EXHIBIT 99.9
LIMITED LIABILITY COMPANY AGREEMENT
OF
[INTERSTATE HOTELS, LLC]
Dated as of May __, 1998
TABLE OF CONTENTS
ARTICLE 1
DEFINITIONS..............................................................2
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 2.4 Purposes and Business......................................8
Section 2.5 Future Business............................................8
ARTICLE 3
RIGHTS AND OBLIGATIONS OF MEMBERS........................................9
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 Managing Member; Members................10
Section 4.2 Bank Accounts.............................................10
Section 4.3 Liability; Indemnification................................11
Section 4.4 Limitations on Sale of Assets; Indemnification............11
ARTICLE 5
BOOKS AND RECORDS.......................................................12
Section 5.1 Books and Records.........................................12
Section 5.2 Accounting and Fiscal Year................................13
Section 5.3 Reports...................................................13
Section 5.4 The Company Accountant....................................14
ARTICLE 6
CONTRIBUTIONS...........................................................14
Section 6.1 Initial Capital Contributions.............................14
Section 6.2 Additional Capital Contributions..........................14
Section 6.3 No Third Party Beneficiary................................15
Section 6.5 Withdrawal of Capital.....................................16
Section 6.6 Negative Capital Accounts.................................16
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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
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 Permitted Transfers of Interests; Right of First Offer....19
Section 9.3 Transferees...............................................20
Section 9.4 Admission of Additional Members...........................20
ARTICLE 10
TERMINATION.............................................................21
Section 10.1 Dissolution...............................................21
Section 10.2 Termination...............................................21
Section 10.3 Acts in Furtherance of Liquidation........................22
ARTICLE 11
INTENTIONALLY RESERVED..................................................23
ARTICLE 12
GENERAL PROVISIONS......................................................23
Section 12.1 Covenants, Representations and Warranties of the Members..23
Section 12.2 Notices...................................................24
Section 12.3 Governing Laws; Jurisdiction; Venue.......................25
Section 12.4 Entire Agreement..........................................26
Section 12.5 Waiver....................................................26
Section 12.6 Severability..............................................26
Section 12.7 Terminology...............................................26
Section 12.8 Action by the Members.....................................26
Section 12.9 Amendments................................................26
Section 12.10 Binding Agreement.........................................27
Section 12.11 Further Assurances........................................27
SCHEDULES & EXHIBITS:
ii
Schedule 1.1 - Initial Capital Contributions, Capital Account Balances
Schedule 1.2 - Existing Subsidiaries
Schedule 2.4.1 - List of Existing Contracts
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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 [New Interstate
Hotels Company] , a Maryland corporation (together with its permitted successors
and assigns hereunder "[Newco]"), and PAH-Interstate Holdings, Inc., a Delaware
corporation (together with its permitted successors and assigns hereunder
"PAH"). Newco and PAH are each sometimes referred to herein individually as a
"Member" and collectively as the "Members".
R E C I T A L S
WHEREAS, [Patriot American Hospitality, Inc. ("Patriot REIT")] has formed
a limited liability company with the name "[Interstate Hotels, 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, Patriot REIT and Interstate Hotels Company, a Pennsylvania
corporation ("Interstate"), have entered into an Agreement and Plan of Merger
dated as of December __, 1997, pursuant to which Interstate will merge with and
into Patriot REIT (the "Interstate Merger");
WHEREAS, following the Interstate Merger and certain internal
restructuring transactions, Patriot REIT intends to cause Interstate Hotels
Corporation, a Pennsylvania corporation and a wholly owned subsidiary of
Interstate, to merge with and into the Company;
WHEREAS, Patriot REIT intends to make capital contributions to PAH and
Newco, who will become the sole Members of the Company, such that PAH will own
[65%- SUBJECT TO THE TERMS OF THE SETTLEMENT AGREEMENT] of the interests in the
Company and Newco will own [approximately 35%- SUBJECT TO THE TERMS OF THE
SETTLEMENT AGREEMENT] of the interests in the Company;
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:
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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.
"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.
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"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;
(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.
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"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.
"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.
"Company Accountant" as defined in Section 5.4.
"Existing Contracts" means those agreements held by the Company or the
Existing Subsidiaries, each as more fully identified on Schedule 2.4.1 hereto.
