1
EXHIBIT 10.1
FORM OF
LIMITED LIABILITY COMPANY AGREEMENT
OF
IHC II, LLC
Dated as of ________, 1999
2
TABLE OF CONTENTS
ARTICLE 1
DEFINITIONS..............................................................................................1
ARTICLE 2
FORMATION, DURATION AND PURPOSES.........................................................................7
Section 2.1 Formation.....................................................................7
Section 2.2 Name; Registered Agent and Registered Office..................................7
Section 2.3 Principal Office..............................................................7
Section 2.5 Purposes and Business.........................................................8
ARTICLE 3
RIGHTS AND OBLIGATIONS OF MEMBERS........................................................................8
Section 3.1 Limited Liability.............................................................9
Section 3.2 Admission of Members..........................................................9
Section 3.3 Bankruptcy of a Member........................................................9
Section 3.4 No Withdrawal.................................................................9
Section 3.5 Remuneration To Members.......................................................9
Section 3.6 Duties and Conflicts..........................................................9
ARTICLE 4
MANAGEMENT..............................................................................................10
Section 4.1 Management by the Class A Member; Members....................................10
Section 4.2 Bank Accounts................................................................12
Section 4.3 Liability; Indemnification...................................................12
Section 4.4 Limitation on Sale of Assets.................................................12
ARTICLE 5
BOOKS AND RECORDS.......................................................................................13
Section 5.1 Books and Records............................................................13
Section 5.2 Accounting and Fiscal Year...................................................13
Section 5.3 Reports......................................................................13
Section 5.4 The Company Accountant.......................................................14
ARTICLE 6
CONTRIBUTIONS...........................................................................................15
Section 6.1 Initial Capital Contributions................................................15
Section 6.2 Additional Capital Contributions.............................................15
Section 6.3 No Third Party Beneficiary...................................................15
Section 6.5 Withdrawal of Capital........................................................16
Section 6.6 Negative Capital Accounts....................................................16
i
3
ARTICLE 7
ALLOCATION OF PROFITS AND LOSSES; TAX MATTERS
.......................................................................................................16
Section 7.1 Profits and Losses...........................................................16
Section 7.2 Regulatory Allocations.......................................................16
Section 7.3 Tax Allocations..............................................................17
Section 7.4 Tax Matters Member...........................................................17
Section 7.5 Tax Elections................................................................17
Section 7.6 Intention of the Members.....................................................17
ARTICLE 8
DISTRIBUTIONS...........................................................................................17
Section 8.1 Cash Available for Distributions.............................................17
ARTICLE 9
TRANSFER................................................................................................18
Section 9.1 No Transfer of Interests.....................................................18
Section 9.2 [Reserved]...................................................................18
Section 9.3 Transferees..................................................................18
Section 9.4 Admission of Additional Members..............................................19
ARTICLE 10
TERMINATION.............................................................................................19
Section 10.1 Dissolution..................................................................19
Section 10.2 Termination..................................................................20
Section 10.3 Acts in Furtherance of Liquidation...........................................21
ARTICLE 11
INTENTIONALLY RESERVED..................................................................................21
ARTICLE 12
GENERAL PROVISIONS......................................................................................21
Section 12.1 Covenants, Representations and Warranties of the Members.....................21
Section 12.2 Notices......................................................................22
Section 12.3 Governing Laws; Jurisdiction; Venue..........................................23
Section 12.4 Entire Agreement.............................................................24
Section 12.5 Waiver.......................................................................24
Section 12.6 Severability.................................................................24
Section 12.7 Terminology..................................................................24
Section 12.8 Action by the Members........................................................25
Section 12.9 Amendments...................................................................25
Section 12.10 Binding Agreement............................................................25
Section 12.11 Further Assurances...........................................................25
ii
4
SCHEDULES & EXHIBITS:
Schedule 1.1 - Initial Capital Account of Class Member
Schedule 1.3 - List of Submanagement Agreements
Schedule 2.4.1 - List of Management Agreements
iii
5
FORM OF
LIMITED LIABILITY COMPANY AGREEMENT
-----------------------------------
THIS LIMITED LIABILITY COMPANY AGREEMENT (this "AGREEMENT"),
made and entered into as of this _____ day of May ___, 1998 by and among
INTERSTATE HOTELS MANAGEMENT, INC., a Maryland corporation (together with its
permitted successors and assigns hereunder "INTERSTATE MANAGEMENT"), and
[MARRIOTT MEMBER], a [Delaware ] corporation (together with its permitted
successors and assigns hereunder "MM"). Interstate Management and MM are each
sometimes referred to herein individually as a "MEMBER" and collectively as the
"MEMBERS."
R E C I T A L S
WHEREAS, the Members have formed a limited liability company with the
name "IHC II, LLC" (the "COMPANY") under the Act (as defined below) by the
filing of a Certificate of Formation (the "CERTIFICATE OF FORMATION") with the
Delaware Secretary of State as of __________, __, 1998; and
WHEREAS, the Members now desire to enter into this Agreement in order
to govern the operations of the Company and the rights and obligations of the
Members.
NOW, THEREFORE, in consideration of the recitals and the covenants and
agreements 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 1
DEFINITIONS
-----------
For purposes of this Agreement, initially capitalized terms used herein
shall have the following meanings:
"ACT" as defined in Section 2.1.
"ADDITIONAL MEMBER" as defined in subsection 9.4.2.
"AFFILIATE" means, when used with respect to any Person, any other
Person controlling or controlled by or under common control with such Person.
For purposes of this definition, the term "CONTROL," with respect to any Person,
means possession, directly or indirectly, of the power to direct or cause the
direction of the management and policies of such Person, whether through the
ownership of voting securities or of other beneficial interests or by contract
or otherwise.
"AGREEMENT" as defined in the Preamble.
6
"BANKRUPTCY" means, with respect to any Person, (I) the commencement by
such Person of a proceeding seeking relief under any provision or chapter of the
Bankruptcy Code or any other federal or state law relating to insolvency,
bankruptcy or reorganization; (ii) an adjudication that such Person is insolvent
or bankrupt; (iii) the entry of an order for relief under the Bankruptcy Code
with respect to such Person; (iv) the filing of any such petition or the
commencement of any such case or proceeding against such Person, unless such
petition and the case or proceeding initiated thereby are dismissed within
seventy-five (75) days from the date of such filing; (v) the filing of an answer
by such Person admitting the material allegations of any such petition; (vi) the
appointment of a trustee, receiver or custodian for all or substantially all of
the assets of such Person unless such appointment is vacated or dismissed within
seventy-five (75) days from the date of such appointment but not less than five
(5) days before the proposed sale of any assets of such Person; (vii) the
insolvency of such Person or the execution by such Person of a general
assignment for the benefit of creditors; (viii) the convening by such Person of
a meeting of its creditors, or any class thereof, for purposes of effecting a
moratorium upon or composition of its debts or an extension of its debts; (ix)
the failure of such Person to pay its debts generally as they mature; (x) the
levy, attachment, execution or other seizure of substantially all of the assets
of such Person where such seizure is not discharged within ten (10) days
thereafter; or (xi) the admission by such Person in writing of its inability to
pay its debts generally as they mature or that it is generally not paying its
debts as they become due.
