
isclassified as a partnership for federal income tax purposes and is not a
"publicly traded partnership," it will not be subject to any federal income tax.
Instead, an Owner will be subject to tax on his or her allocable share of the
partnership's income and gain, and may be entitled to claim his or her allocable
share of the partnership's losses. However, deduction of an Owner's allocable
share of loss from a partnership is subject to many important limitations, some
of which are discussed below. A detailed explanation of such limitations is
beyond the scope of this general discussion. Prospective Owners should consult,
and must depend on, their own tax advisor's advice concerning detailed
application of partnership tax rules to their specific tax situations.
If the arrangement created by the Rental Pool Agreement is classified
as an association taxable as a corporation or as a "publicly traded
partnership," Owners will be treated as shareholders of a corporation, and (1)
the taxable income of the organization will be subject to the federal income tax
imposed on corporations, (2) items of income, gain, loss and deduction will not
flow through to the Owners to be accounted for on their individual federal
income tax returns, and (3) distributions, if any, will be treated as corporate
distributions to Owners, some or all of which may be taxable as dividends.
CLASSIFICATION AS A PARTNERSHIP
Counsel believes that the Rental Pool and the arrangements for sharing
of rental income and payment of related Rental Pool expenses more likely than
not will be treated as an association taxable as a partnership for federal
income tax purposes. Moreover, the Rental Pool will elect to be taxed as a
partnership. A partnership incurs no federal income tax liability. Instead, each
partner is required to take into account an allocable share of the partnership's
net income or loss and an allocable share of certain specially characterized
items (e.g., capital gains and losses) in computing his income tax liability.
Distributions by a partnership to a partner generally are not taxable unless the
distributions exceed the partner's adjusted basis in his partner interest.
Owners in the Rental Pool for any year will be required to report on
their own federal income tax return their share of partnership income allocated
to them under the Rental Pool Agreement. The Rental Pool will file an annual
partnership information return, and each Owner will be provided with the
information required for the preparation of such Owner's respective federal
income tax return.
The discussion that follows is based upon the assumption that the
Owners will be treated as the owners for tax purposes of their Unit and their
undivided share of the Hotel common areas and that the Rental Pool will be
classified as a partnership and not as a corporation for federal income tax
purposes. Owners will be considered partners who have contributed the use of a
Unit, not its ownership, to the Rental Pool, so that each participating Owner
will report separately items of expense or deduction relating to the ownership
of a Unit, including interest and depreciation subject to the limitations
described below.
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TAX CONSEQUENCES OF RENTAL POOL TO OWNERS
1. GENERAL.
No federal income tax is paid by a partnership as an entity. Instead,
each partner is required to report on his income tax return his distributive
share of a partnership's income, gain, loss, deduction or credit (and items of
tax preference), regardless of whether any actual distribution is made to that
partner during his taxable year. Consequently, a partner's share of the
partnership's taxable income may exceed the cash, if any, actually distributed
to that partner. Conversely, actual (or constructive) distributions of money
from a partnership will be taxable only to the extent that such distributions
exceed the adjusted basis of the partner's interest in the partnership,
regardless of whether the partnership has current income. The characterization
of an item of income or loss generally will be the same for the partners as it
is for the partnership.
The Rental Pool's items of income, gain, loss, deduction or credit
will be allocated proportionately between the Owners. The extent to which an
Owner may deduct his or her distributive share of the Rental Pool's expenses
will depend upon: (1) whether the rental activity engaged in is with the intent
of making a profit (Section 183); (2) whether the Unit constitutes a "dwelling
unit" (Section 280A); (3) whether the rental activity is a "passive activity"
(Section 469); (4) whether the taxpayer is "at risk" with respect to the
activity (Section 465); (5) the investment interest limitation, and (6) the
floor on miscellaneous itemized deductions (Section 67(a)). Additional
provisions of the Code may also limit a specific taxpayer's deductions.
Moreover, to the extent that an Owner's share of Rental Pool losses exceeds the
basis of his Unit, such excess losses cannot be utilized in that year by that
Owner for any purpose, but are allowed as a deduction (subject to the
limitations described above) only when that Owner's adjusted basis for his Units
at the end of any year exceeds zero (before reduction by the suspended loss).
2. SECTION 183
Section 183 of the Code provides that, in the case of an activity
engaged in by an individual or an S corporation, certain deductions attributable
to such activity will be limited to the gross income generated by such activity
if the activity is not engaged in for profit. Losses disallowed under Section
183 are not merely suspended but are permanently denied. The Regulations under
Section 183 provide a three-tier system of permitted deductions up to a maximum
of the gross income from the activity. The Regulations also provide rules for
allocation of expenses to the specific tiers.
Section 1.183-2 of the Regulations provides that all facts and
circumstances are to be taken into account and no one factor or combination of
factors is determinative. The Regulations list nine factors that will generally
be considered, but caution that other factors may also be relevant. Because the
presence or absence of a profit objective is in part a factual issue which
depends upon the individual circumstances of each Owner, it is impossible to
presently predict with accuracy whether a particular Owner will be able to
establish that he or she has a profit objective.
Section 183 creates a presumption in favor of the determination that
the activity is engaged in for profit if a profit (without regard to operating
loss carry forwards) is realized in three out of five consecutive years. To
allow the presumption to work, an Owner is given an election to postpone the
determination of whether the presumption applies until the end of the fourth
taxable year following the taxable year in which he first purchased his Unit and
engaged in rental activity. An Owner should
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make an election as prescribed in he Regulations to preserve the ability to take
advantage of this presumption and the delay in determining its application. An
Owner should note that UP Sedona makes no assurances or representations
concerning whether an Owner can expect a profit from the Rental Pool within four
years, however, it believes that the Rental Pool will more likely than not be
considered an activity engaged in for profit.
3. SECTION 280A
The Section 280A home business expense disallowance rule applies to
any "dwelling unit" used by the taxpayer as a residence. Taxpayers include
individuals, partnerships, trusts, estates, and S corporations. Section 280A
does not apply to a regular corporation, except in its capacity as a member of a
partnership or S corporation or as a beneficiary of a trust or estate. A
"dwelling unit" includes a house, apartment, condominium, mobile home, boat or
other similar property that provides basic living accommodations. The
Regulations provide an objective standard for determining whether a taxpayer's
use of a dwelling unit causes it to be considered a residence. The Code and
Regulations impose a gross income limitation upon deductions for any Owner whose
Unit is used by the Owner for personal use for a number of days during a taxable
year which exceeds the greater of (i) 14 days, or (ii) 10% of the number of days
during the year for which the Unit is rented for fair value. Personal use
includes use by the taxpayer, use by the taxpayer's family, use by an individual
pursuant to a reciprocal arrangement that permits the taxpayer use of another
unit, days on which the unit is rented for less than fair rental, use by other
owners in a time sharing arrangement or use by the taxpayer of other units in a
rental pool, and use of the unit as a result of a charitable donation by the
taxpayer. Based upon the proposed operation of the Rental Pool, which would
limit the use by any Owner of any of the Units to a combined total of 14 days,
the Section 280A gross income limitation should not should not apply to the
Owners.
Section 280A also establishes an expense allocation fraction to be used
in apportioning deductions between personal and business use of a property to
which Section 280A applies. The expense allocation formula permits deduction of
the fraction of expenses associated with the property (other than those expenses
that are otherwise deductible even if a property is used for personal use) of
which the numerator is the days the property is actually used for business and
the denominator of which is the total of the days the property is actually used
(either for business or personal use). With respect to time sharing
arrangements, all owners usage is aggregated in determining the numerator and
denominator of the fraction. This allocation formula applies if a property is
used for personal use for even one day. If an Unit is a dwelling unit, it is
possible that Units held by other Owners could be aggregated with the Unit held
by a particular Owner, with the result that even an Owner that never used an
Unit for personal purposes could, nevertheless, have otherwise deductible
expenses reduced pursuant to Section 280A. Based upon the expense allocation
requirement, an Owner will be able to deduct expenses (other than property
taxes) and depreciation attributable to the Rental Pool only to the extent
allocable to business use.
4. INCOME AND LOSSES FROM PASSIVE ACTIVITIES.
The Code characterizes certain activities as producing either passive
or portfolio income and loss. Deductions of passive activity losses incurred by
an individual, estate, trust, or personal service corporation or, with
modifications, certain closely held corporations, may not be used to offset
non-passive activity income. In general, passive activity losses can be used
only to offset passive income, not wages or portfolio income (such as dividends,
interest, annuities and royalties).
46
<PAGE>
In general, a passive activity, is one which: (1) is a trade or
business activity in which the taxpayer does not materially participate; or (2)
is a rental activity. Counsel believes that it is very unlikely that an Owner
will be treated as materially participating in the Rental Pool because, under
the terms of the Pooling Agreement, sole authority for the management and
operation of the Hotel resides in the Hotel Manager.
Investments in rental activities generally produce passive income and
loss. Rental activities are treated as passive without regard to whether they
involve the conduct of trade or business or whether the taxpayer materially
participates. The Regulations provide that where the actual or prospective
customer's payments are principally for the use of tangible property, the
activity is a rental activity, even if payments are made pursuant to a service
contract or other arrangement that is not denominated as a lease. There are
several exceptions provided by the Regulations to treatment as a rental
activity, however, Counsel does not believe that any of the exceptions apply to
the Rental Pool. Therefore, income from the Rental Pool will be passive income.
To the extent that an Owner has passive losses from other activities,
he should be able to offset those passive losses against his allocable share of
the Rental Pool's income and profits. Losses and credits disallowed by the
passive activity rules are suspended and may be carried forward and treated as
losses and credits from passive activities in each successive taxable year until
offset by income from passive activities or allowed against other income as a
result of the complete disposition of the taxpayer's interest in that activity.
When a taxpayer's entire interest in an activity is disposed of in a taxable
transaction (other than to a related party), any remaining suspended loss
incurred in connection with that specific activity is allowed in full, first
against income or gain from such activity during the year of disposition, second
against net income or gain from all other passive activities, and thereafter
against income from all sources, including active income. A disposition can
occur through a partner's disposition of his entire partnership interest.
5. APPLICATION OF AT-RISK LIMITATIONS.
Generally, Code section 465 limits losses that a taxpayer can claim in
real estate and other enumerated activities to the amount that the taxpayer has
at risk with respect to such activities. Losses that are disallowed in any year
because of the at-risk limitations are carried over to succeeding years and can
be used in those years to the extent that the partner's at-risk amount has
increased. A taxpayer is considered at risk in any activity with respect to (i)
the net amount of money and the adjusted basis of property contributed by the
taxpayer to the activity, (ii) any amount with respect to the activity if the
taxpayer is considered personally liable for the repayment of that amount, and
(iii) the taxpayer's proportionate share of any amount borrowed with respect to
the activity if the lender is an institutional lender and the loan is secured by
real property used in the activity ("qualified nonrecourse financing"). A
taxpayer is not considered to be "at risk" to the extent he or she is protected
against loss through nonrecourse financing, guarantees, stop loss agreements or
similar agreements. A taxpayer's at-risk amount is increased by profits earned
in the activity and decreased by losses occurring in the activity. In
determining the amount of loss, if any, disallowed under Section 465, Sections
183 and 280A are applied prior to the application of Section 465, and Section
469 is applied after any limitation under Section 465 is determined.
47
<PAGE>
6. LIMITATION ON INTEREST DEDUCTIONS.
The deductibility of a taxpayer's investment interest expense
generally is limited to the amount of such taxpayer's net investment income.
Investment interest expense does not include any interest expense which is taken
into account in determining the income or loss from a passive activity, but does
include (i) interest on indebtedness incurred or continued to purchase or carry
property held for investment, (ii) a partnership's interest expense attributable
to portfolio income under the passive loss rules, and (iii) the portion of
interest expense incurred or continued to purchase or carry an interest in a
passive activity to the extent attributable to portfolio income (within the
meaning of the passive loss rules). Owners who intend to finance the purchase of
their Units with borrowed funds should consult their own tax advisors before
borrowing such funds and should maintain careful records of any debt they incur
to carry or acquire their Units, because the interest on such debt may be
investment interest to the extent the Rental Pool does not engage in a passive
activity or to the extent of any portfolio income received from the Rental Pool.
Net investment income includes gross income from property held for
investment, gain attributable to the disposition of property held for
investment, and amounts treated as gross portfolio income pursuant to the
passive loss rules less deductible expenses (other than interest) directly
connected with the production of investment income. Investment interest
deductions which are disallowed may be carried forward and deducted in
subsequent years to the extent of net investment income in such years.
7. DEPRECIATION/AMORTIZATION
Each Owner of a Unit used for rental purposes will separately
determine the applicable allowance for depreciation with respect to such Unit
and any tangible personal property associated with such Unit for any year,
subject to the limitations described above. Section 179 of the Code allows a
taxpayer (other than trusts, estates and certain noncorporate lessors) to
expense certain depreciable business assets in the year of acquisition by
electing to treat the cost of new property as an expense rather than as a
capital expenditure subject to depreciation. The deductions for which the
election are made are allowed for the tax year in which the Section 179 property
is placed in service and are in lieu of a depreciation deduction. Generally, a
taxpayer may elect to expense only tangible personal property under Section 179.
8. SALE OF A UNIT.
If a Unit is held solely for business purposes for more than one year
by an Owner who is not a dealer with respect to such Unit, gain or loss realized
on the sale of such Unit generally will be considered gain or loss from the sale
of a Section 1231 asset and will be so taken into account in computing the
taxpayer's net Section 1231 gain or loss for the taxable year. A net Section
1231 gain generally is treated as a long-term capital gain, while a net Section
1231 loss is treated as an ordinary loss. If any such gain on the sale of a Unit
represents recapture of depreciation of personal property, that portion of the
gain will be taxable as ordinary income.
No loss will be allowed in connection with the sale of a Unit held for
personal use. Any gain realized on the sale of a Unit held for personal use will
be a long-term or a short-term capital gain, depending upon whether the Unit was
held for more than one year. If a Unit is held partly for personal use and
partly for business use, an apportionment of the gain or loss will be required
and each portion will be reported in accordance with the principles stated
above.
48
<PAGE>
In the event of an Owner's sale or other transfer of a Unit, the
distributive share of Rental Pool income, gain, loss, deduction or credit for
the entire year allocable to such Unit generally will be allocated between the
transferor and the transferee, based upon the period of time during the taxable
year that each owned such Unit, notwithstanding the timing or amounts of any
Rental Pool distributions.
ADMINISTRATIVE AND COMPLIANCE MATTERS
1. AUDIT RISK.
The Service has adopted a policy of auditing, selectively, a large
number of partnership information returns. In view of the Service's audit
programs, the Rental Pool's information return may be selected for audit. If the
Service audits and adjusts the Rental Pool's information return, it is likely
that the Service will make corresponding adjustments to the Owners' income tax
returns. It is also more likely that the Owners' returns also will be audited.
It is not expected that the Rental Pool will make cash distributions to Owners
to assist them in paying a tax liability resulting therefrom.
2. RESOLUTION OF DISPUTES INVOLVING RENTAL POOL ITEMS.
The Rental Pool will be treated as a separate entity for purposes of
federal tax audits, judicial review of administrative adjustments by the Service
and tax settlement proceedings. The tax treatment of partnership items of
income, gain, loss, deduction and credit are determined at the partnership level
in a unified partnership proceeding rather than in separate proceedings with the
partners. The Code provides for one partner to be designated as the "Tax Matters
Partner" for these purposes. The Board of Directors shall be responsible for
selecting the Tax Matters Partner for the Rental Pool.
The Tax Matters Partner is entitled to make certain elections on behalf
of the Rental Pool and Owners and can extend the statute of limitations for
assessment of tax deficiencies against Owners with respect to Rental Pool items.
The Tax Matters Partner may bind to a settlement with the Service any Owners
with less than a one percent profits interest in the Rental Pool unless the
Owners elect, by filing a statement with the Secretary of the Treasury, not to
give such authority to the Tax Matters Partner. The Tax Matters Partner may seek
judicial review (to which all the Owners are bound) of a final Rental Pool
administrative adjustment and, if the Tax Matters Partner fails to seek judicial
review, such review may be sought by any Owners having in the aggregate at least
a 5 percent profits interest. Only one action for judicial review will go
forward, however, and Owners with an interest in the outcome may participate.
The Owners generally will be required to treat Rental Pool items on
their personal federal income tax returns consistent with the treatment of the
items on the Rental Pool's information return. In general, this consistency
requirement is waived if an Owner files a statement with the Service identifying
the inconsistency. Failure to satisfy the consistency requirement, if not
waived, will result in an adjustment to conform the Owner's treatment of the
item with his treatment on the Rental Pool's information return. Even if the
consistency requirement is waived, adjustments to an Owner's tax liability with
respect to Rental Pool items may result from an audit of the Rental Pool's or
the Owner's tax return. Intentional or negligent disregard of the consistency
requirement may subject an Owner to substantial penalties.
49
<PAGE>
POSSIBLE CHANGES IN FEDERAL TAX LAWS
The Code is subject to change by Congress, and interpretations of the
Code may be modified or affected by judicial decisions, by the Treasury
Department through changes in Regulations and by the Service through its audit
policy, announcements, and published and private rulings. Such changes may be
retroactive. Accordingly, the ultimate effect on an Owner's tax situation may be
governed by laws, regulations or interpretations of laws or regulations which
have not yet been proposed, passed or made, as the case may be. Although
significant changes historically have been given prospective application, no
assurance can be given that any changes made in the tax law affecting an
investment in the Rental Pool would be limited to prospective effect.
INVESTMENT BY FOREIGN PERSONS
The rules governing the federal income taxation of nonresident alien
individuals, foreign corporations, foreign partnerships, and other foreign
investors ("foreign persons") are complex, and no attempt has been made herein
to discuss such rules. Potential investors that are foreign persons should
consult with their tax advisors to fully determine the impact on them of United
States federal, state and local income tax laws.
It should be noted, however, that there is imposed a withholding
requirement on dispositions of a United States real property interest ("USRPI"),
which includes United States real estate and interests in entities, such as
partnerships, holding United States real estate. Therefore, disposition of the
Property or disposition of a Unit will give rise to a withholding requirement.
CORPORATE INVESTORS
Section 183 does not apply to corporate Owners. Section 280A does not
apply to corporations that are not electing S corporations. Section 469 applies
only to certain closely held C corporations and personal service corporations.
However, deduction of expenses associated with the acquisition and ownership of
a Unit by a corporation may be disallowed or restricted under other Code
sections. Corporations that purchase Units should consult their own tax advisor
regarding the application of Section 274 of the Code, which prohibits the
deduction of certain expenses incurred with respect to facilities used for
entertainment, amusement or recreation. There are numerous issues involved in
corporate ownership, and corporations should obtain tax advice from their own
counsel before purchasing a Unit.
STATE AND LOCAL TAXES
The Rental Pool's activities will be carried on within the state of
Arizona and the Rental Pool will be considered to be domiciled in the state of
Arizona. Arizona imposes an income tax with respect to all income, regardless of
source, of Arizona residents and the income derived from Arizona sources earned
by a nonresident. Arizona income tax law generally conforms to federal income
tax law in matters material to an investment in the Rental Pool.
Owners who are not Arizona residents may be subject to taxation by
their state of residence as well as Arizona with respect to income derived from
the Rental Pool. Depending upon applicable state and local laws, Arizona
nonresidents may find that some deductions that are available to the Owners for
federal income tax purposes may not be available for state or local income tax
purposes.
50
<PAGE>
Furthermore, the tax treatment of particular items under other state or local
income tax laws may vary materially from federal income tax treatment. In
addition, Owners may be subject to income, gift, estate or inheritance taxes in
the state or locality of their residence or domicile, as well as in the state of
Arizona. Prospective Owners are urged to consult their tax advisors concerning
those matters.
LEGAL MATTERS
O'Connor, Cavanagh, Anderson, Killingsworth & Beshears, P.A., Phoenix,
Arizona, has passed on certain tax matters as described under "Certain Federal
and State Income Tax Aspects." Prospective Owners should not consider O'Connor,
Cavanagh, Anderson, Killingsworth & Beshears, P.A. to be their legal counsel
with respect to this Offering or any other related matter and are strongly
encouraged to seek the advice of qualified and independent legal counsel with
respect to entering any of the agreements or contracts contemplated by this
Offering and any other related matters, including the tax implications of the
purchase of a Unit.
EXPERTS
The balance sheet of UP Sedona Inc. dated as of December 31, 1996
appearing in this Prospectus and Registration Statement has been audited by
Toback CPAs, independent auditors, as set forth in their report appearing
elsewhere herein, and is included in reliance upon such report given upon the
authority of such firm as experts in accounting and auditing.
SUMMARY OF PROMOTIONAL AND SALES MATERIAL
Sales materials may be used in connection with this Offering only when
accompanied or preceded by the delivery of this Prospectus. Such sales materials
may include a booklet, slides, films, "fact" sheets, articles, publications, and
brochures describing the Offering, United Properties and the Hotel. The Offering
is made only by means of the Prospectus.
ADDITIONAL INFORMATION
UP Sedona has filed with the Securities and Exchange Commission (the
"Commission") a Registration Statement under the Securities Act with respect to
the Units offered by this Prospectus. This Prospectus does not contain all of
the information set forth in the Registration Statement and the exhibits
thereto. For further information with respect to the Units offered by this
Prospectus, reference is made to the Registration Statement, including the
exhibits thereto. Statements contained in this Prospectus as to the contents of
any contract or other document referred to are not necessarily complete, and in
each instance reference is made to the copy of such contract or other document
filed as an exhibit to the Registration Statement, each such statement being
qualified in all respects by such reference. The Registration Statement,
together with exhibits thereto, may be inspected at the public reference
facilities of the Commission at 450 Fifth Street, N.W., Room 1024, Washington,
D.C. 20549, without charge and copies of the material contained therein may be
obtained at prescribed rates from the Commission's public reference facilities
in Washington, D.C. The Commission also maintains a Web site that contains
reports, proxy and information statements and other materials that are filed
through the Commission's Electronic Data Gathering, Analysis, and Retrieval
system. This Web site can be accessed at http://www.sec.gov.
51
<PAGE>
SEDONA GOLF RESORT AND CONFERENCE CENTER
PROPOSED 225 ROOM HOTEL
IN SEDONA, ARIZONA
FORECASTED SUMMARIZED STATEMENTS
OF ESTIMATED ANNUAL OPERATING RESULTS
FOR THE OPERATING YEARS ENDING
DECEMBER 31, 1999 - 2003
F-1
<PAGE>
SEDONA GOLF RESORT AND CONFERENCE CENTER
PROPOSED 225 ROOM HOTEL
IN SEDONA, ARIZONA
FORECASTED SUMMARIZED STATEMENTS
OF ESTIMATED ANNUAL OPERATING RESULTS
FOR THE OPERATING YEARS ENDING
DECEMBER 31, 1999 - 2003
CONTENTS
Page
Accountant's compilation report F-3
Forecasted summarized statement of
estimated annual operating results F-4
Forecasted summarized statement of
allocation of net distributable cash
flow and rate of return of cash on
cash investment to an owner of a
typical one bedroom unit F-5
Forecasted summarized statement of
allocation of net distributable
cash flow and rate of return of
cash on cash investment to an
owner of a typical studio unit F-6
Summary of significant forecast assumptions F-7 - F-12
F-2
<PAGE>
[LETTERHEAD OF TOBACK CPAs, P.C.]
3200 NORTH CENTRAL AVENUE, SUITE 700 PHOENIX, ARIZONA 85012 (602) 264-9011
Board of Directors
UP Sedona, Inc.
Phoenix, Arizona
We have compiled the accompanying forecasted summarized statement of
estimated annual operating results and the related forecasted summarized
statement of allocation of net distributable cash flow and rate of return of
cash on cash investment to an owner of a typical one bedroom unit and the
forecasted summarized statement of allocation of net distributable cash flow and
rate of return of cash on cash investment to an owner of a typical studio unit,
of Sedona Golf Resort and Conference Center, a proposed 225 room hotel in
Sedona, Arizona, for the operating years ending December 31, 1999 through 2003,
in accordance with standards established by the American Institute of Certified
Public Accountants.
A compilation is limited to presenting in the form of a forecast
information that is the representation of management and does not include
evaluation of the support for the assumptions underlying the forecast. We have
not examined the forecasts and, accordingly, do not express an opinion or any
other form of assurance on the accompanying statements or assumptions.
Furthermore, there will usually be differences between the forecasted and actual
results, because events and circumstances frequently do not occur as expected,
and those differences may be material. We have no responsibility to update this
report for events and circumstances occurring after the date of this report.
Toback CPAs, P.C.
February 6, 1997
F-3
<PAGE>
SEDONA GOLF RESORT AND CONFERENCE CENTER
PROPOSED 225 ROOM HOTEL IN SEDONA, ARIZONA
FORECASTED SUMMARIZED STATEMENT OF ESTIMATED ANNUAL OPERATING RESULTS
FOR THE OPERATING YEARS ENDING DECEMBER 31, 1999 - 2003
<TABLE>
<CAPTION>
Years ending:
December 31, 1999 December 31, 2000
Amount % Amount %
-------------- ----------- -------------- -----------
REVENUE:
<S> <C> <C> <C> <C>
Rooms (A) $ 7,510,331 65.57% $ 9,657,900 66.60%
Food and beverage 3,113,638 27.18 3,823,442 26.37
Telephone 311,364 2.72 382,344 2.64
Other income 518,940 4.53 637,240 4.39
-------------- ----------- -------------- ----------
TOTAL REVENUE 11,454,273 100.00 14,500,926 100.00
-------------- ----------- -------------- ----------
DEPARTMENTAL EXPENSES (B):
Rooms 2,002,593 26.66 2,227,066 23.06
Food and beverage 2,802,274 90.00 3,135,222 82.00
Telephone 217,955 70.00 229,407 60.00
Other expenses 311,364 60.00 286,758 45.00
-------------- ----------- -------------- ----------
TOTAL DEPARTMENTAL EXPENSES 5,334,186 46.57 5,878,453 40.54
-------------- ----------- -------------- ----------
INCOME BEFORE UNDISTRIBUTED
EXPENSES 6,120,087 53.43 8,622,473 59.46
-------------- ----------- -------------- ----------
UNDISTRIBUTED EXPENSES:
Administrative and general 1,068,684 9.33 1,174,575 8.10
Sales and marketing 1,097,319 9.58 1,078,869 7.44
Property operations 747,964 6.53 769,999 5.31
Energy 572,714 5.00 661,242 4.56
-------------- ----------- -------------- ----------
TOTAL UNDISTRIBUTED EXPENSE 3,486,681 30.44 3,684,685 25.41
-------------- ----------- -------------- ----------
GROSS OPERATING PROFIT 2,633,406 22.99 4,937,788 34.05
-------------- ----------- -------------- ----------
FIXED EXPENSES:
Management fees (Note 6) 120,000 1.05 435,028 3.00
Incentive management fees (Note 6) - 0.00 5,009 0.03
Real estate taxes (C) 443,714 3.87 457,026 3.15
Association expenses (C) 50,000 0.44 51,750 0.36
Property insurance 84,341 0.74 87,293 0.60
-------------- ----------- -------------- ----------
TOTAL FIXED EXPENSES 698,055 6.10 1,036,106 7.14
-------------- ----------- -------------- ----------
NET OPERATING INCOME BEFORE CERTAIN
FIXED CHARGES (D) $ 1,935,351 16.89% $ 3,901,682 26.91%
============== =========== ============== ==========
NET OPERATING INCOME BEFORE CERTAIN
FIXED CHARGES (D) $ 1,935,351 16.89% $ 3,901,682 26.91%
Reserve for replacements (Note 6) - - 725,046 5.00
-------------- ----------- -------------- ----------
NET DISTRIBUTABLE CASH FLOW $ 1,935,351 16.89% $ 3,176,636 21.91%
============== =========== ============== ==========
Total number of rooms 225 225
Annual available rooms 82,125 82,125
Annual occupied rooms 48,454 57,488
Occupancy percent 59% 70%
Average daily rate $155 $168
December 31, 2001 December 31, 2002 December 31, 2003
Amount % Amount % Amount %
------------ ---------- ------------- -------- ------------- ---------
REVENUE:
Rooms (A) $ 10,902,094 67.00% $ 11,229,157 66.89% $ 11,566,031 66.78%
Food and beverage 4,239,924 26.06 4,388,321 26.14 4,541,913 26.22
Telephone 423,992 2.60 438,832 2.61 454,191 2.62
Other income 706,654 4.34 731,387 4.36 756,985 4.38
------------ ---------- ------------ -------- ------------- ---------
TOTAL REVENUE 16,272,664 100.00 16,787,697 100.00 17,319,120 100.00
------------ ---------- ------------ -------- ------------- ---------
DEPARTMENTAL EXPENSES (B):
Rooms 2,402,772 22.04 2,474,906 22.04 2,549,153 22.04
Food and beverage 3,307,141 78.00 3,422,891 78.00 3,542,692 78.00
Telephone 254,395 60.00 263,299 60.00 272,515 60.00
Other expenses 282,662 40.00 292,555 40.00 302,794 40.00
------------ ---------- ------------ -------- ------------- ---------
TOTAL DEPARTMENTAL EXPENSES 6,246,970 38.39 6,453,651 38.44 6,667,154 38.50
------------ ---------- ------------ -------- ------------- ---------
INCOME BEFORE UNDISTRIBUTED
EXPENSES 10,025,694 61.61 10,334,046 61.56 10,651,966 61.50
------------ ---------- ------------ -------- ------------- ---------
UNDISTRIBUTED EXPENSES:
Administrative and general 1,270,895 7.81 1,311,119 7.81 1,352,623 7.81
Sales and marketing 1,059,350 6.51 1,092,879 6.51 1,127,475 6.51
Property operations 794,106 4.88 801,520 4.77 829,573 4.79
Energy 715,997 4.40 721,368 4.30 746,616 4.31
------------ ---------- ------------ -------- ------------- ---------
TOTAL UNDISTRIBUTED EXPENSE 3,840,348 23.60 3,926,886 23.39 4,056,287 23.42
------------ ---------- ------------ -------- ------------- ---------
GROSS OPERATING PROFIT 6,185,346 38.01 6,407,160 38.17 6,595,679 38.08
------------ ---------- ------------ -------- ------------- ---------
FIXED EXPENSES:
Management fees (Note 6) 488,180 3.00 503,631 3.00 519,574 3.00
Incentive management fees (Note 6) 143,626 .88 180,257 1.07 208,977 1.21
Real estate taxes (C) 488,180 3.00 502,825 3.00 517,910 2.99
Association expenses (C) 53,561 0.33 55,436 0.33 57,376 0.33
Property insurance 90,348 0.56 93,511 0.56 96,784 0.56
------------ ---------- ------------ -------- ------------- ---------
TOTAL FIXED EXPENSES 1,263,895 7.77 1,335,660 7.96 1,400,621 8.09
------------ ---------- ------------ -------- ------------- ---------
NET OPERATING INCOME BEFORE CERTAIN
FIXED CHARGES (D) $ 4,921,451 30.24% $ 5,071,500 30.21% $ 5,195,058 29.99%
============ ========== ============ ======== ============= =========
NET OPERATING INCOME BEFORE CERTAIN
FIXED CHARGES (D) $ 4,921,451 30.24% $ 5,071,500 30.21% $ 5,195,058 29.99%
Reserve for replacements (Note 6) 813,633 5.00 839,385 5.00 865,956 5.00
------------ ---------- ------------ -------- ------------- ---------
NET DISTRIBUTABLE CASH FLOW $ 4,107,818 25.24% $ 4,232,115 25.21% $ 4,329,102 24.99%
============ ========== ============ ======== ============= =========
Total number of rooms 225 225 225
Annual available rooms 82,125 82,125 82,125
Annual occupied rooms 61,594 61,594 61,594
Occupancy percent 75% 75% 75%
Average daily rate $177 $182 $188
</TABLE>
- ----------
(A) This forecast assumes no individual owner usage.
(B) The percentages for departmental expenses are stated as a percentage of the
related revenue.
(C) Property taxes and association expenses will be paid at the individual
investor level and have been included as an expense item in this
presentation for analysis purposes only.
(D) Net operating income excludes certain fixed costs such as interest,
depreciation, and various other costs that will be paid at the investor
level.
See summary of significant forecast assumptions.
F-4
<PAGE>
SEDONA GOLF RESORT AND CONFERENCE CENTER
PROPOSED 225 ROOM HOTEL
IN SEDONA, ARIZONA
FORECASTED SUMMARIZED STATEMENT OF ALLOCATION
OF NET DISTRIBUTABLE CASH FLOW AND RATE OF RETURN
OF CASH ON CASH INVESTMENT TO AN OWNER OF A TYPICAL
ONE BEDROOM UNIT (PURCHASE PRICE OF $191,350)
FOR THE OPERATING YEARS ENDING DECEMBER 31, 1999 - 2003
<TABLE>
<CAPTION>
Years ending:
December 31, 1999 December 31, 2000 December 31, 2001
----------------- ----------------- -----------------
Revenue (1):
<S> <C> <C> <C>
Rooms $ 34,113 $ 43,868 $ 49,519
Food and beverage, telephone and other 17,914 21,998 24,394
----------- ------------ ------------
Gross revenue 52,027 65,866 73,913
Operating expenses (2) 43,236 48,144 51,559
----------- ------------ ------------
Net operating income before certain fixed charges 8,791 17,722 22,354
Reserve for replacements (3): - (3,293) (3,696)
----------- ------------ ------------
Net distributable cash flow 8,791 14,429 18,658
Cash flow provided by UP Sedona, Inc. (4) 3,690 - -
Debt service (5) (12,481) (12,481) (12,481)
----------- ------------ ------------
Annual net cash flow received prior to
deduction for depreciation and
income tax effect $ - $ 1,948 $ 6,177
=========== ============ ============
Owner's initial cash investment (6) 50,432 50,432 50,432
Rate of return of cash on cash investment (7) - 3.86% 12.25%
December 31, 2002 December 31, 2003
--------------- -----------------
Revenue (1):
Rooms $ 51,005 $ 52,535
Food and beverage, telephone and other 25,247 26,131
------------ -----------
Gross revenue 76,252 78,666
Operating expenses (2) 53,217 55,070
------------ -----------
Net operating income before certain fixed charges 23,035 23,596
Reserve for replacements (3): (3,813) (3,933)
------------ -----------
Net distributable cash flow 19,222 19,663
Cash flow provided by UP Sedona, Inc. (4) - -
Debt service (5) (12,481) (12,481)
------------ -----------
Annual net cash flow received prior to
deduction for depreciation and
income tax effect $ 6,741 $ 7,182
============ ===========
Owner's initial cash investment (6) 50,432 50,432
Rate of return of cash on cash investment (7) 13.37% 14.24%
</TABLE>
Notes:(1) Revenues are allocated to owners in the proportion that an individual
initial selling price of a unit relates to the total initial selling
prices of all units, as adjusted for an owners individual usage. This
forecast assumes no individual owner usage. Any personal use of the
unit will reduce the individual investor's rate of return.
(2) Operating expenses include the estimated departmental, undistributed
and fixed expenses to manage the hotel. Expenses also include property
taxes and association expenses which will be paid at the investor
level. Expenses are allocated based on the proportion that an
individual initial selling price of a unit relates to the total
initial selling prices of all units.
(3) Reserve for replacement is zero in the first year and will be 5% of
gross revenue each year thereafter. This reserve for replacement is
established for the replacement of capital items.
(4) During the first year of operations, UP Sedona, Inc., will ensure a
break even cash flow for the investor based on the implied debt
service as described below. The cash flow provided by UP Sedona, Inc.,
during the first year of operations, will not vary based on the amount
financed by each individual investor.
(5) Debt service assumes a 5 year adjustable rate mortgage of 75% of the
purchase price ($143,513), bearing an 8% interest rate with a 30 year
amortization. The terms of this financing have been assumed for the
purpose of calculating the implied debt service with regard to UP
Sedona, Inc.'s commitment to provide a breakeven cash flow for the
first year of operations. The same terms have been assumed for the
subsequent four years for illustrative purposes only. Interest rates
vary from lender to lender based on the borrower's financial strength.
No specific interest rate can, therefore, be assured.
(6) Owner's assumed initial cash investment:
Unit purchase price $ 191,350
Less estimated financing of 75% of purchase price 143,513
----------
Down payment 47,837
Add:
Closing costs (estimated to be 1% of purchase price) 1,914
Initial funding of operating reserve 681
----------
Owner's initial cash investment $ 50,432
==========
(7) Any gain or loss on the sale of the unit is not included in the
forecasted rate of return.
See summary of significant forecast assumptions.
F-5
<PAGE>
SEDONA GOLF RESORT AND CONFERENCE CENTER
PROPOSED 225 ROOM HOTEL
IN SEDONA, ARIZONA
FORECASTED SUMMARIZED STATEMENT OF ALLOCATION
OF NET DISTRIBUTABLE CASH FLOW AND RATE OF RETURN
OF CASH ON CASH INVESTMENT TO AN OWNER OF A
TYPICAL STUDIO UNIT (PURCHASE PRICE OF $165,000)
FOR THE OPERATING YEARS ENDING DECEMBER 31, 1999 - 2003
<TABLE>
<CAPTION>
Years ending:
December 31, 1999 December 31, 2000 December 31, 2001
----------------- ----------------- -----------------
<S> <C> <C> <C>
Revenue (1):
Rooms $ 29,416 $ 37,827 $ 42,700
Food and beverage, telephone and other 15,447 18,969 21,035
------------ ------------- -------------
Gross revenue 44,863 56,796 63,735
Operating expenses (2) 37,283 41,514 44,459
------------ ------------- -------------
Net operating income before certain fixed charges 7,580 15,282 19,276
Reserve for replacements (3): - (2,840) (3,187)
------------ ------------- -------------
Net distributable cash flow 7,580 12,442 16,089
Cash flow provided by UP Sedona, Inc. (4) 3,182 - -
Debt service (5) (10,762) (10,762) (10,762)
------------ ------------- -------------
Annual net cash flow received prior to
deduction for depreciation and income
tax effect $ - $ 1,680 $ 5,327
============ ============ ===========
Owner's initial cash investment (6) 43,488 43,488 43,488
Rate of return of cash on cash investment (7) - 3.86% 12.25%
December 31, 2002 December 31, 2003
----------------- -----------------
Revenue (1):
Rooms $ 43,981 $ 45,300
Food and beverage, telephone and other 21,771 22,533
---------- ---------
Gross revenue 65,752 67,833
Operating expenses (2) 45,888 47,486
---------- ---------
Net operating income before certain fixed charges 19,864 20,347
Reserve for replacements (3): (3,288) (3,392)
---------- ---------
Net distributable cash flow 16,576 16,955
Cash flow provided by UP Sedona, Inc. (4) - -
Debt service (5) (10,762) (10,762)
---------- ---------
Annual net cash flow received prior to
deduction for depreciation and income
tax effect $ 5,814 $ 6,193
========= ==========
Owner's initial cash investment (6) 43,488 43,488
Rate of return of cash on cash investment (7) 13.37% 14.24%
</TABLE>
- ----------
(1) Revenues are allocated to owners in the proportion that an individual
initial selling price of a unit relates to total initial selling sales
prices of all units, as adjusted for an owners individual usage. This
forecast assumes no individual owner usage. Any personal investor use of
the unit will reduce the individual investor's rate of return.
(2) Operating expenses include the estimated departmental, undistributed and
fixed expenses to manage the hotel. Expenses also include property taxes
and association expenses which will be paid at the investor level. Expenses
are allocated based on the proportion that an individual initial selling
price of a unit relates to the initial selling prices of all units.
(3) Reserve for replacement is zero in the first year and will be 5% of gross
revenue each year thereafter. This reserve is established for the
replacement of capital items.
(4) During the first year of operations, UP Sedona, Inc., will ensure a
breakeven cash flow for the investor based on the implied debt service as
described below. The cash flow provided by UP Sedona, Inc., during the
first year of operations, will not vary based on the amount financed by
each individual investor.
(5) Debt service assumes a 5 year adjustable rate mortgage of 75% of the
purchase price ($123,750) bearing an 8% interest rate with a 30 year
amortization. The terms of this financing have been assumed for the purpose
of calculating the implied debt service with regard to UP Sedona, Inc.'s
commitment to provide a breakeven cash flow for the first year of
operations. The same terms have been assumed for the subsequent four years
for illustrative purposes only. Interest rates vary from lender to lender
based on the borrower's financial strength. No specific rate can,
therefore, be assured.
(6) Owner's assumed initial cash investment:
Purchase price $ 165,000
Less estimated financing of 75% of purchase price (123,750)
---------------
Down payment 41,250
Add:
Closing costs (estimated to be 1% of purchase price) 1,650
Initial funding of operating reserve 588
---------------
Initial cash investment $ 43,488
===============
(7) Any gain or loss on the sale of the unit is not included in the forecasted
rate of return.
See summary of significant forecast assumptions.
F-6
<PAGE>
SEDONA GOLF RESORT AND CONFERENCE CENTER
PROPOSED 225 ROOM HOTEL IN SEDONA, ARIZONA
SUMMARY OF SIGNIFICANT FORECAST
ASSUMPTIONS
These financial forecasts present, to the best of management's knowledge
and belief, the hotel's expected annual operating results for the
operating years ending December 31, 1999 through 2003. Accordingly, the
forecasts reflect its judgment as of February 6, 1997, the date of these
forecasts, of the expected conditions and these expected course of
action. The assumptions disclosed herein are those that management
believes are significant to the forecasts. There will usually be
differences between the forecasted and actual results, because events
and circumstances frequently do not occur as expected, and those
differences may be material.
The securities prospectus, dated ___________, should be reviewed for a more
detailed explanation of the investment and its related risk factors.
1. Description of the project and analysis of sources of forecasted information:
UP Sedona, Inc. owns a parcel of land in Sedona, Arizona for the purpose of
developing a hotel which will be subdivided into condominium units. UP
Sedona, Inc. plans to market 171 one bedroom units, 48 studio units and
6 Executive Suites to individual investors. Concurrent with the purchase
of the units, the unit owners will enter into a hotel and operating
rental pool agreement (see Note 5). Unit owners will be subject to
income taxes at an individual level on their allocated share of income
or loss, as forecasted on pages 3 and 4, less any other deductions, such
as interest and depreciation.
Management of UP Sedona, Inc. has evaluated numerous sources of information
to support assumptions for revenues and expenses in this forecast. These
sources include, but are not limited to, industry publications,
operating data for the geographic location and certain mandatory
facility requirements based on architectural renderings, cost analysis,
site surveys, traffic studies, zoning studies and real estate
consultation. In addition, certain facilities contracts are being
negotiated, as more fully described in the following notes. Management
has analyzed this information for consistency and completeness in
developing this forecast.
2. Summary of significant forecast assumptions:
+ The property will be developed as a destination resort hotel with full
amenity package as described in footnote 4
+ The anticipated opening date for the hotel is January 1, 1999
+ The number of rooms available in the rental pool are 171 one bedroom units,
48 studio units and 6 Executive Suites.
F-7
<PAGE>
SEDONA GOLF RESORT AND CONFERENCE CENTER
PROPOSED 225 ROOM HOTEL IN SEDONA, ARIZONA
SUMMARY OF SIGNIFICANT FORECAST
ASSUMPTIONS (CONTINUED)
2. Summary of significant forecast assumptions, continued:
+ The anticipated occupancy and average daily room rates as shown on
page 2 are more fully discussed in footnote 5
+ This forecast assumes no individual owner usage
+ Qualified, competent, and efficient management personnel will be
operating the facility as discussed in footnote 6
+ A golf facilities agreement has been signed with Sedona Golf Resort as
described in footnote 4
+ A health club agreement has been signed with Ridge Spa and Racquet
Club as described in footnote 4
+ The forecasts presented on page 2,3 and 4 assume inflation rates
varying from 3% to 3.5% per annum
+ At a minimum, two hundred rooms must be completed prior to the hotel
opening
+ At the time of closing, UP Sedona, Inc. will retain ownership of any
unsold units and will share in the rental pool operations
proportionately. UP Sedona, Inc. will continue to market any unsold
units.
3. Basis of presentation:
The forecasted presentation of net operating income before certain fixed
charges (NOI) has been presented using the accrual basis of
accounting. NOI as presented on page 2 includes an expense for
property taxes and association expenses that will be assessed and
remitted at the individual investor level.
The operating reserve established concurrently with the purchase of the
units will be used to stabilize cash flow for operations and investor
distribution purposes. Due to the establishment of this reserve, no
adjustments have been made for any differences between the accrual
basis NOI and the net distributable cash flow, except for the reserve
for replacements.
F-8
<PAGE>
SEDONA GOLF RESORT AND CONFERENCE CENTER
PROPOSED 225 ROOM HOTEL IN SEDONA, ARIZONA
SUMMARY OF SIGNIFICANT FORECAST
ASSUMPTIONS (CONTINUED)
4. Development of the Property:
It is anticipated that guest room design will incorporate the physical and
technological features that management believes will appeal to both the
leisure traveler and to conference planners and travel coordinators in
the competitive business environment assumed during the forecast period.
In addition to the innovative guest room design, the property will
include the following amenities.
Meeting Rooms:
+ The hotel will provide a total of 10,000 square feet of meeting space
(approximately 45 square feet per guest room) including a 5,000 square
foot ballroom
+ A variety of breakout meeting rooms, adequate pre-function storage and
kitchen space will be available
Food and Beverage Facility:
+ A 125-seat full-service restaurant that will offer all day dining and
room service for a minimum of 18-hours per day is anticipated
+ A lobby lounge
+ Pool side food and beverage service
Recreation/Other Amenities:
+ A pool feature and jacuzzi
+ A small gift/sundry shop
Golf Facilities Agreement:
A golf facilities agreement has been entered into with the Sedona Golf
Resort. The agreement will allow hotel guests to obtain certain golf
course use privileges including, but not limited to, preferential tee
times, discount pricing, and tournament reservations. The agreement has
various restrictions related to cancellations and advance reservations.
Health Club Agreement:
An agreement to use the Ridge Spa and Racquet Club by hotel guests has been
entered into with the owners of the club. The club is located adjacent
to the hotel and allows guests to use the facilities at a preferential
rate.
F-9
<PAGE>
SEDONA GOLF RESORT AND CONFERENCE CENTER
PROPOSED 225 ROOM HOTEL IN SEDONA, ARIZONA
SUMMARY OF SIGNIFICANT FORECAST
ASSUMPTIONS (CONTINUED)
5. Occupancy rate percentages and average daily room rates:
The extensive development of the hotel facilities, the hiring of an
experienced management group and the amenities available, including
agreements with the Sedona Golf Resort and Ridge Spa and Racquet Club,
are anticipated to allow the hotel to competitively participate in the
destination resort hotel marketplace in Sedona, Arizona. The target
market will be both individual leisure travelers and the corporate
group market. The forecast contemplates fluctuating occupancy levels
and average daily rates in the first two operating years during which
time the hotel will be establishing its niche in the market place and
stabilizing in the third operating year with modest increases in the
average daily room rate in the fourth and fifth operating years. In
addition, operations will incur higher costs in the start-up phase.
Anticipated occupancy rates and average daily room rates for the
forecast period are described below as follows:
Years ending Occupancy rate Average daily
December 31, percentages room rates
1999 59% $ 155
2000 70 168
2001 75 177
2002 75 182
2003 75 188
6. Hotel and Operating Rental Pool Agreement:
Upon purchasing a one bedroom or studio condominium unit, each owner will
be required to sign a ten year agreement with Delta Hotels
International, Inc. (Delta). Delta will be engaged to act as the owner's
exclusive manager for the operation of the hotel. Delta will prepare, on
a monthly basis, calculations of unit revenue based upon the days each
unit qualifies to be included in the rental pool, in addition to various
other financial reports. Operating expenses and the cost of maintaining
the units will be shared by all of the owners based upon their allocated
percentage shares determined at the time each unit is originally
acquired. Certain minimum insurance requirements will be maintained by
Delta at the expense of the owners.
Delta will establish on behalf of the owners, a reserve for capital
expenditures and for the replacement of furniture, fixtures and
equipment. In the first year no reserve will be funded, however a five
percent (5%) reserve based upon gross revenue will be collected each
year thereafter.
F-10
<PAGE>
SEDONA GOLF RESORT AND CONFERENCE CENTER
PROPOSED 225 ROOM HOTEL IN SEDONA, ARIZONA
SUMMARY OF SIGNIFICANT FORECAST
ASSUMPTIONS (CONTINUED)
6. Hotel and Operating Rental Pool Agreement, continued:
UP Sedona, Inc. will fund any cash flow shortfalls (based on the implied
debt service included on pages 3 and 4) during the first year of the
hotel's operations. After the first year, cash flow shortfalls may
result in assessments to the owners by the condominium association (see
Note 7). The forecasts as outlined in pages 2, 3 and 4 do not assume any
requirement for any additional assessment, although one may be required.
The return to the investor will be lower if additional assessments are
required.
An operating cash reserve for working capital purposes in connection with
the operation of the hotel will be funded by the owners at the time of
closing of the owner's purchase of the unit. The estimated reserve to be
collected from each owner is approximately .356% of the initial purchase
price. The operating fund will be managed by Delta.
Distributions will be made monthly to investors by Delta based upon
eighty-percent (80%) of anticipated net distributable cash flow for the
year, multiplied by the individual investor's allocable share. The
balance of the net distributable cash flow will be distributed no later
than seventy five days after the operating year end. Delta will also
prepare final year-end reports for purposes of filing individual income
tax returns.
Base management fees paid to Delta will be $120,000 for year one and three
percent of total revenue for subsequent years.
In addition, an incentive management fee will be paid to Delta when net
distributable cash flow, excluding the management incentive, reaches
$3,200,000. The incentive fees will be calculated for the next five
years, based on the appropriate percentage applied to the net
distributable cash flow, excluding association expenses, in excess of
the base levels as indicated below:
Years ending December 31,
1999 2000 2001- 2003
---- ---- ----------
Net distributable cash flow, excluding association expenses:
Less than $3.2 Million 0.0% 0.0% 0.0%
(base level)
Over $3.2 Million and
up to $4.2 Million 15.0% 15.0% 12.0%
Over $4.2 Million 30.0% 25.0% 22.50%
F-11
<PAGE>
SEDONA GOLF RESORT AND CONFERENCE CENTER
PROPOSED 225 ROOM HOTEL IN SEDONA, ARIZONA
SUMMARY OF SIGNIFICANT FORECAST
ASSUMPTIONS (CONTINUED)
6. Hotel and Operating Rental Pool Agreement, continued:
Delta will receive additional fees for administrative services, sales and
marketing and other maintenance services. These fees are included in
hotel operating expenses in the accompanying forecasted statements on
pages 2, 3 and 4.
7. Formation of a condominium owners association:
UP Sedona, Inc. will form an association which will be taken over by the
owners of the hotel condominium units once seventy five percent (75%) of
the units have been sold. The Association, through its Board of
Directors, will be responsible for interfacing with Delta. Association
expenses are included in fixed expenses in the accompanying forecasted
summarized statement of estimated annual operating results.
F-12
<PAGE>
UP SEDONA, INC.
BALANCE SHEET
DECEMBER 31, 1996
FS-1
<PAGE>
UP SEDONA, INC.
BALANCE SHEET
DECEMBER 31, 1996
CONTENTS
Page
Independent auditor's report FS-3
Balance sheet FS-4
Notes to balance sheet FS-5 - FS-6
FS-2
<PAGE>
TOBACK CPAs, P.C.
Certified Public Accountants
3200 N. Central Ave.
Suite 700
Phoenix, AZ 85012
Board of Directors
UP Sedona, Inc.
Phoenix, Arizona
INDEPENDENT AUDITOR'S REPORT
We have audited the accompanying balance sheet of UP Sedona, Inc. as of
December 31, 1996. This financial statement is the responsibility of the
Company's management. Our responsibility is to express an opinion on this
financial statement based on our audit.
We conducted our audit in accordance with generally accepted auditing
standards. Those standards require that we plan and perform the audit to obtain
reasonable assurance about whether the balance sheet is free of material
misstatement. An audit includes examining, on a test basis, evidence supporting
the amounts and disclosures in the balance sheet. An audit also includes
assessing the accounting principles used and significant estimates made by
management, as well as evaluating the overall balance sheet presentation. We
believe that our audit provides a reasonable basis for our opinion.
In our opinion, the balance sheet referred to above presents fairly, in
all material respects, the financial position of UP Sedona, Inc. as of December
31, 1996, in conformity with generally accepted accounting principles.
Toback CPAs, P.C.
February 6, 1997
FS-3
<PAGE>
UP SEDONA, INC.
BALANCE SHEET
DECEMBER 31, 1996
ASSETS
Real estate under development (Note 2) $3,048,806
Deferred placement costs 45,604
Organization costs 1,694
----------
$3,096,104
==========
LIABILITIES AND SHAREHOLDERS' EQUITY
Liabilities:
Accounts payable $ 161,345
Note payable (Note 3) 165,000
Due to shareholder (Notes 4 and 5) 1,269,759
----------
Total liabilities 1,596,104
----------
Commitments (Note 5)
Shareholders' equity:
Preferred stock, no par value, 1,000,000 shares
authorized, limited voting rights, 18 shares
issued and outstanding, at the rate of 18%
of corporate profits, payable quarterly, cumulative 1,000,000
Common stock, no par value, stated value
$.01 per share, 2,000,000 shares authorized,
one vote per share, 82 shares issued and outstanding 1
Additional paid in capital 499,999
-------
Total shareholders' equity 1,500,000
----------
$3,096,104
==========
The accompanying notes are an integral part of these financial statements.
FS-4
<PAGE>
UP SEDONA, INC.
NOTES TO FINANCIAL STATEMENTS
1. Nature of business and summary of significant accounting policies:
The Company was formally organized as an Arizona corporation in December,
1996 to acquire and develop real estate for future sale. The Company
acquired a parcel of land in Sedona, Arizona in December, 1996 and
intends to develop a resort hotel to be known as Sedona Golf Resort and
Conference Center which will be subdivided into condominium units. As
part of the sales transaction, each condominium purchaser will enter
into a hotel operating and rental pool agreement with the hotel
operator. The Company has incurred certain project development costs,
but has not yet commenced construction or its marketing campaign.
Real estate under development:
Real estate under development is stated at cost which is not in excess of
net realizable value, and includes direct costs of land, land
development, construction and all other costs relative to the
development and sale of the project.
Organization costs:
Organization costs consist of legal fees which will be amortized on a
straight-line basis over five years.
Deferred placement costs:
Deferred placement costs consist of legal and other fees incurred in the
preparation of a securities prospectus. These costs have been deferred
as of December 31, 1996 and will be charged against future sales of
the condominium units.
Financial instruments:
The fair value of the Company's financial instruments, approximates their
carrying value. In addition, based on the borrowing rates currently
available to the Company for loans with similar terms and average
maturities, the fair value of the note payable approximates carrying
value after imputing interest as discussed in Note 3.
Accounting estimates:
The preparation of financial statements in conformity with generally
accepted accounting principles requires management to make estimates
and assumptions that affect the reported amounts of assets and
liabilities and disclosure of contingent assets and liabilities at the
date of the financial statements and the reported amounts of revenues
and expenses during the reporting period. Actual results could differ
from those estimates.
FS-5
<PAGE>
UP SEDONA, INC.
NOTES TO FINANCIAL STATEMENTS (CONTINUED)
2. Real estate under development:
Real estate under development consists of the following:
Land $ 2,665,000
Capitalized closing costs 3,476
Project development costs:
Architectural costs 208,738
Engineering 27,247
Legal and accounting 65,135
Management fees 20,283
Property development and feasibility consulting 58,927
-----------
$ 3,048,806
===========
3. Note payable:
The note payable is due to the seller of the property in five annual
installments of $50,000. The payments commence on the first anniversary
of receipt of the certificate of occupancy for the operation as a resort
hotel, and are due each year thereafter until paid. The note is
non-interest bearing, unsecured and is guaranteed by the parent company
of a shareholder. The note has been adjusted for unamortized discount of
$85,000 based on an imputed interest rate of 10% with the offsetting
amount reducing the carried cost of land (see Note 2).
4. Due to shareholder:
Amounts due to shareholder are for real estate development advances and
accrued management fees (see Note 5). The advances are non-interest
bearing, unsecured and have no fixed repayment terms. The advances will
be repaid from future cash flows as they become available.
5. Shareholders' agreement:
The shareholders' of the Company have entered into an agreement regarding
capital contributions, management, distributions and other business
matters affecting the Company. As part of this agreement, the managing
shareholder will be paid 5% of the costs of developing the project, as
defined in the agreement. The payment also includes compensation for
certain operating and administrative expenses, among other items.
Management fees of $20,283 were accrued during the period ended December
31, 1996. These fees have been capitalized into real estate under
development and are included in the amount due to shareholder.