"Existing Subsidiary Contracts" means those agreements held by the
Existing Subsidiaries, each as more fully identified on Schedule 2.4.1 hereto.
"Existing Subsidiaries" means those entities listed on Schedule 1.2
hereto.
"First Offer Notice" as defined in subsection 9.2.2.1.
"First Offer Price" as defined in subsection 9.2.2.1.
"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 Managing Member; provided, however, if the
Managing Member's bankruptcy, withdrawal or liquidation shall have preceded the
liquidation of the Company, the Non-Managing Member shall be the Liquidating
Member.
"Managing Member" means Newco, and any successor to Newco appointed as
Managing Member in accordance with the provisions of this Agreement.
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"Member" or "Members" means, initially, the Persons identified as Members
in the preamble to this Agreement, and thereafter shall include any Person
admitted as a 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.
"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.
"Non-Managing Member" means PAH, and any successor to PAH as permitted in
accordance with the terms of this Agreement.
"Offered Percentage Interest" as defined in subsection 9.2.2.1.
"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:
Newco [ ]
PAH [the difference between 100% and Newco's interest]
Upon the making of any additional Capital Contribution each Member's Percentage
Interest shall thereafter be adjusted in accordance with Section 6.2.
"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
5
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 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
individually specially allocated 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.
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"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 PAH to recognize any of the "built-in
gain" with respect to its interests in the Company or the assets of the
Company.
"Substitute Member" as defined in Section 9.3.
"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).
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 [Interstate Hotels], LLC or such other name as hereafter may be adopted
by the Managing 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 Managing 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 Managing Member.
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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 Existing Contracts) the
Existing Contracts;
(ii) to own and hold ownership interests in the Existing
Subsidiaries of the Company for the purpose of causing said
subsidiaries to 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 Existing Subsidiary Contracts) the
Existing Subsidiary Contracts to which they are a party;
(iii) to exercise the rights and perform the obligations of
the Company and to cause the Existing Subsidiaries to exercise
their respective rights and perform their respective
obligations under and pursuant to the Existing Contracts,
including to act as managers and franchisees under such
Existing Contracts or any renewals or replacements thereof
with respect to the hotels referenced in such Existing
Contracts; and
(iv) to conduct all activities necessary or desirable to
accomplish the foregoing purposes, including, without
limitation, retaining such employees as the Managing Member
deems reasonably necessary.
2.4.2 The Company shall not:
(i) enter into or permit any Existing Subsidiary to enter
into any contract or agreement other than as permitted
under subsection 2.4.1;
(ii) enter into or permit any Existing Subsidiary to enter
into or conduct any business, other than as set forth
subsection 2.4.1;
(iii) create, acquire or retain any equity interest in any
legal entity, other than the Existing Subsidiaries; or
(iv) permit any Person other than the Company to have any
ownership interest in any Existing Subsidiary.
Section 2.5 Future Business. The Members acknowledge and agree that they
intend for all management and franchise activities, other than franchise or
management
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activities permitted under subsection 2.4.1 or relating to the hotels currently
managed under the Existing Contracts, to be conducted by Newco, as opposed to
the Company, and neither the Managing Member or the Non-Managing 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 Newco.
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. Newco and PAH are Members 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 Newco and PAH.
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
9
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.
ARTICLE 4
MANAGEMENT
Section 4.1 Management by the Managing Member; Members.
4.1.1 Management by the Managing Member. The overall management and
control of the business and affairs of the Company shall be overseen by
the Managing Member, in the form and manner described below. Except as
otherwise expressly provided in this Agreement, the Managing Member shall
have the exclusive power and authority to take such action for and on
behalf of the Company as the Managing 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. The Managing Member
shall in good faith use reasonable efforts to extend or renew the Existing
Contracts with the respective third party owners and shall cause the
Existing Subsidiaries to use good faith efforts to extend or renew the
Existing Subsidiary Contracts with the respective third party owners, in
each case upon the expiration thereof, and shall not allow or cause,
directly or indirectly, Newco or any other affiliate of Newco (other than
the Company) to become the Manager of the hotels currently managed under
the Existing Contracts.
4.1.2 Involvement in Company Business. The Managing 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 Limitations on Powers of the Members. 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.
