Exhibit 10.5
AMENDED AND RESTATED
LIMITED LIABILITY COMPANY AGREEMENT OF
XXX XXXXXXXX HOTELS LLC
This LIMITED LIABILITY COMPANY AGREEMENT of XXX XXXXXXXX HOTELS LLC, a
New York limited liability company (the "Company"), is made as of February 13,
1998 among NORTHSTAR HOSPITALITY LLC, a Delaware limited liability company
("NorthStar"), MHG ASSOCIATES, L.P., a Delaware limited partnership ("Xxxxxxxx")
and CENTURY OPERATING ASSOCIATES, a New York limited partnership ("Pilevsky"),
as initial Members of the Company, and any Persons who become Members of the
Company in accordance with the provisions hereof and whose names are set forth
as Members on Schedule A hereto.
RECITALS:
WHEREAS, the Members have heretofore formed a limited liability
company pursuant to the New York Limited Liability Company Law,
-section- 203, as amended from time to time (the "New York Act"), by filing a
Certificate of Formation of the Company with the office of the Secretary of
State of the State of New York on August 11, 1997;
WHEREAS, the Company was previously known as West 57th LLC;
WHEREAS, on January 27, 1998, the name of the Company was changed to Xxx
Xxxxxxxx Hotels LLC; and
WHEREAS, the Members desire to operate the Company as a limited liability
company under the New York Act and to amend and restate the prior operating
agreement of the Company in its entirety and the terms of such prior agreement
are hereby superceded in their entirety.
NOW, THEREFORE, in consideration of the agreements and obligations set
forth herein and for other good and valuable consideration, the receipt and
sufficiency of which are hereby acknowledged, the Members hereby agree as
follows:
ARTICLE I
DEFINED TERMS
Section Definitions. Unless the context otherwise requires, the terms
defined in this Article I shall, for the purposes of this Agreement, have the
meanings herein specified.
"Accrued Developing Hotel Return Amount" means, with respect to each
Developing Hotel for each calendar year (or portion thereof) for which such
hotel is a Developing Hotel, a (A) an amount which would yield a return equal to
twelve percent (12%) per annum, compounded quarterly on the Unreturned Capital
Contribution attributable to such Developing Hotel minus (B) any Distributions
attributable to such Developing Hotel pursuant to Section 7.1(e).
"Accrued Shortfall Amount" means, with respect to any calendar year in
which NorthStar did not receive a non-cumulative return equal to 12% per annum,
the positive excess of (A) an amount which would yield to the Members a return
equal to twelve percent (12%) per annum, not compounded, on the Unreturned
Capital Contribution attributable to Operating Assets (plus any Accrued
Shortfall Amount for any prior years), minus (B) any amounts distributed to the
Members pursuant to Section 7.1(d).
"Additional Capital Contributions" shall mean Capital Contributions made
by the Members after the date hereof.
"Additional Members" has the meaning set forth in Section 11.8 hereof.
"Adjusted Operating Equity" means for any Payment Period (i) the sum of
the total Weighted Unreturned Capital Contributions of the Members plus the
Weighted Convertible Loan Amount, in each case allocable to all investments and
operations of the Company other than Developing Hotels, plus (ii) any Accrued
Developing Hotel Return.
"Adjusted Ordinary Cash Flow" means for any Payment Period during the
Convertible Loan Term, Ordinary Cash Flow of the Company, calculated prior to
any Convertible Loan Interest Payment, which would be distributable to the
Members pursuant to Sections 7.1(d)(i), 7.1(d)(ii)(B) and 7.1(d)(iii)(B) and 7.1
(e)(i), 7.1 (e)(ii)(B) and 7.1 (e)(iii)(B) after substituting (1) in Section
7.1(d)(i) and 7.1 (e)(i) the phrase "the sum of the total Weighted Unreturned
Capital Contributions of the Members and the Weighted Convertible Loan Amount
for such Payment Period" for the phrase "Unreturned Capital Contributions," (2)
in Section 7.1(d)(ii)(B) and 7.1(e)(ii)(B) the phrase "the sum of the total
Weighted Unreturned Capital Contributions of the Members and the Weighted
Convertible Loan Amount for such Payment Period" for the phrase "based upon the
Members' respective
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Percentage Interests" and (3) in Sections 7.1(d)(i)(B) and 7.1(d)(ii)(B) the
phrase "Adjusted Operating Equity" for the phrase "Operating Equity".
"Advance" has the meaning set forth in Section 4.5 hereof.
"Affiliate" means, with respect to a Person, (i) any other Person
directly or indirectly Controlling, Controlled by or under common Control with
such Person, (ii) any other Person owning or Controlling fifteen percent (15%)
or more of the outstanding voting interests of such Person, (iii) any officer,
director, general partner, shareholder, member or manager of such Person, or
(iv) any other Person who is an officer, director, general partner, shareholder,
member, manager, trustee, or holder of fifty percent (50%) or more of the voting
interests, of any Person described in clauses (i) through (iii) of this
sentence; provided, that with respect to NorthStar, Affiliates shall also
include any Person that acts as an investment manager or investment advisor for
NorthStar or any Person described in clauses (i) through (iii) of this sentence.
"Agreement" means this Limited Liability Company Agreement, as amended,
modified, supplemented or restated from time to time, and the Bylaws. Any
reference to "this Agreement," "herein" or words having a similar meaning in the
context, shall be deemed to include the Bylaws, provided that, in the event of
any inconsistency between the terms hereof and the terms of the Bylaws, the
terms hereof shall control.
"Bankruptcy" means, with respect to any Person, a "Voluntary Bankruptcy"
or an "Involuntary Bankruptcy." A "Voluntary Bankruptcy" means, with respect to
any Person, (i) the inability of such Person generally to pay its debts as such
debts become due or an admission in writing by such Person of its inability to
pay its debts generally or a general assignment by such Person for the benefit
of creditors; (ii) the filing of any petition or answer by such Person seeking
to adjudicate it a bankrupt or insolvent or seeking for itself any liquidation,
winding up, reorganization, arrangement, adjustment, protection, relief or
composition of such Person or its debts under any law relating to bankruptcy,
insolvency or reorganization or relief of debtors, or seeking, consenting to or
acquiescing in the entry of an order for relief or the appointment of a
receiver, trustee, custodian or other similar official for such Person or for
any substantial part of its property; or (iii) corporate action taken by such
Person to authorize any of the actions set forth above. An "Involuntary
Bankruptcy" means, with respect to any Person, without the consent or
acquiescence of such Person, the entering of an order for relief or approving a
petition for relief or reorganization or any other petition seeking any
reorganization, arrangement, composition, readjustment, liquidation, dissolution
or other similar relief under any present or future bankruptcy, insolvency or
similar statute, law or regulation or the filing of any such petition against
such Person which petition shall not be dismissed within 90 days or, without the
consent or acquiescence of such Person or the entering of an order appointing a
trustee, custodian, receiver or liquidator of such Person or of all or any
substantial part of the property of such Person which order shall not be
dismissed within 60 days. "Bankrupt" shall have a correlative meaning.
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"Base Interest" means, with respect to Xxxxxxxx and Pilevsky, all of such
Members' interests in the Distributions of the Company, excluding therefrom the
Carried Interest.
"Board of Managers" has the meaning set forth in 6.1(a) hereof.
"Budget" means an economic forecast of amounts to be expended by the
Company as a whole and for each Separate Business conducted by the Company, in
such detail and with such line items as the Board of Managers may reasonably
require, over a designated period of time, prepared by the Chief Executive
Officer and submitted to and approved by the Board of Managers. The Budget for
the calendar year 1998, as approved by the Members, is annexed hereto as
Exhibit A, provided, The Members acknowledge that the form of the Budget will be
revised for future calendar years as is reasonably required by NorthStar to
reflect a consolidated Company wide budget.
"Business Plan" means a narrative description of the proposed business
activities of the Company as a whole and for each Separate Business conducted by
the Company, in such detail as the Board of Managers may reasonably require,
prepared by the Chief Executive Officer and submitted to and approved by the
Board of Managers, as same may be amended by the Supermajority Decision of the
Board of Managers from time to time. The Business Plan for the calendar year
1998, as approved by the Members, is annexed hereto as Exhibit A.
"Bylaws" means the Bylaws of the Company as amended from time to time,
which Bylaws are expressly incorporated herein by reference as part of this
Agreement, and may only be amended in accordance with the terms of this
Agreement. The initial Bylaws of the Company are attached hereto as Schedule B
and are hereby adopted and approved as a Supermajority Decision of the Board of
Managers.
"Capital Account" means, with respect to any Member, the account
maintained for such Member in accordance with the provisions of Section 4.4
hereof.
"Capital Contribution" means, with respect to any Member, the aggregate
amount of money and the initial Gross Asset Value of any property (other than
money) contributed to the Company in accordance with the terms of this Agreement
with respect to such Member's Interest (net of any liabilities to which such
property may be subject or as to which the Company may assume liability in
connection with such contribution). In the case of a Member who acquires an
interest in the Company by virtue of a Transfer in accordance with the terms of
this Agreement, "Capital Contribution" has the meaning set forth in
Section 4.4(a) hereof.
"Capital Event" shall mean, with respect to the Company or any
Subsidiary, any event not occurring in the ordinary course of business, pursuant
to which the Company or
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its Subsidiary (as the case may be) receive any consideration with respect to
its assets or the disposition thereof, whether in connection with any
recapitalization or restructuring of equity in, or debt of, the Company; any
Transfer of any property held directly by the Company or indirectly through any
Subsidiary; any refinancing of outstanding indebtedness or indebtedness of any
entity in which the Company or its Subsidiary (as the case may be) holds an
equity interest; any casualty or condemnation of any property in which the
Company or its Subsidiary has an interest, as well as termination payments under
any agreements pursuant to which the Company or any Subsidiary of the Company
manages hotel properties and any distributions made by a Subsidiary out of net
proceeds received by such Subsidiary from any of the foregoing transactions to
the extent same occur in respect of such Subsidiary.
"Carried Interest" has the meaning set forth in Section 11.12.
"Cash Available for Distribution" for any period, as determined by the
Managers in their reasonable good faith discretion, shall mean the difference
for such period between (i) the sum of (A) the Company's gross receipts from its
operations, including dividends, interest or other income derived from the
investments of the Company, any Capital Event Proceeds of the Company, and
(B) any amounts withdrawn from the reserves of the Company at the discretion of
the Managers, and (ii) the sum of (A) all cash disbursements of the Company,
including, without limitation, principal and interest payable by the Company in
respect of any of its debt obligations, and (B) the amount of any additional
reserves of the Company set aside during such period.
"Certificate" means the Certificate of Formation and any and all
amendments thereto filed on behalf of the Company with the office of the
Secretary of State of the State of New York pursuant to the New York Act.
"Class A Managers" and "Class B Managers" when used in reference to
members of the Board of Managers shall have the meanings set forth in Section
6.1(a) hereof.
"Code" means the Internal Revenue Code of 1986, as amended from time
to time, or any corresponding federal tax statute enacted after the date of
this Agreement. A reference to a specific section (-section-) of the Code
refers not only to such specific section but also to any corresponding
provision of any federal tax statute enacted after the date of this
Agreement, as such specific section or corresponding provision is in effect
on the date of application of the provisions of this Agreement containing
such reference.
"Company" means Xxx Xxxxxxxx Hotels LLC, the limited liability company
heretofore formed under and pursuant to the New York Act and this Agreement.
"Controls," "is Controlled by" or "is under common Control with" shall
mean the possession, directly or indirectly, of the power to direct or cause the
direction of the
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management and policies of a Person, whether through the ownership of voting
securities, by contract or otherwise.
"Convertible Loan" means that certain loan, made on the date hereof from
the Convertible Member to the Company, in the initial principal amount of the
Convertible Loan Amount.
"Convertible Loan Amount" means ONE HUNDRED THIRTY MILLION SEVEN HUNDRED
NINETY TWO THOUSAND NINETY THREE DOLLARS AND 27 CENTS ($130,792,093.27).
"Convertible Loan Interest Payment" has the meaning set forth in Section
7.1(g)(i).
"Convertible Loan Interest Payment Date" means (i) the tenth day of each
month, or if such day is not a business day, the next succeeding business day
and (ii) the Mandatory Conversion Date.
"Convertible Loan Interest Rate" means a rate equal to the greater of (i)
the Minimum Convertible Loan Interest Rate and (ii) the Equity Return Rate;
provided, however, that the Convertible Loan Interest Rate shall be adjusted
with respect to each Payment Period during the Convertible Loan Term to ensure
that the amounts paid to date to the Convertible Member, in the aggregate
(taking into account all interest payments made to such member on the Xxxxx
Xxxxxx Loan), do not exceed the greater of (i) the Minimum Convertible Loan
Interest Rate and (ii) the Equity Return Rate, in each case for the portion of
the Convertible Loan Term elapsed.
"Convertible Loan Principal Payment" has the meaning set forth in Section
7.1(g)(ii).
"Convertible Loan Term" means the period commencing on the date hereof,
and expiring on the Mandatory Conversion Date.
"Convertible Member" means NorthStar, solely as the holder of the
Convertible Loan, and not as a Member of the Company. On the earlier to occur of
(a) the date on which the remaining principal of the Convertible Loan (and all
accrued and unpaid interest thereon, if any) is repaid and (b) the Mandatory
Conversion Date, all references to the Convertible Member shall be deemed
deleted and any Percentage Interest held by the Convertible Member shall be
deemed a Percentage Interest held by NorthStar.
"Covered Person" means a Member, any Affiliate of any such Member, any
officers, directors, shareholders, partners, employees, representatives or
agents of any such
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Member, or their respective Affiliates, or any employee or agent of the Company
or its Affiliates.
"Default Rate" means the lesser of (a) the sum of (i) the prime lending
rate as announced by Citibank, N.A. and (ii) five percent (5.0%) and (b) the
maximum rate permitted by applicable law.
"Depreciation" means, for each Fiscal Year or other period, an amount
equal to the depreciation, amortization or other cost recovery deduction
allowable with respect to an asset for such Fiscal Year or other period;
provided, however, that if the Gross Asset Value of an asset differs from its
adjusted basis for federal income tax purposes at the beginning of such Fiscal
Year or other period, Depreciation shall be an amount that bears the same ratio
to such Gross Asset Value which the asset had when its value was last adjusted,
as the federal income tax depreciation, amortization or other cost recovery
deduction with respect to such asset for such Fiscal Year or other period bears
to the adjusted tax basis which the asset had when its value was last adjusted;
and provided, further, that if the federal income tax depreciation, amortization
or other cost recovery deduction for such Fiscal Year or other period is zero,
Depreciation shall be determined with reference to such beginning Gross Asset
Value using any reasonable method selected by the Board of Managers.
"Developing Hotel" means (A) any Hotel Property owned or managed by the
Company or any Subsidiary of the Company that is not yet open for business as a
hotel operating in accordance with the Company's customary hotel operating
standards, provided such Hotel Property shall be deemed an Operating Asset, upon
the earlier to occur of (1) the Company owning such Hotel Property for thirty
(30) months or (2) the Hotel Property opening as a renovated Hotel Property in
accordance with the Company's customary hotel operating standards, or (B) such
Hotel Property which is otherwise designated by a Supermajority Decision of the
Board of Managers as a Developing Hotel; provided, further, if a Hotel Property
generates a return of 12% per annum (not compounded) on its Operating Equity for
a calendar year, such Hotel Property shall automatically become an Operating
Asset retroactively for such calendar year during which such return is achieved
and, to the extent necessary, Distributions to Members pursuant to Section 7.1
shall be recalculated and adjusted immediately following the conclusion of such
calendar year.
"Distributions" shall mean any distributions of cash or other assets of
the Company to the Members.
"Equity Return Rate" means (calculated for a particular Payment Period) a
fraction, expressed in percentage terms, the numerator of which is the total
Adjusted Ordinary Cash Flow of the Company, calculated prior to taking into
account any Convertible Loan Interest Payments or interest payments on the Xxxxx
Xxxxxx Loan made during such Payment Period, and the denominator of which is the
sum of (A) the total Weighted Unreturned Capital
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Contributions of the Members and (B) the Weighted Adjusted Convertible Loan
Amount for such Payment Period.
"Fair Market Value" means, with respect to the Company or substantially
all of the Company's assets or investments, (i) for the purposes of Section
10.1(b)(iv), the fair market value of the Company as determined by the
Defaulting Member and the Non- Defaulting Member within thirty (30) days after
the date of any Defaulted Additional Capital Contribution, provided that if the
Members are unable to so agree, such fair market value shall be determined by an
appraisal conducted by an appraiser selected by the Member making such Defaulted
Additional Capital Contribution with the approval of all members of the Board of
Managers, such approval not to be unreasonably withheld or delayed and (ii) for
purposes of Section 11.4(b), the fair market value of such assets or
investments, as determined by the Offering Member and the Offeree Member within
thirty (30) days after the First Interest Election Date, provided that if the
Members are unable to so agree, such fair market value shall be determined by an
appraisal conducted by an appraiser selected by the Offering Member with the
approval of all members of the Board of Managers, such approval not to be
unreasonably withheld or delayed.
"First Interest Election Date" has the meaning set forth in 11.4(b)
hereof.
"Fiscal Year" means (i)the period commencing upon the formation of the
Company and ending on December 31, 1998, (ii) any subsequent twelve (12) month
period commencing on January 1 and ending on December 31, or (iii) any portion
of the period described in clause (ii) of this sentence for which the Company is
required to allocate Profits, Losses and other items of Company income, gain,
loss or deduction pursuant to Article VII hereof.
"Gross Asset Value" means, with respect to any asset, such asset's
adjusted basis for federal income tax purposes, except as follows:
(i) the initial Gross Asset Value of any asset contributed
by a Member of the Company shall be the fair market value of such
asset, as agreed to by the contributing Member and the Board of
Managers;
(ii) the Gross Asset Value of all Company assets shall be
adjusted to equal their respective fair market values, as
determined by the Board of Managers, as of the following times:
(a) the acquisition of an additional interest in the Company by any
new or existing Member in exchange for more than a de minimis
Capital Contribution; and (b) the distribution by the Company to a
Member of more than a de minimis amount of Company assets as
consideration for an interest in the Company; provided, however,
that adjustments pursuant to this sentence shall be made only if
the Board of Managers reasonably determines that such adjustments
are
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necessary or appropriate to reflect the relative economic
interests of the Members in the Company; and
(iii) the Gross Asset Value of any Company asset distributed
to any Member shall be the fair market value of such asset on the
date of distribution, as determined by the distributee Member and
the Board of Managers, or if such parties are unable to agree upon
a determination, as determined pursuant to Section 13.3 hereof.
If the Gross Asset Value of an asset has been determined or adjusted pursuant to
paragraph (i) or paragraph (ii) above, such Gross Asset Value shall thereafter
be adjusted by the Depreciation taken into account with respect to such asset
for purposes of computing Profits and Losses.
"Xxxxx Xxxxxx Loan Amount" means the principal balance outstanding under
that certain Note, dated as of June 23, 1993, given by St. Xxxx'x-Xxxxxxxxx
Hospital Center in favor of Xxxxxx Xxxxxx, as amended by that First Amendment to
Mortgage Note, dated as of the date hereof, by and between NorthStar, as lender
and the Company, as borrower, which principal balance the parties hereto agree
is $24,207,906.73 on the date hereof.
"Hotel Property" shall mean each parcel of land, improved and unimproved,
acquired or leased by the Company for the purpose of constructing, renovating,
developing or operating a hotel thereon.
"Incapacitated," with respect to any Person, means either (i) the
inability of the Person to perform his duties under any applicable agreement or
appointment, whether due to physical or mental incapacity or otherwise, for a
period of ninety (90) consecutive calendar days, provided that after ninety (90)
consecutive calendar days, there is no reasonable likelihood of recovery from
such condition or termination of such inability or (ii) a final judicial
determination that such Person is not mentally competent to handle his or her
own affairs.
"Interest" means (i) a Member's share of the profits and losses of the
Company and a Member's rights to receive distributions of the Company's assets
in accordance with the provisions of this Agreement and the New York Act,
(ii) such Member's right to vote or grant or withhold consents, if any, with
respect to Company matters as provided herein or in the New York Act and (iii)
such Member's other rights and privileges as herein provided.