FS-6
<PAGE>
ANNEX A
SEDONA GOLF RESORT AND CONFERENCE CENTER
UNIT VALUES
<PAGE>
ANNEX A
SEDONA GOLF RESORT AND CONFERENCE CENTER
UNIT VALUES
-----------
<TABLE>
<CAPTION>
INITIAL OPERATING
UNIT UNIT AREA UNIT PURCHASE PERCENTAGE CLOSING CASH
NUMBER TYPE (SQFT) DESCRIPTION PRICE INTEREST COSTS RESERVE
<S> <C> <C> <C> <C> <C> <C> <C>
1008 OB 1 551 1 BED $188,850 0.448283% $1,889 $672
1009 ST 1 347 STUDIO $159,500 0.378613% $1,595 $568
1010 OB 1 551 1 BED $188,850 0.448283% $1,889 $672
1011 EX 1 591 EXECUTIVE $183,900 0.436532% $1,839 $655
1012 OB 1 551 1 BED $188,850 0.448283% $1,889 $672
1013 EX 1 591 EXECUTIVE $183,900 0.436532% $1,839 $655
1014 OB 1 551 1 BED $188,850 0.448283% $1,889 $672
1015 OB 1 551 1 BED $188,850 0.448283% $1,889 $672
1016 OB 1 551 1 BED $188,850 0.448283% $1,889 $672
1017 OB 1 551 1 BED $188,850 0.448283% $1,889 $672
1018 OB 8 618 1 BED $191,850 0.455404% $1,919 $683
1019 OB 1 551 1 BED $188,850 0.448283% $1,889 $672
1020 OB 1 551 1 BED $188,850 0.448283% $1,889 $672
1021 OB 1 551 1 BED $188,850 0.448283% $1,889 $672
1022 OB 1 551 1 BED $188,850 0.448283% $1,889 $672
1023 OB 8 618 1 BED $191,850 0.455404% $1,919 $683
1024 ST 1 347 STUDIO $159,500 0.378613% $1,595 $568
1025 ST 1 347 STUDIO $159,500 0.378613% $1,595 $568
1026 OB 1 551 1 BED $188,850 0.448283% $1,889 $672
1027 OB 3 631 1 BED $191,850 0.455404% $1,919 $683
1028 OB 1 551 1 BED $188,850 0.448283% $1,889 $672
1030 OB 2 648 1 BED $191,850 0.455404% $1,919 $683
1032 OB 2 648 1 BED $191,850 0.455404% $1,919 $683
1034 OB 1 551 1 BED $188,850 0.448283% $1,889 $672
1035 OB 3 631 1 BED $191,850 0.455404% $1,919 $683
1036 OB 1 551 1 BED $188,850 0.448283% $1,889 $672
1037 ST 1 347 STUDIO $159,500 0.378613% $1,595 $568
1038 ST 1 347 STUDIO $159,500 0.378613% $1,595 $568
1039 OB 1 551 1 BED $188,850 0.448283% $1,889 $672
1040 OB 1 551 1 BED $188,850 0.448283% $1,889 $672
1041 ST 1 347 STUDIO $159,500 0.378613% $1,595 $568
1042 ST 1 347 STUDIO $159,500 0.378613% $1,595 $568
1043 OB 7 700 1 BED $191,850 0.455404% $1,919 $683
1044 OB 7 700 1 BED $191,850 0.455404% $1,919 $683
1052 EX 1 591 EXECUTIVE $183,900 0.436532% $1,839 $655
1053 ST 1 347 STUDIO $159,500 0.378613% $1,595 $568
1054 EX 1 591 EXECUTIVE $183,900 0.436532% $1,839 $655
1055 EX 1 591 EXECUTIVE $183,900 0.436532% $1,839 $655
1056 OB 1 551 1 BED $188,850 0.448283% $1,889 $672
</TABLE>
<PAGE>
ANNEX A
SEDONA GOLF RESORT AND CONFERENCE CENTER
UNIT VALUES
-----------
<TABLE>
<CAPTION>
INITIAL OPERATING
UNIT UNIT AREA UNIT PURCHASE PERCENTAGE CLOSING CASH
NUMBER TYPE (SQFT) DESCRIPTION PRICE INTEREST COSTS RESERVE
<S> <C> <C> <C> <C> <C> <C> <C>
1057 EX 1 591 EXECUTIVE $183,900 0.436532% $1,839 $655
1058 OB 1 551 1 BED $188,850 0.448283% $1,889 $672
1059 OB 1 551 1 BED $188,850 0.448283% $1,889 $672
1060 OB 1 551 1 BED $188,850 0.448283% $1,889 $672
1061 OB 1 551 1 BED $188,850 0.448283% $1,889 $672
1062 OB 8 618 1 BED $191,850 0.455404% $1,919 $683
1063 OB 1 551 1 BED $188,850 0.448283% $1,889 $672
1064 OB 1 551 1 BED $188,850 0.448283% $1,889 $672
1065 OB 1 551 1 BED $188,850 0.448283% $1,889 $672
1066 OB 1 551 1 BED $188,850 0.448283% $1,889 $672
1067 OB 8 618 1 BED $191,850 0.455404% $1,919 $683
1068 ST 1 347 STUDIO $159,500 0.378613% $1,595 $568
1069 ST 1 347 STUDIO $159,500 0.378613% $1,595 $568
1070 OB 1 551 1 BED $188,850 0.448283% $1,889 $672
1071 OB 3 631 1 BED $191,850 0.455404% $1,919 $683
1072 OB 1 551 1 BED $188,850 0.448283% $1,889 $672
1074 OB 2 648 1 BED $191,850 0.455404% $1,919 $683
1076 OB 2 648 1 BED $191,850 0.455404% $1,919 $683
1078 OB 1 551 1 BED $188,850 0.448283% $1,889 $672
1079 OB 3 631 1 BED $191,850 0.455404% $1,919 $683
1080 OB 1 551 1 BED $188,850 0.448283% $1,889 $672
1081 ST 1 347 STUDIO $159,500 0.378613% $1,595 $568
1082 ST 1 347 STUDIO $159,500 0.378613% $1,595 $568
1083 OB 1 551 1 BED $188,850 0.448283% $1,889 $672
1084 OB 1 551 1 BED $188,850 0.448283% $1,889 $672
1085 ST 1 347 STUDIO $159,500 0.378613% $1,595 $568
1086 ST 1 347 STUDIO $159,500 0.378613% $1,595 $568
1087 OB 7 700 1 BED $191,850 0.455404% $1,919 $683
1088 OB 7 700 1 BED $191,850 0.455404% $1,919 $683
2003 OB 8 618 1 BED $197,350 0.468459% $1,974 $703
2005 OB 1 551 1 BED $194,350 0.461338% $1,944 $692
2006 OB 10 608 1 BED $194,350 0.461338% $1,944 $692
2007 ST 2 418 STUDIO $167,300 0.397128% $1,673 $596
2008 OB 1 551 1 BED $194,350 0.461338% $1,944 $692
2009 ST 1 347 STUDIO $165,000 0.391669% $1,650 $588
2010 OB 1 551 1 BED $194,350 0.461338% $1,944 $692
2011 OB 1 551 1 BED $194,350 0.461338% $1,944 $692
2012 OB 1 551 1 BED $194,350 0.461338% $1,944 $692
2013 OB 1 551 1 BED $194,350 0.461338% $1,944 $692
</TABLE>
Page 2
<PAGE>
ANNEX A
SEDONA GOLF RESORT AND CONFERENCE CENTER
UNIT VALUES
-----------
<TABLE>
<CAPTION>
INITIAL OPERATING
UNIT UNIT AREA UNIT PURCHASE PERCENTAGE CLOSING CASH
NUMBER TYPE (SQFT) DESCRIPTION PRICE INTEREST COSTS RESERVE
<S> <C> <C> <C> <C> <C> <C> <C>
2014 OB 1 551 1 BED $194,350 0.461338% $1,944 $692
2015 OB 1 551 1 BED $194,350 0.461338% $1,944 $692
2016 OB 1 551 1 BED $194,350 0.461338% $1,944 $692
2017 OB 1 551 1 BED $194,350 0.461338% $1,944 $692
2018 OB 8 618 1 BED $197,350 0.468459% $1,974 $703
2019 OB 1 551 1 BED $194,350 0.461338% $1,944 $692
2020 OB 1 551 1 BED $194,350 0.461338% $1,944 $692
2021 OB 1 551 1 BED $194,350 0.461338% $1,944 $692
2022 OB 1 551 1 BED $194,350 0.461338% $1,944 $692
2023 OB 8 618 1 BED $197,350 0.468459% $1,974 $703
2024 ST 1 347 STUDIO $165,000 0.391669% $1,650 $588
2025 ST 1 347 STUDIO $165,000 0.391669% $1,650 $588
2026 OB 1 551 1 BED $194,350 0.461338% $1,944 $692
2027 OB 3 631 1 BED $197,350 0.468459% $1,974 $703
2028 OB 1 551 1 BED $194,350 0.461338% $1,944 $692
2030 OB 2 648 1 BED $197,350 0.468459% $1,974 $703
2032 OB 2 648 1 BED $194,350 0.461338% $1,944 $692
2034 OB 1 551 1 BED $191,350 0.454217% $1,914 $681
2035 OB 3 631 1 BED $197,350 0.468459% $1,974 $703
2036 OB 1 551 1 BED $191,350 0.454217% $1,914 $681
2037 ST 1 347 STUDIO $165,000 0.391669% $1,650 $588
2038 ST 1 347 STUDIO $162,000 0.384547% $1,620 $577
2039 OB 1 551 1 BED $194,350 0.461338% $1,944 $692
2040 OB 1 551 1 BED $191,350 0.454217% $1,914 $681
2041 ST 1 347 STUDIO $165,000 0.391669% $1,650 $588
2042 ST 1 347 STUDIO $162,000 0.384547% $1,620 $577
2043 OB 7 700 1 BED $197,350 0.468459% $1,974 $703
2044 OB 7 700 1 BED $194,350 0.461338% $1,944 $692
2047 OB 8 618 1 BED $197,350 0.468459% $1,974 $703
2049 OB 1 551 1 BED $194,350 0.461338% $1,944 $692
2051 ST 2 418 STUDIO $167,300 0.397128% $1,673 $596
2052 OB 1 551 1 BED $191,350 0.454217% $1,914 $681
2053 ST 1 347 STUDIO $165,000 0.391669% $1,650 $588
2054 OB 1 551 1 BED $191,350 0.454217% $1,914 $681
2055 OB 1 551 1 BED $194,350 0.461338% $1,944 $692
2056 OB 1 551 1 BED $191,350 0.454217% $1,914 $681
2057 OB 1 551 1 BED $194,350 0.461338% $1,944 $692
2058 OB 1 551 1 BED $191,350 0.454217% $1,914 $681
2059 OB 1 551 1 BED $194,350 0.461338% $1,944 $692
</TABLE>
Page 3
<PAGE>
ANNEX A
SEDONA GOLF RESORT AND CONFERENCE CENTER
UNIT VALUES
-----------
<TABLE>
<CAPTION>
INITIAL OPERATING
UNIT UNIT AREA UNIT PURCHASE PERCENTAGE CLOSING CASH
NUMBER TYPE (SQFT) DESCRIPTION PRICE INTEREST COSTS RESERVE
<S> <C> <C> <C> <C> <C> <C> <C>
2060 OB 1 551 1 BED $191,350 0.454217% $1,914 $681
2061 OB 1 551 1 BED $194,350 0.461338% $1,944 $692
2062 OB 8 618 1 BED $194,350 0.461338% $1,944 $692
2063 OB 1 551 1 BED $194,350 0.461338% $1,944 $692
2064 OB 1 551 1 BED $191,350 0.454217% $1,914 $681
2065 OB 1 551 1 BED $194,350 0.461338% $1,944 $692
2066 OB 1 551 1 BED $191,350 0.454217% $1,914 $681
2067 OB 8 618 1 BED $197,350 0.468459% $1,974 $703
2068 ST 1 347 STUDIO $162,000 0.384547% $1,620 $577
2069 ST 1 347 STUDIO $165,000 0.391669% $1,650 $588
2070 OB 1 551 1 BED $191,350 0.454217% $1,914 $681
2071 OB 3 631 1 BED $194,350 0.461338% $1,944 $692
2072 OB 1 551 1 BED $191,350 0.454217% $1,914 $681
2074 OB 2 648 1 BED $197,350 0.468459% $1,974 $703
2076 OB 2 648 1 BED $197,350 0.468459% $1,974 $703
2078 OB 1 551 1 BED $194,350 0.461338% $1,944 $692
2079 OB 3 631 1 BED $194,350 0.461338% $1,944 $692
2080 OB 1 551 1 BED $194,350 0.461338% $1,944 $692
2081 ST 1 347 STUDIO $162,000 0.384547% $1,620 $577
2082 ST 1 347 STUDIO $165,000 0.391669% $1,650 $588
2083 OB 1 551 1 BED $191,350 0.454217% $1,914 $681
2084 OB 1 551 1 BED $194,350 0.461338% $1,944 $692
2085 ST 1 347 STUDIO $162,000 0.384547% $1,620 $577
2086 ST 1 347 STUDIO $165,000 0.391669% $1,650 $588
2087 OB 7 700 1 BED $194,350 0.461338% $1,944 $692
2088 OB 7 700 1 BED $197,350 0.468459% $1,974 $703
3001 ST 1 347 STUDIO $167,500 0.397603% $1,675 $596
3002 OB 1 551 1 BED $193,850 0.460151% $1,939 $690
3003 OB 8 618 1 BED $199,850 0.474394% $1,999 $712
3004 OB 1 551 1 BED $193,850 0.460151% $1,939 $690
3005 OB 1 551 1 BED $196,850 0.467273% $1,969 $701
3006 OB 10 608 1 BED $196,850 0.467273% $1,969 $701
3007 ST 2 418 STUDIO $169,800 0.403063% $1,698 $605
3008 OB 1 551 1 BED $196,850 0.467273% $1,969 $701
3009 ST 1 347 STUDIO $167,500 0.397603% $1,675 $596
3010 OB 1 551 1 BED $196,850 0.467273% $1,969 1969
3011 OB 1 551 1 BED $196,850 0.467273% $1,969 $701
3012 OB 1 551 1 BED $196,850 0.467273% $1,969 $701
3013 OB 1 551 1 BED $196,850 0.467273% $1,969 $701
</TABLE>
Page 4
<PAGE>
ANNEX A
SEDONA GOLF RESORT AND CONFERENCE CENTER
UNIT VALUES
-----------
<TABLE>
<CAPTION>
INITIAL OPERATING
UNIT UNIT AREA UNIT PURCHASE PERCENTAGE CLOSING CASH
NUMBER TYPE (SQFT) DESCRIPTION PRICE INTEREST COSTS RESERVE
<S> <C> <C> <C> <C> <C> <C> <C>
3014 OB 1 551 1 BED $196,850 0.467273% $1,969 $701
3015 OB 1 551 1 BED $196,850 0.467273% $1,969 $701
3016 OB 1 551 1 BED $196,850 0.467273% $1,969 $701
3017 OB 1 551 1 BED $196,850 0.467273% $1,969 $701
3018 OB 8 618 1 BED $199,850 0.474394% $1,999 $712
3019 OB 1 551 1 BED $196,850 0.467273% $1,969 $701
3020 OB 1 551 1 BED $196,850 0.467273% $1,969 $701
3021 OB 1 551 1 BED $196,850 0.467273% $1,969 $701
3022 OB 1 551 1 BED $196,850 0.467273% $1,969 $701
3023 OB 8 618 1 BED $199,850 0.474394% $1,999 $712
3024 ST 1 347 STUDIO $167,500 0.397603% $1,675 $596
3025 ST 1 347 STUDIO $167,500 0.397603% $1,675 $596
3026 OB 1 551 1 BED $196,850 0.467273% $1,969 $701
3027 OB 3 631 1 BED $199,850 0.474394% $1,999 $712
3028 OB 1 551 1 BED $196,850 0.467273% $1,969 $701
3030 OB 2 648 1 BED $199,850 0.474394% $1,999 $712
3032 OB 2 648 1 BED $196,850 0.467273% $1,969 $701
3034 OB 1 551 1 BED $193,850 0.460151% $1,939 $690
3035 OB 3 631 1 BED $199,850 0.474394% $1,999 $712
3036 OB 1 551 1 BED $193,850 0.460151% $1,939 $690
3037 ST 1 347 STUDIO $167,500 0.397603% $1,675 $596
3038 ST 1 347 STUDIO $164,500 0.390482% $1,645 $586
3039 OB 1 551 1 BED $196,850 0.467273% $1,969 $701
3040 OB 1 551 1 BED $193,850 0.460151% $1,939 $690
3041 ST 1 347 STUDIO $167,500 0.397603% $1,675 $596
3042 ST 1 347 STUDIO $164,500 0.390482% $1,645 $586
3043 OB 7 700 1 BED $199,850 0.474394% $1,999 $712
3044 OB 7 700 1 BED $196,850 0.467273% $1,969 $701
3045 ST 1 347 STUDIO $167,500 0.397603% $1,675 $596
3046 OB 1 551 1 BED $193,850 0.460151% $1,939 $690
3047 OB 8 618 1 BED $199,850 0.474394% $1,999 $712
3048 OB 1 551 1 BED $193,850 0.460151% $1,939 $690
3049 OB 1 551 1 BED $196,850 0.467273% $1,969 $701
3050 OB 10 608 1 BED $193,850 0.460151% $1,939 $690
3051 ST 2 418 STUDIO $169,800 0.403063% $1,698 $605
3052 OB 1 551 1 BED $193,850 0.460151% $1,939 $690
3053 ST 1 347 STUDIO $167,500 0.397603% $1,675 $596
3054 OB 1 551 1 BED $193,850 0.460151% $1,939 $690
3055 OB 1 551 1 BED $196,850 0.467273% $1,969 $701
</TABLE>
Page 5
<PAGE>
ANNEX A
SEDONA GOLF RESORT AND CONFERENCE CENTER
UNIT VALUES
-----------
<TABLE>
<CAPTION>
INITIAL OPERATING
UNIT UNIT AREA UNIT PURCHASE PERCENTAGE CLOSING CASH
NUMBER TYPE (SQFT) DESCRIPTION PRICE INTEREST COSTS RESERVE
<S> <C> <C> <C> <C> <C> <C> <C>
3056 OB 1 551 1 BED $193,850 0.460151% $1,939 $690
3057 OB 1 551 1 BED $196,850 0.467273% $1,969 $701
3058 OB 1 551 1 BED $193,850 0.460151% $1,939 $690
3059 OB 1 551 1 BED $196,850 0.467273% $1,969 $701
3060 OB 1 551 1 BED $193,850 0.460151% $1,939 $690
3061 OB 1 551 1 BED $196,850 0.467273% $1,969 $701
3062 OB 8 618 1 BED $196,850 0.467273% $1,969 $701
3063 OB 1 551 1 BED $196,850 0.467273% $1,969 $701
3064 OB 1 551 1 BED $193,850 0.460151% $1,939 $690
3065 OB 1 551 1 BED $196,850 0.467273% $1,969 $701
3066 OB 1 551 1 BED $193,850 0.460151% $1,939 $690
3067 OB 8 618 1 BED $199,850 0.474394% $1,999 $712
3068 ST 1 347 STUDIO $164,500 0.390482% $1,645 $586
3069 ST 1 347 STUDIO $167,500 0.397603% $1,675 $596
3070 OB 1 551 1 BED $193,850 0.460151% $1,939 $690
3071 OB 3 631 1 BED $196,850 0.467273% $1,969 $701
3072 OB 1 551 1 BED $193,850 0.460151% $1,939 $690
3074 OB 2 648 1 BED $199,850 0.474394% $1,999 $712
3076 OB 2 648 1 BED $199,850 0.474394% $1,999 $712
3078 OB 1 551 1 BED $196,850 0.467273% $1,969 $701
3079 OB 3 631 1 BED $196,850 0.467273% $1,969 $701
3080 OB 1 551 1 BED $196,850 0.467273% $1,969 $701
3081 ST 1 347 STUDIO $164,500 0.390482% $1,645 $586
3082 ST 1 347 STUDIO $167,500 0.397603% $1,675 $596
3083 OB 1 551 1 BED $193,850 0.460151% $1,939 $690
3084 OB 1 551 1 BED $196,850 0.467273% $1,969 $701
3085 ST 1 347 STUDIO $164,500 0.390482% $1,645 $586
3086 ST 1 347 STUDIO $167,500 0.397603% $1,675 $596
3087 OB 7 700 1 BED $196,850 0.467273% $1,969 $701
3088 OB 7 700 1 BED $199,850 0.474394% $1,999 $712
TOTAL 119858 $42,127,450 100% $421,275 $150,000
</TABLE>
Page 6
<PAGE>
ANNEX B
SEDONA GOLF RESORT AND CONFERENCE CENTER
HOTEL OPERATING AND RENTAL POOL AGREEMENT
<PAGE>
ANNEX B
SEDONA GOLF RESORT AND CONFERENCE CENTER,
HOTEL OPERATING AND RENTAL POOL AGREEMENT
This Agreement dated for reference , 1997
BETWEEN:
UP SEDONA, INC., an Arizona corporation
- and -
THE OWNERS OF THE UNITS from time to time, who are parties to
this Agreement in accordance with Article 16 hereof
(collectively, the "Owners")
AND:
DELTA HOTELS INTERNATIONAL, INC., a Delaware Corporation
("Delta")
WHEREAS:
A. The Owners are the owners of the Units;
B. Delta is knowledgeable in the operation of First-Class Hotels and Delta and
its parent company have performed such functions throughout Canada and in
the United States;
C. The Owners desire to engage Delta to act as the Owners' exclusive manager
for the operation of the Hotel in accordance with the terms and conditions
set out in this Agreement; and
D. Delta agrees to perform such services for the Owners in accordance with
this Agreement.
THEREFORE, the parties agree as follows:
ARTICLE 1
INTERPRETATION
1.1 DEFINITIONS. The following terms as used in this Agreement have the
following meanings, except as otherwise expressly provided or unless the context
otherwise requires:
<PAGE>
ANNEX B
(1) "Administration Fee" means the fee payable to Delta established and
paid pursuant to section 7.5.
(2) "Affiliate" means, with respect to any person:
(a) any person which is Controlled by that particular person; or
(b) any person which Controls that particular person,
whether such Control be direct or indirect;
(3) "Annual General Meeting" means the annual general meeting of the
Association pursuant to the Condominium Act;
(4) "Annual Statement" has the meaning set forth in section 8.2(2);
(5) "Approved Operating Plan and Budget" means any Operating Plan and
Budget approved pursuant to section 5.1(3) or deemed to be approved
pursuant to section 5.1(2);
(6) "Arm's Length" means characteristic of a transaction negotiated by
unrelated parties each acting in its own best interests;
(7) "Assessment" means a Common Expense Assessment or a Special Assessment
levied against Unit pursuant to the Condominium Documents;
(8) "Association" means the Sedona Golf Resort and Conference Center
Condominium Association, an Arizona non profit corporation;
(9) "Association Expenses" means expenditures made by or on behalf of the
Association for professional services rendered by accountants,
attorneys, consultants and any manager engaged by the Association who
performs any services other than those required to be performed by
Delta under this Agreement;
(10) "Base Fee" means the fee payable to Delta established and paid
pursuant to section 7.1;
(11) "Board of Directors" means the duly elected board of directors of the
Association, or its authorized agent;
(12) "Business Day" means any day which is not a Saturday, Sunday, or a
statutory state or federal holiday in the State of Arizona;
(13) "Capital Expenditures" means all expenditures of the Hotel of a
capital nature which are not expenses, as determined in accordance
with Generally Accepted Hotel Accounting Principles;
(14) "Certified Public Accountants" means the firm of certified public
accountants selected by Delta and approved by the Board of Directors;
2
<PAGE>
ANNEX B
(15) "Commencement Date" means the date that the Hotel (including the
restaurant, parking areas, and conference facilities contained
therein) is opened by Delta for business as a "Delta" hotel;
(16) "Common Elements" means Tract A on the Plat and all other portions of
the Condominium other than the Units.
(17) "Condominium Act" means the Arizona Condominium Act, A.R.S. 33-1201 et
seq., as amended from time to time.
(18) "Condominium Documents" means the Declaration, the Articles of
Incorporation and the Bylaws of the Association.
(19) "Control" means:
(a) the right to exercise a majority of the votes which may be put at
a meeting of the shareholders of a corporation, the partners of a
partnership, or the members of a limited liability company; and
(b) the right to elect or appoint, directly or indirectly, a majority
of the directors of a corporation or the manager of a limited
liability company or other persons who have the right to manage
or supervise the management of the affairs and business of a
person;
(20) "Declaration" means the Condominium Declaration for Sedona Golf Resort
and Conference Center, a condominium, dated ______________, 1997, by
UP Sedona, Inc., an Arizona corporation, as declarant, which
condominium declaration has been recorded in Book ____ of Maps, page
____, records of Yavapai County, Arizona, and any amendments,
supplements or corrections thereto;
(21) "Delta" means Delta Hotels International, Inc., a Delaware
corporation;
(22) "Delta Group" means the group of hotels located in Canada or the
United States as may, from time to time, be managed by Delta or any
Affiliate of Delta as a "DELTA" hotel using the trademark and
tradename "DELTA";
(23) "Delta Marketing and Sales Expenses" has the meaning set forth in
section 7.3;
(24) "Delta Recoveries" has the meaning set forth in section 7.6;
(25) "Employees" means the employees of the Hotel hired by Delta pursuant
to section 9.6;
(26) "Escalation Factor" means the fraction (which may be greater than,
equal to or less than one) of which:
(a) the numerator is the Consumer Price Index for all Urban Consumers
(CPI-U) U.S. City Average (1982-84 = 100), issued by the United
States Department of
3
<PAGE>
ANNEX B
Labor, Bureau of Labor Statistics (the "Consumer Price Index") as
of the date that the Escalation Factor is to be determined; and
(b) the denominator is the Price Index as of the prior date to which
the date of the determination of the Escalation Factor is being
compared,
except that if at any time the Bureau of Labor Statistics no
longer publishes the Consumer Price Index or is no longer
operated by the United States government, the Escalation Factor
will be determined by the agreement of the Board of Directors and
Delta or, failing such agreement, arbitration in accordance with
section 18.1;
(27) "Executive Unit" means a Unit designated as an Executive Unit pursuant
to the Declaration, which Unit shall not be available for personal use
or occupancy by the Owner, as more fully described in section 10.2.
(28) "FF&E Reserve" means the reserve to be established by Delta pursuant
to the terms of section 6.6;
(29) "First-Class Hotel" means the standards of a first-class commercial
resort in accordance with hotel industry standards in the vicinity of
Sedona and Oak Creek Canyon, Arizona;
(30) "Fringe Benefits" means those benefits normally given from time to
time to employees or personnel at any hotel within the Delta Group,
including without limitation, pension, medical, health and life
insurance and similar employee plans, bonus or gain sharing plan
participation, the benefits of any housing loan and relocation costs;
(31) "Furniture, Fixtures and Equipment" means all furniture, equipment,
fixtures and furnishings necessary for the proper operation of the
Hotel and wherever situated in the Hotel Premises, whether or not
located in a Unit or in the Common Elements, including, without
limitation, office equipment and furniture, computers and computer
systems, conference facility equipment, laundry equipment, telephones
and telephone systems, video machines, mini bars, refrigerators,
stoves, kitchen equipment, food service and dining equipment,
carpeting, rugs and other floor coverings, draperies, curtains,
tapestries, screens, works of art, pictures, paintings, prints, beds,
mattresses, bedspreads, pillows, radios and television sets, including
such items bearing the Delta name or identifying characteristics as
Delta, acting reasonably, considers appropriate;
(32) "Generally Accepted Hotel Accounting Principles" means generally
accepted accounting principles observed by certified public
accountants in the United States and as supplemented by the Uniform
System of Accounts for Hotels published by the Hotel Association of
New York City, Inc.;
(33) "Gross Revenue" means all revenue of any kind whatsoever derived
directly or indirectly from the Hotel Premises or any portion thereof
and the operation of the Hotel, including, without limitation, all of
the following:
4
<PAGE>
ANNEX B
(a) all revenue from the use and enjoyment of the Hotel by Hotel
Guests and Owners pursuant to this Agreement, including room
charges, restaurant revenue, catering revenue, mini-bar revenue
(if applicable), conference center revenue, room service revenue
(if applicable), houseke charges, telephone revenue, movie rental
revenue and the fees and charges referred to in section 10.3;
(b) all revenue from parking, if any;
(c) proceeds received from any business interruption insurance; and
(d) all other revenue from the operation of the Hotel, including
revenue from any amenity at the Hotel for which a charge is made
and from any business or facility operated within the Hotel
Premises, vending machine revenue and revenue and fees from
licensees or concessionaires within the Hotel Premises,
excluding, however, all of the following:
(e) applicable excise, sales, income, hotel, room, entertainment and
use taxes or similar government charges collected directly from
Hotel Guests and Owners or as part of the sales price of any
goods or services;
(f) gains arising from the sale or other disposition of capital
assets or unwanted inventory;
(g) revenue from condemnation awards or sales or other transfers in
lieu of and under the threat of condemnation;
(h) proceeds of any insurance other than business interruption
insurance;
(i) rebates, discounts or credits of a similar nature (other than
credit card discounts, which will be included as an item of
revenue and considered a Hotel Expense);
(j) gratuities paid to Employees; and
(k) payments received at the Hotel for accommodation, goods or
services to be provided at other hotels;
(34) "Head Office Personnel" means any member of the corporate staff of
Delta operating on behalf of the Delta Group and not for the Hotel
only;
(35) "Hotel" means the Hotel Premises and the hotel operation known as
"Sedona Golf Resort and Conference Center, a Delta Suite Hotel"
managed by Delta for the Owners in respect of the Hotel Premises
pursuant to this Agreement;
(36) "Hotel Bank Account" means the bank account established pursuant to
section 8.1;
5
<PAGE>
ANNEX B
(37) "Hotel Expenses" means all expenses properly incurred in accordance
with Generally Accepted Hotel Accounting Principles and the terms and
conditions set out in this Agreement in connection with the earning of
the Gross Revenue and chargeable to the Owners in accordance with this
Agreement, including, without limitation:
(a) the Base Fee;
(b) the Delta Marketing and Sales Expenses;
(c) the Delta Recoveries;
(d) the Administration Fee;
(e) any amount payable to and in respect of the Employees in
accordance with this Agreement, including hiring costs and
expenses, Fringe Benefits, withholding amounts and costs of
termination;
(f) utility costs and charges;
(g) the cost of the Operating Supplies and Expendables;
(h) expenses in connection with the maintenance and repair of the
Hotel Premises and the maintenance and repair of any Furniture,
Fixtures and Equipment;
(i) the cost of operating and maintaining any parking facility at the
Hotel;
(j) travel agent commissions and credit card commissions;
(k) insurance premiums;
(l) deductibles paid in connection with claims on insurance policies
required to be maintained under Article 13; and
(m) the cost of filing any tax returns and reports in regards to the
taxes described in section 6.10(1);
but excluding the following:
(n) the Association Expenses;
(o) Special Assessments for capital improvements
(p) the Incentive Fee;
(q) depreciation and amortization;
(r) capital lease payments;
6
<PAGE>
ANNEX B
(s) Capital Expenditures;
(t) any taxes personal to the Owners, including but not limited to
income taxes, real property taxes and capital gains taxes; and
(u) debt service payments payable by the Owners;
(38) "Hotel Guests" means the users and occupants of the Hotel from time to
time including the Owners, other than the Owners using the Hotel in
accordance with Schedule B and persons claiming under the Owners
pursuant to Schedule B;
(39) "Hotel Premises" means the real property located in Yavapai County,
Arizona, together with the buildings and other improvements located
thereon and more particularly described as the "Condominium" in the
Declaration;
(40) "Incentive Fee" means the fee payable to Delta established and paid
pursuant to section 7.2;
(41) "Initial Term" has the meaning set forth in section 2.2;
(42) "In the Rental Pool" has the meaning set forth in section 6.3;
(43) "Net Hotel Return" means Gross Revenue less the aggregate of all of
the following:
(a) the Hotel Expenses;
(b) the amount contributed to the FF&E Reserve in respect of all of
the Hotel Premises during the Operating Year for which the Net
Hotel Return is being determined; and
(c) real property taxes;
(44) "Operating Cash Reserve" means the reserve to be established pursuant
to section 6.7;
(45) "Operating Plan and Budget" means the marketing and operating plan and
budget for the operations of the Hotel for any Operating Year
established pursuant to the terms of sections 5.1 and 5.2;
(46) "Operating Supplies and Expendables" means any operating supplies used
by Delta in the operation of the Hotel in accordance with this
Agreement, including the terms of any Approved Operating Plan and
Budget, including, without limitation, laundry supplies, linens,
housekeeping supplies, engineering supplies, accounting supplies,
miscellaneous general supply items, uniforms, food and beverage
inventories, inventories, paper supplies and other such items that
when used once are considered to be disposed of and all other similar
items necessary or appropriate for the operation of the Hotel as
contemplated by this Agreement;
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ANNEX B
(47) "Operating Year" means:
(a) firstly, the period from the Commencement Date to and including
December 31 in the year after the year in which the Commencement
Date occurs; and
(b) thereafter, each period of 12 months from and including the first
day of January to and including the last day of December, or the
portion thereof in the case of the last year of the Term;
(48) "Owner-Sponsor" means UP Sedona, Inc., an Arizona corporation;
(49) "Percentage Interest" means the percentage interest of any Unit as set
forth in Exhibit B to the Declaration;
(50) "Person" means any individual, corporation, body corporate, limited
liability company, partnership, joint venture, trust, unincorporated
organization or other entity, government or governmental or regulatory
authority, however constituted, or any trustee, executor,
administrator or other legal representative;
(51) "Plat" means the Condominium Plat for Sedona Golf Resort and
Conference Center, a condominium, which plat has been recorded in Book
___ of Maps, page ____, records of Yavapai County, Arizona, and any
amendments, supplements or corrections thereto;
(52) "Prime Rate" means the floating rate of interest used by Bank One
Arizona, N.A. from time to time as a reference rate for establishing
rates of interest for loans payable on demand and commonly known as
its "prime rate", except that if at any time Bank One Arizona, N.A. no
longer publishes its prime rate, the Prime Rate will be the "prime
rate" published in the "Money Rates" or equivalent section of the
Western Edition of The Wall Street Journal provided that if a "prime
rate" range is published by The Wall Street Journal, then the highest
rate of that range will be used, and if The Wall Street Journal ceases
publishing a prime rate or prime rate range, the Prime Rate will be
determined by the agreement of the Board of Directors and Delta or,
failing such agreement, by arbitration in accordance with section
18.1;
(53) "Related Person" means, with respect to any person:
(a) any Affiliate of such person;
(b) any person who is not at Arm's Length to such person or any
Affiliate of such person; and
(c) any person who is a director, officer, employee or agent of such
person or any Affiliate of such person or any spouse, parent,
child or relative (including by marriage) of any of the
foregoing;
(54) "Rental Pool" means the rental management arrangement in respect of
the Hotel undertaken by Delta on behalf of the Owners pursuant to this
Agreement;
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ANNEX B
(55) "Revpar" means "Room Revenue" divided by "Available Rooms", where:
(a) "Room Revenue" means all gross revenue derived from the rental of
sleeping rooms, net of any applicable rebates and discounts and
excluding any incidental revenue such as telephone charges and
movie rental; and
(b) "Available Rooms" means the total number of rooms available for
rental to the public on a daily basis, and in the case of the
Hotel, the Available Rooms will mean the total number of rooms in
the Rental Pool on a daily basis;
(56) "Security" has the meaning set forth in section 16.5;
(57) "Security Holder" has the meaning set forth in section 16.5;
(58) "Special Resolution" means a resolution passed at a meeting of the
Owners properly convened in accordance with the Condominium Documents
passed by Owners present or represented by proxy and representing not
less than 75% of the Owners entitled to vote thereon provided,
however, that Owners who, in person or by proxy, cast their votes as
abstentions shall not be considered to be entitled to vote on such
matters;
(59) "Term" has the meaning set forth in section 2.2;
(60) "Unit Revenue Share" has the meaning set forth in section 6.2;
(61) "Unit" means that portion of the Hotel Premises designated for
separate ownership or occupancy, the boundaries of which are described
in section 2.5 of the Declaration together with any limited common
element for the exclusive use of any such Units;
1.2 Interpretation. For all purposes of this Agreement, except as otherwise
expressly provided or unless the context otherwise requires:
(1) "this Agreement" means this Hotel Operating and Rental Pool Agreement,
as it may from time to time be supplemented or amended by one or more
agreements between the parties in accordance with the terms hereof;
(2) except where otherwise specifically stated, all references in this
Agreement to designated "Articles", "sections" and other subdivisions
are to be designated Articles, sections and other subdivisions of this
Agreement;
(3) the words "herein", "hereof" and "hereunder" and other words of
similar import refer to this Agreement as a whole or not to any
particular Article, section or other subdivision;
(4) the headings are for convenience only and do not form a part of this
Agreement and they will not be used to interpret, define or limit the
scope, extent or intent of this Agreement or any provision hereof;
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ANNEX B
(5) the word "including", when following any general statement, term or
matter, will not be construed to limit such general statement, term or
matter to the specific items or matters set forth immediately
following such word or to similar items or matters, whether or not
non-limiting language (such as "without limitation", "without limiting
the generality of the foregoing", or "but not limited to" or words of
similar import) is used with reference thereto, but rather will be
deemed to refer to all other items or matters that could reasonably
fall within the broadest possible scope of such general statement,
term or matter;
(6) words importing the neuter gender include the masculine or feminine
gender and words in the singular include the plural, and vice versa.
1.3 Applicable Law. This Agreement will be governed by and construed and
enforced in accordance with the laws of the State of Arizona (without giving
effect to the principles thereof relating to conflicts of law) which will be
deemed to be the proper law hereof, and, subject to Article 18, the courts of
the State of Arizona or of the United States of America for the District of
Arizona will have exclusive jurisdiction in connection with all matters under
this Agreement and the interpretation and enforceability hereof.
1.4 Statutes. Any reference in this Agreement to any statute means such statute
and any statute or law enacted to supersede or replace such statute.
ARTICLE 2
COMMENCEMENT DATE, TERM OF AGREEMENT
2.1 Commencement Date. This Agreement will be a binding agreement and bind the
Hotel Premises, Delta and all of the Owners upon the execution and delivery
hereof by the Owner-Sponsor and Delta. The duties and obligations of the parties
under this Agreement will come into full force and effect upon the Commencement
Date except that Delta's obligation to prepare an Operating Plan and Budget for
the first Operating year will come into full force and effect upon execution of
this Agreement by all of the parties hereto.
2.2 Initial Term. The initial term of the appointment of Delta as the Owners'
manager under this Agreement will be a period commencing on the Commencement
Date and terminating at midnight at the end of the day on December 31, 2008 (the
"Initial Term"). For purposes of this Agreement, the word "Term" means the
Initial Term and any extensions thereof pursuant to section 2.3 or section 2.6.
2.3 Renewals by Delta. Following the Initial Term, the appointment of Delta as
the Owners' manager pursuant to this Agreement will be automatically renewed
(without the requirement for notice by either the Owner or Delta) for two
successive periods of five years each (each called a "Renewal Term"), provided
that:
(1) the Owners have not, prior to the end of the Initial Term or any
Renewal Term, elected to terminate the appointment of Delta as manager
under this Agreement pursuant to section 15.2;
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ANNEX B
(2) Delta has not, prior to the end of the Initial Term or any Renewal
Term, elected to terminate the appointment of Delta as manager under
this Agreement pursuant to section 15.3;
(3) the Initial Term has been extended for all prior periods;
(4) Delta, in its sole discretion, has not given the Board of Directors
written notice of its election not to so renew such appointment on or
before the date which is six months prior to the end of the then
existing Initial Term or Renewal Term, as the case may be; and
(5) the Owners have not elected to terminate the appointment of Delta as
manager under this Agreement in accordance with section 2.5.
2.4 Renewal - By Agreement and Special Resolution by Owners. In addition to
renewals pursuant to section 2.3, the parties may agree to renew the appointment
of Delta as the Owners' manager pursuant to this Agreement for a Renewal Term or
Renewal Terms for such period or periods and upon such terms and conditions as
may be approved by both:
(1) an agreement in writing signed by Delta; and
(2) an agreement in writing signed by the Board of Directors and approved
by a Special Resolution of the Owners,
and both Delta and all of the Owners will be bound by any such renewal.
2.5 Performance by Delta.
(1) This Agreement may be terminated by the Owners in 2009 or any
subsequent Operating Year by Special Resolution if any of the
following occur:
(a) The Revpar Test is not met, or
(b) The Revpar Test is met, but the Profitability Test is not met.
(2) The Owners or the Board of Directors shall give Delta notice of
termination which shall be effective no less than 60 and no more
than 90 days after delivery of the notice of termination.
2.6 Revpar Test.
(1) Commencing in 2008, the Revpar Test shall be deemed to not have been
met if, in two consecutive Operating Years beginning on or after 2007,
the Revpar for the Hotel, under Delta's management, is not at least
the Minimum Average Revpar (as determined below) of the Sample
Properties (as determined below).
(2) The Minimum Average Revpar shall initially be equal to 90% of the
average Revpar of the Sample Properties for the comparable time
period. The Minimum Average Revpar
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ANNEX B
may be adjusted higher or lower by agreement of the Owners and Delta
as provided in section 2.6(6) and following an addition to or deletion
from the Sample Properties.
(3) The Sample Properties shall initially consist of the following
hotels/resorts:
(a) Enchantment Resort
(b) L'Auberge de Sedona
(c) Poco Diablo
(d) Junipine
(e) Arroyo Roble
(4) The Sample Properties may not be changed except as provided in section
2.6(6) and except as agreed to by the Owners and Delta where one of
the following occurs:
(a) One of the Sample Properties ceases to operate or no longer meets
the criteria for Sample Properties.
(b) An additional hotel/resort that satisfies the Sample Properties
criteria opens in the vicinity of Sedona and Oak Creek Canyon,
Arizona and completes 2 full years of operation.
The addition or deletion of a hotel/resort as a Sample Property shall,
at the request of the Owners or Delta, be subject to review by a
member of the International Society of Hospitality Consultants
("ISHC") to determine whether the proposed Sample Property satisfies
the criteria fo being a Sample Property.
(5) The Sample Properties shall consist of the hotels/resorts determined
from time to time in accordance with this Agreement based on the
following criteria:
(a) The Sample Properties shall serve similar market segments to the
Hotel.
(b) The Sample Properties shall be full service hotels/resorts
offering first-class accommodations and recreation and restaurant
facilities.
(c) The Sample Properties shall be located in the vicinity of Sedona
and Oak Creek Canyon, Arizona.
(d) The Hotel shall not be a Sample Property.
(6) The Sample Properties and the amount of the Minimum Average Revpar
shall be reevaluated and, if appropriate, changed by agreement of the
Sponsor and Delta approximately five months prior to the Commencement
Date.
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ANNEX B
(7) If,
i) Delta and the Sponsor are unable to agree upon whether the
initial Minimum Average Revpar or the initial Sample
Properties need to be modified no later than 4 months prior
to the Commencement Date, or
ii) Delta and the Owners are unable to agree within 90 days
after a change in the Sample Properties, upon an appropriate
Minimum Average Revpar taking into account the effect, if
any, of such change,
then, such matter shall be resolved by arbitration in the manner
described in this section 2.6. All arbitrators appointed pursuant to
this section 2.6 shall be hospitality industry experts selected from
the membership of the ISHC. If the Owners and Delta are unable to
agree, withi 30 days after the event giving rise to the arbitration,
upon the selection of a single arbitrator to arbitrate the dispute,
Delta and the Owners shall each select one arbitrator to arbitrate the
dispute. If the two arbitrators selected by the Owners and Delta are
unable to agree upon a resolution of the dispute, a third arbitrator
shall be selected by the Chairman of the ISHC for that purpose. The
authority of the arbitrators shall be limited to determining the
Minimum Average Revpar or the Sample Properties, as the case may be.
(8) Commencing in 2006, the Board of Directors and Delta shall jointly
compile Revpar information for the Sample Properties on or before June
30 of each year. The Revpar information shall be obtained, to the
extent available, from a generally accepted industry source, such as
Smith Travel Research. The Board of Directors and Delta shall jointly
attempt to directly obtain Revpar information for any Sample Property
for which the Revpar information is not available from an recognized
industry source. The Board of Directors and Delta agree that the
Revpar information, whether obtained directly from a Sample Property
or through a recognized industry source, shall be deemed to be
conclusively accurate, absent manifest error.
2.7 Profitability Test.
(1) Commencing in 2008, the Profitability Test shall be deemed to not have
been met if, in any two consecutive Operating Years beginning on or
after 2007 in which the Revpar Test has been met, the annual Net Hotel
Return is less than the following (the "Minimum Return"):
2007 and 2008 $3,625,000
2009 and thereafter $3,750,000
(2) For any Operating Year in which the Hotel is rendered totally or
partially inoperative or in which Net Hotel Return is otherwise
materially adversely affected by reason of force majeure including,
without limitation, strike, fire, flood, pestilence, war, civil
strife, embargo, act of God or other circumstance or market condition
beyond the reasonable control of Delta, or, if the size of the Hotel
shall be reduced by reason of partial
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ANNEX B
destruction or governmental taking, the Minimum Return described in
section 2.7(1) shall be reduced proportionately to reflect the effect
of the foregoing enumerated circumstances.
2.8 Topping Up by Delta. Notwithstanding the provisions of section 2.5:
(1) If the Owners or the Board of Directors have given a notice of
termination in accordance with section 2.5, within 60 days after
receipt by Delta of such notice, Delta will have the right, but not
the obligation, to pay to the Owners the difference between the actual
Net Hotel Return and the Minimum Return for each of the two years in
which the failure occurred. If Delta does not elect to cure, and the
Owners give Delta a notice of termination as provided in section 2.5,
Delta may, within 10 days after receipt of the notice of termination,
give the Owners written notice of Delta's election to arbitrate such
dispute in the following manner. All arbitrators appointed pursuant to
this section 2.8 shall be hospitality industry experts selected by the
Owners and Delta from the membership of the ISHC. If, within 30 days
after Delta's notice of election to arbitrate, the Owners and Delta
are unable to agree upon the selection of a single arbitrator Delta
and the Owners shall each select one arbitrator to arbitrate the
dispute. If the two arbitrators selected by the Owners and Delta are
unable to agree upon a resolution of the dispute, a third arbitrator
shall be selected by the Chairman of the ISHC for that purpose. The
authority of the arbitrators shall be limited to determining whether
the cause of the failure to meet the performance tests described in
this section 2.8 was attributable to factors beyond the reasonable
control of Delta. Unless the arbitrators determine that the failure to
meet the performance test was primarily attributable to factors beyond
the reasonable control of Delta, the Owners' notice of termination
shall be effective. Fees associated with the arbitration shall be
borne equally unless otherwise determined by the arbitrators,
provided, however, that each party shall be responsible for its
attorneys' fees incurred in connection with the arbitration.
(2) The Owner's notice of termination will be deemed to be withdrawn upon
payment by Delta of the amounts permitted to be paid pursuant to this
section and written notice from Delta to the Owners thereof.
ARTICLE 3
HOTEL RENTAL MANAGEMENT
3.1 Management of Hotel Rental Pool. The Owners hereby appoint Delta as their
exclusive manager to manage the operation of the Hotel and the Rental Pool in
respect thereof in accordance with the terms and conditions set out in this
Agreement and to undertake on an exclusive basis, on behalf of and for the
account of the Owners, all duties and obligations coming within the scope of the
management and marketing of the Hotel Premises, including those specific
services as set forth herein. Without limiting any of its duties or obligations
set out in this Agreement, Delta agrees to operate the Hotel Premises as a
First-Class Hotel, except to the extent that Delta is prevented from maintaining
this standard of service due to any default by any Owner pursuant to this
Agreement.
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ANNEX B
3.2 Hotel Rental Pool. Delta will manage the rental of the Units in accordance
with this Agreement. Each of the Owners hereby irrevocably covenants and agrees
to be bound by the rental bookings of its Unit made by Delta in accordance with
this Agreement.
3.3 Use. The Units will be used only as condominium hotel units and only in
accordance with the Declaration, this Agreement and the Rental Pool and will not
be used for any other purpose without the prior written consent of the Owners
and Delta. Any use of the Units will comply with the Declaration, all applicable
laws, bylaws, rules and regulations and any other Condominium Documents.
3.4 Restrictions Re: Condominium Documents. No Owner will vote in favor of any
amendment or modification of, or addition to, the Condominium Documents which
conflicts with a term or condition set out in this Agreement.
3.5 Monitoring Use by Owners. Delta will maintain such books and records as may
be necessary to monitor use of the Units by Owners to ensure that no Owner uses
its Unit more than is permitted by this Agreement.
ARTICLE 4
ACTS OF THE BOARD OF DIRECTORS
4.1 Owners' Meetings. The Owners will have meetings in respect of this Agreement
in accordance with the requirements of the Condominium Documents.
4.2 Board of Directors. Subject to the following, the Owners will be represented
by the Board of Directors established pursuant to the Condominium Documents:
(1) upon a change in the members of the Board of Directors, the new Board
of Directors will notify Delta in writing thereof;
(2) no person on the Board of Directors who is a Related Person to Delta
may vote in respect of any matter under or relating to this Agreement;
(3) Delta will advise the Owners of any nominee to the Board of Directors
who is a representative of a person who is a Related Person to Delta
prior to the election of such person to the Board of Directors.
(4) unless otherwise determined by the Board of Directors from time to
time, Delta will be given notice of and be entitled to attend meetings
of the Board of Directors;
(5) Delta will be entitled to rely on any agreement, document or
instrument signed by the chairperson or any two members of the Board
of Directors or the duly appointed agent of the Board of Directors;
and
(6) all acts and thing done by the Board of Directors or its duly
appointed agent as set out in this Agreement will be binding upon all
of the Owners and Delta will be entitled to rely on all acts and
things done by the Board of Directors in purported compliance with
this Agreement, except where a Special Resolution is expressly
required.
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ANNEX B
4.3 Release and Indemnity of Board of Directors. The Owners hereby release and
agree to fully indemnify and hold harmless the members of the Board of Directors
for all acts and things done by the members of the Board of Directors as members
of the Board of Directors in good faith in connection with this Agreement.
4.4 Major Decisions - Special Resolutions. The following will be subject to the
approval of the Owners by Special Resolution:
(1) any amendment to or modification of this Agreement;
(2) the renewal of the Term pursuant to section 2.4;
(3) termination of the appointment of Delta as Owners' manager pursuant to
section 15.2;
(4) assignment, transfer or disposition of Delta's rights under this
Agreement if required in section 17.1;
(5) changes and modifications to the Hotel Premises as provided in section
9.4(1); and
(6) any other matter which, pursuant to the terms of this Agreement, is
required to be approved by a Special Resolution.
To the extent that Delta or an Affiliate of Delta is an Owner of Units, Delta,
for itself and on behalf of its Affiliates, irrevocably appoints the president
of the Association as its proxy for the limited purpose of casting Hotel
Operator's and its Affiliate's votes as abstentions on matters required to be
approved by Special Resolution described in subsections 4.4(1)-4.4(4).
4.5 Owners to be Bound. All of the Owners will be bound by any acts and things
done by the Board of Directors in accordance with the Condominium Documents and
this Agreement and any Special Resolutions passed by the Owners at any meeting
of the Owners in accordance with the Condominium Documents and this Agreement.
ARTICLE 5
OPERATING PLAN AND BUDGET
5.1 Operating Plan and Budget.
(1) For the first Operating Year, the Operating Plan and Budget will be
prepared by Delta and approved by the Owner-Sponsor, acting as the
Board of Directors, prior to the Commencement Date. Such Operating
Plan and Budget will be an Approved Operating Plan and Budget and
Delta will mail a summary thereof to each of the Owners.
(2) After the first Operating Year, on or before December 1 of each year,
Delta will prepare and deliver to a meeting of the Board of Directors
duly convened in accordance with this Agreement a preliminary
Operating Plan and Budget for the following Operating Year and Delta
will review such preliminary Operating Plan and Budget with the Board
of Directors at such meeting. For a period of 30 days after receipt by
the Board of Directors
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ANNEX B
of the preliminary Operating Plan and Budget at such meeting of the
Board of Directors, the Board of Directors is entitled from time to
time to request further details from Delta and to submit written
comments to Delta. The Board of Directors will give good faith
consideration to the preliminary Operating Plan and Budget and not
reasonably refuse to accept any item, provided such item is in
accordance with this Agreement. If the Board of Directors does not
respond to the preliminary Operating Plan and Budget within the 30 day
period, then the Board of Directors will be deemed to have approved
the preliminary Operating Plan and Budget and such Operating Plan and
Budget will be deemed to be an Approved Operating Plan and Budget. If
after giving good faith consideration to the preliminary Operating
Plan and Budget, the Board of Directors within such 30 day period
gives Delta written notice of its objection and proposals for
amendment of any disputed items, the Board of Directors and Delta,
both acting reasonably, will endeavor to resolve any such differences
between them.
(3) Each Operating Plan and Budget is subject to the approval of the Board
of Directors and no Operating Plan and Budget will be an Approved
Operating Plan and Budget unless it is approved or deemed approved by
the Board of Directors in accordance with this section 5.1(3). If any
Operating Plan and Budget is not approved by the Board of Directors,
then:
(a) pending resolution of any disputed item, the specific disputed
items of the Operating Plan and Budget will be suspended and
replaced for the Operating Year in question by an amount equal to
the lesser of (i) that proposed by Delta for such Operating Year
or (ii) such budget in the Approved Operating Plan and Budget for
the Operating Year prior thereto, subject to escalation per item
by the Escalation Factor, over the 12 month period immediately
following the start of the Operating Year in question, provided
that if such budget item was not in the Approved Operating Plan
and Budget for the Operating Year prior thereto, such item will
be suspended pending resolution of such item; and
(b) either the Board of Directors or Delta may submit the Operating
Plan and Budget to be settled by arbitration in accordance with
section 18.1.
(4) Delta makes no assurances that actual performance of the Hotel will
correspond to such estimates contained in the Approved Operating Plan
and Budget. However, Delta agrees to use its best efforts to operate
the Hotel within the Approved Operating Plan and Budget. The Owners
acknowledge that notwithstanding Delta's experience and expertise in
relation to the operation of hotels, the projections contained in each
Approved Operating Plan and Budget are subject to and may be affected
by changes in financial, economic and other conditions and
circumstances beyond Delta's control.
5.2 Inclusions in Operating Plan and Budget. The Operating Plan and Budget will
be a reasonably detailed budget of revenue and expenses in connection with the
operation of the Hotel, similar in kind and scope to operating plans and budgets
prepared by Delta for other hotels in the Delta Group as of the Commencement
Date, and will include the following:
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ANNEX B
(1) the projected Gross Revenue, detailed as to each source of revenue,
together with information and background as to how the various
projections have been determined;
(2) the budgeted Hotel Expenses, by major expense category, together with
information and background as to how the various projections have been
determined;
(3) the projected Unit Revenue Share for each Unit;
(4) the marketing strategy and plan for the Hotel;
(5) any recommended Capital Expenditures for capital improvements to be
made to the Hotel Premises; and
(6) the basis upon which the Delta Marketing and Sales Expenses and Delta
Recoveries will be charged.
5.3 Budget Summary. Delta will mail to each of the Owners a summary of each
Approved Operating Plan and Budget once it is approved in accordance with this
Article 5.
ARTICLE 6
OWNERS' REVENUES AND DISTRIBUTIONS TO OWNERS
6.1 Calculations by Delta. For each calendar month during the Term, Delta will
prepare or cause to be prepared reasonably detailed financial statements,
prepared in accordance with Generally Accepted Hotel Accounting Principles and
for each such period Delta will calculate:
(1) the Gross Revenue;
(2) the Hotel Expenses;
(3) the Capital Expenditures, if any;
(4) the FF&E Reserve;
(5) the Incentive Fee, if any;
(6) capital lease payments, if any;
(7) the Operating Cash Reserve; and
(8) the Unit Revenue Share for each Unit, determined in accordance with
section 6.2. No later than the 20th day following the end of each
calendar month during the Term, Delta will
(9) deliver to the Board of Directors such financial statements; and
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ANNEX B
(10) mail to each of the Owners a written summary statement (the "Monthly
Statement"), setting out the amounts set out in sections 6.1(1)
through 6.1(8) above and the calculations thereof, in reasonable
detail.
6.2 Calculations of Unit Revenue Share. The Owners and Delta agree that:
(1) for each day that a Unit is In the Rental Pool, the Owner of such Unit
will be entitled to share in the Gross Revenue from the Hotel Premises
and the operation of the Hotel earned on such day, as calculated by
multiplying the Gross Revenue earned on such day by the fraction which
has as its numerator the Percentage Interest of such Unit and as its
denominator the aggregate of the Percentage Interests of all of the
Units In the Rental Pool on such day;
(2) each Owner of a Unit will be responsible for the payment of all Hotel
Expenses, Capital Expenditures exceeding the FF&E Reserve, capital
lease payments and Incentive Fees payable for all days (whether or not
the Unit is In the Rental Pool), as calculated by multiplying the
relevant Hotel Expenses, the Capital Expenditures exceeding the FF&E
Reserve, capital lease payments and Incentive Fees by the Percentage
Interest; and
(3) each Owner will be responsible for the FF&E Reserve in accordance with
section 6.6 and for the Operating Cash Reserve in accordance with
section 6.7, as calculated by multiplying each of the FF&E Reserve and
the Operating Cash Reserve by the Percentage Interest.
For the purposes of this Agreement, the "Unit Revenue Share" for any Unit in
respect of any period means the amount allocated to such Unit in accordance with
section 6.2(1) for such period less the amounts allocated to such Unit in
accordance with sections 6.2(2) and 6.2(3).
6.3 "In the Rental Pool". For the purposes of this Agreement, a Unit will be
considered to be "In the Rental Pool" on a particular day only if it is not
booked for use by the Owner in accordance with Article 10 (unless the Owner
complies with the requirements of section 10.6 and Delta, acting reasonably,
determines that the Unit is In the Rental Pool).
6.4 Payments to Owners. Concurrently with the mailing of the Monthly Statement,
Delta will mail to each Owner a check, drawn upon the Hotel Bank Account, in the
amount equal to the Owner's Unit Revenue Share for the month for which the
Monthly Statement applies less the following amounts:
(1) any unpaid amount then payable by the Owner to Delta pursuant to
section 6.8; and
(2) any amount deductible therefrom pursuant to sections 6.9, 6.10 or
10.3; and
(3) any other amount payable by the Owner to Delta pursuant to this
Agreement; and
(4) withholding tax, if applicable.
Notwithstanding the foregoing, Delta may at any time, in consultation with the
Board of Directors, prepare a reasonable estimate of the annual Unit Revenue
Share payable to each of the Owners pursuant
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ANNEX B
to this section 6.4 and distribute to the Owners concurrently with the mailing
of the monthly statements the amount of such estimate, less a percentage (not to
exceed 20%) established by Delta for seasonal working capital requirements in 12
equal monthly payments, in which case at the end of such Operating Year Delta
will calculate or cause to be calculated the actual Unit Revenue Share payable
to each of the Owners in accordance with this Agreement and include such
calculation in the Annual Statement as set out in section 8.2(2) and at such
time Delta will pay to each Owner the balance of his or her Unit Revenue Share
payable for such Operating Year.
6.5 Maintenance and Repair of Units. Delta will, for and on behalf of the
Owners, keep the Units in substantially the same condition they were in as of
the Commencement Date, nominal wear and tear excepted, and the cost thereof will
be a Hotel Expense. The Owners acknowledge and agree that the cost of
maintaining and repairing the Units will be shared by all of the Owners during
the Term in accordance with pro rata shares based on Percentage Interests.
6.6 FF&E Reserve. Delta will establish for and on behalf of the Owners a reserve
in the following amounts:
(1) 0% of the Gross Revenue for the 12 month period following the
Commencement Date; and
(2) 5.0% of the Gross Revenue thereafter.
The FF&E Reserve will be held by Delta, for and on behalf of the Owners, in a
separate account from the Hotel Bank Account, as a reserve for Capital
Expenditures for the repair and replacement of the Hotel Premises and for the
repair and replacement of any Furniture, Fixtures and Equipment. Delta will, for
and on behalf of the Owners, keep the Hotel Premises and the Furniture, Fixtures
and Equipment in substantially the same condition, quality and scope they were
in as of the Commencement Date, normal wear and tear excepted, and the Owners
hereby authorize Delta to use the FF&E Reserve only for such purposes. Delta
will be under no obligation to use its own funds for such purpose. The Owners
acknowledge and agree that the FF&E Reserve will be for the benefit of all of
the Units collectively and not for each individual Unit separately and that the
cost of maintaining and replacing the Furniture, Fixtures and Equipment will be
shared by all of the Owners during the Term in accordance with pro rata shares
based on Percentage Interests. The FF&E Reserve, at all times during the Term
and after termination or expiry of this Agreement, shall remain the property of
the Owners.
6.7 Operating Cash Reserve. A reserve in the amount of $150,000 will be
established for and on behalf of the Owners, for use by Delta on behalf of the
Owners, as working capital in connection with the operation of the Hotel. The
Operating Cash Reserve will be initially established with funds paid by each
Owner at the time of settlement of the Owner's purchase of its Unit. If, 12
months after the Commencement Date, there have not been a sufficient number of
purchases of Units to fund the Operating Cash Reserve in the amount of $150,000,
Sponsor shall contribute such amounts as are necessary to fully fund the
Operating Cash Reserve. Sponsor shall be reimbursed for the amount so
contributed out of closing proceeds as and when remaining Units are purchased.
Commencing 12 months after the Commencement Date, Delta will at all times be
authorized to withhold each month from the Owners' Unit Revenue Shares
sufficient funds in order to keep the Operating Cash Reserve at such $150,000
level throughout the Term. The Operating Cash Reserve will be held in the Hotel
Bank Account and, commencing 12 months after the Commencement Date, Delta may
withdraw funds from the
20
<PAGE>
ANNEX B
Operating Cash Reserve to pay any Hotel Expenses, Capital Expenditures in excess
of the FF&E Reserve, capital lease payments and the Incentive Fee. During the 12
month period following the Commencement Date, Owner-Sponsor shall provide to
Delta such funds as may be necessary for the payment of Hotel Expenses, Capital
Expenditures, capital lease payments and the Incentive Fee to the extent that
there are inadequate funds derived from the operations of the Hotel to pay such
amounts. The Operating Cash Reserve, at all times during the Term and after
termination or expiry of this Agreement, shall remain the property of the
Owners.
6.8 Shortfalls. If at any time the funds in the Hotel Bank Account are not
sufficient to pay when due any Hotel Expenses, Capital Expenditures in excess of
the FF&E Reserve, capital lease payments or Incentive Fees payable under this
Agreement, then:
(1) Delta may (such as in the case of seasonal operating shortfalls), but
will not be obligated to, pay any such amount out of its own funds, in
which case the Owners will repay such amount to Delta forthwith upon
demand and will pay interest on any amount outstanding at the rate
equal to the Prime Rate plus 2% per annum, calculated from the date of
advance by Delta until the date of repayment by the Owners and Delta
may deduct the amount of any such payment by Delta and interest
thereon from the Hotel Bank Account; or
(2) Delta may require the Owners to pay the amount of the shortfall
estimated by Delta, by mailing to the Owners a written notice setting
out such amount and each Owner's proportionate share thereof, as
calculated by multiplying the amount of such shortfall by the
Percentage Interest.
(3) Delta shall have all rights and remedies available at law or in equity
to enforce the payment of any shortfall by any Owner, and the
Association will cooperate with Delta to collect such shortfall
including enforcing any assessment lien and remitting the proceeds of
any such enforcement actions to Delta.
