Document:

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                                                                   EXHIBIT 10.40

[CLAYTON LOGO]

                             CLAYTON SERVICES, INC.

August 30, 2005

Mr. Brian C. Newman
219 Grandview Road.
Southbury, CT 06488

Re:  Separation Agreement and Mutual Release

Dear Brian:

         Together with Appendix A which is incorporated into this letter in
full, this letter shall be referred to as the "AGREEMENT" and contains the terms
of the separation agreement and mutual release between you, on the one hand ,
and Clayton Services, Inc., a Delaware corporation ("Clayton"), on the other
hand.

         1.   Your last day of active employment with the Company will be August
              31, 2005. You will receive payment through that date consistent
              with Company's regular payroll practices.

         2.   You will receive salary continuation for the period commencing on
              September 1, 2005 through August 31, 2006. During that time
              period, and contingent upon your compliance with the terms of
              Paragraphs 9 - 12 of this Agreement and the Mutual Release
              (defined below), you will receive in equal installments the
              aggregate sum of One Hundred Sixty Eight Thousand Three Hundred
              and Seventy Two Dollars ($168,372.00), less all applicable taxes
              and withholdings, payable beginning with the start of the first
              regularly scheduled pay period falling at least eight days after
              you have returned a signed copy of this letter agreement. Based
              upon your having executed the Agreement by August 31, 2005 and
              provided you do not revoke your acceptance of the Agreement within
              such eight day period, the first payroll date on which you will
              receive payment will be September 9, 2005. You will be paid a
              retention bonus in the amount of $108,333.36 not later than
              September 9, 2005.

         3.   You will receive health insurance continuation for twelve (12)
              months commencing on September 1, 2005 and terminating on August
              31, 2006. Clayton will pay your health insurance premium payments
              during that period in the same proportion as shared by Clayton and
              yourself prior to your termination. To the extent that Clayton may
              change its health insurance plans during this one year period you
              will have the right to receive continuation in the "best and
              highest" plan offered by Clayton to its employees, or you may
              elect to have Clayton pay you the premium payments that Clayton is
              currently paying on your behalf as of the date of this Agreement
              and you may elect your own coverage with a carrier independent of
              Clayton. To the extent you are eligible, elect to, and in fact
              receive continued health insurance coverage under COBRA, coverage
              pursuant to which commences on September 1, 2006, the cost of any
              premium will be paid by you and Clayton will have no COBRA premium
              obligation whatsoever. It is expressly understood and agreed that
              nothing in this Agreement is designed to guarantee, promise,
              convey, or covenant coverage or continuation coverage under any
              insurance or benefit plan except as expressly set forth herein.

         4.   You will receive payment for accrued but unused vacation pay, less
              applicable taxes.

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         5.   Simultaneously with the execution of this Agreement, and as
              consideration for the undertakings set forth herein, you and an
              officer of Clayton will execute the Mutual Release attached hereto
              as APPENDIX A (the "Mutual Release"). Your agreement to, and
              non-revocation of, the Mutual Release is a material term of this
              Agreement and failure to agree to the same will nullify any and
              all obligations of Clayton and any all of your rights under this
              Agreement;

         6.   All amounts payable to you pursuant to this Agreement shall be
              subject to applicable taxes and withholding;

         7.   You agree to return to Clayton, no later than the close of
              business on August 31, 2005, all property of Clayton in your
              possession, including by way of example and not by way of
              limitation, any and all files, documents, books, records, reports,
              credit cards, cell phones, computers, computer equipment,
              networking equipment hardware, software, source code, object code,
              customer lists, customer information, pricing lists, marketing
              materials and other proprietary information.,

         8.   The parties agree to keep the existence and terms of this
              Agreement completely confidential other than (i) as may be
              necessary for each party to enforce its rights against the other
              under the terms of the this Agreement or the Mutual Release, or
              (ii) to the extent necessary to comply with any applicable legal
              process. In any case, you may disclose the terms of this Agreement
              and the Mutual Release to your immediate family, and each of the
              parties may disclose the terms of this Agreement to its legal
              counsel and tax and accounting advisors. Furthermore, you agree
              not to disparage Clayton or any of their respective subsidiaries,
              affiliates, officers, directors, shareholders, agents or employees
              to any third party; and Clayton agrees not to disparage you to any
              third party.

         9.   You shall not use or disclose Confidential Information, as defined
              in this Paragraph 9, to any person or entity for any for any
              reason or purpose whatsoever. You acknowledge that (i) Clayton has
              expended time, effort and money to obtain and develop Confidential
              Information, (ii) the Confidential Information constitutes
              special, valuable and unique assets of Clayton, whether or not any
              of the Confidential Information is embodied in tangible or
              intangible form; and (iii) all materials containing Confidential
              Information are the property of Clayton or its affiliates, as the
              case may be. You agree and acknowledge that for purposes of this
              Agreement, "CONFIDENTIAL INFORMATION" means information and data
              not generally known outside of Clayton that you prepared,
              acquired, learned, or had reasonable access to during your
              employment with Clayton or any of its respective predecessors,
              subsidiaries or affiliates, including, but not limited to,
              research, design, development, strategies, production,
              presentation, methodologies, margins, and budgets, and costs
              related thereto; information and materials used in marketing or
              presenting the business, products or services of Clayton or any of
              its respective affiliates including without limitation, style,
              format and content; customer lists and potential customer lists
              and information pertaining to customer goals and strategies;
              prices and terms offered or paid for products and services by
              customers; information and materials related to determining
              whether products and services should be offered or sold to a
              customer; supplier, vendor and contractor lists, contacts, prices,
              specifications and other information; techniques, source code,
              object code, software documentation, software

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              diagrams, software flow charts, procedures, processes, formulas,
              equipment, methods, technical data and compilations; business
              proposals and plans and financial and operational information and
              strategies; the financial and capital structure of Clayton and its
              affiliates; creditors, debtors and financial data; any other
              material or information of whatever nature which provides any of
              the Clayton or any of its affiliates, an opportunity to gain an
              advantage over competitors; and any and all trade secrets or
              proprietary and confidential information or materials of Clayton
              and its affiliates, or any customer or any potential customers of
              which you had knowledge or reasonable access to; PROVIDED,
              HOWEVER, that: (1) the foregoing confidentiality obligation shall
              not apply to any information or material to the extent it is or
              becomes publicly known (other than as a result of any act by you
              in violation of this Agreement or others in violation of an
              obligation of confidentiality); and (2) the foregoing
              confidentiality obligation shall not prevent you from disclosing
              information pursuant to court order, or order agency of competent
              jurisdiction, or to a government or law enforcement agency if you
              have reasonable cause to believe that the information discloses a
              violation of a State or federal law, rule, or regulation; PROVIDED
              FURTHER, HOWEVER, to the extent permitted by law, that you notify
              Clayton in writing no less than five (5) business days in advance
              of any such disclosure under this Paragraph 9 and that you further
              notify Clayton within five (5) business days of your receipt of
              any subpoena, court order, administrative order, or other legal
              process requiring disclosure of information subject to this
              confidentiality provision. Notwithstanding anything herein to the
              contrary, Clayton agrees that it will provide you with copies of
              Confidential Information required for you to comply with a
              regulatory investigation upon presentation of a subpoena, court
              order, administrative order or other legal process requiring
              disclosure of information subject to this confidentiality
              provision.

         10.  You hereby disclaim, forego, revise, and acquit any and all
              rights, titles and interests possessed by you, directly or
              indirectly, in law or in equity, in any and all Inventions (as
              defined below) capable of being used by Clayton or any of its
              respective subsidiaries or affiliates to its advantage, as
              determined by Clayton in its sole and absolute discretion,
              including but not limited to, any and all interest in proprietary
              software applications (and improvements, modifications and
              derivatives thereof) commonly referred to as Deal Management
              System (DMS), Clayton Loan Analysis System (CLAS), and High-Cost
              Analyzer (HCA), Conduit and CU, and you hereby transfer and assign
              to Clayton , for good and valuable consideration, the receipt and
              sufficiency of which is hereby acknowledged, any and all such
              rights, titles and interests in all such Inventions. For the
              purposes of this Agreement, "INVENTIONS" includes, but is not
              limited to, machinery, apparatus, products, processes, computer
              hardware, information systems, software (including, without
              limitation, source code, object code, documentation, diagrams, and
              flow charts) and any other discoveries, concepts, ideas, and
              inventions, whether patentable or not (including, without
              limitation, processes, methods, formulas, and techniques, as well
              as improvements thereof or know-how related thereto), concerning
              any present or prospective activities of Clayton.

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         11.  You shall not, for a period of twelve (12) months after the date
              of this Agreement, for any reason whatsoever, directly or
              indirectly, as an owner, employee, agent, salesperson or member of
              any person, corporation, firm, agency or otherwise that is engaged
              in a business directly competitive with any business currently
              conducted by Clayton or any of its respective subsidiaries or
              affiliates, solicit such business from or engage in such business
              with a client or potential client of Clayton (a) with which you
              had direct or indirect contact as an employee of Clayton, or (b)
              regarding which client or potential client you had learned , or
              become aware of, or (c) with which client or potential client of
              Clayton has solicited new business, or has conducted new business,
              within the twelve (12) month period immediately preceding the date
              of this Agreement. You shall not, for a period of twelve (12)
              months after the date of this Agreement, for any reason
              whatsoever, individually or on behalf of, directly or indirectly,
              as an owner, employee, agent, salesperson or member of any person,
              corporation, firm, agency or otherwise (a) employ or retain, or
              solicit, entice, encourage or persuade or attempt to solicit,
              entice, encourage or persuade any person who is, at the time, an
              employee of Clayton or who was an employee of Clayton less than
              three (3) months before such an attempt to employ, retain,
              solicit, entice or encourage any such person; or (b) encourage,
              persuade or entice any employee or Client of Clayton to terminate
              his, her or its employment or business relationship with Clayton.

         12.  If you breach any of the foregoing covenants or obligations
              contained in Paragraphs 9-11 of this Agreement, the parties agree
              that Clayton's obligation to make any remaining scheduled payments
              under Paragraph 2 or 3 of this Agreement shall terminate, Clayton
              may retain such amounts by way of liquidated damages (without in
              any way restricting its right to seek injunctive and other relief
              against you in any such event, which right to seek injunctive
              relief is expressly granted herein), and Clayton shall be entitled
              to repayment of the sums previously paid to you under Paragraph 2
              and 3 of this Agreement.

         13.  This Agreement shall inure to the benefit of, and shall be binding
              upon, the parties hereto and their respective successors, assigns,
              heirs, and legal representatives by operation of law or otherwise,
              including any entity with which Clayton may merge or consolidate
              or to which all or substantially all of its assets may be
              transferred. The duties and covenants of you under this Agreement,
              being personal, may not be delegated or assigned.

         14.  You understand that this Agreement is final and binding. By
              signing this Agreement, you acknowledge that you have read and
              understand this Agreement; that you have not relied upon any
              representation or statement, written, or oral, not set forth in
              this Agreement; that you have been advised to consult with an
              attorney; that your signature on this Agreement is voluntary; and
              that you have entered into this Agreement knowingly and willfully.
              You acknowledge and agree that: (a) the restrictions placed upon
              you by this Agreement are reasonable and necessary; (b) you will
              be able to earn a livelihood without violating such

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              restrictions; and (c) you understand that your ability to earn a
              livelihood without violating such restrictions is a material
              condition to this Agreement.

         15.  This Agreement may be executed in counterparts and by facsimile,
              each of which shall be deemed an original and all of which, taken
              together, shall constitute one agreement.

         16.  This Agreement shall be interpreted, construed and enforced under
              the laws of the State of Connecticut.

         17.  This Agreement constitutes the entire agreement, and supersedes
              all other prior agreements and understandings, both written and
              oral, among parties with respect to the subject matter hereof.

         18.  You are advised to consult with an attorney prior to signing this
              Agreement and the Mutual Release attached hereto as Exhibit A. You
              have a period of twenty-one (21) days from the date of delivery of
              this Agreement to accept the Agreement by executing it and
              returning it to Jeanne Rudell, SVP Human Resources of Clayton,
              prior to the expiration of the twenty-one (21) day period. If you
              execute this Agreement prior to the expiration of the twenty-one
              (21) day signing period, such execution shall constitute a waiver
              by you of the remainder of the twenty-one (21) day signing period.
              You also have seven (7) days following your execution of this
              Agreement during which you may revoke the Agreement by delivering
              written notice to the offices of Jeanne Rudell, SVP Human
              Resources at 2 Corporate Drive, Suite 350, Shelton, Connecticut
              06484 by hand or by mail, prior to the expiration of the seven (7)
              day period. If this Agreement is not revoked by you during said
              seven (7) day period, it shall be deemed accepted. The Agreement
              shall not be effective or enforceable until the revocation period
              has expired.

If these terms are acceptable to you, please countersign the enclosed copy of
this letter and the fully incorporated Appendix A and return them to me within
the time parameter above. Thank you very much.

Very truly yours,

CLAYTON SERVICES, INC.

By: /s/ Stephen M. Lamando
    ----------------------
    Stephen M. Lamando
    President and CEO

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AGREED TO AND ACCEPTED:
this 31st day of August, 2005

By:  /s/ Brian C. Newman
     -------------------------------
     Brian C. Newman

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                                                                      APPENDIX A

                                 MUTUAL RELEASE

     WHEREAS, Brian C. Newman, an individual ("NEWMAN"), and Clayton Services,
Inc., a Delaware corporation ("CLAYTON"), are parties to the attached Letter
Agreement (the "LETTER AGREEMENT"); and

     WHEREAS, this Mutual Release is incorporated into, and is a material term
of, the Letter Agreement.

     NOW, THEREFORE, in consideration of the mutual covenants and undertakings
set forth in the Letter Agreement, Newman, on the one hand, and Clayton, on the
other hand, agree as follows:

     1.     Newman, on behalf of himself and on behalf of his heirs, executors,
            administrators, successors and assigns, hereby REMISES, RELEASES,
            ACQUITS, SATISFIES and FOREVER DISCHARGES Clayton as well as its
            respective present and former subsidiaries, parent companies,
            divisions, affiliates, and respective insurers, representatives,
            officers, directors, shareholders, partners, joint ventures,
            independent contractors, members, agents, employees, attorneys,
            retirement benefit plans, welfare benefit plans and their heirs
            executors, administrators, successors and assigns (all hereinafter
            referred to collectively as "the "RELEASED PARTIES"), with respect
            to any and all claims, obligations, demands, liabilities, promises,
            costs, expenses (including attorneys' fees, costs and expenses)
            and/or causes of action of whatever nature, whether known or
            unknown, that Newman has or may have against Clayton from the
            beginning of time through the date of the Agreement. Without
            restricting the generality of the foregoing, the Released Parties
            agrees to and does hereby remise, release, acquit, satisfy, and
            forever discharge Clayton of and from any and all claims,
            obligations, demands, liabilities, costs, expenses, and/or causes of
            action, known or unknown, arising out of or in any way connected
            with or relating to his employment and the termination of his
            employment up to and including the date he signs this Mutual Release
            and the Letter Agreement, including, but not limited to, claims,
            obligations, demands, liabilities, costs, expenses, and/or causes of
            action based in whole or in part on (i) any alleged (oral or
            written) agreement to provide compensation, equity, stock, profit
            sharing, bonus, phantom stock, phantom equity, revenue sharing,
            incentive compensation or similar type of compensation, benefits,
            vesting, or payment; (ii) breach of contract and/or promissory
            estoppel; (iii) tort, retaliatory discharge; (iv) federal, state or
            local law, regulation or ordinance, including, but not limited to,
            claims under the Family Medical Leave Act (29 U.S.C. Sections 2601
            ET SEQ.), the Americans With Disabilities Act (42 U.S.C. Sections
            12101 ET SEQ.), the Age Discrimination in Employment Act (29 U.S.C.
            Sections 621 ET SEQ.), the Older Workers Benefit Protection Act,
            Title VII of the Civil Rights Act (42 U.S.C. Sections 2000e ET
            SEQ.), the Civil Rights Act of 1991, the Employee Retirement Income
            Security Act (29 U.S.C. Sections 1001 ET SEQ.), the Fair Labor
            Standards Act (29 U.S.C. Sections 201 ET SEQ.), all applicable
            Connecticut laws, regulations, ordinances and rules, or any other
            federal, state or municipal statute

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            or ordinance relating to discrimination in employment or
            compensation from employment; (v) federal or state public policy;
            and/or (vi) any other legal restrictions prohibiting, in whole or in
            part, the actual or constructive discharge of employees. This
            release does not impact or affect claims that cannot be released as
            a matter of law or that are related to Clayton's obligations under
            the Letter Agreement between Clayton and Newman.

     2.     In the event any administrative agency or other person or entity
            pursues any claim, charge, lawsuit, demand, or class or group action
            against any of the Clayton Entities relating to Newman's employment,
            termination, compensation, or severance, Newman agrees that he will
            not be entitled to any monetary relief from such pursuit.

     3.     Newman agrees not to commence or bring any action at law,
            proceeding, in equity, or any other judicial or non-judicial
            proceeding against any Released Party relating, in whole or in part,
            to his employment. This covenant not to sue does not extend to
            claims that Newman may not release at this time as a matter of law.

     4.     Newman certifies that he has not filed any claims, complaints, or
            other actions against any of the Released Parties and hereby waives
            any right to recover from any party released pursuant to Paragraph 1
            under any lawsuit charged or filed by him or any federal, state, or
            local agency on his behalf based upon any event occurring up to and
            including the date on which he signs this Agreement.

     5.     Clayton agrees and does hereby release, acquit and forever discharge
            Newman of and from any and all claims, demands and causes of action
            now existing and known, as of the date hereof, to Clayton, which
            arose by any act or omission on the part of Newman committed in his
            capacity as an officer and/or employee of Clayton that occurred at
            any time during his tenure, up to an including the date hereof. This
            release does not extend to any claims, demands or causes of action
            which arose as a result of any fraudulent conduct or willful
            misconduct on the part of Newman during his tenure with Clayton.

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     6.     This Mutual Release may be executed in counterparts and by
            facsimile, each of which shall be deemed an original and all of
            which, taken together, shall constitute one agreement which is
            incorporated in full into the Letter Agreement.

AGREED:                                        AGREED:

                                               CLAYTON SERVICES, INC.

/s/ Brian C. Newman                            By: /s/ Stephen M. Lamando
------------------------------------------         -----------------------------
Brian C. Newman                                    Stephen M. Lamando
                                                   President and CEO

August 31, 2005                                August 31, 2005Exhibit 10.1

 

AMENDED AND RESTATED LIMITED
LIABILITY COMPANY AGREEMENT

OF

MORGANS GROUP LLC

 

THIS AMENDED AND RESTATED LIMITED LIABILITY COMPANY AGREEMENT, dated as of February       ,
2006 of Morgans Group LLC (the “Company”) is entered into by and among Morgans
Hotel Group Co., as Managing Member (the “Managing Member”), and the
Persons identified on the signature pages hereto (the “Non-Managing Members”),
together with any other Persons who become Members (as defined herein) in the
Company as provided herein;

 

WHEREAS, the Company was formed by the filing of a
certificate of formation with the Secretary of State of the State of Delaware
on October 25, 2005 (the “Formation Date”) by an authorized person of
the Company;

 

WHEREAS, on the Formation Date, Morgans Hotel Group
LLC, a Delaware limited liability company (“MHG LLC”), as the sole
initial member of the Company, entered into the Limited Liability Company
Agreement (the “Original Operating Agreement”);

 

WHEREAS, this Agreement is being entered into in accordance
with the provisions of Section 17 of the Original Operating Agreement;

 

WHEREAS, as part of the Formation and Structuring
Transactions (as defined below), the Company will issue Non-Managing Membership
Interests to each of NorthStar Partnership, L.P. and RSA Associates, L.P.;

 

WHEREAS, as part of the Formation and Structuring
Transactions, the Non-Managing Membership Interests of each of NorthStar
Partnership, L.P. and RSA Associates, L.P. will be transferred to the Managing
Member and each of NorthStar Partnership, L.P. and RSA Associates, L.P. shall
cease to be a Member of the Company;

 

WHEREAS, the Members desire that the Managing Member
be the sole Managing Member of the Company upon the completion of the Managing
Member’s initial public offering of its common stock and the contribution by
the Managing Member of certain of the net proceeds from its initial public
offering, as set forth on Exhibit A hereto, and borrowings under its new
revolving credit facility; and

 

WHEREAS, the Members desire to continue to operate
the Company as a limited liability company under the Act (as defined below) and
to amend and restate the Original Operating Agreement in its entirety and the
terms of such Original Operating Agreement are hereby amended and restated in
their entirety as hereinafter set forth;

 

 

NOW, THEREFORE, in consideration of the mutual
promises and agreements herein made, and other good and valuable consideration,
the receipt and sufficiency of which is hereby acknowledged, the Members hereby
agree as follows:

 

ARTICLE I

DEFINED TERMS

 

The following definitions
shall be for all purposes, unless otherwise clearly indicated to the contrary,
applied to the terms used in this Agreement.

 

“Act” means the Delaware Limited Liability
Company Act, as it may be amended from time to time, and any successor to such
statute.

 

“Additional Non-Managing
Member” means a Person admitted to the Company as a Non-Managing Member
pursuant to Section 4.2 and who is shown as such on the books and
records of the Company.

 

“Adjusted Capital Account”
means the Capital Account maintained for each Member as of the end of each Partnership
Year (a) increased by any amounts which such Member is obligated to restore
pursuant to any provision of this Agreement or is deemed to be obligated to
restore pursuant to the penultimate sentences of Regulations Sections 1.704-2(g)(1)
and 1.704-2(i)(5) and (b) decreased by the items described in Regulations
Sections 1.704-1(b)(2)(ii)(d)(4), 1.704-1(b)(2)(ii)(d)(5), and 1.704-1(b)(2)(ii)(d)(6).
The foregoing definition of Adjusted Capital Account is intended to comply with
the provisions of Regulations Section 1.704-1(b)(2)(ii)(d) and shall be
interpreted consistently therewith.

 

“Adjusted Capital Account
Deficit” means, with respect to any Member, the deficit balance, if any, in
such Member’s Adjusted Capital Account as of the end of the relevant Partnership
Year.

 

“Adjusted Property” means any property the
Carrying Value of which has been adjusted pursuant to Section 4.4.

 

“Adjustment Event” has the meaning set forth in
Section 4.5(b).

 

“Affiliate” means,
with respect to any Person, any Person directly or indirectly controlling,
controlled by or under common control with such Person. For purposes of this
definition, “control” when used with respect to any Person means the power to
direct the management and policies of such Person, directly or indirectly,
whether through the ownership of voting securities, by contract or otherwise;
and the terms “affiliated,” “controlling” and “controlled” have meanings
correlative to the foregoing.

