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Certain portions of this Exhibit 10.15 have been omitted pursuant to a
request for confidential treatment under Rule 24b-2 of the Securities
Exchange Act of 1934. The omitted portions have been filed separately with
the Securities and Exchange Commission. The omitted portions of Exhibit 10.15
are marked with an asterisk [*].
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LIMITED LIABILITY COMPANY AGREEMENT
OF
▇▇▇▇▇▇/AEW LLC
A DELAWARE LIMITED LIABILITY COMPANY
DATE: FEBRUARY 1, 1999
TABLE OF CONTENTS
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ARTICLE I -- GENERAL PROVISIONS............................................ 1
Section 1.1 ORGANIZATION........................................... 1
Section 1.2 BUSINESS OF THE COMPANY................................ 1
Section 1.3 PRINCIPAL PLACE OF BUSINESS............................ 2
Section 1.4 QUALIFICATION IN OTHER JURISDICTIONS................... 2
Section 1.5 TERM................................................... 2
ARTICLE II -- DEFINITIONS.................................................. 2
Section 2.1 DEFINITIONS............................................ 2
ARTICLE III -- CAPITAL CONTRIBUTIONS....................................... 12
Section 3.1 INITIAL CAPITAL........................................ 13
Section 3.2 CONTRIBUTIONS TO FUND PRESERVATION COSTS............... 13
Section 3.3 FORM OF CONTRIBUTIONS.................................. 14
Section 3.4 NO RIGHT TO INTEREST OR RETURN OF CAPITAL.............. 14
Section 3.5 NO THIRD PARTY RIGHTS.................................. 14
Section 3.6 LIMITATIONS............................................ 14
Section 3.7 EXPANSION CAPITAL...................................... 14
Section 3.8 FAILURE TO CONTRIBUTE CAPITAL.......................... 15
Section 3.9 CREDIT ENHANCEMENT..................................... 16
Section 3.10 FAILURE TO CONTRIBUTE EXPANSION CAPITAL................ 17
ARTICLE IV -- CAPITAL ACCOUNTS, ALLOCATIONS OF INCOME AND LOSS............. 17
Section 4.1 CAPITAL ACCOUNTS....................................... 17
Section 4.2 ALLOCATION OF NET INCOME............................... 18
Section 4.3 ALLOCATION OF NET LOSS................................. 18
Section 4.4 LOSS LIMITATION........................................ 18
Section 4.5 ALLOCATIONS TO MATCH CARRY DISTRIBUTIONS............... 19
Section 4.6 MINIMUM GAIN CHARGEBACKS AND NON-RECOURSE DEDUCTIONS... 19
Section 4.6.1 COMPANY MINIMUM GAIN........................... 19
Section 4.6.2 NONRECOURSE DEDUCTIONS......................... 19
Section 4.6.3 PARTNER NONRECOURSE DEBT....................... 20
Section 4.7 QUALIFIED INCOME OFFSET................................ 20
Section 4.8 CURATIVE ALLOCATIONS................................... 20
Section 4.9 SPECIAL INCOME ALLOCATION.............................. 20
Section 4.10 CODE SECTION 704(B) AND 514(C)(9)(E) ALLOCATIONS....... 21
Section 4.11 DISTRIBUTIONS OF NONRECOURSE LIABILITY PROCEEDS........ 21
Section 4.12 ALLOCATION OF DEBT..................................... 21
Section 4.13 OTHER ALLOCATION PROVISIONS............................ 21
Section 4.14 NO DEFICIT RESTORATION BY MEMBERS...................... 21
ARTICLE V -- DISTRIBUTIONS................................................. 22
(ii)
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Section 5.1 MAINTENANCE OF RESERVES............................. 22
Section 5.1.1 RESERVES -- GENERAL............................ 22
Section 5.1.2 PROHIBITED DISTRIBUTIONS....................... 22
Section 5.2 DISTRIBUTIONS OF CASH FLOW............................. 22
Section 5.3 DISTRIBUTIONS OF CAPITAL PROCEEDS...................... 23
Section 5.4 DISTRIBUTIONS UPON LIQUIDATION......................... 23
ARTICLE VI -- POWERS AND DUTIES............................................ 23
Section 6.1 BOARD OF MEMBERS....................................... 23
Section 6.1.1 ESTABLISHMENT OF BOARD OF MEMBERS.............. 23
Section 6.1.2 MEETINGS AND ACTION OF THE BOARD OF MEMBERS.... 24
Section 6.1.3 SPECIFIC APPROVAL RIGHTS OF BOARD OF
MEMBERS....................................... 24
Section 6.1.4 APPROVAL BY MEMBERS IN LIEU OF BOARD
APPROVAL; PROJECT REPRESENTATIVES............. 28
Section 6.2 ADDITIONAL RIGHTS OF THE CLASS A MEMBER................ 28
Section 6.3 OPERATING MEMBER....................................... 29
Section 6.3.1 AUTHORITY OF THE OPERATING MEMBER.............. 30
Section 6.3.2 EMPLOYEES...................................... 32
Section 6.3.3 COMPLIANCE WITH GOVERNMENTAL REQUIREMENTS...... 32
Section 6.3.4 FEES........................................... 33
Section 6.4 OTHER BUSINESS ACTIVITIES OF THE MEMBERS............... 33
Section 6.4.1 OPERATING MEMBER; FIRST OPPORTUNITY............ 33
Section 6.4.2 GENERAL PROVISIONS............................. 34
Section 6.4.3 RELATED PARTY TRANSACTIONS..................... 34
Section 6.4.4 COMPETING INVESTMENTS; RESTRICTED AREA......... 34
Section 6.4.5 LEASES......................................... 36
Section 6.5 LIMITATION OF LIABILITY................................ 37
Section 6.5.1 EXCULPATORY PROVISIONS......................... 37
Section 6.5.2 INDEMNIFICATION................................ 37
Section 6.5.3 MODIFICATION OF LIABILITY...................... 37
Section 6.5.4 INSURANCE...................................... 38
Section 6.6 CLASS A MEMBER'S RIGHT TO BECOME THE MANAGING MEMBER... 38
ARTICLE VII -- LIABILITIES OF MEMBERS...................................... 38
ARTICLE VIII -- TRANSFER OF COMPANY INTEREST............................... 38
Section 8.1 TRANSFER BY THE MEMBERS................................ 38
Section 8.1.1 GENERAL RESTRICTIONS........................... 38
Section 8.1.2 INDIRECT TRANSFERS............................. 39
Section 8.1.3 PERMITTED TRANSFERS............................ 39
Section 8.1.4 CONDITIONS TO SUBSTITUTIONS.................... 39
Section 8.2 RIGHT OF FIRST OFFER................................... 39
Section 8.2.1 FIRST OFFER.................................... 39
Section 8.2.2 TARGET ASSET DEPOSIT; FINANCING COMMITMENT..... 40
(iii)
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Section 8.2.3 CONDITIONS..................................... 41
Section 8.2.4 ADJUSTMENTS AND CLOSING COSTS.................. 42
Section 8.2.5 INTENTIONALLY DELETED.......................... 42
Section 8.2.6 CLOSING........................................ 42
Section 8.2.7 RESPONDING MEMBER'S FAILURE TO CLOSE........... 43
Section 8.2.8 BROKERAGE...................................... 43
Section 8.2.9 SALE TO THIRD PARTY............................ 44
Section 8.2.10 CLASS A MEMBER AS INITIATING MEMBER............ 44
Section 8.2.11 INTERRELATIONSHIP OF BUY-SELL.................. 46
Section 8.3 MEMBERS................................................ 46
Section 8.3.1 TERMINATING EVENT.............................. 46
Section 8.3.2 WITHDRAWAL BY MEMBERS.......................... 47
Section 8.4 BUY/SELL............................................... 47
Section 8.4.1 BUY/SELL OFFERING NOTICE....................... 47
Section 8.4.2 VERIFICATION NOTICE............................ 47
Section 8.4.3 RESPONSIVE NOTICE.............................. 47
Section 8.4.4 BUY/SELL DEPOSIT............................... 48
Section 8.4.5 CLOSING PROCESS................................ 48
Section 8.4.6 INTENTIONALLY DELETED.......................... 50
Section 8.4.7 FAILURE TO CLOSE............................... 50
Section 8.5 EFFECT UPON TRANSFEREES................................ 50
Section 8.6 QUALIFIED ORGANIZATIONS................................ 50
ARTICLE IX -- OPERATING MEMBER'S OBLIGATIONS FOR REPORTING, RECORDS AND
ACCOUNTING MATTERS......................................... 51
Section 9.1 FISCAL YEAR............................................ 51
Section 9.2 BANK ACCOUNTS.......................................... 51
Section 9.3 MAINTENANCE OF RECORDS................................. 52
Section 9.4 CERTAIN RECORDS........................................ 53
Section 9.5 REQUIRED REPORTS....................................... 54
Section 9.5.1 PORTFOLIO BUSINESS PLAN........................ 54
Section 9.5.2 ASSET BUSINESS PLANS........................... 54
Section 9.5.3 ANNUAL BUDGETS...... .......................... 55
Section 9.5.4 MONTHLY REPORTS..... .......................... 57
Section 9.5.5 ANNUAL REPORTS...... .......................... 57
Section 9.5.6 TAX RETURNS......... .......................... 57
Section 9.5.7 GENERAL REQUIREMENTS........................... 58
Section 9.5.8 SUPPORTING DOCUMENTATION....................... 58
Section 9.5.9 FAILURE TO APPROVE; BUDGET IMPASSE............. 58
Section 9.6 QUARTERLY PRESENTATIONS................................ 59
Section 9.7 OTHER DISCLOSURES...................................... 59
Section 9.8 CLASS A MEMBER AS TAX MATTERS PARTNER.................. 59
(iv)
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Section 9.9 TAXATION AS A PARTNERSHIP.............................. 59
Section 9.10 COSTS PAYABLE FROM MASTER AND PROPERTY ACCOUNTS........ 59
Section 9.11 YEAR 2000 ISSUES....................................... 59
ARTICLE X- ACQUISITION AND DEVELOPMENT OF PROPERTIES....................... 60
Section 10.1 EXCLUSIVE OBLIGATION................................... 60
Section 10.2 INVESTMENT PERIOD...................................... 60
Section 10.3 PROPOSED ACQUISITIONS.................................. 61
Section 10.3.1 PRELIMINARY APPROVAL PACKAGE................... 61
Section 10.3.2 DUE DILIGENCE AND REVIEW....................... 63
Section 10.3.3 PURCHASE AND SALE.............................. 63
Section 10.3.4 DISAPPROVAL; FAILURE TO PROCEED................ 65
Section 10.3.5 COSTS AND EXPENSES............................. 65
ARTICLE XI -- DISSOLUTION AND EVENTS OF DEFAULT............................ 65
Section 11.1 DISSOLUTION............................................ 65
Section 11.2 EVENTS OF DEFAULT...................................... 65
Section 11.2.1 BREACH OF OBLIGATIONS.......................... 65
Section 11.2.2 FRAUD, GROSS NEGLIGENCE OR WILLFUL
MISCONDUCT.................................... 66
Section 11.2.3 PROHIBITED TRANSFER............................ 66
Section 11.3 REMEDIES............................................... 66
ARTICLE 12 -- MISCELLANEOUS................................................ 66
Section 12.1 NOTICES................................................ 66
Section 12.2 AMENDMENTS............................................. 67
Section 12.3 INTERPRETATION......................................... 68
Section 12.4 COUNTERPARTS........................................... 68
Section 12.5 ERISA, UBTI AND REIT MATTERS........................... 68
Section 12.5.1 ERISA.......................................... 68
Section 12.5.2 UBTI MATTERS................................... 68
Section 12.5.3 REIT MATTERS................................... 69
Section 12.5.4 DEALER PROPERTY................................ 74
Section 12.5.5 OBLIGATION OF OPERATING MEMBER TO AVOID
PROVISIONS OF SECTION 12.5.3.................. 74
Section 12.6 NO PARTITION........................................... 75
Section 12.7 ATTORNEYS'FEES......................................... 75
Section 12.8 SEVERABILITY........................................... 75
Section 12.9 BINDING ON SUCCESSORS.................................. 75
Section 12.10 CONFIDENTIALITY........................................ 75
Section 12.11 REPRESENTATIONS AND WARRANTIES OF EACH MEMBER.......... 75
Section 12.12 BROKERAGE COMMISSIONS.................................. 76
Section 12.13 TIME IS OF THE ESSENCE................................. 76
(v)
EXHIBITS
Exhibit A - Operating Member and Class A Member's Proportionate Share/
Members' Contribution of
Initial Capital/Initial Capital Accounts
Exhibit B - Calculation of Total Return
Exhibit C - Investment Guidelines
Exhibit D - Form of Promissory Note
Exhibit E - Form of Funding Notice
Exhibit F - Insurance Requirements
Exhibit F-1 - Company Insurance Limits Requirements
Exhibit G-1 - Investment Management Fees
Exhibit G-2 - Reimbursable Expenses
Exhibit H - Reporting Requirements
Exhibit H-1 - Form of Portfolio Business Plan and Budgets
Exhibit H-2 - Form of Asset Business Plan and Budgets
Exhibit H-3 - Form of Monthly Reports
Exhibit I - Competing Activity Exclusions
Exhibit J - Preliminary Information and Final Approval Package
Exhibit K - Representations and Warranties
Exhibit L - Intentionally Omitted
Exhibit M - Refinancing Parameters
Exhibit N - Forced Sale Notice
Exhibit O - Approved Tenants
(vi)
LIMITED LIABILITY COMPANY AGREEMENT
OF ▇▇▇▇▇▇/AEW LLC,
a Delaware limited liability company
This Limited Liability Company Agreement is made as of the 1ST day of
February, 1999, by and between AEW PARTNERS III, L.P., a Delaware limited
partnership with a principal place of business at the address set forth in
EXHIBIT A, (the "Class A Member") and ▇▇▇▇▇▇ HOTEL PROPERTIES, L.P., an Ohio
limited partnership, with a principal place of business at the address set forth
in EXHIBIT A (the "Operating Member"). The Class A Member and the Operating
Member, together with any such additional parties as and when admitted to the
Company (as defined below) as members shall be individually a "Member" and
collectively, the "Members."
WHEREAS, ▇▇▇▇▇▇/AEW LLC (the "Company" or the "LLC") has been formed as a
limited liability company under the Delaware Limited Liability Company Act, 6
Del. c. Sec. 18-101, ET seq. (as amended from time to time, the "Act") as of
January 29,1999; and
WHEREAS, the Members wish to set out fully their respective rights,
obligations and duties regarding the Company and its assets and liabilities;
NOW, THEREFORE, in consideration of the mutual covenants expressed herein,
the parties hereby agree as follows:
ARTICLE I - - GENERAL PROVISIONS
Section 1.1 ORGANIZATION. The Company has been formed by the filing on
January 29, 1999 of its Certificate of Formation with the Delaware Secretary of
State pursuant to the Act. The original Certificate of Formation states that the
registered agent and registered office of the Company in Delaware are The
Corporation Trust Company, ▇▇▇▇ ▇▇▇▇▇▇ ▇▇▇▇▇▇, ▇▇▇▇▇▇▇▇▇▇, ▇▇▇▇▇▇▇▇ ▇▇▇▇▇.
Subject to the limitations set forth in this Agreement, the Certificate of
Formation may be restated or amended by the Operating Member as an "authorized
person" within the meaning of the Act or pursuant to Section 6.3 of this
Agreement. The Certificate of Formation as so amended from time to time, is
referred to herein as the "LLC Certificate." The Operating Member shall deliver
a copy of the LLC Certificate and any amendments thereto to any Member who so
requests.
Section 1.2 BUSINESS OF THE COMPANY. The business of the Company shall be,
directly or indirectly (e.g., through limited liability companies, partnerships
and joint ventures), to invest in, own, acquire, develop, improve, lease, sell,
asset manage and otherwise deal with Lodging Facilities. In connection with the
foregoing, it is contemplated that the assets of the Company shall be primarily
invested in real estate which is owned, directly or indirectly, by the Company
and with respect to which the Company has the right to substantially participate
in asset management and development. The Company shall, from time to time,
directly or indirectly
through Subsidiary Companies, acquire real estate and personal property and
interests therein, obtain licenses, enter into operating agreements, and
improve, finance or refinance such property for the benefit of the Company and
engage in any and all activities necessary, appropriate or useful in furtherance
of any of the foregoing. Subject to the terms and conditions of this Agreement,
the Company may directly or indirectly be a partner or member of any
partnership, limited liability company or joint venture engaged in any business
enterprise or any aspect of any business enterprise which it has the power to
conduct on its own.
Section 1.3 PRINCIPAL PLACE OF BUSINESS. The principal office and place of
business of the Company shall initially be c/▇ ▇▇▇▇▇▇ Lodging Company, Guildhall
Building, ▇▇ ▇▇▇▇ ▇▇▇▇▇▇▇▇ ▇▇▇▇▇▇, ▇▇▇▇▇ ▇▇▇▇, ▇▇▇▇▇▇▇▇▇, ▇▇▇▇ ▇▇▇▇▇-▇▇▇▇. The
Operating Member may change the principal office or place of business of the
Company at any time provided such principal office or place of business is
located within the continental United States and is the same principal office or
place of business as the Operating Member and may cause the Company to establish
other offices or places of business in various jurisdictions and appoint agents
for service of process in such jurisdictions.
Section 1.4 QUALIFICATION IN OTHER JURISDICTIONS. The Operating Member
shall cause the Company to be qualified or registered under applicable laws of
every jurisdiction in which the Company transacts business and shall be
authorized to execute, deliver and file any certificates and documents necessary
to effect such qualification or registration.
Section 1.5 TERM. The term of the Company commenced as of the date of the
filing of the LLC Certificate in the office of the Secretary of State of the
State of Delaware and shall continue until December 31, 2010 unless earlier
dissolved pursuant to the provisions of this Agreement.
ARTICLE II-- DEFINITIONS
Section 2.1 DEFINITIONS. The following terms shall have the meanings
indicated or referred to below, inclusive of their singular and plural forms
except where the context requires otherwise.
"Accountants" shall mean the Approved firm of independent certified public
accountants from time to time engaged by the Company for purposes of reviewing
or auditing the Company's financial statements or other information furnished by
the Operating Member with respect to the Properties and performing such other
duties as are imposed on the accountants by this Agreement. The Approved
Accountants initially designated by the Board shall be either The E&Y ▇▇▇▇▇▇▇
▇▇▇▇▇▇▇▇▇ Real Estate Group or ▇▇▇▇▇▇ ▇▇▇▇▇▇▇▇ LLP.
"Acquisition/Redevelopment Budget" shall have the meaning set forth in
Exhibit J-1.
2
"Acquisition/Redevelopment Costs" shall mean those Third Party costs
and expenses of the Company or any Subsidiary Company, reasonably determined by
the Operating Member to be necessary in connection with the acquisition or
redevelopment of a proposed acquisition as identified by the Operating Member
and Approved pursuant to Article X, including, without limitation, deposits,
option payments, the acquisition purchase price, costs of entity formation,
costs of financing, title insurance, escrow, survey, legal, engineering,
architectural, environmental, appraisal and other consultant fees or expenses,
accounting fees, franchise costs and market studies, renovation and repair
costs, brokerage fees, including any fees owed ▇▇▇▇▇▇▇▇, ▇▇▇▇▇▇ and other fees
approved in an Acquisition/Redevelopment Budget, in each case related to the
acquisition of a Property or a proposed acquisition, and any and all other
Approved out-of-pocket Third Party expenses incurred or anticipated to be
incurred by the Company or any Subsidiary Company (or incurred by the Operating
Member and to be reimbursed by the Company or a Subsidiary Company pursuant to
Section 10.3.5) in connection with such acquisition or potential acquisition,
redevelopment or substantial addition or renovation. Acquisition/Redevelopment
Costs shall also include all amounts identified by the Operating Member and
Approved in the applicable Acquisition/Redevelopment Budget for such proposed
acquisition at the time of acquisition as being reasonably necessary to fund all
costs of redevelopment, construction, renovation programs or other identifiable
capital or tenant improvements, reserves, or operating deficits.
"Act" shall have the meaning set forth in the introductory statement.
"AEW Board Members" shall have the meaning set forth in Section 6.1.
"Adjusted Capital Account" shall have the meaning set forth in Section
4.4.
"Annual Budgets" shall have the meaning set forth in Section 9.5.3.
"Approve", "Approved", or "Approval" shall refer to a proposed decision,
action, report, budget, election, or any other matter that has received either
(a) the approval by a Majority Vote of the Board of Members or (b) the written
approval by both Members as described in Section 6.1.4 (subject, however, to the
express provisions of Sections 6.2, 6.4.5, 6.6 and any other provision of this
Agreement pursuant to which Approval for certain actions may result from the
unilateral action of the Class A Member).
"Approved Budgets" shall mean, as the case may be, each or any of the
Annual Budget, Acquisition/Redevelopment Budget, Construction Budget or Pursuit
Cost Budget, as Approved pursuant to the terms of this Agreement.
"Approved Schedule of Accounts" shall mean the chart of accounts proposed
by the Operating Member as Approved.
"Asset Business Plan" shall have the meaning set forth in Section 9.5.2.
3
"Authorized Financing" shall mean any financing by the Company or by a
Subsidiary Company with an institutional lender, to the extent such financing
has specifically been Approved.
"Binding Purchase Agreement" means any bona fide purchase and sale
agreement between the Company or any Subsidiary Company as buyer and a Third
Party as seller for the purchase of a Proposed Investment with respect to which
any due diligence period under the agreement has expired without the purchase
agreement being terminated and the deposit thereunder is generally
nonrefundable.
"BLC" means ▇▇▇▇▇▇ Lodging Company, an Ohio corporation, and its
successors.
"BLC Subsidiary" means any corporations, partnerships, limited
partnerships, joint ventures and limited liability companies which are directly
or indirectly and wholly or majority owned by BLC, including, unless the context
requires otherwise, the Operating Member.
"Board" or "Board of Members" shall have the meaning set forth in Section
6.1.
"Business Day" means any day excluding a Saturday, Sunday and any other
day during which there is no trading on the New York Stock Exchange.
"Calendar Quarter" means each period of three calendar months commencing
on a January 1, April 1, July 1, or October 1.
"Capital Contribution Cap" means the maximum amount of Initial Capital
required to be contributed by each respective Member pursuant to Section 3.1.
The Capital Contribution Cap for each Member shall initially be as follows: (i)
with respect to the Class A Member: Fifty Million Dollars ($50,000,000), and
(ii) with respect to the Operating Member: Sixteen Million Six Hundred Sixty Six
Thousand Six Hundred Sixty Seven and 67/00 Dollars ($16,666,666.67). The Capital
Contribution Cap shall be subject to any Approved increase or any increase
effected pursuant to the provisions of Article III. Such Approval may be in the
form of an Approved increase to the maximum amounts set forth herein or by
virtue of Approval of an Approved Budget or of Pursuit Costs,
Acquisition/Redevelopment Costs, Cash Flow Deficits or other cash expenditures
which result in the increase of the maximum amounts set forth herein.
"Capital Proceeds" means the Gross Receipts of the Company in connection
with a Capital Transaction or resulting from a Capital Transaction (and, if in
connection with the liquidation of the Company, any other property available for
distribution) following deduction of the following, to the extent paid out of
such proceeds: (i) any reasonable expenses incurred in connection with the
transaction giving rise to such proceeds or paid out of such proceeds (including
fees, costs and expenses such as points, loan fees, rate lock fees, interest
rate protections, brokerage fees and all legal fees and expenses), (ii) any
amounts set aside for the establishment or replenishment of reasonable reserves
as permitted under this Agreement and (iii) payment of any indebtedness. Any
balance in a reserve set aside pursuant to clause (ii)
4
above remaining after the payment of sums necessary to satisfy the purpose for
which such reserve was created subsequently released from such reserve shall be
deemed Capital Proceeds.
"Capital Stock" means, with respect to any Person, any and all shares,
interests, participation rights in or other equivalents (however designated) of
such Person's capital stock, and any rights (other than debt securities
convertible into capital stock), warrants or options exchangeable for or
convertible into such capital stock.
"Capital Transaction" means the sale, financing, refinancing, total or
partial destruction, condemnation or other recapitalization or disposition of
one or more Properties or any substantial asset of the Company or any Subsidiary
Company.
"Cash Flow" shall mean, for any period, THE EXCESS, IF ANY, OF (a) the
aggregate, consolidated sum of the Gross Receipts during such period of any kind
and description but EXCLUDING (x) Gross Receipts received in connection with a
Capital Transaction and (y) Contributions, OVER (b) the sum of the following
cash expenditures paid or reserves made or established by the Company or any
Subsidiary Company during such period (other than cash expenditures paid from
Gross Receipts in connection with a Capital Transaction or included in the
calculation of Capital Proceeds or cash expenditures paid from Contributions):
(i) all cash expenditures for Acquisition/Redevelopment Costs and for operating
expenses including, without limitation, all operating expenses related to the
ownership of the Properties such as real estate taxes, expenses of insurance,
maintenance, repair, management and leasing, (ii) debt service payments made on
any Authorized Financing, (iii) cash expenditures for capital improvements and
other expenses of a capital nature with respect to any Property, (iv) additions
to reserves pursuant to Section 5.1 as may be Approved from time to time, and
(v) any contributions, loans or other payments made by the Company to or for the
benefit of any Subsidiary Company. Cash Flow shall be calculated to avoid double
counting of payments to and from reserves. In no event shall any deduction be
made for non-cash expenses such as depreciation, amortization or the like. It is
the intention of the parties that all available cash held by any Subsidiary
Company be distributed to the Company so that the available cash from all
Properties will be consolidated and result in Gross Receipts to the Company.
Cash expenditures made by a Subsidiary Company will be excluded from the
calculation of Cash Flow unless paid directly by the Company. No item of income
or expense included in the calculation of Capital Proceeds shall be included in
the calculation of Cash Flow.
"Cash Flow Deficits" shall mean, for any period, those sums necessary to
fund actual or reasonably foreseeable operating deficits of the Company.
"Change in Control" means the occurrence of one or more of the following
events (whether or not approved by the Board of Directors of BLC): (i) if any
"person" or "group" as such terms are used in Sections 13(d) and 14(d) of the
Exchange Act), is or becomes the "beneficial owner," directly or indirectly, of
more than 50% of the total voting power of the Capital Stock of BLC (treating as
"beneficially owned" all shares of Capital Stock of BLC that such "person" or
"group" may receive upon exchange of units of limited partnership interest
5
in the Operating Member held by such "person" or "group"); (ii) the direct or
indirect sale, lease, exchange or other transfer of all or substantially all of
the assets of BLC in one transaction or a series of transactions to any "person"
(as such term is used in Sections 13(d) and 14(d) of the Exchange Act) or group
of related persons for purposes of Section 13(d) of the Exchange Act (a "Group
of Persons"); (iii) BLC consolidates with or merges with or into another Person
or any Person consolidates with, or merges with or into, BLC (in each case,
whether or not in compliance with the terms of this Agreement), in any such
event pursuant to a transaction in which immediately after the consummation
thereof the stockholders of BLC immediately prior to the consummation of the
transaction shall cease to have the power, directly or indirectly (including by
way of a general partnership interest), to vote or direct the voting of
securities having in the aggregate at least a majority of the ordinary voting
power for the election of the directors of BLC or its successor; or (iv) the
adoption of any plan of liquidation or dissolution of BLC. For purposes of the
foregoing, the transfer (by lease, assignment, sale or otherwise, in a single
transaction or series of transactions) of all or substantially all of the
properties or assets of the Operating Member (or any other BLC Subsidiary, BLC's
interest in which constitutes all or substantially all of the assets of BLC),
shall be deemed to be the transfer of all or substantially all of the assets of
BLC.
"Class A Member" means AEW Partners III, L.P. or any permitted successor
or assign.
"Code" means the Internal Revenue Code of 1986, as amended from time to
time.
"Committed Contributions" means, at any given time, (a) with respect to
any Property and/ or (b) with respect to any Proposed Investment under a Binding
Purchase Agreement, the sum of all unfunded contributions which the Members have
agreed to advance to the Company as Contributions for Acquisition/Redevelopment
Costs in an Approved Acquisition/Redevelopment Budget.
"Company" has the meaning set forth in the introductory statement.
"Competing Investment" shall mean (a) any Lodging Facility in the
Restricted Area which directly competes with a Property as determined either by
agreement of the Operating Member and the Class A Member or absent any
agreement, at the request of either Member, by the Market Expert or (b) twenty
percent (20%) or more of the beneficial interests in any Entity which directly
or indirectly owns any such Lodging Facility in the Restricted Area.
"Construction Budget" shall have the meaning set forth in Section
9.5.3(c).
"Contributions" means the aggregate of each Member's cash and non-cash
capital contributions made to the Company pursuant to Article III. Contributions
shall not include any Default Loans made by a Member under Section 3.8(a) or
Section 3.10 or Committed Contributions.
"Credit Enhancement" shall have the meaning set forth in Section 3.9.
6
"Default Amount" shall have the meaning set forth in Section 3.8.
"Defaulting Member" shall have the meaning set forth in Section 3.8.
"Default Loan" shall have the meaning set forth in Section 3.8(a).
"Default Rate" means fifteen percent per annum (15%), compounded monthly.
"Entity" means any general partnership, limited partnership, corporation,
limited liability company, limited liability partnership, joint venture, trust,
business trust, cooperative or association or other comparable business entity.
"ERISA" means the Employee Retirement Income Security Act of 1974, as
amended from time to time, and any regulations promulgated thereunder.
"Event of Default" shall have the meaning set forth in Section 11.2.
"Exchange Act" means the Securities Exchange Act of 1934, and the rules
and regulations of the United States Securities and Exchange Commission or any
other federal agency at the time administering the Exchange Act promulgated
thereunder, as from time to time amended.
"Excluded Costs" shall have the meaning set forth in EXHIBIT G-2.
"Expansion Capital" shall have the meaning set forth in Section 3.7(b).
"Final Approval Package" shall have the meaning set forth in Section
10.3.2.
"Funding Notice" means a written notice from either Member to the other
Member, substantially in the form attached as EXHIBIT E, requesting each Member
to fund or make Contributions pursuant to Article III.
"Governmental Requirements" shall mean collectively any federal, state or
municipal law, ordinance, regulation, order, permit or approval applicable to
the ownership, development, servicing, use, operation or marketing of any
Property.
"Gross Receipts" shall mean all cash receipts of the Company, including
distributions received by the Company from any Subsidiary Company from any
source whatsoever, but calculated to avoid any double-counting of cash receipts
of a Subsidiary Company and distributions from a Subsidiary Company to the
Company with respect to those cash receipts or payments to and from reserves.
Tenant security deposits shall be excluded from the calculation of Gross
Receipts unless and until such time as the Company or the respective Subsidiary
Company is entitled to apply such amounts toward tenant obligations.
7
"Immediate Family" means with respect to any individual, such individual's
spouse, parents, brothers, sisters, children (natural or adopted), stepchildren,
grandchildren, but not other members of the individual's extended family.
"Initial Capital" shall mean the Contributions required to be made by the
Members pursuant to Section 3.1.
"Indemnified Party" shall have the meaning set forth in Section 6.5.
"Interest Rate" shall mean an annual rate of interest equal to the annual
rate of interest announced by BankBoston, N.A. (or any successor entity) at its
main office as its so called "base rate" plus two percentage (2%) points.
"Insurance Requirements"- shall mean the property and liability insurance
coverages and requirements set forth in EXHIBIT F attached hereto, as the same
may be amended from time to time with the prior written consent of all of the
Members.
"Investment Guidelines" shall mean the investment guidelines to be
followed by the Company in its search for Properties, which are attached hereto
and made a part hereof as EXHIBIT C as such guidelines may be amended from time
to time by mutual agreement of all of the Members.
"Investment Period" shall have the meaning set forth in Section 10.2.
"Key Personnel" shall mean the following officers of the Company (and any
Approved successors to such officers): ▇▇▇▇▇▇ ▇. ▇▇▇▇▇▇.
"Lease" shall mean an Approved lease between the Company or any Subsidiary
Company as landlord and either an Operating Member Related Party or a Third
Party as tenant demising all or substantially all of a Property. Each Lease
shall have an initial term of at least five (5) years.
"Legal Successor" shall mean the legal representative, heir, successor or
assign of any Person who is legally incompetent or has died.
"Lodging Facility" or "Lodging Facilities" shall mean any hotel, motel,
inn or full service commercial and resort hotel property or other lodging
facility or other entity which, directly or indirectly, owns or operates any
such facility and any land, amenities and personal property related to or used
in connection with any such facility and any land acquired for the purpose of
the development of any such facility.
"Majority Vote" shall have the meaning set forth in Section 6.1.2.
8
"Market Expert" shall mean a nationally recognized hotel consulting group
designated by the Board as the determiner of whether a Lodging Facility is a
Competing Investment. Until a different designation is made by the Board, the
Market Expert shall be Pricewaterhouse Coopers LLP.
"Master Account" shall have the meaning set forth in Section 9.2(a).
"Members" shall have the meaning set forth in the introductory statement.
"Monthly Statement" shall have the meaning set forth in Section 9.5.4.
"Mortgage Loan" shall mean any loan secured in whole or in part by a
Property.
"Nondiscretionary Expense" shall have the meaning set forth in Section
9.5.3(b).
"Operating Member" means ▇▇▇▇▇▇ Hotel Properties, L.P., an Ohio limited
partnership or any permitted successor or assign.
"Operating Member Related Party" means the Operating Member and any
Related Party of the Operating Member. In any event, any Key Personnel, BLC,
▇▇▇▇▇▇ Management Company Limited Liability Company and any Related Party of any
of the foregoing shall be deemed an Operating Member Related Party.
Notwithstanding the foregoing, the Class A Member acknowledges that (i) neither
▇▇▇▇▇▇▇ ▇▇▇▇▇▇ nor ▇▇▇▇ ▇. ▇▇▇▇▇▇ is an Operating Member Related Party and (ii)
▇▇▇▇▇▇ Management Company Limited Liability Company shall no longer be deemed an
Operating Member Related Party if ▇▇▇▇▇▇ ▇. ▇▇▇▇▇▇ and any Related Party or
Immediate Family of ▇▇▇▇▇▇ ▇. ▇▇▇▇▇▇ collectively own less than twenty five
percent (25%) of the beneficial interest in ▇▇▇▇▇▇ Management Company Limited
Liability Company and the Class A Member receives notice of such ownership
change from the Operating Member.
"Person" means any individual or Entity, and the heirs, executors,
administrators, legal representatives, successors and assigns of such Person
where the context so permits.
"Portfolio Business Plan" shall have the meaning set forth in Section
9.5.1.