6.9 Payment of Unit Expenses by Owners. Each of the Owners will promptly pay
when due all taxes personal to the Owners in respect of such Owner's Unit,
including income taxes and capital gains taxes, and all amounts owing under any
financing of the Owner's Unit arranged by such Owner. For administrative
purposes, Delta will, if requested by the Board of Directors, pay to the
Association for and on behalf of and in the name of each Owner, out of the Unit
Revenue Share payable to such Owner, the Owner's pro rata share of Assessments.
If any Owner's Unit Revenue Share is not sufficient to pay any such amount,
Delta will notify such Owner thereof and such Owner will either remit to Delta
any shortfall and Delta will pay such amount or pay such amount directly, as
directed by Delta.
6.10 Other Taxes. The parties agree that:
(1) Delta will, as agent for and on behalf of the Owners, collect and
remit to any applicable taxing authority, within the required time for
the remittance thereof, any tax, hotel tax, transient lodging tax, bed
tax and other tax imposed or collected in connection with the
21
<PAGE>
ANNEX B
use of the Hotel Premises by Hotel Guests and Owners, and make any
necessary filings and reports in respect thereof; and
(2) Delta may withhold from any of the Owners and remit to any relevant
taxing authority any amount required to be withheld or remitted in
respect of withholding tax or any other applicable statutory tax,
charge or levy which Delta is required to withhold or remit.
6.11 No Separate Revenue for Delta. Except as specifically set out in this
Agreement or any other agreement in writing between or among Delta, the Owners
or the Association, neither Delta nor any person Related to Delta will receive
any other revenue, profit or reward of any kind or nature from or in respect of
the Hotel Premises or the Hotel or any portion thereof. Notwithstanding the
foregoing, Delta and any person Related to Delta will be entitled to receive any
amount payable to Delta or such person pursuant to this Agreement as an Owner of
any Unit. Except as otherwise provided herein, to the extent Delta or any person
Related to Delta owns any Units, Delta or such person Related to Delta shall be
entitled to all of the rights, benefits and privileges, and shall be subject to
all of the burdens, obligations and liabilities of an Owner hereunder.
ARTICLE 7
MANAGEMENT AND OTHER FEES AND REIMBURSABLE EXPENSES
7.1 Base Fee. The Owners and Delta agree that:
(1) during the Term, Delta will receive a Base Fee as compensation for the
services rendered in accordance with this Agreement as follows:
(a) for the period commencing on the Commencement Date and ending at
the end of the month on the first anniversary of the Commencement
Date, the Owners will pay to Delta a Base Fee of $10,000 per
month (with a pro rata portion thereof for a part of a month);
and
(b) thereafter, the Owners will pay to Delta a Base Fee in an amount
of 3.0% of Gross Revenue for each Operating Year payable in
monthly installments in respect of the Gross Revenue for the
preceding month, payable as a Hotel Expense in each case upon the
delivery of the Monthly Statement in respect of such month;
(2) the Base Fee paid in respect of each Operating Year will be adjusted
annually, based on actual Gross Revenue for that Operating Year,
within 30 days after the delivery of the Annual Statement.
7.2 Incentive Fee. The Owners and Delta agree that:
(1) if for any Operating Year during the Term the Net Hotel Return exceeds
$3,200,000 the Owners will pay to Delta an Incentive Fee for such
Operating Year equal to the aggregate of the following:
22
<PAGE>
ANNEX B
Incentive Fee
-------------
- --------------------------------------------------------------------------------
YEAR YEAR YEAR YEAR
NET HOTEL RETURN 1 2 3,4,5 6,7,8,9,10
- --------------------------------------------------------------------------------
Less than $3.2 Million 0.0% 0.0% 0.0% 0.0%
Over $3.2 Million and 15.0% 15.0% 12.0% 10.0%
up to $4.2 Million of the amount by which Net Hotel Return exceeds $3.2
Million
Over $4.2 Million 30.0% 25.0% 22.50% 10.0%
of the amount by which Net Hotel Return exceeds $4.2
Million
(2) For purposes of computing the Incentive Fee, the first Operating Year
shall be deemed to commence on January 1, 1999 and end on December 31,
1999.
(3) the Incentive Fee in respect of each Operating Year, will be payable
to Delta 30 days after the mailing of the Annual Statement.
(4) during any Renewal Term, the Incentive Fee shall be computed in the
same manner as in year 10 of the Initial Term.
7.3 Sales, Reservations, Advertising and Marketing Expenses. For the services
provided by Delta pursuant to Article 9, including, without limitation, the
Delta Group advertising and marketing programs, sales and reservation systems
the Owners will, pay to Delta and its Affiliates the fees and charges set out in
sections 9.9(3) and 9.9(7), (net of any applicable credits) (collectively called
"Delta's Marketing and Sales Expenses"). The Owners acknowledge that the basis
and method of allocation of Delta's Marketing and Sales Expenses may change
during the Term and the Owners agree to any such change provided it is in
accordance with section 7.4.
7.4 Limitation on Delta's Marketing and Sales Expenses. Delta agrees that none
of Delta's Marketing and Sales Expenses will be:
(1) charged on a basis different than that charged to any other hotel in
the Delta Group; or
(2) allocated by a method other than that set out in the then current
Approved Operating Plan and Budget.
7.5 Administration Fee. The Owners and Delta agree that:
(1) for the services provided by Delta pursuant to Articles 3 and 6 the
Owners will pay to Delta an annual Administration Fee equivalent to $5
per month per Unit.
(2) the Administration Fee will be payable monthly as a Hotel Expense in
each case upon the delivery of the Monthly Statement in respect of
such month.
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<PAGE>
ANNEX B
7.6 Reimbursement of Delta Recoveries. The Owners agree to reimburse Delta for
all reasonable costs incurred by Delta for the Owners' account in the ordinary
course of business, which costs will be Hotel Expenses, including, without
limitation, the following:
(1) the daily per diem rate for those personnel of Delta assigned to
special projects, which will be based upon each individual's rate of
pay and Fringe Benefits (such special projects will include, but not
be limited to, special sales or marketing programs, training and
installation of capital purchases and reasonable travel and
out-of-pocket expenses will be included);
(2) reasonable travel and out-of-pocket expenses incurred directly in
connection with the operation of the Hotel by Head Office Personnel.
When such expenses were incurred in visiting a number of hotels within
the Delta Group, the cost will be reasonably prorated to all those
hotels; and
(3) the reasonable cost of the standard Delta corporate services utilized
by hotels within the Delta Group such as, but not limited to,
attendance at Delta's management seminars and other conferences,
operating handbooks and manuals, purchasing services, departmental
services, and corporate marketing services,
and provided that each of the foregoing is set out in an Approved Operating Plan
and Budget or otherwise preapproved by the Board of Directors.
ARTICLE 8
HOTEL BANK ACCOUNT AND BOOKS AND RECORDS
8.1 Hotel Bank Account. Delta will have the right to designate the United States
bank having a branch reasonably convenient to the Hotel with which the Hotel
will conduct its various banking affairs, and all funds received in the
operation of the Hotel will be deposited into a trust account bearing the name
of the Hotel in such bank. The Hotel Bank Account will be under the control of
Delta. Checks and other documents of withdrawal will be signed only by persons
authorized by Delta. All funds in the Hotel Bank Account will belong to the
Owners and will be dealt with in accordance with this Agreement. Delta is hereby
authorized to pay all Hotel Expenses, Capital Expenditures, Association
Expenses, capital lease payments (if any) and Incentive Fees incurred in
accordance with this Agreement and all amounts repayable to the Owner-Sponsor
pursuant to section 6.7 from funds in the Hotel Bank Account.
8.2 Books, Records, Financial Statements.
(1) Delta agrees on behalf of the Owners, to keep on the Hotel Premises
proper books of account and other records relating to or reflecting
the results of the operations of the Hotel in accordance with this
Agreement. All books of account and other records are the property of
the Owners and will be available to the Board of Directors at all
reasonable times for examination, audit, inspection and copying. Upon
any termination of this Agreement, all financial books and records and
a list of the Hotel's individual guests who stayed at the Hotel during
the preceding two years (with their names and addresses and the dates
of their arrivals and departures) will be turned over forthwith to the
Board
24
<PAGE>
ANNEX B
of Directors to ensure the orderly continuance of the operation
of the Hotel. All books and records will thereafter be available to
Delta at the Hotel, at all reasonable times, for inspection, audit,
examination and copying. Any costs and expenses incurred in providing
books and records to Delta after termination will be paid by Delta.
(2) Within 75 days after the end of each Operating Year, Delta agrees to
cause to be prepared and mailed to all of the Owners, reasonably
detailed financial statements in accordance with Generally Accepted
Hotel Accounting Principles, together with an annual statement setting
out the items referred to in sections 6.1(1) to (6) the Incentive Fee,
if any, and the calculation of each of them (collectively called the
"Annual Statement") and any other reports or information as may be
reasonably required by the Owners for tax purposes. Unless otherwise
agreed by the Board of Directors in advance, the Annual Statement will
be audited by the Certified Public Accountants and will contain a
certification by the Certified Public Accountants to the effect that
all of such items have been calculated in accordance with the terms of
this Agreement.
ARTICLE 9
SERVICES TO BE RENDERED BY DELTA
9.1 Management Services. Delta will:
(1) use all reasonable efforts to sell room nights in respect of the Units
to Hotel Guests;
(2) use all reasonable efforts to sell the use of the conference
facilities, restaurant and other amenities located at the Hotel
Premises to Hotel Guests;
(3) carry out and perform all such acts and things as are reasonably
necessary or desirable in connection with the operation of the Hotel
as a First-Class Hotel in accordance with this Agreement;
(4) procure and maintain any licenses and permits which may be required in
connection with the carrying out of its duties and obligations under
this Agreement;
(5) strictly observe and abide by the terms and conditions set out in the
Declaration; and
(6) diligently and faithfully perform its duties and obligations under
this Agreement as would a reasonably prudent hotel manager in the
position of Delta.
9.2 General Management. Subject to the terms and conditions of this Agreement
and any Approved Operating Plan and Budget, Delta agrees to perform on behalf of
and for the account of the Owners, all appropriate and necessary management
services in connection with the operation of the Hotel as a First-Class Hotel,
including but not limited to:
(1) the general organization of the Hotel;
25
<PAGE>
ANNEX B
(2) the development and implementation of sales, advertising, personnel,
employment, purchasing and maintenance programs consistent with the
provisions of this Agreement;
(3) the implementation of administrative accounting, budgeting, and
operational policies and practices of Delta as used in the hotels
within the Delta Group, from time to time. Such policies and practices
will be deemed to be in compliance with Delta's obligations hereunder,
and the Owners will accept such policies and practices so long as they
do not conflict with any term or condition of this Agreement or any
Approved Operating Plan and Budget;
(4) the review of the conduct of hotel operations at the Hotel from time
to time in accordance with the standards of a First-Class Hotel and
established management practices and policies of Delta;
(5) the establishment and supervision of Delta's standard accounting and
inventory control systems which are normally used for the hotels
within the Delta Group which are comparable to the Hotel;
(6) the arrangement for the provision to the Hotel of all goods and
services as are necessary for the proper operation and maintenance of
a First-Class Hotel as contemplated by this Agreement;
(7) the establishment of all prices, charges and rates, and in connection
therewith, the supervision and control of the collection, receipt and
giving of receipts for all goods or services provided or revenue of
any nature derived from the operations of the Hotel;
(8) the determination of the Hotel's purchasing policy, including the
selection of the merchandise, supplies and materials and establishment
and maintenance of all inventories required for the proper operation
of the Hotel, and the selection of the suppliers and negotiation of
supply contracts in order to assure that all purchases are made on the
best available terms;
(9) the negotiation and execution of contracts which are normally entered
into within the scope of hotel operations and preparation of the
corresponding legal documents;
(10) the determination of credit practices applicable to suppliers and to
the Hotel's clientele and negotiation of arrangements with credit
organizations, in particular those issuing credit cards;
(11) with the prior approval of the Board of Directors, acting reasonably,
instituting in the name of the Hotel any lawsuits or other legal
actions having a direct link with the operations of the Hotel and
deemed necessary or advisable by Delta; and
(12) the supervision and control of the activities of Owners while in
occupancy of a Unit, Hotel Guests and any tenants, concessionaires and
holders of privileges in respect of any portion of the Hotel Premises
and their employees, including the dispossession of Hotel Guests,
Owners and tenants for nonpayment of rent or any other proper cause,
or the termination of the rights of concessionaires or licensees for
proper cause.
26
<PAGE>
ANNEX B
9.3 Maintenance.
(1) Delta agrees for the account of the Owners, to cause the Hotel
Premises and the Furniture, Fixtures and Equipment to be maintained in
good operating condition and repair, normal wear and tear excepted,
and Delta will replace, at the expense of the Owners, such items of
the Furniture, Fixtures and Equipment and Operating Supplies and
Expendables as from time to time may be appropriate in accordance with
the then current Approved Operating Plan and Budget. All items of
Furniture, Fixtures and Equipment not located within a Unit, forthwith
upon acquisition and receipt by Delta of any payment therefor, will
become, without further act, the property of the Owners and will be
owned collectively in accordance with their pro rata shares based on
Percentage Interest. Upon completion of reconstruction of any change
or addition to the Hotel, Delta will furnish to the Board of Directors
any guarantees and warranties relating to any portions of the Hotel or
the Furniture, Fixtures and Equipment and Operating Supplies and
Expendables. Delta agrees to cooperate with the Owners to enforce the
provisions of such guarantees and warranties. Delta will make no
expenditures for the repair and replacement of the Furniture, Fixtures
and Equipment or for maintenance and repair which would result in or
cause a change in the general character of the interior or exterior of
any portion of the Hotel Premises or make any Capital Expenditures
except if the same is included in an Approved Operating Plan and
Budget or otherwise preapproved by the Board of Directors.
(2) The Owners acknowledge that the Hotel will be operated as a member of
the Delta Group and that it will therefore be mandatory for the Hotel
Premises and the Furniture, Fixtures and Equipment to be maintained in
the manner befitting a First-Class Hotel in order to continue
operation of the Hotel as part of the Delta Group.
9.4 Changes and Alterations. From time to time during the Term, Delta may make,
at the Owners' expense, but subject to the terms of this Agreement and the then
current Approved Operating Plan and Budget, reasonable changes and alterations
to the Hotel Premises, or any part thereof, subject however in all cases to the
following:
(1) no change or alteration will be made which would:
(a) change the general character or description of the Hotel;
(b) involve the excavation of any portion of the Hotel Premises;
(c) include alteration of, or result in increasing the burden upon
the foundation of the Hotel Premises; or
(d) reduce the size of any Unit;
without the prior consent of the Owners by Special Resolution;
27
<PAGE>
ANNEX B
(2) all permits, licenses and authorizations required to be procured in
connection with any change or alteration will be procured (or caused
to be procured) by Delta, and the cost of the same will be a Hotel
Expense;
(3) any change or alteration will be made promptly in a good and
workmanlike manner and in compliance with all applicable laws, rules,
regulations and permits and insurance requirements;
(4) the cost of any change or alteration will be promptly paid (or caused
to be paid) so that the Hotel Premises will at all times be free from
any lien, encumbrance, mortgage, chattel mortgage, conditional sales
agreement, title retention agreement or other charge for labor,
services or material supplied or claimed to have been supplied to the
Hotel Premises;
(5) if any such change or alteration involves an estimated cost of more
than $50,000:
(a) Delta agrees to obtain the specific approval (in addition to
approval of the Approved Operating Plan and Budget) of the Board
of Directors to such change or alteration prior to Delta
proceeding;
(b) if Delta proposes to have such change or alteration supervised by
personnel of Delta or the Hotel, Delta will obtain the specific
approval of the Board of Directors as to whether such change or
alteration requires the supervision of an independent engineer or
architect; and
(c) if the Board of Directors so advises Delta in writing prior to
the Owners approving same, such change or alteration will be made
under the supervision of an architect or engineer approved by the
Board of Directors in accordance with detailed plans and
specifications approved the Board of Directors prepared by such
architect or engineer and the Board of Directors will have the
right to approve the contractor and to supervise construction.
9.5 Capital Expenditures. Delta is authorized to make Capital Expenditures only
in accordance with the terms of the then current Approved Operating Plan and
Budget or otherwise pre-approved by the Board of Directors, except where
required in an emergency to preserve property or the safety of persons in or
about the Hotel Premises.
9.6 Personnel and Employees.
(1) The selection and employment of the general manager and all such
other employees and personnel necessary for the proper operation of the Hotel is
the responsibility of Delta and all such persons will be employed by Delta as
employees of Delta. The hiring, promoting and discharging of the general manager
and any other employees and personnel and the terms of their employment,
including compensation, will be at the sole discretion of Delta, acting
reasonably and in the best interest of the Owners.
28
<PAGE>
ANNEX B
(2) Delta may delegate to the general manager of the Hotel, who in turn
may delegate to others, the selection and hiring of all employees and
personnel required for the operation of the Hotel.
(3) The general manager may, during the Term be replaced by Delta, and
likewise the employment of any other Employee may be terminated by
Delta or the general manager or by the person or persons to whom the
general manager will delegate such authority. The decision in regard
to any such discharge, whether directly or through the general manager
of the Hotel, will be at the sole discretion of Delta, acting
reasonably.
(4) The Owners agree that all costs and expenses incurred by Delta, acting
reasonably and prudently, in connection with the employment of the
Employees (including any hiring costs and expenses, Fringe Benefits,
withholding amounts and termination costs payable, including the costs
of terminating Employees at the end of the Term or earlier termination
of the appointment of Delta under this Agreement), will be Hotel
Expenses, payable by the Owners pursuant to this Agreement.
9.7 Delta Group Advertising.
(1) Delta agrees to integrate the Hotel in all corporate publicity,
advertising, audio visual and public relation programs and campaigns
with respect to hotels affiliated with the Delta Group. Advertising
may be implemented on a national or regional basis.
(2) Delta will cause the hotels in and affiliated with the Delta Group to
promote the Hotel with their own clientele in a similar manner to the
other hotels in and affiliated with the Delta Group.
9.8 Marketing at the Hotel.
(1) Delta will carry out on behalf of the Hotel all operational marketing
activities and the implementation of the Delta Group marketing policy
as applied to the Hotel.
(2) Marketing at the Hotel level will be established and carried out by
Delta for the market where the Hotel is located and other markets
which Delta reasonably believes relevant considering the nature of the
Hotel.
(3) Delta agrees to establish for the Hotel, as part of the Operating Plan
and Budget, an annual marketing plan for each Operating Year,
including, but not limited to:
(a) the determination of the sales policy of the Hotel;
(b) the determination of yearly and long-term objectives regarding
occupancy rates, revenues and clientele;
(c) the establishment of all Hotel rates (including the rates for any
lounge, bar, restaurant or conference facilities contained in the
Hotel);
29
<PAGE>
ANNEX B
(d) the setting of any special sales terms;
(e) the determination of credit practices;
(f) the establishment of sales methods and procedures relating to the
various clientele segments; and
(g) the analysis of results and permanent control.
(4) Delta agrees to perform appropriate advertising and promotion services
at the Hotel level including:
(a) the definition of the Hotel policy regarding advertising and
promotion;
(b) the preparation of advertising documents and brochures; and
(c) the reasonable distribution of such documents in the hotels of
the Delta Group, and other sales outlets.
(5) Delta agrees to make its central sales office available to the Hotel
for marketing action intended for specific territories. Delta will
assist the Hotel in reaching specific market segments through the
drafting of potential clientele lists, the visiting of selected travel
agencies, tour operators and corporations and the following up of such
activities in the processing of sales orders.
(6) Delta may undertake advertising campaigns in specific territories
through the Delta Group sales offices if necessary, subject to the
Approved Operating Plan and Budget.
(7) Delta agrees to integrate the Hotel in the various trade shows and
exhibitions attended by Delta or recommended for the Hotel.
(8) The Owners consent to the integration of the Hotel's guest list and
client list into Delta's guest history and client listing data base,
which may be used by hotels in the Delta Group.
9.9 Reservation and Sales Systems.
(1) The Hotel will be integrated into all reservation systems established
and used by the Delta Group including:
(a) the toll free telephone and reciprocal reservation system among
hotels of the Delta Group (the "Delta Reservation System");
(b) other sales and reservation systems (the "Other Reservation
Systems") chosen by the Hotel and available under contract with
the Delta Group according to the same terms and conditions
negotiated by the Delta Group for the other hotels of
30
<PAGE>
ANNEX B
the Delta Group (including international airlines and independent
reservations systems).
(2) Delta agrees with the Owners that throughout the Term, the Hotel will
have the right to benefit from the sales communication systems used by
the Delta Group.
(3) The Owners agree to abide by the reservation charges negotiated or
established by Delta with or for the Other Reservation Systems.
(4) The method of allocation of reservation charges in connection with the
Delta Reservation System will be set out in each Approved Operating
Plan and Budget. The parties acknowledge and agree that as of January
1, 1997, such charges (expressed in Canadian Dollars) were as follows:
(a) an overall charge of $9.00 per available room per month; plus
(b) a per transaction fee of:
(i) $6.25 per automated reservation booked; or
(ii) $7.75 per manual telephone reservation booked,
all charged monthly.
(5) The Owners agree to honor all reservations made by Delta in accordance
with this Agreement, including those made for the 24 month period
after the termination of the appointment of Delta under this
Agreement.
(6) The Hotel will be entitled to benefit from the sales and promotional
activities planned for groups undertaken at the national or
international level and intended for travel agents, tour operators,
incentive groups, conventions, corporations, governmental agencies,
international associations and airline companies. These activities
will be performed by or through Head Office Personnel.
(7) Delta agrees to distribute to all sales outlets as determined by
Delta, the following:
(a) information on services and facilities offered by the Hotel and
advertising literature published by the Hotel; and
(b) the individual and group rates established annually by the Hotel,
and if necessary, any special rates offered for specific markets.
(8) The Owners will pay to Delta its annual advertising and marketing
charge for the Hotel Premises, (the method of allocation of which will
be set out in the Approved Operating Plan and Budget) and the parties
acknowledge and agree that as of January 1, 1997, such advertising and
marketing charge was $45,000 (Canadian) plus 1.15% of Gross Room
Revenue (in Canadian dollar equivalent) per year.
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<PAGE>
ANNEX B
(9) The Owners agree that the Hotel will abide by all commission
agreements negotiated and established by Delta in good faith with
third parties who are not Related to Delta, pursuant to which the
services described in section 9.9(5) may be offered to hotels in the
Delta Group.
9.10 Other Delta Systems. Delta agrees to make available to the Hotel:
(1) all operational departmental supervision and control and other similar
services furnished to other hotels within the Delta Group; and
(2) all services used by hotels within the Delta Group generally, with
regard to the procurement of all Furniture, Fixtures and Equipment and
Operating Supplies and Expendables and other goods and services
required for the Hotel.
9.11 Performance of Delta's Services.
(1) In its management of the Hotel and to provide the Hotel with the
benefits of volume purchasing, market research in the development of
new and used equipment and supplies and design, decorating and other
services, Delta may, subject to the Approved Operating Plan and Budget
or the prior approval of the Board of Directors, purchase goods,
supplies and services from or through Delta or any of its Affiliates,
so long as the prices and terms are competitive with the prices and
terms of goods and services of equal quality available from others.
(2) Delta may pay to any of its Affiliates a reasonable fee for the
negotiation of contracts for the direct purchase by Delta from
independent suppliers of goods, supplies and services so long as the
prices and terms thereof when added to the fee are competitive. Such
fee and the prices and terms of goods and services charged to the
operation of the Hotel will be on the same basis as charged to the
operation of hotels owned by Delta Affiliates.
(3) Subject to the Approved Operating Plan and Budget, Delta may retain an
Affiliate or division as a consultant and to perform technical
services in connection with any substantial remodelling, repairs,
construction or other capital improvement to the Hotel and the
Affiliate or division will be reasonably compensated for its services.
9.12 Meetings. The Board of Directors and Delta agree to meet not less
frequently than quarterly, upon reasonable written notice from either party, to
discuss general Hotel operating procedures, the current Approved Operating Plan
and Budget the Operating Plan and Budget for an Operating Year, results of an
Operating Year, or any other matter of interest or concern.
ARTICLE 10
USE OF UNITS BY OWNERS
10.1 Use of Units by Owners. The parties agree that the terms and conditions set
out in Schedule B are binding upon all the Owners and Delta and are hereby
incorporated into this Agreement. Each Owner
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ANNEX B
(other than the Owner of an Executive Unit) will be permitted to use its Unit in
accordance with Schedule B and in no other manner whatsoever. If any Owner
proposes to book the use of his or her Unit in accordance with Schedule B, Delta
will not be responsible if the Unit has been otherwise booked, provided that
Delta has complied with Schedule B. Notwithstanding anything contained in
Schedule B (including the definition of "Day"), the Owners will be bound by and
comply with the check-in and check-out times established by Delta for the use of
the Units.
10.2 No Use by Executive Unit Owners. Notwithstanding any other provisions of
this Agreement, the Owner of an Executive Unit may not use or authorize or
assign to any other Person the right to use or occupy its Executive Unit (except
that any such Executive Unit shall be made available for use and occupancy under
the terms of this Agreement). The provisions of sections 10.3 through 10.6 shall
not be applicable to Executive Unit.
10.3 Daily Cleaning. The Owners will pay, upon checkouts, Delta's daily
mandatory clean charge, payable by an Owner for the periods in which the Owner
or a person claiming under the Owner uses the Owner's Unit in accordance with
Schedule B. As of the Commencement Date, such fees and charges are as follows:
Unit Type Cleaning Fee
Studio $20
One Bedroom $30
Delta may change any of such fees and charges in any Approved Operating Plan and
Budget, with the approval of the Board of Directors. In addition, the Owners and
those using the Units with the permission of the Owners in accordance with
Schedule B will pay the standard charges established by Delta for the following:
(1) long distance calls;
(2) movie rentals;
(3) vending machine charges;
(4) charges for use of any recreational facilities, including spas, golf
courses and racquet sport facilities at the Hotel Premises or off the
Hotel Premises pursuant to agreement with third parties; and
(5) purchases of other goods and services offered by Delta.
If any Owner does not pay any fee or charge set out in this section 10.3, Delta
may deduct such amount from the Owner's Unit Revenue Share. All of the fees and
charges set out in this section 10.3 received by Delta will be included in the
Gross Revenue.
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ANNEX B
10.4 No Charge for Common Property or Common Facilities. Except as set out in
section 10.3, Delta will not charge any Owner or any person claiming under the
Owner pursuant to Schedule B for the use or enjoyment of its Unit or any portion
of the Hotel Premises (including parking), provided that such use is in
accordance with this Article 10 and Schedule B.
10.5 Owner Election Not to Use. The Owner will forthwith notify Delta in writing
if the Owner determines or discovers at any time that the Owner or any person
claiming under such Owner will not use the Unit on any of the days for which the
Owner gave notice of the Owners use thereof pursuant to Schedule B and Delta may
then rent out the Owner's Unit to Hotel Guests on such days.
10.6 Use by or on Behalf of Owner. No Owner will use or permit any person to use
the Owner's Unit or the Common Elements except in accordance with this Article
10 or with the prior written consent of Delta in its sole discretion. The Owner
will be responsible for any use of its Unit by the Owner or any person claiming
under the Owner in accordance with this Article 10 and any amount payable from
any Owner in respect of such use of such Owner's Unit to Delta hereunder. Under
no circumstances will the Owner during the Term directly or indirectly charge
rent or accept any form of consideration for the use of the Owner's Unit except
in accordance with this Agreement.
10.7 Promotional Use by Owner-Sponsor. Notwithstanding any other provision in
this Agreement to the contrary, until Owner-Sponsor has sold all of the Units to
another Owner, Owner-Sponsor shall have the right to use Units reasonably
designated by Delta as models for the promotion and sale of the remaining unsold
Units. Delta shall also provide, at no cost to Owner-Sponsor, an office on the
Hotel Premises with telephone facilities for use in connection with the
promotion and sale of the unsold Units. Owner-Sponsor shall be liable for
operating costs in connection with the use of the office on the Hotel Premises
(e.g. telephone).
10.8 Additional Personal Use Benefits. Each Owner will have privileges with
other Delta hotels managed or operated in North America by Delta or its parent
company to reserve rooms at a 25% discount off the rack rate, subject to
availability. In addition, each Owner will receive, upon application to Delta or
its parent company, membership in the Delta Privilege guest recognition program.
The Owner's benefits and continued membership as a Delta Privilege member holder
are subject to the rules of the Delta Privilege program, as such rules may be
amended by Delta or its parent company from time to time.
ARTICLE 11
COVENANTS, REPRESENTATIONS AND WARRANTIES
11.1 Covenants. All of the terms and provisions of this Agreement will be deemed
and construed to be "covenants" to be performed by the respective parties as
though words specifically expressing or importing covenants and conditions were
used in each separate term and provision hereof.
11.2 Representations and Warranties of Delta. Delta represents and warrants, as
representations and warranties that are true as of the date hereof and will be
true at all times during the Term, as follows:
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ANNEX B
(1) it is a corporation duly organized, validly existing and in good
standing under the laws of the State of Delaware and is duly qualified
as a foreign corporation authorized to do business in Arizona.
(2) it has full corporate power, authority and legal right to operate the
Hotel and to perform and observe the provisions of this Agreement; and
(3) this Agreement constitutes a binding obligation of Delta enforceable
in accordance with its terms; and
covenants that it will, during the Term, preserve and keep in effect, at its own
expense and not as a Hotel Expense, its corporate existence, rights and licenses
as required to carry on business in the State of Arizona.
11.3 Representations and Warranties of Owners. Each of the Owners represents and
warrants, as representations and warranties that are true as of the date hereof
and will be true at all during the Term, as follows:
(1) if such Owner is a corporation, it is a corporation duly authorized to
do business under the laws of the State of Arizona;
(2) it has full power, authority and legal right to own real property in
the State of Arizona and to execute and deliver, and to perform and
observe the provisions of this Agreement;
(3) this Agreement constitutes the valid and binding obligations of the
Owner enforceable in accordance with its terms; and
covenants that if such Owner is a corporation, it will, during the term of this
Agreement, preserve and keep in effect, at its own expense, its corporate
existence, rights and licenses to carry on business in the State of Arizona.
ARTICLE 12
TRADEMARKS
12.1 Trademarks. The parties agree that:
(1) subject to section 12.2, during the Term, the Hotel will at all times
be known and designated as follows:
"Sedona Golf Resort and Conference Center
A Delta Suite Hotel"
or such other name as may be agreed by Delta and the Board of
Directors.
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ANNEX B
It is, however, agreed between the parties hereto that the name
"DELTA", when used alone or in conjunction with some other work or
words, is and will remain the exclusive property of Delta Hotels
Limited, a corporation constituted under the laws of Ontario, Canada,
which has all rig to the names "DELTA", "DELTA HOTELS", "DELTA HOTELS
& RESORTS" and "DELTA SUITE HOTEL"; and
(2) upon termination of this Agreement for any reason whatsoever or Delta
removing the "Delta" brand pursuant to section 12.2, the Owners will
remove the names "DELTA", "DELTA HOTELS", "DELTA HOTELS & RESORTS" and
"DELTA SUITE HOTEL" from all locations within the Hotel and from all
advertising or other materials used by the Hotel, and will cease
absolutely the use of the names "DELTA", "DELTA HOTELS", "DELTA HOTELS
& RESORTS" and "DELTA SUITE HOTEL" in any trademark thereof with
respect to the Hotel. The Owners hereby give Delta a power of attorney
to cancel any license agreement granted hereunder for the use of such
names.
12.2 Removal of "Delta" Brand. If at any time during the Term, 5 or more Units
are not subject to this Agreement (except where such Units are temporarily not
subject to this Agreement because of damage resulting from fire, flood or other
casualty), then Delta may, at its option, cease to operate or identify the Hotel
as part of the Delta Group, in which case:
(1) Delta may carry out its duties and obligations hereunder through a
subsidiary or assign this Agreement to a subsidiary;
(2) Delta will change the name of the Hotel to remove any references
to"Delta"; and
(3) Delta will not offer any of the Delta Group services described in this
Agreement and will not charge for such services accordingly and
alternate reservation services and marketing will be provided by Delta
or its subsidiary for the fees and charges to be set out in the
Approved Operating Plan and Budget or otherwise approved by the Board
of Directors.
ARTICLE 13
INSURANCE
13.1 Insurance. Delta will, for itself, the Owners, and the Association, at the
sole cost and expense of the Owners, as a Hotel Expense, take out and maintain
at all times during the Term:
(1) insurance in respect of the Hotel Premises and all the Furniture,
Fixtures and Equipment, including those in the Units, against loss or
damage by fire and all other reasonably insurable perils included in
the broad form extended coverage endorsement available under fire
policies in an amount not less than the actual replacement cost;
(2) comprehensive public, products and innkeepers' liability and property
damage insurance against claims for personal and bodily injury or
death and property damage occurring in or about the Hotel Premises,
with a single limit of not less than $50,000,000 per occurrence,
wherever practicable, or such higher amount as the Board of Directors
and Delta may agree, acting prudently;
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ANNEX B
(3) reasonable levels of business interruption insurance, as determined by
Delta, acting reasonably;
(4) worker's compensation insurance to the extent necessary to meet the
requirements of the laws of Arizona;
(5) employer's liability insurance, with a minimum liability limit of
$1,000,000;
(6) employee honesty insurance in the amount of $500,000 per occurrence;
(7) reasonable levels of boiler and machinery insurance; and
(8) such insurance coverages as are required under the Declaration with
limits no less than are required under the Declaration.
in all cases to the extent that such insurance is available.
13.2 Parties Insured. All insurance policies provided for in section 13.1 will,
to the extent reasonably possible, include the Owners, Delta and the Association
as parties insured as their interests may appear. All insurance policies
referred to in section 13.1 will provide that the same may not be cancelled or
materially modified until at least 10 days after prior notice to the Board of
Directors and Delta. Delta and the Board of Directors will be provided copies of
all such policies.
13.3 Insurance by Delta. The cost of furnishing any insurance pursuant to
section 13.1 will be borne by the Owners and charged by Delta to the Owners as a
Hotel Expense.
13.4 Schedules of Insurance. Delta will provide the Board of Directors with
copies of insurance certificates for any insurance obtained pursuant to section
13.1. At least once during each Operating Year, Delta will furnish to the Owners
a schedule of insurance, listing the number of the policies of insurance
obtained by Delta then outstanding and in force with respect to the Hotel
Premises, or any part thereof, the names of the companies issuing such policies,
or dates of such policies and the risks covered thereby.
ARTICLE 14
TITLE
14.1 Title. Each Owner represents, warrants, covenants and agrees that:
(1) it has, and that throughout the Term it will maintain, full ownership
of the Owner's Unit and the Furniture, Fixtures and Equipment therein,
free and clear of all non-consensual liens and encumbrances except any
Security and any other liens or encumbrances which do not materially
affect the operation of the Hotel by Delta, and those hereafter
approved in writing by Delta;
(2) the Owner will not remove, and will not permit any person claiming
under the Owner to remove, any item of FF&E in the Owner's Unit except
in accordance with this Agreement; and
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ANNEX B
(3) Delta, in the course of fulfilling its duties and obligations herein,
will and may peaceably and quietly possess, manage and operate the
Owner's Unit and the Furniture, Fixtures and Equipment therein during
the Term.
Each Owner will, at its own expense, undertake and prosecute any appropriate
action, judicial or otherwise, to assure peaceful and quiet possession of such
Owner's Unit by Delta. Each Owner further agrees that throughout the Term it
will observe and perform all terms, covenants, conditions, duties and
obligations required under any law, mortgage, or other agreement creating a lien
on the Owner's Unit and the Furniture, Fixtures and Equipment therein and pay
all property taxes and other charges levied with the property taxes.
ARTICLE 15
DEFAULT, OBLIGATIONS ON TERMINATION
15.1 Events of Default. The following will constitute events of default on the
part of Delta:
(1) the filing of a voluntary petition in bankruptcy or insolvency or a
petition for reorganization under any bankruptcy law by Delta;
(2) the consent to an involuntary petition in bankruptcy or the failure to
vacate within 60 days from the date of entry thereof any order
approving an involuntary petition by Delta;
(3) the entering of an order, judgement, or decree by any court of
competent jurisdiction, on the application of a creator, adjudicating
Delta a bankrupt or insolvent or approving a petition seeking
reorganization or appointing a receiver, trustee or liquidator of all
or a substantial part of such party's assets, and such order, judgment
or decree will continue unstayed and in effect for a period of 120
consecutive days; and
(4) the failure of Delta to perform, keep or fulfil any of its material
covenants, undertakings, obligations or conditions set forth in this
Agreement.
15.2 Remedies for Owners. If Delta is in default pursuant to section 15.1, the
Board of Directors may give to Delta notice of its intention to call a meeting
of the Owners to terminate the appointment of Delta under this Agreement after
the expiration of a period of 15 days from the date of such notice.
Notwithstanding the foregoing, with respect to events of default referred to in
section 15.1(1) and (4), upon receipt of such notice Delta, promptly and with
all due diligence, will proceed to cure the default referred to in section
15.1(4), or if such default is not susceptible of being cured within a 15 day
period, Delta will take and continue action to cure such default with all due
diligence until the same is cured, such additional period not to exceed 90 days
from such notice. Once a cure has been effected the notice will be of no effect.
If, following the expiration of such period such default has not been cured, the
Owners may, by Special Resolution, terminate the appointment of Delta pursuant
to this Agreement. The remedies granted in this section 15.2 will not be in
substitution for, but will be in addition to any rights and remedies otherwise
available for breach of contract or otherwise.
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ANNEX B
15.3 Termination by Delta. Delta may terminate its appointment as manager under
this Agreement at any time upon 60 days' written notice to the Board of
Directors (i) if the Owners fail to make or authorize Delta to make (at the sole
cost and expense of the Owners) Capital Expenditures without which the Hotel
cannot be operated as a First Class Hotel (and Delta hereby acknowledges and
agrees that as of the Commencement Date the capital improvements within the
Hotel Premises are sufficient for the Hotel to be operated as a First Class
Hotel) or (ii) the number of units subject to this Agreement is less than 200.
Any termination by Delta pursuant to this section 15.3 is without prejudice to
any other rights that Delta might otherwise have against the Owners or any of
them.
15.4 Remedies for Delta. The Owners acknowledge and agree that if any Owner or
Owners are in breach of any of their duties or obligations under this Agreement
Delta may seek an injunction or the specific performance by such Owner or Owners
of such duties or obligations, instead of or in addition to seeking damages
against such Owner or Owners.
15.5 Obligations on Termination. Upon termination or expiry of the appointment
of Delta under this Agreement, the following will apply:
(1) Delta and the Owners will cooperate with respect to all matters
relating to the transition of the Management of the Hotel;
(2) all fees and payments payable to Delta in accordance with this
Agreement, other than those referred to in Subsection 15.5(3) will be
paid to Delta when due, provided that Delta will not be entitled to
any Base Fee, Administrative Fee, Incentive Fee, Delta Marketing and
Sales Expenses or Delta Recoveries for any period following such
termination or expiry;
(3) all fees and payments due to Delta in accordance with this Agreement
which are computed on an annual or other periodic basis will be
annualized, prorated and paid within 30 days after termination of the
appointment of Delta under this Agreement, including all deferred,
accrued and unpaid fees;
(4) Delta will peacefully vacate the Hotel Premises and surrender the
management of the Hotel to or to the order of the Owners; and
(5) Delta will deliver to the Owners all the Owners' books and records
respecting the Hotel in the custody and control of Delta, and assign
and transfer to or to the order of the Owners all of Delta's right,
title and interest in and to all licenses and permits, if any, used by
Delta in the operation of the Hotel, provided that if Delta has
expended any of its own funds in the acquisition of such licenses or
permits, the Owners will reimburse Delta therefor if the Owners
request assignment and transfer of such licenses and permits.
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ANNEX B
ARTICLE 16
OWNER-SPONSOR, UNITS, DISPOSITIONS
16.1 Initial Agreement by Owner-Sponsor. The parties acknowledge and agree that
this Agreement is initially entered into with the Owner-Sponsor, as the owner of
all of the Units. The Owner-Sponsor his entered into this Agreement on behalf of
all subsequent owners of the Units and each such subsequent owners of the Units
will be bound by the terms and conditions of this Agreement insofar as this
Agreement relates to such Owner's Unit as though such Owner was a signatory
hereto. This Agreement will run with each of the Units and bind the Owners from
time to time of all of the Units and all of the Units will continue to be in the
Rental Pool in accordance with the terms and conditions of this Agreement.
Forthwith upon the completion of the sale of each Unit from the Owner-Sponsor,
Owner-Sponsor will provide to Delta the assignment and assumption agreement in
the form of Schedule A, duly executed by the Owner-Sponsor and the purchaser.
16.2 Limitation of Owners' Liability. Notwithstanding anything contained in this
Agreement, the duties, obligations and liabilities of each Owner pursuant to
this Agreement will be limited to:
(1) with respect to the duties and obligations relating directly to the
Units, to such Owner's duties and obligations arising directly in
respect of any Unit owned by such Owner; and
(2) with respect to duties and obligations of the Owners collectively
under this Agreement, to such Owner's proportionate share of such
duties and obligations, as calculated in accordance with the
Percentage Interest,
and without limiting the generality of the foregoing:
(3) Delta will not look to any Owner for the payment of any amount in
connection with this Agreement except as is expressly set out herein;
and
(4) no Owner will be liable for any act or omission of any other Owner.
The duties and obligations of the Owners are several only and not joint duties
or obligations.
16.3 Sale of Unit by any Owner. The Owners and Delta agree that if at any time
any Owner wishes to sell, lease or otherwise directly or indirectly dispose of
its Unit or any interest therein to any person (in this section 16.3 called a
"Transferee") (other than by way of financing to any Security Holder):
(1) prior to entering into any contract or agreement with any Transferee,
the Owner will notify the proposed Transferee of the existence and
substance of this Agreement and the fact that the ownership and use of
the Unit are subject to the rights of Delta and any bookings of the
Unit by the Selling Owner pursuant to this Agreement and the
Declaration, notify the proposed Transferee of any bookings of the
Unit by the Owner pursuant to Article 10 and provide the proposed
Transferee with a true copy of this Agreement;
(2) the Owner will not directly or indirectly sell, lease or otherwise
directly or indirectly dispose of the Unit or any interest therein
unless prior to the completion of such
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ANNEX B
transaction the proposed Transferee covenants pursuant to an agreement
in writing in favor of Delta, in the form and content of Schedule A
(modified to change the name of the Owner-Sponsor to the name of the
vendor of such Unit), to fully assume and be bound by this Agreement
insofar as it relates to such Unit, and Delta will provide the Owner
and the Transferee with copies of such agreement, duly executed by
Delta, as soon as reasonably possible thereafter;
(3) upon written request from the Owner, Delta will provide any
prospective Transferee therein with details of any bookings of the
Unit by the Owner pursuant to Article 10;
(4) the Owner or the Transferee will notify Delta of the completion of the
sale, lease or other disposition of the Unit and provide Delta with
reasonable evidence thereof, together with the assignment and
assumption agreement in the form of Schedule A, duly executed by the
Owner and the Transferee;
(5) Delta will not be required to make any adjustments as between the
Owner and any Transferee and Delta will be deemed to have fully
discharged its obligations hereunder if Delta pays the Unit Revenue
Share payable to such Owner in accordance with section 6.4 to or to
the order of the person who was, according to the records of Delta,
the registered owner of the Unit on the days such Unit Revenue Share
is payable to such Owner in accordance with section 6.4; and
(6) subject to Delta's approval, acting reasonably, the Transferee may
upon not less than 30 days' notice to Delta, reschedule the use by the
Transferee pursuant to Article 10.
16.4 Assumption and Release. Upon the execution and delivery of the assignment
and assumption agreement in the form of Schedule A by the vendor (including the
Owner-Sponsor as vendor) and purchaser of any Unit and the transfer of title of
such Unit to the purchaser thereof:
(1) the vendor of such Unit will be released from its duties and
obligations under this Agreement insofar as such duties and
obligations relate to such Unit for the period from and including the
date of such transfer of title, provided that the vendor of such Unit
will not be released from any of its duties or obligations under this
Agreement in respect of any other Unit owned by such vendor; and
(2) the purchaser of such Unit will be responsible for all duties and
obligations under this Agreement insofar as such duties and
obligations relate to such Unit for the period from and including the
date of such transfer of title.
16.5 Financing of Units. If title to any Unit is at any time to be subject to
any mortgage, assignment of rents or other security registered or to be
registered by any Owner against title to its Unit, including any renewals,
modifications, replacements or extensions thereof (collectively called the
"Security"), then:
(1) prior to granting any Security, the Owner of such Unit will notify the
proposed holder of such Security (the "Security Holder") of the
existence and substance of this Agreement and the fact that the
ownership and use of the Unit are subject to the rights
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ANNEX B
of Delta and the Hotel Guests pursuant to this Agreement and the Owner
will provide the Security Holder with a true copy of this Agreement;
and
(2) if the Security Holder in respect of such Security does not agree to
the priority of the Declaration and this Agreement over the Security,
the Declaration and this Agreement will be subordinate to such
Security and Delta will, upon request of the Owner, execute any
instrument of postponement or in confirmation of the subordination of
the Declaration and this Agreement pursuant to this section 16.5(2)
and in such case the Owner will use its best efforts to obtain a
non-disturbance agreement in the form of Schedule B from such Security
Holder.
16.6 Estoppel Certificates. Delta will, from time to time, upon not less than 10
days' prior notice by any Owner or any Security Holder, execute and deliver to
such Owner or Security Holder, a certificate in writing certifying that this
Agreement is unmodified and in force (or, if there have been modifications, that
the same is in force as modified and stating the modifications), stating such
facts as to this Agreement as such Owner or Security Holder reasonably requires,
and stating whether or not to the best knowledge of the signer of such
certificate, there exists any default in the performance of any duty or
obligation contained in this Agreement, and, if so, specifying each such default
of which the signer may have knowledge. Any certificate so delivered may be
relied upon by such Owner and by any such Security Holder or prospective
Security Holder. Delta, upon similar notice, will be entitled to a similar
certificate from each Owner.
16.7 Attornment by Delta. Delta agrees to attorn to and become the manager, in
accordance with this Agreement, of any purchaser, mortgagee or trustee who
becomes entitled to possession of any Unit in accordance with any requirements
set out in this Article 16.
ARTICLE 17
ASSIGNMENT BY DELTA
17.1 Assignment by Delta. Delta has the right to assign its rights under this
Agreement as security to its bankers, provided prior thereto the assignee agrees
to be liable hereunder for the obligations of Delta to the Owners upon any
enforcement by the assignee of its security comprising Delta's rights under this
Agreement. Delta has the further right, so long as it is not then in default
under this Agreement, to assign its rights under this Agreement:
(1) to an Affiliate of Delta; or
(2) to any successor assignee of Delta which may result from any merger,
transfer, consolidation or reorganization,
provided in any such case that such assignee enjoys the benefits of the
organization of Delta and that Delta will continue to be liable for its
obligations hereunder and following any such assignment, Delta will deliver to
the Board of Directors an agreement pursuant to which such assignee agrees to
assume and be bound by all of the provision of this Agreement on terms and
conditions determined by Delta, acting reasonably. Except as provided, Delta
will not directly or indirectly assign, transfer, convey or otherwise
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ANNEX B
dispose of this Agreement, any interest in this Agreement or any of its rights
or duties and obligations under this Agreement without the Owners' prior
approval by Special Resolution.
ARTICLE 18
ARBITRATION
18.1 Arbitration. Where pursuant to the terms and conditions of this Agreement a
matter is submitted to arbitration (other than pursuant to sections 2.6 or 2.8),
such matter will be settled by arbitration in accordance with this section 18.1.
If any such matter is so submitted to arbitration, the arbitration will be final
and binding upon the parties and will be conducted as follows:
(1) The United States Arbitration Act (Title 9, United States Code) and
the Commercial Rules of the American Arbitration Association (the
"Rules") will apply to the arbitration, except as otherwise provided
in this section 18.1.
(2) Such matter will be determined by a single arbitrator agreed upon by
the parties, or, failing agreement on the arbitrator by the date which
is 10 days after the party submitting the matter to arbitration has
notified the other party that it wishes the matter to be determined by
arbitration, the arbitrator will be appointed in accordance with the
Rules, upon request by either party at any time after such date.
(3) The arbitrator will be an experienced hotel consultant or such other
person as is approved by Delta and the Board of Directors.
(4) The arbitrator will make this determination on the basis of written
submissions and affidavits (including expert evidence) submitted by
the parties, without any hearing, unless the arbitrator determines
that a hearing is necessary, and the arbitrator may require the
parties to make further and other written submissions or provide
further and other affidavits. Each party will receive a copy of each
such submission and affidavit.
(5) The arbitrator's decision will be final and binding on the parties.
(6) The parties will share all costs of the arbitrator equally, unless
otherwise determined by the arbitrator.
(7) The parties acknowledge and agree that they have provided for
arbitration to determine the matters set out in this section 18.1 so
as to promote the efficient, expeditious and inexpensive resolution of
the issue. The parties agree to act at all times so as to facilitate,
and not frustrate nor delay, such efficient, expeditious and
inexpensive resolution of the issue. The arbitrator is authorized and
directed to make orders, on his initiative or upon application of
either party, to ensure that the arbitration proceeds in an efficient,
expeditious and inexpensive manner, and, in particular, to enforce
strictly the time limits provided for in the Rules or as set by order
of the arbitrator, unless the arbitrator considers it inappropriate to
do so. The parties acknowledge and agree that it is their wish that
the issue be determined within 30 days after appointment of the
arbitrator, subject to an order of the arbitrator extending the date.
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ANNEX B
ARTICLE 19
MISCELLANEOUS
19.1 Third Party Beneficiary. The Association is a third party beneficiary of
this Agreement.
19.2 Cooperation. Subject to the terms and conditions set out in this Agreement,
the parties will at all times during the Term act in good faith, cooperate and
act reasonably in respect of all matters within the scope of this Agreement.
19.3 United States Funds. Unless otherwise noted, all amounts payable by either
party to the other hereunder will be paid in funds of the United States.
19.4 No Waiver of Breach. No failure by Delta or the Owners to insist upon the
strict performance of any covenant, agreement, term or condition of this
Agreement, or to exercise any right or remedy consequent upon a breach, will
constitute a waiver of any such breach or any subsequent breach of such
Covenant, agreement, term or condition. No waiver of any breach will affect or
alter this Agreement, but each and every Covenant, agreement, term and condition
of this Agreement will continue in full force and effect with respect to any
other then existing or subsequent breach.
19.5 Severability of Provisions. If any provision of this Agreement or the
application thereof to any person or circumstance will, to any extent, be
invalid or unenforceable, the remainder of this Agreement and the application of
such provision to persons or circumstances other than those as to which it is
held invalid or unenforceable, as the case may be, will not be affected thereby,
and each provision of this Agreement will be valid and enforceable to the
fullest extent permitted by law.
19.6 Notices. All notices, requests, approvals, demands and other communications
required or permitted to be given under this Agreement will be in writing and
addressed to the parties as follows:
(1) if to Delta:
DELTA HOTELS LIMITED
350 Bloor Street East, Suite 300
Toronto, Ontario
M4W IH4
Attention: Chairman
Fax No.: (416) 926-7875
and:
44
<PAGE>
ANNEX B
(2) if to the Owners:
(i) in the case of the Owner-Sponsor:
UP Sedona, Inc.
2601 E. Thomas Street, Suite 225
Phoenix, Arizona 85018
Attention: President
Fax No.: (602) 955-8140
(ii) in the case of any other Owner, to the address of such Owner as
notified by such Owner to Delta,
or, in any case, at such other address as the party to whom the notice is sent
will have designated in accordance with the provision of this section 19.6. All
notices will be delivered personally, transmitted by fax or mailed by postage
prepaid mail (provided that in the event of a disruption in mail services,
notices will be delivered personally or transmitted by fax). Notices will be
deemed to be received:
(3) on the date of delivery or transmittal thereof if delivered personally
or sent by fax; or
(4) on the fifth Business Day after the mailing thereof, if sent by mail.
19.7 Successors and Assigns. Subject to section 16.4, this Agreement will enure
to the benefit of and will be binding upon the heirs, executors, successors,
legal representatives and permitted assigns of the parties.
19.8 Counterparts. This Agreement may be executed in several counterparts, each
of which will be an original, but all of which will constitute but one and the
same instrument.
19.9 Waiver. No provision of this Agreement may be changed orally, but only by
an instrument in writing signed by the party against which the enforcement of
the change is sought.
19.10 Independent Contractor; No Partnership or Joint Venture. For all purposes
of this Agreement, Delta and its affiliates shall be and act as independent
contractors. Nothing contained in this Agreement will constitute or be deemed to
create a partnership or joint venture between the Owners and Delta or its
Affiliates.
19.11 Approvals. Except as expressly set out herein, whenever any party hereto
is requested to give its approval to any matter, such approval will not be
withheld or delayed unreasonably. If a party will desire the approval of the
other party hereto to any matter, such party will give notice to such other
party that it requests such approval, specifying in such notice the matter (in
reasonable detail) as to which such approval is requested.
19.12 Force Majeure. If a party is prevented or delayed from performing any of
the obligations on its part to be performed hereunder by reason of Act of God,
strike, labor dispute, lockout, threat of
45
<PAGE>
ANNEX B
imminent strike, fire, flood, interruption or delay in transportation, war,
insurrection or mob violence, requirement or regulation of government, or
statute, unavoidable casualties, shortage of labor, equipment or materials,
economic or market conditions, plant breakdown or failure of operation equipment
or any disabling cause (other than lack of funds), without regard to the
foregoing enumeration, beyond the control of either party or which cannot be
overcome by the means normally employed in performance, then and in every such
event, any such prevention or delay will not be deemed to be a breach of this
Agreement but performance of any of the said obligations or requirements will be
suspended during such period or disability and the period of all such delays
resulting from any such thing required or permitted by either party to be done
is to be done hereunder, it being understood and agreed that the time within
which anything is to be done, or made pursuant hereto will be extended by the
total period of all such delays.
IN WITNESS WHEREOF, the parties hereto have executed this Agreement as of the
day and year first above written.
DELTA HOTELS INTERNATIONAL, INC., a
Delaware corporation
By:
----------------------------------------
Its:
----------------------------------------
UP SEDONA, INC., an Arizona corporation
By:
----------------------------------------
Its:
----------------------------------------
UP SEDONA, INC., an Arizona corporation,
on behalf of the Owners
By:
----------------------------------------
Its:
----------------------------------------
46
<PAGE>
ANNEX B
SCHEDULE A
ASSIGNMENT AND ASSUMPTION OF HOTEL OPERATING
AND RENTAL POOL AGREEMENT
"DELTA" DELTA HOTELS INTERNATIONAL, INC.
----- 350 Bloor Street East, Suite 300
Toronto, Ontario M4W 1H4
Fax: (416) 926-7875
"SELLER" Name:
----------------------------------
Address:
----------------------------------
----------------------------------
----------------------------------
Phone:
-----------------------------
Fax:
-----------------------------
"PURCHASER" Name:
----------------------------------
Address:
----------------------------------
----------------------------------
----------------------------------
Phone:
-----------------------------
Fax:
-----------------------------
Name:
----------------------------------
Address:
----------------------------------
----------------------------------
----------------------------------
Phone:
-----------------------------
Fax:
-----------------------------
"UNIT" Sedona Golf Resort and Conference Center
Unit
------------
"SALE DATE" , 1997
--------------
WHEREAS:
A. Seller is the owner of the Unit.
<PAGE>
ANNEX B
B. Seller and Purchaser have entered into a contract for the sale of the
Unit from Seller to Purchaser on the Sale Date.
C. Seller and Delta are parties to a Hotel Operating and Rental Pool
Agreement dated as of _________________________, 1997, among Delta, UP Sedona,
Inc., and the Owners of the Units (as defined therein), as amended by the
amendments, if any, described in Section 5 below (collectively, the "RENTAL POOL
AGREEMENT") in respect of the Sedona Golf Resort and Conference Center; and
D. The parties are required to enter into this Agreement in accordance with
the Rental Pool Agreement.
THEREFORE, in consideration of the transfer of the Unit from Seller to
Purchaser on the Sale date, and for other good and valuable consideration, the
receipt and sufficiency of which are hereby acknowledged by all of the parties,
the parties agree as follows:
1. Assignment to Purchaser. Effective as of the Sale Date, Seller hereby
absolutely assigns, transfers and conveys, effective from and including the Sale
Date, all of Seller's right, title and interest in and to the Rental Pool
Agreement insofar as they arise from ownership of and related to the Unit, and
all rights and benefits to be derived thereunder (including any amounts payable
to Seller thereunder) insofar as such rights and benefits arise from ownership
of and related to the Unit.
2. Direction to Pay. Seller and Purchaser hereby direct Delta to pay any
amounts payable under the Rental Pool Agreement in respect to the Unit from and
including the Sale Date to Purchaser at the address set out above.
3. Assumption and Indemnity by Purchaser. Purchaser hereby assumes, from
and including the Sale Date, all of the duties and obligations of Seller under
the Rental Pool Agreement insofar as such duties and obligations arise from
ownership of and relate to the Unit, and covenants and agrees with Seller and
Delta to perform and observe all of such duties and obligations from and
including the Sale Date, and ratifies the Rental Pool Agreement in all respects.
4. Other Units Excluded. This Agreement relates only to the Unit and not to
any other units in the Development.
5. Amendments to Rental Management Agreement. Seller represents to
Purchaser that the Rental Pool Agreement has not been amended except as follows
[none if not completed]:
6. Miscellaneous. If either Seller or Purchaser is comprised of more than
one person, the covenants and agreements of Seller or Purchaser, as the case may
be, are joint and several covenants and agreements. This Agreement will be
binding upon and inure to the benefit of the
2
<PAGE>
ANNEX B
heirs, executors, successors, legal and personal representatives, and assigns of
the parties, as applicable.
7. Purchaser's Acknowledgment. Purchaser acknowledges that Purchaser has
received a copy of and has been given an opportunity to read the Rental Pool
Agreement (including any amendments set out in Section 5 above).
Dated: , 1997.
---------------
SELLER:
- --------------------------------------,
a(n)
----------------------------------
By:
-----------------------------------
Name:
-----------------------------------
Its:
-----------------------------------
PURCHASER:
- --------------------------------------,
a(n)
----------------------------------
By:
-----------------------------------
Name:
-----------------------------------
Its:
-----------------------------------
- --------------------------------------
Name:
- --------------------------------------
Name:
3
<PAGE>
ANNEX B
CONSENT OF DELTA
Delta hereby agrees that Seller is hereby released from all of Seller's
duties and obligations under the Rental Pool Agreement arising from and
including the Sale Date, insofar as such duties and obligations arise from
ownership of or relate to the Unit.
Dated: , 1997.
---------------
DELTA HOTELS INTERNATIONAL, INC., a
Delaware corporation
By:
-------------------------------
Name:
-----------------------------
Its:
------------------------------
4
<PAGE>
ANNEX B
SCHEDULE B
SEDONA GOLF RESORT AND CONFERENCE CENTER
USE OF UNITS BY OWNERS
1. For the purposes of this Schedule B:
(1) capitalized terms used in this Schedule B and not defined herein have
the meanings ascribed to such terms in the Hotel Operating Agreement;
(2) "Day" means any period of 24 consecutive hours, commencing at 2:00
p.m. on any day and ending at 2:00 p.m. on the immediately following
day;
(3) "Delta" means Delta Hotels International, Inc.;
(4) "Hotel Operating Agreement" means the hotel operating and rental pool
agreement to which this Schedule B is attached;
(5) "Public" means all persons other than the Unit Owner;
(6) "Registered Owner" means the person shown in the Official Records of
Yavapai County, Arizona as owner in fee simple of the Unit;
(7) "Unit Owner" means the Registered Owner and the spouse, children and
parents of such Registered Owner and the parents of the Registered
Owner's spouse; and where there is more than one Registered Owner, all
the Registered Owners and their spouses, children, parents and the
parents of their spouses will together constitute the "Unit Owner" for
the Unit and, where the Registered Owner is a corporation,
partnership, limited liability company or trust, all directors,
officers, shareholders, partners, members, beneficiaries and their
respective spouses, children and parents shall constitute the "Unit
Owner" for the Unit; and "Unit Owner" will include any person
permitted by any of the foregoing to use the Unit free of charge;
(8) "Use" includes the purpose to which the Unit is put, and includes
reside, sleep, inhabit, or otherwise occupy;
(9) "Year" means a calendar year.