"BANKRUPTCY CODE" means Title 11 of the United States Code entitled
"Bankruptcy," as now and hereafter in effect, or any successor statute.
"BOOK DEPRECIATION" means, for each fiscal year, an amount equal to the
depreciation, amortization or other cost recovery deduction allowable with
respect to an asset for such year, except that if the Book Value of an asset
differs from its adjusted basis for federal income tax purposes at the beginning
of such year, Book Depreciation shall be an amount which bears the same ratio to
such beginning Book Value as the federal income tax depreciation, amortization
or other cost recovery deduction for such year bears to such beginning adjusted
tax basis; provided, however, that if the adjusted basis for federal income tax
purposes of an asset at the beginning of such year is zero, Book Depreciation
shall be determined with reference to such beginning Book Value using a method
reasonably selected by the Managing Member.
"BOOK VALUE" means, with respect to any asset of the Company, the
asset's adjusted basis for federal income tax purposes, except as follows:
(i) the initial Book Value of any asset contributed by a Member to the
Company shall be the gross fair market value of such assets;
(ii) the Book Values of all Company assets shall be adjusted to equal
their respective fair market values as permitted pursuant to Section
1.704-1(b)(2)(iv)(f) of the Treasury Regulations;
2
7
(iii) the Book Value of any asset of the Company distributed to any
Member shall be adjusted to equal the gross fair market value of such asset as
of the date of distribution; and
(iv) the Book Value of Company assets shall be increased (or decreased)
to reflect any adjustments to the adjusted basis of such assets pursuant to Code
Section 734(b) or 743(b) to the extent such adjustments are taken into account
in determining Capital Accounts and are not otherwise reflected in an adjustment
made pursuant to this definition of "Book Value."
If the Book Value of an asset has been determined or adjusted pursuant
to this definition of Book Value, then such Book Value shall thereafter be
adjusted by Book Depreciation taken into account with respect to such asset for
purposes of computing Profits and Losses.
"BUSINESS DAY" means any day other than a Legal Holiday.
"CAPITAL ACCOUNT" means, with respect to any Member, the separate
"book" account which the Company shall establish and maintain for such Member in
accordance with Section 704(b) of the Code and Regulations Section
1.704-1(b)(2)(iv) and such other provisions of Section 1.704-1(b) of the
Regulations as must be complied with in order for the Capital Accounts to be
determined in accordance with the provisions of said Regulations. In furtherance
of the foregoing, the Capital Accounts shall be maintained in compliance with
Section 1.704-1(b)(2)(iv) of the Regulations, and the provisions hereof shall be
interpreted and applied in a manner consistent therewith.
"CAPITAL CALL DUE DATE" as defined in subsection 6.2.2.
"CAPITAL CALL NOTICE" as defined in subsection 6.2.2.
"CAPITAL CONTRIBUTIONS" as defined in subsection 6.2.1.
"CERTIFICATE OF FORMATION" as defined in the Preamble.
"CLASS A MEMBER" means Interstate Management, and any successor to
Interstate Management appointed as Class A Member in accordance with the
provisions of this Agreement.
"CLASS B MEMBER" means MM, and any successor to MM as permitted in
accordance with the terms of this Agreement.
"CODE" means the Internal Revenue Code of 1986, as amended, and as
hereafter amended from time to time. Reference to any particular provision of
the Code shall mean that provision in the Code at the date hereof and any
successor provision of the Code.
"COMPANY" as defined in the Preamble.
3
8
"COMPANY ACCOUNTANT" as defined in Section 5.4.
"CONTRACTS" means collectively, the Management Agreements and the
Submanagement Agreements and the Marriott franchise agreements assumed by the
Company as franchisee in connection with the Management Agreements.
"HOTELS" means those hotels listed on Schedule 1.1 hereto.
"INITIAL CAPITAL CONTRIBUTIONS" as defined in Section 6.1.
"INTEREST" means, with respect to any Member at any time, the interest
of such Member in the Company at such time, including the right of such Member
to any and all of the benefits to which such Member may be entitled as provided
in this Agreement, together with the obligations of such Member to comply with
all of the terms and provisions of this Agreement.
"LEGAL HOLIDAY" means a Saturday, a Sunday or a day on which banking
institutions in the City of New York are authorized by law, regulation or
executive order to remain closed. If a date is a Legal Holiday, the date set for
any action hereunder shall be the next succeeding day that is not a Legal
Holiday.
"LIQUIDATING MEMBER" means the Class A Member; provided, however, if
the Class A Member's bankruptcy, withdrawal or liquidation shall have preceded
the liquidation of the Company, the Class B Member shall be the Liquidating
Member.
"MANAGEMENT AGREEMENTS" means those certain Management Agreements
entered into by and among the Company and [WYNDHAM] as more fully described
therein, as the same may be amended, modified, restated or otherwise modified
from time to time.
"MEMBER" or "MEMBERS" means, initially, the Persons identified as
Members in the preamble to this Agreement, and thereafter shall include any
Person admitted as Substitute Member or an Additional Member.
"NECESSARY COSTS" as defined in subsection 6.2.3.
"NET CAPITAL PROCEEDS" means (I) the net cash proceeds arising out of
the refinancing or refunding of any Company indebtedness or any additional
indebtedness, and (ii) gross receipts (including condemnation and casualty
insurance proceeds) from the sale, exchange or other disposition (excluding
leasing in the ordinary course of business) of any Company assets, less (A) any
indebtedness relating to or secured by such assets which is paid out of such
gross receipts, (B) the costs and expenses of the sale, exchange or disposition
including brokerage commissions, and (C) in the case of condemnation or
casualty, the cost of any collection, repair or restoration.
4
9
"NET OPERATING CASH FLOW" means, for any period, the excess of cash
receipts of all kinds for that period (including disbursements from reserves
previously established by the Managing Member) over cash disbursements of all
kinds for that period (including reasonable reserves established by the Managing
Member), but excluding Net Capital Proceeds.
"PERCENTAGE INTEREST" means, with respect to each Member, the
percentage set forth below opposite its name, in each case, subject to
adjustment as provided in this Agreement:
Interstate Management 99.99%
MM .01%
"PERMITTED TRANSFER" means any Transfer expressly permitted by the
terms of this Agreement.
"PERSON" means any individual, partnership, limited partnership, trust,
estate, association, corporation, limited liability company, or other entity
whether domestic or foreign.