Section 4.2 Bank Accounts. The Managing Member shall open and thereafter
10
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 Managing 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
Managing 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 Limitations on Sale of Assets; Indemnification.
4.4.1 The Members acknowledge that if any or all of the Existing Contracts
or other assets of the Company were sold or otherwise transferred or
disposed of by the Company, or if the Company were merged with or
acquired by another entity or otherwise engaged in a corporate
transaction in which taxable gain could be recognized in whole or in
part, PAH would suffer significant adverse tax consequences. The
Members also acknowledge that the stock of PAH is held by 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 PAH, the Company
shall not, and the Managing Member shall cause the Company not to,
(i) sell or otherwise dispose of any of the Existing Contracts or
other assets of the Company or the Existing Subsidiaries (except for
sale or disposals of the Existing Contracts or other assets pursuant
to the performance of obligations of the Company which are required
(as distinguished from permitted) under the Existing Contracts),
(ii) merge with, be acquired by or enter into a corporate
acquisition or reorganization transaction with any other person or
entity, or to allow any of the Existing Subsidiaries to merge with,
be acquired by or enter into a corporate acquisition or
reorganization transaction with any other person or entity, (iii)
knowingly cause PAH to recognize any of the "built-in gain" with
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respect to its interest in the Company or the Company's assets, (iv)
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
(other than the Existing Subsidiaries), or to allow any of the
Existing Subsidiaries to acquire any real property or other
interests in real estate, or acquire interests in, or substantially
all of the assets of, any other person or entity (including
leasehold interests) or (v) change the nature of the Company's
business, or allow any of the Existing Subsidiaries to change the
nature of any of the Existing Subsidiaries' business, in a manner
not contemplated by this Agreement.
4.4.2 The Company and the Managing Member, jointly and severally, hereby
indemnify and hold harmless PAH, its shareholders, officers,
directors, agents and other indirect owners from and against any
personal liability, claim, loss, damage, cost or expenses, including
attorneys' fees and expenses, incurred or sustained by any breach of
the obligations set forth in subsections 4.4.1(i) through
4.4.1(iii), including the amount of any such adverse tax
consequences.
Section 4.5 Allocation of Costs and Expenses. The Company and Newco
acknowledge that certain employees, equipment and services may be provided by
the Company for the benefit of Newco (including any subsidiary of Newco, other
than the Company), or vice versa. All costs and expenses relating to services
provided by one party for, in whole or in part, the benefit of the other (the
"Shared Expenses") shall be allocated between the Company and Newco, 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
Newco shall allocate Shared Expenses based on respective gross 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 Newco other than as set forth above.
ARTICLE 5
BOOKS AND RECORDS
Section 5.1 Books and Records. The Managing 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 Managing Member shall maintain or caused
to be maintained said books and accounts in a safe manner and separate from any
12
records not having to do directly with the Company. The Managing 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 Managing Member at a location or
locations designated by the Managing 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 Managing 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 Managing Member
may determine are appropriate. The Managing 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 the Managing Member, certified to by the an independent
accounting firm as being, 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 Managing 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
13
statement of cash flow; and
5.3.1.4 Promptly after the end of each calendar year the
Managing 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 Managing Member will use its reasonable
efforts to have the Company Accountant also prepare federal, state and
local tax returns required of the Company and 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 Managing
Member. In the event the Managing 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
Managing 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 Managing Member in its sole discretion. The fees and expenses of the Company
Accountant shall be a Company expense.
ARTICLE 6
CONTRIBUTIONS
Section 6.1 Initial Capital Contributions. The "Initial Capital
Contributions" of the Members and initial Capital Account balances shall be as
described on Schedule 1.1 attached hereto.
Section 6.2 Additional Capital Contributions.
6.2.1 Except as otherwise provided herein, 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). Upon the
14
making of any additional Capital Contributions, each Member's Percentage
Interest shall thereafter be equal to the ratio, expressed as a
percentage, equal to the aggregate Capital Contributions made by such
Member divided by the aggregate Capital Contributions made by all Members
to the Company.
