Exhibit 10.1

 

AMENDED AND RESTATED

 

LIMITED LIABILITY COMPANY AGREEMENT

 

OF

 

ASHFORD HOSPITALITY HOLDINGS LLC

 

DATED: April 6, 2017

 

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TABLE OF CONTENTS

 

 

 

PAGE

 

 

 

ARTICLE I DEFINED TERMS

 

1

 

 

 

ARTICLE II COMPANY CONTINUATION; ADMISSION OF MEMBERS; NAME; PLACE OF BUSINESS
AND REGISTERED AGENT

 

10

Section 2.1

CONTINUATION

 

10

Section 2.2

CERTIFICATE OF FORMATION; OTHER FILINGS

 

10

Section 2.3

ADDITIONAL MEMBERS

 

10

Section 2.4

NAME, OFFICE AND REGISTERED AGENT

 

10

 

 

 

 

ARTICLE III BUSINESS AND TERM OF COMPANY

 

11

Section 3.1

BUSINESS

 

11

Section 3.2

TERM

 

11

 

 

 

 

ARTICLE IV CAPITAL CONTRIBUTIONS

 

11

Section 4.1

MANAGER

 

11

Section 4.2

MEMBERS

 

11

Section 4.3

ADDITIONAL CAPITAL CONTRIBUTIONS AND ISSUANCES OF ADDITIONAL MEMBERSHIP
INTERESTS

 

11

Section 4.4

ADDITIONAL FUNDING

 

17

Section 4.5

INTEREST

 

17

Section 4.6

RETURN OF CAPITAL

 

17

Section 4.7

PERCENTAGE INTEREST

 

17

Section 4.8

ADMISSIONS

 

17

 

 

 

 

ARTICLE V PROFITS, LOSSES AND ACCOUNTING

 

18

Section 5.1

ALLOCATION OF PROFITS AND LOSSES

 

18

Section 5.2

ACCOUNTING

 

19

Section 5.3

MEMBERS’ CAPITAL ACCOUNTS

 

20

Section 5.4

SECTION 754 ELECTIONS

 

22

Section 5.5

SPECIAL ALLOCATION OF GAIN TO LTIP UNITHOLDERS

 

22

 

 

 

 

ARTICLE VI POWERS, DUTIES, LIABILITIES, COMPENSATION AND VOTING OF THE MANAGER

 

23

Section 6.1

POWERS OF MANAGER

 

23

Section 6.2

DELEGATION OF AUTHORITY

 

26

Section 6.3

DUTIES OF MANAGER

 

26

Section 6.4

LIABILITIES OF MANAGER; INDEMNIFICATION

 

27

Section 6.5

COMPENSATION OF MANAGER; REIMBURSEMENT

 

29

Section 6.6

RELIANCE ON ACT OF MANAGER

 

29

Section 6.7

OUTSIDE SERVICES; DEALINGS WITH AFFILIATES; OUTSIDE ACTIVITIES

 

29

Section 6.8

ADDITIONAL LOANS TO THE COMPANY

 

30

Section 6.9

CONTRIBUTION OF ASSETS

 

30

 

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Section 6.10

RESIGNATION OR TERMINATION OF MANAGER

 

31

 

 

 

 

ARTICLE VII RIGHTS, PROHIBITIONS AND REPRESENTATIONS WITH RESPECT TO MEMBERS

 

31

Section 7.1

RIGHTS OF MEMBERS

 

31

Section 7.2

PROHIBITIONS WITH RESPECT TO THE MEMBERS

 

32

Section 7.3

REDEMPTION RIGHT

 

33

Section 7.4

BASIS ANALYSIS

 

36

Section 7.5

MEMBER GUARANTEES

 

36

Section 7.6

CONVERSION OF LTIP UNITS

 

36

Section 7.7

VOTING RIGHTS OF LTIP UNITS

 

39

 

 

 

 

ARTICLE VIII DISTRIBUTIONS AND PAYMENTS TO MEMBERS

 

40

Section 8.1

DISTRIBUTIONS OF CASH FLOW

 

40

Section 8.2

NO RIGHT TO DISTRIBUTIONS IN KIND

 

41

Section 8.3

WITHDRAWALS

 

41

Section 8.4

AMOUNTS WITHHELD

 

41

 

 

 

 

ARTICLE IX TRANSFERS OF INTERESTS

 

42

Section 9.1

ASHFORD INC.

 

42

Section 9.2

RESTRICTIONS ON TRANSFER OF MEMBERSHIP INTERESTS

 

44

Section 9.3

ADMISSION OF SUBSTITUTE MEMBER

 

45

Section 9.4

RIGHTS OF ASSIGNEES OF MEMBERSHIP INTERESTS

 

46

Section 9.5

EFFECT OF BANKRUPTCY, DEATH, INCOMPETENCE OR TERMINATION OF A MEMBER

 

46

Section 9.6

JOINT OWNERSHIP OF INTERESTS

 

46

Section 9.7

TRANSFEREES

 

47

Section 9.8

ABSOLUTE RESTRICTION

 

47

Section 9.9

INVESTMENT REPRESENTATION

 

47

 

 

 

 

ARTICLE X TERMINATION OF THE COMPANY

 

47

Section 10.1

TERMINATION

 

47

Section 10.2

PAYMENT OF DEBTS

 

48

Section 10.3

DEBTS TO MEMBERS

 

48

Section 10.4

REMAINING DISTRIBUTION

 

48

Section 10.5

RESERVE

 

49

Section 10.6

FINAL ACCOUNTING

 

49

 

 

 

 

ARTICLE XI AMENDMENTS

 

50

Section 11.1

AUTHORITY TO AMEND

 

50

Section 11.2

NOTICE OF AMENDMENTS

 

50

Section 11.3

IMPLEMENTATION OF AMENDMENT

 

50

 

 

 

 

ARTICLE XII POWER OF ATTORNEY

 

51

Section 12.1

POWER

 

51

Section 12.2

SURVIVAL OF POWER

 

51

 

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ARTICLE XIII CONSENTS, APPROVALS, VOTING AND MEETINGS

 

52

Section 13.1

METHOD OF GIVING CONSENT OR APPROVAL

 

52

Section 13.2

MEETINGS OF MEMBERS

 

52

Section 13.3

OPINION

 

52

Section 13.4

SUBMISSIONS TO MEMBERS

 

53

 

 

 

 

ARTICLE XIV MISCELLANEOUS

 

53

Section 14.1

GOVERNING LAW

 

53

Section 14.2

AGREEMENT FOR FURTHER EXECUTION

 

53

Section 14.3

ENTIRE AGREEMENT

 

53

Section 14.4

SEVERABILITY

 

53

Section 14.5

NOTICES

 

53

Section 14.6

TITLES AND CAPTIONS

 

54

Section 14.7

COUNTERPARTS

 

54

Section 14.8

TERMS

 

54

Section 14.9

SURVIVAL OF RIGHTS

 

54

 

 

EXHIBIT A

–

List of Members

EXHIBIT B

–

Federal Income Tax Matters

EXHIBIT C

–

Notice of Exercise of Redemption Right

EXHIBIT D

–

Notice of Election by Member to Convert LTIP Units into Common Units

EXHIBIT E

–

Notice of Election by the Company to Force Conversion of LTIP Units into Common
Units

 

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AMENDED AND RESTATED

 

LIMITED LIABILITY COMPANY AGREEMENT

 

OF

 

ASHFORD HOSPITALITY HOLDINGS LLC

 

RECITALS:

 

This Amended and Restated Limited Liability Company Agreement is entered into
effective April 6, 2017 (the “Effective Date”).

 

WHEREAS, Ashford Hospitality Holdings LLC (the “Company”) was formed as a
limited liability company under the laws of the State of Delaware by the filing
of a Certificate of Formation with the Secretary of State of Delaware on
April 6, 2017;

 

WHEREAS, Ashford Inc. as sole initial member, executed the Limited Liability
Company Agreement of Ashford Hospitality Holdings LLC as of April 6, 2017 (the
“Prior Agreement”);

 

WHEREAS, on the Effective Date the Company acquired all of the outstanding
common units of Ashford Hospitality Advisors LLC constituting all of the
outstanding membership interests in Ashford Hospitality Advisors LLC as a result
of the merger (“Merger”) of Ashford Merger Sub LLC with and into Ashford
Hospitality Advisors LLC pursuant to the terms of the Agreement and Plan of
Merger, between the Company, its wholly owned subsidiary, Ashford Merger Sub
LLC, and Ashford Hospitality Advisors LLC, dated April 6, 2017 (the “Merger
Agreement”), and each of the outstanding common units of Ashford Hospitality
Advisors LLC were converted into an identical number of Common Units of the
Company;

 

WHEREAS, Ashford Inc. desires to, and pursuant to the terms of the Prior
Agreement and the Merger Agreement has the authority to, amend and restate the
Prior Agreement, as of the Effective Date, to make the revisions to the Prior
Agreement set forth below and to provide for the admission as Members of the
Company each of the other Persons identified on Exhibit A attached to this
Agreement; and

 

NOW, THEREFORE, in consideration of the foregoing, of the mutual covenants
between the parties to this Agreement, and of other good and valuable
consideration, the receipt and sufficiency of which are acknowledged, the
parties to this Agreement amend and restate the Prior Agreement and agree as
follows:

 

ARTICLE I
DEFINED TERMS

 

Whenever used in this Agreement, the following terms have the meanings
respectively assigned to them in this Article I, unless otherwise expressly
provided in this Agreement or unless the context otherwise requires:

 

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“Act” means the Delaware Limited Liability Company Act, 6 Del C. § 18-101, et.
seq., as amended, supplemented or restated from time to time, and any successor
to such statute.

 

“Additional Funds” has the meaning set forth in Section 4.4.

 

“Additional Member” means a Person admitted to this Company as a Member pursuant
to and in accordance with Section 4.8.

 

“Additional Securities” means any additional Ashford Inc. Shares (other than
Ashford Inc. Shares issued in connection with a redemption pursuant to
Section 7.3) or rights, options, warrants or convertible or exchangeable
securities containing the right to subscribe for or purchase Ashford Inc.
Shares, as set forth in Section 4.3(a)(ii).

 

“Adjustment Event” has the meaning set forth in Section 4.3(d).

 

“Affiliate” of another Person means (a) any Person directly or indirectly
owning, controlling or holding with power to vote ten percent (10%) or more of
the outstanding voting securities of such other Person; (b) any Person ten
percent (10%) or more of whose outstanding voting securities are directly or
indirectly owned, controlled or held with power to vote by such other Person;
(c) any Person directly or indirectly controlling, controlled by, or under
common control with, such other Person; (d) any officer, director, member or
partner of such other Person; and (e) if such other Person is an officer,
director, member or partner in a company, the company for which such Person acts
in any such capacity.

 

“Agreed Value” means the fair market value of Contributed Property as agreed to
by the contributing Member and the Company, using such reasonable method of
valuation as they may adopt except that the Agreed Value of all property
constituting Contributed Property as of the Effective Date shall be determined
by Manager.

 

“Agreement” means this Amended and Restated Limited Liability Company Agreement
of Ashford Hospitality Holdings LLC, as amended from time to time.

 

“Ashford Inc.” means Ashford Inc., a Maryland corporation.

 

“Ashford Inc. Common Stock” means the common stock of Ashford Inc.

 

“Ashford Inc. Common Stock Amount” means a whole number of shares of Ashford
Inc. Common Stock equal to the product of the number of Common Units offered for
redemption by a Redeeming Member, multiplied by the Conversion Factor in effect
on the Specified Redemption Date (rounded down to the nearest whole number if
such product is not a whole number); provided, however, that if Ashford Inc. at
any time issues to all holders of Ashford Inc. Common Stock rights, options,
warrants or convertible or exchangeable securities entitling the stockholders to
subscribe for or purchase Ashford Inc. Common Stock, or any other securities or
property (collectively, the “Rights”), which Rights have not expired pursuant to
their terms, then the Ashford

 

2

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Inc. Common Stock Amount thereafter shall also include such Rights that a holder
of that number of shares of Ashford Inc. Common Stock would be entitled to
receive.

 

“Ashford Inc. Expenses” means (i) costs and expenses relating to the formation
and continuity of existence of Ashford Inc. and any of its Subsidiaries (which
Subsidiaries shall, for purposes of this definition, be included within the
definition of Ashford Inc.), including taxes, fees and assessments associated
therewith, any and all costs, expenses or fees payable to any director, officer,
or employee of Ashford Inc., (ii) costs and expenses relating to the public
offering and registration of securities or private offering of securities by
Ashford Inc. and all statements, reports, fees and expenses incidental thereto,
including underwriting discounts and selling commissions applicable to any such
offering of securities, (iii) costs and expenses associated with the preparation
and filing of any periodic reports by Ashford Inc. under federal, state or local
laws or regulations, including filings with the Commission, (iv) costs and
expenses associated with compliance by Ashford Inc. with laws, rules and
regulations promulgated by any regulatory body, including the Commission, and
(v) all other operating or administrative costs of Ashford Inc., including,
without limitation, insurance premiums, and legal, accounting and directors’
fees, incurred in the ordinary course of its business on behalf of or in
connection with the Company.

 

“Ashford Inc. Preferred Stock” means the preferred stock of Ashford Inc.

 

“Ashford Inc. Share” means a share of Ashford Inc. Common Stock or a share of
Ashford Inc. Preferred Stock.

 

“Bankruptcy Code” means the United States Bankruptcy Code, as amended, 11 U.S.C.
ss.ss. 101 ET SEQ., and as hereafter amended from time to time.

 

“Business Day” means any day, other than a Saturday or Sunday, that is neither a
legal holiday nor a day on which banking institutions in New York, New York are
authorized or required by law, regulation or executive order to close.

 

“Capital Account” means, as to any Member, the account established and
maintained for such Member pursuant to Section 5.3.

 

“Capital Account Limitation” has the meaning set forth in Section 7.6(b).

 

“Capital Contribution” means the amount in cash or the Agreed Value of
Contributed Property (net of liabilities secured by the Contributed Property
that the Company is considered to assume or take subject to under Code
Section 752) contributed by each Member (or its original predecessor in
interest) to the capital of the Company for its interest in the Company.

 

“Carrying Value” means, with respect to any property, the adjusted basis of such
property for federal income tax purposes as of the time of determination except
as follows: (a) the initial Carrying Value of any property contributed by a
Member to the Company shall be its Agreed Value, (b) the Carrying Value of
property distributed to a Member shall the fair market value of such property,
as determined by the

 

3

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Manager, and (c) the Carrying Value of property shall be adjusted as provided by
Exhibit B, items A.1., B.1(c), B.3., and B.4.

 

“Cash Amount” means an amount of cash per Common Unit equal to the Value on the
Valuation Date of the Ashford Inc. Common Stock Amount.

 

“Cash Flow” means the excess of cash revenues actually received by the Company
in respect of Company operations for any period, the amount of any reduction in
reserves of the Company, and, to the extent determined by Manager, the net
proceeds received by the Company from the disposition of any Company Property
over Operating Expenses for such period.

 

“Certificate of Formation” means the certificate of formation of the Company
filed with the Secretary of State of the State of Delaware, as amended or
restated from time to time.

 

“Certificate of Incorporation” means the certificate of incorporation of the
Manager filed with the Secretary of State of the State of Delaware, as amended
or restated from time to time.

 

“Code” means the Internal Revenue Code of 1986, as amended, and as hereafter
amended from time to time. Reference to any particular provision of the Code
means that provision in the Code at the Effective Date and any succeeding
provision of the Code.

 

“Commission” means the U.S. Securities and Exchange Commission.

 

“Common Membership Interest” means an interest in the Company, other than a
Preferred Membership Interest, and includes a limited liability company interest
in the Company and any and all other benefits to which the holder of such an
interest in the Company may be entitled as provided in this Agreement or the
Act, together with all obligations of such Person to comply with the terms and
provisions of this Agreement and the Act.

 

“Common Unit” means a fractional, undivided share of the Common Membership
Interests issued under this Agreement. At all times after the Effective Date
there shall be maintained an economic equivalency of a Common Unit and a share
of Ashford Inc. Common Stock (subject to the effect of the Conversion Factor and
to the effect of income taxation of Ashford Inc.’s taxable income), except as
otherwise provided in this Agreement.

 

“Common Unit Distribution” has the meaning set forth in Section 4.3(d)(ii).

 

“Common Unit Distribution Period” means any quarter or shorter period with
respect to which a distribution is to be made to the holders of the Common
Units.

 

“Common Unit Economic Balance” has the meaning set forth in Section 5.5.

 

4

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“Common Percentage Interest” means the percentage ownership interest in the
Common Units of each Member, as determined by dividing the Common Units owned by
a Member by the total number of Common Units then outstanding, subject to
Sections 4.3(d) and 4.3(e) which treat LTIP Units as Common Units for this
purpose.

 

“Company” means Ashford Hospitality Holdings LLC, a Delaware limited liability
company.

 

“Company Representative” has the meaning set forth in Section 5.2(d).

 

“Constituent Person” has the meaning set forth in Section 7.6(f).

 

“Contributed Property” means a Member’s interest in property or other
consideration (excluding services and cash) contributed to the Company by such
Member.

 

“Conversion Date” has the meaning set forth in Section 7.6(b).

 

“Conversion Factor” means 1.0; provided, however, that if Ashford Inc.
(i) declares or pays a dividend on its outstanding Ashford Inc. Common Stock in
shares of Ashford Inc. Common Stock or makes a distribution to all holders of
its outstanding Ashford Inc. Common Stock in shares of Ashford Inc. Common
Stock, (ii) subdivides its outstanding Ashford Inc. Common Stock, or
(iii) combines its outstanding Ashford Inc. Common Stock into a smaller number
of Ashford Inc. Common Stock, the Conversion Factor shall be adjusted by
multiplying the Conversion Factor by a fraction, the numerator of which shall be
the number of shares of Ashford Inc. Common Stock issued and outstanding on the
record date for such dividend, distribution, subdivision or combination
(assuming for such purposes that such dividend, distribution, subdivision or
combination has occurred as of such time), and the denominator of which shall be
the actual number of shares of Ashford Inc. Common Stock (determined without the
above assumption) issued and outstanding on the record date for such dividend,
distribution, subdivision or combination. Any adjustment to the Conversion
Factor shall become effective immediately after the effective date of such event
retroactive to the record date, if any, for such event; PROVIDED, HOWEVER, that
if the Manager receives a Notice of Redemption after the record date, but prior
to the effective date of such dividend, distribution, subdivision or
combination, the Conversion Factor shall be determined as if the Manager had
received the Notice of Redemption immediately prior to the record date for such
dividend, distribution, subdivision or combination.

 

“Conversion Notice” has the meaning set forth in Section 7.6(b).

 

“Conversion Right” has the meaning set forth in Section 7.6(a).

 

“Distribution Payment Date” means the a date upon which the Manager makes
distributions in accordance with Section 8.1.

 

“Economic Capital Account Balance” has the meaning set forth in Section 5.5.

 

5

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“Effective Date” has the meaning set forth in the Recitals.

 

“Event of Bankruptcy” means as to any Person the filing of a petition for relief
as to such Person as debtor or bankrupt under the Bankruptcy Code or similar
provision of law of any jurisdiction (except if such petition is contested by
such Person and has been dismissed within ninety (90) days of the filing
thereof); insolvency of such Person as finally determined by a court of
competent jurisdiction; filing by such Person of a petition or application to
accomplish the same or for the appointment of a receiver or a trustee for such
Person or a substantial part of such Person’s assets; commencement of any
proceedings relating to such Person as a debtor under any other reorganization,
arrangement, insolvency, adjustment of debt or liquidation law of any
jurisdiction, whether now in existence or hereinafter in effect, either by such
Person or by another, but if such proceeding is commenced by another, only if
such Person indicates his approval of such proceeding, or such proceeding is
contested by such Person and has not been finally dismissed within ninety (90)
days.

 

“Exchange Act” means the Securities Exchange Act of 1934, as amended.

 

“Forced Conversion” has the meaning set forth in Section 7.6(c).

 

“Forced Conversion Notice” has the meaning set forth in Section 7.6(c).

 

“Full Distribution Amount” has the meaning set forth in Section 8.1(a).

 

“Indemnitee” means (i) any Person made a party to a proceeding by reason of its
status as (A) the Manager or (B) a director, officer, employee or agent of the
Company or the Manager, and (ii) such other Persons (including Affiliates of the
Manager or the Company) as the Manager may designate from time to time (whether
before or after the event giving rise to potential liability), in its sole and
absolute discretion.