"Interest Sale Notice" has the meaning set forth in Section 11.4(a)
hereof.
"Internal Rate of Return" means the annual rate, compounded quarterly, at
which the net present value, of all Distributions, from all sources, to a Member
(discounted at such rate from the dates such Distributions are actually received
by such Member), is equal to
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the net present value, as of the date of the first Capital Contribution, of the
Capital Contributions made by such Member to the Company or any Subsidiary of
the Company (discounted at such rate from the dates such Capital Contributions
were made by such Member). Except with respect to Capital Contributions made by
NorthStar prior to the date hereof with respect to the Xxxxx Xxxxxx Hotel (and
no other contributed asset), no Capital Contributions or Distributions shall be
deemed to have been made prior to the date hereof. For purposes of calculating
an Internal Rate of Return hereunder all Capital Contributions and all
Distributions shall be deemed made as of the date such Capital Contributions and
Distributions are actually made to or by the Company.
"Liquidating Trustee" has the meaning set forth in Section 12.4(a)
hereof.
"Lockout Period" shall mean the period commencing on the date hereof and
expiring on the day immediately preceding the fourth (4th) anniversary of the
date hereof.
"Major Decision" means any of the following actions of the Company,
directly on behalf of the Company or indirectly on behalf of any Subsidiary:
(a) to add to or increase the capital of the Company, to issue Interests
representing additional capital investment in the Company, to determine the
Gross Asset Value of any Additional Capital Contribution to the Company or to
cause the Company to accept an Advance;
(b) to do anything that would cause a Member, or to require any Member,
to guaranty or otherwise to become personally liable for any indebtedness
incurred by the Company, without the prior consent of such Member, other than as
such guarantee or liability may relate to customary exceptions from exculpation
clauses or provisions in any loan or similar agreement approved by the Board of
Managers;
(c) to sell, exchange, finance, refinance, convey or otherwise dispose of
any asset, business, investment, property or project directly or indirectly
owned by the Company or any Subsidiary, including, without limitation,
permitting any Subsidiary of the Company to cancel, terminate or otherwise
materially modify any existing management agreement;
(d) to undertake an initial public offering of Interests or other
securities of the Company or any Subsidiary, or securities of any Person into
which the Company is proposed to be merged or consolidated in contemplation of
such an initial public offering;
(e) to commence, invest in or engage in business activities other than
the business activities described in clauses (i) and (ii) of Section 3.1 below;
(f) to Transfer, directly or indirectly, an Interest to a Person other
than in accordance with Article XI hereof;
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(g) to merge or to consolidate the Company with, or sell substantially
all of the Company's assets to, any other Person;
(h) to amend the Agreement;
(i) to authorize and approve the dissolution of the Company;
(j) to admit any new Member to the Company (and in connection therewith,
the designation of additional members of the Board of Managers to represent the
interests of any such new member) or accept the resignation of any existing
Member of the Company;
(k) to appoint, or approve the appointment of, a member of the Board of
Managers, other than the initial members thereof (except as such decision may be
made by NorthStar as expressly set forth in Section 6.1);
(l) acquire, by purchase, lease or otherwise, any interest in real or
personal property, including, without limitation, any direct or indirect
interest in any entity that owns or is to acquire any interest in real or
personal property other than in the ordinary course of business;
(m) give or grant any deeds of trust, mortgages, pledges, ground leases,
security interests or otherwise encumber any real property or any portion
thereof, except the granting of utility easements, the filing of the plat for a
property or project of the Company or any Subsidiary and such other encumbrances
in accordance with a development plan approved by the Board of Managers by a
Supermajority Decision;
(n) confess a judgment against the Company or any Subsidiary in an amount
in excess of $200,000;
(o) undertake any other matter that would constitute or cause a material
change in, including any material revision to, a Budget or the Business Plan;
(p) to commence a Voluntary Bankruptcy or to decide not to contest an
Involuntary Bankruptcy;
(q) in connection with the admission of any new Member, to allocate or
reallocate indebtedness of the Company for guaranty by the continuing Members in
accordance with Section 7.9 hereof;
(r) to establish general policies for the investment of Company funds,
including, without limitation, the types and maturities of such investments; and
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(s) the sale, dissemination, licensing, or the granting of any right to
use, to third parties, of any trade secrets, customer lists or other
intellectual property of the Company and the decision not to seek enforcement of
a violation of the intellectual property rights of the Company (e.g. a trademark
infringement);
(t) those matters specified in Section 3.3;
(u) the determination of Cash Available for Distribution, Ordinary Cash
Flow, reserves and the amount of any distributions pursuant to Section 7.1;
(v) the selection of law firms or accounting firms to render services on
behalf of the Company (subject to Section 8.3); and
(w) the restructuring of the Company or the ownership of assets by the
Company, as is prudent, advisable or necessary in connection with the
qualification of certain of the beneficial owners of NorthStar as a "real estate
investment trust" pursuant to Sections 856 through 860 of the Code (with the
costs and expenses of the Company in connection with such restructuring being
paid by the Company).
"Manager" means any member of the Board of Managers.
"Mandatory Conversion Date" means December 15, 1998.
"Member" means any Person named as a member of the Company on Schedule A
hereto and includes any Person admitted as an Additional Member or a Substitute
Member pursuant to the provisions of this Agreement, in such Person's capacity
as a member of the Company, and "Members" means two (2) or more of such Persons
when acting in their capacities as Members of the Company.
"Minimum Convertible Loan Interest Rate" means a rate of fifteen percent
(15%) per annum, compounded quarterly and calculated on the basis of the actual
number of days elapsed over a 365 day year.
"Net Capital Proceeds" means the cash proceeds received by the Company
from any Capital Event, minus
(i) the unpaid principal balance of, any accrued interest on,
prepayment cost of or other fees and expenses incident to, any indebtedness
of the Company or Subsidiary required to be paid out of such proceeds,
including, without limitation, indebtedness due to Members;
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(ii) the costs and expenses incurred by the Company or any
Subsidiary (including brokerage commissions, attorneys' fees, appraisal
fees, collection costs, closing expenses and other customary sales costs
and fees) in connection with such sale, financing or other disposition;
(iii) all cash expenditures (including capital expenditures) to be
incurred subsequent to the capital transaction to be funded out of the net
proceeds thereof and made necessary by such Capital Event, as reasonably
determined by the Board of Managers; and
(iv) such reserves as are established in connection with any Capital
Event as determined by the Supermajority Decision of the Board of Managers.
"New York Act" means the New York Limited Liability Company Law,
-section- 203, as amended from time to time.
"Offered Interest" has the meaning set forth in Section 11.4(a) hereof.
"Offeree Member" has the meaning set forth in Section 11.4(a) hereof.
"Offering Member" has the meaning set forth in Section 11.4(a) hereof.
"Officers" means the officers of the Company selected as provided in the
Bylaws.
"Operating Asset" means any asset of the Company which is not a
Developing Hotel.
"Operating Equity" means (i) those Unreturned Capital Contributions
allocable to all investments and operations of the Company other than Developing
Hotels, plus (ii) any Accrued Developing Hotel Return Amount, plus (iii) any
Accrued Shortfall Amount.
"Ordinary Cash Flow" means (i) Cash Available For Distribution less (ii)
any proceeds received by the Company with respect to a Capital Event which are
included in such Cash Available For Distribution.
"Outstanding Interests" shall mean any equity interests of any Person in
the following hotel properties to the extent not already contributed to the
Company by the Members as of the date hereof: the Royalton Hotel, the Morgans
Hotel, the Delano Hotel in Miami Beach, and the Xxxxx Hotel in San Francisco.
"Payment Period" means each calendar month or part thereof during the
Convertible Loan Term.
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"Percentage Interest" means the Interest of a Member, expressed as a
percentage of one hundred percent, as shown on Schedule A hereto and as such
Schedule shall be amended from time to time in accordance with the provisions
hereof, and as adjusted pursuant to Section 10.1.
"Person" includes any individual, corporation, association, partnership
(general or limited), joint venture, trust, estate, limited liability company,
or other legal entity or organization.
"Pilevsky Debt Amount" means $24,000,000.
"Profits" and "Losses" means, for each Fiscal Year, an amount equal to
the Company's taxable income or loss for such Fiscal Year, determined in
accordance with -section- 703(a) of the Code (but including in taxable income
or loss, for this purpose, all items of income, gain, loss or deduction
required to be stated separately pursuant to -section- 703(a)(1) of the Code),
with the following adjustments:
(i) any income of the Company exempt from federal income tax and not
otherwise taken into account in computing Profits or Losses pursuant to
this definition shall be added to such taxable income or loss;
(ii) any expenditures of the Company described in
-section- 705(a)(2)(B) of the Code (or treated as expenditures described
in -section- 705(a)(2)(B) of the Code pursuant to Treasury Regulation
-section- 1.704-1(b)(2)(iv)(i)) and not otherwise taken into account
in computing Profits or Losses pursuant to this definition shall be
subtracted from such taxable income or loss;
(iii) in the event the Gross Asset Value of any Company asset is
adjusted in accordance with the definition of "Gross Asset Value" above,
the amount of such adjustment shall be taken into account as gain or loss
from the disposition of such asset for purposes of computing Profits or
Losses;
(iv) gain or loss resulting from any disposition of any asset of the
Company with respect to which gain or loss is recognized for federal
income tax purposes shall be computed by reference to the Gross Asset
Value of the asset disposed of, notwithstanding that the adjusted tax
basis of such asset differs from its Gross Asset Value; and
(v) in lieu of the depreciation, amortization and other cost
recovery deductions taken into account in computing such taxable income
or loss, there shall be taken into account Depreciation for such Fiscal
Year or other period, computed in accordance with the definition of
"Depreciation" above.
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"Remaining Debt Amount" means all indebtedness of the Company or its
Affiliates available for guaranty in excess of the aggregate of the Xxxxxxxx
Debt Amount and the Pilevsky Debt Amount.
"Xxxxxxxx Affiliate" means, with respect to a Person, any other Person
which Xxx Xxxxxxxx, his spouse or children own any legal or beneficial interest
in.
"Xxxxxxxx Outside Date" has the meaning set forth in Section 6.10(a)
hereof.
"Xxxxxxxx Competitor" means any Person which engages in the business of
managing or operating Hotel Properties.
"Xxxxxxxx Debt Amount" means $40,000,000.
"Securities Act" means the Securities Exchange Act of 1934, and the rules
and regulations promulgated thereunder.
"Separate Business" means each hotel, or interest therein, owned or
managed by the Company, whether directly or indirectly; any Social
Establishment, or interest therein, owned by the Company and any other asset,
business or investment, or interest therein, owned or held by the Company that
is either owned or operated independently of the other assets, businesses or
investments of the Company.
"Social Establishment" means a restaurant, timeshare facility, gaming or
merchandising related facility, bar, nightclub, beach club, pool, golf, tennis
or polo club, or other social establishment, to the extent located in, or to the
extent providing services integral to, a particular hotel, motel, or other
lodging facility.
"Substitute Member" means a Person who is admitted to the Company as a
Member pursuant to Section 11.1 hereof, and who is named as a Member on
Schedule A to this Agreement.
"Subsidiary" of a Person means another Person in which the first Person
owns, directly or indirectly, an equity interest. Unless the context otherwise
requires, all references herein to Subsidiaries shall be to Subsidiaries of the
Company.
"Supermajority Decision" shall mean (i) all of those actions of the
Company identified in the definition of Major Decisions except for those
identified in clauses (a), (c), (m), (p) , (q) and (w) of said definition; (ii)
the incurrence of any indebtedness other than in the ordinary course of business
as well as all of those actions identified in clauses (c) and (m) of the
definition of Major Decisions, other than the financing and collateralization of
the contribution of assets contributed to the Company on the date hereof as well
as any Outstanding Interests contributed to the Company, provided that, with
respect to the decision
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to incur debt other than in the ordinary course of business or to finance or
collateralize assets initially or subsequently contributed to, or acquired by,
the Company, such decisions shall be Supermajority Decisions from and after the
first date that NorthStar (x) does not have any Unreturned Capital Contributions
and (y) has received an Internal Rate of Return of twelve percent (12%) per
annum on all of its Capital Contributions; (iii) all actions identified in
clause (p) of the definition of Major Decisions at a time when the name of the
Company includes the name "Xxx Xxxxxxxx" or any derivation thereof; (iv) those
actions identified in Section 3.3 (except, with respect to subsection (i)
thereof, in the case of a Transfer which occurs as a result of the exercise of
lender's remedies in connection with a Loan properly entered into by the
Company); (v) any of the actions identified in clause (a) of the definition of
Major Decisions, except if (I) such Additional Capital Contribution, investment
or loan in the reasonable opinion of the Class B Managers, is necessary for the
Company to continue operating in compliance with all of its contractual and
other legal obligations or (II) is being made in connection with an acquisition
of an Outstanding Interest or other investment previously approved by a
Supermajority Decision of the Board of Managers; (vi) any action by the Company
in connection with clause (w) of the definition of Major Decisions which would
(a) cause the Company to be required to file periodic reports under the
Securities Act, (b) result in adverse tax consequences to Xxxxxxxx or the
Company or (c) diminish the Chief Executive's powers with respect to the
operations of the Company, or (vii) any other action expressly identified herein
as requiring the Supermajority Decision of the Board of Managers. The taking of
any action identified in clauses (i) through (vii) of the prior sentence or any
other decision identified as a Supermajority Decision herein, shall require the
consent of both the Class A Manager and a majority of the Class B Managers.
"Tag-Along Exercise Notice" has the meaning set forth in Section
11.5(a)(i) hereof.
"Tag-Along Right" has the meaning set forth in Section 11.5(a)(i) hereof.
"Targeted Amount" has the meaning set forth in Section 6.10(f)
"Target Interest Price" has the meaning set forth in Section 11.4(a)
hereof.
"Tax Matters Member" has the meaning set forth in Section 6.11 hereof.
"Transfer" means, as a noun, any voluntary or involuntary assignment,
transfer, syndication, sale or other disposition or purported disposition, and,
as a verb, voluntarily or involuntarily to assign, syndicate, transfer, sell or
otherwise dispose of.
"Treasury Regulations" means the income tax regulations, including
temporary regulations, promulgated under the Code, as such regulations may be
amended from time to time (including corresponding provisions of succeeding
regulations).
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"Unreturned Capital Contribution" means the excess, if any, of a Member's
Capital Contributions over the amount previously distributed to such Member
pursuant to Section 7.1(c)(i), excluding any amount constituting a return on a
Capital Contribution, as distinguished from a return of a Capital Contribution.
"Warrant Co." means the entity designated as such by NorthStar at such
time as a transfer is effected by NorthStar pursuant to Section 11.6(c) hereof.
"Weighted Adjusted Convertible Loan Amount" means the amount equal to the
sum of the Weighted Convertible Loan Amount plus the Weighted Xxxxx Xxxxxx Loan
Amount for the applicable Payment Period.
"Weighted Convertible Loan Amount" means the amount equal to (a) the sum
of the Convertible Loan Amount outstanding on each day of the applicable Payment
Period, divided by (b) the total number of days in such Payment Period.
"Weighted Xxxxx Xxxxxx Loan Amount" means the amount equal to the sum of
(a) the principal balance of the Xxxxx Xxxxxx Loan outstanding on each day of
the applicable Payment Period, divided by (b) the total number of days in such
Payment Period.
"Weighted Unreturned Capital Contributions" means the amount equal to (a)
the sum of the Unreturned Capital Contributions outstanding on each day of the
applicable Payment Period, divided by (b) the total number of days in such
Payment Period.
Section 1.2 Headings. The headings and subheadings in this Agreement are
included for convenience and identification only and are in no way intended to
describe, interpret, define or limit the scope, extent or intent of this
Agreement or any provision hereof.
ARTICLE II
OPERATION; TERM; ETC.
Section 2.1 Operation.
(a) The Members hereby agree to operate the Company as a limited
liability company under and pursuant to the provisions of the New York Act
and agree that the rights, duties and liabilities of the members shall be as
provided in the New York Act, except as otherwise provided herein.
(b) The name and mailing address of each Member and the amount
contributed to the capital of the Company shall be listed on Schedule A attached
hereto. The Board of Managers shall update Schedule A from time to time as
necessary to accurately
17
reflect the information therein. Any amendment or revision to Schedule A made in
accordance with this Agreement shall not be deemed an amendment to this
Agreement. Any reference in this Agreement to Schedule A shall be deemed to be a
reference to Schedule A as amended and in effect from time to time.
Section 2.2 Name. The name of the Company heretofore formed and governed
hereby is Xxx Xxxxxxxx Hotels LLC. The business of the Company may be conducted
under any other name designated by the Board of Managers upon compliance with
all applicable laws.
Section 2.3 Term. The term of the Company commenced on the date the
Certificate was filed in the office of the Secretary of State of the State of
New York and shall continue until the Company is dissolved in accordance with
the provisions of this Agreement.
Section 2.4 Principal Place of Business. The principal place of business
of the Company shall be at c/o Xxx Xxxxxxxx Hotels LLC, 000 Xxxx 00xx Xxxxxx,
Xxx Xxxx, Xxx Xxxx 00000. At any time, the Chief Executive Officer may change
the location of the Company's principal place of business, subject to approval
by the Board of Managers.
Section 2.5 Qualification in Other Jurisdictions. The Board of Managers
shall cause the Company to be qualified, formed or registered under assumed or
fictitious name statutes or similar laws in any jurisdiction in which the
Company transacts business. Each of the Officers of the Company, as an
authorized person within the meaning of the New York Act, shall execute, deliver
and file any certificates (and any amendments and/or restatements thereof)
necessary for the Company to qualify to do business in a jurisdiction in which
the Company may wish to conduct business.
ARTICLE III
PURPOSE AND POWERS OF THE COMPANY
Section 3.1 Purpose. The Company is formed for the object and purpose of,
and the nature of the business to be conducted and promoted by the Company is,
engaging in any lawful act or activity for which limited liability companies may
be formed under the New York Act and engaging in any and all activities
necessary, convenient, desirable or incidental to the foregoing, including,
without limitation, such business activities as may be determined by the Board
of Managers from time to time. Such activities shall include, but not be limited
to (i) acquiring various direct and indirect interests in hotel properties and
other properties or businesses, including management of hotels and appurtenant
or related facilities, wherever located and (ii) owning, managing, operating,
developing, franchising and receiving management and licensing fees with respect
to any trade or business.
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Section 3.2 Powers of the Company.
(a) The Company shall have the power and authority to take any and all
actions necessary, appropriate, proper, advisable, incidental or convenient to
or for the furtherance of the purpose set forth in Section 3.1 hereof,
including, but not limited to, the power:
(i) to conduct its business, carry on its operations and have and
exercise the powers granted to a limited liability company by
the New York Act in any state, territory, district or
possession of the United States, or in any foreign country
that may be necessary, convenient or incidental to the
accomplishment of the purpose of the Company;
(ii) to acquire by purchase, lease, contribution of property or
otherwise, own, hold, operate, maintain, finance, improve,
lease, sell, convey, mortgage, transfer, demolish or dispose
of any real or personal property that may be necessary,
convenient or incidental to the accomplishment of the purpose
of the Company, including without limitation, the acquisition
of the Outstanding Interests;
(iii) to form subsidiary corporations, partnerships and limited
liability companies and hold interests therein;
(iv) to act as general partner of partnerships and a member or
manager of limited liability companies, and to exercise all
of the powers, duties, rights and responsibilities associated
therewith;
(v) to take any and all actions necessary, convenient or
appropriate as a general partner, as a stockholder of a
general partner, or as a limited partner of a partnership, or
as a member or manager of a limited liability company,
including the granting or approval of waivers, consents or
amendments of rights or powers relating thereto and the
execution of appropriate documents to evidence such waivers,
consents or amendments;
(vi) to enter into, perform and carry out contracts of any kind,
including, without limitation, contracts with any Member, any
Affiliate thereof, or any agent of the Company necessary to,
in connection with, convenient to, or incidental to the
accomplishment of the purpose of the Company;
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(vii) to purchase, take, receive, subscribe for or otherwise
acquire, own, hold, vote, use, employ, sell, mortgage, lend,
pledge, or otherwise dispose of, and otherwise use and deal
in and with, shares or other interests in or obligations of
domestic or foreign corporations, associations, general or
limited partnerships (including, without limitation, the
power to be admitted as a partner thereof and to exercise the
rights and perform the duties created thereby), trusts,
limited liability companies (including, without limitation,
the power to be admitted as a member or appointed as a
manager thereof and to exercise the rights and perform the
duties created thereof), or individuals or direct or indirect
obligations of the United States or of any government, state,
territory, governmental district or municipality or of any
instrumentality of any of them;
(viii) to lend money, to invest and reinvest its funds, to take and
hold real and personal property for the payment of funds so
loaned or invested;
(ix) to xxx and be sued, complain and defend, and participate in
administrative or other proceedings, in its name;
(x) to appoint employees and agents of the Company, and define
their duties and fix their compensation;
(xi) to indemnify any Person in accordance with the New York Act
and to obtain any and all types of insurance;
(xii) to cease its activities and cancel its Certificate;
(xiii) to negotiate, enter into, renegotiate, extend, renew,
terminate, modify, amend, waive, execute, acknowledge or take
any other action with respect to any lease, contract or
security agreement in respect of any assets of the Company;
(xiv) to borrow money and issue evidences of indebtedness, and to
secure the same by a mortgage, pledge or other lien on the
assets of the Company;
(xv) to pay, collect, compromise, litigate, arbitrate or otherwise
adjust or settle any and all other claims or demands of or
against the Company or to hold such proceeds against the
payment of contingent liabilities; and
20
(xvi) to make, execute, acknowledge and file any and all documents
or instruments necessary, convenient or incidental to the
accomplishment of the purpose of the Company.