"PROFITS"and "LOSSES" means, for each fiscal year or other period, an
amount equal to the Company's taxable income or loss for such year or period,
determined in accordance with Code Section 703(a) (for this purpose, all items
of income, gain, loss or deduction required to be stated separately pursuant to
Code Section 703(a)(1) shall be included in taxable income or loss), with the
following adjustments:
(a) any depreciation, amortization and/or cost recovery
deductions with respect to any asset shall be deemed to be equal to the
Book Depreciation available with respect to such asset;
(b) any income or gain of the Company that is exempt from
federal income tax and not otherwise taken into account in computing
Profits or Losses shall be added to such taxable income or loss;
(c) any expenditures of the Company described in Code Section
705(a)(2)(B) or treated as Code Section 705(a)(2)(B) expenditures
pursuant to Regulations Section 1.704-1(b)(2)(iv)(I), and not otherwise
taken into account in computing Profits or Losses, shall be subtracted
from such taxable income or loss;
(d) to the extent an adjustment to the adjusted tax basis of
any Company asset pursuant to Section 734(b) or 743(b) of the Code is
required to be taken into account in determining Capital Accounts as a
result of a distribution other than in liquidation of a Member's
Interest, the amount of such adjustment shall be treated as an
5
10
item of gain (if the adjustment increases the basis of the asset) or
loss (if the adjustment decreases the basis of the asset) from the
disposition of the asset and shall be taken into account for purposes
of computing Profits or Losses;
(e) in the event the Book Value of any Company asset is
adjusted pursuant to the definition of Book Value, the amount of such
adjustment shall be taken into account as gain or loss from the
disposition of such asset for purposes of computing Profits or Losses;
(f) gain or loss resulting from any disposition of property
with respect to which gain or loss is recognized for federal income tax
purposes shall be computed by reference to the Book Value of the
property disposed of, notwithstanding that the adjusted tax basis of
such property differs from its Book Value; and
(g) any items of income, gain, loss or deduction which are
allocated individually specially pursuant to the provisions of Section
7.2 shall not be taken into account in computing Profits and Losses for
any taxable year.
"REMAINING MEMBERS" as defined in subsection 10.1.1.
"REQUIRED FUNDS" as defined in subsection 6.2.2.
"SECURITIES ACT" as defined in subsection 12.1.6.
"SECURITIES LAWS" as defined in subsection 12.1.6.
"SPECIAL TAX EVENT" means a sale or transfer of all or part of a
Member's Percentage Interest that would cause Interstate Management to recognize
any of the "built-in gain" with respect to its interests in the Company.
"SUBMANAGEMENT AGREEMENTS" means those certain Submanagement Agreements
entered into by and among the Company and the Submanager with respect to the
Hotels, as the same may be amended, modified, restated or supplemented from time
to time.
"SUBSTITUTE MEMBER" as defined in Section 9.3.
"SUBMANAGER" MEANS [MARRIOTT OR MARRIOTT WHOLLY OWNED ENTITY].
"TAX MATTERS MEMBER" as defined in Section 7.4.
"TRANSFER" as defined in subsection 9.1.1.
"TREASURY REGULATIONS" means the income tax regulations promulgated
under the Code, whether temporary, proposed or finalized, as such regulations
may be amended from time to time (including corresponding provisions of
succeeding regulations).
6
11
ARTICLE 2
FORMATION, DURATION AND PURPOSES
--------------------------------
SECTION 2.1 FORMATION. Pursuant to the Delaware Limited Liability
Company Act, codified in the Delaware Code Annotated, Title 6, Sections 18-101
to 18-1109, as the same may be amended from time to time (the "ACT"), the
Members have formed a limited liability company by filing the Certificate of
Formation with the Secretary of State of the State of Delaware. The rights and
liabilities of the Members, and the operation of the Company, shall be governed
by and determined pursuant to the Act and this Agreement. To the extent the
rights and obligations of any Member are different by reason of any provision of
this Agreement than they would be in the absence of such provision, this
Agreement, to the extent permitted by the Act, shall control.
SECTION 2.2 NAME; REGISTERED AGENT AND REGISTERED OFFICE. The name of
the Company, and the name under which the business of the Company shall be
conducted shall be IHC II, LLC or such other name as hereafter may be adopted by
the Class A Member. The Registered Agent of the Company shall be [Corporation
Service Company], or such other Person as may be selected from time to time by
the Class A Member. The registered office of the Company shall be at [1013
Xxxxxx Xxxx, Xxxxxxxxxx, Xxxxxxxx 00000].
SECTION 2.3 PRINCIPAL OFFICE. The principal place of business and
office of the Company shall be located c/o [________________________________ ],
or at such other place as may be determined by the Class A Member.
SECTION 2.4 PURPOSES AND BUSINESS.
2.4.1 The purpose and nature of the business of the Company shall be:
(i) to directly or indirectly own, hold, manage,
terminate, extend, amend, amend and restate or
otherwise modify, or renew or replace (provided such
renewal or replacement relates solely to the hotels
referenced in the Contracts) the Contracts;
(ii) to exercise the rights and perform the
obligations of the Company under and pursuant to the
Contracts, including to act as managers and
franchisees under such Contracts or any renewals or
replacements thereof with respect to the hotels
referenced in such Contracts; and
7
12
(iv) to conduct all activities necessary or desirable
to accomplish the foregoing purposes.
2.4.2 For so long as the Management Agreement remains in
place, the Company shall not:
(i) employ any individual other than as an
independent contractor;
(ii) enter into any contract or agreement other
than as permitted under subsection 2.4.1;
(iii) enter into or conduct any business other
than as set forth subsection 2.4.1;
(iv) fail to correct any known misunderstanding
regarding its separate identity;
(v) commingle its funds or other assets with
those of any other Person (except as
specifically contemplated in the Contracts);
(vi) guarantee or become obligated for the debts
of any other person or hold its credit as
being available to satisfy the obligations
of any other person;
(vii) pledge any of its assets for the benefit of
any other Person other than in connection
with the Management Agreement; or
(viii) make any loans to any other person;
SECTION 2.5 PURPOSES AND BUSINESS. The Members acknowledge and agree
that they intend for all management and franchise activities, other than
franchise or management activities permitted under subsection 2.4.1 or relating
to the hotels currently managed under the Contracts, to be conducted by
Interstate Management, as opposed to the Company, and neither the Class A Member
or the Class B Member shall have any obligation, fiduciary or otherwise, to
offer or bring to the Company any opportunities relating to any business
activities not contemplated in subsection 2.4.1. It is anticipated that all such
opportunities not contemplated by subsection 2.4.1 shall be transferred to
Interstate Management.
8
13
ARTICLE 3
RIGHTS AND OBLIGATIONS OF MEMBERS
---------------------------------
SECTION 3.1 LIMITED LIABILITY. Except as required under the Act or as
expressly set forth in this Agreement, the debts, obligations and liabilities of
the Company, whether arising in contract, tort or otherwise, will be solely the
debts, obligations and liabilities of the Company, and no Member will be
obligated personally for any debt, obligation or liability of the Company solely
by reason of being a member of the Company.
SECTION 3.2 ADMISSION OF MEMBERS. Interstate Management is the sole
Class A Member and MM is the sole Class B Member of the Company and shall be
shown as such on the books and records of the Company. Except as expressly
permitted by this Agreement, no other Person will be admitted as a member of the
Company, and no additional Interests will be issued, without the approval of
Interstate Management and MM.
SECTION 3.3 BANKRUPTCY OF A MEMBER. Except as provided in Section 10.1,
the Bankruptcy of any Member shall not cause a dissolution of the Company, and
the rights of such Member to share in the profits or losses of the Company and
to receive distributions of Company funds shall, on the happening of such event,
devolve on its successors or assigns, subject to the terms and conditions of
this Agreement, and the Company shall continue as a limited liability company.
However, in no event shall any such assignee become a substitute Member or
succeed to any right to vote or participate in the management of the business,
property and affairs of the Company or to exercise any rights of a Member,
unless such assignee shall otherwise be entitled to become a Substitute Member
under the terms of this Agreement.