 

“Ineligible Unit” has the meaning set forth in Section 5.5.

 

“Initiating Member” has the meaning set forth in Section 7.5.

 

“IRS” means the Internal Revenue Service.

 

“Liquidating Events” has the meaning set forth in Section 10.1.

 

“LTIP Unit” means a Unit that is designated as an LTIP Unit and which has the
rights, preferences and other privileges designated in Sections 4.3(d) and
4.3(e) and elsewhere in this Agreement in respect of LTIP Unitholders.  The
allocation of LTIP Units among the Members shall be set forth on Exhibit A, as
may be amended by the Manager from time to time.

 

“LTIP Unitholder” means a Member that holds LTIP Units.

 

“Manager” means Ashford Inc., in its position as a Manager of the Company, and
any Person who becomes a manager as provided in this Agreement, and any of their

 

6

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successors as Manager each of whom shall constitute a “manager” of the Company
for purposes of the Act.

 

“Member” means any Person named as a Member on Exhibit A and any Person who
becomes a Substitute Member pursuant to Section 9.3 or an Additional Member
pursuant to Section 4.8, in such Person’s capacity as a Member of the Company
for so long as such Person holds any Units.

 

“Membership Interest” means an interest in the Company and includes a limited
liability company interest and any and all other benefits to which the holder of
such an interest in the Company may be entitled as provided in this Agreement or
the Act, together with all obligations of such Person to comply with the terms
and provisions of this Agreement and the Act.

 

“Newly Issued Common Unit” means with respect to any Common Unit Distribution
Period, a Common Unit issued during such Common Unit Distribution Period, other
than to Ashford Inc. and other than Common Units outstanding on the Effective
Date.

 

“Notice of Redemption” means the Notice of Exercise of Redemption Right
substantially in the form of Exhibit C.

 

“Operating Expenses” means (i) all administrative and operating costs and
expenses incurred by the Company, (ii) those administrative costs and expenses
of the Manager, including any salaries or other payments to directors, officers
or employees of the Manager, and any accounting and legal expense of the
Manager, which expenses, the Members have agreed, are expenses of the Company
and not the Manager, and (iii) to the extent not included in clause (ii) above,
Ashford Inc. Expenses; PROVIDED, HOWEVER, that Operating Expenses shall not
include any administrative costs and expenses incurred by the Manager that are
attributable to properties or interests in a Subsidiary that are owned by the
Manager or Ashford Inc. directly.

 

“Person” means any individual, partnership, corporation, limited liability
company, trust or other entity.

 

“Plan” means the Ashford Inc. 2014 Equity Incentive Plan, as amended and/or one
or more successor or additional equity incentive plans or programs that Ashford
Inc. has adopted or may adopt, as amended (each individually and all of them
collectively, as the context requires).

 

“Preferred Membership Interest” means an interest in the Company evidenced by a
designated series of Preferred Units, having a preference in payment of
distributions or on liquidation as determined by the Manager for such series of
Preferred Units and as set forth in an amendment to this Agreement, and includes
a limited liability company interest and all other benefits to which the holder
of such an interest in the Company may be entitled as provided in this Agreement
or the Act, together with all obligations of such Person to comply with the
terms and provisions of this Agreement and the Act.

 

7

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“Preferred Percentage Interest” with respect to a series of Preferred Units,
means the percentage ownership interest in the Preferred Units of each Member
holding Preferred Units of such specified series, as determined by dividing the
Preferred Units of such series owned by a Member by the total number of
Preferred Units of that series then outstanding.

 

“Preferred Return” means any payment made or to be made on any Preferred Unit
corresponding to any dividend paid or to be paid on the related series of
preferred stock issued by Ashford Inc., in accordance with Section 4.3.

 

“Preferred Unit” means a fractional, undivided share of Preferred Membership
Interests in the specified series issued under this Agreement.

 

“Prior Agreement” has the meaning assigned to such term in the Recitals.

 

“Property” means any property or other investment in which the Company holds an
ownership interest.

 

“Record Date” means the record date established by the Manager for the
distribution of Cash Flow pursuant to Section 8.1, which record date, as to
Common Units, shall be the corresponding record date established by Ashford Inc.
with respect to the Ashford Inc. Common Stock and which record date, as to a
series of Preferred Units, shall be the corresponding record date established by
Ashford Inc. with respect to the corresponding series of Ashford Inc. Preferred
Stock.

 

“Redeeming Member” has the meaning provided in Section 7.3(a).

 

“Redemption Right” has the meaning provided in Section 7.3(a).

 

“Safe Harbor” means, the election described in the Safe Harbor Regulation,
pursuant to which a partnership and all of its partners may elect to treat the
fair market value of a partnership interest that is transferred in connection
with the performance of services as being equal to the liquidation value of that
interest.

 

“Safe Harbor Election” means the election by a partnership and its partners to
apply the Safe Harbor, as described in the Safe Harbor Regulation and Internal
Revenue Service Notice 2005-43.

 

“Safe Harbor Regulation” means Proposed Treasury Regulations Section 1.83-3(l).

 

“Specified Redemption Date” means, with respect to a given Member and Notice of
Redemption, the later of any date so specified in the Notice of Redemption and 
the third (3rd) Business Day after receipt by the Manager of the Notice of
Redemption, provided that no Specified Redemption Date may occur with respect to
any Unit before one year after such Unit is issued by the Company.

 

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“Subsidiary” means, with respect to any Person, any corporation or other entity
of which a majority of (i) the voting power of the voting equity securities, or
(ii) the outstanding equity interests, are owned, directly or indirectly, by
such Person.

 

“Substitute Member” means any Person admitted to the Company as a Member
pursuant to Section 9.3.

 

“Surviving Entity” has the meaning set forth in Section 9.1(c).

 

“Target Balance” has the meaning set forth in Section 5.5.

 

“Tax Matters Member” has the meaning set forth in Section 5.2(d).

 

“Transaction” has the meaning set forth in Section 9.1(b).

 

“Transfer” has the meaning set forth in Section 9.2(a).

 

“Treasury Regulations” means the regulations promulgated by the United States
Department of the Treasury pursuant to and in respect of provisions of the Code.

 

“Unit” means a Common Unit, a Preferred Unit, an LTIP Unit, or any other
fractional, undivided share of the Membership Interests that the Manager has
authorized pursuant to this Agreement.  The Units of the Members shall be set
forth on Exhibit A, as may be amended by the Manager from time to time.

 

“Unit Transaction” has the meaning set forth in Section 7.6(f).

 

“Unvested Incentive Units” has the meaning set forth in Section 4.3(e)(i).

 

“Valuation Date” means the date of receipt by the Manager of a Notice of
Redemption or, if such date is not a Business Day, the first Business Day
thereafter.

 

“Value” means, with respect to a share of Ashford Inc. Common Stock, the average
of the daily market price for the ten (10) consecutive trading days immediately
preceding the Valuation Date. The market price for each such trading day shall
be: (i) if the Ashford Inc. Common Stock is listed or admitted to trading on any
securities exchange or the NASDAQ National Market System, the closing price,
regular way, on such day, or if no such sale takes place on such day, the
average of the closing bid and asked prices on such day; (ii) if the Ashford
Inc. Common Stock is not listed or admitted to trading on any securities
exchange or the NASDAQ National Market System, the last reported sale price on
such day or, if no sale takes place on such day, the average of the closing bid
and asked prices on such day, as reported by a reliable quotation source
designated by the Manager; or (iii) if the Ashford Inc. Common Stock is not
listed or admitted to trading on any securities exchange or the NASDAQ National
Market System and no such last reported sale price or closing bid and asked
prices are available, the average of the reported high bid and low asked prices
on such day, as reported by a reliable quotation source designated by the
Manager, or if there shall be no bid and asked prices on such day, the average
of the high bid and low asked prices, as so reported, on

 

9

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the most recent day (not more than ten (10) days prior to the date in question)
for which prices have been so reported; provided, however, that if there are no
bid and asked prices reported during the ten (10) days prior to the date in
question, the Value of the Ashford Inc. Common Stock shall be determined by the
Manager acting in good faith on the basis of such quotations and other
information as it considers, in its reasonable judgment, appropriate. If the
Ashford Inc. Common Stock Amount includes rights that a holder of Ashford Inc.
Common Stock would be entitled to receive, and the Manager acting in good faith
determines that the value of such rights is not reflected in the Value of the
Ashford Inc. Common Stock determined as aforesaid, then the Value of such rights
shall be determined by the Manager acting in good faith on the basis of such
quotations and other information as it considers, in its reasonable judgment,
appropriate.

 

“Vested LTIP Units” has the meaning set forth in Section 4.3(e)(i).

 

“Vesting Agreement” means each or any, as the context implies, LTIP Unit Award
Agreement entered into by a LTIP Unitholder upon acceptance of an award of LTIP
Units under the Plan (as such agreement may be amended, modified or supplemented
from time to time).

 

ARTICLE II
COMPANY CONTINUATION; ADMISSION OF MEMBERS; NAME; PLACE OF BUSINESS AND
REGISTERED AGENT

 

Section 2.1                        CONTINUATION. By this Agreement, the Members
agree to continue the Company pursuant to the provisions of the Act and upon the
terms and conditions set forth in this Agreement.  Except as expressly provided
in this Agreement, the rights and obligations of the Members and the
administration and termination of the Company shall be governed by the Act.  The
Membership Interest of each Member shall be personal property for all purposes.

 

Section 2.2                        CERTIFICATE OF FORMATION; OTHER FILINGS. The
Manager shall prepare (or caused to be prepared), execute, acknowledge, record
and file at the expense of the Company, a Certificate of Formation and all
requisite fictitious name statements and notices in such places and
jurisdictions as may be required by the Act or necessary to cause the Company to
be treated as a limited liability company under, and otherwise to comply with,
the laws of each state or other jurisdiction in which the Company conducts
business.

 

Section 2.3                        ADDITIONAL MEMBERS.  The Manager shall in
timely fashion amend this Agreement and, if required by the Act, the Certificate
of Formation filed for record to reflect the admission pursuant to the terms of
this Agreement of a Person as a Member.

 

Section 2.4                        NAME, OFFICE AND REGISTERED AGENT. The name
of the Company shall be Ashford Hospitality Holdings LLC.  The principal place
of business of the Company shall be at 14185 Dallas Parkway, Suite 1100, Dallas,
Texas 75254. The Manager may at any time change the location of such office,
provided the Manager gives

 

10

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notice to the Members of any such change. The name and address of the Company’s
statutory agent for service of process on the Company in Texas is Ashford Inc.,
14185 Dallas Parkway, Suite 1100, Dallas, Texas 75254.  The name and address of
the Company’s statutory agent for service of process on the Company in Delaware
is Corporation Service Company, 2711 Centerville Road, Suite 400, Wilmington,
Delaware 19808.

 

ARTICLE III
BUSINESS AND TERM OF COMPANY

 

Section 3.1                        BUSINESS. The purpose and nature of the
business of the Company is to conduct any business that may lawfully be
conducted by a limited liability company organized pursuant to the Act. To
consummate the foregoing and to carry out the obligations of the Company in
connection therewith or incidental thereto, the Manager shall have the
authority, in accordance with and subject to the limitations set forth elsewhere
in this Agreement, to make, enter into, perform and carry out any arrangements,
contracts or agreements of every kind for any lawful purpose, without limit as
to amount or otherwise, with any corporation, association, partnership, limited
liability company, firm, trustee, syndicate, individual or any political or
governmental division, subdivision or agency, domestic or foreign, and generally
to make and perform agreements and contracts of every kind and description and
to do any and all things necessary or incidental to the foregoing for the
protection and enhancement of the assets of the Company.

 

Section 3.2                        TERM. The Company shall continue in
perpetuity and shall have perpetual existence, unless earlier dissolved pursuant
to law or the provisions of this Agreement.  The existence of the Company as a
separate legal entity shall continue until the cancellation of the Certificate
of Formation pursuant to the Act.

 

ARTICLE IV
CAPITAL CONTRIBUTIONS

 

Section 4.1                        MANAGER. The Manager, as manager, has not
contributed, and shall not be required to contribute, cash or other assets to
the capital of the Company.

 

Section 4.2                        MEMBERS. Ashford Inc.was the initial Member
and continues to be a member of the Company and, except as provided in
Section 4.8(b), the other Members are admitted to the Company as members of the
Company as a result of the Merger effective as of the Effective Date.  The
Members are deemed to have contributed as the Contributed Properties their
respective membership interests in Ashford Hospitality Advisors LLC to the
Company as identified on Exhibit A.  The Agreed Values of the Members’
proportionate interest in the Contributed Properties as of the date of
contribution are set forth on Exhibit A.

 

Section 4.3                        ADDITIONAL CAPITAL CONTRIBUTIONS AND
ISSUANCES OF ADDITIONAL MEMBERSHIP INTERESTS. Except as provided in this
Section 4.3 or in Section 4.4, the Members have and shall have no preemptive or

 

11

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other right or obligation to make any additional Capital Contributions or loans
to the Company.  Ashford Inc. may contribute additional capital or property to
the Company, from time to time, and receive additional Membership Interests in
respect thereof, in the manner contemplated in this Section 4.3.

 

(a)                               ISSUANCES OF ADDITIONAL MEMBERSHIP INTERESTS.

 

(i)                                  GENERAL. The Manager is authorized to cause
the Company to issue such additional Membership Interests in the form of Common
Units and Preferred Units for any Company purpose at any time or from time to
time, to the Members or to other Persons for such consideration and on such
terms and conditions as shall be established by the Manager in its sole and
absolute discretion, all without the approval of any of the Members.  Any
additional Membership Interest issued as provided in the prior sentence may be
issued in one or more classes, or one or more series of any of such classes,
with such designations, preferences and relative, participating, optional or
other special rights, powers and duties, including rights, powers and duties
senior to Membership Interests, all as shall be determined by the Manager in its
sole and absolute discretion and without the approval of any Member, subject to
Delaware law, and all as may be set forth in an Exhibit to this Agreement, each
of which Exhibit shall be incorporated into and become part of this Agreement
upon adoption by the Manager, including, without limitation, (i) the allocations
of items of Company income, gain, loss, deduction and credit to each such class
or series of Membership Interests; (ii) the right of each such class or series
of Membership Interests to share in Company distributions; (iii) the rights of
each class or series of Membership Interests upon dissolution and liquidation of
the Company and (iv) the right to vote; PROVIDED, HOWEVER, that no additional
Membership Interests shall be issued to Ashford Inc. unless:

 

(ii)                              (1) (A) The additional Membership Interests
are issued in connection with an issuance of Ashford Inc. Shares of or other
interests in Ashford Inc., all such that the economic interests are
substantially similar to the designations, preferences and other rights of the
additional Membership Interests issued to Ashford Inc. by the Company in
accordance with this Section 4.3 (but taking into account that Ashford Inc. is
subject to income tax on its taxable income) and (B) Ashford Inc. shall make,
directly or through one or more Affiliates, a Capital Contribution to the
Company in an amount equal to the proceeds raised or other property received by
Ashford Inc., directly or through one or more Affiliates, in connection with the
issuance of such stock or other interests in Ashford Inc., (2) the additional
Membership Interests are issued in exchange for property owned by Ashford Inc.,
with a fair market value, as determined by the Manager, in good faith, equal to
the value of the Membership Interests or in connection with issuances by Ashford
Inc. of Additional Securities pursuant to the Plan, or (3) the additional
Membership Interests

 

12

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are issued to all Members in proportion to their respective Common Percentage
Interests or Preferred Percentage Interests, as applicable.

 

Without limiting the foregoing, the Manager is expressly authorized to cause the
Company to issue Common Units or Preferred Units for less than fair market
value, so long as the Manager concludes in good faith that such issuance is in
the best interests of Ashford Inc. and the Company.  There are no Preferred
Membership Interests or Preferred Units outstanding on the Effective Date, but
the Manager is authorized to cause the Company to issue Preferred Membership
Interests or Preferred Units after the Effective Date.

 

(b)                              UPON ISSUANCE OF ADDITIONAL SECURITIES. After
the Effective Date, Ashford Inc. shall not issue any Additional Securities other
than to all holders of Ashford Inc. Shares, unless (A) the Manager shall cause
the Company to issue to Ashford Inc. or its Affiliates, Membership Interests or
rights, options, warrants or convertible or exchangeable securities of the
Company having designations, preferences and other rights, all such that the
economic interests are substantially similar to those of the Additional
Securities (but taking into account that Ashford Inc. is subject to income tax
on its taxable income), and (B) Ashford Inc. contributes, directly or through
one or more Affiliates, the proceeds or other property received from the
issuance of such Additional Securities and from any exercise of rights contained
in such Additional Securities to the Company.  For the avoidance of doubt,
Ashford Inc. may in any event issue Additional Securities pursuant to the Plan.

 

Without limiting the foregoing, Ashford Inc. may issue Additional Securities for
less than fair market value, and as a result the Manager is expressly authorized
to cause the Company to issue to Ashford Inc. or its Affiliates corresponding
Membership Interests, so long as (x) Ashford Inc. concludes in good faith that
such issuance is in the best interests of Ashford Inc. and the Company, and
(y) Ashford Inc., directly or through one or more Affiliates, contributes all
proceeds or other property received from such issuance to the Company. For
example, if Ashford Inc. issues Ashford Inc. Common Stock for a cash purchase
price and contributes, directly or through one or more Affiliates, all of the
proceeds of such issuance to the Company as required under this Agreement,
Ashford Inc. or its Affiliates shall be issued a number of additional Common
Units equal to the product of (A) the number of shares of such Ashford Inc.
Common Stock issued by Ashford Inc., the proceeds of which were so contributed,
multiplied by (B) a fraction, the numerator of which is 100%, and the
denominator of which is the Conversion Factor in effect on the date of such
contribution.

 

(c)                               CERTAIN DEEMED CONTRIBUTIONS OF PROCEEDS OF
ISSUANCE OF ASHFORD INC. SHARES. In connection with any and all issuances of
Ashford Inc. Shares, Ashford Inc., directly or through one or more Affiliates,
shall contribute all of the proceeds raised in connection with such issuance to
the Company as Capital Contributions, PROVIDED THAT if the proceeds actually
received and contributed by Ashford Inc. or its Affiliates are

 

13

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less than the gross proceeds of such issuance as a result of any underwriter’s
discount or other expenses paid or incurred in connection with such issuance,
then Ashford Inc., directly or through one or more Affiliates, shall be deemed
to have made Capital Contributions to the Company in the aggregate amount of the
gross proceeds of such issuance and the Company shall be deemed simultaneously
to have paid such offering expenses in connection with the required issuance of
additional Units to Ashford Inc. or its Affiliates for such Capital
Contributions pursuant to Section 4.3(a).