 

“Agreed Value” means
(a) in the case of any Contributed Property set forth on Exhibit B and
as of the time of its contribution to the Company, the Agreed Value of such
property as set forth on Exhibit B; (b) in the case of any Contributed
Property not set forth on Exhibit B and as of the time of its
contribution to the Company, the 704(c) Value of such property or other

 

2

 

consideration, reduced by any liabilities
either assumed by the Company upon such contribution or to which such property
is subject when contributed, and (c) in the case of any property distributed to
a Member by the Company, the Company’s Carrying Value of such property at the
time such property is distributed, reduced by any indebtedness either assumed
by such Member upon such distribution or to which such property is subject at
the time of distribution as determined under Section 752 of the Code and the
Regulations thereunder.

 

“Agreement” means this
Amended and Restated Limited Liability Company Agreement and all Exhibits
attached hereto, as the same may be amended, supplemented or restated from time
to time.

 

“Assignee” means a
Person to whom one or more Membership Units have been transferred but who has
not been admitted as a Substituted Non-Managing Member, and who has the rights
set forth in Section 11.5.

 

“Bankruptcy” as to any Person, shall be deemed
to have occurred when (i) such Person commences a voluntary proceeding seeking
liquidation, reorganization or other relief under any bankruptcy, insolvency or
other similar law now or hereafter in effect, (ii) such Person is adjudged as
bankrupt or insolvent, or a final and nonappealable order for relief under any
bankruptcy, insolvency or similar law now or hereafter in effect has been
entered against such Person, (iii) such Person executes and delivers a general
assignment for the benefit of such Person’s creditors, (iv) such Person files
an answer or other pleading admitting or failing to contest the material
allegations of a petition filed against such Person in any proceeding of the
nature described in clause (ii) above, (v) such Person seeks, consents to or
acquiesces in the appointment of a trustee, receiver or liquidator for such
Person or for all or any substantial part of such Person’s properties, (vi) any
proceeding seeking liquidation, reorganization or other relief under any
bankruptcy, insolvency or other similar law now or hereafter in effect has not
been dismissed within 120 days after the commencement thereof, (vii) the
appointment without such Person’s consent or acquiescence of a trustee,
receiver or liquidator has not been vacated or stayed within 90 days of such
appointment, or (viii) an appointment referred to in clause (vii) is not
vacated within 90 days after the expiration of any such stay.

 

“Book-Tax Disparities” means, with respect to
any item of Contributed Property or Adjusted Property, as of the date of any
determination, the difference between the Carrying Value of such Contributed
Property or Adjusted Property and the adjusted basis thereof for Federal income
tax purposes as of such date. A Member’s share of the Company’s Book-Tax
Disparities in all of its Contributed Property and Adjusted Property will be
reflected by the difference between such Member’s Capital Account balance as
maintained pursuant to Section 4.4 and the hypothetical balance of such
Member’s Capital Account computed as if it had been maintained strictly in
accordance with Federal income tax accounting principles.

 

“Business Day” means any day except a Saturday,
Sunday or other day on which commercial banks in New York City are authorized
or required by law to close.

 

“Capital Account” means the capital account
maintained by the Company for each Member pursuant to Section 4.4.

 

3

 

“Capital Account Limitation” has the meaning
set forth in Section 4.6.

 

“Capital Contribution” means, with respect to
each Member, the total amount of cash, cash equivalents and the Agreed Value of
Contributed Property which such Member contributes or is deemed to contribute
to the Company pursuant to Section 4.1 or 4.2 and which are
intended to be treated as a contribution to the Company pursuant to Section
721(a) of the Code.

 

“Carrying Value” means (a) with respect to a
Contributed Property or Adjusted Property, the 704(c) Value of such property
(or in the case of an Adjusted Property, the fair market value of such property
at the time of its latest adjustment under Section 4.4(d)) reduced (but
not below zero) by all Depreciation with respect to such Contributed Property
or Adjusted Property charged to the Members’ Capital Accounts and (b) with
respect to any other Company property, the adjusted basis of such property for
Federal income tax purposes, all as of the time of determination. The Carrying
Value of any property shall be adjusted from time to time in accordance with Section
4.4(d), and to reflect changes, additions or other adjustments to the
Carrying Value for dispositions and acquisitions of Company Properties, as
deemed appropriate by the Managing Member to the extent consistent with Section
704(b) of the Code and the Regulations issued thereunder.

 

“Cash Amount” means an amount of cash per Unit
equal to the number of Units offered for redemption by the Redeeming Member
(multiplied by the Unit Adjustment Factor) multiplied by the Value of a Common
Share on the Valuation Date.

 

“Certificate” means the Certificate of
Formation relating to the Company filed in the office of the Secretary of State
of the State of Delaware, as amended from time to time in accordance with the
terms hereof and the Act.

 

“Charter” means the Certificate of
Incorporation of the Managing Member filed in the office of the Secretary of
State of the State of Delaware on October 19, 2005, as amended from time to
time in accordance with the terms thereof and the Delaware General Corporation
Law, and any successor to such statute.

 

“Code” means the Internal Revenue Code of 1986,
as amended. Any reference herein to a specific section or sections of the Code
shall be deemed to include a reference to any corresponding provision of future
law.

 

“Common Share Rights” has the meaning set forth
in Section 4.2(e).

 

“Common Shares” means the shares of common
stock, $0.01 par value per share, of the Managing Member.

 

“Company” means Morgans Group LLC, the limited
liability company formed under the Act and any successor thereto.

 

“Company Property” means such interests in real
property and personal property including without limitation, fee interests,
interests in ground leases, interests in joint ventures, interests in
mortgages, and Debt instruments as the Company may hold from time to time.

 

4

 

“Consent” means the consent or approval of a
proposed action by a Member given in accordance with Section 14.1.

 

“Constituent Person” has the meaning set forth
in Section 4.6.

 

“Contributed Property” means each property or
other asset (but excluding cash and cash equivalents), in such form as may be
permitted by the Act contributed or deemed contributed to the Company. Once the
Carrying Value of a Contributed Property is adjusted pursuant to Section 4.4,
such property shall no longer constitute a Contributed Property, but shall be
deemed an Adjusted Property for purposes of Section 4.4.

 

“Conversion Date” has the meaning set forth in Section
4.6.

 

“Conversion Notice” has the meaning set forth
in Section 4.6.

 

“Conversion Right” has the meaning set forth in
Section 4.6.

 

“Debt” means, as to any Person, as of any date
of determination, (a) all indebtedness of such Person for borrowed money or for
the deferred purchase price of property or services, which purchase price is
due more than six months after the date of placing such property in service or
taking delivery and title thereto or the completion of such services, (b) all
amounts owed by such Person to banks or other Persons in respect of
reimbursement obligations under letters of credit, surety bonds and other
similar instruments guaranteeing payment or other performance of obligations by
such Person, (c) all indebtedness for borrowed money or for the deferred
purchase price of property or services secured by any lien on any property
owned by such Person, to the extent attributable to such Person’s interest in
such property, even though such Person has not assumed or become liable for the
payment thereof, (d) lease obligations of such Person which, in accordance with
generally accepted accounting principles, should be capitalized and (e) all
guarantees and other contingent obligations of such Person with respect to Debt
of others.

 

“Depreciation” means for each fiscal year or
other period, an amount equal to the Federal income tax depreciation,
amortization, or other cost recovery deduction allowable with respect to an
asset for such year or other period, except that if the Carrying Value of an
asset differs from its adjusted basis for Federal income tax purposes at the
beginning of such 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 year or
other period bears to such beginning adjusted tax basis; provided, however,
that if the Federal income tax depreciation, amortization, or other cost
recovery deduction for such year is zero, Depreciation shall be determined with
reference to such beginning Carrying Value using any reasonable method selected
by the Managing Member.

 

“Economic Capital Account Balance” has the
meaning set forth in Section 6.3(a).

 

“Effective Date” means the date of closing of
the initial public offering of the Common Shares upon which date the
contributions set forth on Exhibit A shall become effective.

 

“Events of Dissolution” has the meaning set
forth in Section 13.1.

 

5

 

“Exchange Act” has the meaning set forth in Section
7.1(a)(2).

 

 “Forced
Conversion” has the meaning set forth in Section 4.6.

 

“Forced Conversion Notice” has the meaning set
forth in Section 4.6.

 

“Formation and Structuring Agreement” means the
Formation and Structuring Agreement, dated October 25, 2005, by and among the
Company, Morgans Hotel Group LLC and other parties thereto.

 

“Formation and Structuring Transactions” means
the transactions outlined in Exhibit A to the Formation and Structuring
Agreement.

 

“Formation Date” has the meaning set forth in
the recitals.

 

“Guaranty” has the meaning set forth in Section
11.2(e).

 

“Holder” means either (a) a Member or (b) an
Assignee, owning a Membership Interest, that is treated as a Member for federal
income tax purposes.

 

“IRS” means the Internal Revenue Service, which
is charged with administering the internal revenue laws of the United States.

 

“Immediate Family” means, with respect to any
natural Person, such natural Person’s spouse, parents, grandparents,
descendants (including adopted children and step-children), nephews, nieces,
brothers, and sisters.

 

“Incapacity” or “Incapacitated” means
(a) as to any individual Member, death, total physical disability or entry by a
court of competent jurisdiction adjudicating him incompetent to manage his
Person or his estate, (b) as to any corporation that is a Member, the filing of
a certificate of dissolution, or its equivalent, for the corporation or the
revocation of its charter, (c) as to any partnership that is a Member, the
dissolution and commencement of winding up of the partnership, (d) as to any
estate that is a Member, the distribution by the fiduciary of the estate’s
entire interest in the Company, (e) as to any trust that is a Member, the
termination of the trust (but not the substitution of a new trustee), or (f) as
to any Member, the Bankruptcy of such Member.

 

“Incentive Plans” means Common Share or Unit
incentive plans or other employee benefit plans established by, or for the
benefit of the employees of, the Managing Member, the Company or any Subsidiary,
including the Morgans Hotel Group Co. 2006 Omnibus Stock Incentive Plan and the
Morgans Hotel Group Co. Annual Bonus Plan.

 

“Indemnitee” means (a) any Person made a party
to a proceeding by reason of his status as (i) the Managing Member (including
as a guarantor of any Membership Debt) or (ii) an officer of the Company or a
director or officer of the Managing Member, and (b) such other Persons
(including Affiliates of the Managing Member or the Company) as the Managing
Member may designate from time to time, in its sole and absolute discretion.

 

6

 

“Liquidating Gains means any net capital gain
realized in connection with the actual or hypothetical sale of all or
substantially all of the assets of the Company (including any Liquidating
Transaction), including but not limited to net capital gain realized in
connection with an adjustment to the Carrying Value of the Company’s assets
under Section 4.4(d).

 

“Liquidating Transaction” means any sale or
other disposition of all or substantially all of the assets of the Company or a
related series of transactions that, taken together, results in the sale or
other disposition of all or substantially all of the assets of the Company.

 

“Liquidator” has the meaning set forth in Section
13.2.

 

“LTIP” means Long Term Incentive Plan.

 

“LTIP Unit” means a Membership Interest which
is designated as an LTIP Unit and which has the rights, preferences and other
privileges designated in Section 4.5 hereof and elsewhere in this
Agreement in respect of Holders of LTIP Units. The allocation of LTIP Units
among the Members shall be set forth on Exhibit A, as may be amended
from time to time.

 

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

 

“Managing Member” means Morgans Hotel Group Co., a Delaware corporation, and its
successors as a Managing Member of the Company in accordance with the terms of
this Agreement.

 

“Managing Membership Interest” means a
Membership Interest held by the Managing Member (including any Membership
Interest acquired by the Managing Member pursuant to Section 4.2 hereof)
that is a Managing Membership interest and includes any and all benefits to
which the Managing Member may be entitled and all obligations of the Managing
Member hereunder. A Managing Membership Interest may be expressed as a number
of Membership Units. All Membership Units held by the Managing Member shall be
deemed to be the Managing Member Interest.

 

“Member” means individually, the Managing
Member or a Non-Managing Member, and “Members” means collectively, the
Managing Member and the Non-Managing Members.

 

“Membership Interest” means an ownership
interest in the Company representing a Capital Contribution by either a
Non-Managing Member or the Managing Member and includes any and all benefits to
which the holder of such a Membership Interest may be entitled as provided in
this Agreement, together with all obligations of such Person to comply with the
terms and provisions of this Agreement. A Membership Interest may be expressed
as a number of Membership Units.

 

“Membership Record Date” means the record date
established by the Managing Member for the distribution pursuant to Section
5.1 hereof, which record date shall be the same as the record date
established by the Managing Member for a distribution to its shareholders of
some or all of its portion of such distribution, and also means any record date
established by the Managing Member in connection with any vote or consent of
the Non-Managing Members pursuant to this Agreement.

 

7

 

“Membership Unit” or “Unit” means a
fractional, undivided share of the Membership Interests of all Members issued
pursuant to Sections 4.1 and 4.2, in such number as set forth on Exhibit A,
as such Exhibit may be amended from time to time. Any rights and preferences or
other obligations with respect to Units as may be authorized hereunder shall be
set forth in an exhibit hereto.

 

“Membership Unit Economic Balance” has the
meaning set forth in Section 6.3(a).

 

“Net Income” means for any taxable period, the
excess, if any, of the Company’s items of income and gain for such taxable
period over the Company’s items of loss and deduction for such taxable period. The
items included in the calculation of Net Income shall be determined in
accordance with Section 4.4. Once an item of income, gain, loss or
deduction that has been included in the initial computation of Net Income is
subjected to the special allocation rules in Sections 6.3 and 6.4,
Net Income or the resulting Net Loss, whichever the case may be, shall be
recomputed without regard to such item.

 

“Net Loss” means for any taxable period, the
excess, if any, of the Company’s items of loss and deduction for such taxable
period over the Company’s items of income and gain for such taxable period. The
items included in the calculation of Net Loss shall be determined in accordance
with Section 4.4. Once an item of income, gain, loss or deduction that
has been included in the initial computation of Net Loss is subjected to the
special allocation rules in Sections 6.3 and 6.4, Net Loss or the
resulting Net Income, whichever the case may be, shall be recomputed without
regard to such item.

 

“New Securities” has the meaning set forth in Section
4.2(c).

 

“Non-Managing Member” means any Person named as
a Non-Managing Member on Exhibit A, as such Exhibit may be amended from
time to time, including any Substituted Non-Managing Member or Additional
Non-Managing Member, in such Person’s capacity as a Non-Managing Member in the
Company.

 

“Non-Managing Membership Interest” means a
Membership Interest held by a Non-Managing Member representing a fractional
part of the Membership Interests of all Non-Managing Members and includes any
and all benefits to which such Non-Managing Member may be entitled and all
obligations of such Non-Managing Member hereunder. A Non-Managing Membership Interest
may be expressed as a number of Membership Units.

 

“Nonrecourse Built-in Gain” means, with respect
to any Contributed Properties or Adjusted Properties that are subject to a
mortgage or negative pledge securing a Nonrecourse Liability, the amount of any
taxable gain that would be allocated to the Members pursuant to Section
6.4(b) if such properties were disposed of in a taxable transaction in full
satisfaction of such liabilities and for no other consideration.

 

“Nonrecourse Deductions” has the meaning set
forth in Regulations Section 1.704-2(b)(1), and the amount of Nonrecourse
Deductions for a Partnership Year shall be determined in accordance with the
rules of Regulations Section 1.704-2(c).

 

“Nonrecourse Liability” has the meaning set
forth in Regulations Section 1.752-1(a)(2).

 

8

 

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

 

“Original Operating Agreement” has the meaning
set forth in the recitals.

 

“Partner Minimum Gain” means an amount, with
respect to each Partner Nonrecourse Debt, equal to the Partnership Minimum Gain
that would result if such Partner Nonrecourse Debt were treated as a
Nonrecourse Liability, determined in accordance with Regulations Section 1.704-2(i)(3).

 

“Partner Nonrecourse Debt” has the meaning set
forth in Regulations Section 1.704-2(b)(4).

 

“Partnership Minimum Gain” has the meaning set
forth in Regulations Section 1.704-2(b)(2), and the amount of Partnership
Minimum Gain, as well as any net increase or decrease in Partnership Minimum
Gain, for a Partnership Year shall be determined in accordance with the rules
of Regulations Section 1.704-2(d).

 

“Partnership Year” means the fiscal year of the
Company, which shall be the calendar year.

 

“Percentage Interest” means, as to any Member,
its interest in the Company as determined by dividing the Membership Units
owned by such Member by the total number of Membership Units then outstanding
and as specified on Exhibit A, as such Exhibit may be amended from time
to time.

 

“Person” means an individual or a corporation,
partnership, trust, unincorporated organization, association, limited liability
company, estate or other entity.

 

“Plan Asset Regulations” means the regulations
promulgated by the United States Department of Labor in Title 29, Code of
Federal Regulations, Part 2510, Section 101.3, and any successor regulations
thereto.

 

“Preferred Shares” has the meaning set forth in
Section 4.2(c).

 

 “Recapture
Income” means any gain recognized by the Company (computed without regard
to any adjustment required by Section 734 or Section 743 of the Code) upon the
disposition of any property or asset of the Company, which gain is
characterized as ordinary income because it represents the recapture of
deductions previously taken with respect to such property or asset.

 

“Recourse Liabilities” has the meaning set
forth in Regulations Section 1.752-1(a)(1).

 

“Redeeming Member” shall have the meaning as
set forth in Section 4.2(e)(1).

 

“Redemption Right” shall have the meaning as
set forth in Section 4.2(e)(1).

 

9

 

 “Regulations”
means the Income Tax Regulations promulgated under the Code, as such
regulations may be amended from time to time (including corresponding
provisions of succeeding regulations).

 

“Residual Gain” or “Residual Loss” means
any item of gain or loss, as the case may be, of the Company recognized for
Federal income tax purposes resulting from a sale, exchange or other
disposition of Contributed Property or Adjusted Property, to the extent such
item of gain or loss is not allocated pursuant to Section 6.4(b)(1)(i)
or 6.4(b)(2)(i) to eliminate Book-Tax Disparities.

 

“Securities Act” shall have the meaning set
forth in Section 4.2(e)(4).

 

“704(c) Value” of any Contributed Property
means the value of such property as set forth on Exhibit B, or if no
value is set forth on Exhibit B, the fair market value of such property
or other consideration at the time of contribution as determined by the Managing
Member using such reasonable method of valuation as it may adopt. Subject to Section
4.4, the Managing Member shall use such method as it deems reasonable and
appropriate to allocate the aggregate of the 704(c) Value of Contributed
Properties among each separate property on a basis proportional to its fair
market value.

 

“Shares” means any Common Shares, of any class,
and Preferred Shares issued to a Non-Managing Member pursuant to Section
4.2(e).

 

“Shares Amount” shall mean a number of Common
Shares equal to the number of Units offered for redemption by a Redeeming
Member, multiplied by the Unit Adjustment Factor.

 

“Specified Redemption Date” means the tenth
Business Day after receipt by the Managing Member of a Notice of Redemption.

 

“Stock Incentive Plan” means the Morgans Hotel
Group Co. 2006 Omnibus Stock Incentive Plan, as such plan may be amended,
modified or supplemented from time to time.

 

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

 

“Substituted Non-Managing Member” means a
Person who is admitted as a Non-Managing Member to the Company pursuant to Section
11.4.

 

“Tendered Units” shall have the meaning set
forth in Section 4.2(e)(1).

 

“Transaction” has the meaning set forth in Section
11.2(c).

 

“Unit Adjustment Factor” means initially 1.0,
unless provided otherwise in an exhibit hereto setting forth rights,
preferences and obligations with respect to any specific class or series of
Membership Units issued after the date hereof; provided, however,
that in the event that the Managing Member (a) declares or pays a dividend on
its outstanding Common Shares in Common Shares or makes a distribution to all
holders of its outstanding Common Shares in

 

10

 

Common Shares, (b) subdivides its outstanding Common Shares, or (c)
combines its outstanding Common Shares into a smaller number of Common Shares,
the Unit Adjustment Factor, as applicable, shall be adjusted by multiplying the
Unit Adjustment Factor by a fraction, the numerator of which shall be the
number of Common Shares issued and outstanding on the record date (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 Common Shares (determined without the above assumption) issued and
outstanding on the record date for such dividend, distribution, subdivision or
combination. Any adjustment to the Unit Adjustment Factor shall become
effective immediately after the effective date of such event retroactive to the
record date, if any, for such event. Any adjustment to the Unit Adjustment
Factor shall be carried forward to successive adjustments.

 

“Unrealized Gain” attributable to any item of
Company Property means, as of any date of determination, the excess, if any, of
(a) the fair market value of such property (as determined under Section 4.4)
as of such date, over (b) the Carrying Value of such property (prior to any
adjustment to be made pursuant to Section 4.4) as of such date.

 

“Unrealized Loss” attributable to any item of
Company Property means, as of any date of determination, the excess, if any, of
(a) the Carrying Value of such property (prior to any adjustment to be made
pursuant to Section 4.4) as of such date, over (b) the fair market value
of such property (as determined under Section 4.4) as of such date.

 

“Unvested LTIP Units” has the meaning set forth
in Section 4.5(d)(i).

 

“Valuation Date” means the date of receipt by
the Managing Member 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 Common Share,
of any class, the average of the daily market price for the twenty (20)
consecutive trading days immediately preceding the Valuation Date. The market
price for each such trading day shall be: (a) if the Common Shares are 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;
(b) if the Common Shares are 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 Managing Member; or (c) if the Common Shares
are 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
Managing Member, 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 the most
recent day (not more than 20 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 20 days prior to the date in
question, the Value of the Common Shares shall be determined by the Managing
Member acting in good faith on the basis of such quotations and other
information as it considers, in its judgment, appropriate. In the event a
holder of Common Shares, of any class, would be entitled to receive Common
Share

 

11

 

Rights, then the Value of such Common Share Rights shall be determined
by the Managing Member 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 4.5(d)(i).

 

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

 

ARTICLE II

ORGANIZATIONAL MATTERS

 

Section 2.1             Organization and Continuation;
Application of Act.

 

(a)           Organization and Continuation of Company. The Managing Member and the
Non-Managing Members do hereby continue the Company as a limited liability
company according to all of the terms and provisions of this Agreement and
otherwise in accordance with the Act. The Managing Member is the sole Managing
Member and the Non-Managing Members are the sole Non-Managing Members of the
Company.

 

(b)           Application of Act. The Company is a limited liability
company subject to the provisions of the Act and the terms and conditions set
forth in this Agreement. Except as expressly provided herein to the contrary,
the rights and obligations of the Members and the administration and
termination of the Company shall be governed by the Act. No Member has any
interest in any Company Property and the Membership Interests of each Member
shall be personal property for all purposes.