"Portfolio Expenses" shall mean, as of the date of determination, an
amount equal to (a) all reasonable costs and expenses incurred by the Company
from time to time directly in connection with its operations and activities
conducted pursuant to this Agreement, to the extent that any such costs and
expenses are not specifically attributable to the acquisition, development,
ownership, operation or disposition of any one Property. Portfolio Expenses
shall include, for example and without limitation, all costs and expenses in
connection with investigation, due diligence and deposits with respect to
Proposed Investments which are not acquired by the Company, (b) all costs of the
Accountants and other Third Parties in connection with maintenance of the books
and records of the Company (to the extent not properly allocable to a specific
Property), and (c) all filing fees and other Third Party expenses incurred in
connection
9
with maintenance of the existence of the Company as an entity.
Portfolio Expenses shall be reasonable in light of industry standards and shall
be calculated to avoid the double-counting of costs and expenses between
specific Property-related expenses and Portfolio Expenses.
"Preliminary Information" shall have the meaning set forth Section 10.3.1.
"Preservation Capital" shall have the meaning set forth in Section 3.2.
"Preservation Costs" shall have the meaning set forth Section 3.2.
"Project Representative" shall have the meaning set forth in Section
6.1.4.
"Property" shall mean, at any time, any Lodging Facility or other real
property owned directly or indirectly in whole or in part by the Company,
including all land and other real and personal property owned by the Company or
a Subsidiary Company and used in connection with the ownership or operation
thereof.
"Property Account" shall have the meaning set forth in Section 9.2.
"Proportionate Share" shall mean, unless and until there has been a
transfer of an interest in the Company or an admission of a new Member, with
respect to the Class A Member, seventy five percent (75%), and with respect to
the Operating Member, twenty five percent (25%), as set forth on EXHIBIT A,
subject at all times to recalculation in accordance with the provisions of
Section 3.8 or as otherwise provided in accordance with the terms of this
Agreement.
"Proposed Investment" shall mean any Lodging Facility or other real estate
proposed by the Operating Member (whether or not referred to the Operating
Member by the Class A Member) to be acquired, leased or developed directly by
the Company or through a Subsidiary Company pursuant to Article X and with
respect to which the Operating Member has submitted a Preliminary Approval
Package under Section 10.3.1.
"Purchase and Sale Agreement" shall have the meaning set forth in Section
10.3.3.
"Pursuit Cost Budget" shall mean, from time to time, the Approved budget
for Pursuit Costs with respect to Proposed Investments with a maximum limit on
an asset and portfolio basis. As of the date of this Agreement, the Pursuit Cost
Budget does not permit the expenditure of more than $25,000 in the aggregate of
Pursuit Costs for any one Proposed Investment or more than $100,000 in the
aggregate of Pursuit Costs for all Proposed Investments at any one time, such
limits to be calculated and recalculated from time to time in accordance with
Sections 10.3.1(c) and 10.3.5.
"Pursuit Costs" shall mean costs and expenses of the Company of the type
described in the definition of Acquisition/Redevelopment Costs associated with
pursuing investment opportunities, including Proposed Investments, pursuant to
the then approved Pursuit Cost
10
Budget and which have not been Approved in an Acquisition/Redevelopment Budget
or otherwise. In no event shall Pursuit Costs include any Excluded Costs.
"Qualified Organization" shall have the meaning set forth in Section
514(c)(9)(C) of the Code or in any successor provision of similar import.
"Related Party" shall mean with respect to any Person, (i) any Person who
directly or indirectly through one or more intermediaries controls, is
controlled by, or is under common control with such Person, or (ii) any Person
who is a member of the Immediate Family of such Person, or (iii) any Person in
which such Person or one or more members of the Immediate Family of such Person
has a twenty-five percent (25%) or more beneficial interest or as to which such
Person serves as a trustee or general partner or in a similar fiduciary
capacity. A Person shall be deemed to control a Person if it and/or any member
of the Immediate Family of such Person owns, directly or indirectly, at least
twenty-five percent (25%) of the ownership interest in such Person or otherwise
has the power to direct the management, operations or business of such Person.
The term "beneficial owner" is to be determined in accordance with Rule 13d-3
promulgated by the SEC under the Securities Exchange Act of 1934.
"REIT" means a real estate investment trust under the provisions of
Sections 856-860 of the Code.
"REIT Gross Income" shall have the meaning set forth in Section 12.5.3
hereof.
"REIT Tax Provisions" means Parts II and III of Subchapter M of Chapter I
of Subtitle A of the Code, as now enacted or hereafter amended, and other
provisions of the Code referred to or incorporated in, or referring to or
incorporating any other provisions of, said Parts II and III, or similar
provisions or successor statutes, and applicable regulations under and rulings
with respect to the aforesaid provisions of the Code.
"Requested Amount" means with respect to each of the Members, such
Member's Proportionate Share of any capital requested by a Member pursuant to a
Funding Notice under Article III.
"Restricted Area" shall have the meaning set forth in Section 6.4.4
hereof.
"Safety Costs" shall have the meaning set forth in Section 3.2 hereof.
"Special Managing Member" shall have the meaning set forth in Section
8.2.10 hereof.
"Subsidiary Company" or "Subsidiary Companies" shall mean, at any time,
the Entity or Entities that directly own one or more Properties and which are,
in turn, directly or indirectly majority or wholly-owned and controlled by the
Company in accordance with this Agreement.
"Target Asset" shall have the meaning set forth in Section 8.2.1 hereof.
11
"Target Asset Closing Date" shall have the meaning set forth in Section
8.2.6.
"Target Market" means the United States of America.
"Terminating Event" means any of the following:
(a) FOR A NATURAL PERSON: death; any disabling mental or physical
condition which prevents such person from carrying on business activities
and which continues for an uninterrupted period of more than six months;
entry of an order adjudicating such person incompetent by a court of
competent jurisdiction; appointment of a conservator; or execution of a
certificate diagnosing such person's incompetency by each of such person's
physician and two additional independent consulting physicians, each
licensed to practice medicine in the state of such person's residence.
(b) FOR AN ENTITY OTHER THAN A NATURAL PERSON: filing of a
certificate of dissolution or its equivalent for any corporation;
dissolution of a partnership; termination of a trust; distribution of a
trust estate's entire interest in the Company; or the dissolution,
termination or bankruptcy of any other entity that is a Member, whether
voluntary or involuntary; provided that a tax termination of an Entity
shall not alone be a Terminating Event.
(c) FOR ANY MEMBER: withdrawal, resignation or Transfer in
contravention of this Agreement; or filing with respect to such Member for
relief under Title 11 of the United States Code or similar debtor
protection laws or an assignment for the benefit of creditors, which would
include an involuntary filing not dismissed within ninety (90) days.
"Third Party" means any Person who is not a Member, or a Related Party of
any Member.
"Total Return" shall have the meaning set forth on EXHIBIT B attached
hereto.
"Transfer" shall have the meaning set forth in Section 8.1.1.
"Treasury Regulations" means the Income Tax Regulations and Procedure and
Administration Regulations promulgated under the Code, as amended from time to
time.
"Uncontributed Expansion Amount" shall have the meaning set forth in
Section 3.10 hereof.
12
ARTICLE III-- CAPITAL CONTRIBUTIONS
Section 3.1 INITIAL CAPITAL. The Members shall be obligated to make
Contributions of Initial Capital to the Company in an aggregate amount equal to
each Member's respective Capital Contribution Cap to fund Pursuit Costs,
Acquisition/Redevelopment Costs, Cash Flow Deficits or other cash expenditures
which have been Approved in an Approved Budget or otherwise. All contributions
of Initial Capital by the Members shall be made in proportion to the Members'
Proportionate Share. If capital is needed to fund such costs, either Member may
issue a Funding Notice substantially in the form attached hereto as EXHIBIT E
setting forth the amount of Initial Capital being requested. Within thirty (30)
days after receipt of a duly issued Funding Notice, each Member shall advance to
the Company as a Contribution of Initial Capital, such Member's Requested
Amount, up to such Member's Capital Contribution Cap. In any event, as of the
date of expiration of the Investment Period, each Member shall be required to
advance to the Company as Initial Capital, such Member's Proportionate Share of
all Committed Contributions, determined and calculated as of such date.
Section 3.2 CONTRIBUTIONS TO FUND PRESERVATION COSTS. Subject to the
limitations set forth herein, if at any time after the sum of all Contributions
made by the Members and all Committed Contributions is equal to or greater than
the Members' aggregate Capital Contribution Cap then in effect, either Member
reasonably determines (after taking into account any existing cash reserves of
the Company) that the Company requires additional capital to fund the payment of
(x) regularly scheduled debt service obligations, real estate taxes, utility
costs and/or insurance premiums (all such costs, collectively "Preservation
Costs") and/or (y) other costs and expenses reasonably necessary to prevent
imminent harm to the safety and welfare of the employees or guests at a Property
("Safety Costs"), either Member shall have the right to issue a Funding Notice
substantially in the form attached hereto as EXHIBIT E setting forth each
Member's Requested Amount. Within thirty (30) days after receipt of a duly
issued Funding Notice, each Member shall advance to the Company such Member's
Requested Amount unless a Buy/Sell Offering Notice has been issued in which
case, once it has been determined which Member will be the Seller, the Seller
shall not be obligated to fund such Requested Amount and Buyer's only right with
respect to the failure of Seller to fund such Requested Amount shall be the
right to make a Default Loan to a Seller pursuant to Section 3.8(a). Any funds
advanced by the Members to the Company pursuant to this Section 3.2 for
Preservation Costs or Safety Costs shall be referred to as "Preservation
Capital" and shall constitute additional Contributions to the Company. All
contributions by the Members pursuant to this Section 3.2 shall be made in
proportion to the Members' Proportionate Shares. Notwithstanding the above, if
at any time the Operating Member issues a Funding Notice under this Section 3.2
which requires the Class A Member to fund Preservation Costs for a Property
under this Section 3.2 (taking into account any prior Contributions of
Preservation Costs for such Property under this Section 3.2 funded by the Class
A Member) in excess of five percent (5%) of the sum of the Contributions and
Committed Contributions made by the Class A Member with respect to the
acquisition and initial development or renovation of such Property, the Class A
Member by written notice to the Operating Member (the "Declination Notice"),
which notice must be given within fifteen (15) days after the date of receipt of
the applicable Funding Notice, may elect to decline to make such
13
Contribution and in such event, neither Member shall be obligated or have the
right to make a Contribution to fund such Preservation Costs. In addition, if at
any time a Member issues a Funding Notice under this Section 3.2 which requires
the Members to fund Preservation Capital (taking into account any prior
Contributions of Preservation Capital) in excess of five percent (5%) of the sum
of the Contributions and Committed Contributions (other than Contributions of
Preservation Capital) made by the Members, neither Member shall be obligated or
have the right to make a Contribution to fund such Preservation Capital.
Section 3.3 FORM OF CONTRIBUTIONS. Unless otherwise Approved, all
Contributions shall be paid in cash.
Section 3.4 NO RIGHT TO INTEREST OR RETURN OF CAPITAL. Except as
specifically provided for herein, no Member shall be entitled to any return of
or interest on Contributions to the Company.
Section 3.5 NO THIRD PARTY RIGHTS. Any obligations or rights of the
Company or the Members to make or require any Contribution under this Article
III shall not result in the grant of any rights to or confer any benefits upon
any Person who is not a Member.
Section 3.6 LIMITATIONS. Except as set forth in this Article III, no
Member shall be entitled or required to make any Contribution to the Company. No
Member shall have any liability for the repayment of the Contribution of any
other Member (other than as set forth in Section 3.8), and each Member shall
look only to the assets of the Company for return of its Contributions.
Section 3.7 EXPANSION CAPITAL. (a) If (i) at any time prior to the
first anniversary of the date of this Agreement, the sum of all Contributions
made by the Members and all Committed Contributions equal $64,666,666.67 or more
or (ii) on the first anniversary of the date of this Agreement, the sum of all
Contributions made by the Members and all Committed Contributions equal
$26,666,666.67 or more, the Operating Member shall promptly send a written
notification of such fact to the Class A Member, which notice shall contain a
specific reference to this Section 3.7. Within 60 days after the receipt of such
written notice from the Operating Member with respect to the satisfaction of
either of the conditions set forth in (i) or (ii) above or upon the
determination by the Class A Member that either of the conditions set forth in
(i) or (ii) above has been satisfied, the Class A Member shall have the right,
at its option, to notify the Operating Member in writing (such notice, the "Cap
Increase Notice") that the Class A Member is prepared to increase its Capital
Contribution Cap. The Cap Increase Notice shall set forth the amount by which
the Class A Member proposes the aggregate Capital Contribution Caps of the
Members shall be increased, which amount shall not be less than $33,333,333.33
nor more than $66,666,666.67. The Operating Member shall, within thirty (30)
days following the giving of any such Cap Increase Notice, give written notice
to the Class A Member of the Operating Member's election either (i) approving
the increase in the aggregate Capital Contribution Cap proposed by the Class A
Member, in which event the Capital Contribution Cap for each Member shall be
increased by its Proportionate Share of such aggregate increase, or (ii)
14
disapproving such increase, in which event the Capital Contribution Caps of the
Members shall not be increased. The Operating Member's failure to give notice
within the aforesaid thirty (30) day period shall be deemed to be the Operating
Member's election not to approve the increase in the Capital Contribution Caps
as set forth in the Cap Increase Notice.
(b) If at any time during the Investment Period, the Operating
Member offers a Lodging Facility to the Company as a proposed acquisition under
Article X and such proposed acquisition is approved by the Class A Member or the
AEW Board Members, then notwithstanding the fact that Approval of the proposed
acquisition, taking into account all Contributions of Initial Capital made by
the Members and all Committed Contributions then in effect, would result in the
Capital Contribution Cap of each Member being exceeded, the Operating Member
shall be deemed to have approved such acquisition and an increase in its Capital
Contribution Cap in an amount necessary to fund its Proportionate Share of all
Pursuit Costs and Acquisition/Redevelopment Costs in connection with such
proposed acquisition, in any event, all subject to the rights of the Class A
Member pursuant to Article X. In no event shall the aggregate increases in the
Capital Contribution Caps pursuant to this Section 3.7(b) exceed $33,333,333.33.
Any Capital advanced or required to be advanced under this Article III as a
result of the increase in the Capital Contribution Cap under Section 3.7 (a) or
(b) shall be referred to as "Expansion Capital".
Section 3.8 FAILURE TO CONTRIBUTE CAPITAL. Subject to the provisions of
Section 3.10, if any Member fails to make a Contribution required under this
Article III by the date such Contribution is due and such failure continues for
ten (10) days after written notice from any Member who has not failed to make
its Contribution (any such failing Member shall be a "Defaulting Member" and the
amount of the failed contribution shall be the "Default Amount"), then, in
addition to its other rights and remedies set forth herein, or otherwise
provided by law, the nondefaulting Member shall have one or more of the
following remedies:
(a) to advance to the Company on behalf of, and as a
loan to the Defaulting Member, an amount equal to the Default Amount to
be evidenced by a promissory note in substantially the form attached
hereto as EXHIBIT D (each such loan, a "Default Loan"). The Capital
Account of the Defaulting Member shall be credited with the amount of
such Contribution and such amount shall constitute a debt owed by the
Defaulting Member to the nondefaulting Member. Any Default Loan shall
bear interest at the Default Rate (but in no event in excess of the
highest rate permitted by applicable law) and shall be payable from any
distributions due the Defaulting Member hereunder, but shall in all
events be payable in full by the Defaulting Member on or before the
earlier of (i) December 31, 2010 and (ii) the transfer of the entire
interest of a Member in the Company to the other Member. Interest on a
Default Loan to the extent unpaid shall accrue and compound monthly. A
Default Loan shall be prepayable, in whole or in part, at any time or
from time to time without penalty. Any such Default Loans shall be
secured solely by the Defaulting Member's interest in the Company,
including, without limitation, such Defaulting Member's rights to
distributions under Article V. Except as expressly provided herein,
Default Loans, with interest as aforesaid, shall otherwise be
15
without recourse to any other assets of the Defaulting Member. The
Defaulting Member hereby grants a security interest in its interest in
the Company to the nondefaulting Member and the Defaulting Member
hereby irrevocably appoints the nondefaulting Member, and any of its
respective officers, as its attorney-in-fact coupled with an interest
with full power to prepare and execute any documents, instruments and
agreements, including, but not limited to, any note evidencing the
Default Loan and such Uniform Commercial Code Financing Statements,
continuation statements, and other security instruments as may be
appropriate to perfect and continue its security interest in favor of
the nondefaulting Member. Any Contributions contributed by the
nondefaulting Member on behalf of a Defaulting Member shall be deemed
to be made by the Defaulting Member except as otherwise expressly
provided herein. All distributions to the Defaulting Member hereunder
shall be applied first to payment of any interest due under any Default
Loan and then to principal until all amounts due thereunder are paid in
full. While any Default Loan is outstanding, the Company shall be
obligated to pay directly to the nondefaulting Member, until all
Default Loans have been paid in full, the amount of (x) any
distributions payable to the Defaulting Member, and (y) any proceeds of
a sale that would otherwise be payable to the Defaulting Member
resulting from the sale of a Target Asset as contemplated by Section
8.2 or from the sale of the Defaulting Member's interest in the Company
as contemplated by Section 8.4; or
(b) to advance to the Company as an additional
Contribution the Default Amount whereupon the Proportionate Shares of
the Members shall be recalculated as provided in this subparagraph (b).
After the exercise of a Member's rights under this subparagraph (b),
each Member's Proportionate Share shall equal a fraction (expressed as
a percentage), the numerator of which shall equal the aggregate sum of
all Contributions made by the Member under this Agreement and the
denominator of which shall equal the aggregate sum of all Contributions
made by all Members under this Agreement; or
(c) in lieu of the remedies set forth in
subparagraphs (a) or (b) above, to revoke the Funding Notice for both
Members, whereupon any unmatched Contributions paid by the
nondefaulting Member pursuant to such Funding Notice shall be returned,
with interest computed at the Interest Rate, in which event the
nondefaulting Member shall reconsider the needs of the Company for
additional capital and may issue any Funding Notice following such
reconsideration.
Section 3.9 CREDIT ENHANCEMENT. Either Member may, on a case by case
basis, but subject to obtaining Approval, elect to provide credit enhancement
for Authorized Financing for one or more Properties in the form of guaranties,
indemnifications, pledges of collateral or letters of credit to the provider of
the Authorized Financing (a "Lender"), in each case to secure certain
obligations of the Company or any Subsidiary Company (any such credit
enhancement shall be collectively, "Credit Enhancement"). Any request for
Approval made by a Member may include proposed fees to be charged to the Company
by such Member in connection with providing such Credit Enhancement. The
provision of any such Credit Enhancement shall not be deemed a
16
Contribution unless and until any funds payable under any guaranty are paid, or
with respect to collateral, such collateral is applied or with respect to a
letter of credit, such letter of credit is drawn upon, but shall be deemed a
Contribution upon and after such payment, application or draw (but only to the
extent funds are paid, collateral applied or a letter of credit is drawn upon).
If any Member is required to make payments under any Credit Enhancement or any
Credit Enhancement supplied by a Member is drawn or applied by any Lender
against the obligation of the Company or any Subsidiary Company other than in
proportion to the Proportionate Shares of all of the Members, or if the Members
shall incur reasonable costs in providing such Credit Enhancement that are
disproportionate to the Members' Proportionate Shares, then the Member who has
proportionally paid or funded less Credit Enhancement or has had proportionally
less of its Credit Enhancement so applied (or who has incurred proportionally
fewer costs in providing Credit Enhancement) shall promptly reimburse the other
Member in an amount which shall result in each Member having its Proportionate
Share of the Credit Enhancement applied (or having incurred its Proportionate
Share of Credit Enhancement costs) and the Contributions deemed made by the
Members shall reflect any such payment. If any Member fails to promptly
reimburse the other Member, the non-failing Member shall have the right to cause
the Company to reimburse both Members for all costs and expenses reasonably
incurred by the Members in connection with such Credit Enhancement (and such
non-failing Member shall have the unilateral right to issue a Funding Notice in
such amount) and the Members agree that such reimbursement shall be made prior
to any distributions to the Members under Article V.
Section 3.10 FAILURE TO CONTRIBUTE EXPANSION CAPITAL. If the Operating
Member fails to contribute its Requested Amount of Expansion Capital after the
issuance of a Cap Increase Notice (the portion of its Requested Amount which the
Operating Member fails to contribute shall be the "Uncontributed Expansion
Amount"), then, notwithstanding the provisions of Section 3.8, if the Operating
Member notifies the Class A Member within ten (10) days after a receipt of a
Funding Notice for such Expansion Capital that it does not intend to fund its
Requested Amount and such notice sets forth the Uncontributed Expansion Amount,
then such failure shall not be deemed a default of the Operating Member under
this Agreement or an Event of Default hereunder, but the Class A Member shall
have the specific right to the remedies set forth in Section 3.8(a) or 3.8(c).
Any loan made by the Class A Member pursuant its rights under Section 3.8(a) as
a result of the application of this Section shall be deemed a "Default Loan" for
all purposes of this Agreement.
ARTICLE IV-- CAPITAL ACCOUNTS, ALLOCATIONS OF INCOME AND LOSS
Section 4.1 CAPITAL ACCOUNTS. A separate capital account (each a
"Capital Account") shall be maintained for each Member in accordance with the
rules of Treasury Regulations Section 1.704-1(b)(2)(iv), and this Section 4.1
shall be interpreted and applied in a manner consistent therewith. Whenever the
Company would be permitted to adjust the Capital Accounts of the Members
pursuant to Treasury Regulations Section 1.704-1(b)(2)(iv)(F) to reflect
revaluations of Company property, the Company may so adjust the Capital Accounts
of the Members. In the event that the Capital Accounts of the Members are
adjusted pursuant to Treasury Regulations Section 1.704-1(b)(2)(iv)(F) to
reflect revaluations of Company property,
17
(i) the Capital Accounts of the Members shall be adjusted in accordance with
Treasury Regulations Section 1.704-1(b)(2)(iv)(G) for allocations of
depreciation, depletion, amortization and gain or loss, as computed for book
purposes, with respect to such property, (ii) the Members' distributive shares
of depreciation, depletion, amortization and gain or loss, as computed for tax
purposes, with respect to such property shall be determined so as to take
account of the variation between the adjusted tax basis and book value of such
property in the same manner as under Code Section 704(c), and (iii) the amount
of upward and/or downward adjustments to the book value of the Company property
shall be treated as income, gain, deduction and/or loss for purposes of applying
the allocation provisions of this Article IV. In the event that Code Section
704(c) applies to Company property, the Capital Accounts of the Members shall be
adjusted in accordance with Treasury Regulations Section 1.704-1(b)(2)(iv)(G)
for allocations of depreciation, depletion, amortization and gain and loss, as
computed for book purposes, with respect to such property.
Section 4.2 ALLOCATION OF NET INCOME. Subject to Sections 4.5 through
4.9, net income for any fiscal year or portion thereof shall be allocated among
the Members in the following order and priority:
(a) First, to the Members until the aggregate allocations of
net income to each Member pursuant to this Section 4.2(a) for all
fiscal years or portions thereof are equal to the aggregate allocations
of net loss to each Member pursuant to Section 4.4 for all fiscal years
or portions thereof, in the reverse order of, and in proportion to, the
prior allocations of net loss to the Members pursuant to Section 4.4;
and
(b) Thereafter, to the Members, pro rata in accordance with
their Proportionate Shares.
Section 4.3 ALLOCATION OF NET LOSS. Subject to Sections 4.4 through
4.9, net loss for any fiscal year or portion thereof shall be allocated among
the Members in accordance with their Proportionate Shares.
Section 4.4 LOSS LIMITATION. Net loss allocated pursuant to Section 4.3
shall not exceed the maximum amount of net loss that can be allocated without
causing or increasing a deficit balance in a Member's Adjusted Capital Account.
A Member's "Adjusted Capital Account" balance shall mean such Member's Capital
Account balance increased by such Member's obligation to restore a deficit
balance in its Capital Account, including any deemed obligation pursuant to the
penultimate sentences of Treasury Regulations Section 1.704-2(g)(1) and
1.704-2(i)(5), and decreased by the amounts described in Treasury Regulations
Section 1.704-1(b)(2)(ii)(D)(4), (5), or (6). In the event that one but not both
of the Members would have a deficit balance in its Adjusted Capital Account as a
consequence of an allocation of net loss pursuant to Section 4.3 in excess of
the amount, if any, permitted under the first sentence of this Section 4.4, the
limitation set forth in this Section 4.4 shall be applied by allocating 100%of
the remaining net loss to the other Member until the Adjusted Capital Account of
such other Member is zero.
18
Section 4.5 ALLOCATIONS TO MATCH CARRY DISTRIBUTIONS. After giving
effect to the special allocations set forth in Sections 4.6 through 4.8, the
Operating Member shall be specially allocated 100% of the net income of the
Company until the aggregate amount of net income (including any gross items of
income or gain allocated under this Section 4.5) allocated to the Operating
Member pursuant to this Section 4.5 in all fiscal years of the Company is equal
to the aggregate amount of the Carry Distributions which the Operating Member
has received. If the Company has insufficient net income to make the allocation
required by the preceding sentence, the Company shall specially allocate gross
items of income and gain to the Operating Member to the extent of any such
shortfall.
"Carry Distributions" means the portion of the distributions made (or
deemed made pursuant to the following provisions of this Section 4.5) to the
Operating Member pursuant to Sections 5.2(b), 5.2(c), 5.3(b) and 5.3(c) in
amounts not in accordance with the Operating Member's Proportionate Share (e.g.
16 2/3% of all distributions under Sections 5.2(b) and 5.3(b)). For purposes of
determining the amount of Carry Distributions, all distributions made, or which
will be made, pursuant to Section 5.4 shall be treated as if made pursuant to
each applicable paragraph of Section 5.3 to the extent of the amount that would
have been made pursuant to each such paragraph if the aggregate amount
distributed, or to be distributed, pursuant to Section 5.4 had been distributed
pursuant to Section 5.3. In addition, for purposes of determining the amount of
Carry Distributions, distributions shall only be taken into account if they are
made prior to the date which is the earlier of (i) the date on which the Company
files its federal income tax return with respect to the fiscal year for which
the allocation pursuant to this Section 4.5 is being made, or (ii) the date
prescribed by law for the filing of such return (not including extensions).
Finally, the parties acknowledge that it is the intention of this Section 4.5
and Section 4.9 that, to the extent possible and subject to the other provisions
of this Agreement, each Member will receive the same aggregate amount of net
distributions under this Agreement that each Member would have received if this
Agreement did not contain Section 5.4.
Section 4.6 MINIMUM GAIN CHARGEBACKS AND NON-RECOURSE DEDUCTIONS.
Section 4.6.1 COMPANY MINIMUM GAIN. Notwithstanding any other
provisions of this Agreement, in the event there is a net decrease in Company
Minimum Gain during a fiscal year, the Members shall be allocated items of
income and gain in accordance with Treasury Regulations Section 1.704-2(f). For
purposes of this Agreement, the term "Company Minimum Gain" shall mean
"Partnership Minimum Gain" as set forth in Treasury Regulations Section
1.704-2(b)(2), and any Member's share of Company Minimum Gain shall be
determined in accordance with Treasury Regulations Section 1.704-2(g)(1). This
Section 4.6.1 is intended to comply with the minimum gain charge-back
requirement of Treasury Regulations Section 1.704-2(f) and shall be interpreted
and applied in a manner consistent therewith.
Section 4.6.2 NONRECOURSE DEDUCTIONS. Notwithstanding any
other provision of this Agreement, non-recourse deductions shall be allocated to
the Members, pari passu, in
19
proportion to their Proportionate Shares. "Non-recourse deductions" shall have
the meaning set forth in Treasury Regulations Section 1.704-2(b)(1).
Section 4.6.3 PARTNER NONRECOURSE DEBT. Notwithstanding any
other provisions of this Agreement, to the extent required by Treasury
Regulations Section 1.704-2(i), any items of income, gain, loss or deduction of
the Company that are attributable to a nonrecourse debt of the Company that
constitutes "partner nonrecourse debt" as defined in Treasury Regulations
Section 1.704-2(b)(4) (including chargebacks of partner nonrecourse debt minimum
gain) shall be allocated in accordance with the provisions of Treasury
Regulations Section 1.704-2(i). This Section 4.6.3 is intended to satisfy the
requirements of Treasury Regulations Section 1.704-2(i) (including the partner
nonrecourse debt minimum gain chargeback requirements) and shall be interpreted
and applied in a manner consistent therewith.
Section 4.7 QUALIFIED INCOME OFFSET. Any Member who unexpectedly
receives an adjustment, allocation or distribution described in Treasury
Regulations Section 1.704-1(b)(2)(ii)(D)(4), (5) or (6) that causes a deficit
balance in its Capital Account (in excess of any deemed deficit restoration
obligation pursuant to Treasury Regulations Sections 1.704-2(g)(1) and (i)(5),
and adjusted as provided in Treasury Regulations Section 1.704-1(b)(2)(ii)(D))
shall be allocated items of income and gain in an amount and a manner sufficient
to eliminate, to the extent required by the Treasury Regulations, such deficit
balance as quickly as possible. This Section 4.7 is intended to comply with the
alternate test for economic effect set forth in Treasury Regulations Section
1.704-1(b)(2)(ii)(D) and shall be interpreted and applied in a manner consistent
therewith.
Section 4.8 CURATIVE ALLOCATIONS. The allocations set forth in Sections
4.6 and 4.7 (the "Regulatory Allocations") are intended to comply with the
requirements of Treasury Regulations Sections 1.704-1(b) and 1.704-2.
Notwithstanding any other provisions of this Article IV (other than the
Regulatory Allocations), the Regulatory Allocations shall be taken into account
as provided for in the following two sentences. Income, gain, loss and deduction
shall be reallocated to the extent that such reallocation causes the net
aggregate amount of allocations of income, gain, deduction and loss to each
Member to be equal to or more closely approximate the net aggregate amount of
such items that would have been allocated to each such Member if the Regulatory
Allocations had not occurred; PROVIDED, HOWEVER, that such reallocations shall
be made only if and to the extent they are consistent with the requirements of
Code Section 514(c)(9)(E) and Treasury Regulations Section 1.514(c)-2. This
Section 4.8 shall be interpreted and applied in such a manner and to such extent
as is reasonably necessary to eliminate, as quickly as possible but consistent
with the requirements of Code Section 514(c)(9)(E), permanent economic
distortions that would otherwise occur as a consequence of the Regulatory
Allocations in the absence of this Section 4.8.
Section 4.9 SPECIAL INCOME ALLOCATION. Notwithstanding any other
provision of this Article IV (except Sections 4.6 through 4.8), in the year in
which the Company liquidates (within the meaning of Treasury Regulations Section
1.704-1(b)(2)(ii)(g)), items of gross income and gain shall be allocated to the
Operating Member and items of gross loss and deduction shall be
20
allocated to the Class A Member to the extent necessary to cause the aggregate
amount of net distributions under Article V with respect to each Member to be
equal to or more closely approximate the aggregate net distributions that each
such Member would have received pursuant to Article V if this Agreement did not
contain Section 5.4; PROVIDED, HOWEVER, that gross items of loss and deduction
shall not be allocated to the Class A Member pursuant to this Section 4.9 to the
extent they would cause or increase a deficit balance in the Class A Member's
Adjusted Capital Account; and PROVIDED FURTHER, that gross items of loss and
deduction shall be allocated to the Operating Member pursuant to this Section
4.9 to the extent necessary to reflect the agreement of the parties that the
Operating Member will bear the cost of certain transaction expenses pursuant to
Section 6.4.1(a), the last sentence of Section 10.3.3(b) and certain lease
termination expenses pursuant to Section 6.4.4, but only to the extent permitted
by Treasury Regulations Sections 1.514(c)-2(f) or (g).
Section 4.10 CODE SECTION 704(B) AND 514(C)(9)(E) ALLOCATIONS. The
allocation provisions contained in this Article IV are intended to comply with
Code Section 704(b) and the Treasury Regulations promulgated thereunder, and
shall be interpreted and applied in a manner consistent therewith. Further, it
is the intention of the Members that this Agreement provide for allocations to
comply with the requirements of Code Section 514(c)(9)(E) and the Treasury
Regulations promulgated thereunder, and the Members agree that any provision of
this Article IV that is reasonably subject to different interpretations shall be
interpreted in a manner that comports with the foregoing intention.
Section 4.11 DISTRIBUTIONS OF NONRECOURSE LIABILITY PROCEEDS. If,
during a fiscal year, the Company makes a distribution to any Member that is
allocable to the proceeds of any nonrecourse liability of the Company that is
allocable to an increase in Company Minimum Gain pursuant to Treasury
Regulations Section 1.704-2(h), then the Company shall elect, to the extent
permitted by Treasury Regulations Section 1.704-2(h)(3), to treat such
distribution as a distribution that is not allocable to an increase in Company
Minimum Gain.
Section 4.12 ALLOCATION OF DEBT. For purposes of allocating excess
nonrecourse liabilities among the Members pursuant to Treasury Regulations
Section 1.752-3(a)(3), the Operating Member's interest in Company profits shall
be 100% and the Class A Member's interest in profits shall be 0%.
Section 4.13 OTHER ALLOCATION PROVISIONS. Any elections or other
decisions relating to the allocations of Company items of income, gain, loss,
deduction or credit shall be made by the Class A Member in any manner that
reasonably reflects the purpose and intention of this Agreement.
Section 4.14 NO DEFICIT RESTORATION BY MEMBERS.
No Member shall be required to contribute capital to the Company to
restore a deficit balance in its Capital Account upon liquidation or otherwise.
21
ARTICLE V-- DISTRIBUTIONS.
Section 5.1 MAINTENANCE OF RESERVES.
Section 5.1.1 RESERVES -- GENERAL. Subject to the reserve
requirements set forth herein, the Operating Member shall cause all available
cash held by each Subsidiary Company to be distributed to the Company. The
Company shall maintain such Approved reserves at each Subsidiary Company or at
the Company level as the Operating Member deems appropriate in light of
customary industry standards and potential opportunities and obligations of the
Company to meet the anticipated cash needs and obligations of the Properties and
the Company, including, without limitation, any reasonably anticipated
contingent liabilities of the Company. If the Members are unable to agree on
required reserves for a particular Property, the Company (or Subsidiary Company)
shall maintain reserves equal to four percent (4%) of the annual gross revenue
generated by the particular Property. There shall be no distributions to the
Members (other than in the event of dissolution and liquidation of the Company)
during any period that the Company does not have reserves meeting Approved (or
minimum) levels, until such reserves have been funded or replenished to those
levels, as the case may be.