 

(d)                             LTIP UNITS.  The Manager may from time to time
issue LTIP Units to Persons who provide services to the Company, for such
consideration as the Manager may determine to be appropriate, and admit such
Persons as Members.  The Capital Accounts of such LTIP Unitholders shall be
credited with the amount of their respective Capital Contributions pursuant to
Section 5.3.  Except to the extent a Capital Contribution is made with respect
to an LTIP Unit, an LTIP Unit is intended to qualify as a “profits interest” in
the Company.  Subject to the provisions of Sections 4.3(d) and 4.3(e) and the
special provisions of Sections 5.5, 7.6 and 7.7, LTIP Units shall be treated as
Common Units, with all of the rights, privileges and obligations attendant
thereto.  For purposes of computing the Common Percentage Interests, holders of
LTIP Units shall be treated as Common Unitholders and LTIP Units shall be
treated as Common Units.  In particular, the Company shall comply with the
following procedures:

 

(i)                                  If an Adjustment Event (as defined below)
occurs, then the Manager shall make a corresponding adjustment to the LTIP Units
to maintain a one-for-one conversion and economic equivalence ratio between
Common Units and LTIP Units.  The following shall be “Adjustment Events”:
(A) the Company makes a distribution on all outstanding Common Units in Units,
(B) the Company subdivides the outstanding Common Units into a greater number of
units or combines the outstanding Common Units into a smaller number of Units,
or (C) the Company issues any Units in exchange for its outstanding Common Units
by way of a reclassification or recapitalization of its Common Units.  If more
than one Adjustment Event occurs, the adjustment to the LTIP Units need be made
only once using a single formula that takes into account each and every
Adjustment Event as if all Adjustment Events occurred simultaneously.  For the
avoidance of doubt, the following shall not be Adjustment Events: (x) the
issuance of Units in a financing, reorganization, acquisition or other similar
business transaction, (y) the issuance of Units pursuant to any employee benefit
or compensation plan or distribution reinvestment plan, or (z) the issuance of
any Units to Ashford Inc. in respect of a capital contribution to the Company of
proceeds from the sale of securities by Ashford Inc.  If the Company takes an
action affecting the Common Units other than actions specifically described
above as “Adjustment Events” and in the opinion of the Manager such action would
require an adjustment to the LTIP Units to maintain the one-to-one
correspondence described above, the Manager

 

14

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shall have the right to make such adjustment to the LTIP Units, to the extent
permitted by law and by the Plan, in such manner and at such time as the
Manager, in its sole discretion, may determine to be appropriate under the
circumstances.  If an adjustment is made to the LTIP Units as provided in this
Section 4.3 the Company shall promptly file in the books and records of the
Company an officer’s certificate setting forth such adjustment and a brief
statement of the facts requiring such adjustment, which certificate shall be
conclusive evidence of the correctness of such adjustment absent manifest
error.  Promptly after filing of such certificate, the Company shall mail a
notice to each LTIP Unitholder setting forth the adjustment to his or her LTIP
Units and the effective date of such adjustment; and

 

(ii)                              Subject to the provisions of Section 10.4, the
LTIP Unitholders shall, in respect of each Distribution Payment Date, when, as
and if authorized and declared by the Manager out of assets legally available
for that purpose, be entitled to receive distributions in an amount per LTIP
Unit equal to the distributions per Common Unit (the “Common Unit
Distribution”), paid to holders of record on the same Record Date established by
the Manager with respect to such Distribution Payment Date.  The term “Newly
Issued Common Unit” shall be deemed to include LTIP Units issued during a Common
Unit Distribution Period and Section 8.1(a) shall apply in full to LTIP Units. 
During any Common Unit Distribution Period, so long as any LTIP Units are
outstanding, except upon liquidation of the Company and as provided in the
following sentence and Section 10.4, no distributions (whether in cash or in
kind) shall be authorized, declared or paid on Common Units, unless equal
distributions have been or contemporaneously are authorized, declared and paid
on the LTIP Units for such Common Unit Distribution Period.

 

The LTIP Units shall rank pari passu with the Common Units as to the payment of
regular and special periodic or other distributions and distribution of assets
upon liquidation, dissolution or winding up, provided upon liquidation the
amount distributed with respect to a LTIP Unit shall be limited to the related
Capital Account balance as provided by Section 10.4.  As to the payment of
distributions and as to distribution of assets upon liquidation, dissolution or
winding up, any class or series of Units or Membership Interests which by its
terms specifies that it shall rank junior to, on a parity with, or senior to the
Common Units shall also rank junior to, or pari passu with, or senior to, as the
case may be, the LTIP Units. Subject to the terms of any Vesting Agreement, a
LTIP Unitholder shall be entitled to transfer his or her LTIP Units to the same
extent, and subject to the same restrictions as holders of Common Units are
entitled to transfer their Common Units pursuant to Article IX.

 

(e)                               TERMS OF LTIP UNITS.  LTIP Units shall be
subject to the following special provisions:

 

15

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(i)                                  VESTING AGREEMENTS.  LTIP Units may, in the
sole discretion of the Manager, be issued subject to vesting, forfeiture and
additional restrictions on transfer pursuant to the terms of a Vesting
Agreement.  The terms of any Vesting Agreement may be modified by the Manager
from time to time in its sole discretion, subject to any restrictions on
amendment imposed by the relevant Vesting Agreement or by the Plan, if
applicable.  LTIP Units that have vested under the terms of a Vesting Agreement
are referred to as “Vested LTIP Units”; all other LTIP Units shall be treated as
“Unvested Incentive Units.”

 

(ii)                              FORFEITURE.  Unless otherwise specified in the
Vesting Agreement, upon the occurrence of any event specified in a Vesting
Agreement as resulting in the right of the Company to repurchase LTIP Units at a
specified purchase price or some other forfeiture of any LTIP Units, then if the
Company exercises such right to repurchase or forfeiture in accordance with the
applicable Vesting Agreement, then the relevant LTIP Units shall immediately,
and without any further action, be treated as cancelled and no longer
outstanding for any purpose.  Unless otherwise specified in the Vesting
Agreement, no consideration or other payment shall be due with respect to any
LTIP Units that have been forfeited, other than any distributions declared with
respect to a Record Date prior to the effective date of the forfeiture.  In
connection with any repurchase or forfeiture of LTIP Units, the balance of the
portion of the Capital Account of the LTIP Unitholder that is attributable to
all of his or her LTIP Units shall be reduced by the amount, if any, by which it
exceeds the Target Balance contemplated by Section 5.5, calculated with respect
to the LTIP Unitholder’s remaining LTIP Units, if any, with such reduction being
accomplished by an allocation of gross deductions or losses to the applicable
LTIP Unitholder.

 

(iii)                          ALLOCATIONS.  LTIP Units shall generally be
treated as Common Units for purposes of Article V, but LTIP Unitholders shall
also be entitled to certain special allocations of gain under Section 5.5.

 

(iv)                          REDEMPTION.  The Redemption Right provided to
Members under Section 7.3 shall not apply with respect to LTIP Units unless and
until they are converted to Common Units as provided in clause (vi) below and
Section 7.6.

 

(v)                              LEGEND.  Any certificate evidencing an LTIP
Unit shall bear an appropriate legend indicating that additional terms,
conditions and restrictions on transfer, including without limitation any
Vesting Agreement, apply to the LTIP Unit.

 

(vi)                          CONVERSION TO COMMON UNITS.  Vested LTIP Units are
eligible to be converted into Common Units under Section 7.6.

 

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(vii)                      VOTING.  LTIP Units have the voting rights provided
in Section 7.7.

 

(viii)                  ISSUANCE.  An LTIP Unit shall be considered issued to an
LTIP Unitholder upon the later to occur of: (i) execution of a counterpart
signature page to this Agreement, unless such Person is already a Member,
(ii) execution by such LTIP Unitholder and the Company of a Vesting Agreement
with respect to such LTIP Unit, if applicable, and (iii) payment to the Company
of the Capital Contribution, if any, provided for in the related Vesting
Agreement.

 

Section 4.4                        ADDITIONAL FUNDING. If the Manager determines
that it is in the best interests of the Company to provide for additional
Company funds (“Additional Funds”) for any Company purpose, the Manager may
(i) cause the Company to obtain such funds from outside borrowings, or
(ii) elect to have the Manager provide such Additional Funds to the Company
through loans or otherwise.

 

Section 4.5                        INTEREST. No interest shall be paid on the
Capital Contribution of any Member.

 

Section 4.6                        RETURN OF CAPITAL. Except as expressly
provided in this Agreement, no Member shall be entitled to demand or receive the
return of its Capital Contribution.

 

Section 4.7                        PERCENTAGE INTEREST.  If the number of
outstanding Common Units increases or decreases during a taxable year, the
Manager shall adjust each holder’s Common Percentage Interest, as reflected on
Exhibit A, to a percentage equal to the number of Common Units held by such
Member divided by the aggregate number of outstanding Common Units.

 

Section 4.8                        ADMISSIONS

 

(a)                               Any Person issued Units pursuant to this
Article IV shall, to the extent not already a Member, be admitted to the Company
as a Member upon its execution of a counterpart or amendment to this Agreement

 

(b)                              Notwithstanding the foregoing provisions of
Section 4.8(a), any member of Ashford Hospitality Advisors LLC on the Effective
Date who is issued Common Units in the Company pursuant to the Merger shall be
admitted to the Company as a Member and be bound by the terms of this Agreement
effective simultaneously with the effectiveness of the Merger without any
written execution of a counterpart or amendment to this Agreement; provided,
however, that if such Person objects to being admitted as a Member in writing to
the Manager within 10 days of being notified by the Manager of the Merger, such
Person such shall be deemed to be an assignee and shall be treated as if such
Person were an assignee in accordance with Section 9.4 for all purposes of this
Agreement and the Act.

 

17

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ARTICLE V
PROFITS, LOSSES AND ACCOUNTING

 

Section 5.1                        ALLOCATION OF PROFITS AND LOSSES. Except as
otherwise provided in this Agreement or in Exhibit B, profits earned and losses
incurred by the Company shall be allocated among the Members as follows:

 

(a)                               Profits for each year shall be allocated among
the Members, and shall be credited to the respective Capital Accounts of the
Members, in the following order and priority:

 

(i)                                  First, items of gross income to the holders
of Preferred Units in the amount necessary so that the cumulative amount of
gross income allocated to holders of Preferred Units pursuant to this
Section 5.1(a)(i) is equal to the cumulative amount of distributions of
Preferred Return (as defined, for each series of Preferred Units, in the
exhibit, if any, to this Agreement setting forth the terms of such Preferred
Units) distributed to holders of Preferred Units;

 

(ii)                              Second, to the Members to the extent of
losses, in the proportions and in the reverse order in which losses were
allocated to them pursuant to Section 5.1(b), until the cumulative amounts
allocated to each Member pursuant to this Section 5.1(a)(ii) are equal to the
cumulative losses so allocated to such Member;

 

(iii)                          Third, any remaining profits shall be allocated
to the holders of Common Units in accordance with their Common Percentage
Interests.

 

(b)                              Losses for each year shall be allocated among
the Members, and shall be debited to the respective Capital Accounts of the
Members, in the following order and priority:

 

(i)                                  First, to the holders of Common Units pro
rata in accordance with, and to the extent of, the positive balances in their
Adjusted Capital Account Balances (as defined in Exhibit B) attributable to
Common Units;

 

(ii)                              Second, to the holders of Preferred Units pro
rata in accordance with, and to the extent of, the positive balances in their
Adjusted Capital Account Balances (as defined in Exhibit B) attributable to
Preferred Units; and

 

(iii)                          Thereafter, any remaining losses will be
allocated to the holders of Common Units in accordance with their Common
Percentage Interests.

 

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(c)                               If the Company issues additional Units
pursuant to the provisions of this Agreement, the Manager is authorized to make
revisions to this Section 5.1 as it determines are necessary or desirable to
reflect the terms of the issuance of such additional Units, including, without
limitation, making preferential allocations to certain classes of Units.  For
purposes of determining the profits and losses or any other items allocable to
any period, profits and losses, and any such other items shall be determined on
a daily, monthly, or other basis, as determined by the Manager using any
permissible method under Code Section 706 and the Treasury Regulations
thereunder.

 

(d)                             Notwithstanding the provisions of
Section 5.1(a) and Section 5.1(b), upon liquidation of the Company or upon
redemption of any redeemable Preferred Units, items of gross income or items of
deduction or loss shall be allocated to the holders of the Preferred Units or
the Common Units, such that the Capital Accounts attributable to the Preferred
Units equal, after all allocations of profit and loss are completed, the amount
to be distributed to the Preferred Units.

 

Section 5.2                        ACCOUNTING.

 

(a)                               The books of the Company shall be kept on the
accrual basis and in accordance with generally accepted accounting principles
consistently applied.

 

(b)                              The fiscal year of the Company shall be the
calendar year.

 

(c)                               The terms “profits” and “losses,” as used in
this Agreement, means all items of income, gain, expense or loss as determined
utilizing federal income tax accounting principles and shall also include each
Member’s share of income described in Section 705(a)(1)(B) of the Code, any
expenditures described in Section 705(a)(2)(B) of the Code, any expenditures
described in Section 709(a) of the Code which are not deducted or amortized in
accordance with Section 709(b) of the Code, losses not deductible pursuant to
Sections 267(a) and 707(b) of the Code and adjustments made pursuant to
Exhibit B.

 

(d)                             For any taxable year during which the new
partnership audit rules (which are set forth in Subchapter C of Chapter 63 of
Subtitle F of the Code (Sections 6221 through 6241 of the Code as amended by the
Bipartisan Budget Act of 2015) that are generally effective for tax years
beginning after December 31, 2017) are not in effect, Ashford Inc. shall be the
“tax matters partner” (Tax Matters Member”) of the Company within the meaning of
Section 6231(a)(7) of the Code.  As Tax Matters Member, Ashford Inc. shall have
the right and obligation to take all actions authorized and required,
respectively, by the Code for the tax matters partner.  Ashford Inc. shall have
the right to retain professional assistance in respect of any audit of the
Company by the IRS, and all out-of-pocket expenses and fees incurred by Ashford
Inc. on behalf of the Company as Tax Matters Member shall constitute Operating
Expenses of the Company.  If Ashford Inc. receives notice of a final partnership
adjustment under Section

 

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6223(a)(2) of the Code, Ashford Inc. shall either (i) file a court petition for
judicial review of such final adjustment within the period provided under
Section 6226(a) of the Code, a copy of which petition shall be mailed to each
Member on the date such petition is filed, or (ii) mail a written notice to each
Member, within such period, that describes Ashford Inc.’s reasons for
determining not to file such a petition.  For any taxable year during which the
new partnership audit rules are in effect, the Manager (or such other Person as
may be designated by the Manager from time to time) shall be the “partnership
representative” as that term is defined in Section 6223(a) of the Code, as added
by the Bipartisan Budget Act of 2015 (the “Company Representative”), and each
Member shall take all actions necessary to cause such Person to be so designated
in accordance with any procedures prescribed therefor. The Company
Representative shall inform each Member of all significant matters that may come
to his, her or its attention in his, her or its capacity as Company
Representative by giving notice thereof after becoming aware thereof and, within
that time, shall forward to each Member copies of all significant written
communications he, she or it may receive in that capacity. Any Person who is
designated as Company Representative shall not take any action contemplated by
Sections 6222 through 6232 of the Code without the consent of Members whose
aggregate Common Percentage Interests exceed 50%, and may not in any case take
any action left to the determination of an individual Member under Sections 6222
through 6231 of the Code.

 

(e)                               Except as specifically provided in this
Agreement, all elections required or permitted to be made by the Company under
the Code shall be made by the Manager in its sole discretion.

 

(f)                                Any Member shall have the right to a private
audit of the books and records of the Company, provided such audit is made at
the expense of the Member desiring it, and it is made during normal business
hours.

 

(g)                              The Members agree that the Company shall be
authorized and directed to make the Safe Harbor Election and the Company and
each Member (including any person to whom a Membership Interest is transferred
in connection with the performance of services) agrees to comply with all
requirements of the Safe Harbor with respect to all Membership Interests
transferred in connection with the performance of services while the Safe Harbor
Election remains effective.  Ashford Inc., as the Tax Matters Member, shall be
authorized to (and shall) prepare, execute, and file the Safe Harbor Election.

 

Section 5.3                        MEMBERS’ CAPITAL ACCOUNTS.

 

(a)                               There shall be maintained a Capital Account
for each Member in accordance with this Section 5.3 and the principles set forth
in Exhibit B. The amount of cash and the Agreed Value of property contributed to
the Company by each Member, net of liabilities assumed by the Company or
securing property contributed by such Member, shall be credited to its Capital
Account, and from time to time, but not less often than annually, the share of
each Member in profits,

 

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losses and Carrying Value of distributions (net of liabilities secured by the
distributed property that such Member is considered to assume or take subject
to) shall be credited or debited to its Capital Account. The determination of
Members’ Capital Accounts, and any adjustments thereto, shall be made consistent
with tax accounting and other principles set forth in Section 704(b) of the Code
and applicable Treasury Regulations thereunder and Exhibit B.

 

(b)                              Except as otherwise specifically provided in
this Agreement, as required by the Act or other law, or in a deficit restoration
obligation agreement or in a guarantee of a Company liability signed by a
Member, no Member shall be required to make any further contribution to the
capital of the Company to restore a loss, to discharge any liability of the
Company or for any other purpose, nor shall any Member personally be liable for
any liabilities of the Company or of the Manager. All Members waive their right
of contribution which they may have against other Members in respect of any
payments made by them under any guarantee of Company debt.

 

(c)                               Immediately following the transfer of any
Membership Interest, the Capital Account of the transferee Member attributable
to the transferred interest shall be equal to the Capital Account of the
transferor Member attributable to the transferred interest.

 

(d)                             For purposes of computing the amount of any item
of income, gain, deduction or loss to be reflected in the Members’ Capital
Accounts, the determination, recognition and classification of any such item
shall be the same as its determination, recognition and classification for
federal income tax purposes, taking into account any adjustments required
pursuant to Section 704(b) of the Code and the applicable Treasury Regulations
thereunder as more fully described in Exhibit B.

 

(e)                               The provisions of the Agreement relating to
the maintenance of Capital Accounts are intended to comply with Treasury
Regulations Section 1.704-1(b), and shall be interpreted and applied in a manner
consistent with such Treasury Regulations.  If the Manager shall determine that
it is prudent to modify the manner in which the Capital Accounts, or any debits
or credits thereto (including, without limitation, debits or credits relating to
liabilities which are secured by contributed or distributed property or which
are assumed by the Company or the Members) are computed in order to comply with
such Treasury Regulations, the Manager may make such modification, provided that
it is not likely to have a material effect on the amounts distributable to any
Person upon the dissolution of the Company.  The Manager also shall (i) make any
adjustments that are necessary or appropriate to maintain equality between the
Capital Accounts of the Members and the amount of Company capital reflected on
the Company’s balance sheet, as computed for book purposes, in accordance with
Treasury Regulations Section 1.704-1(b)(2)(iv)(q) and (ii) make appropriate
modifications if unanticipated events might otherwise cause this Agreement not
to comply with Treasury Regulations Sections 1.704-1(b) or 1.704-2.

 

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Section 5.4                        SECTION 754 ELECTIONS. The Manager shall
elect, pursuant to Section 754 of the Code, to adjust the basis of the Company’s
assets for (i) all Transfers of Membership Interests, and (ii) any distribution
of Company property as described in Section 734 of the Code, if such election
would benefit any Member or the Company.

 

Section 5.5                        SPECIAL ALLOCATION OF GAIN TO LTIP
UNITHOLDERS.  Notwithstanding the provisions of Section 5.1 above, but subject
to the prior allocation of income, gain, deduction and loss under the terms of
the Agreement in respect of any class of Membership Interests ranking senior to
the LTIP Units with respect to return of capital or any preferential or priority
return, any gains realized in connection with the actual or hypothetical sale of
all or substantially all of the assets of the Company, including but not limited
to, gain realized in connection with an adjustment to the Carrying Value of
Company assets under Section 704(b) of the Code, shall first be allocated to the
LTIP Unitholders until the Economic Capital Account Balances of such Members, to
the extent attributable to their ownership of LTIP Units, are equal to (i) the
Common Unit Economic Balance, multiplied by (ii) the number of their LTIP
Units.  For this purpose, the “Economic Capital Account Balances” of the LTIP
Unitholders will be equal to their Capital Account balances, plus the amount of
their shares of any Member Minimum Gain or Company Minimum Gain, in each case to
the extent attributable to their ownership of LTIP Units.  For clarification,
each Member will have only one Capital Account as to all Membership Interests it
owns, but solely for determining the Economic Capital Account Balance of LTIP
Units of an LTIP Unitholder its Capital Account will be separately computed for
each group of LTIP Units having the same issue date.  Similarly, the “Common
Unit Economic Balance” means (i) the Capital Account Balance of Ashford Inc.,
plus the amount of Ashford Inc.’s share of any Member Minimum Gain or Company
Minimum Gain, in either case to the extent attributable to Ashford Inc.’s
ownership of Common Units and computed on a hypothetical basis after taking into
account all allocations under Article V through the date on which any allocation
is made under this Section 5.5, divided by (ii) the number of Ashford Inc.’s
Common Units (with respect to each holder, the “Target Balance”).  Any such
allocations shall be made among the LTIP Unitholders in proportion to the
amounts required to be allocated to each under this Section 5.5, provided,
however, that no amounts will be allocated with respect to any particular LTIP
Unit (each, an “Ineligible Unit”) until all special allocations pursuant to
Part A of Exhibit B with respect to such LTIP Unit have been reversed to the
extent required by paragraph 10 of Part A of Exhibit B.  If, notwithstanding the
foregoing, not all LTIP Units (including Ineligible Units) are fully booked up,
an LTIP Unitholder may determine how gains shall be allocated among such LTIP
Unitholder’s LTIP Units (other than Ineligible Units); provided, however, if
such LTIP Unitholder does not make such a determination, gains shall generally
be allocated so that the Economic Capital Account Balance of the maximum amount
of Vested LTIP Units held by such LTIP Unitholder is equal to the Common Unit
Economic Balance on a per LTIP Unit basis; provided, further, that such gains
may only be allocated to LTIP Units that are held by such LTIP Unitholder on the
date of the allocation under this Section 5.5.  The parties agree that the
intent of this Section 5.5 is to make the Capital Account balances of the LTIP
Unitholders with respect to their LTIP Units economically equivalent to the
Capital Account balance of Ashford Inc. (on a per-Unit basis) with respect to
its Common Units.