 

Section 2.2             Name. The name of the Company is Morgans Group LLC. The
Company’s business may be conducted under any other name or names deemed
advisable by the Managing Member, including the name of the Managing Member or
any Affiliate thereof. The words “limited liability company,” or “LLC” or
similar words or letters shall be included in the Company’s name where
necessary for the purposes of complying with the laws of any jurisdiction that
so requires. The Managing Member in its sole and absolute discretion may change
the name of the Company at any time and from time to time and shall notify the
Non-Managing Members of such change in the next regular communication to the
Non-Managing Members.

 

Section 2.3             Registered Office and Agent; Principal
Office. The
address of the registered office of the Company in the State of Delaware is
located c/o Corporation Trust Company, Corporation Trust Center, 1209 Orange
Street, Wilmington, Delaware 19801, County of New Castle and the registered
agent for service of process on the Company in the State of Delaware at such
registered office is the Corporation Trust Company. The principal office of the
Company is located at 475 Tenth Avenue, New York, New York 10018, or such other
place as the Managing Member may from time to time designate by notice to the
Non-Managing

 

12

 

Members. The Company may
maintain offices at such other place or places within or outside the State of
Delaware as the Managing Member deems advisable.

 

Section 2.4             Term. The term of the Company shall continue until
dissolved pursuant to the provisions of Article XIII or as otherwise provided
by law.

 

ARTICLE III

PURPOSE

 

Section 3.1             Purpose and Business. The purpose and nature of the business
to be conducted by the Company is (a) to conduct any business that may be
lawfully conducted by a limited liability company organized pursuant to the Act,
(b) to enter into any partnership, joint venture or other similar
arrangement to engage in any of the foregoing or the ownership of interests in
any entity engaged in any of the foregoing and (c) to do anything
necessary or incidental to the foregoing which, in each case, is not in breach
of this Agreement.

 

Section 3.2             Powers. The Company is empowered to do any and all acts and
things necessary, appropriate, proper, advisable, incidental to or convenient
for the furtherance and accomplishment of the purposes and business described
herein and for the protection and benefit of the Company including, without
limitation, full power and authority, directly or through its ownership
interest in other entities, to enter into, perform and carry out contracts of
any kind, borrow money and issue evidences of indebtedness, whether or not
secured by mortgage, deed of trust, pledge or other lien, acquire, own, manage,
improve and develop real property, and lease, sell, transfer and dispose of
real property.

 

ARTICLE IV

CAPITAL CONTRIBUTIONS;

ISSUANCE OF UNITS; CAPITAL ACCOUNTS

 

Section 4.1             Capital Contributions of the Members.

 

(a)           Initial Capital Contributions. At the time of the execution of this
Agreement, the Members shall make or shall have made the Capital Contributions
set forth in Exhibit A to this Agreement. The Members shall own
Membership Units in the amounts set forth on Exhibit A and shall have a
Percentage Interest in the Company as set forth on Exhibit A, which
Percentage Interest shall be adjusted on Exhibit A from time to time by
the Managing Member to the extent necessary to reflect accurately redemptions,
conversions, Capital Contributions, the issuance of additional Membership
Units, or similar events having an effect on a Member’s Percentage Interest. The
ownership of Membership Units may be evidenced by a form of certificate for
units designated by the Managing Member; provided, however, that
the Managing Member may provide that some or all of any or all classes or series
of the Membership Units shall be uncertificated. Each certificate for
Membership Units shall be consecutively numbered or otherwise identified. Certificates
of Membership Units shall be signed by or in the name of the Company by the
Chief Executive Officer, the President or a Vice President and by the

 

13

 

Treasurer or an Assistant Treasurer or the Secretary
or an Assistant Secretary of the Company. Where a certificate is countersigned
by a transfer agent, other than the Company or an employee of the Company, or
by a registrar, the signatures of one or more officers of the Company may be
facsimiles. In case any officer, transfer agent or registrar who has signed or
whose facsimile signature has been placed upon a certificate shall have ceased
to be such officer, transfer agent or registrar before such certificate is
issued, the certificate may be issued by the Company with the same effect as if
such officer, transfer agent or registrar were such officer, transfer agent or
registrar at the date of its issue.

 

(b)           Additional Capital Contributions.

 

(1)           No Member shall be assessed or, except as
provided for in Section  4.1(b)(2) and except for any such amounts
which a Non-Managing Member may be obligated to repay under Section 10.4,
be required to contribute additional funds or other property to the Company. Any
additional funds or other property required by the Company, as determined by
the Managing Member in its sole discretion, may, at the option of the Managing
Member and without an obligation to do so (except as provided for in Section
4.1(b)(2)), be contributed by the Managing Member as additional Capital
Contributions. If and as the Managing Member or any other Member makes
additional Capital Contributions to the Company, each such Member shall receive
additional Membership Units as provided for in Section 4.2.

 

(2)           Except to the extent provided in Section
7.5 below relating to interests in Company Properties held directly by the
Company or through Subsidiaries, the net proceeds of any and all funds raised
by or through the Managing Member through the issuance of additional Shares of
the Managing Member shall be contributed to the Company as additional Capital
Contributions, and in such event the Managing Member shall be issued additional
Membership Units pursuant to Section 4.2 below.

 

(c)           Return of Capital Contributions. Except as otherwise expressly provided
herein, the Capital Contribution of each Member will be returned to that Member
only in the manner and to the extent provided in Article V and Article XIII
hereof, and no Member may withdraw from the Company or otherwise have any right
to demand or receive the return of its Capital Contribution to the Company (as
such), except as specifically provided herein. Under circumstances requiring a
return of any Capital Contribution, no Member shall have the right to receive
property other than cash, except as specifically provided herein. No Member
shall be entitled to interest on any Capital Contribution or Capital Account
notwithstanding any disproportion therein as between the Members. Except as
specifically provided herein, the Managing Member shall not be liable for the
return of any portion of the Capital Contribution of any Non-Managing Member,
and the return of such Capital Contributions shall be made solely from Company
assets.

 

14

 

(d)           Liability of Members. No Member shall have any further
personal liability to contribute money to, or in respect of, the liabilities or
the obligations of the Company, nor shall any Member be personally liable for
any obligations of the Company, except as otherwise provided in this Article IV
or in the Act.

 

Section 4.2             Issuances of Additional Membership
Interests.

 

(a)           Issuance to Other Than the Managing
Member. The
Managing Member is hereby authorized to cause the Company to issue such
additional Membership Interests in the form of Membership Units for any Company
purpose at any time or from time to time, to the Members (other than issuances
to the Managing Member, which issuances are governed by Section 4.2(b)
and Section 4.2(c)) or to other Persons for such consideration and on
such terms and conditions as shall be established by the Managing Member in its
sole and absolute discretion, all without the approval of any Non-Managing
Members except to the extent provided herein; provided, however,
that the Company also may from time to time issue to third parties additional
Membership Interests (other than any such issuance to the Managing Member which
is governed by Sections  4.2(b) and 4.2(c)) in one or more
classes, or one or more series of any of such classes, with such voting powers,
full or limited, or no voting powers, and such designations, preferences and
relative, participating, optional or other special rights, and qualifications,
limitations or restrictions thereof, including voting powers, designations,
preferences and relative, participating, optional or other special rights, and
qualifications, limitations or restrictions senior to Non-Managing Membership
Interests, as may be set forth an exhibit hereto from time to time, subject to
Delaware law, including, without limitation, with respect to (i) the
allocations of items of 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 distributions, and (iii) the rights
of each such class or series of Membership Interests upon dissolution and
liquidation of the Company. To the extent more than one class of Membership
Units is outstanding, the Membership Units in this Agreement shall be referred
to as Class A Units. To the extent more than one class of Common Shares is
outstanding, the Common Shares in this Agreement shall be referred to as Class
A Common Shares.

 

(b)           Issuance to the Managing Member. The Company also may from time to time
issue to the Managing Member additional Membership Units or other Membership
Interests in one or more classes, or one or more series of any of such classes,
with such voting powers, full or limited, or no voting powers, and such
designations, preferences and relative, participating, optional or other
special rights, and qualifications, limitations or restrictions thereof,
including voting powers, designations, preferences and relative, participating,
optional or other special rights, and qualifications, limitations or
restrictions senior to Non-Managing Membership Interests, as may be set forth
in an exhibit hereto from time to time, all as shall be determined by the
Managing Member, subject to Delaware law, including, without limitation, with
respect to (i) the allocations of items of 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 Interests to share in distributions, and (iii) the
rights of each such class or series of Membership Interests upon dissolution
and liquidation of the Company; provided, however, that (x) the
additional Membership

 

15

 

Interests are issued in connection with an issuance of
shares of the Managing Member, which shares have designations, preferences and
other rights, all such that the economic interests are substantially similar to
the designations, preferences and other rights of the additional Membership
Interests issued to the Managing Member in accordance with this Section
4.2(b), and (y) the Managing Member shall make a Capital Contribution to
the Company (1) in an amount equal to the net proceeds raised in connection
with the issuance of such shares of the Managing Member in the event such
shares are sold for cash or cash equivalents or (2) in the form of the property
received in consideration for such shares, in the event such shares are issued
in consideration for other property.

 

(c)           Issuance of Additional Common Shares or
Preferred Shares.
The Managing Member is explicitly authorized to issue additional Common Shares,
of any class, or preferred shares of beneficial interest of the Managing Member
(“Preferred Shares”), or rights, options, warrants or convertible or
exchangeable securities containing the right to subscribe for or purchase
Common Shares, of any class, or Preferred Shares (“New Securities”) and
in connection therewith, as further provided in Section 4.2(b), (i) the
Managing Member shall cause the Company to issue to the Managing Member
Membership Interests or rights, options, warrants or convertible or
exchangeable securities of the Company having designations, preferences and
other rights, as may be set forth on an exhibit hereto from time to time, all
such that the economic interests are substantially similar to those of the New
Securities, and (ii) the Managing Member shall contribute the net proceeds
from, or the property received in consideration for, the issuance of such New
Securities and from the exercise of rights contained in such New Securities to
the Company. In connection with the issuance of Membership Interests which are
substantially similar to New Securities, the Managing Member is authorized to
modify or amend the distributions or allocations hereunder solely to the extent
necessary to give effect to the designations, preferences and other rights
pertaining to such Membership Interests.

 

(d)           Issuance Pursuant to Option Plans.

 

(1)           Upon the exercise of an option granted by
the Managing Member for Common Shares, of any class, the Managing Member shall
cause the Company to issue to the Managing Member one Membership Unit for each
such Common Share acquired upon such exercise pursuant to the Option Plans (or
such other number of Membership Units based on the relationship a different
class of Common Shares bears to Common Shares), and the Managing Member shall
contribute to the Company the net proceeds received upon such exercise (it
being understood that the Managing Member may issue Common Shares in connection
with the Option Plans without receiving a specified amount of proceeds and that
the issuance of such Common Shares shall nonetheless entitle the Managing
Member to additional Membership Units).

 

(2)           The Managing Member shall cause the
Company to issue Membership Units to employees of the Company upon the exercise
by any such employees of an option to acquire Membership Units granted by the
Company

 

16

 

pursuant to the Option Plans in accordance with the
terms of the Option Plans. Membership Units so issued shall represent
Non-Managing Membership Interests.

 

(3)           The Managing Member shall cause the
Company to issue Membership Units to any Subsidiary upon the exercise by an
employee of such Subsidiary of an option to acquire Membership Units granted by
such Subsidiary pursuant to the Option Plans, and such Subsidiary shall
transfer to the Company the price per Membership Unit required by the Option
Plans to be paid by Subsidiaries. Membership Units issued to any such
Subsidiary shall represent Non-Managing Membership Interests.

 

(e)           Redemption of Units.

 

(1)           Subject to Section 11.3(d) and the further
provisions of this Section 4.2(e), and except as otherwise set forth in
an exhibit hereto setting forth rights, preferences and obligations with
respect to any particular class or series of Membership Units issued after the
date hereof, each Non-Managing Member shall have the right (i) on or after the
date twelve (12) months after the Effective Date, with respect to the
Membership Units acquired on or contemporaneously with the Effective Date, or
(ii) on or after such other date as expressly provided in any agreement entered
into between the Company and any Non-Managing Member, including the Structuring
and Contribution Agreement, to require the Company to redeem (the “Redemption
Right”) on a Specified Redemption Date all or a portion of the Membership
Units held by such Non-Managing Member at a redemption price equal to and in
the form of the Cash Amount to be paid by the Company. The Redemption Right
shall be exercised pursuant to a Notice of Redemption delivered to the Company
(with a copy to the Managing Member) by the Non-Managing Member who is
exercising the Redemption Right (the “Redeeming Member”); provided,
however, that the Company shall not be obligated to satisfy such
Redemption Right if the Managing Member elects to purchase the Membership Units
subject to the Notice of Redemption (the “Tendered Units”); provided,
further, that in the event the Managing Member issues to all holders of
Common Shares rights, options, warrants or convertible or exchangeable
securities entitling the shareholders to subscribe for or purchase Common
Shares, or any other securities or property (collectively, the “Common Share
Rights”) then (except to the extent such rights have already been reflected
in an adjustment to the Unit Adjustment Factor as provided in Section 4.2(e)(2)
below) the Redeeming Member shall also be entitled to receive such Common Share
Rights that a holder of that number of Common Shares would be entitled to
receive. A Non-Managing Member may not exercise the Redemption Right for less
than ten thousand (10,000) Membership Units or, if such Non-Managing Member
holds less than ten thousand (10,000) Membership Units, all of the Membership
Units held by such Non-Managing Member.

 

(2)           Notwithstanding the provisions of Section
4.2(e)(1), a Non-Managing Member that exercises the Redemption Right shall
be deemed to have offered to sell the Membership Units described in the Notice
of Redemption to the

 

17

 

Managing Member, and the Managing Member may, in its
sole and absolute discretion, elect to assume directly and satisfy a Redemption
Right, and acquire some or all of such Membership Units by paying to the
Redeeming Member either the Cash Amount, or the Shares Amount, as elected by
the Managing Member (in its sole and absolute discretion), on the Specified
Redemption Date, whereupon the Managing Member shall acquire the Membership
Units offered for redemption by the Redeeming Member. If the Managing Member
shall elect to exercise its right to purchase Membership Units under this Section
4.2(e)(2) with respect to a Notice of Redemption, it shall so notify the
Redeeming Member promptly after the receipt by the Company of such Notice of
Redemption. In the event the Managing Member shall exercise its right to
purchase Membership Units with respect to the exercise of a Redemption Right in
the manner described in the first sentence of this Section 4.2(e)(2),
the Company shall have no obligation to pay any amount to the Redeeming Member
with respect to Redeeming Member’s exercise of the Redemption Right, and each
of the Redeeming Member, the Company and the Managing Member shall treat the
transaction between the Managing Member and the Redeeming Member for federal
income tax purposes as a sale of the Redeeming Member’s Membership Units to the
Managing Member.

 

(3)           In the event of any change in the Unit
Adjustment Factor, the number of Membership Units held by each Member shall be
proportionately adjusted by multiplying the number of Membership Units held by
such Member immediately prior to the change in the Unit Adjustment Factor by
the new Unit Adjustment Factor; the intent of this provision is that one
Membership Unit remains equivalent in value to one Common Share without
dilution (including any securities for which Shares are exchanged in a
transaction contemplated by Section 11.2(c)). In the event the Managing
Member issues any Common Shares in exchange for Membership Units pursuant to
this Section 4.2(e), any such Membership Units so acquired by the
Managing Member shall immediately thereafter be canceled by the Company and the
Company shall issue to the Managing Member new Membership Units pursuant to Section
4.2(c) hereof. Each Redeeming Member agrees to execute such documents as
the Managing Member may reasonably require in connection with the issuance of
Common Shares upon exercise of the Redemption Right.

 

(4)           The Shares Amount, if applicable, shall
be delivered as duly authorized, validly issued, fully paid and nonassessable
Common Shares and, if applicable, free of any pledge, lien, encumbrance or
restriction, other than those provided in the Charter, the Bylaws of the
Managing Member, the Securities Act of 1933, as amended (the “Securities Act”),
relevant state securities or blue sky laws and any applicable registration
rights agreement with respect to such Common Shares entered into by the
Redeeming Member. Notwithstanding any delay in such delivery (but subject to Section
4.2(e)(6)), the Redeeming Member shall be deemed the owner of such Common
Shares for all purposes, including without limitation, rights to vote or
consent, and receive dividends, as of the Specified Redemption Date.

 

18

 

(5)          Each Non-Managing Member covenants and
agrees with the Managing Member that all Tendered Units shall be delivered to
the Managing Member free and clear of all liens, claims and encumbrances
whatsoever and should any such liens, claims and/or encumbrances exist or arise
with respect to such Tendered Units, the Managing Member shall be under no
obligation to acquire the same. Each Non-Managing Member further agrees that,
in the event any state or local property transfer tax is payable solely with
respect to its Tendered Units transferred to the Managing Member (or its
designee), such Non-Managing Member shall assume and pay such transfer tax.

 

(6)          Notwithstanding the provisions of Section
4.2(e) or any other provision of this Agreement, a Member (i) shall not be
entitled to effect a Redemption for cash or an exchange for Common Shares to
the extent the ownership or right to acquire Common Shares pursuant to such
exchange by such Member on the Specified Redemption Date could cause such
Member or any other Person to violate the restrictions on ownership and
transfer of Common Shares set forth in the Charter and (ii) shall have no
rights under this Agreement to acquire Common Shares which would otherwise be
prohibited under the Charter. To the extent any attempted redemption or
exchange for Common Shares would be in violation of this Section 4.2(e)(6),
it shall be null and void ab initio and such Member shall not acquire any
rights or economic interest in the cash otherwise payable upon such redemption
or the Common Shares otherwise issuable upon such exchange.

 

(7)          Notwithstanding anything herein to the
contrary (but subject to Section 4.2(e)(6)), with respect to any
redemption or exchange for Common Shares pursuant to this Section 4.2(e):

 

(i)            All Membership Units acquired by the
Managing Member pursuant thereto shall automatically, and without further
action required, be converted into and deemed to be Managing Member Interests
comprised of the same number and class of Membership Units.

 

(ii)           The consummation of any redemption or
exchange for Common Shares shall be subject to the expiration or termination of
the applicable waiting period, if any, under the Hart-Scott-Rodino Antitrust
Improvements Act of 1976, as amended.

 

(iii)          Each Redeeming Member shall continue to
own all Membership Units subject to any redemption or exchange for Common Shares,
and be treated as a Non-Managing Member with respect to such Membership Units
for all purposes of this Agreement, until the Specified Redemption Date. Until
a Specified Redemption Date, the Redeeming Member shall have no rights as a
stockholder of the Managing Member with respect to such Redeeming Member’s
Membership Units, except as may be provided in the Investors Agreement.

 

19

 

Section 4.3             No Preemptive Rights. Except as specifically provided in this
Agreement, no Person shall have any preemptive, preferential or other similar
right with respect to (a) additional Capital Contributions or loans to the
Company, or (b) issuance or sale of any Membership Units.

 

Section 4.4             Capital Accounts of the Members.

 

(a)           General. The Company shall maintain for each Member a
separate Capital Account in accordance with the rules of Regulations Section
1.704-1(b)(2)(iv). Such Capital Account shall be increased by (a) the amount of
all Capital Contributions made by such Member to the Company pursuant to this
Agreement and (b) all items of income and gain (including income and gain
exempt from tax) computed in accordance with Section 4.4(b) hereof and
allocated to such Member pursuant to Sections 6.1 through Section 6.3
of the Agreement, and decreased by (i) the amount of cash or Agreed Value of
all actual and deemed distributions of cash or property made to such Member
pursuant to this Agreement and (ii) all items of deduction and loss computed in
accordance with Section 4.4(b) hereof and allocated to such Member
pursuant to Sections 6.1 through Section 6.3 of the Agreement.

 

(b)           Income, Gains, Deductions and Losses. For purposes of computing the amount of
any item of income, gain, loss or deduction to be reflected in the Members’
Capital Accounts, unless otherwise specified in this Agreement, the
determination, recognition and classification of any such item shall be the
same as its determination, recognition and classification for Federal income
tax purposes determined in accordance with Section 703(a) of the Code (for this
purpose all items of income, gain, loss or deduction required to be stated
separately pursuant to Section 703(a)(1) of the Code shall be included in
taxable income or loss), with the following adjustments:

 

(1)           Except as otherwise provided in
Regulations Section 1.704-1(b)(2)(iv)(m), the computation of all items of
income, gain, loss and deduction shall be made without regard to any election
under Section 754 of the Code which may be made by the Company.

 

(2)           The computation of all items of income,
gain, loss and deduction shall be made without regard to the fact that items
described in Sections 705(a)(1)(B) or 705(a)(2)(B) of the Code are not
includable in gross income or are neither currently deductible nor capitalized
for Federal income tax purposes.

 

(3)           Any income, gain or loss attributable to
the taxable disposition of any Company Property shall be determined as if the
adjusted basis of such property as of such date of disposition were equal in
amount to the Company’s Carrying Value with respect to such property as of such
date.

 

(4)           In lieu of the depreciation,
amortization, and other cost recovery deductions taken into account in
computing such taxable income or loss, there shall be taken into account
Depreciation for such fiscal year.

 

20

 

(5)           In the event the Carrying Value of any
Company asset is adjusted pursuant to Section 4.4(d) hereof, the amount
of any such adjustment shall be taken into account as gain or loss from the
disposition of such asset.

 

(6)           Any items specially allocated under Section
6.4 hereof shall not be taken into account.

 

(c)           Transfers of Membership Units. A transferee of a Membership Unit shall
succeed to a pro rata portion of the Capital Account of the transferor.

 

(d)           Unrealized Gains and Losses.

 

(1)           Consistent with the provisions of
Regulations Section 1.704-1(b)(2)(iv)(f), and as provided in Section
4.4(d)(2), the Carrying Values of all Company assets shall be adjusted upward
or downward to reflect any Unrealized Gain or Unrealized Loss attributable to
such Company Property, as of the times of the adjustments provided in Section
4.4(d)(2) hereof, as if such Unrealized Gain or Unrealized Loss had been
recognized on an actual sale of each such property and allocated pursuant to Section
6.1 of the Agreement.

 

(2)           Such adjustments shall be made as of the
following times: (i) immediately prior to the acquisition of an additional
interest in the Company by any new or existing Member in exchange for more than
a de minimis Capital Contribution; (ii) immediately prior to 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; (iii) immediately
prior to the issuance of any LTIP Units; and (iv) immediately prior to the
liquidation of the Company or the Managing Member’s interest in the Company
within the meaning of Regulations Section 1.704-l(b)(2)(ii)(g).

 

(3)           In accordance with Regulations Section
1.704-1(b)(2)(iv)(e), the Carrying Values of Company assets distributed in kind
shall be adjusted upward or downward to reflect any Unrealized Gain or
Unrealized Loss attributable to such Company Property, as of the time any such
asset is distributed.