Section 5.1.2 PROHIBITED DISTRIBUTIONS. Notwithstanding any
provision of this Agreement to the contrary, the Company shall not make any
distributions prohibited by the terms of the Act.
Section 5.2 DISTRIBUTIONS OF CASH FLOW. Subject to the provisions of
Sections 3.8, 3.10, 5.1 and 5.4, within thirty (30) days after the end of each
Calendar Quarter, the Operating Member shall distribute Cash Flow with respect
to such Calendar Quarter to the Members as follows:
(a) First, one hundred percent (100%) to the Members,
pari passu, in proportion to their Proportionate Shares, until the
Class A Member has received distributions under this Article V which
provide to the Class A Member a Total Return equal to [*] percent [*];
and
(b) Second, eighty three and one-third percent
(83-1/3%) to the Members, pari passu, in proportion to their
Proportionate Shares and sixteen and two-thirds percent (16-2/3%)
to the Operating Member until the Class A Member has received
distributions under this Article V which provide to the Class A
Member a Total Return equal to [*] percent [*]; and
(c) Thereafter, the balance, sixty six and two-thirds
percent (66-2/3%) to the Members, pari passu, in proportion to their
Proportionate Shares and thirty three and one-third percent (33-1/3%)
to the Operating Member.
22
Section 5.3 DISTRIBUTIONS OF CAPITAL PROCEEDS. Subject to the
provisions of Sections 3.8, 3.10, 5.1 and 5.4, the Operating Member shall,
promptly after a Capital Transaction, calculate the Capital Proceeds resulting
therefrom, if any, and shall distribute the same to the Members as follows:
(a) First, one hundred percent (100%) to the Members,
pari passu, in proportion to their Proportionate Shares, until the
Class A Member has received distributions under this Article V which
provide to the Class A Member a Total Return equal to [*] percent [*];
and
(b) Second, eighty three and one-third percent
(83-1/3%) to the Members, pari passu, in proportion to their
Proportionate Shares and sixteen and two-thirds percent (16-2/3%)
to the Operating Member until the Class A Member has received
distributions under this Article V which provide to the Class A
Member a Total Return equal to [*] percent [*]; and
(c) Thereafter, the balance, sixty six and two-thirds
percent (66-2/3%) to the Members, pari passu, in proportion to their
Proportionate Shares and thirty three and one-third percent (33-1/3%)
to the Operating Member.
Section 5.4 DISTRIBUTIONS UPON LIQUIDATION. In the event the Company
(or a Member's interest therein) is "liquidated" within the meaning of Treasury
Regulations Section 1.704-1(b)(2)(ii)(G), then any distributions shall be made
pursuant to this Section 5.4 to the Members (or such Member, as appropriate), in
accordance with their (or its, as appropriate) positive Capital Account balances
in compliance with Treasury Regulations Section 1.704-1(b)(2)(ii)(B)(2).
ARTICLE VI-- POWERS AND DUTIES
Section 6.1 BOARD OF MEMBERS.
Section 6.1.1 ESTABLISHMENT OF BOARD OF MEMBERS. Subject to
the rights of the Class A Member as set forth in this Agreement (including,
without limitation, Section 6.1.3, Section 6.2, Section 6.4.5 and Section 6.6),
the decision-making power of the Company shall be vested in a Board of Members,
which shall consist of four (4) individuals (each a "Board Member") comprised as
follows: (a) two (2) Board Members chosen by the Operating Member, initially
consisting of ▇▇▇▇▇▇ ▇. ▇▇▇▇▇▇ and ▇▇▇▇▇▇▇ ▇. ▇▇▇▇▇ (together with their
permitted successors, the "Operating Member's Board Members"), and (b) two (2)
Board Members chosen by the Class A Member (the "AEW Board Members"). Either
Member may change the designation of the individual or individuals appointed by
it to the Board of Members at any time by written notice to the Operating
Member, except that the Operating Member shall not change the designation of ▇▇.
▇▇▇▇▇▇ as a Board Member without the prior consent of the Class A Member and
such consent shall not be unreasonably withheld. The names and addresses of the
23
initial Board Members of the Company are set forth on EXHIBIT A attached hereto,
and EXHIBIT A shall be amended from time to time by the Operating Member to
reflect the resignation or removal of any Board Member or the appointment of new
or additional Board Members pursuant to this Agreement.
Section 6.1.2 MEETINGS AND ACTION OF THE BOARD OF MEMBERS.
Except as otherwise set forth in this Agreement, all action to be taken by the
Board of Members shall be taken at a meeting of the Board of Members by the
affirmative vote (a "Majority Vote") of a majority in number of the Board
Members, PROVIDED, however, that no combination of affirmative votes shall be
deemed to qualify as a Majority Vote unless such combination of affirmative
votes includes at least one (1) Operating Member Board Member and one (1) AEW
Board Member. If action is to be taken at a duly called meeting of the Board of
Members, notice of the time, date and place of meeting shall be given to each
Board Member by the Operating Member or the Board Member(s) calling the meeting
by personal delivery, telephone or fax sent to the address of each Board Member
set forth on EXHIBIT A at least three (3) Business Days in advance of the
meeting; PROVIDED, HOWEVER, no notice need be given to a Board Member who waives
notice before or after the meeting or who attends the meeting without protesting
at or before its commencement the inadequacy of notice to him or her. The Board
Members may attend a meeting in person or by proxy, and they may also
participate in the meeting by means of conference call or similar communications
equipment that permits all Board Members to hear each other. A chairman selected
by the Class A Member shall preside over all meetings of the Board of Members.
Either Member may introduce meeting agenda items, all of which the Board of
Members shall consider. The chairman shall determine the order of business and
the procedures to be followed at each meeting of the Board of Members. Any
action required or permitted to be taken at any meeting of the Board of Members
may be taken without a meeting if one or more written consents to such action
shall be signed by the requisite number of Board Members required for a Majority
Vote. Such written consents shall be delivered to the Operating Member at the
principal office of the Company and, unless otherwise specified, shall be
effective on the date when the first consent is delivered. To the extent that
this Agreement permits the Board to request materials, reports, information or
clarifications, such request may be made by any individual Member of the Board
without further action by the Board.
Section 6.1.3 SPECIFIC APPROVAL RIGHTS OF BOARD OF MEMBERS.
Notwithstanding any provision of this Agreement to the contrary, the Operating
Member shall not, in the exercise of its general control and decision-making
authority as more particularly described in Section 6.3, take, consent to or
permit the Company or any Subsidiary Company to take any of the following
actions (each, a "Major Decision"), without in each instance first obtaining
Approval. In addition, except as expressly set forth in this Agreement to the
contrary, the Class A Member shall not unilaterally cause a Major Decision to
occur, without in each instance first obtaining Approval. The Major Decisions
are as follows:
(a) Acquire any Lodging Facility or other real or
personal property or interest therein on behalf of the Company or any
Subsidiary Company other than personal property in the ordinary course
of business. Any Approval by the Board of the Final
24
Approval Package for the acquisition of a proposed acquisition pursuant
to Article X shall be deemed Approval pursuant to this Section
6.1.3(a), subject to the provisions of Article X, including, without
limitation, the provisions of Section 10.3 which provide the Members
with the right to disapprove an acquisition as a result of diligence
conditions or otherwise.
(b) Execute or enter into any franchise agreement,
management agreement, Lease or operating agreement with respect to any
Property or Properties, unless with respect to an operating agreement
only, such operating agreement is in the ordinary course of the
business of the Company, is terminable on not less than thirty (30)
days prior written notice for a penalty of not more than One Thousand
Dollars ($1,000.00) and is for an expense which has been Approved in an
Approved Budget.
(c) Sell, convey, exchange, mortgage, or otherwise
transfer or encumber or lease all of or any interest in any Property or
any real or personal, tangible or intangible property, other than
non-material transfers, financings or leases with respect to personal,
tangible or intangible property in the ordinary course of business or
leases of less than 3,000 square feet of leasable space with a term,
including extension options, of not greater than five (5) years which
are consistent with any current Approved Leasing Plan.
(d) Execute or enter into, amend, modify or terminate
any development agreement, construction contract or other agreement
relating to the development, redevelopment or improvement of any
Property or Properties; provided, however, without Approval, the
Operating Member may enter into any such contract or agreement if the
obligations under such contract or agreement are for less than $100,000
and the scope of the work to be completed under such contract or
agreement has been Approved (whether by inclusion in an Approved Budget
or otherwise) and may approve any single change order or series of
related change orders causing a price adjustment of less than of
Fifteen Thousand Dollars ($15,000) per item or related items or
Twenty-Five Thousand Dollars ($25,000) in the aggregate under any such
contract.
(e) Execute or enter into any contract or agreement
other than of the type described in (b) or (d) above or incur any
obligation other than obligations which would not require Approval
under (d) above, unless such agreement or obligation is in the ordinary
course of the business of the Company and such agreement or obligation
has been contemplated in an Approved Budget.
(f) Borrow money, issue evidences of indebtedness or
grant any mortgages or other encumbrances on or security interests in
the assets of the Company or any Subsidiary Company, including without
limitation, any financing or refinancing of any Property or any portion
thereof, or modify, extend, renew, change or prepay in whole or in part
any borrowing, financing or refinancing, or make any commitments to
borrow funds or give any consideration to obtain a commitment for the
loan of funds except as
25
expressly permitted under (c) above with respect to nonmaterial
personal, tangible or intangible property.
(g) Make a distribution of any Cash Flow or Capital
Proceeds of the Company, which, in either case, is inconsistent with
the current Approved Budgets, Portfolio Business Plan or Asset Business
Plan, or otherwise in contravention of this Agreement.
(h) Institute legal action or proceedings or
otherwise bring or prosecute any claim available to the Company or any
Subsidiary Company, or settle any claim against the Company or any
Subsidiary Company or any other matter, in each case outside of the
ordinary course of business of the Company or the Subsidiary Company;
or settle any eminent domain taking.
(i) Establish any amendment to any Portfolio Business
Plan or Asset Business Plan, including, without limitation, the
establishment of or amendment (whether or not material) to any Approved
Budget. The content of any Portfolio Business Plan, Asset Business
Plan, Annual Budget, Acquisition/Redevelopment Budget, Construction
Budget or Pursuit Cost Budget, or any other budget or report to be
generated by the Operating Member pursuant to this Agreement shall
require Approval before any such plan, budget or report shall become
operative or effective. The foregoing shall not be deemed to require
separate Approval for a conforming amendment to an Approved
expenditure, Approved plan, Approved Budget or Approved report where
such amendment is clearly derived from an Approved expenditure,
Approved plan, Approved Budget, or Approved report.
(j) Modify any contract, agreement or lease or other
arrangement, if such modification would require Approval as provided
herein in the case of a new contract, agreement or lease or other
arrangement.
(k) Other than as already Approved in an Approved
Budget, develop or approve on behalf of the Company any plans for the
construction of any improvements or the making of any capital
improvements or alterations in or to any Property or any portion
thereof having a cost in excess of $100,000 or any material deviation
in construction from Approved plans and specifications.
(l) Alter the amount or nature of the Contributions.
(m) Allow any Property to be owned and operated
without a Lease.
(n) Engage the Accountant or any other accountant or
legal counsel for the Company or change or terminate any accountant or
legal counsel unless (a) the Operating Member determines in its
reasonable judgment that an adverse determination of any dispute is
reasonably expected to result in exposure of less than $100,000 and (b)
26
the amount of professional fees incurred with respect to any individual
matter will be less than $50,000.
(o) Establish, increase, replenish or decrease the
amount of reserves held by the Company or any Subsidiary Company,
except in accordance with the applicable Approved Budget unless
required by law or pursuant to the terms of any Authorized Financing.
(p) Permit any Related Party of the Operating Member
to engage in Competing Activities in violation of the provisions of
Section 6.4 or Article X hereof.
(q) Permit the Transfer of any Member's interest in
the Company or admit any additional Members, except for Transfers
permitted under Article VIII.
(r) Dissolve the Company or any Subsidiary Company.
(s) Effect a merger, conversion, consolidation or
other reorganization of the Company or any Subsidiary Company or modify
or amend this Agreement or the LLC Certificate.
(t) Engage in any business not described in
Section 1.2.
(u) Discharge or replace Key Personnel.
(v) Pay any fees, compensation or expense
reimbursement to the Operating Member or any Operating Member Related
Party or the Class A Member or any Related Party of the Class A Member
or enter into any transaction with any Operating Member Related Party
or any Related Party of the Class A Member.
(w) Intentionally deleted.
(x) Modify the Insurance Requirements set forth in
EXHIBIT F for the benefit of the Company.
(y) Guaranty the payment of any money, or debt of
another Person, or guaranty the performance of any other obligation of
another Person.
(z) Grant any general power of attorney or other
unlimited authority to act on behalf or in the name of the Company.
(aa) Agree to any material change to accounting and
related matters material to the Company or the Members or any material
changes to accounting practices or policies.
27
(b) Initiate or respond to any so called "buy/sell"
or "forced sale" provision under any agreement (other than this
Agreement) to which the Company or any Subsidiary Company is a party or
commit on behalf of the Company to acquire any partnership or
membership interest owned by a Third Party in any Subsidiary Company.
(cc) File any voluntary petition for the Company or
any Subsidiary Company under Title 11 of the United States Code, the
Bankruptcy Act, or seek the protection of any other Federal or State
bankruptcy or insolvency law or debtor relief statute.
(dd) Make any other decision or take any other action
which by any provision of this Agreement is required to be approved by
the Board.
(ee) Do any act in contravention of this Agreement.
(ff) In any instance where the consent or approval of
the Company or a Subsidiary Company is required under any Lease, the
granting of such consent or approval with respect to any action which
if undertaken by the Operating Member under this Agreement would
require Approval.
Section 6.1.4APPROVAL BY MEMBERS IN LIEU OF BOARD APPROVAL;
PROJECT REPRESENTATIVES. Notwithstanding the foregoing provisions of this
Section 6.1, the unanimous approval by the Members (any approval of any Member
must be in writing) as to any matter or decision shall satisfy the requirement
for Approval by the Board of Members for all purposes of this Agreement, and any
such matter or decision receiving the unanimous approval of the Members shall be
deemed "Approved." Each Member shall designate at least two (2) individuals to
represent such Member as its "Project Representatives." The initial Project
Representatives for each Member and their addresses are set forth on EXHIBIT A
hereto, and each Member may by written notice to the other Member redesignate
its Project Representatives. The written approval of a Project Representative as
to any matter or decision shall be deemed to constitute the approval of the
Member represented by such Project Representative.
Section 6.2 ADDITIONAL RIGHTS OF THE CLASS A MEMBER. After the initial
acquisition and financing of any Property, in the event that any financing,
refinancing, or other recapitalization of such Property (a "Financing Proposal")
is proposed by either Member for consideration by the Board and the Board of
Members does not achieve a Majority Vote approving the terms of such Financing
Proposal or such Financing Proposal is not otherwise Approved by the Members,
then, notwithstanding the lack of a Majority Vote of the Board of Members or
Approval of the Members and notwithstanding any provision or provisions of this
Agreement to the contrary, the Class A Member shall have the right to
unilaterally propose and approve on behalf of the Company any bona fide
Financing Proposal from a Third Party satisfactory to the Class A Member within
the financing parameters set forth on EXHIBIT M and such unilateral proposal and
approval by the Class A Member shall constitute Approval within the terms of
this Agreement. At the direction of the Class A Member, the Operating Member
shall use all reasonable and
28
diligent efforts to cause the Company to enter into and consummate such
Financing Proposal as so proposed and approved by the Class A Member.
In addition to other rights reserved or granted to the Class A Member,
the Class A Member and its agents and representatives shall have the right, at
their sole cost and expense, at any time and from time to time, upon reasonable
notice (which shall not be deemed to require notice of more than one (1)
Business Day) and during normal business hours to:
(i) inspect any or all of the Properties, proposed
acquisitions or other assets of the Company in a manner which does not
unduly interfere with the operation and/or development of the
Properties; and
(ii) review (x) the books and records required to be
maintained under Article IX below, and (y) any information and reports
relating to the management, operations, policies or strategies of any
or all of the Properties or other assets of the Company.
The Class A Member shall have the right to obtain, at the expense of
the Company, an appraisal for any Property once every twelve months.
Section 6.3 OPERATING MEMBER. Subject to the terms and conditions of
this Agreement, the Operating Member shall have responsibility and authority for
the day-to-day management and operation of the business and affairs of the
Company in accordance with the Leases, the Approved Portfolio Business Plan, the
Approved Asset Business Plans, the Approved Budgets and the other terms and
conditions of this Agreement. The Operating Member accepts and agrees to perform
the duties and undertake the responsibilities set forth for it in this Agreement
and to exercise reasonable, diligent, and efficient business administration
consistent with customary administration of business enterprises comparable to
the Company having similarly sophisticated principals and investors. Except as
otherwise set forth herein, the Operating Member shall act as the Company's
representative with respect to all aspects of the acquisition, development and
leasing of the Properties and other Company assets, shall perform the specified
reporting functions, shall use diligent efforts to comply with and perform all
obligations of the Company and the Subsidiary Companies under any agreements
affecting them and, generally, shall execute and implement decisions and
directions of the Board of Members with respect to the Properties and the
activities contemplated in, and in each case consistent with, the Approved
Portfolio Business Plan, Approved Asset Business Plans, the Approved Budgets and
with any decision of the Board of Members, and shall, as requested by the Board,
act as the Board's representative in connection with any proposed sale or
financing transaction, providing required financial information or other
documentation, dealing with brokers and potential sources of financing or
purchasers and performing such additional duties as the Board may reasonably
request.
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In addition to the general responsibilities of the Operating Member set
forth above, the Operating Member shall also use commercially reasonable efforts
to provide all of the following services:
(a) Collect all rents and other charges which may
become due at any time from any tenant under any Lease and any other monies due
the Company or any Subsidiary Company in connection with each such Property. All
monies collected are to be deposited in the applicable Property Accounts.
(b) Coordinate the bidding, awarding, and negotiation
of contracts with, and coordinate activities among all applicable service
providers such as architects, engineers, designers, brokers, consultants,
attorneys and other professionals providing services to the Company or
Subsidiary Company in connection with asset management, operation or
redevelopment of any Property;
(c) Coordinate the administration and payment of all
construction costs, equipment costs, architectural and engineering costs,
insurance costs and other hard and soft costs incurred in connection with
capital improvement to or redevelopment of any Property;
(d) Notify the Class A Member of any conditions which
would cause any of the Properties to be in violation of any Mortgage Loan, and
take Approved remedial action to cause the Properties to remain in compliance
with all Mortgage Loans;
(e) Maintain copies of all Leases; subject to the
Class A Member's rights under Section 6.4.5, advise, administer, asset manage
and oversee all leasing activities, leasing negotiations and other
communications with present and proposed tenants under Leases and use
commercially reasonable efforts to cause the Company or the applicable
Subsidiary Company to be in compliance with the terms of all Leases;
(f) Review bills for real estate taxes, improvements
assessments and other like charges which are or may become liens against each
Property and, subject to the terms of each Lease, as part of the Asset Business
Plan recommend payment, appeal or application for abatement as in its reasonable
judgment it shall determine; and assist the Company in the preparation and
prosecution of any such appeal or application for abatement; and
(g) Inspect or cause to be inspected each Property at
least quarterly and promptly provide to Class A Member with an inspection
report.
Section 6.3.1 AUTHORITY OF THE OPERATING MEMBER. Subject to
the other provisions of this Article VI and all other provisions of this
Agreement calling for the Approval of the Board or of the Class A Member, or
otherwise limiting the authority or powers of the Operating Member, the
Operating Member shall have the decision-making authority and power
30
necessary for the day-to-day administration and operation of the business and
affairs of the Company, including the power and authority to do the following on
behalf of and at the Company's expense (except that the Operating Member shall
have no authority to take any of the actions listed in Section 6.2 unless, and
then only to the extent, such action has been Approved), in each case consistent
with the Approved Portfolio Business Plan, Approved Asset Business Plans, the
Approved Budgets and with any decision of the Board of Members:
(a) Acquire real and personal property and interests
in real and personal property on behalf of the Company.
(b) Deal in and with the assets of the Company,
including without limitation, selling, leasing, developing,
constructing, improving, rehabilitating, maintaining, creating
easements and conveying all or any part of any real or personal
property of the Company.
(c) Exercise the rights of the Company with respect
to the Subsidiary Companies.
(c) Enter into contracts for the construction,
development, improvement, servicing, maintenance, repair and
rehabilitation of the Properties.
(e) Bring, defend, compromise, collect, pay, adjust,
arbitrate or otherwise take any action and exercise any remedies with
respect to any receivable held by or claim available to or against the
Company.
(f) Pay Company expenses incurred in the
administration and operation of the business and affairs of the
Company.
(g) Borrow money and issue evidences of indebtedness
and grant mortgages and other encumbrances on and security interests in
assets of the Company for the benefit of the Company.
(h) Appoint such agents of the Company as the
Operating Member may deem appropriate and delegate to any of them such
authority as the Operating Member may deem appropriate to carry out the
business of the Company.
(i) Employ, engage, hire or otherwise secure the
services of such Persons as may be necessary or advisable for the
proper operation of the Company, including without limitation,
construction contractors, engineers, appraisers, attorneys,
accountants, and real estate and loan brokers, upon such terms as the
Operating Member may deem appropriate.
(j) File any voluntary petition for the Company or
any Subsidiary Company under Title 11 of the United States Code, the
Bankruptcy Act, or seek
31
the protection of any other Federal or State bankruptcy or insolvency
law or debtor relief statute.
(k) Effect a merger, conversion, consolidation or
other reorganization of the Company.
(l) Prepare, execute, acknowledge and file, record,
publish and deliver all instruments or documents necessary or
convenient to effectuate any actions of the Company.
(m) Take any other action permitted or required of
the Operating Member under this Agreement or applicable law.
Section 6.3.2 EMPLOYEES. All persons employed by the Operating
Member in connection with the services to be rendered hereunder shall be
Operating Member's employees, agents or independent contractors and shall not be
the employees, agents or independent contractors of the Company. Operating
Member shall be solely responsible for the salaries of its employees and any
employee benefits, including, without limitation, wages, worker's compensation
benefits, employment and social security taxes and fringe benefits, to which
Operating Member's employees or agents may claim to be entitled. Operating
Member shall indemnify and hold the Class A Member, any AEW Board Member, any
Related Party of the Class A Member or any of their agents, officers, partners,
members, employees, representatives, directors or shareholders from any loss,
claim or damage resulting from the failure of the Operating Member to fully
comply with all applicable laws and regulations having to do with worker's
compensation, social security, unemployment insurance, hours of labor, wages,
working conditions, and other employer-employee related subjects with respect to
Operating Member's employees.
Section 6.3.3 COMPLIANCE WITH GOVERNMENTAL REQUIREMENTS.
During the term of this Agreement, Operating Member shall be responsible for
monitoring whether each Property is in compliance with all Governmental
Requirements applicable thereto and that all applicable governmental and
municipal licenses, permits, consents and approvals are in full force and effect
and shall promptly notify the Class A Member of any known uncorrected material
violation of any such Governmental Requirement.
Section 6.3.4 FEES. Until the occurrence of an Event of
Default or the Closing Date (as defined in Section 8.4.5), Operating Member
shall receive fees hereunder (collectively, the "Fees") in amounts and upon the
terms and conditions as set forth in EXHIBIT G-1 hereto and reimbursement of
certain of its expenses (such reimbursable expenses, the "Reimbursable
Expenses") of an amount that has been Approved upon the terms and conditions and
subject to the exclusions as set forth in EXHIBIT G-2. In no event shall
Operating Member be reimbursed for Excluded Costs as set forth in EXHIBIT G-2.
Notwithstanding anything to the contrary contained herein, after the occurrence
of an Event of Default and for as long as the Operating Member is a Member, the
Operating Member shall be entitled to receive any acquisition fees set forth in
32
paragraph (b) of Exhibit G-1 with respect to any Proposed Investment submitted
by the Operating Member to the Company under this Agreement.
Section 6.4 OTHER BUSINESS ACTIVITIES OF THE MEMBERS.
Section 6.4.1 OPERATING MEMBER; FIRST OPPORTUNITY.
(a) During the Investment Period, the Operating
Member shall not directly or indirectly through an Operating Member
Related Party acquire, develop, rehabilitate or redevelop any Lodging
Facility (other than the Lodging Facilities listed on EXHIBIT I which
are owned by the Operating Member or an Operating Member Related Party
as of the date hereof and which the Members acknowledge are exempt from
the restriction set forth in this Section 6.4.1) without in good faith
first offering such Lodging Facility to the Company pursuant to Article
X. The Operating Member shall offer such Lodging Facility by delivering
a complete set of Preliminary Information as described in Section
10.3.1. If the Class A Member or the Class A Member Board Members
disapprove such acquisition, then the Operating Member or any Operating
Member Related Party may, during the twelve (12) month period
commencing upon the disapproval of such Lodging Facility by the Class A
Member, but subject to the restrictions in Section 6.4.4, proceed to
acquire a direct or indirect interest in such Lodging Facility,
provided that the terms and conditions of acquiring such Lodging
Facility are not more favorable to the Operating Member or such
Operating Member Related Party in any material respect than the
proposed terms and conditions presented to the Class A Member for
approval. In addition, the Operating Member or such Operating Member
Related Party shall reimburse the Company for all Pursuit Costs
incurred by the Company with respect to such Lodging Facility.
(b) Notwithstanding the provisions of Section
6.4.1(a) above, the Class A Member acknowledges that the Operating
Member during the Investment Period may dispose of its interest in the
DoubleTree Hotel Yakima, DoubleTree Hotel ▇▇▇▇▇▇/Springfield,
DoubleTree Hotel Spokane and DoubleTree Hotel Bellevue (each, a
"Disposition Property") and is obligated to substitute one or more
Lodging Facilities in connection therewith and in any event within six
months of the date of such sale (each such substitute Lodging Facility,
a "Substitute Property") and that the restrictions set forth in Section
6.4.1(a) shall not apply to any Substitute Property acquired by the
Operating Member or Operating Member Related Party in connection
therewith and in any event within six months of the date of disposition
of any Disposition Properties. In addition, until such time as the
Class A Member has made Contributions of at least $25,000,000, the
Operating Member or Operating Member Related Party may acquire from a
Third Party not more than one (1) Lodging Facility in connection with
the disposition of a Lodging Facility owned by the Operating Member or
Operating Member Related Party pursuant to a bona fide tax free
exchange permitted pursuant to Section 1031 of the Code (a "1031
Exchange"). After the Class A Member has made Contributions of at least
$25,000,000, the Operating Member or Operating Member
33
Related Party may engage in up to three additional 1031 Exchanges,
provided that prior to each subsequent 1031 Exchange after the first
1031 Exchange permitted after the $25,000,000 threshold has been
achieved, the Company has acquired an additional Lodging Facility. The
restrictions set forth in Section 6.4.1(a) shall not apply to a 1031
Exchange permitted by this Section 6.4.1(b). The Operating Member shall
notify the Class A Member of the identity of the Lodging Facility and
the terms of any 1031 Exchange permitted hereunder prior to the date of
commitment thereof.
Section 6.4.2 GENERAL PROVISIONS. The Class A Member and its
Related Parties shall not be obligated to present any investment opportunity to
the Company, even if the opportunity is of a character consistent with the
Company's other activities and interests. The Class A Member and any of its
Related Parties may engage in or possess any interest, directly or indirectly,
in any other business venture of any nature or description independently or with
others, including but not limited to, the ownership, financing, leasing,
operation, management, syndication, brokerage, or development of real property
competitive with the Properties. Membership in the Company and the assumption by
the Class A Member of any duties hereunder shall be without prejudice to such
Class A Member's rights (or the rights of its Related Parties and other
affiliates) to have such other interests and activities and to receive and enjoy
profits or compensation therefrom, and neither the Company nor the other Members
shall have any right by virtue of this Agreement in and to such ventures or the
income or profits derived therefrom. If the Operating Member (i) lists a Lodging
Facility on the "deal sheet" referenced in Section 10.3 which the Class A Member
indicates in writing should not be pursued as a potential acquisition because
the Class A Member does not anticipate Approving the acquisition of such Lodging
Facility pursuant to Section 10.3; (ii) lists a Lodging Facility on the "deal
sheet" referenced in Section 10.3 and submits a Preliminary Approval Package
within thirty (30) days of being listed on a "deal sheet" and the Class A Member
disapproves such acquisition pursuant to Article X or (iii) proposes a Proposed
Investment pursuant to Article X which the Class A Member disapproves, the Class
A Member agrees not to acquire an interest in such Lodging Facility during the
next twelve month period following such disapproval, unless such interest is
acquired directly or indirectly by Dolce/AEW, L.P., a Delaware limited
partnership, to be used and operated as a conference center hotel.
Section 6.4.3 RELATED PARTY TRANSACTIONS. No Member shall
engage or pay any compensation to any Related Party of a Member for the
provision of services to the Company unless (a) such party is fully qualified
and experienced to provide the required services, (b) both the scope of services
and the compensation payable to such Related Party for the services are
consistent with then current market standards for arms-length transactions, (c)
the Member discloses such engagement to the Board as a transaction with a
Related Party of a Member and (d) such engagement or payment is Approved.
Section 6.4.4 COMPETING INVESTMENTS; RESTRICTED AREA. The
Operating Member shall not directly or indirectly through an Operating Member
Related Party acquire, develop, rehabilitate or redevelop any Competing
Investment unless expressly permitted pursuant to this Section 6.4.4. The
"Restricted Area" shall mean the geographical area surrounding the Property
34
which if a Lodging Facility comparable to the applicable Property were located
therein would be deemed a direct competitor of the Property. The parties
acknowledge that the Restricted Area shall differ with respect to each Property
based on the relevant competitive market, geographic area and type of property
to be acquired by the Company. In connection with the approval of any proposed
acquisition, the Members shall negotiate in good faith to define the Restricted
Area for such acquisition. In the event that the Members are unable to agree on
a Restricted Area for any proposed acquisition, the resolution shall be
submitted to the Market Expert, whose determination of the Restricted Area shall
be conclusive and binding on the Members. During the pendency of any
determination of the definition of the Restricted Area for any proposed
acquisition, the Operating Member shall not directly or indirectly through an
Operating Member Related Party acquire, develop, rehabilitate or redevelop any
Lodging Facility located within the area proposed by the Class A Member to be
the Restricted Area.
During the Investment Period, the Operating Member shall not, directly
or indirectly through an Operating Member Related Party, acquire a Competing
Investment or develop, rehabilitate or redevelop a Lodging Facility or other
real property in a manner which causes such Lodging Facility or other real
property to be a Competing Investment. Notwithstanding the foregoing, a
Competing Investment may be acquired by the Operating Member or Operating Member
Related Party during the Investment Period as part of a transaction involving
the direct or indirect acquisition of three or more Lodging Facilities provided
the Operating Member complies with the provisions of Section 6.4.1 with repect
to offering the Lodging Facilities to the Company and the timing and terms of
the acquisition of such Lodging Facilities by the Operating Member or an
Operating Member Related Party.
After the expiration of the Investment Period, the Operating Member or
an Operating Member Related Party may acquire a Competing Investment or develop,
rehabilitate or redevelop a Lodging Facility or other real property in a manner
which causes such Lodging Facility or other real property to be a Competing
Investment, provided, however, the Operating Member shall give the Class A
Member prior notice of its intention to so acquire a Competing Investment or
develop, rehabilitate or redevelop a Lodging Facility or other real property in
a manner which would cause such Lodging Facility or real property to be a
Competing Investment, which notice shall set forth all material details
reasonably necessary for the Class A Member to assess the impact of such
Competing Investment on any Property and prompt notice after the acquisition of
the Competing Investment or the development, rehabilitation or redevelopment of
the Lodging Facility or other real property to be a Competing Investment,
whether during or after the Investment Period. The Class A Member shall have the
right, by delivering written notice to the Operating Member within twelve (12)
months after receipt of notice of the occurrence of the closing of the
acquisition of the Competing Investment or the completion of development,
rehabilitation or redevelopment of the Lodging Facility or other real property
into a Competing Investment by the Operating Member or any Operating Member
Related Party, to either (x) cause the Company to terminate the Lease with an
Operating Member Related Party with respect to the Property which competes with
the Competing Investment or (y) cause the Company to convey the Property which
competes with the Competing Investment to the Operating Member or a designated
Operating Member Related Party for a purchase price equal to the aggregate
35
Contributions made by the Members with respect to such Property without further
adjustment or proration. If any termination fees are due to an Operating Member
Related Party as a result of a termination of a Lease pursuant to this Section
6.4.4, such fees shall be the sole responsibility of the Operating Member. If
the Class A Member elects to cause the Company to convey the Property which
competes with the Competing Investment to the Operating Member or a designated
Operating Member Related Party, the closing of the sale of such Property shall
be on the date which is thirty (30) days after the Class A Member's election
hereunder. Any Property conveyed by the Company pursuant to this Section 6.4.4
shall be conveyed to the Operating Member or the Operating Member Related Party
subject to any and all easements, liens, restrictions, covenants and matters of
record title and the Operating Member or Operating Member Related Party
acquiring such Property shall acquire the Property subject to all liabilities
with respect to such Property. The Operating Member shall use all commercially
reasonable efforts to obtain for the benefit of the Company and the Class A
Member releases from any and all monetary or other guaranties given by them with
respect to such liabilities. If following the exercise of commercially
reasonable efforts, the Operating Member is unable to obtain such releases, the
Operating Member shall provide to the Company and the Class A Member indemnities
reasonably satisfactory to each to address the contingent liability contained in
the unreleased liabilities.
Section 6.4.5 LEASES.
(a) The Operating Member shall not enter into any
Lease unless the form and substance thereof and the identity of the tenant have
all been Approved.
(b) The Operating Member acknowledges and agrees that
the Class A Member shall have the sole and exclusive right and authority on
behalf of the Company to take any action on the part of the Company with respect
to a Lease with an Operating Member Related Party, including, without limitation
(i) the right to modify, amend or terminate such Lease, (ii) the right to
exercise any right or option on the part of the Company or to grant or withhold
any material consent or approval contained therein, and (iii) the right to
enforce any rights or remedies therein. Any Lease for a Property with an
Operating Member Related Party shall contain the right of the Company to
terminate such Lease without cause for an Approved termination fee.