 

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ARTICLE VI
POWERS, DUTIES, LIABILITIES, COMPENSATION
AND VOTING OF THE MANAGER

 

Section 6.1                        POWERS OF MANAGER. The Manager’s discretion
and authority are subject to the limitations imposed by law and by the Manager’s
Certificate of Incorporation. Subject to the foregoing and to other limitations
imposed by this Agreement, the Manager shall have full, complete and exclusive
discretion to manage and control the business and affairs of the Company and
make all decisions affecting the business and assets of the Company. Without
limiting the generality of the foregoing (but subject to the restrictions
specifically contained in this Agreement), the Manager shall have the power and
authority to take the following actions on its own behalf in its capacity as
Manager or on behalf of the Company:

 

(a)                               to acquire, purchase, own, manage, operate,
lease and dispose of any real property and any other property or assets that the
Manager determines are necessary or appropriate or in the best interests of
conducting the business of the Company;

 

(b)                              to construct buildings and make other
improvements (including renovations) on or to the properties owned or leased by
the Company;

 

(c)                               to borrow money for the Company, issue
evidences of indebtedness in connection therewith, refinance, guarantee,
increase the amount of, modify, amend or change the terms of, or extend the time
for the payment of, any indebtedness or obligation of or to the Company, and
secure such indebtedness by mortgage, deed of trust, pledge or other lien on the
Company’s assets;

 

(d)                             to pay, either directly or by reimbursement, for
all Operating Expenses to third parties or to the Manager (as set forth in this
Agreement);

 

(e)                               to lease all or any portion of any of the
Company’s assets, whether or not the terms of such leases extend beyond the
termination date of the Company and whether or not any portion of the Company’s
assets so leased are to be occupied by the lessee, or, in turn, subleased in
whole or in part to others, for such consideration and on such terms as the
Manager may determine;

 

(f)                                to prosecute, defend, arbitrate, or
compromise any and all claims or liabilities in favor of or against the Company,
on such terms and in such manner as the Manager may reasonably determine, and
similarly to prosecute, settle or defend litigation with respect to the Members,
the Company, or the Company’s assets;

 

(g)                              to file applications, communicate, and
otherwise deal with any and all governmental agencies having jurisdiction over,
or in any way affecting, the Company’s assets or any other aspect of the Company
business;

 

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(h)                              to make or revoke any election permitted or
required of the Company by any taxing authority;

 

(i)                                  to maintain such insurance coverage for
public liability, fire and casualty, and any and all other insurance for the
protection of the Company, for the conservation of Company assets, or for any
other purpose convenient or beneficial to the Company, in such amounts and such
types as the Manager shall determine from time to time;

 

(j)                                  to determine whether or not to apply any
insurance proceeds for any Property to the restoration of such Property or to
distribute the same;

 

(k)                              to retain providers of services of any kind or
nature in connection with the Company business and to pay therefor such
reasonable remuneration as the Manager may deem proper;

 

(l)                                  to negotiate and conclude agreements on
behalf of the Company with respect to any of the rights, powers and authority
conferred upon the Manager, including, without limitation, management agreements
as to the Company, management agreements of other Persons by the Company as
manager, franchise agreements, and agreements with operators of Company
property;

 

(m)                          to maintain accurate accounting records and to file
promptly all federal, state and local income tax returns on behalf of the
Company;

 

(n)                              to form or acquire an interest in, and
contribute property to, any further limited or general partnerships, joint
ventures or other relationships that it deems desirable (including, without
limitation, the acquisition of interests in, and the contributions of property
to, the Company’s Subsidiaries and any other Person in which it has an equity
interest from time to time);

 

(o)                              to distribute Company cash or other Company
assets in accordance with this Agreement;

 

(p)                              to establish Company reserves for working
capital, capital expenditures, contingent liabilities or any other valid Company
purpose;

 

(q)                              to authorize, issue, sell, redeem or otherwise
purchase any Membership Interests or any securities (including secured and
unsecured debt obligations of the Company, debt obligations of the Company
convertible into any class or series of Membership Interests, or options,
rights, warrants or appreciation rights relating to any Membership Interests) of
the Company;

 

(r)                                 subject to the provisions of Section 9.1, to
merge, consolidate or combine the Company with or into another Person (to the
extent permitted by applicable law);

 

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(s)                                to do any and all acts and things necessary
or prudent to ensure that the Company will not be classified as a “publicly
traded partnership” for purposes of Section 7704 of the Code;

 

(t)                                 to issue additional Membership Interests
pursuant to Section 4.3;

 

(u)                              to pay cash to redeem Units held by a Member in
connection with a Member’s exercise of its Redemption Right under Section 7.3 or
in connection with a redemption of any Preferred Unit;

 

(v)                              to amend and restate Exhibit A to reflect
accurately at all times the Capital Contributions, Common Percentage Interests
and Preferred Percentage Interests of the Members as the same are adjusted from
time to time to the extent necessary to reflect redemptions, Capital
Contributions, the issuance of Units, the admission of any Additional Member or
any Substitute Member or otherwise, which amendment and restatement,
notwithstanding anything in this Agreement to the contrary, shall not be deemed
an amendment to this Agreement, as long as the matter or event being reflected
in Exhibit A otherwise is authorized by this Agreement;

 

(w)                          to take whatever action the Manager deems
appropriate to maintain the economic equivalency of a Common Unit and a share of
Ashford Inc. Common Stock (subject in each case to the effect of the Conversion
Factor and to the effect of income taxation of Ashford Inc.’s taxable income)
and a Preferred Unit of a series and a share of Ashford Inc. Preferred Stock of
the corresponding series, respectively (subject in each case to the effect of
the Conversion Factor and to the effect of income taxation of Ashford Inc.’s
taxable income); and

 

(x)                              to take such other action, execute,
acknowledge, swear to or deliver such other documents and instruments, and
perform any and all other acts the Manager deems necessary or appropriate for
the formation, continuation and conduct of the business and affairs of the
Company and to possess and enjoy all of the rights and powers of a manager as
provided by the Act.

 

Each of the Members agrees that the Manager is authorized to execute, deliver
and perform the above-mentioned agreements and transactions on behalf of the
Company without any further act, approval or vote of the Members (except as
provided in the last sentence of Section 6.10, Section 7.7 or Article XI),
notwithstanding any other provisions of the Act or any applicable law, rule or
regulation to the fullest extent permitted under the Act or other applicable
law, rule or regulation.  The execution, delivery or performance by the Manager
or the Company of any agreement authorized or permitted under this Agreement
shall not constitute a breach by the Manager of any duty that the Manager may
owe the Company or the Members or any other persons under this Agreement or of
any duty stated or implied by law or equity.

 

Except as otherwise provided in this Agreement, to the extent the duties of the
Manager require expenditures of funds to be paid to third parties, the Manager
shall not have any

 

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obligations under this Agreement except to the extent that Company funds are
reasonably available to it for the performance of such duties, and nothing in
this Agreement contained shall be deemed to authorize or require the Manager, in
its capacity as such, to expend its individual funds for payment to third
parties or to undertake any individual liability or obligation on behalf of the
Company.

 

Section 6.2                        DELEGATION OF AUTHORITY. The Manager may
delegate, including by appointment of officers of the Company, any or all of its
powers, rights and obligations under this Agreement, and may appoint, employ,
contract or otherwise deal with any Person for the transaction of the business
of the Company, which Person may, under supervision of the Manager, perform any
acts or services for the Company as the Manager may approve.

 

Section 6.3                        DUTIES OF MANAGER.

 

(a)                               The Manager, subject to the limitations
contained elsewhere in this Agreement, shall manage or cause to be managed the
affairs of the Company in a prudent and businesslike manner and shall devote
sufficient time and effort to the Company affairs.

 

(b)                              In carrying out its obligations, the Manager
shall:

 

(i)                                  Render annual reports to all Members with
respect to the operations of the Company;

 

(ii)                              Mail to all persons who were Members at any
time during the Company’s prior fiscal year an annual report of the Company,
including all necessary tax information, and any other information regarding the
Company and its operations during the prior fiscal year deemed by the Manager to
be material;

 

(iii)                          Maintain complete and accurate records of all
business conducted by the Company and complete and accurate books of account
(containing such information as shall be necessary to record allocations and
distributions), and make such books of account available for inspection and
audit by any Member (at the sole expense of such Member) to the extent provided
in Section 7.1(b); and

 

(iv)                          Cause to be filed such certificates and do such
other acts as may be required by law to qualify and maintain the Company as a
limited liability company under the laws of the State of Delaware.

 

(c)                               The Manager shall take such actions as it
deems necessary to maintain the economic equivalency of a Common Unit and a
share of Ashford Inc. Common Stock (subject in each case to the effect of the
Conversion Factor and to the effect of income taxation of Ashford Inc.’s taxable
income) and a Preferred Unit of a series and a share of Ashford Inc. Preferred
Stock of the corresponding series, respectively, required by this Agreement
(subject in each

 

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case to the effect of the Conversion Factor and to the effect of income taxation
of Ashford Inc.’s taxable income).  The Members acknowledge that Ashford Inc. is
taxable on its distributive share of the Company’s taxable income for federal,
state and local income tax purposes as a C corporation.

 

Section 6.4                        LIABILITIES OF MANAGER; INDEMNIFICATION.

 

(a)                               The Manager shall not be liable for the return
of all or any part of the Capital Contributions of the Members. Any returns
shall be made solely from the assets of the Company according to the terms of
this Agreement.

 

(b)                              Notwithstanding anything to the contrary set
forth in this Agreement, none of the Manager or Ashford Inc. nor any of their
officers, directors, agents or employees shall be liable or accountable in
damages or otherwise to the Company, any Members or any assignees who are bound
by this Agreement, or any of their successors or assigns, for any losses
sustained, liabilities incurred or benefits not derived, as a result of errors
in judgment or mistakes of fact or law or any act or omission if the Manager,
Ashford Inc., or such officers, directors, agents or employees acted in good
faith.  The Manager shall not be responsible for any misconduct or negligence on
the part on any agent appointed by it in good faith pursuant to Section 6.2. 
The Members expressly acknowledge that the Manager is acting on behalf of the
Company, the Manager, and Ashford Inc.’s stockholders collectively, and that the
Manager is under no obligation to consider the separate interests of the Members
(including, without limitation, the tax consequences to Members or their
assignees) in deciding whether to cause the Company to take (or decline to take)
any actions. In the event of a conflict between the interests of the
stockholders of Ashford Inc. on one hand and the Members on the other, the
Manager shall endeavor in good faith to resolve the conflict in a manner not
adverse to either the stockholders of Ashford Inc. or the Members; provided,
however, that, notwithstanding any duty otherwise existing at law or in equity,
to the fullest extent permitted by law, for so long as Ashford Inc. owns a
controlling interest, directly or indirectly, in the Company, any such conflict
that cannot be resolved in a manner not adverse to either the stockholders of
Ashford Inc. or the Members shall be resolved in favor of the stockholders of
Ashford Inc. Subject to the implied contractual covenant of good faith and fair
dealing, the Manager shall not be liable for monetary damages for losses
sustained, liabilities incurred, or benefits not derived by Members in
connection with such decisions, provided that the Manager has acted in good
faith.

 

(c)                               The Company shall indemnify each Indemnitee to
the fullest extent permitted by law and save and hold it harmless from and
against, and in respect of, any and all losses, claims, damages, liabilities
(joint or several), expenses (including legal fees and expenses), judgments,
fines, settlements, and other amounts arising from any and all claims, demands,
actions, suits or proceedings, civil, criminal, administrative or investigative,
that relate to the operations of the Company in which any Indemnitee may be
involved, or is threatened to be

 

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involved, as a party or otherwise; provided, however, that this indemnification
shall not apply if: (A) the act or omission of the Indemnitee was material to
the matter giving rise to the proceeding and either was committed in bad faith
or was the result of active and deliberate dishonesty; (B) the Indemnitee
actually received an improper personal benefit in money, property or services;
or (C) in the case of any criminal proceeding, the Indemnitee had reasonable
cause to believe that the act or omission was unlawful. The termination of any
proceeding by judgment, order or settlement does not create a presumption that
the Indemnitee did not meet the requisite standard of conduct set forth in this
Section 6.4(c). The termination of any proceeding by conviction or upon a plea
of nolo contendere or its equivalent, or an entry of an order of probation prior
to judgment, creates a rebuttable presumption that the Indemnitee acted in a
manner contrary to that specified in this Section 6.4(c). Any indemnification
pursuant to this Section 6.4 shall be made only out of the assets of the
Company, and any insurance proceeds from the liability policy covering the
Manager and any Indemnitee.

 

(d)                             The Company shall reimburse an Indemnitee for
reasonable expenses incurred by an Indemnitee who is a party to a proceeding in
advance of the final disposition of the proceeding upon receipt by the Company
of (i) a written affirmation by the Indemnitee of the Indemnitee’s good faith
belief that the standard of conduct necessary for indemnification by the Company
as authorized in this Section 6.4 has been met, and (ii) a written undertaking
by or on behalf of the Indemnitee to repay the amount if it shall ultimately be
determined that the standard of conduct has not been met.

 

(e)                               The indemnification provided by this
Section 6.4 shall be in addition to any other rights to which an Indemnitee or
any other Person may be entitled under any agreement, pursuant to any vote of
the Members, as a matter of law or otherwise, and shall continue as to an
Indemnitee who has ceased to serve in such capacity.

 

(f)                                The Company may purchase and maintain
insurance on behalf of the Indemnitees, and such other Persons as the Manager
shall determine, against any liability that may be asserted against or expenses
that may be incurred by such Person in connection with the Company’s activities,
regardless of whether the Company would have the power to indemnify such Person
against such liability under the provisions of this Agreement.

 

(g)                              For purposes of this Section 6.4, the Company
shall be deemed to have requested an Indemnitee to serve as fiduciary of an
employee benefit plan whenever the performance by the Indemnitee of its duties
to the Company also imposes duties on, or otherwise involves services by, the
Indemnitee to the plan or participants or beneficiaries of the plan; excise
taxes assessed on an Indemnitee with respect to an employee benefit plan
pursuant to applicable law shall constitute fines within the meaning of this
Section 6.4; and actions taken or omitted by the Indemnitee with respect to an
employee benefit plan in the performance of its duties for a purpose reasonably
believed by the Indemnitee to

 

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be in the interest of the participants and beneficiaries of the plan shall be
deemed to be for a purpose which is not opposed to the best interests of the
Company.

 

(h)                              In no event may an Indemnitee subject the
Members to personal liability by reason of the indemnification provisions set
forth in this Agreement.

 

(i)                                  An Indemnitee shall not be denied
indemnification in whole or in part under this Section 6.4 because the
Indemnitee had an interest in the transaction with respect to which the
indemnification applies if the transaction was otherwise permitted by the terms
of this Agreement.

 

(j)                                  Any amendment, modification or repeal of
this Section 6.4 or any provision of this Section 6.4 shall be prospective only
and shall not in any way affect the limitations on the Manager’s liability to
the Company and the Members under this Section 6.4 as in effect immediately
prior to such amendment, modification or repeal with respect to matters
occurring, in whole or in part, prior to such amendment, modification or repeal,
regardless of when claims relating to such matters may arise or be asserted. 
The provisions of this Section 6.4 are for the benefit of the Indemnitees, their
heirs, successors, assigns and administrators and shall not be deemed to create
any rights for the benefit of any other Persons.

 

Section 6.5                        COMPENSATION OF MANAGER; REIMBURSEMENT. The
Manager, as such, shall not receive any compensation for services rendered to
the Company. Notwithstanding the preceding sentence, the Manager shall be
entitled, in accordance with the provisions of Section 6.7 below, to pay
reasonable compensation to its Affiliates and other entities in which it may be
associated for services performed.  The Manager shall be reimbursed on a monthly
basis, or such other basis as the Manager may determine in its sole and absolute
discretion, for all Ashford Inc. Expenses.

 

Section 6.6                        RELIANCE ON ACT OF MANAGER. No financial
institution or any other person, firm or corporation dealing with the Manager or
the Company shall be required to ascertain whether the Manager is acting in
accordance with this Agreement, but such financial institution or such other
person, firm or corporation shall be protected in relying solely upon the
assurance of and the execution of any instrument or instruments by the Manager.

 

Section 6.7                        OUTSIDE SERVICES; DEALINGS WITH AFFILIATES;
OUTSIDE ACTIVITIES.

 

(a)                               Notwithstanding any provision of this
Article VI to the contrary, the Manager may employ such agents, accountants,
attorneys and others as it shall deem advisable, including its directors,
officers, members, and its Affiliates and entities with which the Manager, any
Member or their respective Affiliates may be associated, Ashford Inc.’s
directors, officers and stockholders, and may pay them reasonable compensation
from Company funds for services performed, which compensation shall be
reasonably believed by the Manager to be comparable to and competitive with fees
charged by unrelated Persons who

 

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render comparable services which could reasonably be made available to the
Company. The Manager shall not be liable for the neglect, omission or wrongdoing
of any such Person so long as it appointed such Person in good faith.

 

(b)                              The Company may lend or contribute to its
Subsidiaries or other Persons in which it has an equity investment Company funds
on terms and conditions established in the sole and absolute discretion of the
Manager. The foregoing authority shall not create any right or benefit in favor
of any Subsidiary or any other Person.

 

(c)                               The Company may transfer assets to joint
ventures, other partnerships, corporations or other business entities in which
it is or becomes a participant upon such terms and subject to such conditions as
are consistent with this Agreement and applicable law.

 

(d)                             Except as expressly permitted by this Agreement,
no Member nor any of its Affiliates shall sell, transfer or convey any property
to, or purchase any property from, the Company, directly or indirectly, except
pursuant to transactions that are on terms that are fair and reasonable to the
Company.

 

(e)                               Subject to the Certificate of Incorporation
and any agreements entered into by Ashford Inc. or its Affiliates with the
Company or a Subsidiary, any officer, director, employee, agent, trustee, or
Affiliate of Ashford Inc. shall be entitled to and may have business interests
and engage in business activities in addition to those relating to the Company,
including business interests and activities substantially similar or identical
to those of the Company. Neither the Company nor any of the Members shall have
any rights by virtue of this Agreement in any business ventures of such person.

 

(f)                                If Ashford Inc. repurchases any shares of
Ashford Inc. Common Stock, then the Manager shall cause the Company to purchase
from Ashford Inc. a number of Common Units determined based on the application
of the Conversion Factor on the same terms as those on which Ashford Inc.
repurchased such shares of Ashford Inc. Common Stock.

 

Section 6.8                        ADDITIONAL LOANS TO THE COMPANY.  If
additional funds are required by the Company for any purpose relating to the
business of the Company or for any of its obligations, expenses, costs, or
expenditures, including operating deficits, the Company may borrow such funds as
are needed from time to time from any Person (including, without limitation, the
Manager or any Affiliate of the Manager; provided, however, that the terms of
any loan from the Manager or any Affiliate of the Manager shall be substantially
equivalent to the terms that could be obtained from a third party on an
arm’s-length basis) on such terms as the Manager and such other Person may
agree.

 

Section 6.9                        CONTRIBUTION OF ASSETS. Ashford Inc.,
directly or through one or more of its Affiliates, shall contribute to the
capital of the Company from time to

 

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time each asset it owns from time to time during the existence of the Company,
but it is not required to so contribute:

 

(a)                               its direct or indirect interest in any entity
in a chain of entities of which Ashford Inc. is the sole beneficial owner, so
long as all of the assets or other ownership interests in the entity in that
chain furthest removed from Ashford Inc. are contributed directly or indirectly
to the Company; or

 

(b)                              any equity interest in any entity of which
Ashford Inc. is the sole beneficial owner that is created or used solely by
Ashford Inc. in connection with any borrowing transaction in whole or in part
for the benefit of the Company.