 

(4)           In determining such Unrealized Gain or
Unrealized Loss, the aggregate cash amount and fair market value of all Company
assets (including cash or cash equivalents) shall be determined by the Managing
Member using such reasonable method of valuation as it may adopt, or in the
case of a liquidating distribution pursuant to Article XIII of this Agreement,
be determined and allocated by the Liquidator using such reasonable methods of
valuation as it may adopt. The Managing Member, or the Liquidator, as the case
may be, shall allocate such aggregate value among the assets of the Company (in
such manner as it determines in its sole and absolute discretion to arrive at a
fair market value for individual properties).

 

(e)           Modification by Managing Member. The provisions of this Agreement
relating to the maintenance of Capital Accounts are intended to comply with
Regulations

 

21

 

issued under Sections 704(b) of the Code, and shall be
interpreted and applied in a manner consistent with such Regulations. In the
event the Managing Member 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, the Managing Member, or any Non-Managing Members) are computed in
order to comply with such Regulations, the Managing Member may make such
modification; provided, however, that it will not have a material
effect on the amounts distributable to any Person pursuant to Article XIII of
this Agreement upon the liquidation of the Company. The Managing Member also
shall (a) 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 Regulations Section 1.704-1(b)(2)(iv)(q), and (b)
make any appropriate modifications in the event unanticipated events might
otherwise cause this Agreement not to comply with Regulations Section 1.704-1(b).

 

Section 4.5             LTIP Units.

 

(a)           Issuance of LTIP Units. The Managing Member may from time to
time issue LTIP Units to Persons who provide services to the Company, for such
consideration (or no consideration) as the Managing Member may determine to be
appropriate, and admit such Persons as Non-Managing Members. Subject to the
following provisions of this Section and the special provisions of
Sections 4.6, 6.3(a) and 14.3, LTIP Units shall be treated as Membership
Units, with all of the rights, privileges and obligations attendant thereto. For
purposes of computing the Members’ Percentage Interests, LTIP Units shall be treated
as Membership Units.

 

(b)           Adjustments to LTIP Units. The Company shall maintain at all times
a one-to-one correspondence between LTIP Units and Membership Units for
conversion, distribution and other purposes, including without limitation
complying with the following procedures: 
If an Adjustment Event (as defined below) occurs, then the Managing
Member shall make a corresponding adjustment to the LTIP Units to maintain a
one-for-one correspondence between Membership Units and LTIP Units. The following
shall be “Adjustment Events”: 
(A) the Company makes a distribution on all outstanding Membership
Units in Membership Units, (B) the Company subdivides the outstanding
Membership Units into a greater number of units or combines the outstanding
Membership Units into a smaller number of units, or (C) the Company issues
any Membership Units in exchange for its outstanding Membership Units by way of
a reclassification or recapitalization of its Membership 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 Membership Units in
a financing, reorganization, acquisition or other similar business transaction,
(y) the issuance of Membership Units pursuant to any employee benefit or
compensation plan or distribution reinvestment plan, or (z) the issuance
of any Membership Units to the Managing Member in respect of a

 

22

 

capital contribution to the Company of proceeds from
the sale of securities by the Managing Member. If the Company takes an action
affecting the Membership Units other than actions specifically described above
as “Adjustment Events” and in the opinion of the Managing Member such action
would require an adjustment to the LTIP Units to maintain the one-to-one
correspondence described above, the Managing Member shall have the right to
make such adjustment to the LTIP Units, to the extent permitted by law and by
the terms of any plan pursuant to which the LTIP Units have been issued, in
such manner and at such time as the Managing Member, in its sole discretion,
may determine to be appropriate under the circumstances. If an adjustment is
made to the LTIP Units as herein provided 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.

 

For the avoidance of
doubt, maintenance of the one-to-one correspondence between LTIP Units and
Membership Units as provided above is not intended to alter the Capital Account
Limitation applicable to LTIP Units, the special allocations to be made with
respect to LTIP Units under Section 6.3(a), or any differences in
liquidating distributions to be made under Section 13.2 in the event
that the Company has recognized insufficient Liquidating Gains to make the full
special allocations under Section 6.3(a).

 

(c)           Priority. The LTIP Units shall rank pari passu with the
Membership Units as to the payment of regular and special periodic or other
distributions and, subject to the provisions of Section 13.2, as to
distribution of assets upon liquidation, dissolution or winding up.

 

(d)           Special Provisions. LTIP Units shall be subject to the
following special provisions:

 

(i)            Vesting Agreements and Transferability. LTIP Units may, in the sole discretion
of the Managing Member, 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 Managing Member from time
to time in its sole discretion, subject to any restrictions on amendment
imposed by the relevant Vesting Agreement or by the plan pursuant to which the
LTIP Units were issued, 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.”  Subject to the terms of any Vesting
Agreement, an 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
Membership Units are entitled to transfer their Membership Units pursuant to
Article XI.

 

(ii)           Forfeiture. Unless otherwise specified in the Vesting Agreement,
upon the occurrence of any event specified in a Vesting Agreement as resulting
in either the right of the Company or the Managing Member to repurchase LTIP
Units at a specified

 

23

 

purchase price or some other forfeiture of any LTIP
Units, then if the Company or the Managing Member exercises such right to
repurchase or forfeiture in accordance with the applicable Vesting Agreement,
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 a Membership 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 6.3(a), calculated with respect to the LTIP
Unitholder’s remaining LTIP Units, if any.

 

(iii)          Allocations. LTIP Units shall generally be treated
as Membership Units for purposes of Article VI, but shall also be entitled to
certain special allocations of gain under Section 6.3(a).

 

(iv)          Redemption. The Redemption Right provided to Non-Managing
Members under Section 4.2(e)(1) shall not apply with respect to
LTIP Units unless and until they are converted to Membership Units as provided
in Section 4.6. Thereafter, the Redemption Right under Section
4.2(e)(1) shall apply to such converted Membership Units.

 

(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 Membership Units. Vested LTIP Units are eligible to be
converted into Membership Units under Section 4.6.

 

Section 4.6             Conversion of LTIP Units.

 

(a)           Right to Convert LTIP Units into
Membership Units.
A 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 Membership Units; provided, however, that a LTIP Unitholder
may not exercise the Conversion Right for fewer than one thousand (1,000)
Vested LTIP Units or, if such LTIP Unitholder holds fewer than one thousand
Vested LTIP Units, all of the LTIP Unitholder’s Vested LTIP Units. LTIP
Unitholders shall not have the right to convert Unvested LTIP Units into
Membership 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 LTIP Units to become Vested LTIP Units,
such Person 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 Managing Member shall have the right at any time
to cause a conversion of Vested LTIP Units into Membership Units.

 

24

 

In all cases, the conversion of any LTIP Units into
Membership Units shall be subject to the conditions and procedures set forth in
this Section 4.6.

 

(b)           Number of Units Convertible. A LTIP Unitholder who holds Vested LTIP
Units may convert such Units into an equal number of fully paid and
non-assessable Membership Units, giving effect to all adjustments (if any) made
pursuant to Section 4.5(b). Notwithstanding the foregoing, in no event may
a LTIP Unitholder 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
Membership Unit Economic Balance, in each case as determined as of the
effective date of conversion (the “Capital Account Limitation”).

 

(c)           Notice. In order to exercise his or her Conversion Right, a
LTIP Unitholder shall deliver a notice (a “Conversion Notice”) in the
form attached as Exhibit D to the Company (with a copy to the Managing Member)
not less than 10 nor more than 60 days prior to a date (the “Conversion Date”)
specified in such Conversion Notice; provided, however, that if
the Managing Member has not given to the LTIP Unitholders notice of a proposed
or upcoming Transaction at least thirty (30) days prior to the effective date
of such 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 Managing Member of a Transaction or (y) the third
business day immediately preceding the effective date of such Transaction. A
Conversion Notice shall be provided in the manner provided in Section 15.1.
Each LTIP Unitholder covenants and agrees with the Company that all Vested LTIP
Units to be converted pursuant to this Section 4.6 shall be free and clear of
all liens. Notwithstanding anything herein to the contrary, a LTIP Unitholder
may deliver a redemption notice relating to those Membership Units that will be
issued to such LTIP Unitholder upon conversion of such LTIP Units into
Membership Units in advance of the Conversion Date; provided, however,
that the redemption of such Membership Units by the Company shall in no event
take place until 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 Membership Units into which his or her Vested LTIP
Units will be converted can be redeemed by the Company simultaneously with the
conversion, with the further consequence that, if the Managing Member elects to
assume the Company’s redemption obligation with respect to such Membership
Units under Section 4.2(e)(1) by delivering to such LTIP Unitholder
Common Shares rather than cash, then such LTIP Unitholder can have such Common
Shares issued to him or her simultaneously with the conversion of his or her
Vested LTIP Units into Membership Units. The Managing Member shall cooperate
with LTIP Unitholders to coordinate the timing of the different events
described in the foregoing sentence.

 

(d)           Forced Conversion. The Company, at any time at the
election of the Managing Member, may cause any number of Vested LTIP Units held
by a LTIP Unitholder to be converted (a “Forced Conversion”) into an
equal number of Membership Units, giving effect to all adjustments (if any)
made pursuant to Section 4.2(b); provided, that the Company may not
cause 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

 

25

 

paragraph (b) above. In order to exercise its right of
Forced Conversion, the Company shall deliver a notice (a “Forced Conversion
Notice”) in the form attached as 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 15.1.

 

(e)           Conversion Procedures. A conversion of Vested LTIP Units for
which the LTIP Unitholder 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, Member 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 Membership Units issuable upon such
conversion. After the conversion of LTIP Units, the Company shall deliver to
the LTIP Unitholder, upon his or her written request, a certificate of the
Managing Member certifying the number of Membership Units and remaining LTIP
Units, if any, held by such Person immediately after such conversion in the
manner provided in Section 15.1.

 

(f)            Treatment of Capital Account. For purposes of making future
allocations under Section 6.3(a) 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 Membership Unit Economic Balance.

 

(g)           Mandatory Conversion in Connection with a
Transaction. If
the Company or the Managing Member shall be a party to any Transaction, as a
result of which Membership Units shall be exchanged for or converted into the
right, or the LTIP Unitholders of such Units shall otherwise be entitled, to
receive cash, securities or other property or any combination thereof, then the
Managing Member shall, immediately prior to the 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 Transaction or that would occur in connection with the
Transaction if the assets of the Company were sold at the Transaction price or,
if applicable, at a value determined by the Managing Member in good faith using
the value attributed to the Membership Units in the context of the Transaction
(in which case the Conversion Date shall be the effective date of the
Transaction).

 

In anticipation of such
Forced Conversion and the consummation of the Transaction, the Company shall
use commercially reasonable efforts to cause each LTIP Unitholder to be
afforded the right to receive in connection with such Transaction in
consideration for the Membership 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 Transaction
by a holder of the same number of Membership Units, assuming such holder of
Membership Units is not a Person with which the Company consolidated or into
which the Company merged or which merged into the Company or to which such sale
or transfer was made, as the

 

26

 

case may be (a “Constituent Person”), or an
affiliate of a Constituent Person. In the event that holders of Membership
Units have the opportunity to elect the form or type of consideration to be
received upon consummation of the Transaction, prior to such Transaction the
Managing Member shall give prompt written notice to each LTIP Unitholder of
such election, and shall use commercially reasonable efforts to afford such
LTIP Unitholders the right to elect, by written notice to the Managing Member,
the form or type of consideration to be received upon conversion of each LTIP
Unit held by such LTIP Unitholder into Membership Units in connection with such
Transaction. If a LTIP Unitholder fails to make such an election, such LTIP
Unitholder (and any of its transferees) shall receive upon conversion of each
LTIP Unit held by him or her (or by any of his or her transferees) the same
kind and amount of consideration that a holder of a Membership Unit would
receive if such Person failed to make such an election.

 

Subject to the rights of
the Company and the Managing Member under any Vesting Agreement and the terms
of any plan or plans under which the LTIP Units were issued, the Company shall
use commercially reasonable effort to cause the terms of any Transaction to be
consistent with the provisions of this Section 4.6 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
Membership Units in connection with the Transaction that will (i) contain
provisions enabling the holders of LTIP Units that remain outstanding after
such Transaction to convert their LTIP Units into securities as comparable as
reasonably possible under the circumstances to the Membership Units and
(ii) preserve as far as reasonably possible under the circumstances the
distribution, special allocation, conversion, and other rights set forth in the
Agreement for the benefit of the LTIP Unitholders.

 

ARTICLE V

DISTRIBUTIONS

 

Section 5.1             Distributions. The Managing Member shall cause the
Company to distribute such amounts as the Managing Member may in its discretion
determine among the Members (i) first, with respect to any class of Membership
Interests issued pursuant to Section 4.2(a) or 4.2(b) which are
entitled to a preference over Membership Units on distribution and are
specially allocated items under Section 6.1 prior to allocated items
with respect to amounts distributed pursuant to clause (ii) below (and within
and among such classes, in order of the preferences designated therein and pro
rata among any such classes), and (ii) thereafter, pro rata in accordance with
their respective Percentage Interests from time to time as determined by the
Managing Member; provided that in no event may a Member receive a
distribution with respect to a Unit if such Member is entitled to receive a
dividend from the Managing Member which is derived from a distribution to the
Managing Member with respect to a Common Share for which such Unit has been
redeemed or exchanged. In the event the Company is subject to any tax or other
obligation that is attributable to the interest of one or more Members in the
Company, but fewer than all the Members, such tax or other obligation shall be
specially allocated to, and charged against the Capital Account of, such Member
or Members, and the amounts otherwise

 

27

 

distributable to such
Member or Members pursuant to this Agreement shall be reduced by such amount.

 

Section 5.2             Amounts Withheld. All amounts withheld pursuant to the
Code or any provisions of any state or local tax law and Section 10.4
hereof with respect to any allocation, payment or distribution to the Managing
Member, or any Non-Managing Members or Assignees shall be treated as amounts
distributed to the Managing Member or such Non-Managing Members, or Assignees
pursuant to Section 5.1 for all purposes under this Agreement.

 

Section 5.3             Distributions Upon Liquidation. Proceeds from a Liquidating Transaction
shall be distributed to the Members in accordance with Section 13.2.

 

ARTICLE VI

ALLOCATIONS

 

Section 6.1             Allocations For Capital Account Purposes
Other than the Taxable Year of Liquidation. Subject to a preferential allocation of gain or net
income to any class of Membership Interests issued pursuant to Section
4.2(a) or 4.2(b) which is entitled to a preference over Membership
Units on distributions, for purposes of maintaining the Capital Accounts and in
determining the rights of the Members among themselves, the Company’s items of
income, gain, loss and deduction (computed in accordance with Section 4.4
hereof) shall be allocated among the Members for each taxable year (or portion
thereof) as provided herein below:

 

(a)           Net Income. After giving effect to the special allocations set
forth in Sections 6.2 and 6.3 below, Net Income shall be
allocated to the Members in accordance with their respective Percentage
Interests.

 

(b)           Net Losses. After giving effect to the special allocations set forth
in Sections 6.2 and 6.3 below, Net Losses shall be allocated to
the Members in accordance with their respective Percentage Interests.

 

(c)           Nonrecourse Liabilities. For purposes of Regulations Section
1.752-3(a), the Members agree that Nonrecourse Liabilities of the Company in
excess of the sum of (i) the amount of Partnership Minimum Gain and (ii) the
total amount of Nonrecourse Built-in Gain shall be allocated among the Members
in the manner determined by the Managing Member, provided that such
allocation shall be permissible under Regulations Section 1.752-3.

 

(d)           Gains. Any gain allocated to the Members upon the sale or
other taxable disposition of any Company asset shall to the extent possible,
after taking into account other required allocations of gain pursuant to Section
6.3 below, be characterized as Recapture Income in the same proportions and
to the same extent as such Members have been allocated any deductions directly
or indirectly giving rise to the treatment of such gains as Recapture Income,
all in such a manner consistent with Regulations Section 1.1245-1.

 

28

 

Section 6.2             Allocations for Capital Account Purposes
in the Taxable Year of Liquidation. Subject to Section 6.3, the Net Income and Net
Loss of the Company for the taxable year of liquidation of the Company shall be
allocated prior to the final liquidating distributions of the Company and shall
be allocated first to eliminate any Member’s Adjusted Capital Account Deficit
and then, to the extent permissible under Sections 704(b) of the Code, in a
manner such that the Capital Accounts of the Members immediately prior to such
final liquidating distributions are equal to the amount which would have been
distributable to the Members under Section 5.1 if such distributions
were to be governed by Section 5.1. Notwithstanding the preceding
sentence, actual distributions made subsequent to the allocations under this Section
6.2 shall be made pursuant to Section 5.3.

 

Section 6.3             Special Allocation Rules. Notwithstanding any other provision of
this Agreement, the following special allocations shall be made in the
following order:

 

(a)           Special Allocations With Respect to LTIP
Units. After
giving effect to the special allocations set forth in the following provisions
of this Section 6.3, and subject to any preferential allocation of gain
or net income to any class of Membership Interests issued pursuant to Section
4.2(a) or 4.2(b) which is entitled to a preference over Membership
Units on liquidating distributions, any Liquidating Gains shall first be
allocated to the LTIP Unitholders until the Economic Capital Account Balances
of such Holders, to the extent attributable to their ownership of LTIP Units,
are equal to (i) the Membership Unit Economic Balance, multiplied by
(ii) the number of their LTIP Units. 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 Partner Minimum Gain or
Partnership Minimum Gain, in either case to the extent attributable to their
ownership of LTIP Units. Similarly, the “Membership Unit Economic Balance”
shall mean (i) the Capital Account balance of the Managing Member, plus the
amount of the Managing Member’s share of any Partner Minimum Gain or
Partnership Minimum Gain, in either case to the extent attributable to the
Managing Member’s ownership of Membership Units and computed on a hypothetical
basis after taking into account all allocations through the date on which any
allocation is made under this Section 6.3(a), divided by (ii) the number
of the Managing Member’s Membership Units. Any such allocations shall be made
among the LTIP Unitholders in proportion to the amounts required to be
allocated to each under this Section 6.3(a). The parties agree that the
intent of this Section 6.3(a) is to make the Capital Account balance
associated with each LTIP Unit economically equivalent to the Capital Account
balance associated with the Managing Member’s Membership Units (on a per-unit
basis).

 

(b)           Minimum Gain Chargeback. Notwithstanding any other provisions of
Article VI, if there is a net decrease in Partnership Minimum Gain during any Partnership
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 Partnership Minimum Gain, as determined
under Regulations Section 1.704-2(g). 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 Regulations Section 1.704-2(f)(6). This Section
6.3(b) is intended to comply with the minimum gain

 

29

 

chargeback requirements in Regulations Section 1.704-2(f)
and for purposes of this Section 6.3(b) only, each Member’s Adjusted
Capital Account Deficit shall be determined prior to any other allocations pursuant
to Article VI of this Agreement with respect to such Partnership Year, and
without regard to any decrease in Partner Minimum Gain during such fiscal year.

 

(c)           Partner Minimum Gain Chargeback. Notwithstanding any other provision of
Article VI (except Section 6.3(b) hereof), if there is a net decrease in
Partner Minimum Gain attributable to a Partner Nonrecourse Debt during any Partnership
Year, each Member who has a share of the Partner Minimum Gain attributable to
such Partner Nonrecourse Debt, determined in accordance with Regulations
Section 1.704-2(i)(5), 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 Partner Minimum Gain attributable to
such Partner Nonrecourse Debt, determined in accordance with Regulations
Section 1.704-2(i)(5). 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 Regulations Section 1.704-2(i)(4). This Section 6.3(c)
is intended to comply with the minimum gain chargeback requirement in such
Section of the Regulations and shall be interpreted consistently therewith. Solely
for purposes of this Section 6.3(c), each Member’s Adjusted Capital
Account Deficit shall be determined prior to any other allocations pursuant to
Article VI of this Agreement with respect to such fiscal year, other than
allocations pursuant to Sections 6.3(a) and 6.3(b) hereof.

 

(d)           Qualified Income Offset. In the event any Member unexpectedly
receives any adjustments, allocations or distributions described in Regulations
Sections 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),
and after giving effect to the allocations required under Sections 6.3(a),
6.3(b) and 6.3(c) hereof, such Member has an Adjusted Capital Account
Deficit, items of Company income and gain shall be specially allocated to such
Member in an amount and manner sufficient to eliminate, to the extent required
by the Regulations, its Adjusted Capital Account Deficit created by such
adjustments, allocations or distributions as quickly as possible. It is
intended that this Section 6.3(d) qualify and be construed as a “qualified
income offset” within the meaning of Regulations 1.704-1(b)(2)(ii)(d), which
shall be controlling in the event of a conflict between such Regulations and
this Section 6.3(d).

 

(e)           Nonrecourse Deductions. Nonrecourse Deductions for any taxable
period shall be allocated to the Members in the manner determined by the
Managing Member, provided that such allocation shall be permissible
under Section 704(b) of the Code.

 

(f)            Partner Nonrecourse Deductions. Any Partner Nonrecourse Deductions for
any fiscal year shall be specially allocated to the Member who bears the
economic risk of loss with respect to the Partner Nonrecourse Debt to which
such Partner Nonrecourse Deductions are attributable in accordance with
Regulations Sections 1.704-2(b)(4) and 1.704-2(i)(2).

 

30

 

(g)           Code Section 754 Adjustments. To the extent an adjustment to the
adjusted tax basis of any Company asset pursuant to Section 734(b) or 743(b) of
the Code is required, pursuant to Regulations Section 1.704-1(b)(2)(iv)(m), to
be taken into account in determining Capital Accounts, the amount of such
adjustment to the Capital Accounts shall be specially allocated to the Members
in a manner consistent with the manner in which their Capital Accounts are
required to be adjusted pursuant to such Section of the Regulations.

 

Section 6.4             Allocations for Tax Purposes.

 

(a)           General. Except as otherwise provided in this Section 6.4,
for Federal income tax purposes, each item of income, gain, loss and deduction
shall be allocated among the Members in the same manner as its correlative item
of “book” income, gain, loss or deduction is allocated pursuant to Sections
6.1 and 6.3 of this Agreement.

 

(b)           To Eliminate Book-Tax Disparities. In an attempt to eliminate Book-Tax
Disparities attributable to a Contributed Property or Adjusted Property, items
of income, gain, loss, and deduction shall be allocated for Federal income tax
purposes among the Members as follows:

 

(1)           (i) 
In the case of a Contributed Property, such items attributable thereto
shall be allocated among the Members consistent with the principles of Section
704(c) of the Code in a manner that takes into account the variation between
the 704(c) Value of such property and its adjusted basis at the time of
contribution, and (ii) any item of Residual Gain or Residual Loss attributable
to a Contributed Property shall be allocated among the Members in the same
manner as its correlative item of “book” gain or loss is allocated pursuant to Sections
6.1 and 6.3 of this Agreement.