(c) In the event an Operating Member Related Party is
in default under a Lease and the Class A Member desires to terminate such Lease
and enter into a new Lease for the applicable Property, the Class A Member shall
notify the Operating Member and the Members shall cooperate to identify an
approved replacement tenant for a new Lease for the Property within thirty (30)
days. If the Members are not able to agree on a replacement tenant, then,
notwithstanding the lack of Approval and notwithstanding any provision or
provisions of this Agreement to the contrary, the Class A Member shall have the
right to unilaterally propose and approve on behalf of the Company of one of the
entities listed on EXHIBIT O or any Affiliate thereof as a replacement tenant
and to negotiate and cause the Company (or Subsidiary Company) to enter into a
new lease substantially on the terms and conditions contained in the
36
form of Lease entered into with the Operating Member Related Party; provided
that the Class A Member, in connection with its right to negotiate a Lease
pursuant to this Section 6.4.5, shall have the right to unilaterally propose,
negotiate and approve base rent, percentage rent and other economic terms in the
Lease.
(d) The Operating Member acknowledges and agrees that
the Class A Member shall have the sole and exclusive right and authority on
behalf of the Company to take any action on the part of the Company with respect
to terminating a Lease due to the breach by a tenant (a "Defaulting Tenant") of
a non-compete covenant or clause in such Lease if the breach is the result of
the Defaulting Tenant's involvement with a Competing Investment owned or
operated by the Operating Member or an Operating Member Related Party.
Section 6.5 LIMITATION OF LIABILITY.
Section 6.5.1 EXCULPATORY PROVISIONS. None of the Operating
Member, the Class A Member, any Board Member, any Related Party of any Member or
any Member's agents, officers, partners, members, employees, representatives,
directors or shareholders (each such party, an "Indemnified Party") shall be
liable, responsible or accountable in damages or otherwise to the Company or any
Member for (i) any act performed in good faith within the scope of the authority
conferred by this Agreement, (ii) any failure or refusal to perform any acts
except those required by the terms of this Agreement, or (iii) any performance
or omission to perform any acts in reliance on the advice of accountants or
legal counsel for the Company; provided, however, that each Indemnified Party
shall nevertheless be liable in all events for its own fraud, gross negligence
or willful misconduct.
Section 6.5.2 INDEMNIFICATION. To the fullest extent permitted
by law, the Company shall indemnify and save harmless each Indemnified Party
from any loss, cost, damage, fee (including without limitations, legal fees and
costs) or expense incurred by reason of (i) such party's status as a Member or
Board Member or the Related Party of a Member or such party's status as agent,
officer, partner, member, employee, representative, director or shareholder of
such Member (ii) any act performed in good faith within the scope of the
authority conferred by this Agreement, (iii) any failure or refusal to perform
any acts except those required by the terms of this Agreement or (iv) any
performance or omission to perform any acts based upon reasonable good faith
reliance on the advice of accountants or legal counsel for the Company, provided
that no indemnification shall be given with respect to acts or omissions which
constitute fraud, willful misconduct or gross negligence.
Section 6.5.3 MODIFICATION OF LIABILITY. The Operating Member
expressly agrees that with respect to any approval right granted to the Class A
Member or any AEW Board Member or the exercise of the Right of First Offer
pursuant to Section 8.2 or the Buy-Sell pursuant to Section 8.4 or rights under
Section 6.4.4, the Class A Member and any such AEW Board Member shall have no
fiduciary duty whatsoever to the Operating Member, and the Class A Member and
any such AEW Board Member may grant such approval or refuse to grant such
approval under this Agreement for the sole benefit of the Class A Member, as
determined in its
37
sole discretion. Likewise, the Class A Member expressly agrees that with respect
to any approval right granted to the Operating Member or any Operating Member
Board Member or the exercise of the Right of First Offer pursuant to Section 8.2
or the Buy-Sell pursuant to Section 8.4, the Operating Member and any such
Operating Member Board Member shall have no fiduciary duty whatsoever to the
Class A Member, and the Operating Member and any such Operating Member Board
Member may grant such approval or refuse to grant such approval under this
Agreement for the sole benefit of the Operating Member, as determined in its
sole discretion.
Section 6.5.4 INSURANCE. The Operating Member shall,
consistent with the Portfolio Business Plan, maintain, for the benefit and at
the expense of the Company, such insurance in such amounts, with such carriers
and providing such coverages as satisfy the Insurance Requirements.
Section 6.6 CLASS A MEMBER'S RIGHT TO BECOME THE MANAGING MEMBER.
Notwithstanding anything in this Agreement to the contrary, if there shall exist
an Event of Default by the Operating Member hereunder or a default, beyond any
applicable notice and cure periods by the Operating Member or any Operating
Member Related Party under any Lease, contract or agreement between such party
and the Company or any Subsidiary Company, then, in any such event, the Class A
Member shall have the unilateral right, by written notice to the Operating
Member given at any time thereafter to become the managing member of the Company
and in such capacity, shall have the unilateral decision-making authority and
power to replace the Key Personnel and to take all actions on behalf of and at
the Company's expense permitted or required of a managing member of a Delaware
limited liability company, including, without limitation, all Major Decisions,
without the necessity for obtaining any consent or approval of the Operating
Member, the Operating Member Board Members or the Board. Nothing in this Section
6.6 is intended to permit the Class A Member to unilaterally Approve any
amendment to this Agreement or increase the obligations of the Operating Member
under this Agreement beyond those contained herein or permit the Class A Member
to act as the Operating Member's agent or representative.
ARTICLE VII -- LIABILITIES OF MEMBERS
No Member shall be liable for any debts, liabilities, contracts or
other obligations of the Company nor shall any Member be required to lend funds
to the Company. Except as otherwise specifically required by Article III or by
applicable law, no Member shall be required to make any Contributions to the
Company.
ARTICLE VIII -- TRANSFER OF COMPANY INTEREST
Section 8.1 TRANSFER BY THE MEMBERS.
Section 8.1.1 GENERAL RESTRICTIONS. No Member shall sell,
assign, transfer, mortgage, charge or otherwise encumber, or permit or suffer
any Third Party to sell, assign,
38
transfer, mortgage, charge or otherwise encumber, or contract to do or permit
any of the foregoing, directly or indirectly and whether voluntarily or by
operation by law (collectively referred to as a "Transfer") any part or all of
its interest or membership in the Company except as provided in this Article
VIII. Any attempt to effect any of the foregoing prohibited actions shall be
void and, in addition to other rights and remedies at law and in equity, the
other Member or Members shall be entitled to injunctive relief enjoining the
prohibited action. The Members expressly acknowledge that damages at law would
be an inadequate remedy for a breach or threatened breach of the provisions
concerning transfer set forth in this Agreement. The giving of consent or
approval by the Member required under this Article VIII in any one or more
instances shall not limit or waive the need for such consent or approval in any
other or subsequent instances. Notwithstanding anything in this Article VIII or
this Agreement to the contrary, no Member shall have the right to effect any
Transfer of its interest in the Company if the Transfer, in the opinion of
counsel to the Company, may constitute a violation of any state or federal
securities laws or other applicable laws, rules or regulations.
Section 8.1.2 INDIRECT TRANSFERS. For as long as BLC stock is
listed and publicly traded on a nationally recognized stock exchange, for
purposes of this Section 8.1, (i) the sale, exchange or transfer of stock in BLC
and (ii) the sale, exchange or transfer of partner interests in the Operating
Member shall not be deemed a Transfer subject to the restrictions of this
Section, provided BLC remains the sole general partner of the Operating Member.
The restrictions set forth in this Article VIII shall not be construed to limit
or restrict in any way the (i) Operating Member's or the Special Managing
Member's authority to sell the Company's assets as described and limited in
Section 8.2, (ii) indirect transfers otherwise permitted under this Article
VIII, (iii) transfers of the general partner interest in the Class A Member as a
result of the removal of the general partner of the Class A Member by its
limited partners or (iv) indirect transfers of interest by or in the Class A
Member or its constituent partners or members, as the case may be.
Section 8.1.3 PERMITTED TRANSFERS. Without any requirement for
obtaining Approval, each Member shall have the right to Transfer all or a
portion of its interest in the Company solely (a) if such Transfer is to an
Entity which is owned or controlled by, is under common ownership and control
with or owns and controls the original Member or as to the Class A Member only
is to an Entity in which AEW Capital Management L.P. (including any successor
thereto, including, without limitation, any successor by merger, consolidation
or the sale of all or substantially all of the assets thereof) has the authority
to direct the management, operations or business or (b) as to the Class A Member
only, if the Transfer is (i) to banks, insurance companies, public or private
pension or endowment funds or other institutional lenders or investors, or (ii)
granting a security interest to any such institutional lender or investor as
security for a loan to the Class A Member, or (iii) a transfer due to
foreclosure or other realization on collateral under a security interest
referred to in clause (ii).
Section 8.1.4 CONDITIONS TO SUBSTITUTIONS. An assignee or
transferee of a Member shall not be entitled to vote on Company matters and
shall not have any other rights of a Member other than its right to
distributions, unless and until the assignee is admitted as a
39
substituted Member. Thereafter, subject to the last sentence of this Section,
such assignee shall have all rights and obligations of a Member hereunder. An
assignee or transferee shall become a substituted Member when and if the
assignee or transferee (a) pays all Company expenses incurred in connection with
its substitution; (b) submits a duly executed instrument of assignment and
assumption, in a form reasonably satisfactory to the non-assigning Member,
specifying the membership interest assigned to it and setting forth the
assigning Member's intention that the assignee succeed to such portion of the
assigning Member's membership interest and acknowledging that the assignor or
transferor remains liable for its obligations hereunder; and (c) executes a copy
of this Agreement or an amendment to this Agreement. The admission of a
substituted Member shall be effective as of the close of the day on which all of
the conditions specified in this Section 8.1.4 have been satisfied.
Section 8.2 RIGHT OF FIRST OFFER.
Section 8.2.1 FIRST OFFER. At any time after the first
anniversary of the date of this Agreement and provided the Buy/Sell procedure
under Section 8.4 has not previously been initiated (unless there shall have
been a default under such Buy/Sell procedure and the Buy/Sell is no longer in
effect), if either Member wishes the Company or any Subsidiary Company to sell
any Property or Properties (any such Property or Properties, collectively, the
"Target Asset"), that Member (the "Initiating Member") shall deliver a written
notice (a "First Offer Notice") to the other Member (the "Responding Member")
stating a gross purchase price (the "Offered Price") at which the Initiating
Member is prepared to have the Company (or the applicable Subsidiary Company or
Companies) sell the Target Asset. If the Target Asset is at or after the time of
the First Offer Notice under development or substantial renovation or
rehabilitation, the Offered Price shall be deemed increased on a dollar for
dollar basis by the amount of all costs incurred by the Company to fund such
development, renovation and rehabilitation expenses during the period beginning
on the date of the First Offer Notice and ending on the date of Target Asset
Closing Date. The Responding Member may elect to purchase or to cause its
nominee to purchase the Target Asset for the First Offer Price by (i) giving
written notice thereof to the Initiating Member and (ii) depositing in escrow
with the with the Company the Target Asset Deposit (hereinafter defined), each
within thirty (30) days after receipt of the First Offer Notice (the "Response
Period"); provided, however, the Response Period shall be reduced to fifteen
(15) days in the event a First Offer Notice is given under Section 8.2.7 or in
the event a subsequent First Offer Notice is given by the Initiating Member with
respect to a Target Asset during the six (6) month period described in Section
8.2.9. If the Responding Member duly elects to purchase or to cause its nominee
to purchase the Target Asset as set forth above, the Initiating Member and the
Responding Member shall cause the Company to convey the Target Asset to the
Responding Member or its nominee in accordance with the provisions of this
Section 8.2. The failure of the Responding Member to give such a responsive
notice and/or to deliver the Target Asset Deposit within the Response Period
shall be deemed an election by the Responding Member not to purchase the Target
Asset. During the Response Period, the Responding Member may also elect to issue
its own First Offer Notice with respect to such Target Asset, (a "Subsequent
First Offer Notice"), provided the gross purchase price contained in the
Subsequent First Offer Notice is less than ninety-five percent (95%) of the
gross purchase price contained in
40
the First Offer Notice and upon the issuance of such a Subsequent First Offer
Notice, the previous First Offer Notice shall be deemed null and void and the
Subsequent First Offer Notice shall be operative. A First Offer Notice may only
be issued with respect to a Target Asset by the Responding Member within the
Response Period as set forth above. After the Response Period, the Responding
Member may not issue a First Offer Notice with respect to a Target Asset during
the pendency of the Initiating Member's rights under Section 8.2.9 with respect
to such Target Asset.
Section 8.2.2 TARGET ASSET DEPOSIT; FINANCING COMMITMENT. The
"Target Asset Deposit" shall be an amount equal to One Million Dollars
($1,000,000). The Target Asset Deposit shall be delivered to the Company in
escrow together with the Responding Member's notice of election to purchase the
Target Asset.
Section 8.2.3 CONDITIONS. Each of the following (unless and
except to the extent waived by the Responding Member) shall be a condition to
the Responding Member's obligation to proceed with a purchase under this Section
8.2:
(a) As of the Target Asset Closing Date, the Company
shall have received no notice of any eminent domain proceeding or other
governmental taking of all or any material portion of the Target Asset,
and there shall have occurred no material casualty to the Target Asset,
whether insured or uninsured, which has not been restored, in either
case, and of which the Responding Member was unaware as of the making
of its election to purchase the Target Asset; and
(b) There shall be no suit, action or other
proceeding pending on the Target Asset Closing Date before or by any
court or governmental body seeking to restrain or prohibit, or material
damages or other relief in connection with the sale of the Target
Asset.
For purposes of this Section 8.2.3, (i) a "material casualty" shall
mean a casualty resulting in damage to any Property constituting part of the
Target Asset requiring repairs (as estimated by an engineer reasonably
acceptable to the Class A Member and the Operating Member) costing in excess of
two hundred fifty thousand dollars ($250,000), and (ii) a "material portion"
shall mean the taking by eminent domain of (A) an area of any Property
constituting part of the Target Asset having a material adverse effect upon
access to any Property constituting part of the Target Asset or parking at any
Property constituting part of the Target Asset, (B) any portion of a building
located at any Property constituting part of the Target Asset, or (C) any
portion of any Property constituting part of the Target Asset having a material
adverse impact upon the use of the Target Asset for its intended purposes or its
continued compliance with applicable laws. If there shall occur a casualty or
taking that is not "material," then there shall be no corresponding adjustment
to the Purchase Price and the insurance proceeds for such casualty or the
eminent domain award for such taking shall be assigned to the Responding Member
on the Target Asset Closing Date.
41
Section 8.2.4 ADJUSTMENTS AND CLOSING COSTS. The following
adjustments and prorations shall be made on any sale of the Target Asset to the
Responding Member pursuant to this Section 8.2 (references to the Company shall
be deemed to be made to the respective Subsidiary Company if the Target Asset is
owned by a Subsidiary Company):
(a) The Company shall pay the actual cost of all
transfer taxes and documentary stamps and any prepayment fees due under
any loans coming due, if any, as a result of such sale;
(b) The Responding Member or its nominee shall pay
all title fees, recording costs and if applicable, recording taxes,
loan assumption fees, termination fees under any Leases and all fees
and costs customarily paid by buyers of real property in the state or
states where the Target Asset is located;
(c) Each Member shall pay its own legal fees;
(d) Taxes on the Target Asset shall be prorated
between the Company and the Responding Member, according to the closing
customs of the local real estate bar within which the Target Asset is
located. In the event that real estate taxes are not ordinarily
prorated between a buyer and seller on the basis of the taxes paid for
the most recent fiscal year, with a subsequent re-proration promptly
after issuance of the tax ▇▇▇▇ for the year of the closing ("Customary
Adjustments"), then the Initiating Member shall clearly state in the
First Offer Notice the basis upon which taxes will be adjusted for all
Properties included in the Target Asset. Special assessment liens
certified as of the closing shall be paid by the Company. Collected
rents and other customary closing adjustments shall be adjusted to the
date of closing in a customary manner, provided, however, that in all
events all rental income from the Target Asset accruing prior to the
Target Asset Closing Date shall remain the property of the Company. The
Company shall be responsible for paying management fees, insurance,
debt service and other operating costs through the Target Asset Closing
Date. The Company shall either deliver to the Responding Member, or
give the Responding Member a credit against the Purchase Price for the
amount of any tenant security deposits and other prepaid rent with
respect to the Target Asset. If any rent attributable to the period
prior to the closing is collected after the closing, the Responding
Member shall promptly remit to the Company the amounts so collected;
and
(e) If the Target Asset consists of all or
substantially all of the Properties, then all Default Loans shall
become due and payable on the Target Asset Closing Date and reconciled
at the closing.
Section 8.2.5 INTENTIONALLY DELETED.
Section 8.2.6 CLOSING. The closing on any sale of the Target
Asset to a Member pursuant to this Section 8.2 shall be held on the date sixty
(60) days (or thirty (30) days in the
42
event Section 8.2.7 is applicable) following the date the Responding Member
elects to purchase the Target Asset (or on the first Business Day thereafter if
such date is not a Business Day) or on such earlier date as the Responding
Member may specify on at least fifteen (15) days prior written notice to the
Initiating Member (in either event, the "Target Asset Closing Date"). The
closing shall be held at such location as the Responding Party may reasonably
designate at least five (5) Business Days prior to the Target Asset Closing
Date. The purchase price for the Target Asset (the "Purchase Price") shall be
the Offered Price, subject to adjustment pursuant to Section 8.2.4, if
applicable. At the closing, the Purchase Price shall be payable to the Company
or applicable Subsidiary Company, by wire transfer of immediately available
federal funds. The Target Asset shall be conveyed to the Responding Party or its
nominee subject to then existing title encumbrances other than any Prohibited
Mortgage. A "Prohibited Mortgage" is any mortgage or other lien securing the
payment of money that is not a Permitted Mortgage. A "Permitted Mortgage" means
any mortgage or other lien securing the payment of money if (i) either (A) the
consent of the holder of such mortgage or lien is not required for the transfer
of the Target Asset to the Responding Member or its nominee or (B) the consent
of the holder of such mortgage or lien is required for the transfer of the
Target Asset to the Responding Member or its nominee and such consent has been
obtained, and (ii) if applicable, the Initiating Member has been released from
any personal guaranties or indemnities or other undertakings granted with
respect to such mortgage or lien or in connection with the Target Asset. The
Responding Member may elect, by written notice given to the Initiating Member
not later than thirty (30) days prior to the Target Asset Closing Date, to
purchase the Target Asset subject to any then existing Permitted Mortgage. The
Company shall apply such portion of the Purchase Price as is necessary to
discharge any Prohibited Mortgage (or any Permitted Mortgage not being assumed).
If the Target Asset is conveyed to the Responding Member subject to a Permitted
Mortgage, the purchase price payable to the Company or the appropriate
Subsidiary Company shall be reduced by the amount of principal and interest
owing with respect to such Permitted Mortgage as of the Target Asset Closing
Date. At the closing, the Target Asset Deposit shall be credited towards the
Purchase Price and the Target Asset Deposit shall become the property of the
Company.
Section 8.2.7 RESPONDING MEMBER'S FAILURE TO CLOSE. In the
event the sale of the Target Asset to the Responding Member fails to close on
the Target Asset Closing Date, and such failure to close is a result of a
default by the Responding Member, then in addition to any other rights the
nondefaulting Member may have hereunder, (i) the Target Asset Deposit may be
retained by the Company as liquidated damages, and (ii) the Initiating Member
may elect to sell the Target Asset to a Third Party pursuant to Section 8.2.9.
In addition, in the event the nondefaulting Member issues a new First Offer
Notice with respect to such Target Asset during the twelve month period after
the default by the Responding Member, the Response Period with respect to such
First Offer Notice shall be fifteen (15) days and the closing of the disposition
of the Target Asset to the Responding Member pursuant to Section 8.2.6 shall be
held no later than the date thirty (30) days following the date the Responding
Member elects to purchase the Target Asset (or on the first Business Day
thereafter if such date is not a Business Day).
Section 8.2.8 BROKERAGE. No brokerage fees or commissions
shall be payable by the Company (or any Subsidiary Company) in connection with
any purchase by a Member
43
pursuant to this Section 8.2; and each Member shall indemnify and hold harmless
the Company and the other Member from and against any such claims made based
upon the actions of such Member, including any fees and expenses in defending
any such claims.
Section 8.2.9 SALE TO THIRD PARTY. If the Responding Member
elects not to purchase the Target Asset or is deemed not to have elected to
purchase the Target Asset, or in the event of a sale under this Section 8.2.9
expressly permitted pursuant to Section 8.2.7, the Initiating Member may,
without the further consent of the Responding Member or the Board Members
designated by the Responding Member, cause the Company to sell the Target Asset
to a Third Party on an all cash basis for an "adjusted gross purchase price" of
not less than ninety five percent (95%) of the Offered Price originally proposed
by the Initiating Member (subject to adjustment for development, renovation and
rehabilitation costs as set forth in Section 8.2.1). In connection with a sale
of the Target Asset to a Third Party pursuant to this Section 8.2.9, an
agreement of sale must be entered into within six months following (i) in the
case of an election not to purchase, the date of receipt by the Initiating
Member of written notice from the Responding Member of such election; and (ii)
in the case of a deemed election not to purchase, the end of the Response
Period; and (iii) in the case of a sale to a Third Party pursuant to Section
8.2.7, the original Target Asset Closing Date and the closing must occur within
120 days after the execution of such written contract. For purposes of this
Section 8.2.9, "adjusted gross purchase price" shall mean the gross purchase
price for the Property to be paid by a Third Party purchaser (prior to
calculation of prorations, prepayment fees, and the like) reduced only by any
termination fees under the Lease of the Target Asset which the Company has
agreed to assume as a result of such sale. For example, if the Offered Price for
a Target Asset is $10,000,000, the gross purchase price for the sale of the
Target Asset to a Third Party is $9,800,000 and in connection with the sale of
the Target Asset to such Third Party, the Company has agreed to assume a
termination fee under the Lease of the Target Asset on the Target Asset Closing
Date equal to $250,000, the "adjusted gross purchase price" shall be $9,550,000,
i.e. 95.5% of the Offered Price, then the Initiating Member may cause Company to
sell the Target Asset without the further consent of the Responding Member.
Alternatively, if the Company agrees to assume a lease termination fee of
$400,000, the "adjusted gross purchase price" would be $9,400,000, i.e. 94% of
the Offered Price, and the consent of the Responding Member to such sale would
be required. If the Company fails to sell the Target Asset pursuant to the terms
and conditions set forth above for any reason other than the willful act or
omission of the Responding Member, neither Member shall be entitled to require
the Company to sell the Target Asset without again complying with the provisions
of this Section 8.2.
Section 8.2.10 CLASS A MEMBER AS INITIATING MEMBER. If the
Class A Member is the Initiating Member pursuant to Section 8.2.1, then, solely
for the purpose of consummating the sale of the Target Asset in accordance with
the provisions of Section 8.2.6, 8.2.7 or 8.2.9, the Class A Member shall have
the right, upon five (5) days' written notice given to the Operating Member, to
unilaterally propose and approve itself or a Person of its choosing to be the
interim Managing Member of the Company (the "Special Managing Member") and upon
such unilateral proposal and approval by the Class A Member and in the case of
the designation of another Person to be the Special Managing Member, the
assignment of some or all of the Class A
44
Member's membership interest to the Special Managing Member (which assignment
shall be permitted hereunder without the approval of any Member, including the
Operating Member), the Special Managing Member shall thereafter have the
exclusive power and authority, at any time and from time to time, acting singly,
without the further consent of any other Member, including the Operating Member,
to sell and transfer (a "Disposition") the Target Asset in accordance with
Sections 8.2.6, 8.2.7 or 8.2.9. The Operating Member shall fully cooperate with
the Special Managing Member in the exercise of the rights conferred on the
Special Managing Member hereunder and shall take all action reasonably requested
by the Special Managing Member to consummate the sale of the Target Asset,
including without limitation, confirming the power and authority granted to the
Special Managing Member hereunder. The Operating Member shall not take any
action which would prevent, interfere with or constrain in any way the exercise
of the rights of the Special Managing Member to dispose of the Target Asset. In
furtherance of the Special Managing Member's rights under this Section 8.2.10,
the Special Managing Member shall have full power and authority to take all
action necessary or incidental to effect the Disposition of the Target Asset,
including, without limitation, engaging on behalf of the Company and at the
Company's expense, one or more real estate brokers to market the Target Asset
upon customary market terms and conditions (provided the terms of any such
agreement may not bind the Company after the six month period described in
Section 8.2.9 if the Company fails to enter a purchase and sale agreement within
such period or fails to close on the Target Asset within the 120 day period
described in Section 8.2.9), entering into contracts and agreements, oral or in
writing, executing and delivering deeds and all of the other rights and powers
granted to the Operating Member hereunder to accomplish the foregoing. The
rights of the Special Managing Member with respect to the Disposition of the
Target Asset shall be exclusive and the Operating Member shall not take any
action inconsistent with the foregoing. The Operating Member shall cause the
Company to take any action reasonably necessary to accomplish the foregoing,
including, but not limited to, causing the Company to take all action necessary
or appropriate to accomplish the Disposition of the Target Asset and any action
necessary or appropriate to confirm the rights of the Special Managing Member
hereunder. With respect only to the sale of a Target Asset pursuant to section
8.2, the Special Managing Member shall be entitled to the same rights and have
all of the powers as the Operating Member hereunder, and shall, in connection
with its actions as Special Managing Member, have the fiduciary obligations to
the Company as are imposed upon the Operating Member hereunder. The Operating
Member shall retain its other rights, obligations and powers with respect to the
Company following the appointment of the Special Managing Member. If the
Operating Member is the Initiating Member pursuant to Section 8.2.1, then,
solely for the purpose of consummating the sale of the Target Asset in
accordance with the provisions of Section 8.2.6, 8.2.7 or 8.2.9, the Operating
Member shall have the same powers and authorities as the Special Managing Member
would have had as described above and the Class A Member shall in good faith
cooperate in all reasonable respects to effect the consummation of such sale,
subject to the terms and conditions set forth herein. Nothing in this Section
8.2.10 is intended to modify the provisions of Section 6.4.3.
45
Section 8.2.11 INTERRELATIONSHIP OF BUY-SELL.
(a) An Initiating Member under Section 8.2.1 shall
have no right to give a Buy/Sell Offering Notice during the
Response Period. The Responding Member under Section 8.2.1 may
give a Buy/Sell Offering Notice during the Response Period,
provided however that if the Target Asset as described in the
First Offer Notice consists of all or substantially all of the
Properties, then the Responding Member may give a Buy/Sell
Offering Notice during the Response Period only if the
Proposed Value indicated in the Buy/Sell Offering Notice is
less than ninety percent (90%) of the Offered Price set forth
in the First Offer Notice.
(b) If the Responding Member validly issues a
Buy/Sell Offering Notice during the Response Period, then the
First Offer Notice shall be deemed null and void and the
provisions of Section 8.4 shall control.
(c) If (i) the Responding Member under Section 8.2.1
fails to elect to purchase the Target Asset during the
Response Period and (ii) the Target Asset consists of more
than seventy five percent (75%) of the number of the
Properties, then the Responding Member shall have no right to
give a Buy/Sell Notice during the period beginning on the date
thirty (30) days after the end of the Response Period and
ending on the termination of the six (6) month period
described in Section 8.2.9.
(d) If (i) the Responding Member duly elects to buy
the Target Asset under Section 8.2.1, and (ii) during the
period subsequent to such election but before acquisition of
such Target Asset by the Responding Member either Member gives
a Buy/Sell Offering Notice, then the Responding Member shall
nonetheless have the right and be obligated to acquire the
Property pursuant to this Section 8.2, but the Proposed Value
in the Buy/Sell Offer Notice shall take into account the value
of the Target Asset.
(e) if any Property or Target Asset is under a
binding agreement for sale with a Third Party at the time of
the issuance of a Buy/Sell Offering Notice, the Members agree
to sell such Property or Target Asset pursuant to the terms of
such agreement, but the Proposed Value in the Buy/Sell Offer
Notice shall take into account the value of the Target Asset.
Section 8.3 MEMBERS
Section 8.3.1 TERMINATING EVENT. Upon the occurrence of a
Terminating Event with respect to a Member, the Legal Successor of the Member
shall continue to possess the Member's interest in Company distributions, but
shall possess no rights of approval or decision otherwise attendant to such
interest.
46
Section 8.3.2 WITHDRAWAL BY MEMBERS. Notwithstanding any
provision of the Act to the contrary, no Member may resign, withdraw or withdraw
capital from the Company, except pursuant to a right expressly set forth herein.
Section 8.4 BUY/SELL.
Section 8.4.1 BUY/SELL OFFERING NOTICE. Subject to Section
8.2.11, the operation of this Section 8.4 may be triggered upon written notice
(the "Buy/Sell Offering Notice") by either Member given at any time after the
earlier of (x) the date eighteen (18) months after the date of this Agreement
and (y) the occurrence of a Change in Control, in each case provided that there
is no Event of Default with respect to the Member initiating such notice and the
provisions of this Section 8.4 are not then in effect with respect to a prior
Buy/Sell Offering Notice. Notwithstanding the foregoing, the Operating Member
may issue a Buy/Sell Offering Notice within ten (10) Business Days of its
receipt of a notice from the Class A Member that the Class A Member is
exercising its right to become the managing member of the Company pursuant to
Section 6.6. The Member duly triggering such right shall be the "Initiating
Member" and the other Member shall be the "Responding Member" for the purposes
of this Section 8.4. The Buy/Sell Offering Notice shall set forth an amount
determined by the Initiating Member as the basis for the calculations required
under Section 8.4.3 (the "Proposed Value"), and shall include a calculation of
the Sale Price and the Buy Price, as calculated pursuant to Section 8.4.3. No
Buy/Sell Offering Notice or responsive notice under this Section 8.4 may be
rescinded without the written consent of each of the Members.
Section 8.4.2 VERIFICATION NOTICE. Within twenty (20) days
after the Buy/Sell Offering Notice is received, the Responding Member shall
promptly and in good faith review the same and shall give written notice (the
"Verification Notice") to the Initiating Member identifying errors in
calculating the Buy Price and/or the Sell Price or such other matters as the
Initiating Member may reasonably request in the Buy/Sell Offering Notice to be
verified; provided that the Responding Member shall have no right or obligation
to verify the accuracy of the Proposed Value. If the Responding Member gives a
Verification Notice, which, if correct, would increase the Sale Price or reduce
the Buy Price by more than three percent (3%) in either event, the Initiating
Member shall have the right, within five (5) days after receipt of the
Verification Notice, by written notice to the Responding Member, to withdraw the
Buy/Sell Offering Notice, in which event the parties shall return to the STATUS
QUO ANTE.
Section 8.4.3 RESPONSIVE NOTICE. Unless the Buy/Sell Offering
Notice is withdrawn as set forth above, within 30 days following the date of the
Buy/Sell Offering Notice, the Responding Member shall deliver to the Initiating
Member a responsive notice, without qualification or condition, electing either:
(a) To sell to the Initiating Member the entirety of
the Responding Member's interest in the Company at a price (the "Sale
Price") equal to the amount of cash that would be distributed to the
Responding Member under Section 5.4, if all of the assets of the
Company were sold for cash in the amount of the Proposed Value taking
47
into account the allocations set forth in Article IV which would be
required to be made as a result of such sale and the adjustments
required to be made hereunder; OR
(b) To purchase from the Initiating Member the
entirety of the Initiating Member's interest in the Company at a price
(the "Buy Price") equal to the amount of cash that would be distributed
to the Initiating Member under Section 5.4 if all of the assets of the
Company were sold for cash in the amount of the Proposed Value taking
into account the allocations set forth in Article IV which would be
required to be made as a result of such sale and the adjustments
required to be made hereunder.
The failure of the Responding Member to give such a responsive notice (without
qualification or condition) within the required time period shall be deemed
notice of an election to sell its entire interest under clause (a) above. The
date as of which the Responding Member shall have given notice of its election
(or be deemed to have made an election) shall be the "Buy/Sell Election Date."
In calculating the amount which would be distributed to the applicable
Member under either (a) or (b) above, the parties shall assume that the sum of
$50,000 (or such lesser amount as is then known to be sufficient for such
purposes) shall be deemed set aside for liquidation costs and reserves, and all
Company indebtedness shall be deemed to be retired as of the Closing Date. If
any Company indebtedness becomes due as a result of the closing under this
Section 8.4 or at the time of closing any indebtedness of the Company is prepaid
(any such indebtedness shall be collectively "Accelerated Debt"), then Company
indebtedness shall include all prepayment penalties due on Accelerated Debt as
of the date of closing. Otherwise prepayment penalties on Company indebtedness
shall not be taken into account.
Section 8.4.4 BUY/SELL DEPOSIT. The Member bound to purchase
pursuant to the election referenced in Section 8.4.3 (the "Purchaser," and the
other Member shall be the "Seller") shall be required to make an ▇▇▇▇▇▇▇ money
deposit (the "Buy/Sell Deposit") in an amount equal to One Million Dollars
($1,000,000). The Buy/Sell Deposit shall be delivered in escrow within five (5)
Business Days following the Buy/Sell Election Date, in immediately available
funds, to a national title insurance company reasonably acceptable to Seller,
who shall perform the services of escrow agent. The Buy/Sell Deposit shall be
nonrefundable to the Purchaser (except in the event of a material default of the
Seller in performing its closing obligations pursuant to Section 8.4.5).
Section 8.4.5 CLOSING PROCESS. The Purchaser shall fix a
closing date (the "Closing Date") not later than sixty (60) days following the
Buy/Sell Election Date by notifying the Seller in writing of the Closing Date
not less than ten (10) days prior thereto. The closing shall take place on the
Closing Date at the principal office of the Company or such other location as
the Purchaser shall reasonably designate at least five (5) Business Days prior
to the Closing Date. The purchase price for the Seller's interest shall be paid
in immediately available funds and the Seller shall convey good and marketable
title to its membership interest in the Company to Purchaser or its designee
free and clear of all liens and encumbrances. Each Member agrees to
48
cooperate and to take all actions and execute all documents reasonably necessary
or appropriate to reflect the purchase of the Seller's interest by the
Purchaser. The Operating Member shall in good faith prepare a balance sheet for
the Company as of the date of determination of the Closing Date showing all
items of adjustment described below and such adjustments shall be made as of the
Closing Date. At the closing, the following adjustments shall be made to
Proposed Value as set forth in the Buy/Sell Offering Notice in order to complete
the final calculation of the applicable purchase price due Seller:
(a) There shall also be added to the Proposed Value
(i) the amount of cash and cash equivalents then held by the Company or
any Subsidiary Company (ii) the amount of any cash receivables of the
Company and other tangible liquid assets which are customarily the
subject of adjustment between buyers and sellers of Lodging Facilities
(iii) the aggregate of all Contributions made by the Members during the
period (the "Closing Period") commencing on the date of the Buy/Sell
Offering Notice and ending on the Closing Date and (iv) if any Property
is acquired by the Company or any Subsidiary Company during the Closing
Period, the gross purchase price of such Property; and
(b) There shall be subtracted from the Proposed Value
(i) the amount of any accounts payable and other liabilities of the
Company which are customarily the subject of adjustment between buyers
and sellers of Lodging Facilities and (ii) if any Property is sold by
the Company or any Subsidiary Company during the Closing Period, the
gross sale price of such Property.