2. The Unit Owner may use the Unit for up to a maximum of 14 days per Year and
for no other Days; any use by the Unit Owner must be reserved by the
Registered Owner pursuant to section 4.
3. If a Unit Owner reserves the use of the Unit for a stay which commences at
or after 2:00 p.m. on a Friday or a Saturday, the Unit Owner must reserve
the use of the Unit for a minimum of 2 Days. A Unit Owner may use its Unit
no more than 4 times per year with respect to 2 or 3 Day stays that
commence at or after 2:00 p.m. on a Friday or a Saturday.
4. If any Unit Owner wishes to use the Unit, the Registered Owner (or any
other person permitted by Delta, in its sole discretion, to reserve the use
of the Unit on behalf of the Registered Owner) must first reserve the use
of the Unit by a notice in writing to Delta at least six months prior to
the commencement of the Period in which the Unit Owner wishes to use the
Unit.
<PAGE>
ANNEX B
5. If the Registered Owner (or any other person permitted by Delta, in its
sole discretion, to reserve the use of the Unit on behalf of the Registered
Owner) reserves the use of the Unit pursuant to section 4, the Unit Owner:
(a) shall be entitled to use such Unit during the period or periods so
reserved regardless of whether Delta has accepted a reservation from the
Public for the use of the Unit for the period or periods reserved by the
Registered Owner; and (b) will be deemed to have used the Unit during the
period or periods so reserved, whether or not the Unit Owner actually uses
or occupies the Unit during such period or periods unless the Unit is
available for rental to the Public and at least 30 Days prior to the Unit
Owner's scheduled use of the Unit the Registered Owner cancels such
reservation, with the approval of Delta, acting reasonably.
6. If the Unit Owner does not use the full amount of Days permitted to be used
by the Unit Owner pursuant to section 2 in any calendar year, the Unit
Owner will not be entitled to accumulate or otherwise use the unused Days
in any future calendar year.
7. Subject to the use by the Unit Owners pursuant to this Schedule B, the Unit
will be available at all times for rental to the Public; Delta may accept
reservations from the Public for the use of the Unit for any future Day or
Days, unless the Registered Owner has already reserved that Day or those
Days pursuant to section 4 hereof.
8. The terms of this Exhibit B do not apply to Executive Units.
2
<PAGE>
ANNEX C
CONDOMINIUM DECLARATION
FOR
SEDONA GOLF RESORT AND CONFERENCE CENTER
<PAGE>
ANNEX C
WHEN RECORDED, RETURN TO:
Michael E. Woolf
O'Connor, Cavanagh, et al.
One E. Camelback Road
Suite 1100
Phoenix, Arizona 85012-1656
CONDOMINIUM DECLARATION
FOR
SEDONA GOLF RESORT & CONFERENCE CENTER, A CONDOMINIUM
<PAGE>
ANNEX C
CONDOMINIUM DECLARATION
FOR
SEDONA GOLF RESORT & CONFERENCE CENTER, A CONDOMINIUM
TABLE OF CONTENTS
Page
ARTICLE 1
DEFINITIONS.............................. 1
1.1 General Definitions................................................. 1
1.2 Defined Terms....................................................... 1
1.2.1 "Articles"............................................ 1
1.2.2 "Assessments"......................................... 1
1.2.3 "Assessment Lien"..................................... 1
1.2.4 "Association"......................................... 1
1.2.5 "Board of Directors".................................. 1
1.2.6 "Buildings"........................................... 1
1.2.7 "Bylaws".............................................. 1
1.2.8 "Common Elements"..................................... 1
1.2.9 "Common Expenses"..................................... 2
1.2.10 "Common Expense Assessment"........................... 2
1.2.11 "Common Expense Liability"............................ 2
1.2.12 "Condominium"......................................... 2
1.2.13 "Condominium Act"..................................... 2
1.2.14 "Condominium Documents"............................... 2
1.2.15 "Declarant"........................................... 2
1.2.16 "Declaration"......................................... 2
1.2.17 "Development Rights".................................. 2
1.2.18 "Eligible Insurer or Guarantor"....................... 3
1.2.19 "Eligible Mortgage Holder"............................ 3
1.2.20 "Executive Unit"...................................... 3
1.2.21 "First Mortgage"...................................... 3
1.2.22 "First Mortgagee"..................................... 3
1.2.23 "Guests............................................... 3
1.2.24 "Hotel Operating and Rental Pool Agreement"........... 4
1.2.25 "Hotel Facilities".................................... 4
1.2.26 "Hotel Furnishings"................................... 4
1.2.27 "Hotel Operator....................................... 4
1.2.28 "Improvement"......................................... 4
1.2.29 "Limited Common Elements"............................. 4
1.2.30 "Member".............................................. 4
1.2.31 "Percentage Interest"................................. 4
<PAGE>
ANNEX C
1.2.32 "Period of Declarant Control"......................... 4
1.2.33 "Person".............................................. 5
1.2.34 "Plat"................................................ 5
1.2.35 "Public".............................................. 5
1.2.36 "Public Rental Residential Use"....................... 5
1.2.37 "Purchaser"........................................... 5
1.2.38 "Reciprocal Easement"................................. 5
1.2.39 "Rules"............................................... 5
1.2.40 "Special Declarant Rights"........................... 5
1.2.41 "Unit"................................................ 6
1.2.42 "Unit Furnishings".................................... 6
1.2.43 "Unit Owner".......................................... 6
1.2.44 "Year"................................................ 6
1.2.45 "Zoning Ordinance".................................... 6
ARTICLE 2
SUBMISSION OF PROPERTY; UNIT BOUNDARIES; ALLOCATION OF
PERCENTAGE INTERESTS, VOTES AND COMMON EXPENSE LIABILITIES....... 6
2.1 Submission of Property.............................................. 6
2.2 Name of Condominium................................................. 6
2.3 Name of Association................................................. 7
2.4 Identifying Numbers of Units........................................ 7
2.5 Unit Boundaries..................................................... 7
2.6 Allocation of Common Element Interest and Common
Expense Liabilities................................................. 7
2.7 Allocation of Votes in the Association.............................. 8
2.8 Allocation of Limited Common Elements............................... 8
ARTICLE 3
EASEMENTS.................................... 9
3.1 Utility Easement.................................................... 9
3.2 Easements for Ingress and Egress.................................... 9
3.3 Unit Owners' Easements of Enjoyment................................. 9
3.4 Declarant's Use for Sales Purposes.................................. 10
3.5 Declarant's Rights and Easements.................................... 11
3.6 Easement for Support................................................ 11
3.7 Common Elements Easement in Favor of the Association and
Hotel Operator...................................................... 12
3.8 Common Elements Easement in Favor of Unit Owners.................... 12
3.9 Units and Limited Common Elements Easement in Favor of Association
and Hotel Operator.................................................. 12
3.10 Easement for Unintended Encroachments............................... 13
<PAGE>
ANNEX C
ARTICLE 4
USE AND OCCUPANCY RESTRICTIONS...................... 13
4.1 Public Rental Residential Use....................................... 13
4.2 Hotel Operating and Rental Pool Agreement........................... 13
4.3 Access to Hotel Operator............................................ 14
4.4 Hotel Facilities.................................................... 14
4.5 Compliance with Laws................................................ 14
4.6 No Acts in Contravention of Hotel Operating and Rental
Pool Agreement...................................................... 14
4.7 Limitation on Right to Lease or Use Unit............................ 14
4.8 Residential Use by Unit Owners...................................... 14
4.9 Antennas............................................................ 15
4.10 Utility Service..................................................... 15
4.11 Improvements and Alterations........................................ 16
4.12 Trash Containers and Collection..................................... 16
4.13 Machinery and Equipment............................................. 16
4.14 Animals............................................................. 16
4.15 Clothes Drying Facilities........................................... 16
4.16 Mineral Exploration................................................. 16
4.17 Diseases and Insects................................................ 17
4.18 Trucks, Trailers, Campers and Boats................................. 17
4.19 Motor Vehicles...................................................... 17
4.20 Towing of Vehicles.................................................. 17
4.21 Signs............................................................... 17
4.22 Lawful Use.......................................................... 17
4.23 Nuisances and Offensive Activity.................................... 17
4.24 Window Coverings.................................................... 18
4.25 Limitation on Leasing of Units...................................... 18
4.26 Furnishings......................................................... 18
ARTICLE 5
MAINTENANCE AND REPAIR OF COMMON ELEMENTS AND UNITS............ 18
5.1 Repair of Common Elements........................................... 18
5.2 Repair of Units..................................................... 18
5.3 Repair or Restoration Necessitated by Owner......................... 18
5.4 Repair and Recovery Rights of Association........................... 19
ARTICLE 6
THE ASSOCIATION; RIGHTS AND DUTIES; MEMBERSHIP............. 19
6.1 Rights, Powers and Duties of the Association........................ 19
6.2 Directors and Officers.............................................. 21
6.3 Rules............................................................... 22
6.4 Composition of Members.............................................. 22
6.5 Personal Liability.................................................. 22
6.6 Implied Rights...................................................... 22
<PAGE>
ANNEX C
6.7 Voting Rights....................................................... 22
6.8 Voting Procedures................................................... 23
6.9 Transfer of Membership.............................................. 23
6.10 Suspension of Voting Rights......................................... 23
6.11 Conveyance or Encumbrance of Common Elements........................ 23
ARTICLE 7
ASSESSMENTS.............................. 24
7.1 Preparation of Budget............................................... 24
7.2 Common Expense Assessment........................................... 24
7.3 Special Assessments................................................. 25
7.4 Effect of Nonpayment of Assessments; Remedies of the Association.... 25
7.5 Subordination of Assessment Lien to Mortgages....................... 26
7.6 Exemption of Unit Owner............................................. 26
7.7 Certificate of Payment.............................................. 26
7.8 No Offsets.......................................................... 27
7.9 Reserve Fund........................................................ 27
7.10 Surplus Funds....................................................... 27
7.11 Monetary Penalties.................................................. 27
7.12 Transfer Fee........................................................ 27
7.13 Additional Reserves................................................. 27
7.14 Hotel Operating Revenues............................................ 27
7.15 Unit Taxes.......................................................... 28
7.16 Utilities........................................................... 28
ARTICLE 8
INSURANCE................................ 28
8.1 Scope of Coverage................................................... 28
8.2 Fidelity Bonds...................................................... 30
8.3 Payment of Premiums................................................. 30
8.4 Insurance Obtained by Unit Owners................................... 31
8.5 Payment of Insurance Proceeds....................................... 31
8.6 Certificate of Insurance............................................ 31
8.7 Delegation of Insurance Responsibility.............................. 31
<PAGE>
ANNEX C
ARTICLE 9
RIGHTS OF FIRST MORTGAGEES........................ 31
9.1 Notification to First Mortgagees.................................... 31
9.2 Approval Required for Amendment to Declaration, Articles or Bylaws.. 32
9.3 Right of Inspection of Records...................................... 33
9.4 Prior Written Approval of First Mortgagees.......................... 33
9.5 Condemnation or Insurance Proceeds.................................. 34
9.6 Limitation on Partition and Subdivision............................. 34
9.7 Conflicting Provisions.............................................. 34
ARTICLE 10
RESERVATION OF DEVELOPMENTAL AND
SPECIAL DECLARANT'S RIGHTS....................... 34
10.1 Developmental Rights................................................ 35
10.2 Right to Complete Improvements and Construction Easement............ 35
10.3 Offices, Model Units and Promotional Signs.......................... 35
10.4 Appointment and Removal of Directors and Officers................... 35
ARTICLE 11
GENERAL PROVISIONS............................ 35
11.1 Enforcement......................................................... 35
11.2 Severability........................................................ 35
11.3 Duration............................................................ 35
11.4 Termination of Condominium.......................................... 35
11.5 Amendment........................................................... 35
11.6 Remedies Cumulative................................................. 36
11.7 Notices............................................................. 36
11.8 Binding Effect...................................................... 37
11.9 Gender.............................................................. 37
11.10 Topic Headings...................................................... 37
11.11 Survival of Liability............................................... 37
11.12 Construction........................................................ 37
11.13 Joint and Several Liability......................................... 38
11.14 Guests and Tenants.................................................. 38
11.15 Attorneys' Fees..................................................... 38
11.16 Number of Days...................................................... 38
11.17 Declarant's Right to Use Similar Name............................... 38
11.18 Notice of Violation................................................. 38
11.19 No Absolute Liability............................................... 39
Exhibits
Exhibit A Legal Description
Exhibit B Percentage Interest
Exhibit C Advance Booking/Use Rights
<PAGE>
ANNEX C
CONDOMINIUM DECLARATION
FOR
SEDONA GOLF RESORT & CONFERENCE CENTER, A CONDOMINIUM
This Condominium Declaration for Sedona Golf Resort & Conference
Center, a condominium, is made this ____ day of _____________________ , 1997,
by UP SEDONA, INC., an Arizona corporation.
ARTICLE 1
DEFINITIONS
1.1 GENERAL DEFINITIONS Capitalized terms not otherwise defined in this
Declaration shall have the meanings specified for such terms in the Arizona
Condominium Act, A.R.S. ss.33-1201, et seq., as amended from time to time.
1.2 DEFINED TERMS. The following capitalized terms shall have the general
meanings described in the Condominium Act and for purposes of this Declaration
shall have the specific meanings set forth below:
1.2.1 "ARTICLES" means the Articles of Incorporation of the Association,
as amended from time to time.
1.2.2 "ASSESSMENTS" means the Common Expense Assessments and Special
Assessments levied and assessed against each Unit pursuant to Article 7 of this
Declaration.
1.2.3 "ASSESSMENT LIEN" means the lien granted to the Association by the
Condominium Act to secure the payment of Assessments, monetary penalties and
other charges owed to the Association.
1.2.4 "ASSOCIATION" means Sedona Golf Resort & Conference Center
Condominium Association, an Arizona nonprofit corporation, its successors and
assigns.
1.2.5 "BOARD OF DIRECTORS" means the Board of Directors of the
Association.
1.2.6 "BUILDINGS" means the structures designated as buildings on the
Plat.
1.2.7 "BYLAWS" means the Bylaws of the Association, as amended from time
to time.
1.2.8 "COMMON ELEMENTS" means Tract A on the Plat and all other portions
of the Condominium other than the Units.
<PAGE>
ANNEX C
1.2.9 "COMMON EXPENSES" means expenditures made by or financial
liabilities of the Association, together with any allocations to reserves,
including, without limitation, (i) the cost of cleaning, maintenance,
management, operation, repair and replacement of the Common Elements and all
Improvements thereon; (ii) the cost of centrally metered utilities and trash
removal which serve the Units and/or the Common Elements; (iii) the cost of
insurance premiums for fire, liability, workers' compensation, errors and
omissions and directors, officers and agents liability, and the costs of bonding
the members of the Board of Directors, (iv) the cost of compensation, wages,
materials, services, supplies and other expenses required for the
administration, operation, maintenance and repair of the Condominium, including
landscape renovation and maintenance; (v) the costs of rendering to the Unit
Owners all services required to be rendered by the Association under the
Condominium Documents; (vi) such other funds as may be necessary to provide
general operating reserves and reserves for contingencies and replacements
deemed appropriate by the Board of Directors; (vii) maintenance, repair and
other reimbursement obligations under the Reciprocal Easement attributable to
the Condominium; and (viii) the cost of any other item or items incurred by the
Association, for any reason whatsoever in connection with the Condominium, for
the common benefit of the Unit Owners.
1.2.10 "COMMON EXPENSE ASSESSMENT" means the assessment levied against
the Units pursuant to Section 7.2 of this Declaration.
1.2.11 "COMMON EXPENSE LIABILITY" means the liability for Common
Expenses allocated to each Unit by this Declaration.
1.2.12 "CONDOMINIUM" means the real property located in Yavapai County,
Arizona, which is described in Exhibit A attached to this Declaration, together
with all Buildings and other Improvements located thereon.
1.2.13 "CONDOMINIUM ACT" means the Arizona Condominium Act, A.R.S.
ss. 33-1201, et seq., as amended from time to time.
1.2.14 "CONDOMINIUM DOCUMENTS" means this Declaration and the Articles,
Bylaws and Rules.
1.2.15 "DECLARANT" means UP Sedona, Inc., an Arizona corporation, and
its successors and any person or entity to whom it may transfer any Special
Declarant Rights.
1.2.16 "DECLARATION" means this Condominium Declaration, as amended from
time to time.
1.2.17 "DEVELOPMENT RIGHTS" means any right or combination of rights
reserved by or granted to the Declarant in this Declaration to do any of the
following:
(i) Add real estate to the Condominium;
2
<PAGE>
(ii) Create easements, Units, Common Elements or Limited Common
Elements within the Condominium, including without limitation the right to
enclose the patio allocated to any Unit as a Limited Common Element;
(iii) Subdivide Units, convert Units into Common Elements or
convert Common Elements into Units;
(iv) Withdraw real estate from the Condominium;
(v) Make the Condominium part of a larger condominium or planned
community;
(vi) Amend the Declaration during the Period of Declarant
Control to comply with the Condominium Act or any other applicable law, or to
correct any error or inconsistency in the Declaration provided the amendment
does not adversely affect the rights of any Unit Owner;
(vii) Amend the Declaration during the Period of Declarant
Control to comply with (a) the rules or guidelines, in effect from time to time,
of any governmental or quasi-governmental entity or federal corporation
guaranteeing or insuring mortgage loans or governing transactions involving
mortgage instruments, including, without limitation, the Federal National
Mortgage Association ("FNMA"), the Federal Home Loan Mortgage Corporation
("FHLMC"), the Federal Housing Administration ("FHA") or the Veterans
Administration ("VA"), or (d) the rules or requirements of any federal, state or
local governmental entity or agency whose approval of the Condominium, the Plat
or the Condominium Documents is required by law or requested by Declarant.
1.2.18 "ELIGIBLE INSURER OR GUARANTOR" means an insurer or governmental
guarantor of a First Mortgage who has requested notice of certain matters in
accordance with Section 9.1 of this Declaration.
1.2.19 "ELIGIBLE MORTGAGE HOLDER" means a First Mortgagee who has
requested notice of certain matters from the Association in accordance with
Section 9.1 of this Declaration.
1.2.20 "EXECUTIVE UNIT" means a Unit designated as "EX" on Exhibit "B"
attached hereto, which Unit shall not be available for use for occupancy by any
Owner, as is more fully set forth in Section 4.8 of this Declaration.
1.2.21 "FIRST MORTGAGE" means any mortgage or deed of trust on a Unit
with first priority over any other mortgage or deed of trust on the same Unit.
1.2.22 "FIRST MORTGAGEE" means the holder of any First Mortgage.
1.2.23 "GUESTS" means those Persons who use and occupy the Units from
time to time and their permitted additional occupants, invitees and guests,
excluding Unit Owners using their Units in accordance with Exhibit "C".
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ANNEX C
1.2.24 "HOTEL OPERATING AND RENTAL POOL AGREEMENT" means an agreement
entered into by and between the Unit Owners and a Hotel Operator for the purpose
of operating the Condominium for Public Rental Residential Use.
1.2.25 "HOTEL FACILITIES" means that portion of the Common Elements
consisting of the front desk, restaurant, conference rooms, fitness rooms, linen
closets not included within Units, janitor closets, laundry rooms, offices,
lobby areas, mechanical rooms, parking areas, recreation areas and other areas
of the Common Elements which are required or reasonably convenient for the use
and operation of a hotel facility.
1.2.26 "HOTEL FURNISHINGS" means those furnishings, including furniture,
art work, shutters, blinds, curtains, appliances, decorations, fixtures and
other personal property installed or located within the Condominium, but
excluding the Unit Furnishings and further excluding any fixtures or personal
property owned or leased by the Hotel Operator.
1.2.27 "HOTEL OPERATOR" means a hotel manager engaged by or on behalf of
the Unit Owners pursuant to a Hotel Operating and Rental Pool Agreement to
operate and manage the condominium-hotel business for the Condominium, as such
Hotel Operator may change from time to time.
1.2.28 "IMPROVEMENT" means any physical structure, fixture or facility
existing or constructed, placed, erected or installed on the land included in
the Condominium, including, but not limited to, buildings, private drives,
walkways, tennis courts, basketball hoops and poles, pools, spas, paving,
fences, walls, hedges, plants, trees, shrubs and landscaping of every type and
kind.
1.2.29 "LIMITED COMMON ELEMENTS" means a portion of the Common Elements
specifically designated in this Declaration as a Limited Common Element and
allocated by this Declaration or by operation of the Condominium Act for the
exclusive use of one or more but fewer than all of the Units.
1.2.30 "MEMBER" means any Person who is or becomes a member of the
Association.
1.2.31 "PERCENTAGE INTEREST" means for each Unit that percentage
applicable to the Unit as more fully set forth on Exhibit "B" attached hereto.
1.2.32 "PERIOD OF DECLARANT CONTROL" means the time period commencing on
the date this Declaration is recorded with the County Recorder of Yavapai
County, Arizona, and ending on the earlier of: (i) ninety (90) days after the
conveyance of seventy-five percent (75%) of the Units which may be created to
Unit Owners other than the Declarant; (ii) four (4) years after all Declarants
have ceased to offer Units for sale in the ordinary course of business; or (iii)
the date Declarant records an instrument with the County Recorder of Yavapai
County relinquishing its right to appoint and remove officers and members of the
Board of Directors of the Association.
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ANNEX C
1.2.33 "PERSON" means a natural person, corporation, business trust,
estate, trust, partnership, limited liability company, association, joint
venture, government, governmental subdivision or agency, or other legal or
commercial entity.
1.2.34 "PLAT" means the Condominium Plat for Sedona Hotel Resort, a
condominium, which plat has been recorded in Book ____ of Maps, page ____,
records of Yavapai County, Arizona, and any amendments, supplements or
corrections thereto.
1.2.35 "PUBLIC" means all Persons other than a Unit Owner and family
members of such Unit Owner.
1.2.36 "PUBLIC RENTAL RESIDENTIAL USE" means use of a Unit for
commercial rental to the Public for tourist, visitor and transient traveller
accommodation.
1.2.37 "PURCHASER" means any Person, other than the Declarant, who by
means of a voluntary transfer becomes a Unit Owner, except for (i) a Person who
purchases a Unit and then leases it to the Declarant for use as a model in
connection with the sale of other Units, or (ii) a Person who, in addition to
purchasing a Unit, is assigned any Special Declarant Right.
1.2.38 "RECIPROCAL EASEMENT" means that Reciprocal Easement Agreement
with Covenants and Restrictions Affecting Land recorded in Book 3332, page 279,
records of Yavapai County, Arizona, which establishes reciprocal rights and
obligations between the Condominium and the health club facility located
adjacent to the Condominium.
1.2.39 "RULES" means the rules and regulations adopted by the
Association, as amended from time to time.
1.2.40 "SPECIAL DECLARANT RIGHTS" means any right or combination of
rights reserved by or granted to the Declarant in this Declaration or by the
Condominium Act to do any of the following:
(i) Construct Improvements provided for in this Declaration or
shown on the Plat;
(ii) Exercise any Development Right;
(iii) Maintain sales offices, management offices, models, and
signs advertising the Condominium;
(iv) Use easements through the Common Elements for the purpose
of making Improvements within the Condominium; and
(v) Appoint or remove any officer of the Association or any
member of the Board of Directors during the Period of Declarant Control.
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ANNEX C
1.2.41 "UNIT" means a portion of the Condominium designated for separate
ownership or occupancy, the boundaries of which are described in Section 2.5 of
this Declaration.
1.2.42 "UNIT FURNISHINGS" means those furnishings, including, furniture,
art work, shutters, blinds, curtains, appliances, decorations, fixtures and
other personal property initially installed by Declarant in each Unit and all
replacements, substitutions, supplements and additions thereto.
1.2.43 "UNIT OWNER" means the record owner, whether one or more
Persons, of beneficial or equitable title (and legal title if the same has
merged with the beneficial or equitable title) to the fee simple interest of a
Unit. Unit Owner shall not include Persons having an interest in a Unit merely
as security for the performance of an obligation, or a Guest or lessee, tenant,
or licensee of a Unit. Unit Owner shall include a purchaser under a contract for
the conveyance of real property, a contract for deed, a contract to convey, an
agreement for sale or any similar contract subject to A.R.S. ss. 33-741, et seq.
Unit Owner shall not include a purchaser under a purchase contract and receipt,
escrow instructions or similar executory contracts which are intended to control
the rights and obligations of the parties to executory contracts pending the
closing of a sale or purchase transaction. In the case of Units the fee simple
title to which is vested in a trustee pursuant to A.R.S. ss. 33-801, et seq.,
the trustor shall be deemed to be the Unit Owner. In the case of Units the fee
simple title to which is vested in a trustee pursuant to a subdivision trust
agreement or similar agreement, the beneficiary of any such trust who is
entitled to possession of the Unit shall be deemed to be the Unit Owner.
1.2.44 "YEAR" means a calendar year.
1.2.45 "ZONING ORDINANCE" means the Yavapai County Zoning Code
applicable to the Condominium and the applicable zoning and development
stipulations of Yavapai County, which limit the use of the Condominium for
Public Rental Residential Use.
ARTICLE 2
SUBMISSION OF PROPERTY; UNIT BOUNDARIES; ALLOCATION OF
PERCENTAGE INTERESTS, VOTES AND COMMON EXPENSE LIABILITIES
2.1 SUBMISSION OF PROPERTY. Declarant hereby submits the real property
described on Exhibit A attached to this Declaration, together with all
Improvements situated thereon and all easements, rights and appurtenances
thereto, to the provisions of the Condominium Act for the purpose of creating a
condominium in accordance with the provisions of the Condominium Act and hereby
declares that the real property described on Exhibit A attached to this
Declaration, together with all Improvements situated thereon, and all easements,
rights and appurtenances thereto, shall be held and conveyed subject to the
terms, covenants, conditions and restrictions set forth in this Declaration.
2.2 NAME OF CONDOMINIUM. The name of the Condominium created by this
Declaration is Sedona Golf Resort & Conference Center, a condominium.
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ANNEX C
2.3 NAME OF ASSOCIATION. The name of the Association is Sedona Golf Resort
& Conference Center Condominium Association.
2.4 IDENTIFYING NUMBERS OF UNITS. The identifying numbers of the Units are
as set forth on Exhibit "B" attached hereto.
2.5 UNIT BOUNDARIES.
2.5.1 The boundaries of each Unit are the interior unfinished surfaces
of the perimeter walls, floors, ceiling, doors and windows of the Unit. All
lath, furring, wallboard, plasterboard, plaster, paneling, tiles, wallpaper,
paint, finished flooring and any other materials constituting any part of the
finished surfaces of the walls, floors and ceilings are part of the Unit, and
all other portions of the walls, floors and ceilings are part of the Common
Elements.
2.5.2 Any chute, flue, duct, wire, conduit, bearing wall, bearing column
or other fixture, whether located within or outside of the boundaries of a Unit,
which serve only that Unit, is a Limited Common Element allocated solely to that
Unit, and any portion serving more than one Unit or any portion of the Common
Elements is a part of the Common Elements.
2.5.3 Subject to the provisions of Subsection 2.5.2 of this Declaration,
all spaces, interior partitions and other fixtures and Improvements within the
boundaries of a Unit are part of the Unit; provided, however, any entryway,
vestibule or foyer shown on the Plat which serves as an entrance to more than
one Unit shall not be considered part of any Unit so served but shall instead be
considered a Limited Common Element allocated to the Units so served.
2.5.4 Any shutters, awnings, window boxes, doorsteps, stoops, porches,
balconies, entryways or patios, and all exterior doors (including doors from any
entryway, vestibule or foyer) and windows or other fixtures designed to serve a
single Unit, but located outside the Unit's boundaries, are Limited Common
Elements allocated exclusively to that Unit.
2.5.5 In the event of any inconsistency or conflict between the
provisions of this Article 2 and the Plat, this Article 2 shall control.
2.5.6 The physical boundaries of a Unit shall be considered to be the
proper boundaries regardless of the settling, rising or lateral movement of the
Buildings and regardless of any variances between the boundaries shown on the
Plat and the actual physical boundaries.
2.5.7 Subject to and in accordance with A.R.S. ss. 33-1222, Declarant
reserves the right to relocate the boundaries between adjoining Units owned by
the Declarant and to reallocate each such Unit's Common Element interest, votes
in the Association, and Common Expense Liabilities.
2.6 ALLOCATION OF COMMON ELEMENT INTEREST AND COMMON EXPENSE LIABILITIES.
The allocation of undivided interests in the Common Elements and in the Common
Expenses of the Association is based upon the ratio of the initial sales
offering price of each of the Units to the aggregate initial sales offering
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ANNEX C
prices of all of the Units, as such initial sales offering prices are
established by Declarant. Nothing herein shall obligate Declarant to sell any
Unit for the initial sales offering price and Units may be sold for more or less
than the initial sales offering price without any adjustment to the allocation
of undivided interests in the Common Elements and the Common Expenses. The
percentage interest for each Unit in the Common Elements and the Common Expenses
of the Association is set forth on Exhibit B hereto.
2.7 ALLOCATION OF VOTES IN THE ASSOCIATION. The total votes in the
Association shall be equal to the number of Units in the Condominium. The votes
in the Association shall be allocated equally among all the Units, with each
Unit having one (1) vote.
2.8 ALLOCATION OF LIMITED COMMON ELEMENTS.
2.8.1 The following portions of the Common Elements are Limited Common
Elements and are allocated to the exclusive use of one or more Units as follows:
(i) Each first floor Unit is allocated the patio adjoining the
Unit, if any, as shown on the Plat;
(ii) Each second and third floor Unit is allocated the balcony
adjoining the Unit, if any, as shown on the Plat;
(iii) Each Unit to which access is provided via an entryway,
vestibule or foyer which serves another Unit, is allocated use of such area, as
shown on the Plat, and use is exclusively limited to those Units so served.
(iv) Any chute, flue, pipe, duct, wire, conduit, bearing wall,
bearing column or other fixtures, whether located within or outside of the
boundaries of a Unit, which serve only one Unit is a Limited Common Element
allocated solely to the Unit served;
(v) If a chute, flue, pipe, duct, wire, conduit, bearing wall,
bearing column or other fixtures lies partially within and partially outside the
designated boundaries of a Unit, the portion serving only the Unit is a Limited
Common Element allocated solely to the Unit, the use of which is limited to that
Unit and any portion serving more than one Unit or a portion of the Common
Elements is a part of the Common Elements;
(vi) Any shutters, awnings, window boxes, doorsteps, stoops,
porches and exterior doors and windows or other fixtures designed to serve a
single Unit, located outside the boundaries of the Unit, are Limited Common
Elements allocated exclusively to the Unit and their use is limited to that
Unit; and
(vi) Any gas, electric or water meter which serves only one Unit
is allocated to the Unit it serves.
2.8.2 A Limited Common Element may be reallocated by an amendment to
this Declaration made in accordance with the provisions of A.R.S. ss. 33-1218(B)
of the Condominium Act.
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ANNEX C
2.8.3 The Board of Directors shall have the right, without a vote of the
Members, to allocate as a Limited Common Element any portion of the Common
Elements not previously allocated as a Limited Common Element. Any such
allocation by the Board of Directors shall be made by an amendment to this
Declaration and an amendment to the Plat if required by the Condominium Act.
ARTICLE 3
EASEMENTS
3.1 UTILITY EASEMENT. There is hereby created an easement upon, across,
over and under the Common Elements for reasonable ingress, egress, installation,
replacing, repairing or maintaining of all utilities, including, but not limited
to, gas, water, sewer, telephone, cable television and electricity. By virtue of
this easement, it shall be expressly permissible for the providing utility
company to erect and maintain the necessary equipment on the Common Elements,
but no sewers, electrical lines, water lines, or other utility or service lines
may be installed or located on the Common Elements except as initially designed,
approved and constructed by the Declarant or as approved by the Board of
Directors. This easement shall in no way affect any other recorded easements on
the Common Elements.
3.2 EASEMENTS FOR INGRESS AND EGRESS. There is hereby created easements for
ingress and egress for pedestrian traffic over, through and across sidewalks,
paths, walks, and lanes that from time to time may exist upon the Common
Elements. There is also created an easement for ingress and egress for
pedestrian and vehicular traffic over, through and across such driveways and
parking areas as from time to time may be paved and intended for such purposes
except that such easements shall not extend to any Limited Common Elements. Such
easements shall run in favor of and be for the benefit of the Hotel Operator,
the Unit Owners, Guests and their families and permitted tenants and invitees.
3.3 UNIT OWNERS' EASEMENTS OF ENJOYMENT.
3.3.1 Every Unit Owner shall have a right and easement of enjoyment in
and to the Common Elements, which right and easement shall be appurtenant to and
shall pass with the title to every Unit, subject to the following provisions:
(i) The right of the Association to adopt reasonable rules and
regulations governing the use of the Common Elements;
(ii) The right of the Association to convey the Common Elements
or subject the Common Elements to a mortgage, deed of trust, or other security
interest, in the manner and subject to the limitations set forth in the
Condominium Act;
(iii) All rights, easements and restrictions set forth in this
Declaration including, but not limited to, the provisions of Section 3.3.2 and
the rights and easements granted to the Declarant by Sections 3.4 and 3.5 of
this Declaration;
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ANNEX C
(iv) The right of the Association to suspend the right of a Unit
Owner and any occupant of such Unit Owner's Unit (other than a Guest) to use the
Common Elements for any period during which the Unit Owner is in violation of
any provision of the Condominium Documents; (v) The right of the Hotel Operator
to make use of the Common Elements (including exclusive use of the Hotel
Facilities) in accordance with the terms of the Hotel Operating and Rental Pool
Agreement; and
(vi) The right of each Owner to make use of the Common Elements
shall be limited to those times when the Owner has the right to occupy its Unit,
and then in accordance with the terms of the Hotel Operating and Rental Pool
Agreement.
3.3.2 If a Unit is leased, rented or otherwise made available for hotel
use, the Guest and the family members residing with such Guest and any permitted
invitees and guests shall have the right to use the Common Elements during the
occupancy term, subject to any limitation established pursuant to Section 3.3.3.
Unless a Unit Owner is occupying a Unit as a Guest or is exercising its rights
to occupy its own Unit pursuant to the rights of occupancy set forth in any
Hotel Operating and Rental Pool Agreement then in effect, no Unit Owner shall
have the right to occupy or utilize its own Unit or the Common Elements, it
being understood that such use rights have been delegated and assigned for the
use of the Hotel Operator and Guests pursuant to the Hotel Operating and Rental
Pool Agreement.
3.3.3 The Board of Directors shall have the right to limit the number of
guests and invitees of Unit Owners and Guests who may use the Common Elements at
any one time and may restrict the use of the Common Elements by Unit Owners,
Guests and their respective guests and invitees to certain specified times. The
Board of Directors may delegate this right to restrict use of the Common
Elements to any Hotel Operator.
3.3.4 Subject to the assignment set forth in any Hotel Operating and
Rental Pool Agreement for the benefit of Guests, a Unit Owner's right and
easement of enjoyment in and to the Common Elements shall not be conveyed,
transferred, alienated or encumbered separate and apart from a Unit. Such right
and easement of enjoyment in and to the Common Elements shall be deemed to be
conveyed, transferred, alienated or encumbered upon the sale of any Unit,
notwithstanding that the description in the instrument of conveyance, transfer,
alienation or encumbrance may not refer to such right and easement.
3.3.5 Notwithstanding anything to the contrary in this Section 3.3, the
right to the use of the Limited Common Elements that are allocated to one or
more but less than all of the Units shall be limited to those Persons who have
the right to use the Unit to which the Limit Common Elements are appurtenant.
3.4 DECLARANT'S USE FOR SALES PURPOSES.
3.4.1 Declarant shall have the right and an easement to maintain sales
offices, management offices and models throughout the Condominium and to
maintain one or more advertising signs on the Common Elements while the
Declarant is selling Units in the Condominium. Declarant reserves the right to
place models, management offices and sales offices in any Units owned by
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ANNEX C
Declarant and on any portion of the Common Elements in such number, of such size
and in such locations as Declarant deems appropriate.
3.4.2 Declarant may from time to time relocate models, management
offices and sales offices to different locations within the Condominium. Upon
the relocation of a model, management office or sales office from any area
constituting a Common Element, Declarant may remove all personal property and
fixtures therefrom.
3.4.3 The Declarant reserves the right to retain all personal property
and equipment used in the sales, management, construction and maintenance of the
Condominium that has not been represented in writing by Declarant as being
property of the Association. The Declarant reserves the right to remove from the
Condominium any and all goods and improvements used in development, marketing
and construction, whether or not they have become fixtures.
3.5 DECLARANT'S RIGHTS AND EASEMENTS.
3.5.1 Declarant shall have the right and an easement on and over the
Common Elements to construct the Common Elements and the Units shown on the Plat
and all other Improvements the Declarant may deem necessary, and to use the
Common Elements and any Units owned by Declarant for construction or renovation
related purposes including the storage of tools, machinery, equipment, building
materials, appliances, supplies and fixtures, and the performance of work in the
Condominium.
3.5.2 Declarant shall have the right and an easement on, over and under
those portions of the Common Elements not located within the Buildings for the
purpose of correcting drainage of surface, roof or storm water, for so long as
Declarant has any legal obligation to correct drainage. The easement created by
this Subsection 3.5.2 expressly includes the right to cut any trees, bushes, or
shrubbery, to grade the soil or to take any other action reasonably necessary.
3.5.3 The Declarant shall have an easement within and through the Units
for any access necessary to complete any construction, renovations, warranty
work or modifications to be performed by Declarant.
3.5.4 The Declarant shall have the right and an easement on, over, and
through the Common Elements as may be reasonably necessary for the purpose of
discharging its obligations and exercising Special Declarant Rights whether
arising under the Condominium Act or reserved in this Declaration.
3.6 EASEMENT FOR SUPPORT. To the extent necessary, each Unit shall have an
easement for structural support over every other Unit in the Buildings, the
Common Elements and the Limited Common Elements, and each Unit and the Common
Elements shall be subject to an easement for structural support in favor of
every other Unit in the Buildings, the Common Elements and the Limited Common
Elements.
3.7 COMMON ELEMENTS EASEMENT IN FAVOR OF THE ASSOCIATION AND HOTEL
OPERATOR. The Common Elements shall be subject to an easement in favor of the
Association and the Hotel Operator and their respective agents, employees and
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ANNEX C
independent contractors for the purpose of inspection, upkeep, maintenance,
repair and replacement of the Common Elements and for the purpose of operating
the Condominium as a hotel and exercising all rights of the Association and the
Hotel Operator and discharging all obligations of the Association and the Hotel
Operator as set forth in this Declaration or in the Hotel Operating and Rental
Pool Agreement.
3.8 COMMON ELEMENTS EASEMENT IN FAVOR OF UNIT OWNERS. The Common Elements
shall be subject to the following easements in favor of the Units benefitted:
3.8.1 For the installation, repair, maintenance, use, removal or
replacement of pipes, ducts, heating and air conditioning equipment and systems,
electrical, telephone and other communication wiring and cables, plumbing lines
and fixtures, fire sprinkler lines and systems, structural systems, and all
other utility lines and conduits which are a part of or serve any Unit and which
pass across or through a portion of the Common Elements.
3.8.2 For the installation, repair, maintenance, use, removal or
replacement of lighting fixtures, electrical receptacles, panel boards and other
electrical installations which are a part of or serve any Unit but which
encroach into a part of a Common Element adjacent to such Unit; provided that
the installation, repair, maintenance, use, removal or replacement of any such
item does not unreasonably interfere with the common use of any part of the
Common Elements, adversely affect either the thermal or acoustical character of
the Buildings or impair or structurally weaken the Buildings.
3.8.3 For driving and removing nails, screws, bolts and other attachment
devices into the Unit side surface of the stone, block, brick or other masonry
walls bounding the Unit and the Unit side surface of the studs which support the
dry wall or plaster perimeter walls bounding the Unit, the bottom surface of
floor joists above the Unit and the top surface of the floor joists below the
Unit to the extent such nails, screws, bolts and other attachment devices may
encroach into a part of a Common Element adjacent to such Unit; provided that
any such action will not unreasonably interfere with the common use of any part
of the Common Elements, adversely affect either the thermal or acoustical
character of the Buildings or impair or structurally weaken the Buildings.
3.8.4 For the maintenance of any lighting devices, outlets, medicine
cabinets, exhaust fans, ventilation ducts, registers, grilles and similar
fixtures which serve only one Unit but which encroach into any part of the
Common Elements.
3.9 UNITS AND LIMITED COMMON ELEMENTS EASEMENT IN FAVOR OF ASSOCIATION AND
HOTEL OPERATOR. The Units and the Limited Common Elements are hereby made
subject to the following easements in favor of the Association and the Hotel
Operator and their respective agents, employees and independent contractors:
3.9.1 For inspection of the Units and Limited Common Elements in order
to verify the performance of all required items of maintenance, repair and
replacement required by the terms of this Declaration or the Hotel Operating and
Rental Pool Agreement;
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ANNEX C
3.9.2 For inspection, maintenance, repair and replacement of the Common
Elements or the Limited Common Elements situated in or accessible from such
Units or Limited Common Elements;
3.9.3 For correction of emergency conditions in one or more units or
Limited Common Elements or casualties to the Common Elements, the Limited Common
Elements or the Units.
3.9.4 For the purpose of enabling the Association, the Board of
Directors or any other committees appointed by the Board of Directors to
exercise and discharge their respective rights, powers and duties under the
Condominium Documents and for the purpose of enabling the Hotel Operator to
exercise and discharge its respective rights, powers and duties under any Hotel
Operating and Rental Pool Agreement.
3.9.5 For inspection, at reasonable times and upon reasonable notice to
the Unit Owner, of the Units and the Limited Common Elements in order to verify
that the provisions of the Condominium Documents are being complied with.
3.10 EASEMENT FOR UNINTENDED ENCROACHMENTS. To the extent that any Unit or
Common Element encroaches on any other Unit or Common Element as a result of
original construction, shifting or settling, or alteration or restoration
authorized by this Declaration or any reason other than the intentional
encroachment on the Common Elements or any Unit by a Unit Owner, a valid
easement for the encroachment, and for the maintenance thereof, exists.
ARTICLE 4
USE AND OCCUPANCY RESTRICTIONS
4.1 PUBLIC RENTAL RESIDENTIAL USE. All Units shall be used, improved and
devoted exclusively to Public Rental Residential Use in accordance with the
Zoning Ordinance, subject only to the Unit Owner's limited right to occupy the
Unit as described in Section 4.8 below. No use of any Unit shall be permitted
which violates the Zoning Ordinance.
4.2 HOTEL OPERATING AND RENTAL POOL AGREEMENT. Each Unit Owner acknowledges
and agrees that the development in which the Units are located is a
condominium-hotel project and that rights of the Unit Owner to use the Units and
the Common Elements are subject to the terms of the Hotel Operating and Rental
Pool Agreement, and that the Condominium shall be operated by the Hotel Operator
for the benefit of the Unit Owner pursuant to the terms of such Hotel Operating
and Rental Pool Agreement. Each Unit Owner shall subject its Unit to the effect
of the Hotel Operating and Rental Pool Agreement and no Unit Owner shall have
the right to use or permit its Unit to be used in any manner contrary to the
terms of the Hotel Operating and Rental Pool Agreement and this Declaration. If
at any time a Hotel Operating Rental Pool Agreement terminates or otherwise
expires without a new Hotel Operating and Rental Pool Agreement being in place
and effective, the Board of Directors shall arrange for the Condominium to be
operated as a condominium-hotel project and the Board of Directors shall have
the right to hire such resident managers and other personnel as may be necessary
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ANNEX C
and appropriate until a new Hotel Operator is engaged pursuant to a new Hotel
Operating and Rental Pool Agreement.
4.3 ACCESS TO HOTEL OPERATOR. The Hotel Operator, its employees, agents,
contractors and permittees shall at all times have access to and use of all
portions of the Condominium as are reasonably required for the operation of the
condominium-hotel from time to time, as determined by the Hotel Operator, acting
reasonably, including, without limitation, all Hotel Facilities. During the term
of any Hotel Operating and Rental Pool Agreement, the Hotel Operator shall have
the exclusive right to (i) make use of the Hotel Facilities; and (ii) make Units
available to Guests (who may also have access to the right to use those portions
of the Common Elements authorized by Hotel Operator) and no Unit Owner shall
interfere with such exclusive rights.
4.4 HOTEL FACILITIES. The Hotel Operator shall be entitled to set up and
maintain within the Common Elements any facilities as are reasonably required by
the Hotel Operator in connection with the operation of the condominium-hotel,
including, without limitation, the Hotel Facilities and any interior or exterior
signage reasonably desired by the Hotel Operator.
4.5 COMPLIANCE WITH LAWS. The Hotel Operator shall comply with all
governmental and other regulatory statutes, laws, bylaws, rules, regulations,
codes, ordinances and licensing requirements related to the operation of a
condominium-hotel.
4.6 NO ACTS IN CONTRAVENTION OF HOTEL OPERATING AND RENTAL POOL AGREEMENT.
All Unit Owners agree that all bylaws, rules and regulations of the Association
shall be consistent with the operation of the Condominium as a condominium-hotel
in accordance with the Hotel Operating and Rental Pool Agreement, as in effect
from time to time, and that they will not impair, interfere with or adversely
affect such operation. The Unit Owners further agree that they will not do any
act or thing and shall cause the Association to refrain from doing any act or
thing which may impair, interfere with or limit the ability of the Hotel
Operator to operate the Condominium as a condominium-hotel in accordance with
the Hotel Operating and Rental Pool Agreement.
4.7 LIMITATION ON RIGHT TO LEASE OR USE UNIT. No Unit Owner shall rent,
lease or otherwise use its Unit for any purpose, including personal use by the
Unit Owner, except as expressly permitted pursuant to the Hotel Operating and
Rental Pool Agreement.
4.8 RESIDENTIAL USE BY UNIT OWNERS. Notwithstanding anything in this
Article 4 to the contrary, (i) the Unit Owner of an Executive Unit may not use
or occupy or authorize or assign to any other Person the right to use or occupy
its Executive Unit (except that any such Executive Unit shall be made available
for use and occupancy under the terms of the Hotel Operating and Rental Pool
Agreement); (ii) the provisions of Subsections 4.8.1 through 4.8.5 shall not be
applicable to Executive Units; and (iii) a Unit Owner (other than the Unit Owner
of an Executive Unit) may use its Unit only as follows:
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ANNEX C
4.8.1 A Unit Owner may use its Unit for not more than fourteen (14) days
in any Year. In order to use the Unit, the Unit Owner must reserve the Unit in
accordance with the provisions of this Section 4.8.
4.8.2 A Unit Owner may use its Unit only in accordance with the advance
reservation and occupancy duration provisions of Exhibit "C" attached hereto. If
a Unit Owner fails to reserve its Unit as provided in Exhibit "C", Subsection
4.8.3 shall be applicable. If a Unit Owner reserves its Unit pursuant to Exhibit
"C", but does not actually use the Unit during the time reserved, the Unit Owner
shall still be deemed to have used the Unit for the time so reserved unless, at
least thirty (30) days prior to the Unit Owner's scheduled use of the Unit, the
Unit Owner cancels such reservation with the approval of the Hotel Operator.
4.8.3 If the Unit Owner does not use the full amount of days permitted
to be used by the Unit Owner pursuant to Exhibit "C" in any Year, the Unit Owner
shall not be entitled to accumulate or otherwise use the unused days in any
future Year.
4.8.4 Subject to the use by Unit Owners of their Units as permitted by
this Article 4 and the rights of Declarant as set forth in Section 3.4, all
Units shall be made available at all times for rental to or use by the Public in
accordance with the terms of the Hotel Operating and Rental Pool Agreement. The
Hotel Operator may accept reservations at any time from the Public for the use
of any Unit for any future day or days; however, provided a Unit Owner has
booked the use of its Unit in accordance with the terms of Exhibit "C", use of
the Unit by the Unit Owner shall take precedence.
4.8.5 Each Unit Owner acknowledges that at all times while it is
occupying and making use of its Unit (or if such Unit Owner has reserved its
Unit but does not actually use the Unit during the time reserved, without having
provided the Hotel Operator at least thirty (30) days prior written notice of
intent not to use the Unit), the Unit Owner will not share in the Rental Pool
proceeds for the days the Unit Owner occupies, or is deemed to have occupied the
Unit.
4.9 ANTENNAS. The Board of Directors shall regulate, to the extent
permitted under federal, state and local law, any antenna, aerial, satellite
television dish or other device for the transmission or reception of television
or radio signals or any other form of electromagnetic radiation proposed to be
erected, used or maintained outdoors on any portion of the Condominium whether
attached to a Building or structure or otherwise. To the extent permitted by
applicable law, the prior approval of the Board of Directors shall be required
for the installation, use or maintenance of any such device, which approval the
Board may condition upon the satisfaction of certain conditions including, but
not limited to, the size, placement, height, means of installation and screening
of such devices.
4.10 UTILITY SERVICE. Except for lines, wires and devices existing on the
Condominium as of the date of this Declaration and maintenance and replacement
of the same, without the prior written approval of the Association, no lines,
wires, or other devices for the communication or transmission of electric
current or power, including telephone, television, and radio signals, shall be
erected, placed or maintained anywhere in or upon the Condominium unless they
are installed and maintained underground or concealed in, under, or on Buildings
or other structures permitted under this Declaration. No provision hereof shall
be deemed to forbid the erection of temporary power or telephone structures
incident to the operation of the Condominium as a hotel or construction of
Buildings or structures permitted under this Declaration.
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ANNEX C
4.11 IMPROVEMENTS AND ALTERATIONS. No structural additions, alterations or
improvements shall be made to any Building, Common Area or within a Unit, unless
prior to the commencement of each addition, alteration or improvement, the Board
of Directors has given its prior written approval (which may be withheld in the
sole and absolute discretion of the Board of Directors) and, if required by the
Board of Directors, an architect or engineer, licensed in Arizona, certifies
that such addition, alteration or improvement will not impair the structural,
electrical, mechanical, plumbing or functional integrity of the Building or Unit
to or within which such addition, alteration or improvement is to be made.
4.12 TRASH CONTAINERS AND COLLECTION. No garbage or trash shall be placed
or kept on the Condominium except in covered containers of a type, size and
style which are approved by the Board of Directors and the Hotel Operator. The
Board of Directors or the Hotel Operator shall have the right to subscribe to a
trash service for the use and benefit of the Hotel Operator, the Association and
all Unit Owners. The Board of Directors and the Hotel Operator together may
adopt and promulgate rules and regulations regarding garbage, trash, trash
containers and collection. No incinerators shall be kept or maintained in any
Unit.
4.13 MACHINERY AND EQUIPMENT. No machinery or equipment of any kind shall
be placed, operated or maintained upon the Condominium except such machinery or
equipment as is usual and customary in connection with the use, maintenance or
construction of buildings, improvements or structures which are within the uses
permitted by this Declaration, and except for such machinery and equipment as
the Hotel Operator reasonably deems necessary in order to permit the Hotel
Operator to operate the Condominium as a condominium-hotel.
4.14 ANIMALS. No animals, birds, fowl, poultry or livestock shall be
maintained or kept in any Units or on any other portion of the Condominium,
except for physical impairment, assistive animals, to the extent that a Unit
Owner or Guest or any employee or contractor of the Association or the Hotel
Operator requires the use of such assistive animals, and in any such instance,
in accordance with any Association rules and regulations which then may be in
effect.
4.15 CLOTHES DRYING FACILITIES. Outside clotheslines or other outside
facilities for drying or airing clothes shall not be erected, placed or
maintained on the Condominium.
4.16 MINERAL EXPLORATION. No portion of the Condominium shall be used in
any manner to explore for or to remove any water, oil or other hydrocarbons,
minerals of any kind, gravel, earth, or any earth substance of any kind.
4.17 DISEASES AND INSECTS. No Unit Owner shall permit any thing or
condition to exist upon the Condominium which could induce, breed or harbor
infectious plant diseases or noxious insects.
4.18 TRUCKS, TRAILERS, CAMPERS AND BOATS. No truck, mobile home, travel
trailer, tent trailer, trailer, camper shell, detached camper, recreational
vehicle, boat, boat trailer, or other similar equipment or vehicle may be
parked, kept, maintained, constructed, reconstructed or repaired on any part of
the Condominium, except for temporary parking for Guests which must be in
accordance with applicable Association rules and regulations.
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ANNEX C
4.19 MOTOR VEHICLES. Except for emergency repairs, no automobile,
motorcycle, motorbike or other motor vehicle shall be constructed,
reconstructed, serviced or repaired on any portion of the Condominium, and no
inoperable vehicle may be stored or parked on any portion of the Condominium. No
automobile, motorcycle, motorbike or other motor vehicle shall be parked upon
any part of the Condominium except in such parking spaces as may exist from time
to time on the Common Elements and then only in accordance with parking
regulations jointly adopted by the Board of Directors and the Hotel Operator.
4.20 TOWING OF VEHICLES. The Board of Directors and the Hotel Operator
shall have the right to have any truck, mobile home, travel trailer, tent
trailer, trailer, camper shell, detached camper, recreational vehicle, boat,
boat trailer or similar equipment or vehicle or any automobile, motorcycle,
motorbike, or other motor vehicle parked, kept, maintained, constructed,
reconstructed or repaired in violation of the Condominium Documents or any
parking regulation adopted by the Hotel Operator or the Board of Directors towed
away at the sole cost and expense of the owner of the vehicle or equipment. Any
expense incurred by the Association or the Hotel Operator in connection with the
towing of any vehicle or equipment shall be paid upon demand by the owner of the
vehicle or equipment.
4.21 SIGNS. Except for signs of the Hotel Operator incidental to the
operation of the Condominium as a hotel as reasonably determined to be
appropriate by the Hotel Operator and any "For Sale" or other advertising signs
which Declarant may elect to post in connection with its marketing of the
development, no signs (including, but not limited to, "For Sale" or "For Rent"
signs) shall be permitted on the exterior of any Unit or Building or any other
portion of the Condominium without the prior written approval of the Board of
Directors and any Hotel Operator.
4.22 LAWFUL USE. No immoral, improper, offensive, or unlawful use shall be
made of any part of the Condominium. All valid laws, zoning ordinances, and
regulations of all governmental bodies having jurisdiction over the Condominium
shall be observed. Any violation of such laws, zoning ordinances or regulations
shall be a violation of this Declaration.
4.23 NUISANCES AND OFFENSIVE ACTIVITY. No nuisance shall be permitted to
exist or operate upon the Condominium, and no activity shall be conducted upon
the Condominium which is offensive or detrimental, or is an annoyance, to any
portion of the Condominium or any occupant of the Condominium. No exterior
speakers, horns, whistles, bells or other sound devices, except (i) security or
other emergency devices used exclusively for security or emergency purposes, or
(ii) sound systems used by or with the consent of the Hotel Operator for outdoor
functions and activities in connection with the operation of the Condominium as
a hotel, shall be located, used or placed on the Condominium.
4.24 WINDOW COVERINGS. No reflective materials, including, but without
limitation, aluminum foil, reflective screens or glass, mirrors or similar
items, shall be installed or placed upon the outside or inside of any windows of
a Unit or of any Limited Common Elements allocated to the Unit without the prior
written approval of the Board of Directors. No enclosures, drapes, blinds,
shades, screens or other items affecting the exterior appearance of a Unit or
any Limited Common Elements allocated to the Unit shall be constructed or
installed without the prior written consent of the Board of Directors.
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ANNEX C
4.25 LIMITATION ON LEASING OF UNITS. No Unit Owner may lease its Unit or
permit any Person to use its Unit or any of the Common Elements except in
accordance with this Article 4. Under no circumstances will any Unit Owner
directly or indirectly charge rent or any form of consideration for the use of
such Unit Owner's Unit except in accordance with the terms of the Hotel
Operating and Rental Pool Agreement.
4.26 FURNISHINGS. No Owner may remove, replace, substitute, alter, repair
or add to any of the Unit Furnishings or Hotel Furnishings. Redecorating and
repair, refurbishment and replacement of Unit Furnishings and Hotel Furnishings
shall be scheduled and accomplished by the Hotel Operator, in accordance with
the terms of the Hotel Operating and Rental Pool Agreement.
ARTICLE 5
MAINTENANCE AND REPAIR OF COMMON ELEMENTS AND UNITS
5.1 REPAIR OF COMMON ELEMENTS. Except as otherwise set forth in Section
5.3, the Association shall clean, maintain, repair and replace all Common
Elements and all Limited Common Elements. Subject to the provision of Section
5.3, the expense thereof shall be a Common Expense.
5.2 REPAIR OF UNITS. The repair and maintenance of the Units and the cost
of repairs, refurbishing, replacement and maintenance of all Furnishings shall
be the responsibility of the Unit Owners, each of which shall cause its Unit and
the Furnishings for such Unit to be maintained in good order and repair,
reasonable wear and tear excepted. To enable the Condominium to be properly
operated as a hotel, each Owner shall delegate its obligation under this Section
to the Hotel Operator under the Hotel Operating and Rental Pool Agreement, and
except as set forth in Section 5.3, all costs of such cleaning, repair,
maintenance, refurbishing and replacement of the Units and their Furnishing
shall be jointly shared by all Unit Owners, as part of the operating costs of
the hotel operation.
5.3 REPAIR OR RESTORATION NECESSITATED BY OWNER. Each Unit Owner shall be
liable to the extent permitted by Arizona law, for any damage to such Unit
Owner's Unit, any Furnishings within its Unit, or the Common Elements (including
the Improvements, landscaping, personal property or equipment) which results
from the negligence or willful conduct of the Unit Owner or its family members
or invitees (other than Guests). If the Association or Hotel Operator pays the
cost of any such repair, maintenance or replacements required by such act of a
Unit Owner, the Unit Owner shall pay all such costs upon demand. The Association
may enforce collection of any such amounts in the same manner and to the same
extent as provided for in this Declaration for the collection of Assessments.
5.4 REPAIR AND RECOVERY RIGHTS OF ASSOCIATION. It is anticipated that the
Hotel Operator will undertake the responsibility to perform the cleaning,
repair, maintenance, replacement and refurbishment of the Units, the Unit
Furnishings, Hotel Furnishings, Common Elements and Limited Common Elements,
pursuant to the terms of the Hotel Operating and Rental Pool Agreement and that
the costs thereof will be jointly charged to the Unit Owners. To the extent such
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ANNEX C
costs are included in the annual proposed operating budget submitted to the
Association by the Hotel Operator, such costs relating to the Common Elements
and Limited Common Elements shall not be included in initially establishing the
annual Assessments to be levied by the Board of Directors pursuant to Section
7.2; however, if at any time (i) a Hotel Operating and Rental Pool Agreement is
not in effect; or (ii) such agreement does not provide for the Hotel Operator to
pay the costs of complying with Sections 5.1 and 5.2; or (iii) the Hotel
Operator is in default under such agreement and is not paying such costs, the
Association shall be responsible for assuring compliance with Section 5.1 and
5.2, and any costs incurred by the Association in performing any cleaning,
repair, maintenance, refurbishing or replacement obligations of Sections 5.1 or
5.2 shall become Common Expenses and shall be payable in accordance with the
terms of Section 7.21 and the Association may enforce collection of any such
amounts in the same manner and to the same extent as provided for in this
Declaration for the collection of Assessments.
ARTICLE 6
THE ASSOCIATION; RIGHTS AND DUTIES; MEMBERSHIP
6.1 RIGHTS, POWERS AND DUTIES OF THE ASSOCIATION. No later than the date on
which the first Unit is conveyed to a Purchaser, the Association shall be
organized as a nonprofit Arizona corporation. The Association shall be the
entity through which the Unit Owners shall act. Unless the Condominium Documents
or the Condominium Act specifically require a vote of the Members, approvals or
actions to be given or taken by the Association shall be valid if given or taken
by the Board of Directors. The Association shall have such rights, powers and
duties as are prescribed by law and as are set forth in the Condominium
Documents together with such rights, powers and duties as may be reasonably
necessary in order to effectuate the objectives and purposes of the Association
as set forth in this Declaration and the Condominium Act. The rights and
obligations of the Association under this Declaration may be assigned and
delegated to a Hotel Operator to enable the Hotel Operator to comply with its
obligations under any Hotel Operating and Rental Pool Agreement. Without
limiting the generality of the foregoing, the Association shall have the
following rights, powers and duties:
6.1.1 The Association shall have the right to finance capital
improvements in the Condominium by encumbering future Assessments if such action
is approved by the written consent or affirmative vote of Unit Owners
representing more than fifty percent (50%) of the votes in the Association.
