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Exhibit 3.12
OPERATING AGREEMENT
OF
AGH UPREIT LLC
a Delaware limited liability company
Dated as of the 5th day of June, 1996
THE INTERESTS ISSUED UNDER THIS AGREEMENT HAVE NOT BEEN REGISTERED
UNDER THE SECURITIES ACT OF 1933, AS AMENDED (THE "SECURITIES ACT"), OR
REGISTERED OR QUALIFIED UNDER THE APPLICABLE STATE SECURITIES LAWS, IN RELIANCE
UPON EXEMPTIONS FROM REGISTRATION AND QUALIFICATION PROVIDED IN THE SECURITIES
ACT AND THE APPLICABLE STATE SECURITIES LAWS, AND MAY NOT BE SOLD OR TRANSFERRED
IN THE ABSENCE OF AN EFFECTIVE REGISTRATION STATEMENT UNDER THE SECURITIES ACT
AND QUALIFICATION OR REGISTRATION UNDER THE APPLICABLE STATE SECURITIES LAWS, OR
AN OPINION OF COUNSEL SATISFACTORY TO THE ISSUER THAT SUCH REGISTRATION OR
QUALIFICATION IS NOT REQUIRED.
IN ADDITION, THE INTERESTS ISSUED UNDER THIS AGREEMENT MAY BE SOLD OR
TRANSFERRED ONLY IN COMPLIANCE WITH THE RESTRICTIONS ON TRANSFER SET FORTH
HEREIN.
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TABLE OF CONTENTS
Page No.
ARTICLE 1
GENERAL PROVISIONS ................................ [1]
1.1 FORMATION ................................................................ [1]
1.2 NAME OF COMPANY .......................................................... [2]
1.3 COMPLIANCE ............................................................... [2]
1.4 PURPOSES OF COMPANY ...................................................... [2]
1.5 INTERESTS IN THE COMPANY ................................................. [3]
1.6 OTHER QUALIFICATIONS ..................................................... [3]
1.7 TERM OF COMPANY .......................................................... [3]
1.8 TITLE TO COMPANY PROPERTY ................................................ [4]
1.9 DEFINITIONS .............................................................. [4]
1.10 AUTHORIZED ACTS .......................................................... [11]
1.11 AUTHORIZED REPRESENTATIVES ............................................... [12]
ARTICLE 2
CAPITAL CONTRIBUTIONS AND
ADDITIONAL CONTRIBUTIONS ............................. [13]
2.1 CAPITAL CONTRIBUTIONS .................................................... [13]
2.2 THIRD PARTY LOANS AND ADDITIONAL CAPITAL CONTRIBUTIONS AND CAPITAL CALLS . [13]
2.3 MEMBER LOANS ............................................................. [15]
ARTICLE 3
INCOME TAX ALLOCATIONS .............................. [15]
3.1 ESTABLISHMENT AND MAINTENANCE OF CAPITAL ACCOUNTS; PARTNERSHIP STATUS .... [15]
3.2 PROFIT AND LOSS Allocations .............................................. [15]
3.3 ALLOCATIONS OF GAIN OR LOSS ON DISPOSITION ............................... [16]
3.4 MINIMUM GAIN CHARGEBACK AND QUALIFIED INCOME OFFSET ...................... [17]
3.5 OTHER TAX ALLOCATION PROVISIONS .......................................... [18]
3.6 INTENT OF ALLOCATIONS .................................................... [20]
3.7 BASIS ELECTIONS .......................................................... [20]
3.8 GENERAL ALLOCATION RULES ................................................. [20]
3.9 SHARING OF COMPANY NONRECOURSE DEBT ...................................... [21]
3.10 ADJUSTMENT OF GROSS ASSET VALUE .......................................... [21]
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ARTICLE 4
INVESTMENT LOAN REPAYMENTS
AND DISTRIBUTIONS ................................. [22]
4.1 NET AVAILABLE CASH ....................................................... [22]
4.2 PROCEEDS AND DISTRIBUTIONS IN LIQUIDATION ................................ [22]
4.3 GENERAL DISTRIBUTION RULES ............................................... [23]
4.4 SOURCE OF DISTRIBUTIONS .................................................. [23]
ARTICLE 5
MANAGEMENT; DUTIES AND POWERS OF MEMBERS
RIGHTS AND DUTIES OF MEMBERS ........................... [23]
5.1 MANAGEMENT OF BUSINESS; EXECUTION AUTHORITY; OFFICERS; MEMBER
OBLIGATIONS; REIMBURSEMENTS; MAJOR DECISIONS; RETAINED APPROVALS ......... [23]
5.2 AFFILIATE TRANSACTIONS ................................................... [29]
5.3 REPORTING REQUIREMENTS; FINANCIALS; MEETINGS ............................. [30]
5.4 TAX MATTERS PARTNER; TAX RETURNS ......................................... [30]
5.5 INDEMNIFICATION AND LIABILITY OF MEMBERS AND COMPANY EMPLOYEES ........... [31]
5.6 OPPORTUNITY TO DEFEND .................................................... [32]
5.7 LIMITATION OF LIABILITY .................................................. [32]
5.8 NO PRIORITIES ............................................................ [32]
ARTICLE 6
BOOKS, RECORDS AND BANK ACCOUNTS ......................... [32]
6.1 BOOKS AND RECORDS; ACCOUNTING METHOD ..................................... [32]
6.2 BANK ACCOUNTS ............................................................ [33]
ARTICLE 7
TRANSFERS OF COMPANY INTERESTS .......................... [33]
7.1 RESTRICTIONS ON TRANSFER ................................................. [33)
7.2 TAKE-ALONG RIGHTS ........................................................ [33]
7.3 BANKRUPTCY OR DISSOLUTION OF MEMBERS ..................................... [33]
7.4 SUBSTITUTION OF MEMBER ................................................... [34]
7.5 ADDITIONAL TRANSFER RESTRICTIONS ......................................... [34]
7.6 TRANSFER INDEMNIFICATION AND CONTRIBUTION PROVISIONS ..................... [35]
7.7 BASIS FOR RESTRICTIONS AND SECTION 7.9 REMEDIES .......................... [36]
7.8 REPRESENTATIONS, WARRANTIES AND COVENANTS ................................ [36]
7.9 TERMINATED MEMBER ........................................................ [37]
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ARTICLE 8
TERM, DISSOLUTION AND TERMINATION ........................ [39]
8.1 EVENTS OF DISSOLUTION .................................................... [39]
8.2 LIMITATION ON DISSOLUTION ................................................ [40]
8.3 LIQUIDATION AND WINDING UP ............................................... [40]
8.4 RECONSTITUTION AFTER BANKRUPTCY OR DISSOLUTION OF MEMBERS ................ [41]
8.5 DISTRIBUTION UPON DISSOLUTION AND CAPITAL ACCOUNT ADJUSTMENTS ............ [41]
8.6 COMPLIANCE WITH TIMING REQUIREMENTS OF TREASURY REGULATIONS .............. [41]
ARTICLE 9
MISCELLANEOUS .................................. [41]
9.1 OTHER INTERESTS .......................................................... [41]
9.3 NO AGENCY ................................................................ [42]
9.4 GOVERNING LAW ............................................................ [43]
9.5 NOTICES .................................................................. [43]
9.6 PRONOUNS AND PLURALS ..................................................... [44]
9.7 WAIVER ................................................................... [44]
9.8 SEVERABILITY ............................................................. [44]
9.9 TITLES AND CAPTIONS ...................................................... [45]
9.10 AGREEMENT IN COUNTERPARTS ................................................ [45]
9.11 BINDING AGREEMENT ........................................................ [45]
9.12 FURTHER ASSURANCES ....................................................... [45]
9.13 WAIVER OF PARTITION ...................................................... [45]
9.14 ENTIRE AGREEMENT ......................................................... [45]
9.15 AMENDMENTS ............................................................... [45]
9.16 NO DRAFTING PRESUMPTION .................................................. [45]
9.17 NO THIRD PARTY BENEFICIARIES ............................................. [46]
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OPERATING AGREEMENT
OF
AGH UPREIT LLC
a Delaware limited liability company
THIS OPERATING AGREEMENT ("Agreement") is made and entered into as of
the 5th day of June, 1996, by and among AMERICAN GENERAL HOSPITALITY OPERATING
PARTNERSHIP, L.P., a Delaware limited partnership ("AGHOP"), and AMERICAN
GENERAL HOSPITALITY CORPORATION, A Maryland corporation ("AGHC") (AGHOP and AGHC
are collectively referred to as the "Members"), with reference to the following:
RECITALS
A. The Members desire to form a limited liability company
pursuant to the provisions of the Delaware Limited Liability Company Act,
Delaware Code, Title 6, Sections 18-101, et seq., as amended from time to time
(the "Act"), and to constitute themselves a limited liability company for the
purposes set forth in Section 1.4 and 1.10, and on the terms and conditions set
forth in this Agreement.
B. Each of AGHC and AGHOP desires to make its respective capital
contributions to the Company as described in this Agreement and to be a Member
of the Company.
NOW THEREFORE, in consideration of the mutual covenants and agreements
contained herein (the receipt and sufficiency of which hereby are acknowledged
by each party hereto), the parties hereto, intending to be legally bound, do
hereby agree as follows:
ARTICLE 1
GENERAL PROVISIONS
1.1 FORMATION. The Members hereby form a limited liability company
pursuant to the Act. This Agreement shall constitute the operating agreement
among the Members. All capitalized terms used in this Agreement and not
otherwise defined herein shall have the meanings set forth in Section 1.9
hereof. The Members agree to take such other actions (a) as may from time to
time be necessary or appropriate under the laws of the State of Delaware with
respect to the formation, operation and continued good standing of the Company
as a limited liability company and (b) as may be necessary to comply with
Sections 1.3 and 1.6.
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1.2 NAME OF COMPANY. The name of the Company shall be AGH UPREIT
LLC or such other name as may be reasonably Approved by the Members from time to
time.
1.3 COMPLIANCE.
1.3.1 CERTIFICATE OF FORMATION. On June 5, 1996, the
Certificate of Formation (the "Articles") for the Company was filed with the
Office of the Secretary of State of Delaware. The Articles shall be amended
whenever, and within the time periods, required by the Act.
1.3.2 PRINCIPAL OFFICE, RESIDENT AGENT AND REGISTERED
OFFICE; FOREIGN REGISTRATION. The principal office of the Company shall be
located at ▇▇▇▇ ▇▇▇▇ ▇▇▇▇▇▇▇▇▇ ▇▇▇▇▇▇▇, ▇▇▇▇▇ ▇▇▇, ▇▇▇▇▇▇, ▇▇▇▇▇ ▇▇▇▇▇, or at
such other place or places as the Members may from time to time reasonably
Approve, provided, however, that the Company shall at all times maintain a
registered agent and an office in the State of Delaware. The name and address of
the registered agent for service of process on the Company in the State of
Delaware is The Corporation Trust Company, Corporation Trust Center, ▇▇▇▇ ▇▇▇▇▇▇
▇▇▇▇▇▇, ▇▇▇▇▇▇▇▇▇▇, ▇▇▇▇▇▇▇▇ ▇▇▇▇▇. The address of the registered office of the
Company in the State of Delaware is c/o The Corporation Trust Company,
Corporation Trust Center, ▇▇▇▇ ▇▇▇▇▇▇ ▇▇▇▇▇▇, ▇▇▇▇▇▇▇▇▇▇, ▇▇▇▇▇▇▇▇ ▇▇▇▇▇. Such
principal office, registered agent or registered office may be changed by the
Members from time to time upon the reasonable Approval of the Members, so long
as in accordance with the Act; concurrently with any such change, written notice
thereof shall be given to each Member. Promptly following execution and delivery
of this Agreement and filing of the Articles with the Secretary of State of
Delaware, the Members shall cause the Company to register as a foreign limited
liability company in the appropriate official recording offices of the
appropriate and necessary States. Such registration shall be amended whenever
required by the laws of any such State.
1.4 PURPOSES OF COMPANY. The purposes of the Company shall be:
1.4.1 (a) to acquire, own for investment purposes, and
dispose of an interest (i) as a general partner in: 3100 Glendale Joint Venture,
an Ohio joint venture (i.e. single purpose general partnership); MDV Limited
Partnership, a Texas limited partnership; Madison Motel Associates, a Wisconsin
general partnership; 183 Hotel Associates, Ltd., a Texas limited partnership;
and Richmond Williamsburg Associates, Ltd., a Texas limited partnership, and
(ii) as a member in 2929 ▇▇▇▇▇▇▇▇ Limited Liability Company, a Delaware limited
liability company (each such Entity in which the Company acquires such an
interest is referred to as an "Investment Entity" and the interest in each
Investment Entity that is acquired by the Company is referred to as a "Company
Interest") and (b) to engage in any activity related to real estate investments
and the hotel business;
1.4.2 To own for investment purposes and dispose of any
asset previously owned by any Investment Entity upon the distribution of such
asset or an interest
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therein, as the case may be (an "Investment"), by any Investment Entity in
connection with the liquidation of such Investment Entity;
1.4.3 To enter into those certain Assignment, Contribution,
Withdrawal and Admission Agreements, dated as of a date in July, 1996 pursuant
to which the Company Interest in each Investment Entity is being assigned to the
Company (the "Assignment Agreements");
1.4.4 To enter into the amended and restated partnership
agreement and/or operating agreement, as the case may be, with AGHOP pursuant to
which each Investment Entity will be operated, and amendments thereof (as so
amended, an "Investment Entity Agreement") and to serve as a general partner
and/or a member, as the case may be of each Investment Entity pursuant to each
Investment Entity Agreement and to take all actions permitted to be taken by it
in such capacity under each such Investment Entity Agreement; and
1.4.5 To engage in any and all other lawful general
business activities incidental or reasonably related to the foregoing,
including, without limitation, borrowing money from any source, whether secured
or unsecured, contracting for necessary or desirable services of professionals
and others and causing each Investment Entity to do so. All of the foregoing
shall be subject to the more specific terms and conditions, including required
Approvals by the Members, set forth in this Agreement.
1.4.6 The Company shall be a single purpose entity and
shall not engage in any activity that is not described in the foregoing purposes
of the Company. The Company shall not merge, consolidate, dissolve, enter into
Bankruptcy, or declare insolvency without the unanimous Approval of its Members.
1.5 INTERESTS IN THE COMPANY.
Unless the context otherwise clearly indicates, a Member's
"interest" in the Company shall mean and include its share of the capital of the
Company, its share of the Profits and Losses (including its share of Gain or
Loss on Disposition) and other tax items of the Company, its share of the
distributions of the Company, its Capital Account, and its other rights and
obligations, all as determined under this Agreement.
1.6 OTHER QUALIFICATIONS. At Company expense, the Members shall
cause the Company and each Investment Entity to be qualified to do business in
each jurisdiction in which such qualification becomes necessary, on or before
the date on which such qualification becomes necessary.