The cost of any title insurance policy endorsements desired by the Purchaser
shall be paid by the Purchaser. All other costs shall be borne by the party who
customarily bears such costs. Any risk of casualty, condemnation or loss prior
to the Closing Date shall be borne by Purchaser, who shall succeed to all rights
to insurance proceeds or condemnation awards (and any such casualty or
condemnation proceeds received by the Company after the date of the Buy/Sell
Notice shall not be taken into account in the adjustment of the Proposed Value
set forth above). In no event shall Purchaser be required to repay or to cause
the Company to repay any indebtedness of the Company at such closing.
Notwithstanding anything to the contrary contained in this Section 8.4, it shall
be a condition precedent to Seller's obligation to close on the Closing Date
that Purchaser obtains for the benefit of Seller releases from any and all
monetary or other guaranties (including, without limitation, hazardous
substances indemnities and the like) ("Guaranties") given by Seller to Third
Party lenders. If following the exercise of commercially reasonable efforts the
Purchaser is unable to obtain releases from all Guaranties, then the Purchaser
shall provide to the Seller indemnities reasonably satisfactory to Seller to
address the contingent liability contained in the unreleased Guaranties. All
adjustments to Proposed Value shall be made on the basis of good faith estimates
of the Members using currently available information, and final adjustment shall
be made promptly after precise figures are determined or available, and in any
event within thirty (30) days after the Closing Date. In addition, on the
Closing Date or on any other date when a Member is transferring its entire
interest in the Company to the other Member or a Related Party of the other
Member, all Default Loans made
49
by the Purchaser on the Seller's behalf shall be repaid in full from the sale
proceeds otherwise payable to the Seller and all Default Loans made by the
Seller on the Purchaser's behalf shall be repaid in full by adding the amount
thereof to the sale proceeds otherwise due the Seller.
Section 8.4.6 INTENTIONALLY DELETED.
Section 8.4.7 FAILURE TO CLOSE. If the Purchaser fails to
perform its obligations under this Section 8.4 (following such failure, the
"Defaulting Purchaser"), the Seller, in addition to its other rights hereunder,
is entitled to retain the Deposit, and shall have the additional right to
purchase the interest of the Defaulting Purchaser for a price equal to ninety
percent (90%) of the amount the Defaulting Purchaser would have received
pursuant to Section 8.4.2 had it been the Seller rather than the Purchaser, and
subject to the same adjustments as set forth herein, upon written notice to the
Purchaser given within thirty (30) days after the originally scheduled Closing
Date. If the Seller elects to purchase the interest of the Defaulting Purchaser,
Seller shall deposit the Buy/Sell Deposit in escrow within five (5) business
days following its notice to elect to purchase the interest of the Defaulting
Purchaser, the closing of such purchase shall take place in accordance with the
provisions hereof, except that the Closing Date shall be not later than ninety
(90) days following the date on which the notice electing such purchase is
given. If the Seller shall fail to perform its obligations under this Section
8.4, the Purchaser shall have all rights and remedies available to it hereunder
or at law or equity, including, without limitation, the right to seek specific
performance. The Defaulting Purchaser shall lose the right to give a Buy/Sell
Offering Notice for a period of twelve months after the date such Defaulting
Purchaser failed to perform its obligations under this Section 8.4.
Section 8.5 EFFECT UPON TRANSFEREES. Following any Transfer of the
interest or membership of any Member effective under this Agreement, the
provisions of this Article VIII shall be binding upon such transferee Member.
Any transferee of such interest who is admitted as a successor Member shall
enjoy fully the benefits and be subject to the burdens of such provisions.
Section 8.6 QUALIFIED ORGANIZATIONS. The Operating Member hereby
represents and covenants that it is not and will not become (for so long as
it is a Member in the Company) a Qualified Organization and, further, that so
long as the Operating Member is classified as a partnership for federal
income tax purposes, no equity interest in the Operating Member will be held
directly, or indirectly through one or more entities taxed as partnerships or
disregarded for federal income tax purposes, by a Qualified Organization. In
addition to the restrictions on transfer set forth in this Article VIII, the
Operating Member further represents and covenants that it will not transfer
or assign or permit the transfer or assignment of all or any portion of its
interest as a Member, or of any direct or indirect interest in itself (other
than pursuant to this Agreement or any instrument entered into pursuant to
this Agreement), that would result in the direct or indirect or beneficial
ownership by a Qualified Organization of any interest in the Company held or
formerly held by or through such Member; PROVIDED, HOWEVER, that a Qualified
Organization may own an indirect interest in the Company through a taxable
corporation or a REIT. If the Operating Member or any of the holders of
interests in the Operating Member fails
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to comply with the requirements of this Section 8.6, or breach any of the
representations and covenants made in connection therewith, and such failure or
breach causes or contributes to the failure of the Company to comply with the
requirements of Code Section 514(c)(9)(E) and the Treasury Regulations
promulgated thereunder, said Operating Member or holder shall be liable to the
Company, to the Class A Member and to any direct or indirect investors in the
Class A Member for any damages resulting directly or indirectly therefrom,
including but not limited to any unrelated business income tax incurred by the
Class A Member (and its constituent partners) with respect to its investment in
the Company.
ARTICLE IX -- OPERATING MEMBER'S OBLIGATIONS FOR REPORTING, RECORDS
AND ACCOUNTING MATTERS
Section 9.1 FISCAL YEAR. Except as provided by the Code, the fiscal
year and the taxable year of the Company shall be the calendar year.
Section 9.2 BANK ACCOUNTS.
(a) The Operating Member shall deposit or cause each
Subsidiary Company to deposit all cash balances derived from rents or
occupancy payments or otherwise arising from ownership of a Property,
in one or more bank accounts established in the name of the Company or
the applicable Subsidiary Company by the Operating Member (each a
"Property Account"). Each such Property Account shall be in the name of
the Company or the applicable Subsidiary Company. In no event shall any
Property Account be co-mingled with any accounts of any other party.
The Property Account shall be deposited in such depository institution
under such arrangements as the Operating Member may determine. Any
investment of funds shall be made in the name of the Company or the
applicable Subsidiary Company and shall be consistent with investment
guidelines stated in the Approved Portfolio Business Plan (as
hereinafter defined). At the request of the Class A Member, the
Operating Member shall cause all such funds received to be transferred
into a master account of the Company (the "Master Account"), subject to
sufficient funds being reserved in any Property Account to pay for all
contemplated expenses of the corresponding Property.
(b) In connection with the development, construction
or reconstruction of a Project, the Operating Member shall establish a
separate interest-bearing bank account (each a "Development Account")
for the Project in the name of the Company. To the extent that a
Project is funded by a Mortgage Loan, any disbursements requested by
the Company shall be deposited directly in the applicable Development
Account. Any Contributions made in accordance with Section 3.1 for a
Project shall also be deposited in the applicable Development Account.
In no event shall a Development Account be commingled with any account
of the Operating Member. The Operating Member shall not change any
depository institution or depository arrangement without the approval
of the Board, which approval shall not be unreasonably withheld or
delayed.
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(c) Through the use of signature cards, authorized
representatives of the Class A Member shall have access to all Property
Accounts and the Master Accounts and the contents thereof. The Class A
Member agrees not to draw against any Property Account and Master
Account until there is an Event of Default with respect to the
Operating Member, shall only draw upon any Property Account and Master
Account in accordance with the terms of this Agreement and shall
promptly give the Operating Member notice if it draws upon any Property
Account or Master Account. Upon an Event of Default with respect to the
Operating Member, the Operating Member's authority to draw against any
Master Account may be suspended or terminated by the Class A Member, in
which event the Class A Member and the Operating Member shall establish
an alternative method of paying obligations of the Company.
(d) The Operating Member shall have fiduciary
responsibility for the safekeeping and use of all funds and assets of
the Company and each Subsidiary Company. The funds of the Company and
of any Subsidiary Company shall not be commingled with the funds of any
other Person and the Operating Member shall not employ such funds in
any manner except for the benefit of the Company or the Subsidiary
Company.
Section 9.3 MAINTENANCE OF RECORDS.
(a) The Operating Member shall maintain and develop
on a current basis a uniform system of accounts and document filing
system with respect to the Company, each Subsidiary Company and each
Property. All such records shall be maintained at a principal office of
the Company.
(b) The Operating Member shall maintain files related
to the Properties in a good and orderly fashion, all such files being
the sole property of the Company or the applicable Subsidiary Company,
including, but not limited to, the following to the extent the same are
delivered to the Operating Member upon acquisition of the applicable
Properties or delivered to or generated by the Operating Member during
the term of this Agreement, to wit:
(i) Occupancy files, including executed
leases, or residency agreements and amendments thereto,
correspondence, and current rent roll;
(ii) Maintenance and repair files;
(iii) Accounting books and records and
supporting documentation;
(iv) Construction files, competitive bid
records, including site plans, construction drawings, as-built
drawings, plans, construction specifications,
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capital improvements schedules and information, construction
contracts, architects agreements, engineering contracts and
subcontracts;
(v) Operation files, including HVAC
maintenance schedules, warranties, and operation manuals;
(vi) Service contracts, including
cleaning, maintenance, landscaping, snow removal, trash
removal, etc.;
(vii) Permits, licenses and certifications
from governmental authorities;
(viii) Copies of insurance policies or
certificates; and
(ix) Such other Property information as
the Class A Member reasonably requests from time to time.
(c) The Class A Member may, at its expense, from time
to time audit such of the books, records and internal systems and
procedures of the Operating Member as may be necessary or appropriate
to ascertain the appropriateness and reasonableness of the allocations
and internal audit procedures of the Operating Member as they relate to
the Company or any Subsidiary Company.
Section 9.4 CERTAIN RECORDS. The Operating Member shall cause the
Company to keep a complete set of books of account which fully and accurately
reflect all transactions of the Company and each Subsidiary Company. The
Operating Member shall keep at the principal office of the Company a current
list of the full name and last known business or residence address of each
Member and each Board Member, a copy of the LLC Certificate and all
certificates of amendment to any of them, together with executed copies of
any powers of attorney pursuant to which any of the certificates or any
amendments have been executed, copies of the Company's federal, state and
local income tax or information returns and reports, if any, for the six most
recent taxable years, copies of this Agreement and any amendments thereto,
copies of any and all financial statements of the Company for the six most
recent fiscal years, and the books and records of the Company as they relate
to the internal affairs of the Company for at least the current and past four
fiscal years, if any, including calculations of capital accounts and Total
Returns and, for purposes of satisfying the request of an appraiser, a true
copy of business records relevant to the amount, cost and value of all
property owned, claimed, possessed or controlled by the Company. All of the
Company's books of account shall be maintained in accordance with generally
accepted accounting principles (including, but not limited to being prepared
in accordance with the Uniform System of Accounting for Hotels) consistently
applied. The Operating Member shall perform all such tasks, as applicable,
with respect to the Subsidiary Companies in the same fashion as for the
Company. Each Member has the right, upon reasonable request, to inspect and
copy during normal business hours any of the Company's books and records.
53
Section 9.5 REQUIRED REPORTS. The Operating Member shall promptly
deliver to the Class A Member, at the Company's expense, a copy of this
Agreement as in effect from time to time, and any amendments thereto and,
upon request, shall so deliver any additional documents or information
required by the Act or reasonably requested by a Member. The Operating Member
shall furnish or arrange to be furnished to the Board reports prepared for
the Company in accordance with the reporting requirements set forth in
EXHIBIT H.
Section 9.5.1 PORTFOLIO BUSINESS PLAN. On or before thirty
days after the date of this Agreement with respect to calendar year 1999 and on
or before December 1 of each subsequent calendar year during the term hereof,
the Operating Member shall prepare and submit to the Class A Member, a proposed
portfolio business and management plan, together with the Pursuit Cost Budget.
The Operating Member shall meet with the Class A Member to discuss the proposed
portfolio business plan, shall furnish promptly any additional information or
explanations requested by the Class A Member and shall modify any proposed
portfolio business plan as agreed between the Members. Such portfolio plan, or
any modified version thereof, when approved in writing by the Class A Member,
shall be referred to as the "Portfolio Business Plan." The Portfolio Business
Plan shall be in the form and contain such information as is required by the
terms of EXHIBIT H-1. The Portfolio Business Plan shall be supplemented or
modified as necessary from time to time, at least quarterly but also within
thirty (30) days after the acquisition or sale or financing of a Property. With
respect to each Property, the Operating Member shall use all commercially
reasonable efforts to implement the Portfolio Business Plan. Any material
changes to or material deviations from the Portfolio Business Plan shall require
Approval.
Section 9.5.2 ASSET BUSINESS PLANS.
(a) As part of the materials submitted to the Board
prior to the Board's final approval of the closing of the acquisition
and/or development of any Property pursuant to Article X below and on
or before December 1st of each year during the term hereof for the
calendar year beginning on the next following January 1st, the
Operating Member shall prepare and submit to the Board an asset
business plan for such Property in accordance with the requirements set
forth on EXHIBIT H-2. Each such plan, or any modified version thereof,
when approved in writing by the Board, shall be referred to as an
"Asset Business Plan." The Board shall either approve in writing each
Asset Business Plan or provide comments to the Operating Member either
orally or in writing or both. The Operating Member shall meet with the
Board to discuss the proposed Asset Business Plan, and shall furnish
promptly any additional information or explanations requested by the
Board and shall modify any proposed asset business plan in accordance
with the Board's comments or directions. To the extent necessary, the
Operating Member shall be required to submit to the Board an updated
Asset Business Plan with respect to any such Property no more
frequently than quarterly during each year of the term hereof, but in
any event, within thirty (30) days after any Authorized Financing on
any Property.
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(b) The Operating Member shall use all commercially
reasonable efforts to implement and comply with the approved Asset
Business Plan. Unless and until a current Asset Business Plan is
Approved, however, the Operating Member shall comply with the
requirements of Section 9.5.9. Any material changes to or material
deviations from the Asset Business Plan shall require Approval. In
addition to complying with the foregoing requirements, the Operating
Member shall prepare and propose for Approval such revisions and
updates to the Asset Business Plan as may either be requested from time
to time by the Board, Class A Member or as the Operating Member may
otherwise deem appropriate.
Section 9.5.3 ANNUAL BUDGETS.
(a) As part of each Asset Business Plan, the
Operating Member shall prepare and submit to the Board for the Board's
approval each year a detailed budget for each Property in the form and
containing the information as is required by the terms of EXHIBIT H-2
or in the alternative deliver to the Board budgets prepared by tenants
under the Leases which satisfy the requirements of EXHIBIT H-2. The
Operating Member shall review proposed budgets prepared by tenants
under Leases and shall forward such proposed budgets when received for
the Class A Member's review and in any event prior to December 1 of
each year. The Members shall thereafter work together to review the
budgets and coordinate discussions with each tenant under a Lease to
finalize such budgets.
(b) The Operating Member shall use all commercially
reasonable efforts to avoid (or cause a tenant under a Lease to avoid)
causing the actual costs of operation and management of any Property to
exceed the applicable Approved Budget either in total or in any one
accounting category. The Operating Member shall secure prior Approval
before expending, obligating the Company for or approving any
expenditure in connection with the operation and management of any
Property that would result in a budget line item or category being
exceeded by at least the greater of: (a) $15,000, or (b) ten percent
(10%) or more in that category of the applicable Approved Budget,
PROVIDED, HOWEVER, that where emergency action is necessary to prevent
imminent risk to health and safety, imminent property damage, or
imminent imposition of criminal or civil sanctions against the Company
or any Member, the Operating Member may make, or cause to be made,
expenditures not contemplated by the Approved Budget IF (A) any
expenditure made without the Board's consent is, in the Operating
Member's good faith judgment, reasonable under the circumstances and
(B) the Operating Member endeavors diligently and in good faith (1) to
notify the Class A Member of any such emergency and (2) obtain verbal
approval for any required expenditure. Notwithstanding the above, the
Operating Member may make or cause to be made an expenditure in excess
of the corresponding amount in the Approved Budget which is (a) paid
for real estate taxes, utility costs, insurance premiums or other like
nondiscretionary expenses and over which the Operating Member has no
reasonable control (each a "Nondiscretionary Expense"), or (b) incurred
pursuant to and in accordance with any contract or agreement
55
theretofore entered into by or on behalf of the Company that is either
permitted hereunder or otherwise Approved. Except as specifically
provided herein, all expenses must be charged to the proper accounting
category as specified in the Approved Schedule of Accounts and no
expense may be classified or reclassified for the purpose of avoiding
an excess in the annual budgeted amount of any accounting category.
(c) In the case of any Property involving renovation
or construction, the Operating Member shall prepare a construction
budget based on the projected construction costs of the applicable
project (when approved in writing by the Board, the "CONSTRUCTION
BUDGET"), including, without limitation all so-called "hard" and "soft"
costs and other capital requirements. The Construction Budget shall
include the estimated timing and amount of all projected construction
expenses and shall be accompanied by a construction and development
status report containing a cost-savings analysis, a description of any
change-orders and a summary of any deviations of the proposed
construction budget from the then existing Construction Budget and
original Construction Budget. The Operating Member shall update such
Construction Budget for each such project as needed from time to time,
for Approval.
(d) The Operating Member shall use all commercially
reasonable efforts to avoid (or cause tenant under a Lease to avoid)
causing the actual costs of development and construction of any such
construction project to exceed the Approved Construction Budget, either
in total or any one accounting category. The Operating Member shall
notify the Board in each instance that the Operating Member moves funds
from the "contingency" line item of the Approved Construction Budget to
any other line item in any Approved Construction Budget. The Class A
Member acknowledges that it will not object to contingency line items
which are less than five percent (5%) of the aggregate costs contained
in an Approved Construction Budget. In addition, the Operating Member
shall obtain Approval in advance of authorizing the General Contractor
to incur costs that the General Contractor proposes to be charged to
the line item of the Approved Construction Budget which would exceed
the greater of Twenty Five Thousand Dollars ($25,000) in any one
instance, or (ii) five percent of the amount of the "contingency" line
item of the Approved Construction Budget. The Operating Member shall
obtain Approval before expending, obligating the Company for or
approving any expenditure in connection with the construction and
development of any Property in excess of amounts provided for in the
applicable Approved Construction Budget. Any material change in
materials, systems or quality of components shall be promptly explained
to the Board by the Operating Member as part of the Operating Member's
monthly reporting pursuant to Section 9.5.4 below.
(e) The Operating Member shall further prepare and
propose for Approval, from time to time, but no more often than
quarterly, such additional revisions to the Approved Budgets as may
reasonably be required to reflect changes in costs or expenditures in
redevelopment and management of the Properties.
56
Section 9.5.4 MONTHLY REPORTS. The Operating Member shall
prepare monthly reports ("Monthly Statements") of all transactions occurring
during such month to be furnished to the Board with respect to each Property AND
a report for all Properties on a consolidated and consolidating basis, in each
case within twenty (20) days after the end of each calendar month during the
term of this Agreement. The Monthly Statement shall be designed so as to clearly
and efficiently communicate to the Board relevant information compiled on an
asset by asset basis, and on a consolidated, overall portfolio basis. The
general requirements for all Monthly Statements and other financial reports are
set forth in EXHIBIT H-3 attached hereto.
Section 9.5.5 ANNUAL REPORTS. Within sixty (60) days after the
end of each calendar year during the term of this Agreement (and within sixty
(60) days after the date of termination of this Agreement, if such termination
does not occur on and as of the last day of a calendar year), the Operating
Member shall, if so requested by the Class A Member, arrange for and furnish to
the Class A Member annual audited financial statements for such (full or
partial) calendar year accurately reflecting the financial condition and the
results of operation of each Property individually and of all of the Properties
on a consolidated and consolidating basis (the "Audited Annual Report"), all
prepared and certified by the Accountants in accordance with generally accepted
accounting principles, consistently applied, and the applicable provisions of
this Agreement. If the Accountants are unable to prepare and deliver to the
Class A Member the Audited Annual Reports within sixty (60) days following the
end of the respective calendar year, then, within such sixty (60) day period,
(i) the Operating Member shall deliver to the Class A Member the unaudited
financial statements of the Company for such (full or partial) calendar year,
and (ii) the Accountants shall provide a written statement to the Class A Member
stating that, based upon their review of the financial statements delivered
pursuant to clause (i) and to the best of their knowledge and belief, the
Audited Annual Report when delivered will not indicate any adverse changes from
the financial statements delivered pursuant to clause (i). In any event, the
Operating Member shall cause the Audited Annual Report to be delivered to the
Class A Member not later than ninety (90) days following the end of the
respective calendar year. The Audited Annual Report shall be accompanied by a
compliance letter prepared by the Accountants or other party agreed upon by the
Operating Member and the Class A Member indicating that the Operating Member is
in compliance with its reporting requirements under this Agreement. The Class A
Member shall have the unilateral right to appoint, on behalf of the Company, the
Accountants to perform such audit.
Section 9.5.6 TAX RETURNS. The Operating Member shall prepare
or cause to be prepared drafts of all tax returns required of the Company. The
Operating Member shall submit drafts of all tax returns (including all schedules
and exhibits thereto and upon request, copies of all supporting workpapers),
together with a request to the Board for its consent at least thirty (30) days
prior to the required filing date thereof. The Operating Member shall file or
cause to be filed all such tax returns required of the Company once Approved.
Any decisions regarding or affecting the reporting or characterization for tax
purposes of items of Company income, gain, loss or deduction including, but not
limited to, whether to make any available election pursuant to the Code and the
regulations which will materially affect the taxation of the Class A Member or
any of its constituent partners shall require Approval. The Class A Member shall
have the
57
unilateral right to appoint, on behalf of the Company, the Accountants to
perform the annual tax audit.
Section 9.5.7 GENERAL REQUIREMENTS. The Class A Member may
from time to time, reasonably modify, supplement or amend the reporting
requirements of this Agreement in its reasonable discretion, and the Operating
Member shall supply such additional information as the Class A Member may
reasonably request, provided that the Company shall reimburse the Operating
Member for its costs incurred in connection with any material increase in
reporting requirements. In addition, the following general requirements shall
apply to all financial reports required under this Agreement: all such reports
shall be prepared typed or computer-generated on forms reasonably acceptable to
the Class A Member and shall include all detail required by the Approved
Schedule of Accounts; the Operating Member shall use commercially reasonable
efforts to maintain electronically, in format reasonably acceptable to the Class
A Member, all financial and operating information, in order to enable the Class
A Member to maintain its core data base and shall cooperate with the Class A
Member to make such data available to the Class A Member in a manner mutually
acceptable to the parties hereto; all statements and reports shall be prepared
on an accrual basis in accordance with generally accepted accounting principles,
except as otherwise required hereunder; and all such reports shall be certified
as true and correct to the best knowledge of the Operating Member. Each
financial report shall include comparisons of actual results for the period to
previously forecasted results in the Final Approval Package and the Asset
Business Plans, each on a consolidated and a consolidating basis. The Operating
Member shall cooperate with the Class A Member's accountants in the preparation
of the Class A Member's annual financial statements and with the institution and
maintenance of an on-line, accounting system mutually acceptable to the parties
hereto.
Section 9.5.8 SUPPORTING DOCUMENTATION. As additional support
to required reporting information under this Agreement, the Operating Member, at
the Class A Member's reasonable request shall provide (or cause tenants under
Leases to provide) copies of (a) detailed cash receipts and disbursement
records, (b) general ledger listing and journal entries, (c) copies of invoices
for capital expenditures and nonrecurring items, (d) summaries of adjusting
journal entries, (e) copies of all paid bills and (f) such other supporting
documentation as the Class A Member may reasonably require.
Section 9.5.9 FAILURE TO APPROVE; BUDGET IMPASSE. In the event
Approval is not obtained with respect to any proposed Portfolio Business Plan,
Asset Business Plan, Annual Budget or Construction Budget prior to the intended
period for such plan or budget, then a "Budget Impasse" shall be deemed to
exist, until such time as such plan or budget is Approved. During any Budget
Impasse, the Operating Member shall operate and cause to be operated the
Company, each Subsidiary Company and each Property in accordance with the most
recently Approved Budget, except that the Operating Member may make or cause to
be made any expenditure not contemplated by the Approved Budget which is (a) a
Nondiscretionary Expense or (b) incurred pursuant to and in accordance with any
contract or agreement that was entered into prior to the commencement of such
Budget Impasse by or on behalf of the Company (to the
58
extent such contract or agreement was Approved pursuant to an Approved Budget or
following review by the Class A Member).
Section 9.6 QUARTERLY PRESENTATIONS. Not less than once each calendar
quarter the Operating Member shall make a presentation to the Board detailing
the status of each Property and performance of the Operating Member's duties
hereunder at such locations as may from time to time be designated by the Board.
Section 9.7 OTHER DISCLOSURES. The Operating Member shall keep the
Class A Member informed of any material fact, information, projection,
litigation, employee relations or other matter of which the Operating Member has
knowledge which could reasonably be expected to have a material impact on the
operations or financial position of any Property or the Company. The Operating
Member shall provide any and all material information relating to the Property
or the management or operation thereof as the Class A Member may reasonably
request from time to time.
Section 9.8 CLASS A MEMBER AS TAX MATTERS PARTNER. The Class A Member
is designated the tax matters partner of the Company as provided in Section
6231(a)(7) of the Code and corresponding provisions of applicable state law.
This designation is effective only for the purpose of activities performed
pursuant to the Code, corresponding provisions of applicable state law and under
this Agreement. The Class A Member shall inform the Members of any material
decisions or actions taken by the Class A Member as the tax matters partner. The
Company may, subject to Approval, make an election pursuant to Section 754 of
the Code and the regulations thereunder (and a corresponding election under the
applicable sections of state and local law).
Section 9.9 TAXATION AS A PARTNERSHIP. It is the intent of the Company
and its Members that the Company be treated as a partnership for income tax
purposes, and the terms of this Agreement shall be construed so as to accomplish
that goal, and the Members will use their best efforts to cause the Company to
be so treated.
Section 9.10 COSTS PAYABLE FROM MASTER AND PROPERTY ACCOUNTS. With
respect to each Property, the Operating Member shall, to the extent of available
funds, pay directly from the applicable Property Account, all Approved costs
incurred in connection with the acquisition, development, redevelopment,
management, servicing and disposition of the applicable Property.
Pre-acquisition expenses associated with any Proposed Investment which the
Company is contemplating purchasing or developing pursuant to this Agreement
shall be paid directly from the Master Account to the extent such expenses are
within the Portfolio Business Plan or have been approved by the Board under this
Agreement.
Section 9.11 YEAR 2000 ISSUES. The Operating Member shall use all
commercially reasonable efforts to assure that all tenants under Leases comply
with the so called "Year 2000" covenants set forth in the Leases.
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ARTICLE X - ACQUISITION AND DEVELOPMENT OF PROPERTIES
Section 10.1 EXCLUSIVE OBLIGATION. During the Investment Period, the
Operating Member shall use all commercially reasonable efforts to locate and
propose investment opportunities with respect to Lodging Facilities within
the Target Market which satisfy the Investment Guidelines. If approved by the
Board, any proposed acquisition (or any direct or indirect ownership interest
therein) shall be acquired by the Company at a cost and in accordance with
the provisions of this Agreement and the appropriate form of purchase and
sale agreement.
Section 10.2 INVESTMENT PERIOD. The Operating Member shall be
obligated to use all commercially reasonable efforts to seek, identify and
offer Lodging Facilities which satisfy the Investment Guidelines for
potential acquisition to the Company for a period (the "Investment Period")
commencing on the date hereof and expiring upon the earlier of: (a) the date
on which the sum of Initial Capital contributed by each Member plus the
amount of Committed Contributions then in effect equals or exceeds the sum of
each Member's respective Capital Contributions Cap then in effect); (b) the
date two (2) years after the date of this Agreement or (c) the date of the
sale or assignment of fifty one percent (51%) or more of the Class A Member's
interest in the Company to an institutional lender or investor described in
Section 8.1.3(b) which is not otherwise an Entity described in Section
8.1.3(a). The Investment Period unless terminated under (c) above shall
automatically be extended in the event that the Class A Member gives a Cap
Increase Notice pursuant to Section 3.7(a). In such event, the Investment
Period shall be extended until the earlier of (i) the date on which the sum
of Initial Capital contributed by each Member plus the amount of Committed
Contributions then in effect equal the sum of each Member's respective
Capital Contributions Cap then in effect (as increased) if the Operating
Member elects (or is deemed to have elected) to increase the Capital
Contribution Cap pursuant to Section 3.7; (ii) the date twelve (12) months
after the date that the Operating Member notifies the Class A Member in
writing that it disapproves an increase in the Capital Contribution Cap
pursuant to Section 3.7(a); (iii) the date of the sale or assignment of fifty
one percent (51%) or more of the Class A Member's interest in the Company to
an institutional lender or investor described in Section 8.1.3(b) which is
not otherwise an Entity described in Section 8.1.3(a); (iv) the date thirty
six (36) months after the date of this Agreement or (v) the date the Class A
Member gives the Operating Member notice that it is terminating the
Investment Period. Notwithstanding the above, if as of the first anniversary
of the date of this Agreement, the sum of Initial Capital contributed by each
Member plus the amount of Committed Contributions then in effect equals less
than $26,666,667, the Operating Member may elect within the thirty (30) day
period following the first anniversary of this Agreement to notify the Class
A Member that it is terminating the Investment Period, in which event the
Investment Period shall terminate as of the date of that election. In
addition, if the Operating Member has approved an increase in the Capital
Contribution Caps of the Members pursuant to Section 3.7(a) and as of the
first anniversary of the date of receipt by the Class A Member of the notice
from the Operating Member acknowledging such approval, the sum of Expansion
Capital contributed by the Members and the amount of Committed Contributions
then in effect to advance capital that would be classified as Expansion
Capital is less than forty percent (40%) of the Expansion
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Capital approved by the Operating Member, the Operating Member may elect within
the thirty (30) day period following such first anniversary to notify the Class
A Member that it is terminating the Investment Period in which event the
Investment Period shall terminate as of the date of that election, provided such
termination date shall never be earlier than the date twenty four (24) months
after the date of this Agreement. Each Member's Proportionate Share of any
Committed Contributions outstanding as of the expiration of the Investment
Period shall be deemed contributed as of the date of the expiration of the
Investment Period and shall be contributed by each Member within ten (10) days
after the termination of the Investment Period.
Section 10.3 PROPOSED ACQUISITIONS. In connection with the
obligations of the Operating Member under this Article, the Operating Member
shall furnish to the Class A Member, not less frequently than once per month,
an updated "deal list," in such detail as the Class A Member may reasonably
require, identifying all potential acquisitions and assessing the likelihood
of completion thereof. Each "deal list" shall have three boxes next to each
listed Lodging Facility enabling the Class A Member to indicate whether such
Lodging Facility (i) should continue to be pursued as a potential acquisition
by the Company; (ii) should not be pursued as a potential acquisition because
the Class A Member does not anticipate approving the acquisition of such
Lodging Facility pursuant to Section 10.3, or (iii) should not be pursued as
a potential acquisition because the Class A Member is already contemplating
pursuing the acquisition of such Lodging Facility without offering such
opportunity to the Company. The Class A Member shall use diligent efforts to
respond to each "deal list" within ten (10) days of receipt.
Section 10.3.1 PRELIMINARY APPROVAL PACKAGE.
(a) When the Operating Member identifies a Lodging
Facility which the Operating Member intends to recommend for purchase
consideration by the Company, the Operating Member shall prepare and
submit to the Class A Member a package of information in such form as
the Class A Member may from time to time reasonably approve, with
respect to such Lodging Facility, which shall include, but not be
limited to, the information set forth in EXHIBIT J-1 (collectively, the
"Preliminary Information").
(b) To the extent that the Operating Member
recommends that the Company execute a letter of intent, the Operating
Member shall endeavor to cause the same to follow substantially a form
of the letter of intent approved by the Class A Member incorporated
into the Portfolio Business Plan upon such approval. Any letter of
intent shall be in the name of the Company or an appropriate Subsidiary
Company. Although not required as a part of the Preliminary
Information, the Operating Member shall also deliver with the
Preliminary Information such portions of the Final Approval Package as
are then available to the Operating Member. The Operating Member may
also seek Approval, prior to receiving conditional approval of the
Preliminary Information, to enter into a Purchase and Sale Agreement on
behalf of the Company or a Subsidiary Company for such proposed
acquisition if the Operating Member reasonably determines that prompt
execution of a Purchase and Sale Agreement is necessary in order
61
to obtain the right to acquire the proposed acquisition, PROVIDED,
however, that any such Purchase and Sale Agreement entered into by the
Operating Member shall explicitly state that, prior to the expiration
of the due diligence period therein provided, the Company must
affirmatively give notice to the seller that the necessary Approval of
all diligence related materials has been granted as required by Section
10.3.2(b), and that without such affirmative notice all deposits shall
be returned to the Company and such Purchase and Sale Agreement shall
thereupon terminate.
(c) Any conditional approval by the Class A Member of
the Preliminary Information under this Section 10.3.1 shall mean that
expenses incurred by the Operating Member on behalf of the Company or a
Subsidiary Company (or by the Operating Member and reimbursed by the
Company pursuant to Section 10.3.5) with respect to such proposed
acquisition shall thereafter be deemed Acquisition/Redevelopment Costs
pursuant to the Acquisition/Redevelopment Budget and shall no longer be
expenses under the Pursuit Cost Budget.
(d) The Class A Member shall, promptly on receipt of
the Preliminary Information with respect to any proposed acquisition
review the same and, by notice to the Operating Member, either give
conditional approval to the proposed acquisition by the Company or a
Subsidiary Company and authorize the execution of the letter of intent
by the Company, if applicable, or indicate that the Class A Member
shall not approve the proposed acquisition by the Company. Any such
conditional approval shall constitute authorization to the Operating
Member (i) to incur on behalf of the Company additional expenses in
connection with the proposed acquisition (subject, however, to the
right of the Class A Member, in connection with giving any such
conditional approval, to place more specific limitations on such
expenditures), (ii) to proceed with due diligence with respect to such
proposed acquisition and (iii) when and as the Operating Member deems
appropriate, to negotiate a purchase and sale agreement on behalf of
the Company with respect to such proposed acquisition as hereinafter
further provided.