6.1.2 The Association has the specific duty to make available, during
normal business hours, to the Declarant, Eligible Mortgage Holders, Unit Owners,
and Eligible Insurers or Guarantors, current copies of the Declaration, Bylaws,
Articles, Rules and other books, records and financial statements of the
Association as may be requested from time to time by such parties. Such requests
shall be in writing, and the Association shall have the right to charge for
copying expenses.
6.1.3 The Association shall control, manage and administer the Common
Elements for the benefit of all Unit Owners, subject to the rights granted to
the Hotel Operator under any Hotel Operating and Rental Pool Agreement.
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ANNEX C
6.1.4 The Association shall assure that the Units and the Common
Elements and all Limited Common Elements are kept and maintained in a clean,
safe and attractive condition and in a state of good and serviceable repair
(reasonable wear and tear excepted) and that all Unit Furnishings and all Hotel
Furnishings are properly maintained, repaired and replaced and if not so
maintained by the Unit Owners (or on their behalf by the Hotel Operator), the
Association is authorized to undertake all such upkeep, maintenance, repair and
replacement and recover the cost thereof from any Person(s) responsible
therefor.
6.1.5 Subject to the right of the Association to pay amounts to the
Hotel Operator as set forth in this Declaration, the Association shall collect
and receive all Assessments levied by the Association and other amounts payable
to the Association and shall pay all sums of money properly required to be paid
on account of all services, supplies and obligations pertaining to or for the
benefit of the Association.
6.1.6 The Association shall conduct all negotiations with the Hotel
Operator on behalf of the Unit Owners, including but not limited to negotiating
the terms of the Hotel Operating and Rental Pool Agreement and all extensions,
renewals, amendments, supplements and replacements thereto and perform all
reasonable obligations undertaken by the Association under any such agreement.
6.1.7 The Association may:
(i) purchase, hire or otherwise acquire personal property to
enable the Condominium to be used for hotel purposes;
(ii) borrower money required by it in the performance of its
duties or the exercise of its powers, including arranging an operating line of
credit, on terms and at rates of interest which are consistent with prudent
business practices;
(iii) secure the repayment of money borrowed by it, and the
payment of interest, by negotiable instrument or encumbrance of unpaid
Assessments, whether levied or not, or mortgage any property vested in it, or by
combination of those means;
(iv) invest, as it may determine, in separate accounts,
Association funds, including but not limited to reserve funds;
(v) designate by special resolution an area as Limited Common
Element and specify the Unit or Units that are to have the use of such Limited
Common Element;
(vi) do all things necessary for the enforcement of this
Declaration, the Bylaws and the Rules of the Association, and for the control,
management and administration of the Common Elements or other assets of the
Association, including removing privileges for the use of certain facilities, or
fixing and collecting fines for contravention of the Declaration, Bylaws or
Rules;
(vii) set up and maintain separate contingency reserve funds for
such purposes and in such amounts as the Board of Directors deems appropriate;
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ANNEX C
(viii) grant, revise, amend and supplement easements over Common
Elements (including but not limited to parking areas) for the benefit of any
governmental agency (including the County of Yavapai), for the use of the
general public and for the benefit of adjoining landowners, upon such terms as
the Board of Directors deems to be reasonably prudent;
(ix) hire a management company, managing agent or executive
director and establish committees to assist the Association and the Board of
Directors in performing their respective duties and responsibilities; and
(x) initiate, pursue, compromise, and settle (including
dismissal) real estate tax protests and appeals relative to the Condominium,
including individual Units, in the name of the Association and/or the individual
Unit Owners, and upon request, each Unit Owner will grant to the Association a
limited power of attorney, in the form required by any taxing authority, to
permit the Association to pursue any such real estate tax protest or appeal on
behalf of the respective Unit Owner.
6.2 DIRECTORS AND OFFICERS.
6.2.1 During the Period of Declarant Control, the Declarant shall have
the right to appoint and remove the members of the Board of Directors and the
officers of the Association. Such members of the Board of Directors and officers
are not required to be Unit Owners.
6.2.2 Upon the termination of the Period of Declarant Control, the Unit
Owners shall elect the Board of Directors which must consist of at least five
(5) members, at least a majority of whom must be Unit Owners. The Board of
Directors elected by the Unit Owners shall then elect the officers of the
Association.
6.2.3 The Declarant may voluntarily surrender its right to appoint and
remove the members of the Board of Directors and the officers of the Association
before termination of the Period of Declarant Control, and in that event the
Declarant may require, for the duration of the Period of Declarant Control, that
specified actions of the Association or the Board of Directors, as described in
a recorded instrument executed by the Declarant, be approved by the Declarant
before they become effective.
6.3 RULES. The Board of Directors, from time to time and subject to the
provisions of this Declaration and the Condominium Act, may adopt, amend, and
repeal Rules. The Rules may, among other things, restrict and govern the use of
any area by any Guest, any Unit Owner, or by any family member or invitee of
such Unit Owner; provided, however, that the Rules may not unreasonably
discriminate among Unit Owners and shall not be inconsistent with the
Condominium Act, this Declaration, the Articles, Bylaws or any Hotel Operating
and Rental Pool Agreement, nor shall such Rules discriminate against the Hotel
Operator or unreasonably restrict the Hotel Operator from performing its duties
or exercising its rights under the Hotel Operating and Rental Pool Agreement. A
copy of the Rules as they may from time to time be adopted, amended or repealed,
shall be mailed or otherwise delivered to each Unit Owner and may be recorded.
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ANNEX C
6.4 COMPOSITION OF MEMBERS. Each Unit Owner shall be a Member of the
Association. The membership of the Association at all times shall consist
exclusively of all the Unit Owners. A Unit Owner (including Declarant) of a Unit
shall automatically, upon becoming the Unit Owner thereof, be a Member of the
Association and shall remain a Member of the Association until such time as such
Unit Owner's ownership ceases for any reason, at which time, such Unit Owner's
membership in the Association shall automatically cease.
6.5 PERSONAL LIABILITY. Neither Declarant nor any member of the Board of
Directors or of any committee of the Association, any officer of the Association
nor any manager or other employee of the Association shall be personally liable
to any Member, or to any other person or entity, including the Association, for
any damage, loss or prejudice suffered or claimed on account of any act,
omission, error or negligence of the Declarant, the Association, the Board of
Directors, the manager, any representative or employee of the Association, or
any committee, committee member or officer of the Association; provided,
however, the limitations set forth in this Section 6.5 shall not apply to any
person who has failed to act in good faith or has engaged in wilful or
intentional misconduct.
6.6 IMPLIED RIGHTS. The Association may exercise any right or privilege
given to the Association expressly by the Condominium Documents and every other
right or privilege reasonably to be implied from the existence of any right or
privilege given to the Association by the Condominium Documents or reasonably
necessary to effectuate any such right or privilege.
6.7 VOTING RIGHTS. Subject to Section 6.8 below, each Unit Owner of a Unit,
including Declarant, shall be entitled to cast one (1) vote for each Unit owned
by such Unit Owner, on any Association matter which is put to a vote of the
membership in accordance with this Declaration, the Articles and/or Bylaws.
6.8 VOTING PROCEDURES. No change in the ownership of a Unit shall be
effective for voting purposes unless and until the Board of Directors is given
actual written notice of such change and is provided satisfactory proof thereof.
The vote for each such Unit must be cast as a unit, and fractional votes shall
not be allowed. In the event that a Unit is owned by more than one (1) Person
and such Unit Owners are unable to agree among themselves as to how their vote
or votes shall be cast, they shall lose their right to vote on the matter in
question. If any Member casts a vote representing a certain Unit, it will
thereafter be conclusively presumed for all purposes that such Unit Owner was
acting with the authority and consent of all other Unit Owners of the same Unit
unless objection thereto is made at the time the vote is cast. In the event more
than one (1) vote is cast by a Member for a particular Unit, none of the votes
shall be counted and all of the votes shall be deemed void.
6.9 TRANSFER OF MEMBERSHIP. The rights and obligations of any Member other
than the Declarant shall not be assigned, transferred, pledged, conveyed or
alienated in any way except upon transfer of ownership of a Unit Owner's Unit,
and then only to the transferee of ownership to the Unit. A transfer of
ownership to a Unit may be effected by deed, intestate succession, testamentary
disposition, foreclosure of a mortgage of record, or such other legal process as
now in effect or as may hereafter be established under or pursuant to the laws
of the State of Arizona. Any attempt to make a prohibited transfer shall be
void. Any transfer of ownership to a Unit shall operate to transfer the
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ANNEX C
membership appurtenant to said Unit to the new Unit Owner thereof. Each
Purchaser of a Unit shall notify the Association of its purchase within ten (10)
days after becoming the Unit Owner of a Unit.
6.10 SUSPENSION OF VOTING RIGHTS. If any Unit Owner fails to pay any
Assessments or other amounts due to the Association under the Condominium
Documents within fifteen (15) days after such payment is due or if any Unit
Owner violates any other provision of the Condominium Documents and such
violation is not cured within fifteen (15) days after the Association notifies
the Unit Owner of the violation, the Board of Directors shall have the right to
suspend such Unit Owner's right to vote until such time as all payments,
including interest and attorneys' fees, are brought current, and until any other
infractions or violations of the Condominium Documents are corrected.
6.11 CONVEYANCE OR ENCUMBRANCE OF COMMON ELEMENTS. The Common Elements
shall not be mortgaged, transferred, dedicated or encumbered without the prior
written consent or affirmative vote of Unit Owners representing at least eighty
percent (80%) of the votes of the Members. In addition, any conveyance,
encumbrance, judicial sale or other transfer (whether voluntary or involuntary)
of an individual interest in the Common Elements shall be void unless the Unit
to which that interest is allocated also is transferred.
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ANNEX C
ARTICLE 7
ASSESSMENTS
7.1 PREPARATION OF BUDGET.
7.1.1 At least thirty (30) days before the beginning of each fiscal year
of the Association commencing with the fiscal year in which the first Unit is
conveyed to a Purchaser, the Board of Directors shall adopt a budget for the
Association containing an estimate of the total amount of funds which the Board
of Directors believes will be required during the ensuing fiscal year to pay all
Common Expenses, excluding any Common Expenses which are proposed to be paid by
the Hotel Operator pursuant to the terms of the annual operating budget prepared
by the Hotel Operator for the ensuing year. The budget shall separately reflect
any Common Expenses to be assessed against less than all of the Units pursuant
to Subsection 7.2.4 of this Declaration.
7.1.2 Within thirty (30) days after the adoption of a budget, the Board
of Directors shall send to each Unit Owner the budget or a summary of the budget
and a statement of the amount of the Common Expense Assessment assessed against
the Unit of the Unit Owner in accordance with Section 7.2 of this Declaration.
The failure or delay of the Board of Directors to prepare or adopt a budget for
any fiscal year shall not constitute a waiver or release in any manner of a Unit
Owner's obligation to pay his allocable share of the Common Expenses as provided
in Section 7.2 of this Declaration, and each Unit Owner shall continue to pay
the Common Expense Assessment against his Unit as established for the previous
fiscal year until notice of the Common Expense Assessment for the new fiscal
year has been established by the Board of Directors.
7.1.3 The Board of Directors is expressly authorized to adopt and amend
budgets for the Association, and no ratification of any budget or amended budget
by the Unit Owners shall be required.
7.2 COMMON EXPENSE ASSESSMENT.
7.2.1 For each fiscal year of the Association commencing with the fiscal
year in which the first Unit is conveyed to a Purchaser, the Common Expense
Assessment for each Unit shall be determined by multiplying the total estimated
Common Expenses set forth in the budget adopted by the Board of Directors
(except for the Common Expenses which are to be assessed against less than all
of the Units pursuant to Subsection 7.2.4) times the applicable Percentage
Interest as set forth on Exhibit "B" attached hereto (the "Common Expense
Share"). If the Board of Directors determines during any fiscal year that funds
budgeted or available for that fiscal year are or will become inadequate to meet
all Common Expenses for any reason, including, without limitation, reduced
income and expense reimbursement from the operation of the hotel, or increased
Common Expenses, nonpayment of Assessments by Members, or nonpayment of hotel
operating costs (including maintenance and repairs of the Common Elements, Unit
Furnishings, Hotel Furnishings and Units by the Hotel Operator) the Board of
Directors may increase and reallocate the Common Expense Assessment for that
fiscal year and the revised Common Expense Assessment for each Unit shall
commence on the date designated by the Board of Directors.
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ANNEX C
7.2.2 The Common Expense Assessments shall commence as to all Units on
the first day of the month following the conveyance of the first Unit to a
Purchaser. The first Common Expense Assessment shall be adjusted according to
the number of months remaining in the fiscal year of the Association. The Board
of Directors may require that the Common Expense Assessments or be paid in
installments. For the period from the date upon which this Declaration is
recorded through the first day of the month following the conveyance of the
first Unit to a Purchaser, the Declarant shall be responsible for assuring that
the actual Common Expenses accrued through such date are paid.
7.2.3 Except as otherwise expressly provided for in this Declaration,
all Common Expenses shall be assessed against all of the Units in accordance
with Subsection 7.2.1 of this Declaration.
7.2.4 If any Common Expense is caused by the negligence or other
misconduct of any Unit Owner, or if any Unit Owner fails to pay when due any
amount owing to the Hotel Operator under the Hotel Operating and Rental Pool
Agreement (a "Rental Pool Delinquency"), the Association (i) shall assess any
such Common Expense exclusively against such Unit Owner to the extent not
covered by insurance; and (ii) may assess any such Rental Pool Delinquency
exclusively against such Unit Owner.
7.2.5 All Assessments, monetary penalties and other fees and charges
levied against a Unit shall be the personal obligation of the Unit Owner of the
Unit at the time the Assessments, monetary penalties or other fees and charges
became due. The personal obligation of a Unit Owner for Assessments, monetary
penalties and other fees and charges levied against his Unit shall not pass to
the Unit Owner's successors in title unless expressly assumed by them.
7.3 SPECIAL ASSESSMENTS. In addition to Common Expense Assessments, the
Association may levy, in any fiscal year of the Association, a special
assessment applicable to that fiscal year only for the purpose of defraying, in
whole or in part, the cost of any construction, reconstruction, repair or
replacement of a capital improvement of one or more Units and/or the Common
Elements, including fixtures and personal property related thereto, or for any
other lawful Association purpose, provided that any Special Assessment shall
have first been approved by Unit Owners representing two-thirds (2/3) of the
votes in the Association who are voting in person or by proxy at a meeting duly
called for such purpose. Unless otherwise specified by the Board of Directors,
Special Assessments shall be due thirty (30) days after they are levied by the
Association and notice of the Special Assessment is given to the Unit Owners.
7.4 EFFECT OF NONPAYMENT OF ASSESSMENTS; REMEDIES OF THE ASSOCIATION.
7.4.1 Any Assessment, or any installment of an Assessment, which is not
paid within five (5) days after the Assessment first became due shall be deemed
delinquent and shall bear interest from the date of delinquency at the rate of
interest established from time to time by the Board of Directors.
7.4.2 All Assessments, monetary penalties and other fees and charges
imposed or levied against any Unit or Unit Owner shall be secured by the
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Assessment Lien as provided for in the Condominium Act. The recording of this
Declaration constitutes record notice and perfection of the Assessment Lien, and
no further recordation of any claim of lien shall be required. Although not
required in order to perfect the Assessment Lien, the Association shall have the
right but not the obligation, to record a notice setting forth the amount of any
delinquent assessments, monetary penalties or other fees or charges imposed or
levied against a Unit or the Unit Owner which are secured by the Assessment
Lien.
7.4.3 The Association shall have the right, at its option, to enforce
collection of any delinquent Assessments, monetary penalties and all other fees
and charges owed to the Association in any manner allowed by law including, but
not limited to: (i) bringing an action at law against the Unit Owner personally
obligated to pay the delinquent amounts and such action may be brought without
waiving the Assessment Lien securing any such delinquent amounts; or (ii)
bringing an action to foreclose its Assessment Lien against the Unit in the
manner provided by law for the foreclosure of a realty mortgage. The Association
shall have the power to bid in at any foreclosure sale and to purchase, acquire,
hold, lease, mortgage and convey any and all Units purchased at such sale.
7.5 SUBORDINATION OF ASSESSMENT LIEN TO MORTGAGES. The Assessment Lien
shall be subordinate to the lien of any First Mortgage. Any First Mortgagee or
any other party acquiring title or coming into possession of a Unit through
foreclosure of a First Mortgage, purchase at a foreclosure sale or trustee sale,
or through any equivalent proceedings, such as, but not limited to, the taking
of a deed in lieu of foreclosure, shall acquire title free and clear of any
claims for unpaid Assessments, monetary penalties and other fees and charges
against the Unit which became payable prior to such sale or transfer. Any
delinquent Assessments, monetary penalties and other fees and charges which are
extinguished pursuant to this Section 7.5 may be reallocated and assessed to all
Units as at Common Expense. Any Assessments, monetary penalties and other fees
and charges against the Unit which accrue prior to such sale or transfer shall
remain the obligation of the defaulting Unit Owner.
7.6 EXEMPTION OF UNIT OWNER. No Unit Owner may exempt itself from liability
for payment of Assessments, monetary penalties and other fees and charges levied
pursuant to the Condominium Documents by waiver and nonuse of any of the Common
Elements or by the abandonment or non-use of its Unit.
7.7 CERTIFICATE OF PAYMENT. The Association on written request shall issue
or cause to be issued to a lienholder, Unit Owner or Person designated by a Unit
Owner a recordable statement setting forth the amount of unpaid Assessments
against his Unit. The statement shall be furnished within twenty (20) business
days after receipt of the request and is binding on the Association, the Board
of Directors, and every Unit Owner. In addition, upon receipt of written notice
from a Unit Owner or other interested Person, the Association shall furnish to a
Purchaser within seven (7) days after receipt of notice of a pending sale of a
Unit, a written statement setting forth the amount of the Common Expense
Assessment for the Unit and any unpaid Common Expense Assessment, fee or charge
currently due from the selling Unit Owner, together with such other information
as may be required under the Condominium Act. The Association may charge a
reasonable fee in an amount established by the Board of Directors for each such
statement.
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ANNEX C
7.8 NO OFFSETS. All Assessments, monetary penalties and other fees and
charges shall be payable in accordance with the provisions of this Declaration,
and no offsets against such Assessments, monetary penalties and other fees and
charges shall be permitted for any reason, including, without limitation, a
claim that the Association is not properly exercising its duties and powers as
provided in the Condominium Documents or the Condominium Act or that
insufficient revenue is being generated by the Hotel Operator.
7.9 RESERVE FUND. To assist the Association in maintaining adequate funds
to pay any hotel operation expenses and to establish appropriate reserves
therefor, each Purchaser of a Unit from the Declarant shall pay to the
Association, immediately upon becoming the Unit Owner of the Unit, a reserve
fund payment equal to $150,000 multiplied times the Percentage Interest
attributable to the Unit. Such amount shall not be considered as an advance
payment of any Assessments levied by the Association pursuant to this
Declaration. The Association shall make such reserve fund payment available to
the Hotel Operator following the first year's operation of the Hotel to apply
against any operating cash reserve required to be funded by the Unit Owners
pursuant to the term of the Hotel Operating and Rental Pool Agreement.
7.10 SURPLUS FUNDS. Surplus funds of the Association remaining after
payment of or making provisions for Common Expenses and establishing any
reserves may in the discretion of the Board of Directors either be returned to
the Unit Owners pro rata in accordance with each Unit Owner's Common Expense
Liability or be credited on a pro rata basis to the Unit Owners to reduce each
Unit Owner's future Common Expense Assessments or may be added to any
contingency or other reserve funds maintained by the Association.
7.11 MONETARY PENALTIES. In accordance with the procedures set forth in the
Bylaws, the Board of Directors shall have the right to levy reasonable monetary
penalties against a Unit Owner for violations of the Condominium Documents.
7.12 TRANSFER FEE. Each Purchaser of a Unit shall pay to the Association
immediately upon becoming the Owner of the Unit a transfer fee in such amount as
is established from time to time by the Board of Directors.
7.13 ADDITIONAL RESERVES. The Association may establish and maintain, from
Common Expense Assessments, additional reserves to provide for the replacement
and capital repairs of the Common Elements, Unit Furnishings, Hotel Furnishings
and other Improvements to the Condominium which the Association is obligated to
repair, maintain and replace. In determining whether to establish such reserves
and the amount of such reserves, the Board of Directors may take into account
the reserves provided for in Section 7.9 and any other reserves established by
the Hotel Operator pursuant to the Hotel Operating and Rental Pool Agreement
which are established for similar purposes. The Association may make such
additional reserves available to the Hotel Operator in order to enable the Hotel
Operator to comply with its obligations under the Hotel Operating and Rental
Pool Agreement to repair or replace Improvements, Unit Furnishings and Hotel
Furnishings.
7.14 HOTEL OPERATING REVENUES. Notwithstanding anything contained in this
Article 7 to the contrary, all or any portion of distributions otherwise due and
payable to a Unit Owner pursuant to the Hotel Operating and Rental Pool
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ANNEX C
Agreement may be collected by the Association from the Hotel Operator upon
demand and may be used by the Association to pay and offset against all or any
portion of the Assessments or other amounts due and payable by such Unit Owner
pursuant to this Declaration. The foregoing shall not, however, relieve any such
Unit Owner of its obligation to pay Assessments or any deficiencies resulting
after the application of revenues from the Hotel Operating and Rental Pool
Agreement.
7.15 UNIT TAXES. Each Unit Owner shall be responsible for all real estate
taxes attributable to its Unit and all income, sales, use, privilege, bed,
lodging and other taxes attributable to any revenue earned by such Unit Owner in
connection with participating in the rental pool arrangement or any other income
produced relative to its respective Unit. It is anticipated that the Hotel
Operator will file and remit to the appropriate governmental agencies the sales,
use, privilege, bed or lodging taxes applicable to the rental pool arrangement.
7.16 UTILITIES. Utility usage shall be considered a Common Expense and as
such shall be governed by the provisions of Subsection 7.1 and 7.2.
ARTICLE 8
INSURANCE
8.1 SCOPE OF COVERAGE.
8.1.1 Commencing not later than the date of the first conveyance of a
Unit to a Purchaser, the Association shall maintain, to the extent reasonably
available, the following insurance coverage from generally acceptable insurance
carriers:
(i) Property insurance on the Common Elements and Units,
including Hotel Furnishings and Unit Furnishings but exclusive of all other
personal property of Unit Owners, issued under a standard form "All Risk of
Direct Physical Loss Form" in an amount equal to the maximum insurable
replacement value of the Common Elements and Units, as determined by the Board
of Directors; provided, however that the total amount of insurance after
application of any deductibles shall not be less than one hundred percent (100%)
of the current replacement cost of the insured property, exclusive of land,
excavations, foundations and other items normally excluded from a property
insurance policy.
(ii) Broad form comprehensive general liability insurance, for a
limit to be determined by the Board, but not less than $1,000,000.00 for any
single occurrence. Such insurance shall cover all occurrences commonly insured
against for death, bodily injury and property damage arising out of or in
connection with the use, ownership or maintenance of the Common Elements. Such
policy shall include (i) a cross liability clause to cover liabilities of the
Unit Owners as a group to a Unit Owner, (ii) medical payments insurance and
contingent liability coverage arising out of the use of hired and nonowned
automobiles, and (iii) coverage for any legal liability that results from
lawsuits related to employment contracts to which the Association is a party.
(iii) Worker's compensation insurance to the extent necessary to
meet the requirements of the laws of Arizona.
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ANNEX C
(iv) Directors' and officers' liability insurance covering all
the directors and officers of the Association in such limits as the Board of
Directors may determine from time to time.
(v) Such other insurance as the Association shall determine from
time to time to be appropriate to protect the Association, the members of the
Board of Directors, the members of any committee or the Board of Directors or
the Unit Owners.
(vi) The insurance policies purchased by the Association shall,
to the extent reasonably available, contain the following provisions:
(a) Each Unit Owner shall be an insured under the policy
with respect to liability arising out of his ownership of an undivided interest
in the Common Elements or membership in the Association.
(b) There shall be no subrogation with respect to the
Association, its agents, servants, and employees against Unit Owners and members
of their household.
(c) No act or omission by any Unit Owner shall void the
policy or be a condition to recovery on the policy.
(d) The coverage afforded by such policy shall be
primary and shall not be brought into contribution or proration with any
insurance which may be purchased by Unit Owners or their mortgagees or
beneficiaries under deeds of trust.
(e) A "severability of interest" endorsement which shall
preclude the insurer from denying the claim of a Unit Owner because of the
negligent acts of the Association or other Unit Owners.
(f) The Association shall be the insured for use and
benefit of the individual Unit Owners (designated by name if required by the
insurer).
(g) For policies of hazard insurance, a standard
mortgagee clause providing that the insurance carrier shall notify the
Association and each First Mortgagee named in the policy at least thirty (30)
days in advance of the effective date of any substantial change in coverage or
cancellation of the policy.
(h) Any insurance trust agreement will be recognized by
the insurer.
(vii) Boiler explosion insurance evidenced by the standard form
of boiler machinery insurance policy and providing coverage in the minimum
amount of $50,000.00 per accident per location.
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ANNEX C
(viii) If the Condominium is located in an area identified by
the Secretary of Housing & Urban Development as an area having special flood
hazards, a "blanket policy" of flood insurance on the Condominium in the lesser
of one hundred percent (100%) of the current replacement cost of the Buildings
and any other property covered on the required form of policy or the maximum
limit of coverage available under the National Insurance Act of 1968, as
amended.
(ix) "Agreed Amount" and "Inflation Guard" endorsements.
8.1.2 If, at the time of a loss insured under an insurance policy
purchased by the Association, the loss is also insured under an insurance policy
purchased by a Unit Owner, the Association's policy shall provide primary
coverage.
8.2 FIDELITY BONDS.
8.2.1 The Association shall maintain blanket fidelity bonds for all
officers, directors, trustees and employees of the Association and all other
persons handling or responsible for funds of or administered by the Association
including, but without limitation, officers, directors and employees of any
management agent of the Association, whether or not they receive compensation
for their services. The total amount of the fidelity bonds maintained by the
Association shall be based upon the best business judgment of the Board of
Directors, and shall not be less than the greater of the estimated maximum
funds, including reserve funds, in the custody of the Association or the
management agent, as the case may be, at any given time during the term of each
bond, or the sum equal to three months aggregate Common Expense Assessments on
all Units plus reserve funds. Fidelity bonds obtained by the Association must
also meet the following requirements:
(i) The fidelity bonds shall name the Association as an obligee;
(ii) The bonds shall contain waivers by the issuers of the bonds
of all defenses based upon the exclusion of persons serving without compensation
from the definition of "employees" or similar terms or expressions;
(iii) The bonds shall provide that they may not be cancelled or
substantially modified (including cancellation from nonpayment of premium)
without at least ten (10) days prior written notice to the Association and each
First Mortgagee.
8.2.2 The Association shall require any management agent of the
Association to maintain its own fidelity bond in an amount equal to or greater
than the amount of the fidelity bond to be maintained by the Association
pursuant to Subsection 8.2.1 of this Declaration. The fidelity bond maintained
by the management agent shall cover funds maintained in bank accounts of the
management agent and shall name the Association as an obligee.
8.3 PAYMENT OF PREMIUMS. Premiums for all insurance obtained by the
Association pursuant to this Article shall be Common Expenses and shall be paid
for by the Association.
8.4 INSURANCE OBTAINED BY UNIT OWNERS. The issuance of insurance policies
to the Association pursuant to this Article shall not prevent a Unit Owner from
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ANNEX C
obtaining insurance for its own benefit and at its own expense covering its
Unit, its personal property and providing personal liability coverage.
8.5 PAYMENT OF INSURANCE PROCEEDS. Any loss covered by property insurance
obtained by the Association in accordance with this Article shall be adjusted
with the Association and the insurance proceeds shall be payable to the
Association and not to any mortgagee or beneficiary under a deed of trust. The
Association shall hold any insurance proceeds in trust for Unit Owners and
lienholders as their interests may appear, and the proceeds shall be disbursed
and applied as provided for in A.R.S. ss. 33-1253.
8.6 CERTIFICATE OF INSURANCE. An insurer that has issued an insurance
policy pursuant to this Article shall issue certificates or memoranda of
insurance to the Association and, on written request, to any Unit Owner or First
Mortgagee. The insurer issuing the policy shall not cancel or refuse to renew it
until thirty (30) days after notice of the proposed cancellation or nonrenewal
has been mailed to the Association, each Unit Owner, and each First Mortgagee to
whom a certificate or memorandum of insurance has been issued at their
respective last known addresses.
8.7 DELEGATION OF INSURANCE RESPONSIBILITY. The Association shall be deemed
to have complied with its obligations under this Article 8 if the insurance
required by the terms hereof is obtained by the Hotel Operator. Any such
insurance may include the Hotel Operator as a named insured and any such
insurance may include business interruption insurance to the extent required in
any Hotel Operating and Rental Pool Agreement.
ARTICLE 9
RIGHTS OF FIRST MORTGAGEES
9.1 NOTIFICATION TO FIRST MORTGAGEES. Upon receipt by the Association of a
written request from a First Mortgagee or insurer or governmental guarantor of a
First Mortgage informing the Association of its correct name and mailing address
and number or address of the Unit to which the request relates, the Association
shall provide such Eligible Mortgage Holder or Eligible Insurer or Guarantor
with timely written notice of the following:
9.1.1 Any condemnation loss or any casualty loss which affects a
material portion of the Condominium or any Unit on which there is a First
Mortgage held, insured or guaranteed by such Eligible Mortgage Holder or
Eligible Insurer or Guarantor;
9.1.2 Any delinquency in the payment of Assessments or charges owed by a
Unit Owner subject to a First Mortgage held, insured or guaranteed by such
Eligible Mortgage Holder or Eligible Insurer or Guarantor or any other default
in the performance by the Unit Owner of any obligation under the Condominium
Documents, which delinquency or default remains uncured for the period of sixty
(60) days;
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ANNEX C
9.1.3 Any lapse, cancellation or material modification of any insurance
policy or fidelity bond maintained by the Association;
9.1.4 Any proposed action which requires the consent of a specified
percentage of Eligible Mortgage Holders as set forth in Section 9.2 of this
Declaration.
9.2 APPROVAL REQUIRED FOR AMENDMENT TO DECLARATION, ARTICLES OR BYLAWS.
9.2.1 The approval of Eligible Mortgage Holders holding First Mortgages
on Units owned by Unit Owners who have at least fifty-one percent (51%) of the
votes in the Association allocated to Unit Owners of all Units subject to First
Mortgages held by Eligible Mortgage Holders shall be required to add or amend
any material provisions of the Declaration, Articles or Bylaws which establish,
provide for, govern or regulate any of the following:
(i) Voting rights;
(ii) Assessments, assessment liens or subordination of assessment
liens;
(iii) Reserves for maintenance, repair and replacement of Common
Elements;
(iv) Insurance or fidelity bonds;
(v) Responsibility for maintenance and repairs;
(vi) Expansion or contraction of the Condominium, or the addition,
annexation or withdrawal of property to or from the Condominium;
(vii) Boundaries of any Unit;
(viii) Reallocation of interests in the Common Elements or Limited
Common Elements or rights to their use;
(ix) Convertibility of Units into Common Elements or of Common
Elements into Units;
(x) Use of the Units for other than Public Rental Residential Use;
(xi) Imposition of any restrictions on a Unit Owner's right to sell
or transfer its Unit;
(xii) A decision by the Association to establish self-management when
professional management previously had been required by an Eligible Mortgage
Holder;
(xiii) Restoration or repair of the Condominium (after a hazard damage
or partial condemnation) in a manner other than that specified in the
Condominium Documents;
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ANNEX C
(xiv) Any action to terminate the legal status of the Condominium
after substantial destruction or condemnation occurs;
(xv) Any provisions which expressly benefit First Mortgagees,
Eligible Mortgage Holders or Eligible Insurers or Guarantors.
9.2.2 Any action to terminate the legal status of the Condominium for
reasons other than substantial destruction or condemnation of the Condominium
must be approved by Eligible Mortgage Holders holding First Mortgages on Units
owned by Unit Owners who have at least sixty-seven percent (67%) of the votes in
the Association allocated to Unit Owners of all Units subject to First Mortgages
held by Eligible Mortgage Holders.
9.2.3 Any First Mortgagee who receives a written request to approve
additions or amendments to the Declaration, Articles or Bylaws, who does not
deliver or mail to the requesting party a negative response within thirty (30)
days shall be deemed to have approved such request, provided the notice was
delivered by certified or registered mail, with a return receipt requested.
9.2.4 The approvals required by this Section 9.2 shall not apply to
amendments that may be executed by the Declarant in the exercise of its
Development Rights.
9.3 RIGHT OF INSPECTION OF RECORDS. Any Unit Owner, First Mortgagee or
Eligible Insurer or Guarantor will, upon written request, be entitled to: (i)
inspect the current copies of the Condominium Documents and the books, records
and financial statements of the Association during normal business hours; (ii)
receive within ninety (90) days following the end of any fiscal year of the
Association, an audited financial statement of the Association for the
immediately preceding fiscal year of the Association, free of charge to the
requesting party; and (iii) receive written notice of all meetings of the
Members of the Association and be permitted to designate a representative to
attend all such meetings.
9.4 PRIOR WRITTEN APPROVAL OF FIRST MORTGAGEES. Except as provided by
statute in case of condemnation or substantial loss to the Units or the Common
Elements, unless at least two-thirds (2/3) of all First Mortgagees (based upon
one vote for each First Mortgage owned) or Unit Owners (other than the Declarant
or other sponsor, developer or builder of the Condominium) of the Units have
given their prior written approval, the Association shall not be entitled to:
9.4.1 By act or omission, seek to abandon or terminate this Declaration
or the Condominium;
9.4.2 Change the pro rata interest or obligations of any individual Unit
for the purpose of: (i) levying Assessments or charges or allocating
distributions of hazard insurance proceeds or condemnation awards, or (ii)
determining the pro rata share of ownership of each Unit in the Common Elements;
9.4.3 Partition or subdivide any Unit;
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ANNEX C
9.4.4 By act or omission, seek to abandon, partition, subdivide,
encumber, sell or transfer the Common Elements. The granting of easements for
public utilities or for other public purposes consistent with the intended use
of the Common Elements shall not be deemed a transfer within the meaning of this
Subsection; or
9.4.5 Use hazard insurance proceeds for losses to any Units or the
Common Elements for any purpose other than the repair, replacement or
reconstruction of such Units or the Common Elements.
Nothing contained in this Section 9.4 or any other provisions of this
Declaration shall be deemed to grant the Association the right to partition any
Unit without the consent of the Unit Owners thereof. Any partition of a Unit
shall be subject to such limitations and prohibitions as may be set forth
elsewhere in this Declaration or as provided under Arizona law.
9.5 CONDEMNATION OR INSURANCE PROCEEDS. No Unit Owner, or any other Person,
shall have priority over any rights of any First Mortgagee of the Unit pursuant
to its mortgage in the case of a distribution to such Unit Owner of insurance
proceeds or condemnation awards for losses to or a taking of Units and/or Common
Elements.
9.6 LIMITATION ON PARTITION AND SUBDIVISION. No Unit shall be partitioned
or subdivided without the prior written approval of the Holder of any First
Mortgage on such Unit.
9.7 CONFLICTING PROVISIONS. In the event of any conflict or inconsistency
between the provisions of this Article and any other provision of the
Condominium Documents, the provisions of this Article shall prevail; provided,
however, that in the event of any conflict or inconsistency between the
different Sections of this Article or between the provisions of this Article and
any other provision of the Condominium Documents with respect to the number or
percentage of Unit Owners, First Mortgagees, Eligible Mortgage Holders or
Eligible Insurers or Guarantors that must consent to (i) an amendment of the
Declaration, Articles or Bylaws, (ii) a termination of the Condominium, or (iii)
certain actions of the Association as specified in Sections 9.2 and 9.4 of this
Declaration, the provision requiring the consent of the greatest number or
percentage of Unit Owners, First Mortgagees, Eligible Mortgage Holders or
Eligible Insurers or Guarantors shall prevail; provided, however, that the
Declarant, without the consent of any Unit Owner or First Mortgagee being
required, shall have the right to amend this Declaration, the Plat, the Articles
or the Bylaws as set forth in Section 11.5.3.
ARTICLE 10
RESERVATION OF DEVELOPMENTAL AND
SPECIAL DECLARANT'S RIGHTS
Pursuant to the Condominium Act, Declarant reserves all of the development
and special declarant rights in the Condominium afforded under A.R.S. ss.
33-1202(14) and (21), respectively, subject to the expiration deadlines set
forth below. Specifically, but without limitation, Declarant reserves the
following rights:
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ANNEX C
10.1 DEVELOPMENTAL RIGHTS. Declarant hereby reserves, during the Period of
Declarant Control, all Development Rights under A.R.S. ss. 33-1202(14).
10.2 RIGHT TO COMPLETE IMPROVEMENTS AND CONSTRUCTION EASEMENT. Declarant
hereby reserves the right, for a period of five (5) years following the
recordation of this Declaration, to complete the construction of Improvements on
the Condominium, and an easement over and through the Condominium, including all
Common Elements, for the purpose of doing so. Any damage caused to a Unit or the
Common Elements by Declarant or its agents in the use or exercise of such right
and/or easement shall be repaired by and at the expense of Declarant.
10.3 OFFICES, MODEL UNITS AND PROMOTIONAL SIGNS. Declarant reserves the
right to maintain offices for sales and management and models as provided in
Section 3.4 above, and to maintain signs on the Common Elements for so long as
Declarant owns one or more Units and is actively marketing the Units for sale.
10.4 APPOINTMENT AND REMOVAL OF DIRECTORS AND OFFICERS. Declarant reserves
the right to appoint and remove any officer of the Association or any member of
the Board of Directors as set forth in Section 6.2 above, for the time period
set forth therein.
ARTICLE 11
GENERAL PROVISIONS
11.1 ENFORCEMENT. The Association, or any Unit Owner, shall have the right
to enforce, by any proceeding at law or in equity, all restrictions, conditions,
covenants, reservations, liens and charges now or hereafter imposed by the
provisions of the Condominium Documents. Failure by the Association or by any
Unit Owner to enforce any covenant or restriction contained in the Condominium
Documents shall in no event be deemed a waiver of the right to do so thereafter.
11.2 SEVERABILITY. Invalidation of any one of these covenants or
restrictions by judgment or court order shall in no way affect any other
provisions which shall remain in full force and effect.
11.3 DURATION. The covenants and restrictions of this Declaration shall
continue in full force and effect and run with and bind the Condominium until
terminated in accordance with the provisions of Section 11.4.
11.4 TERMINATION OF CONDOMINIUM. The Condominium may be terminated only in
the manner provided for in the Condominium Act.
11.5 AMENDMENT.
11.5.1 Except in cases of amendments that may be executed by a Declarant
in the exercise of its Development Rights or under A.R.S. ss. 33-1220, by the
Association under A.R.S. ss. 33-1206 or 33-1216(D), or by certain Unit Owners
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ANNEX C
under A.R.S. ss. 33-1218(B), 33-1222, 33-1223 or 33-1228(B), or in cases where
a higher percentage is required by the Condominium Act, the Declaration,
including the Plat, may be amended only by a vote of the Unit Owners to which at
least sixty-seven percent (67%) of the votes in the Association are allocated.
11.5.2 An amendment to the Declaration shall not terminate or decrease
any unexpired Development Right, Special Declarant Right or Period of Declarant
Control unless the Declarant approves the amendment in writing.
11.5.3 During the Period of Declarant Control, the Declarant shall have
the right to amend the Declaration, including the Plat, to (i) comply with the
Condominium Act or any other applicable law if the amendment does not adversely
affect the rights of any Unit Owner, (ii) correct any error or inconsistency in
the Declaration if the amendment does not adversely affect the rights of any
Unit Owner, (iii) comply with the rules or guidelines in effect from time to
time of any governmental or quasi-governmental entity or federal corporation
guaranteeing or insuring mortgage loans or governing transactions involving
mortgage instruments, including without limitation, the VA, the FHA, the FNMA or
the FHLMC, or (iv) the rules or requirements of any federal, state or local
governmental entity or agency whose approval of the Condominium, the Plat or the
Condominium Documents is required by law or requested by Declarant.
11.5.4 To the extent that any First Mortgages insured by the FHA or
guaranteed by the VA are held on any of the Units at the time of amendment, and
to the extent that it is required by any regulations governing FHA/VA mortgages,
during the Period of Declarant Control, any amendment to the Declaration or the
Plat must be approved by the VA or the FHA.
11.5.5 Any amendment adopted by the Unit Owners pursuant to Subsection
11.5.1 of this Declaration shall be signed by the President or Vice President of
the Association and shall be recorded with the County Recorder of each County in
which any portion of the Condominium is located. Any such amendment shall
certify that the amendment has been approved as required by this Subsection
11.5.5. Any amendment made by the Declarant pursuant to Subsection 11.5.3 of
this Declaration or the Condominium Act shall be executed by the Declarant and
shall be recorded with the County Recorder of each County in which any portion
of the Condominium is located.
11.6 REMEDIES CUMULATIVE. Each remedy provided herein is cumulative and not
exclusive.
11.7 NOTICES. All notices, demands, statements or other communications
required to be given to or served on a Unit Owner under this Declaration shall
be in writing and shall be deemed to have been duly given and served if
delivered personally or sent by United States mail, postage prepaid, return
receipt requested, addressed to the Unit Owner, at the address which the Unit
Owner shall designate in writing and file with the Association or, if no such
address is designated, at the address of the Unit of such Unit Owner. A Unit
Owner may change his address on file with the Association for receipt of notices
by delivering a written notice of change of address to the Association pursuant
to this Section 11.7. A notice given by mail, whether regular, certified, or
registered, shall be deemed to have been received by the person to whom the
notice was addressed on the earlier of the date the notice is actually received
or three days after the notice is mailed. If a Unit is owned by more than one
person, notice to one of the Unit Owners shall constitute notice to all Unit
36
<PAGE>
ANNEX C
Owners of the same Unit. Each Unit Owner shall file its correct mailing address
with the Association, and shall promptly notify the Association in writing of
any subsequent change of address.
11.8 BINDING EFFECT. By acceptance of a deed or by acquiring any ownership
interest in any portion of the Condominium, each Person, for himself, his heirs,
personal representatives, successors, transferees and assigns, binds himself,
his heirs, personal representatives, successors, transferees and assigns, to all
of the provisions, restrictions, covenants, conditions, rules, and regulations
now or hereafter imposed by the Condominium Documents and any amendments
thereof. In addition, each such Person by so doing thereby acknowledges that the
Condominium Documents set forth a general scheme for the improvement and
development of the real property covered thereby and hereby evidences his intent
that all the restrictions, conditions, covenants, easements, rules and
regulations contained in the Condominium Documents shall run with the land and
be binding on all subsequent and future Unit Owners, grantees, purchasers,
assignees, and transferees thereof. Furthermore, each such person fully
understands and acknowledges that the Condominium Documents shall be mutually
beneficial, prohibitive and enforceable by the various subsequent and future
Unit Owners. Declarant, its successors, assigns and grantees, covenants and
agrees that no Unit and the membership in the Association and the other rights
created by the Condominium Documents related to such Unit shall be separated or
separately conveyed, and such membership and other rights shall be deemed to be
conveyed or encumbered with the respective Unit even though the description in
the instrument of conveyance or encumbrance may refer only to the Unit.
11.9 GENDER. The singular, wherever used in this Declaration, shall be
construed to mean the plural when applicable, and the necessary grammatical
changes required to make the provisions of this Declaration apply either to
corporations or individuals, or men or women, shall in all cases be assumed as
though in each case fully expressed.
11.10 TOPIC HEADINGS. The marginal or topical headings of the sections
contained in this Declaration are for convenience only and do not define, limit
or construe the contents of the sections or of this Declaration.
11.11 SURVIVAL OF LIABILITY. The termination of membership in the
Association shall not relieve or release any such former Unit Owner or Member
from any liability or obligation incurred under, or in any way connected with,
the Association during the period of such ownership or membership, or impair any
rights or remedies which the Association may have against such former Unit Owner
or Member arising out of, or in any way connected with, such ownership or
membership and the covenants and obligations incident thereto.
11.12 CONSTRUCTION. In the event of any discrepancies, inconsistencies or
conflicts between the provisions of this Declaration and the Articles, Bylaws or
the Association Rules, the provisions of this Declaration shall prevail.
11.13 JOINT AND SEVERAL LIABILITY. In the case of joint ownership of a
Unit, the liabilities and obligations of each of the joint Unit Owners set forth
in, or imposed by, the Condominium Documents shall be joint and several.
37
<PAGE>
ANNEX C
11.14 GUESTS AND TENANTS. Each Unit Owner shall be responsible for
compliance by his agents, tenants, guests, invitees, licensees and their
respective servants, agents, and employees with the provisions of the
Condominium Documents. A Unit Owner's failure to insure compliance by such
Persons shall be grounds for the same action available to the Association or any
other Unit Owner by reason of such Unit Owner's own noncompliance.
Notwithstanding the foregoing, no Unit Owner shall be responsible for the acts
or omissions of any Guest who may occupy the Unit Owner's Unit.
11.15 ATTORNEYS' FEES. In the event the Declarant, the Association or any
Unit Owner employs an attorney or attorneys to enforce a lien or to collect any
amounts due from a Unit Owner or to enforce compliance with or recover damages
for any violation or noncompliance with the Condominium Documents, the
prevailing party in any such action shall be entitled to recover from the other
party his reasonable attorneys' fees incurred in the action.
11.16 NUMBER OF DAYS. In computing the number of days for purposes of any
provision of the Condominium Documents, all days shall be counted including
Saturdays, Sundays and holidays; provided, however, that if the final day of any
time period falls on a Saturday, Sunday or holiday, then the next day shall be
deemed to be the next day which is not a Saturday, Sunday or holiday.
11.17 DECLARANT'S RIGHT TO USE SIMILAR NAME. The Association hereby
irrevocably consents to the use by any other nonprofit corporation which may be
formed or incorporated by Declarant of a corporate name which is the same or
deceptively similar to the name of the Association provided one or more words
are added to the name of such other corporation to make the name of the
Association distinguishable from the name of such other corporation. Within five
(5) days after being requested to do so by the Declarant, the Association shall
sign such letters, documents or other writings as may be required by the Arizona
Corporation Commission in order for any other nonprofit corporation formed or
incorporated by the Declarant to use a corporate name which is the same or
deceptively similar to the name of the Association.
11.18 NOTICE OF VIOLATION. The Association shall have the right to record a
written notice of a violation by any Unit Owner of any restriction or provision
of the Condominium Documents. The notice shall be executed and acknowledged by
an officer of the Association and shall contain substantially the following
information: (i) the name of the Unit Owner; (ii) the legal description of the
Unit against which the notice is being recorded; (iii) a brief description of
the nature of the violation; (iv) a statement that the notice is being recorded
by the Association pursuant to this Declaration; and (v) a statement of the
specific steps which must be taken by the Unit Owner to cure the violation.
Recordation of a Notice of Violation shall serve as a notice to the Unit Owner
and to any subsequent purchaser of the Unit that there is a violation of the
provisions of the Condominium Documents. If, after the recordation of such
notice, it is determined by the Association that the violation referred to in
the notice does not exist or that the actual violation referred to in the notice
has been cured, the Association shall record a notice of compliance which shall
state the legal description of the Unit against which the Notice of Violation
was recorded, the recording data of the Notice of Violation, and shall state
that the violation referred to in the notice of violation has been cured, or if
such be the case, that it did not exist.
11.19 NO ABSOLUTE LIABILITY. No provision of the Condominium Documents
shall be interpreted or construed as imposing on any Unit Owner absolute
38
<PAGE>
ANNEX C
liability for damage to the Common Elements or the Units. A Unit Owner shall
only be responsible for damage to the Common Elements or Units caused by such
Unit Owner's negligence or intentional acts.
UP Sedona, Inc.,
an Arizona corporation
By:___________________________________
Name:_________________________________
Its:__________________________________
STATE OF ARIZONA )
) ss.
County of Maricopa )
The foregoing instrument was acknowledged before me this __________ day of
________________, 1996, by ________________________ the _______________________
of UP Sedona, Inc., an Arizona corporation, on behalf of the corporation.
--------------------------------------
Notary Public
My commission expires:________________
39
<PAGE>
ANNEX C
EXHIBIT A
LEGAL DESCRIPTION OF PROPERTY SUBMITTED TO CONDOMINIUM
A-1
<PAGE>
ANNEX C
EXHIBIT B
PERCENTAGE INTEREST
UNIT NUMBER PERCENTAGE INTEREST
----------- -------------------
1008 0.448283%
1009 0.378613%
1010 0.448283%
1011 EX 0.436532%
1012 0.448283%
1013 EX 0.436532%
1014 0.448283%
1015 0.448283%
1016 0.448283%
1017 0.448283%
1018 0.455404%
1019 0.448283%
1020 0.448283%
1021 0.448283%
1022 0.448283%
1023 0.455404%
1024 0.378613%
1025 0.378613%
1026 0.448283%
1027 0.455404%
1028 0.448283%
1030 0.455404%
1032 0.455404%
1034 0.448283%
1035 0.455404%
1036 0.448283%
1037 0.378613%
1038 0.378613%
1039 0.448283%
1040 0.448283%
1041 0.378613%
1042 0.378613%
1043 0.455404%
1044 0.455404%
1052 EX 0.436532%
1053 0.378613%
1054 EX 0.436532%
1055 EX 0.436532%
B-1
<PAGE>
ANNEX C
UNIT NUMBER PERCENTAGE INTEREST
----------- -------------------
1056 0.448283%
1057 EX 0.436532%
1058 0.448283%
1059 0.448283%
1060 0.448283%
1061 0.448283%
1062 0.455404%
1063 0.448283%
1064 0.448283%
1065 0.448283%
1066 0.448283%
1067 0.455404%
1068 0.378613%
1069 0.378613%
1070 0.448283%
1071 0.455404%
1072 0.448283%
1074 0.455404%
1076 0.455404%
1078 0.448283%
1079 0.455404%
1080 0.448283%
1081 0.378613%
1082 0.378613%
1083 0.448283%
1084 0.448283%
1085 0.378613%
1086 0.378613%
1087 0.455404%
1088 0.455404%
2003 0.468459%
2005 0.461338%
2006 0.461338%
2007 0.397128%
2008 0.461338%
2009 0.391669%
2010 0.461338%
2011 0.461338%
2012 0.461338%
2013 0.461338%
2014 0.461338%
B-2
<PAGE>
ANNEX C
UNIT NUMBER PERCENTAGE INTEREST
----------- -------------------
2015 0.461338%
2016 0.461338%
2017 0.461338%
2018 0.468459%
2019 0.461338%
2020 0.461338%
2021 0.461338%
2022 0.461338%
2023 0.468459%
2024 0.391669%
2025 0.391669%
2026 0.461338%
2027 0.468459%
2028 0.461338%
2030 0.468459%
2032 0.461338%
2034 0.454217%
2035 0.468459%
2036 0.454217%
2037 0.391669%
2038 0.384547%
2039 0.461338%
2040 0.454217%
2041 0.391669%
2042 0.384547%
2043 0.468459%
2044 0.461338%
2047 0.468459%
2049 0.461338%
2051 0.397128%
2052 0.454217%
2053 0.391669%
2054 0.454217%
2055 0.461338%
2056 0.454217%
2057 0.461338%
2058 0.454217%
2059 0.461338%
2060 0.454217%
2061 0.461338%
2062 0.461338%
B-3
<PAGE>
ANNEX C
UNIT NUMBER PERCENTAGE INTEREST
----------- -------------------
2063 0.461338%
2064 0.454217%
2065 0.461338%
2066 0.454217%
2067 0.468459%
2068 0.384547%
2069 0.391669%
2070 0.454217%
2071 0.461338%
2072 0.454217%
2074 0.468459%
2076 0.468459%
2078 0.461338%
2079 0.461338%
2080 0.461338%
2081 0.384547%
2082 0.391669%
2083 0.454217%
2084 0.461338%
2085 0.384547%
2086 0.391669%
2087 0.461338%
2088 0.468459%
3001 0.397603%
3002 0.460151%
3003 0.474394%
3004 0.460151%
3005 0.467273%
3006 0.467273%
3007 0.403063%
3008 0.467273%
3009 0.397603%
3010 0.467273%
3011 0.467273%
3012 0.467273%
3013 0.467273%
3014 0.467273%
3015 0.467273%
3016 0.467273%
3017 0.467273%
3018 0.474394%
B-4
<PAGE>
ANNEX C
UNIT NUMBER PERCENTAGE INTEREST
----------- -------------------
3019 0.467273%
3020 0.467273%
3021 0.467273%
3022 0.467273%
3023 0.474394%
3024 0.397603%
3025 0.397603%
3026 0.467273%
3027 0.474394%
3028 0.467273%
3030 0.474394%
3032 0.467273%
3034 0.460151%
3035 0.474394%
3036 0.460151%
3037 0.397603%
3038 0.390482%
3039 0.467273%
3040 0.460151%
3041 0.397603%
3042 0.390482%
3043 0.474394%
3044 0.467273%
3045 0.397603%
3046 0.460151%
3047 0.474394%
3048 0.460151%
3049 0.467273%
3050 0.460151%
3051 0.403063%
3052 0.460151%
3053 0.397603%
3054 0.460151%
3055 0.467273%
3056 0.460151%
3057 0.467273%
3058 0.460151%
3059 0.467273%
3060 0.460151%
3061 0.467273%
3062 0.467273%
B-5
<PAGE>
ANNEX C
3063 0.467273%
3064 0.460151%
3065 0.467273%
3066 0.460151%
3067 0.474394%
3068 0.390482%
3069 0.397603%
3070 0.460151%
3071 0.467273%
3072 0.460151%
3074 0.474394%
3076 0.474394%
3078 0.467273%
3079 0.467273%
3080 0.467273%
3081 0.390482%
3082 0.397603%
3083 0.460151%
3084 0.467273%
3085 0.390482%
3086 0.397603%
3087 0.467273%
3088 0.474394%
TOTAL 100%
B-6
<PAGE>
ANNEX C
EXHIBIT C
SEDONA GOLF RESORT & CONFERENCE CENTER
USE OF UNITS BY OWNERS
1. For the purposes of this Exhibit C:
(1) capitalized terms used in this Exhibit C and not defined herein
have the meanings ascribed to such terms in the Declaration;
(2) "Day" means any period of 24 consecutive hours, commencing at
2:00 p.m. on any day and ending at 2:00 p.m. on the immediately
following day;
(3) "Public" means all persons other than the Unit Owner;
(4) "Registered Owner" means the person shown in the Official
Records of Yavapai County, Arizona as owner in fee simple of the
Unit;
(5) "Unit Owner" means the Registered Owner and the spouse, children
and parents of such Registered Owner and the parents of the
Registered Owner's spouse; and where there is more than one
Registered Owner, all the Registered Owners and their spouses,
children, parents and the parents of their spouses will together
constitute the "Unit Owner" for the Unit and, where the
Registered Owner is a corporation, partnership, limited
liability company or trust, all directors, officers,
shareholders, partners, members, beneficiaries and their
respective spouses, children and parents shall constitute the
"Unit Owner" for the Unit; and "Unit Owner" will include any
person permitted by any of the foregoing to use the Unit free of
charge;
(6) "Use" includes the purpose to which the Unit is put, and
includes reside, sleep, inhabit, or otherwise occupy;
(7) "Year" means a calendar year.
2. The Unit Owner may use the Unit for up to a maximum of 14 days per Year
and for no other Days; any use by the Unit Owner must be reserved by the
Registered Owner pursuant to section 4.
3. If a Unit Owner reserves the use of the Unit for a stay which commences
at or after 2:00 p.m. on a Friday or a Saturday, the Unit Owner must
reserve the use of the Unit for a minimum of two (2) Days. A Unit Owner
may use its Unit no more than 4 times per year with respect to 2 or 3
Day stays that commence at or after 2:00 p.m. on a Friday or a Saturday.
4. If any Unit Owner wishes to use the Unit, the Registered Owner (or any
other person permitted by the Hotel Operator, in its sole discretion, to
reserve the use of the Unit on behalf of the Registered Owner) must
first reserve the use of the Unit by a notice in writing to the Hotel
Operator at least six months prior to the commencement of the Period in
which the Unit Owner wishes to use the Unit.
C-1
<PAGE>
ANNEX C
5. If the Registered Owner (or any other person permitted by the Hotel
Operator, in its sole discretion, to reserve the use of the Unit on
behalf of the Registered Owner) reserves the use of the Unit pursuant to
section 4, the Unit Owner: (a) shall be entitled to use such Unit during
the period or periods so reserved regardless of whether the Hotel
Operator has accepted a reservation from the Public for the use of the
Unit for the period or periods reserved by the Registered Owner; and (b)
will be deemed to have used the Unit during the period or periods so
reserved, whether or not the Unit Owner actually uses or occupies the
Unit during such period or periods unless the Unit is available for
rental to the Public and at least 30 Days prior to the Unit Owner's
scheduled use of the Unit the Registered Owner cancels such reservation,
with the approval of the Hotel Operator, acting reasonably.
6. If the Unit Owner does not use the full amount of Days permitted to be
used by the Unit Owner pursuant to section 2 hereof in any Year, the
Unit Owner will not be entitled to accumulate or otherwise use the
unused Days in any future Year.
7. Subject to the use by the Unit Owners pursuant to this Exhibit C, the
Unit will be available at all times for rental to the Public; the Hotel
Operator may accept reservations from the Public for the use of the Unit
for any future Day or Days, unless the Registered Owner has already
reserved that Day or those Days pursuant to section 4 hereof.
8. The terms of this Exhibit C do not apply to Executive Units.
C-2
<PAGE>
ANNEX D
ARTICLES OF INCORPORATION
OF
SEDONA GOLF RESORT AND CONFERENCE CENTER
CONDOMINIUM ASSOCIATION
<PAGE>
ANNEX D
ARTICLES OF INCORPORATION
OF
SEDONA GOLF RESORT AND CONFERENCE CENTER
CONDOMINIUM ASSOCIATION
In compliance with the requirements of ss. 10-2301 et seq.,
Arizona Revised Statutes, the undersigned, who is a person capable of
contracting, does hereby certify:
ARTICLE I
NAME
The name of the corporation is Sedona Golf Resort and Conference
Center Condominium Association (the "Association").
ARTICLE II
DEFINED TERMS
Capitalized terms used in these Articles of Incorporation without
definition shall have the meanings specified for such terms in the Condominium
Declaration for Sedona Golf Resort and Conference Center, a condominium,
recorded at Recorder's No. ___________, records of Yavapai County, Arizona.
ARTICLE III
PRINCIPAL OFFICE
The principal office of the Association shall be located at _____
__________________.
<PAGE>
ANNEX D
ARTICLE IV
STATUTORY AGENT
Michael E. Woolf, whose address is One East Camelback Road, Suite
1100, Phoenix, Arizona 85012-1656, and who has been a bona fide resident of the
State of Arizona for more than three (3) years last past, is hereby appointed
and designated as the initial statutory agent for the Association.
ARTICLE V
PURPOSE OF THE ASSOCIATION
The object and purpose for which the Association is organized is
to provide for the management, maintenance and care of the Common Elements and
other property owned by the Association or property placed under its
jurisdiction and to perform all duties and exercise all rights imposed on or
granted to the Association by the Condominium Documents. In furtherance of, and
in order to accomplish the foregoing object and purpose, the Association may
transact any or all lawful business for which corporations may be incorporated
under the laws of the State of Arizona, as they may be amended from time to
time.