1.7 TERM OF COMPANY. The term of the Company shall commence as of
the date of filing the Articles and shall continue until the Company shall be
dissolved, liquidated and terminated pursuant to the provisions of Article 8.
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1.8 TITLE TO COMPANY PROPERTY. Legal title to the Company
Interests and other assets of the Company and of the assets of each Investment
Entity shall be held in such manner as the Members shall Approve as being in the
best interests of the Company. It is expressly understood and agreed that the
manner of holding title to Company property is solely for the convenience of the
Company; accordingly, legal representatives, beneficiaries, distributees,
officers, employees, partners, members, shareholders, successors or assigns of
any Member shall have no right, title or interest in or to any such Company
property by reason of the manner in which title is held, but all such property
shall be treated as Company property subject to the terms of this Agreement.
1.9 DEFINITIONS.
As used in this Agreement, the following terms shall have the
following meanings:
1.9.1 "ACT" shall mean the Delaware Limited Liability
Company Act, as amended from time to time (Delaware Code, Title 6, Sections
18-101, et seq.)
1.9.2 "ADJUSTED CAPITAL ACCOUNT DEFICIT" shall mean with
respect to any Member, the deficit balance, if any, in such Member's Capital
Account as of the end of the relevant tax year, after giving effect to the
following adjustments:
1.9.2.1 Credit to such Capital Account any amounts
which such Member is obligated to restore or is deemed to be obligated to
restore to the Company pursuant to the penultimate sentences of Regulations
Sections 1. 704-2(g)(1) and 1. 704-2(i)(5); and
1.9.2.2 Debit to such Capital Account the items
described in Sections 1.704-1(b)(2)(ii)(d)(4), 1.704-1(b)(2)(ii)(d)(5), and
1.704-1(b)(2)(ii)(d)(6) of the Regulations.
The foregoing definition of Adjusted Capital Account Deficit is intended to
comply with the provisions of Section 1.704-1(b)(2)(ii)(d) of the Regulations
and shall be interpreted consistently therewith.
1.9.3 "AFFILIATE," with respect to any Person, shall mean
any Person which (directly or indirectly) Controls or is Controlled or is under
common Control with such Person or such Person's Affiliates. For the purposes of
this Agreement, the term "Control," or any derivative thereof (including
"Controlled by" or "Controlling"), when used with respect to any specified
Person, shall mean the possession, directly or indirectly, of the power to
direct or cause the direction of the management or policies of such Person,
whether through ownership of voting securities or partnership or other ownership
interests, or by contract.
1.9.4 "AGHC" is defined in the heading to this Agreement.
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1.9.5 "AGHC PROSPECTUS" is defined in Section 5.1.1.
1.9.6 "AGHOP" is defined in the heading to this Agreement.
1.9.7 "AGREEMENT" shall mean and refer to this Operating
Agreement and all Exhibits referred to herein and attached hereto, each of which
is hereby made a part hereof, as amended and in effect from time to time.
1.9.8 "AGREEMENT DATE" shall mean the date first written
above as of which this Agreement is effective.
1.9.9 "APPROVAL" (and any variation thereof) of a Member
shall mean the prior written consent or approval of the Member, which may be
granted or withheld to its sole discretion unless otherwise expressly provided
to the contrary in this Agreement. Such Approval shall be valid for a Member who
is not a natural person only if given by an Authorized Representative of such
Member. Use of the term "reasonable" or "reasonably" in connection with the term
"Approval" or any variation thereof or with the term "satisfactory" means that
such Approval shall not be withheld or delayed unreasonably. Unless either of
such terms is used in connection with the term "Approval" (or any variation
thereof), such Approval may be granted or withheld in a Member's sole
discretion. Except as provided in Section 5.1.6.1, the Approval of a Member
shall not be required from and after the date on which such Member has ceased to
have Approval rights under Section 7.9 of this Agreement.
1.9.10 "APPROVED BY THE MEMBERS" is defined in Section 1.11.
1.9.11 "ARTICLES" shall mean the Certificate of Formation of
the Company, as filed with the Office of the Secretary of State of Delaware.
1.9.12 "ASSIGNMENT AGREEMENTS" is defined in Section 1.4.3.
1.9.13 "AUTHORIZED REPRESENTATIVES" is defined in Section
1.11 hereof.
1.9.14 "BANKRUPT" shall mean, with respect to any Member,
if:
1.9.14.1 such Member, or a Person that Controls such
Member (the "Controlling Person"), shall (i) apply for or consent to the
appointment of, or the taking of possession by, a receiver, custodian, trustee,
administrator, liquidator or the like of itself or of all or of a substantial
portion of its assets, (ii) admit in writing its inability, or be generally
unable or deemed unable under any applicable law, to pay its debts as such debts
become due, (iii) convene a meeting of creditors for the purpose of consummating
an out-of-court arrangement, or entering into a composition, extension or
similar arrangement, with creditors in respect of all or a substantial portion
of its debts, (iv) make a general assignment for the benefit of its creditors,
(v) place itself or allow itself to be
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placed, voluntarily or involuntarily, under the protection of the law of any
jurisdiction relating to bankruptcy, insolvency, reorganization, winding-up, or
composition or adjustment of debts, or (vi) take any action for the purpose of
effecting any of the foregoing; or
1.9.14.2 a proceeding or case shall be commenced to
any court of competent jurisdiction, seeking (i) the liquidation,
reorganization, dissolution. winding-up, or composition or readjustment of
debts, of such Member or a Controlling Person with respect thereto, (ii) the
appointment of a trustee, receiver, custodian, administrator, liquidator or the
like of such Member or of a Controlling Person with respect thereto or of all or
a substantial portion of such Member's or such Controlling Person's assets, or
(iii) similar relief in respect of such Member or such Controlling Person under
any law relating to bankruptcy, insolvency, reorganization, winding-up, or
composition or adjustment of debts, without the consent of the other Members and
such proceeding or case shall continue undismissed for a period of ninety (90)
days, or an order, judgment or decree approving or ordering any of the foregoing
shall be entered and continue unstayed and in effect for a period of sixty (60)
days, or an order for relief or other legal instrument of similar effect against
such Member or such Controlling Person shall be entered in an involuntary case
under such law and shall continue for a period of sixty (60) days.
1.9.15 "BANKRUPTCY" shall mean any condition described in
the definition of "Bankrupt" which renders a Member a Bankrupt.
1.9.16 "BFLLP" is defined in Section 7.8.5.
1.9.17 "BUY-OUT PRICE" is defined in Section 7.9.
1.9.18 "CAPITAL ACCOUNT" shall mean, with respect to any
Member, the Capital Account maintained for such Member in accordance with the
provisions of Section 3.1.
1.9.19 "CAPITAL CONTRIBUTION" OR "CAPITAL CONTRIBUTIONS"
shall mean the amount of cash and the net fair market value (as reasonably
Approved by the Members) of any property contributed to the capital of the
Company by the Members pursuant to this Agreement. The term "Capital
Contributions" with respect to a Member shall include (i) the contributions of
such Member made pursuant to Sections 2.1 and 2.2 and (ii) such Member's
payments made to third party creditors of the Company after the Agreement Date
with respect to Company obligations unless and until reimbursed by the Company,
but only to the extent reimbursable to such Member under this Agreement.
1.9.20 "CODE" shall mean the Internal Revenue Code of 1986,
as amended and in effect from time to time (or any corresponding provision of
succeeding law).
1.9.21 "COMPANY" shall mean the limited liability company
formed under the Act and operated pursuant to this Agreement.
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1.9.22 "COMPANY ACCOUNTING YEAR" shall mean and refer to the
accounting year of the Company ending December 31 of each calendar year or such
shorter fiscal period during such year for which a relevant determination is
being made under this Agreement.
1.9.23 "COMPANY INTEREST" is defined in Section 1.4.1.
1.9.24 "COMPANY MINIMUM GAIN" is defined in Section 3.5.6
hereof.
1.9.25 "CONTROL" OR "CONTROLLED BY" OR "CONTROLLING" is
defined in the definition of "Affiliate."
1.9.26 "CONTROLLING PERSON" is defined in the definition of
the term "Bankrupt".
1.9.27 "DEFAULTING MEMBER" shall have the meaning set forth
in Section 2.2.1.
1.9.28 "DISPOSITION" is defined in the definition of "Gain
or Loss on Disposition."
1.9.29 "ELECTING MEMBER(S)" is defined in Section 7.9.
1.9.30 "EMERGENCY" shall mean an event which reasonably
requires immediate action involving the expenditure of funds or other action in
order to avert or mitigate significant damage to Persons or property in
connection with the Company, any Investment Entity or any of their assets if it
is not possible for a Member after reasonable efforts to reach or obtain the
Approval of the other Member whose Approval to take such action otherwise would
be required.
1.9.31 "ENTITY" shall mean any general partnership, limited
partnership, limited liability company, corporation, joint venture, trust,
business trust, joint-stock company, cooperative, association or other firm or
any governmental or political subdivision or agency, department or
instrumentality thereof.
1.9.32 "ERISA" shall mean the Employee Retirement Income
Security Act of 1974, as amended from time to time, and any successor statute.
1.9.33 "FORCE MAJEURE" shall mean any act of God (including
weather disturbance, earthquake, fire, mechanical failure of equipment, disease
and the like), labor strike or work stoppage or slowdown, sabotage, war, riot,
or any other act of any third party that reasonably prevents an action from
being taken through no fault of the party who is required to take such action.
1.9.34 "FUNDING NOTICE" is defined in Section 2.1.2.
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1.9.35 "FUNDING PROPORTION" shall mean the following
percentage for each Member:
AGHOP 99%
AGHC 1%
1.9.36 "GAIN" OR "LOSS" ON "DISPOSITION" shall mean the gain
or loss (as the case may be) of the Company for federal income tax purposes, (i)
arising from a sale, exchange or other taxable disposition (including casualty
or condemnation) of all or a portion of any Company Interest or other asset of
the Company, and (ii) the Company's distributive share of the gain or loss for
federal income tax purposes arising from the sale, exchange or other taxable
disposition of all or a portion of any of the assets of any Investment Entity or
of any Entity in which any Investment Entity has a direct or indirect equity
ownership interest. Gain or loss resulting from any disposition of property for
which there is a difference between Gross Asset Value and adjusted tax basis (as
computed for tax as opposed to book purposes) shall be computed by reference to
the Gross Asset Value (as reasonably Approved by the Members) of the property
disposed of (as adjusted for book purposes from time to time).
1.9.37 "GROSS ASSET VALUE" shall mean, with respect to any
asset, the adjusted basis of the asset for federal income tax purposes, adjusted
as provided in Section 3.10.
1.9.38 "INCLUDING" OR "including" shall mean "including,
without limitation."
1.9.39 "INDEPENDENT TAX COUNSEL" shall mean a nationally
recognized tax counsel Approved by the Members that is capable of advising the
Company with respect to specified tax matters.
1.9.40 "INTEREST" OR "interest" is defined in Section 1.5.
1.9.41 "INVESTMENT" is defined in Section 1.4.1.
1.9.42 "INVESTMENT ENTITY" is defined in Section 1.4.2.
1.9.43 "INVESTMENT ENTITY AGREEMENT" is defined in Section
1.4.4.
1.9.44 "LIABILITIES" is defined in Section 5.5.3.
1.9.45 "LIQUIDATOR" is defined in Section 8.3.
1.9.46 "MAJOR DECISIONS" is defined in Section 5.1.5.
1.9.47 "MAJOR DEFAULTS" is defined in Section 5.5.3.
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1.9.48 "MEMBER ASSIGNEE" is defined in Section 7.4.
1.9.49 "MEMBER NONRECOURSE DEBT" is defined in Section 3.5.6
hereof.
1.9.50 "MEMBER NONRECOURSE DEBT MINIMUM GAIN" is defined in
Section 3.5.6 hereof.
1.9.51 "MEMBER NONRECOURSE DEDUCTIONS" is defined in Section
3.5.6 hereof.
1.9.52 "MEMBERS" shall mean AGHC and AGHOP (each a
"Member"), in their respective capacities as Members, and any of their
successors in their respective capacities as Members admitted to the Company as
Members hereunder, and any other Person admitted as a Member under this
Agreement, for so long as any such Person is a Member under the terms of this
Agreement.
1.9.53 "NET AVAILABLE CASH," with respect to any period,
shall mean (i) the sum of all cash receipts of the Company during such period
from all sources (including Capital Contributions, cash on hand at the beginning
of such period to the extent not held in reserves, proceeds from the sale or
other disposition of any Company Interest, proceeds from borrowings,
distributions from each Investment Entity and any funds released during such
period from cash reserves previously established), minus (ii) the Operating
Costs for such period.
1.9.54 "NON-DEFAULTING MEMBER" is defined in Section 2.2.1.
1.9.55 "NONRECOURSE DEDUCTIONS" is defined in Section 3.5.6.
1.9.56 "NONRECOURSE LIABILITY" is defined in Section 3.5.6.
1.9.57 "OPERATING COSTS" for a period shall mean the sum of
(i) all cash expenditures of the Company made during such period for costs and
expenses including payments of interest and principal or other monetary
obligations due under any loan made to the Company; accounting, legal and
auditing fees; taxes paid by the Company; public or private utility charges;
sales, use, payroll taxes and withholding taxes related thereto; and all other
operating costs, expenses and capital expenditures actually paid during such
period with respect to the Company's business or reimbursed to Members, plus
(ii) such reserves established from time to time during such period upon the
reasonable Approval of the Members, plus (iii) any amounts contributed by the
Company to any Investment Entity pursuant to the applicable Investment Entity
Agreement during such period.
1.9.58 "PERSON" shall mean any individual or Entity.
1.9.59 "PRIME RATE" shall mean the so-called "Reference
Rate" announced by Citibank, N.A., in New York, New York, from time to time.
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1.9.60 "PROFIT" OR "LOSS" shall mean, for each Company
Accounting Year, an amount equal to the Company's net taxable income or loss for
such Accounting Year (including any items of income, gain or deduction taken
into account in computing the Company's Gain or Loss on Disposition for such
Accounting Year), determined in accordance with Code Section 703(a) (for this
purpose, all items of income, gain, loss or deduction required to be stated
separately pursuant to Code Section 703(a)(1) shall be included in computing
such taxable income or loss), including its allocated share thereof from any
Investment Entity, with the following adjustments:
1.9.60.1 Any income of the Company that is exempt
from federal income tax and is not otherwise taken into account in computing
Profit or Loss shall be added to such taxable income or loss;
1.9.60.2 In the event the agreed fair market value of
any Company asset is adjusted pursuant to Regulations Section
1.704-1(b)(2)(iv)(f) or other pertinent sections of such Regulations, the amount
of such adjustment shall be taken into account as Gain or Loss on Disposition of
such asset for purposes of computing Profit or Loss; and in lieu of the
depreciation, amortization and other cost recovery deductions taken into account
in computing such taxable income or loss, there shall be taken into account
depreciation, amortization or other cost recovery deduction computed with
reference to the value of Company property reasonably Approved by the Members
(if different from its adjusted tax basis) pursuant to Regulations Section
1.704-1(b)(2)(iv)(g) for such Company Accounting Year; and
1.9.60.3 Notwithstanding any other provisions, any
items which are specially allocated pursuant to Sections 3.4, 3.5 and 3.6 shall
not be taken into account in computing Profit or Loss.