SECTION 3.4 NO WITHDRAWAL. No Member may withdraw from the Company
without the prior consent of the other Members (which may be granted or withheld
in the sole discretion of such Members), other than as expressly provided in
this Agreement.
SECTION 3.5 REMUNERATION TO MEMBERS. Except as expressly otherwise
authorized in, or pursuant to, this Agreement, no Member shall be entitled to
remuneration for acting in the Company business.
SECTION 3.6 DUTIES AND CONFLICTS. Notwithstanding anything to the
contrary contained in this Agreement, (i) each Member recognizes that the other
Member and its Affiliates have or may have other business interests, activities
and investments, some of which may be in conflict or competition with the
business of the Company, and that such Persons are entitled to carry on such
other business interests, activities and investments; (ii) the Members and their
Affiliates may engage in or possess an interest in any other business or venture
of any kind, independently or with others, on their own behalf or on behalf of
other entities with which they are affiliated or associated, and such Persons
may engage in any activities, whether or not competitive with the Company,
without any obligation to offer any interest in such activities to the Company
or to any Member; and (iii) neither the Company nor any Member shall have any
right, by virtue of this Agreement, in or to such activities, or the income or
profits derived therefrom, and the pursuit of such activities, even if
competitive with the business of the Company, shall not be deemed wrongful or
improper.
9
14
ARTICLE 4
MANAGEMENT
----------
SECTION 4.1 MANAGEMENT BY THE CLASS A MEMBER; MEMBERS.
4.1.1 MANAGEMENT BY THE CLASS A MEMBER. Subject to the
limitations contained in subsection 4.1.3, the overall management and
control of the business and affairs of the Company shall be overseen by
the Class A Member, in the form and manner described below. Except as
otherwise expressly provided in this Agreement, the Class A Member
shall have the exclusive power and authority to take such action for
and on behalf of the Company as the Class A Member shall from time to
time deem necessary or appropriate to carry on the Company business and
to carry out the purposes for which the Company was organized.
4.1.2 INVOLVEMENT IN COMPANY BUSINESS. The Class A Member
shall devote such time to the Company business as it deems to be
necessary or desirable in connection with its respective duties and
responsibilities hereunder.
4.1.3 ACTIONS REQUIRING THE CONSENT OF THE CLASS B MEMBER.
Notwithstanding any other provision hereof to the contrary, for so long
as the Submanagement Agreements remain in effect, the Company shall
not, without the prior written consent of both the Class A Member and
the Class B Member:
(a) dissolve, liquidate, consolidate or merge or sell all or
substantially all of its assets;
(b) engage in any business other than that specified in Section
2.4;
(c) acquire any assets or incur any liabilities not reasonably
related to the conduct of the business specified in Section
2.4;
(d) institute proceedings to have the Company adjudicated as
bankrupt or insolvent, or consent to the institution of
bankruptcy or insolvency proceedings against it, or file a
petition with respect to the Company or consent to a petition
with respect to the Company seeking reorganization or relief
under any applicable Federal or state laws relating to
bankruptcy or insolvency, or consent to the appointment of
receiver, liquidator, assignee, trustee, sequestrator (or
other similar official) of the Company or a substantial
portion of its assets, or make any assignment for the benefit
of creditors by the Company, or except as required by law,
admit in writing the inability of the Company to pay its debts
generally as they become due, or take any action as a limited
liability company
10
15
in furtherance of any such action;
(e) terminate (or assert, either directly to the Submanager or in
any judicial or administrative proceeding involving the
Submanagement Agreements, the right to terminate) the
Submanagement Agreement except (A) as a result of a breach by
the Submanager of any of the Submanager's duties or
obligations under the Submanagement Agreements (subject to the
conditions and limitations set forth in the Submanagement
Agreements); or (B) pursuant to the exercise of an express
termination right set forth in the Submanagement Agreement;
(f) assert, either directly to the Submanager or in any judicial
or administrative proceeding involving the Submanagement
Agreement, (A) that the status of the Submanager with respect
to the Company under the Submanagement Agreements is other
than that of an "independent contractor" with the rights and
obligations expressly set forth in the Submanagement
Agreement, or (B) that the Submanager is not entitled to
injunctive relief preventing a termination of the
Submanagement Agreements (except in accordance with the
express terms thereof or as a result of a breach by the
Submanager of any of the Submanager's duties or obligations
under the Submanagement Agreement (subject to the conditions
and limitations set forth in the Submanagement Agreement)) by
reason of the fact that the Submanager would have an adequate
remedy at law for money damages by reason of such wrongful
termination; or
(g) assert, either directly to the Class B Member or in any
judicial or administrative proceeding, that the provisions of
this Section are invalid or otherwise not enforceable strictly
in accordance with their express terms.
If either Member shall at any time violate, or attempt to violate, any
of the provisions of this subsection 4.1.3 and any rights hereby granted, then
the other Member shall, in addition to all rights and remedies at law and in
equity, be entitled to a decree or order restraining such violation.
4.1.4 In exercising voting and other management rights under this LLC
Agreement (including, those set forth in Subsection 4.1.4), no Member,
(i) shall have any fiduciary duty to the Company or the other Member or
(ii) shall be liable for (or otherwise prevented from) exercising such
rights in a manner that solely benefits its economic and business
interests, without regard to the interests of the Company or the other
Member.
4.1.5 Notwithstanding the foregoing provisions of this Section 4.1 or
any other provision of this Agreement to the contrary, the Members
shall not be empowered to, and shall not (i) undertake any act in
violation of this Agreement; (ii) possess or take title to any assets
of the Company; or (iii) take any action that makes it illegal or
impossible for the Company to carry on its business.
11
16
SECTION 4.2 BANK ACCOUNTS. The Class A Member shall open and thereafter
maintain, for the Company, a commercial checking account and such other accounts
at one or more banks or trust companies organized and existing under the laws of
the United States or any state thereof, each having combined capital and surplus
aggregating at least $500,000,000 and none of which is an Affiliate of any
Member, which accounts shall be interest bearing to the extent practicable. All
funds of the Company shall be promptly deposited in said accounts.
SECTION 4.3 LIABILITY; INDEMNIFICATION. Except as set forth in Section
4.4, no Member (including the Class A Member) shall be liable to the Company or
any Member for any act or omission by it in the conduct of its duties as a Class
A Member or Member, as the case may be, which is within the scope of such
Person's authority hereunder and which is performed or omitted in good faith and
without gross negligence or willful misconduct on its part. The Company shall
indemnify, defend and hold harmless each such Person and their respective
Affiliates and agents from and against any personal liability, claim, loss,
damage, cost or expenses, including attorneys' fees and expenses, incurred or
sustained by such Person or such Affiliate or agent by reason of any act or
omission by it which is within the scope of its authority hereunder and which is
performed or omitted in good faith and without gross negligence or willful
misconduct on its part. The indemnification provided under this Section 4.3
shall be in addition to, and shall not limit or diminish, the coverage of any
such Person or Affiliate or agent under any insurance covering the Company. The
provisions of this Section 4.3 shall survive any termination of the Company or
this Agreement.