(b) The Board of Managers may authorize any Person (including, without
limitation, any Officer or Member) to enter into and perform any document on
behalf of the Company, provided that if such entry or performance is in
furtherance of a matter requiring a Supermajority Decision such authorization
shall require the affirmative Supermajority Decision of the Board of Managers.
(c) The Company may merge with, or consolidate into, another New York
limited liability company or other entity.
Section 3.3 Limitations on Company Powers. Notwithstanding the foregoing
provisions of Section 3.2 hereof, the Company shall have no power or authority,
without the approval of the Class B Managers, or to the extent same constitute
Supermajority Decisions, without the approval of the Class A Manager and a
majority of the Class B Managers:
(i) to make a Transfer for the benefit of creditors or cause a
Voluntary Bankruptcy to occur;
(ii) to apply for the entry of a decree of judicial dissolution
under Section 18-802 of the New York Act or otherwise;
(iii) to confess a judgment on behalf of the Company for more than
$200,000;
(iv) to do any act in contravention of this Agreement;
(v) to commingle the funds of the Company with those of any other
Person;
(vi) to change the purpose of the Company;
(vii) except as set forth herein, to dissolve or liquidate the
Company, seek a partition of the assets of the Company or a
judicial dissolution of the Company; or
(viii) to approve a trustee, custodian or receiver for the Company
or its assets.
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ARTICLE IV
CAPITAL CONTRIBUTIONS, INTERESTS,
CAPITAL ACCOUNTS AND ADVANCES
Section 4.1 Capital Contributions.
(a) Each Member has contributed or is deemed to have contributed to the
capital of the Company the amount set forth opposite the Member's name on
Schedule A attached hereto. The agreed value of the Capital Contributions made
or deemed to have been made by each Member shall be set forth on Schedule A.
(b) No Member shall be required to make any Additional Capital
Contribution to the Company, provided, however, that the failure to make an
Additional Capital Contribution may result in the dilution of a Member's
Percentage Interest pursuant to the terms hereof. Members may make Additional
Capital Contributions to the Company pro rata or otherwise, if approved as a
Supermajority Decision by the Board of Managers. Except as otherwise provided
herein, no Member shall be required to lend any funds to the Company. No Member
shall have any personal liability for the repayment of any Capital Contribution
of any other Member.
Section 4.2 Member's Interest. A Member's Interest shall for all purposes
be personal property. A Member has no interest in specific Company property.
Section 4.3 Status of Capital Contributions.
(a) Except as otherwise provided in this Agreement, the amount of a
Member's Capital Contributions may be returned to it, in whole or in part, at
any time, but only with the consent of the Board of Managers. Other than as
provided in Section 7.1, any such returns of Capital Contributions shall be made
to all Members in proportion to their Unreturned Capital Contributions.
Notwithstanding the foregoing, no return of a Member's Capital Contributions
shall be made hereunder if such distribution would violate applicable state law.
Under circumstances requiring a return of any Capital Contribution, no Member
shall have the right to demand or receive property other than cash, except as
may be specifically provided in this Agreement.
(b) No Member shall receive any interest, salary or drawing with respect
to its Capital Contributions or its Capital Account or for services rendered on
behalf of the Company or otherwise in its capacity as a Member (including as a
member of the Board of Managers), except as otherwise specifically provided in
this Agreement or as otherwise agreed by the Board of Managers.
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Section 4.4 Capital Accounts.
(a) An individual Capital Account shall be established and maintained for
each Member, which Capital Account shall initially be in the amount of the
Member's Capital Contributions set forth in Schedule A hereto. The original
Capital Account established for any Member who acquires an interest in the
Company by virtue of a Transfer in accordance with the terms of this Agreement
shall be in the same amount as, and shall replace, the Capital Account of the
transferor of such interest, and, for purposes of this Agreement, such Member
shall be deemed to have made the Capital Contributions made by the transferor of
such interest (or made by such transferor's predecessor in interest). To the
extent such Member acquires less than the entire interest in the Company of the
transferor of the interest so acquired by such Member, the original Capital
Account of such Member and its Capital Contributions shall be in proportion to
the interest it acquires, and the Capital Account of the transferor who retains
a partial interest in the Company, and the amount of its Capital Contributions,
shall be reduced in proportion to the interest it retains.
(b) Anything in this Agreement to the contrary notwithstanding, it is the
Company's intention to maintain the Member's Capital Accounts in accordance with
Section 704(b) of the Code and Treasury Regulations Section 1.704-1(b). The
Capital Account of each Member shall be maintained in accordance with the
following provisions:
(i) to such Member's Capital Account there shall be credited such
Member's Capital Contributions (which shall not include the
Convertible Loan Amount prior to the Mandatory Conversion
Date), such Member's distributive share of Profits (as
determined pursuant to Section 7.5 through Section 7.8
hereof) and the amount of any Company liabilities that are
assumed by such Member or that are secured by any Company
assets distributed to such Member;
(ii) to such Member's Capital Account there shall be debited the
amount of cash and the Gross Asset Value of any Company
assets distributed to such Member pursuant to any provision
of this Agreement (other than Convertible Loan Interest
Payments and Convertible Loan Principal Payments made
pursuant to Sections 7.1(g)(i) and (ii), respectively), such
Member's distributive share of Losses (as determined pursuant
to Section 7.5 through Section 7.8 hereof) and the amount of
any liabilities of such Member that are assumed by the
Company or that are secured by any property contributed by
such Member to the Company; and
23
(iii) in determining the amount of any liability for purposes of
this Section 4.4(b), there shall be taken into account
-section- 752(c) of the Code and any other applicable
provisions of the Code and the Treasury Regulations.
Section 4.5 Loans; Advances. If any Member shall advance any funds to, or
for the account or benefit of the Company (whether by way of a loan, by payment
on a guarantee issued by such Member covering obligations of the Company, by
forbearance from collecting any amount due, by payment of expenses on behalf of
the Company or otherwise) in excess of Capital Contributions (an "Advance"), the
amount of such Advance shall neither increase its Capital Account nor entitle it
to any increase in its share of the distributions of the Company.
Notwithstanding anything to the contrary contained herein, the Convertible Loan
and the Xxxxx Xxxxxx Loan shall not be considered an Advance hereunder. The
amount of any such Advance shall be a debt obligation of the Company to such
Member and shall be repaid to it by the Company with interest at the Default
Rate, or upon such interest rate and upon such other terms and conditions as
shall be determined by the Board of Managers and agreed to by such Member. Any
such Advance shall be payable and collectible only out of Company assets, and
the other Members shall not be personally obligated to repay any part thereof,
except as otherwise agreed by such other Members. Furthermore, in no event shall
any Member be required to pledge its Membership Interest or any other collateral
as security for such Advance, nor shall the Member making any such Advance be
entitled to compel the Company or any of the Members to repay any such Advance;
provided, however that Advances made pursuant to this Section 4.5, and the
interest due thereon, shall be repayable out of the first Cash Available For
Distribution of the Company (computed without taking into account payment of
interest on such Advances or repayment of such Advances).
ARTICLE V
MEMBERS
Section 5.1 Powers of Members. Except as otherwise specifically provided
by this Agreement or the Bylaws, or required by the New York Act, no Member
shall have the power to act for or on behalf of, or to bind, the Company.
Section 5.2 Reimbursements and Payments of Expenses.
(a) The Company shall reimburse the Members, the Managers and the
Officers for all ordinary and necessary out-of- pocket expenses incurred by the
Members, the Managers and the Officers on behalf of the Company in accordance
with the Budget. The Board of Managers' determination to reimburse a Member,
Manager or Officer for any additional expenses not in the Budget, and the amount
of such expenses, shall be conclusive. From time to time, the Board of Managers,
as a Supermajority Decision, will select one or more law firms and, subject to
Section 8.3, accounting firms, to render services on behalf
24
of the Company, and no Member will be entitled to reimbursement from the Company
for separate representation. The Company shall pay for the expenses arising out
of or incidental to discussions, evaluation and negotiation of this Agreement
and the transactions contemplated hereby, including without limitation legal
costs and expenses.
(b) The Company's offices shall be located c/o Xxx Xxxxxxxx Hotels, LLC,
000 Xxxx 00xx Xxxxxx, Xxx Xxxx, Xxx Xxxx 00000 and the actual cost of providing
office services shall be an expense borne by the Company, including, without
limitation, the use of office space, and accounting, bookkeeping and occasional
mail room services. In the event, for any reason, the Chief Executive Officer,
with the approval of the Board of Managers, decides to have NorthStar provide
the Company with such office services, NorthStar or its Affiliate shall be paid
for such services at current market rates from time to time for the provision of
same in transactions negotiated on an arm's length basis. In all events, the
cost of office services to the Company, as an expense of the Company, shall be
deducted in computing Cash Available For Distribution and shall not be deemed to
constitute a distributive share of Profits or a distribution or return of
capital to any Member.
Section 5.3 Partition. Each Member waives any and all rights that it may
have to maintain an action for partition of the Company's property.
Section 5.4 Pilevsky's Membership Interest. Notwithstanding anything
herein to the contrary, in no event shall Pilevsky's interest in the Company as
a Member hereunder carry with it any right to vote on or approve any decision,
action or inaction on the part of the Company. Pilevsky hereby grants to the
Board of Managers an irrevocable power of attorney, coupled with an interest, to
execute any documents on Pilevsky's behalf to effectuate any decisions of the
Board of Managers made in accordance with the terms of this Agreement, provided,
that the Company's use of such power of attorney shall not be deemed a waiver by
Pilevsky of any rights hereunder, nor shall any use of such power of attorney
increase Pilevsky's obligations hereunder. Additionally, the Board of Managers,
by Supermajority Decision, may amend or modify this Agreement (and MHG and
NorthStar may execute documentation to effectuate such amendment) without the
consent of or notice to Pilevsky, provided, that such modification does not (a)
decrease Pilevsky's Distribution percentages pursuant to Section 7.1(c)(ii)(A),
7.1(c)(iii)(A), 7.1(d)(ii)(A), 7.1(d)(iii)9A), 7.1(e)(ii)(A) or 7.1(e)(iii)(A)
or (b) diminish Pilevsky's rights under Section 11.7.
ARTICLE VI
MANAGEMENT
Section 6.1 Management of the Company.
(a) The initial board of managers of the Company, and any successor board
of managers of the Company selected in accordance with this Agreement and with
the Bylaws
25
(the "Board of Managers"), shall be divided into two classes, designated the
Class A Manager ("Class A Manager") and the Class B Managers ("Class B
Managers"). Class A shall consist of Xxx Xxxxxxxx and Class B shall be comprised
of individuals designated by NorthStar. The following individuals shall be the
initial Board of Managers of the Company:
Class A Manager: Xxx Xxxxxxxx
Class B Managers: W. Xxxxxx Xxxxxxx
Xxxxx Xxxxxxxx
Xxx Xxxxx
As set forth in the By-laws, one of the Managers shall be the Chairman,
President and Chief Executive Officer, and initially such Manager shall be Xxx
Xxxxxxxx. The other three Managers are the initial designees of NorthStar to the
Board of Managers. The Board of Managers shall manage the Company in accordance
with this Agreement and the actions of the Board of Managers taken in such
capacity and in accordance with this Agreement shall bind the Company, provided,
however, that the Chief Executive Officer may bind the Company with respect to
matters that are not Major Decisions and, with respect to Major Decisions, to
the extent same have been expressly included in and budgeted for in the Business
Plan or Budget or otherwise consented to by the Board of Managers. Each of the
Class B Managers shall serve until he resigns, dies, becomes Incapacitated or is
removed by NorthStar. The Chairman, President and Chief Executive Officer shall
serve on the Board of Managers until he resigns, dies or becomes Incapacitated;
provided, however, that in the event that Xxx Xxxxxxxx is no longer the
Chairman, President and Chief Executive Officer other than as the result of his
death or Incapacitation, he shall still be entitled to serve on the Board until
such time as he or the Member controlled by him holds less than ten percent
(10%) of the Percentage Interests. Upon the death or Incapacitation of Xxx
Xxxxxxxx, the resulting vacancy on the Board of Managers as well as the position
of Chief Executive Officer or other positions held by Xxx Xxxxxxxx at such time
shall be filled by the remaining members of the Board of Mangers in their sole
discretion.
(b) In the event Additional Members are admitted to the Company, such
Additional Members may, upon the affirmative Supermajority Decision of the Board
of Managers, be granted the right to designate additional members of the Board
of Managers, however, notwithstanding the foregoing, the Board of Managers shall
be constituted in such a manner that at all times NorthStar (as Class B
Managers) shall maintain majority representation thereon.
(c) All Major Decisions, including all Supermajority Decisions, shall be
made at a regular or special meeting of the Board of Managers or upon the
necessary consent of the Board of Managers without a meeting. Each Major
Decision shall require the affirmative vote of a majority of both the Class A
Manager and a majority of the Class B Managers, or the affirmative vote of a
majority of the Class B Managers alone, absent
26
the consent of the Class A Manager; provided, further, however, that the Chief
Executive Officer shall be advised and consulted regarding any Major Decision
within five (5) business days prior to the meeting of the Board of Managers at
which such Decision is to be considered. All Supermajority Decisions shall
require the consent of the Class A Manager and a majority of the Class B
Managers. Any action to be taken by the Board of Managers at a meeting may be
taken without such meeting by the written consent of the Class A Manager and a
majority of the Class B Managers. Any such written consent may be executed and
given by telecopy or similar electronic means. Such written consents shall be
filed with the minutes of the proceedings of the Board of Managers.
(d) Subject to the delegation of rights and powers as provided for herein
and in the Bylaws, the Board of Managers shall have the sole right to manage the
business of the Company and shall have all powers and rights necessary,
appropriate or advisable to effectuate and carry out the purposes and business
of the Company. No Member, by reason of its status as such, shall have any
authority to act for or bind the Company, but shall have only the right, to vote
on or approve the actions specified in this Agreement to be voted on or approved
by the Members.
(e) The Officers of the Company shall be elected and removed as provided
for in the Bylaws. The Officers of the Company shall be responsible for ensuring
that the Company operates within the parameters of the Budget, and shall perform
such other functions as are provided in the Bylaws. The Board of Managers may
appoint, employ or otherwise contract with such other Persons for the
transaction of the business of the Company or the performance of services for or
on behalf of the Company as it shall determine in its sole discretion. The Board
of Managers may delegate to any Officer of the Company or to any other Person
authority to act on behalf of the Company as the Board of Managers may, from
time to time, deem appropriate in its sole discretion.
(f) Except as otherwise provided by the Board of Managers or in the
Bylaws, when the taking of any action has been authorized by the Board of
Managers, any Officer of the Company or any other Person authorized by the Board
of Managers may execute any document, agreement or instrument on behalf of the
Company, and may execute and file on behalf of the Company with the Secretary of
State of the State of New York any certificates of amendment to the Company's
Certificate, certificates of merger and, upon the dissolution and completion of
the winding up of the Company, a certificate of cancellation canceling the
Company's Certificate.
(g) All members of the Board of Managers shall be entitled to receive
managers' fees in an amount equal to $10,000 per annum, plus $2,000 for each
meeting of the Board of Managers or a committee thereof attended.
Section 6.2 Powers of the Chief Executive Officer. Subject to the
limitations and restrictions set forth in this Agreement (including, without
limitation, those set forth in
27
this Section 6.2), and provided that the actions of the Chief Executive Officer
are in accordance with the Business Plan and Budget, the Chief Executive Officer
may bind the Company with respect to all matters expressly included and budgeted
for in the Business Plan and Budget, as well as other matters that are not Major
Decisions. These include, without limitation and without expanding the powers of
the Chief Executive Officer beyond those set forth in the preceding sentence,
the following specific rights and powers:
(a) to operate, maintain, and improve any real or personal property held
by the Company or any Subsidiary to the extent necessary, convenient or
incidental to the accomplishment of the purposes of the Company and its
Subsidiaries. To this end, the Chief Executive Officer shall have available a
working capital fund as set forth in the Budget, from which expenditures may be
made in the reasonable discretion of the Chief Executive Officer and shall, from
time to time, be replenished by the Board of Managers upon satisfactory review
and accounting by the Chief Executive Officer;
(b) to execute leases and any other agreements, contracts, documents,
certifications and instruments necessary or convenient in connection with the
management, maintenance and operation of a property or project of the Company or
any Subsidiary or in connection with managing the business and affairs of the
Company and its Subsidiaries, including, without limitation, the authorization
of the Company or any Subsidiary to enter into any new, or to renew any
existing, management contracts with respect to any hotel, provided, however,
that the Board of Managers shall be consulted prior to entry into any such new
or renewed contracts and that cancellation, termination or the material
modification of any existing management agreement shall be a Supermajority
Decision requiring consent of the Board of Managers and Xxxxxxxx;
(c) to contract on behalf of the Company and its Subsidiaries for the
employment and services of employees, consultants and independent contractors,
such as architects, engineers, computer or software developers, political
advisers, lawyers and accountants, and delegate to such Persons the duty to
manage or supervise any of the assets or operations of the Company and its
Subsidiaries;
(d) to ask for, collect and receive any rents, royalties, fees,
distributions, issues and profits or income from the real property of the
Company and its Subsidiaries and to disburse the funds of the Company and its
Subsidiaries for proper purposes to those Persons entitled to receive same;
(e) to distribute the Cash Available For Distribution and Net Capital
Proceeds to the Members in accordance with Article VII;
(f) to purchase, from or through others, contracts of liability, casualty
or other insurance for the protection of the properties or affairs of the
Company, its Subsidiaries,
28
its Members, Managers, officers, employees and consultants, or for any purpose
convenient or beneficial to the Company and its Subsidiaries;
(g) to pay all taxes, licenses or assessments of whatever kind or nature
imposed upon or against the Company or its Subsidiaries, any real property owned
by the Company or its Subsidiaries and, for such purposes, to make such returns
and do all other such acts or things as may be deemed necessary and advisable by
the Company;
(h) to establish after consultation with the Board of Managers, maintain
and supervise the deposit of any monies or securities of the Company and its
Subsidiaries with insured banking institutions or other institutions as may be
selected by the Chief Executive Officer, in accounts in the name of the Company
or its Subsidiaries with such institutions;
(i) to institute, prosecute, defend, settle, compromise and dismiss
lawsuits or other judicial or administrative proceedings brought on behalf of,
or against, the Company, its Subsidiaries or the Members in connection with
activities arising out of, or connected with or incidental to this Agreement and
to engage counsel or others in connection therewith, subject to approval by the
Board of Managers in matters involving payment to or by the Company or a
Subsidiary of an amount in excess of $200,000;
(j) to execute, for and on behalf of the Company or its Subsidiaries, all
such applications for permits and licenses as the Chief Executive Officer deems
necessary and advisable; and
(k) to perform all ministerial and other acts and duties relating to the
business and affairs of the Company and its Subsidiaries, provided same do not
constitute a Major Decision(s), and to execute, acknowledge and deliver any and
all instruments to effectuate any and all of the foregoing.