 

Section 6.10                RESIGNATION OR TERMINATION OF MANAGER.  Ashford Inc.
shall not, by any means, resign as, cease to be or be replaced as Manager except
in compliance with this Section 6.10.  No termination or replacement of Ashford
Inc. as Manager shall be effective unless proper provision is made, in
compliance with this Agreement, so that the obligations of Ashford Inc., its
successor (if applicable) and any new Manager and the rights of all Members
under this Agreement and applicable law remain in full force and effect.  No
appointment of a Person other than Ashford Inc. (or its successor, as
applicable) as Manager shall be effective unless Ashford Inc. (or its successor,
as applicable) and the new Manager (as applicable) provide all other Members
with contractual rights, directly enforceable by such other Members against
Ashford Inc. (or its successor, as applicable) and the new Manager (as
applicable), to cause (a) Ashford Inc. to comply with all Ashford Inc.’s
obligations under this Agreement other than those that must necessarily be taken
in its capacity as Manager and (b) the new Manager to comply with all the
Manager’s obligations under this Agreement.  Ashford Inc. may appoint a new
Person as Manager, subject to the provisions of this Section 6.10.  If Ashford
Inc. ceases to be the Manager and fails to appoint a new manager, then
notwithstanding Section 7.1(a) nor Section 7.2(a), Members holding more than
fifty percent (50%) of the Common Percentage Interests of all Members shall
promptly appoint a new Person as Manager.

 

ARTICLE VII
RIGHTS, PROHIBITIONS AND REPRESENTATIONS
WITH RESPECT TO MEMBERS

 

Section 7.1                        RIGHTS OF MEMBERS.

 

(a)                               The Company may engage the Members or persons
or firms associated with them for specific purposes and may otherwise deal with
such Members on terms and for compensation to be agreed upon by any such Member
and the Company; provided, however, that no Member shall be entitled to
participate in the management or control of the business of the Company, in its
capacity as a Member, except as provided with respect to the Tax Matters Member
or Company Representative in Section 5.2(d).

 

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(b)                              Each Member shall be entitled to have the
Company books kept at the principal place of business of the Company and at all
times, during reasonable business hours and at such Member’s sole expense, upon
written demand shall be entitled to inspect and copy any of them for any purpose
reasonably related to the Member’s interest as a Member and demand in writing
true and full information of all things affecting the Company and a formal
accounting of Company affairs whenever circumstances render it just and
reasonable and reasonably related to the Member’s interest as a Member;
provided, however, that any such demand shall state the purpose of such demand;
and provided, further, for such period of time as the Manager determines in its
sole and absolute discretion to be reasonable, the Manager may keep confidential
from the Members any information that (i) the Manager believes to be in the
nature of trade secrets or other information the disclosure of which the Manager
in good faith believes is not in the best interest of the Company or could
damage the Company or its business or (ii) the Company or the Manager is
required by law or by agreements with unaffiliated third parties to keep
confidential; provided, further, that as long as Ashford Inc. or its Affiliate
is a Member in the Company, the Company and the Manager shall timely provide
such information as Ashford Inc. reasonably requests such that Ashford Inc.,
Ashford Hospitality Trust, Inc., Ashford Hospitality Prime, Inc. and any other
entity to which Ashford Inc. provides management services, may prepare all of
its tax returns and prepare its financial statements and filings with the
applicable government authorities and laws.

 

(c)                               No Member shall be liable for any debts,
liabilities, contracts or obligations of the Company solely as a result of being
a member of the Company.  A Member shall be liable to the Company only to make
payments of its Capital Contribution, if any, and any other payments provided
for in this Agreement, as and when due under this Agreement or pursuant to any
separate deficit restoration agreement executed by the Member for benefit of the
Company. After its Capital Contribution is fully paid, no Member shall, except
as otherwise required by the Act or pursuant to any separate deficit restoration
agreement executed by the Member for the benefit of the Company, be required to
make any further Capital Contributions or other payments or lend any funds to
the Company.

 

Section 7.2                        PROHIBITIONS WITH RESPECT TO THE MEMBERS. No
Member shall have the right:

 

(a)                               To take part in the control or management of
the Company business, to transact business for or on behalf of the Company or to
sign for or to bind the Company, such powers being vested solely in the Manager
as set forth in this Agreement except as provided with respect to the Tax
Matters Member in Section 5.2(d);

 

(b)                              To have such Member’s Capital Contributions
repaid except to the extent provided in this Agreement;

 

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(c)                               To require partition of Company property or to
compel any sale or appraisement of Company assets or sale of a deceased Member’s
interests in any Company property or Company assets, notwithstanding any
provisions of law to the contrary; or

 

(d)                             To sell or assign all or any portion of such
Member’s Membership Interest in the Company or to constitute the vendee or
assignee thereunder a Substitute Member, except as provided in Article IX.

 

Section 7.3                        REDEMPTION RIGHT.

 

(a)                               Subject to Section 7.3(b) and Section 7.3(c),
and the provisions of any agreements between the Company and one or more
Members, each Member other than Ashford Inc., shall have the right (the
“Redemption Right”) to require the Company to redeem on a Specified Redemption
Date all or a portion of the Common Units held by such Member (the “Redeeming
Member”) at a redemption price per Common Unit equal to and in the form of the
Cash Amount to be paid by the Company on the Specified Redemption Date. The
Redemption Right shall be exercised pursuant to a Notice of Redemption delivered
to the Company (with a copy to the Manager) by the Redeeming Member. A Member
may not exercise the Redemption Right for less than one thousand (1,000) Common
Units or, if such Member holds less than one thousand (1,000) Common Units, all
of the Common Units held by such Member.  Neither the Redeeming Member nor any
permitted or purported assignee of any Member shall have any right, with respect
to any Common Units so redeemed, to receive any distributions paid after the
Specified Redemption Date except as provided in Section 7.3(b). Each Redeeming
Member agrees to provide such representations and related indemnities regarding
good and unencumbered title, and to execute such documents, as the Manager may
reasonably require in connection with any redemption.

 

(b)                              The provisions of Section 7.3(b) may be applied
by the Manager, if the Manager is Ashford Inc. or Ashford Inc. otherwise
agrees.  Notwithstanding the provisions of Section 7.3(a), if a Member elects to
exercise the Redemption Right, the Manager at the direction of Ashford Inc.,
directly or indirectly through one or more Affiliates, may, in its sole and
absolute discretion, elect to assume directly and satisfy a Redemption Right by
paying to the Redeeming Member either (i) the Cash Amount, as provided for in
Section 7.3(a), or (ii) the Ashford Inc. Common Stock Amount, as elected by the
Manager, as directed by Ashford Inc. (in its sole and absolute discretion) on
the Specified Redemption Date, provided that if the Manager has not
affirmatively notified the Redeeming Member on or before one Business Day before
the Specified Redemption Date that either the Company, the Manager or its
Affiliates will pay the Cash Amount then the Manager shall be deemed to have
elected, directly or through one or more Affiliates, to pay the Ashford Inc.
Common Stock Amount to the Redeeming Member on the Specified Redemption Date,
and Ashford Inc. agrees that it will provide such Ashford Inc. Common Stock on
the Specified

 

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Redemption Date, subject to the other provisions of this Section 7.3.  On any
such election of the Manager to assume and satisfy a Redemption Right, Ashford
Inc., directly or indirectly through one or more of its Affiliates, shall
acquire the Common Units offered for redemption by the Redeeming Member and
shall be treated for all purposes of this Agreement as the owner of such Common
Units. Unless the Manager, as directed by Ashford Inc. (in its sole and absolute
discretion) shall exercise its right to assume and satisfy the Redemption Right,
or unless the Manager has been deemed to assume the Redemption Right as provided
in this Section 7.3(b), neither the Manager nor Ashford Inc. itself shall have
any obligation to the Redeeming Member or to the Company with respect to the
Redeeming Member’s exercise of the Redemption Right. If the Manager shall
exercise its right, or shall be deemed to have elected, to satisfy the
Redemption Right in the manner described in this Section 7.3(b), except as
provided in the following paragraph, the Company shall have no obligation to pay
any amount to the Redeeming Member with respect to such Redeeming Member’s
exercise of the Redemption Right, and each of the Redeeming Member, the Company,
and Ashford Inc. shall treat the transaction between Ashford Inc. and the
Redeeming Member for federal income tax purposes as a sale of the Redeeming
Member’s Common Units to Ashford Inc. or its Affiliates; provided that if the
Redeeming Member is redeeming all of its Common Units, the Company shall redeem
any fractional Common Unit (constituting less than one Common Unit) owned by the
Redeeming Member by paying the Cash Amount with respect to such fractional
Common Unit to such Redeeming Member.  Each Redeeming Member agrees to provide
such representations and related indemnities regarding good title, and to
execute such documents, as Ashford Inc. may reasonably require in connection
with the issuance of Ashford Inc. Common Stock upon exercise of the Redemption
Right. If the Redemption Right is satisfied by the delivery of Ashford Inc.
Common Stock, the Redeeming Member shall be deemed to become a holder of Ashford
Inc. Common Stock as of the close of business on the Specified Redemption Date
or on such later date permitted by this Section 7.3(b) that Ashford Inc.
delivers Ashford Inc. Common Stock, as the case may be.

 

Notwithstanding anything to the contrary in Section 7.3(a) or this
Section 7.3(b), and in addition to the right of Ashford Inc. to deliver Ashford
Inc. Common Stock in satisfaction of the Redemption Right, as provided above,
should the Manager, elect, or be deemed to elect, to satisfy a Redemption Right
by paying the Redeeming Member the Ashford Inc. Common Stock Amount, and it is
necessary to obtain Ashford Inc. stockholder approval in order for it to issue
sufficient Ashford Inc. Common Stock to satisfy such Redemption Right in full,
then Ashford Inc. shall have one hundred twenty (120) days beyond the Specified
Redemption Date in which to obtain such stockholder approval and to pay the
Ashford Inc. Common Stock Amount, and the redemption date shall be required to
occur by ten (10) days after stockholder approval of the issuance of the Ashford
Inc. Common Stock has been obtained, if it is obtained.  If such stockholder
approval is not obtained within one hundred and thirty (130) days after such
Common Units are presented for redemption or the stockholders have voted against
the issuance of the Ashford Inc. Common Stock and payment of the

 

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Ashford Inc. Common Stock, the Company will distribute to the Redeeming Member
any distributions pursuant to Section 8.1 that were not made after the Specified
Redemption Date with respect to the Common Units redeemed because of the
provisions of Section 7.3(a), the Company shall pay to the Redeeming Member the
Cash Amount no later than the earlier of (i) ten (10) days after stockholders
have voted against the issuance of the Ashford Inc. Common Stock, or (ii) one
hundred and thirty (130) days after such Common Units are presented for
redemption, together with interest on such Cash Amount from the Specified
Redemption Date to the date of payment at the rate equal to the lesser of
(i) Ashford Inc.’s annual dividend rate on Ashford Inc. Common Stock for the
twelve (12) month period prior to the Valuation Date and based upon the Cash
Amount for Common Units redeemed, or (ii) eight percent (8%).

 

(c)                               Notwithstanding the provisions of
Section 7.3(a) and Section 7.3(b), a Member shall not be entitled to receive
Ashford Inc. Common Stock if the delivery of Ashford Inc. Common Stock to such
Member on the Specified Redemption Date (or such later date permitted by
Section 7.3(b), as applicable) by Ashford Inc. pursuant to Section 7.3(b) would
be prohibited under the Articles of Incorporation of Ashford Inc., as amended or
restated from time to time.  Without limiting the effect of the preceding
sentence, no Person shall be permitted to receive Ashford Inc. Common Stock if
as a result of, and after giving effect to, such exercise any Person would
Beneficially Own (as defined in the Articles of Incorporation of Ashford Inc.,
as amended or restated from time to time) more than 9.8% of the total number of
issued of shares of outstanding Ashford Inc. Common Stock, unless waived by the
board of directors of Ashford Inc. in its sole discretion.  To the extent any
attempted redemption for Ashford Inc. Common Stock would be a violation of this
Section 7.3(c), it shall, to the fullest extent permitted by law, be null and
void ab initio. The Cash Amount shall be paid in such instances, in accordance
with the terms set forth in Section 7.3(a) or Section 7.3(b).

 

(d)                             Each Member covenants and agrees with the
Manager and the Company that all Common Units delivered for redemption shall be
delivered to the Company, Ashford Inc. or its Affiliates, as the case may be,
free and clear of all liens and, notwithstanding anything contained in this
Agreement to the contrary, neither the Manager, Ashford Inc. (nor any of its
Affiliates) nor the Company shall be under any obligation to acquire Common
Units which are or may be subject to any liens. Each Member further agrees that,
if any state or local property transfer tax is payable as a result of the
transfer of its Common Units to the Company or Ashford Inc., such Member shall
assume and pay such transfer tax.

 

(e)                               Ashford Inc. Common Stock issued pursuant to
Section 7.3(b) may contain such legends regarding restrictions on transfer as
Ashford Inc. in good faith determines to be necessary or advisable in order to
comply with restrictions on transfer under the Securities Act and applicable
state securities laws.

 

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Section 7.4                        BASIS ANALYSIS. Upon the request of any
Member but subject to the Manager’s agreement, which may be withheld in the
Manager’s sole discretion, the Manager may, prior to the end of each calendar
year, beginning in 2017, cause accountants to prepare and provide to the Members
a study analyzing each refinancing, reduction (other than scheduled periodic
amortization of principal) of debt or other event that occurred during that year
that reduced the amount of any nonrecourse liabilities of the Company that a
Member may include in the tax basis of its Membership Interests.

 

Section 7.5                        MEMBER GUARANTEES.  Upon the request of the
Manager, or upon a Member’s own election but subject to the Manager’s agreement,
which may be withheld in the Manager’s sole discretion, a Member (the
“Initiating Member”) from time to time, may, but shall not be required to,
guarantee or otherwise provide credit support for Company indebtedness or a
deficit restoration obligation as such Member may elect. All Members are
entitled to notice of any such guarantee or credit support, and shall have the
right to provide guarantees or credit support on the same terms and conditions
as the Initiating Member does, and all Members interested in providing such
guarantee or credit support shall cooperate with the Manager and each other in
considering any guarantee or credit support proposal, and the Manager will
cooperate in permitting or obtaining any consents for such guarantees or credit
support.

 

Section 7.6                        CONVERSION OF LTIP UNITS.

 

(a)                               An LTIP Unitholder shall have the right (the
“Conversion Right”), at his or her option, at any time to convert all or a
portion of his or her Vested LTIP Units into Common Units; provided, however,
that a holder may not exercise the Conversion Right for less than one thousand
(1,000) Vested LTIP Units or, if such holder holds less than one thousand Vested
LTIP Units, all of the Vested LTIP Units held by such holder.  LTIP Unitholders
shall not have the right to convert Unvested Incentive Units into Common Units
until they become Vested LTIP Units; provided, however, that when a LTIP
Unitholder is notified of the expected occurrence of an event that will cause
his or her Unvested Incentive Units to become Vested LTIP Units, such LTIP
Unitholder may give the Company a Conversion Notice conditioned upon and
effective as of the time of vesting and such Conversion Notice, unless
subsequently revoked by the LTIP Unitholder, shall be accepted by the Company
subject to such condition.  The Manager shall have the right at any time to
cause a conversion of Vested LTIP Units into Common Units. In all cases, the
conversion of any LTIP Units into Common Units shall be subject to the
conditions and procedures set forth in this Section 7.6.

 

(b)                              A holder of Vested LTIP Units may convert such
LTIP Units into an equal number of fully paid and non-assessable Common Units,
giving effect to all adjustments (if any) made pursuant to Sections 4.3(d),
4.3(e) and 5.5.  Notwithstanding the foregoing, in no event may a holder of
Vested LTIP Units convert a number of Vested LTIP Units that exceeds (x) the
Economic Capital Account Balance of such LTIP Unitholder, to the extent
attributable to its ownership of LTIP Units, divided by (y) the Common Unit
Economic Balance, in

 

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each case as determined as of the effective date of conversion (the “Capital
Account Limitation”).

 

In order to exercise his or her Conversion Right, a LTIP Unitholder shall
deliver a notice (a “Conversion Notice”) in the form of Exhibit D (with a copy
to the Manager) not less than 3 Business Days nor more than 10 Business Days
prior to a date for conversion (the “Conversion Date”) specified in such
Conversion Notice; provided, however, that if the Manager has not given to the
LTIP Unitholders notice of a proposed or upcoming Unit Transaction (as defined
below) at least thirty (30) days prior to the effective date of such Unit
Transaction, then LTIP Unitholders shall have the right to deliver a Conversion
Notice until the earlier of (x) the tenth (10th) day after such notice from the
Manager of a Unit Transaction or (y) the third Business Day immediately
preceding the effective date of such Unit Transaction.  A Conversion Notice
shall be provided in the manner provided in Section 14.5.  Each LTIP Unitholder
covenants and agrees with the Company that all Vested LTIP Units to be converted
pursuant to this Section 7.6 shall be free and clear of all liens. 
Notwithstanding anything in this Agreement to the contrary, a holder of LTIP
Units may deliver a Redemption Notice pursuant to Section 7.3 relating to those
Common Units that will be issued to such holder upon conversion of such LTIP
Units into Common Units in advance of the Conversion Date; provided, however,
that the redemption of such Common Units by the Company shall in no event take
place until on or after the Conversion Date.  For clarity, it is noted that the
objective of this paragraph is to put a LTIP Unitholder in a position where, if
he or she so wishes, the Common Units into which his or her Vested LTIP Units
will be converted can be redeemed by the Company simultaneously with such
conversion, with the further consequence that, if the Manager elects to assume
the Company’s redemption obligation with respect to such Common Units under
Section 7.3(b) by delivering to such holder shares of Ashford Inc. Common Stock
rather than cash, then such holder can have such shares of Ashford Inc. Common
Stock issued to him or her simultaneously with the conversion of his or her
Vested LTIP Units into Common Units.  The Manager shall cooperate with a LTIP
Unitholder to coordinate the timing of the different events described in the
foregoing sentence.

 

(c)                               The Company, at any time at the election of
the Manager, may cause any number of Vested LTIP Units held by a LTIP Unitholder
to be converted (a “Forced Conversion”) into an equal number of Common Units,
giving effect to all adjustments (if any) made pursuant to Sections 4.3(d),
4.3(e) and 5.5; provided, however, that the Company may not cause a Forced
Conversion of any LTIP Units that would not at the time be eligible for
conversion at the option of such LTIP Unitholder pursuant to Section 7.6(b).  In
order to exercise its right of Forced Conversion, the Company shall deliver a
notice (a “Forced Conversion Notice”) in the form of Exhibit E to the applicable
LTIP Unitholder not less than 10 nor more than 60 days prior to the Conversion
Date specified in such Forced Conversion Notice.  A Forced Conversion Notice
shall be provided in the manner provided in Section 14.5.

 

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(d)                             A conversion of Vested LTIP Units for which the
holder thereof has given a Conversion Notice or the Company has given a Forced
Conversion Notice shall occur automatically after the close of business on the
applicable Conversion Date without any action on the part of such LTIP
Unitholder, as of which time such LTIP Unitholder shall be credited on the books
and records of the Company with the issuance as of the opening of business on
the next day of the number of Common Units issuable upon such conversion.  After
the conversion of LTIP Units as aforesaid, the Company shall deliver to such
LTIP Unitholder, upon his or her written request, a certificate of the Manager
certifying the number of Common Units and remaining LTIP Units, if any, held by
such person immediately after such conversion.  The assignee of any Member
pursuant to Article IX may exercise the rights of such Member pursuant to this
Section 7.6 and such Member shall be bound by the exercise of such rights by the
assignee.

 

(e)                               For purposes of making future allocations
under Section 5.5 and applying the Capital Account Limitation, the portion of
the Economic Capital Account Balance of the applicable LTIP Unitholder that is
treated as attributable to his or her LTIP Units shall be reduced, as of the
date of conversion, by the product of the number of LTIP Units converted and the
Common Unit Economic Balance.

 

(f)                                If the Company or Ashford Inc. shall be a
party to any transaction (including without limitation a merger, consolidation,
unit exchange, self tender offer for all or substantially all Common Units or
other business combination or reorganization, or sale of all or substantially
all of the Company’s assets, but excluding any transaction which constitutes an
Adjustment Event) in each case as a result of which Common Units shall be
exchanged for or converted into the right, or the holders of such Units shall
otherwise be entitled, to receive cash, securities or other property or any
combination thereof (each of the foregoing being referred to in this Agreement
as a “Unit Transaction”), then the Manager may, immediately prior to the Unit
Transaction, exercise its right to cause a Forced Conversion with respect to the
maximum number of LTIP Units then eligible for conversion, taking into account
any allocations that occur in connection with the Unit Transaction or that would
occur in connection with the Unit Transaction if the assets of the Company were
sold at the Unit Transaction price or, if applicable, at a value determined by
the Manager in good faith using the value attributed to the Units in the context
of the Unit Transaction (in which case the Conversion Date shall be the
effective date of the Unit Transaction).