SECTION 4.4 LIMITATION ON SALE OF ASSETS. The Members acknowledge that
a portion of the stock of Interstate Management is held by PAH Interstate
Holdings, Inc. ("PAH"), an entity that is a "real estate investment trust" for
Federal income tax purposes (a "REIT") that must comply with certain
requirements to continue to qualify as a REIT, including proposed legislation
affecting the operations and activities of "stapled" REITs entitled to
grandfathering relief under Section 269B of the Code. Accordingly, without the
prior written consent of Interstate Management, the Company shall not, and the
Managing Member shall cause the Company not to, (I) acquire any real property or
other interests in real estate (including leasehold interests), or acquire
interests in, or substantially all of the assets of, any other person or entity
or (ii) change the nature of the Company's business in a manner not contemplated
by this Agreement.
SECTION 4.5 ALLOCATION OF COSTS AND EXPENSES. The Company and
Interstate Management acknowledge that certain services may be provided by
Interstate Management for the benefit of the Company. All costs and expenses
relating to services provided by Interstate Management for, in whole or in part,
the benefit of Company (the "SHARED EXPENSES") shall be allocated between the
Company and Interstate Management, based on generally accepted accounting
principles consistently applied, on the basis of which party benefited from the
expenditure of such Shared Expenses. To the extent the allocation of any Shared
Expenses cannot be fairly or equitably apportioned (including general and
administrative expenses), the Company and Interstate Management shall allocate
Shared Expenses based on respective gross
12
17
revenues so that each party's profit margins are substantially the same for
similar services. The Managing Member and the Non-Managing Member may mutually
agree to apportion Shared Expenses between the Company and Interstate Management
other than as set forth above.
ARTICLE 5
BOOKS AND RECORDS
-----------------
SECTION 5.1 BOOKS AND RECORDS. The Class A Member shall maintain or
cause to be maintained, at the expense of the Company, in a manner customary and
consistent with good accounting principles, practices and procedures, a
comprehensive system of office records, books and accounts (which records, books
and accounts shall be and remain the property of the Company) in which shall be
entered fully and accurately each and every financial transaction with respect
to the operations of the Company. Bills, receipts and vouchers shall be
maintained on file by the Company. The Class A Member shall maintain or caused
to be maintained said books and accounts in a safe manner and separate from any
records not having to do directly with the Company. The Class A Member shall
cause audits to be performed and audited financial statements and income tax
returns to be prepared as it deems necessary. Such books and records of account
shall be prepared and maintained by the Class A Member at a location or
locations designated by the Class A Member. Each Member or its duly authorized
representative shall have the right to inspect, examine and copy such books and
records of account at the Company's office during reasonable business hours.
SECTION 5.2 ACCOUNTING AND FISCAL YEAR. The books of the Company shall
be kept on the accrual basis and the Company shall report its operations for tax
purposes on the accrual method. The taxable year of the Company shall end on
December 31 of each year, unless a different taxable year shall be required by
the Code.
SECTION 5.3 REPORTS.
5.3.1 The Class A Member shall prepare, or cause to be
prepared, at Company expense, the financial reports and other
information, including, without limitation, audited financial
statements, that the Class A Member may determine are appropriate. The
Class A Member shall prepare or cause to be prepared at the expense of
the Company and furnished to each of the Members the following:
5.3.1.1 Within sixty (60) calendar days after the
close of each calendar year of the Company, audited financial
statements, including, without limitation, related notes to financial
statements, a balance sheet of the Company dated as of the end of the
calendar year, a related statement of income and expense, a statement
of cash flow and a statement of changes in Members' capital for the
Company for the calendar year and information for the calendar year as
to the balance in each Member's Capital Account, and all other
information deemed reasonably necessary by
13
18
the Class A Member, certified to by an independent accounting firm as,
to the best of its knowledge, true and correct and prepared in
accordance with generally accepted accounting principles applied on a
consistent basis, and all of which shall otherwise be certified in such
manner as is customary;
5.3.1.2 Within twenty (20) calendar days after the
close of each calendar quarter of the Company (other than the last
calendar quarter in any calendar year), a balance sheet of the Company
dated as of the end of the calendar quarter, a related statement of
income and expense, a statement of cash flow and a statement of changes
in Members' capital for the calendar quarter and information for the
calendar quarter as to the balance in each Member's Capital Account,
and all other information, including a market update, as is deemed
reasonable by the Class A Member, all of which shall be certified to by
the Person preparing or responsible for preparing such statements as
being, to the best of its knowledge, true and correct;
5.3.1.3 Within twenty (20) calendar days after the
end of each calendar month, an income statement (with budget variance
explanations) and statement of cash flow; and
5.3.1.4 Promptly after the end of each calendar
year the Class A Member will use its best efforts to have the Company
Accountant prepare and deliver to each Member a report setting forth in
sufficient detail all such information and data with respect to
business transactions effected by or involving the Company during the
calendar year as will enable the Company and each Member to timely
prepare its federal, state and local income tax returns in accordance
with the laws, rules and regulations then prevailing. The Class A
Member will use its reasonable efforts to have the Company Accountant
also prepare federal, state and local tax returns required of the
Company, submit those returns to the Company for its approval no later
than 30 calendar days prior to the date required for the filing thereof
(including any extensions granted) and will file the tax returns after
they have been approved by the Class A Member. In the event the Class A
Member shall not desire or be able to approve any such tax return prior
to the date required for the filing thereof (including any extensions
granted), the Company will timely obtain an extension of such date if
such extension is available under applicable law. In all cases, tax
returns shall be prepared and filed in accordance with applicable law.
5.3.2 All decisions as to accounting principles shall be made
by the Class A Member subject to the provisions of this Agreement.
SECTION 5.4 THE COMPANY ACCOUNTANT. The Company shall retain as the
regular accountant and auditor for the Company (the "COMPANY ACCOUNTANT") a
nationally-recognized accounting firm or any other accounting firm acceptable to
the Class A Member in its sole discretion. The fees and expenses of the Company
Accountant shall be a Company expense.
14
19
ARTICLE 6
CONTRIBUTIONS
-------------
SECTION 6.1 INITIAL CAPITAL CONTRIBUTIONS. The "INITIAL CAPITAL
CONTRIBUTIONS" of the Class A Member and initial Capital Account balance for the
Class A Member shall be as described on Schedule 1.1 attached hereto.
SECTION 6.2 ADDITIONAL CAPITAL CONTRIBUTIONS.
6.2.1 No Member shall be obligated to make any additional
contributions of capital (all contributions of capital to the Company,
including the Initial Capital Contributions, "CAPITAL CONTRIBUTIONS")
to the Company (including upon dissolution and liquidation of the
Company).
6.2.2 The Class A Member shall monitor the finances of the
Company in an attempt to determine whether or not, and when, the cash
receipts of the Company are insufficient to pay all costs and expenses
of the Company (such costs and expenses, the "NECESSARY COSTS"). The
Class A Member shall have the right, but not the obligation, to
contribute capital to the Company to cover Necessary Costs. If the
Class A Member makes such additional contributions of capital, its
Capital Account shall be adjusted accordingly.
6.2.3 [Reserved]
SECTION 6.3 NO THIRD PARTY BENEFICIARY. The provisions hereof are
intended for the benefit of the Members and the Company only and shall not
confer any right or claim upon, or otherwise inure to the benefit of, any
officer or creditor of, or other third party having dealings with, the Company.