 

(2)           (i) 
In the case of an Adjusted Property, such items shall (A) first, be
allocated among the Members in a manner consistent with the principles of
Section 704(c) of the Code in a manner to take into account the adjustments to
the Carrying Value of such property pursuant to Section 4.4(d) and (B)
second, in the event such property was originally a Contributed Property, be
allocated among the Members in a manner consistent with Section 6.4(b)(1)(i),
and (ii) any item of Residual Gain or Residual Loss attributable to an Adjusted
Property shall be allocated among the Members in the same manner as its
correlative item of “book” gain or loss is allocated pursuant to Sections
6.1 and 6.4 of this Agreement.

 

(3)           All other items of income, gain, loss and
deduction shall be allocated among the Members in the same manner as their
correlative item of “book” gain or loss is allocated pursuant to Sections
6.1 and 6.3 of this Agreement.

 

(c)           Power of Managing Member to Elect Method. To the extent Treasury Regulations
promulgated pursuant to Section 704(c) of the Code permit a partnership to

 

31

 

utilize alternative methods to eliminate the
disparities between the agreed value of property and its adjusted basis, and
subject to any agreements existing between the Company and any Member or
Members prior to the date hereof, the Managing Member shall have the authority
to elect the method to be used by the Company and such election shall be
binding on all Members.

 

ARTICLE VII

MANAGEMENT AND OPERATION OF BUSINESS

 

Section 7.1             Management.

 

(a)           Powers of Managing Member. Except as otherwise expressly provided
in this Agreement, all management powers over the business and affairs of the
Company are exclusively vested in the Managing Member, and no Non-Managing
Member shall have any right to participate in or exercise control or management
power over the business and affairs of the Company. Notwithstanding anything to
the contrary in this Agreement, the Managing Member may not be removed by the
Non-Managing Members with or without cause. In addition to the powers now or
hereafter granted a Managing Member of a limited liability company under
applicable law or which are granted to the Managing Member under any other
provision of this Agreement, the Managing Member, subject to Section 7.3
hereof, shall have full power and authority to do all things deemed necessary
or desirable by it to conduct the business of the Company, to exercise all
powers set forth in Section 3.2 hereof and to effectuate the purposes
set forth in Section 3.1 hereof including, without limitation:

 

(1)           the making of any expenditures, the
lending or borrowing of money, the assumption or guarantee of, or other
contracting for, indebtedness and other liabilities, the issuance of evidences
of indebtedness (including the securing of same by mortgage, deed of trust or
other lien or encumbrance on the Company’s assets) and the incurring of any
obligations it deems necessary for the conduct of the activities of the
Company;

 

(2)           the making of tax, regulatory and other
filings, or rendering of periodic or other reports to the New York Stock
Exchange, governmental or other agencies having jurisdiction over the business
or assets of the Company, the registration of any class of securities of the
Company under the Securities Exchange Act of 1934, as amended (the “Exchange
Act”), and the listing of any debt securities of the Company on any
exchange;

 

(3)           the acquisition, disposition, sale,
conveyance, financing, refinancing, mortgage, pledge, encumbrance,
hypothecation, contribution or exchange of any assets of the Company or the
merger or other combination of the Company with or into another entity on such
terms as the Managing Member deems proper;

 

32

 

(4)           the use of the assets of the Company
(including, without limitation, cash on hand) for any purpose consistent with
the terms of this Agreement and on any terms it sees fit including, without
limitation, the financing of the assets and the operations of the Managing
Member, the Company or any of the Company’s Subsidiaries, the lending of funds
to other Persons (including the Managing Member or any of the Company’s
Subsidiaries) and the repayment of obligations of the Company and its
Subsidiaries and any other Person in which it has an equity investment and the
making of capital contributions to its Subsidiaries, the holding of any real,
personal and mixed property of the Company in the name of the Company or in the
name of a nominee or trustee (subject to Section 7.10), the creation, by
grant or otherwise, of easements or servitudes, and the performance of any and
all acts necessary or appropriate to the operation of the Company assets
including, but not limited to, applications for rezoning, objections to
rezoning, constructing, altering, improving, repairing, renovating,
rehabilitating, razing, demolishing or condemning any improvements or property
of the Company or any Subsidiary of the Company;

 

(5)           the negotiation, execution, and
performance of any contracts, conveyances or other instruments (including with
Affiliates of the Company to the extent provided in Section 7.6) that
the Managing Member considers useful or necessary to the conduct of the Company’s
operations or the implementation of the Managing Member’s powers under this
Agreement including, without limitation, the execution and delivery of leases
on behalf of or in the name of the Company (including the lease of Company
Property for any purpose and without limit as to the term thereof, whether or
not such term (including renewal terms) shall extend beyond the date of
termination of the Company and whether or not the portion so leased is to be
occupied by the lessee or, in turn, subleased in whole or in part to others);

 

(6)           the opening and closing of bank accounts,
the investment of Company funds in securities, certificates of deposit and
other instruments, and the distribution of Company cash or other Company assets
in accordance with this Agreement;

 

(7)           the selection and dismissal of employees
of the Company or the Managing Member (including, without limitation, employees
having titles such as “president”, “vice president”, “secretary” and “treasurer”),
and the engagement and dismissal of agents, outside attorneys, accountants,
engineers, appraisers, consultants, contractors and other professionals on
behalf of the Managing Member or the Company and the determination of their
compensation and other terms of employment or hiring;

 

(8)           the maintenance of such insurance for the
benefit of the Company and the Members and the directors and officers of the
Company as it deems necessary or appropriate;

 

33

 

(9)           the formation of, or acquisition of
an interest in, and the contribution of 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 contribution of property to, its Subsidiaries and any other Person in which
it has an equity investment from time to time);

 

(10)         the control of any matters affecting
the rights and obligations of the Company, including the conduct of litigation
and the incurring of legal expense and the settlement of claims and litigation,
and the indemnification of any Person against liabilities and contingencies to
the extent permitted by law;

 

(11)         the undertaking of any action in
connection with the Company’s direct or indirect investment in its Subsidiaries
or any other Person (including, without limitation, the contribution or loan of
funds to, incurring indebtedness on behalf of, or guaranteeing the obligations
of any such Persons);

 

(12)         the determination of the fair market
value of any Company property distributed in kind using such reasonable method
of valuation as it may adopt;

 

(13)         the management, operation, leasing,
landscaping, repair, alteration, demolition or improvement of any real property
or improvements owned by the Company or any Subsidiary of the Company or any
Person in which the Company has made a direct or indirect equity investment;

 

(14)         holding, managing, investing and
reinvesting cash and other assets of the Company;

 

(15)         the collection and receipt of revenues
and income of the Company;

 

(16)         the exercise, directly or indirectly
through any attorney-in-fact acting under a general or limited power of
attorney, of any right, including the right to vote, appurtenant to any asset
or investment held by the Company;

 

(17)         the exercise of any of the powers of
the Managing Member enumerated in this Agreement on behalf of or in connection
with any Subsidiary of the Company or any other Person in which the Company has
a direct or indirect interest, or jointly with any such Subsidiary or other
Person;

 

(18)         the exercise of any of the powers of
the Managing Member enumerated in this Agreement on behalf of any Person in
which the Company does not have an interest pursuant to contractual or other
arrangements with such Person;

 

(19)         the making, execution and delivery of
any and all deeds, leases, notes, deeds to secure debt, mortgages, deeds of
trust, security agreements, conveyances, contracts, guarantees, warranties,
indemnities, waivers, releases or

 

34

 

legal instruments or agreements in writing necessary
or appropriate in the judgment of the Managing Member for the accomplishment of
any of the powers of the Managing Member enumerated in this Agreement;

 

(20)         the issuance of Membership Interests,
as appropriate, pursuant to Section 4.2 of this Agreement; and

 

(21)         the consummation of the Formation and
Structuring Transactions.

 

(b)           No Approval Required for Above
Powers. Except as expressly provided in this Agreement (including, without
limitation, the last sentence of this Section 7.1(b)), each of the
Members agrees that the Managing Member 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,
notwithstanding any other provision of this Agreement, 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 Managing Member or the Company of any agreement authorized
or permitted under this Agreement shall not constitute a breach by the Managing
Member of any duty that the Managing Member may owe the Company or the
Non-Managing Members or any other Persons under this Agreement or of any duty
stated or implied by law or equity.

 

(c)           Insurance. At all times from
and after the date hereof, the Managing Member may cause the Company to obtain
and maintain casualty, liability and other insurance on Company Properties and
liability insurance for the Indemnitees hereunder. The right to procure such
insurance on behalf of the Indemnitees shall in no way mitigate or otherwise
affect the right of any such Indemnitee to indemnification under Section 7.7.

 

(d)           Working Capital Reserves. At
all times from and after the date hereof, the Managing Member may cause the
Company to establish and maintain working capital reserves in such amounts as
the Managing Member, in its sole and absolute discretion, deems appropriate and
reasonable from time to time.

 

(e)           No Obligation to Consider Tax
Consequences to Non-Managing Members. In exercising its authority under
this Agreement, the Managing Member may, but shall be under no obligation to,
take into account the tax consequences to any Member of any action taken by it.
The Managing Member and the Company shall not have liability to a Non-Managing
Member under any circumstances as a result of an income tax liability incurred
by such Non-Managing Member as a result of an action (or inaction) by the
Managing Member pursuant to its authority under this Agreement.

 

(f)            No Obligation To Expend
Individual Funds, etc. Except as otherwise provided herein, to the extent
the duties of the Managing Member require expenditures of funds to be paid to
third parties, the Managing Member shall not have any obligations hereunder
except to the extent that Company funds are reasonably available to it for the
performance of such duties, and nothing herein contained shall be deemed to
authorize or require the Managing Member, in its capacity as such, to expend
its individual funds for

 

35

 

payment to third parties or to undertake any
individual liability or obligation on behalf of the Company.

 

Section 7.2             Certificate of Formation. To the extent that such action is
determined by the Managing Member to be reasonable and necessary or
appropriate, the Managing Member shall file amendments to and restatements of
the Certificate and do all the things to maintain the Company as a limited
liability company (or an entity in which the Non-Managing Members have limited
liability) under the laws of the State of Delaware and each other jurisdiction
in which the Company may elect to do business or own property. Subject to the
terms of Section 8.5(a)(4) hereof, the Managing Member shall not be
required, before or after filing, to deliver or mail a copy of the Certificate,
as it may be amended or restated from time to time, to any Non-Managing Member.
The Managing Member shall use all reasonable efforts to cause to be filed such
other certificates or documents as may be reasonable and necessary or
appropriate for the formation, continuation, qualification and operation of a
limited liability company (or an entity in which the Non-Managing Members have
limited liability) in the State of Delaware and any other jurisdiction in which
the Company may elect to do business or own property.

 

Section 7.3             Restrictions on Managing Member’s Authority. The Managing Member may not, without
the written Consent of all of the Non-Managing Members, take any action in
contravention of this Agreement including, without limitation:

 

(a)           take any action that would make it
impossible to carry on the ordinary business of the Company, except as
otherwise provided in this Agreement (provided that this restriction shall not
be deemed to restrict the sale, lease, transfer or disposition of all or
substantially all of the Company’s assets as may otherwise be provided herein);

 

(b)           possess Company property, or assign
any rights in specific Company property, for other than a Company purpose
except as otherwise provided in this Agreement (other than this Section 7.3);

 

(c)           admit a Person as a Member, except as
otherwise provided in this Agreement; or

 

(d)           perform any act that would subject a
Member to personal liability for the debts, obligations and liabilities of the
Company except as provided herein or under the Act.

 

Section 7.4             Responsibility for Expenses.

 

(a)           No Compensation. Except as
provided in this Section 7.4 and elsewhere in this Agreement (including
the provisions of Articles V and VI regarding distributions, payments and
allocations to which it may be entitled), the Managing Member shall not be
compensated for its services as Managing Member of the Company.

 

(b)           Responsibility for Ownership and
Operation Expenses. The Company shall be responsible for and shall pay all
expenses relating to the Company’s ownership of its assets, and the operation
of, or for the benefit of, the Company. The Managing Member is hereby
authorized to pay compensation for accounting, administrative, legal,

 

36

 

technical, management and other services rendered to
the Company. The Managing Member shall be reimbursed on a monthly basis, or
such other basis as the Managing Member may determine in its sole and absolute
discretion, for all expenses it incurs relating to the Company’s ownership of
its assets and the operation of, or for the benefit of, the Company; provided,
however, that the amount of any such reimbursement shall be reduced by
any interest or other amounts earned by the Managing Member with respect to
bank accounts or other instruments held by it as permitted in Section 7.5(a).
The Non-Managing Members acknowledge that all such expenses of the Managing
Member are deemed to be for the benefit of the Company. Such reimbursements
shall be in addition to any reimbursement to the Managing Member as a result of
indemnification pursuant to Section 7.7 hereof. In the event that
certain expenses are incurred for the benefit of the Company and other entities
(including the Managing Member), such expenses shall be allocated to the
Company and such other entities in such a manner as the Managing Member in its
sole and absolute discretion deems fair and reasonable. All payments and
reimbursements hereunder shall be characterized for federal income tax purposes
as expenses of the Company incurred on its behalf, and not as expenses of the
Managing Member.

 

(c)           Responsibility for Organization
Expenses. The Company shall be responsible for and shall pay all expenses
incurred relating to the admission of the Managing Member to the Company.

 

(d)           Common Share Repurchases. If
the Managing Member shall elect to purchase from its stockholders Common Shares
for the purpose of delivering such Common Shares to satisfy an obligation under
any dividend reinvestment program adopted by the Managing Member, any employee
stock purchase plan adopted by the Managing Member, or any similar obligation
or arrangement undertaken by the Managing Member in the future or for the
purpose of retiring such Common Shares, the purchase price paid by the Managing
Member for such Common Shares and any other expenses incurred by the Managing
Member in connection with such purchase shall be considered expenses of the
Company and shall be advanced to the Managing Member or reimbursed to the
Managing Member, subject to the condition that: (i) if such Common Shares
subsequently are sold by the Managing Member, the Managing Member shall pay to
the Company any proceeds received by the Managing Member for such Common Shares
(which sales proceeds shall include the amount of dividends reinvested under
any dividend reinvestment or similar program; provided, that a transfer of
Common Shares for Membership Units pursuant to Section 4.2(e) would not
be considered a sale for such purposes); and (ii) if such Common Shares are not
retransferred by the Managing Member within thirty (30) days after the purchase
thereof, or the Managing Member otherwise determines not to retransfer such
Common Shares, the Managing Member shall cause the Company to redeem a number
of Membership Units held by the Managing Member equal to the number of such
Common Shares, as adjusted (x) pursuant to Section 7.5 (in the event the
Managing Member acquires material assets, other than on behalf of the Company)
and (y) for stock dividends and distributions, stock splits and subdivisions,
reverse stock splits and combinations, distributions of rights, warrants or
options, and distributions of evidences of indebtedness or assets relating to
assets not received by the Managing Member pursuant to a pro rata distribution
by the Company (in which case

 

37

 

such advancement or reimbursement of expenses shall be
treated as having been made as a distribution in redemption of such number of
Membership Units held by the Managing Member).

 

(e)           If and to the extent any
reimbursements to the Managing Member pursuant to this Section 7.4
constitute gross income of the Managing Member (as opposed to the repayment of
advances made by the Managing Member on behalf of the Company), such amounts
shall constitute guaranteed payments within the meaning of Section 707(c) of
the Code, shall be treated consistently therewith by the Company and all
Members, and shall not be treated as distributions for purposes of computing
the Members’ Capital Accounts.

 

Section 7.5             Outside Activities of the Managing Member.

 

(a)           The Managing Member shall not
directly or indirectly enter into or conduct any business, other than in
connection with the ownership, acquisition and disposition of Membership
Interests as a Managing Member or Non-Managing Member and the management of the
business of the Company, its operation as a public reporting company with a
class (or classes) of securities registered under the Exchange Act and listed on
the New York Stock Exchange and such activities as are incidental thereto. The
Managing Member shall not own any assets other than Membership Interests
(except for certain interests in Company Properties held directly by the
Managing Member or which have been caused by the Managing Member to be
contributed to or purchased by Subsidiaries, which interests shall not exceed
1% of the aggregate economic interests of any property) and other than such
bank accounts or similar instruments as it deems necessary to carry out its
responsibilities contemplated under this Agreement and the Charter. The Managing
Member and Affiliates of the Managing Member may acquire Non-Managing
Membership Interests and shall be entitled to exercise all rights of a
Non-Managing Member relating to such Non-Managing Membership Interests.

 

(b)           Purchases of Shares. In the
event the Managing Member purchases Shares, then the Managing Member shall
cause the Company to purchase from it an equal number of Membership Units
(after application of the Unit Adjustment Factor) on the same terms that the
Managing Member purchased such Shares.

 

Section 7.6             Contracts with Affiliates.

 

(a)           Loans. The Managing Member may
cause the Company to lend or contribute to its Subsidiaries or other Persons in
which the Company has an equity investment, and such Persons may borrow funds
from the Company, on terms and conditions established in the sole and absolute
discretion of the Managing Member. The foregoing authority shall not create any
right or benefit in favor of any Subsidiary or any other Person.

 

(b)           Transfers of Assets. Except as
provided in Section 7.5(a), the Managing Member may cause the Company to
transfer assets to joint ventures, other partnerships, corporations or other
business entities in which the Company is or thereby becomes a

 

38

 

participant upon such terms and subject to such
conditions consistent with this Agreement and applicable law as the Managing
Member in its sole discretion deems advisable.

 

(c)           Employee Benefit Plans. The
Managing Member, in its sole and absolute discretion and without the approval
of the Non-Managing Members, may propose and adopt on behalf of the Managing
Member and the Company employee benefit plans funded by the Company for the
benefit of employees of the Managing Member, the Company, Subsidiaries of the Company
or any Affiliate of any of them in respect of services performed, directly or
indirectly, for the benefit of the Company, the Managing Member, or any of the
Company’s Subsidiaries, including any such plan which requires the Company, the
Managing Member or any of the Company’s Subsidiaries to issue or transfer
Membership Units to employees. The Managing Member also is expressly authorized
to cause the Company to issue to it Membership Units corresponding to Common
Shares issued by the Managing Member pursuant to any such plan or any similar
or successor plan and to repurchase such Membership Units to the extent
necessary to permit the Managing Member to repurchase such Common Shares in
accordance with such plan.

 

(d)           Other Agreements. The Managing
Member is expressly authorized to enter into, on its own behalf or in the name
and on behalf of the Company, asset management agreements, cross-indemnity
agreements, registration rights agreements with respect to the Common Shares,
right of first opportunity arrangements or other conflict avoidance agreements
with various Affiliates of the Company and the Managing Member on such terms as
the Managing Member, in its sole and absolute discretion, believes are
advisable. Any indemnification pursuant to this Section 7.7 shall be
made only out of the assets of the Company, and any insurance proceeds from any
liability policy covering the Managing Member and any Indemnitee, and neither
the Managing Member nor any Non-Managing Member shall have any obligation to
contribute to the capital of the Company or otherwise provide funds to enable
the Company to fund its obligations under this Section 7.7, except to
the extent otherwise expressly agreed to by such Member and the Company.

 

Section 7.7             Indemnification.

 

(a)           General. The Company shall
indemnify, in accordance with and to the fullest extent now or hereafter
permitted by law, any Person who was or is a party or is threatened to be made
a party to any threatened, pending or completed action, suit or proceeding,
whether civil, criminal, administrative or investigative (other than an action
by or in the right of the corporation) by reason of the fact that the Person is
or was a Member, director, officer, employee or agent of the Company or the
Managing Member, or is or was serving at the request of the Company as a
director, officer, employee or agent of another corporation, partnership, joint
venture, trust or other enterprise, against expenses (including attorneys’
fees), judgments, fines and amounts paid in settlement actually and reasonably
incurred by the Person in connection with such action, suit or proceeding if
the Person acted in good faith and in a manner the Person reasonably believed
to be in or not opposed to the best interests of the Company, and, with respect
to

 

39

 

any criminal action or proceeding, had no reasonable
cause to believe the Person’s conduct was unlawful. The termination of any
action, suit or proceeding by judgment, order, settlement, conviction, or upon
a plea of nolo contendere or its equivalent, shall not, of itself, create a
presumption that the Person did not act in good faith and in a manner which the
Person reasonably believed to be in or not opposed to the best interests of the
Company, and, with respect to any criminal action or proceeding, had reasonable
cause to believe that the Person’s conduct was unlawful.

 

(b)           Actions in the Right of the
Company. The Company shall indemnify any Person who was or is a party or is
threatened to be made a party to any threatened, pending or completed action or
suit by or in the right of the Company to procure a judgment in its favor by
reason of the fact that the Person is or was a Member, director, officer,
employee or agent of the Company or the Managing Member, or is or was serving
at the request of the Company as a director, officer, employee or agent of
another corporation, partnership, joint venture, trust or other enterprise
against expenses (including attorneys’ fees) actually and reasonably incurred
by the Person in connection with the defense or settlement of such action or
suit if the Person acted in good faith and in a manner the Person reasonably
believed to be in or not opposed to the best interests of the Company and
except that no indemnification shall be made in respect of any claim, issue or
matter as to which such Person shall have been adjudged to be liable to the
Company unless and only to the extent that the court in which such action or
suit was brought shall determine upon application that, despite the
adjudication of liability but in view of all the circumstances of the case,
such Person is fairly and reasonably entitled to indemnity or such expenses
which such court shall deem proper.

 

(c)           Authorization. Any
indemnification under subsections (a) and (b) of this section (unless ordered
by a court) shall be made by the Company only as authorized in the specific
case upon a determination that indemnification of the present or former Member,
director, officer, employee or agent is proper in the circumstances because the
Person has met the applicable standard of conduct set forth in subsections (a)
and (b) of this section. Such determination shall be made in the sole and
absolute discretion of the Managing Member.

 

(d)           In Advance of Final Disposition.
Expenses (including attorneys’ fees) incurred by a Person entitled to
indemnification hereunder in defending any civil, criminal, administrative or
investigative action, suit or proceeding may be paid by the Company in advance
of the final disposition of such action, suit or proceeding upon receipt of an
undertaking by or on behalf of such Person to repay such amount if it shall
ultimately be determined that such Person is not entitled to be indemnified by
the Company as authorized in this section. Such expenses (including attorneys’
fees) incurred by such Persons may be so paid upon such terms and conditions,
if any, as the Managing Member deems appropriate.

 

(e)           Non-Exclusive Section. The
indemnification and advancement of expenses provided by, or granted pursuant
to, this Agreement shall not be deemed exclusive of any other rights to which
those seeking indemnification or advancement of

 

40

 

expenses may be entitled under any agreement, or
otherwise, both as to action in such Person’s official capacity and as to
action in another capacity while holding such office.