1.9.61 "PURCHASE NOTICE" is defined in Section 7.9.1.
1.9.62 "REGULATIONS" shall mean the final or temporary
regulations promulgated from time to time under the Code or, if no final or
temporary regulations with respect to a tax issue then are in effect, proposed
regulations then in effect if reasonably Approved by the Members, and
administrative and judicial interpretations thereof.
1.9.63 "RESIDUAL PERCENTAGE" of a Member as of any relevant
time shall mean the following percentage for each Member:
AGHOP 99%
AGHC 1%
1.9.64 "REVALUED PROPERTY" is defined in Section 3.5.3.2.
1.9.65 "SHORTFALL DISBURSEMENT" is defined in Section 2.2.1.
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1.9.66 "TAX MATTERS PARTNER" is defined in Section 5.4
(which references the Code).
1.9.67 "TAX TERMINATION" is defined in Section 7.5.1.3.
1.9.68 "TERMINATED MEMBER" shall mean (i) any Member that
becomes Bankrupt, (ii) any Member which has been dissolved (and which has not
been reconstituted within sixty (60) days thereafter) or (iii) any Member which
has committed a Major Default.
1.9.69 "TERMINATION DATE" shall mean the date upon which a
Member became a Terminated Member.
1.9.70 "TRANSFER" shall mean (i) the issuance, transfer,
sale, gift, grant, conveyance, assignment, or redemption of any equity ownership
interest (whether stock, membership interest, partnership interest or otherwise)
in the Company or in any Person holding a direct (or indirect through tiered
Entities) interest in the Company, or the merger or consolidation of any such
Person into or with another Person, as the case may be; and (ii) the execution
and delivery by the Company or any Person holding a direct (or indirect through
tiered Entities) interest in the Company of a contract of sale, option or other
agreement providing for any of the foregoing.
1.9.71 "TRANSFER RESTRICTION TERMINATION DATE" is defined in
Section 5.1.6.1.
1.9.72 "UNREPAID CAPITAL" with respect to each Member shall
mean the Capital Contributions made from time to time to the Company by such
Member, reduced by any distributions previously made to such Member pursuant to
Section 4.1.1.
1.10 AUTHORIZED ACTS. In furtherance of its purposes, but subject
to all the other provisions of this Agreement including required Approvals of
the Members under Article 5, the Company, the Members and the Company's officers
appointed on its behalf under Section 5.5 are hereby authorized:
1.10.1 To pursue any rights of the Company (and cause each
Investment Entity to pursue any rights of such Investment Entity) with respect
to each Investment pursuant to any agreement to which it or such Investment
Entity is a party and to own any Company Interest and to own and operate any
other asset acquired by the Company pursuant to the provisions of this
Agreement.
1.10.2 To own the Company Interests for investment purposes
and to finance, sell, convey, assign, transfer or mortgage any Company Interest,
as well as any other property necessary, convenient or incidental to the
accomplishment of the purposes of the Company, all on terms as shall be Approved
by the Members;
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1.10.3 To borrow money on behalf of itself and/or to cause
any Investment Entity to do so (whether secured or unsecured), and issue
evidences of indebtedness in furtherance of any or all of the purposes of the
Company or any Investment Entity, and to secure the same by mortgage, deed of
trust, pledge or other lien on any assets of the Company or any Investment
Entity;
1.10.4 To borrow money on the general credit of the Company
or any Investment Entity for use in the Company or Investment Entity business;
1.10.5 To enter into, perform and carry out contracts of any
kind, including contracts with Affiliates of any of the Members, necessary to,
in connection with or incidental to the accomplishment of the purposes of the
Company or any Investment Entity;
1.10.6 To issue Funding Notices calling for additional
Capital Contributions in accordance with the provisions of this Agreement;
1.10.7 To enter into any kind of lawful activity and to
perform and carry out contracts of any kind necessary to or in connection with
or incidental to the accomplishment of the purposes of the Company, so long as
said activities and contracts may lawfully be carried on or performed by a
foreign limited liability company under the laws of the states in which the
Company is qualified to do business; and
1.10.8 To enter into and to perform the Company's
obligations under any agreement to which it becomes a party, including the
Assignment Agreements and each Investment Entity Agreement.
1.11 AUTHORIZED REPRESENTATIVES. The "Authorized Representatives"
of a Member that is not a natural person shall be those representatives
designated by notice to all other Members by such Member from time to time to
represent such Member in connection with the Company, unless and until replaced
or removed by notice from such Member to all Members. The written statements and
representations of an Authorized Representative for a Member that is not a
natural Person shall be the only authorized statements and representations of
such Member with respect to the matters covered by this Agreement. The written
statement or representation of any one Authorized Representative of such Member
shall be sufficient to bind such Member with respect to all matters pertaining
to the Company. The term "Approved by" or "Consented to by" or "Consent of" or
"satisfactory to" with respect to a Member that is not a natural Person means a
decision or action which has been consented to in writing by any Authorized
Representative of such Member. In order for a decision or action to be "Approved
by the Members" (or any variation thereof), the decision or action must be
Approved by at least one Authorized Representative of each Member who then
continues to have Approval rights with respect to such action or decision under
this Agreement.
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ARTICLE 2
CAPITAL CONTRIBUTIONS
AND ADDITIONAL CONTRIBUTIONS
2.1 CAPITAL CONTRIBUTIONS.
2.1.1 INITIAL CAPITAL CONTRIBUTIONS. Concurrently with
execution and delivery of this Agreement, the Members shall contribute the
following amounts in cash to the capital of the Company.
Capital
Member Contribution
------ ------------
AGHOP $ 9,900
AGHC 100
-------
Total $10,000
=======
2.1.2 ADDITIONAL CAPITAL CONTRIBUTIONS. If notice is given
to all Members by any Member who is not a Terminated Member (under Section 7.9
of this Agreement) stating that the Company requires additional Capital
Contributions, and such notice is made on a form that has been Approved by the
Members for such purpose (a "Funding Notice"), the Members shall contribute to
the capital of the Company in cash the amounts required under Section 2.2.1
(such amounts to be specified in such Funding Notice) on or before the Due Date
therefor under Section 2.2.1, provided, however, that no Funding Notice may be
issued by either Member under any circumstances unless the issuance of such
notice has been Approved by the Members or otherwise is permitted to be issued
without Approval of the Members under this Agreement, and provided, further,
that no Member shall be required to issue a Funding Notice under any
circumstances without such Member's Approval.
2.2 THIRD PARTY LOANS AND ADDITIONAL CAPITAL CONTRIBUTIONS AND
CAPITAL CALLS.
2.2.1 If a Funding Notice is properly given by either
Member pursuant to Section 2.1.2, each Member shall have the obligation to
contribute additional cash to the capital of the Company, in an amount equal to
the product of (a) the aggregate amount of required funds that is set forth in
such Funding Notice ("Shortfall Disbursement") multiplied by (b) such Member's
Funding Proportion, which amount shall be used to satisfy the items described in
such Funding Notice. Such Capital Contributions shall be made by the Members pro
rata in proportion to their respective Funding Proportions. The Funding Notice
shall specify the amount of each Member's share, as so determined, of any
Shortfall Disbursement required under this Section 2.2.1. Each Member shall
contribute its share of any Shortfall Disbursement within five (5) days after
the later to occur of (i) the date on which the Funding Notice has been received
(or is deemed to have been received under Section 9.5) or (ii) the required
funding date that is set forth in the Funding Notice (the
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expiration of such five-day period is referred to as the "Due Date"). There
shall be a cure period of five (5) days after the Due Date for each Member to
contribute its share of such Shortfall Disbursement, as provided in Section
2.2.2.
2.2.2 If any Member fails to contribute the full amount of
its Capital Contributions required to be made pursuant to Section 2.1.2 and
Section 2.2.1 within five (5) days after the Due Date thereunder ("Defaulting
Member"), then, as the exclusive remedies of the Company and the other Member
(the "Non-Defaulting Member"), the Non-Defaulting Member shall have the
following remedies, exercisable by notice from the Non-Defaulting Member to the
Defaulting Member: (i) to cause the Company to ▇▇▇ the Defaulting Member for
actual (and not consequential) damages that shall be limned to the portion of
the Defaulting Member's share of the Shortfall Disbursement that was not
received timely, plus interest at the Prime Rate and the costs of collection,
and (ii) either: (a) to elect to lend (or to cause the Non-Defaulting Member's
Affiliates to lend), to the Defaulting Member or to the Company, as Approved by
the Non-Defaulting Member, the amount of such Capital Contribution that was not
made timely by the Defaulting Member, or (b) to elect to contribute the amount
of such Capital Contribution that was not made timely by the Defaulting Member,
in which case the amount so contributed shall be treated as Capital
Contributions of the Non-Defaulting Member for all purposes. Upon the failure of
the Non-Defaulting Member to elect which of the remedies specified in clause (a)
or (b) of this Section 2.2.2 has been selected, by written notice to the Company
and the Defaulting Member given within thirty (30) days after funding the share
of the Capital Contribution not made by the Defaulting Member, the remedy
described in such clause (b) shall be deemed to have been selected. The remedies
described in clauses (i) and (ii) of this Section 2.2.2 shall be cumulative, and
all or any of them may be elected and apply simultaneously, except that the
remedies described in clauses (a) and (b) of this Section 2.2.2 shall be
mutually exclusive with respect to each Funding Notice.
2.2.2.1 If the Non-Defaulting Member chooses to
lend (or to cause its Affiliates to lend) the amount of the Capital Contribution
not made by the Defaulting Member, the loan shall be a recourse loan to the
Company or to the Defaulting Member, as the case may be, and shall bear
interest, compounded monthly, at the rate equal to the lesser of (i) the Prime
Rate or (ii) the maximum interest rate permitted by law, from the date such loan
is made until the date of repayment. Such loan shall be deemed to have been made
to the Defaulting Member (and not to the Company) only if the Non-Defaulting
Member (or the Non-Defaulting Member's Affiliate) has paid such amount directly
to the Company and specifies, by notice to the Members given within five (5)
days after such funding, that the loan is being made to the Defaulting Member,
in which case said amount shall be deemed to have been contributed to the
Company by the Defaulting Member for all purposes. Repayment of any such loan to
the Defaulting Member shall be effected by the Members causing the Company to
pay directly to the Non-Defaulting Member all distributions otherwise payable to
the Defaulting Member under this Agreement as and when payable, instead of
making such distributions to the Defaulting Member (with such distributions
being deemed for all purposes to have been made to the Defaulting Member and
then paid by the Defaulting Member to the Non-Defaulting Member or its
Affiliates, as the case may be). Repayment of any such loan to the Company shall
be made as provided in
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Section 4.1 and Section 4.2.2. Any payments made with respect to loans described
in this Section 2.2.2.1 shall first be deemed to pay accrued but unpaid
interest, and then be deemed to repay principal.
2.2.3 Except as otherwise specifically set forth in this
Agreement, no Member shall have the right (i) to withdraw such Member's Capital
Contribution or to demand or receive the return of a Capital Contribution or to
make any claim to any portion of Company capital or (ii) to demand or receive
property other than cash in return for a Capital Contribution or to receive any
cash in return for a Capital Contribution.
2.2.4 Except as expressly provided in this Agreement, no
Member shall have personal liability to make any Capital Contribution.
2.2.5 A deficit Capital Account of a Member (or of a
partner or member of a Member) shall not be deemed to be a liability of such
Member (or of such partner or member) or an asset or property of the Company (or
any Member). Furthermore, no Member shall have any obligation to the Company or
any other Member for any deficit balance in such Member's Capital Account.
2.3 MEMBER LOANS. The Members may lend money to the Company for
any Company purposes on terms that are Approved by the Members from time to
time.
ARTICLE 3
INCOME TAX ALLOCATIONS
3.1 ESTABLISHMENT AND MAINTENANCE OF CAPITAL ACCOUNTS; PARTNERSHIP
STATUS. The Members shall establish and cause the Company to maintain a single
Capital Account for each Member which reflects such Member's Capital
Contributions to the Company. Each Member's Capital Account shall also reflect
the allocations and distributions made to such Member pursuant to Articles 3 and
4 and otherwise be adjusted in accordance with Code Section 704 and the
principles set forth in Regulations Sections 1.704-1(b) and 1.704-2. In applying
such principles, any expenditures of the Company described in Code Section
705(a)(2)(B) or treated as Code Section 705(a)(2)(B) expenditures pursuant to
Regulations Section 1.704-1(b)(2)(iv)(i) shall be allocated among the Members in
proportion to their respective Funding Proportions. The Members intend that the
Company be treated as a partnership for tax purposes.
3.2 PROFIT AND LOSS ALLOCATIONS. For purposes of determining
Capital Account balances under this Section 3.2, Profit and Loss with respect to
any Company Accounting Year shall be allocated prior to reducing Capital
Accounts by any distributions with respect to such Company Accounting Year.
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3.2.1 LOSS ALLOCATIONS. For each Company Accounting Year
from the Agreement Date until the termination of the Company, Loss from Company
operations shall be allocated among the Members in the following order of
priority:
3.2.1.1 First, among the Members as necessary to
cause the portion of each Member's Capital Account balance exceeding such
Member's Unrepaid Capital, if any, to be in proportion to the Members'
respective Residual Percentages;
3.2.1.2 Second, as necessary to cause each Member's
Capital Account balance, determined after adjusting the Members' Capital
Accounts for the allocations made pursuant to Section 3.2.1.1 for the Company
Accounting Year, to equal such Member's Unrepaid Capital;
3.2.1.3 Third, as necessary to cause each Member's
Capital Account balance, determined after adjusting the Members' Capital
Accounts for the allocations made pursuant to Sections 3.2.1.1 and 3.2.1.2 for
the Company Accounting Year to equal zero; and
3.2.1.4 Fourth, after giving effect to the
allocations made pursuant to Sections 3.3.1.1, 3.3.1.2 and 3.3.1.3, among the
Members in proportion to their respective Residual Percentages.
3.2.2 Profit Allocations. For each Company Accounting Year,
Profit from Company operations shall be allocated in the following order of
priority:
3.2.2.1 First, among the Members as necessary to
cause the Capital Account balance of each Member to equal such Member's Unrepaid
Capital;
3.2.2.2 Second, after giving effect to the
allocations made pursuant to Section 3.2.2.1, among the Members as necessary
to cause the portion of each Member's Capital Account balance exceeding such
Member's Unrepaid Capital to be in proportion to the Members' respective
Residual Percentages; and
3.2.2.3 Third, among the Members to proportion to
their then respective Residual Percentages.