6.2.2 The Managing 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"). Prior to the Managing
Member contributing any capital to the Company (other than the Managing
Member's Initial Capital Contribution), the Managing Member shall issue
capital calls to the Members to fund shortfalls related to the Company
(the "Capital Call Notice"). Such Capital Call Notice shall set forth the
amount of the required funds (the "Required Funds") and a list of
Necessary Costs, and shall specify a date (the "Capital Call Due Date")
for contribution of such funds. Upon receipt of the Capital Call Notice,
the Non-Managing Member shall have the right, but not the obligation, be
required to fund its proportionate share (based on its respective
Percentage Interest) of the total funds specified in the Capital Call
Notice. The Capital Call Due Date shall be at least thirty (30) days after
receipt of the Capital Call Notice unless a shorter time is agreed to by
the Non-Managing Member. All additional Capital Contributions shall be
made by wire transfer of immediately available funds to an account of the
Company.
6.2.3 To the extent the Non-Managing Member elects not to fund its
proportional share of the Required Funds, the Managing Member shall have
the right, but not the obligation, to contribute the unfunded amount to
the Company. Should the Managing Member elect to fund such amount, then
the Members' Percentage Interests will be adjusted as described in
subsection 6.2.1.
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
each Member. Initially, the Capital Account of each Member shall be credited
with the amounts referred to in Schedule 1.1. Thereafter, each Member's Capital
Account shall be credited with such Member's share of 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 Member's share of 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
15
subject). In the event that all or a portion of an interest in the Company is
transferred in accordance with the terms of this Agreement, the transferee shall
succeed to the Capital Account of the transferor to the extent it related to the
transferred interest.
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 any 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 for such Member.
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 allocated to the Members in accordance with their respective
Percentage Interests as determined from time to time. The Percentage Interests
of the Members shall be appropriately adjusted to reflect any disproportionate
contribution made by one or more of the Members.
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 Percentage
Interests. "Partner nonrecourse deductions" (within the
meaning of Treasury Regulations Section 1.704-2(i)) shall be
allocated to the Member who
16
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 Managing 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. Any
action taken by the Tax Matters Member shall be made as a fiduciary with respect
to the interests of all Members notwithstanding any other provision contained
herein.
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; provided
that the Tax Matters Member shall consult with and obtain the consent of the
other Member(s) (such consent not to be unreasonably withheld) to the extent
that any such election or decision could adversely impact the other Member(s).
ARTICLE 8
DISTRIBUTIONS
Section 8.1 Cash Available for Distributions.
8.1.1 At such times as are determined by the Managing Member (but no
less frequently than quarterly), the Company shall make a distribution of
Net Operating
17
Cash Flow of the Company (to the extent positive). Net Operating Cash Flow
distributions shall be made pro rata to the Members, in accordance with
their Percentage Interests.
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 Members pro rata to the Members, in
accordance with their Percentage Interests.
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.
8.1.4 If the Percentage Interests of the Members are adjusted
effective at any time or times during any fiscal year of the Company, all
distributions of cash made to the Members during such fiscal year (without
regard to the actual timing of such distributions) shall be allocated to
each portion of such fiscal year during which different Percentage
Interests are in effect in the proportion that the number of days in such
portion bears to the total number of days in such fiscal year except with
respect to Net Capital Proceeds, in which case such proceeds shall be
distributed in accordance with the Percentage Interests on the date of the
applicable transaction. The amounts so allocated to each such portion of
said fiscal year shall be divided among the Members in proportion to their
respective Percentage Interests in effect during each such portion of the
fiscal year in question. Such allocations to such portions of a fiscal
year, and the adjustments, if any, of such cash distributions made during
such year, shall be determined with reasonable promptness after the close
of each such fiscal year by the Company's accountant. The Members will
promptly make any adjusting payments between them as may be required in
order to effect any adjustments of such cash distributions as determined
by the Company Accountant.
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.
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.
18
Section 9.2 Permitted Transfers of Interests; Right of First Offer.