 

(f)            Insurance. The Company shall
have power to purchase and maintain insurance on behalf of any Person who is or
was a Member, director, officer, employee or agent of the Company, or is or was
serving at the request of the Company as a director, officer, employee or agent
of another corporation, partnership, joint venture, trust or other enterprise
against any liability asserted against such Person and incurred by such Person
in any such capacity, or arising out of such Person’s status as such, whether
or not the Company would have the power to indemnify such Person against such
liability under this section.

 

(g)           Merger and Consolidation; Other
Enterprises. For purposes of this section, references to “the Company”
shall include, in addition to the resulting entity, any constituent entity
(including any constituent of a constituent) absorbed in a consolidation or
merger which, if its separate existence had continued, would have had power and
authority to indemnify its members, directors, officers, and employees or
agents, so that any person who is or was a Member, director, officer, employee,
or agent of such constituent entity, or is or was serving at the request of
such constituent entity as a director, officer, employee or agent of another
corporation, partnership, joint venture trust or other enterprise, shall stand
in the same position under this section with respect to the resulting or surviving
corporation as such Person would have with respect to such constituent entity
if its separate existence had continued. For purposes of this section,
references to “other enterprises” shall include employee benefit plans;
references to “fines” shall include any excise taxes assessed on a Person with
respect to any employee benefit plan; and references to “serving at the request
of the Company” shall include any service as a Member, director, officer,
employee or agent of the Company which imposes duties on, or involves services
by, such Member, director, officer, employee, or agent with respect to an
employee benefit plan, its participants or beneficiaries; and a Person who
acted in good faith and in a manner such Person reasonably believed to be in
the interest of the participants and beneficiaries of an employee benefit plan
shall be deemed to have acted in a manner “not opposed to the best interests of
the Company” as referred to in this section.

 

(h)           Continuation. The
indemnification and advancement of expenses provided by, or granted pursuant
to, this section shall, unless otherwise provided when authorized or ratified,
continue as to a Person who has ceased to be a Member, director, officer,
employee or agent and shall inure to the benefit of the heirs, executors and
administrators of such a Person.

 

(i)            Interested Transactions. A
Person entitled to indemnification hereunder shall not be denied
indemnification in whole or in part under this Section 7.7 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)            Binding Effect. The
provisions of this Section 7.7 are for the benefit of the Indemnitees,
their heirs, successors, assigns and administrators and shall not be

 

41

 

deemed to create any rights for the benefit of any
other Persons. Any amendment, modification or repeal of this Section 7.7
or any provision hereof shall be prospective only and shall not in any way
affect the limitations on the Company’s liability to any Indemnitee under this Section
7.7 as in effect immediately prior to such amendment, modification or
repeal with respect to claims arising from or relating to matters occurring, in
whole or in part, prior to such amendment, modification or repeal, regardless
of when such claims may arise or be asserted.

 

(k)           Reimbursements to Managing Member
Shall Not Be Treated As Distributions. If and to the extent any reimbursements
to the Managing Member pursuant to this Section 7.7 constitute gross
income of the Managing Member (as opposed to the repayment of advances made by
the Managing Member on behalf of the Company) such amounts shall constitute
guaranteed payments within the meaning of Section 707(c) of the Code, shall be
treated consistently therewith by the Company and all Members, and shall not be
treated as distributions for purposes of computing the Members’ Capital
Accounts.

 

Section 7.8             Liability of the Managing Member.

 

(a)           General. Notwithstanding
anything to the contrary set forth in this Agreement, the Managing Member shall
not be liable for monetary damages to the Company, any Members or any Assignees
for losses sustained or liabilities incurred as a result of errors in judgment
or of any act or omission, unless (i) the Managing Member actually received an
improper benefit in money, property or services (in which case, such liability
shall be for the amount of the benefit in money, property or services actually
received), or (ii) the Managing Member’s action or failure to act was the
result of active and deliberate dishonesty, gross negligence or bad faith and
was material to the cause of action being adjudicated; provided, however,
that the Managing Member shall owe the same duty of care to the Non-Managing
Members as its directors owe to the Shareholders of the Managing Member.

 

(b)           No Obligation to Consider
Interests of Non-Managing Members. The Non-Managing Members expressly
acknowledge that the Managing Member is acting on behalf of the Company, the
Non-Managing Members and the Managing Member’s shareholders collectively, that,
except as otherwise provided in Section 7.8(a), the Managing Member is
under no obligation to give priority to the separate interests of the Managing
Member’s shareholders or the Non-Managing Members (including, without
limitation, the tax consequences to Non-Managing Members or Assignees) in
deciding whether to cause the Company to take (or decline to take) any actions
which the Managing Member has undertaken in good faith on behalf of the Company.
If there is a conflict between the interests of the Managing Member’s
shareholders on the one hand and the interests of the Non-Managing Members on
the other, the Managing Member will endeavor in good faith to resolve the
conflict in a manner not adverse to either the Managing Member’s shareholders
or the Non-Managing Members; provided, however, that for so long as the
Managing Member owns a controlling interest in the Company, any conflict that
cannot be resolved in a manner not adverse to either the Managing Member’s
shareholders or the Non-Managing Members will be resolved in favor of the

 

42

 

Managing Member’s
shareholders. The
Managing Member shall not be liable for monetary damages for losses sustained,
liabilities incurred, or benefits not derived by Non-Managing Members in
connection with such decisions with respect to causing the Company to take (or
decline to take) any actions which the Managing Member has undertaken in good
faith on behalf of the Company, unless (i) the Managing Member actually
received an improper benefit in money, property or services (in which case,
such liability shall be for the amount of the benefit in money, property or
services actually received), or (ii) the Managing Member’s action or failure to
act was the result of active and deliberate dishonesty, gross negligence or bad
faith and was material to the cause of action being adjudicated.

 

(c)           Acts of Agents. Subject to its
obligations and duties as Managing Member set forth in Section 7.1(a)
hereof, the Managing Member may exercise any of the powers granted to it by
this Agreement and perform any of the duties imposed upon it hereunder either
directly or by or through its agents. The Managing Member shall not be
responsible for any misconduct or negligence on the part of any such agent
appointed by it in good faith.

 

(d)           Effect of Amendment. Any
amendment, modification or repeal of this Section 7.8 or any provision
hereof shall be prospective only and shall not in any way affect the
limitations on the Managing Member’s liability to the Company and the
Non-Managing Members under this Section 7.8 as in effect immediately
prior to such amendment, modification or repeal with respect to claims arising
from or relating to matters occurring, in whole or in part, prior to such
amendment, modification or repeal, regardless of when such claims may arise or
be asserted.

 

Section 7.9             Other Matters Concerning the Managing Member.

 

(a)           Reliance on Documents. The
Managing Member may rely and shall be protected in acting or refraining from
acting upon any resolution, certificate, statement, instrument, opinion,
report, notice, request, consent, order, bond, debenture, or other paper or
document believed by it to be genuine and to have been signed or presented by
the proper party or parties.

 

(b)           Reliance on Consultants and
Advisers. The Managing Member may consult with legal counsel, accountants,
appraisers, management consultants, investment bankers and other consultants
and advisers selected by it, and any act taken or omitted to be taken in
reliance upon the opinion of such Persons as to matters which such Managing
Member reasonably believes to be within such Person’s professional or expert
competence shall be conclusively presumed to have been done or omitted in good
faith and in accordance with such opinion.

 

(c)           Action Through Officers and
Attorneys. The Managing Member shall have the right, in respect of any of
its powers or obligations hereunder, to act through any of its duly authorized
officers and a duly appointed attorney or attorneys-in-fact. Each such attorney
shall, to the extent provided by the Managing Member in the power of

 

43

 

attorney, have full power and authority to do and
perform all and every act and duty which is permitted or required to be done by
the Managing Member hereunder.

 

Section 7.10           Title to Company Assets. Company assets, whether real, personal
or mixed and whether tangible or intangible, shall be deemed to be owned by the
Company as an entity, and no Member, individually or collectively, shall have
any ownership interest in such Company assets or any portion thereof. Title to
any or all of the Company assets may be held in the name of the Company, the
Managing Member or one or more nominees, as the Managing Member may determine,
including Affiliates of the Managing Member. The Managing Member hereby
covenants, declares and warrants that any Company assets as to which legal
title is held in the name of the Managing Member or any nominee or Affiliate of
the Managing Member shall be held by the Managing Member or such nominee or
Affiliate for the exclusive use and benefit of the Company in accordance with the
provisions of this Agreement; provided, however, that the
Managing Member shall use its best efforts to cause beneficial and record title
to such assets to be vested in the Company as soon as reasonably practicable. All
Company assets shall be recorded as the property of the Company in its books
and records, irrespective of the name in which legal title to such Company
assets is held.

 

Section 7.11           Reliance by Third Parties. Notwithstanding anything to the
contrary in this Agreement, any Person dealing with the Company shall be
entitled to assume that the Managing Member has full power and authority to
encumber, sell or otherwise use in any manner any and all assets of the Company
and to enter into any contracts on behalf of the Company, and such Person shall
be entitled to deal with the Managing Member as if it were the Company’s sole
party in interest, both legally and beneficially. Each Non-Managing Member
hereby waives any and all defenses or other remedies which may be available
against such Person to contest, negate or disaffirm any action of the Managing
Member in connection with any such dealing. In no event shall any Person
dealing with the Managing Member or its representatives be obligated to
ascertain that the terms of this Agreement have been complied with or to
inquire into the necessity or expedience of any act or action of the Managing
Member or its representatives. Each and every certificate, document or other
instrument executed on behalf of the Company by the Managing Member or its representatives
shall be conclusive evidence in favor of any and every Person relying thereon
or claiming thereunder that (a) at the time of the execution and delivery of
such certificate, document or instrument, this Agreement was in full force and
effect, (b) the Person executing and delivering such certificate, document or
instrument was duly authorized and empowered to do so for and on behalf of the
Company and (c) such certificate, document or instrument was duly executed and
delivered in accordance with the terms and provisions of this Agreement and is
binding upon the Company.

 

ARTICLE VIII

RIGHTS AND OBLIGATIONS OF NON-MANAGING MEMBERS

 

Section 8.1             Limitation of Liability. The Non-Managing Members shall have no
liability under this Agreement except as expressly provided in this Agreement,
including Section 10.4 hereof, or under the Act.

 

44

 

Section 8.2             Management of Business. No Non-Managing Member or Assignee
(other than the Managing Member, any of its Affiliates or any officer,
director, employee, member or agent of the Managing Member, the Company or any
of their Affiliates, in their capacity as such) shall take part in the
operation, management or control (within the meaning of the Act) of the Company’s
business, transact any business in the Company’s name or have the power to sign
documents for or otherwise bind the Company. The transaction of any such
business by the Managing Member, any of its Affiliates or any officer,
director, employee, member or agent or trustee of the Managing Member, the
Company or any of their Affiliates, in their capacity as such, shall not
affect, impair or eliminate the limitations on the liability of the
Non-Managing Members or Assignees under this Agreement.

 

Section 8.3             Outside Activities of Non-Managing
Members. Subject
to any agreements entered into pursuant to Section 7.6 hereof and
subject to any other agreements entered into by a Non-Managing Member or its
Affiliates with the Managing Member, the Company or a Subsidiary, the following
rights shall govern outside activities of Non-Managing Members:  (a) any Non-Managing Member (other than the
Managing Member) and any officer, director, employee, agent, trustee, Affiliate
or shareholder of any Non-Managing Member 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 in direct
competition with the Company; (b) neither the Company nor any Members shall have
any rights by virtue of this Agreement in any business ventures of any
Non-Managing Member or Assignee; (c) none of the Non-Managing Members (in their
capacities as Non-Managing Members) nor any other Person shall have any rights
by virtue of this Agreement or the Company relationship established hereby in
any business ventures of any other Person, other than the Managing Member, and
such Person shall have no obligation pursuant to this Agreement to offer any
interest in any such business ventures to the Company, any Non-Managing Member
or any such other Person, even if such opportunity is of a character which, if
presented to the Company, any Non-Managing Member or such other Person, could
be taken by such Person; (d) the fact that a Non-Managing Member may encounter
opportunities to purchase, otherwise acquire, lease, sell or otherwise dispose
of real or personal property and may take advantage of such opportunities
himself or introduce such opportunities to entities in which it has or has not
any interest, shall not subject such Member to liability to the Company or any
of the other Members on account of the lost opportunity; and (e) except as
otherwise specifically provided herein, nothing contained in this Agreement
shall be deemed to prohibit a Non-Managing Member or any Affiliate of a
Non-Managing Member from dealing, or otherwise engaging in business, with
Persons transacting business with the Company or from providing services
relating to the purchase, sale, rental, management or operation of real or personal
property (including real estate brokerage services) and receiving compensation
therefor, from any Persons who have transacted business with the Company or
other third parties. Nothing in this Section 8.3 is intended to alter
any fiduciary obligations of any Person under applicable Delaware law.

 

Section 8.4             Return of Capital and Priority Among
Members. Except
pursuant to the Redemption Rights set forth in Section 4.2(e) hereof, no
Member shall be entitled to the withdrawal or return of his or her Capital
Contribution, except to the extent of distributions made pursuant to this
Agreement or upon termination of the Company as provided herein. No Member or
Assignee shall have priority over any other Member or Assignee either as to the
return of

 

45

 

Capital
Contributions or otherwise unless expressly provided in this Agreement, as to
profits, losses, distributions or credits.

 

Section 8.5             Rights of Non-Managing Members Relating
to the Company.

 

(a)           Copies of Business Records. In
addition to other rights provided by this Agreement or by the Act, and except
as limited by Section 8.5(c) hereof, each Non-Managing Member shall have
the right, for a purpose reasonably related to such Non-Managing Member’s
interest as a Non-Managing Member in the Company, upon written demand with a
statement of the purpose of such demand and at such Non-Managing Member’s own
expense:

 

(1)           to obtain a copy of the most recent
annual and quarterly reports filed with the Securities and Exchange Commission
by the Managing Member pursuant to the Exchange Act, and each communication
sent to all of the stockholders of the Managing Member;

 

(2)           to obtain a copy of the Company’s
Federal, state and local income tax returns for each Partnership Year;

 

(3)           to obtain a current list of the name
and last known business, residence or mailing address of each Member;

 

(4)           to obtain a copy of this Agreement
and the Certificate and all amendments thereto, together with executed copies
of all powers of attorney pursuant to which this Agreement, the Certificate and
all amendments thereto have been executed; and

 

(5)           to obtain true and full information
regarding the amount of cash and a description and statement of any other
property or services contributed by each Member and which each Member has
agreed to contribute in the future, and the date on which each became a Member.

 

(b)           Notification of Changes in Unit
Adjustment Factor. The Company shall notify each Non-Managing Member in
writing of any change made to the Unit Adjustment Factor within 10 Business
Days of the date such change becomes effective.

 

(c)           Confidential Information. Notwithstanding
any other provision of this Section 8.5, the Managing Member may keep
confidential from the Non-Managing Members, for such period of time as the
Managing Member determines in its sole and absolute discretion to be
reasonable, any Company information that (i) the Managing Member believes to be
in the nature of trade secrets or other information the disclosure of which the
Managing Member in good faith believes is not in the best interests of the
Company or (ii) the Company is required by law or by agreements with
unaffiliated third parties to keep confidential.

 

(d)           Debt Allocation. The Managing
Member shall allow any Non-Managing Member to guarantee on a “bottom dollar
basis,” an amount of indebtedness of the

 

46

 

Company or any successor thereto, as is necessary from
time to time to provide an allocation of debt to such Non-Managing Member equal
to the amount of debt then required to be allocated to such Non-Managing Member
to enable such Non-Managing Member to avoid recognizing gain pursuant to
Section 731(a)(1) of the Code as a result of a deemed distribution of money to
such Non-Managing Member pursuant to Section 752(b) of the Code. The Managing
Member may, in its discretion, permit Non-Managing Members to provide similar
guarantees from time to time or as a result of minimum gain chargebacks.

 

(e)           Notice for Certain Transactions.
In the event of (a) a dissolution or liquidation of the Company or the Managing
Member, (b) a merger, consolidation or combination of the Company or the
Managing Member with or into another Person (including the events set forth in Sections
11.2(c) and 11.2(d)), (c) the sale of all or substantially all of
the assets of the Company or the Managing Member, or (d) the transfer by the
Managing Member of all or any part of its interest in the Company, the Managing
Member shall give written notice thereof to each Non-Managing Member at least
twenty (20) Business Days prior to the effective date or, to the extent
applicable, record date of such transaction, whichever comes first.

 

ARTICLE IX

BOOKS, RECORDS, ACCOUNTING AND REPORTS

 

Section 9.1             Records and Accounting. The Managing Member shall keep or cause
to be kept at the principal office of the Company appropriate books and records
with respect to the Company’s business, including, without limitation, all
books and records necessary to provide to the Non-Managing Members any
information, lists and copies of documents required to be provided pursuant to Section
9.3 hereof or required by the Act. Any records maintained by or on behalf
of the Company in the regular course of its business may be kept on, or be in
the form of, punch cards, magnetic tape, photographs, micrographics or any
other information storage device; provided, however, that the
records so maintained are convertible into clearly legible written form within
a reasonable period of time. The books of the Company shall be maintained for
financial purposes on an accrual basis in accordance with generally accepted
accounting principles and for tax reporting purposes on the accrual basis.

 

Section 9.2             Fiscal Year. The fiscal year of the Company shall be
the calendar year.

 

Section 9.3             Reports.

 

(a)           Annual Reports. As soon as
practicable, but in no event later than 120 days after the close of each Partnership
Year, or such earlier date that they are filed with the Securities and Exchange
Commission, the Managing Member shall cause to be mailed to each Non-Managing
Member as of the close of the Company Year, an annual report containing
financial statements of the Company, or of the Managing Member if such
statements are prepared solely on a consolidated basis with the Managing
Member, for such Partnership Year, presented in accordance with generally
accepted accounting

 

47

 

principles, such statements to be audited by a
nationally recognized firm of independent public accountants selected by the
Managing Member.

 

(b)           Quarterly Reports. As soon as
practicable, but in no event later than 60 days after the close of each
calendar quarter (except the last calendar quarter of each year), or such
earlier date that they are filed with the Securities and Exchange Commission,
the Managing Member shall cause to be mailed to each Non-Managing Member as of
the last day of the calendar quarter, a report containing unaudited financial
statements of the Company, or of the Managing Member, if such statements are
prepared solely on a consolidated basis with the Managing Member, and such
other information as may be required by applicable law or regulation, or as the
Managing Member determines to be appropriate.

 

ARTICLE X

TAX MATTERS

 

Section 10.1           Preparation of Tax Returns. The Managing Member shall arrange for
the preparation and timely filing of all returns of Company income, gains,
deductions, losses and other items required of the Company for Federal and
state income tax purposes and shall use all reasonable efforts to furnish the
tax information reasonably required by the Managing Member and the Non-Managing
Members for Federal and state income tax reporting purposes within 60 days
after the close of such taxable year. Each Non-Managing Member shall promptly
provide the Managing Member with any information reasonably requested by the
Managing Member relating to any Contributed Property contributed (directly or
indirectly) by such Non-Managing Member to the Company.

 

Section 10.2           Tax Elections. Except as otherwise provided herein,
the Managing Member shall, in its sole and absolute discretion, determine
whether to make any available election pursuant to the Code, except that the
election under Section 754 of the Code in accordance with applicable
regulations thereunder shall be made at the request of any Member. The Managing
Member shall have the right to seek to revoke any such election (including
without limitation, any election under Section 754 of the Code) upon the Managing
Member’s determination in its sole and absolute discretion that such revocation
is the best interests of the Members.

 

Section 10.3           Tax Matters Member.

 

(a)           General. The Managing Member
shall be the “tax matters Member” of the Company for Federal income tax
purposes. Pursuant to Section 6223(c) of the Code, upon receipt of notice from
the IRS of the beginning of an administrative proceeding with respect to the
Company, the tax matters Member shall provide the Members notice of such
receipt and shall furnish the IRS with the name, address and profit interest of
each of the Non-Managing Members; provided, however, that such
information is provided to the Company by the Non-Managing Members. The
Non-Managing Members shall provide such information to the Company as the
Managing Member shall reasonably request.

 

48

 

(b)           Powers. The tax matters Member
is authorized, but not required:

 

(1)           to enter into any settlement with the
IRS with respect to any administrative or judicial proceedings for the
adjustment of Company items required to be taken into account by a Member for
income tax purposes (such administrative proceedings being referred to as a “tax
audit” and such judicial proceedings being referred to as “judicial review”),
and in the settlement agreement the tax matters Member may expressly state that
such agreement shall bind all Members, except that such settlement agreement
shall not bind any Member (a) who (within the time prescribed pursuant to the
Code and Regulations) files a statement with the IRS providing that the tax
matters Member shall not have the authority to enter into a settlement
agreement on behalf of such Member or (b) who is a “notice Member” (as defined
in Section 6231 of the Code) or a member of a “notice group” (as defined in
Section 6223(b)(2) of the Code);

 

(2)           in the event that a notice of a final
administrative adjustment at the Company level of any item required to be taken
into account by a Member for tax purposes (a “final adjustment”) is mailed or
otherwise given to the tax matters Member, to seek judicial review of such
final adjustment, including the filing of a petition for readjustment with the
Tax Court or the United States Claims Court, or the filing of a complaint for
refund with the District Court of the United States for the district in which
the Company’s principal place of business is located;

 

(3)           to intervene in any action brought by
any other Member for judicial review of a final adjustment;

 

(4)           to file a request for an
administrative adjustment with the IRS at any time and, if any part of such
request is not allowed by the IRS, to file an appropriate pleading (petition,
complaint or other document) for judicial review with respect to such request;

 

(5)           to enter into an agreement with the
IRS to extend the period for assessing any tax which is attributable to any
item required to be taken into account by a Member for tax purposes, or an item
affected by such item; and

 

(6)           to take any other action on behalf of
the Members of the Company in connection with any tax audit or judicial review
proceeding to the extent permitted by applicable law or regulations.

 

The taking of
any action and the incurring of any expense by the tax matters Member in
connection with any such proceeding, except to the extent required by law, is a
matter in the sole and absolute discretion of the tax matters Member, and the
provisions relating to indemnification of the Managing Member set forth in Section
7.7 of this Agreement shall be fully applicable to the tax matters Member
in its capacity as such.

 

49

 

(c)           The tax matters Member shall, upon
the request of any Member, provide such Member with copies of any tax returns,
elections or any returns or documents to be filed with the IRS at least ten
Business Days prior to the date such filing is required.

 

(d)           Reimbursement. The tax matters
Member shall receive no compensation for its services. All third-party costs
and expenses incurred by the tax matters Member in performing its duties as
such (including legal and accounting fees) shall be borne by the Company. Nothing
herein shall be construed to restrict the Company from engaging an accounting
firm and a law firm to assist the tax matters Member in discharging its duties
hereunder, so long as the compensation paid by the Company for such services is
reasonable.