Section 6.3 Restrictions on the Chief Executive Officer. Except as
expressly provided in this Agreement, the Chief Executive Officer shall not have
any authority to take any action not expressly delegated to the Chief Executive
Officer by the Board of Managers. Without limiting the generality of the
preceding sentence, the Chief Executive Officer shall not have the authority to,
and the Chief Executive Officer covenants and agrees that he shall not, make or
implement any decision that, directly or indirectly, would constitute a Major
Decision (except to the extent that the matter is expressly included and
budgeted for in the Business Plan or the Budget).
Section 6.4 Rights, Duties and Obligations of the Chief Executive
Officer.
(a) The Chief Executive Officer shall devote substantially all of his
business time to the management of the business of the Company.
29
(b) The Chief Executive Officer further agrees:
(i) to obtain and maintain in effect adequate general liability
insurance for the Company, its Subsidiaries and the Projects
and to cause all Members to be named as additional insureds
in such insurance policies;
(ii) to use his good faith efforts to maintain good relations with
all lenders, the surrounding community and all local
government authorities and others having jurisdictions over
any real property acquired by the Company or a Subsidiary;
and
(iii) to use his good faith efforts, to the extent within the
authority granted to the Chief Executive Officer hereunder,
to protect all real property acquired by the Company or its
Subsidiaries against liens (other than liens granted in
accordance with this Agreement or existing on the date
hereof).
Section 6.5 Consent of Members Not Required. No Member in its capacity as
a Member shall have any right to participate in or exercise control or
management power over the business and affairs of the Company. Each Member
agrees that each of the Chief Executive Officer and the Board of Managers are
authorized to carry on and conduct the business and affairs of the Company in
accordance with the terms of this Agreement and to authorize, approve, execute,
deliver and perform all agreements and transactions on behalf of the Company
without any further act, approval or vote of the Members, notwithstanding any
other provision of this Agreement, the Act or other applicable law. The
execution, delivery or performance by the Chief Executive Officer or the Company
of any agreement authorized or permitted under this Agreement shall not
constitute a breach by the Chief Executive Officer of any duty that the Chief
Executive Officer may owe the Company or the Members or any other Persons under
this Agreement or of any duty stated or implied by law or equity.
Section 6.6 Reliance by Third Parties. Any Person dealing with the
Company may rely upon a certificate signed by the Secretary or Assistant
Secretary of the Company as to:
(i) the identity of any Manager, Member or Officer;
(ii) the existence or non-existence of any fact or facts which
constitute a condition precedent to acts by the Board of
Managers, Members or Officers or which are in any other
manner germane to the affairs of the Company; or
30
(iii) the identity of Officers, Managers or other Persons who are
authorized to execute and deliver any document, agreement or
instrument of or on behalf of the Company.
Section 6.7 Transactions with Affiliates. No contract or transaction
between the Company and one or more of its Members, Managers or Officers, or
between the Company and any officer, director, employee or Affiliate of a
Member, Manager or Officer, shall be void or voidable solely for this reason, or
solely because the Member, Manager or Officer is present at or participates in
the meeting of the Board of Managers which authorizes the contract or
transaction, or solely because his votes are counted for such purpose, if
(i) the material facts of his relationship or interest and as to the contract or
transaction are disclosed or are known to the Board of Managers and the Board of
Managers authorizes the contract or transaction by the affirmative vote of a
majority of the disinterested Managers, even though the disinterested Managers
be less than a quorum and (ii) the contract or transaction is fair as to the
Company as of the time it is authorized, approved or ratified by the Board of
Managers.
Section 6.8 Confidentiality; Exclusivity. The Members will, and will
cause their officers, directors, employees and Affiliates to, preserve the
confidential nature of all material confidential and proprietary information of
the Company (including, without limitation, the confidential nature of any and
all new developments proposed to be effected by the Company). Pilevsky shall not
be bound by such obligations and shall not have any rights or obligations to
inspect the books and records of the Company, provided, however, Pilevsky's
designated accountant shall have the right, in accordance with Article VIII
hereof, to inspect the books of account of the Company, provided that such
accountant agrees in writing to be bound by the terms and conditions of this
Section 6.8.
Section 6.9 Outside Businesses. Except as otherwise provided herein,
including without limitation Section 6.10 hereof, nothing herein shall prohibit
any Member or Affiliate thereof, solely by virtue of his or its status as a
Member or an Affiliate of a Member, from engaging in or possessing an interest
in any other business ventures of any nature or description, independently or
with others, competitive, similar or dissimilar to the business of the Company,
and the Company and the Members shall have no rights by virtue of this Agreement
in and to such independent ventures or the income or profits derived therefrom,
and the pursuit of any such venture, even if competitive with the business of
the Company, shall not be deemed wrongful or improper. Subject to Section 6.10
hereof, no Member or Affiliate thereof shall be obligated to present any
particular investment opportunity to the Company even if such opportunity is of
a character that, if presented to the Company, could be taken by the Company,
and any Member or Affiliate thereof shall have the right to take for its own
account (individually or as a partner, member or fiduciary) or to recommend to
others any such particular investment opportunity.
Section 6.10 Non-Competition and Other Xxxxxxxx Related Matters.
31
(a) Notwithstanding Section 6.9 to the contrary, without the consent of
the Class B Managers, until the later to occur of (A) the fifth (5th)
anniversary of the date hereof and (B) the second (2nd) anniversary of the date
upon which Xxx Xxxxxxxx is no longer the Chief Executive Officer of the Company
(such later date, the "Xxxxxxxx Outside Date"), Xxx Xxxxxxxx, Xxxxxxxx and the
other holders of any equity interest in Xxxxxxxx, as well as the respective
Affiliates of any of the foregoing, shall not, directly or indirectly, through
any legal or beneficial ownership interest, debt or equity investment or
contractual or other arrangement with any other Person, conduct or perform, or
hold any interest or investment in any Person that conducts or performs, any
hotel management or franchising services or activities, including, without
limitation, the management of any Social Establishment (other than in connection
with the Delano and Morgans Hotels). Notwithstanding the foregoing, however, the
foregoing Persons may own, collectively, five percent (5%) or less of the
outstanding common stock of any entity which is a reporting company pursuant to
the Securities Exchange Act of 1934 and which conducts or performs hotel
management or franchising services or activities, provided said investment is at
all times passive in nature and Xxx Xxxxxxxx is not represented on the Board of
Directors. In addition to the foregoing, nothing in this Section 6.10 shall
prohibit Xxx Xxxxxxxx, Xxxxxxxx or any Affiliate of Xxx Xxxxxxxx from holding
passive investments in non-public companies, whatever the business of such
companies, so long as (i) the total capital contributions of Xxx Xxxxxxxx,
Xxxxxxxx or any other Xxxxxxxx Affiliates in connection with such investment do
not exceed $500,000, (ii) Xxxxxxxx notifies the Company of any such initial
investment in a non-public company and subsequent investments therein, (iii)
such investment is not intended to circumvent any other restrictions on Xxx
Xxxxxxxx, Xxxxxxxx or any Xxxxxxxx Affiliate contained in this agreement and
(iv) Xxx Xxxxxxxx continues to spend substantially all of his time discharging
his duties to the Company. For purposes of this Agreement, in no event shall
either Pilevsky or Xxxxxxxx be deemed Affiliates of one another.
(b) Additional Restrictions on Xxxxxxxx. In addition to the restrictions
set forth in subsection (a) of this Section 6.10, from and after the date of
Transfer by Xxxxxxxx of all or substantially all of its Base Interest in the
Company pursuant to the terms of this Agreement (the "Transfer Date") and until
a date which is the later to occur of (x) one year after Xxxxxxxx Outside Date
and (y) three (3) years from the Transfer Date, neither Xxxxxxxx nor Xxx
Xxxxxxxx nor any Xxxxxxxx Affiliate (other than a Person in which Xxxxxxxx is
permitted to own an interest pursuant to the third sentence of Section 6.10(a))
shall (i) purchase, offer or agree to purchase, directly or indirectly, any
securities or assets of the Company or its Affiliates; (ii) to the extent then
relevant (a) sponsor or engage, directly or any "solicitation" or "proxies" to
vote or "consents" (as such terms are used in the rules and regulations of the
Securities and Exchange Commission), or to seek to advise or influence any
person with respect to the voting of any voting securities of the Company and
its Affiliates; (b) initiate or support, directly on indirectly, any
"stockholder proposal" with respect to the Company or its Affiliates; or (c)
form, join or in any way participate in a "group" as defined in Section 13(d)(3)
of the Exchange Act in connection with any of the foregoing. Additionally, until
the later to occur of (x) the Xxxxxxxx Outside Date and (y) two
32
(2) years from the Transfer Date, neither Xxxxxxxx, Xxx Xxxxxxxx nor any
Xxxxxxxx Affiliate (other than a Person which Xxxxxxxx is permitted to own an
interest in pursuant to the third sentence of Section 6.10(a)) shall solicit the
employment services of any then current employee of the Company or contractually
induce any employee of the Company to leave the employment of the Company.
(c) Xxxxx Hotel. Xxxxxxxx hereby agrees that to the extent Xxxxxxxx or
any Affiliate of Xxxxxxxx (excluding the Company or its Subsidiaries) receives
any interest in or derives any fee or other income, directly or indirectly, from
the Xxxxx Hotel, or proceeds with respect to the disposition thereof, Xxxxxxxx
shall cause the contribution of any such interest or proceeds to the Company,
provided that the Company pays all tax liabilities associated with such receipt
or contribution.
(d) Outstanding Royalton Interests. With respect to the remaining
one-third equity interest in Royalton, LLC held by Apollon, LLC, the Board of
Mangers hereby consents, as a Supermajority Decision, to the acquisition thereof
by the Company at a price not to exceed the price paid to Affiliates of Xxxxxxxx
and Pilevsky on the date hereof for their respective one-third interests in
Royalton, LLC (held through 44th Hotel Associates II).
(e) Morgans Hotel. If requested in writing by NorthStar, prior to
September 30, 1998, Xxxxxxxx agrees to cause MHG (New York) Corp. and MHG (New
York) Associates, L.P. to sell up to 49% of their respective interests in MHG
Hotel Associates, L.P. to the Company. The purchase price for such interests
shall be equal to that amount that would be realized by such entities for the
sale of such interests in connection with the sale of the Morgans Hotel to a
third party for $30 million, subject to customary New York hotel closing
adjustments and payment of transfer and sales taxes, to the extent applicable,
and if in conjunction with the sale of other interests in the Morgans Hotel,
only if such amounts are paid by the other sellers.
(f) Delano Hotel. If requested by NorthStar, Xxxxxxxx agrees to use
reasonable efforts to cause Xxxx Xxxxxx, Xxxxx Xxxxx, Xxx Xxxxx and Xxxxxxx
Xxxxx (the "Investors") to sell to the Company their respective interests
(collectively, the "Investor Interests") in MHG Beach Associates, L.P. ("MHG
Beach"). Xxxxxxxx also agrees to sell to the Company any such Investor
Interests, to the extent acquired by Xxx Xxxxxxxx, Xxxxxxxx or their respective
Affiliates, prior to June 30, 1999, at a price equal to the Targeted Amount,
subject to the adjustments provided for in the next sentence. To the extent that
the amount such Investors Interests are purchased for is less than the amount
that such Investor Interests would be entitled to receive if the Delano Hotel
were sold to a third party for $65 million, subject to customary New York hotel
closing adjustments and Beach Hotel Associates Limited Partnership and MHG Beach
were both liquidated on the date of purchase by such third party (such amount,
the "Targeted Amount"), then, upon acquisition of the Investor Interests by the
Company, the Company shall pay to Xxxxxxxx an amount equal to one-half of the
difference between the Targeted Amount and the amount actually paid for such
Investor Interests by the
33
Company (either directly to the Investors or to Xxx Xxxxxxxx, Xxxxxxxx or their
respective Affiliates for the purchase of such Investor Interests). Xxxxxxxx
also agrees, to the extent same would not be in violation of, or subject Xxx
Xxxxxxxx to any penalty under, the Partnership Agreement of MHG Beach, to
negotiate in good faith to sell to the Company, prior to June 30, 1999, a
portion of the Class B Limited Partnership Interests in MHG Beach now owned or
hereafter acquired by Xxx Xxxxxxxx or his Affiliates for a purchase price equal
to that amount that would be realized by such entities for the sale of such
interests in connection with the sale of the Delano Hotel to a third party for
$65 million, subject to customary New York hotel closing adjustments, as of the
date of transfer.
(g) Reimbursement of Xxxxxxxx Costs. With respect to any of the
contributions set forth in Sections 6.10(b) through (e) hereof, the Company
shall pay all of Xxxxxxxx'x out-of-pocket costs, reimbursable to third-party
professionals, in connection therewith.
(h) Key Man Life Insurance. Xxx Xxxxxxxx agrees to give the Company (i) a
collateral assignment of Massachusetts Mutual Life Insurance Company Policy
#6,179,903, which policy has a face amount of $4,000,000 and Metropolitan
Insurance and Annuity Company Policy #940550003p, which policy has a face amount
of $4,000,000 (and the Company agrees to pay all premiums due with respect to
such policies and Xxx Xxxxxxxx shall not incur any out-of-pocket costs in
connection with maintaining the coverage afforded under such policies), and,
(ii) a secondary collateral assignment, to the extent that he is able to do so,
in Massachusetts Mutual Life Policy # 6199081 and Aetna Life Insurance Policy #
W4314476, each in the face amount of five million dollars ($5,000,000), which
have been previously collaterally assigned to CS First Boston Mortgage Capital
Corp.("CSFB"), in connection with a loan related to the Delano Hotel and, (iii)
when and if the purchase of the Morgans Hotel by the company occurs, a
collateral assignment of Massachusetts Mutual Life Insurance Company Policy #
6090455, to the extent the current collateral assignee of such policy releases
same. As between the Company and Xxxxxxxx, such assignment shall be effective as
of the date hereof. To the extent CSFB or the owner of the Morgans Hotel
releases the collateral assignment of the insurance policies described in (ii)
and (iii), Xxx Xxxxxxxx shall not collaterally assign them to any other Person
and the Company shall pay all costs and expenses in connection with maintaining
the insurance coverage under such policies and Xxx Xxxxxxxx shall not incur any
out-of-pocket costs in connection with maintaining the coverage afforded under
such policies. Xxx Xxxxxxxx also agrees to reasonably cooperate with the Company
in obtaining additional key man life insurance policies for the benefits of
Company, including taking physical examinations reasonably consented to by Xxx
Xxxxxxxx.
Section 6.11 Tax Matters Member. NorthStar is hereby authorized to act
as the "tax matters partner" under the Code and in any similar capacity under
state or local law. As such, NorthStar (the "Tax Matters Member") is
authorized, to the extent provided in Code -sections-6221 through 6231, to
represent the Company (and all Subsidiaries) and the Members (other than
Pilevsky) before taxing authorities or courts of competent jurisdiction in
tax matters
34
affecting the Company and its Members and to file any tax returns and to execute
any agreements or other documents relating to or affecting such tax matters,
including agreements or other documents that bind the Members with respect to
such tax matters or otherwise affect the rights of the Company and its Members,
provided, the Tax Matters Member shall reasonably consult with Xxxxxxxx and its
representatives (including its accountants) with respect to its representation
of the Company, with respect to all tax matters and Xxxxxxxx shall have the
right to represent Xxxxxxxx with respect to any tax matters solely applicable to
Xxxxxxxx and not NorthStar. The Tax Matters Member shall not be liable,
responsible or accountable in damages or otherwise to the Company or any Member
for any action taken in good faith and without negligence as Tax Matters Member
in connection with the examination by the Internal Revenue Service of the
Company's Federal partnership tax return or the determination, protest or
adjudication of any Federal or state income tax liability of any Member
resulting from the Company. Notwithstanding the foregoing to the contrary,
however, the Tax Matters Member shall use all reasonable efforts to avoid taking
any action that would result in a materially adverse tax consequence to any
Member so long as the consequence of refraining from such action would not
materially prejudice the rights or tax position of any other Member and would
not have a potentially adverse affect on the rights or tax position of the
Company, such determination to be made by the Tax Matters Member in its sole and
absolute discretion.
ARTICLE VII
DISTRIBUTIONS AND ALLOCATIONS
Section 7.1 Distributions.
(a) All distributions of Net Capital Proceeds pursuant to this
Section 7.1 shall be made at such times and in such amounts as shall be
determined by the Supermajority Decision of the Board of Managers. All
distributions of Ordinary Cash Flow shall be made monthly and reconciled on an
annual basis.
(b) All amounts withheld pursuant to the Code or any provision of any
foreign, state or local tax law with respect to any payment, distribution or
allocation to the Company or the Members shall be treated as amounts distributed
to the Members pursuant to this Article VII for all purposes of this Agreement.
The Board of Managers is authorized to withhold from distributions made pursuant
to this Article VII, or with respect to allocations, to the Members and to pay
over to any Federal, foreign, state or local government, any amounts required to
be so withheld pursuant to the Code or any provision of any other Federal,
foreign, state or local law and shall allocate such amounts to those Members
with respect to which such amounts were withheld.
(c) Subject to Section 7.2, Net Capital Proceeds received by the Company
shall be distributed to the Members on the following basis:
35
(i) First, pro rata to the Members based on Unreturned Capital
Contributions until NorthStar has received an Internal Rate
of Return equal to 12% per annum; then
(ii) Second, (A) 4.125% to Xxxxxxxx and .875% to Pilevsky, less,
with respect to Pilevsky, any amounts theretofore paid or
payable to Pilevsky pursuant to Sections 7.1(c)(i) and
7.1(c)(ii)(B), to the extent such amounts have not previously
been offset against amounts paid under this Section and (B)
95% to the Members (including Xxxxxxxx and Pilevsky) on a pro
rata basis based upon the Members' respective Percentage
Interests, until NorthStar has received an Internal Rate of
Return of 15%; then
(iii) Lastly, (A) 8.25% to Xxxxxxxx and 1.75% to Pilevksy, less,
with respect to Pilevsky, any amounts theretofore paid or
payable to Pilevsky pursuant to Sections 7.1(c)(i),
7.1(c)(ii)(B) and
7.1(c)(iii)(B), to the extent such amounts have not
previously been offset against amounts paid under this
Section and (B) 90% to the Members (including Xxxxxxxx and
Pilevsky) on a pro rata basis based upon the Members'
respective Percentage Interests.
(d) Subject to Section 7.2, Ordinary Cash Flow received by the Company
with respect to Operating Assets shall be distributed to the Members on the
following basis:
(i) First, pro rata to the Members based on Unreturned Capital
Contributions until NorthStar has received a non-cumulative
return on Operating Equity equal to 12% per annum, not
compounded; then
(ii) Second, (A) 4.125% to Xxxxxxxx and .875% to Pilevsky, less,
with respect to Pilevsky, any amounts theretofore paid or
payable to Pilevsky pursuant to Sections 7.1(d)(i) and
7.1(d)(ii)(B), to the extent such amounts have not previously
been offset against amounts paid under this Section and (B)
36
95% to the Members (including Xxxxxxxx and Pilevsky) on a pro
rata basis based upon the Members' respective Percentage
Interests, until NorthStar has received a simple annual
return of 15% on its Capital Contributions constituting
Operating Equity; then
(iii) Lastly, (A) 8.25% to Xxxxxxxx and 1.75% to Pilevsky, less,
with respect to Pilevsky, any amounts therefore paid or
payable to Pilevsky pursuant to Sections 7.1(d)(i),
7.1(d)(ii)(B) and 7.1(d)(iii)(B), to the extent such amounts
have not previously been offset against amounts paid under
this Section and (B) 90% to the Members (including Xxxxxxxx
and Pilevsky) on a pro rata basis based upon the Members'
respective Percentage Interests.