9.2.1 The Non-Managing Member, from time to time and in its sole
discretion, without the consent of the Managing Member, may Transfer its
Interest in whole, or in part, to any party, provided such transferee
agrees to be bound by all the terms, conditions and provisions of this
Agreement (including the provisions of this Article 9). Any Transfer of
the Non-Managing Member's Interest to a third party shall be deemed a
Permitted Transfer, and if such transferee acquires all of the
Non-Managing Member's Interest, such transferee shall be admitted as a
Substitute Member pursuant to Section 9.3. If the Non-Managing Member
elects to sell its interest to the Managing
9.2.2 Notwithstanding the foregoing, if a transfer of all or part of
the Non-Managing Member's Interest would result in a Special Tax Event,
the following procedures shall apply:
9.2.2.1 The Non-Managing Member shall, prior to any transfer
permitted under subsection 9.2.1, offer in writing (the "First Offer
Notice") to sell to the Managing Member all or any part of its
Percentage Interest (the "Offered Percentage Interest"). The
Managing Member shall notify the Non-Managing Member within fifteen
(15) Business Days of receipt of the First Offer Notice that the
Managing Member either: a) is willing to purchase the Offered
Percentage Interest at a given price (the "First Offer Price"), or
b) is unwilling to purchase the Offered Percentage Interest. A
failure to respond to a First Offer Notice within such fifteen (15)
Business Day period shall be deemed to be an election not to
purchase the Percentage Interest.
9.2.2.2 If the Managing Member has timely offered elected to
purchase the Percentage Interest specified in the First Offer Notice, then
the Non-Managing Member may: a) sell the Offered Percentage Interest to
the Managing Member at the First Offer Price (which, the sale shall be
without recourse, representation or warranty, except that the Non-Managing
Member shall represent and warrant that it has authority to sell, and owns
the Interest free and clear of liens or claims of third parties) or b)
elect to market and sell the Offered Percentage Interest to third parties
within 180 days of receiving the First Offer Price at a price not less
than ninety-eight percent (98%) of the First Offer Price. If the
Non-Managing Member does not transfer its interest within such 180 day
period, then prior to any transfer which would result in a Special Tax
Event, the Non-Managing Member shall again comply with the terms of this
subsection 9.2.2.
9.2.3 Any Permitted Transfer shall not relieve the transferor of any
of its obligations prior to such Transfer. Nothing contained in this
Article 9 shall prohibit a Transfer indirectly of a Member's Interest in
the Company if a direct Transfer would
19
otherwise be permitted under this Section 9.2. Subject to Section 9.3, any
transferee of a direct Interest pursuant to this Section 9.2 shall become
a Substitute Member of the Company. Each Member and its permitted
transferees shall be treated as one Member for all purposes of this
Agreement. The provisions of this Section 9.2 will not apply to or be
deemed to authorize or permit any collateral transfer of, or grant of a
security interest in, a Member's interest in the Company or in any asset
of the Company (which transfer or grant shall be subject to the other
provisions of this Agreement).
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 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 Managing Member or
the Members, as the case may be, accepting and agreeing to be bound by
this Agreement, and such other documentation as the Managing 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 Managing Member or
20
the Members, as the case may be, to such admission.
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;
10.1.2 entry of a decree of judicial dissolution of the Company; or
10.1.3 the termination of all of the Existing Contracts and any
renewals or replacements thereof entered into in accordance with
subsection 2.4.1.
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 (and the
Company shall cause the Existing Subsidiaries to be wound up and the business of
the Existing Subsidiaries to be 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 consolidated
with the Existing Subsidiaries) 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 (including those held
by the Existing Subsidiaries) 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.
21
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 Members 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 each Member in accordance with their respective capital
account balances.
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 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 distributed pro-rata unless the
Members otherwise agree in writing and 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 Members. Without limiting the foregoing, with respect
to any assets distributed in kind, there shall be a calculation of the
amount of income, gain, 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.
22
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.
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").
23
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 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 [Newco]
24
With a copy to:
[NEWCO]
With a copy to:
[PAH]
If to Newco:
[Newco]
If to PAH:
[PAH]
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.
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
25
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 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.
26
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]
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IN WITNESS WHEREOF, this Agreement is executed effective as of the date
first set forth above.
NEWCO
a Maryland corporation
By: ________________________
Name:
Title:
PAH-INTERSTATE HOLDINGS, INC.
a Delaware corporation
By: ____________________________
Name:
Title:
28
SCHEDULE 1.1
INITIAL CAPITAL ACCOUNTS
Sch. 1.1
SCHEDULE 1.2
EXISTING SUBSIDIARIES
Sch. 1.2
SCHEDULE 2.4.1
LIST OF EXISTING CONTRACTS
(INCLUDING EXISTING SUBSIDIARY CONTRACTS)
Sch. 2.4.1