ARTICLE VI
CHARACTER OF BUSINESS
The character of the business which the Association intends to
conduct in Arizona is to provide for the management, maintenance and care of the
Common Elements and to exercise and perform such other powers and duties as are
imposed on or granted to the Association by the Condominium Documents.
ARTICLE VII
MEMBERSHIP AND VOTING RIGHTS
Membership in the Association shall be limited to Unit Owners of
Units. Each Unit Owner shall have such rights, privileges and votes in the
Association as are set forth in the Condominium Documents.
2
<PAGE>
ANNEX D
ARTICLE VIII
BOARD OF DIRECTORS
The number of directors constituting the initial Board of
Directors shall be five (5). The names and addresses of the initial directors of
the Association who shall serve until the first annual meeting of the Members or
until their successors are elected and qualified are as follows:
Name Mailing Address
- --------------------- ------------------------------
------------------------------
- --------------------- ------------------------------
------------------------------
- --------------------- ------------------------------
------------------------------
- --------------------- ------------------------------
------------------------------
- --------------------- ------------------------------
------------------------------
The Board of Directors shall adopt the initial Bylaws of the
Association. The power to alter, amend or repeal the Bylaws is reserved to the
Members except to the extent that the consent of Eligible Mortgage Holders may
be required in connection with such alteration, amendment or repeal in
accordance with the Declaration and except that during the Period of Declarant
Control, the Declarant, without the consent of any Unit Owner, shall have the
right to amend the Bylaws in order to: (i) comply with the Condominium Act or
any other applicable law if the amendment does not adversely affect any Unit
Owner; (ii) correct any error or inconsistency in the Bylaws if the amendment
does not adversely affect the rights of any Unit Owner; or (iii) comply with the
requirements or guidelines in effect from time to time of any governmental or
quasi-governmental entity or federal corporation guarantying or insuring
mortgage loans or governing transactions involving mortgage instruments
including, without limitation, the Federal National Mortgage Association
("FNMA"), the Federal Home Loan Mortgage Corporation ("FHLMC"), the Federal
Housing Administration ("FHA") or the Veterans Administration ("VA"). So long as
the Declarant owns any Unit, any amendment of the Bylaws must be approved in
writing by the Declarant.
3
<PAGE>
ANNEX D
ARTICLE IX
OFFICERS
The following persons shall be the initial officers of the
Association and shall hold the positions opposite their names until the first
annual meeting of the Association and until their successors have been elected
and qualified:
_________________________ President
_________________________ Vice President
_________________________ Secretary/Treasurer
ARTICLE X
LIMITATION ON LIABILITY OF DIRECTORS
The personal liability of a director of the Association to the
Association or its Members for monetary damages for breach of his or her
fiduciary duties as a director is hereby eliminated to the extent permitted by
the Arizona Nonprofit Corporation Act, as it may be amended from time to time.
ARTICLE XI
AMENDMENTS
These Articles of Incorporation may be amended by Members
representing at least seventy-five percent (75%) of the total authorized votes
entitled to be cast by Members of the Association; provided that these Articles
of Incorporation shall not be amended without the consent of Eligible Mortgage
Holders to the extent that such consent is required by the Declaration and
further provided, however, that the Declarant, during the Period of Declarant
Control, and thereafter the Board of Directors, without a vote of Members, may
amend these Articles of Incorporation in order to conform these Articles of
Incorporation to the requirements or guidelines of the FNMA, the FHLMC, the FHA,
the VA or any federal, state or local governmental agency whose approval of the
Condominium, the Plat or the Condominium Documents is required by law or
requested by the Declarant or the Association. So long as the Declarant owns any
Unit, any amendment to these Articles of Incorporation must be approved in
writing by the Declarant.
4
<PAGE>
ANNEX D
ARTICLE XII
DISSOLUTION
The Association may be dissolved with the assent given in writing
and signed by Unit Owners representing not less than eighty percent (80%) of the
total authorized votes entitled to be cast by the Members provided that the
Association shall not be dissolved without the consent of Eligible Mortgage
Holders to the extent that such consent is required by the Declaration. Upon
dissolution of the Association, other than incident to a merger or
consolidation, the assets of the Association shall be dedicated to an
appropriate public agency to be used for purposes similar to those for which the
Association was created. In the event that such dedication is refused
acceptance, such assets shall be granted, conveyed or assigned to any nonprofit
corporation, association, trust or other organization to be devoted to such
similar purpose.
ARTICLE XIII
INCORPORATOR
The name and address of the incorporator of the Association is:
Name Address
_____________________ ______________________________
______________________________
Dated this _____ day of ___________________, 1997.
______________________________
5
<PAGE>
ANNEX D
ACCEPTANCE OF APPOINTMENT AS STATUTORY AGENT
The undersigned, having been designated to act as statutory agent
for the Association, hereby accepts such appointment and agrees to act in that
capacity until removal or resignation is submitted in accordance with applicable
provisions of the Arizona Revised Statutes.
Dated this _____ day of ___________________, 1997.
-----------------------------------
Michael E. Woolf
6
<PAGE>
ANNEX E
BYLAWS
OF
SEDONA GOLF RESORT AND CONFERENCE CENTER
CONDOMINIUM ASSOCIATION
<PAGE>
ANNEX E
BYLAWS
OF
SEDONA GOLF RESORT AND CONFERENCE CENTER
CONDOMINIUM ASSOCIATION
ARTICLE I.
GENERAL PROVISIONS
1.1 DEFINED TERMS. Capitalized terms used in these Bylaws without
definition shall have the meanings specified for such terms in the Arizona
Condominium Act, A.R.S. ss. 33-1201 et seq., and in the Condominium Declaration
for Sedona Golf Resort and Conference Center, a condominium, recorded at
Recording No. __________________, official records of Yavapai County, Arizona,
as amended from time to time.
1.2 PRINCIPAL OFFICE. The principal office of the Association shall be
located at the place designated in the Articles or such other place as may be
designated from time to time pursuant to Arizona law. Meetings of Members and
the Board of Directors may be held at the principal office of the Association or
at such other place as may be designated by the Board of Directors.
1.3 CONFLICTING PROVISIONS. In the case of any conflict between the
Articles and these Bylaws, the Articles shall control; and in the case of any
conflict between the Declaration and these Bylaws, the Declaration shall
control.
1.4 CORPORATE SEAL. The Association may have a seal in a form approved by
the Board of Directors.
1.5 DESIGNATION OF FISCAL YEAR. The fiscal year of the Association shall
begin on the 1st day of January and end of the 31st day of December of every
year, except that the first fiscal year shall begin on the date of
incorporation.
1.6 BOOKS AND RECORDS. The Condominium Documents and all other books,
records and papers of the Association shall be available for inspection by any
Member and his authorized agents during reasonable business hours at the
principal office of the Association where copies may be purchased at reasonable
cost, except that the Board of Directors may withhold from disclosure any books,
records and papers relating to any of the following: (i) personnel matters or a
person's medical records; (ii) communication between an attorney for the
<PAGE>
ANNEX E
Association and the Association; (iii) pending or contemplated litigation; (iv)
pending or contemplated matters relating to enforcement of the Condominium
Documents; and (v) meeting minutes or other records of a session of a Board of
Directors meeting or Association meeting that is not required to be open to all
Unit Owners pursuant to A.R.S. ss. 33-1258. The Association shall not be
required to disclose financial and other records of the Association if
disclosure would violate any local, state or federal law.
1.7 OBLIGATION OF ASSOCIATION TO DISCLOSE INFORMATION. Except for a sale of
a Unit from the Declarant to a purchaser or an exempt sale pursuant to A.R.S ss.
32-2181.02, the Association shall furnish to a purchaser within seven (7) days
(or such longer period of time as may be provided for in A.R.S ss. 33-1260)
after receipt of notice of a pending sale, a copy of the Condominium Documents
and a dated statement containing: (i) the telephone number and address of a
principal contact for the Association, which may be a Manager for the
Association, an association management company, an officer of the Association or
any other person designated by the Board of Directors; (ii) a statement setting
forth the amount of the Common Expense Assessment for the Unit and the unpaid
Common Expense Assessment, or installment thereof, any special assessment or
other assessment, fee or charge currently due and payable from the selling Unit
Owner; (iii) a statement as to whether a portion of the Unit is covered by
insurance maintained by the Association; (iv) a statement as to whether the
Association has knowledge of any violations of any alterations or Improvements
to the Unit that violate any provisions of the Condominium Documents; (v) a
statement as to whether the Association has knowledge of any violations of the
health or building code with respect to the Unit; and (vi) a statement of case
names and case numbers for pending litigation with respect to the Unit filed by
the Association against the Unit Owner or filed by the Unit Owner against the
Association, except for any information concerning such pending litigation which
would violate any applicable rule of attorney-client privilege under Arizona
law. The Association may charge the Unit Owner a reasonable fee to compensate
the Association for the costs incurred in the preparation of a statement
furnished by the Association pursuant to this Section. The Association shall
make available to any interested party the amount of any such fee established
from time to time by the Association.
1.8 AMENDMENT.
1.8.1 Except as provided for in Subsection 1.8.2 below, these Bylaws
may only be amended, at a regular or special meeting of the Members, by a vote
of the Members entitled to cast more than fifty percent (50%) of the votes
entitled to be cast by the Members present in person or by proxy and except to
the extent that the consent of Eligible Mortgage Holders may be required in
connection with such amendment in accordance with the Declaration. The Bylaws
may not be amended by a vote of the Unit Owners if such amendment would be
inconsistent with any Hotel Operating and Rental Pool Agreement that the Unit
Owners may have entered into.
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ANNEX E
1.8.2 During the Period of Declarant Control, the Declarant, without
the consent of any Unit Owner, shall have the right to amend these Bylaws in
order to: (i) comply with the Condominium Act or any other applicable law if the
amendment does not adversely affect any Unit Owner; (ii) correct any error or
inconsistency in these Bylaws if the amendment does not adversely affect the
rights of any Unit Owner; or (iii) comply with the requirements or guidelines in
effect from time to time of any governmental or quasi-governmental entity or
federal corporation guaranteeing or insuring mortgage loans or governing
transactions involving mortgage instruments including, without limitation, the
Federal National Mortgage Association, the Federal Home Loan Mortgage
Corporation, the Federal Housing Administration or the Veterans Administration.
So long as the Declarant owns any Unit, any amendment of the Bylaws must be
approved in writing by the Declarant.
1.9 INDEMNIFICATION. The Association shall have the power to indemnify its
Members, directors, officers, employees and agents to the extent and in the
manner provided for in the Arizona Nonprofit Corporation Act, A.R.S. ss. 10-2301
et seq, as amended from time to time.
1.10 NOTICES. All notices, demands, statements or other communications
required to be given or served under these Bylaws shall be in writing and shall
be deemed to have been duly given and served if hand-delivered or sent by United
States mail, postage prepaid or, in the case of a notice pursuant to Section 5.2
of these Bylaws, registered or certified United States mail, return receipt
requested, postage prepaid, (i) if to a Unit Owner, at the address which the
Unit Owner shall designate in writing and file with the Secretary or, if no such
address is designated, at the address of the Unit of such Unit Owner, or (ii) if
to the Association, the Board of Directors or to the Managing Agent, at the
principal office of the Managing Agent or at such other address as shall be
designated by notice in writing to the Unit Owners pursuant to this Section
1.10. A notice given by mail, whether regular, certified or registered, shall be
deemed to have been received by the person to whom the notice was addressed on
the earlier of the date the notice is actually received or three days after the
notice is mailed. If a Unit is owned by more than one person, notice to one of
the Unit Owners shall constitute notice to all Unit Owners of the same Unit.
ARTICLE 2
MEETINGS OF MEMBERS
2.1 ANNUAL MEETING. The first Annual meeting of the Members shall be held
within one (1) year of the date on which the Association is incorporated, and an
annual meeting of the Members shall be held during each calendar year
thereafter. The date, time and place of each annual meeting of the Members shall
be determined by the Board of Directors.
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ANNEX E
2.2 SPECIAL MEETINGS. Special meetings of the Members may be called at any
time by the President or by a majority of the Board of Directors or by Unit
Owners having at least twenty-five percent (25%) of the votes in the
Association.
2.3 NOTICE OF MEETINGS. Written notice of each meeting of the Members shall
be given by, or at the direction of, the Secretary or person authorized to call
the meeting by hand-delivering or mailing a copy of each notice, postage
prepaid, no fewer than ten (10) nor more than fifty (50) days before such
meeting to each Member entitled to vote at the meeting, addressed to the
Member's address last appearing on the books of the Association or supplied by
such Member to the Association for the purpose of notice. Such notice shall
specify the place, day and hour of the meeting, and, in the case of a special
meeting, the purpose for which the meeting is called, including the general
nature of any proposed amendment to the Declaration or the Bylaws, any changes
in Assessments that require approval of the Unit Owners and any proposal to
remove a director or officer. The failure of any Unit Owner to receive actual
notice of a meeting does not affect the validity of any action taken at that
meeting.
2.4 QUORUM. Except as otherwise provided in the Articles, the Declaration
or these Bylaws, the presence in person or by proxy of Members entitled to cast
one-tenth (1/10th) of the total authorized votes in the Association shall
constitute a quorum at all meetings of the Members. If a quorum shall not be
present at any meeting, the Members entitled to vote who are present at such
meeting shall have the power to adjourn the meeting for a period of no less than
seven days, without notice other than announcement at the meeting, and the
Members present in person or by proxy at the time and place announced at the
prior adjourned meeting shall constitute a quorum.
2.5 MULTIPLE OWNERS. If only one of the multiple Unit Owners of a Unit is
present at a meeting of the Association, he is entitled to cast all the votes
allocated to that Unit. If more than one of the multiple Unit Owners are
present, the votes allocated to that Unit may be cast only in accordance with
the agreement of a majority in interest of the multiple Unit Owners unless the
Declaration expressly provides otherwise. There is majority agreement if any one
of the multiple Unit Owners casts the votes allocated to that Unit without
protest being made promptly to the person presiding over the meeting by any of
the other Unit Owners of the Unit. If a Unit is owned by more then one (1)
person and such Unit Owners are unable to agree among themselves as to how their
vote or votes shall be cast, they shall lose their right to vote on the matter
in question.
2.6 PROXIES. Votes allocated to a Unit may be cast pursuant to a proxy duly
executed by a Unit Owner. If a Unit is owned by more than one person, each Unit
Owner of the Unit may vote or register protest to the casting of votes by the
other Unit Owners of the Unit through a duly executed proxy. A Unit Owner may
not revoke a proxy except by actual notice of revocation to the person presiding
over a meeting of the Association. A proxy is void if it is not dated
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ANNEX E
or purports to be revocable without notice. The proxy is revoked on presentation
of a later dated proxy executed by the same Unit Owner. A proxy terminates one
year after its date, unless is specifies a shorter term or unless it states that
it is coupled with an interest and is irrevocable.
2.7 SUSPENSION OF VOTING RIGHTS. If any Unit Owner fails to pay any
Assessments or other amounts due to the Association under the Condominium
Documents within fifteen (15) days after such payment is due or if any Unit
Owner violates any other provision of the Condominium Documents and such
violation is not cured within fifteen (15) days after the Association notifies
the Unit Owner of the violation, the Board of Directors shall have the right to
suspend such Unit Owner's right to vote until such time as all payments,
including interest and attorneys' fees, are brought current, and until any other
infractions or violations of the Condominium Documents are corrected.
2.8 SPECIAL RESOLUTION. Any matter required to be determined by a
particular voting percentage under the provisions of the Declaration or a Hotel
Operating and Rental Pool Agreement shall be recognized and deemed a requirement
hereof.
ARTICLE 3
BOARD OF DIRECTORS
3.1 NUMBER. The affairs of this Association shall be initially managed by a
board of five (5) directors. The number of directors may be changed from time to
time by the Board of Directors but the number of directors may not be less than
five (5) or more than seven (7) and must always be an odd number. During the
Period of Declarant Control, the Declarant shall have the right to appoint and
remove the members of the Board of Directors who do not have to be Unit Owners.
Upon the termination of the Period of Declarant Control, the Unit Owners shall
elect the Board of Directors, which must consist of at least five (5) members,
at least a majority of whom must be Unit Owners. The Declarant may voluntarily
surrender his right to appoint and remove the members of the Board of Directors
before termination of the Period of Declarant Control, and in that event the
Declarant may require, for the duration of the Period of Declarant Control, that
specified actions of the Association or the Board of Directors, as described in
a recorded instrument executed by the Declarant, be approved by the Declarant
before they become effective.
3.2 TERM OF OFFICE. The initial members of the Board shall hold office
until the first annual meeting of the Members and until their successors are
elected and qualified. Commencing with the first annual meeting of the Members,
and for the duration of the Period of Declarant Control, all directors shall be
elected for a term of one (1) year. At the first annual or special meeting after
termination of the Period of Declarant Control, the Members shall elect one (1)
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ANNEX E
director for a term of one (1) year, two (2) directors for a term of two (2)
years and two (2) director for a term of three (3) years. At each annual meeting
thereafter, the Members shall elect directors to replace those directors whose
terms have expired and all such directors shall be elected for a term of three
(3) years. If the Board increases the number of directors, the newly appointed
directors shall serve until the first annual meeting after such increase, at
which time the terms of the new directorships shall be designated by the
Members.
3.3 REMOVAL. Except with respect to members of the Board of Directors
appointed by the Declarant, at any annual or special meeting of the Members any
one or more of the members of the Board of Directors may be removed from the
Board of Directors, with or without cause, by a two-thirds (2/3) vote at any
meeting of the Unit Owners at which a quorum is present, in person or by proxy,
and a successor shall then and there be elected to fill the vacancy thereby
created.
3.4 COMPENSATION. No director shall receive compensation for any service he
may render to the Association which is within his duties as a director. However,
any director may be reimbursed for his actual expenses incurred in the
performance of his duties. A director may receive compensation for services
rendered to the Association which are outside his duties as a director if the
payment of such compensation is approved by all of the other directors.
3.5 ACTION TAKEN WITHOUT A MEETING. The directors shall have the right to
take any action in the absence of a meeting which they could take at a meeting
by obtaining the written consent of all the directors. Any such written consent
shall be filed with the minutes of the proceedings of the Board of Directors.
3.6 VACANCIES. Except with respect to members appointed by the Declarant
and vacancies caused by the removal of a member of the Board of Directors by a
vote of the Unit Owners as set forth in Section 3.3 of these Bylaws, all
vacancies in the Board of Directors shall be filled by a vote of a majority of
the remaining directors, though less than a quorum, or by a sole remaining
director. Any person so elected shall serve the unexpired portion of the prior
director's term. Any newly created directorship shall be deemed a vacancy. Any
person elected to fill such a vacancy shall serve until the next annual meeting
of the members.
3.7 MEETINGS.
3.7.1 Meetings of the Board of Directors, regular or special, shall be
held at least annually and may be held by means of conference telephone or other
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ANNEX E
similar communications equipment by means of which all persons participating in
the meeting can hear each other, and participation at such meeting shall
constitute presence in person at the meeting.
3.7.2 Until termination of the Period of Declarant Control, regular
meetings of the Board of Directors may be held with or without notice at such
time and place as is determined from time to time by the Board. After
termination of the Period of Declarant Control, notice to Members of meetings of
the Board of Directors shall be by newsletter, conspicuous posting or any other
reasonable means as determined by the Board. Any notice of a Board of Directors
meeting shall state the time and place of the meeting. An affidavit of notice by
an officer of the Association is prima facie evidence that notice was given as
prescribed by this subsection. The failure of any Member to receive actual
notice of a meeting of the Board of Directors does not affect the validity of
any action taken at that meeting.
3.7.3 Special meetings of the Board of Directors may be called by the
President on three (3) business days notice to each director, given in writing,
by hand delivery, mail or facsimile, which notice shall state the time, place
and purpose of the meeting. Special meetings of the Board shall be called by the
President or Secretary in like manner and on like notice on the written request
of at least two (2) directors. In addition, after termination of the Period of
Declarant Control, notice of special meetings of the Board of Directors shall be
given to Members as set forth in Subsection 3.7.2, except that notice to Members
of meetings of the Board of Directors is not required if emergency circumstances
require action by the Board before notice can be given.
3.7.4 Attendance of a director at a meeting shall constitute a waiver of
notice of such meeting except when a director attends a meeting for the express
purpose of objecting to the transaction of any business because the meeting is
not lawfully called or convened.
3.7.5 Regular and special meetings of the Board of Directors are open to
all Members and all Members so desiring shall be permitted to attend and listen
to the deliberations and proceedings; provided, however, that for regular and
special meetings of the Board, Members who are not Board members may not
participate in any deliberation or discussion unless expressly so authorized by
a vote of the majority of a quorum of the Board. Any portion of a meeting may be
closed only if the closed portion of the meeting is limited to consideration of
one or more of the following: (i) employment or personnel matters for employees
of the Board of Directors or the Association; (ii) legal advice from an attorney
for the Board of Directors or the Association; (iii) pending or contemplated
litigation; or (iv) pending or contemplated matters relating to enforcement of
the Condominium Documents.
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ANNEX E
3.8 QUORUM. A majority of the directors shall constitute a quorum for the
transaction of business. Except as provided in the Condominium Act, every act or
decision done or made by a majority of the directors present at a duly held
meeting at which a quorum is present shall be regarded as the act of the Board
of Directors.
3.9 POWERS AND DUTIES.
3.9.1 The Board of Directors shall have all of the powers and duties
necessary for the administration of the affairs of the Association and may do
all such acts and things as are not by the Condominium Act or the Condominium
Documents required to be exercised or done by the Members. The Board of
Directors may delegate all of the powers granted to the Board of Directors or
the officers of the Association by the Act to a hotel operator, if the Members
have entered into a Hotel Operating and Rental Pool agreement. In addition to
the duties imposed by these Bylaws or by any resolution of the Members that may
hereafter be adopted, the Board of Directors shall have the following powers and
duties:
(1) Open bank accounts on behalf of the Association and designate
the signatories thereon;
(2) Make, or contract for the making of, repairs, additions to,
improvements to, or alterations of, the Condominium and repairs to the Common
Elements, in accordance with the Condominium Documents, after damage or
destruction by fire or other casualty, or as a result of condemnation or eminent
domain proceedings;
(3) In the exercise of its discretion, enforce by legal means the
provisions of the Condominium Documents;
(4) Designate, hire and dismiss the personnel necessary for the
maintenance, operation, repair, replacement of the Common Elements and provide
services for the Condominium, and, where appropriate, provide for the
compensation of such personnel and for the purchase of equipment, supplies and
material to be used by such personnel in the performance of their duties;
(5) Provide for the operation, care, upkeep and maintenance of
all of the Common Elements and services of the Condominium and borrow money on
behalf of the Association when required in connection with any one instance
relating to the operation, upkeep and maintenance for the Common Elements;
(6) Prepare and adopt an annual budget for the Association prior
to the commencement of each fiscal year;
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ANNEX E
(7) Adopt and publish rules and regulations governing the use of
the Common Elements and facilities, and the personal conduct of the Members and
their guests, lessees, invitees and family members thereon, and establish
penalties for the infraction of such rules and regulations;
(8) In accordance with these Bylaws, suspend the voting rights
and the right to use of the Common Elements of a Member;
(9) Exercise for the Association all powers, duties and authority
vested in or delegated to the Association and not reserved to the membership by
other provisions of the Condominium Documents;
(10) Except with respect to members of the Board of Directors
appointed by the Declarant, declare the office of a member of the Board to be
vacant in the event such member shall be absent from three (3) consecutive
regular meetings of the Board of Directors;
(11) Employ, hire and dismiss such employees as it deems
necessary and to prescribe such employees' duties and compensation;
(12) Cause to be kept a complete record of all its acts and
corporate affairs and to present a statement thereof to the Members at the
annual meeting of the Members, or at any special meeting when such statement is
requested in writing by any Member entitled to vote;
(13) Supervise all officers, agents and employees of the
Association and see that their duties are properly performed;
(14) Levy, collect and enforce the payment of Assessments in
accordance with the provisions of the Declaration;
(15) Issue, or cause an appropriate officer to issue: (i) upon
demand to any interested person, a certificate setting forth whether or not any
Assessment has been paid; and (ii) to any lien holder, Member or person
designated by a Member, within twenty (20) business days (or such longer period
of time as may be provided for in A.R.S ss.33-1256) after receipt of a written
request therefor, a recordable statement setting forth the amount of any unpaid
Assessment against a Unit. A reasonable charge may be made by the Board for the
issuance of such certificates or statements. If a certificate or statement
states that an Assessment has been paid, such certificate or statement shall be
binding on the Association.
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ANNEX E
(16) Procure and maintain adequate property liability and other
insurance as required by the Declaration;
(17) Cause all officers or employees having fiscal
responsibilities to be bonded, as it may deem appropriate; and
(18) Cause the Common Elements to be maintained, as more fully
set forth in the Declaration; provided, however that this duty is subject to
delegation to a hotel operator pursuant to a Hotel Operating and Rental Pool
Agreement.
3.10 MANAGING AGENT. The Board of Directors may employ for the Condominium
a "Managing Agent" at a compensation established by the Board of Directors. The
Managing Agent shall perform such duties and services as the Board of Directors
shall authorize, including, but not limited to, all of the duties listed in the
Condominium Act, the Declaration and these Bylaws except for such duties and
services that under the Condominium Act or the Declaration may not be delegated
to the Managing Agent. The Board of Directors may delegate to the Managing Agent
all of the powers granted to the Board of Directors or the officers of the
Association by the Act, the Declaration and these Bylaws other than the power:
(i) to adopt the annual budget, any amendment thereto or to assess any Common
Expenses; (ii) to adopt, repeal or amend the Rules and Regulations; (iii) to
designate signatories on Association bank accounts; (iv) to borrow money on
behalf of the Association; (v) to acquire real property and mortgage Units; or
(vi) to allocate Limited Common Elements. Any contract with the Managing Agent
must provide that it may be terminated with or without cause and without payment
of any penalty or termination fee on no more than thirty (30) days' written
notice. The term of any such contract may not exceed three (3) years.
ARTICLE 4
OFFICERS AND THEIR DUTIES
4.1 ENUMERATION OF OFFICERS. The principal officers of the Association
shall be the president, vice president, the secretary, and the treasurer. The
Board of Directors may create such other offices as the affairs of the
Association may require. During the Period of Declarant Control, all officers of
the Association shall be appointed and removed by the Declarant. After the
termination of the Period of Declarant Control, all officers shall be elected by
the Board of Directors. The President must be a member of the Board of
Directors. Any other officers may, but need not, be members of the Board of
Directors.
4.2 ELECTION OF OFFICERS. The election of officers shall take place at the
first meeting of the Board of Directors following each annual meeting of the
Members.
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ANNEX E
4.3 TERM. After the termination of the Period of Declarant Control, the
officers of the Association shall be elected annually by the Board of Directors
and each shall hold office for one (1) year unless he shall sooner resign, or
shall be removed, or otherwise disqualified to serve.
4.4 RESIGNATION AND REMOVAL. Except for officers appointed by the
Declarant, any officer may be removed from office with or without cause by the
Board of Directors. Any officer may resign at any time by giving written notice
to the Board of Directors, the President or the Secretary. Such resignation
shall take effect on the date of receipt of such notice or at any later time
specified therein, and unless otherwise specified therein, the acceptance of
such resignation shall not be necessary to make it effective.
4.5 VACANCIES. Except for officers appointed by the Declarant, a vacancy in
any office may be filled by appointment by the Board of Directors. The officer
appointed to such vacancy shall serve for the remainder of the term of the
officer he replaces.
4.6 MULTIPLE OFFICES. Any two or more offices may be held by the same
person except the offices of President and Secretary.
4.7 POWERS AND DUTIES. To the extent such powers and duties are not
assigned or delegated to a hotel operator or a Managing Agent, the powers and
duties of the officers shall be as follows:
PRESIDENT. The president shall be the chief executive officer of
the Association; shall preside at all meetings of the Board of Directors or the
Members; shall see that orders and resolutions of the Board of Directors are
carried into effect; sign checks and promissory notes of the Association;
deposit monies in bank accounts of the Association; and shall generally manage
the business of the Association.
VICE PRESIDENT. The Vice President shall act in the place and
stead of the President in the event of his absence, inability or refusal to act,
and shall exercise and discharge such other duties as may be required of him by
the Board of Directors.
SECRETARY. The Secretary shall record the votes and keep the
minutes of all meetings and proceedings of the Board of Directors and of the
members; keep the corporate seal of the Association and affix it on all papers
requiring said seal; serve notice of meetings of the Board of Directors and of
the Members; keep appropriate current records showing the Members of the
Association together with their addresses, and shall perform such other duties
as required by the Board of Directors.
TREASURER. The Treasurer shall receive and deposit in appropriate
bank accounts all monies of the Association and shall disburse such funds as
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ANNEX E
directed by resolution of the Board of Directors; shall sign checks and
promissory notes of the Association; shall keep proper books of account; shall
prepare an annual budget and a statement of income and expenditures to be
presented to the membership at its regular annual meeting, and deliver a copy of
each to the Members; and, in general, perform all the duties incident to the
office of treasurer.
4.8 OFFICERS AUTHORIZED TO EXECUTE AMENDMENTS TO DECLARATION. Any
amendments to the Declaration or the Plat which are required by the Condominium
Act or the Declaration to be executed by the Association may be executed by
either the President or Vice President of the Association.
ARTICLE 5
MONETARY PENALTIES
5.1 POWER OF BOARD OF DIRECTORS TO IMPOSE MONETARY PENALTIES. In
accordance with the procedures set forth in this Article, the Board of Directors
shall have the right to impose reasonable monetary penalties against any Unit
Owner for a violation of any provisions of the Condominium Documents by the Unit
Owner, his family, tenants or guests. Any monetary penalty imposed by the Board
of Directors shall be imposed only after the procedures set forth in this
Article have been complied with.
5.2 NOTICE OF VIOLATION.
5.2.1 The Board of Directors, or any person designated by the
Board, may serve a "Notice of Violation" against a Unit Owner for a violation of
any provision of the Condominium Documents by the Unit Owner, his family,
tenants or guests. A Notice of Violation shall contain (i) a description of the
violation, (ii) the approximate time and place at which the violation was
observed, (iii) the amount of the fine to be paid by the Unit Owner for such
violation, (iv) the name of the person issuing the Notice of Violation, and (v)
a statement advising the Unit Owner of the Unit Owner's right to request a
hearing pursuant to Section 5.2.4 of the Bylaws.
5.2.2 A Notice of Violation shall be deemed to have been
served if delivered personally to the Unit Owner named in the Notice of
Violation or sent to the Unit Owner by registered or certified United States
mail, return receipt requested, postage prepaid. A Notice of Violation served by
mail shall be deemed to have been received by the Unit Owner to whom the notice
was addressed on the earlier of the date the notice is actually received or
three (3) days after the notice is deposited in the United States mail. A Notice
of Violation given by mail shall be addressed to the Unit Owner at the address
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ANNEX E
of the Unit Owner as shown on the records of the Association. If a Unit is owned
by more than one person or entity, a Notice of Violation to one of the joint
Unit Owners shall constitute notice to all of the joint Unit Owners.
5.2.3 The Unit Owner shall pay the fine set forth in the
Notice of Violation to the Association within ten (10) days after the Notice of
Violation is served on the Unit Owner unless prior to that time the Unit Owner
requests a hearing on the violation pursuant to Section 5.2.4 of the Bylaws.
5.2.4 Any Unit Owner served with a Notice of Violation may
request a hearing on the violation. The request for a hearing must be addressed
to the Secretary of the Association and must be actually received by the
Association within ten (10) days after the service of the Notice of Violation.
Upon receipt of a request for a hearing pursuant to this Section, the President
or any other officer of the Association shall schedule a hearing on the
violation before the Board of Directors or before a hearing officer or a
committee approved by the Board and shall notify the Unit Owner requesting the
hearing of the date, time and place of the hearing. The notice of the hearing
shall also advise the Unit Owner of his right to produce statements, evidence
and witnesses on his behalf and to be represented at the hearing by an attorney.
If the hearing on the violation is before the Board of Directors, then the
minutes of the meeting of the Board at which the hearing is held shall reflect
the fact that the hearing on the violation was held and the action taken by the
Board on the violation. If the hearing is held before a hearing officer or a
committee appointed by the Board of Directors, then the hearing officer of the
committee conducting the hearing shall, within ten (10) days after the
conclusion of the hearing, make a written recommendation to the Board on what
action the Board should take in the violation. Upon receipt of the
recommendation from the hearing officer or the committee, the Board of Directors
shall act upon the recommendation. Any fine which is affirmed by the Board
following a hearing pursuant to this Section shall be paid by the offending Unit
Owner within ten (10) days after a notice of the action of the Board of
Directors is served upon the Unit Owner. Service of the notice from the Board of
Directors shall be made in the same manner as service of a Notice of Violation
pursuant to Section 5.2.2 of the Bylaws.
5.2.5 Any fines imposed pursuant to this Article 5 shall be
the joint and several liability of all of the joint Unit Owners of a Unit and
shall be secured by the Assessment Lien.
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ANNEX E
CERTIFICATION
I hereby certify that the foregoing Bylaws were duly adopted by the Board
of Directors of the Association on the _____ day of _________________, 1997.
_______________________________
Secretary/Treasurer
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ANNEX F
PURCHASE CONTRACT AND RECEIPT
(SEDONA GOLF RESORT AND CONFERENCE CENTER)
<PAGE>
ANNEX F
PURCHASE CONTRACT AND RECEIPT
(SEDONA GOLF RESORT AND CONFERENCE CENTER)
THIS PURCHASE CONTRACT AND RECEIPT (the "CONTRACT") is entered into between
UP SEDONA, INC. an Arizona corporation, with principal offices at the address
set forth on the signature page hereof (the "SELLER"), and ____________________
___________________ whose address is set forth on the signature page hereof (the
"BUYER"), who will take title as (check one):
____ an unmarried ____ man, ____ woman, as sole and separate property
____ married ____ man, ____woman, as his/her sole and separate property
____ husband and wife as community property
____ husband and wife as community property with right of survivorship
____ joint tenant with right of survivorship
____ tenants in common
____ trustee(s) under trust agreement dated _______________
____ other, ____ corporation, ____ partnership, ____ limited liability company
under the following terms and conditions:
1. PURCHASE. Seller hereby agrees to sell and Buyer hereby agrees to buy
for the price and in accordance with the terms set forth herein, that certain
real property, together with all rights and appurtenances thereto, described as
follows:
Unit ____ (the "UNIT") of Sedona Golf Resort & Conference Center, a
condominium (the "PROJECT"), recorded in the office of the Recorder of
Yavapai County, Arizona, in Book ____ of Maps, Page ____, together with an
undivided interest in the common areas thereof (the "COMMON AREA") in
accordance with plans and specifications on file in the office of Seller
(the "PLANS"), which Buyer hereby acknowledges having reviewed and
approved. (The Unit and the interest in the Common Area are collectively
referred to as the "PROPERTY".)
The purchase of the Property includes participation by Buyer in a mandatory
rental pool for the Project (the "RENTAL POOL"), as more fully described in the
Prospectus previously delivered to Buyer, which Buyer acknowledges receiving.
Buyer's Initials: _______
2. OWNERS ASSOCIATION AND RENTAL POOL. Upon recordation of the deed
from Seller to Buyer for the Property, Buyer will automatically become a member
of Sedona Golf Resort & Conference Center Condominium Owners Association (the
"ASSOCIATION"), and shall be subject to the terms of the Declaration of
<PAGE>
ANNEX F
Covenants, Conditions and Restrictions for Sedona Golf Resort & Conference
Center, recorded as Instrument No. _______________, records of Yavapai County,
Arizona, as the same have been and may be amended from time to time (the
"DECLARATION"), the Hotel Operating and Rental Pool Agreement (the "RENTAL POOL
AGREEMENT") by and between Seller, the owners of all of the Units within the
Project (collectively, the "UNIT OWNERS"), and the hotel operator referred to in
the Prospectus (the "HOTEL OPERATOR"), the Articles of Incorporation, Bylaws,
Rules and Regulations of the Association. Buyer acknowledges that concurrently
with the execution of this Contract, Seller has furnished to Buyer copies of the
Declaration, the Rental Pool Agreement, the Articles of Incorporation, Bylaws,
and the Rules and Regulations of the Association. At the Closing (as defined
below), Buyer shall execute a written instrument reasonably satisfactory to
Seller or an execution counterpart of the Rental Pool Agreement confirming that
Buyer adopts and ratifies all the terms, covenants, provisions, conditions, and
stipulations of the Rental Pool Agreement. Buyer has carefully reviewed the
Declaration, the Rental Pool Agreement, Articles of Incorporation, Bylaws, and
Rules and Regulations of the Association, and Buyer is familiar with and
understands the development objectives for the Project and the use restrictions
on the Unit which are consistent with such objectives.
Buyer's Initials: _________
3. PURCHASE PRICE AND METHOD OF PAYMENT. The purchase price for the
Property to be paid by Buyer and method of payment shall be as follows:
Purchase Price for Unit
and Furnishings $ ____________
Earnest money paid herewith to
Escrow Agent
_____ Cash; _____ Check (subject to
collection if by check): $ ____________
Mortgage Amount due at Closing
from loan proceeds if Buyer
elects to obtain financing $ ____________
Balance due at Closing
(exclusive of Mortgage Amount
and closing costs) $ ____________
The earnest money shall be deposited with Escrow Agent and shall not be released
to the Seller until the Closing at which time it shall apply against the
purchase price.
4. FINANCING. If any part of the purchase price for the Property is to be
paid from the proceeds of a loan, within five (5) days following execution of
this Contract by Buyer, Buyer shall make application for and use its best
efforts to obtain a loan from a lender (to be approved in writing by Seller).
Within three (3) business days of being requested to do so, Buyer shall furnish
all information and truthfully and diligently make, execute and complete all
2
<PAGE>
ANNEX F
documents which any lender may request for the prompt loan processing and timely
funding. Buyer shall notify Seller within three (3) days from the date that any
loan applied for by Buyer is accepted, rejected or modified. If Buyer is
approved for a loan in an amount less than that applied for, the difference
shall be deposited by Buyer into escrow five (5) business days after
notification of the lender's approval for such lesser amount. If (i) Buyer is
rejected for a loan by any lender to whom Buyer has made a loan application, or
(ii) Buyer's loan application has not been approved within thirty (30) days from
the date of Seller's acceptance of this Contract, or (iii) loan approval is
subject to conditions that are unacceptable to Seller, Seller may cancel this
Contract, and if Buyer has fully complied in good faith with its obligations
under this Paragraph and has done nothing to delay or hinder loan approval,
Buyer may cancel this Contract, unless prior to such cancellation Buyer receives
written notice of loan approval and Seller approves same. In the event of such
cancellation, Seller shall refund to Buyer all sums received from Buyer pursuant
to this Contract. Buyer shall be responsible for and shall pay any and all fees
and costs in connection with any loan applied for, whether or not this
transaction is completed, including but not limited to points, interest,
application fees, appraisal costs and credit report fees. The interest rate and
fees for any loan applied for by Buyer are matters of concern solely between
Buyer and the lender and shall not in any way affect the rights or obligations
of the parties hereto. Seller has not agreed to provide a loan to Buyer nor has
Seller guaranteed the availability of a loan or any particular loan terms.
Seller shall not be responsible for the representations, actions, or omissions
made by any lender.
5. CONSTRUCTION AND COMPLETION.
(a) Seller shall cause the Project and the Unit to be constructed in
substantial conformance with the County-approved Plans subject to substitution
of materials, fixtures and appliances of equal or better quality and subject to
such changes in the Plans as may be required or approved by any state, federal,
county or local government authority. The final inspection and acceptance of the
Unit by Yavapai County shall constitute conclusive evidence that the Unit has
been constructed in substantial accordance with the Plans and that Seller's
construction obligations relative to the Unit have been fully satisfied, subject
to the limited warranty items described below. As the Unit will be subject to
the Rental Pool Agreement and the Project will be operated as a hotel, Buyer
understands that Buyer will not be involved in the selection of furnishings,
finishes or other design and/or decorative items relative to the Unit. Buyer
understands that the Project will be constructed by , which is licensed as a
contractor by the Arizona Registrar of Contractors, license number .
(b) If not already complete, Seller expects to complete construction
of the Project no later than December 31, 1998 (the "EXPECTED COMPLETION DATE"),
which may be extended by reason of delays caused by or contributed to as a
result of casualties, acts of God, labor difficulties, material or fuel
shortages, adverse weather conditions, governmental moratoriums, delays in
obtaining governmental permits and approvals, fire, vandalism, unavailability of
utilities, or other conditions beyond the control of Seller (the "UNCONTROLLABLE
EVENTS"). Buyer's sole remedy for Seller's failure to complete construction of
the Project by the Expected Completion Date (as such date may be extended by any
Uncontrollable Events) shall be to
3
<PAGE>
ANNEX F
terminate this Contract, which shall occur sixty (60) days following written
notice of termination received by Seller from Buyer; provided, however, that
this Contract shall not be terminated if Seller completes the Project within
such sixty (60) day period. If this Contract is so terminated, all earnest money
and other amounts paid by Buyer to Seller under this Contract shall be returned
to Buyer and thereafter neither party shall have any obligation to the other
under this Contract. If Buyer does not elect to terminate this Contract during
such sixty (60) day period and Seller fails to complete the Project within
twenty-four (24) months from the date Buyer executes this Contract, Buyer shall
have all rights and remedies available at law or in equity against Seller,
including specific performance but excluding incidental or consequential damages
(including lost profits). Except as set forth in this paragraph, no
representation is made by Seller as to a specific completion date or
construction schedule.
(c) Insulation will be installed in the Unit as follows where
construction allows: (i) walls separating refrigerated areas from
nonrefrigerated areas: Type: fiberglass batts; thickness: _________ inches;
R-value: __________; (ii) ceiling (except over unrefrigerated storage areas):
Type: cellulose or fiberglass batts; thickness: _______________ inches; R-value:
___________ or greater. All thickness and R-values are approximate and R-values
do not include the R-value of other wall or ceiling materials. Notwithstanding
the foregoing, insulation may be of lesser thickness and R-value than indicated
in certain areas where the design of the Unit does not permit greater thickness.
Examples of locations where thickness and R-values may vary include locations
where studs are placed in walls, at corners and windows and where roof trusses
attach to outside walls. The R-values are based on the representation of the
manufacturer and/or installer of the insulation and Seller does not warrant or
represent that these R-values are correct. Seller has the right to make
substitutions as to the type, thickness and R-value of insulation installed in
the Unit without obtaining the consent of Buyer, as long as there are no
substantial changes in the R-value of the insulation installed in a substantial
portion of the Unit.
6. POSSESSION, ESCROW AND CLOSING.
(a) Possession of the Property shall remain exclusively with Seller
until the Closing and Buyer shall not have the right to take possession or
occupancy of the Unit at or following the Closing except as provided in the
Rental Pool Agreement.
(b) Seller and Buyer hereby employ , or such other escrow agent as
Buyer and Seller may agree upon (the "ESCROW AGENT"), to act as escrow agent to
facilitate the closing of this transaction. This Contract shall serve as escrow
instructions to Escrow Agent and the parties do not intend to execute separate
instructions. Upon Closing, Escrow Agent shall cause the recording in the
appropriate county offices of all necessary documents, disburse all funds, issue
to Buyer the title insurance policy referred to below and issue to any lender
any required title insurance policy insuring the lender's lien against the
Property in the amount of any loan obtained by Buyer. Escrow Agent will not
accept payments or tendered performance from Buyer after a cancellation notice
has been issued by Seller unless Seller authorizes acceptance of the same in
Seller's sole discretion. The parties hereto grant to Escrow Agent the right to
4
<PAGE>
ANNEX F
execute on their behalf an Affidavit of Value to enable recording of the deed,
using the total purchase price set forth above, unless instructed by the parties
to the contrary.
(c) It is Seller's intention to complete construction of the Project
prior to completion of the sale contemplated by this Contract. Accordingly,
Closing shall occur on the seventh (7th) day after Seller has notified Buyer
that Yavapai County has approved the Project (including the Unit) for occupancy,
which may occur prior to the Expected Completion Date. Should Buyer not fully
perform all of its payment and performance obligations (including but not
limited to execution and delivery of all loan and other closing documents) on or
before the date set for the Closing, in addition to all other amounts payable
hereunder, Buyer shall pay to Seller to compensate Seller for the delay,
interest at twelve percent (12%) per annum on the entire purchase price from the
date originally scheduled for the Closing to the date that this transaction is
actually completed, unless Seller elects to cancel this transaction by reason of
the failure of Buyer to timely complete this transaction on the Closing, or
unless such nonperformance by Buyer is caused by Seller's nonperformance of any
terms or conditions hereof. Provided Seller completes construction of the Unit
as required by the terms hereof, Seller shall not be liable to Buyer for any
costs, expenses, liabilities, losses or damages incurred by Buyer as a result of
any delay in the Closing, including but not limited to any loss or damage as a
result of any increase in commitment fees, points or interest rates assessed or
charged by any lender.
7. CONVEYANCE. Title to the Property shall be conveyed by special warranty
deed at the Closing subject only to (i) patent reservations, (ii) taxes and
assessments not due and payable at Closing, (iii) any liabilities, charges and
obligations imposed upon the Property by reason of inclusion or membership in
any electrical, agricultural, hospital, community facilities or other
improvement district or any water users association, (iv) the Declaration and
any amendments thereto and any matters referred to therein, (v) matters shown on
the plat, or which an accurate survey would show, (vi) easements and
rights-of-way for roads, canals, ditches, drainage and public utilities, (vii)
water rights, (viii) Buyer's purchase money encumbrance, if any, (ix) any other
matters of record not adversely affecting marketability of title to the
Property; and (x) any other matters agreed to in writing by Buyer, including,
without limitation, the Rental Pool Agreement. Once title to the Property has
been so conveyed, all claims and demands of Buyer against Seller arising under
this Contract or otherwise, including without limitation claims of negligence,
shall be waived, released and forever discharged, except, however, any warranty
claims arising under Paragraph 12.
8. CLOSING COSTS AND PRORATIONS. In addition to the purchase price for the
Unit, Buyer shall deposit in escrow at least three (3) days prior to the Closing
(i) an amount (determined by Escrow Agent or any lender) equal to all unpaid
financing costs (including but not limited to credit reports, appraisal fees,
inspection fees, document preparation charges, casualty and liability insurance
premiums, lender's title insurance premiums, impound, loan origination fees and
points and tax service fees), (ii) all advance payments to the Association as
may be required, including, without limitation, the reserve fund payment as
required by the Declaration equal to $150,000 multiplied by the Percentage
Interest attributable to the Unit under the Declaration, and (iii) all other
escrow and recording fees, and the premium for any title insurance which Buyer
may elect to purchase. In no event shall Buyer be required to pay more than one
percent of the purchase price of the Unit for the items set forth in the
immediately preceding subsection (iii), and if such costs and fees exceed such
5
<PAGE>
ANNEX F
one percent amount, Seller shall pay any excess. Taxes, general and special
assessments, community facilities district assessments and homeowner association
assessments ("PRORATE ITEMS") shall be prorated as of the Closing based on the
most recent information available to Escrow Agent without adjustment following
the Closing; however, if Buyer causes any delay in the Closing, Buyer shall be
responsible for all Prorate Items from the date initially established for the
Closing regardless of the actual date of Closing. Income and expenses payable
under the Rental Pool Agreement shall also be prorated as of the Closing, based
upon information provided by the Hotel Operator.
9. DEFAULT AND REMEDIES.
(a) If, due to circumstances other than Seller's failure to perform
any term or condition hereof, Buyer fails to make any payment when due or to
timely perform any other term or condition hereof, Seller may deliver to Buyer
and Escrow Agent written notice detailing Buyer's failure of payment or
performance. Buyer shall have seven (7) days from receipt of such notice from
Seller or Escrow Agent within which to remedy the failure of payment or
performance. If, at the expiration of such curative period, Buyer has not cured
such failure of payment or performance, Seller's sole right and remedy for
Buyer's failure to perform and close escrow shall be to cancel this Contract and
any escrow established in connection herewith and retain all amounts paid to or
for the benefit of Seller as liquidated damages (and not as a penalty), in
consideration for administering this Contract, canceling escrow and taking the
Unit off the market, it being acknowledged that the actual damages of Seller
would be extremely difficult and impractical to ascertain.
(b) If Seller fails to complete the Project by the Expected Completion
Date (as it may be extended by Uncontrollable Events), Buyer shall have the
rights and remedies as set forth in Paragraph 5(b) above. In all other
instances, if Seller fails to comply with the terms and conditions of this
Contract and if Buyer shall have complied with all of its obligations hereunder,
Buyer may deliver to Seller a written notice setting forth in detail the alleged
failure of performance by Seller. Seller shall have thirty (30) days from the
receipt of such notice from Buyer within which to cure such failure of
performance, except that if the required performance cannot reasonably be
completed by Seller within said thirty-day period, then Seller shall have a
reasonable time within which to complete its performance, not to exceed an
additional sixty (60) days. If, at the expiration of such period, Seller shall
not have cured such failure of performance, Buyer may, by further notice to
Seller, either (i) require Seller to refund all money deposited into escrow by
Buyer, whereupon this Contract shall be terminated without liability to either
party, or (ii) enforce any other right or remedy available at law or in equity;
however, in order to elect specific performance Buyer must tender full and
complete performance. In no event shall Seller be responsible to Buyer for
incidental or consequential damages, including lost profits. If Buyer does not
elect a specific remedy in its initial default notice to Seller, Buyer shall be
conclusively deemed to have elected to terminate this Contract and receive a
refund of all money deposited into escrow.
6
<PAGE>
ANNEX F
(c) If either party cancels this Contract as permitted herein, Buyer
shall have no further right, title or interest in or to the Property.
(d) If either party commences litigation, arbitration or any
regulatory proceeding to enforce any of the terms of this Contract, then the
nonprevailing party shall pay to the prevailing party all court costs,
arbitration fees, expert witness fees and other expenses of arbitration,
regulatory proceeding or suit (including any appeal) in connection therewith,
together with reasonable attorneys' fees determined by the court (without a
jury), arbitrator or regulatory agency.
10. NO ORAL CHANGES OR REPRESENTATIONS. Seller wishes to avoid any
misunderstanding concerning the purchase of the Property and it is the policy of
Seller not to enter into any oral agreement or to ask any buyer to rely on any
oral representations concerning the Property or the Project. Buyer should not
rely on any representation or promise that is not set forth in writing in this
Contract or the Prospectus. No salesperson or broker has any authority to modify
the terms hereof nor any authority to make any representation or agreement not
contained in this Contract or the Prospectus and no person on behalf of Seller
is authorized to make any future oral agreement upon which Buyer may rely to
cancel, change or modify any portion of this Contract. This Contract supersedes
any and all prior understandings and agreements. This Contract may be amended or
modified only by an agreement in writing signed by Buyer and Seller and Seller's
authorized agent.
11. NOTICES. All notices to be given by either party to the other shall be
in writing and shall be served by personal delivery or by depositing such notice
in the United States mail, certified or registered, addressed and delivered to
the party to receive the notice at the addresses set forth herein or at such
other address as may be indicated by one party to the other party by written
notice. Notices sent by certified or registered mail as set forth above shall be
deemed to have been delivered upon the third business day following the day on
which such notice is deposited for delivery in any United States Postal Service
mail box or branch office established by the United States Postal Service, as
evidenced by the postmark.
12. REPRESENTATIONS AND WARRANTIES.
(a) Except as otherwise set forth in Paragraph 12(d) below, in lieu of
and as a substitute for all implied warranties of any kind relative to
construction of the Unit, Seller expressly warrants that it shall repair or
replace all defective materials and correct all defective workmanship
incorporated in the Unit if Buyer notifies Seller in writing of the defect
within one (1) years from the date of Closing. Such warranty does not apply to
(and Seller should have no liability for) defects or damage caused, by way of
example and not as a limitation, by (i) normal wear and tear or deterioration,
(ii) any damage caused or made worse by the negligence, improper maintenance,
improper operation or alteration of the Unit by anyone other than Seller, (iii)
any loss or damage resulting from acts of God, natural disasters or other causes
beyond the control of Seller, including but not limited to, fire, explosion,
smoke, water, glass breakage, windstorm, hail, lightening, changes which are not
reasonably foreseeable in the level of the underground water table, falling
trees, aircraft, vehicles, flood and earthquake; (iv) insubstantial variances or
7
<PAGE>
ANNEX F
defects; (v) environmental conditions such as overhead, underground or
above-ground power lines or facilities, radon or other naturally occurring
hazardous environmental conditions; (vii) deferred maintenance items or
vandalism or other damage caused by occupants of the Unit; (vii) warranty
service which is the responsibility of the manufacturer or supplier of any
tangible personal property included within the Unit; or (viii) maintenance and
repairs which are the responsibility of the Hotel Operator under the Rental Pool
Agreement. Buyer understands and agrees that warranty service may require
multiple service calls in order to complete corrective action. Buyer hereby
authorizes the Hotel Operator to conduct on Buyer's behalf a walk-through
inspection of the Unit and the Project upon completion. Seller shall make agreed
upon repairs identified during such walk-through inspection within a reasonable
period of time following the Closing.
(b) THE WARRANTIES CONTAINED IN THIS CONTRACT ARE THE ONLY WARRANTIES
OF ANY KIND WHATSOEVER, EXPRESS OR IMPLIED. TO THE EXTENT PERMITTED BY LAW
SELLER HEREBY DISCLAIMS (AND BUYER HEREBY WAIVES AND RELEASES SELLER FROM ALL
LIABILITIES IN CONNECTION WITH) ALL IMPLIED WARRANTIES OF MERCHANTABILITY,
FITNESS FOR A PARTICULAR PURPOSE, HABITABILITY OR WORKMANSHIP WHICH EXCEED THE
EXPRESS WARRANTY SET FORTH IN PARAGRAPH 12(a) ABOVE. BUYER UNDERSTANDS AND
AGREES THAT SELLER'S LIABILITY, WHETHER IN CONTRACT, TORT, WARRANTY OR
OTHERWISE, IS LIMITED TO THE REMEDY OF REPAIR OR REPLACEMENT AS SET FORTH ABOVE.
NO STEPS TAKEN BY SELLER TO CORRECT DEFECTS OR ALLEGED DEFECTS SHALL EXTEND THE
WARRANTY PERIOD BEYOND THE ONE-YEAR PERIOD SET FORTH ABOVE. UNDER NO
CIRCUMSTANCES SHALL SELLER BE LIABLE TO BUYER FOR ANY SPECIAL, INCIDENTAL OR
CONSEQUENTIAL DAMAGES. NO ACTION, REGARDLESS OF FORM, ARISING OUT OF THE
TRANSACTIONS UNDER THIS CONTRACT, MAY BE BROUGHT BY BUYER MORE THAN ONE YEAR
AFTER THE CAUSE OF ACTION HAS ACCRUED UNDER THE WARRANTY PROVISIONS OF THIS
SECTION 12.
Buyer's Initials: ______
13. ENTRY ON PROPERTY. Seller's field construction personnel and
contractors have no authority to make promises or waivers which are binding upon
Seller. Buyer agrees not to interfere with the work of such personnel and
contractors. Buyer understands that the Project site could be dangerous and
prior to closing Buyer shall not enter the Project. Buyer shall be responsible
for all injury and damage to persons or property suffered by Buyer or Buyer's
family members or guests who enter the Project, and Buyer shall indemnify,
defend and hold Seller and its contractors harmless for, from and against any
such injuries and damages and all costs and expenses related thereto, including
attorneys' fees.
14. ENVIRONMENTAL NOTICE. SELLER MAKES NO WARRANTIES, EXPRESS OR IMPLIED,
ABOUT THE EXISTING OR FUTURE SOIL OR ENVIRONMENTAL CONDITIONS ON OR ADJACENT TO
THE PROPERTY OR THE PROJECT, INCLUDING POSSIBLE PRESENT OR FUTURE POLLUTION OF
THE AIR, WATER OR SOIL FROM ANY SOURCES, INCLUDING BUT NOT LIMITED TO RADON GAS
OR UNDERGROUND MIGRATION OR SEEPAGE OF HAZARDOUS SUBSTANCES OR OTHER POLLUTANTS.
SELLER EXPRESSLY DISCLAIMS ANY LIABILITY FOR ANY TYPE OF DAMAGE, WHETHER DIRECT,
INDIRECT OR CONSEQUENTIAL, WHICH THE PROPERTY OR ITS INHABITANTS MAY SUFFER
BECAUSE OF ANY EXISTING OR FUTURE ENVIRONMENTAL OR OTHER CONDITIONS, INCLUDING
BUT NOT LIMITED TO POWER LINES OR RADON, AFFECTING SUCH INHABITANTS, THE LOT OR
REAL PROPERTIES IN OR ADJACENT TO THE PROJECT.
8
<PAGE>
15. BROKERAGE DISCLOSURE. Buyer acknowledges that the agents marketing
Units for Seller at the Project are acting solely as the agents of Seller.
Seller does not utilize sub-agents; therefore, if Buyer has been shown the Unit
by an agent other than one of Seller's Project agents, such agent is the agent
of Buyer and solely represents Buyer. Seller shall not pay any broker or agent a
commission or any other compensation unless there is a written agreement signed
by Seller and the broker or agent detailing the amount of compensation to be
paid, the conditions of payment and confirming that the agent or broker is
acting solely on behalf of Buyer and not as a sub-agent of Seller and that such
agent or broker is legally qualified to be paid compensation for participating
in the sale of the Unit.
16. MISCELLANEOUS.
(a) If this Contract is signed by more than one Buyer, each Buyer
shall be jointly and severally liable hereunder. The numbers and gender used
herein shall be deemed to apply to such number and gender as the context
requires.
(b) This Contract shall inure to the benefit of and shall be binding
upon the parties, their heirs, personal representatives, successors and assigns,
provided, however, neither this Contract nor any rights hereunder may be
assigned or transferred by Buyer prior to the Closing without the prior written
consent of Seller, which consent may be withheld in the sole discretion of
Seller, and any such prohibited assignment shall be void.
9
<PAGE>
(c) Except as otherwise provided herein, no waiver in connection with
this Contract shall be effective unless it is in writing signed by the party
against whom enforcement of the waiver is sought. The waiver of a breach of any
position of this Contract shall not constitute a waiver of the same or a
different breach in the future.
(d) Time is of the essence with respect to the performance of all
terms, conditions and provisions of this Contract.
(e) This Contract shall not be binding upon Seller until accepted by
Seller and executed by Seller's authorized representative. Buyer's earnest money
deposit is accepted subject to prior sale, and this Contract may be canceled by
Seller in the event of prior sale.
(f) If prior to the Closing all or a substantial portion of the
Project shall be destroyed or materially damaged by fire or other casualty,
either Buyer or Seller may cancel this Contract, in which event Buyer shall be
entitled to a full refund of all amounts paid hereunder, unless Seller agrees to
repair and compete construction no later than one year after the date of fire or
other casualty, in which event this Contract shall remain in full force and
effect.
(g) This Contract shall be governed and enforced under the laws of the
State of Arizona.
(h) Within five (5) days after request therefor, Buyer and Seller
shall execute and deliver any additional documents and provide any additional
information required or reasonably requested by the other party, any lender or
escrow agent in order to evidence or give effect to the provisions of this
Contract, both prior to and following the Closing. If the parties cannot agree
upon the terms and conditions of any documents to be executed which are not
specifically agreed upon in this Contract, then Escrow Agent's standard form of
that particular document shall be used.
17. ACKNOWLEDGEMENTS AND RIGHTS OF BUYER.
(a) Buyer understands and accepts that (i) the character and uses of
property surrounding and in the vicinity of the Project may change, (ii) there
may be minor deviations in the Unit from Seller's standard plans or model units
located within the Project and from illustrations and designs shown in
promotional materials, (iii) floor plans, maps, landscaping and elevation
renderings included within information and promotional brochures may not have
been drawn to scale and any square footage or dimensions shown in such materials
are only approximations, and (iv) Seller reserves the right to make changes in
the design of the Project and in the plans, specifications, materials, size and
location of all Project improvements (except that only minor deviations may be
made with respect to the Unit).
(b) Buyer represents that Buyer is purchasing the Property and the
participation in the Rental Pool for Buyer's own account.
(c) Buyer acknowledges that there is no organized market for the
resale of the Unit and that this investment is not liquid.