(e) Subject to Section 7.2, Ordinary Cash Flow received by the Company
with respect to Developing Hotels shall be distributed to the Members on the
following basis:
(i) First, pro rata to the Members based on Unreturned Capital
Contributions until NorthStar has received a non-cumulative
return on its Unreturned Capital Contributions with
respect to Developing Hotels equal to 12% per annum, not
compounded; then
(ii) Second, (A) 4.125% to Xxxxxxxx and .875% to Pilevsky, less,
with respect to Pilevsky, any amounts theretofore paid or
payable to Pilevsky pursuant to Sections 7.1(e)(i) and
7.1(e)(ii)(B), to the extent such amounts have not previously
been offset against amounts paid under this Section and (B)
95% to the Members (including Xxxxxxxx and Pilevsky) on a pro
rata basis based upon the Members' respective Percentage
Interests, until NorthStar has received a simple annual
return of 15% on its Capital Contributions with respect to
Developing Hotels; then
(iii) Lastly, (A) 8.25% to Xxxxxxxx and 1.75% to Pilevsky, less,
with respect to Pilevsky, any amounts theretofore paid or
payable to Pilevsky pursuant to Sections 7.1(e)(i),
7.1(e)(ii)(B) and 7.1(e)(iii)(B), to the extent such amounts
have not previously been offset against amounts paid under
this Section and (B) 90% to the Members (including Xxxxxxxx
and Pilevsky) on a pro rata basis based upon the Members'
respective Percentage Interests.
(f) Intentionally Omitted.
(g) Rights and Obligations of Convertible Member. On the date hereof, the
Convertible Member has loaned the Convertible Loan Amount to the Company. The
Convertible Loan Amount shall bear interest on the daily outstanding principal
amount thereof, for each day from the date the Loan is made until the Mandatory
Conversion Date, at a rate per annum equal to the Convertible Loan Interest
Rate.
(i) Interest Payments. On each Convertible Loan Interest Payment
Date, the Convertible Loan Member shall receive an interest
payment from the Company, computed on the Weighted
37
Convertible Loan Amount outstanding during the immediately
prior Payment Period, at a rate equal to the Convertible Loan
Interest Rate for such Payment Period (the "Convertible Loan
Interest Payments").
(ii) Distributions of Capital Event Proceeds. Notwithstanding
anything to the contrary contained in Section 7.1(c), during
the Convertible Loan Term, all Capital Event Proceeds shall
be distributed solely to the Convertible Member (the
"Convertible Loan Principal Payments"), until the principal
balance of the Convertible Loan (and any accrued but unpaid
Convertible Loan Interest Payment) has been repaid in full.
(iii) Distributions of Ordinary Cash Flow. Notwithstanding anything
to the contrary contained herein, for purposes of calculating
Distributions under Sections 7.1(d) and (e), the amount of
Ordinary Cash Flow shall be calculated taking into account
the amount of any Convertible Loan Interest payments due.
Ordinary Cash Flow of the Company shall not be used to
amortize the Convertible Loan.
(iv) Mandatory Conversion. On the Mandatory Conversion Date, the
then outstanding principal balance of the Convertible Loan
(and any accrued but unpaid Convertible Loan Interest
Payment), if any (after giving effect to any Capital Event
Proceeds Distributed to the Convertible Member on such date),
shall be deemed a Capital Contribution of the Convertible
Member, deemed to have been made on a pari passu basis with
the Capital Contributions made on the date hereof and the
Convertible Member shall be allocated a Percentage Interest
in the Company based on such deemed Contribution. Thus, the
Percentage Interest of the Convertible Member on the
Mandatory Conversion Date shall be a fraction, the numerator
of which is the Convertible Loan Amount (and any accrued but
unpaid Convertible Loan Interest Payment) outstanding on the
Mandatory Conversion Date (after giving effect to any Capital
Event Proceeds Distributed to the Convertible Member or
Convertible Loan Interest Payments made on such date) and the
denominator of which is the total of all Capital
Contributions made on the date hereof (including the deemed
Capital Contribution of the Convertible Member on the
Mandatory Conversion Date, after giving effect to any Capital
Event Proceeds Distributed to the Convertible Member on such
date), and the Percentage Interest of each other Member (a
"Non-
38
Convertible Member") shall be decreased by an amount equal
to the product of (i) the Percentage Interest of the
Convertible Member immediately following the conversion of
the Convertible Loan into an Interest in the Company and (ii)
a fraction the numerator of which is the Percentage Interest
of the Non- Convertible Member, immediately prior to such
conversion, and the denominator of which is one hundred
percent (100%). Notwithstanding anything to the contrary
contained herein, it is the intention of the Members that all
Convertible Loan Interest Payments be made on or prior to the
Mandatory Conversion Date, and that there be no accrued but
unpaid Convertible Loan Interest Payments when the balance of
the Convertible Loan is converted into a Percentage Interest
in the Company. For purposes of calculating the Internal Rate
of Return with respect to deemed Capital Contributions of the
Convertible Member, all Convertible Loan Interests Payments
and the origination fee attributable to such deemed Capital
Contribution shall be included as Distributions to the
Convertible Member, made as of the date actually paid to the
Convertible Member.
(v) Origination Fee. On the date hereof the Convertible Member
shall be deemed to have earned a loan structuring and
origination fee equal to 1% of (x) the initial principal
balance of the Convertible Loan and (y) the outstanding
principal balance of the Xxxxx Xxxxxx Loan, which fee shall
not be paid by the Company, but shall be added to the
principal balance of the Convertible Loan.
(vi) Excess Interest. The Members intend and believe that each
provision of this Section 7.1 comports with all applicable
law, it being the intention of the Members to comply with the
laws of the State of New York with regard to the rate of
interest charged hereunder. It is agreed that if any
provision of this Section 7.1(g) providing for the payment of
interest or other charges, shall require the payment or
permit the collection of any amount in excess of the maximum
amount of interest permitted by law to be charged ("Excess
Interest"), then any Excess Interest that the Convertible
Member may have received hereunder shall be applied as a
credit against the unpaid Convertible Loan Amount and the
applicable interest rate or rates provided for herein shall
be automatically subject to reduction to the maximum lawful
rate allowed to be contracted for in writing under the
applicable usury laws of the State of New York, and this
Agreement shall be
39
deemed to have been, and shall be, reformed and modified to
reflect such reduction in such interest rate or rates; and
the Company shall not have any action or remedy against the
Convertible Member for any damages whatsoever arising out of
the payment or collection of any Excess Interest.
(h) For purposes of Sections 7.1(c), (d) and (e), the Percentage Interest
and Capital Account of Warrant Co. shall be as specified by NorthStar at such
time as the transfer permitted by Section 11.6(c) hereof takes place and when
such transaction takes place, the Percentage Interest and Capital Account of
NorthStar shall be reduced by the Percentage Interest and Capital Account
allocated, respectively, to Warrant Co.
Section 7.2 Limitations on Distribution. Notwithstanding any provision to
the contrary contained in this Agreement, the Company shall not make a
distribution to any Member on account of his or its interest in the Company if
such distribution would violate Section 508 of the New York Act or other
applicable law.
Section 7.3 Intentionally Omitted.
Section 7.4 Mandatory Tax Distributions.
(a) Notwithstanding any provision to the contrary contained in this
Article VII, to the extent that the Company has sufficient Cash Available for
Distribution, to facilitate the payment by the Members of their income tax
liability attributable to the Company's Profits for a calendar year, within 60
days after the end of the Company's fiscal year, the Board of Managers shall
distribute to each Member the amount, if any, by which (I)the product of such
Member's allocable share of taxable income for such fiscal year as will be
required to be shown on the U.S. federal information return of the Company for
such fiscal year (other than income or gain that is specifically allocated
pursuant to Section 704(c) of the Code or other comparable provisions of the
Code) multiplied by the sum of the maximum federal, New York State and New York
City personal income tax rates (taking into account the deductibility of state
and local taxes), exceeds (II) the amount, if any, of Cash Available for
Distribution distributed to such Member pursuant to Section 7.1 for such fiscal
year.
(b) In the event that the Company does not have sufficient Cash Available
for Distribution to make all distributions required by Section 7.4(a), the
Company shall distribute any Cash Available for Distribution to the Members in
proportion to the Members' respective distributable amounts thereunder.
Section 7.5 Profits and Losses. Subject to Section 7.6 hereof relating to
allocations in the case of Members admitted during the period as to which such
allocation applies:
40
(a) if the Company shall have an aggregate Profit from the date of its
inception to the end of the period for which an allocation is being made,
Profits for the period shall be allocated as follows:
(i) To the extent that Profits shall be less than the total of
all previous distributions (other than distributions
constituting a return of Capital Contributions or Additional
Capital Contributions, Convertible Loan Interest Payments,
and Convertible Loan Principal Payments), then, to the extent
possible, Profits for the period shall be allocated first to
the Members in such proportion as would cause the aggregate
amount of Profit allocated to each Member to equal the amount
of such prior distributions (other than distributions
constituting a return of Capital Contributions or Additional
Capital Contributions, Convertible Loan Interest Payments,
and Convertible Loan Principal Payments) made to such Member,
and
(ii) The remainder shall be allocated among the Members in the
same manner as if such excess had been distributed pursuant
to Sections 7.1(c), 7.1(d) and 7.1(e) hereof, as applicable,
other than distributions constituting a return of Capital
Contributions or Additional Capital Contributions,
Convertible Loan Interest Payments, and Convertible Loan
Principal Payments made to such Member
(b) if the Company shall have an aggregate Profit from the date of its
inception to the end of the period for which an allocation is being made, Loss
for the period shall be allocated in proportion to the cumulative previous
allocations to each Member of Profits and Losses;
(c) if the Company shall have an aggregate Loss from the date of its
inception to the end of the period for which an allocation is being made,
Profits for the period shall be allocated in proportion to the cumulative
previous allocations to each Member of Profits and Losses;
(d) if the Company shall have an aggregate Loss from the date of its
inception to the end of the period for which an allocation is being made, Loss
for the period shall be allocated in proportion to the Capital Accounts of the
Members until each Member's Capital Account has been reduced to zero and,
thereafter, in accordance with each Member's respective Percentage Interest;
41
(e) Notwithstanding anything contained in this Article VII to the
contrary, if there is a net decrease in partnership minimum gain during any
Fiscal Year, except as otherwise permitted by Sections 1.704-2(f)(2), (3), (4)
and (5) of the Regulations, items of Company income and gain for such taxable
year (and subsequent years, if necessary) in the order provided in
Section 1.704-2(j)(2)(i) of the Regulations shall be allocated among all Members
whose shares of partnership minimum gain decreased during that year in
proportion to and to the extent of such Member's share of the net decrease in
partnership minimum gain during such year, it being understood that the
allocation contained in this Section 7.5(e) is intended to be a minimum gain
chargeback within the meaning of Section 1.704-2 of the Regulations, and shall
be interpreted consistently therewith;
(f) Notwithstanding anything contained in this Article VII to the
contrary, if there is a net decrease in partner nonrecourse debt minimum gain,
except as provided in Section 1.704-2(i) of the Regulations, items of Company
income and gain for such taxable year (and subsequent years, if necessary) in
the order provided in Section 1.704-2(j)(2)(ii) of the Regulations shall be
allocated among all Members whose share of partner nonrecourse debt minimum gain
decreased during that year in proportion to and to the extent of such Member's
share of the net decrease in partner nonrecourse debt minimum gain during such
year, it being understood that this Section 7.5(f) is intended to comply with
the minimum gain chargeback requirement in Section 1.704-2 of the Regulations
and shall be interpreted consistently therewith;
(g) Notwithstanding any provisions of this Article VII to the contrary,
in the event any Member unexpectedly receives any adjustments, allocations, or
distributions described in Sections 1.704-1(b)(2)(ii)(d)(4),
1.704-1(b)(2)(ii)(d)(5), or 1.704-1(b)(2)(ii)(d)(6) of the Regulations, items of
Company income and gain (including gross income) shall be specially allocated to
each such Member in an amount and manner sufficient to eliminate, to the extent
required by the Regulations, the adjusted capital account deficit of such Member
as quickly as possible, provided that an allocation pursuant to this Section
7.5(g) shall be made only if and to the extent that such Member would have an
adjusted capital account deficit, it being understood that the allocation
contained in this Section 7.5(g) is intended to be a "qualified income offset"
within the meaning of Section 1.704-1(b)(2)(ii)(d) of the Regulations, and shall
be subject thereto;
(h) In accordance with Section 1.704-2(i)(1) of the Regulations, any item
of Company loss or deduction which is attributable to partner nonrecourse debt
for which a Member bears the economic risk of loss (such as a non-recourse loan
made by a Member to the Company or an otherwise non-recourse loan to the Company
that has been guaranteed by a Member) shall first be allocated to that Member to
the extent of the economic risk of loss that such Member bears with respect to
such partner non- recourse debt.
42
(i) In accordance with Section 1.704-2(b)(1) of the Regulations,
nonrecourse deductions (as defined in Section 1.704- 2(c) of the Regulations)
shall be allocated among the Members in proportion to their respective
Percentage Interests.
Section 7.6 Allocation Rules.
(a) In the event Members are admitted to the Company pursuant to this
Agreement on different dates, the Profits (or Losses) allocated to the
Members for each Fiscal Year during which Members are so admitted shall be
allocated among the Members in proportion to the Percentage Interests during
such Fiscal Year in accordance with -section- 706 of the Code, using any
convention permitted by law and selected by the Board of Managers.
(b) For purposes of determining the Profits, Losses or any other items
allocable to any period, Profits, Losses and any such other items shall be
determined on a daily, monthly or other basis, as determined by the Board of
Managers using any method that is permissible under -section- 706 of the
Code and the Treasury Regulations thereunder.
(c) Except as otherwise provided in this Agreement, all items of
Company income, gain, loss, deduction and any other allocations not otherwise
provided for shall be divided among the Members in the same proportions as
they share Profits and Losses for the Fiscal Year in question.
Section 7.7 Members' Share of Company Recourse Liabilities. In accordance
with Section 1.752-2 of the Regulations, each Member's share of the Company's
recourse liabilities (as defined in Section 1.752-1(a)(1) of the Regulations)
will be determined based on the extent, if any, to which such Member bears the
economic risk of loss (including through a guarantee of all or any portion of
outstanding Company or Subsidiary debt) with respect to such liabilities (as
determined in accordance with Section 1.752-2 of the Regulations). Neither the
Company nor any Member shall take any position inconsistent with the foregoing
in any filing, return, tax audit, tax controversy, closing agreement or
otherwise.
Section 7.8 Tax Allocation; Section 704(c) of the Code.
(a) In accordance with -section- 704(c) of the Code and the Treasury
Regulations thereunder, income, gain, loss and deduction with respect to any
property contributed to the capital of the Company shall, solely for income
tax purposes, be allocated among the Members so as to take account of any
variation between the adjusted basis of such property to the Company for
federal income tax purposes and its initial Gross Asset Value (computed in
accordance with the definition thereof in Section 1.1 hereof).
(b) In the event the Gross Asset Value of any Company asset is adjusted
pursuant to paragraph (ii) of the definition of "Gross Asset Value" contained in
Section 1.1 hereof, subsequent allocations of income, gain, loss and deduction
with respect to such asset shall take account of any variation between the
adjusted basis of such asset
43
for federal income tax purposes and its Gross Asset Value in the same manner
as under -section- 704(c) of the Code and the Treasury Regulations
thereunder.
(c) Any elections or other decisions relating to allocations under
this Section 7.8, including the selection of any allocation method permitted
under proposed Treasury Regulation -section- 1.704-3, shall be made by the
Board of Managers in any manner that reasonably reflects the purpose and
intention of this Agreement. Allocations pursuant to this Section 7.8 are
solely for purposes of federal, state and local income taxes and shall not
affect, or in any way be taken into account in computing, any Member's
Capital Account or share of Profits, Losses, other items or distributions
pursuant to any provision of this Agreement.
Section 7.9 Guaranty.
(a) As of the date hereof, in accordance with certain contribution
agreements of even date herewith, Xxxxxxxx and Pilevsky (or principals or
Affiliates thereof) will guarantee a portion of the indebtedness of the Company
currently outstanding on the Paramount Hotel, in an amount equal to the Xxxxxxxx
Debt Amount and the Pilevsky Debt Amount, respectively, from the date hereof
through the date of their respective deaths. Xxxxxxxx and Pilevsky acknowledge
that there can be no assurance that such lenders will accommodate the Board's
request or, if accommodated, the length and terms of such accommodation. The
Board of Managers, Xxxxxxxx, and Pilevsky acknowledge that Xxxxxxxx and Pilevsky
will bear the economic risk of loss (within the meaning of Section 1.752-2 of
the Regulations) with respect to that portion of the indebtedness of the Company
so guaranteed and agree to treat such guaranty consistently therewith in
accordance with Section 1.752-2 of the Regulations and Section 7.7 hereof.
(b) Xxxxxxxx and Pilevsky acknowledge that subsequent to the date hereof,
the Company may permit NorthStar or any Additional Member to guarantee a portion
of the indebtedness of the Company in connection with the contribution of assets
by NorthStar or such Additional Member. In such event, the amount of debt
available for guaranty by Xxxxxxxx and Pilevsky, if there be insufficient debt
available for guarantee by NorthStar or Additional Member, shall be reduced so
that the proportion of debt available for guaranty by Xxxxxxxx, Pilevsky and
NorthStar or such Additional Member, respectively, shall be in the ratio of each
guarantor's share of the income that would be recognized if such guarantor could
not guaranty any debt to the entire amount of income that would be so recognized
by all of the guarantors if none of them could guaranty any debt.
Notwithstanding the foregoing, if the mortgage loan secured by the Paramount
Hotel is discharged prior to January 1, 2000 and the payment pursuant to Section
11.7 has not been made to Pilevsky, the Company shall make available to Pilevsky
and Xxxxxxxx debt with a comparable risk factor for Pilevsky and Xxxxxxxx to
guaranty, in an amount up to the Pilevsky Debt Amount and the Xxxxxxxx Debt
Amount, if Pilevsky and Xxxxxxxx so choose to guaranty such debt.
44
(c) Any guarantees provided by Xxxxxxxx, Pilevsky and, if applicable,
NorthStar or any Additional Member, pursuant to this Section 7.9 shall be
provided pari passu with respect to one another.
(d) The Members hereby agree that, notwithstanding anything in this
Section 7.9 to the contrary, the Company shall maintain indebtedness in an
amount at least equal to the aggregate of the Pilevsky Debt Amount and the
Xxxxxxxx Debt Amount for period commencing on the date hereof and ending no
earlier than January 1, 2000, subject to the Company's option to reduce such
debt amount pursuant to Section 11.7(b) hereof.
ARTICLE VIII
BOOKS AND RECORDS; REPORTING
Section 8.1 Books, Records and Financial Statements.
(a) At all times during the continuance of the Company, the Company shall
maintain, at its principal place of business, separate books of account for the
Company that shall show a true and accurate record of all costs and expenses
incurred, all charges made, all credits made and received and all income derived
in connection with the operation of the Company business in accordance with
generally accepted accounting principles consistently applied, and, to the
extent inconsistent therewith, in accordance with this Agreement. Such books of
account, together with a certified copy of this Agreement, the Bylaws and the
Certificate, shall at all times be maintained at the principal place of business
of the Company and shall be open to inspection and examination at reasonable
times upon reasonable notice given not more than once per year by any Member or
Additional Member and their respective duly authorized representatives for any
purpose reasonably related to such Member's interest in the Company.
(b) The Company shall maintain at its principal place of business a
record of its Members, giving the names and addresses of all Members and the
Interest held by each Member. Subject to such reasonable standards (including
standards governing what information and documents are to be furnished and at
whose expense) as may be established by the Board of Managers from time to time,
each Member will have the right to obtain from the Company, from time to time
upon reasonable demand for any purpose reasonably related to the Member's
Interest, a record of the Company's Members.
Section 8.2 Accounting Method. For both financial and tax reporting
purposes and for purposes of determining Profits and Losses, the books and
records of the Company shall be kept on the accrual method of accounting applied
in a consistent manner and shall reflect all Company transactions and be
appropriate and adequate for the Company's business.