SECTION 6.4 CAPITAL ACCOUNTS. A Capital Account shall be maintained for
the Class A Member. Initially, the Capital Account of the Class A Member shall
be credited with the amounts referred to in Schedule 1.1. Thereafter, the Class
A Member's Capital Account shall be credited with the Profits, any individual
items of income and gain allocated to such Member pursuant to the provisions of
Article 7, the amount of additional cash, and the Book Value of any asset (net
of any liabilities assumed by the Company and liabilities to which the asset is
subject), contributed to the Company by such Member (an "ADDITIONAL CAPITAL
CONTRIBUTION"), and shall be debited with the Losses, any individual items of
deduction and loss allocated to such Member pursuant to the provisions of
Article 7, the amount of any cash distributed to such Member and the Book Value
of any asset distributed to such Member (net of any liabilities assumed by the
Member and liabilities to which the asset is subject). In the event that all or
a portion of an interest in the Company is transferred in accordance with the
15
20
terms of this Agreement, the transferee shall succeed to the Capital Account of
the transferor to the extent it relates to the transferred interest.
It is the intention of the Members that the Class B Member
have no economic interest in the assets of the Company, but rather has the
consent rights specifically set forth herein. Accordingly, no Capital Account
shall be maintained for the Class B Member.
SECTION 6.5 WITHDRAWAL OF CAPITAL. Except as provided herein, (i) no
Member shall be entitled to withdraw any part of its Capital Account, (ii) no
Member shall be entitled to receive any interest on its Capital Account or
distributions from the Company, and (iii) no Member shall be entitled to demand
or receive any property from the Company other than cash.
SECTION 6.6 NEGATIVE CAPITAL ACCOUNTS. In no event shall the Class A
Member be obligated to make any capital contribution to the Company solely as a
result of the existence at any time of a negative Capital Account balance.
ARTICLE 7
ALLOCATION OF PROFITS AND LOSSES; TAX MATTERS
---------------------------------------------
SECTION 7.1 PROFITS AND LOSSES. Profits and Losses for each fiscal year
of the Company shall be allocated to the Class A Member.
SECTION 7.2 REGULATORY ALLOCATIONS.
7.2.1 Notwithstanding subsection 7.1, the following special
allocations shall be made each taxable year, to the extent required, in the
following order:
(i) Minimum Gain Chargebacks and Qualified Income Offset.
Items of Company income and gain shall be allocated
to the extent of, and in an amount sufficient to
satisfy, the "minimum gain chargeback" requirements
of Treasury Regulations Section 1.704-2(f) and (i)(4)
and the "qualified income offset" requirement of
Treasury Regulations Section 1.704-1(b)(2)(ii)(d)(3).
(ii) Nonrecourse and Partner Nonrecourse Deductions.
"Nonrecourse deductions" of the Company (within the
meaning of Treasury Regulations Section
1.704-2(b)(1)) shall be allocated among the Members
in proportion to their respective Capital
Contributions. "Partner nonrecourse deductions"
(within the meaning of Treasury Regulations Section
1.704-2(i)) shall be allocated to the Member who
16
21
bears the economic risk of loss associated with such
deductions, in accordance with Treasury Regulations
Section 1.704-2(i).
(iii) Any Other Allocations of Items Which Cannot Have
Economic Effect. Unless otherwise required by Code
Section 704(b) or the Treasury Regulations
promulgated thereunder or otherwise provided in this
subsection 7.2.2, any allocations of Company items of
income, gain, loss, deduction or credit that cannot
have "economic effect" (within the meaning of
Treasury Regulations Section 1.704-1 and 1.704-2)
shall be allocated among the Members in proportion to
their respective Percentage Interests.
SECTION 7.3 TAX ALLOCATIONS. The Company's ordinary income and losses
and capital gain as determined for tax purposes (and each item of income, gain,
loss or deduction entering into the computation thereof) shall be allocated to
the Members in the same proportions as the corresponding "book" items are
allocated pursuant to Sections 7.1 and 7.2 of this Agreement. Notwithstanding
the foregoing, tax items relating to property with an adjusted tax basis that is
different from its Book Value shall be allocated among the Members in accordance
with Section 704(c) of the Code and the Treasury Regulations issued thereunder.
Items described in this Section 7.3 shall neither be credited nor charged to the
Member's Capital Accounts.
SECTION 7.4 TAX MATTERS MEMBER. The Class A Member is hereby designated
as the "TAX MATTERS MEMBER" for the Company (as such term is defined in Section
6231(a)(7) of the Code), and all federal, state and local tax audits and
litigation shall be conducted under the direction of the Tax Matters Member.
SECTION 7.5 TAX ELECTIONS. All elections required or permitted to be
made by the Code or other applicable tax laws, and all material decisions with
respect to the calculation of taxable income or tax loss under the Code or any
other applicable tax laws, shall be made by the Tax Matters Member.
SECTION 7.6 INTENTION OF THE MEMBERS. It is the intention of the
Members that the Class A Member is the sole member of the Company for Federal,
state and local income tax purposes, the Tax Matters Member shall perform its
duties consistent with such intent and the Members agree to take no action
inconsistent with that intent.
ARTICLE 8
DISTRIBUTIONS
-------------
SECTION 8.1 CASH AVAILABLE FOR DISTRIBUTIONS.
17
22
8.1.1 At such times as are determined by the Class A Member
(but no less frequently than quarterly), the Company shall make a
distribution of Net Operating Cash Flow of the Company (to the extent
positive). Net Operating Cash Flow distributions shall be made to the
Class A Member.
8.1.2 Except upon the liquidation of the Company (in which
event Net Capital Proceeds shall be distributed pursuant to Section
10.2) any Net Capital Proceeds shall be distributed within thirty (30)
days following receipt by the Company to the Class A Member.
8.1.3 Except as provided in subsection 8.1.1 and subsection
8.1.2 above, no portion of any capital contribution made by any Member
to the Company may be withdrawn or distributed at any time.
ARTICLE 9
TRANSFER
--------
SECTION 9.1 NO TRANSFER OF INTERESTS.
9.1.1 Except as expressly permitted or contemplated by this
Agreement: no Member may sell, assign, give, hypothecate, pledge,
encumber or otherwise transfer ("TRANSFER") all or any portion of its
Interest, whether directly or indirectly without the written consent of
the other Members of the Company.
9.1.2 Any Transfer by a Member of its Interest in
contravention of this Article 9 shall be null and void. No Member shall
withdraw from the Company except in connection with a Permitted
Transfer or in accordance with Section 3.4.
SECTION 9.2 [RESERVED]
SECTION 9.3 TRANSFEREES. Notwithstanding anything to the contrary
contained in this Agreement, no transfer of all or any part of any Interest
shall be made if, as a result thereof, any income of the Company will be subject
to corporate federal income tax. No transferee of all or any portion of any
Interest shall be admitted as a Member unless such Interest is transferred in
compliance with the applicable provisions of this Agreement, such transferee
shall have furnished evidence of satisfaction of the requirements of Section 9.2
reasonably satisfactory to the remaining Members, and such transferee shall have
executed and delivered to the Company such instruments necessary to effectuate
the admission of such transferee as a Member and to confirm the agreement of
such transferee to be bound by all of the terms and provisions of this Agreement
with respect to such Interest. At the request of the remaining Members prior to
such transfer, each such transferee shall also cause to be delivered to the
Company, at the transferee's sole cost and expense, a favorable opinion of legal
counsel
18
23
reasonably acceptable to the Company, to the effect that such transferee has the
legal right, power and capacity to own the Interest proposed to be transferred.
