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EXHIBIT 10.2
FORM OF AMENDED AND RESTATED
LIMITED LIABILITY COMPANY AGREEMENT
OF
INTERSTATE HOTELS, LLC
Dated as of ______, 1999
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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
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SCHEDULES & EXHIBITS:
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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FORM OF AMENDED AND RESTATED
LIMITED LIABILITY COMPANY AGREEMENT
-----------------------------------
THIS LIMITED LIABILITY COMPANY AGREEMENT (this "AGREEMENT"), made and
entered into as of this _____ day of _____, 1999 by and among INTERSTATE HOTELS
MANAGEMENT, INC., a Maryland corporation (together with its permitted successors
and assigns hereunder "INTERSTATE MANAGEMENT"), 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 March __, 1999; 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 2, 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
Interstate Management, 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 Interstate Management 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
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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.
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"MANAGING MEMBER" means Interstate Management, and any successor to
Interstate Management appointed as Managing Member in accordance with the
provisions of this Agreement.
"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:
Interstate Management [ ]
PAH [the difference between 100% and
Interstate Management'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.
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"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 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.
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"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 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
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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
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Company shall be located c/o [ ___________________________ ], or at such other
place as may be determined by the Managing 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 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.
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SECTION 2.5 FUTURE 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 Existing Contracts, to be conducted by Interstate
Management, 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
Interstate Management.
ARTICLE 3
RIGHTS AND OBLIGATIONS OF MEMBERS
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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 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 Interstate Management 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.
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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.
ARTICLE 4
MANAGEMENT
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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, Interstate Management or any other affiliate of Interstate
Management (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
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(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 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
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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 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
Interstate Management acknowledge that certain employees, equipment and services
may be provided by the Company for the benefit of Interstate Management
(including any subsidiary of Interstate Management, 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 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 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 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
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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 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
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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 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.
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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 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
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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 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
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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 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).
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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 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.
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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.
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
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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 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.
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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 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:
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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.
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
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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.
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
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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 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:
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If to the Company:
[c/o Interstate Management]
With a copy to:
[Interstate Management]
With a copy to:
[PAH]
If to INTERSTATE MANAGEMENT:
[Interstate Management]
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.
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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 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."
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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]
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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:
PAH-INTERSTATE HOLDINGS, INC.
a Delaware corporation
By: ________________________
Name:
Title:
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SCHEDULE 1.1
------------
INITIAL CAPITAL ACCOUNTS
------------------------
Sch. 1.1
34
SCHEDULE 1.2
------------
EXISTING SUBSIDIARIES
---------------------
Sch. 1.2
35
SCHEDULE 2.4.1
--------------
LIST OF EXISTING CONTRACTS
(INCLUDING EXISTING SUBSIDIARY CONTRACTS)
Sch. 2.4.1