 

Section 10.4           Withholding. Each Non-Managing Member hereby
authorizes the Company to withhold from or pay on behalf of or with respect to
such Non-Managing Member any amount of Federal, state, local, or foreign taxes
that the Managing Member determines that the Company is required to withhold or
pay with respect to any amount distributable or allocable to such Non-Managing
Member pursuant to this Agreement, including, without limitation, any taxes
required to be withheld or paid by the Company pursuant to Section 1441, 1442,
1445 or 1446 of the Code. Any amount paid on behalf of or with respect to a
Non-Managing Member shall constitute a loan by the Company to such Non-Managing
Member, which loan shall be repaid by such Non-Managing Member within 15 days
after notice from the Managing Member that such payment must be made unless (a)
the Company withholds such payment from a distribution which would otherwise be
made to the Non-Managing Member or (b) the Managing Member determines, in its
sole and absolute discretion, that such payment may be satisfied out of the
available funds of the Company which would, but for such payment, be
distributed to the Non-Managing Member. Any amounts withheld pursuant to the
foregoing clauses (a) or (b) shall be treated as having been distributed to
such Non-Managing Member. Each Non-Managing Member hereby unconditionally and
irrevocably grants to the Company a security interest in such Non-Managing
Member’s Membership Interest to secure such Non-Managing Member’s obligation to
pay to the Company any amounts required to be paid pursuant to this Section
10.4. In the event that a Non-Managing Member fails to pay any amounts owed
to the Company pursuant to this Section 10.4 when due, the Managing
Member may, in its sole and absolute discretion, elect to make the payment to
the Company on behalf of such defaulting Non-Managing Member, and in such event
shall be deemed to have loaned such amount to such defaulting Non-Managing
Member and shall succeed to all rights and remedies of the Company as against
such defaulting Non-Managing Member (including, without limitation, the right
to receive distributions). Any amounts payable by a Non-Managing Member
hereunder shall bear interest at 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, plus four percentage points (but not higher
than the maximum lawful rate) from the date such amount is due (i.e., 15
days after demand) until such amount is paid in full. Each Non-Managing Member
shall take such actions as the Company or the Managing Member shall request in
order to perfect or enforce the security interest created hereunder.

 

50

 

ARTICLE XI

TRANSFERS
AND WITHDRAWALS

 

Section 11.1           Transfer.

 

(a)           Definition. The term “transfer,”
when used in this Article XI with respect to a Membership Unit, shall be deemed
to refer to a transaction by which the Managing Member purports to assign its
Managing Membership Interest to another Person or by which a Non-Managing
Member purports to assign its Non-Managing Membership Interest to another
Person, and includes a sale, assignment, gift, pledge, encumbrance,
hypothecation, mortgage, exchange or any other disposition by law or otherwise.

 

(b)           Requirements. No Membership
Interest shall be transferred, in whole or in part, except in accordance with
the terms and conditions set forth in this Article XI. Any transfer or
purported transfer of a Membership Interest not made in accordance with this
Article XI shall be null and void.

 

Section 11.2           Transfer of Managing Member’s Membership Interest.

 

(a)           General. The Managing Member
may not transfer any of its Managing Membership Interest or withdraw as
Managing Member except as provided in Section 11.2(b) or in connection
with a transaction described in either Section 11.2(c) or Section
11.2(e).

 

(b)           Transfer to Company. The
Managing Member may transfer Membership Interests held by it to the Company in
accordance with Section 7.5(b) hereof.

 

(c)           Transfer in Connection With
Reclassification, Recapitalization, or Business Combination Involving Managing
Member. Except as otherwise provided in Section 11.2(d), the Managing
Member shall not engage in any merger, consolidation or other business
combination with or into another Person or sale of all or substantially all of
its assets, or any reclassification, or recapitalization or change of
outstanding Common Shares (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 “Unit Adjustment Factor”) (“Transaction”), unless as a result
of the Transaction each Non-Managing Member thereafter remains entitled to
redeem each Membership Unit owned by such Non-Managing Member (after
application of the Unit Adjustment Factor) for an amount of cash, securities,
or other property equal to the greatest amount of cash, securities or other
property which such Non-Managing Member would have received from such
Transaction, if such Non-Managing Member had exercised its Redemption Right
immediately prior to the Transaction, provided 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 50 percent of the outstanding Common
Shares, the holders of Membership Units shall receive the greatest amount of
cash, securities, or other property which a Non-Managing Member would have
received had it exercised the Redemption Right and received Common Shares in
exchange for its Membership Units immediately prior to the expiration of such
purchase, tender or exchange offer. In connection with any merger,

 

51

 

consolidation or business combination described in
this Section 11.2(c) in which Common Shares were exchanged for securities of
the acquiring Person, the Non-Managing Members shall (unless Non-Managing
Members Consent is obtained) remain entitled to exercise their Redemption Right
with respect to such Person and the Unit Adjustment Factor shall continue to
apply.

 

(d)           Merger Involving Managing Member
Where Surviving Entity’s Assets Contributed to Company. Notwithstanding Section
11.2(c), the Managing Member may merge with another entity if, under the
terms of the transaction, Non-Managing Members will not engage in a sale or
exchange for Federal income tax purposes and immediately after such merger
substantially all of the assets of the surviving entity, other than Membership
Units held by the Managing Member, are contributed to the Company as a Capital
Contribution in exchange for Membership Units with a fair market value equal to
the 704(c) Value of the assets so contributed.

 

(e)           Pledge of
Membership Units by Managing Member. The Managing Member may (i) pledge its Managing Membership Interest
as security for any obligations of the Company or the Managing Member under any
credit facility that the Company may enter into from time to time, and (ii)
transfer such Managing Membership Interest in the event of any foreclosure (or
in lieu of any foreclosure) on such pledge.

 

Section 11.3           Non-Managing Members’ Rights to Transfer.

 

(a)           General. Prior to twelve (12)
months after the closing of the initial public offering of Common Shares, no
Non-Managing Member shall transfer all or any portion of its Membership
Interests to any transferee without the consent of the Managing Member, which
consent may be withheld in its sole and absolute discretion. After such twelve
(12) month anniversary and subject to the remaining provisions of this Section
11.3 as well as Section  11.4, a Non-Managing Member may
transfer all or any portion of his Membership Interest, or any of such
Non-Managing Member’s rights as a Non-Managing Member, without the prior
written consent of the Managing Member. In order to effect such transfer, the
Non-Managing Member must deliver to the Managing Member a duly executed copy of
the instrument making such transfer and such instrument must evidence the
written acceptance by the assignee of all of the terms and conditions of this
Agreement and represent that such assignment was made in accordance with all
applicable laws and regulations. Notwithstanding the foregoing, any transferee
of any transferred Membership Interest shall be subject to any and all
ownership limitations contained in the Charter. Unless admitted as a
Non-Managing Member, no transferee, whether by a voluntary transfer, by operation
of law or otherwise, shall have any rights hereunder, other than the rights of
an Assignee as provided in Section 11.5.

 

(b)           Incapacitated Non-Managing Members.
If a Non-Managing Member is subject to Incapacity, the executor, administrator,
trustee, committee, guardian, conservator or receiver of such Non-Managing
Member’s estate shall have all the rights of a Non-Managing Member, but not
more rights than those enjoyed by other Non-Managing Members for the purpose of
settling or managing the estate and such power as the Incapacitated
Non-Managing Member possessed to transfer all or any part of his or its

 

52

 

interest in the Company. The Incapacity of a
Non-Managing Member, in and of itself, shall not dissolve or terminate the
Company.

 

(c)           Transfers Contrary to Securities
Laws. The Managing Member may prohibit any transfer otherwise permitted
under this Section 11.3 by a Non-Managing Member of its Membership Units
if, in the opinion of legal counsel to the Company, such transfer would require
filing of a registration statement under the Securities Act or would otherwise
violate any Federal or state securities laws or regulations applicable to the
Company or the Company Units.

 

(d)           Publicly Traded Partnership
Restrictions. No Transfer by a Non-Managing Member of its Membership
Interests, any Redemption, or any other acquisition of Membership Units by the
Company or the Managing Member may be made to or by any person if the Managing
Member determines, in its reasonable discretion, that such Transfer, Redemption
or acquisition creates a material risk that the Company will be classified as a
publicly traded partnership under Section 7704 of the Code.

 

Section 11.4           Substituted Non-Managing Members.

 

(a)           Consent of Managing Member
Required. A Non-Managing Member shall have the right in its discretion to
substitute a transferee as a Non-Managing Member in his place, in which event
such substitution shall occur if the Non-Managing Member so provides; provided,
however, that any transferee desiring to become a Substituted Non-Managing
Member must furnish to the Managing Member (i) evidence of acceptance in form
satisfactory to the Managing Member of all of the terms and conditions of this
Agreement, including, without limitation, the power of attorney granted in
Article XVI and (ii) such other documents or instruments as may be required in
the reasonable discretion of the Managing Member in order to effect such Person’s
admission as a Substituted Non-Managing Member.

 

(b)           Rights and Duties of Substituted
Non-Managing Members. A transferee who has been admitted as a Substituted
Non-Managing Member in accordance with this Article XI shall have all the
rights and powers and be subject to all the restrictions and liabilities of a
Non-Managing Member under this Agreement.

 

(c)           Amendment of Exhibit A. Upon
the admission of a Substituted Non-Managing Member, the Managing Member shall
amend Exhibit A to reflect the name, address, number of Membership
Units, and Percentage Interest of such Substituted Non-Managing Member and to
eliminate or adjust, if necessary, the name, address and interest of the
predecessor of such Substituted Non-Managing Member.

 

Section 11.5           Assignees. If a Non-Managing Member, in its sole and absolute discretion,
does not provide for the admission of any permitted transferee under Section
11.4(a) as a Substituted Non-Managing Member, as described in Section
11.4, such transferee shall be considered an Assignee for purposes of this
Agreement. An Assignee shall be entitled to all the rights of an assignee of a
Non-Managing Membership Interest under the Act, including the right to receive
distributions from the Company and the share of Net Income, Net Losses, gain,
loss

 

53

 

and Recapture
Income attributable to the Company Units assigned to such transferee, but shall
not be deemed to be a holder of Membership Units for any other purpose under
this Agreement, and shall not be entitled to vote such Membership Units in any
matter presented to the Non-Managing Members for a vote (such Membership Units
being deemed to have been voted on such matter in the same proportion as all
Membership Units held by Non-Managing Members are voted). In the event any such
transferee desires to make a further assignment of any such Membership Units,
such transferee shall be subject to all the provisions of this Article XI to
the same extent and in the same manner as any Non-Managing Member desiring to
make an assignment of Membership Units.

 

Section 11.6           General Provisions.

 

(a)           Withdrawal of Non-Managing Member.
No Non-Managing Member may withdraw from the Company other than as a result of
(i) a permitted transfer of all of such Non-Managing Member’s Membership Units
in accordance with this Article XI and the transferee of such Membership Units
being admitted to the Company as a Substituted Non-Managing Member or (ii)
pursuant to redemption or exchange of all of its Membership Units under Section
4.2(e).

 

(b)           Transfer of All Membership Units
by Non-Managing Member. Any Non-Managing Member who shall transfer all of
his Membership Units in a transfer permitted pursuant to this Article XI where
the transferee was admitted as a Substituted Non-Managing Member or pursuant to
the redemption or exchange of all of its Membership Units under Section
4.2(e) shall cease to be a Non-Managing Member.

 

(c)           Timing of Transfers. Transfers
pursuant to this Article XI may only be made on the first day of a calendar
month of the Company or on a Non-Restricted Transfer Date, unless the Managing
Member otherwise agrees.

 

(d)           Allocation When Transfer Occurs.
If any Membership Interest is transferred during any quarterly segment of the
Company’s fiscal year in compliance with the provisions of this Article XI or
redeemed or converted pursuant to Section 4.2(e), Net Income, Net
Losses, each item thereof and all other items attributable to such interest for
such fiscal year shall be divided and allocated between the transferor Member
and the transferee Member in accordance with the method determined by the
Managing Member, provided that such method shall be permissible under Section
706(d) of the Code and the regulations issued thereunder. Solely for purposes
of making such allocations, each of such items for the calendar month in which
the transfer or redemption occurs shall be allocated to the Person who is a
Member as of midnight on the last day of said month. All distributions with
respect to which the Membership Record Date is before the date of such transfer
or redemption shall be made to the transferor Member, and all distributions
with Membership Record Dates thereafter shall be made to the transferee Member.

 

54

 

ARTICLE XII

ADMISSION OF MEMBERS

 

Section 12.1           Admission of Successor Managing Member. A successor to all of the Managing
Member’s Managing Membership Interest pursuant to Section 11.2 hereof
who is proposed to be admitted as a successor Managing Member shall be admitted
to the Company as the Managing Member, effective upon such transfer. Any such
transferee shall carry on the business of the Company without dissolution. In
each case, the admission shall be subject to the successor Managing Member
executing and delivering to the Company an acceptance of all of the terms and
conditions of this Agreement and such other documents or instruments as may be
required to effect the admission.

 

Section 12.2           Admission of Additional Non-Managing
Members.

 

(a)           General. A Person who makes a
Capital Contribution to the Company in accordance with this Agreement or who
exercises an option to receive Membership Units shall be admitted to the
Company as an Additional Non-Managing Member only upon furnishing to the
Managing Member (i) evidence of acceptance in form reasonably satisfactory to
the Managing Member of all of the terms and conditions of this Agreement,
including, without limitation, the power of attorney granted in Article XVI
hereof and (ii) such other documents or instruments as may be required in the
reasonable discretion of the Managing Member in order to effect such Person’s
admission as an Additional Non-Managing Member.

 

(b)           Consent of Managing Member
Required. Notwithstanding anything to the contrary in this Section 12.2,
no Person shall be admitted as an Additional Non-Managing Member without the
consent of the Managing Member, which consent may be given or withheld in the
Managing Member’s sole and absolute discretion. The admission of any Person as
an Additional Non-Managing Member shall become effective on the date upon which
the name of such Person is recorded on the books and records of the Company,
following the consent of the Managing Member to such admission.

 

Section 12.3           Amendment of Agreement and Certificate. For the admission to the Company of any
Member, the Managing Member shall take all steps necessary and appropriate
under the Act to amend the records of the Company and, if necessary, to prepare
as soon as practical an amendment of this Agreement (including an amendment of Exhibit
A) and, if required by law, shall prepare and file an amendment to the
Certificate and may for this purpose exercise the power of attorney granted
pursuant to Article XVI hereof.

 

ARTICLE XIII

DISSOLUTION AND LIQUIDATION

 

Section 13.1           Dissolution. The Company shall not be dissolved by
the admission of Substituted Non-Managing Members or Additional Non-Managing
Members or by the admission of a successor Managing Member in accordance with
the terms of this Agreement. The

 

55

 

Company shall
dissolve, and its affairs shall be wound up, upon the first to occur of any of
the following (“Events of Dissolution”):

 

(a)           Withdrawal of Managing Member--an
event of withdrawal of the Managing Member, as defined in the Act, unless,
within 90 days after the withdrawal all the remaining Members agree in writing
to continue the business of the Company and to the appointment, effective as of
the date of withdrawal, of a substitute Managing Member;

 

(b)           Voluntary Dissolution--from
and after the date of this Agreement, with the Consent of a majority of the
Percentage Interests of the Non-Managing Members, an election to dissolve the
Company made by the Managing Member, in its sole and absolute discretion;

 

(c)           Judicial Dissolution Decree--entry
of a decree of judicial dissolution of the Company pursuant to the provisions
of the Act;

 

(d)           Sale of Company’s Assets--the
sale or disposition of all or substantially all of the assets and properties of
the Company or a related series of transactions that, taken together, result in
the sale or other disposition of all or substantially all of the assets of the
Company;

 

(e)           Bankruptcy or Insolvency of Managing
Member--the Managing Member

 

(1)           makes an assignment for the benefit
of creditors;

 

(2)           files a voluntary petition in
bankruptcy;

 

(3)           is adjudged a bankrupt or insolvent,
or has entered against it an order for relief in any bankruptcy or insolvency
proceeding;

 

(4)           files a petition or answer seeking
for itself any reorganization, arrangement, composition, readjustment,
liquidation, dissolution or similar relief under any statute, law or
regulation;

 

(5)           files an answer or other pleading
admitting or failing to contest the material allegations of a petition filed
against it in any proceeding of this nature; or

 

(6)           seeks, consents to or acquiesces in
the appointment of a trustee, receiver or liquidator of the Managing Member or
of all or any substantial part of its properties; or

 

(f)            Readjustment, etc. One
hundred and twenty (120) days after the commencement of any proceeding against
the Managing Member seeking reorganization, arrangement, composition,
readjustment, liquidation, dissolution or similar relief under any statute, law
or regulation, the proceeding has not been dismissed, or if within 90 days
after the appointment without the Managing Member’s consent or acquiescence of
a

 

56

 

trustee, receiver or liquidator of the Managing Member
or of all or any substantial part of its properties, the appointment is not
vacated or stayed, or within 90 days after the expiration of any such stay, the
appointment is not vacated.

 

Section 13.2           Winding Up.

 

(a)           General. Upon the occurrence
of an Event of Dissolution, the Company shall continue solely for the purposes
of winding up its affairs in an orderly manner, liquidating its assets, and
satisfying the claims of its creditors and Members. No Member shall take any
action that is inconsistent with, or not necessary to or appropriate for, the
winding up of the Company’s business and affairs. The Managing Member (or, in
the event there is no remaining Managing Member, any Person elected by a
majority in interest of the Non-Managing Members (the “Liquidator”))
shall be responsible for overseeing the winding up and dissolution of the
Company and shall take full account of the Company’s liabilities and property
and the Company property shall be liquidated as promptly as is consistent with
obtaining the fair value thereof, and the proceeds therefrom (which may, to the
extent determined by the Managing Member, include shares of stock in the
Managing Member) shall be applied and distributed in the following order:

 

(1)           First, to the payment and discharge
of all of the Company’s debts and liabilities to creditors other than the
Members;

 

(2)           Second, to the payment and discharge
of all of the Company’s debts and liabilities to the Members, pro rata in
accordance with amounts owed to each such Member; and

 

(3)           The balance, if any, to the Managing
Member and Non-Managing Members in accordance with their Capital Accounts,
after giving effect to all contributions, distributions, and allocations for
all periods.

 

The Managing Member shall not receive any additional
compensation for any services performed pursuant to this Article XIII other
than reimbursement of its expenses as provided for in Section 7.4.

 

(b)           Where Immediate Sale of Company’s
Assets Impractical. Notwithstanding the provisions of Section 13.2(a)
hereof which require liquidation of the assets of the Company, but subject to
the order of priorities set forth therein, if prior to or upon dissolution of
the Company the Liquidator determines that an immediate sale of part or all of
the Company’s assets would be impractical or would cause undue loss to the
Members, the Liquidator may, in its sole and absolute discretion, defer for a
reasonable time the liquidation of any assets except those necessary to satisfy
liabilities of the Company (including to those Members as creditors) or, with
the Consent of the Non-Managing Members holding a majority of the Non-Managing
Membership Units, distribute to the Members, in lieu of cash, as tenants in
common and in accordance with the provisions of Section 13.2(a) hereof,
undivided interests in such Company assets as the Liquidator deems not suitable
for liquidation. Any such distributions in kind shall be made only if, in the
good faith judgment of the Liquidator, such distributions in kind are

 

57

 

in the best interest of the Members, and shall be
subject to such conditions relating to the disposition and management of such
properties as the Liquidator deems reasonable and equitable and to any
agreements governing the operation of such properties at such time. The
Liquidator shall determine the fair market value of any property distributed in
kind using such reasonable method of valuation as it may adopt.

 

Section 13.3           Capital Contribution Obligation. If any Member has a deficit balance in
his or her Capital Account (after giving effect to all contributions,
distributions and allocations for the taxable years, including the year during
which such liquidation occurs), such Member shall have no obligation to make
any contribution to the capital of the Company with respect to such deficit,
and such deficit at any time shall not be considered a debt owed to the Company
or to any other Person for any purpose whatsoever, except to the extent
otherwise expressly agreed to by such Member and the Company.

 

Section 13.4           Compliance with Timing Requirements of
Regulations; Allowance for Contingent or Unforeseen Liabilities or Obligations. Notwithstanding anything to the
contrary in this Agreement, in the event the Company is “liquidated” within the
meaning of Regulations Section 1.704-1(b)(2)(ii)(g), distributions shall be
made pursuant to this Article XIII to the Managing Member and Non-Managing
Members who have positive Capital Accounts in compliance with Regulations
Section 1.704-1(b)(2)(ii)(b)(2) (including any timing requirements therein). In
the discretion of the Managing Member, a pro rata portion of the distributions
that would otherwise be made to the Managing Member and Non-Managing Members
pursuant to this Article XIII may be: 
(i) distributed to a liquidating trust established for the benefit
of the Managing Member and Non-Managing 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 of the
Managing Member arising out of or in connection with the Company (the assets of
any such trust shall be distributed to the Managing Member and Non-Managing
Members from time to time, in the reasonable discretion of the Managing Member,
in the same proportions as the amount distributed to such trust by the Company
would otherwise have been distributed to the Managing Member and Non-Managing
Members pursuant to this Agreement); or (ii) withheld or escrowed 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 or escrowed amounts shall be distributed
to the Managing Member and Non-Managing Members in the manner and priority set
forth in Section 13.2(a) as soon as practicable.

 

Section 13.5           Other Events. Notwithstanding any other provision of
this Article XIII, in the event the Company is liquidated within the meaning of
Regulations Section 1.704-1(b)(2)(ii)(g) but no Event of Dissolution has
occurred, the Company’s 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, for federal income tax purposes the Company shall be
deemed to have contributed all of its assets and liabilities to a new limited
liability company in exchange for an interest in the new limited liability
company and, immediately thereafter, the terminated Company shall be deemed to
distribute interests in the new Company to the Managing Member and Non-Managing
Members in proportion to their respective Membership Interests in liquidation
of the terminated Company.

 

58

 

Section 13.6           Rights of Non-Managing Members. Except as specifically provided in this
Agreement, each Non-Managing Member shall look solely to the assets of the
Company for the return of his Capital Contribution and shall have no right or
power to demand or receive property other than cash from the Company. Except as
specifically provided in this Agreement, no Non-Managing Member shall have
priority over any other Non-Managing Member as to the return of his Capital
Contributions, distributions, or allocations.

 

Section 13.7           Notice of Dissolution. In the event an Event of Dissolution or
an event occurs that would, but for provisions of Section 13.1, result
in a dissolution of the Company, the Managing Member shall, within 30 days
thereafter, provide written notice thereof to each of the Members and to all
other parties with whom the Company regularly conducts business (as determined
in the discretion of the Managing Member) and shall publish notice thereof in a
newspaper of general circulation in each place in which the Company regularly
conducts business (as determined in the discretion of the Managing Member).