3.3 ALLOCATIONS OF GAIN OR LOSS ON DISPOSITION.
3.3.1 GAIN OR LOSS ON DISPOSITION. Gain or Loss on
Disposition shall be a part of Profit or Loss for the period in which such Gain
or Loss on Disposition is recognized by the Company for tax purposes, and shall
be allocated as a part of Profit or Loss pursuant to Section 3.2.
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3.3.2 RULES OF CONSTRUCTION.
3.3.2.1 For purposes of applying Section 3.2 for a
Company Accounting Year, a Member's Capital Account balance shall be deemed to
be increased by such Member's share of Company Minimum Gain and Member
Nonrecourse Debt Minimum Gain remaining at the close of such Company Accounting
Year as determined under the Regulations under Section 704(b).
3.3.2.2 If there is insufficient Profit or Loss
(including Gain or Loss on Disposition) to allocate to the Members pursuant to
any subsection of Section 3.2 to cause every Member's Capital Account balance to
equal the entire Capital Account balance described in such subsection with
respect to such Member, such Profit or Loss (including Gain or Loss on
Disposition) available to be allocated among the Members pursuant to said
subsection shall be allocated in proportion to the amounts thereof that would
have been allocated to each Member pursuant to such subsection if there had been
sufficient amounts thereof to fully satisfy the requirements of such subsection
with respect to every Member.
3.3.2.3 Except as is otherwise provided in this
Article 3, an allocation of Company taxable income or taxable loss to a Member
shall be treated as an allocation to such Member of the same share of each item
of income, gain, loss and deduction that has been taken into account in
computing such taxable income or taxable loss.
3.4 MINIMUM GAIN CHARGEBACK AND QUALIFIED INCOME OFFSET.
3.4.1 NO IMPERMISSIBLE DEFICITS. Notwithstanding any other
provision of this Agreement, taxable loss (or items of deduction) shall not be
allocated to a Member to the extent that the Member has or would have, as a
result of such allocations, an Adjusted Capital Account Deficit. Any taxable
loss (or items of deduction) which otherwise would be allocated to a Member, but
which cannot be allocated to such Member because of the application of the
immediately preceding sentence, shall instead be allocated to the other Members.
3.4.2 QUALIFIED INCOME OFFSET. In order to comply with the
"qualified income offset" requirement of the Regulations under Code Section
704(b), and notwithstanding any other provision of this Agreement to the
contrary except Section 3.4.3 below, in the event a Member for any reason
(whether or not expected) has an Adjusted Capital Account Deficit, items of
Profits, including Gain on Disposition (consisting of a pro rata portion of each
item of income comprising the Company's Profits, including Gain on Disposition,
and both gross income and gain for the taxable year) shall be allocated to such
Member in an amount and manner sufficient to eliminate as quickly as possible
the Adjusted Capital Account Deficit.
3.4.3 MINIMUM GAIN CHARGEBACK. In order to comply with the
"minimum gain chargeback" requirements of Treasury Regulations Sections
1.704-2(f)(1)
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and 1.704-2(i)(4), and notwithstanding any other provision of this Agreement to
the contrary, in the event there is a net decrease in a Member's share of
Company Minimum Gain and/or Member Nonrecourse Debt Minimum Gain during a
Company taxable year, such Member shall be allocated items of income and gain
for that year (and if necessary, other years) as required by and in accordance
with Regulations Sections 1.704-2(f)(1) and 1.704-2(i)(4) before any other
allocation is made.
3.5 OTHER TAX ALLOCATION PROVISIONS.
3.5.1 INCOME CHARACTERIZATION. For purposes of determining
the character (as ordinary income or capital gain) of any Gain on Disposition
allocated to the Members pursuant to Section 3.2, 3.3 or 3.4. such portion of
the taxable income of the Company allocated pursuant to any such Section which
is treated as ordinary income attributable to the recapture of depreciation
shall, to the extent possible, be allocated among the Members in the proportion
which (i) the amount of depreciation previously allocated to each Member bears
to (ii) the total of such depreciation allocated to all Members. This Section
3.5.1 shall not alter the amount of allocations among the Members pursuant to
Sections 3.2, 3.3 and 3.4, but merely the character of income so allocated.
3.5.2 CHANGE IN PERCENTAGE INTERESTS. Notwithstanding the
foregoing, in the event any Member's Residual Percentage changes during a fiscal
year for any reason, the allocations of taxable income or loss under this
Article 3, and distributions, shall be adjusted as necessary to reflect the
varying interests of the Members during such year using an interim closing of
the books method as of the date of such change, or such other method as is
reasonably Approved by the Members.
3.5.3 MANDATORY ALLOCATIONS -- SECTION 704(c) AND MEMBER
NONRECOURSE DEBT.
3.5.3.1 Notwithstanding the foregoing, (i) in the
event Code Section 704(c) or Code Section 704(c) principles applicable under
Regulations Section 1.704-1(b)(2)(iv) require allocations of income or loss of
the Company in a manner different than that set forth above, the provisions of
Section 704(c) and the Regulations thereunder shall control such allocations
among the Members; and (ii) all tax deductions and taxable losses of the Company
that, pursuant to Regulations Section 1.704-2(i), are attributable to a Member
Nonrecourse Debt for which a Member (or a Person related to such Member under
Treasury Regulations Section 1.752-4(b)) bears the economic risk of loss (within
the meaning of Regulations Section 1.752-2) shall be allocated to such Member as
required by Regulations Section 1.704-2(c).
3.5.3.2 Any item of income, gain, loss and deduction
with respect to any property (other than cash) that has been contributed by a
Member to the capital of the Company or which has been revalued for Capital
Account purposes pursuant to Regulations Section 1.704-1(b)(2)(iv) and which is
required or permitted to be allocated to such Member for income tax purposes
under Section 704(c) of the Code so as to take into account the variation
between the tax basis of such property and its fair
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market value at the time of its contribution or at the time of its revaluation
for Capital Account purposes pursuant to Regulations Section 1.704-1(b)(2)(iv)
(such contributed or revalued property is referred to as "Revalued Property")
shall be allocated solely for income tax purposes in the manner so required or
permitted under Code Section 704(c) using any reasonable method of allocation
permitted under the Regulations, such allocations to be made as shall be
reasonably Approved by the Members. Allocations under this Section 3.5.3.2 are
solely for purposes of federal, state and local taxes and shall not affect, or
in any way be taken into account in computing, any Member's Capital Account or
share of Profit or Loss (including Gain or Loss on Disposition) or other items
or distributions under any provision of this Agreement.
3.5.4 GUARANTEE OF COMPANY INDEBTEDNESS. Except for
arrangements expressly described in this Agreement (including loans described in
Section 2.2.2.1 and/or 2.3), no Member shall enter into (or permit any Person
related to the Member to enter into) any arrangement with respect to any
liability of the Company that would result in such Member (or a Person related
to such Member under Regulations Section 1.752-4(b)) bearing the economic risk
of loss (within the meaning of Regulations Section 1.752-2) with respect to such
liability unless such arrangement has been Approved by the Members. To the
extent a Member is permitted to guarantee the repayment of any Company
indebtedness under this Agreement, each of the other Members shall be afforded
the opportunity to guarantee such Member's pro rata share of such indebtedness,
determined in accordance with the Members' respective Funding Proportions. If a
loan is to be made to the Company or any Investment Entity and such loan is to
be guaranteed by any Members (which guaranty by a Member shall occur only upon
the Approval of such Member), then, as between such Approving Members, such
liability shall be shared in proportion to their respective Funding Proportions
(and, if joint and several liability of such Members shall be required by the
lender under a Company or Investment Entity borrowing that has been Approved by
the Members, each such Approving Member shall make contributions to the Company
when requested by any Member to do so, which amounts shall immediately be
distributed to such other Approving Members, as necessary for such Approving
Members to bear the economic risk of loss with respect to any such borrowing in
proportion to their respective Funding Proportions).
3.5.5 REFERENCES TO REGULATIONS. Any reference in this
Agreement to a provision of final, proposed and/or temporary Regulations shall,
in the event such provision is modified or renumbered, be deemed to refer to the
successor provision as so modified or renumbered, but only to the extent such
successor provision applies to the Company under the effective date rules
applicable to such successor provision or the Members otherwise so reasonably
Approve under applicable elections contained in such Regulations.
3.5.6 TAX DEFINITIONS.
3.5.6.1 "NONRECOURSE DEDUCTIONS" has the meaning set
forth in Regulations Section 1.704-2(c).
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3.5.6.2 "NONRECOURSE LIABILITY" has the meaning set
forth in Regulations Section 1.704-2(b)(3).
3.5.6.3 "MEMBER NONRECOURSE DEBT MINIMUM GAIN" means
an amount, with respect to each Member Nonrecourse Debt, equal to the Company
Minimum Gain that would result if such Member Nonrecourse Debt were treated as a
Nonrecourse Liability, determined in accordance with Regulations Section
1.704-2(i)(2).
3.5.6.4 "MEMBER NONRECOURSE DEBT" has the meaning
ascribed to the term "Partner Nonrecourse Debt" set forth in Regulations Section
1.704-2(b)(4).
3.5.6.5 "MEMBER NONRECOURSE DEDUCTIONS" has the
meaning ascribed to the term "Partner Nonrecourse Deductions" set forth in
Regulations Section 1.704-2(i).
3.5.6.6 "COMPANY MINIMUM GAIN" has the meaning
ascribed to the term "Partnership Minimum Gain" in Regulations Section
1.704-2(d)(1) (and includes the Company's Share of the Company Minimum Gain of
each Investment Entity).
3.6 INTENT OF ALLOCATIONS. The parties intend that the foregoing
tax allocation provisions of this Article 3 shall produce final Capital Account
balances of the Members that will permit liquidating distributions made in
accordance with final Capital Account balances under Section 4.2.3 to be made
(after unpaid loans and interest thereon, including those owed to Members have
been paid) in a manner identical to the order of priorities set forth in
Sections 4.1.1 and 4.1.2. To the extent that the tax allocation provisions of
this Article 3 would fail to produce such final Capital Account balances, (i)
such provisions shall be amended by the Members if and to the extent necessary
to produce such result and (ii) taxable income and taxable loss of the Company
for prior open years (or items of gross income and deduction of the Company for
such years) shall be reallocated among the Members to the extent it is not
possible to achieve such result with allocations of items of income (including
gross income) and deduction for the current year and future years, as reasonably
Approved by the Members. This Section 3.6 shall control notwithstanding any
reallocation or adjustment of taxable income, taxable loss, or items thereof by
the Internal Revenue Service or any other taxing authority.
3.7 BASIS ELECTIONS. In the event of a transfer of all or any part
of a Member's interest in the Company, the Company shall elect to adjust the
basis of the Company's assets under Code Section 754 if Approved by the Members.
The transferor or transferee of a Company interest shall pay all costs of
preparing and filing all instruments or documents necessary to effectuate such
election if made, unless otherwise Approved by the Members.
3.8 GENERAL ALLOCATION RULES. All Profit and Loss of the Company
(including Gain or Loss on Disposition) shall be allocated with respect to each
Company
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Accounting Year as of the end of, and within ninety (90) days after the end of,
such year, or as soon thereafter as is practically possible. All Profit and Loss
(including Gain or Loss on Disposition) shall be allocated to the Members shown
on the records of the Company to have been Members as of the last day of the
Company Accounting Year for which such allocation is to be made, except that, if
a Member sells or exchanges its interest in the Company or otherwise is admitted
as a substituted Member, the Profit or Loss and Gain or Loss on Disposition
shall be allocated between the transferor and the transferee by taking into
account their varying interests during the Company Accounting Year in accordance
with Code Section 706(d), using the interim closing of the books method or such
other method as shall be reasonably Approved by the Members.
3.9 SHARING OF COMPANY NONRECOURSE DEBT. Throughout the term of
the Company, the nonrecourse debt of the Company (other than Member Nonrecourse
Debt) shall be allocated for tax purposes among the Members in accordance with
their then respective Residual Percentages.
3.10 ADJUSTMENT OF GROSS ASSET VALUE. Gross Asset Value, with
respect to any asset, shall be the adjusted basis for federal income tax
purposes of that asset, except as follows:
3.10.1 The initial Gross Asset Value of any asset
contributed (or deemed contributed under Regulations Section 1.708-1(b)(1)(iv))
by a Member to the Company shall be the fair market value of the asset on the
date of the contribution, as reasonably Approved by the Members.
3.10.2 The Gross Asset Values of all Company assets shall be
adjusted to equal the respective fair market values of the assets, as reasonably
Approved by the Members:
3.10.2.1 If the Members reasonably Approve that an
adjustment is necessary or appropriate to reflect the relative economic
interests of the Members in the Company, as a result of (i) the acquisition of
an additional interest in the Company by any new or existing Member in exchange
for more than a de minimis capital contribution; or (ii) the distribution by the
Company to a Member of more than a de minimis amount of Company property as
consideration for an interest in the Company; and
3.10.2.2 As of the liquidation of the Company within
the meaning of Regulations Section 1.704-1(b)(2)(ii)(g).
3.10.3 The Gross Asset Value of any Company asset
distributed to any Member shall be the gross fair market value of the asset on
the date of distribution as reasonably Approved by the Members (less any
liabilities assumed by the distributee Member or to which such asset is subject
as of the time of distribution).
3.10.4 The Gross Asset Values of Company assets shall be
increased or decreased to reflect any adjustment to the adjusted basis of the
assets under
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Code Section 734(b) or 743(b), but only to the extent that the adjustment is
taken into account to determining Capital Accounts under Regulations Section
1.704-1(b)(2)(iv)(m), provided that Gross Asset Values shall not be adjusted
under this Section 3.10.4 to the extent that the Members reasonably Approve that
an adjustment under Section 3.10.2 is necessary or appropriate in connection
with a transaction that would otherwise result in an adjustment under this
Section 3.10.4.
After the Gross Asset Value of any asset has been determined or adjusted under
Section 3.10.1, 3.10.2 or 3.10.4, Gross Asset Value shall be adjusted by the
depreciation taken into account with respect to the asset for purposes of
computing Profits or Losses.