As promptly as practicable after the admission of any Person as a Member, the
books and records of the Company shall be changed to reflect such admission.
Upon satisfaction of the requirements of this Section 9.3 and any other
applicable provisions of this Agreement), such transferee shall be a substitute
Member (a "SUBSTITUTE MEMBER") of the Company. All reasonable costs and expenses
incurred by the Company in connection with any Transfer of any Interest and, if
applicable, the admission of any transferee as a Member shall be paid by such
transferee.
SECTION 9.4 ADMISSION OF ADDITIONAL MEMBERS.
9.4.1 No person may be admitted as an additional Member of the
Company (in contrast with admission as a Substitute Member in
connection with a Permitted Transfer) without the prior written consent
of the Members.
9.4.2 Any additional Member admitted to the Company shall
execute and deliver documentation in form satisfactory to the Class A
Member or the Members, as the case may be, accepting and agreeing to be
bound by this Agreement, and such other documentation as the Class A
Member or the Members, as the case may be, shall require in order to
effect such person's admission as an additional Member. The admission
of any person as an additional Member (an "ADDITIONAL MEMBER") shall
become effective as of the date upon which the name of such person is
recorded on the books and records of the Company following the consent
of the Class A Member or the Members, as the case may be, to such
admission.
SECTION 9.5 MANDATORY REDEMPTION OF CLASS B INTERESTS. Promptly
following the termination of the last Submanagement Agreement, the Class A
Member shall be required to purchase the Interest of the Class B Member (and the
Class B Member shall be required to sell its Interest to the Class A Member) in
the Company for One Dollar ($1.00).
ARTICLE 10
TERMINATION
-----------
SECTION 10.1 DISSOLUTION. The Company shall be dissolved and its
business wound up upon the happening of any of the following events, whichever
shall first occur:
10.1.1 the Bankruptcy of any Member, if within ninety (90)
days thereafter, a majority in interest of the remaining Members (the
"REMAINING MEMBERS") shall not have elected to continue the Company,
which right of election is hereby granted to them; or
10.1.2 entry of a decree of judicial dissolution of the
Company.
19
24
In no event shall the Company dissolve prior to the occurrence of one of the
events set forth above.
SECTION 10.2 TERMINATION. In cases of dissolution of the Company, the
business of the Company shall be wound up and the Company terminated as promptly
as practicable thereafter, and each of the following shall be accomplished:
10.2.1 The Liquidating Member shall cause to be prepared a
statement setting forth the assets and liabilities of the Company as of
the date of dissolution, a copy of which statement shall be furnished
to all of the Members.
10.2.2 The property and assets of the Company shall be
liquidated by the Liquidating Member as promptly as possible, but in an
orderly and businesslike and commercially reasonable manner. The
Liquidating Member may, in the exercise of its business judgment and if
commercially reasonable, determine not to sell all or any portion of
the property and assets of the Company, in which event such property
and assets shall be distributed in kind pursuant to subsection 10.2.4
below.
10.2.3 Any income, gain, profit or loss realized by the
Company upon the sale or other disposition of its property pursuant to
subsection 10.2.2 shall be allocated to the Class A Member as and to
the extent required by Article 7 hereof.
10.2.4 The proceeds of sale and all other assets of the
Company shall be applied and distributed as follows and in the
following order of priority:
(i) To the payment of the Company's outstanding
liabilities, which shall be set forth on a statement
as provided in subsection 10.2.1.
(ii) To the setting up of any reserves which the
Liquidating Member shall determine to be reasonably
necessary for contingent, unliquidated or unforseen
liabilities or obligations of the Company or the
Members arising out of or in connection with the
Company. Such reserves, may, in the discretion of the
Liquidating Member, be paid over to a national bank
or national title with the Company as escrowee for
the purposes of disbursing such reserves to satisfy
the liabilities and obligations described above, and
at the expiration of such period as the Liquidating
Member may reasonably deem advisable, distribute any
remaining balance in the manner set forth below.
(iii) To the Class A Member.
No payment or distribution in any of the foregoing categories shall be
made until all payments in each prior category shall have been made in
full. If the payments due to be made in any of the foregoing categories
exceed the remaining assets available for such
20
25
purpose, such payment shall be made to the Persons entitled to receive
the same pro rata in accordance with the respective amount due to each
such Person. Payments described in clause (ii) above may be made in
cash or in assets of the Company in kind. Any asset distributed in kind
shall be valued at its fair market value and for all purposes of this
Agreement shall be treated as if such asset had been sold at such value
and the net cash proceeds therefrom distributed to the Class A Member.
Without limiting the foregoing, with respect to any assets distributed
in kind, there shall be a calculation of the amount of Profit or Loss
that would have been realized by the Company with respect to such
assets if such assets had been sold at fair market value.
SECTION 10.3 ACTS IN FURTHERANCE OF LIQUIDATION. Each Member, upon the
request of the Liquidating Member, shall promptly execute, acknowledge and
deliver all documents and other instruments as the Liquidating Member shall
reasonably request to effectuate the proper dissolution and termination of the
Company, including the winding up of the business of the Company.
ARTICLE 11
INTENTIONALLY RESERVED
----------------------
[Reserved]
ARTICLE 12
GENERAL PROVISIONS
------------------
SECTION 12.1 COVENANTS, REPRESENTATIONS AND WARRANTIES OF THE MEMBERS.
Each Member represents and warrants to the other Members as follows:
12.1.1 It is duly organized, validly existing and in good
standing under the laws of its jurisdiction of formation with all
requisite power and authority to enter into this Agreement.
12.1.2 This Agreement constitutes the legal, valid and binding
obligation of the Member enforceable in accordance with its terms,
subject to the application of principles of equity and laws governing
insolvency and creditors' rights generally.
12.1.3 No consents or approvals are required from any
governmental authority or other Person for the Member to enter into
this Agreement. All limited liability company, corporate or partnership
action on the part of the Member necessary for the authorization,
execution and delivery of this Agreement, and the consummation of the
transactions contemplated under this Agreement, have been duly taken.
21
26
12.1.4 The execution and delivery of this Agreement by the
Member, and the consummation of the transactions contemplated under
this Agreement, do not conflict with or contravene the provision of the
Member's organizational documents or any agreement or instrument by
which it or its properties are bound or any law, rule, regulations,
order or decree to which it or its properties are subject.
12.1.5 No Member has retained any broker, finder or other
commission or fee agent, and no such person has acted on its behalf in
connection with the execution and delivery of this Agreement.
12.1.6 Each Member is acquiring its interest in the Company
for investment, solely for its own account, with the intention of
holding such interest for investment and not with a view to, or for
resale in connection with, any distribution or public offering or
resale of any portion of such interest within the meaning of the
Securities Act of 1933 (the "SECURITIES ACT") or any other applicable
federal or state securities law, rule or regulation ("SECURITIES
LAWS").