10
<PAGE>
ANNEX F
IN WITNESS WHEREOF, the parties have executed this Contract as of the
date set forth below.
APPROVED AND ACCEPTED FOR SELLER: BUYER:
_________________________
UP SEDONA, INC., an Arizona corporation a(n)_____________________
ON __________________, 199___ By:______________________
Name:____________________
Its:_____________________
By:______________________ Date:____________________
Authorized Agent
Address:
Address: _________________________
_________________________ _________________________
_________________________ _________________________
_________________________
Telephone Number_________
Telephone:_______________
_________________________
State of Residence
_________________________
Citizenship
_________________________
Social Security No.
Mailing Address if Different:
_________________________
_________________________
_________________________
Submitted by the following
broker/representative on
______________________, 199_
_________________________
of_______________________
The broker/representative by transmitting this Purchase Contract acknowledges
that the purchase of the Property contracted for by Buyer, based on information
obtained from Buyer concerning Buyer's investment objectives, is suitable for
Buyer and that Buyer has been informed by broker/representative of the facts
relating to liquidity and marketability of the Property. Broker/representative
agrees to maintain records confirming Buyer's suitability.
11
<PAGE>
ANNEX F
ADDENDUM TO PURCHASE CONTRACT AND RECEIPT
This Addendum to Purchase Contract and Receipt (this "ADDENDUM") is
attached to that certain Purchase Contract and Receipt (the "CONTRACT"), dated
___________________, 199__, by and between UP SEDONA, INC., an Arizona
corporation ("SELLER") and , a(n) ("BUYER"). Capitalized terms not otherwise
defined in this Addendum be as defined in the Contract. In the event of any
inconsistency or conflict between the terms of this Addendum and the Contract,
the terms of this Addendum shall govern.
1. DEFINITIONS.
a. "CASH FLOW DEFICIENCY" means that at any time during the Inducement
Period, there is a negative difference between Gross Revenues and Expenses with
respect to the Unit which have been earned and incurred during the Inducement
Period.
b. "EXPENSES" shall include all "Hotel Expenses" as defined in the
Rental Pool Agreement plus: (1) assessments payable by the Buyer pursuant to the
Declaration; (2) real property taxes and assessments for the Unit; and (3) debt
service payments which would be payable pursuant to an Imputed Mortgage.
Expenses shall exclude, however, (i) any expenses incurred to repair or replace
any damage to the Unit or the furniture and furnishings within the Unit as a
result of Buyer's intentional or negligent acts; and (ii) any exclusion to the
term "Hotel Expenses" as set forth in the Rental Pool Agreement unless
specifically included above.
c. "GROSS REVENUE" shall have the same definition as in the Rental
Pool Agreement.
d. "INDUCEMENT PERIOD" means the period commencing on the Closing Date
and expiring one year following the date upon which the Project opens for
business and begins accepting paying hotel guests (as determined by the Hotel
Operator).
e. "IMPUTED MORTGAGE" means a loan which, for computation purposes,
has a loan to value ratio of seventy-five percent (75%) of the purchase price of
the Unit as set forth in Paragraph 3 of the Contract and bears interest at a
rate not to exceed eight percent (8%) per annum, computed biannually, amortized
over a period of thirty (30) years, which results in a mortgage constant of
.00724711 on a monthly basis. Therefore, in computing monthly debt service
payments for purposes of establishing whether there is a Cash Flow Deficiency,
the price of the Unit would be multiplied by 75% and the product would be
multiplied by the mortgage constant of .00724711. Seller's obligations under
this Addendum are based upon an Imputed Mortgage regardless of whether Buyer
pays cash for the Unit or obtains a purchase money loan of more or less than
seventy-five percent (75%) of the Unit purchase price.
1
<PAGE>
ANNEX F
2. PAYMENT OF CASH FLOW DEFICIENCY.
a. If following the end of any calendar month Seller receives notice
from the Hotel Operator that there was a Cash Flow Deficiency for the Unit which
occurred in the prior month during the Inducement Period, Seller will cause such
Cash Flow Deficiency (less any Cash Flow Deficiency amount previously paid by
Seller) to be paid to the Hotel Operator, for the account of Buyer (and for
distribution and application as set forth in the Rental Pool Agreement), within
fifteen (15) days of receipt of such written statement from the Hotel Operator
detailing the amount of the applicable Cash Flow Deficiency.
b. Buyer understands that the amounts to be derived under the Rental
Pool Agreement will likely fluctuate from month to month and that while there
may be a Cash Flow Deficiency during one or more monthly periods, in other
monthly periods Buyer may receive distributions under the Rental Pool Agreement
which would have otherwise offset prior Cash Flow Deficiencies, such that at the
end of the Inducement Period (i) there may be no actual accumulated Cash Flow
Deficiency, or (ii) the total accumulated Cash Flow Deficiency may be less than
the total monthly Cash Flow Deficiencies which Seller has paid for the benefit
of Buyer during the Inducement Period. Accordingly, at the end of the Inducement
Period, based upon the reports of the Hotel Operator, if Seller has paid to
Buyer any Cash Flow Deficiencies during the Inducement Period and either (i)
there is no aggregate Cash Flow Deficiency, or (ii) the aggregate Cash Flow
Deficiency for the term of the Inducement Period is less than the total of the
periodic amounts paid by Seller to Buyer under the terms of subparagraph 2(a),
Buyer shall immediately remit any overpayments to Seller. If Seller has not
received such payment within fifteen (15) days following notice to Buyer
requesting repayment, Seller may enforce all rights and remedies available at
law or in equity to collect such reimbursement and Buyer hereby irrevocably
instructs the Hotel Operator to pay to Seller all amounts which would otherwise
be payable to Buyer under the Rental Pool Agreement until such reimbursement
amount, together with interest thereon at the rate of twelve percent (12%) per
annum from the due date until paid, has been paid in full.
c. Seller shall have no obligation to Buyer for any Cash Flow
Deficiency which may occur at any time after the Inducement Period.
SELLER:
UP SEDONA, INC., an Arizona corporation
By:______________________
Name:____________________
Its:_____________________
BUYER:
_________________________
a(n)_____________________
By:______________________
Name:____________________
Its:_____________________
2
<PAGE>
[GRAPHIC OMITTED]
<PAGE>
[GRAPHIC OMITTED]
<PAGE>
[GRAPHIC OMITTED]
<PAGE>
================================================================================
Until ______________ all dealers that buy, sell or trade the Units, whether or
not participating in this offering, may be required to deliver a Prospectus.
This is in addition to the dealer's obligation to deliver a Prospectus when
acting as Underwriters and with respect to unsold allotments or subscriptions.
You should rely only on the information contained in this document or
incorporated by reference and supplemental literature referred to in this
Prospectus. UP Sedona has not authorized anyone to provide you with information
that is different. This Prospectus does not constitute an offer to sell or
solicitation of an offer to buy any of the securities offered by this Prospectus
in any State to any person to whom it is unlawful to make such offer. Neither
the delivery of this Prospectus nor any sale made pursuant to this Prospectus
shall under any circumstances create any implication that there has been no
change in the affairs of the proposed hotel condominium project since the
respective dates at which information is given as set forth in the Prospectus or
since the date of this Prospectus. However, if any material change in the
affairs of the proposed hotel condominium project shall occur during the time
when a copy of this Prospectus is required to be delivered, UP Sedona will amend
or supplement this Prospectus to reflect such change.
SEDONA GOLF RESORT
AND CONFERENCE CENTER
$42,500,000
PROSPECTUS DATED
______________, 1997
================================================================================
<PAGE>
APPENDIX A
Description of Graphic and Image Material
1. Location: Inside Front Cover Page of Prospectus
Item: Photographs
Description: The photographs appearing on the inside front cover of the
prospectus are from top to bottom:(a)The Sedona golf resort
and conference center, and (b) model of hotel against the
surrounding area.
2. Location: First Page Front and Back Following Inside Front Cover Page
Item: Photographs
Description: The photographs appearing on the front and back of the first
page after the inside front cover of the prospectus are from
top to bottom and front to back: (a) a colored main floor
plate indicating units by type and suite numbers, corridors,
conference center, restaurant, parking and landscaping, (b)
a colored second floor plate showing unit types, suite
numbers and corridors, and (c) a colored third floor plate
showing unit types and suite numbers,
3. Location: Last Page of Prospectus Preceeding Inside Back Cover Page
Item: Photographs
Description: The photographs appearing on the last page of the prospectus
preceeding the inside back cover page are from top to
bottom and front to back: (a) a one bedroom OB1 Floor Plan.,
(b) a one bedroom OB2 Floor Plan., (c) a one bedroom OB3
Floor Plan, and (d) a studio ST1 floor plan.
4. Location: Inside Back Cover Page of Prospectus
Item: Photographs
Description: The photographs appearing on the inside back cover of the
prospectus are from top to bottom: (a) a general location
map of Phoenix to the Grand Canyon, and (b) a map of the
Sedona area.
5. Location: Page 13 of Prospectus
Item: Bar Graph
Description: This bar graph from Smith Travel Research outlines in
graphical form, the growth in occupancy and average daily
rate for the total U.S. lodging industry from 1991 through
1995.
6. Location: Page 14 of Prospectus
Item: 3 Bar Graphs stacked vertically
Description: These bar graphs from Smith Travel Research outline in
graphical form, the occupancy, average daily rate and the
revenue per available room for the total U.S. full service
market and the total U.S. resort market from 1991 through
1995,
7. Location: Page 20 of Prospectus
Item: 3 Bar Graphs stacked vertically
Description: These bar graphs outline in graphical form, the occupancy,
average daily rate and the revenue per available room for
the total U.S. full service market, the total U.S. resort
market and the Sedona resort market from 1991 through 1995,
8. Location: Page 27 of Prospectus
Item: Bar Graph
Description: This bar graphs outline in graphical form, the steady
history of growth in occupancy, average rate and revenue per
available room for Delta Hotels Limited, the primary
competitors of Delta Hotels Limited and Hotels in Canada for
1995 and 1996.
9. Location: Page 28 of Prospectus
Item: Bar Graph
Description: This bar graphs outline in graphical form, the net income
per available room for Delta Hotels Limited and for the
hotel industry in Canada from 1991 and 1996.
<PAGE>
PART II
INFORMATION NOT REQUIRED IN PROSPECTUS
ITEM 30. OTHER EXPENSES OF ISSUANCE AND DISTRIBUTION.
The expenses incurred in connection with the issuance and distribution
of the securities being registered hereby are as follows:
SEC registration fee............................... $12,878.79
NASD Filing Fee*...................................
Accountants' fees and expenses*....................
Legal fees and expenses*...........................
Printing expenses*.................................
Miscellaneous fees*................................
Total*....................................
* To be filed by amendment
ITEM 31. SALES TO SPECIAL PARTIES.
None.
ITEM 32. RECENT SALES OF UNREGISTERED SECURITIES.
None.
ITEM 33. INDEMNIFICATION OF DIRECTORS AND OFFICERS.
The Registrant's Articles of Incorporation (the "Articles") require the
Registrant to indemnify any person who is or was a director, officer, employee,
or agent of the Corporation against liability for monetary damages for acts or
alleged acts and failures to act or alleged failures to act of such person with
respect to the Corporation. The effect of the provisions of the Articles and the
Arizona Business Corporation Act (the "Business Corporation Act") is described
below.
The Articles and the Business Corporation Act require the Registrant to
indemnify all "Outside Directors," as defined below, and officers of the
Registrant who are not directors against "liability," as defined below. The
Articles and the Business Corporation Act also require the Registrant to
indemnify against reasonable "expenses," as defined below, any director who is
the prevailing party in the defense of any proceeding to which the director is a
party because such person is or was a director of the Registrant. In addition,
the Business Corporation Act requires the Registrant to pay expenses to Outside
Directors in advance of a final disposition of the proceeding if (1) the
director furnishes to the Registrant a written affirmation (an "Affirmation") of
his or her good faith belief that (i) his or her conduct was in good faith, (ii)
he or she reasonably believed that the conduct was in the best interests of the
Registrant or at least not opposed to the Registrant's best interests, and (iii)
in the case of any criminal proceeding, he or she had no reasonable cause to
believe the conduct was unlawful (the "Standard of Conduct") and (2) the
director provides the Registrant with a written undertaking (an "Undertaking")
to repay the advance if it ultimately is determined that the director did not
meet the Standard of Conduct. However, the Business Corporation Act prohibits
the Registrant from advancing expenses to an Outside Director if a court of
competent jurisdiction determines before payment that the director failed to
meet the Standard of Conduct and a court does not otherwise authorize
indemnification.
The Articles and the Business Corporation Act also require the
Registrant to indemnify a director who is not an Outside Director against
liability, but only if the Registrant is authorized in the specific case after a
determination has been made by either (a) a majority of the members of the Board
of Directors who are not at the time parties to the proceeding, (b)
II-1
<PAGE>
special legal counsel, or (c) the shareholders of the Registrant (excluding
shares owned by or voted under the control of directors who are at the time
parties to the proceeding) that the director has met the Standard of Conduct (a
"Determination"). In addition, the Business Corporation Act prohibits the
Registrant from indemnifying a director who is not an Outside Director in
connection with a proceeding by or in the right of the Registrant in which the
director is adjudged liable to the Registrant, or in connection with a
proceeding in which the director was adjudged liable on the basis that the
director improperly received a personal benefit. The Business Corporation Act
and the Articles permit the Registrant to pay for or reimburse the reasonable
expenses of a director who is not an Outside Director in advance of the final
disposition of a proceeding if the director furnishes the Registrant with an
Affirmation, an Undertaking, and a Determination is made that the facts then
known to the persons making the Determination would not preclude indemnification
under the Business Corporation Act.
As permitted by the Business Corporation Act, except for situations
where the Registrant is required to indemnify its officers who are not also
directors against liability, as described above, the Articles require the
Registrant to indemnify against liability and permit the Registrant to advance
expenses to any officer, employee, or agent who is not a director to the same
extent as to a director. However, the Business Corporation Act prohibits the
Registrant from indemnifying such persons against liability unless a
Determination is made that indemnification is permissible because the person has
met the Standard of Conduct. The Business Corporation Act permits the Registrant
to pay for or reimburse expenses to an officer, employee, or agent who is not a
director in advance of a final disposition of the proceeding, but only if the
person furnishes to the Registrant an Affirmation and an Undertaking, and a
Determination is made that the facts then known to the persons making the
Determination would not otherwise preclude indemnification.
The Articles and the Business Corporation Act permit a director or
officer of the Registrant to apply to a court for indemnification, in which case
the court may, subject to certain conditions, order the Registrant to indemnify
such person for part or all of the person's liability and expenses.
The Business Corporation Act defines "Outside Director" to mean a
director who, when serving as a director, was not an officer, employee or holder
of more than 5% of the outstanding shares of any class of stock of the
Registrant. "Liability" under the Business Corporation Act means the obligation
to pay a judgment, settlement, penalty or fine, including an excise tax assessed
with respect to an employee benefit plan, or reasonable expenses incurred with
respect to a proceeding and include obligations and expenses that have not yet
been paid by the indemnified person but that have been or may be incurred. The
Business Corporation Act defines "expenses" as attorney fees and all other costs
and expenses reasonably related to a proceeding.
ITEM 34. TREATMENT OF PROCEEDS FROM STOCK BEING REGISTERED.
Not Applicable.
ITEM 35. FINANCIAL STATEMENTS AND EXHIBITS.
(a) Financial Statements
Independent Auditors' Report
Balance Sheet as of December 31, 1996
Notes to Balance Sheet - December 31, 1996
II-2
<PAGE>
(b) Exhibits
EXHIBIT
NUMBER EXHIBIT
1.1* Form of Selling Agent Agreement
3.1 Articles of Incorporation of the Registrant
3.2 Bylaws of the Registrant
4.1* Form of Certificate evidencing ownership of a Unit
5.1* Opinion of O'Connor, Cavanagh, Anderson, Killingsworth & Beshears, a
professional association
8.1* Form of Opinion of O'Connor, Cavanagh, Anderson, Killingsworth &
Beshears, a professional association, as to the Tax Matters
10.1 Golf Facilities Agreement
10.2 Reciprocal Easement Agreement with Covenants and Restrictions
Affecting Land regarding Ridge Spa and Racquet Club
23.1* Consent of O'Connor, Cavanagh, Anderson, Killingsworth & Beshears, a
professional association (included as Exhibits 5.1 and 8.1 hereto)
23.2 Consent of Toback CPA's, P.C.
24.1 Power of Attorney of Directors and Executive Officers (included on the
Signature Page of the Registration Statement)
27* Financial Data Schedule
* To be filed by amendment
ITEM 36. UNDERTAKINGS.
(a) The undersigned registrant hereby undertakes:
(1) To file, during any period in which offers or sales are
being made, a post-effective amendment to this registration statement.
(i) To include any prospectus required by Section 10(a)(3) of
the Securities Act of 1933;
(ii) To reflect in the prospectus any facts or events arising
after the effective date of the registration statement (or the most recent
post-effective amendment thereof) which, individually or in the aggregate,
represent a fundamental change in the information set forth in the registration
statement. Notwithstanding the foregoing, any increase or decrease in volume of
securities offered (if the total dollar value of securities offered would not
exceed that which was registered) and any deviation from the low or high and of
the estimated maximum offering range may be reflected in the form of prospectus
filed with the Commission pursuant to Rule 424(b) if, in the aggregate, the
changes in volume and price represent no more than 20 percent change in the imum
aggregate offering price set forth in the "Calculation of Registration Fee"
table in the effective registration statement.
(iii) To include any material information with respect to the
plan of distribution not previously disclosed in the registration statement or
any material change to such information in the registration statement.
II-3
<PAGE>
(2) That, for the purpose of determining any liability under
the Securities Act of 1933, each such post-effective amendment shall be deemed
to be a new registration statement relating to the securities offer therein, and
the offering of such securities at that time shall be deemed to be the initial
bona fide offering thereof.
(3) To remove from registration by means of a post-effective
amendment any of the securities being registered which remain unsold at the
termination of the offering.
(h) Insofar as indemnification for liabilities arising under the
Securities Act of 1933 may be permitted to directors, officers and controlling
persons of the registrant pursuant to the foregoing provisions, or otherwise,
the registrant has been advised that in the opinion of the Securities and
Exchange Commission such indemnification is against public policy as expressed
in the Act and is, therefore, unenforceable. In the event that a claim for
indemnification against such liabilities (other than the payment by the
registrant of expenses incurred or paid by a director, officer or controlling
person of the registrant in the successful defense of any action, suit or
proceeding) is asserted by such director, officer or controlling person in
connection with the securities being registered, the registrant will, unless in
the opinion of its counsel the matter has been settled by controlling precedent,
submit to a court of appropriate jurisdiction the question whether such
indemnification by it is against public policy as expressed in the Act and will
be governed by the final adjudication of such issue.
II-4
<PAGE>
SIGNATURES
Pursuant to the requirements of the Securities Act of 1933, the
Registrant certifies that it has reasonable grounds to believe that it meets all
of the requirements for filing on Form S-11 and has duly caused this
Registration Statement to be signed on its behalf by the undersigned, thereunto
duly authorized in the City of Phoenix, State of Arizona, on the 27th day of
February, 1997.
UP SEDONA, INC.
By: /s/ William Oliver
--------------------------
William Oliver
President
POWER OF ATTORNEY
KNOWN ALL PERSONS BY THESE PRESENTS, that each person whose signature
appears below constitutes and appoints jointly and severally, William Oliver and
Raymond J. Langrish, and each one of them, as his true and lawful
attorneys-in-fact and agents, with full power of substitution and
resubstitution, for him and in his name, place and stead, in any and all
capacities, to sign any and all amendments (including post-effective amendments)
to this Registration Statement, and to file the same, with all exhibits thereto,
and other documents in connection therewith, with the Securities and Exchange
Commission, granting unto said attorneys-in-fact and agents, and each of them,
full power and authority to do and perform each and every act and thing
requisite and necessary to be done in connection therewith, as fully to all
intents and purposes as he might or could do in person, hereby ratifying and
confirming all that said attorneys-in-fact and agents, or any of them, or their
or his substitute or substitutes, may lawfully do or cause to be done by virtue
hereof.
Pursuant to the requirements of the Securities Act of 1933, this
Registration Statement has been signed by the following persons in the
capacities and on the dates indicated:
Signature Position Date
--------- -------- ----
/s/ Victor D. Setton
- ------------------------- Chairman of the Board February 27, 1997
Victor D. Setton
/s/ William Oliver
- ------------------------- President February 27, 1997
William Oliver (Chief Executive Officer)
/s/ Raymond J. Langrish
- ------------------------- Secretary and Treasurer February 27, 1997
Raymond J. Langrish (Chief Financial Officer and
Chief Accounting Officer)
II-5
ARTICLES OF INCORPORATION
OF
UP SEDONA, INC.
KNOW ALL MEN BY THESE PRESENTS:
I, the undersigned, have this day set my hand hereto for the purpose of
forming a corporation under and pursuant to the laws of the State of Arizona,
and for that purpose do hereby adopt these Articles of Incorporation:
ARTICLE I
The name of the Corporation is UP Sedona, Inc., (the "Corporation").
ARTICLE II
The name and address of the Incorporator is as follows:
William S. Oliver
2601 E. Thomas Road
Suite 225
Phoenix, Arizona 85016
All powers, duties and responsibilities of the above Incorporator shall cease at
the time of delivery of these Articles of Incorporation to the Arizona
Corporation Commission for filing.
ARTICLE III
The purpose for which this Corporation is organized is the transaction
of any or all lawful business for which corporations may be incorporated under
the laws of the State of Arizona, as they may be amended from time to time. The
Corporation initially intends to engage in real estate investment and related
activities.
ARTICLE IV
The known place of business of the Corporation shall be 2111 E.
Highland, Suite 255, Phoenix, Arizona 85016.
EXHIBIT 3.1
<PAGE>
ARTICLE V
The capitalization of the Corporation shall consist of two million
(2,000,000) shares of common stock without par value and one million (1,000,000)
shares of preferred stock without par value. Shares of the Corporation's common
stock may be issued upon such terms and conditions as shall be prescribed by the
Board of Directors of the Corporation and may be issued in exchange for cash,
services or anything of right or value. The judgment of the Board of Directors
as to the value of property or services taken in exchange for stock, as to the
determination of cash reserves and operating capital and as to the value of
consideration received from time to time for the sale of stock, shall be
conclusive in the absence of fraud. The stock of this Corporation shall be fully
paid for when issued and shall be forever nonassessable. Each shareholder in
this Corporation shall, at all shareholders' meetings, whether general or
special, be entitled to one (1) vote for every share of common stock that he
shall hold, except as otherwise provided in the Constitution of the State of
Arizona.
Issued and outstanding shares of preferred stock will entitle the
holder thereof only to those votes, if any, which may be expressly fixed herein,
and to voting rights on certain matters, and in certain circumstances, as set
forth in this Article.
Preferred stock, in preference to the common stock, will be entitled to
dividends from funds or other assets legally available therefor, at the rate of
18% of corporate profits (as determined on a consistent basis by the Board of
Directors of the Corporation), payable quarterly, and shall be cumulative to the
extent not so timely paid. In the event of dissolution or liquidation of the
Corporation, voluntary or involuntary, the holders of the preferred stock, in
preference to the common stock, will be entitled to receive such amount or
amounts as may be fixed by the Board of Directors pursuant to the authority
herein conferred upon it.
So long as any shares of preferred stock are outstanding, the
Corporation will not, without the affirmative vote or consent of the holders of
at least fifty percent (50%) of the outstanding shares of the preferred stock,
voting as a class, authorize by amendment of the Articles of Incorporation, any
stock ranking prior in any respect to the preferred stock.
Except as otherwise stated herein, dividends may be paid upon the
common stock of the Corporation only when dividends have been paid, or funds
have been set apart for the payment of dividends, on the preferred stock from
the date after which dividends on the preferred stock become cumulative to the
beginning of the then current dividend period, but whenever there shall have
been paid or funds shall have been set apart for the payment of all such
dividends upon the preferred stock, then dividends upon the common stock may be
declared for payment then or thereafter out of any remaining funds or other
assets legally available for such payment. After the payment of the designated
dividends, and amounts payable upon dissolution or liquidation, if any, to
2
<PAGE>
which the shares of the preferred stock are expressly entitled in preference to
the common stock in accordance with the provisions herein set forth, the common
stock is to receive all further such dividends and amounts.
A consolidation, merger or amalgamation of this Corporation with or into
any other corporation or corporations shall not be deemed a distribution of
assets of the Corporation within the meaning of any provisions hereof.
ARTICLE VI
The holders from time to time of the capital stock of the Corporation
shall have no preemptive rights whatsoever as to the capital stock then or
thereafter authorized to be issued, including treasury stock.
ARTICLE VII
The number of Directors constituting the initial Board of Directors
shall be one (1). The name and address of the person who is to serve as Director
until the first annual meeting of Shareholders or until their successors shall
be elected and qualified are as follows:
Victor D. Setton
1333 W. Broadway, Suite 550
Vancouver, British Columbia
Canada V6H 4C1
The minimum and maximum number of Directors that shall from time to
time serve the Corporation shall be set forth in the Bylaws of the Corporation.
ARTICLE VIII
The Board of Directors of the Corporation may, from time to time,
distribute on a pro rata basis to its Shareholders a portion of its assets from
the capital surplus of the Corporation.
ARTICLE IX
The Board of Directors of the Corporation may, from time to time, cause
the Corporation to purchase its own shares to the extent of the unreserved and
unrestricted earned and capital surplus of the Corporation.
3
<PAGE>
ARTICLE X
To the fullest extent permitted by applicable law, the Corporation
shall indemnify any person who is or was a director, officer, employee or agent
of the Corporation against liability for monetary damages for acts or alleged
acts and failures to act or alleged failures to act of such person with respect
to the Corporation.
ARTICLE XI
The name and address of the initial statutory agent of the Corporation
is S.A. One Ltd., an Arizona corporation, 2111 E. Highland, Suite 255, Phoenix,
Arizona 85016.
IN WITNESS WHEREOF, I have hereunto set my hand this 17th day of
December, 1996.
/s/William Oliver
-----------------------
William Oliver
4
BYLAWS OF
UP SEDONA, INC.
ARTICLE I
Offices
The principal office of this Corporation shall be in Phoenix, Arizona.
Offices may also be maintained at such other place or places, either within or
without the State of Arizona, as may be designated from time to time by the
Board of Directors, or as the business of the Corporation may require, and the
business of the Corporation may be transacted at such other offices with the
same effect as that conducted at the principal office.
ARTICLE II
Shareholders
Section 2.1 Annual Meeting
The annual meeting of the Shareholders shall be held on the second
Tuesday in August of each year, or if that day is a legal holiday, at the same
hour on the next day thereafter which is not a legal holiday, for the purpose of
electing directors and for the transaction of such other business as may
properly come before the meeting. If the election of directors shall not be held
on the day designated herein for the annual meeting of the Shareholders, the
Board of Directors shall cause the election to be conducted at a special meeting
of the Shareholders as soon thereafter as such may conveniently be held.
Section 2.2 Special Meetings
Special meetings of the Shareholders, for any purpose or purposes, may
be called by the President or by the Vice President whenever deemed expedient or
necessary. The President or Vice President shall call a special meeting of the
Shareholders when so requested by the holders of a majority of the outstanding
stock entitled to vote of the Corporation, or when so instructed by a majority
of the Board of Directors.
Section 2.3 Place of Meetings
Annual and special meetings of the Shareholders shall be held at the
principal office of the Corporation, unless a different place is specified in
the notice of such meeting. No annual or special meeting of the Shareholders
shall be held without the State of Arizona, except by the written consent of all
Shareholders entitled to vote at such meeting.
EXHIBIT 3.2
<PAGE>
Section 2.4 Notice of Meetings
Written notice stating the place, day and hour of the meeting, and in
the case of a special meeting, the purpose or purposes for which the meeting is
called, shall be delivered by or at the direction of the President, Vice
President or Secretary to each Shareholder of record entitled to vote at such
meeting not less than ten (10) nor more than fifty (50) days before the date of
the meeting, except that notice of special meetings may be given personally or
by telephone or telegraph where more convenient, at least five (5) days prior to
such meeting, and the giving of such notice shall be evidenced by the affidavit
of the officer or person giving such notice. If mailed, such notice shall be
deemed to be delivered when deposited in the United States mail, addressed to
the Shareholder at his last address appearing on the records of the Corporation.
The attendance of a Shareholder at a meeting of Shareholders shall constitute a
waiver of notice of such meeting, except where the Shareholder attends for the
express purpose of objecting to the transaction of any business because the
meeting is not lawfully called or convened.
Section 2.5 List of Shareholders
The officer who has charge of the stock ledger of the Corporation shall
prepare and make, at least ten (10) days before every meeting of Shareholders, a
complete list of the Shareholders entitled to vote at the meeting, arranged in
alphabetical order, and showing the address and the number of shares registered
in the name of each Shareholder. Such list shall be open to the examination of
any Shareholder, for any purpose germane to the meeting, during ordinary
business hours, for a period of at least ten (10) days prior to the meeting,
either at a place within the city where the meeting is to be held, which place
shall be specified in the notice of the meeting, or, if not so specified, at the
place where the meeting is to be held. The list shall also be produced and kept
at the time and place of the meeting during the whole time thereof, and may be
inspected by any Shareholder present.
Section 2.6 Record Date
For the purpose of determining Shareholders entitled to notice of or to
vote at any meeting of Shareholders or any adjournment thereof, or Shareholders
entitled to receive payment of any dividend, or in order to make a determination
of Shareholders for any other proper purpose, the Board of Directors, at its
election, may provide that the stock transfer books shall be closed for a stated
period, but not to exceed in any case fifty (50) days prior to the event
concerned. If no record date is fixed for the determination of Shareholders
entitled to receive payment of a dividend, the date on which the resolution of
the Board of Directors declaring such dividend is adopted (as the case may be)
shall be the record date for the purposes of such event. Where a determination
of Shareholders has been made, as provided in this section, such determination
shall apply to any adjournment of any meeting called pursuant thereto.
2
<PAGE>
Section 2.7 Quorum
At any meeting of the Shareholders, the holders of a majority of the
shares issued, outstanding and entitled to vote at the meeting, present in
person or represented by proxy, shall constitute a quorum at all meetings of
Shareholders for the transaction of business except as otherwise provided by
statute of the Articles of Incorporation. In the absence of a quorum, the
meeting may be adjourned from time to time, without notice, other than an
announcement at the meeting of adjournment until a quorum becomes present. At
any such adjourned meeting at which a quorum later becomes present, any business
may be transacted which might have been transacted at the meeting as originally
notified. If the transaction of business is commenced with a quorum present, the
meeting may continue to transact business until adjournment, notwithstanding the
withdrawal of Shareholders leaving less than a quorum.
Section 2.8 Voting
Each Shareholder shall be entitled to one vote for each share standing
in his name on the books of the Corporation on the record date. A Shareholder
may vote by proxy executed in writing by the Shareholder. Such proxy shall be
filed with the Secretary before or at the time of the meeting. No proxy shall be
valid after eleven (11) months from the date of its execution, unless otherwise
provided in the proxy. Shares held by a legal personal representative or by a
court appointed receiver may be voted, in person or by proxy, by such
representative or receiver without the transfer of such shares into the name of
the trustee, except pursuant to a valid voting trust agreement. A Shareholder
whose shares are pledged shall be entitled to vote such shares. Treasury shares
of the Corporation shall not be voted at any meeting of the Shareholders. When a
quorum is present at any meeting, the vote of the holders of a majority of the
voting power present, whether in person or represented by proxy, shall decide
any question brought before any such meeting, unless the question is one upon
which, the express provision by Arizona statute or of the Articles of
Incorporation, a different vote is required, in which case such express
provision shall govern and control the decision of such question.
Section 2.9 Cumulative Voting
In all elections of Directors of the Corporation, each Shareholder shall
have the right to cast as many votes in the aggregate as shall equal the number
of his shares of stock having voting power, multiplied by the number of
Directors to be elected at such election; and each Shareholder may cast the
whole of such votes whether in person or by proxy for one candidate, or
distribute such votes among two or more candidates; and Directors of the
Corporation shall not be elected otherwise.
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Section 2.10 Informal Action
Any action required to be taken at a meeting of the Shareholders, or any
other action which may be taken at such meeting, may be taken without a meeting
if a consent in writing, setting forth the action so taken, shall be signed by
all of the Shareholders entitled to vote with respect to the subject matter
thereof.
Section 2.11 Irregularities
All information and/or irregularities in calls, notices of meetings and
in the manner of voting, form of proxies, credentials, and method of
ascertaining those present, shall be deemed waived if no objection is made at
the meeting or if waived in writing.
ARTICLE III
Board of Directors
Section 3.1 Qualification, Duties and Powers
The property and business of the Corporation shall be managed and
controlled by a Board of Directors, none of whom need be Shareholders or
residents of the State of Arizona. Subject to the restrictions imposed by law,
the Articles of Incorporation or these Bylaws, the Board of Directors may
exercise all of the powers of the Corporation. It shall be the duty of the
Directors to keep a complete record of the proceedings of their meetings.
Section 3.2 Number of Directors
The number of Directors may be increased or decreased from time to time
by resolution of the Board of Directors, or by resolution at an annual meeting
of the Shareholders, or by a special meeting of Shareholders duly called for
that purpose, but shall not be less than one (1) or more than ten (10). Until
further action by the Board of Directors or the Shareholders, the Board shall be
composed of one (1) member.
Section 3.3 Regular Meetings
A regular meeting of the Board of Directors shall be held without notice
other than by this Bylaw immediately after and at the same place as the annual
meeting of the Shareholders. The Board of Directors may provide by resolution
the time and place, either within or without the State of Arizona, for the
holding of additional regular meetings without other notice than such
resolution.
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Section 3.4 Special Meetings
Special meetings of the Board of Directors may be called by the
President, Vice President or a majority of the Board of Directors, whenever
deemed expedient or necessary with written notice of such meeting to be given at
least five (5) days prior to the proposed meeting date, and delivered personally
or mailed to each Director at his business address, or by telegram. If notice be
given by telegram, such notice shall be deemed to be delivered when the telegram
is delivered to the telegraph company. If mailed, such notice shall be deemed to
be delivered when deposited in the United States mail properly addressed, with
postage prepaid. Any Director may waive notice of any meeting. The attendance of
a Director at a meeting shall constitute a waiver of notice of such meeting,
except where the Director attends a meeting for the express purpose of objecting
to the transaction of any business because the meeting is not lawfully called or
convened. Neither the business to be transacted at, nor the purpose of any
meeting of the Board of Directors need be specified in the notice or waiver of
notice of such meeting.
Section 3.5 Quorum and Voting
A majority of the Directors then in office shall constitute a quorum for
the transaction of business at any meeting of the Board of Directors. If less
than a quorum is present at the meeting, a majority of the Directors present may
adjourn the meeting to another time and place without further notice other than
announcement at the meeting. A quorum shall be considered to exist for all
purposes if a majority of the Directors participate in the meeting by means of a
conference telephone call hookup (or by ordinary telephone hookup in the event
only one Director participates by such means), but the decisions reached at a
meeting of the Directors so held shall not become effective unless and until the
Directors physically absent from the place of holding such meeting shall confirm
by telegram or other writing delivered to the Secretary of the meeting their
votes with respect to the matters decided upon. When a quorum is present at any
meeting, the concurrence of a majority of the Directors present shall decide any
issue brought before such meeting unless the question is one upon which, by the
express provision of an Arizona statute or of the Articles of Incorporation, a
different vote is required, in which case such express provision shall govern
and control the decision of such question.
Section 3.6 Action Without Meeting
Unless otherwise restricted by the Articles of Incorporation or these
Bylaws, any action required or permitted to be taken at any meeting of the Board
of Directors may be taken without a meeting, if all members of the Board or
Committee, as the case may be, consent thereto in writing, and the writing or
writings are filed with the minutes of proceedings of the Board or Committee.
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Section 3.7 Waiver of Notice
Attendance of a Director at a meeting shall constitute waiver of notice
of such meeting, except when the person attends the meeting for the express
purpose of objecting to the transaction of any business because the meeting is
not lawfully called or convened. Any Director may waive notice of any annual,
regular, or special meeting of Directors by executing a written notice of waiver
either before or after the time of the meeting.
Section 3.8 Vacancies
A vacancy occurring in the Board of Directors by resignation may be
filled by the affirmative vote of a majority of the remaining Directors though
less than a quorum of the Board of Directors or, if only one Director remains in
office, a vacancy may be filled by appointment by such remaining Director, and
further vacancies shall then be filled by vote of those Directors then in
office. A vacancy occurring by reason of the death or legal incompetency of any
Director shall be filled at a special meeting of the Shareholders to be called
by the President or Vice President for that purpose. At such meeting, an
election of all of the Directors shall be held upon the principle of cumulative
voting. Any vacancy occurring by reason of an increase in the number of
Directors shall be filled by the majority vote of the existing Directors.
Directors shall serve until their successors are elected and qualified. Should
the last remaining Director die or resign while in office, there shall be a
special meeting called by the Shareholders in order to elect a new Board of
Directors.
Section 3.9 Compensation
The Directors may be paid their expenses, if any, of attendance at each
meeting of the Board of Directors and may be paid a fixed sum for attendance at
each meeting of the Board of Directors or a stated salary as Director. No such
payment shall preclude any Director from serving the Corporation in any other
capacity and receiving compensation therefore.
ARTICLE IV
Officers
Section 4.1 Selection and Term of Office
Officers shall be elected at the annual meeting of the Board of
Directors, or at a special meeting called for that purpose of the Board of
Directors. The Board of Directors may fill vacancies from time to time occurring
among the officers and may create such additional offices as they deem
desirable. A special meeting may be called at any time by a majority vote of the
Board of Directors to consider the removal of officers. Each officer shall serve
at the pleasure of the Board of Directors, or until his death, legal
incompetency, resignation or removal.
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Section 4.2 President
The President shall be the principal executive officer of the
Corporation and, subject to the control of the Board of Directors or the
Executive Committee thereof, shall supervise and control all of the business and
affairs of the Corporation. He shall, when present, preside at all meetings of
the Shareholders and of the Board of Directors.
Section 4.3 Vice President
In the absence of the President or in the event of his death, inability
or refusal to act, the Vice President (or in the event there be more than one
vice president, the vice presidents in the order designated at the time of their
election, or in the absence of any designation, then in the order of their
election) shall perform the duties of the President and when so acting shall
have all the powers of and be subject to all the restrictions upon the
President. The President or any Vice President may sign, with the Secretary or
an Assistant Secretary, certificates for shares of the Corporation; and shall
perform such other duties as from time to time may be assigned to him by the
President or the Board of Directors. The office of Vice President, while
established by these Bylaws, may be filled or may remain vacant in the sole
discretion of the Board of Directors. In the absence of affirmative action by
the Board of Directors, it shall be presumed that the office of Vice President
shall remain vacant.
Section 4.4 Secretary
The Secretary shall: (1) keep minutes of all meetings of the Board of
Directors and of all meetings of the Shareholders; (2) see that all notices are
duly given in accordance with the provisions of these Bylaws or as required by
law; (3) be the custodian of the corporate records and of the seal of the
Corporation; (4) keep a register of the post office address of each Shareholder
which shall be furnished to the Secretary by such Shareholder; (5) have general
charge of the stock transfer books of the Corporation; and (6) in general, shall
perform duties incident to the office of Secretary and such other duties as from
time to time shall be assigned by the President or the Board of Directors.
Section 4.5 Treasurer
The Treasurer shall: (1) have charge and custody of and be responsible
for all the funds and securities of the Corporation; (2) receive and give
receipts for monies due and payable to the Corporation from any source
whatsoever, and deposit all monies in the name of the Corporation in such banks,
trust companies or other depositories as shall be selected in accordance with
the provisions of these Bylaws; (3) keep such regular books and accounts as may
be necessary and appropriate for the orderly management of the Corporation's
affairs, or have such books and accounts kept under his direction and
supervision; (4) render statements of such accounts to the President, Directors
or Shareholders when so requested; and (5) in general, shall perform all of the
duties as from time to time shall be assigned by the President or the Board of
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Directors. If required by the Board of Directors, the Treasurer shall give bond
for the faithful performance of his duties in such sum and with such surety or
sureties as the Board of Directors shall determine.
Section 4.6 Assistant Offices
One or more offices of Assistant Vice President, Assistant Secretary or
Assistant Treasurer may from time to time be established by the Board of
Directors, and the persons appointed or elected to such offices shall assist in
the performance of the duties of the designated office and such other duties as
shall be assigned to them by the Vice President, Secretary or Treasurer, as the
case may be, or by the President or the Board of Directors.
Section 4.7 Combination of Offices
Any two (2) of the offices hereinabove enumerated may be held by one and
the same person if such person is so elected or appointed, except the offices of
President and Secretary.
Section 4.8 Salaries
The salaries of the officers shall be fixed from time to time by the
Board of Directors, and no officer shall be prevented from receiving such salary
by reason of the fact that he is also a Director of the Corporation.
ARTICLE V
Instruments and Documents:
Contracts, Loans, Checks and Deposits
Section 5.1 Documents and Obligations
The President or Vice President of the Corporation may sign any deeds,
mortgages, bonds, contracts, notes and other evidence of debt, or other
instruments or documents which the Board of Directors has authorized to be
executed, except in cases where the signing and execution thereof shall be
expressly delegated by the Board of Directors or by these Bylaws to some other
officer or agent of the Corporation, or shall be required by law to be otherwise
signed or executed.
Section 5.2 Checks
All checks, drafts or other orders for the payment of money issued in
the name of the Corporation shall be signed by such officer or agent of the
Corporation, and in such manner as shall from time to time be determined by
resolution of the Board of Directors.
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Section 5.3 Attestation
The Vice President, the Secretary or any Assistant Secretary may attest
the execution of any instrument or document by the President or any other duly
authorized officer or agent of the Corporation, and may affix the corporate seal
in witness thereof, but neither such attestation nor the affixing of the
corporate seal shall be required for the effectiveness or validity of any such
document or instrument.
Section 5.4 Deposits
All sums of the Corporation not otherwise employed or needed in the
ordinary business affairs of the Corporation shall be deposited from time to
time to the credit of the Corporation in such banks, trust companies or other
depositories as the Board of Directors may select.
ARTICLE VI
Stock
Section 6.1 Certificates
Certificates representing shares of the Corporation shall be in such
form as shall be determined by the Board of Directors. Such certificates shall
be signed by the President or the Vice President, and the Secretary or an
Assistant Secretary. All certificates for shares shall be consecutively numbered
or otherwise identified. The name and the address of the person to whom the
shares represented thereby are issued shall be entered on the stock transfer
books of the Corporation together with the number of shares and the date of
issue. All certificates surrendered to the Corporation for transfer shall be
canceled and no new certificates shall be issued until the former certificate
for a like number of shares shall have been surrendered or canceled; except that
in the case of a lost, destroyed, or mutilated certificate, a new certificate
may be issued therefor upon such terms and indemnity to the Corporation as the
Board of Directors may determine.
Section 6.2 Transfers of Stock
Stock shall be transferred on the stock transfer books of the
Corporation upon surrender for cancellation of the certificate for such shares
only at the direction of the holder thereof, or by his attorney-in-fact duly
authorized thereunto in writing. The Corporation shall be protected and have no
liability in treating the person in whose name shares stand on the books of the
Corporation as the owner thereof for all purposes.
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ARTICLE VII
Dividends
The Board of Directors may, from time to time, declare, and the
Corporation may pay, dividends on its outstanding shares in the manner and upon
the terms and conditions provided by law and the Articles of Incorporation.
ARTICLE VIII
Seal
The Corporation shall have a seal consisting of two concentric circles
having in the intermediate space the words "UP Sedona, Inc.", and in the center
the words "CORPORATE SEAL ARIZONA 1996". Use of the corporate seal shall not be
requisite to the validity of any instrument by or on behalf of the Corporation.
ARTICLE IX
Fiscal Year
The fiscal year of this Corporation shall be as determined by the Board
of Directors.
ARTICLE X
Amendments
These Bylaws may be altered, amended or repealed and new Bylaws may be
adopted at any regular or special meeting of the Shareholders, or at any regular
or special meeting of the Board of Directors; provided, however, that the Board
of Directors shall not alter, amend or repeal any Bylaw provision initially
adopted at a meeting of the Shareholders of the Corporation.
Adopted by the Board of Directors of UP Sedona, Inc., at Phoenix,
Arizona, this 17th day of December, 1996.
/s/ Victor D. Setton
-----------------------
Victor D. Setton
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GOLF FACILITIES AGREEMENT
THIS GOLF FACILITIES AGREEMENT ("Agreement") is entered into as of the
19th day of December, 1996, by and between SEDONA GOLF RESORT, L.C. an Arizona
limited liability company, ("SGR") and UP Sedona, Inc., an Arizona corporation,
(""Hotel Owner") or nominee.
RECITALS
A. SGR owns and is in the process of developing a master planned
residential/golf community currently known as Sedona Golf Resort, (the
"Project") and operates the Sedona Golf Resort Golf Course, including the
clubhouse and practice facility (the "Golf Course") within the Project. The Golf
Course is graphically depicted as Parcel C on Exhibit "A" attached hereto and
legally described on Exhibit "B" attached hereto (the "Golf Course Property").
B. Hotel Owner is the fee owner of that certain parcel of real estate
located in Yavapai County, Arizona graphically depicted as Parcel B on Exhibit
"A" attached hereto and legally described on Exhibit "C" (the "Hotel Parcel").
Hotel Owner purchased the Hotel Parcel from SGR pursuant to a Real Estate
Purchase Agreement dated March 28, 1996 in which Hotel Owner has warranted to
SGR that it will construct a luxury "Mobil four-star" resort hotel facility
("Hotel") on the Hotel Property.
C. SGR desires to encourage the utilization of the Golf Course by
guests of the Hotel;
D. Hotel Owner desires to obtain certain Golf Course use preferences
for Hotel guests as an amenity for the development and operation of the Hotel;
E. The Purchase Agreement between SGR and Hotel Owner provides that
the parties shall negotiate and agree to the provision of preferred tee times
and other privileges to be extended to Hotel guests.
NOW, THEREFORE, for valuable consideration the receipt of which is
hereby acknowledged, Hotel Owner and SGR agree as follows:
1. Hotel Construction and Operation. Provided Hotel Owner constructs
and operates a luxury four star resort hotel on the Hotel Parcel, SGR agrees to
provide Hotel Guests as defined in paragraph 2.2 below with access to and use of
the Golf Course facilities upon the terms and conditions set forth herein.
2. Golf Course Facility.
EXHIBIT 10.1
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2.1 Continued Operation. SGR and/or its successors and assigns
agree to operate and maintain the Golf Course, in a manner commensurate with its
existing operation (i.e., a top quality championship Golf Course).
2.2 Hotel Guest Defined. A "Hotel Guest" as used in this
Agreement shall mean a person or persons residing at the Hotel in a room
registered in his name or registered in the name of another person on his
behalf. A tee time may be reserved for a Hotel Guest provided at least one (1)
member of the group of golfers for such tee time is a Hotel Guest.
2.3 Use of Golf Course. SGR shall make available to Hotel Owner
on a year-round basis, golf and related facilities sufficient to permit Hotel
Guests the use of the Golf Course for the number of rounds of golf stated in
Paragraph 2.4 below, with a "round of golf" being defined as a single golfer
playing 18 holes ("Hotel Guest Rounds").
2.4 Method of Determining Number of Hotel Guest Rounds. Hotel
Owner shall have the right to reserve a Hotel Guest Round up to sixty (60) days
in advance. Hotel Owner may reserve sixty (60) day advanced Hotel Guest Rounds
for up to forty percent (40%) of the prior year's total rounds of golf played at
the Golf Course. Hotel Owner must provide a credit card guarantee for each Hotel
Guest Round when the reservation is made with the Golf Course. This guaranteed
Hotel Guest Round is subject to cancellation only as provided in Paragraph 3.2
below.
2.5 Tee Times For Hotel Guests. Hotel Guest Rounds for weekends
and holidays shall be allocated equally between the morning and the afternoon.
The Hotel Owner shall be responsible for coordinating and booking all tee times
with the Golf Course's pro shop for individuals, tournaments and groups. SGR
shall cooperate with Hotel Owner in setting up an appropriate booking system,
including confirmations, to insure the bookings will be properly processed and
honored by SGR.
2.6 Tournaments. A tournament ("Tournament") shall be defined as
any scheduled use of the Golf Course which would preclude playing for a certain
period of time during the day by anyone not a part of the Tournament. SGR may
schedule any number of Tournaments. Hotel Owner may also schedule Tournaments,
provided SGR is given at least ninety (90) days' prior written notice of such
event. Equal distribution of tournament times A.M. and P.M. shall be made
available to Hotel tournament bookings.
2.7 Fees. Hotel Guests shall be required to pay greens fees and
cart fees, (collectively "Base Fees"), for use of the Golf Course as established
by SGR each year with such fees to be the "Base Fees" by season for the ensuing
year. Hotel Guests shall be granted a ten percent (10%) reduction of the "Base
Fees", provided tee times are arranged by the Hotel in advance as provided
herein and only for the number of Hotel Guest Rounds provided in paragraph 2.4
above. The Hotel's ten percent (10%) "Base Rate" discount shall also apply
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to tournament bookings. Tournament discounts shall be determined at the time of
booking, based on the number of golfers and services to be provided by SGR.
2.8 Base Fee Adjustment. The Base Fees shall be subject to an
increase or decrease in the reasonable discretion of the Golf Course, provided
however: (a) the fees available to Hotel Guests shall be subject to adjustment
by SGR only once per calendar year (during either September or October)
effective January or February and shall thereafter remain constant for one year
from the date of each adjustment.
2.9 Distribution of Starting Times. Except as may be limited by
tournaments as defined herein, SGR agrees that the starting times during each
season shall be allocated fifty percent (50%) before noon, and fifty percent
(50%) after noon, and shall be further distributed daily between Hotel Guests
and other individual golfers on a first come, first booked basis. If Hotel Owner
has not reserved its allotment of starting times at least fourteen (14) days
prior to the commencement of play of a given day, SGR may assign all such
unreserved starting times to golfers on a first come, first booked basis. SGR
will reasonably cooperate with Hotel Owner in providing unreserved starting
times to accommodate Hotel Guests desiring to golf without advance reservations.
2.10 Driving Range/Practice Putting Greens. All players of the
Golf Course shall have the right to use the driving range and practice putting
greens on a first-come, first-served basis.
2.11 Over-seeding and Holidays. Notwithstanding anything above to
the contrary, SGR may cease operation of the Golf Course due to weather
conditions or on holidays and at such other times as it is not reasonable to
operate the Golf Course provided that SGR will provide as much advance written
notice to Hotel Owner, where such cessation is anticipated, as is reasonably
possible.
2.12 Advance Booking Fee Waiver. The Golf Course's then
applicable advance booking fee shall be waived for the number of Hotel Guest
Rounds provided in paragraph 2.4 above. The current advance booking fee is ten
and no/100 Dollars ($10.00) for reservations of 14-60 days in advance. For all
rounds of golf played by Hotel Guests in excess of the number provided in
paragraph 2.4 above, the Golf Course's then applicable advance booking fee shall
apply.
3. Guaranteed Tee Times.
3.1 Hotel Owner to Guarantee in Advance. Hotel Owner shall have
the right to book Tournaments or group outings (minimum of twenty four players)
up to twelve (12) months in advance of the scheduled Tournament or group play
date provided that Hotel Owner shall be required to guarantee said group or
Tournament reservation up to sixty
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(60) days prior thereto. Once payment is received by SGR, these tee times shall
be considered guaranteed. All Tournament or group tee time bookings shall be
handled on a case by case basis subject to the terms hereof. If Hotel Owner
should fail to make payment for the Tournament or group outing sixty (60) days
in advance, the reservation may be deemed canceled. No payment shall be required
prior to sixty (60) days of Tournament day.
3.2 Cancellation of Tee Times and/or Tournament Reservations.
Hotel Owner shall have the right to cancel Hotel Guest Rounds by written notice
to SGR up to six (6) days prior to scheduled tee time without penalty. Further,
Hotel Owner shall have the right to cancel Tournaments or group outings by
written notice to SGR up to sixty-one (61) days prior to the scheduled
Tournament date without penalty.
3.3 Tournament Formats. SGR agrees to cooperate with Hotel Owner
in the planning and running tournaments scheduled by Hotel Owner in formats that
are typical in the industry.
4. Miscellaneous.
4.1 Rules and Policies. Hotel Guests will be permitted to use the
Golf Course and facilities provided they adhere to the policies, rules and
procedures adopted by the Golf Course.
4.2 Sale of Golf Merchandise and Use of Name. Hotel Owner agrees
for itself and its successors and assigns that neither the Hotel nor any vendor
or occupant of the Hotel Parcel shall operate a pro shop or other entity which
sells golf clubs, golf balls, golf bags, golf clothing or other golfing
paraphernalia or otherwise compete with the Golf Course and affiliated pro shop
within the Project; however, Hotel Owner shall have the right to sell non-golf
related merchandise in the resort such as resort (Hotel) apparel, accessories,
souvenirs and clothing.
4.3 Clothing. Hotel Owner shall have the right, subject to the
prior reasonable written approval of SGR, to utilize the "Sedona Golf Resort"
name and logo in connection with Hotel Owner's development, operation and
advertisements concerning the Hotel.
4.4 Governing Law. This Agreement shall be governed by the laws
of the State of Arizona. Each party shall have such remedies at law available to
it in order to enforce the terms of this Agreement.
4.5 Successors and Assigns. This Agreement shall be binding upon
and shall inure to the benefit of the successors and assigns.
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4.6 Notices. All notices, demands and writing in this Agreement
provided to be given, made or sent shall be deemed to have been given, made or
sent only when made in writing and actually received or deemed, pursuant to the
following sentence to have been received. Any item sent by Federal Express, or
similar overnight delivery or certified U.S. mail, return receipt requested and
postage prepaid, shall be deemed to have been received on the date indicated on
the return receipt as (i) the date of delivery, or (ii) the date delivery was
refused, or (ii) the date the item was finally determined to be undeliverable.
Notices, demands, and any other writings shall be addressed to the parties at
their respective addresses set forth below:
Hotel Owner UNITED PROPERTIES, INC.
Attn: William S. Oliver
2601 East Thomas Road
Suite 225
Phoenix, Arizona 85016
With a Copy to:
Robert L. Shaw, Esq.
Byrne, Beaugreau, Shaw, Zukowski & Hancock
2111 E. Highland, Suite 255
Phoenix, AZ 85016
SGR c/o SunCor Development Company
3838 North Central Avenue
Suite 1500
Phoenix, AZ 85016
Attn: Peggy Kirch
With a Copy to: SunCor Resort and Golf Management
3838 North Central Avenue
Suite 1500
Phoenix, AZ 85016
Attn: Tom Patrick
4.7 Continued Use. The parties hereto agree: (a) the terms of
this Agreement shall remain in effect so long as the Golf Course Property
remains in use as a public use or public access, private or semi-private golf
course; and (b) to meet and confer in good faith, every five (5) years form the
date of this Agreement with regard to the number of rounds allotted to Hotel
Owner.
4.8 SGR Representations. SGR represents and warrants to Hotel
Owner that: (a) execution and performance of its obligations under this
Agreement has been duly
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authorized by appropriate organizational or other action of SGR and does not
violate any agreement, law or other arrangement by which SGR is bound.
4.9 Hotel Owner Representations. Hotel Owner represents and
warrants to SGR that execution and performance of its obligations under this
Agreement has been duly authorized by appropriate organizational or other action
of Hotel Owner, and does not violate any agreement, law or other arrangement by
which Hotel Owner is bound.
4.10 Recordation. A Notice of this Agreement shall be recorded by
SGR on the land occupied by the golf clubhouse in the county in which the Golf
Course Property and/or Hotel Property are located.
4.11 Benefit. This Agreement shall benefit the Hotel Property.
All references to "SGR" shall refer to the owner and holder of title to the Golf
Course Property. All references to "Hotel Owner" shall refer to the owner and
holder of title to the Hotel Property.
IN WITNESS WHEREOF the parties have executed this Agreement as of the
day and year first above written.
SEDONA GOLF RESORT, L.C. an
Arizona limited liability company
By: SunCor Development Company,
an Arizona corporation, its Managing
Member
By:/s/ Peggy Kirch
-------------------------------------
Its: Vice President
HOTEL OWNER
By:/s/ William S. Oliver
-------------------------------------
Its: President
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When recorded return to:
SunCor Development Company
3838 North Central Avenue
Suite 1500
Phoenix, Arizona 85012
Attention: Peggy Kirch
RECIPROCAL EASEMENT AGREEMENT WITH COVENANTS
AND RESTRICTIONS AFFECTING LAND
This RECIPROCAL EASEMENT AGREEMENT WITH COVENANTS AND RESTRICTIONS
AFFECTING LAND ("Agreement") is entered into as of the 19th day of December,
1996, by and among Sedona Golf Resort, L.C., an Arizona limited liability
company ("Project Developer"), UP Sedona, Inc., an Arizona corporation ("Resort
Owner"), and All Seasons Resorts, Inc., an Arizona corporation ("Health Club
Owner").
RECITALS
I. Simultaneously with the recording of this Agreement, Resort Owner is
purchasing from Project Developer, pursuant to that Real Estate Sales Agreement
dated March 28, 1996 ("Resort Owner Agreement"), the real property described on
Exhibit "A" attached hereto for the construction and operation of a luxury
resort hotel with a Mobil four-star rating ("Resort Parcel"). The Resort Parcel
contains approximately 7.5 acres of land and is part of a master-planned golf
and residential development known as Sedona Golf Resort.
A. Project Developer is the owner of a parcel of land adjacent to, and
to the east of, the Resort Parcel, and north of Ridge Trail Drive, as more
particularly described on Exhibit "B" attached hereto ("Project Developer
Parcel"). The Project Developer Parcel will share an entryway off Ridge Trail
Drive with the Resort Parcel, and Project Developer and Resort Owner desire to
grant certain cross-easements for ingress, egress and parking and for the
maintenance of curbcuts to provide for vehicular and pedestrian access and
certain cross-parking rights between the Resort Parcel and the Project Developer
Parcel.
EXHIBIT 10.2
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B. Health Club Owner owns and operates an existing health club and
related facilities known as "The Ridge Spa and Racquet Club at Sedona Golf
Resort" on that parcel of land located adjacent to, and to the west of, the
Resort Parcel, and north of Ridge Trail Drive, as more particularly described on
Exhibit "C" attached hereto ("Health Club Parcel"). To accommodate the desires
of neighboring land owners regarding existing access points along the western
boundary of the Health Club Parcel, the Health Club Owner and Project Developer
desire to close such access points and provide alternate access to the Health
Club Parcel upon and across portions of the Resort Parcel.
C. Resort Owner desires to grant access to the Health Club Parcel upon
and across the Resort Parcel in exchange for access to and reciprocal easement
rights upon and across the Health Club Parcel. Likewise, the Health Club Owner
and the Project Developer desire to grant reciprocal ingress and egress
easements with respect to their respective parcels for the benefit of the Resort
Parcel.
NOW THEREFORE, for and in consideration of the easements, covenants and
restrictions contained in this Agreement, the sufficiency of which is hereby
acknowledged by each party, the parties do hereby agree as set forth below:
AGREEMENT
1. DEFINITIONS.
In addition to the defined terms set forth in the Recitals or elsewhere
in this Agreement, each of the following capitalized terms shall have the
following meaning:
1.1 "Easement Area Improvements" shall mean all improvements from
time to time comprising the Easement Areas, including without limitation
roadways, driveways, lighting, sidewalks, walkways, curbs, bumpers, traffic
control signs and other traffic control devices.
1.2 "Easement Areas" shall mean all land areas within any Parcel
improved from time to time with roadways, driveways, sidewalks, walkways and
other paved surfaces designed and intended by the respective Owner thereof for
vehicular and pedestrian ingress and egress.
1.3 "Grantee" shall mean an Owner who receives an easement
pursuant to this Agreement.
1.4 "Grantor" shall mean an Owner who grants an easement pursuant
to this Agreement.
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1.5 "Health Club Easement Areas" shall mean all Easement Areas
that may exist from time to time on the Health Club Parcel.
1.6 "Health Club Owner" shall mean All Seasons Resort, Inc., an
Arizona corporation, and each successor Owner of any portion of the Health Club
Parcel.