 

In anticipation of such Forced Conversion and the consummation of the Unit
Transaction, the Company shall use commercially reasonable efforts to cause each
LTIP Unitholder to be afforded the right to receive in connection with such Unit
Transaction in consideration for the Common Units into which his or her LTIP
Units will be converted the same kind and amount of cash, securities and other
property (or any combination thereof) receivable upon the consummation of such
Unit Transaction by a holder of the same number of Common Units, assuming such
holder of Common Units is not a Person with which the Company

 

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consolidated or into which the Company merged or which merged into the Company
or to which such sale or transfer was made, as the case may be (a “Constituent
Person”), or an Affiliate of a Constituent Person.  If holders of Common Units
have the opportunity to elect the form or type of consideration to be received
upon consummation of the Unit Transaction, prior to such Unit Transaction the
Manager shall give written notice to each LTIP Unitholder of such election, and
shall use commercially reasonable efforts to afford the LTIP Unitholders the
right to elect, by written notice to the Manager, the form or type of
consideration to be received upon conversion of each LTIP Unit held by such
holder into Common Units in connection with such Unit Transaction.  If a LTIP
Unitholder fails to make such an election, such holder (and any of its
transferees) shall receive upon conversion of each LTIP Unit held him or her (or
by any of his or her transferees) the same kind and amount of consideration that
a holder of a Common Unit would receive if such Common Unit holder failed to
make such an election.

 

Subject to the rights of the Company, the Manager and Ashford Inc., under any
Vesting Agreement and the Plan, the Company shall use commercially reasonable
effort to cause the terms of any Unit Transaction to be consistent with the
provisions of this Section 7.6(f) and to enter into an agreement with the
successor or purchasing entity, as the case may be, for the benefit of any LTIP
Unitholders whose LTIP Units will not be converted into Common Units in
connection with the Unit Transaction that will (i) contain provisions enabling
the holders of LTIP Units that remain outstanding after such Unit Transaction to
convert their LTIP Units into securities as comparable as reasonably possible
under the circumstances to the Common Units and (ii) preserve as far as
reasonably possible under the circumstances the distribution, special
allocation, conversion, and other rights set forth in this Agreement for the
benefit of the LTIP Unitholders.

 

Section 7.7                        VOTING RIGHTS OF LTIP UNITS.  LTIP
Unitholders shall (a) have those voting rights required from time to time by
applicable law, if any, (b) have the same voting rights as a holder of Common
Units, with the LTIP Units voting as a single class with the Common Units and
having one vote per LTIP Unit; and (c) have the additional voting rights that
are expressly set forth below.  So long as any LTIP Units remain outstanding,
the Company shall not, without the affirmative vote of the holders of at least a
majority of the LTIP Units outstanding at the time, given in person or by proxy,
either in writing or at a meeting (voting separately as a class), amend, alter
or repeal, whether by merger, consolidation or otherwise, the provisions of this
Agreement applicable to LTIP Units so as to materially and adversely affect any
right, privilege or voting power of the LTIP Units or the LTIP Unitholders as
such, unless such amendment, alteration, or repeal affects equally, ratably and
proportionately the rights, privileges and voting powers of the holders of
Common Units; but subject, in any event, to the following provisions:

 

(a)                               With respect to any Unit Transaction, so long
as the LTIP Units are treated in accordance with Section 7.6(f), the
consummation of such Unit

 

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Transaction shall not be deemed to materially and adversely affect such rights,
preferences, privileges or voting powers of the LTIP Units or the LTIP
Unitholders as such; and

 

(b)                              Any creation or issuance of any Units or of any
class or series of Membership Interest including without limitation additional
Common Units, LTIP Units or Preferred Units, whether ranking senior to, junior
to, or on a parity with the LTIP Units with respect to distributions and the
distribution of assets upon liquidation, dissolution or winding up, shall not be
deemed to materially and adversely affect such rights, preferences, privileges
or voting powers of the LTIP Units or the LTIP Unitholders as such.

 

The foregoing voting provisions will not apply if, at or prior to the time when
the act with respect to which such vote would otherwise be required will be
effected, all outstanding LTIP Units shall have been converted into Common
Units.

 

ARTICLE VIII
DISTRIBUTIONS AND PAYMENTS TO MEMBERS

 

Section 8.1                        DISTRIBUTIONS OF CASH FLOW.

 

(a)                               The Manager shall cause the Company to
distribute on a quarterly basis such portion of the Cash Flow of the Company as
the Manager shall determine in its sole discretion.  Except as provided in
Section 10.4, such distributions shall be made to the Members who are Members on
the applicable Record Date as follows:

 

first, to the holders of the Preferred Units, an amount equal to the unpaid
portion of the Preferred Return due to the holders of the Preferred Units on the
applicable Record Date, as determined pursuant to the applicable exhibit to this
Agreement setting forth the terms of such Preferred Units;

 

second, to all Members who are Members on the applicable Record Date and who
beneficially own Common Units, in accordance with their respective Common
Percentage Interests;

 

provided, however, if for any Common Unit Distribution Period, a Newly Issued
Common Unit is outstanding on the Record Date for such period, there shall not
be distributed in respect of such Newly Issued Common Unit the amount (the “Full
Distribution Amount”) that would otherwise be distributed in respect of such
Unit in accordance with its respective Common Percentage Interest, but rather,
the Manager shall cause to be distributed with respect to each such Newly Issued
Common Unit an amount equal to the Full Distribution Amount multiplied by a
fraction, the numerator of which equals the number of days such Newly Issued

 

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Common Unit has been outstanding during the Common Unit Distribution Period and
the denominator of which equals the total number of days in such Common Unit
Distribution Period.

 

Any Cash Flow not distributed to the holders of Units by operation of this
provision shall be retained by the Company and applied toward future
distributions or payment of Company expenses.

 

(b)                              In no event may a Member receive a distribution
of Cash Flow with respect to a Unit if such Member is entitled to receive a
dividend out of Ashford Inc.’s share of such Cash Flow with respect to an
Ashford Inc. Share for which all or part of such Unit has been exchanged.

 

(c)                               If the Company issues additional Units
pursuant to the provisions of this Agreement, the Manager is authorized to make
such revisions to this Article VIII as it determines are necessary or desirable
to reflect the issuance of such additional Units, including without limitation,
making preferential distributions to certain classes of Units.

 

Section 8.2                        NO RIGHT TO DISTRIBUTIONS IN KIND. No Member
shall be entitled to demand property other than cash in connection with any
distribution by the Company.  A Member may be compelled to accept a distribution
in kind of any asset from the Company, whether or not pro rata as to each asset
so distributed.

 

Section 8.3                        WITHDRAWALS. No Member shall be entitled to
make withdrawals from its Capital Account, or withdraw as a Member, except as
expressly provided in this Agreement.

 

Section 8.4                        AMOUNTS WITHHELD.

 

(a)                               Notwithstanding any other provision of this
Agreement, the Manager is authorized to take any action that it determines to be
necessary or appropriate to cause the Company to comply with any withholding
requirements established under the Code or any other federal, state or local law
including, without limitation, pursuant to Sections 1441, 1442, 1445 and 1446 of
the Code.  To the extent that the Company is required to withhold and pay over
to any taxing authority any amount resulting from the allocation or distribution
of income to any Member or assignee (including by reason of Section 1446 of the
Code), either (i) if the actual amount to be distributed to the Member equals or
exceeds the amount required to be withheld by the Company, the amount withheld
shall be treated as a distribution of cash in the amount of such withholding to
such Member, or (ii) if the actual amount to be distributed to the Member is
less than the amount required to be withheld by the Company, the actual amount
shall be treated as a distribution of cash in the amount of such withholding and
the additional amount required to be withheld shall be treated as a loan (a
“Company Loan”) from the Company to the Member on the day the Company pays over
such amount to a taxing authority.  A Company Loan shall be repaid through

 

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withholding by the Company with respect to subsequent distributions to the
applicable Member or assignee.  If a Member (a “Defaulting Member”) fails to pay
any amount owed to the Company with respect to the Company Loan within fifteen
(15) days after demand for payment thereof is made by the Company on the Member,
the Manager, in its sole and absolute discretion, may elect to make the payment
to the Company on behalf of such Defaulting Member.  In such event, on the date
of payment, the Manager shall be deemed to have extended a loan (a “Manager
Loan”) to the Defaulting Member in the amount of the payment made by the Manager
and shall succeed to all rights and remedies of the Company against the
Defaulting Member as to that amount.  Without limitation, the Manager shall have
the right to receive any distributions that otherwise would be made by the
Company to the Defaulting Member until such time as the Manager Loan has been
paid in full, and any such distributions so received by the Manager shall be
treated as having been received by the Defaulting Member and immediately paid to
the Manager.

 

Any amounts treated as a Company Loan or a Manager Loan pursuant to this
Section 8.4(a) shall bear interest at the lesser of (i) the base rate on
corporate loans at large United States money center commercial banks, as
published from time to time in The Wall Street Journal, or (ii) the maximum
lawful rate of interest on such obligation, such interest to accrue from the
date the Company or the Manager, as applicable, is deemed to extend the loan
until such loan is repaid in full.

 

(b)                              All amounts withheld pursuant to the Code or
any provisions of any state or local tax law and Section 8.4(a) with respect to
any allocation, payment or distribution to any Member shall be treated as
amounts paid or distributed to such Member pursuant to Section 8.1 for all
purposes under this Agreement.

 

(c)                               Notwithstanding any other provision of this
Agreement, the Company, and the Manager on behalf of the Company, shall not make
any distribution or other payment to a Member in respect of its Membership
Interest to the extent that such distribution would violate the Act or other
applicable law.

 

ARTICLE IX
TRANSFERS OF INTERESTS

 

Section 9.1                        ASHFORD INC.

 

(a)                               Other than to an Affiliate of Ashford Inc.,
Ashford Inc. may not transfer any of its Membership Interest or withdraw as a
Member except (i) Ashford Inc. may grant a security interest in or pledge its
Membership Interest in the Company to secure debt for borrowed money, or any
guaranty thereof, now existing or subsequently incurred, (ii) as provided in
Section 9.1(b) or (iii) in connection with a transaction described in
Section 9.1(c).

 

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(b)                              Except as otherwise provided in Section 6.7 or
Section 9.1(c), Ashford Inc. or its Subsidiaries shall not engage in any merger,
consolidation or other combination with or into another Person or in any sale of
all or substantially all of its assets, or any reclassification, or
recapitalization or change of outstanding Ashford Inc. Common Stock (other than
a change in par value, or from par value to no par value, or as a result of a
subdivision or combination as described in the definition of “Conversion
Factor”) (each of the foregoing being referred to as a “Transaction”), unless
the Transaction also includes a merger of the Company or sale of substantially
all of the assets of the Company or other transaction as a result of which all
Members will receive for each Common Unit an amount of cash, securities or other
property equal to the product of the Conversion Factor and the greatest amount
of cash, securities or other property paid to a holder of one share of Ashford
Inc. Common Stock in consideration of one share of Ashford Inc. Common Stock as
a result of the Transaction; provided, however, that if, in connection with the
Transaction, a purchase, tender or exchange offer shall have been made to and
accepted by the holders of more than fifty percent (50%) of the outstanding
shares of Ashford Inc. Common Stock, the holders of Common Units shall receive
the greatest amount of cash, securities or other property which a Member would
have received had it exercised the Redemption Right and Ashford Inc. had
exercised its election to satisfy the Redemption Right by the issuance of
Ashford Inc. Common Stock immediately prior to the expiration of such purchase,
tender or exchange offer.

 

(c)                               Notwithstanding Section 9.1(b), Ashford Inc.
or its Subsidiaries may merge into or consolidate with another entity if
immediately after such merger or consolidation (i) substantially all of the
assets of the successor or surviving entity (the “Surviving Entity”), other than
Units held by Ashford Inc. or its Subsidiaries, are contributed to the Company
as a Capital Contribution in exchange for Units with a fair market value equal
to the value of the assets so contributed as determined by the Surviving Entity
in good faith and (ii) the Surviving Entity or one of its Subsidiaries expressly
agrees to assume all obligations of Ashford Inc. under this Agreement. Upon such
contribution and assumption, the Surviving Entity shall have the right and duty
to amend this Agreement as set forth in this Section 9.1(c). The Surviving
Entity shall in good faith arrive at a new method for the calculation of the
Cash Amount and Conversion Factor for a Common Unit after any such merger or
consolidation so as to approximate the existing method for such calculation as
closely as reasonably possible. Such calculation shall take into account, among
other things, the kind and amount of securities, cash and other property that
was receivable upon such merger or consolidation by a holder of Ashford Inc.
Shares or options, warrants or other rights relating thereto, and which a holder
of Common Units could have acquired had such Common Units been redeemed
immediately prior to such merger or consolidation. Such amendment to this
Agreement shall provide for adjustment to such method of calculation, which
shall be as nearly equivalent as may be practicable to the adjustments provided
for with respect to the Conversion Factor. The above provisions of this
Section 9.1(c) shall similarly apply to successive mergers or consolidations
permitted under this Agreement.

 

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Section 9.2                        RESTRICTIONS ON TRANSFER OF MEMBERSHIP
INTERESTS.

 

(a)                               Except as otherwise provided in this
Article IX, no Member may offer, sell, assign, hypothecate, pledge or otherwise
transfer its Membership Interest, in whole or in part, whether voluntarily or by
operation of law or at judicial sale or otherwise (collectively, a “Transfer”)
or withdraw or retire from the Company, without the written consent of the
Manager, which consent may be withheld in the sole and absolute discretion of
the Manager. The Manager may require, as a condition of any Transfer, that the
transferor assume all costs incurred by the Company in connection therewith.  In
no event may a Member have any rights to distributions pursuant to Act §18-604
without Manager’s approval.

 

(b)                              No Member may effect a Transfer of its
Membership Interest if, (i) in the opinion of legal counsel for the Company,
such proposed Transfer would require the registration of the Membership Interest
under the Securities Act of 1933, as amended, or would otherwise violate any
applicable federal or state securities or “Blue Sky” law (including investment
suitability standards) or (ii) the assignee is not an Accredited Investor within
the meaning of Rule 501 of the Securities Act of 1933, as amended.

 

(c)                               No Transfer by a Member of its Units may be
made to any Person if (i) the Manager determines that the Transfer would create
a risk that the Company would be treated as an association taxable as a
corporation or (ii) such transfer is effectuated through an “established
securities market” or a “secondary market” (or the substantial equivalent
thereof) within the meaning of Section 7704 of the Code.

 

(d)                             Subject to the other provisions of this
Section 9.2, Section 9.2(a) shall not prevent any donative Transfer by an
individual Member to his immediate family members or any trust in which the
individual or his immediate family members own, collectively, one hundred
percent (100%) of the beneficial interests, provided that the transferor assumes
all costs of the Company in connection therewith and any such transferee shall
not have the rights of a Substitute Member (unless and until admitted as a
Substitute Member pursuant to this Section 9.2 and Section 9.3 of this
Agreement).

 

(e)                               Any Transfer in contravention of any of the
provisions of this Article IX shall be void and ineffectual and shall not be
binding upon, or recognized by, the Company.  Except as required by operation of
law Transfers of Membership Interests and Units shall be made on the books of
the Company only upon receipt of proper transfer instructions from the
registered holder of the Membership Interests and Units and upon compliance with
the other provisions of this Article IX.

 

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Section 9.3                        ADMISSION OF SUBSTITUTE MEMBER.

 

(a)                               Subject to the other provisions of this
Article IX (including, without limitation, the provisions of
Section 9.2(a) regarding consent of the Manager), an assignee of the Membership
Interest of a Member (including, without limitation, any purchaser, transferee,
donee, or other recipient of any disposition of such Membership Interest) shall
be deemed admitted as a Member of the Company only upon the satisfactory
completion of the following:

 

(i)                                  the assignee has obtained the prior written
consent of the Manager as to its admission as a Substitute Member, which consent
may be given or denied in the exercise of the Manager’s sole and absolute
discretion;

 

(ii)                              the assignee shall have accepted and agreed to
be bound by the terms and provisions of this Agreement by executing a
counterpart or an amendment thereof and such other documents or instruments as
the Manager may require in order to effect the admission of such Person as a
Member;

 

(iii)                          the assignee shall have delivered a letter
containing the representation and warranty set forth in Section 9.9 and the
agreement set forth in Section 9.9;

 

(iv)                          if the assignee is a corporation, limited
liability company, partnership or trust, the assignee shall have provided the
Manager with evidence satisfactory to counsel for the Company of the assignee’s
authority to become a Member under the terms and provisions of this Agreement;

 

(v)                              the assignee shall have executed a power of
attorney containing the terms and provisions set forth in Article XII; and

 

(vi)                          the assignee shall have paid all reasonable legal
fees of the Company and the Manager and all filing and publication costs
incurred in connection with its substitution as a Member.

 

(b)                              For the purpose of allocating profits and
losses and distributing cash received by the Company, a Substitute Member shall
be treated as having become, and appearing in the records of the Company as of
the later of the date specified in the transfer documents, or the date on which
the Manager has received all necessary instruments of transfer and substitution.

 

(c)                               The Manager shall as promptly as practicable
take all action required to effectuate the admission of the Person seeking to
become a Substitute Member, including preparing the documentation required by
this Section 9.3 and making all official filings and publications.

 

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Section 9.4                        RIGHTS OF ASSIGNEES OF MEMBERSHIP INTERESTS.

 

(a)                               Subject to the provisions of Sections 9.2 and
9.3, except as required by operation of law, the Company shall not be obligated
for any purposes whatsoever to recognize the assignment by any Member of his
Membership Interest until the Company has received notice thereof. If the
Manager, in its sole and absolute discretion, does not consent (subject to
Section 9.2(a), Section 9.3(a)(i))to the admission of any transferee of any
Membership Interest as a Substitute Member in connection with a Transfer
permitted by Section 9.2, such transferee shall be considered an assignee for
the purposes of this Agreement.  An assignee shall be entitled to all the rights
of an assignee of a limited liability company interest under the Act, including
the right to receive distributions attributable to the Units assigned, but such
assignee shall not be entitled to effect a consent or vote on any matter
presented to the Members for approval or, except as waived by the Manager,
effect a Redemption Right with respect to such Units (such right to consent or
vote or effect a Redemption Right, to the extent provided in this Agreement or
under the Act, fully remaining with the transferor Member).

 

(b)                              Any Person who is the assignee of all or any
portion of a Member’s Membership Interest, but does not become a Substitute
Member and desires to make a further assignment of such Membership Interest,
shall be notified that such Membership Interest is subject to Article IX, and,
to the fullest extent permitted by applicable law, shall be subject to all of
the provisions of this Article IX to the same extent and in the same manner as
any Member desiring to make an assignment of its Membership Interest.

 

Section 9.5                        EFFECT OF BANKRUPTCY, DEATH, INCOMPETENCE OR
TERMINATION OF A MEMBER.  The occurrence of an Event of Bankruptcy as to a
Member, the death of a Member or a final adjudication that a Member is
incompetent (which term shall include, but not be limited to, insanity) shall
not, in and of itself, cause the dissolution of the Company, and the business of
the Company shall continue. If an order for relief in a bankruptcy proceeding is
entered against an individual Member, the trustee or receiver of his estate or,
if he dies, his executor, administrator or trustee, or, if he is finally
adjudicated incompetent, his committee, guardian or conservator, shall have the
rights of such Member for the purpose of settling or managing his estate
property and such power as the bankrupt, deceased or incompetent Member
possessed to assign all or any part of his Membership Interest and to join with
the assignee in satisfying conditions precedent to the admission of the assignee
as a Substitute Member.