ARTICLE 4
INVESTMENT LOAN REPAYMENTS
AND DISTRIBUTIONS
4.1 NET AVAILABLE CASH. The Members shall, at the end of each
quarter, determine the amount of Net Available Cash for such quarter (or more
frequently, if Approved by the Members). All Net Available Cash for any period
shall be distributed as follows, within thirty (30) days after the end of each
calendar quarter (or at such other times as shall be Approved by the Members)
after first repaying any loans to the Company from the Members under Section
2.2.2.1 and/or 2.3 (loans which have been outstanding the longest shall be
repaid first and if two or more Members have loans which have been outstanding
for equal periods, repayment of such loans shall be made pro rata, in proportion
to such Members' then respective loan balances, with payments first repaying
accrued but unpaid interest and then repaying principal):
4.1.1 First, distributions shall be made to the Members
until each Member has received distributions pursuant to this Section 4.1.1 in
an amount equal to such Member's Unrepaid Capital; such distributions to be made
pro rata, in proportion to the then respective aggregate Unrepaid Capital of
each Member; and
4.1.2 Next, the balance shall be distributed to the
Members, pro rata, in proportion to the Members' then respective Residual
Percentages.
4.2 PROCEEDS AND DISTRIBUTIONS IN LIQUIDATION. The proceeds
received by the Company in connection with the liquidation and winding up of the
Company shall be applied in the following order of priority:
4.2.1 First, to the payment of the expenses incurred in
dissolution and termination;
4.2.2 Next, to the payment of creditors of the Company
(including making the repayments of any unpaid Member loans in the same priority
as is
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described in Section 4.1) except secured creditors whose obligations will be
assumed or otherwise transferred on a liquidation of the Company property or
assets; and
4.2.3 The balance, if any, shall be distributed to the
Members in accordance with their respective positive Capital Account balances
(determined after applying Article 3 for all periods, including the liquidation
period) as provided in Section 8.6.
4.3 GENERAL DISTRIBUTION RULES.
The timing and amount of all distributions shall be in
accordance with Sections 4.1, 4.2, 8.5 and 8.6. All distributions of cash shall
be made to the Members shown on the records of the Company to have been Members
on the date of the distribution. All distributions, upon request by a Member,
shall be made by wire transfer in immediately available funds to such Member's
account specified in such request. Distributions of Net Available Cash made to a
Member shall be deemed to be advances on account of such Member's share of the
distributable amounts thereof. For purposes of this Agreement, the term
"distributable" with respect to such distributions shall mean the amount of such
distributions as finally determined pursuant to the provisions of this Agreement
by the Members for the Company Accounting Year in respect of which they were
made and for the term of the Company.
4.4 SOURCE OF DISTRIBUTIONS. Each Member shall look solely to the
assets of the Company for the return of its Capital Contributions and its share
of distributions and shall have no recourse upon dissolution or otherwise
against the Company, the Members or the Liquidator. No holder of an interest in
the Company shall have any right to receive any distributions except as provided
to this Agreement or any right to demand or receive property other than cash
upon dissolution and termination of the Company.
ARTICLE 5
MANAGEMENT; DUTIES AND POWERS OF MEMBERS;
RIGHTS AND DUTIES OF MEMBERS
5.1 MANAGEMENT OF BUSINESS; EXECUTION AUTHORITY; OFFICERS; MEMBER
OBLIGATIONS; REIMBURSEMENTS; MAJOR DECISIONS; RETAINED APPROVALS.
5.1.1 MANAGEMENT.
5.1.1.1 MEMBER MANAGEMENT. The Company shall be
Member managed and shall have no managers. Except as otherwise provided in this
Agreement (including the right of the Members to Approve Major Decisions under
Section 5.1.5), any Member who is not a Terminated Member may supervise and/or
undertake the business of the Company and make decisions affecting the
day-to-day operations of the Company, the Company Interests and the Investments.
Except to the extent the Approval of
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a Member is expressly required under this Agreement, no consent or Approval of
the other Member shall be required with respect to any action or decision of
such Member with respect to Company or Investment Entity matters. No Member
shall receive any compensation for serving as a Member or undertaking any action
on behalf of the Company. Each Member shall cause each of its Authorized
Representatives to devote as much time as is reasonably necessary to fulfill the
Member's obligations under this Agreement.
5.1.1.2 EXECUTION AUTHORITY. The signature of either
Member, the President of the Company or any Vice President of the Company
appointed under Section 5.1.4.1 shall be required on all contracts of the
Company. The execution and delivery by any Member, the President of the Company
or any Vice President of the Company of any document shall be sufficient to bind
and shall be binding upon the Company for all purposes, and third parties shall
be entitled to rely on the authority of any Member, the President or any Vice
President of the Company to take any action on behalf of the Company.
Notwithstanding the foregoing, (i) neither Member nor any officer of the Company
shall take any action requiring Approval of the Members under this Agreement
unless the provisions of this Agreement concerning such Approval have been fully
satisfied, and (ii) no officer or employee of the Company shall take any action
on behalf of the Company unless such action either has been Approved by the
Members or is both (a) permitted to be taken by any Member without the Approval
of the other Member under this Agreement and (b) is directed to be taken by such
officer or employee by a Member who is not a Terminated Member under Section
7.9. Either Member shall have the authority and responsibility, at Company
expense, of supervising the Company's employees, if any.
5.1.1.3 AGHC PROSPECTUS COMPLIANCE. The Members
shall use their reasonable efforts, at Company expense, to cause the Company to
comply with all applicable laws and regulations and to operate the business of
the Company and each Investment Entity in a manner that is reasonably consistent
in all material respects with the description contained in the prospectus of
AGHC pursuant to which shares in AGHC were offered (the "AGHC Prospectus").
5.1.2 COMPENSATION; REIMBURSEMENT. No compensation shall be
payable by the Company to any Member or to an Affiliate of any Member unless
permitted pursuant to the AGHC prospectus and Section 5.2. Unless reimbursement
is prohibited under Section 5.5 or another provision of this Agreement, the
Company shall reimburse the Members for their actual and reasonable
out-of-pocket expenses incurred in connection with Company business to the
extent such Member is authorized to take the action resulting in such expenses,
including those expenses that are described in this Section 5.1 or that are
otherwise specifically authorized by this Agreement.
5.1.3 BUDGETS AND RESERVES.
5.1.3.1 OPERATING BUDGET; INVESTMENT BUDGETS;
RESERVES. The Members shall cause to be prepared, at Company Expense, such
budgets with respect to the Company or the Investments as shall be Approved by
the Members or as shall be required by Persons making loans to the Company, any
Investment Entity or either
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Member. Reserves shall be established for the Company only to the extent
reasonably Approved by the Members, taking into account the requirements of
lenders to the Company, any Investment Entity, or either Member under loan
documents that are binding on the Company.
5.1.4 POWERS OF THE MEMBERS. Each Member who is not a
Terminated Member shall have full power and shall have the obligation without
the necessity of obtaining the Approval of any other Member (except as otherwise
set forth in this Agreement), and at the expense of the Company, to take all
actions required to conduct the day-to-day operations of the Company and
accomplish the purposes stated in this Agreement, and, subject to the
availability of Company funds, to implement the Major Decisions and other
decisions that have been Approved by the Members, and to pay the expenses of the
Company (or cause them to be paid) when due. Neither Member (nor any officer)
shall have the power to implement any Major Decision unless such Major Decision
has been Approved by the Members, as set forth in Section 5.1.6.2 hereof.
5.1.4.1 OFFICERS AND EMPLOYEES; DELEGATION OF
AUTHORITY; BONDING/ O&D INSURANCE. The Company shall have its own offices and
administrative and operating employees, and shall bear the cost thereof, to the
extent Approved by the Members from time to time. The Company shall have such
officers (including a President and one or more Vice Presidents) if and to the
extent Approved by the Members from time to time. At Company expense, each
Member who is not a Terminated Member shall have the authority to hire and
discharge Company employees (including Company officers) as the Members shall
reasonably Approve. The compensation arrangements for all employees shall be as
Approved by the Members from time to time. The President and any Vice President
of the Company shall have the authority described in Section 5.1.1.2. Fidelity
bonds, in amounts and on terms Approved by the Members, may be obtained at
Company expense for Company employees, and the Company may obtain officer and
director (or comparable) insurance for the Company's officers and other
employees on such terms, and in such amounts, as shall be Approved by the
Members from time to time. The Members may delegate the authority to take any
action permitted under this Agreement to either of the Members or to any Company
officer, employee or agent, in each case to the extent Approved by the Members,
as evidenced by a written document that has been executed by all Members who are
not Terminated Members.
5.1.4.2 NON-EXCLUSIVITY. No Member shall be required
to conduct the Company's day-to-day operations and implement Mayor Decisions as
its sole and exclusive function, and it and its Affiliates may have other
business interests and may engage in other activities in addition to those
relating to the Company, without having or incurring any obligation to offer any
interest in such activities to the Company or any Member, except as provided in
the AGHC Prospectus, and the Members shall be obligated to devote, and cause
controlling persons to devote, only so much of their time to the Company's
business as shall be reasonably required to meet the Members' respective
obligations hereunder.
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5.1.5 MAJOR DECISIONS. The following are mayor decisions
(the "Mayor Decisions") requiring the prior Approval (or unanimous reasonable
Approval, if so indicated) of the Members (except as otherwise required in case
of Emergency or Force Majeure); provided, however, that a Member's Approval
shall not be required after such Member has lost its Approval rights under
Section 7.9 or another provision of this Agreement except to the extent provided
in Section 5.1.6.1.
5.1.5.1 Any act in contravention of this Agreement
(including the requirements concerning compliance with the AGHC Prospectus
contained in Sections 5.1.1, 5.1.2 and 5.1.4.2) or extending the term of the
Company;
5.1.5.2 Any act which would make it impossible to
carry on the ordinary business of the Company, except the liquidation of the
Company under the circumstances permitted in Article 8, or the sale, exchange or
other disposition of any Company Interest or Investment or any other Company or
Investment Entity assets by the Company or any Investment Entity that has been
Approved by the Members or otherwise is permitted under this Agreement;
5.1.5.3 Any action which would cause the Company to
become an entity other than a Delaware limited liability company;
5.1.5.4 Changing the purposes of the Company;
5.1.5.5 Amending this Agreement except as permitted
herein (including Section 3.6);
5.1.5.6 Making in-kind distributions;
5.1.5.7 Establishing or adjusting Gross Asset Value
under Section 3.10 for any contributed or distributed asset (reasonable Approval
only);
5.1.5.8 Indemnification of any Person other than a
Member;
5.1.5.9 Except as provided in Section 3.5.4,
entering into any agreement (i) which would cause any Member to become
personally liable on or in respect of or to guarantee any indebtedness of the
Company or (ii) which is not nonrecourse to the Members;
5.1.5.10 Causing the Company to redeem or repurchase
all or any portion of the interest of a Member except as provided in Section
7.9;
5.1.5.11 Acceptance of additional Capital
Contributions other than those expressly provided for in this Agreement;
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5.1.5.12 Causing or permitting the Company to be
merged with any other entity;
5.1.5.13 Causing or permitting the Company to make
loans to, or enter into any contract with any Member or any Affiliate of a
Member, other than contracts permitted under Section 5.2;
5.1.5.14 Dissolving, terminating or liquidating of
the Company, except as provided in Article 8 of this Agreement;
5.1.5.15 Entering into a binding commitment letter,
option or contract to acquire or cause any Investment Entity to acquire an
Investment, or substantially modifying or disposing of a Company Interest or an
Investment unless such action has been Approved by the Members or is authorized
to be taken without further Approval under this Agreement (upon the liquidation
of the Company, the terms of all dispositions shall require only the reasonable
Approval of each Member);
5.1.5.16 Causing any action to be taken with respect
to any Investment Entity that constitutes a "Mayor Decision" (as such term is
defined under the applicable Investment Entity Agreement) with respect to such
Investment Entity;
5.1.5.17 Issuing Funding Notices pursuant to Section
2.1.2 with respect to Shortfall Disbursements addressed in Section 2.2.1;
5.1.5.18 Obtain any third party loans (whether
secured or unsecured), or cause or permit any Investment Entity to do so, or, in
connection with any third party loan, execute or deliver on behalf of the
Company any guarantee or other agreement whereby the Company is or may become
liable for any obligations of any Investment Entity or any other Entity; or
borrow money from a Member or its Affiliates except pursuant to Sections 2.2.2
or 2.3;
5.1.5.19 Acquire any real property or other
Investment not within the scope of the Company purposes as set forth in Section
1.4;
5.1.5.20 Except as provided in Sections 5.1.4.1 and
5.2, pay any salary, fees or other compensation to, or enter into any contract
with, any Affiliate of any Member;
5.1.5.21 Modify or refinance any indebtedness of the
Company or any Investment Entity, or select a lender to make loans to the
Company or any Investment Entity;
5.1.5.22 Make any distribution except as permitted
under Article 4 or Section 7.9.1 except in connection with the liquidation of
the Company under Article 8, or make any Company expenditure or permit any
Investment Entity expenditure other than as Approved by the Members except as
otherwise permitted or
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authorized by this Agreement (including a budget that has been Approved under
Section 5.1.3 or an Emergency expenditure);
5.1.5.23 Commence, dismiss, terminate or settle any
material litigation matter or material condemnation claim, or any other matter
or claim in connection with which the amount in controversy is reasonably
expected to exceed One Hundred Thousand Dollars ($100,000);
5.1.5.24 Substantially modify the terms of any
Investment (reasonable Approval only);
5.1.5.25 Determine the terms of any participation
(e.g., distribution and control issues) of third party investors;
5.1.5.26 Admit additional or transferee Members to
the Company as substituted Members or enter into financing that participates in
profits; or permit any Transfer of any interest in the Company or of ownership
interests in a Member, to the extent Approval of the Members for such Transfer
is required under this Agreement;
5.1.5.27 Confess any judgment against the Company or
any Investment Entity or cause the Company or any Investment Entity to file for
Bankruptcy or other relief from creditors;
5.1.5.28 Establish insurance requirements for the
Company or any Investment Entity;
5.1.5.29 Make tax elections on behalf of the Company
and file tax returns for the Company or any Investment Entity (reasonable
Approval only);
5.1.5.30 Establish or release reserves for use by the
Company except pursuant to a budget Approved by the Members or as otherwise
provided in this Agreement (reasonable Approval only);
5.1.5.31 Voluntarily deviate materially from the
terms of acquisition, disposition or other course of action with respect to any
Investment that required the Approval of the Members, except in case of
Emergency or Force Majeure; or
5.1.5.32 Take any other action that is required to be
Approved by the Members under this Agreement.
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5.1.6 RETAINED APPROVALS: PROCEDURE FOR MEMBER REVIEW AND
APPROVAL.