(e) The Class A Member shall endeavor to notify the
Operating Member of its conditional approval or its disapproval with
respect to any proposed acquisition within five (5) Business Days
following the date upon which the Class A Member receives all the
Preliminary Information with respect to such proposed acquisition. If
the Class A Member fails to respond within such five (5) Business Day
period, the Operating Member may issue a written notice (the "Approval
Notice") to the Class A Member which notice shall state on the envelope
and on the first page of the notice in capital letters the following
"FAILURE TO RESPOND TO THIS NOTICE WITHIN TEN (10) DAYS WILL RESULT IN
THE LOSS OF SIGNIFICANT RIGHTS". Such written notice shall also
expressly refer to this Agreement and to this Section 10.3.1(e). If the
Class A Member fails to respond within ten (10) days after receipt of
the Approval Notice, the Class A Member shall be deemed to have given
conditional approval of such proposed acquisition.
62
Section 10.3.2 DUE DILIGENCE AND REVIEW.
(a) In the event that, having received the
Preliminary Information for a proposed acquisition, the Class A Member
gives notice to the Operating Member of the Class A Member's
conditional approval with respect to such proposed acquisition by the
Company, such notice shall constitute authorization to the Operating
Member to prepare, obtain and submit to the Class A Member, to the
extent reasonably obtainable and consistent with the Class A Member's
approval authorization, in such form as the Class A Member may from
time to time approve, a package including a preliminary budget
projection of income and expense for the period following substantial
completion of a proposed acquisition until such proposed acquisition is
expected to reach stabilization and for the first twelve (12) months
following the date on which the proposed acquisition achieves
stabilization, together with the information set forth in EXHIBIT J-2
(the "Final Approval Package") within the limits of expenditures
therefor authorized by the Class A Member.
(b) The Class A Member shall within 10 days after
receipt of all material items required to be included in the Final
Approval Package, give notice to the Operating Member whether the Class
A Member desires to approve the acquisition by the Company of such
proposed acquisition. If the Class A Member shall give notice to the
Operating Member of its intention to give approval for the Company to
proceed with acquisition of such proposed acquisition, the Company
shall proceed to execution of a Purchase and Sale Agreement
(hereinafter defined) in accordance with Section 10.3.3 below. If the
Class A Member has not given written notice of its approval or
disapproval of the Final Approval Package within the aforementioned ten
(10) day period, the Operating Member may give to the Class A Member a
"Second Approval Notice" which Second Approval Notice shall state on
the envelope and on the first page of the Second Approval Notice in
capital letters the following: "FAILURE TO RESPOND TO THIS NOTICE
WITHIN TEN (10) DAYS WILL RESULT IN A LOSS OF SIGNIFICANT RIGHTS". Such
written notice shall also expressly refer to this Agreement and this
Section 10.3.2 (b). If the Class A Member fails to respond within ten
(10) days after receipt of the Second Approval Notice, the Class A
Member shall be deemed to have disapproved such proposed acquisition.
Section 10.3.3 PURCHASE AND SALE.
(a) At such time, during the period commencing with
the Class A Member's conditional approval of the proposed acquisition
by the Company pursuant to Section 10.3.1, as the Operating Member
shall reasonably deem appropriate, the Operating Member shall use
commercially reasonable efforts to negotiate a purchase and sale
agreement in the name of the Company for such proposed acquisition, it
being understood (i) that any such purchase and sale agreement (each a
"Purchase and Sale Agreement") shall be substantially in a form
approved by the Class A Member and incorporated by and upon such
approval into the Portfolio Business Plan, (ii) that the final
63
form of such Purchase and Sale Agreement, including the amount of any
deposit, the purchase price and all other terms and conditions therein,
must be reviewed by and be acceptable, in both form and substance, to
the Class A Member and (iii) that, when requested by the Operating
Member following the Class A Member's approval of the applicable Final
Approval Package, the Company shall enter into such Purchase and Sale
Agreement (or accept an assignment thereof as herein provided) and
provide all necessary deposits. No Purchase and Sale Agreement shall
provide the Seller, upon the default of the Company of its obligations
thereunder, with a (i) a remedy of specific performance against the
Company or (ii) have any liquidated damages in excess of the deposit
made therein.
(b) Following the execution by the Company of any
such Purchase and Sale Agreement, the Operating Member shall carry out
all remaining required due diligence and documentation required
hereunder in order to consummate the acquisition of such proposed
acquisition by the Company in accordance with the terms of such
Purchase and Sale Agreement and shall deliver copies of all inspection
reports, site studies, environmental reports and the like received or
commissioned by the Operating Member to be delivered to the Class A
Member. The Operating Member shall expressly notify the Class A Member
of any matter that becomes known to it which would have a material
adverse impact on the value of such proposed acquisition. Prior to
waiver or approval of the inspection/due diligence conditions set forth
in the Purchase and Sale Agreement, however, the Operating Member shall
further prepare and submit to the Class A Member for the Class A
Member's review and approval a revised and updated
Acquisition/Redevelopment Budget, the proposed Asset Business Plan for
such proposed acquisition and a detailed status report on the due
diligence review and investigations conducted by the Operating Member
and legal counsel. Any determination as to the satisfaction of any
closing condition or other requirement to closing under any Purchase
and Sale Agreement shall be made by the Members; any Member shall at
all times have the right to disapprove the purchase of any proposed
acquisition and, as applicable, to forfeit any deposit thereunder,
which forfeiture shall be at the Company's cost and expense, provided
that in the event such forfeiture was solely at the request of the
Class A Member, all money, including, without limitation, any deposit,
paid with respect to such proposed acquisition that was paid by the
Company with the Class A Member's approval or otherwise in accordance
with the provisions hereof shall be reimbursed by the Class A Member to
the Company unless the forfeiture of the deposit thereunder is solely
the result of the Class A Member obtaining knowledge with respect to a
proposed acquisition which was required to be included, but was not
included, in the Preliminary Information or the Final Approval Package.
In the event such forfeiture was solely at the request of the Operating
Member, all money, including, without limitation, any deposit, paid
with respect to such proposed acquisition that was paid by the Company
with the Operating Member's approval or otherwise in accordance with
the provisions hereof shall be reimbursed by the Operating Member to
the Company.
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Section 10.3.4 DISAPPROVAL; FAILURE TO PROCEED. In the event
that the Class A Member disapproves the purchase of such proposed acquisition
for any reason pursuant to this Section 10.3, the Operating Member (or an
Operating Member Related Party) may acquire the applicable proposed acquisition
without the participation of the Class A Member therein, but only subject to the
conditions set forth in Section 6.4.4.
Section 10.3.5 COSTS AND EXPENSES. Until the Class A Member
shall have given its conditional approval of acquisition by the Company of a
proposed acquisition in accordance with Section 10.3.1, the Company shall
reimburse or advance, any costs or expenses incurred by the Operating Member in
connection with the investigation or acquisition of any such proposed
acquisition to the extent consistent with the Pursuit Cost Budget (or to the
extent otherwise Approved), PROVIDED that all such costs and expenses to be
reimbursed or advanced shall be or have been incurred, or any action giving rise
to such obligation of indemnification occurs, prior to the first date upon which
the Operating Member receives notice that the Class A Member has failed to
Approve the purchase of the proposed acquisition and are not otherwise the
subject of any limitation on permitted expenditures set forth in any notice from
the Class A Member with respect to a proposed acquisition. From and after the
receipt by the Operating Member of a conditional approval notice pursuant to
Section 10.3.1, such costs and expenses shall no longer be deemed Pursuit Costs
but shall be deemed Acquisition/Redevelopment Costs, and the Company shall be
obligated to pay for out-of-pocket costs and expenses incurred and paid in
connection with the proposed acquisition or development of such proposed
acquisition; provided such reimbursable costs and expenses are reasonable in
amount and do not exceed the sums budgeted therefor under the then current
Approved Acquisition/Redevelopment Budget.
ARTICLE XI -- DISSOLUTION AND EVENTS OF DEFAULT
Section 11.1 DISSOLUTION. Dissolution of the Company shall be
effective on the day of the event giving rise to the dissolution. The Company
shall not terminate until the assets of the Company have been distributed as
provided herein and a certificate of cancellation of the Company has been
filed with the Secretary of State of Delaware. In the event of dissolution,
the Company shall conduct only such activities as are necessary to wind up
its affairs, including a sale of the assets of the Company in an orderly
manner and the assets of the Company shall be applied in the manner and in
the priority set forth in this Agreement.
Section 11.2 EVENTS OF DEFAULT. There will be an "Event of Default"
under this Agreement if any one or more of the following events or
circumstances shall transpire or exist and shall not be cured within any
applicable period of notice and grace specified below:
Section 11.2.1 BREACH OF OBLIGATIONS. If either Member is in
breach of any material obligation under this Agreement and such breach is not
corrected within fifteen (15) days after written notice thereof from the other
Member, provided, however, if such breach is not able to be corrected within
fifteen (15) days and the defaulting Member is diligently prosecuting cure, the
curing Member shall have an additional time period to cure, which in no event
shall be
65
longer than sixty (60) days after receipt of the default notice; provided that
if such breach is willful, flagrant and material and not susceptible of cure,
then no notice or grace period shall be required.
Section 11.2.2 FRAUD, GROSS NEGLIGENCE OR WILLFUL MISCONDUCT.
If either Member shall commit an act involving fraud, willful misconduct or
gross negligence with respect to any matter relating to the Company.
Section 11.2.3 PROHIBITED TRANSFER. Any Transfer by either
Member in violation of the provisions of Article VIII.
Section 11.3 REMEDIES. Upon an Event of Default by either Member,
the other Member shall have, in addition to any other rights set forth
herein, all of its rights at law and in equity and upon the occurrence of an
Event of Default by the Operating Member, no Fees or Reimbursable Expenses
shall be earned or paid to the Operating Member pursuant to Section 6.3.4
other than acquisition fees set forth in paragraph (b) of EXHIBIT G-1.
ARTICLE 12 -- MISCELLANEOUS
Section 12.1 NOTICES.
(a) Any and all notices, demands, consents,
approvals, offers, elections and other communications required or
permitted under this Agreement (collectively, "notices") shall be
deemed adequately given if in writing and the same shall be delivered
either in hand or by mail or Federal Express or similar expedited
commercial carrier, addressed to the recipient of the notice, postpaid
and registered or certified with return receipt requested (if by mail),
or with all freight charges prepaid (if by Federal Express or similar
carrier).
(b) All notices required or permitted to be sent
hereunder shall be deemed to have been given for all purposes of this
Agreement upon the date of acknowledged receipt and in all other cases,
upon the date of receipt or refusal, except that whenever under this
Agreement a notice is either received on a day which is not a Business
Day or is required to be delivered on or before a specific day which is
not a Business Day, the day of receipt or required delivery shall
automatically be extended to the next Business Day.
66
(c) All such notices shall be addressed:
If to the Company, the Class A Member, or the AEW
Board Members, to:
▇/▇ ▇▇▇ ▇▇▇▇▇▇▇ ▇▇▇▇▇▇▇▇▇▇, ▇.▇.
▇▇▇ ▇▇▇▇▇▇▇▇ ▇▇▇▇▇▇
▇▇▇▇▇▇, ▇▇▇▇▇▇▇▇▇▇▇▇▇ ▇▇▇▇▇
Attn: J. ▇▇▇▇▇ ▇▇▇▇▇▇▇, Esq.
Telecopier No. (▇▇▇) ▇▇▇-▇▇▇▇
with a copy to:
▇▇▇▇▇▇▇, Procter & ▇▇▇▇ ▇▇▇
▇▇▇▇▇▇▇▇ ▇▇▇▇▇
▇▇▇▇▇▇, ▇▇▇▇▇▇▇▇▇▇▇▇▇ ▇▇▇▇▇
Attn: ▇▇▇▇▇▇▇ ▇. ▇▇▇▇▇▇, P.C.
Telecopier No. (▇▇▇) ▇▇▇-▇▇▇▇
If to the Operating Member, to:
▇▇▇▇▇▇ Lodging Company
Guildhall Building
▇▇ ▇▇▇▇ ▇▇▇▇▇▇▇▇ ▇▇▇▇▇▇, ▇▇▇▇▇ ▇▇▇▇
▇▇▇▇▇▇▇▇▇, ▇▇ ▇▇▇▇▇-▇▇▇▇
Attn: ▇▇▇▇▇▇ ▇. ▇▇▇▇▇▇, Chief Executive Officer
Telecopier No.
with a copy to:
▇▇▇▇▇ & ▇▇▇▇▇▇▇▇▇, LLP
3200 National City Center
▇▇▇▇ ▇. ▇▇▇ ▇▇▇▇▇▇
▇▇▇▇▇▇▇▇▇, ▇▇▇▇ ▇▇▇▇▇-▇▇▇▇
Attn: ▇▇▇▇▇▇ ▇. ▇▇▇▇▇▇, Esq.
Telecopier No. (▇▇▇) ▇▇▇-▇▇▇▇
(d) By notice given as herein provided, 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 effective upon receipt by the other
parties of such notice and each shall have the right to specify as its
address any other address within the United States of America.
Section 12.2 AMENDMENTS. This Agreement may be amended only with
the written approval of all Members.
67
Section 12.3 INTERPRETATION. This Agreement shall be governed by and
construed in accordance with the laws of the State of Delaware without regard
to the principles of conflicts of law. The parties agree that any dispute
arising in connection with this Agreement shall be resolved in the Chancery
Court in the State of Delaware, and each party hereby submits to the
jurisdiction of that court. EACH PARTY HEREBY WAIVES ITS RIGHT TO TRIAL BY
JURY IN CONNECTION WITH ANY DISPUTE BETWEEN ANY OF THE PARTIES TO THIS
AGREEMENT ARISING OUT OF THIS AGREEMENT OR THE RIGHTS OR OBLIGATIONS OF THE
PARTIES HEREUNDER. The table of contents and titles of the Articles and
Sections in this Agreement are for convenience only and shall not be
considered in construing this Agreement. Pronouns used with reference to the
Members shall be construed to refer to the feminine, neuter, singular and
plural as the identity of the individual or entity referred to may require.
This Agreement, together with the documents and agreements being executed on
the date hereof, constitutes the entire agreement among the Members and the
Operating Member and supersedes any prior written or oral agreements with
respect to the subject matter of this Agreement. No provision of this
Agreement (including, without limitation, any obligation of any Member to
make Contributions) shall be interpreted as bestowing any rights whatsoever
upon any third party. A cross-reference to another section shall be deemed to
be to such section of this Agreement, unless explicitly stated otherwise.
Section 12.4 COUNTERPARTS. This Agreement may be executed in
multiple counterparts, each of which shall be deemed an original.
Section 12.5 ERISA, UBTI AND REIT MATTERS.
Section 12.5.1 ERISA. The Operating Member acknowledges that
it has been advised that the Class A Member desires the Company to conduct its
business in such manner as to enable the Company to qualify as a "real estate
operating company," under Department of Labor Regulation Section 2510.3-101 and
the Members agree that each Member shall be entitled to exercise any vote,
consent, election, or other right under this Agreement with a view to causing
the Company to so conduct its business. Notwithstanding anything to the contrary
contained in Section 3.1 or otherwise in this Agreement, the Class A Member
shall have the right to require, prior to making its initial Contribution, an
opinion of counsel to the Company in form and substance reasonably acceptable to
the Class A Member that the Company is a "real estate operating company" under
Department of Labor Regulation Section 2510.3-101. The "annual valuation period"
of the Company is hereby specified as the 90-day period commencing on each
December 31 following the "initial valuation date," as such terms are defined in
said regulation. The Class A Member shall be entitled to request and, if such a
request is made, receive an opinion of counsel to the Company in form and
substance and from counsel all reasonably acceptable to the Class A Member as to
the then current status of the Company as being or not being a "real estate
operating company" under said regulation, provided that the Class A Member shall
not make more than one such request with respect to each annual valuation
period.
Section 12.5.2 UBTI MATTERS. The Operating Member acknowledges
that it has been advised that certain indirect investors in the Class A Member
are Qualified Organizations
68
which are not generally required to pay federal income tax on interest, certain
real property rents and certain other types of income and agrees that the
business and affairs of the Company will be managed with a view to minimizing
the amount of income of the Company that will constitute unrelated business
taxable income ("UBTI") to a Qualified Organization under Section 511 ET SEQ. of
the Code. The Operating Member agrees that the Class A Member shall be entitled
to exercise any consent, election or other right under this Agreement with a
view to avoiding any UBTI to the Class A Member or any of its members and
without regard to whether conducting the business of the Company in such manner
will maximize either pre-tax or after-tax profit of the Company to a Member who
is not such a Qualified Organization. Without the prior written consent of the
Class A Member which specifically refers to the requirement of a consent under
this Section 12.5.2, the Company shall not (i) obtain financing from any seller
to the Company of any property or any individual or entity who bears a
relationship described in Code Sections 267(b) or 707(b) to any such seller,
(ii) lease any property to any seller or to any individual or entity who bears a
relationship described in Code Sections 267(b) or 707(b) to any such seller,
(iii) obtain any financing where the amount of the indebtedness or any other
amount payable with respect to the financing, or the time for making any
payment, is dependent upon any revenue, income or profits derived from any
property, (iv) incur any indebtedness which would otherwise be treated as
"acquisition indebtedness" under Code Section 514(c), (v) incur any indebtedness
which would constitute "partner nonrecourse debt" as defined in Treasury
Regulations ss.1.704-2(b)(4), (vi) enter into any lease which provides for
contingent rental payments unless based upon the tenant's gross receipts, (vii)
enter into any lease or other arrangement pursuant to which it receives rents
from personal property or payment for the performance of services which would
constitute UBTI, (viii) invest or hold, directly or through one or more
entities, any interest in any partnership (or any entity treated as a
partnership for federal income tax purposes) if at any time it does not comply
with Code Section 514(c)(9)(E) and the Treasury Regulations thereunder or (ix)
otherwise engage in any transactions which would result in UBTI for the Class A
Member or any of the holders of direct or indirect equity interests in the Class
A Member.
Section 12.5.3 REIT MATTERS.
(a) The Members agree that the business and affairs
of the Company will be managed in a manner that will neither jeopardize the REIT
status of any Member or direct or indirect owner of any Member, nor result in
the imposition of any taxes or penalties under the REIT Tax Provisions on any
such Person. Any provision of this Agreement that might otherwise jeopardize a
Member's REIT status under the Code (or the REIT status of a direct or indirect
owner of a Member) or cause the imposition of such tax or penalty (other than
the provisions of this Section 12.5.3 and other Sections of this Agreement
expressly referenced by the provisions of this Section 12.5.3) shall be (i) void
and of no effect, or (ii) reformed, as necessary, to avoid such Person's loss of
REIT status or the imposition of such tax or penalty.
(b) Without limiting the foregoing paragraph (a), the
Members agree as follows:
69
(i) For each taxable year, the Company
shall be managed so that the gross income of the Company allocable to the
Operating Member (for purposes of the income tests set forth in Section
856(c)(2) and (3) of the Code, and excluding gross income from "prohibited
transactions" as defined in Section 857(b)(6)(B)) (such allocation of gross
income, the "REIT Gross Income") that fails to qualify as one of the following
shall not exceed twenty-five percent (25%) of the Operating Member's aggregate
REIT Gross Income: (a) "rents from real property" within the meaning of Section
856(d) of the Code (determined with respect to the Company as if the Company
were a REIT for federal income tax purposes, subject to the modifications set
forth below), (b) interest on obligations secured by mortgages on real property
or on interests in real property, (c) gain from the sale or other disposition of
real property (including interests in real property and interests in mortgages
on real property) which is not described in Section 1221(1) of the Code, (d)
dividends or other distributions on, and gain from the sale or other disposition
of transferable shares in qualifying REITs, or (e) amounts described in Sections
856(c)(3)(E) through 856(c)(3)(I) of the Code.
(ii) For each taxable year, the Company
shall be managed so that the Operating Member's REIT Gross Income that fails to
qualify as one of the following shall not exceed five percent (5%) of the
Operating Member's aggregate REIT Gross Income: (a) the items of income
described in paragraph (i) hereof (other than those described in Section
856(c)(3)(I) of the Code), (b) gain realized from the sale or other disposition
of stock or securities which are not property described in Section 1221(1) of
the Code, (c) interest, (d) dividends, or (e) income derived from payments to
the Company on interest rate swap or cap agreements, options, futures contracts,
forward rate agreement or other similar financial instruments entered into to
reduce the interest rate risks with respect to any indebtedness incurred or to
be incurred to acquire or carry real estate assets, or gain from the sale or
other disposition of such an investment.
(iii) As of the end of the last day of
each quarter of each of the Company's taxable years, not more than twenty-five
percent (25%) of the total assets of the Company allocable (for purposes of the
seventy-five percent (75%) asset test set forth in Section 856(c)(4) of the
Code) to the Operating Member will fail to qualify as one of the following: (a)
real estate assets within the meaning of Section 856(c)(5) of the Code, (b) cash
and cash items (including receivables which arise in the ordinary course of the
Company's operations, but not including receivables purchased from another
person), or (c) Government securities.
(iv) The Company will not own, directly
or indirectly, more than ten percent (10%) of the voting securities (as defined
for purposes of Section 856(c)(4)(B) of the Code) of any issuer that is treated
as a corporation for federal income tax purposes.
(v) The Company will not hold, directly
or indirectly, any (a) stock in trade or other property of a kind which would
properly be includable in inventory at hand at the close of a taxable year or
(b) property held primarily for sale to customers in the
70
ordinary course of a trade or business, unless the disposition of such property
is expected to result in the recognition of no more than DE MINIMIS gains by the
Company.
(vi) The Company will not hold, directly
or indirectly (as determined for purposes of Section 860E of the Code) any REMIC
residual interests.
(vii) The activities of the Company will
be conducted in accordance with the Agreement, and the Company will not be
properly classifiable as a corporation for federal income tax purposes. The
Company shall not elect to be taxed as a corporation for federal income tax
purposes or otherwise take or omit to take any action that reasonably could be
expected to cause the Company to be a corporation, or to be treated as an
association taxable as a corporation, for federal income tax purposes.
(viii) The Company will, as and when
requested, make available to the Operating Member a list of all entities that
the Company (and any entity that is treated as a partnership or disregarded
entity for federal tax purposes in which the Company holds, or is treated as
holding, an interest) uses to provide services to tenants or with respect to the
properties in which the Company owns a direct or indirect interest the Company
is treating as an "independent contractor" (within the meaning of Section
856(d)(3) of the Code and Treasury Regulation Section 1.856-4(b)(5)(iii)) for
purposes of determining compliance with the covenants set forth in clauses (i)
and (ii) above. At least ten (10) days prior to entering into any contract or
other arrangement with a party whose status as an independent contractor with
respect to the Operating Member could affect the characterization of amounts
received or accrued, directly or indirectly, by the Company as "rents from real
property" when allocated to the Operating Member, the Company shall provide the
Operating Member with written notice of the identity of such party. The Company
shall not, directly or indirectly, enter into any contract or other arrangement
that involves or would require treating as an "independent contractor" for these
purposes any person identified by the Operating Member in a written notice to
the Company; provided that any such restriction shall be solely for the purpose
of maintaining the REIT status of the general partner of the Operating Member.
If such contracts or other arrangements are already in place at the time that
written notice is provided by the Operating Member, then the Company shall take
all commercially reasonable steps to terminate such contracts or other
arrangements.
(ix) The Company shall use commercially
reasonable efforts to make distributions to its Partners in accordance with
Article V, in amounts large enough such that the Operating Member will receive
an amount sufficient to permit the Operating Member (assuming hypothetically
that it were a REIT and that its interests in the Company constituted its only
asset) to satisfy the distribution requirements for REIT status and to avoid the
imposition of any taxes under Section 857 or 4981 of the Code with respect to
the taxable year of the Company to which the Operating Member's request relates.
(x) Without the prior written consent
of the Operating Member, the Company will not, directly or indirectly, acquire
securities issued by, or otherwise enter into any arrangement which will cause
the Company directly or indirectly to
71
derive income from any person identified by the Operating Member on a written
notice provided to the Company prior to the acquisition of such securities or
the entering into of such arrangement; provided that any such restriction shall
be solely for the purpose of maintaining the REIT status of the general partner
of the Operating Member.
(c) For purposes of the covenants in this
Section 12.5.3, the assets and gross income of the Company will be determined as
if the Company were a REIT. Thus, the Company will be deemed to own its
proportionate share (determined in accordance with Treasury Regulations
ss. 1.856-8(g)) of each of the assets of each entity that is treated as a
partnership or disregarded entity for federal tax purposes in which the Company
holds, or is treated as holding, an interest and will be deemed to derive
directly the income of such entities attributable to such share. Notwithstanding
the foregoing, the determination of compliance with these covenants shall be
made by reference to the general partner of the Operating Member as the REIT,
and the Company will not be treated as a REIT (i) for purposes of determining
whether a subsidiary of the Company is a "qualified REIT subsidiary" within the
meaning of Section 856(i) of the Code, (ii) for purposes of determining whether
amounts received from a tenant of the Company would be "related party rent" as
described in Section 856(d)(2)(B) of the Code (except that no tenant shall be
considered a "related party tenant" for such purposes if the Company does not
own, directly or indirectly, any interest in that tenant unless the Operating
Member has notified the Company in writing that such tenant would be considered
to be a "related party tenant" as to the Operating Member or the REIT), and
(iii) for purposes of determining whether an entity or person that provides
services to tenants of the Company meets the definition of an "independent
contractor," as set forth in Section 856(d)(3) of the Code and Treasury
Regulation Section 1.856-4(b)(5)(iii).
(d) So long as the provisions of this Section 12.5.3
remain in effect, the Company shall deliver to the Operating Member, at such
times as may be requested by the Operating Member upon reasonable notice to the
Company, a certificate, or certificates signed by an authorized person to the
effect that the Company has complied with the covenants set forth in this
Section 12.5.3 through the date of such certificate or certificates and that
such person anticipates that the Company will continue to comply with such
covenants. Such certificate or certificates also will contain such other
certifications, in a form and substance reasonably satisfactory to the Operating
Member, as the Operating Member shall reasonably request, that relate to matters
involving the Company that reasonably could be anticipated to bear upon the
general partner of the Operating Member's status as a REIT. In addition, the
Company shall cooperate (including, without limitation, by providing information
and documents relating to the income and assets of the Company) with the
Operating Member, even if the Operating Member at such time no longer holds an
interest in the Company, in addressing issues raised by any taxing authority in
any audit or similar proceeding relating to the Operating Member or any of its
affiliates that relate to or arise out of the Operating Member's investment in
the Company.
(e) This Section 12.5.3 is for the exclusive benefit
of the Operating Member and its general partner, their direct and indirect
owners and subsidiaries, and any
72
successor or assign of all or substantially all of the assets of the Operating
Member or its general partner (in which case references herein to the Operating
Member or its general partner shall be treated as references to such successors
or assignees), provided that such succession or assignment is otherwise
permitted by the terms of this Agreement. The provisions of this Section 12.5.3
may be waived by the Operating Member in its sole discretion.
(f) For purposes of this Section 12.5.3 and
certifications made by the Company hereunder, the Company will not treat as
"rent from real property" any of the following:
(i) rent attributable to personal
property, except where the personal property is leased under, or in connection
with, the rental of real property where the average of the adjusted bases of the
personal property at the beginning and at the end of the taxable year does not
exceed fifteen percent (15%) of the average of the aggregate adjusted bases of
the real property and the personal property leased under such lease at the
beginning and at the end of such taxable year within the meaning of Section
856(d)(1) of the Code;
(ii) any rent received or accrued,
directly or indirectly, where the determination of the amount of rent depends on
the income or profits of any person from the property, except where rent is
based on a fixed percentage or percentages of receipts or sales within the
meaning of Section 856(d)(2)(A) of the Code; and
(iii) any rent (or any other consideration
under a lease) received or accrued, directly or indirectly, from any person in
which the Operating Member or its general partner owns, directly or indirectly,
(a) in the case of a corporation, ten percent (10%) or more of the total
combined voting power of all classes of stock entitled to vote, or ten percent
(10%) or more of the total number of shares of all classes of stock, or (b) in
the case of an entity other than a corporation, an interest of ten percent (10%)
or more in the assets or net profits of such entity. For purposes of this
paragraph, ownership will be determined by taking into account the constructive
ownership rules of Section 318(a) of the Code (as modified by Section 856(d)(5)
of the Code).
(g) For purposes of this Section 12.5.3 and
certifications made by the Company hereunder, the Company will not treat as
"interest" any interest received or accrued, directly or indirectly, where the
determination of the amount of interest depends on the income or profits of any
person, except where interest is based on a fixed percentage or percentages of
receipts or sales within the meaning of Section 856(f)(1)(A) of the Code.
(h) The foregoing provisions of this Section 12.5.3
shall be subject to the following restrictions:
(i) Any reformations to this Agreement,
or voiding of its provisions, under paragraph (a) above shall be the minimum
changes necessary to accomplish
73
the intent of this Section 12.5.3. If the provisions of this Agreement are
reformed or voided, the parties shall negotiate in good faith to provide
replacement provisions that have no material adverse effect on the interest of
the Class A Member in the Company, and replicate, as closely as possible in
conformance with this Section 12.5.3, the intended after-tax economic
consequences to the parties, including without limitation the compliance of the
terms of this Agreement with the present requirements of Sections 4.10 and 4.12.
(ii) The Company shall in no event make
distributions to the Members in an order and priority less favorable to the
Class A Member than the order and priority set forth in Sections 5.2 through
5.4. Further, the Company shall be obliged to make distributions in the amounts
contemplated by Section 12.5.3(b)(ix) only upon the written request of the
Operating Member, accompanied by a certificate signed by an officer of BLC as
general partner of the Operating Member stating that BLC and the Operating
Member have made all commercially reasonable efforts to obtain sufficient funds
from other sources. The Company shall not be required to borrow funds to fulfill
any obligation to make distributions to the Operating Member without the prior
written consent of all Members.
(iii) So long as the Class A Member
complies with the provisions of Section 12.5.4, this Section 12.5.3 shall not
restrict or impair the Class A Member's rights to cause the sale of a Target
Asset under Section 8.2, nor shall this Section 12.5.3 restrict or impair the
Class A Member's rights under Section 8.4.
Section 12.5.4 DEALER PROPERTY.
In the event that either Member exercises its right under Section 8.2
to require the sale of any of the Company's properties within four years of the
date on which the Company acquired such property or first put the property into
service, the Initiating Member shall provide a certification to the Responding
Member in substantially the form attached as EXHIBIT N hereto.
Section 12.5.5 OBLIGATION OF OPERATING MEMBER TO AVOID
PROVISIONS OF SECTION 12.5.3.
The Operating Member shall use commercially reasonable efforts to
conduct its own affairs, and cause any Operating Member Related Party to conduct
its own affairs, so that the provisions of 12.5.3(a) will not come into effect.
Section 12.6 NO PARTITION. Except as set forth in Section 8.2, no
Member nor any Legal Successor of a Member shall have the right to partition
the Company or any Property or any part thereof or interest therein, or to
file a complaint or institute any proceeding at law or in equity to partition
the Company or any Property or any part thereof or interest therein. Each
Member, for such Member and such Member's Legal Successor, hereby waives any
such rights. The Members intend that, during the term of this Agreement, the
rights of the Members and their
74
successors in interest, as among themselves, shall be governed solely by the
terms of this Agreement and by the Act.
Section 12.7 ATTORNEYS' FEES. If any Member seeks to enforce such
Member's rights under this Agreement by legal proceedings or otherwise the
non-prevailing party shall be responsible for all costs and expenses in
connection therewith, including without limitation, reasonable attorneys'
fees and witness fees.
Section 12.8 SEVERABILITY. If any provision of this Agreement is
determined to be unenforceable for any reason, it shall be adjusted rather
than voided, if possible, to achieve the intent of the parties. In any event,
all other provisions shall be deemed valid and enforceable to the greatest
possible extent.
Section 12.9 BINDING ON SUCCESSORS. Subject to the provisions of
Article VIII, the rights and obligations of the Members under this Agreement
shall inure to the benefit of and bind their respective heirs, successors and
assigns.
Section 12.10 CONFIDENTIALITY. Both parties hereto agrees to
maintain the confidentiality of the terms and conditions of this Agreement
and to maintain the confidentiality of (a) any information provided by one
party to the other, and (b) all information contained in any facility books,
records, computer discs and similar materials containing facility
information, invoices and other documents received or maintained by the
Company pursuant to this Agreement, other than information that is available
from public sources. No public announcement of any development with respect
to the Company shall be made without the consent of each of the Members.
Either party may, however, disclose any of such information to its agents,
directors, officers, employees, advisors, attorneys, Affiliates or
representatives who require such information for the purpose of performing or
assisting in the performance of its obligations or services hereunder, and to
investors or lenders or proposed investors or lenders, provided that in all
such cases such parties shall be informed of the confidential nature of such
information. Either party hereto may also disclose any such information (x)
to the extent required by law or court order provided that such party shall
have first, to the extent reasonably practicable, advised the other of the
requirement to disclose such information and shall have afforded the other an
opportunity to dispute such requirement and seek relief therefrom by legal
process, (y) in connection with any suit, action, arbitration or other
proceedings between the parties hereto or their respective Related Parties,
or (z) to the extent required in connection with the preparation or filing of
any tax returns or other filings required by any applicable law.
Section 12.11 REPRESENTATIONS AND WARRANTIES OF EACH MEMBER. As an
inducement to each Member to enter into this Agreement, in addition to the
representations and warranties contained in this Agreement, the parties make
the additional representations and warranties contained in EXHIBIT K attached
hereto and made a part hereof.
75
Section 12.12 BROKERAGE COMMISSIONS. The parties hereto represent
and warrant to each other that, other than ▇▇▇▇▇▇▇▇, ▇▇▇▇▇▇ (the "Broker"),
they have not dealt with any brokers, consultants or other third parties in
the negotiation of this Agreement and the transactions contemplated herein.
The parties further agree to indemnify, defend and hold each other harmless
from and against any liability, claim, damage, cost or expense (including,
without limitation, reasonable attorneys' fees) arising out of or in
connection with the claims for commissions or any other fees due in
connection with this Agreement and the transaction contemplated herein
arising from such Member's actions. Notwithstanding the foregoing, in
connection with any Contribution by the Class A Member, the Company shall pay
a fee to the Broker equal to [*] percent [*] of the amount of such
Contribution (or reimburse the Operating Member for any fees previously
advanced by the Operating Member to the Broker). In no event shall the
Company be responsible for payment or reimbursement of fees in excess of
[*] percent [*] of the amount of such Contribution.
Section 12.13 TIME IS OF THE ESSENCE. Time is of the essence with
respect to all time or notice deadlines set forth herein, however, this
provision shall not affect the rights of any defaulting party hereunder to
cure such default within the time periods (if any) explicitly set forth
herein, if and as so permitted pursuant to the terms of this Agreement.