1.7 "Health Club Parcel" shall have the meaning set forth in
Recital C above.
1.8 "Improvement(s)" shall mean all land preparation and
excavation, buildings, outbuildings, structures, underground installations,
slope and grade alterations, lighting, roads, walkways, curbs, gutters, storm
drains, drainageways, utilities, driveways, parking areas, fences, screening
walls and barriers, retaining walls, stairs, decks, patio areas, wind breaks,
plantings, trees and shrubs, sidewalks, poles, signs, storage or display areas,
loading areas, docks, water retention areas, fountains, pools, spas, ponds and
other water features, recreational facilities, and all other structures, land
development or landscaping improvements of every type or nature.
1.9 "Owner" shall mean each of the parties to this Agreement and
each Owner of a fee simple interest in any Parcel, including, without
limitation, one who is buying such interest under a recorded contract, but
excluding others who hold such title merely as security. The term "O shall not
include a lessee or licensee. If fee simple title is vested of record in a
trustee named in a deed of trust recorded pursuant to Arizona Revised Statutes,
Section 33-801, et seq., then the trustor named in said deed of trust shall be
deemed the Owner. If fee simple title is vested in a trustee pursuant to a
subdivision trust agreement or similar trust, the beneficiary of any such trust
entitled to possession shall be deemed to be the Owner. An Owner shall include
any person who holds record title to a parcel in joint ownership with any other
person or holds an undivided fee interest.
1.10 "Parcel" shall mean all or any portion of the Health Club
Parcel, the Project Developer Parcel or the Resort Parcel.
1.11 "Parking Area" shall mean that portion of the Project
Developer Parcel outlined or otherwise designated on Exhibit "D-1" attached
hereto and described on Exhibit "D-2" attached hereto.
1.12 "Permittee" shall mean the tenants, subtenants, employees,
officers, agents, contractors, customers, invitees and licensees of each Owner
to the extent the same are designated by an Owner as Permittees entitled to the
benefits of this Agreement, and the employees, agents, contractors, customers,
invitees and licensees of each tenant or subtenant of an Owner who are
designated as Permittees under this Agreement.
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1.13 "Person" shall mean and refer to a natural person, a
corporation, a partnership, a limited liability company, a trust or any other
legal entity.
1.14 "Primary Access Drive" shall mean the main boulevard
entryway from Ridge Trail Drive to the Resort Parcel and Project Developer
Parcel as shown on Exhibit "D-1" attached hereto, the location of which may be
moved from time to time by Project Developer when it develops the Project
Developer Parcel, provided that any alteration to the Primary Access Drive must
be approved by the Owner of the Resort Parcel, which approval shall not be
unreasonably withheld, conditioned or delayed. Project Developer and the Owner
of the Resort Parcel are hereby authorized to execute amendments to this
Agreement with a revised Exhibit "D-1" attached showing the new location of the
Primary Access Drive.
1.15 "Prime Rate" means the prime commercial lending rate
announced by Bank One of Arizona (or any successor thereof) as its "prime rate",
as the same may be changed from time to time. If for any reason any such
institution shall at any time discontinue quoting or charging a "prime rate" in
the manner set forth above, then Project Developer, in the exercise of
reasonable judgment, may substitute another benchmark annual lending rate of
interest charged by major commercial banks in the Phoenix metropolitan area, and
the rate so determined shall thereafter be the Prime Rate as defined herein.
1.16 "Project Developer" shall mean Sedona Golf Resort, L.C., an
Arizona limited liability company, and each successor and assign who (i) owns
fee title to any portion of the Project Developer Parcel or any other portion of
the Sedona Golf Project, and (ii) is expressly named as successor to and
assignee of the rights of Sedona Golf Resort, L.C. under this Agreement in a
document executed and recorded by Sedona Golf Resort, L.C. (or a successor or
assignee thereof as defined in this Section).
1.17 "Project Developer Easement Areas" shall mean all Easement
Areas that may exist from time to time on the Project Developer Parcel, as may
be reduced pursuant to Section 4.9 below.
1.18 "Project Developer Parcel" shall have the meaning set forth
in Recital B above, as may be reduced pursuant to Section 4.9 below.
1.19 "Resort Easement Areas" shall mean all Easement Areas that
may exist from time to time on the Resort Parcel.
1.20 "Resort Owner" shall mean UP Sedona, Inc., an Arizona
corporation, and each successor Owner of any portion of the Resort Parcel.
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1.21 "Resort Owner Agreement" shall have the meaning set forth in
Recital A above.
1.22 "Resort Parcel" shall have the meaning set forth in Recital
A above.
1.23 "Sedona Golf Project" shall mean the real property depicted
on Exhibit "E" attached hereto.
2. COVENANTS TO RUN WITH THE LAND.
All restrictions, covenants and easements in this Agreement shall create
privity of contract and estate between each Owner to the extent the same benefit
or burden the Parcel owned by each such Owner as set forth in this Agreement,
and shall operate as covenants running with the lan By acquiring title to any
portion of a Parcel, each Owner shall be subject to this Agreement and shall be
deemed a party hereto who has agreed to all of the terms, covenants and
restrictions set forth herein to the extent the same benefit or burden the
Parcel owned by each such Owner, as set forth in this Agreement.
3. RESTRICTIONS ON USE.
3.1 Permitted Use Resort Parcel. Subject to Section 3.2, Project
Developer and Resort Owner agree Project Developer is conveying the Resort
Parcel to Resort Owner so that it can construct and operate a luxury resort
hotel with a Mobil four-star rating thereon with a maximum o keyed entries to
provide first-class lodging facilities to complement and support Project
Developer's development plans for the Sedona Golf Project. Accordingly, the
Resort Parcel shall be used only for the operation of a luxury resort hotel with
a Mobil four-star rating and a maximum of 225 keyed entries. Such use may
include convention and meeting facilities, boutique shops, lobby bar/lounge,
cocktail lounge, restaurant, hair salon, concierge and other amenities typically
operated as part of a luxury resort hotel with a Mobil four-star rating of the
type contemplated herein. The foregoing notwithstanding, all such uses on the
Resort Parcel, and the design and location thereof, shall be subject to the
prior written approval of Project Developer in each instance. In addition, each
Resort Owner shall not use, and shall not permit any tenant, subtenant or other
Person to use, any portion of the Resort Parcel for any purpose other than as
set forth above in this Section and approved in writing by Project Developer,
unless another purpose is specifically approved by Project Developer, in its
sole and absolute discretion, in a recorded amendment to this Agreement. Project
Developer may withhold such approval for any reason whatsoever.
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3.2 Restrictions on Use Resort Parcel. The Resort Parcel may be
used only for the purposes permitted by Section 3.1, subject to the following
restrictions:
3.2.1 The Resort Parcel shall not be used by anyone for any
purpose that will create a nuisance, including without limitation, (i) any
vibration, noise, sound or disturbance that is objectionable due to
intermittence, beat, frequency, shrillness, loudness or pulsating effect, (ii)
any lighting which is flashing or intermittent or not focused downward or away
from adjacent land (unless otherwise approved by Project Developer), (iii) any
emission of odor or noxious, caustic or corrosive gas or matter, whether toxic
or non-toxic, or (iv) any explosion or other damaging or dangerous firing,
detonation or activity, including the firing or detonation of ammunition or
explosives or the storage, display, sale or use of explosives or fireworks.
3.2.2 No Owner of the Resort Parcel shall use or permit the
use of the Resort Parcel in a manner which violates the common law or any law,
statute, ordinance, code, order, rule or regulation of any governmental
authorities having jurisdiction over the Resort Parcel.
3.2.3 No Owner of the Resort Parcel shall dispose or permit
the disposal of any waste, refuse or garbage generated on the Resort Parcel
except in a commercial-size solid waste container located on the Resort Parcel
in an area and with proper screening approved as provided in Article 5, which
shall be equipped with a metal lid, maintained in good mechanical condition,
emptied as frequently as reasonably necessary to prevent such container from
overflowing, and maintained in reasonably clean condition at all times. The
foregoing restriction shall not apply to garbage disposed of in a sanitary sewer
through customary garbage disposal/grinding equipment.
3.2.4 No Improvement shall be constructed or maintained on the
Resort Parcel by the Owner thereof or any lessee or other Person which exceeds
three (3) stories or a total of thirty (30) feet in height from finished grade.
Sections 3.2.1 and 3.2.3 shall not apply to Construction
Activities (as defined in Section 5.2) conducted in a reasonable manner and in
compliance with applicable statutes, ordinances and codes.
3.2.5 No Owner of the Resort Parcel shall use or permit the
use of the Resort Parcel by anyone for the development and/or operation of a pro
shop and/or for the sale of golf clubs, golf bags, golf balls, golf clothing or
other golfing paraphernalia or for the operation of any other use which competes
with any golf course and affiliated pro shop within the Sedona Golf Project, as
reasonably determined by Project Developer.
3.2.6 So long as the health spa and tennis facility located on
the Health Club Parcel is in operation and available for use by the Owners of
the Resort Parcel and open for membership and use by the general public, no
Owner of the Resort Parcel shall use or permit the use o the Resort Parcel by
anyone as a health club or related facilities available for membership or open
to the general public, provided that a health club and related facilities may be
constructed and operated as part of a resort hotel upon the Resort Parcel if use
of the same is restricted to guests and employees of such hotel, subject to
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approval by Project Developer of such health club and related facilities
pursuant to Section 3.1 above. In addition, provided that the Owner of the
Health Club Parcel is operating the health spa and tennis facilities thereon, no
clothing, bags, and other equipment, and paraphernalia for tennis, swimming or
other exercise activities conducted as part of said health spa and tennis
facilities, but only if and to the extent the same are being sold on the Health
Club Parcel in connection with such activities, shall be offered for sale in the
hotel located on the Resort Parcel. Notwithstanding any other provision in this
Agreement, this subsection 3.2.6 shall terminate upon the date that the health
spa and tennis facilities located on the Health Club Parcel are no longer in
operation and available for use by the Owners of the Resort Parcel, or is no
longer available for memberships and use by members or the general public.
3.3 Restriction on Use of Sedona Golf Project Name and Logo
Resort Parcel and Health Club Parcel. The name and/or logo used from time to
time for the Sedona Golf Project shall not be used on any portion of the Resort
Parcel or the Health Club Parcel, or in the operation or promotion of any
business conducted on either Parcel, without the prior written consent of
Project Developer in each instance, which consent may be withheld for any
reason. If Project Developer elects in its discretion to grant such consent, it
shall have the right to impose restrictions and conditions, including without
limitation a requirement that any use of the name and logo must comply with all
design and graphic standards established by Project Developer from time to time.
The foregoing notwithstanding, the Owner of the Resort Parcel may, without the
prior written consent of Project Developer, use the name and/or logo used from
time to time for the Sedona Golf Project, but only if and to the extent (i) the
same are used in a reasonable first-class manner for purposes reasonably related
to the promotion of a luxury resort hotel on the Resort Parcel, (ii) such use
does not give the impression that a Person other than Project Developer is the
primary developer of the Sedona Golf Project, and (iii) such use complies with
all design and graphic standards established by Project Developer from time to
time.
3.4 Enforcement of this Article. All of the restrictions and
obligations imposed by this Article may be enforced only by Project Developer,
except that the Health Club Owner shall have the right to enforce subsection
3.2.6.
4. EASEMENTS; CONSTRUCTION OF CERTAIN IMPROVEMENTS.
4.1 Grant of Non-Exclusive Easements for Ingress and Egress All
Parcels. Subject to Sections 4.6, 4.7, 4.8 or 4.9, each Owner, as a Grantor,
hereby grants to every other Owner, as Grantee, for the benefit of each Grantee
and their respective Permittees, a non-exclusive easeme upon, over and across
all Easement Areas of each Grantor, for vehicular and pedestrian ingress and
egress to and from any portion of any Parcel to another Parcel, and to and from
all public streets and roads adjacent to a Parcel if access points are available
from such Parcel, including, without limitation, ingress and egress for
delivery, service and emergency trucks and vehicles.
4.2 Grant of Non-Exclusive Easements for Parking Resort Parcel
and Project Developer Parcel Only. Subject to Sections 4.6, 4.7, 4.8, and 4.9:
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4.2.1 Each Owner of the Resort Parcel, as a Grantor, hereby
grants to every other Owner of the Project Developer Parcel, as Grantee, for the
benefit of each Grantee and their respective Permittees, a non-exclusive
easement upon and across all parking spaces and parking areas located from time
to time on the Resort Parcel; and
4.2.2 Each Owner of the Project Developer Parcel, including the
Parking Area, as Grantor, hereby grants to each Owner of the Resort Parcel, as
Grantee, for the benefit of each Grantee and their respective Permittees, a
non-exclusive easement for parking upon and across all parking spaces or parking
areas located from time to time on the Project Developer Parcel, including the
Parking Area, subject to Section 4.9 below.
The foregoing notwithstanding, each Grantor shall have the right
to (i) designate certain portions of the Parking Areas on its Parcel for
handicapped spaces, and for use by emergency vehicles and service and delivery
vehicles, and (ii) prohibit the employees of a Grantee or tenants or subtenants
of a Grantee from parking on the servient tenement of such Grantor.
4.3 Easement for Landscaping Resort Parcel. Each Owner of the
Resort Parcel, as Grantor, hereby grants to the Sedona Golf Resort Community
Association, and its successors and assigns, an easement over, under, upon and
across the south 25 feet of the Resort Parcel for the purp of maintaining and
replacing all landscaping, irrigation systems and related Improvements to be
constructed by the Owner of the Resort Parcel pursuant to Section 5.2 below,
provided that any driveways or parking areas approved pursuant to Article 5
which are located within said easement area shall be permitted on said easement
area unless and until the same are converted to landscaped areas after approval
of the plans and specifications therefor pursuant to Article 5. The Sedona Golf
Resort Homeowner's Association, and each successor and assign with respect to
the easements rights set forth in this Section 4.3, shall constitute third-party
beneficiaries of this provision.
4.4 Drainage Easement Resort Parcel. Each Owner of the Resort
Parcel, as Grantor, hereby grants to each Owner of the Health Club Parcel, an
easement for the drainage and flow of storm water from the Health Club Parcel
upon, over and across the Resort Parcel, subject to the following limitations
and restrictions:
4.4.1 All drainage plans and specifications for the Health
Club Parcel must be approved by the Owner of the Resort Parcel, which approval
shall not be unreasonably withheld or delayed, and must comply with the Storm
Water Pollution Prevention Plan of Yavapai County, and must be approved by
Yavapai County.
4.4.2 The point at which storm water will be allowed to flow
from the Health Club Parcel onto the Resort Parcel must be approved by the Owner
of the Resort Parcel and the Project Developer.
4.4.3 The Owner of the Resort Parcel shall have the right to
reasonably determine those areas upon the Resort Parcel over which storm water
from the Health Club Parcel will flow, and may relocate such areas from time to
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time, subject to the rights of Project Developer in Section 4.5 below, and
further subject to those requirements of Yavapai County applicable to, and
controlling drainage to, over, upon and from, the Resort Parcel.
4.5 Drainage Easement Project Developer Parcel. Each Owner of the
Project Developer Parcel, as Grantor, hereby grants to each Owner of the Resort
Parcel, as Grantee, an easement for the drainage and flow of storm water from
the Resort Parcel upon, over and across the Project Developer Parcel to a
drainage pipe under Highway 179 on the eastern boundary of the Project Developer
Parcel, subject to the following limitations and restrictions:
4.5.1 All drainage plans and specifications for the Resort
Parcel must be approved by Project Developer pursuant to Article 5, must comply
with the Storm Water Pollution Prevention Plan of Yavapai County, and must be
approved by Yavapai County.
4.5.2 The point at which storm water will be allowed to flow
from the Resort Parcel onto the Project Developer Parcel must be approved by
Project Developer.
4.5.3 The Owner of the Project Developer Parcel shall have
the right to reasonably determine those areas upon the Project Developer Parcel
over which storm water from the Resort Parcel will flow, and may relocate such
areas from time to time, subject to those requirements of Yavapai County
applicable to, and controlling drainage to, over, upon and from, the Project
Developer Parcel. The foregoing notwithstanding, if and to the extent required
by Yavapai County, the Owner of the Project Developer Parcel will be obligated
to design and maintain on the Project Developer Parcel detention facilities
sufficient to attenuate the peak flows from two-year and five-year storm events
due to the development of the Resort Parcel and the Project Developer Parcel.
4.6 Limitation on Exercise of Easement Rights; Reservation of
Rights. No Grantee or its Permittees shall have the right to exercise the
easement rights granted under Sections 4.1, 4.2, 4.3, 4.4 or 4.5 in a manner
that would materially interfere with the business operations of Grantor or its
Permittees. The Easement Areas and/or the parking areas referred to in Section
4.2 may be closed from time to time for reasonable periods only (i) for the
purpose of cleaning, maintenance, repair, repaving or resurfacing thereof, or
(ii) for the development, construction, maintenance or repair of Improvements on
a servient tenement, or (iii) to prevent any party not otherwise entitled to use
the same pursuant to this Agreement from obtaining prescriptive rights thereon,
or (iv) as provided in subsection 8.1.4. Subject only to the foregoing
limitations, to permit the full exercise of the easements granted in Sections
4.1 and 4.2, there shall at all times be maintained, for the duration of the
easement rights herein granted:
4.6.1 at least one (1) open access point at least
twenty-four (24) feet in width along the common boundary between the Resort
Parcel and the Health Club Parcel; and
4.6.2 at least one (1) open access point at least
twenty-four (24) feet in width along the common boundary between the Resort
Parcel and the Project Developer Parcel.
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All of the foregoing must be approved as provided in Article 5.
No Owner shall construct, or cause or permit to be constructed, any barriers
that prevent free and open ingress and egress within said 24-foot accessways.
Each Owner of the Project Developer Parcel shall have the right to establish or
close curbcuts along Highway 179 as such Owner determines in its sole
discretion, except the entrance for Ridge Trail Drive.
4.7 Duration of Easements. Except as may otherwise be provided in
this Agreement, all easements shall continue until this Article 4 is amended or
this Agreement is terminated pursuant to Article 7 below.
4.8 No Charges or Fees. No one shall be obligated to pay any fee
or charge for the exercise of the easement rights set forth in this Agreement.
4.9 Reduction of Project Developer Easement Areas and Parking
Areas; Termination of Easements. Sections 4.1, 4.2 and any other provision in
this Agreement to the contrary notwithstanding, the Project Developer Parcel,
the Project Developer Easement Areas and/or the parking area subject to the
easements granted in Section 4.2 (except for the minimum number of spaces to be
maintained as provided below) may be reduced by Project Developer from time to
time as its development plans are finalized and implemented for the Project
Developer Parcel, as Project Developer may determine in its sole discretion.
Upon exercising such rights, all easements upon and across the Project Developer
Parcel as granted in Sections 4.1 and 4.2 above shall thereupon be deemed
terminated as to those portions of the Project Developer Parcel so designated
for exclusion by Project Developer from time to time, subject to the following
rights, limitations and conditions:
4.9.1 The Project Developer Parcel and/or Project Developer
Easement Areas may be reduced by Project Developer, in its sole discretion, to
an extent that the other Owners and their Permittees have available for ingress
and egress only that portion of the Primary Access Drive located on the Project
Developer Parcel.
4.9.2 The Project Developer Parcel and/or the parking areas
subject to the easements granted in Section 4.2.2 may be reduced by Project
Developer, in its sole discretion, to an extent that all portions thereof are
excluded as set forth above, provided that so long as Yavapai County requires,
for parking code purposes, that the Resort Parcel needs to have available for
its use the number of spaces in the Parking Area (58 spaces) or a fewer number
of spaces, then the Owners of the Resort Parcel and their respective Permittees
shall always have available on the Project Developer Parcel, for parking
purposes pursuant to Section 4.2.2, the number of spaces (not to exceed 58
spaces) necessary to satisfy the parking code requirements of Yavapai County.
The Owner of the Project Developer Parcel may designate the Parking Area, or
other portions of the Project Developer Parcel improved for such purposes, if
the location thereof is approved by Yavapai County as sufficient to satisfy its
parking requirements.
4.9.3 The election to reduce the size of the Project
Developer Easement Areas or such parking areas for purposes of this Agreement
and to terminate the easement rights set forth in Sections 4.1 or 4.2 with
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respect thereto, shall become effective upon the recording of a dul executed and
acknowledged notice of Project Developer's election to do so. Project Developer
may record one or more such notices from time to time as plans for the Project
Developer Parcel are finalized from time to time, subject to the limitations in
Sections 4.9.1 and 4.9.2 above.
4.9.4 If pursuant to Section 4.9.1 Project Developer elects
to reduce the Project Developer Easement Areas available for ingress and egress
to an extent that only the portion of the Primary Access Drive located on the
Project Developer Parcel is available for ingress and egress, then the Owner of
the Resort Parcel may, in its discretion, elect to terminate the ingress and
egress easements granted pursuant to Section 4.1 upon and across the Resort
Parcel to an extent that the Owners of the Project Developer Parcel and their
respective Permittees have available for ingress and egress pursuant to Section
4.1 only that portion of the Primary Access Drive located on the Resort Parcel.
4.9.5 If pursuant to Section 4.9.2 Project Developer elects
to reduce the number of parking spaces available for use on the Project
Developer Parcel, then the Owner of the Resort Parcel may, in its discretion,
reduce the number of spaces available for parking on the Resort Parcel, pursuant
to Section 4.2.1, to an identical number of spaces so designated by Project
Developer, so long as such spaces designated by the Owner of the Resort Parcel
are located in those parking areas located adjacent to the Project Developer
Parcel.
4.9.6 The election by the Owner of the Resort Parcel to
exercise its rights under Sections 4.9.4 and/or 4.9.5 shall become effective
upon the recording of a duly executed and acknowledged notice of such Owner's
election to do so from time to time, subject to the limitation in Sections 4.9.4
and 4.9.5 above.
4.10 Resort Owner to Construct Primary Access Drive and Parking
Area. The Owner of the Resort Parcel shall be responsible for constructing all
Improvements comprising the Primary Access Drive and the Parking Area at its
expense, subject to a partial reimbursement from the Owner the Project Developer
Parcel as hereafter provided. All such Improvements shall be constructed in
accordance with plans and specifications approved by Project Developer pursuant
to Article 5 below, and shall be completed free and clear of liens in a good
workmanlike manner in compliance with applicable statutes, codes and ordinances.
The Owner of the Resort Parcel is not obligated to commence and complete
construction of said Improvements by a given date, but once construction
activities of any kind have been commenced with respect to any portion of said
Improvements, such Owner shall thereafter be obligated to proceed diligently to
complete the Primary Access Drive and/or Parking Area, as the case may be, in
the manner prescribed by this Section. Upon completion of such Improvements and
after an inspection thereof by Project Developer or its agents or contractors to
confirm that the Improvements have been constructed in the manner prescribed
this Section, the Owner of the Project Developer Parcel shall reimburse Resort
Owner for 50% of the reasonable cost of completing the Primary Access Drive and
other Improvements connecting the same to the Parking Area, as set forth in the
separate agreement to be entered into by the parties as set forth below in this
Section. Such reimbursement shall be paid to the Owner of the Resort Parcel
within 30 days after such Owner submits to the Project Developer the total cost
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thereof listed in reasonable detail, together with lien waivers for all work
performed on the Project Developer Parcel. If the Owner of the Project Developer
Parcel fails to pay such amount within said 30-day period, the amount due shall
thereafter bear interest at a variable rate per annum equal to three (3)
percentage points over the Prime Rate. This provision shall not preclude Resort
Owner from seeking relief under Article 8 below. If the Owner of the Resort
Parcel constructs the Parking Area as herein provided, the cost of the Parking
Area shall be paid by such Owner, and the Owner of the Project Developer Parcel
will have no obligation to pay any portion of such cost. After plans and
specifications are approved pursuant to Article 5, and when the Owner of the
Resort Parcel is ready to commence construction, the Owner of the Resort Parcel
and the Owner of the Project Developer Parcel shall thereafter act reasonably
and in good faith to negotiate and execute a separate agreement which sets forth
in reasonable detail the elements of the proposed construction and the types of
costs to be incurred, as well as cost estimates for labor and materials, and for
design, engineering, surveying and permit costs, directly related to the
proposed Improvements comprising the Primary Access Drive. Each Owner of the
Project Developer Parcel hereby grants to the Owner of the Resort Parcel and its
Permittees a non-exclusive easement upon, over, under and across those portions
of the Project Developer Parcel necessary, in the reasonable judgment of such
Owner, to complete construction of the Primary Access Drive and the Parking
Area.
4.11 Project Developer's Right to Construct Certain Easement
Areas. Project Developer and Resort Owner acknowledge that although Resort Owner
is obligated to construct the Parking Area and the Primary Access Drive pursuant
to Section 4.10, Project Developer has not imposed a dat by which said
Improvements must be completed. Accordingly, since Project Developer and its
Permittees may require the use of the Primary Access Drive and/or the Parking
Area before the Owner of the Resort Parcel has elected to construct the same,
Project Developer shall have the right, but not the obligation, to construct or
install all or a portion of the Improvements comprising the Primary Access Drive
and/or the Parking Area (and the portion or all of such Improvements Project
Developer elects to construct will be referred to herein as "Parking and Access
Improvements"), subject to the following:
4.11.1 The right of Project Developer to construct a
specific portion of the Parking and Access Improvements may not be exercised
after Resort Owner has actually commenced on-site construction of said portion,
but only so long as Resort Owner diligently proceeds to complete said portion of
the Parking and Access Improvements pursuant to the requirements of Section
4.10.
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4.11.2 Unless Section 4.11.1 above applies, Project
Developer shall have the right at any time to notify the Owner of the Resort
Parcel that Project Developer elects to construct the Parking and Access
Improvements by delivering written notice of its intention to do so to such
Owner, together with plans and specifications for the portion thereof Project
Developer intends to construct. Upon giving such notice, the rights of Project
Developer in this Section 4.11.2 shall prevail over any rights of the Owner of
the Resort Parcel in Section 4.10 to construct such Parking and Access
Improvements. The Resort Owner shall have the right to review and approve said
plans and specifications within thirty (30) days after it receives the same,
which approval shall not be unreasonably withheld, conditioned or delayed,
provided that (i) Project Developer and Resort Owner agree that the portion of
the Parking and Access Improvements to be constructed must generally conform to
the layout shown on the preliminary site plan for the Resort Parcel attached
hereto as Exhibit "D-1", and (ii) the Resort Owner's failure to approve or
disapprove such plans and specifications within said 30-day period shall be
deemed approval thereof. The Resort Owner shall provide its objections to such
plans and specifications in reasonable detail within said 30-day period, and the
parties shall thereafter act reasonably and in good faith to (i) finalize said
plans and specifications as soon as reasonably possible thereafter, and to (ii)
negotiate and execute a separate agreement which sets forth in reasonable detail
the elements of the proposed construction and the types of costs to be incurred,
as well as cost estimates for labor and materials, and for design, engineering,
surveying and permit costs, related to the proposed Improvements comprising the
Primary Access Drive.
4.11.3 After the proposed plans and specifications are
approved or deemed approved as provided in Section 4.11.2 above, Project
Developer shall have the right to construct and complete the Parking and Access
Improvements covered by the approved plans and specifications and shall do so
free and clear of liens in a good and workmanlike manner in compliance with
applicable statutes, codes and ordinances and the approved plans and
specifications. Upon completion, Resort Owner or the current Owner of the Resort
Parcel shall reimburse Project Developer for fifty percent (50%) of the
reasonable costs of completing the Primary Access Drive and other Improvements
connecting the same to the Parking Area, as set forth in the separate agreement
to be entered into by the parties as provided in Section 4.11. Such
reimbursement shall be paid to Project Developer within thirty (30) days after
Project Developer submits the total costs thereof listed in reasonable detail,
and provides evidence of lien waivers for the work performed on the Resort
Parcel. If the Owner of the Resort Parcel fails to pay such amount within said
30-day period, the amount due shall bear interest at a variable rate per annum
equal to three (3) percentage points over the Prime Rate. This provision shall
not preclude Project Developer from seeking relief under Article 8 below. If
Project Developer elects to construct the Parking Area as herein provided, the
cost of the Parking Area will be paid by Project Developer.
4.11.4 Each Owner of the Resort Parcel hereby grants to
Project Developer and its Permittees a non-exclusive easement upon, over, under
and across those portions of the Resort Parcel necessary, in the reasonable
judgment of Project Developer, to complete construction of the Parking and
Access Improvements.
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4.12 Representations and Warranties All Parcels. Each Owner
executing this Agreement represents and warrants, with respect to its Parcel
described herein, that (i) such Owner holds fee title to such Parcel and has
full right, power and authority to enter into and record this Agreement against
its Parcel, and (ii) upon recording this Agreement, this Agreement shall impose
all covenants, easements, liens and restrictions set forth in this Agreement
against the fee title of such Owner to the extent provided in this Agreement,
and shall be superior to all liens, encumbrances and other matters of record (or
the same shall be made subordinate to this Agreement pursuant to a subordination
agreement reasonably acceptable to the Owners of the other Parcels). In the
event of a breach of this Section by any Owner, the Owners not in breach of this
Section shall be entitled, in addition to other rights and remedies they may
have under Article 8, to close off the Easement Areas on the Parcel of the
non-breaching Owner during any period such breach prevents an Owner with a
dominant tenement from utilizing the servient tenement of the breaching Owner or
otherwise utilizing and enjoying the rights and benefits granted to such Owner
in this Agreement.
5. CONSTRUCTION AND REGULATION OF IMPROVEMENTS ON RESORT PARCEL.
5.1 Architectural Control.
5.1.1 No Improvements shall be constructed, erected, placed,
altered, maintained or permitted to remain on or within the Resort Parcel until
plans and specifications for all such Improvements, including a site plan and
drainage plans, are approved by Project Developer as hereafter provided. The
term "Improvements" as used in this Section 5.1 shall not include any signs,
lights, structures and improvements constructed within a building and not
visible from the exterior of such building.
5.1.2 All plans and specifications for Improvements,
including a site plan and drainage plans, shall first be submitted to Project
Developer, who shall review the same to determine whether the architectural
design, style, quality, materials, colors and layout of each building and the
other Improvements, including without limitation, signs, lighting, driveways,
medians, sidewalks and landscaping, and the site plan and drainage plans, are
compatible with the present or intended use of adjacent portions of the Sedona
Golf Project. Project Developer agrees that its approval shall not be
unreasonably withheld; however, Project Developer shall have at least forty-five
(45) days after receipt of all plans and specifications to make its decision
with respect thereto, provided that Project Developer shall have 30 days to make
decisions on plans and specifications for minor changes to previously approved
plans and specifications or for review of initial plans and specifications for
minor construction projects, as reasonably determined by Project Developer. Any
action not expressly approved in writing by Project Developer shall be deemed
disapproved. However, if Project Developer fails to respond within such 30-day
or 45-day period, as the case may be, and also fails to do so within ten days
after it receives a written request for a decision given after the applicable
time period expires by an Owner seeking approval, then such failure to respond
shall constitute Project Developer's approval of the requested matter, except
that all Improvements must nevertheless comply with all applicable laws, codes,
rules and regulations of all governmental authorities.
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5.1.3 The Resort Parcel shall not be subdivided, by fee
title conveyance, ground lease or otherwise, without the prior written consent
of Project Developer, provided that a horizontal property regime may be
establlished to convert hotel rooms or units into condominium unit so long as
the Resort Parcel continues to be operated in the manner permitted by Section
3.1.
5.1.4 The foregoing notwithstanding, Project Developer, or
its assignee as hereafter provided, may establish from time to time development
guidelines with regard to the architectural design, style, quality, materials,
colors and layout of each building and other Improvements on the Resort Parcel,
which shall apply to all Improvements for which plans and specifications have
not yet been approved as provided in this Section 5.1.
5.1.5 Project Developer shall have the right to assign,
separate from any other rights and benefits of the Project Developer set forth
in this Agreement, any or all of its rights and benefits set forth in this
Article 5 to the Sedona Golf Resort Community Association and/o its governing
architectural committee, or a similar committee or entity designated by Project
Developer in the instrument assigning such rights and benefits, in which event
each reference in this Article 5 to "Project Developer" shall be deemed to refer
to each such assignee.
5.1.6 Resort Owner agrees that the terms of this Article 5
and other terms of this Agreement are a material inducement for Project
Developer's conveyance of the Resort Parcel to Resort Owner.
5.2 Construction Requirements and Activities - Resort Parcel and
Project Developer Parcel. No construction, alteration, remodeling, rebuilding or
repair work on the Project Developer Parcel, the Resort Parcel or within the
Primary Access Drive or the Parking Area ("Construction Activity" or
"Construction Activities") shall be undertaken by the Owner of the Project
Developer Parcel or the Owner of the Resort Parcel except in compliance with,
and each such Owner shall be responsible for complying or causing compliance
with, the following:
5.2.1 Once any Construction Activity is commenced by such
Owner, the same shall be diligently pursued to completion in accordance with all
plans and specifications approved pursuant to, and all other requirements set
forth in, this Article 5 and in Sections 4.10 and 4.11.
5.2.2 All Construction Activities shall be performed in a
good and workmanlike manner using first-class construction and building and
landscaping materials, and shall be in conformity with this Agreement and all
applicable laws, statutes, codes, ordinances, rules and regulations of any
governmental authority having jurisdiction over the Construction Activities.
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5.2.3 All dust generated from any Construction Activities
shall be controlled by watering down the construction site, and any sandblasting
activities shall be restricted to the water-type method. If trucks or other
construction vehicles entering and leaving such Owner's Parcel and/or the
Primary Access Drive or Parking Area track mud or dust onto the Easement Areas
of an Owner governed by this Section 5.2, or on public streets or on private
streets within the Sedona Golf Project, such Owner shall be responsible at its
expense for cleaning and removing dust and mud on a daily basis.
5.2.4 No roads, driveways, sidewalks or other rights-of-way
within or adjacent to the Sedona Golf Project shall be unreasonably obstructed
or disturbed with machinery, equipment or personnel used in connection with any
Construction Activities.
5.2.5 All Construction Activities shall be performed on the
Resort Parcel or within the Primary Access Drive and/or the Parking Area, as the
case may be, in a manner which minimizes impact on the natural terrain and
vegetation, and shall in any event be performed, to the greatest extent
reasonably possible, in a manner which protects existing trees, cacti and
yuccas. If Resort Owner and Project Developer reasonably determine that
relocation of any trees, cacti or yuccas is necessary and the same are
salvageable, Resort Owner shall relocate the same, or any other vegetation, to
appropriate alternative locations on the Resort Parcel or, if relocation thereon
is not practicable, and Project Developer so directs, to the Project Developer
Parcel, or the same may be used for common area landscaping within the Sedona
Golf Project. Resort Owner and its Permittees shall keep Project Developer
advised of any plans to relocate vegetation on the Resort Parcel, and shall
provide reasonable prior notice of their intention to make any vegetation
available to Project Developer. However, Project Developer shall be under no
obligation to accept such vegetation and if Project Developer elects not to
accept the same, Resort Owner or its Permittees shall cause the same to be
removed and disposed of at their expense, subject to Project Developer's right
to reasonably determine whether relocation is appropriate.
5.2.6 All Construction Activities and all Improvements shall
be constructed and completed in accordance with the Storm Water Pollution
Prevention Plan of Yavapai County. Each Owner shall cause its subcontractors to
comply with said Plan, and shall cause a copy of said Pla to be included in all
construction contracts between such Owner and its contractors and subcontractors
for all Construction Activities.
5.2.7 On or before the opening of the Improvements on the
Resort Parcel for business, Resort Owner shall install, or cause to be
installed, at its expense, all landscaping and related irrigation systems within
the landscape easement area referred to in Section 4.3 above.
5.3 Repair of Damage. If any damage to real or personal property
occurs within or adjacent to the Sedona Golf Project not owned by an Owner
governed by Section 5.2 which results from, or is connected with, any
Construction Activities being performed by or at the request of the of the
Resort Parcel ("non-performing Owner" for purposes of this Section only), then
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upon written notice from the other Owner governed by Section 5.2 ("enforcing
Owner"), the non-performing Owner shall have ten (10) calendar days thereafter
in which to commence to repair such damage and restore the damaged property to
its condition immediately prior to such damage, and shall thereafter diligently
pursue such repairs to completion. If the non-performing Owner fails to commence
the repair of the damage within said ten-day period, or to pursue diligently
such repairs thereafter, the enforcing Owner shall have the right to repair the
damage and charge the non-performing Owner the total cost thereof, plus interest
thereon at a variable rate per annum equal to three (3) percentage points over
the Prime Rate from the date each such cost is incurred until paid, and a
construction fee equal to the greater of $1,000.00 or fifteen percent (15%) of
the cost of said repairs. This Section shall not preclude the enforcing Owner
from seeking relief under any provisions of Article 8 below.
5.4 Enforcement of this Article. The restrictions, rights and
obligations imposed by (i) Section 5.1 may be enforced only by Project
Developer, and (ii) Sections 5.2 and 5.3 may be enforced only by the Owner of
the Project Developer Parcel and the Owner of the Resort Parcel.
6. MAINTENANCE OBLIGATIONS.
6.1 Maintenance Duties. The Owner of the Resort Parcel shall,
with respect to all Resort Owner Easement Areas and all other Improvements on
the Resort Parcel, and the Owner of the Project Developer Parcel shall, with
respect to all Project Developer Easement Areas, be responsib for complying or
causing compliance with the following covenants and restrictions:
6.1.1 Any business conducted on such Parcels shall be
carried out in a first class, clean and orderly manner.
6.1.2 Maintaining, repairing and replacing its respective
Easement Areas, including all paving, curbs, bumpers, walkways, directional
signs, lights, traffic control signs, markers and lines which are a part
thereof, in good condition and repair.
6.1.3 Removing all paper, mud, sand, debris, filth and
refuse and sweeping all areas outside of buildings and around trash dumpsters to
the extent reasonably necessary to keep such areas in a clean and orderly
condition.
6.1.4 Maintaining, mowing, weeding, trimming and watering
any landscaped areas, and making all replacements of such landscaping, as may be
necessary to maintain an attractive appearance and/or to comply with the
requirements of Yavapai County.
6.1.5 Maintaining or causing to be maintained all portions
of buildings, fences, walls (including retaining walls) and structures on those
portions of its Parcel governed by this Section, including signs located
thereon, in good order, condition and repair.
6.1.6 Promptly removing all graffiti or other similar
markings from all perimeter or other walls, exterior building walls and other
exterior surfaces, paved areas and other exterior portions of any Improvements
on those portions of its Parcel governed by this Section.
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6.2 Failure to Maintain. If the Owner of the Resort Parcel
fails to perform, or cause to be performed, its duties under Section 6.1, then
Project Developer may do so after giving at least fifteen (15) days written
notice specifying the basis for claiming non-performance, unless non-performing
Owner begins to satisfy the maintenance requirements within said 15-day period
and thereafter diligently pursues the same to completion. Project Developer
shall be entitled to reimbursement for all costs incurred in curing the default,
which amount shall be reimbursed by the non-performing Owner to Project
Developer within thirty (30) days after demand therefor, after which the amount
due shall bear interest at a variable rate per annum equal to three (3)
percentage points over the Prime Rate. This Section shall not preclude Project
Developer from seeking relief under any of the provisions of Article 8 below.
6.3 Enforcement of this Article. The restrictions and obligations
imposed by this Article may be enforced as provided in Article 8 only by Project
Developer and/or the respective Owners of the Resort Parcel and the Project
Developer Parcel.
7. TERM; MODIFICATION OR TERMINATION.
7.1 Term. Subject to Section 7.2, this Agreement shall commence
with the recording hereof and shall continue in full force and effect until
December 31, 2021, after which this Agreement, as may be amended from time to
time, shall be automatically extended for successive periods five (5) years
each, unless earlier terminated as provided in Section 7.2 below.
7.2 Modification or Termination. This Agreement, or any provision
hereof, may be terminated, modified or amended by the terms of a recorded
document executed by all Owners, provided that (i) Sections 1.14 and 4.9 above
shall prevail over this Section 7 and this Agreement may be amended by the Owner
or Owners referred to in said Sections for the limited purposes set forth
therein, and (ii) Article 3 (except subsection 3.2.6), Sections 4.2, 4.10 and
4.11, and Article 5 may be terminated, modified or amended by the terms of a
recorded document executed only by Project Developer and the Owners of the
Resort Parcel.
8. ENFORCEMENT.
8.1 Defaults and Remedies. In addition to the remedies set forth
in Sections 5.3 and 6.2 above, in the event of any breach, default,
non-compliance, violation or failure to perform or satisfy any of the covenants,
restrictions and easements contained in this Agreement by an Own their
respective Permittees (collectively referred to herein as a "default"), and the
default is not cured within fifteen (15) days after written notice describing
the default as given to such Owner ("defaulting Owner") by another Owner
entitled to enforce the same under the terms of this Agreement ("enforcing
Owner") or if such default is not reasonably capable of being cured within such
15-day period, then if the defaulting Owner has not commenced to cure the
default promptly after such notice is given and has not thereafter diligently
continued to prosecute such cure to completion, then the enforcing Owner may
enforce any one or more of the following rights or remedies in this Section, or
any other rights or remedies available at law or in equity, whether or not set
forth in this Agreement; all such rights and remedies shall be cumulative and
not mutually exclusive.
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8.1.1 Damages. The enforcing Owner may bring a suit for
damages arising from or with respect to any such default.
8.1.2 Declaratory Relief. The enforcing Owner may bring suit
for declaratory relief to determine the enforceability of any of the provisions
of this Agreement.
8.1.3 Injunctive Relief; Specific Performance. It is
recognized that a default under this Agreement may cause material injury or
damage not compensable by an award of money damages and that the enforcing Owner
shall be entitled to bring an action in equity or otherwise fo specific
performance to enforce compliance with this Agreement, or for any injunctive
relief to enjoin the continuance of any default or to prevent a default.
8.1.4 Suspension of Easement Rights. If the defaulting Owner
has breached the provisions of Section 4.12 and the enforcing Owner(s) is an
Owner of a dominant tenement benefitting from easement rights that are
materially and adversely affected as a result of such breach, then each such
enforcing Owner may restrict or prevent the defaulting Owner and its Permittees
from exercising easement rights upon, over and across the Parcel of such
enforcing Owner, as a servient tenement, unless and until the default is cured.
8.2 Waiver. No waiver by any Owner of a breach of this Agreement
and no delay or failure to enforce this Agreement shall be construed or held to
be a waiver of any preceding or succeeding breach of the same by an Owner. No
waiver shall be implied from any Owner's failure to ta any action on account of
such default, and no express waiver shall affect a breach other than as
specified in said waiver. The consent or approval by an Owner to or of any
action shall not be deemed to waive or render unnecessary any Owner's consent to
or approval of any subsequent similar acts.
8.3 Costs of Enforcement. If any legal or equitable action or
proceeding is instituted to enforce any provision of this Agreement, the party
prevailing in such action shall be entitled to recover from the non-prevailing
party all of its costs, including court costs and reasonab attorneys' fees and
expenses, as determined by the Court and not the jury.
8.4 Rights of Lenders. No breach of any provision of this
Agreement shall defeat or render invalid the lien of any mortgage or similar
instrument securing a loan made in good faith and for value with respect to the
development or permanent financing or refinancing of any portio any Parcel or
any Improvements thereon; provided that all provisions of this Agreement shall
be binding upon and effective against any subsequent Owner whose title is
acquired by foreclosure (or by deed in lieu thereof), or otherwise acquired
pursuant to such lien rights.
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9. INDEMNIFICATION AND INSURANCE.
9.1 Indemnification.
9.1.1 Each Owner shall defend, indemnify and hold harmless
each of the other Owners and their respective officers, shareholders, directors,
partners, members, managers, agents and employees, from and against all claims,
liens, liabilities and expenses (including reasonable attorneys' fees and costs)
arising from liens imposed or personal injury, death or property damage arising
out of or connected with or resulting from the use of the easement rights
granted in this Agreement, or any Construction Activities undertaken, by the
indemnifying Owner or their respective Permittees.
9.1.2 Each Owner of the Health Club Parcel and the Resort
Parcel acknowledge that golfing activities are an essential part of the Sedona
Golf Project and hereby (i) waives and releases any claims or causes of action
of any kind each such Owner may have against the Project Developer and/or the
Sedona Golf Resort Community Association arising in any way from damages caused
by golf balls entering the Parcel of such Owner, and (ii) agrees to defend,
indemnify and hold harmless Project Developer and the Sedona Golf Resort
Community Association from and against any liabilities, obligations, damages,
claims, causes of action, costs, expenses and fees (including reasonable
attorneys' fees and costs) arising in any way from golf balls entering such
indemnifying Owner's Parcel.
9.2 Liability Insurance. Each Owner shall procure and maintain
public liability and property damage insurance affording coverage for claims for
personal injury, death or property damage occurring in, on or about such Owner's
Parcel and the Easement Areas used by such Owner and Permittees and for all
obligations undertaken by such Owner under Section 9.1 above. Each policy of
insurance maintained as herein required shall be primary and non-contributory
and shall name the other Owners as additional insured parties. Said policy shall
provide coverage of at least $2,000,000.00 combined single limit, or such higher
amounts as are reasonably designated by Project Developer from time to time
based on coverage that owners or developers of other similar properties
customarily maintain in Yavapai County or the Phoenix metropolitan area. Each
policy shall provide that it cannot be cancelled without at least thirty (30)
days prior written notice to the other Owners, and shall be issued by
financially sound and reputable insurance companies, as reasonably determined by
Project Developer, and shall be authorized to do business in Arizona.
Certificates evidencing the existence of such insurance, including the 30-day
notice of cancellation set forth above and the waiver of subrogation set forth
in Section 9.4, shall be provided by each Owner to the other Owners from time to
time upon request.
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9.3 Self-insurance. The insurance requirements in this Article 9
may be satisfied by a plan of self-insurance from time to time, but only so long
as such Owner has and maintains a net worth of $200,000,000.00 or more and such
Owner furnishes to any other Owner requesting the sa evidence of compliance with
the minimum net worth requirement set forth above. The annual report or annual
financial statements of such Owner audited by an independent certified public
accountant shall be sufficient evidence of its net worth. If any Owner elects to
self-insure pursuant to this Section and thereafter elects to terminate such
self-insurance programs, it shall give at least thirty (30) days prior written
notice thereof to the other Owners and within said 30-day period shall comply
with Sections 9.1, 9.2 and 9.4 and shall deliver to each Owner the certificate
of insurance referred to in Section 9.2.
9.4 Waiver of Subrogation. Notwithstanding any other provisions
in this Agreement, each Owner hereby waives any and all rights of recovery
against each Owner, and their respective directors, partners, officers,
employees, shareholders, members, managers and representatives, for of or damage
to the waiving Owner, its property or the property of others under its control,
to the extent that such loss or damage is insured against under any insurance
policy in force at the time of such loss or damage. Each Owner shall, upon
obtaining the insurance policies required hereunder, give notice to its
insurance carriers that the foregoing waiver of subrogation is contained in this
Agreement and shall obtain, at its expense, if any, an appropriate waiver of
subrogation endorsement from their insurer.
10. RIGHT TO RECORD ADDITIONAL COVENANTS AND EASEMENTS.
Project Developer expressly reserves the right to record from
time to time additional covenants, conditions, restrictions and easements
against the Project Developer Parcel and Project Developer Easement Areas, as
may be reduced pursuant to Section 4.9 above, with respect to the development
and operation of all or portions of the Project Developer Parcel, to the extent
it deems necessary and appropriate from time to time in its sole discretion,
provided that the same shall not materially amend the rights, benefits and
burdens set forth in this Agreement except in accordance with Sections 4.9 and 7
above. In no event will Project Developer have any obligation to undertake the
construction or development of the Project Developer Parcel and/or the Project
Developer Easement Areas now or in the future, or to develop the Project
Developer Parcel in any manner other than as Project Developer chooses in its
sole discretion.
11. ADDITIONAL PROVISIONS.
11.1 Condemnation. If any portion of the Easement Areas is taken
through eminent domain proceedings, or is acquired in lieu thereof, by any duly
constituted authority for a public or a quasi-public use, that portion of the
award attributable to the value of the land and improvements so taken shall be
payable only to the Owner thereof (or to the Owner's lender, as their respective
interest(s) may appear), and no claim thereon shall be made by any other Owner,
provided that such other Owner may independently file collateral claims with the
condemning authority for loss of easement rights if such claims do not operate
to reduce the award to be paid to the Owner of the land and improvements so
taken.
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11.2 Constructive Notice and Acceptance. Every Owner or Permittee
who now or hereafter owns or acquires any right, title or interest in or to any
portion of Parcel is and shall be conclusively deemed to have consented and
agreed to every covenant, restriction and easement contai herein which burdens,
restricts or benefits said portion, whether or not any reference to this
Agreement is contained in the instrument by which such interest is acquired.
11.3 Headings. The headings used herein are for convenience only
and do not in any way limit or define the scope or intent of the provisions
hereof.
11.4 Invalidity of any Provision. If any provision of this
instrument is adjudged by a court of competent jurisdiction to be void or
unenforceable for any reason, the same shall in no way affect any other
provision of this instrument, or the application of any such provision und
circumstances different from those adjudicated by the court, or the validity or
enforceability of this instrument as a whole.
11.5 Notices. Any notice, consent, request, demand, approval or
other communication provided for herein or sent pursuant hereto shall be in
writing and shall be given by delivering the same to an Owner in person or by
sending the same by United States mail (registered, certified express mail),
with postage prepaid, or by "Federal Express" or other reputable overnight
courier service, to the address set forth below:
To Project Developer: 3838 North Central Avenue
Suite 1500
Phoenix, Arizona 85012
Attention: Peggy Kirch
Jeff Romaine, Esq.
To Resort Owner: 2601 E. Thomas Road
Suite 225
Phoenix, Arizona 85016
To Health Club: P.O. Box 1243
Sedona, AZ 86339
OR
561 Highway 179
Sedona, AZ 86336
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with copy to: The Ridge Spa and Racquet Club
at Sedona Golf Resort
10 Ridge View Drive
Sedona, AZ 86336
Attn: Ivan Madar
Any Owner may change its mailing address by giving written notice of such change
to the other Owners in the manner set forth above at least ten (10) days prior
to the date such change is to become effective. All notices, consents or other
communications under this Agreement shall be deemed given, received and made on
the date personal delivery or overnight courier delivery is effected or, if
mailed, on the delivery date or attempted delivery date shown on the return
receipt.
11.6 No Representations or Warranties. No representations or
warranties of any kind whatsoever, express or implied, shall be deemed to have
been given or made by Project Developer with respect to its approval of any
plans and specifications submitted pursuant to this Agreement o the Resort Owner
Agreement, including without limitation with respect to compliance with zoning
and subdivision requirements, or with building and other applicable codes,
regulations and laws, or fitness for the intended use.
11.7 Governing Law; Time of the Essence; Exhibits. This Agreement
shall be construed and governed under the laws of the State of Arizona. Time is
of the essence with respect to each of the covenants contained in this
Agreement. All exhibits attached hereto are a part of this Agreement.
11.8 No Rights to Public. No part of this Agreement shall be
construed as creating or granting any rights to the general public, nor shall
any part be construed as a dedication of any portion of an Easement Areas for
public use.
11.9 Estoppel. Each Owner shall, upon the written request of
another Owner, execute an estoppel certificate which may be relied upon by the
requesting Owner, its successors and assigns and lenders, stating whether any
defaults exist under this Agreement on the part of the requesting Owner, whether
any sums are owed by the requesting party to such Owner and such other
information as may be reasonably required. Any failure to deliver or mail by
certified mail, return receipt requested, a written response to the address set
forth in the notice from the requesting Owner within thirty (30) days after
receipt of the request shall be deemed to be an acknowledgment that the
non-responding party claims no defaults and that no sum is owed by the
requesting Owner.
11.10 Force Majeure. Each Owner shall be excused from performing
any of its respective obligations in this Agreement (except obligations to pay
or reimburse sums of money) for as long as the performance of any such
obligation is prevented, delayed or hindered by act of God, flood or other
weather conditions of unusual severity, explosion, war (declared or undeclared),
riot, inability to procure or general shortage of labor, equipment, facilities
or materials in the open market, failure of transportation, strikes, order of
government or civil or defense authorities, or other cause not within the
reasonable control of the respective Owner (financial inability excepted).
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11.11 Taxes. Each Owner shall pay prior to delinquency all taxes,
assessments or other charges levied or made by a governmental body or agency
against its Parcel, provided that each Owner may contest in good faith any such
real property tax or assessment so long as any such contested tax or assessment
is paid prior to a tax sale under any applicable law.
11.12 Release Upon Sale of Interest. Upon the assignment,
conveyance, sale or other transfer by an Owner of its entire right, title and
interest in its Parcel ("transfer"), that Owner shall be released from those
obligations in this Agreement as the Owner thereof arising after th effective
date of such transfer (other than those obligations arising from any default by
such Owner under this Agreement prior to such transfer, including payment of any
amounts which may then be due and owing), but only after the recording of the
instrument consummating the transfer. Upon a transfer, the transferee shall not
be personally liable for any default under this Agreement which occurred prior
to the effective date of the transfer if, prior to such transfer, such
transferee executes and delivers to the other Owners a written statement in
which the name and address of the transferee shall be disclosed and the
transferee acknowledges its obligations to be bound by this Agreement and to
perform all obligations hereunder upon consummation of the transfer. Otherwise,
such transferee shall be obligated for any defaults under this Agreement
occurring before or after such transfer. Failure to deliver any such written
statement shall not affect the running of the covenants herein with the land,
nor negate, modify or otherwise affect the liability of any transferee pursuant
to this Agreement.
11.13 Authority; Joint and Several Liability. Each individual
executing this Agreement represents and warrants that he or she is duly
authorized to bind the entity on behalf of which he or she is signing. If a
Parcel is owned by more than one Owner, each Person constituting an Owner shall
be jointly and severally obligated for all liabilities of an Owner of such
Parcel.
11.14 Resort Owner Agreement Requirements. Project Developer and
Resort Owner acknowledge that certain obligations and requirements regarding the
development of certain on-site and off-site improvements for the Resort Parcel
are set forth in the Resort Owner Agreement, all of which shall survive the
transfer of the Resort Parcel to Resort Owner. With respect to the rights,
duties and obligations between Project Developer and Resort Owner, in the event
of a conflict between the Resort Owner Agreement and the provisions of this
Agreement, the more restrictive provision shall control.
11.15 Rule Against Perpetuities. If any of the interests,
privileges, covenants or rights created by this Agreement shall be unlawful,
void or voidable for violation of the rule against perpetuities or any related
rule, then such provision shall continue until 21 years after the death of the
last survivor of those issue of Bruce Babbitt, former Governor of Arizona, who
are living on the date this Agreement is recorded, and the descendants of such
issue.
11.16 Governmental Requirements. The covenants and restrictions
in this Agreement are in addition to all applicable governmental requirements,
laws, rules, codes and ordinances. If a conflict exists between this Agreement
and such requirements, laws, rules, codes or ordinances, then the more
restrictive requirement shall govern.
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11.17 No Third-Party Beneficiaries. There shall be no third-party
beneficiaries of this Agreement except as may be specifically named and
designated as such in this Agreement.
11.18 Buildings on Project Developer Parcel. The Owner of the
Project Developer Parcel agrees, for the benefit of the Owner of the Resort
Parcel, that (i) the buildings, walls and landscaping constructed or installed
from time to time on the Project Developer Parcel, shall be constructed and
installed in a first-class fashion and designed in an attractive manner
compatible with the overall appearance of the Sedona Golf Project, provided that
certain retail and grocery store uses may be designed to be compatible with the
unique look and appearance customary for such uses, (ii) any roof-mounted
heating, ventilation or air conditioning equipment located on the Project
Developer Parcel will be screened on the side facing the Resort Parcel by an
attractive barrier at least as high as such equipment, which barrier shall be
constructed of materials and colors suitable for the Sedona Golf Project, and
(iii) if the rear portion of any buildings on the Project Developer Parcel face
the Resort Parcel, then such rear portion shall be designed in a reasonably
attractive manner compatible with the overall appearance of other buildings in
the Sedona Golf Project. This Section may only be enforced by the Owner of the
Resort Parcel.
11.19 Parties Bound By This Agreement. Project Developer and
Resort Owner agree that, to accommodate the closing for the transfer of the
Resort Parcel to Resort Owner, this Agreement shall be recorded prior to its
execution by Health Club Owner. Accordingly, this Agreement will be recorded
without Exhibit "C" attached, and this Agreement shall neither bind nor benefit
the Health Club Parcel or the Owner of the Health Club Parcel or its Permittees
in any way unless and until such Owner agrees, in a recorded document also
signed by Resort Owner and Project Developer, to be bound by and subject to all
of the covenants, conditions, easements and restrictions set forth in this
Agreement. In no event shall the Owner of the Health Club Parcel or any of its
Permittees be deemed to constitute third-party beneficiaries of this Agreement.
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IN WITNESS WHEREOF, the undersigned have executed this instrument
as of the date first above written.
SEDONA GOLF RESORT, L.C., an
Arizona limited liability company,
BY: SunCor Development Company, an
Arizona corporation, its Managing Member
By: /s/Peggy Kirch
------------------------------
(Signature)
Its: Vice President
-----------------------------
(Printed/Typed Name and Title)
UP SEDONA, INC.,
an Arizona corporation
By: /s/William S. Oliver
------------------------------
William S. Oliver, President
ALL SEASONS RESORTS, INC.,
an Arizona corporation
By:
------------------------------
(Signature)
Its:
-----------------------------
(Printed/Typed Name and Title)
26
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STATE OF ARIZONA )
) SS:
COUNTY OF MARICOPA )
Before me, the undersigned, a Notary Public in and for said
County and State, this 19th day of December, 1996, personally appeared Peggy
Kirch the Vice President of SunCor Development Company, an Arizona corporation,
which corporation is the Managing Member of Sedona Golf Resort, L.C., an Arizona
limited liability company, who acknowledged the execution of the above Agreement
to be his/her voluntary act and deed on behalf of said corporation, as such
Managing Member.
WITNESS my hand and notarial seal.
/s/Pamela D. Swoboda Notary Public
----------------------------------
Resident of Maricopa County
My Commission Expires: May 28, 1998
STATE OF ARIZONA )
) SS:
COUNTY OF MARICOPA )
Before me, the undersigned, a Notary Public in and for said
County and State, this 19th day of December, 1996, personally appeared William
S. Oliver, the President of UP Sedona, Inc., an Arizona corporation, who
acknowledged the execution of the above Agreement to be his/her voluntary act
and deed.
WITNESS my hand and notarial seal.
/s/Pamela D. Swoboda
------------------------------
Notary Public
Resident of Maricopa County
My Commission expires: May 23, 1998
STATE OF ARIZONA )
) SS:
COUNTY OF )
Before me, the undersigned, a Notary Public in and for said
County and State, this _____ day of , 1996, personally appeared , the of All
Seasons Resorts, Inc., an Arizona corporation, who acknowledged the executi of
the above Agreement to be his/her voluntary act and deed.
WITNESS my hand and notarial seal.
Notary Public
------------------------------
Resident of County
My Commission expires:
27
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EXHIBITS
Exhibit "A" - Legal description of Resort Parcel (Recital A)
Exhibit "B" - Legal description of Project Developer Parcel (Recital B)
Exhibit "C" - Legal description of Health Club Parcel (Recital C) to be
added later
Exhibit "D-1" - Site Plan showing Parking Area with 56 spaces and Primary
Access Drive designated (Sections 1.11, 1.14 and 4.2.2)
Exhibit "D-2" - Legal description of Parking Area (Section 4.2.2)
Exhibit "E" - Legal description or diagram of Sedona Golf Project
(Section 1.23)
[LETTERHEAD OF TOBACK CPAs, P.C.
INDEPENDENT AUDITORS' CONSENT
We consent to the inclusion in the Registration Statement on Form S-11
of UP Sedona, Inc. of our report dated February 6, 19977 on our audit of the
balance sheet of UP Sedona, Inc. as of December 31, 1996. We also consent to the
reference to our Firm under the caption "Experts".
/s/ Toback CPAs, P.C.
---------------------------
TOBACK CPAs, P.C.
Phoenix, Arizona
February 28, 1997
EXHIBIT 23.2