5.1.6.1 RETAINED APPROVALS. Notwithstanding anything
to the contrary contained in this Agreement, after the loss of Approval rights
by a Terminated Member under Section 7.9, the Terminated Member shall still
retain Approval rights with respect to the matters described in (a) Sections
5.1.5.1 through (and including) 5.1.5.13, (b) Section 5.1.5.20, (c) Section
5.1.5.26 with respect to the substitution of a transferee or additional Member
as a Member, provided, however, that the provisions of this clause (c) shall
terminate if and when the Company has received an opinion of Independent Tax
Counsel that the termination of such Approval rights would not cause the Company
to lose its status as a partnership for federal income tax purposes under the
Code and Regulations as in effect as of the date the Approval of such
substitution is required under this Agreement (the "Transfer Restriction
Termination Date"); and (d) Sections 5.1.5.25 and 5.1.5.26. except that the
Terminated Member shall not have the right to Approve the actions described in:
(i) Section 5.1.5.25 or 5.1.5.26 (1) to the extent provided in (c) of this
Section 5.1.6.1, (2) otherwise except to the extent that the Terminated Member's
interest is diluted by the admission of the third party investors, any new
Member or any Transfer described therein, and (3) with respect to participating
financing, if Members' interests are diluted pro rata by such participating
financing, (ii) Section 5.1.5.5 to the extent amendment of this Agreement is
permitted under Section 3.6 or is necessary or appropriate (as reasonably
Approved by the non-Terminated Member) to admit a new Member if the Admission is
permitted under preceding clause (i) without the Terminated Member's Approval,
and (iii) Section 5.1.5.9 except to the extent the Terminated Member would be
personally liable for the repayment of all or a portion of the indebtedness or
under the agreement described in such Section 5.1.5.9.
5.1.6.2 APPROVAL PROCEDURE. Notice of the request
for a Member's Approval of any matter for which such Approval is required
pursuant to this Agreement shall be delivered by the requesting Member to each
of the then Authorized Representatives, together with the requesting Member's
summary and analysis of any other matter for which such Approval is requested
and the requesting Member's recommendations with respect to any matter for which
Approval is requested. Each Authorized Representative shall approve or
disapprove such matter by notice to the other Member given within ten (10) days
following delivery of such notice. Failure of any Authorized Representative to
timely respond by written notice to the requesting Member, indicating Approval
or disapproval of such matter and, if disapproved, the reason for such
disapproval, shall be deemed withholding of the Approval by such Authorized
Representative of such matter for which Approval is requested. Notwithstanding
anything in this Agreement to the contrary, no Authorized Representative of a
Member shall have the right to Approve any action if such Member no longer has
Approval rights with respect to such issue under Sections 7.9 and 5.1.6.1.
5.2 AFFILIATE TRANSACTIONS. If Approved by the Members, Affiliates
of any Member may provide property management services, accounting services,
construction services, office administration, and/or document control services
to the Company or to any
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Investment Entity, subject to the following conditions: (i) the fees for such
services must be no greater than the fees charged generally by qualified,
unaffiliated third-parties performing similar services in the geographical area
in which the services are to be performed; and (ii) the other terms of the
agreement pursuant to which such services will be performed shall generally be
no more onerous than the terms of agreements used by qualified, unaffiliated
third-parties performing similar services in the geographical area in which the
particular services are to be rendered.
5.3 REPORTING REQUIREMENTS; FINANCIALS; MEETINGS.
5.3.1 GOVERNMENTAL REPORTS; MEETINGS. The Members shall, at
Company expense, use reasonable efforts to cause to be prepared and timely filed
with appropriate federal, state and foreign regulatory and administrative
bodies, all reports required to be filed with such entities under then current
applicable laws, rules and regulations, subject to the reasonable Approval of
the Members. Such reports shall be prepared on the accounting or reporting basis
required by such regulatory bodies. The Members shall be provided with a copy of
any such report. No meeting of the Members shall be required unless requested by
any Member upon notice to all Members, which notice may be given by any Member
at any time. All Members shall be given written notice of any meeting of the
Company at least twenty (20) days prior to any such meeting by the Member
requesting such meeting. Any meetings shall be held at the record-keeping office
of the Company or at any other reasonably convenient location within the United
States as the Members may reasonably Approve and specify in such notice.
5.3.2 ACCESS; AUDIT. The Members shall permit any Member to
review and copy, during normal business hours at the office of the Company, all
Company financial records and information. The records and information of the
Company shall be audited at Company expense by auditors to be selected upon the
Approval of the Members. The Members shall maintain (at the office of the
Company) reports required or otherwise prepared and delivered hereunder, under
any Investment Entity Agreement, or by law or any contract to which the Company
is a party, copies of which shall be furnished to each Member when available, at
the Company's expense.
5.3.3 FINANCIALS AND STATUS REPORTS. At Company expense,
the Members shall use reasonable efforts to cause the following to be issued to
the Members:
(i) annual financials shall be prepared by the Partnership's
independent certified public accountants at Company expense, within ninety (90)
days after the close of each year (including sources and uses of funds, cash on
hand, distributions, changes in financial position, tax information, Unrepaid
Capital and unrepaid Member loans); and
(ii) such other reports as are contemplated by the AGHC Prospectus.
5.4 TAX MATTERS PARTNER; TAX RETURNS. AGHOP is hereby designated
as the "Tax Matters Partner", as such term is defined in Section 6231(a)(7) of
the Code, and it shall serve as such at Company expense with all powers granted
to a tax matters partner
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under the Code. Each Member shall give prompt notice to each other Member of any
and all notices it receives from the Internal Revenue Service (or any other
taxing authority) concerning the Company, including any notice of audit, any
notice of action with respect to a revenue agent's report, any notice of a
30-day appeal letter and any notice of a deficiency in tax concerning the
Company's federal, state or local income tax returns. At company expense, the
Tax Matters Partner shall furnish each Member with status reports regarding any
negotiation between the Internal Revenue Service (or other taxing authority) and
the Company promptly after any material new development. The Tax Matters Partner
shall use its reasonable efforts to cause the Company's accountants to prepare
and file on a timely basis, with due regard to extensions (if such extensions
are reasonably Approved by the Members) all tax and information returns which
the Company may be required to file. No tax or information return shall be filed
unless reasonably Approved by the Members. The Members shall cause the Company's
accountants to prepare and deliver, at Company expense, to each Member on a
timely basis an information reporting return (E-1) reflecting such Member's
distributive share of all income, gain, loss, deductions, allowances or credits
of the Company for each Company Accounting Year, as computed pursuant to Article
3.
5.5 INDEMNIFICATION AND LIABILITY of MEMBERS AND COMPANY
EMPLOYEES.
5.5.1 No Member or Company officer or other employee shall
be liable, responsible or accountable in damages or otherwise to any of the
Members or the Company for any act or omission performed or omitted by it in
good faith on behalf of the Company and in a manner reasonably believed by it
to be (i) within the scope of the authority granted to it by this Agreement or,
in the case of an employee, the scope of the authority granted to the employee
by the Members and (ii) in the best interests of the Company, the Members or
their Affiliates, except for Major Defaults (as defined in Section 5.5.3) and
damages for a breach of this Agreement as provided in Section 9.2 and, in the
case of an employee, damages for the employee's breach of any employment
agreement with the Company.
5.5.2 Except with respect to a Member's Major Defaults
described in Section 5.5.3 and a Member's breach of this Agreement as provided
in Section 9.2 (or, in the case of an employee, such employee's acting outside
the scope of the employee's authority granted to him by the Members, the
employee's Major Default, or the employee's breach of any employment agreement
with the Company), the Company shall indemnify and hold harmless each Member and
employee from and against any obligations, actual damages, penalties, actions,
judgments, suits, expenses, disbursements, losses, costs or liabilities of any
kind or nature whatsoever which may be imposed upon, incurred or asserted
against such Member or employee (including reasonable attorneys' and paralegals'
fees and court costs) in connection with, due to or arising out of (i) such
Member's (or a partner or a member of such Member) serving as a Member of the
Company, (ii) such Member's serving as an employee of an Affiliate of a Member
or (iii) such employee serving as an employee of the Company, in each case so
long as such Member (or such partner or member) and its Affiliates, or employee,
acted in good faith, with reasonable belief that such actions were within the
scope of authority granted to such Member under this Agreement, or
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to such employee by the Members, as the case may be, and such actions did not
constitute a Major Default or a breach of this Agreement under Section 9.2 or,
in the case of an employee, a breach of any employment agreement with the
Company.
5.5.3 Each Member shall (and each employee shall be
required to) indemnify and hold harmless each other Member, employee and the
Company from and against any direct (and not consequential or incidental)
obligations, actual damages, penalties, actions, judgments, suits, expenses,
disbursements, losses, costs or liabilities (collectively, the "Liabilities")
incurred or paid by such employees, other Members or the Company (to the extent
such Liabilities are not reimbursed by insurance proceeds or indemnities from
third parties), to the extent such Liabilities are caused by, and such Member or
employee is finally adjudicated to have engaged in, actual fraud or intentional
misappropriation of funds ("Major Defaults") or is determined to have committed
a breach of this Agreement as provided in Section 9.2 or any employment
agreement with the Company.
5.6 OPPORTUNITY TO DEFEND. In any case where indemnity is sought
by a Member (or an employee pursuant to the principles set forth in this Section
5.5), such Member shall (and such employee shall be required to) give notice of
the request for indemnification to the Company and the other Members from whom
the indemnity is required and give them the opportunity to the extent reasonably
possible, to participate in the defense of the claim giving rise to the claim
for indemnity, all at Company expense and subject to the reasonable Approval of
the Members.
5.7 LIMITATION OF LIABILITY. Each Member's liability shall be
limited as set forth in this Agreement, the Act and other applicable law. No
partner, officer, director, shareholder, manager or member of a Member shall be
liable for the obligations of such Member to the Company or the other Members
under any circumstances other than a Major Default that has actually been
commited by such partner, officer, director, shareholder, manager or member.
5.8 NO PRIORITIES. Except as specifically provided in this
Agreement, no Member shall have any priority over any other Member as to the
return of its Capital Contributions or as to distributions or allocations of
Profits or Losses or other tax items.
ARTICLE 6
BOOKS, RECORDS AND BANK ACCOUNTS
6.1 BOOKS AND RECORDS; ACCOUNTING METHOD. At Company expense, the
Members shall cause to be kept (at the office of the Company referred to in
Section 1.3.2) accurate, just and true books of account, in which shall be
entered fully and accurately each and every transaction of the Company. Such
records shall be maintained for the period, in the manner, and at the locations
required by applicable law. The books shall be kept in accordance with the
Company's method of reporting for federal income tax purposes (which shall be
the accrual method of accounting). Tax accounting elections, including methods
of
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depreciation and deduction or capitalization of interest, taxes and insurance
premiums during any construction period, shall be made as the Members shall
reasonably Approve. The Company's financial statements shall be prepared in
accordance with generally accepted accounting principles, consistently applied.
6.2 BANK ACCOUNTS. The funds of the Company shall be deposited in
the name of the Company, in such bank account or accounts as the Members shall
reasonably Approve. Such funds shall be invested by the Members in such high
quality, short term instruments as shall be reasonably Approved by the Members
(which may or may not bear interest as the Members shall Approve). The
individual signatories on all Company accounts shall be appointed and Approved
by the Members from time to time. The signature of any such appointee shall be
sufficient to effect withdrawals if so Approved by the Members.
ARTICLE 7
TRANSFERS OF COMPANY INTERESTS
7.1 RESTRICTIONS ON TRANSFER. No Member shall be permitted to
Transfer all or any part of its interest in the Company under any circumstances
until the Transfer Restriction Termination Date. Any such attempted or actual
Transfer shall be null and void ab initio and of no force and effect.
Notwithstanding the foregoing, from and after the Transfer Restriction
Termination Date, a Member may Transfer all or part of its interest in the
Company, as follows:
7.1.1 To the Company or another Member or a partner, member
or shareholder or Affiliate of a Member; and
7.1.2 Any other Transfer which is Approved by the Members
(excluding any Member that is a Terminated Member).
The following shall be conditions precedent to the effectiveness of any Transfer
of any interest in the Company pursuant to this Article 7 (no such Transfer
shall occur or be effective for any purpose until the Transfer Restriction
Termination Date): (i) the transferee shall assume in writing each of the
obligations of the transferor to the Company; (ii) such transferee shall agree
in writing to be bound by each of the terms and conditions of this Agreement;
(iii) the transferee shall deliver to the Company instruments of assumption and
security reasonably Approved by the Members, for the payment and performance of
all obligations of or attendant to the interest so transferred and assumed; and
(iv) the requirements of Sections 7.4 and 7.5 shall be satisfied.
7.2 TAKE-ALONG RIGHTS. There shall be no right of any
other Member to participate in any Transfer permitted by a Member under this
Agreement.
7.3 BANKRUPTCY OR DISSOLUTION OF MEMBERS. The Bankruptcy
or dissolution (without reconstitution within sixty (60) days thereafter) of any
Member shall
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dissolve the Company and cause its liquidation, except as otherwise provided in
Section 8.4. Upon the occurrence of a Bankruptcy or the dissolution (without
reconstitution within sixty (60) days thereafter) of any Member, such Member
shall become a Terminated Member under Section 7.9, and the trustee in
Bankruptcy, receiver or other legal representative of the Bankrupt Member or
other legal representatives of the dissolved Member, shall have all the rights
of an assignee of the Member, including the same right (subject to the same
limitations) as the Bankrupt or dissolved Member would have had under the
provisions of Section 7.1 to Transfer its interest in the Company, subject to
the substitution rules of Section 7.4 and the provisions of Section 7.9.
7.4 SUBSTITUTION OF MEMBER. Subject to the restrictions on
Transfers and Approval rights of the Members as set forth in Section 7.1 and the
provisions of Section 7.5, the assignee of any Transfer by a Member (a "Member
Assignee") shall become a substitute Member only if (i) the assignor Member so
provides in an instrument of assignment, (ii) the Member Assignee agrees in
writing to be bound by the provisions of this Agreement and of the Articles and
any amendments hereto and thereto, and (iii) each Member Approves such
substitution, which Approval may be given or withheld in its sole and absolute
discretion (this clause (iii) shall cease to have any force and effect if and
when the Transfer Restriction Termination Date occurs). If the assignor Member
so provides, the Member Assignee agrees to be bound as aforesaid, and, if
applicable under preceding clause (iii), the Members so Approve such
substitution, the Member Assignee shall become a substitute Member upon payment
to the Company of all costs and expenses of reviewing the instrument of
assignment, if appropriate, and, if required by law, an amendment to the
Articles to reflect such substitution. In such event, if and as required by law,
the Members shall prepare or cause to be prepared an amendment to the Articles
to be signed by the Members and, to the extent required, by the Member Assignee.
The Members shall attend to the due execution and filing of such amendment to
the Articles, if such amendment is required. Unless named in this Agreement, or
unless admitted to the Company as provided in this Agreement, no Person shall be
considered a Member, and the Company, each Member and any other Persons having
business with the Company need deal only with Members so named or so admitted
and shall not be required to deal with any other Person by reason of a Transfer.
A Member Assignee of an interest in the Company who is not admitted as a
substitute Member as provided in this Section 7.4 shall be entitled to receive
the economic benefits of the interest purported to be Transferred but shall not
be considered a Member for any purposes and shall have none of the rights of a
Member under this Agreement or under the Act.