[THE REMAINDER OF THIS PAGE INTENTIONALLY LEFT BLANK]
76
IN WITNESS WHEREOF, each of the Members has executed this Agreement as
of the date first written above.
CLASS A MEMBER:
AEW PARTNERS III, L.P., a Delaware limited partnership
By: AEW III, L.L.C., a Delaware limited liability
company, its general partner
By: AEW Partners III, Inc., its managing member
By: /s/ ▇▇▇▇▇ ▇. ▇▇▇▇▇▇▇▇
--------------------------------------
Name: ▇▇▇▇▇ ▇. ▇▇▇▇▇▇▇▇
Title: Vice President
OPERATING MEMBER:
▇▇▇▇▇▇ HOTEL PROPERTIES, L.P.
By: ▇▇▇▇▇▇ LODGING COMPANY, its general partner
By: /s/ ▇▇▇▇ ▇. ▇'▇▇▇▇
-------------------------------------------
Name: ▇▇▇▇ ▇. ▇'▇▇▇▇
Title: Chief Financial Officer and Treasurer
77
----------------------------------------------------------------------------------------------------------
EXHIBIT A
----------------------------------------------------------------------------------------------------------
----------------------------------------------------------------------------------------------------------
MEMBERS ADDRESS Proportionate Share
----------------------------------------------------------------------------------------------------------
Class A Member AEW Partners III, L.P., a c/o AEW Capital Management, L.P. 75%
Delaware limited partnership ▇▇▇ ▇▇▇▇▇▇▇▇ ▇▇▇▇▇▇
▇▇▇▇▇▇, ▇▇ ▇▇▇▇▇
----------------------------------------------------------------------------------------------------------
Operating Member ▇▇▇▇▇▇ Hotel Properties, L.P. Guildhall Building 25%
▇▇ ▇▇▇▇ ▇▇▇▇▇▇▇▇ ▇▇▇▇▇▇, ▇▇▇▇▇ ▇▇▇▇
▇▇▇▇▇▇▇▇▇, ▇▇ ▇▇▇▇▇-▇▇▇▇
----------------------------------------------------------------------------------------------------------
NAMES AND ADDRESSES OF INITIAL BOARD MEMBERS
OPERATING MEMBER BOARD MEMBERS
▇▇▇▇▇▇ ▇▇▇▇▇▇ All c/o the Operating Member
▇▇▇▇▇▇▇ ▇▇▇▇▇
AEW BOARD MEMBERS All c/o the Class A Member
▇▇▇▇▇ ▇. ▇▇▇▇▇▇▇, ▇▇.
▇▇▇▇ ▇. ▇▇▇▇▇▇▇▇
A-1
IDENTIFICATION OF PROJECT REPRESENTATIVES
OPERATING MEMBER PROJECT REPRESENTATIVES
▇▇▇▇▇▇▇ ▇▇▇▇▇▇
▇▇▇▇▇▇▇ ▇▇▇▇▇
AEW PROJECT REPRESENTATIVES
▇▇▇▇▇ ▇. ▇▇▇▇▇▇▇, ▇▇.
▇▇▇▇ ▇. ▇▇▇▇▇▇▇▇
A-2
EXHIBIT B
CALCULATION OF TOTAL RETURN
The calculation of Total Return with respect to the Class A Member (with
respect to this EXHIBIT B, the Class A Member shall include any permitted
successor or assign of the Class A Member's membership interest under this
Agreement shall be made as of a given time as follows:
(a) Determine the date and amount of all Contributions made by the Class
A Member to the Company; and
(b) Determine the date and amount of all distributions paid to the Class
A Member pursuant to Article V.
The Class A Member's Total Return shall equal the discount rate (the
"Applicable Rate") which causes (i) the present value of the contributions made
by the Class A Member under (a) above to equal (ii) the present value of the
distributions paid to the Class A Member under (b) above. The present value of
(a) and (b) shall each be determined as of the date of the first Contribution
made by the Class A Member to the Company and discounting such contributions or
distributions, as the case may be, on a monthly convention basis.
In no event shall any funds advanced by the Class A Member as a Default
Loan or any funds received by the Class A Member in payment thereof be included
in the calculation of Total Return.
Under the terms of Section 3.9 of the LLC Agreement, the Class A Member
may elect to provide Credit Enhancement in connection with certain Authorized
Financing of the Company. For the purpose of calculating the Total Return of the
Class A Member under this Agreement, if the Class A Member (or any affiliate of
the Class A Member) provides such Credit Enhancement, then all out of pocket
costs and expenses incurred by the Class A Member (or affiliate of the Class A
Member) in connection with such Credit Enhancement (including any legal expenses
incurred in connection therewith and any costs of renewal) shall be deemed a
Contribution made by the Class A Member to the Company on the date such cost or
costs are incurred and if the Credit Enhancement or any portion thereof shall be
drawn or applied (e.g. funds are paid by the Class A Member under a guaranty or
there is a draw under a letter of credit given by or for the benefit of the
Class A Member), the amount of any such payment or draw or amount applied shall
be deemed an additional Contribution made by the Class A Member to the Company
on the date that the Credit Enhancement was first issued or made.
For purposes of calculating Total Return with respect to the Class A
Member, all legal expenses paid by the Class A Member in connection with the
formation of the Company or in connection with a default of the Operating
Member's obligations under this Agreement or the
B-1
default of the Operating Member or any Operating Member Related Party under any
Approved Related Party Agreement shall be deemed Contributions.
B-2
EXHIBIT C
INVESTMENT GUIDELINES
[*]
C-1
EXHIBIT D
FORM OF PROMISSORY NOTE
$
-------------- -------- --, ----
WHEREAS, ▇▇▇▇▇▇ Hotel Properties, L.P. ("Operating Member") and AEW
Partners III, L.P. ("Class A Member") entered into that certain Limited
Liability Company Agreement (the "LLC Agreement"), dated as of February _, 1999,
of ▇▇▇▇▇▇/AEW LLC (the "Company");
WHEREAS, the Class A Member and the Operating Member are required pursuant
to the LLC Agreement to make certain contributions of capital to the Company, as
more specifically set forth in the LLC Agreement;
WHEREAS, the [Operating Member/Class A Member] has failed to make a
contribution required to be made pursuant to Article III of the Company
Agreement;
WHEREAS, the [Class A Member/Operating Member] has agreed to lend to the
[Operating Member/Class A Member] as Borrower (defined below) a total of
__________________________ Dollars ($___________), to be contributed on behalf
of the [Operating Member/Class A Member] to the Company;
NOW THEREFORE, FOR VALUE RECEIVED, [▇▇▇▇▇▇ Hotel Properties, L.P., with an
address of Guildhall Building ▇▇ ▇▇▇▇ ▇▇▇▇▇▇▇▇ ▇▇▇▇▇▇, ▇▇▇▇▇ ▇▇▇▇, ▇▇▇▇▇▇▇▇▇,
▇▇▇▇ ▇▇▇▇▇-▇▇▇▇/▇▇▇ Partners III, L.P., a Delaware limited partnership with an
address of c/o AEW Capital Management, L.P., ▇▇▇ ▇▇▇▇▇▇▇▇ ▇▇▇▇▇▇, ▇▇▇▇▇▇, ▇▇
▇▇▇▇▇] (the "Borrower"), promise(s) to pay to the order of [Class A
Member/Operating Member] (together with any successor holder or holders of this
Note, the "Lender") at its office at [c/o AEW Capital Management, L.P., ▇▇▇
▇▇▇▇▇▇▇▇ ▇▇▇▇▇▇, ▇▇▇▇▇▇, ▇▇▇▇▇▇▇▇▇▇▇▇▇ ▇▇▇▇▇/ Guildhall Building, ▇▇ ▇▇▇▇
▇▇▇▇▇▇▇▇ ▇▇▇▇▇▇, ▇▇▇▇▇ ▇▇▇▇, ▇▇▇▇▇▇▇▇▇, ▇▇▇▇ ▇▇▇▇▇-▇▇▇▇] or such other place as
Lender may designate, the principal sum of ________________________ Dollars
($________), or so much thereof as shall be advanced hereunder, together with
interest thereon, as hereinafter set forth.
Interest on the principal balance of this Note from time to time
outstanding shall accrue from the date hereof at an annual rate which shall
equal the "Interest Rate" (defined below). Subject to Borrower's right to defer
payments of interest as provided below, interest shall be payable on the unpaid
principal balance from time to time outstanding, on a monthly basis in arrears
on the first day of each month (the "Interest Payment Date") beginning with the
first day of _______________. Interest shall be computed on the basis of a three
hundred
D-1
and sixty (360)-day year and shall be paid for the actual number of days on
which principal is outstanding.
"Interest Rate" means the lesser of (i) fifteen percent (15%) per annum,
compounded monthly, or (ii) the highest lawful rate per annum, compounded
monthly.
Borrower may defer payments of interest to the extent that a payment of
interest due on an Interest Payment Date exceeds the amount of distributions to
Borrower from the Company during the calendar month immediately preceding said
Interest Payment Date (such excess, known hereinafter as the "Deferred
Interest"). Deferred Interest shall accrue interest at the Interest Rate,
compounded monthly (such Deferred Interest together with the interest thereon
shall be referred to as "Interest Accruals").
To the extent that distributions to Borrower from the Company, including
any return of capital to Borrower by the Company, for any month prior to an
Interest Payment Date exceed the amount due on said Interest Payment Date, then
Borrower shall pay such excess to Lender to the extent of and to reduce: first,
any late charges or other costs or expenses due hereunder, second, Interest
Accruals then outstanding, third, interest then due, and fourth, the outstanding
principal balance of this Note.
The entire outstanding principal balance of this Note, together with any
interest, Interest Accruals and other charges as may be due hereunder, shall be
paid on the earlier of: (i)______________,_____, (ii) the dissolution of the
Company, (iii) the sale of all of the Properties owned by the Company, (iv) the
sale of all or substantially all of the Borrower's membership interest in the
Company or (v) the occurrence of an Event of Default (hereinafter defined)
hereunder (the earlier of such dates, the "Maturity Date").
In the event that any payment required hereunder is not paid within five
(5) days after the date it is due (such five day period, the "Grace Period;"
which failure to pay within the Grace Period shall constitute an "Event of
Default" hereunder), Lender shall have the right, in addition to any other
rights hereunder, upon written demand to Borrower, to collect a late charge as
compensation for increased costs of administering such late payment. Such late
charge shall be in an amount equal to four percent (4%) of the amount of any
payment amount remaining unpaid after the expiration of the Grace Period, which
sum Borrower agrees to pay upon demand; provided, however, that said late charge
shall not be Lender's sole remedy for Borrower's default hereunder.
In the event that any payment due hereunder is not paid prior to the
expiration of the Grace Period, Lender at its option may declare immediately due
and payable the entire outstanding balance of principal and interest, together
with all other charges to which Lender may be entitled.
D-2
The outstanding principal amount due hereunder may be prepaid in whole or
in part, together with any interest or Interest Accruals then outstanding,
without penalty or premium, upon five (5) days prior written notice to Lender
Any notice required or permitted to be delivered hereunder shall be in
writing and shall be deemed to be delivered on the earlier of (i) the date
received, or (ii) the date of delivery, refusal, or non-delivery indicated on
the return receipt, if deposited in a United States Postal Service depository,
postage prepaid, sent registered or certified mail, return receipt requested,
addressed to the party to receive the same at the address of such party set
forth at the beginning of this Note, or at such other address as may be
designated in a notice delivered or mailed as herein provided.
Borrower agrees to pay all charges (including reasonable attorney's fees)
of Lender in connection with the collection and/or enforcement of this Note or
in protecting or preserving the security for this Note, whether or not suit is
brought against Borrower.
The failure of Lender at any time to exercise any option or right
hereunder shall not constitute a waiver of Lender's right to exercise such
option or right at any other time.
Borrower and all endorsers and guarantors of this Note hereby jointly and
severally waive presentment, demand, notice, protest and all other suretyship
defenses generally and agree that (i) any renewal, extension or postponement of
the time of payment or any other indulgence, or (ii) any substitution, exchange
or release of collateral or the addition or release of any person or entity
primarily or secondarily liable, may be effected without notice to Borrower or
any endorser or guarantor of Borrower's obligations, and without releasing
Borrower or such endorser or guarantor from any liability hereunder.
D-3
This Note shall be governed by, construed, and enforced in accordance with
the laws of The State of Delaware. If any provision of this Note is held to be
invalid or unenforceable by a court of competent jurisdiction, the other
provisions of this Note shall remain in full force and effect. If the payment of
any interest due hereunder would subject Lender to any penalty under applicable
law, then the payments due hereunder shall be automatically reduced to what they
would be at the highest rate authorized under applicable law.
This Note is secured only by Borrower's membership interests in the
Company, including any return of capital to Borrower upon liquidation of the
Company and is otherwise without recourse to Borrower or any member or partner
therein.
This Note shall have the effect of an instrument under seal.
Witness: Borrower:
----------------------------------- ---------------------------------------
D-4
EXHIBIT E
FORM OF FUNDING NOTICE
$
-------------
Re: FUNDING OF CAPITAL TO ▇▇▇▇▇▇/AEW, LLC
Gentlemen:
Reference is hereby made to the Limited Liability Company Agreement of
▇▇▇▇▇▇/AEW LLC, dated as of February __, 1999, (the "Operating Agreement").
Capitalized terms not otherwise defined shall have the meaning ascribed to them
in the Operating Agreement.
Pursuant to Article III of the Operating Agreement, you are advised, as
the ______________ Member of the Company, that the ________ Member has
determined that Capital is required to fund [Acquisition/Redevelopment Costs/
Cash Flow Deficits/Pursuit Costs/Preservation Capital] in the aggregate amount
of $_________.
Each Member is hereby requested to contribute, in the form of cash or cash
equivalents, fund in the amount of its Proportionate Share (as set forth below)
of such required Capital within [INSERT APPROPRIATE TIME PERIOD WHICH SHALL NOT
BE LESS THAN AS SET FORTH IN ARTICLE III] of the date of this notice.
[add description of reason for capital contribution]
Contributions Percentage Interest
------------- -------------------
AEW Partners III, L.P. $ __%
▇▇▇▇▇▇ Hotel Properties, L.P. $ __%
TOTAL 100%
E-1
▇▇▇▇▇▇ HOTEL PROPERTIES, L.P.
By: ▇▇▇▇▇▇ Lodging Company, its general partner
By: ___________________________
Name:
Title:
[or]
AEW PARTNERS III, L.P., a Delaware limited
partnership
By: AEW III, L.L.C., a Delaware limited
liability company, its general partner
By: AEW Partners III, Inc., its
managing member
By: ___________________
Name:
Title:
E-2
EXHIBIT F
INSURANCE REQUIREMENTS
A. INSURANCE. The Class A Member shall arrange, in consultation with the
Operating Member, for all property and liability insurance with respect to each
Property naming the Company and any Subsidiary Company, as applicable, as
insured and having Approved coverages consistent with comparable facilities in
the area. The Company's Insurance Limits Requirements are set forth on EXHIBIT
F-1, which Exhibit may be amended or replaced from time to time as Approved.
Insurers must have an A.M. Best's rating of A-VII or higher. The cost of
premiums for such insurance shall be allocated as an operating expense of each
Property payable from the applicable Property Account or otherwise payable by
the Company if not paid by a tenant under a Lease. At the Class A Member's
election, any such insurance may be blanketed with other insurance carried by
the Company (so long as the required coverages are not diminished), in which
case a pro rata share of the premiums, as reasonably determined by the Class A
Member, shall be chargeable to the applicable Property or Properties as an
operating expense. All such insurance maintained by the Company shall be primary
and not contributing with respect to the coverages maintained pursuant to this
Agreement. The Class A Member shall furnish the Operating Member with evidence
of the coverages and limits then in effect, upon request.
B. INSURANCE CLAIMS. Subject to the provisions of the Leases, the Company
or the Company's insurer shall have the right, at its option (chargeable as an
operating expense of the applicable Property), to conduct the defense of any
claim, demand or suit arising out of the ownership, operation, development or
management of the Properties. The foregoing is not intended to affect the
general requirements of this Agreement with respect to the operation,
maintenance and management of the Properties or with respect to any indemnities
by either party hereunder. The Operating Member and the Class A Member shall aid
and cooperate in every reasonable way with respect to such insurance and any
claim or loss thereunder. The Operating Member shall notify the Class A Member
promptly upon receiving notice of any casualty, loss, injury, claim or
threatened claim, condition or other event which the Operating Member believes
may result in a claim under any insurance policy maintained hereunder.
C. OPERATING MEMBER'S INSURANCE. Except as expressly set forth herein or
in an Approved Annual Business Plan or Approved Annual Budget, the Operating
Member shall maintain at its own expense, the following minimum insurance
coverages and limits:
(i) Worker's compensation as required by law;
(ii) Employer's Liability in jurisdictions where employer's
liability insurance is required by law -- $100,000 each accident; $100,000
disease -- each employee; $500,000 disease -- policy limit (or, if higher,
such minimum limits as may be required to satisfy umbrella liability
insurance requirements);
F-1
(iii) Commercial General Liability Insurance: bodily injury and
property damage with limits of at least $1,000,000 each occurrence and
$2,000,000 in the aggregate; and Excess Liability Coverage of at least
$5,000,000;
(iv) Automobile Liability -- As to any vehicle owned, non-owned or
hired by the Operating Member, $1,000,000 covering losses due to the
insured's liability for bodily injury to others or to the property or
others; as to Medical Expenses -- $5,000 per person per accident; and
(v) Comprehensive crime insurance (including Employee Dishonesty)
with limits and terms reasonably acceptable to the Class A Member or a
fidelity bond reasonably acceptable to the Class A Member.
The premium for all insurance required to be maintained by the Operating
Member under this Paragraph shall be at the Operating Member's own expense. The
minimum A.M. Best's rating of each insurer shall be A-/VII. The Operating Member
shall furnish the Class A Member with certificates evidencing the aforesaid
coverages, which shall include provisions to the effect that the Class A Member
shall be given at least 30 days' prior written notice of cancellation of or any
material change in any of the aforesaid policies. The Class A Member shall be
named as an additional insured with respect to the Operating Member's excess
liability policies and as a loss payee with respect to the coverage described in
clause (v).
D. PAYMENTS AND CERTIFICATES. Unless otherwise directed by the Class A
Member, Operating Member shall pay or cause to be paid as they become due all
premiums for the insurance required hereunder. Not later than 30 days if
commercially available (but in no event fewer than 10 days) prior to the
expiration of each such policy, the Class A Member shall deliver to the
Operating Member a certificate of insurance and copies of the insurance policies
evidencing the insurance required to be provided for a period of not less than
one year and evidence of payment (upon payment by the Operating Member for and
on behalf of the Company); said certificates shall obligate the insurer to give
the Operating Member not less than 30 days prior written notice of the
cancellation or material amendment of any insurance required to be carried under
this Agreement. The Operating Member shall pay or cause to be paid insurance
premiums as to each Property out of the applicable Property Account, to the
extent funds are available therefor, provided that the Operating Member shall
not refrain from paying any such insurance premium or causing the same to be
paid when due, nor otherwise permit insurance coverage to lapse as to any
Property to be insured hereunder, unless specifically authorized by the Approved
Asset Business Plan or as otherwise Approved.
E. COMPLIANCE WITH POLICIES. The Operating Member shall use commercially
reasonable efforts to cause the Company to comply with: (i) all of the
provisions of each such insurance policy affecting each Property and (ii) all of
the requirements of the insurers thereunder applicable to the Company or, in the
case of each such Property, to improvements
F-2
located on each such Property or to the use, manner of use, occupancy,
possession, operation, maintenance, alteration, repair or restoration of any of
the improvements located on each such Property. The Operating Member, upon its
knowledge of same, shall notify the Class A Member of any condition which would
cause said Property to be in violation of any insurance requirements with
respect to said Property. The foregoing shall not be construed to require the
Company to make any structural changes or improvements to any Property or to
expend any funds not provided in the Approved Budgets.
F. CONTRACTORS' AND SUBCONTRACTORS' INSURANCE. The Operating Member shall
cause all material service contracts and all construction contracts with respect
to the Properties (including any Related Party Agreements) to require the
contracting party thereunder to maintain insurance coverage, at such party's
expense, with such limits and complying in all other respects with the relevant
insurance requirements set forth in Exhibit F-2 and the Lease for such Property.
The Operating Member shall obtain and keep on file a certificate of insurance
for each service contract and major subcontract which shows that each such party
is so insured. The Operating Member shall not waive or permit to be waived any
such requirements without the Class A Member's prior written consent. The
Operating Member shall obtain from each party to a service contract
indemnification and hold harmless provisions in favor of the Company and each of
the Members in accordance with industry standards.
G. WAIVER OF SUBROGATION. The Members agree that with respect to any
hazard, liability, casualty or other loss or claim which is covered by insurance
then carried (or required to be carried pursuant to the provisions herein) by
either Member, (a) the party carrying such insurance and suffering such loss
releases the other party of and from any and all claims with respect to such
loss; and (b) their respective insurance companies shall have no right of
subrogation against the other party or their respective agents, contractors,
employees, licensees or invitees on account thereof.
F-3
EXHIBIT F-1
COMPANY
INSURANCE LIMITS REQUIREMENTS
INSURANCE. The Class A Member shall keep the Properties insured, or cause
tenants under Leases to keep the Properties insured, at all times throughout the
term of this Agreement with policies of insurance of the type set forth below:
(a) PROPERTY INSURANCE. Property insurance on an "All Risk" basis,
including, without limitation, flood and earthquake insurance, with a full
replacement cost endorsement and an agreed amount endorsement (including
builder's risk during any period or periods of time that construction or
remodeling is being performed on any Properties), in an amount equal to 100% of
the full replacement cost of all improvements (excluding only the reasonable
value of footings and foundations) and the Company's contents therein,
determined to the reasonable satisfaction of the Class A Member. Deductibles
shall not exceed $10,000, except $50,000 for Flood and Earthquake (5% of values
for California assets).
(b) BOILER INSURANCE. Policies of insurance against loss or damage
arising from incidents relating to the air conditioning and/or heating system,
electrical systems, fly-wheels, steam pipes, steam turbines, steam engines,
steam boilers, other pressure vessels, high pressure piping and machinery, if
any, installed in the buildings and improvements, for an amount reasonably
satisfactory to the Class A Member.
(c) LIABILITY INSURANCE. Policies of commercial general liability
insurance on an occurrence basis against claims for bodily injury and property
damage with limits of liability of at least $1,000,000 per occurrence and
$2,000,000 in the aggregate per location, with contractual liability coverages.
(d) UMBRELLA LIABILITY INSURANCE. Umbrella liability insurance with
limits of liability of at least $50,000,000 each occurrence and $50,000,000
aggregate.
(e) BUSINESS INTERRUPTION AND/OR LOSS OF RENTAL VALUE INSURANCE.
Business interruption and/or loss of rental insurance for a period of twelve
months in an amount determined to the reasonable satisfaction of the Class A
Member by completion on an annual basis of a hotel business interruption
worksheet.
(f) FLOOD INSURANCE. If any Property is located in an area
designated by any governmental agency as an area of special flood hazard,
federal flood insurance will be required.
(g) WORKERS' COMPENSATION. Workers' Compensation Insurance required
by the laws where each Property is located, if the Company has employees.
F-1-1
(h) EMPLOYERS LIABILITY. $500,000 each occurrence; $500,000 each
employee-disease; and $500,000 policy limit-disease, if the Company has
employees.
(i) AUTOMOBILE LIABILITY. If there is any vehicle owned, leased, or
hired by the Company, coverage of $1,000,000 covering losses due to the
insured's liability for bodily injury to others or to the property of others
and, as to medical expenses, $5,000 per person per accident.
(j) COMPREHENSIVE CRIME. If the Company or any Subsidiary Company
has employees, comprehensive crime insurance (including Employee Dishonesty)
with limits and terms reasonably acceptable to the Class A Member or a fidelity
bond reasonably acceptable to the Class A Member.
(k) LIQUOR LIABILITY INSURANCE. Liquor Liability insurance with
limits of $5,000,000 each common cause and $5,000,000 in the aggregate;
Garagekeepers Legal Liability insurance with limits of $1,000,000 for collision
coverage and $1,000,000 for other-than-collision coverage, if the hotel offers
valet parking or otherwise takes custody of guests' vehicles; Innkeepers Legal
Liability and Safe Deposit Box Liability insurance with a $50,000 limit.
(l) ADDITIONAL INSURANCE. Insurance with respect to such other
insurable risks relating to the Properties, the Subsidiary Companies or the
Company in such amounts and containing such terms and conditions as the Class A
Member may reasonably require from time to time.
Such insurance may be issued as blanket insurance. All such insurance
policies shall be written on such terms, in such form and for such periods and
amounts as the Class A Member shall from time to time reasonably designate or
approve, shall be primary and without right of contribution from other insurance
which may be available, shall waive any right of set off, counterclaim or
subrogation, shall provide that with respect to the Class A Member, the
insurance shall not be invalidated by any action or inaction by the Operating
Member, and shall provide that they shall not be canceled or amended without at
least thirty (30) days' prior written notice to both the Class A Member and the
Operating Member. The Company, or Subsidiary Company if applicable, shall be the
Named Insured and the Class A Member and the Operating Member (and the Company
if applicable) shall be Additional Named Insureds on all policies.
F-1-2
EXHIBIT F-2 (CONSTRUCTION CONTRACTS)
INSURANCE AND INDEMNIFICATION
INDEMNIFICATION
The Contractor agrees to indemnify and hold the Owner harmless from all
claims for bodily injury and property damage that may arise from the
Contractor's operations under this Agreement.
CONTRACTOR'S LIABILITY INSURANCE
The Contractor shall purchase and maintain such insurance as will protect it
from the claims set forth below which may arise out of or result from the
Contractor's operations under this Agreement whether such operations be
completed by Contractor or by any Subcontractor or by any person directly or
indirectly employed by Contractor or any Subcontractor, or by any person for
whose acts Contractor or any Subcontractor may be liable:
1. Claims under workers' compensation, disability benefit and other similar
employee benefit acts which are applicable to the Work to be performed.
2. Claims for damages because of bodily injury, occupational sickness or
disease, or death of employees under any applicable employer's liability law.
3. Claims for damages because of bodily injury, or death of any person other
than Contractor's employees.
4. Claims for damages insured by usual personal injury liability coverage
which are sustained (a) by any person as a result of an offense directly or
indirectly related to the employment of such person by the Contractor or (b)
by any other person.
5. Claims for damages, other than to the Work itself, because of injury to or
destruction of tangible property, including loss of use therefrom.
6. Claims for damages because of bodily injury or death of any person or
property damage arising out of the ownership, maintenance or use of any motor
vehicle.
The Contractor's Commercial General Liability Insurance shall include
premises/operations (including explosion, collapse and underground coverage),
elevators, independent contractors, completed operations, and blanket
contractual liability on all written contracts, all including broad form
property damage coverage.
The Contractor's Commercial General, Automobile, Employers and Umbrella
Liability Insurance shall be written for not less than limits of liability as
follows:
a. Commercial General Liability
BODILY INJURY AND PROPERTY DAMAGE AS REQUIRED BY EXHIBIT F-2
Page 1 of 3
b. Comprehensive Automobile Liability
BODILY INJURY AND PROPERTY DAMAGE $1,000,000 EACH PERSON
$1,000,000 EACH OCCURRENCE
c. Employers Liability
EACH ACCIDENT $500,000
DISEASE - POLICY LIMIT $500,000
DISEASE - EACH EMPLOYEE $500,000
d. Umbrella Liability
BODILY INJURY AND PROPERTY DAMAGE AS REQUIRED BY EXHIBIT F-2
(EXCESS OF COVERAGES a, b & c ABOVE)
All Subcontractors shall carry the same coverages and limits as specified
above, unless different limits are specifically negotiated with Owner.
The foregoing policies shall contain a provision that coverages afforded
under the policies will not be canceled or not renewed until at least sixty
(60) days' prior written notice has been given to the Owner. Certificates of
Insurance showing such coverages to be in force shall be filed with the Owner
prior to the commencement of the Work and prior to each renewal. Coverage for
Completed Operations must be maintained for three years following completion
of the work and certificates evidencing this coverage must be provided to the
Owner.
The minimum A.M. Best's rating of each insurer shall be A-/VII. The Owner
shall be named as an Additional Insured under Contractor's Commercial General
and Umbrella Liability Insurance policies.
OWNER'S LIABILITY INSURANCE
The Owner shall be responsible for purchasing and maintaining his own
liability insurance and, at its option, may purchase and maintain such
insurance as will protect it against claims which may arise from operations
under this Agreement.
INSURANCE TO PROTECT PROJECT
The Owner shall purchase and maintain property insurance upon the entire
Project for the full replacement cost at the time of any loss. This insurance
shall be on an "All Risks" basis, with Flood and Earthquake coverage provided
at the option of the Owner.
Contractor's responsibilities include:
- insuring all materials, on an All Risks basis for the full replacement
cost, in transit and until delivered to the project site;
- insuring all tools and equipment used in the installation process;
- assuming costs within the deductible(s) if a property loss is caused by
the Contractor's failure to take reasonable steps to prevent the loss;
- protecting the site to prevent both natural and man-caused (i.e. arson,
theft, vandalism)
Page 2 of 3
losses.
PROPERTY INSURANCE LOSS ADJUSTMENT
Any insured loss shall be adjusted with the Owner and made payable to the
Owner, subject to any applicable mortgagee clause.
Page 3 of 3
EXHIBIT F-2
CONTRACTOR AND SUBCONTRACTOR INSURANCE LIMIT REQUIREMENTS
DIVISION TRADE DESCRIPTION TRADE NUMBER FOR
LIMITS REQUIRED (SEE
ATTACHED)
1. Sitework Earthwork 3
Excavation 5
Grading 2
Paving 2
Piling/Caisson 3
Retention 4
2. Concrete Formwork 5
Precasts 5
Structural 5
3. Masonry Masonry 5
4. Metal And Structural Metal Deck 4
Misc. Metals 2
Structural Steel 5
5. Carpentry Millwork 2
Rough Carpentry 2
Wood Doors 2
6. Moisture Protection Caulking 3
Dampproofing 3
Roofing/Sheet Metal 5
Waterproofing 3
7. Doors, Windows Curtainwall 5
And Glass Glass, Glazing & Aluminum 3
Hardware 1
Hollow Metal Work 1
8. Finishes Acoustic 2
Ceramic & Quarry 2
Covering 2
Lathe, Plaster & Drywall 2
Resilient Floor 2
Paint & Vinyl Wall 2
Page 1 of 4
DIVISION TRADE DESCRIPTION TRADE NUMBER FOR
LIMITS REQUIRED (SEE
ATTACHED)
9. Specialties Access Flooring 1
Partitions 1
Toilet Accessories 1
10. Equipment Crane Operations 4
11. Furnishings Suppliers 1
12. Special Asbestos Abatement 5
Construction Blasting 5
13. Conveying Systems Elevators 5
Escalators 5
Conveyers 3
Dumbwaiters 3
14. Mechanical Fire Protection System 4
Plumbing 4
15. HVAC 5
16. Electrical Electrical 5
17. Demolition More Than 3 Stories 10
3 Stories Or Less 5
General Contractor Major Project 50
General Contractor Performing Following Work: 10
New construction Under 4 Stories and Less Than 150,000 Sq. Ft.
Construction Contract Up to $15,000,000
Renovation Less Than 15% of Existing Structure
Any unusual or specialized renovation or repair work undertaken by the
General Contractor under this contract may require other limits of liability
than those listed above. Owner will make any determination of revised
liability limits in consultation with its risk management staff.
Page 2 of 4
EXHIBIT F-2 (CONT'D)
CONTRACTOR AND SUBCONTRACTOR INSURANCE LIMIT REQUIREMENTS
The following are Limits of Liability required depending on the trade number
of the Contractor:
1. $1,000,000 Each Occurrence
$1,000,000 General Aggregate
$1,000,000 Products & Completed Operations Aggregate
2. $1,000,000 Each Occurrence
$2,000,000 General Aggregate
$2,000,000 Products & Completed Operations Aggregate
3. $2,000,000 Each Occurrence
$2,000,000 General Aggregate
$2,000,000 Products & Completed Operations Aggregate
$1,000,000 Umbrella Each Occurrence/Aggregate
OR
$1,000,000 Each Occurrence
$2,000,000 General Aggregate
$2,000,000 Products & Completed Operations Aggregate
$2,000,000 Umbrella Each Occurrence/Aggregate
4. $2,000,000 Each Occurrence
$2,000,000 General Aggregate
$2,000,000 Products & Completed Operations Aggregate
$2,000,000 Umbrella Each Occurrence/Aggregate
OR
$1,000,000 Each Occurrence
$2,000,000 General Aggregate
$2,000,000 Products & Completed Operations Aggregate
$3,000,000 Umbrella Each Occurrence/Aggregate
5. $2,000,000 Each Occurrence
$2,000,000 General Aggregate
$2,000,000 Products & Completed Operations Aggregate
$3,000,000 Umbrella Each Occurrence/Aggregate
OR
Page 3 of 4
EXHIBIT F-2 (CONT'D)
$1,000,000 Each Occurrence
$2,000,000 General Aggregate
$2,000,000 Products & Completed Operations Aggregate
$4,000,000 Umbrella Each Occurrence/Aggregate
10. $2,000,000 Each Occurrence
$2,000,000 General Aggregate
$2,000,000 Products & Completed Operations Aggregate
$8,000,000 Umbrella Each Occurrence/Aggregate
OR
$1,000,000 Each Occurrence
$2,000,000 General Aggregate
$2,000,000 Products & Completed Operations Aggregate
$9,000,000 Umbrella Each Occurrence/Aggregate
50. $2,000,000 Each Occurrence
$2,000,000 General Aggregate
$2,000,000 Products & Completed Operations Aggregate
$49,000,000 Umbrella Each Occurrence/Aggregate
OR
$1,000,000 Each Occurrence
$2,000,000 General Aggregate
$2,000,000 Products & Completed Operations Aggregate
$50,000,000 Umbrella Each Occurrence/Aggregate
Page 4 of 4
EXHIBIT F-2 (SERVICE CONTRACTS)
INSURANCE AND BOND
COVERAGE. Contractor shall purchase and maintain insurance during the
entire Term of the Contract for the benefit of the Contractor and
Owner (as their interest may appear) with terms and coverages reasonably
satisfactory to Owner, and with insurers having a minimum A.M. Best
rating of A-/VII, and with such increases in limits as Owner may from
time to time reasonably request, but initially Contractor shall maintain
the following coverages in the following amounts:
(i) Commercial General Liability Insurance naming Owner, and
Owner's management, leasing and development agents as additional
insureds, with coverage for premises/operations, personal and
advertising injury, products/completed operations and contractual
liability with limits of liability not less than those limits specified
in Exhibit F-2.