 

Section 9.6                        JOINT OWNERSHIP OF INTERESTS. A Membership
Interest may be acquired by two (2) individuals as joint tenants with right of
survivorship (but not as tenants in common), provided that such individuals
either are married or are related and share the same home as tenants in common.
The written consent or vote of both owners of any such jointly held Membership
Interest shall be required to constitute the action of the owners of such
Membership Interest; provided, however, that the written consent of only one
(1) joint owner will be required if the Company has been provided with evidence
satisfactory to counsel for the Company that the actions of a single joint

 

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owner can bind both owners under the applicable laws of the state of residence
of such joint owners. Upon the death of one (1) owner of a Membership Interest
held in a joint tenancy with a right of survivorship, the Membership Interest
shall become owned solely by the survivor as a Member and not as an assignee.
The Company need not recognize the death of one (1) of the owners of a jointly
held Membership Interest until it shall have received notice of such death. Upon
notice to the Manager from either owner that the tenancy satisfying the first
sentence of this Section 9.6 has been destroyed, the Manager shall cause the
Membership Interest to be divided into two (2) equal Membership Interests, which
shall thereafter be owned separately by each of the former owners.

 

Section 9.7                        TRANSFEREES. Any Membership Interests owned
by the Members and transferred pursuant to this Article IX shall be and remain
subject to all of the provisions of this Agreement.

 

Section 9.8                        ABSOLUTE RESTRICTION. Notwithstanding any
provision of this Agreement to the contrary (except Section 9.2(a)), unless
waived in writing by the Manager, the sale or exchange of any interest in the
Company will not be permitted if the interest sought to be sold or exchanged,
when added to the total of all other interests sold or exchanged within the
period of twelve (12) consecutive months ending with the proposed date of the
sale or exchange, would result in the termination of the Company under
Section 708 of the Code, if such termination would materially and adversely
affect the Company or any Member.

 

Section 9.9                        INVESTMENT REPRESENTATION. Each Member
represents and warrants to the Manager and to the Company that the acquisition
of his Membership Interest is made as a principal for his account for investment
purposes only and not with a view to the resale or distribution of such
Membership Interest. Each Member agrees that he will not sell, assign or
otherwise transfer his Membership Interest or any fraction thereof, whether
voluntarily or by operation of law or at judicial sale or otherwise, to any
Person who does not similarly represent and warrant and similarly agree not to
sell, assign or transfer such Membership Interest or fraction thereof to any
Person who does not similarly represent, warrant and agree.

 

ARTICLE X
TERMINATION OF THE COMPANY

 

Section 10.1                TERMINATION. The Company shall dissolve and commence
winding up and liquidating upon the first to occur of the following
(“Liquidating Events”):

 

(a)                               The sale of all or substantially all of the
assets of the Company;

 

(b)                              The determination of the Manager to dissolve,
wind up, and liquidate the Company; and

 

(c)                               At any time there are no members of the
Company, unless the Company is continued pursuant to the Act.

 

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The Members agree that the Company shall not dissolve prior to the occurrence of
a Liquidating Event and that, to the fullest extent permitted by law, no Member
shall seek a dissolution of the Company, under Section §18-802 of the Act or
otherwise, other than based on the matters set forth in Section 10.1(a), (b) and
(c) above.  If it is determined by a court of competent jurisdiction that the
Company has dissolved prior to the occurrence of a Liquidating Event, the
Members agree, to the fullest extent permitted by law, to continue the business
of the Company without a winding up or liquidation.  In the event of a
dissolution pursuant to Section 10.1(b) or Section 10.1(c), the relative
economic rights of each class of Units immediately before such dissolution shall
be preserved to the greatest extent practicable with respect to distributions
made to Members pursuant to Section 10.4 following such dissolution, taking into
consideration tax and other legal constraints that may adversely affect one or
more Members and subject to compliance with applicable laws and regulations,
unless, with respect to any class of Units, holders of a majority of the Units
of such class consent in writing to a treatment other than as described above,
the Manager (or its trustee, receiver, successor or legal representative) shall
proceed with the winding up of the Company, and its assets shall be applied and
distributed as provided in the remainder of this Article X.

 

Section 10.2                PAYMENT OF DEBTS. Upon a winding up of the Company,
the assets shall first be applied to the satisfaction of the creditors of the
Company (other than Members who are creditors in light of any loans or advances
that may have been made by Members to the Company), including the expenses of
liquidation, whether by payment or the making of reasonable provision for
payment thereof. A reasonable time shall be allowed for the orderly liquidation
of the assets of the Company and the satisfaction of liabilities to creditors so
as to enable the Manager to minimize any losses resulting from liquidation.

 

Section 10.3                DEBTS TO MEMBERS. After the application of
Section 10.2, the remaining assets shall next be applied to the repayment of any
loans made by any Member to the Company.

 

Section 10.4                REMAINING DISTRIBUTION.

 

(a)                               After the application of Section 10.3, the
remaining assets shall then be distributed first, to the holders of the
Preferred Units, if any, as provided in the applicable exhibit, if any, to this
Agreement setting forth the terms of such Preferred Units, and second, to the
holders of the Common Units in accordance with their positive Capital Account
balances, determined after taking into account all Capital Account adjustments
for all prior periods and the Company taxable year during which the liquidation
occurs.

 

(b)                              If the Company is liquidated within the meaning
of Section 1.704-1(b)(2)(ii)(g), distributions shall be made pursuant to
Section 10.4(a) in compliance with Section 1.704-1(b)(2)(ii)(b)(2) of the
Treasury Regulations, except as provided in Section 10.4(c).  In the discretion
of the Manager, a pro rata portion of the distributions that would otherwise be
made to the Members pursuant to Section 10.4(a) may be:

 

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(i)                                  distributed to a trust established for the
benefit of the Members for the purposes of liquidating Company assets,
collecting amounts owed to the Company, and paying any contingent or unforeseen
liabilities or obligations of the Company or the Members arising out of or in
connection with the Company.  The assets of any such trust shall be distributed
to the Members from time to time, in the reasonable discretion of the Manager,
in the same proportions as the amount distributed to such trust by the Company
would otherwise have been distributed to the Members pursuant to
Section 10.4(a); or

 

(ii)                              in furtherance of satisfaction of the
Company’s creditors pursuant to Section 10.2, withheld to provide a reasonable
reserve for Company liabilities (contingent or otherwise) and to reflect the
unrealized portion of any installment obligations owed to the Company, provided
that such withheld amounts shall be distributed to the Members pursuant to this
Section 10.4 as soon as practicable.

 

(c)                               Notwithstanding any other provisions of this
Article X, if the Company is liquidated within the meaning of
Section 1.704-1(b)(2)(ii)(g) of the Treasury Regulations but no Liquidating
Event pursuant to Section 10.1 has occurred, the Property shall not be
liquidated, the Company’s liabilities shall not be paid or discharged, and the
Company’s affairs shall not be wound up.  Instead, solely for federal income tax
purposes, the Company shall be deemed to have contributed all its Property and
liabilities to a new partnership in exchange for an interest in such new
partnership and, immediately thereafter, the Company will be deemed to liquidate
by distributing interests in the new partnership to the Members.

 

Section 10.5                RESERVE. Notwithstanding the provisions of Sections
10.3 and 10.4, the Manager may retain such amount as it deems necessary as a
reserve for any contingent liabilities or obligations of the Company in
furtherance of satisfaction of the Company’s creditors pursuant to Section 10.2,
which reserve, after the passage of a reasonable period of time, shall be
distributed pursuant to the provisions of this Article X.

 

Section 10.6                FINAL ACCOUNTING. Each of the Members shall be
furnished with a statement examined by the Company’s independent accountants,
which shall set forth the assets and liabilities of the Company as of the date
of the complete liquidation. Upon the compliance by the Manager with the
foregoing distribution plan, the Members shall cease to be such, and the Manager
shall execute and cause to be filed a certificate of cancellation of the
Certificate of Formation of the Company and any and all other documents
necessary with respect to termination and cancellation of the Company.

 

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ARTICLE XI
AMENDMENTS

 

Section 11.1                AUTHORITY TO AMEND.

 

(a)                               This Agreement may be amended by Ashford Inc.
without the approval of any other Member if such amendment (i) is solely for the
purpose of clarification or is of an inconsequential nature and (ii) does not
change the substance of this Agreement and the Company has obtained an opinion
of counsel to that effect.

 

(b)                              This Agreement may be amended by Ashford Inc.
without the approval of any other Member if such amendment is to reflect the
admission, substitution or withdrawal of Members; to reflect the issuance of
additional Membership Interests or to amend the calculation of the Cash Amount
and the Conversion Factor pursuant to a transaction described in
Section 9.1(c).  For avoidance of doubt, Manager may amend Exhibit A without the
approval of any Member as provided by Section 6.1(v).

 

(c)                               This Agreement may be amended by Ashford Inc.
without the approval of any other Member if such amendment is, in the opinion of
counsel for the Company, necessary or appropriate to any federal or state
securities laws or regulations. Any amendment made pursuant to this
Section 11.1(c) may be made effective as of the date of this Agreement.

 

(d)                             Notwithstanding any contrary provision of this
Agreement, any amendment to this Agreement or other act which would (i) impose
on the Members any obligation to make additional Capital Contributions to the
Company, (ii) except as provided in Section 11.1(b), change the method of
allocation of profit and loss as provided in Article V or the distribution
provisions of Articles VIII and X, (iii) seek to impose personal liability on a
Member without that Member’s written consent, or (iv) affect the operation of
the Conversion Factor of the Redemption Right shall require the consent and
approval of Members holding more than sixty-six and two-thirds percent (66 2/3%)
of the Common Percentage Interests of the Members.

 

(e)                               Except as otherwise specifically provided in
this Section 11.1, amendments to this Agreement shall require the approval of
the Manager and Members holding more than fifty percent (50%) of the Common
Percentage Interests of the Members.

 

Section 11.2                NOTICE OF AMENDMENTS. A copy of any amendment to be
approved by the Members pursuant to Sections 11.1(d) or 11.1(e) shall be mailed
in advance to such Members. Members shall be notified as to the substance of any
amendment pursuant to Sections 11.1(a), (b) or (c), and upon request shall be
furnished a copy thereof.

 

Section 11.3                IMPLEMENTATION OF AMENDMENT. Upon obtaining such
approvals required by this Agreement and without any further action or execution
by any other Person, including any Member, (i) any amendment, restatement,
modification or waiver of this Agreement may be implemented and reflected in a
writing executed solely by the Manager, and (ii) each of the Members and any
other party to or bound by this

 

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Agreement shall be deemed a party to and bound by such amendment, restatement,
modification or waiver of this Agreement.

 

ARTICLE XII
POWER OF ATTORNEY

 

Section 12.1                POWER. Each of the Members irrevocably constitutes
and appoints the Manager as such Member’s true and lawful attorney in such
Member’s name, place and stead to make, execute, swear to, acknowledge, deliver
and file:

 

(a)                               Any certificates or other instruments which
may be required to be filed by the Company under the laws of the State of
Delaware or of any other state or jurisdiction in which the Manager shall deem
it advisable to file;

 

(b)                              Any documents, certificates or other
instruments, including, but not limited to, (i) any and all amendments and
modifications of this Agreement or of the instruments described in
Section 12.1(a) which may be required or deemed desirable by the Manager to
effectuate the provisions of any part of this Agreement, (ii) all instruments
relating to the admission, withdrawal, removal or substitution of any Member,
and (iii) by way of extension and not limitation, to do all such other things as
shall be necessary to continue and to carry on the business of the Company; and

 

(c)                               All documents, certificates or other
instruments that may be required to effectuate the dissolution and termination
of the Company, to the extent such dissolution and termination is authorized by
this Agreement. The power of attorney granted by this Agreement shall not
constitute a waiver of, or be used to avoid, the rights of the Members to
approve certain amendments to this Agreement pursuant to Sections 11.1(d) and
11.1(e) or be used in any other manner inconsistent with the status of the
Company as a limited liability company or inconsistent with the provisions of
this Agreement. Each such Member agrees to be bound by any representation made
by the Manager, acting in good faith pursuant to such power of attorney; and
each such Member waives any and all defenses which may be available to contest,
negate or disaffirm the action of the Manager taken in good faith under such
power of attorney.

 

Section 12.2                SURVIVAL OF POWER. It is expressly intended by each
of the Members that the foregoing power of attorney is coupled with an interest,
is irrevocable and shall survive the death, incompetence, dissolution,
liquidation or adjudication of insanity or bankruptcy or insolvency of each such
Member. The foregoing power of attorney shall survive the delivery of an
assignment by any of the Members of such Member’s entire interest in the
Company, except that where an assignee of such entire interest has become a
Substitute Member, then the foregoing power of attorney of the assignor Member
shall survive the delivery of such assignment for the sole purpose of enabling
the Manager to execute, acknowledge and file any and all instruments necessary
to effectuate such substitution.

 

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ARTICLE XIII
CONSENTS, APPROVALS, VOTING AND MEETINGS

 

Section 13.1                METHOD OF GIVING CONSENT OR APPROVAL. Any consent or
approval required by this Agreement may be given as follows:

 

(a)                               by a written consent given by the consenting
Member and received by the Manager at or prior to the doing of the act or thing
for which the consent is solicited, provided that such consent shall not have
been nullified by:

 

(i)                                  Notice to the Manager of such nullification
by the consenting Member prior to the doing of any act or thing, the doing of
which is not subject to approval at a meeting called pursuant to Section 13.2,
or

 

(ii)                              Notice to the Manager of such nullification by
the consenting Member prior to the time of any meeting called pursuant to
Section 13.2 to consider the doing of such act or thing, or

 

(iii)                          The negative vote by such consenting Member at
any meeting called pursuant to Section 13.2 to consider the doing of such act or
thing;

 

(b)                              by the affirmative vote by the consenting
Member for the doing of the act or thing for which the consent is solicited at
any meeting called pursuant to Section 13.2 to consider the doing of such act or
thing; or

 

(c)                               by the failure of the Member to respond or
object to a request from the Manager for such Member’s consent within thirty
(30) days from its receipt of such request (or such shorter period of time as
the Manager may indicate in such request in order to ensure that the Manager has
sufficient time to respond, if required, to any third party with respect to the
subject matter of such request).

 

Section 13.2                MEETINGS OF MEMBERS. Any matter requiring the
consent or vote of all or any of the Members may be considered at a meeting of
the Members held not less than five (5) nor more than sixty (60) days after
notice thereof shall have been given by the Manager to all Members. Such notice
(i) may be given by the Manager, in its discretion, at any time, or (ii) shall
be given by the Manager within fifteen (15) days after receipt from Members
holding more than fifty percent (50%) of the Common Percentage Interests of the
Members of a request for such meeting.

 

Section 13.3                OPINION. Except for consents obtained pursuant to
Sections 13.1 or 13.2, no Member shall exercise any consent or voting rights
unless either (a) at the time of the giving of consent or casting of any vote by
the Members under this Agreement, counsel for the Company or counsel employed by
the Members shall have delivered to the Company an opinion satisfactory to the
Members to the effect that such conduct (i) is permitted by the Act, (ii) will
not impose personal liability on a Member without that Member’s consent, and
(iii) will not adversely affect the classification of the

 

52

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Company as a partnership for federal income tax purposes, or (b) irrespective of
the delivery or non-delivery of such opinion of counsel, Members holding more
than seventy-five percent (75%) of the Common Percentage Interests of the
Members determine to exercise their consent or voting rights.

 

Section 13.4                SUBMISSIONS TO MEMBERS. The Manager shall give the
Members notice of any proposal or other matter required by any provision of this
Agreement, or by law, to be submitted for consideration and approval of the
Members. Such notice shall include any information required by the relevant
provision or by law.

 

ARTICLE XIV
MISCELLANEOUS

 

Section 14.1                GOVERNING LAW. The Company and this Agreement shall
be governed by and construed in accordance with the laws of the State of
Delaware.

 

Section 14.2                AGREEMENT FOR FURTHER EXECUTION. At any time or
times upon the request of the Manager, the Members agree to sign, swear to,
acknowledge and deliver all further documents and certificates required by the
laws of Delaware, or any other jurisdiction in which the Company does, or
proposes to do, business, or which may be reasonable, necessary, appropriate or
desirable to carry out the provisions of this Agreement or the Act. This
Section 14.2 shall not prejudice or affect the rights of the Members to approve
certain amendments to this Agreement pursuant to Sections 11.1(d) and 11.1(e).

 

Section 14.3                ENTIRE AGREEMENT. This Agreement (including the
exhibits following the signature pages to this Agreement and which exhibits are
a part of this Agreement) contain the entire understanding among the parties to
this Agreement and supersede any prior understandings or agreements among them
respecting the within subject matter.  There are no representations, agreements,
arrangements or understandings, oral or written, between or among the parties to
this Agreement relating to the subject matter of this Agreement which are not
fully expressed in this Agreement; provided that an LTIP Unit may be subject to
a Vesting Agreement and a Member may enter into a deficit restoration obligation
agreement.

 

Section 14.4                SEVERABILITY. This Agreement is intended to be
performed in accordance with, and only to the extent permitted by, all
applicable laws, ordinances, rules and regulations of the jurisdictions in which
the Company does business. If any provision of this Agreement, or the
application thereof to any person or circumstance, shall, for any reason and to
any extent, be invalid or unenforceable, the remainder of this Agreement and the
application of such provision to other persons or circumstances shall not be
affected thereby, but rather shall be enforced to the greatest extent permitted
by law.

 

Section 14.5                NOTICES. Notices to Members or to the Company shall
be deemed to have been given when personally delivered or mailed, by prepaid
registered or certified mail, addressed as set forth in Exhibit A, unless a
notice of change of address

 

53

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has previously been given in writing by the addressee to the addressor, in which
case such notice shall be addressed to the address set forth in such notice of
change of address.

 

Section 14.6                TITLES AND CAPTIONS. All titles and captions are for
convenience only, do not form a substantive part of this Agreement, and shall
not restrict or enlarge any substantive provisions of this Agreement.

 

Section 14.7                COUNTERPARTS. This Agreement may be executed in
multiple counterparts, each one of which shall constitute an original executed
copy of this Agreement.

 

Section 14.8                TERMS. All pronouns and any variations thereof shall
be deemed to refer to the masculine, feminine, neuter, singular or plural, as
the identity of the person or persons may require.  Any reference to the Code or
other statutes or laws include all amendments, modifications or replacements of
the specific sections and provisions concerned.  Unless otherwise specified, all
references to “Section”, “Article” or “Exhibit” contained in this Agreement
refer to sections, articles or exhibits of this Agreement.  Unless the context
of this Agreement clearly requires otherwise, the use of the word “including” is
not limiting and the use of the word “or” has the inclusive meaning of both “or”
and “and.”

 

Section 14.9                SURVIVAL OF RIGHTS. Subject to the provisions of
this Agreement limiting transfers, this Agreement shall be binding upon and
inure to the benefit of the Members and the Company and their respective legal
representatives, successors, transferees and assigns.

 

54

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IN WITNESS WHEREOF, Ashford Inc. as owner of more than 80 percent of the Common
Percentage Interests and Ashford Inc., as Manager, have hereunto set their hands
as of the day and year first above written.

 

 

MEMBER:

 

 

 

 

 

ASHFORD INC.

 

a Maryland corporation

 

 

 

 

 

 

 

 

 

By:

/s/ David A. Brooks

 

 

 

David A. Brooks, Chief Operating Officer and

 

 

General Counsel

 

 

 

 

 

 

 

 

 

 

 

MANAGER:

 

 

 

 

 

ASHFORD INC.,

 

a Maryland corporation

 

 

 

 

 

 

 

By:

/s/ David A. Brooks

 

 

 

David A. Brooks, Chief Operating Officer and

 

 

General Counsel

 

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EXHIBIT A

 

[Begins on Next Page]

 

Exhibit A

 

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EXHIBIT B

 

FEDERAL INCOME TAX MATTERS

 

For purposes of interpreting and implementing Article V of the Agreement, the
following rules shall apply and shall be treated as part of the terms of the
Agreement:

 

A.        SPECIAL ALLOCATION PROVISIONS.

 

1.         To the extent an adjustment to the adjusted tax basis of any Company
asset pursuant to Code Section 734(b) or Section 743(b) is required pursuant to
Section 1.704-1(b)(2)(iv)(m)(2) or Section 1.704-1(b)(2)(iv)(m)(4) of the
Treasury Regulations to be taken into account in determining Capital Accounts as
the result of a distribution to a Member in complete liquidation of its
Membership Interest, the amount of such adjustment to the Capital Accounts shall
be treated as an item of gain (if the adjustment increases the basis of the
asset) or loss (if the adjustment decreases such basis) and such gain or loss
shall be specially allocated to the Members in accordance with their interests
in the Company if Section 1.704-1(b)(2)(iv)(m)(2) of the Treasury Regulations
applies, or to the Company to whom such distribution was made if
Section 1.704-1(b)(2)(iv)(m)(4) of the Treasury Regulations applies.