12.1.7 Each Member acknowledges that it is aware that its
interest in the Company has not been registered under the Securities
Act or under any other Securities Law in reliance upon exemption
contained therein. Each Member understands and acknowledges that its
representations and warranties contained herein are being relied upon
by the Company, the other Members and the constituent owners of such
other Members as the basis for exemption of the issuance of interest in
the Company from registration requirements of the Securities Act and
other Securities Laws. Each Member acknowledges that the Company will
not and has no obligation to register any interest in the Company under
the Securities Act or other Securities Laws.
12.1.8 Each Member acknowledges that prior to its execution of
this Agreement, it received a copy of this Agreement and that it
examined this document or caused this document to be examined by its
representative or attorney. Each Member further acknowledges that it or
its representative or attorney is familiar with this Agreement, and
with the business and affairs of the Company, and that except as
otherwise specifically provided in this Agreement, it does not desire
any further information or data relating to the Company, the Assets or
the other Members. Each Member acknowledges that it understand that the
acquisition of its interest in the Company is a speculative investment
involving a high degree of risks and represents that it has a net worth
sufficient to bear the economic risk of its investment in the Company
and to justify its investing in a highly speculative Company of this
type.
SECTION 12.2 NOTICES. All notices, demands, approvals, consents or
requests provided for or permitted to be given pursuant to this Agreement must
be in writing.
12.2.1 All notices, demands, approvals, consents and requests
to be sent to the Company pursuant to the terms hereof shall be deemed
to have been properly given or
22
27
served by personal delivery or by a nationally recognized overnight
courier or by registered or certified mail, return receipt requested,
postage prepaid and addressed as follows:
If to the Company:
c/o Interstate Management
With a copy to:
Interstate Management
With a copy to:
[MM]
If to Interstate Management:
Interstate Management
If to MM:
[MM]
12.2.2 All notices, demands and requests shall be effective
upon personal delivery or upon the date of receipt by the addressee as
shown on the return receipt or upon the date of acknowledgment or
confirmation of receipt with respect to delivery by or nationally
recognized overnight courier. Rejection or other refusal to accept or
the inability to deliver because of changed address of which no notice
was given shall be deemed to be receipt of the notice, demand or
request sent.
12.2.3 By giving to the other parties at least ten (10) days
prior written notice thereof, the parties hereto and their respective
successors and assigns shall have the right from time to time and at
any time during the term of this Agreement to change their respective
addresses.
23
28
SECTION 12.3 GOVERNING LAWS; JURISDICTION; VENUE.
12.3.1 GOVERNING LAWS. This Agreement and the obligations of
the Members hereunder shall be interpreted, construed and enforced in
accordance with the laws of the State of Delaware without regard to
conflicts of law principles.
12.3.2 JURISDICTION; VENUE. Each of the Members hereby
irrevocably submits to the exclusive jurisdiction of any state court
located in the City of Wilmington, Delaware and any federal court in
the State of Delaware and any other court with jurisdiction to hear
appeals from such courts for the purposes of any suit, action or other
proceeding of any type whatsoever arising out of this Agreement or the
subject matter hereof, and to the extent permitted by applicable law,
hereby waives, and agrees not to assert, by way of motion, as a
defense, or otherwise, in any such suit, action or proceeding any claim
that it is not personally subject to the jurisdiction of the
above-named courts, that the suit, action or proceeding is brought in
an inconvenient forum, that the venue of the suit, action or proceeding
is improper or that this Agreement or the subject matter hereof may not
be enforced in or by such court.
SECTION 12.4 ENTIRE AGREEMENT. This Agreement contains the entire
agreement between the parties hereto relative to the formation and operation of
the Company. No variations, modifications, or changes herein or hereof shall be
binding upon any party hereto unless set forth in a document duly executed by or
on behalf of such party.
SECTION 12.5 WAIVER. No consent or waiver, express or implied, by any
Member to or of any breach or default by any other Member in the performance by
the other Member of its obligations hereunder shall be deemed or construed to be
a consent or waiver to or of any other breach or default in the performance by
such other Member of the same or any other obligations of such other Member
hereunder. Failure on the part of any Member to complain of any act or failure
to act of any of the other Members or to declare any of the other Members in
default, irrespective of how long such failure continues, shall not constitute a
waiver by such Member of its rights hereunder.
SECTION 12.6 SEVERABILITY. If any provision of this Agreement or the
application thereof to any Person or circumstance shall be invalid or
enforceable to any extent, the remainder of this Agreement and the application
of such provisions to other Persons or circumstances shall not be affected
thereby and shall be enforced to the greatest extent permitted by law.
SECTION 12.7 TERMINOLOGY. All personal pronouns used in this Agreement,
whether used in the masculine, feminine, or neuter gender, shall include all
other genders; the singular shall include the plural, and vice versa and shall
refer solely to the parties signatory thereto except where otherwise
specifically provided. Titles of Articles and Sections are for convenience only,
and neither limit nor amplify the provisions of the Agreement itself, and all
references herein to Articles, Sections or subdivisions thereof shall refer to
the corresponding
24
29
Articles, Sections or subdivisions thereof of this Agreement unless specific
reference is made to such Articles, Sections or subdivisions of another document
or instrument. Any use of the word "INCLUDING" herein shall, unless the context
clearly requires otherwise, be deemed to mean "INCLUDING WITHOUT LIMITATION."
SECTION 12.8 ACTION BY THE MEMBERS. No approval, consent, designation
or other action by a Member shall be binding upon such Member unless the same is
in writing and executed on behalf of such Member by a duly authorized
representative of such Member.
SECTION 12.9 AMENDMENTS. No change, modification or amendment of this
Agreement shall be valid or binding unless such change, modification or
amendment shall be in writing and duly executed by all of the Members.
SECTION 12.10 BINDING AGREEMENT. Subject to the restrictions on
transfers and encumbrances set forth herein, this Agreement shall inure to the
benefit of and be binding upon the undersigned Members and their respective
heirs, executors, legal representatives, successors and assigns. Whenever, in
this instrument, a reference to any party or Member is made, such reference
shall be deemed to include a reference to the heirs, executors, legal
representatives, successors and assigns of such party or Member.
SECTION 12.11 FURTHER ASSURANCES. Each of the Members shall hereafter
execute and deliver such further instruments and do such further acts and things
as may be reasonably necessary to carry out the intent and purpose of this
Agreement and as are not inconsistent with the terms hereof.
[THE REMAINDER OF THIS PAGE HAS BEEN INTENTIONALLY LEFT BLANK]
25
30
IN WITNESS WHEREOF, this Agreement is executed effective as of the date
first set forth above.
INTERSTATE HOTELS MANAGEMENT, INC.
a Maryland corporation
By: _______________________________
Name:
Title:
MARRIOTT MEMBER
a [** Delaware **] corporation
By: _______________________________
Name:
Title:
26
31
SCHEDULE 1.1
------------
INITIAL CAPITAL ACCOUNT OF CLASS A MEMBER
-----------------------------------------
32
SCHEDULE 1.3
------------
LIST OF SUBMANAGEMENT AGREEMENTS
--------------------------------
33
SCHEDULE 2.4.1
--------------
LIST OF MANAGEMENT CONTRACTS