45
The books of account and records of the Company shall be maintained in
accordance with generally accepted accounting principles consistently applied
during the term of the Company, wherein all transactions, matters and things
relating to the business and properties of the Company shall be currently
entered.
Section 8.3 Audits. The financial statements of the Company shall be
audited each year by either Xxxxxx Xxxxxxxx LLP, Xxxxx Xxxxxx & Co. LLP or any
other independent certified "big six" public accounting firm, as selected by the
Board of Managers as a Supermajority Decision, with such audit to be accompanied
by a report of such accountant containing its opinion. The cost of such audit
will be an expense of the Company. A copy of any such audited financial
statements and accountant's report will be made available to the Members within
sixty (60) days after the close of each Fiscal Year, together with a statement
of such Member's Capital Account as of the close of such Fiscal Year, and
changes therein during such Fiscal Year; and a statement indicating such
Member's share of each item of Company income, gain, loss, deduction or credit
for such Fiscal Year for income tax purposes. Immediately after execution of
this Agreement, and thereafter as necessary, with respect to any Hotel Property
or other asset contributed to or acquired by the Company that does not have
audited historical financial statements appropriate for a public reporting real
estate investment trust, the Company shall retain an independent certified "big
six" public accounting firm, selected by the Board of Managers as a
Supermajority Decision, to conduct an audit of such Hotel Property or other
asset in order that the Company be provided with the requisite financial
information. The cost of such audit shall be an expense of the Company.
Section 8.4 Other Reports.
(a) Within forty-five (45) days after the end of each fiscal quarter, the
Officers of the Company shall prepare and transmit to each member of the Board
of Managers a status report and financials for the Company for such quarter and
the fiscal period then ended. Such report and financials shall include (a) an
unaudited balance sheet and statement of income, changes in equity and cash
flows for the Company as of and for the fiscal period then ended, (b) a report
analyzing and comparing the actual results of operations with the current annual
Budget, together with a narrative explanation of any significant variances, and
(c) a summary of prospective investments and their status.
(b) Within thirty (30) days after the end of each month, the Officers of
the Company shall prepare and transmit to each member of the Board of Managers
an executive summary and description of operations and financial results.
(c) On or before January 31 of each year beginning with 1998, the Chief
Executive Officer and the Company's other Officers shall prepare and submit the
Budget and Business Plan for the coming year to the Board of Managers for its
approval. If the Board of Managers withholds its approval of either said Budget
or Business Plan, the Company shall operate pursuant to the Budget and Business
Plan for the prior year, except that with respect to
46
any line item in the previous year's Budget, the Company may spend one hundred
five percent (105%) of the amount corresponding to such line item during the
period prior to the approval of the Budget for such year.
ARTICLE IX
TAX MATTERS
Section 9.1 Certain Notices. The Tax Matters Member shall, within 10 days
of the receipt of any notice from the Internal Revenue Service in any
administrative proceeding at the Company level relating to the determination of
any Company item of income, gain, loss, deduction or credit, mail a copy of such
notice to each Partner.
Section 9.2 Right to Make Section 754 Election. The Class B Managers
may vote to make or revoke, on behalf of the Company, an election in
accordance with -section- 754 of the Code, so as to adjust the basis of
Company property in the case of a distribution of property within the meaning
of -section- 734 of the Code, and in the case of a transfer of a Company
interest within the meaning of -section- 743 of the Code. Each Member shall,
upon request of the Tax Matters Member, supply the information necessary to
give effect to such an election.
Section 9.3 Taxation as Partnership. The Company shall be treated as a
partnership for U.S. federal income tax purposes. The Members agree to take all
reasonable actions, including the amendment of this Agreement and the execution
of such other documents, agreements and instruments as may reasonably be
required in order for the Company to qualify for and receive "partnership"
treatment for federal, state and local income tax purposes.
ARTICLE X
LIABILITY, EXCULPATION AND INDEMNIFICATION
Section 10.1 Liability; Adjustment of Percentage Interests upon Defaulted
Additional Capital Contributions.
(a) Except as otherwise provided by the New York Act, the debts,
obligations and liabilities of the Company, whether arising in contract, tort or
otherwise, shall be solely the debts, obligations and liabilities of the
Company, and no Covered Person shall be obligated personally for any such debt,
obligation or liability of the Company solely by reason of being a Covered
Person.
47
(b) (i) Except as otherwise provided by the New York Act or this
paragraph (b), a Member shall have no liability in excess of (A) the amount
of its Capital Contributions, (B) its share of any assets and undistributed
profits of the Company, and (C) the amount of any distributions wrongfully
distributed to it. Additional Capital Contributions to the Company shall
not be mandatory, but the Board of Managers (by approval of a the Class A
Member and a majority of the Class B Member unless such call does not
constitute a Supermajority Decision) may issue calls for Additional Capital
Contributions from Members, any such call not to require such Additional
Capital Contributions on less than five (5) business days' prior written
notice.
(ii) If made, calls (each, a "Capital Call") for Additional Capital
Contributions shall be funded by the Members pro rata based upon the
Members' Percentage Interests and similarly, the Members shall be permitted
to fund any Additional Capital Contribution not funded by a Defaulting
Member pursuant to subparagraph (iii) of this Section 10.1(b) pro rata
based upon the non-Defaulting Members' Percentage Interests.
(iii) If a Member (a "Defaulting Member") does not meet a call for
Additional Capital Contributions, either Xxxxxxxx or NorthStar may pay to
the Company the amount of such noncontributing Member's Additional Capital
Contribution, which amount shall be an Additional Capital Contribution on
the part of NorthStar or Xxxxxxxx, as applicable.
(iv) Notwithstanding anything to the contrary set forth herein, in the
event that a Defaulting Member fails to make all or a portion of its pro
rata share of an Additional Capital Contribution and such default continues
for a period of seven business days after the receipt of notice from a
non-defaulting Member requiring such contributions (the "Default Date"),
then the Members' Percentage Interests shall be adjusted as set forth in
the next sentence. The Percentage Interest of each Defaulting Member, with
respect to each Additional Capital Contribution where such Member does not
fund its pro rata share, shall be decreased by an amount equal to (A) such
Defaulting Member's Percentage Interest, immediately prior to the
applicable Capital Call, multiplied by (B) a fraction, the numerator of
which is the total of all Additional Capital Contributions made by the
Members pursuant to the applicable Capital Call and the denominator of
which is the sum of (A) the Fair Market Value of the equity of the Company
determined as of the Default Date plus (B) the total of all Additional
Capital Contributions made by the Members pursuant to the applicable
Capital Call. The Percentage Interest of each non-Defaulting Member shall
be increased by an amount equal to the product of (A) the amount by which
the Defaulting Member's Percentage Interest was decreased and (B) a
fraction the numerator of which is the Additional Capital Contribution made
by such non-Defaulting Member pursuant to the applicable
48
Capital Call and the denominator of which is the total of all Additional
Capital Contributions made by all of the Members pursuant to the applicable
Capital Call.
Section 10.2 Exculpation.
(a) No Covered Person shall be liable to the Company or any other Covered
Person for any loss, damage or claim incurred by reason of any act or omission
performed or omitted by such Covered Person in good faith on behalf of the
Company and in a manner reasonably believed to be within the scope of authority
conferred on such Covered Person by this Agreement.
(b) A Covered Person shall be fully protected in relying in good faith
upon the records of the Company and upon such information, opinions, reports or
statements presented to the Company by any Person as to matters the Covered
Person reasonably believes are within such other Person's professional or expert
competence and who has been selected with reasonable care by or on behalf of the
Company, including information, opinions, reports or statements as to the value
and amount of the assets, liabilities, Profits, Losses, Capital Event Proceeds
or Cash Available For Distribution or any other facts pertinent to the existence
and amount of assets from which distributions to Members might properly be paid.
Section 10.3 Fiduciary Duty.
(a) Subject to the relevant provisions of the New York Act and other
applicable law, to the extent that, at law or in equity, a Covered Person has
duties (including fiduciary duties) and liabilities relating thereto to the
Company or to any other Covered Person, a Covered Person acting under this
Agreement shall not be liable to the Company or to any other Covered Person for
its good faith reliance on the provisions of this Agreement. The provisions of
this Agreement, to the extent that they restrict the duties and liabilities of a
Covered Person otherwise existing at law or in equity, are agreed by the parties
hereto to replace such other duties and liabilities of such Covered Person.
(b) Unless otherwise expressly provided herein, (i) whenever a conflict
of interest exists or arises between Covered Persons, or (ii) whenever this
Agreement or any other agreement contemplated herein or therein provides that a
Covered Person shall act in a manner that is, or provides terms that are, fair
and reasonable to the Company or any Member, the Covered Person shall resolve
such conflict of interest, taking such action or providing such terms,
considering in each case the relative interest of each party (including its own
interest) to such conflict, agreement, transaction or situation and the benefits
and burdens relating to such interests, any customary or accepted industry
practices, and any applicable generally accepted accounting practices or
principles. In the absence of bad faith by the Covered Person, the resolution,
action or term so made, taken or provided by the Covered Person shall not
constitute a breach of this Agreement or any other agreement contemplated herein
or of any duty or obligation of the Covered Person at law or in equity or
otherwise.
49
Nothing in this Section 10.3 shall be deemed to otherwise limit the rights of
the Members under Sections 6.3, 6.4 and 6.5 hereof.
(c) Whenever in this Agreement a Covered Person is permitted or required
to make a decision (a) in its "discretion" or under a grant of similar authority
or latitude, the Covered Person shall be entitled to consider such interests and
factors as it desires, including its own interests, and shall have no duty or
obligation to give any consideration to any interest of or factors affecting the
Company or any other Person, or (b) in its "good faith" or under another express
standard, the Covered Person shall act under such express standard and shall not
be subject to any other or different standard imposed by this Agreement or other
applicable law.
(d) Notwithstanding anything herein to the contrary, Pilevsky shall have
no fiduciary duties to the Company.
Section 10.4 Indemnification. To the fullest extent permitted by
applicable law, a Covered Person shall be entitled to indemnification from the
Company for any loss, damage or claim incurred by such Covered Person by reason
of any act or omission performed or omitted by such Covered Person in good faith
on behalf of the Company and in a manner reasonably believed to be within the
scope of authority conferred on such Covered Person by this Agreement; provided,
however, that any indemnity under this Section 10.4 shall be provided out of and
to the extent of Company assets only, and no Covered Person shall have any
personal liability on account thereof. The rights to indemnification and to the
advancement of expenses conferred in this Article X shall be contract rights and
such rights shall continue as to a Covered Person who has ceased to be a Covered
Person, shall inure to the benefit of the Covered Person's heirs, executors and
administrators, and shall not be exclusive of any other right that any Covered
Person may have or hereafter acquire under any statute, agreement, vote of the
Board of Managers or otherwise.
Section 10.5 Expenses. To the fullest extent permitted by applicable law,
expenses (including legal fees, disbursements and court costs) incurred by a
Covered Person in defending any claim, demand, action, suit or proceeding shall,
from time to time, be advanced by the Company prior to the final disposition of
such claim, demand, action, suit or proceeding upon receipt by the Company of an
undertaking by or on behalf of the Covered Person to repay such amount if it
shall be determined that the Covered Person is not entitled to be indemnified as
authorized in Section 10.4 hereof.
Section 10.6 Insurance. The Company may purchase and maintain insurance,
to the extent and in such amounts as the Board of Managers shall, in its sole
discretion, deem reasonable, on behalf of Covered Persons and such other Persons
as the Board of Managers shall determine, against any liability that may be
asserted against or expenses that may be incurred by any such Person in
connection with the activities of the Company or such indemnities, regardless of
whether the Company would have the power to indemnify such
50
Person against such liability under the provisions of this Agreement. In
particular, the Company shall obtain, to the extent available at commercially
reasonable rates, insurance in favor of the Board of Managers and the Officers
of the Company with respect to actions and omissions by them in the fulfillment
of their respective duties hereunder. The Board of Managers and the Company may
enter into indemnity contracts with Covered Persons and such other Persons as
the Board of Managers shall determine and adopt written procedures pursuant to
which arrangements are made for the advancement of expenses and the funding of
obligations under Section 10.5 hereof and containing such other procedures
regarding indemnification as are appropriate.
ARTICLE XI
TRANSFERABILITY AND SUBSTITUTE MEMBERS;
RIGHT OF FIRST OFFER; TAG-ALONG RIGHT;
TRANSFERS AFFECTING PILEVSKY
Section 11.1 Transferability of Interests.
(a) A Member may Transfer its Interest or any direct or indirect interest
in its Interest only by complying with this Section 11.1. Neither Xxxxxxxx nor
Pilevsky may Transfer all or any portion of their respective Interests during
the Lockout Period, except as set forth in Section 11.1(c) below.
(b) Except as otherwise provided in this Article XI, any Transfer by a
Member shall be a Supermajority Decision. If all approvals required hereby are
obtained, or if no approval is required, for any Transfer, such Transfer shall,
nevertheless, not entitle the transferee to become a Substitute Member or to be
entitled to exercise or receive any of the rights, powers or benefits of a
Member other than the right to receive distributions to which the transferring
Member would be entitled, unless or until the following conditions are
satisfied:
(i) The transferor and the transferee execute such documents and
instruments of conveyance and such amendments to this Agreement as may be
necessary or appropriate in the opinion of counsel to the Company to effect
such Transfer, to confirm the transferee's agreement to be bound by the
provisions of this Article XI and, if the Board of Managers consents, to
reflect the admission of the Transferee as a Member.
(ii) The Company shall receive, prior to such Transfer, an opinion
of counsel reasonably satisfactory to the Company confirming that such
Transfer (A) is not contrary to, or in violation of, any applicable
securities law, (B) is permitted under this Agreement, (C) will not affect
the Company's status as a limited liability company
51
under the applicable laws of the State of New York and (D) will not
terminate the Company as a partnership for Federal income tax purposes.
(iii) The transferor and transferee shall furnish the Company with
the transferee's taxpayer identification number, sufficient information to
determine the transferee's initial adjusted cost basis in the Transferred
Interest and any other information reasonably necessary to permit the
Company to file all required Federal, state and foreign tax returns and
other legally required information statements or returns. Without limiting
the generality of the foregoing, the Company shall not be required to make
any distribution otherwise provided for in this Agreement with respect to
any Transferred Interest until it has received such information.
(iv) The transferor and the transferee thereof pay all reasonable
costs and expenses incurred by the Company in connection with such
Transfer.
(c) Notwithstanding anything to the contrary in this Article XI, and
without the consent of the Board of Managers or any other Member, at any time
hereafter;
(i) Xxxxxxxx, Pilevsky and any Additional Member who is an
individual may, upon death, Transfer his Interest or an interest therein to
the estate, legatees or devisees of Xxx Xxxxxxxx, Xxxx Xxxxxxxx or such
individual, respectively,
(ii) each of Xxxxxxxx and Pilevsky may Transfer all or any portion
of their respective Interests, as the case may be, to members of the
immediate family of Xxx Xxxxxxxx, with respect to Xxxxxxxx, or Xxxx
Xxxxxxxx, with respect to Pilevsky, or to any corporation, partnership,
limited liability company, trust or other entity all of the equity
interests in which are owned by members of such individual's immediate
family; provided that Xxx Xxxxxxxx or Xxxx Xxxxxxxx, as the case may be,
can demonstrate that he Controls such transferee or transferees; and
(iii) NorthStar may Transfer all or any part of its interest to any
of its Affiliates.
Section 11.2 Recognition of Transfer by Company. No Transfer, or any part
thereof, that is in violation of this Article XI shall be valid or effective,
and neither the Company nor the Board of Managers shall recognize the same for
the purpose of making distributions pursuant to Section 7.1 hereof with respect
to such Interest or part thereof. Neither the Company nor the Board of Managers
shall incur any liability as a result of refusing to make any such distributions
to the transferee of any such invalid Transfer.
Section 11.3 Effect of Transfers.
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(a) The Transfer of an Interest shall not cause the dissolution of the
Company.
(b) If a Transfer of an Interest occurs during any Fiscal Year, Profits,
Losses, each item of income, gain, loss, deduction or credit and all other items
attributable to the Transferred Interest for such Fiscal Year shall be divided
and allocated between the Transferor and the Transferee by taking into account
their varying interests during the Fiscal Year in accordance with Code
-section-706(d), using any conventions permitted by law and selected by the
Board of Managers. All distributions on or before the date of the Transfer
shall be made to the Transferor and all distributions thereafter shall be
made to the Transferee. Solely for purposes of making such allocations and
distributions, the Company shall recognize a transfer made in accordance with
the terms of this Article XI not later than the end of the calendar month
during which it is given notice stating the date such Interest was
transferred and such other information as the Board of Managers may
reasonably require. The Board of Managers and the Company shall incur no
liability for making allocations and distributions in accordance with the
provisions of this Section.
Section 11.4 NorthStar/Xxxxxxxx Right of First Offer.
(a) If after the expiration of the Lockout Period, either Xxxxxxxx or
NorthStar (the "Offering Member") shall decide to sell all, or any part of its
Interest (the "Offered Interest") other than pursuant to Section 11.1(c), then
the Offering Member shall give the other such Member (the "Offeree Member")
prior written notice thereof (the "Interest Sale Notice"), setting forth:
(i) the price for which the Offering Member would like to sell such Offered
Interest to an unaffiliated third party for cash (the "Target Interest Price")
and (ii) if the Offering Member is Xxxxxxxx, a statement whether Xxx Xxxxxxxx
intends to maintain any interest in, or association with, such prospective
buyer, including, without limitation, whether he will agree to be employed by
such buyer in a consulting, management or similar role, any such agreement to be
deemed a material term of such offer, and which, if NorthStar, as the Offeree
Member, exercises its option to purchase the Offered Interest, shall inure to
the benefit of NorthStar, as the Offeree Member, as if initially made with
NorthStar, as the Offeree Member in accordance with its terms, and which shall
be evidenced by Xxxxxxxx'x written agreement with NorthStar, as Offeree Member.
Simultaneously, with delivery of the Interest Sale Notice to the Offeree Member,
for informational purposes only the Offering Member shall provide a copy of such
Interest Sale Notice to Pilevsky.
(b) Upon receipt of an Interest Sale Notice, the Offeree Member shall
have the right, exercisable in its sole discretion, by written notice to the
Offering Member to either (I) purchase or have its designee purchase such
Offered Interest at the Target Interest Price or (II) permit the Offering Member
to use all reasonable endeavors to negotiate a sale of the entire Company or all
or substantially all (as defined at the end of this paragraph) of the Company's
assets and investments, provided that the Offering Member shall employ for such
purpose an investment advisor reasonably acceptable to the Offeree Member, the
fees
53
and expenses of such advisor to be paid by the Company. The Offeree Member shall
exercise its option under clause (I) or clause (II) of the preceding sentence
within sixty (60) days, time being of the essence, after receipt of the Interest
Sale Notice (such sixtieth day, the "First Interest Election Date"). If the
Offeree Member elects to purchase such Offered Interest, then the closing of
such acquisition shall occur on or prior to the date which is one hundred twenty
(120) days, time being of the essence, after the date on which the Offeree
Member delivers to the Offering Member written notice of its election to
purchase the Offered Interest, and the purchase price for such Offered Interest
shall be the Target Interest Price. The Offered Interest shall be sold to the
Offeree Member free and clear of all liens, pledges, security interests and
other encumbrances, other than encumbrances relating to Obligations of the
Company, or unless otherwise indicated in the Interest Sale Notice. If the
Offeree Member elects to permit the Offering Member to cause a sale, at the
Offering Member's option, of the Company, or all or substantially all of the
Company's assets and investments, the Offering Member shall market the Company
in a diligent manner and shall keep the Offeree Member informed of all material
decisions made with respect to the marketing and sale of the Company. The other
Members (other than Pilevsky) shall reasonably cooperate with the Offering
Member in such efforts. Any such sale must be consummated, if at all, within
nine (9) months after the First Interest Election Date, time being of the
essence (such date, the "Offeree Sale Deadline"). In the case of a sale of the
entire Company, the amount received with respect to the sale of the Company
must, when distributed to the Offeree Member in accordance with Section 7.1(c),
on a proportionate basis for the percentage interest being sold by the Offeree
Member, yield to the Offeree Member an amount greater than or equal to the
amount that the Target Interest Price would have yielded the Offering Member
with respect to the Offered Interest. In the case of a sale of substantially all
of the Company's assets or investments, the amount received with respect to the
sale of such assets or investments must, when distributed to the Offeree Member
in accordance with Section 7.1(c), on a proportionate basis for that portion of
the assets or investments sold that are represented by the Offeree Member's
percentage interest in the Company, yield to the Offeree Member an amount
greater than or equal to that which the Target Interest Price would have yielded
the Offering Member for a sale of the assets or investments of the Company
represented by the Offered Interest. The Company shall not be sold pursuant to
any offer not meeting such conditions unless consented to in writing by the
Offeree Member and the Offering Member. For the purposes of this Section 11.4,
"substantially all of the Company's assets or investments" shall mean eighty
percent (80%) or more of such assets or investments calculated on the basis of
the Fair Market Value of the assets or investments of the Company.