 

2.         If a Member transfers any part or all of its Membership Interest or
if Common Percentage Interests or Preferred Percentage Interests vary during a
taxable year of the Company, the Manager, in its sole and absolute discretion,
shall determine which method authorized under the Code (including Section 706 of
the Code) and the Treasury Regulations shall be used to allocate the
distributive shares.

 

3.         To the extent required by law, income, gain, loss and deduction
attributable to property contributed to the Company by a Member shall be shared
among the Members so as to take into account any variation between the basis of
the property and the fair market value of the property at the time of
contribution in accordance with the requirements of Section 704(c) of the Code
and the applicable Treasury Regulations thereunder as more fully described in
Part B. Treasury Regulations under Section 704(c) of the Code allow partnerships
to use any reasonable method for accounting for Book-Tax Differences for
contributions of property so that a contributing partner receives the tax
benefits and burdens of any built-in gain or loss associated with contributed
property.  The Company shall account for Book-Tax Differences using a method
specifically approved in the Treasury Regulations, such as the traditional
method.  An allocation of remaining built-in gain under Section 704(c) will be
made when Section 704(c) property is sold.

 

4.         If the Company is entitled to a deduction for interest imputed under
any provision of the Code on any loan or advance from a Member (whether such
interest is currently deducted, capitalized or amortized), such deduction shall
be allocated solely to such Member.

 

5.         To the extent any payments in the nature of fees made to a Member or
reimbursements of expenses to any Member are finally determined by the Internal
Revenue Service to be distributions to a Member for federal income tax purposes,
there will be a gross income allocation to such Member in the amount of such
distribution.

 

Exhibit B – Page 1

 

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6.         (a) Notwithstanding any provision of the Agreement to the contrary
and subject to the exceptions set forth in Section 1.704-2(f)(2)-(5) of the
Treasury Regulations, if there is a net decrease in Company Minimum Gain during
any Company fiscal year, each Member shall be specially allocated items of
Company income and gain for such year (and, if necessary, subsequent years) in
an amount equal to such Member’s share of the net decrease in Company Minimum
Gain determined in accordance with Section 1.704-2(g)(2) of the Treasury
Regulations. Allocations pursuant to the previous sentence shall be made in
proportion to the respective amounts required to be allocated to each Member
pursuant thereto. The items to be so allocated shall be determined in accordance
with Section 1.704-2(f) of the Treasury Regulations. This paragraph 6(a) is
intended to comply with the minimum gain chargeback requirement in such
Section of the Treasury Regulations and shall be interpreted consistently
therewith. To the extent permitted by such Section of the Treasury Regulations
and for purposes of this paragraph 6(a) only, each Member’s Adjusted Capital
Account Balance shall be determined prior to any other allocations pursuant to
Article V of the Agreement with respect to such fiscal year and without regard
to any net decrease in Member Minimum Gain during such fiscal year.

 

(b)        Notwithstanding any provision of the Agreement to the contrary,
except paragraph 6(a) of this Exhibit B and subject to the exceptions set forth
in Section 1.704-2(i)(4) of the Treasury Regulations, if there is a net decrease
in Member Nonrecourse Debt Minimum Gain during any Company fiscal year, each
Member who has a share of the Member Nonrecourse Debt Minimum Gain, determined
in accordance with Section 1.704-2(i)(3) of the Treasury Regulations, shall be
specially allocated items of Company income and gain for such year (and, if
necessary, subsequent years) in an amount equal to such Member’s share of the
net decrease in Member Nonrecourse Debt Minimum Gain, determined in accordance
with Section 1.704-2(i)(5) of the Treasury Regulations. Allocations pursuant to
the previous sentence shall be made in proportion to the respective amounts
required to be allocated to each Member pursuant thereto. The items to be so
allocated shall be determined in accordance with Section 1.704-2(i)(4) of the
Treasury Regulations. This paragraph 6(b) is intended to comply with the minimum
gain chargeback requirement in such Section of the Treasury Regulations and
shall be interpreted consistently therewith. Solely for purposes of this
paragraph 6(b), each Member’s Adjusted Capital Account Balance shall be
determined prior to any other allocations pursuant to Article V of the Agreement
with respect to such fiscal year, other than allocations pursuant to paragraph
6(a).

 

7.         If any Members unexpectedly receive any adjustments, allocations or
distributions described in Treasury Regulation Section 1.704-1(b)(2)(ii)(d)(4),
1.704-1(b)(2)(ii)(d)(5) or 1.704-1(b)(2)(ii)(d)(6), items of Company income and
gain shall be specially allocated to such Members in an amount and manner
sufficient to eliminate the deficits in their Adjusted Capital Account Balances
created by such adjustments, allocations or distributions as quickly as
possible, provided that an allocation pursuant to this paragraph 7 shall be made
only if and to the extent that the Member would have a deficit balance in its
Adjusted Capital Account Balance after all other allocations provided for
Article V of the Agreement and this Exhibit B have been tentatively made as if
this paragraph 7 were not in this Exhibit B.

 

Exhibit B – Page 2

 

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8.         No loss shall be allocated to any Member to the extent that such
allocation would result in a deficit in its Adjusted Capital Account Balance
while any other Member continues to have a positive Adjusted Capital Account
Balance; in such event, losses shall first be allocated to any Members with
positive Adjusted Capital Account Balances, and in proportion to such balances,
to the extent necessary to reduce their positive Adjusted Capital Account
Balances to zero. Any excess shall be allocated to the Manager.

 

9.         If any Member has a deficit balance in its Adjusted Capital Account
Balance at the end of any fiscal year or other period, such Member shall be
specially allocated items of Company gross income and gain in the amount of such
excess as quickly as possible; provided, however, that an allocation pursuant to
this paragraph 9 shall be made only if and to the extent that such Member would
have a deficit balance in its Adjusted Capital Account Balance after all other
allocations provided in this Part A have been tentatively made as if paragraph 7
and this paragraph 9 were not in this Exhibit B.

 

10.       Any special allocations of items pursuant to this Part A shall be
taken into account in computing subsequent allocations so that the net amount of
any items so allocated and the profits, losses and all other items allocated to
each such Member pursuant to Article V of the Agreement shall, to the extent
possible, be equal to the net amount that would have been allocated to each such
Member pursuant to the provisions of Article V of the Agreement if such special
allocations had not occurred.

 

11.       Nonrecourse Deductions for any fiscal year or other period shall be
specially allocated to the Members in the manner set forth in
Section 5.1(b)(iii) of the Agreement.

 

12.       Any Member Nonrecourse Deductions for any fiscal year or other period
shall be specially allocated to the Member who bears the economic risk of loss
with respect to the Member Nonrecourse Debt to which such Member Nonrecourse
Deductions are attributable in accordance with Section 1.704-2(i) of the
Treasury Regulations.  If more than one Member bears the economic risk of loss
(in accordance with Section 1.704-2(i) of the Treasury Regulations) with respect
to a Member Nonrecourse Debt, Member Nonrecourse Deductions attributable thereto
shall be allocated between or among such Members in accordance with the ratios
in which they share such economic risk of loss.

 

13.       If the Company disposes of all or substantially all of its assets in a
transaction that will lead to a liquidation of the Company pursuant to
Article X, then any profits or losses realized in connection with such
transaction and thereafter (and, if necessary, constituent items of income,
gain, loss and deduction) shall be specially allocated for such taxable year of
the Company (and to the extent permitted by Section 761(c) of the Code, for the
immediately preceding taxable year of the Company) among the Members as required
so as to cause liquidating distributions pursuant to Section 10.4(a) of the
Agreement to be made in the same amounts and proportions as would have resulted
had such distributions instead been made pursuant to Article VIII of the
Agreement.

 

Exhibit B – Page 3

 

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B.        CAPITAL ACCOUNT ADJUSTMENTS AND TAX ALLOCATIONS.

 

1.         For purposes of computing the amount of any item of income, gain,
deduction or loss to be reflected in the Members’ Capital Accounts, the
determination, recognition and classification of any such item shall be the same
as its determination, recognition and classification for federal income tax
purposes; provided, however, that:

 

(a)        Any income, gain or loss attributable to the taxable disposition of
any property shall be determined by the Company as if the adjusted basis of such
property as of such date of disposition was equal in amount to the Carrying
Value.

 

(b)        The computation of all items of income, gain, loss and deduction
shall be made by the Company and, as to those items described in
Section 705(a)(1)(B) or Section 705(a)(2)(B) of the Code, without regard to the
fact that such items are not includable in gross income or are neither currently
deductible nor capitalizable for federal income tax purposes.

 

(c)        In lieu of the depreciation, amortization, and other cost recovery
deductions taken into account in computing the Company’s taxable income or loss,
there shall be taken into account Depreciation for a fiscal year or other
period.

 

(d)       The Company shall be treated as owning directly its proportionate
share (as determined by the Manager based upon the provisions of the applicable
partnership or limited liability agreement of a Subsidiary of the Company) of
all property owned by (i) a Subsidiary of the Company that is classified as a
partnership for U.S. federal income tax purposes and (ii) any other partnership,
limited liability company, unincorporated business or other entity classified as
a partnership for U.S. federal income tax purposes of which the Company or a
Subsidiary of the Company is, directly or indirectly, a partner, member or other
equity holder.

 

2.         A transferee of a Membership Interest will succeed to the Capital
Account relating to the Membership Interest transferred.

 

3.         Upon (i) an issuance of additional Membership Interests in exchange
for more than a de minimis capital contribution to the Company, (ii) an issuance
of additional Membership Interests (other than a de minimis interest) as
consideration for the provision of services to or for the benefit of the Company
by an existing Member acting in a member capacity or by a new Member acting in a
member capacity or in anticipation of being a Member, (iii) the distribution by
the Company to a Member of more than a de minimis amount of property as
consideration for an interest in the Company, or (iv) the acquisition of an
interest in the Company by any new or existing Member upon the exercise of a
noncompensatory option or upon the conversion of a Preferred Unit into a Common
Unit in accordance with Treasury Regulations Section 1.704-1(b)(2)(iv)(s), the
Capital Accounts of all Members (and the Carrying Values of all Company
properties) shall, immediately prior to such event, be adjusted (consistent with
the provisions of this Exhibit B) upward or downward to reflect any unrealized
gain or unrealized loss attributable to each Company property (as if such
unrealized gain or unrealized loss had been recognized upon an actual sale of
such property at the fair market value thereof, immediately prior to such
issuance, and had been allocated to the

 

Exhibit B – Page 4

 

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Members, at such time, pursuant to Article V of the Agreement). In determining
such unrealized gain or unrealized loss attributable to the properties, the fair
market value of Company properties shall be determined by the Manager using such
reasonable methods of valuation as it may adopt.  If any noncompensatory options
are outstanding upon the occurrence of an event described in this paragraph
(3)(i) through (3)(iv), Manager shall adjust the Gross Asset Values of its
properties in accordance with Treasury Regulations Sections
1.704-1(b)(2)(iv)(f)(1) and 1.704-1(b)(2)(iv)(h)(2).

 

4.         Immediately prior to the distribution of any Company property, the
Capital Accounts of all Members shall be adjusted (consistent with the
provisions of this Exhibit B and Section 704 of the Code) upward or downward to
reflect any unrealized gain or unrealized loss attributable to the Company
property distributed (as if such unrealized gain or unrealized loss had been
recognized upon an actual sale of each such property, immediately prior to such
distribution, and had been allocated to the Members, at such time, pursuant to
Article V of the Agreement). In determining such unrealized gain or unrealized
loss attributable to property, the fair market value of Company property
distributed shall be determined by the Manager using such reasonable methods of
valuation as it may adopt.

 

5.         In accordance with Section 704(c) of the Code and the Treasury
Regulations thereunder, income, gain, loss and deduction with respect to any
property shall, solely for tax purposes, and not for Capital Account purposes,
be allocated among the Members so as to take account of any variation between
the adjusted basis of such property to the Company for federal income tax
purposes and its Carrying Value.  The Manager shall make any elections or other
decisions relating to such allocations.

 

6.         If the Carrying Value of any Company asset is adjusted as described
in paragraph 3 above, subsequent allocations of income, gain, loss and deduction
with respect to such asset shall take account of any variation between the
adjusted basis for federal income tax purposes of such asset and its Carrying
Value immediately after such adjustment in the same manner as under
Section 704(c) of the Code and the Treasury Regulations thereunder.

 

7.         Except as provided in paragraphs 5 and 6 of this Exhibit B or as
otherwise required by the Code or Treasury Regulations, solely for federal
income tax purposes, items of taxable income, gain, loss and deduction of the
Company shall be allocated among the Members in the same manner as each
correlative item of income, gain, loss and deduction, as determined for Capital
Account purposes, is allocated.  Any elections or other decisions relating to
such allocations shall be made by the Manager in any manner that reasonably
reflects the purpose and intention of the Agreement and this Exhibit B.

 

C.        DEFINITIONS. For the purposes of this Exhibit B, the following terms
shall have the meanings indicated unless the context clearly indicates
otherwise:

 

“ADJUSTED CAPITAL ACCOUNT BALANCE”: means the balance in the Capital Account of
a Member as of the end of the relevant fiscal year of the Company, after giving
effect to the following: (i) credit to such Capital Account any amounts the
Member is obligated to restore, pursuant to the terms of the Agreement or
otherwise, or is deemed obligated to restore pursuant to the penultimate
sentences of Sections 1.704-2(g)(1) and 1.704-2(i)(5) of the

 

Exhibit B – Page 5

 

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Treasury Regulations, and (ii) debit to such capital account the items described
in Sections 1.704-1(b)(2)(ii)(d)(4), (5) and (6) of the Treasury Regulations.

 

“AGREEMENT”: means this Amended and Restated Limited Liability Agreement of
Ashford Hospitality Holdings LLC, as amended.

 

“COMPANY MINIMUM GAIN”: shall have the meaning set forth in Sections
1.704-2(b)(2) and 1.704-2(d) of the Treasury Regulations.

 

“DEPRECIATION”: means, for each fiscal year or other period, an amount equal to
the depreciation, amortization or other cost recovery deduction allowable for
federal income tax purposes with respect to property for such fiscal year or
other period, except that (a) with respect to any property the Carrying Value of
which differs from its adjusted tax basis for federal income tax purposes and
which difference is being eliminated by use of the remedial allocation method
pursuant to Section 1.704-3(d) of the Treasury Regulations, Depreciation for
such fiscal year or other period shall be the amount of book basis recovered for
such fiscal year or other period under the rules prescribed by
Section 1.704-3(d)(2) of the Treasury Regulations, and (b) with respect to any
other property the Carrying Value of which differs from its adjusted tax basis
at the beginning of such fiscal year or other period, Depreciation shall be an
amount which bears the same ratio to such beginning Carrying Value as the
federal income tax depreciation, amortization or other cost recovery deduction
for such fiscal year or other period bears to such beginning adjusted tax basis;
provided, that if the adjusted tax basis of any property at the beginning of
such fiscal year or other period is zero, Depreciation with respect to such
property shall be determined with reference to such beginning value using any
reasonable method selected by the Manager.

 

“MEMBER NONRECOURSE DEBT MINIMUM GAIN”: means an amount, with respect to each
Member Nonrecourse Debt, determined in accordance with Section 1.704-2(i) of the
Treasury Regulations.

 

“MEMBER NONRECOURSE DEBT”: shall have the meaning set forth in
Section 1.704-2(b)(4) of the Treasury Regulations.

 

“MEMBER NONRECOURSE DEDUCTIONS”: shall have the meaning set forth in
Section 1.704-2(i)(2) of the Treasury Regulations. For any Company taxable year,
the amount of Member Nonrecourse Deductions with respect to a Member Nonrecourse
Debt equal the net increase during the year, if any, in the amount of Member
Nonrecourse Debt Minimum Gain reduced (but not below zero) by proceeds of the
liability that are both attributable to the liability and allocable to an
increase in the Member Nonrecourse Debt Minimum Gain.

 

“NONRECOURSE DEDUCTIONS”: shall have the meaning set forth in
Section 1.704-2(b)(1) of the Treasury Regulations. The amount of Nonrecourse
Deductions for a Company fiscal year equals the excess, if any, of the net
increase, if any, in the amount of Company Minimum Gain during that fiscal year
over the aggregate amount of any distributions during that fiscal year of
proceeds of a Nonrecourse Liability, that are allocable to an increase in
Company Minimum Gain, determined according to the provisions of
Section 1.704-2(c) of the Treasury Regulations.

 

Exhibit B – Page 6

 

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“NONRECOURSE LIABILITY”: shall have the meaning set forth in
Section 1.704-2(b)(3) of the Treasury Regulations.

 

For purposes of this Exhibit B, all other capitalized terms will have the same
definition as in the Agreement.

 

Exhibit B – Page 7

 

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EXHIBIT C

 

NOTICE OF EXERCISE OF REDEMPTION RIGHT

 

The undersigned irrevocably (i) presents for redemption on_________(such date
being at least 3 Business Days after the date set forth below) _________ Units
(as defined in the LLC Agreement defined below) in Ashford Hospitality Holdings
LLC, in accordance with the terms of the Amended and Restated Limited Liability
Company Agreement of Ashford Hospitality Holdings LLC (the “LLC Agreement”), and
the Redemption Right (as defined in the LLC Agreement) referred to in the LLC
Agreement, (ii) surrenders such Units and all right, title and interest in such
Units, and (iii) directs that the Cash Amount or Ashford Inc. Shares (both as
defined in the LLC Agreement) deliverable upon exercise of the Redemption Right
be delivered to the address specified below, and if Ashford Inc. Shares are to
be delivered, such Ashford Inc. Shares be registered or placed in the
name(s) and at the addresses specified below.

 

Dated:

 

 

Name of Member:

 

 

 

 

 

(Signature of Member)

 

 

 

(Street Address)

 

 

 

 

 

(City State Zip Code)

 

 

 

 

 

If Ashford Inc. Shares are to be issued, issue to:

 

 

 

(Name)

 

 

 

(Social Security or Identifying Number)

 

 

Exhibit C – Page 1

 

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EXHIBIT D

 

NOTICE OF ELECTION BY MEMBER TO CONVERT
LTIP UNITS INTO COMMON UNITS

 

 

The undersigned LTIP Unitholder irrevocably (i) elects to convert the number of
LTIP Units in Ashford Hospitality Holdings LLC (the “Company”) set forth below
into Common Units in accordance with the terms of the Amended and Restated
Limited Liability Agreement of the Company, as amended; and (ii) directs that
any cash in lieu of Common Units that may be deliverable upon such conversion be
delivered to the address specified below.  The undersigned represents, warrants,
and certifies that the undersigned (a) has title to such LTIP Units, free and
clear of the rights or interests of any other person or entity other than the
Company; (b) has the full right, power, and authority to cause the conversion of
such LTIP Units as provided in this notice and as provided in the Amended and
Restated Limited Liability Agreement of the Company, as amended; and (c) has
obtained the consent or approval of all persons or entities, if any, having the
right to consent or approve such conversion.

 

Name of LTIP Unitholder:

 

 

(Please Print: Exact Name as Registered with the Company)

 

 

 

 

Number of LTIP Units to be Converted:

 

 

 

 

Date to be Converted___________ (such date being not less than 3 Business Days
nor more than 10 Business Days prior to the Date of this Notice set forth below)

 

 

 

 

 

 

Date of this Notice:

 

 

 

 

 

 

 

 

 

 

(Signature of Member: Sign Exact Name as Registered with the Company)

 

 

 

 

 

 

 

 

 

 

(Street Address)

 

 

 

 

 

 

 

 

 

 

 

(City)

(State)

(Zip Code) 

 

 

Exhibit D – Page 1

 

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EXHIBIT E

 

NOTICE OF ELECTION BY THE COMPANY TO FORCE CONVERSION
OF LTIP UNITS INTO COMMON UNITS

 

 

Ashford Hospitality Holdings LLC (the “Company”) irrevocably (i) elects to cause
the number of LTIP Units held by the LTIP Unitholder set forth below to be
converted into Common Units in accordance with the terms of the Amended and
Restated Limited Liability Company Agreement of the Company, as amended.

 

Name of LTIP Unitholder:

 

 

(Please Print: Exact Name as Registered with the Company)

 

 

Number of LTIP Units to be Converted:

 

 

 

 

 

 

Date to be Converted:

 

 

 

 

 

 

Date of this Notice:

 

 

 

Exhibit E - Page 1

 

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