7.5 ADDITIONAL TRANSFER RESTRICTIONS.
7.5.1 Notwithstanding any provision of this Agreement to
the contrary, and subject to the limitations in Sections 7.1 through 7.4, a
Member's ability to Transfer all or any portion of its interest as a Member in
the Company shall be subject to the following additional restrictions:
7.5.1.1 No Transfer of all or any portion of such
interest shall be effective unless (i) such Transfer complies with the Transfer
restrictions in all agreements to which the Company, each Investment Entity or
such Member is a party,
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and (ii) such interest is registered under the Securities Act and any
applicable state securities laws, or an exemption from registration is
available, and, for any direct Transfer of an interest to the Company, the
Company shall have received an opinion of counsel, reasonably Approved by the
Members, to such effect (unless the requirement that the Company receive such
legal opinion is waived by the Approval of the Members);
7.5.1.2 No Member shall be permitted to Transfer any
portion of its Company interest or take any other action which would cause the
Company to be (i) treated as a "publicly traded partnership" within the meaning
of Code Section 7704 or (ii) classified as a corporation (or as an association
taxable as a corporation) within the meaning of Code Section 7701(a);
7.5.1.3 No Member shall be permitted to Transfer all
or any portion of its Company interest or to take any other action (including,
in the case of any Member which is a corporation, limited liability company or
partnership or a partner or member of a partnership or limited liability company
which is a Member, a Transfer of any interest in such partnership, limited
liability company or corporation or in the partners, members or shareholders
thereof) which would result in a termination of the Company as a partnership
within the meaning of Code Section 708(b)(1)(B) (a "Tax Termination"), without
the Approval of the Members;
7.5.1.4 Unless arrangements concerning withholding
are reasonably Approved by the Members (if such withholding is required of the
Company), no Member shall be permitted to Transfer all or any portion of its
interest in the Company to any Person, unless such Person is a United States
Person as defined in Code Section 7701(a)(30) and is not subject to withholding
of any federal tax; and
7.5.1.5 No Member shall be permitted to Transfer all
or any portion of its Company interest if such Transfer will (i) cause the
assets of the Company or any Investment Entity to be deemed to be "plan assets"
under ERISA or its accompanying regulations or the Code or (ii) result in any
"prohibited transaction" under ERISA or its accompanying regulations affecting
the Company or such Investment Entity.
7.5.2 Any purported transfer or any other action taken in
violation of this Section 7.5 shall be void ab initio.
7.6 TRANSFER INDEMNIFICATION AND CONTRIBUTION PROVISIONS.
Each Member shall indemnify, defend and hold the Company and
each other Member, and the shareholders, partners, employees, agents, members
and Affiliates thereof, harmless from any Liabilities in any way arising from
the failure of a Transfer of any interest in the Company (including any Transfer
of an interest in any partners, members or shareholders of the indemnifying
Member, or the partners, members or shareholders therein, and regardless of
whether occurring before or after the date of this Agreement) to comply with all
applicable federal and state securities laws, including all registration or
qualification requirements and anti-fraud requirements, or the impact of such
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Transfer upon compliance of the Company and its Members with those securities
laws in connection with any previous Transfer of an interest in the Company
Should the preceding indemnity be unenforceable to any extent, then, to such
extent the Member otherwise required to so indemnify the Company and the other
Member shall be obligated to contribute to any loss, liability, cost or expense
resulting from the actions, omissions or events set forth in the above
indemnification to the extent of its responsibility therefor, as determined by
the trier of fact.
7.7 BASIS FOR RESTRICTIONS AND SECTION 7.9 REMEDIES. The Members
acknowledge that the relationship of each Member to the other Members is a
personal relationship and that the restrictions on the power of each Member to
withdraw or Transfer its interest in the Company, and the provisions of Section
7.9 (including the purchase and redemption rights contained therein) (i) are
necessary to preserve such personal relationship and safeguard the investment of
the other Members in the Company and, under current law, the Transfer
restrictions help preserve the Company's status as a partnership for tax
purposes, and (ii) were a material inducement to the other Members entering into
this Agreement and shall be enforceable notwithstanding the Bankruptcy of any
Member or any applicable restrictions on alienation.
7.8 REPRESENTATIONS, WARRANTIES AND COVENANTS.
Each Member hereby represents and warrants to each of the
other Members as follows:
7.8.1 Such Member, if not a natural Person, is duly formed
and validly existing under the laws of the jurisdiction of its organization with
full power and authority to enter into this Agreement and to conduct its
business to the extent contemplated in this Agreement;
7.8.2 This Agreement has been duly authorized, executed and
delivered by such Member and constitutes the valid and legally binding agreement
of such Member, enforceable in accordance with its terms against such Member,
except as such enforceability may be limited by bankruptcy, insolvency,
moratorium and other similar laws relating to creditors' rights generally, by
general equitable principles and by any implied covenant of good faith and fair
dealing;
7.8.3 The execution and delivery of this Agreement by such
Member and the performance of its duties and obligations hereunder do not result
in a breach of any of the terms, conditions or provisions of, or constitute a
default under, any indenture, mortgage, deed of trust, credit agreement, note or
other evidence of indebtedness, or any lease or other agreement, or any license,
permit, franchise or certificate to which such Member is a party or by which it
is bound or to which its properties are subject or require any authorization or
approval under or pursuant to any of the foregoing, or violate any statute,
regulation, law, order, writ, injunction, judgment or decree to which such
Member is subject;
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7.8.4 Such Member is acquiring its interest in the Company
for investment purposes and without a view toward its resale or distribution;
7.8.5 Such Member recognizes that Battle ▇▇▇▇▇▇ LLP
("BFLLP") serves as special counsel to Affiliates of both of the Members, and
each Member hereby waives all potential conflicts of interest resulting from
BFLLP's representation of the Members and the Company hereunder, of Affiliates
of AGHC and AGHOP in other transactions, and of the Company in the future on
matters for which BFLLP is retained as counsel by the Company;
7.8.6 Such Member is aware that transfers of interests in
the Company and within such Member are not permitted except in the limited
circumstances expressly as provided in Article 7 hereof and that an investment
in the Company is a long-term investment, without liquidity;
7.8.7 None of the other Members is acting as the
representative or agent or in any other capacity, fiduciary or otherwise, on
behalf of such Member in connection with the Company, any Investment Entity or
the other matters referred to in this Agreement;
7.8.8 Such Member understands that it may lose its Approval
rights (and be subject to having such Member's interest purchased by the Company
for its appraised fair market value in certain circumstances) under Section 7.9
if the Member becomes a Terminated Member, and that it has waived its rights to
a trial by jury in any dispute concerning this Agreement or the Company under
Section 9.4; and
7.8.9 Such Member understands that the Company and its
Members are relying on the accuracy of the representations set forth in this
Section 7.8 in entering into this Agreement without requiring that the interests
in the Company be registered under federal or state securities laws.
7.9 TERMINATED MEMBER.
7.9.1 When a Member becomes a Terminated Member, (i) such
Member shall automatically cease to have any Approval or voting rights under
this Agreement or with respect to the Company, except as provided in Section
5.1.6.1, (ii) upon the election of the Member who is not the Terminated Member
(the "Electing Member"), given by notice from the Electing Member to the
Terminated Member (a "Purchase Notice") at any time after a Member becomes a
Terminated Member, sell the Terminated Member's interest in the Company to the
Company (or to the other Member or its designee as set forth in Section 7.9.4),
at a price (the "Buy-Out Price") to be determined as hereinafter provided. The
Electing Member shall notify the Terminated Member in writing of its election
(exercisable at any time after a Member becomes a Terminated Member) under
clause (ii), above, and (iii) the other provisions applicable by reason of
becoming a Defaulting Member (including Sections 7.9.5 and 8.1.1) shall apply.
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If a Purchase Notice has been given under clause (ii) above, the
Electing Member and the Terminated Member shall attempt to agree upon the
Buy-Out Price of the Terminated Member's interest in the Company. If such
agreement is not reached within thirty (30) days after the notice of electron is
given, the Terminated Member, on the one hand, and the Electing Member, on the
other hand, shall each, within ten (10) additional days, appoint an M.A.I.
accredited appraiser by notice to the others. The two appraisers so appointed
shall, within five (5) additional days, appoint a third M.A.I. accredited
appraiser and the three appraisers shall meet to determine the gross proceeds
that would have been received by the Company if the Company and each Investment
Entity sold, on the Termination Date, all of their assets (other than interests
in each other) for cash at their then fair market value, less all costs and
expenses of sale, including closing costs, real estate brokerage commissions and
fees, title insurance premiums and escrow fees, appropriate reserves and legal
and other expenses incident to such sale (the "Appraised Value"). The Appraised
Value shall equal the average of the appraised values determined by each of the
two appraisers whose appraisals are closest to each other. The cost of such
appraisal shall be borne 50% by the Company and 50% by the Terminated Member.
The Buy-Out Price shall equal the amount the Terminated Member would receive
under Section 4.2.3, if all of the assets of the Company and each Investment
Entity (other than interests in each other) were sold to a third party for the
Appraised Value and the Company were liquidated, after withholding therefrom any
damages determined to be payable by the Terminated Member under Section 5.5.3 by
reason of the Terminated Member's Major Default for all periods. If the Company
redeems the Terminated Member, there shall be no discount in the Buy-Out Price
for any encumbrances to which such redeemed interest is subject, but the Company
shall apply the proceeds of such redemption to satisfy such encumbrances instead
of making distributions thereof to the Terminated Member to the extent required
by law (such distributions being deemed for all purposes to have been made to
the Terminated Member by the Company and then paid by the Terminated Member to
satisfy such encumbrances). If the interest of the Terminated Member is
purchased by the other Member (or its designee), and not by the Company,
pursuant to Section 7.9.4, the Buy-Out Price for the Terminated Member's
interest as determined above shall be reduced to the extent the other Member or
its designee acquires the Terminated Member's interest subject to (or assumes)
the encumbrances on such interest at the closing. Within ten (10) days following
the determination of the Buy-Out Price, the Electing Member may elect, in its
sole and absolute discretion, by notice to the Terminated Member, to rescind any
notice pursuant to this Section 7.9.1, IN WHICH EVENT THE RIGHT TO elect to
cause the Terminated Member to sell its interest to the Company or to the other
Member (or its designee) pursuant to this Section 7.9.1 as a result of the
event(s) which led to the Purchase Notice (but not any future event which would
authorize any such notice) shall no longer be of any force or effect.
7.9.2 The purchase and sale of the Terminated Member's
interest in the Company pursuant to this Section 7.9 shall be consummated on or
before the thirtieth (30th) day following the date upon which the Buy-Out Price
was determined (whether by agreement of the Terminated Member and the Electing
Member or by appraisal), at the offices of the Company, or at such other time
and place as may be agreed upon by the Terminated Member and the Electing
Member. At the closing, the Terminated Member shall execute and deliver to the
Company (or the Electing Member or its designee,
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as appropriate) such instruments of assignment, conveyance and transfer as the
Electing Member(s) may reasonably deem necessary or appropriate to consummate
the purchase and sale, and the purchaser shall issue its recourse promissory
note payable to the Terminated Member in the amount of the Buy-Out Price
(adjusted for encumbrances to the extent provided in Section 7.9.1), bearing
interest at an annual rate equal to the Prime Rate, with interest compounded
quarterly, and all principal and accrued interest being payable on the date
which is twenty-four (24) months after the closing (and with prepayment being
allowed at any time without penalty).
7.9.3 Following the closing date, the Company shall
indemnify and hold the Terminated Member harmless from and against all
liabilities of the Company arising from acts taken or omitted to be taken by the
Company after the date on which the closing occurs of the sale of the
Terminating Member's interest to the Company (or to the Electing Member or its
designee, as appropriate).
7.9.4 The Company shall fund the purchase of the Terminated
Member's interest pursuant to this Section 7.9 by borrowings or, if the
remaining Member so Approves, by additional Capital Contributions from the
remaining Member, such borrowings or Capital Contributions to occur when needed
to make the required payments of the Buy-Out Price. If the remaining Member so
Approves, the interest of the Terminated Member shall be purchased by such
remaining Member (or its designee, which designee may be admitted as a Member
hereunder upon the date of the closing of the purchase of the Terminated
Member's interest in order to avoid a termination of the Company).
7.9.5 The provisions of this Section 7.9 have been agreed
to by the Members for the reasons set forth in Section 7.7.
ARTICLE 8
TERM, DISSOLUTION AND TERMINATION
8.1 EVENTS OF DISSOLUTION. The Company shall continue until
December 31, 2046, or such later date as is Approved by the Members; provided,
however, that dissolution and liquidation shall occur prior to that date upon
the occurrence of any one of the following events:
8.1.1 An election to dissolve the Company being made in
writing upon the Approval of the Members other than any Terminated Member;
8.1.2 The sale for cash, exchange or other disposition of
all or substantially all of the assets of the Company and every Investment
Entity; or
8.1.3 The Bankruptcy or dissolution (without reconstitution
within sixty (60) days thereafter) of any Member, unless the Company is
reconstituted and continued as provided in Section 8.4.
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8.2 LIMITATION ON DISSOLUTION. Until the dissolution of the
Company otherwise occurs, neither Member shall voluntarily retire, resign or
withdraw from the Company, take any step voluntarily to dissolve itself or
voluntarily cause a dissolution of the Company, except as provided in Section
8.1.1.
8.3 LIQUIDATION AND WINDING UP.
8.3.1 If the Company is dissolved for any reason and is not
reconstituted pursuant to Section 8.4.1, the Members who are not Terminated
Members (they, collectively, or any other Person empowered to liquidate the
Company under this Section 8.3, the "Liquidator") shall commence to wind up the
affairs of the Company and to liquidate and sell its assets as reasonably
Approved by the Members as soon as is practicable thereafter. A third-party
liquidator may be appointed as the Liquidator if Approved by the Members. Any
Liquidator other than the Members shall have sufficient business expertise and
competence to conduct the winding up and termination of the business of the
Company as it has theretofore been conducted or (subject to the limitations
hereinafter set forth) which the Company may thereafter enter into. No
Liquidator who is a Member shall be paid any compensation or fee for conducting
the liquidation of the Company.
8.3.2 The Liquidator shall proceed with such liquidation in
as expeditious a manner as is reasonably practicable. The holders of interests
in the Company shall continue to share income and losses during the period of
liquidation in accordance with Article 4.
8.3.3 If a Member or an Affiliate of a Member desires to
purchase any of the Company's remaining assets, the price, terms and conditions
of such purchase shall be subject to the Approval of the Members.