(c) If the Offeree Member does not timely elect or is deemed not to have
elected to either purchase the Offered Interest in accordance with Section
11.4(b)(I) or to permit the Offering Member to endeavor to negotiate a sale of
the Company in accordance with Section 11.4(b)(II), then notwithstanding
anything to the contrary in Section 11.1, the Offering Member shall have the
right, during the nine (9) month period commencing on the earlier of (i) the
date the Offeree Member notifies the Offering Member that it will not exercise
its rights under this Section 11.4 and (ii) the First Interest Election Date, to
sell the
54
Offered Interest to any Person at a price not less than ninety-five (95%) of the
Target Interest Price. If such nine (9) month period has expired and the
Offering Member has not sold the Offered Interest, then the Offering Member
shall not have the right to sell the Offered Interest without re-offering it to
the Offeree Member in accordance with all of the provisions of this Section
11.4.
(d) If the Offeree Member elects to purchase the Offered Interest, and
the Offering Member tenders the Offered Interest in accordance with this Section
11.4 (and free and clear of all liens, and other encumbrances, except as
otherwise identified in the Interest Sale Notice) and the Offeree Member fails
to close the acquisition for any reason, then notwithstanding anything to the
contrary, the Offering Member shall have the right, at any future date, to sell
the Offered Interest to unaffiliated third parties without re- offering it to
the Offeree Member in accordance with the provisions of this Section 11.4,
provided, however, that if the Offering Member does procure an unaffiliated
third-party purchaser, it shall issue another Interest Sale Notice to the
Offeree Member and the Offeree Member shall still be entitled to exercise its
Tag Along Right pursuant to Section 11.5 hereof.
Section 11.5 NorthStar/Xxxxxxxx Tag-Along Right.
(a) Upon receipt of an Interest Sale Notice, either NorthStar or Xxxxxxxx
shall in addition to its rights to an election pursuant to Section 11.4(b)
hereof, have the right in its sole discretion to continue to retain its Interest
in the Company, or, to sell or contribute, concurrently with the sale or
contribution by the Offering Member and on the same terms, including the same
proportionate valuation (the "Tag-Along Right"), its Interest in the Company by
written notice of the exercise of such Tag-Along Right to the Offering Member
within thirty (30) days after its receipt of the Interest Sale Notice (the
"Tag-Along Exercise Notice"). In the event that the Offeree Member fails to send
the Offering Member a Tag-Along Exercise Notice within thirty (30) days after
its receipt of the Interest Sale Notice, the Offeree Member will be deemed to
have elected to continue to retain its Interest in the Company.
(b) In the event that the Offeree Member exercises its Tag-Along Right,
from and after its receipt of such Tag-Along Exercise Notice from the Offeree
Member, the Offering Member shall keep the Offeree Member fully informed as to
the status of the Offering Member's negotiations and all material terms relating
to such sale or contribution, and shall promptly deliver to the Offeree Member
copies of all drafts of agreements relating thereto and shall promptly notify
the Offeree Member of all proposed changes to such material terms. Further, if
the Offeree Member exercises the Tag-Along Right, the Offering Member shall
attempt to have all of the Interests proposed to be sold or contributed by the
Offering Member and the Offeree Member included in such sale or contribution;
provided, however, that if the purchaser is unwilling to purchase all of the
Interests proposed to be sold or contributed, the amount to be sold will be sold
pro rata in proportion to the selling or contributing Members' Percentage
Interests.
55
(c) Notwithstanding anything to the contrary in this Section 11.5,
NorthStar, as Offeree Member, shall not be required to Transfer any part of its
interest if such Transfer would result in NorthStar holding less than a majority
of all Interests, unless such Transfer is a Transfer of all of NorthStar's
Interest.
Section 11.6 NorthStar's Right to Transfer.
(a) Except as expressly permitted by this Article XI, NorthStar shall not
have the right to Transfer all or any portion of its Interest in the Company in
one or more transactions from time to time.
(b) During the Lockout Period, with respect to Transfers to parties that
are not Affiliates of NorthStar, NorthStar may Transfer, without the consent of
the Company or any other Member, in any Transfer or series of Transfers, up to
seventy-five percent (75%) in the aggregate of its Interest as the same exists
on the date hereof; provided, however, that (i) any such Transferee shall not be
a Member of the Company but rather shall hold its interest in an entity, or
otherwise, controlled directly or indirectly by NorthStar that does not compete,
either directly or through its Affiliates, in any material way, with the
business of the Company or its Affiliates; (ii) NorthStar shall maintain a
majority control of the Class B Members of the Board of Managers, with either W.
Xxxxxx Xxxxxxx or Xxxxx Xxxxxxxx holding at least one Board seat and (iii) any
such Transferee shall not be a Xxxxxxxx Competitor.
(c) Notwithstanding the provisions of Section 11.6(b) hereof, NorthStar
may Transfer up to thirty-five percent (35%) of its Interest in one or more
transactions from time to time to UBS Mortgage Finance, Inc. or such assignees
or transferees thereof as may be approved by NorthStar, without the Consent of
the Company or any other Member, provided such Transfer(s) are counted in
determining whether the seventy-five percent (75%) limit contained in Section
11.6(b) has been reached. The three (3) enumerated limitations set forth in
Section 11.6(b) shall not apply to the right granted in this Section 11.6(c);
however, said transferees shall be bound by NorthStar's elections in Sections
11.4 and 11.5 as if it were NorthStar itself, and shall have no right to vote on
or approve any decision, action or inaction on the part of the Company. The
Interest of such transferees shall be bought or sold along with NorthStar's
Interest at a price equal to, on a pro rata basis, the price paid for
NorthStar's Interest. Any transferees under this Section 11.6(c) hereby grants
to the Board of Managers an irrevocable power of attorney, coupled with an
interest, to execute any documents on its or their behalf to effectuate any
decisions of the Board of Managers made in accordance with the terms of this
Agreement.
Section 11.7 Transfers Affecting Pilevsky. (a) In no event shall the
Company sell all or any portion of its assets prior to January 1, 1999, if the
effect of such sale would be to render the Company with indebtedness available
for Pilevsky's guaranty pursuant to Section 7.9 hereof in an amount less than
the Pilevsky Debt Amount.
56
(b) Notwithstanding anything to the contrary contained herein, in the
event that the Board of Managers, by Supermajority Decision, decides to sell all
or any portion of the assets of the Company such that indebtedness remaining for
guaranty by Pilevsky would be less than the Pilevsky Debt Amount, and such
Transfer would take place after January 1, 1999, but prior to January 1, 2000,
then in such event the Company shall pay to Pilevsky, in addition to any other
amounts Pilevsky would be entitled to hereunder, the amount of $2,500,000 upon
the consummation of such sale, if as and when the sale closes, but only under
these circumstances.
(c) Subject to the Company fulfilling its obligation, if any, pursuant to
Section 11.7(b), in the event Xxxxxxxx sells all or any portion of its Base
Interest and/or Carried Interest in accordance with this Agreement in an
arm's-length transaction, Xxxxxxxx shall notify the Company and Pilevsky of such
intention at least ten (10) days' prior to any such Transfer, and any proposed
transferee shall be required (subject to the provisions set forth below) to
purchase a pro rata portion of Pilevsky's Base Interest and/or Carried Interest,
as applicable, such purchase to be consummated prior to that date which is one
hundred twenty (120) days from such notice to Pilevsky and on the same date as
the sale of the applicable Xxxxxxxx Interest. Such purchase shall be at a price
which would yield Pilevsky an amount equivalent, on a pro rata basis, to the
amount received by Xxxxxxxx, taking into account each of Xxxxxxxx'x and
Pilevsky's respective Base Interests and Carried Interests in the Company.
Pilevsky may not Transfer its Interest except as expressly set forth in this
Section and Section 11.1(c). Pilevsky hereby grants to the Board of Managers an
irrevocable power of attorney, coupled with an interest, to execute any
documents on its behalf to effectuate any transfer made in accordance with the
terms of this Section 11.7(c). If for any reason Xxxxxxxx is prevented by any
act or omission of the Company or Pilevsky from consummating a sale of all or a
portion of the Pilevsky Interest, in accordance with this Section 11.7(c),
Xxxxxxxx shall still have the right to consummate the sale of its Interest, and
have the transferee admitted as a Member, but shall, in conjunction with the
transferee, reasonably pursue its available remedies against Pilevsky to compel
the sale of all or a portion of Pilevsky's Interest in accordance with this
Section 11.7.
(d) Any payments made to Pilevsky pursuant to Section 7.9 shall be
credited to the Company's obligations hereunder.
Section 11.8 Admission. The Company is authorized to admit any Person as
an additional member of the Company (each, an "Additional Member" and
collectively, the "Additional Members") upon such terms and conditions
(including, but not limited to, as to the existence of any right to vote) as are
approved by all members of the Board of Managers. Upon the admission of an
Additional Member, the Percentage Interest of each Member will be reduced to an
amount equal to (i) the Percentage Interest of such Member immediately prior to
the admission of such Additional Member, expressed as a decimal, divided by (ii)
the sum of 1 and the Percentage Interest of such Additional Member, expressed as
a decimal. Each such Person to be admitted as an Additional Member shall be
admitted at the time such Person
57
(a) executes this Agreement or a counterpart of this Agreement and (b) is named
as a Member on Schedule A hereto.
Section 11.9 Resignation. Members may not resign or withdraw from the
Company without the approval of the Class B Managers and upon such terms and
conditions as may be specifically agreed upon between the Company and the
resigning Member. The provisions hereof with respect to distributions are
exclusive and no Member shall be entitled to claim any further or different
distribution upon resignation under Section 18-604 of the New York Act or
otherwise. The Company may recover damages for breach of this Section 11.9 if
any Member violates this Section 11.9 and may offset the Company's damages
against any amount owed to a resigning Member for distributions.
Section 11.10 Pledges. Any Member may pledge or collaterally assign
all or any part of its Interest in the Company to one or more institutional
lenders or "bulge bracket" investment banks (as that term is generally
defined) without the consent of any other Member or the Board of Managers;
provided, however, that should Xxxxxxxx so pledge or collaterally assign all
or any portion of its Interest (the "Pledged Interest") such pledge or
collateral assignment instrument shall provide that prior to the foreclosure
(or assignment in lieu of foreclosure) of such Pledged Interest, the pledgee
(or its successors or assigns) shall first offer the Pledged Interest to the
Company according to the procedure set forth in Section 11.4, mutatis
mutandis, except that, as provided above, the time period for the exercise of
such right of first offer shall be twenty (20) days from receipt of the
Interest Sale Notice and the time period for the closing of such acquisition
shall be sixty (60) days from the receipt of the Interest Sale Notice.
Section 11.11 Xxxxxxxx Right to Sell Company. Notwithstanding anything in
this Agreement to the contrary, in the event that neither W. Xxxxxx Xxxxxxx nor
Xxxxx Xxxxxxxx is serving on the Board of Managers, Xxxxxxxx shall have the
right to use all reasonable endeavors to negotiate a sale of the entire Company
or all or substantially all of the Company's assets and investments provided
that Xxxxxxxx shall employ for such purpose an investment advisor reasonably
acceptable to a majority of the Class B Managers, the fees and expenses of such
advisor to be paid by the Company. If Xxxxxxxx elects to cause a sale of the
Company, the other Members (other than Pilevsky) shall reasonably cooperate in
the marketing and sale of the Company and shall be kept informed of all material
decisions made with respect to the marketing and sale of the Company. Any such
sale must be consummated, if at all, within nine (9) months after the first date
on which neither W. Xxxxxx Xxxxxxx nor Xxxxx Xxxxxxxx is serving on the Board of
the Managers, time being of the essence.
Section 11.12 Xxxxxxxx Right to Transfer Carried Interest.
Notwithstanding anything in this Agreement to the contrary, in no event shall
Xxxxxxxx be entitled to Transfer its right to distributions pursuant to Section
7.1(c)(ii)(A) or (iii)(A), Section 7.1(d)(ii)(A) or (iii)(A) or Section
7.1(e)(ii)(A) or (iii)(A) (collectively the "Carried Interest"), whether in
connection with a Transfer of its Interest permitted under this Agreement or
otherwise, the
58
right to such distributions being personal to Xxxxxxxx. The foregoing shall not,
however, prevent Xxxxxxxx from Transferring all of its Interest (other than the
Carried Interest) provided such Transfer otherwise complies with the terms of
this Agreement. In addition, if Xxxxxxxx transfers all of its Interest other
than the Carried Interest, Xxxxxxxx shall receive any distribution to which it
would otherwise be entitled to hereunder. For purposes of receiving such
distributions with respect to the Carried Interest, Xxxxxxxx will retain a
Membership Interest in the Company, albeit without a capital account or any
voting rights or rights to representation on the Board of Managers, despite such
Transfer of its Interest (other than the Carried Interest).
ARTICLE XII
DISSOLUTION, LIQUIDATION AND TERMINATION
Section 12.1 No Dissolution. The Company shall not be dissolved by the
admission of Additional Members or Substitute Members in accordance with the
terms of this Agreement.
Section 12.2 Events Causing Dissolution. The Company shall be dissolved
and its affairs shall be wound up upon the occurrence of any of the following
events:
(i) Supermajority Decision of the members of the Board of
Managers approving the dissolution of the Company; or
(ii) the bankruptcy or dissolution of NorthStar or Xxxxxxxx
unless, within ninety (90) days after the occurrence of such
an event, a majority in Interest of the remaining Members
(excluding Pilevsky) agree in writing to continue the
business of the Company.
Section 12.3 Notice of Dissolution. Upon the dissolution of the Company
the Board of Managers shall promptly notify the Members of such dissolution.
Section 12.4 Liquidation; Compliance With Certain Requirements of
Regulations; Deficit Capital Accounts.
(a) Upon dissolution of the Company, the Board of Managers, or the Person
or Persons approved by a vote of the Class B Managers, shall carry out the
winding up of the Company (in such capacity, the "Liquidating Trustee"), shall
immediately commence to wind up the Company's affairs; provided, however, that a
reasonable time shall be allowed for the orderly liquidation of the assets of
the Company and the satisfaction of liabilities to creditors so as to enable the
Members to minimize the normal losses attendant upon a liquidation. The
59
assets of the Company shall be used, first, to pay or provide for the payment of
all outstanding liabilities of the Company in their respective order of priority
according to law, including the repayment of any Advances made pursuant to
Section 4.5 of this Agreement and accrued and unpaid interest thereon. Except as
required by applicable law, obligations of the Company to Members or other
persons related to Members shall be paid in the same manner and order as if such
obligation were not owed to a Member or to a person related to a Member. Any
amount determined by the Liquidating Trustee to be in excess of the amounts
needed for the foregoing purposes shall be distributed to the Members in the
same manner as provided for in Section 7.1 of this Agreement.
(b) In the event the Company is "liquidated" within the meaning of
regulations -section-1.704-1(b)(2)(ii)(g), distributions shall be made
pursuant to this Article XII to the Members who have positive Capital
Accounts in compliance with Regulations -section-1.704-1(b)(2)(ii)(b)(2). If
any Member's Capital Account has a deficit balance (after giving effect to
all contributions, distributions and allocations for all Fiscal Years,
including the Fiscal Year during which such liquidation occurs), such Member
shall not be obligated to contribute to the capital of the Company the amount
necessary to restore such deficit balance to zero.
Section 12.5 Termination. The Company shall terminate when all of the
assets of the Company, after payment of or due provision for all debts,
liabilities and obligations of the Company, shall have been distributed to the
Members in the manner provided for in this Article XII and the Certificate shall
have been canceled in the manner required by the New York Act.
Section 12.6 Claims of the Members. The Members and former Members shall
look solely to the Company's assets for the return of their Capital
Contributions, and if the assets of the Company remaining after payment of or
due provision for all debts, liabilities and obligations of the Company are
insufficient to return such Capital Contributions, the Members and former
Members shall have no recourse against the Company or any other Member.
Section 12.7 Bankruptcy or Dissolution of a Member. Subject to Section
12.2(ii), the Bankruptcy or dissolution of a Member shall not dissolve the
Company. Subject to Article XI, the legal representative of a Bankrupt Member or
the assignee of a dissolved Member shall have the rights of an assignee to
receive distributions and allocations of Profits and Losses pursuant to Article
VII and may become a Member only upon compliance with the procedures as provided
in Article XI. In the absence of admission, any payment by the Company in the
name of the Bankrupt or dissolved Member, or to its legal representative or
assignee, shall acquit the Company of all liability to any Person who may be
interested in such payment by reason of the Bankruptcy or dissolution of a
Member.
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ARTICLE XIII
MISCELLANEOUS
Section 13.1 Amendments. Any amendment to this Agreement shall be adopted
and be effective as an amendment hereto if it is approved as a Supermajority
Decision of the Board of Managers. In the event this Agreement shall be amended
pursuant to this Article XV, the Chief Executive Officer shall amend the
Certificate to reflect such change if it deems such amendment of the Certificate
to be necessary. Each Member (other than NorthStar) does hereby constitute and
appoint NorthStar and its designees as its true and lawful representative and
attorney- in-fact, in its name, place and stead to make, execute, sign, deliver
and file such amendment to this Agreement.
Section 13.2 Notices. All notices provided for in this Agreement shall be
in writing, duly signed by the party giving such notice, and shall be given
personally, or given by telephone (promptly confirmed by telecopied message), or
by telecopier (promptly confirmed by telephone), or by registered or certified
mail, or by a nationally recognized overnight courier, charges prepaid,
addressed as follows:
(i) if given to the Company, in care of each of the Members at
their mailing addresses set forth on Schedule A attached
hereto; or
(ii) if given to any Member, at the address set forth opposite its
name on Schedule A attached hereto, or at such other address
as such Member may hereafter designate by written notice to
the Company.
All such notices shall be deemed to have been given when received or, in
the case of notice by mail only, six (6) business days after being sent,
whichever occurs first.
Section 13.3 Dispute Resolution. Any and all disputes, controversies and
claims arising out of or relating to this Agreement or the performance hereof
other than those brought by or against Pilevsky shall be settled and determined
by arbitration in New York City before a panel of three arbitrators pursuant to
the Commercial Rules then in effect of the American Arbitration Association. The
parties agree that the arbitrators shall have the power to award damages,
preliminary or permanent injunctive relief and reasonable attorneys' fees and
expenses to any party in such arbitration. The arbitration award shall be final
and binding upon the parties and judgment thereon may be entered in any court
having competent jurisdiction thereof. The arbitrators shall be governed by and
shall apply the substantive law of the State of New York in making their award.
61
Section 13.4 Failure to Pursue Remedies. The failure of any party to seek
redress for violation of, or to insist upon the strict performance of, any
provision of this Agreement shall not prevent a subsequent act, which would have
originally constituted a violation, from having the effect of an original
violation.
Section 13.5 Cumulative Remedies. The rights and remedies provided by
this Agreement are cumulative and the use of any one right or remedy by any
party shall not preclude or waive its right to use any or all other remedies.
Said rights and remedies are given in addition to any other rights the parties
may have by law, statute, ordinance or otherwise.
Section 13.6 Binding Effect. This Agreement shall be binding upon and
inure to the benefit of all of the parties and, to the extent permitted by this
Agreement, their successors, legal representatives and Transfers.