(ii) Auto Liability Insurance covering any owned, leased or borrowed
vehicle used to fulfill this contract with a combined single limit
of liability of $1,000,000.
(iii) Workers' Compensation Insurance with statutory benefits and
Employers Liability Insurance with the following amounts: Each
Accident - $100,000; Disease - Policy Limit - $500,000; Disease -
Each Employee - $100,000
(iv) Umbrella Liability insurance excess of coverages (i), (ii)
and (iii) above with limits not less than those limits specified in
Exhibit F-2.
(v) Fidelity Bond covering all employees in the amount of
$500,000 with Owner shown as loss payee as its interest may appear.
Contractor shall, prior to the commencement of the Contract Term and
on each anniversary of the Commencement Date and/or renewal date
thereof, furnish to Owner certificate(s) evidencing such coverage, which
certificate(s) shall state that such insurance coverage may not be
changed or canceled without at least thirty (30) days prior written
notice to Owner and Contractor. The insurance maintained by Contractor
shall be deemed to be primary insurance and any insurance maintained by
Owner shall be deemed secondary thereto.
EXHIBIT "F-2"
SERVICE CONTRACTOR INSURANCE LIMITS REQUIREMENTS
TYPE OF SERVICE NUMBER FOR LIMITS
--------------- REQUIRED
-----------------
Garbage Removal and Disposal including 2
dumpster maintained on premises.
Telephone and T.V. Equipment and Master Wiring 10 (exterior)
and Antennas Service 5 (interior)
Snow Removal Service 2
Sprinkler System Service and Repair 3
Alarm Systems Service and Repair 3
Signage and Light Post Maintenance 2
Landscaping and Lawn Maintenance 1
Electrical Maintenance 1
Parking Surface Maintenance and Striping 1
Asbestos Abatement and Hazardous Material 5
Removal
Overhead and Revolving Door Services 2
Interior & Exterior Cleaning and Janitorial 2
Fire Extinguishing in Restaurants 2
Elevator/Escalator Service & Maintenance 5
Window Washing and Swing Station Equipment 3
Services
Security & Guard Services 2
TYPE OF SERVICE NUMBER FOR LIMITS
--------------- REQUIRED
-----------------
Special Events and Exhibition Call Risk Mg
Heating, Ventilation and Air Conditioning 2
Service
Plumbing Service 2
Metal Cleaners and Refinishers 3
Roofers 10
Office Equipment Service 1
EXHIBIT "F-2" (cont.)
SERVICE CONTRACTOR INSURANCE LIMITS REQUIREMENTS
The following are limits of liability required depending on the trade number
of the Contractor:
1. $1,000,000 Each Occurrence
$1,000,000 General Aggregate
$1,000,000 Each Occurrence
$2,000,000 General Aggregate
$2,000,000 Products & Completed Operations Aggregate
$1,000,000 Each Occurrence
$2,000,000 General Aggregate
$2,000,000 Products & Completed Operations Aggregate
$1,000,000 Umbrella Each Occurrence/Aggregate
OR
$1,000,000 Each Occurrence
$2,000,000 General Aggregate
$2,000,000 Products & Completed Operations Aggregate
$2,000,000 Umbrella Each Occurrence/Aggregate
4. $2,000,000 Each Occurrence
$2,000,000 General Aggregate
$2,000,000 Products & Completed Operations Aggregate
$2,000,000 Umbrella Each Occurrence/Aggregate
OR
$1,000,000 Each Occurrence
$2,000,000 General Aggregate
$2,000,000 Products & Completed Operations Aggregate
$3,000,000 Umbrella Each Occurrence/Aggregate
EXHIBIT "F-2" (cont.)
SERVICE CONTRACTOR INSURANCE LIMITS REQUIREMENTS
5. $2,000,000 Each Occurrence
$2,000,000 General Aggregate
$2,000,000 Products & Completed Operations Aggregate
$3,000,000 Umbrella Each Occurrence/Aggregate
OR
$1,000,000 Each Occurrence
$2,000,000 General Aggregate
$2,000,000 Products & Completed Operations Aggregate
$4,000,000 Umbrella Each Occurrence/Aggregate
10. $2,000,000 Each Occurrence
$2,000,000 General Aggregate
$2,000,000 Products & Completed Operations Aggregate
$8,000,000 Umbrella Each Occurrence/Aggregate
OR
$1,000,000 Each Occurrence
$2,000,000 General Aggregate
$2,000,000 Products & Completed Operations Aggregate
$9,000,000 Umbrella Each Occurrence/Aggregate
EXHIBIT G-1
FEES
(a) BASE FEE. For each month period during the term of this Agreement,
Operating Member shall be entitled to a base fee equal to the product of (i) the
aggregate Contributions made by the Members to Company (calculated as of the end
of the applicable month) and (ii) [*]. The base fee shall be payable
quarterly in arrears on the last of March, June, September and December,
beginning on March 31, 1999. The base fee shall be prorated for any month which
consists of less than 30 days at the beginning or end of the term.
Notwithstanding the above, during the first twelve (12) months of the term of
this Agreement, the base fee shall not be less than [*] per month.
(b) ACQUISITION FEE. At the time Company acquires any Lodging Facility
during the term of this Agreement, Operating Member shall be entitled to an
acquisition fee equal to [*] percent [*] of the gross purchase price paid by
Company to the seller of such Lodging Facility. Such fee shall only be deemed
earned if the Company acquires such Lodging Facility and not otherwise. Such
fee shall be payable upon the acquisition of the Lodging Facility by Company.
If the Company acquires an interest in an Entity which owns or acquires a
Lodging Facility, the acquisition fee shall be prorated based on the
Company's interest in the Entity. The Operating Member shall also be entitled
to an acquisition fee equal to [*] percent [*] of the amount of Capital
Expenditures (as hereinafter defined) Approved as part of an
Acquisition/Redevelopment Budget and actually expended. Such fee shall be
deemed earned upon the expenditure of such funds by the Company and shall be
payable quarterly.
(c) INCENTIVE FEE. In addition to the Base Fee, if for any full
calendar year during the term of this Agreement, the Company has achieved a
"Return on Costs" greater than [*], all as determined as set forth below,
Operating Member shall be entitled to an incentive fee for such calendar year
equal to the product of (i) the aggregate Contributions made by the Members
to the Company (calculated as of the end of the applicable calendar year)
times (ii) [*] percent [*]. In addition, if for any full calendar year
during the term of this Agreement, the Company has achieved a "Return on
Costs" greater than [*], all as determined as set forth below, Operating
Member shall be entitled to an additional incentive fee for such calendar
year equal to the product of (ii) the aggregate Contributions made by the
Members to the Company (calculated as of the end of the applicable calendar
year) times (ii) [*] percent [*]. Such amount or amounts shall be payable
annually in arrears within fifteen (15) days after Return on Costs is
calculated and verified for such calendar year. If the payment of the
incentive fee causes Return on Costs to be less than [*] or [*], as the case
may be, the incentive fee shall be reduced to an amount which will result in
Return on Costs to equal [*] or [*], as the case may be. For purposes of this
provision, "Return on Costs" shall be calculated in accordance with the
following formula:
Return on Costs= NOI/TC
G-1-1
where, NOI equals the amount by which (i) the gross operating
receipts of the Company and each Subsidiary Company for such calendar year
(but excluding any gross receipts arising out of a Capital Transaction or
any duplication of receipts between the Company and any Subsidiary
Company) exceeds the sum of (ii) (a) the gross operating expenses of the
Company and each Subsidiary Company for such calendar year, including
without limitation, real estate taxes, insurance, utility costs and the
fees and expenses payable to the Operating Member hereunder (excluding
incentive fees), rental payments and the like (but excluding debt service
payments, capital expenditures and other expenditures of a capital nature
(such capital expenditures and expenses, "Capital Expenditures") and
additions to reserves); and (b) an annual capital expense reserve equal to
4% of the amount of gross operating receipts set forth in (i) above (the
"Annual Capital Expense Reserve"); and
TC equals the sum of (i) all Acquisition/Redevelopment Costs of the
Properties incurred by the Company and each Subsidiary Company, including,
without limitation, all Capital Expenditures Approved as part of the
Acquisition/Redevelopment Budget (such Capital Expenditures, the
"Anticipated Capital Expenditures") and (ii) the amount, if any, by which
the aggregate amount of all Capital Expenditures other than Anticipated
Capital Expenditures (such Capital Expenditures, the "Unanticipated
Capital Expenditures") exceed the aggregate reserves established by the
Company and each Operating Company for all Unanticipated Capital
Expenditures (such reserves shall be deemed to equal the cumulative total
of the Annual Capital Expense Reserve from the inception of the Company
through the end of the applicable calendar year).
In calculating Return on Costs, appropriate adjustments shall be made to
NOI and TC to reflect the purchase or sale of any Property during the applicable
calendar year.
G-1-2
EXHIBIT G-2
REIMBURSABLE EXPENSES
The Operating Member will only be entitled to reimbursement of Third Party
costs and expenses reasonably incurred if such expenses consist of Pursuit Costs
or have otherwise been Approved in an Approved Budget as costs to be reimbursed
to the Operating Member. In no event shall the Operating Member be entitled to
any reimbursement for any Excluded Cost.
The following expenses or costs ("Excluded Costs") incurred in connection
with the services to be provided by Operating Member hereunder will be at the
sole cost and expense of Operating Member and will not be reimbursed by the
Company or any Subsidiary Company from the Property Account or otherwise:
- Costs incurred by Operating Member for salary and wages, payroll taxes,
workmen's compensation, bonus compensation, incentive compensation,
retirement plan payments, travel expenses and other benefits payable to
Operating Member's employees;
- Costs incurred by Operating Member for in-house accounting and reporting
systems, software or services, furnished by Operating Member under this
Agreement, as distinguished from third party accounting and reporting
costs (as for example, the annual auditing costs of accountants);
- Costs incurred by Operating Member for forms, papers, ledgers and other
supplies, equipment, copying and telephone of any kind used in Operating
Member's office at any location other than the Properties;
- Costs incurred by Operating Member for electronic data processing
equipment, systems software or services, or any pro rata charge therefor;
- Costs incurred by Operating Member for political contributions;
- Costs incurred by Operating Member for advances made to employees and cost
of travel by Operating Member's employees or agents other than reasonable
and customary travel to and from the Properties in connection with the
performance of Operating Member's services hereunder;
- Costs attributable to losses which are covered by the indemnity
obligations of Operating Member;
- Costs incurred by Operating Member for comprehensive crime insurance or
fidelity bonds purchased by Operating Member for its own account;
- Costs incurred by Operating Member for training and hiring expenses,
including but not limited to employment and employment agency fees;
G-2-1
- Costs incurred by Operating Member for any insurance carried by Operating
Member, whether or not required to be carried by Operating Member under
this Agreement;
- Costs incurred by Operating Member for advertising expenses of Operating
Member not related to marketing any Property for lease;
- Costs incurred by Operating Member for dues of Operating Member or any of
its employees in professional organizations or for any of Operating
Member's employees participating in industry conventions or meetings;
G-2-2
EXHIBIT H
PORTFOLIO BUSINESS PLAN
The Portfolio Business Plan shall set forth the overall strategic plan for
acquiring, asset managing, leasing, financing and disposing of the Properties,
general guidelines for the development of individual Asset Business Plans,
including, but not limited to the Company's general leasing and financial
strategy, policies and procedures, forms of all required statements and reports,
any proposed changes (unless previously approved by the Class A Member) to forms
of any documents required to be approved by the Class A Member, the format of
Asset Business Plans, the form, scope and content of all required budgets,
financial projections taking into account the entire capital structure of the
Company and such other matters pertaining to the ownership, leasing and asset
management of the Properties and the performance of Operating Member's services
hereunder as the Class A Member may reasonably specify.
H-1
EXHIBIT H-2
ASSET BUSINESS PLANS AND ANNUAL BUDGETS
I. ASSET BUSINESS PLANS. Each Asset Business Plan shall be prepared in
accordance with the format specified in the Portfolio Business Plan or otherwise
approved by the Class A Member, and shall set forth, without limitations and in
addition to the budget information detailed in Section II below, the following:
(i) in narrative form, a basic description of the Property and
Operating Member's recommended course of action with respect to the
Property (including, without limitation, any strategic or tactical actions
relating to sale or disposition of the Property, and an explanation of the
reasons underlying such recommendations; and
(ii) as to each Property, a narrative report including details on
Operating Member's planned activities, any proposed expansion, acquisition
and renovation plans and strategy, the status of current and projected
occupancy; a commentary on physical condition, including any deferred
maintenance items; a summary of market conditions, comparables and such
other summary market statistics as the Class A Member may reasonably
request; a status report of all competitive projects known to Operating
Member in the market area; and detailed plans for the renovation, repair
and maintenance, leasing, asset management and marketing of each Property,
including for this purpose any analysis of average daily room rates
facility fees and projected occupancy and any proposed updates or
revisions to any existing plans provided by tenants under Leases; and such
other information as the Class A Member shall reasonably have requested.
In addition, the Operating Member shall use commercially reasonable
efforts to require any tenant under a Lease (a "Lessee") to provide the
Operating Member with the following information for inclusion in the Asset
Business Plan:
(i) Lessee's reasonable estimate (on a monthly basis) of gross
revenues, taxes and property insurance, and necessary reserves for the
next calendar year, itemized in a reasonable manner consistent with the
Uniform System of Accounts (the "Operating Budget"), together with the
assumptions (in narrative form) utilized in preparing the Operating
Budget;
(ii) A budget of Lessee's recommended renewals, revisions,
rebuilding, replacements, substitutions or improvements to the Property
for the next calendar year which are of a capital nature under the Uniform
System of Accounts (the "Capital Budget"), including Lessee's reasonable
estimates for the cost of designs, plans and specifications, material,
labor (including installation), storage, consultants, travel, overhead,
sales tax and freight and a description of the extent of completion of any
partially completed capital improvements included in a previously approved
Capital Budget;
H-2-1
(iii) A description of the general marketing strategy which Lessee
intends to implement during the next calendar year to optimize both short
and long-term profitability of the Property, together with a marketing
plan that includes a positioning statement, competition analysis, group
sales quotas, sales action plans, media schedule, public relations plan,
travel schedule, pricing schedule, food and beverage strategies and
segmentation analysis;
(iv) Lessee's estimates of any amounts the Company (or Subsidiary
Company) will be required to provide as working capital or to fund
expenditures contemplated by the Capital Budget during the next calendar
year;
(v) A description of the current legal status of pending or
threatened suits, actions, proceedings, inquiries, or investigations
concerning the Property;
(vi) Any other matter deemed appropriate by Lessee or reasonably
requested by the Class A Member.
II. ANNUAL BUDGETS. As part of each Asset Business Plan, Operating Member shall
prepare and submit to the Class A Member for the Class A Member's approval each
year a budget for each Property, projecting all revenues expected to be received
with respect to such Property during the following one (1) calendar year,
together with projected capital requirements, projected occupancy and average
daily room rates, and projected expenses of the Company and Subsidiary
Companies. The Class A Member acknowledges that certain information contained in
the Annual Budget will be produced by tenants under Leases. The Operating Member
shall use commercially reasonable efforts to obtain all of the foregoing
information from such tenants and covenants to provide the Class A Member with
copies of all materials prepared by such tenants which the Operating Member
receives. Operating Member shall explain in reasonable detail any assumptions
used in projecting all revenue and Company costs, including fees payable to
Operating Member hereunder, real estate taxes, insurance and general and
administrative costs and proposed capital expenditures, and a comparison of
projected revenues and expenses against prior year actual (including an
explanation of material deviations). In such budget, Operating Member may
expressly correlate an income category with a corresponding expense category and
expressly provide that if the actual income category exceeds the budget, the
corresponding expense category in the budget shall be deemed increased by the
same percentage as the actual income with respect to such income category
exceeds the budgeted amount for such income category. For example, if in the
budget, Operating Member provides for corresponding income and expense
categories and in such budget the income category equals $100 and the
corresponding expense category equals $50, if actual income with respect to such
income category is $110, then the expense category will be deemed automatically
increased by a corresponding percentage (in this example 10%) to $55. Such
budgets shall be supplemented by a sales and marketing plan, a capital plan and
such information as the Class A Member may reasonably request the
H-2-2
Operating Member to produce, or obtain from tenants under Leases, from time to
time. The format of such budgets shall be reasonably acceptable to the Class A
Member.
▇-▇-▇
▇▇▇▇▇▇▇ ▇-▇
MONTHLY REPORTS
The Class A Member acknowledges that certain Property related information
contained in the Monthly Reports will be provided by tenants under Leases for
the purpose of monitoring gross revenues and the net worth of such tenants. The
Operating Member shall use commercially reasonable efforts to obtain all of the
foregoing information from such tenants and provide copies of all reports
required hereunder to the Class A Member on-line or by computer diskette.
The general requirements for all monthly statements and other financial
reports are as follows:
(i) The monthly statement and other reports required by the Class A Member
will include other items as reasonably specified in the Asset Business Plan; and
(ii) The monthly statement shall include, but not be limited to, the
following materials relating to the Company's or Subsidiary Company's ownership
of the Properties.
(A) A transmittal letter which highlights key financial matters
relating to the Company and the Subsidiary Company, including comments on
the performance of each Property and the status of any mortgage loan then
in default;
(B) A balance sheet as of month end, prepared on an accrual basis,
showing current month and prior month balances with the change from prior
month, an accrual basis statement of income and expense and a cash flow
statement reconciling from net income to net cash flow on a monthly and
year-to-date basis in each case on an individual and consolidated basis.
All expenses shall be included in such statements, regardless of the
source of payment.
(C) Intentionally Deleted
(D) A status report on the status of all capital improvements,
including analysis of expenditures to date, costs to complete and expected
completion date;
(E) A current detailed summary of leases, if any, (including, to the
extent such information is not provided elsewhere, vacancies, lease
expirations, security deposits, a calculation of lease commissions, status
of collection efforts and legal proceedings and other information
specified by owner) in a format reasonably acceptable to Owner;
(F) A so-called "booking or pace report" with respect to future
rooms and banquet revenues;
H-3-1
(G) Three-month cash flow forecasts, with an explanation of variances from
both budget and previous projections set forth in the Final Approval Package;
(H) Intentionally Deleted
(I) An itemized list of costs paid or reimbursed, together with the source
of payment, and an accounts payable listing;
(K) A budget versus actual variance report for the Company, the Subsidiary
Companies and gross revenues from the Properties for the then current month and
cumulatively year-to-date, showing variances from the Approved Budgets. Any
income statement or cash flow statement line item which indicates a variance of
more than the greater of: (a) $10,000, or (b) five percent (5%) in any one
budget line item or accounting category for the then current month or the
cumulative year-to-date total must be explained in detail satisfactory to the
Class A Member.
(L) A calculation of all fees which are due and payable;
(M) A status report on all pending acquisitions of any Proposed Property
or any mortgage loan being sought by the Operating Member in such form as is
reasonably specified by the Class A Member.
(N) A status report of pending litigation and collective bargaining
negotiations, if any;
(O) a market segmentation analysis; and
(P) a competitive market analysis from ▇▇▇▇▇ Travel Research.
H-3-2
EXHIBIT I
COMPETING ACTIVITIES
See attached
I-1
Exhibit to Section 6.4.1 of LLC Agreement
LIST OF HOTELS OWNED BY ▇▇▇▇▇▇
# PROPERTY NAME - LOCATION ROOMS
1 Hampton Inn - Charlotte (Lake ▇▇▇▇▇▇), NC 117
2 Holiday Inn - Charlotte (Lake ▇▇▇▇▇▇), NC 119
3 Marriott Hotel - Buffalo, NY 356
4 Marriott Hotel - Cleveland (Airport), OH 375
5 Marriott Hotel - Columbus, OH 300
6 Marriott Hotel - Cleveland (Beachwood), OH 403
7 Quality Suites - Melbourne, FL 208
8 Radisson Hotel - Berkeley, CA 373
9 Radisson Hotel - Ft. ▇▇▇▇▇▇, FL 157
▇▇ ▇▇▇▇▇▇▇▇ ▇▇▇▇▇▇ - ▇▇▇▇▇▇▇, ▇▇ 206
11 Hilton Hotel - Melbourne, FL 118
12 Holiday Inn - Raleigh (▇▇▇▇▇▇▇▇), NC 176
13 French Lick Springs Resort - French Lick, IN 485
14 Marriott Hotel - ▇▇▇▇ Valley, MD 392
15 Holiday Inn - Minneapolis, MN 196
16 Doubletree Hotel - Kansas City, MO 388
▇▇ ▇▇▇▇▇▇▇ ▇▇▇ - ▇▇▇ ▇▇▇▇▇, ▇▇ 199
18 Radisson Hotel - Highpoint, NC 251
19 Hilton Hotel - Knoxville, TN 317
20 Pink Shell Resort - Ft. ▇▇▇▇▇▇, FL 208
21 Doubletree Hotel - Bellevue, WA 208
22 Doubletree Hotel - Boise, ID 304
23 Doubletree Hotel - Colorado Springs, CO 299
▇▇ ▇▇▇▇▇▇▇▇▇▇ ▇▇▇▇▇ - ▇▇▇▇▇, ▇▇ 413
25 Doubletree Hotel - Portland (Downtown), OR 235
26 Doubletree Hotel - Portland (▇▇▇▇▇ Ctr), OR 476
27 Doubletree Hotel - Sacramento, CA 448
28 Doubletree Hotel - Spokane, WA 237
29 Doubletree Hotel - Springfield, OR ▇▇▇
▇▇ ▇▇▇▇▇▇▇▇▇▇ ▇▇▇▇▇ - ▇▇▇▇▇▇ ▇▇▇▇▇▇, ▇▇ 208
▇▇ ▇▇▇▇▇▇▇▇ ▇▇▇▇▇ - ▇▇. ▇▇▇▇▇▇, ▇▇ 283
I-2
EXHIBIT J-1
INFORMATION IN PRELIMINARY AND FINAL APPROVAL PACKAGES
Preliminary Package Information
(i) a term sheet identifying and describing the Proposed Investment
in general terms, including the ownership, location, occupancy status, number of
units and overall condition thereof (or if raw land, the acreage and potential
unit numbers, based on state and local land use laws) and containing such
information with respect to the relevant market and the demographics thereof as
the Class A Member may reasonably request;
(ii) an outline of the contemplated acquisition and leasing strategy
(I.E., the proposed deposit and closing schedule, leverage terms (as
applicable), acquisition price, potential lessees and acquisition, development
and permitting schedules and similar matters) and the development strategy
(consistent with the Portfolio Business Plan) with respect to all Proposed
Investments;
(iii) a preliminary form of a budget ("Acquisition/ Redevelopment
Budget") setting forth the estimated Acquisition/Redevelopment Costs and the
timing and amount of all projected due diligence associated with all stages of
the proposed acquisition and development including Operating Member's out of
pocket travel costs, title review, appraisal costs, legal expenses, Phase I
environmental work, engineering reports, an FF&E Survey and an ADA Survey;
(iv) preliminary economic projections (current year and beyond) for
the Proposed Investment;
(v) a summary narrative description of the conformity of the
Proposed Investment to the Portfolio Business Plan and the strategic objectives
of the Company; and
(vi) a summary memorandum describing all critical path items
anticipated in connection with a Proposed Investment, including, without
limitation, environmental reviews, approvals and orders of condition, if any,
that will be required in connection with such Proposed Investment; all issues
concerning zoning, governmental approvals, if any needed in connection with
operation of the Proposed Investment, licensing, operational permits and the
like.
▇-▇-▇
▇▇▇▇▇▇▇ ▇-▇
FINAL PACKAGE INFORMATION
As To Each Proposed Investment:
(i) a site plan;
(ii) floor plans (if an existing Property);
(iii) property description including the following items:
(1) Name and address of hotel
(2) Year constructed and last renovated
(3) Number of rooms and their square footage
(4) Owner and current operator
(5) Original developer, contractor and architect
(6) Land area and parking
(7) Typical room module
(8) Number of singles, doubles, kings, suites and meeting rooms
(9) Amenities (i.e., pool, tennis courts, lounges)
(iv) market survey/comparables including the following items:
(1) Aerial and property photographs and maps
(2) Major employers
(3) List of demand generators
(4) List of competitors including: name, affiliation, number of
rooms, quoted rates, and historic operations (where available
and within immediate trade area)
(5) Traffic counts on adjacent roads, if available
(6) Demographics (site, neighborhood, city, SMSA)
(7) Recent trends in hotel occupancies and rates
(8) Proposed future competition
(9) Proposed roadway changes
(v) if applicable, any proposed amendment of the Restricted Area
(vi) rent roll (if an existing Property);
(vii) historical operating experience (when available) including the
following items:
J-2-1
(A) Occupancy year to date
(B) Average daily rate year to date
(C) Revpar year to date
(D) Current operating statements
(E) Operating statements year to date and prior operating
statements
(F) Current land value and replacement cost estimate
(G) Real estate tax and utility verification
(viii) lease and marketing strategy including detailed information on
proposed lessees and Lease terms;
(ix) financial projections (current year and for at least five (5) years
beyond acquisition);
(x) preliminary capital expenditure strategy (current year and for at
least five (5) years beyond acquisition);
(xi) a revised and updated Acquisition/Redevelopment Budget;
(xii) any applicable refurbishment or improvement activities (if an
existing Property);
(xiii) a statement of asset replacement costs (if applicable);
(xiv) existing loan documents (when and as available and applicable
including summary of material terms);
(xv) all other material agreements (E.G., easement agreements, PUD
agreements, etc.), when and as available;
(xvi) a property engineering inspection report, when appropriate;
(xvii) a reasonably detailed report prepared by an environmental
engineering firm describing any and all hazardous materials or buried materials
located at the site of the Proposed Investment (including, without limitation,
oil, mattresses, tires, asbestos and the like), and potential environmental
issues and impacts that can be reasonably anticipated in connection with such
Proposed Investment;
(xviii) a list of exclusive use clauses and all other restrictions related
to the Proposed Investment;
(xix) if a leasehold, summary of the terms of the ground lease;
J-2-2
(xx) a title insurance commitment for the Proposed Investment;
(xxi) if raw land, an analysis of zoning and other land use requirements,
and a schedule for obtaining necessary land use permits and approvals;
(xxii) restaurant information, if applicable:
(A) Name
(B) Square footage and land area
(C) Number of seats
(D) Parking
(E) Lease summary including: Base rent, percentage rent, operating
history, term and credit
As to All Properties:
(xxiii) Financial projections of the Properties, including and excluding
the Proposed Investment (current year and for at least five (5) years beyond
acquisition) taking into account the Company's entire capital structure; and
(xxiv) such other information as the Class A Member shall by notice have
reasonably requested.
Each item shall be (a) in form and substance and (b) where applicable,
prepared by knowledgeable and reputable professionals, as is customary for such
items in institutional real estate investment transactions. Unless otherwise
requested by the Class A Member, the Operating Member shall provide the Class A
Member with each item upon the Operating Member's receipt thereof.
J-2-3
EXHIBIT K
REPRESENTATIONS AND WARRANTIES
1. REPRESENTATIONS AND WARRANTIES OF THE CLASS A MEMBER.
(a) The Class A Member is a limited partnership duly organized and validly
existing under the laws of the State of Delaware, with full power and authority
and legal right to be a Member of the Company and to carry on its business in
the manner and in the locations in which such business has been and is now being
conducted by it, to execute and deliver this Agreement and to perform its
obligations hereunder.
(b) No consent of any third party is required as a condition to the
entering into of this Agreement by the Class A Member other than such consent as
has been previously obtained.
(c) The execution and delivery of this Agreement has been duly authorized
and executed by the Class A Member and this Agreement constitutes the valid and
binding obligation and agreement of the Class A Member, enforceable in
accordance with its terms (subject to the effect of bankruptcy, insolvency or
creditor's rights generally, and to limitations imposed by general principles of
equity).
(d) In addition, the general partner of the Class A Member is a limited
partnership duly organized and validly existing under the laws of the State of
Delaware, with full power and authority and legal right to carry on its business
in the manner and in the locations in which such business has been and is now
being conducted by it and to execute and deliver this Agreement as general
partner of the Class A Member.
(e) Neither the execution and delivery of this Agreement, nor compliance
with the terms and provisions thereof, will result in any breach of the terms,
conditions or provisions of, or conflict with or constitute a default under, or
result in the creation of any lien, charge or encumbrance upon any property or
assets of the Class A Member pursuant to the terms of, any indenture, mortgage,
deed of trust, note, evidence of indebtedness, agreement or other instrument to
which the Class A Member may be party or by which it or they or any of its
properties or assets may be bound, or violate any provision of law, or any
applicable order, writ, injunction, judgment or decree of any court, or any
order or other public regulation of any governmental commission, bureau or
administrative agency.
(f) Except as in each instance previously disclosed to the Operating
Member in writing, there are no judgments presently outstanding and unsatisfied
against the Class A Member or any of its assets and neither the Class A Member
nor any of its assets is involved in any litigation at law or in equity, or in
any proceeding before any court, or by or before any governmental or
administrative agency, which judgment, litigation or proceeding could reasonably
be anticipated to have a material adverse effect on the Class A Member, the
Company or the Properties, and no such material judgment, litigation or
proceeding is, to the
K-1
best of the Class A Member's knowledge, threatened against the Class A Member or
any of its assets, and to the best of the Class A Member's knowledge, no
investigation looking toward such a proceeding has begun or is contemplated.
(g) No order, permission, consent, approval, license, authorization,
registration or validation of, or filing with, or exemption by, any governmental
agency, commission, board or public authority is required to authorize, or is
required in connection with the execution, delivery and performance by the Class
A Member of this Agreement or the taking of any action thereby contemplated,
which has not been obtained, other than any such order, permission, consent,
approval, license, authorization, registration or validation of, or filing with,
or exemption by, any governmental agency, commission, board or public authority
required in connection with the ownership or the development of the Properties
or with the other operations of the Company.
(h) To the best of the Class A Member's knowledge, all information,
documents and materials provided by the Class A Member or any Related Party to
the Operating Member, or the Operating Member's employees, agents or
consultants, in connection with the formation of the Company are complete and
accurate in all material respects.
2. REPRESENTATIONS AND WARRANTIES OF THE OPERATING MEMBER.
(a) The Operating Member is a limited partnership duly organized and
validly existing under the laws of the State of Ohio, with full power and
authority and legal right to be a Member of the Company and to carry on its
business in the manner and in the locations in which such business has been and
is now being conducted by it, to execute and deliver this Agreement and to
perform its obligations hereunder.
(b) No consent of any third party is required as a condition to the
entering into of this Agreement by the Operating Member other than such consent
as has been previously obtained.
(c) The execution and delivery of this Agreement has been duly authorized
and executed by the Operating Member and this Agreement constitutes the valid
and binding obligation and agreement of the Operating Member, enforceable in
accordance with its terms (subject to the effect of bankruptcy, insolvency or
creditor's rights generally, and to limitations imposed by general principals of
equity).
(d) Neither the execution and delivery of this Agreement, nor compliance
with the terms and provisions hereof, will result in any breach of the terms,
conditions or provisions of, or conflict with or constitute a default under, or
result in the creation of any lien, charge or encumbrance upon any property or
assets of the Operating Member pursuant to the terms of any indenture, mortgage,
deed of trust, note, evidence of indebtedness, agreement or other instrument to
which the Operating Member may be party or by which it or they or any of its
properties or assets may be bound, or violate any provision of law, or any
applicable order,
K-2
writ, injunction, judgment or decree of any court, or any order or other
public regulation of any governmental commission, bureau or administrative
agency.
(e) Except as in each instance previously disclosed to the Class A Member
in writing, there are no judgments presently outstanding and unsatisfied against
the Operating Member or any of its assets and neither the Operating Member nor
any of its assets is involved in any litigation at law or in equity, or in any
proceeding before any court, or by or before any governmental or administrative
agency, which judgment, litigation or proceeding could reasonably be anticipated
to have a material adverse effect on the Operating Member, the Company or the
Properties and no such material judgment, litigation or proceeding is, to the
best of the Operating Member's knowledge, threatened against the Operating
Member or any of its facilities, and to the best of the Operating Member's
knowledge, no investigation looking toward such a proceeding has begun or is
contemplated.
(f) No order, permission, consent, approval, license, authorization,
registration or validation of, or filing with, or exemption by, any governmental
agency, commission, board or public authority is required to authorize, or is
required in connection with the execution, delivery and performance by the
Operating Member of this Agreement or the taking of any action thereby
contemplated, which has not been obtained, other than any such order,
permission, consent, approval, license, authorization, registration or
validation of, or filing with, or exemption by, any governmental agency,
commission, board or public authority required in connection with the ownership
or the development of the Properties or with the other operations of the
Company.
(g) To the best of the Operating Member's knowledge, all information,
documents and materials provided by the Operating Member or any Related Party to
the Class A Member, or the Class A Member's employees, agents or consultants, in
connection with the formation of the Company are complete and accurate in all
material respects.
K-3
EXHIBIT L
INTENTIONALLY OMITTED
L-1
EXHIBIT M
REFINANCING PARAMETERS
1. LOAN AMOUNT. Loan proceeds shall not exceed amount of debt being
refinanced (including principal, accrued interest, penalties and fee).
2. INTEREST RATE. (a) If variable interest rate, loan shall be prepayable
without penalty.
(b) If fixed interest rate, loan shall be prepayable subject only to
payment of yield maintenance premium in an amount not to exceed
premiums then customarily required by institutional lenders.
3. TERM. If prepayment is subject to payment of yield maintenance premium,
term of Loan shall be no longer than five years.
4. RECOURSE. Loan shall only be nonrecourse to the Company subject only to
non-recourse carve-outs then customarily required by institutional lenders
(e.g. filing of bankruptcy, misapplication of funds, fraud, waste, etc.).
M-1
EXHIBIT N
FORCED SALE NOTICE
In connection with the undersigned Member's election, pursuant to
Section 8.2 of the Agreement, to require the Company to sell a Target Asset, the
Member hereby certifies that:
(1) The Member approved the acquisition or construction of the Target Asset
with the intent and expectation that the Company would hold the Target
Asset for investment purposes, and not as stock in trade or for sale in
the ordinary course of the Company's trade or business.
(2) The Member is exercising its rights under Section 8.2 due to circumstances
that were not in existence at the time [the Target Asset was first put
into productive use by the Company]/[the Member gave such approval].
Member Name:
By:
Date:
N-1
EXHIBIT O
APPROVED TENANTS
[*]
9. Other Lessees mutually agreed upon
O-1