8.3.4 Except as expressly provided in this Article 8, any
Liquidator which is not the Members shall have and may exercise all of the
powers conferred upon the Members under the terms of this Agreement (but subject
to all of the applicable limitations, contractual and otherwise, upon the
exercise of such powers), to the extent necessary or desirable in the good faith
judgment of the Liquidator to carry out the duties and functions of the
Liquidator hereunder for and during the liquidation period.
8.3.5 If (i) the Company is dissolved for any reason and is
not reconstituted and continued pursuant to Section 8.4.1, (ii) both Members
have become Bankrupt or been dissolved, and (iii) within ninety (90) days
following the date of dissolution a Liquidator or successor Liquidator has not
been appointed by remaining Members pursuant to Section 8.3 1, any interested
party shall have the right to seek judicial supervision of the winding up of the
Company pursuant to the Act.
8.3.6 After making payment or provision for payment of all
debts and liabilities of the Company and all expenses of liquidation, the
Liquidator may establish, for a period Approved by the Members not to exceed
eighteen (18) months after
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the date the liquidation is complete, such cash reserves as the Liquidator may
reasonably deem necessary for any contingent or unforeseen liabilities or
obligations of the Company.
8.4 RECONSTITUTION AFTER BANKRUPTCY OR DISSOLUTION OF MEMBERS.
8.4.1 Upon the Bankruptcy or dissolution (without
reconstitution within sixty (60) days thereafter) of any Member, the Company
shall be dissolved and liquidated unless within ninety (90) days subsequent to
such event the remaining Member elects, by giving notice to all Members, to
reconstitute the Company and to continue the business of the Company. If such
election is made, then (i) the Company shall not be dissolved and liquidated;
(ii) the Company and the business of the Company may be continued, under and
pursuant to the provisions of this Agreement; (iii) the Bankrupt or dissolved
Members' interest in the Company may be purchased as set forth in Section 7.9,
and upon such Bankruptcy or dissolution, the other rights against a Terminated
Member under Section 7.9 shall also apply to the extent applicable; and (iv) the
Articles shall be amended to reflect such continuation, if so required.
8.5 DISTRIBUTION UPON DISSOLUTION AND CAPITAL ACCOUNT ADJUSTMENTS.
Upon dissolution of the Company without reconstitution as permitted by this
Article 8, the Company's assets shall be sold or otherwise disposed of to third
parties as directed by the Liquidator upon the reasonable Approval of the
Members, and, after paying or providing for liabilities owing to creditors
(including Members) and the establishment of such reserves as the Liquidator
reasonably deems necessary for contingent or unforeseen liabilities or
obligations of the Company for a period Approved by the Members of up to
eighteen (18) months after the liquidation has been completed, the remaining
liquidation proceeds (and the reserves, after the expiration of a period of time
deemed reasonable by the Liquidator for a period of up to eighteen (18) months
after the liquidation has been completed) shall be distributed pursuant to
Section 4.2.
8.6 COMPLIANCE WITH TIMING REQUIREMENTS OF TREASURY REGULATIONS.
Notwithstanding anything in this Article 8 to the contrary, in the event the
Company is "liquidated" within the meaning of Regulations Section
1.704-1(b)(2)(ii)(g), distributions shall be made to the Members who have
positive Capital Account balances pursuant to Section 4.2 in a manner that
complies with Regulations Section 1.704-1(b)(2)(ii)(b)(2). However, a
liquidation occurring as a result of a Tax Termination shall not require an
actual distribution of Company assets, but shall instead be treated as a
constructive liquidation and reformation in the manner in Regulations Section
1.708-1(b)(1)(iv), or otherwise as required by successor Regulations, if any.
ARTICLE 9
MISCELLANEOUS
9.1 OTHER INTERESTS. Except as provided in the AGHC Prospectus, no
Member and no Affiliate of a Member shall have any right, by virtue of this
Agreement or
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otherwise, to share or participate in or to Approve any other investments or
activities of any other Member or the income or proceeds derived therefrom, no
Member and no Affiliate of any Member shall be obligated to offer or to bring to
the attention of the Company or the Members any property or other business
investment or opportunity, whether or not within the scope of the Company's
purposes, and any Member and any Affiliate of any Member may at any time during
the term of the Company own, invest in, develop or manage, directly or
indirectly, any property or other business investment or opportunity, whether or
not competitive with the Company or any Investment Entity or their respective
assets or otherwise within the scope of the Company purposes. Each of the
Members acknowledges and agrees that, except as provided in the AGHC Prospectus,
each Member and its Affiliates may have engaged or invested in, may now be
engaged and investing in and may in the future be offered, consider, engage
and/or invest in other business or real property ventures of every kind and
nature, including the ownership, acquisition, financing, leasing, operating,
management, syndication, brokerage and development of hotels, motels and/or
other real property and other investments and opportunities to make or purchase
loans which may be competitive with the Investments of the Company and each
Investment Entity, and, except as provided in the AGHC Prospectus, none of the
Members or their Affiliates shall have any obligation or responsibility to
disclose, account for or offer any of such real properties, investments or
opportunities to the Company or any Member or their Affiliates, and the Company,
the Members and their Affiliates shall have no rights or interests therein.
9.2 DAMAGES: CERTAIN CURE RIGHTS; OFFSET. Each Member shall be
liable (and each Company employee shall be required to agree to be liable) to
the Company and the other Members for any actual (but not consequential or
incidental) damages arising from any breach hereof (or, in the case of an
employee, acting outside the scope of the employee's authority granted by the
Members or breaching any employment agreement with the Company). Upon any
alleged breach or default of this Agreement by any Member, it shall be a
condition to any action against such Member that such Member have received
notice of such alleged breach or default (which may be any notice otherwise
required by this Agreement) and that such Member shall have failed to cure or
commence to cure such alleged breach or default within thirty (30) days
following such notice and failed, at all times thereafter, to use diligent
efforts to pursue such cure to completion, but in no event beyond ninety (90)
days. Notwithstanding anything in this Agreement to the contrary, (a) there
shall be no cure period for a Major Default, and (b) the only cure period for
failure timely to make a Capital Contribution under Article 2 is set forth in
Sections 2.2.1 and 2.2.2. Notwithstanding anything in this Agreement to the
contrary, all amounts payable to a Member under this Agreement shall be subject
to offset for amounts owed to the Company or the other Member under this
Agreement and shall be withheld and either retained by the Company or
reallocated to the other Member in a reasonable manner, as the case may be.
9.3 NO AGENCY. Except as provided herein, nothing herein contained
shall be construed to constitute any Member hereof the agent of any other Member
hereof or to limit in any manner the carrying on of each Member's respective
businesses or activities.
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9.4 GOVERNING LAW. It is the intent of the parties hereto that all
questions with respect to the construction of this Agreement and the rights and
liabilities of the parties hereto shall be determined in accordance with the
provisions of the laws of the State of Delaware as applicable to a limited
liability company formed under the Act. Each of the parties hereto hereby waives
any and all rights to a trial by jury with respect to any dispute among the
Members or their Affiliates or among a Member (or its Affiliates) and the
Company concerning this Agreement, the Company or its assets or those of any
Investment Entity. In any dispute among the Members concerning the Company or
this Agreement, the prevailing Member(s) shall be entitled to recover its
reasonable attorneys' fees and costs (including litigation and collection costs)
from the non-prevailing Member(s).
9.5 NOTICES. Any notices or solicitations of Approval required or
permitted to be given under the terms of this Agreement shall be in writing and
shall be deemed to have been given when (i) personally delivered with signed
delivery receipt obtained, (ii) when transmitted by facsimile machine, if
followed by a mailing thereof pursuant to this Section 9.5 before the end of the
first business day thereafter with printed confirmation of successful
transmission to the facsimile number set forth in the appropriate address
listed below being obtained by the sender from the sender's facsimile machine,
or (iii) when deposited in the United States first class mail if sent postage
prepaid by registered or certified mail, return receipt requested, in each
case addressed as follows:
IF TO AGHOP, to it in care of:
American General Hospitality Corporation
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▇▇▇▇▇ ▇▇▇
▇▇▇▇▇▇, ▇▇▇▇▇ ▇▇▇▇▇
Phone: (▇▇▇) ▇▇▇-▇▇▇▇
Fax: (▇▇▇) ▇▇▇-▇▇▇▇
with a copy to:
Battle ▇▇▇▇▇▇ LLP
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▇▇▇ ▇▇▇▇, ▇▇▇ ▇▇▇▇ ▇▇▇▇▇
Phone: (▇▇▇) ▇▇▇-▇▇▇▇
Fax: (▇▇▇) ▇▇▇-▇▇▇▇
Attention: ▇▇▇▇▇▇ ▇. ▇▇▇▇▇▇▇, Esq. and
▇▇▇▇▇▇▇ ▇. ▇▇▇▇▇▇▇, Esq.
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IF TO AGHC, to it in care of:
American General Hospitality Corporation
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▇▇▇▇▇ ▇▇▇
▇▇▇▇▇▇, ▇▇▇▇▇ ▇▇▇▇▇
Phone: (▇▇▇) ▇▇▇-▇▇▇▇
Fax: (▇▇▇) ▇▇▇-▇▇▇▇
with a copy to:
Battle ▇▇▇▇▇▇ LLP
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▇▇▇ ▇▇▇▇, ▇▇▇ ▇▇▇▇ ▇▇▇▇▇
Phone: (▇▇▇) ▇▇▇-▇▇▇▇
Fax: (▇▇▇) ▇▇▇-▇▇▇▇
Attention: ▇▇▇▇▇▇ ▇. ▇▇▇▇▇▇▇, Esq. and
▇▇▇▇▇▇▇ ▇. ▇▇▇▇▇▇▇, Esq.
The time to respond to any notice shall commence to run on the date of delivery
at the appropriate addresses (or attempted delivery if delivery is refused
during normal business hours). A Member may change the address to which notices
shall be sent to it, or any of its Authorized Representatives, by written notice
to all Members (said change of address or of Authorized Representatives to be
effective upon receipt by all Members).
9.6 PRONOUNS AND PLURALS. References herein to the singular shall
include the plural and to the plural shall include the singular, and references
to the masculine gender shall include the feminine and neuter genders (and vice
versa), except where the same shall not be appropriate.
9.7 WAIVER. No consent or waiver, express or implied, by any
Member to or of any breach or default by any other Member in the performance by
the other of its obligations hereunder shall be deemed or construed to be a
consent or waiver to or of any other breach or default by the other in the
performance by such other party of the same or any other obligations of such
Member hereunder. Failure on the part of any Member to object to or complain of
any act or failure to act of any other Member or to declare any other Member in
default, irrespective of how long such failure continues, shall not constitute a
waiver by such Member of its rights hereunder.
9.8 SEVERABILITY. If any provision of this Agreement or the
application thereof to any Person or circumstance shall be invalid or
unenforceable to any extent, the remainder of this Agreement and the application
of such provisions to other Persons or circumstances shall not be affected
thereby and shall be enforced to the greatest extent permitted by law.
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9.9 TITLES AND CAPTIONS. All Article or Section titles or captions
contained in this Agreement are for convenience only and shall not be deemed a
part of the content of this Agreement.
9.10 AGREEMENT IN COUNTERPARTS. This Agreement may be executed in
several counterparts, each of which shall be deemed an original, but all of
which shall constitute one and the same instrument. In addition, this Agreement
may contain more than one counterpart of the signature page and the Agreement
may be executed by the affixing of the signatures of each of the Members to one
of such counterpart signature pages; all of such signature pages shall be read
as though one, and shall have the same force and effect as though all of the
signers had signed a single signature page.
9.11 BINDING AGREEMENT. Subject to the restrictions on Transfers
set forth herein, this Agreement shall inure to the benefit of and be binding
upon the undersigned Members and their respective successors and assigns.
Whenever in this instrument a reference to any party or Member is made, such
reference shall be deemed to include a reference to the successors and assigns
of such party or Member.
9.12 FURTHER ASSURANCES. The Members shall execute and deliver such
further instruments and do such further acts and things as may reasonably be
required to carry out the intent and purposes of this Agreement promptly upon
request from either Member.
9.13 WAIVER OF PARTITION. Unless otherwise specifically provided in
this Agreement (including Article 8), no Member shall, and each Member hereby
irrevocably waives the right to, either directly or indirectly, take any action
to require partition or appraisement of the Company, any Company Interest, any
Investment Entity, any Investments or any part thereof, and, notwithstanding any
provision of applicable law to the contrary, each Member hereby irrevocably
waives any and all right to maintain any action for partition or to compel any
sale with respect to its interest in the Company or with respect to the assets
of the Company, any Investment Entity or any part thereof.
9.14 ENTIRE AGREEMENT. This Agreement contains the final and entire
agreement among the parties hereto with respect to the subject matter hereof,
and they shall not be bound by any terms, conditions, statements or
representations, oral or written, not contained herein.
9.15 AMENDMENTS. Except as expressly provided in this Agreement
(including Section 3.6 and Section 5.1.6.1), this Agreement may be modified or
amended only upon the Approval of the Members.
9.16 NO DRAFTING PRESUMPTION. In interpreting the provisions of
this Agreement, no presumption shall apply against any Member that otherwise
would operate against such Member by reason of such document having been drafted
by such Member or at the direction of such Member or an Affiliate of such
Member.
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9.17 NO THIRD PARTY BENEFICIARIES. Except for the representations
concerning conflict waivers pertaining to BFLLP in Section 7.8.5 (which shall
inure to the benefit of BFLLP), the provisions of this Agreement are not
intended to be for the benefit of any creditor or other Person (other than the
Members in their capacities as such) to whom any debts, liabilities or
obligations are owed by (or who otherwise have a claim against or dealings with)
the Company or the Members, and no such creditor or other Person shall obtain
any rights under any of such provisions (whether as a third party beneficiary or
otherwise) or shall by reason of any such provisions make any claim in respect
to any debt, liability or obligation (or otherwise) including any debt,
liability or obligation with respect to Capital Contributions, against the
Company or the Members. In addition, no deficit balance in any Member's Capital
Account or in the capital account of any partner or member of a Member shall be
an asset of the Company, and no Member shall be obligated to restore any such
deficit balance.
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IN WITNESS WHEREOF, this Agreement is executed, and is effective for
all purposes, as of the date first set forth above.
AMERICAN GENERAL HOSPITALITY
OPERATING PARTNERSHIP, L.P., a
Delaware limited partnership, a Member
By: AGH GP, Inc., Nevada corporation, its
general partner
By: /s/ ▇▇▇▇▇▇ ▇. ▇▇▇▇▇
------------------------------------
Name: ▇▇▇▇▇▇ ▇. ▇▇▇▇▇
Title: Chairman of the Board,
Chief Executive Officer and
President
AMERICAN GENERAL HOSPITALITY
CORPORATION, a Maryland corporation, a
Member
By: /s/ ▇▇▇▇▇ ▇. ▇▇▇▇▇
------------------------------------
Name: ▇▇▇▇▇ ▇. ▇▇▇▇▇
Title: Executive Vice President