Section 13.7 No Third Party Beneficiaries. None of the provisions of this
Agreement shall be for the benefit of or enforceable by any Person not a party
hereto.
Section 13.8 Interpretation. Throughout this Agreement, nouns, pronouns
and verbs shall be construed as masculine, feminine, neuter, singular or plural,
whichever shall be applicable. All references herein to "Articles," "Sections"
and "Paragraphs" shall refer to corresponding provisions of this Agreement.
Section 13.9 Severability. The invalidity or unenforceability of any
particular provision of this Agreement shall not affect the other provisions
hereof, and this Agreement shall be construed in all respects as if such invalid
or unenforceable provisions were omitted.
Section 13.10 Counterparts. This Agreement may be executed in any number
of counterparts with the same effect as if all parties hereto had signed the
same document. All counterparts shall be construed together and shall constitute
one instrument.
Section 13.11 Integration. This Agreement and the documents executed and
delivered in connection therewith constitute the entire agreement among the
parties hereto pertaining to the subject matter hereof and thereof, and
supersede all prior agreements and understandings pertaining thereto.
Section 13.12 Governing Law. This Agreement and the rights of the parties
hereunder shall be interpreted in accordance with the laws of the State of New
York, and all rights and remedies shall be governed by such laws without regard
to principles of conflict of laws.
Section 13.13 Construction. Every covenant, term and provision of this
Agreement shall be construed simply according to its fair meaning and not
strictly for or against any Member. The terms of this Agreement are intended to
embody the economic
62
relationship among the Members and shall not be subject to modification by, or
be conformed with, any actions by the Internal Revenue Service except as this
Agreement may be explicitly so amended and except as may relate specifically to
the filing of tax returns.
Section 13.14 Time. Time is of the essence with respect to this
Agreement.
Section 13.15 Headings. Section and other headings contained in this
Agreement are for reference purposes only and are not intended to describe,
interpret, define or limit the scope, extent or intent of this Agreement or any
provision hereof.
Section 13.16 Incorporation by Reference. Every exhibit, schedule and
other appendix attached and referred to in this Agreement is incorporated in
this Agreement by reference unless this Agreement expressly otherwise provides.
Section 13.17 Further Action. Each Member agrees to perform all further
acts and execute, acknowledge and deliver any documents which may be reasonably
necessary, appropriate or desirable to carry out the provisions of this
Agreement.
63
IN WITNESS WHEREOF, the parties hereto have executed this Agreement as of
the date first above stated.
MEMBERS:
NORTHSTAR HOSPITALITY LLC, a Delaware
limited liability company
By: /s/ W. Xxxxxx Xxxxxxx
--------------------------------
Name: W. Xxxxxx Xxxxxxx
Title: Executive Vice President
MHG ASSOCIATES, L.P., a Delaware
limited partnership
By: Morgans Century Corp., its general partner
By: /s/ Xxx Xxxxxxxx
--------------------------------
Name: Xxx Xxxxxxxx
Title: President
CENTURY OPERATING ASSOCIATES, a
New York limited partnership
By: CPH Operating Corp., its general partner
By: /s/ Xxxxxx Xxxxxxxx
--------------------------------
Name: Xxxxxx Xxxxxxxx
Title: President
Consented to and agreed with
respect to Section 6.10:
/s/ Xxx Xxxxxxxx
------------------------
Xxx Xxxxxxxx
Date: February 13, 1998 SCHEDULE A
------------
MEMBERS AND THEIR MAILING ADDRESSES,
CAPITAL CONTRIBUTIONS AND PERCENTAGE INTERESTS
Percentage of
Capital Percentage
Name Mailing Address Capital Contribution(1) Contributions Interest(2)
----- --------------- ----------------------- ------------- -----------
NorthStar Hospitality 000 Xxxxxxx Xxxxxx, New $102,479,445.00 83.986% 83.986000%
LLC Xxxx, Xxx Xxxx 00000
MHG Associates, L.P. 000 Xxxx 00xx Xxxxxx, New $19,540,230.00 16.014% 15.933930%
Xxxx, Xxx Xxxx 00000
Century Operating 000 Xxxxx Xxxxxx, New $1.00 0% .080070%
Associates Xxxx, Xxx Xxxx 00000
---------------- ---------
$122,019,676.00 100.0% 100.0%
------------------------------
(1) This column sets forth the cash amount of any cash Capital Contributions,
the agreed value of any Capital Contributions, net of any liabilities,
made in the form of property or property interests in the initial
contributions or series of contributions effected in connection with the
formation of the Company, and the value, as determined by the Board of
Managers, of any Capital Contributions made in the form of property or
property interests after such initial contributions or series of
contributions.
(2) The Pilevsky Percentage Interest is 0.5% of the initial Xxxxxxxx
Percentage Interest (prior to deducting the Pilevsky Percentage Interest
therefrom) and such amount has been deducted from the Xxxxxxxx Percentage
Interest.
SCHEDULE B
BY LAWS
OF
XXX XXXXXXXX HOTELS LLC
These Bylaws of XXX XXXXXXXX HOTELS LLC, a Delaware limited liability
company (the "Company") shall be subject to the Limited Liability Company
Agreement of Xxx Xxxxxxxx Hotels L.L.C., as from time to time in effect (the
"Agreement"),. In the event of any inconsistency between the terms hereof and
the terms of the Agreement, the terms of the Agreement shall control.
Capitalized terms used herein and not herein defined are used as defined in the
Agreement.
ARTICLE I.
Board of Managers; Meetings of Board of Managers
Section 1.1 Voting. The Board of Managers shall be divided into two
classes, designated Class A and Class B. Each Class A Manager shall have one
vote and each Class B Manager shall have one vote; provided, however, that the
majority of the Class B Managers, voting separately as a class, shall determine
the votes of the Class B Managers.
Section 1.2 Resignation of Managers. Any member of the Board of Managers
may resign at any time by giving written notice to the Company. Any resignation
shall take effect at the date of the receipt of that notice or at any later time
specified in that notice, and unless otherwise specified in that notice, the
acceptance of the resignation shall not be necessary to make it effective.
Section 1.3 Chairman of the Board of Managers. The Board of Managers
shall elect a Chairman, who shall preside at meetings of the Board of Managers.
Section 1.4 Place of Meetings and Meetings by Telephone. All meetings of
the Board of Managers may be held at any place that has been designated from
time to time by resolution of the Board of Managers or, in lieu thereof, written
resolutions of the Board of Managers may be executed by the Class A Manager and
a majority of the Class B Managers. In the absence of such a designation,
meetings shall be held at the principal place of business of the Company. Any
meeting may be held by conference telephone or similar communication equipment
so long as all Managers participating in the meeting can hear one another, and
all Managers participating by telephone or similar communication equipment shall
be deemed to be present in person at the meeting.
Section 1.5 Notice of Meetings. Regular meetings of the Board of Managers
shall be held at least once per year at such times and at such places as shall
be fixed by the Board of Managers. Such regular meetings may be held without
notice. All notices of the time and place of special meetings of the Board of
Managers shall be called by any member of the Board of Managers upon forty-eight
(48) hours notice to each Manager personally or by telephone confirmed by
written notice by telecopy.
The notice shall specify (i) the place, date and hour of the meeting, and (ii)
the general nature of the business to be transacted.
Section 1.6 Waiver of Notice. Notice of any meeting need not be given to
any Manager who either before or after the meeting signs a written waiver of
notice, a consent to holding the meeting, or an approval of the minutes. The
waiver of notice or consent need not specify the purpose of the meeting. All
such waivers, consents, and approvals shall be filed with the records of the
Company or made a part of the minutes of the meeting. Notice of a meeting shall
also be deemed given to any Manager who attends the meeting without protesting
before or at its commencement the lack of notice to that Manager.
Section 1.7 Adjournment. A majority of the Managers present, whether or
not constituting a quorum, may adjourn any meeting to another time and place.
Notice of the time and place of holding an adjourned meeting need not be given
unless the meeting is adjourned for more than forty-eight (48) hours, in which
case notice of the time and place shall be given before the time of the
adjourned meeting in the manner specified in Section 1.4.
Section 1.8 Delegation of Power. The Board of Managers may, by
resolution, delegate any Decisions or all of their powers and duties (other than
powers and duties pertaining to a matter that requires a Supermajority Decision)
granted hereunder or under the Agreement to one or more committees of the Board
of Managers, each consisting of one or more Managers, or to one or more
officers, employees or agents, including without limitation Members, and to the
extent any such powers or duties are so delegated, action by the delegate or
delegates shall be deemed for all purposes to be action by the Manager. All such
delegates shall serve at the pleasure of the Board of Managers. To the extent
applicable, notice shall be given to, and action may be taken by, any delegate
of the Board of Managers as herein provided with respect to notice to, and
action by, the Managers.
Section 1.9 Quorum. The Class A Manager and a majority of the Class B
Managers must be present at any meeting of the Board of Managers in order to
constitute a quorum for the purposes of any such meeting.
ARTICLE II.
Officers
Section 2.1 Officers. The officers of the Company shall be a President,
one or more Vice Presidents, a Secretary and a Treasurer. The Company may also
have, at the discretion of the Board of Managers, such other officers as may be
appointed in accordance with the provisions of Section 2.3. Any number of
offices may be held by the same person. The President shall also be a Manager.
Other officers may, but need not, be Managers.
Section 2.2 Election of Officers. The officers of the Company shall be
chosen by the Board of Managers, and each shall serve at the pleasure of the
Board of Managers.
Section 2.3 Additional Officers. The Board of Managers may appoint, and
may empower the President to appoint, such additional officers as the business
of the Company may require, each of whom shall hold office for such period, have
such authority and perform such duties as are provided in these Bylaws or as the
Board of Managers (or, to the extent the power to prescribe authorities and
duties of additional officers is delegated to him, the President) may from time
to time determine.
Section 2.4 Removal and Resignation of Officers. Any officer other than
the President may be removed, with or without cause, by the Board of Managers at
any regular or special meeting of the Board of Managers or by such officer, if
any, upon whom such power of removal may be conferred by the Board of Managers.
Any officer may resign at any time by giving written notice to the Company. Any
resignation shall take effect at the date of the receipt of that notice or at
any later time specified in that notice; and unless otherwise specified in that
notice, the acceptance of the resignation shall not be necessary to make it
effective.
Section 2.5 Vacancies in Offices. A vacancy in any office because of
death, resignation, removal, disqualification or other cause shall be filled by
the Board of Managers.
Section 2.6 President. The President shall be the Chief Executive Officer
of the Company. He shall have the general powers and duties of management
usually vested in the office of President of a corporation and shall have such
other powers and duties as may be prescribed by the Board of Managers, the
Agreement or these Bylaws.
Section 2.7 Vice-Presidents. In the absence of the President or in the
event of his 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 by the Board of Managers, 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 Vice-Presidents shall perform such other
duties and have such other powers as the Board of Managers may from time to time
prescribe.
Section 2.8 Secretary and Assistant Secretaries.
(a) The Secretary shall keep or cause to be kept at the principal
place of business of the Company or such other place as the Board of Managers
may direct a book of minutes of all meetings and actions of Board of Managers,
committees or other delegates of Managers. The Secretary shall keep or cause to
be kept at the principal place of business of the Company a register or a
duplicate register showing the names of all Members and their addresses, the
number and classes of Interest held by each, the number and date of certificates
issued for the same, if any, and the number and date of cancellation of every
certificate surrendered for cancellation. The Secretary shall give or cause to
be given notice of all meetings of the Board of Managers (or committees or other
delegates
thereof) required to be given by these Bylaws or by applicable law and shall
have such other powers and perform such other duties as may be prescribed by the
Board of Managers or the President or by these Bylaws.
(b) The Assistant Secretary (or if there be more than one, the
Assistant Secretaries in the order designated by the Board of Managers, or in
the absence of any designation, then in the order of their election) shall, in
the absence of the Secretary or in the event of his or her inability or refusal
to act, perform the duties and exercise the powers of the Secretary and shall
perform such other duties and have such other powers as the Board of Managers
may from time to time prescribe.
Section 2.9 Treasurer, Assistant Treasurer or Chief Financial Officer.
(a) The Treasurer shall be the chief financial officer of the Company
and shall keep and maintain or cause to be kept and maintained adequate and
correct books and records of accounts of the properties and business
transactions of the Company. The books of account shall at all reasonable times
be open to inspection by any Manager. The Treasurer shall deposit all monies and
other valuables in the name and to the credit of the Company with such
depositories as may be designated by the Board of Managers. He or she shall
disburse the funds of the Company as may be ordered by the Board of Managers,
shall render to the President and Board of Managers, whenever they request it,
an account of all of his or her transactions as chief financial officer and of
the financial condition of the Company and shall have other powers and perform
such other duties as may be prescribed by the Board of Managers or the President
or by these Bylaws.
(b) The Assistant Treasurer (or if there shall be more than one, the
Assistant Treasurers in the order designated by the Board of Managers, or in the
absence of any designation, then in the order of their election) shall, in the
absence of the Treasurer or in the event of his or her inability or refusal to
act, perform the duties and exercise the powers of the Treasurer and shall
perform such other duties and have such other powers as the Manager may from
time to time prescribe.
ARTICLE III.
General Matters
Section 3.1 Checks, Drafts, Evidence of Indebtedness. All
checks, drafts, or other orders for payment of money, notes or other
evidences of indebtedness issued in the name of or payable by the
Company shall be signed or endorsed in such manner and by such person
or persons as shall be designated from time to time in accordance with
the resolution of the Board of Managers.
Section 3.2 Representation of Shares of Other Entities Held by
Company. The President or any other person authorized by the Board of Managers
or by any of the foregoing designated officers is authorized to vote or
represent on behalf of the Company any and all shares of or interests in any
corporation, partnership, limited liability company, trust, or other entity,
foreign or domestic, standing in the name of the Company. The authority granted
may be exercised in person or by a proxy duly executed by such designated
person.
Section 3.3 Seal. The Board of Managers may approve and adopt an
official Company seal, which may be altered by them at any time. Unless
otherwise required by the Board of Managers, any seal so adopted shall not be
necessary to be placed on, and its absence shall not impair the validity of, any
document, instrument or other paper executed and delivered by or on behalf of
the Company.
ARTICLE IV.
Amendments and Incorporation by Reference into Agreement
Section 4.1 Amendment. These Bylaws may be restated, amended, supplemented
or repealed only by Supermajority Decision of the Board of Managers.
EXHIBIT A
1998 BUDGET
[Intentionally Omitted]
-------------------------------------------------------------
AMENDED AND RESTATED
LIMITED LIABILITY COMPANY AGREEMENT
OF
XXX XXXXXXXX HOTELS LLC
-------------------------------------------------------------
As of February 13, 1998
TABLE OF CONTENTS
ARTICLE I
DEFINED TERMS
Section 1.1 Definitions....................................................2
Section 1.2 Headings.....................................................17
ARTICLE II
OPERATION; TERM; ETC.
Section 2.1 Operation....................................................17
Section 2.2 Name.........................................................17
Section 2.3 Term.........................................................17
Section 2.4 Principal Place of Business..................................17
Section 2.5 Qualification in Other Jurisdictions.........................17
ARTICLE III
PURPOSE AND POWERS OF THE COMPANY
Section 3.1 Purpose......................................................18
Section 3.2 Powers of the Company........................................18
Section 3.3 Limitations on Company Powers................................20
ARTICLE IV
CAPITAL CONTRIBUTIONS, INTERESTS,
CAPITAL ACCOUNTS AND ADVANCES
Section 4.1 Capital Contributions........................................21
Section 4.2 Member's Interest............................................21
Section 4.3 Status of Capital Contributions..............................22
Section 4.4 Capital Accounts.............................................22
Section 4.5 Loans; Advances..............................................23
ARTICLE V
MEMBERS
Section 5.1 Powers of Members............................................24
Section 5.2 Reimbursements and Payments of Expenses......................24
Section 5.3 Partition....................................................24
Section 5.4 Pilevsky's Membership Interest...............................24
ARTICLE VI
MANAGEMENT
Section 6.1 Management of the Company....................................25
Section 6.2 Powers of the Chief Executive Officer........................27
Section 6.3 Restrictions on the Chief Executive Officer..................28
Section 6.4 Rights, Duties and Obligations of the Chief
Executive Officer............................................29
Section 6.5 Consent of Members Not Required..............................29
Section 6.6 Reliance by Third Parties....................................30
Section 6.7 Transactions with Affiliates.................................30
Section 6.8 Confidentiality; Exclusivity.................................30
Section 6.9 Outside Businesses...........................................30
Section 6.10 Non-Competition and Other Xxxxxxxx Related Matters..........31
Section 6.11 Tax Matters Member..........................................33
ARTICLE VII
DISTRIBUTIONS AND ALLOCATIONS
Section 7.1 Distributions.................................................34
Section 7.2 Limitations on Distribution..................................38
Section 7.3 Intentionally Omitted........................................39
Section 7.4 Mandatory Tax Distributions..................................39
Section 7.5 Profits and Losses...........................................39
Section 7.6 Allocation Rules.............................................41
Section 7.7 Members' Share of Company Recourse Liabilities...............41
Section 7.8 Tax Allocation; Section 704(c) of the Code...................42
Section 7.9 Guaranty.....................................................42
ARTICLE VIII
BOOKS AND RECORDS; REPORTING
Section 8.1 Books, Records and Financial Statements......................43
Section 8.2 Accounting Method............................................44
Section 8.3 Audits.......................................................44
Section 8.4 Other Reports................................................44
ARTICLE IX
TAX MATTERS
Section 9.1 Certain Notices..............................................45
Section 9.2 Right to Make Section 754 Election...........................45
Section 9.3 Taxation as Partnership......................................45
ARTICLE X
LIABILITY, EXCULPATION AND INDEMNIFICATION
Section 10.1 Liability...................................................46
Section 10.2 Exculpation.................................................47
Section 10.3 Fiduciary Duty..............................................47
Section 10.4 Indemnification.............................................48
Section 10.5 Expenses....................................................48
Section 10.6 Insurance...................................................49
ARTICLE XI
TRANSFERABILITY AND SUBSTITUTE MEMBERS;
RIGHT OF FIRST OFFER; TAG-ALONG RIGHT;
TRANSFERS AFFECTING PILEVSKY
Section 11.1 Transferability of Interests................................49
Section 11.2 Recognition of Transfer by Company..........................51
Section 11.3 Effect of Transfers.........................................51
Section 11.4 NorthStar/Xxxxxxxx Right of First Offer.....................51
Section 11.5 NorthStar/Xxxxxxxx Tag-Along Right..........................53
Section 11.6 NorthStar's Right to Transfer...............................54
Section 11.7 Transfers Affecting Pilevsky................................55
Section 11.8 Admission...................................................55
Section 11.9 Resignation.................................................56
Section 11.10 Pledges....................................................56
Section 11.11 Xxxxxxxx Right to Sell Company.............................56
Section 11.12 Xxxxxxxx Right to Transfer Carried Interest................56
ARTICLE XII
DISSOLUTION, LIQUIDATION AND TERMINATION
Section 12.1 No Dissolution.............................................57
Section 12.2 Events Causing Dissolution.................................57
Section 12.3 Notice of Dissolution......................................57
Section 12.4 Liquidation................................................57
Section 12.5 Termination................................................58
Section 12.6 Claims of the Members......................................58
Section 12.7 Bankruptcy or Dissolution of a Member......................58
Section 13.1 Amendments.................................................59
Section 13.2 Notices....................................................59
Section 13.3 Dispute Resolution.........................................59
Section 13.4 Failure to Pursue Remedies.................................60
Section 13.5 Cumulative Remedies........................................60
Section 13.6 Binding Effect.............................................60
Section 13.7 No Third Party Beneficiaries...............................60
Section 13.8 Interpretation.............................................60
Section 13.9 Severability...............................................60
Section 13.10 Counterparts...............................................60
Section 13.11 Integration................................................60
Section 13.12 Governing Law..............................................60
Section 13.13 Construction...............................................60
Section 13.14 Time.......................................................61
Section 13.15 Headings...................................................61
Section 13.16 Incorporation by Reference.................................61
Section 13.17 Further Action.............................................61
Schedule A - Members
Schedule B - Bylaws
Exhibit A - 1998 Budget