 

Section 13.8           Cancellation of Certificate. Upon the completion of the liquidation
of the Company as provided in Section 13.2 hereof, the Company shall be
terminated and the Certificate and all qualifications of the Company as a foreign
limited liability company in jurisdictions other than the State of Delaware
shall be canceled and such other actions as may be necessary to terminate the
Company shall be taken.

 

Section 13.9           Reasonable Time for Winding-Up. A reasonable time shall be allowed for
the orderly winding-up of the business and affairs of the Company and the
liquidation of its assets pursuant to Section 13.2 hereof, in order to
minimize any losses otherwise attendant upon such winding-up, and the
provisions of this Agreement shall remain in effect between the Members during
the period of liquidation.

 

ARTICLE XIV

AMENDMENT OF AGREEMENT; MEETINGS

 

Section 14.1           Amendments.

 

(a)           General. Amendments to this
Agreement may be proposed by the Managing Member or by any Non-Managing Members
holding 25 percent or more in the aggregate of the Membership Interests held by
all Non-Managing Members. Following such proposal, the Managing Member shall
submit any proposed amendment to the Non-Managing Members. The Managing Member
shall seek the written vote of the Members on the proposed amendment or shall
call a meeting to vote thereon and to transact any other business that it may
deem appropriate. For purposes of obtaining a written consent, the Managing
Member may require a response within a reasonable specified time, but not less
than 15 days, and failure to respond in such time period shall constitute a
consent which is consistent with the Managing Member’s recommendation (if so
recommended) with respect to the proposal; provided, that, an action shall
become effective at such time as requisite consents are received even if prior
to such specified time. Except as provided in Section 14.1(b), 14.1(c)
or 14.1(d), a proposed amendment shall be adopted and be effective as an
amendment hereto if it is approved by the Managing Member and it

 

59

 

receives the Consent of Non-Managing Members holding a
majority of the Percentage Interests of the Non-Managing Members.

 

(b)           Managing Member’s Power to Amend.
Notwithstanding Section 14.1(a), the Managing Member shall have the
power, without the consent of the Non-Managing Members, to amend this Agreement
as may be required to facilitate or implement any of the following purposes:

 

(1)           to add to the obligations of the
Managing Member or surrender for the benefit of the Non-Managing Members any
right or power granted to the Managing Member or any Affiliate of the Managing
Member;

 

(2)           to reflect the issuance of additional
Membership Interests or the admission, substitution, termination, or withdrawal
of Members in accordance with this Agreement;

 

(3)           to set forth the rights, powers,
duties, and preferences of the holders of any additional Membership Interests
issued pursuant to Section 4.2(b) hereof;

 

(4)           to reflect a change that is of an
inconsequential nature and does not adversely affect the Non-Managing Members
in any material respect, or to cure any ambiguity, correct or supplement any
provision in this Agreement not inconsistent with law or with other provisions;

 

(5)           to satisfy any requirements,
conditions, or guidelines contained in any order, directive, opinion, ruling or
regulation of a Federal or state agency or contained in Federal or state law;

 

(6)           to modify the manner in which Capital
Accounts are computed as set forth in Section 4.4(e).

 

The Managing Member will provide notice to the
Non-Managing Members when any action under this Section 14.1(b) is
taken.

 

(c)           Consent of Adversely Affected
Member Required. Notwithstanding Section 14.1(a) and Section 14.1(b)
hereof, this Agreement shall not be amended without the Consent of each Member
adversely affected if such amendment would (i) convert a Non-Managing Member’s
interest in the Company into a Managing Member’s interest (except as a result
of the Managing Member acquiring such interest), (ii) modify the limited
liability of a Non-Managing Member, (iii) alter rights of the Member to receive
distributions pursuant to Article V, or the allocations specified in Article VI
(except as permitted pursuant to Section 4.2 and Section 14.1(b)(3)
hereof), (iv) alter or modify the Redemption Right as set forth in Sections
4.2(e) and 11.2(b), and related definitions hereof, (v) cause the
termination of the Company prior to the time set forth in Sections 2.5
or 13.1 or (vi) amend this Section 14.1(c). Further, no amendment
may alter the restrictions on the Managing Member’s authority set forth in Section
7.3 without the Consent specified in that section. This Section 14.1(c)
does not require unanimous

 

60

 

consent of all Members adversely affected unless the
amendment is to be effective against all Members adversely affected.

 

(d)           When Consent of Majority of
Non-Managing Membership Interests Required. Notwithstanding Section 14.1(a)
hereof, the Managing Member shall not amend Section 4.2(b), the second sentence
of Section 7.1(a), Sections 7.5, 7.6, 7.8, 11.2, and 14.1(c), this Section
14.1(d) or Section 14.2 without the Consent of two-thirds of the Percentage
Interests of the Non-Managing Members.

 

Section 14.2           Meetings of the Members.

 

(a)           General. Meetings of the
Members may be called by the Managing Member and shall be called upon the
receipt by the Managing Member of a written request by Non-Managing Members
holding 25 percent or more of the Membership Interests. The call shall state
the nature of the business to be transacted. Notice of any such meeting shall
be given to all Members not less than seven days nor more than 30 days prior to
the date of such meeting. Members may vote in person or by proxy at such
meeting. Whenever the vote or Consent of Members is permitted or required under
this Agreement, such vote or Consent may be given at a meeting of Members or
may be given in accordance with the procedure prescribed in Section 14.1
hereof. Except as otherwise expressly provided in this Agreement, the Consent
of holders of a majority of the Percentage Interests shall control.

 

(b)           Informal Action. Any action
required or permitted to be taken at a meeting of the Members may be taken
without a meeting if a written Consent setting forth the action so taken is
signed by a majority of the Percentage Interests of the Members (or such other
percentage as is expressly required by this Agreement). Such Consent may be in
one instrument or in several instruments, and shall have the same force and
effect as a vote of a majority of the Percentage Interests of the Members (or
such other percentage as is expressly required by this Agreement). Such Consent
shall be filed with the Managing Member. An action so taken shall be deemed to
have been taken at a meeting held on the effective date so certified.

 

(c)           Proxies. Each Non-Managing
Member may authorize any Person or Persons to act for him by proxy on all
matters in which a Non-Managing Member is entitled to participate, including
waiving notice of any meeting, or voting or participating at a meeting. Every
proxy must be signed by the Non-Managing Member or his attorney-in-fact. No
proxy shall be valid after the expiration of 11 months from the date thereof
unless otherwise provided in the proxy. Every proxy shall be revocable at the
pleasure of the Non-Managing Member executing it.

 

(d)           Conduct of Meeting. Each
meeting of Members shall be conducted by the Managing Member or such other
Person as the Managing Member may appoint pursuant to such rules for the
conduct of the meeting as the Managing Member or such other Person deems
appropriate.

 

61

 

Section 14.3           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 Membership Units, with the LTIP Units
voting as a single class with the Membership 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 LTIP Unitholders who hold 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 Membership Units; but subject, in any event, to the following
provisions:

 

(i)            With respect to any Transaction, so
long as the LTIP Units are treated in accordance with Section 4.6 hereof, the
consummation of such 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

 

(ii)           Any creation or issuance of any
Membership Units or of any class of series of Membership Unites including
without limitation additional Membership Units or LTIP 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 Membership Units.

 

ARTICLE XV

GENERAL PROVISIONS

 

Section 15.1           Addresses and Notice. All notices and demands under this
Agreement shall be in writing, and may be either delivered personally (which
shall include deliveries by courier), by telefax, telex or other wire
transmission (with request for assurance of receipt in a manner appropriate
with respect to communications of that type, provided that a confirmation copy
is concurrently sent by a nationally recognized express courier for overnight
delivery) or mailed, postage prepaid, by certified or registered mail, return
receipt requested, directed to the parties at their respective addresses set
forth on Exhibit A, as it may be amended from time to time, and, if to
the Company, such notices and demands sent in the aforesaid manner must be
delivered at its principal place of business set forth above. Unless delivered
personally or by telefax, telex or other wire transmission as above (which
shall be effective on the date of such delivery or transmission), any notice
shall be deemed to have been made three (3) days following the date so mailed. Any
party hereto may designate a different address to which notices and

 

62

 

demands shall
thereafter be directed by written notice given in the same manner and directed
to the Company at its office hereinabove set forth.

 

Section 15.2           Titles and Captions. All article or section titles or
captions in this Agreement are for convenience only. They shall not be deemed
part of this Agreement and in no way define, limit, extend or describe the
scope or intent of any provisions hereof. Except as specifically provided
otherwise, references to “Articles” and “Sections” are to Articles and Sections
of this Agreement.

 

Section 15.3           Pronouns and Plurals. Whenever the context may require, any
pronoun used in this Agreement shall include the corresponding masculine, feminine
or neuter forms, and the singular form of nouns, pronouns and verbs shall
include the plural and vice versa.

 

Section 15.4           Further Action. The parties shall execute and deliver
all documents, provide all information and take or refrain from taking action
as may be necessary or appropriate to achieve the purposes of this Agreement.

 

Section 15.5           Binding Effect. This Agreement shall be binding upon
and inure to the benefit of the parties hereto and their heirs, executors,
administrators, successors, legal representatives and permitted assigns.

 

Section 15.6           Waiver of Partition. The Members hereby agree that the
Company Properties are not and will not be suitable for partition. Accordingly,
each of the Members hereby irrevocably waives any and all rights (if any) that
it may have to maintain any action for partition of any of the Company
Properties.

 

Section 15.7           Entire Agreement. This Agreement constitutes the entire
agreement among the parties with respect to the matters contained herein; it
supersedes any prior agreements or understandings among them and it may not be
modified or amended in any manner other than pursuant to Article XIV.

 

Section 15.8           Securities Law Provisions. The Membership Units have not been
registered under the Federal or state securities laws of any state and,
therefore, may not be resold unless appropriate Federal and state securities
laws, as well as the provisions of Article XI hereof, have been complied with.

 

Section 15.9           Remedies Not Exclusive. Any remedies herein contained for
breaches of obligations hereunder shall not be deemed to be exclusive and shall
not impair the right of any party to exercise any other right or remedy,
whether for damages, injunction or otherwise.

 

Section 15.10         Time. Time is of the essence of this Agreement.

 

Section 15.11         Creditors. None of the provisions of this Agreement shall be
for the benefit of, or shall be enforceable by, any creditor of the Company.

 

Section 15.12         Waiver. No failure by any party to insist upon the strict
performance of any covenant, duty, agreement or condition of this Agreement or
to exercise any right or remedy

 

63

 

consequent upon a
breach thereof shall constitute waiver of any such breach or any other
covenant, duty, agreement or condition.

 

Section 15.13         Execution Counterparts. This Agreement may be executed in
counterparts, all of which together shall constitute one agreement binding on
all the parties hereto, notwithstanding that all such parties are not
signatories to the original or the same counterpart. Each party shall become
bound by this Agreement immediately upon affixing its signature hereto.

 

Section 15.14         Applicable Law. This Agreement shall be construed in
accordance with and governed by the laws of the State of Delaware, without
regard to the principles of conflicts of law.

 

Section 15.15         Invalidity of Provisions. If any provision of this Agreement is
or becomes invalid, illegal or unenforceable in any respect, the validity,
legality and enforceability of the remaining provisions contained herein shall
not be affected thereby.

 

Section 15.16         No Rights as Stockholders. Nothing contained in this Agreement
shall be construed as conferring upon the holders of Membership Units any
rights whatsoever as stockholders of the Managing Member, including without
limitation any right to receive dividends or other distributions made to
stockholders of the Managing Member or to vote or to consent or to receive
notice as stockholders in respect of any meeting of stockholders for the
election of directors of the Managing Member or any other matter, except as may
be provided in the Investors Agreement.

 

ARTICLE XVI

POWER OF ATTORNEY

 

Section 16.1           Power of Attorney.

 

(a)           Scope. Each Non-Managing
Member and each Assignee constitutes and appoints the Managing Member, any
Liquidator, and authorized officers and attorneys-in-fact of each, and each of
those acting singly, in each case with full power of substitution, as its true
and lawful agent and attorney-in-fact, with full power and authority in its
name, place and stead to:

 

(1)           execute, swear to, acknowledge,
deliver, publish, file and record in the appropriate public offices (a) all
certificates, documents and other instruments (including, without limitation,
this Agreement and the Certificate and all amendments or restatements thereof)
that the Managing Member or the Liquidator deems appropriate or necessary to
form, qualify or continue the existence or qualification of the Company as a
limited liability company (or an entity in which the Non-Managing Members have
limited liability) in the State of Delaware and in all other jurisdictions in
which the Company may conduct business or own property; (b) all instruments
that the Managing Member or any Liquidator deems appropriate or necessary to
reflect any amendment, change, modification or

 

64

 

restatement of this Agreement in accordance with its
terms; (c) all conveyances and other instruments or documents that the Managing
Member or any Liquidator deems appropriate or necessary to reflect the
dissolution and liquidation of the Company pursuant to the terms of this
Agreement, including, without limitation, a certificate of cancellation; (d)
all instruments relating to the admission, withdrawal, removal or substitution
of any Member pursuant to, or other events described in, Article XI, XII or
XIII hereof or the Capital Contribution of any Member; and (e) all
certificates, documents and other instruments relating to the determination of
the rights, preferences and privileges of Membership Interests; and

 

(2)           execute, swear to, acknowledge and
file all ballots, consents, approvals, waivers, certificates and other
instruments appropriate or necessary, in the sole and absolute discretion of
the Managing Member, to make, evidence, give, confirm or ratify any vote,
consent, approval, agreement or other action which is made or given by the
Members hereunder or is consistent with the terms of this Agreement or
appropriate or necessary, in the sole discretion of the Managing Member, to
effectuate the terms or intent of this Agreement.

 

Nothing contained herein shall be construed as
authorizing the Managing Member to amend this Agreement except in accordance
with Article XIV hereof or as may be otherwise expressly provided for in this
Agreement.

 

(b)           Irrevocability. The foregoing
power of attorney is hereby declared to be irrevocable and a power coupled with
an interest, in recognition of the fact that each of the Members will be
relying upon the power of the Managing Member to act as contemplated by this
Agreement in any filing or other action by it on behalf of the Company, and it
shall survive and not be affected by the subsequent Incapacity of any
Non-Managing Member or Assignee and the transfer of all or any portion of such
Non-Managing Member’s or Assignee’s Membership Units and shall extend to such
Non-Managing Member’s or Assignee’s heirs, successors, assigns and personal
representatives. Each such Non-Managing Member or Assignee hereby agrees to be
bound by any representation made by the Managing Member, acting in good faith
pursuant to such power of attorney; and each such Non-Managing Member or
Assignee hereby waives any and all defenses which may be available to contest,
negate or disaffirm the action of the Managing Member, taken in good faith
under such power of attorney. Each Non-Managing Member or Assignee shall
execute and deliver to the Managing Member or the Liquidator, within 15 days
after receipt of the Managing Member’s request therefor, such further
designation, powers of attorney and other instruments as the Managing Member or
the Liquidator, as the case may be, deems necessary to effectuate this
Agreement and the purposes of the Company.

 

65

 

IN WITNESS WHEREOF, the parties hereto have executed
this Amended and Restated Limited Liability Company Agreement of Morgans Group LLC
as of the date first written above.

 

	
   

  	
  Managing Member:

  
	
   

  	
   

  
	
   

  	
  MORGANS HOTEL GROUP CO.

  
	
   

  	
   

  
	
   

  	
   

  
	
   

  	
  By:

  	
   

  	
   

  
	
   

  	
   

  	
  Name:

  
	
   

  	
   

  	
  Title:

  
	
   

  	
   

  
	
   

  	
   

  
	
   

  	
  Non-Managing Members:

  
	
   

  	
   

  
	
   

  	
   

  
	
   

  	
  MORGANS HOTEL GROUP LLC

  
	
   

  	
   

  
	
   

  	
   

  
	
   

  	
  By:

  	
   

  	
   

  
	
   

  	
   

  	
  Name:

  
	
   

  	
   

  	
  Title:

  
	
   

  	
   

  
	
   

  	
   

  
	
   

  	
  NORTHSTAR PARTNERSHIP, L.P.

  
	
   

  	
   

  
	
   

  	
   

  
	
   

  	
  By:

  	
   

  	
   

  
	
   

  	
   

  	
  Name:

  
	
   

  	
   

  	
  Title:

  
	
   

  	
   

  
	
   

  	
   

  
	
   

  	
  RSA ASSOCIATES, L.P.

  
	
   

  	
   

  
	
   

  	
   

  
	
   

  	
  By:

  	
   

  	
   

  
	
   

  	
   

  	
  Name:

  
	
   

  	
   

  	
  Title:

  

 

66

 

EXHIBIT A

MEMBERS, CONTRIBUTIONS AND

MEMBERSHIP INTERESTS

 

	
  Name and Address of Member

  	
   

  	
  Cash

  Contribution

  	
   

  	
  Agreed Value of

  Contributed

  Property

  	
   

  	
  Membership

  Units

  	
   

  	
  LTIP

  Units

  	
   

  	
  Percentage

  Interest

  	
   

  
	
   

  	
   

  	
   

  	
   

  	
   

  	
   

  	
   

  	
   

  	
   

  	
   

  	
   

  	
   

  
	
  Managing
  Member:

  	
   

  	
   

  	
   

  	
   

  	
   

  	
   

  	
   

  	
   

  	
   

  	
   

  	
   

  
	
   

  	
   

  	
   

  	
   

  	
   

  	
   

  	
   

  	
   

  	
   

  	
   

  	
   

  	
   

  
	
  Morgans Hotel Group Co.

  475 Tenth Avenue

  New York, New York 10018

  	
   

  	
  $

  	
   

  	
   

  	
  $

  	
   

  	
   

  	
   

  	
   

  	
   

  	
   

  	
   

  	
  %

  
	
   

  	
   

  	
   

  	
   

  	
   

  	
   

  	
   

  	
   

  	
   

  	
   

  	
   

  	
   

  
	
  Non-Managing
  Members:

  	
   

  	
   

  	
   

  	
   

  	
   

  	
   

  	
   

  	
   

  	
   

  	
   

  	
   

  
	
   

  	
   

  	
   

  	
   

  	
   

  	
   

  	
   

  	
   

  	
   

  	
   

  	
   

  	
   

  
	
  Morgans Hotel Group LLC

  475 Tenth Avenue

  New York, New York 10018

  	
   

  	
   

  	
   

  	
   

  	
   

  	
   

  	
   

  	
   

  	
   

  	
   

  	
  %

  
	
   

  	
   

  	
   

  	
   

  	
   

  	
   

  	
   

  	
   

  	
   

  	
   

  	
   

  	
   

  
	
  Total

  	
   

  	
  $

  	
   

  	
   

  	
  $

  	
   

  	
   

  	
   

  	
   

  	
   

  	
   

  	
  100

  	
  %

  

 

 

EXHIBIT B

VALUE OF CONTRIBUTED PROPERTY

 

	
  Contributed Property

  	
   

  	
  Basis

  	
   

  	
  704(c) Value

  	
   

  
	
   

  	
   

  	
   

  	
   

  	
   

  	
   

  
	
   

  	
   

  	
   

  	
   

  	
   

  	
   

  
	
   

  	
   

  	
   

  	
   

  	
   

  	
   

  

 

 

EXHIBIT C

NOTICE OF REDEMPTION

 

The undersigned hereby
irrevocably (a) elects to exercise its Redemption Right set forth in the Amended
and Restated Limited Liability Company Agreement of Morgans Group LLC (the “Agreement”;
capitalized terms used and not otherwise defined herein shall have the meanings
assigned to such terms in the Agreement), with respect to an aggregate of              
Membership Units, (b) surrenders such Membership Units and all right, title and
interest therein, and (c) directs that the Cash Amount or Shares Amount (as
determined by the Managing Member) deliverable upon exercise of the Redemption
Right be delivered to the address specified below, and if Common Shares are to
be delivered, such Common Shares be registered or placed in the name(s) and at
the address(es) specified below.

 

Dated: 

 

Name of Non-Managing Member:

 

(Signature of Non-Managing Member)

 

(Street Address)

 

(City) 
(State)  (Zip Code)

 

Signature Guaranteed by:

 

If Common Shares are to be issued, issue to:

 

Please insert social security or identifying number:

 

Name:

 

 

EXHIBIT D

NOTICE OF ELECTION BY LTIP UNITHOLDER TO
CONVERT LTIP UNITS INTO

MEMBERSHIP UNITS

 

The undersigned Holder of LTIP Units hereby irrevocably (i) elects to
convert the number of LTIP Units in Morgans Group LLC (the “Company”) set forth
below into Membership Units in accordance with the terms of the Amended and
Restated Limited Liability Company Agreement of the Company, as amended; and
(ii) directs that any cash in lieu of Membership Units that may be deliverable
upon such conversion be delivered to the address specified below. The undersigned
hereby 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 herein; 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 Holder:

  	
   

  	
   

  
	
   

  	
   

  
	
  Number of LTIP Units to be Converted:

  	
   

  	
   

  
	
   

  	
   

  
	
  Date of this Notice:

  	
   

  	
   

  
						

 

	
   

  	
   

  	
   

  	
   

  	
   

  	
   

  
	
   

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

  	
   

  	
   

  	
   

  	
   

  
	
   

  	
   

  	
   

  	
   

  	
   

  
	
   

  	
   

  	
   

  	
   

  	
   

  	
   

  
	
   

  	
  (Street
  Address)

  	
   

  	
   

  	
   

  	
   

  
	
   

  	
   

  	
   

  	
   

  	
   

  
	
   

  	
   

  	
   

  	
   

  	
   

  	
   

  
	
   

  	
  (City)

  	
  (State)

  	
  (Zip Code)

  	
   

  	
   

  	
   

  	
   

  
	
   

  	
   

  	
   

  	
   

  	
   

  	
   

  	
   

  	
   

  
	
   

  	
   

  	
   

  	
   

  	
   

  	
   

  	
   

  	
   

  
	
   

  	
  Signature
  Guaranteed by:

  	
   

  	
   

  	
   

  	
   

  	
   

  
									

 

 

EXHIBIT E

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

MEMBERSHIP UNITS

 

Morgans Group LLC (the “Company”) hereby irrevocably elects to cause
the number of LTIP Units held by the Holder of LTIP Units set forth below to be
converted into Membership Units in accordance with the terms of Amended and
Restated Limited Liability Company Agreement of the Company, as amended.

 

	
  Name of Holder:

  	
   

  	
   

  
	
   

  	
  (Please
  Print: Exact Name as Registered with Company)

  	
   

  
	
   

  	
   

  
	
  Number of LTIP Units to be Converted:

  	
   

  	
   

  
	
   

  	
   

  
	
  Date of this Notice:

Source: [{"source": "alea-institute/alea-institute/kl3m-data-edgar-agreements/train-00097-of-00352.parquet"}, [{"source": "alea-institute/alea-institute/kl3m-data-edgar-agreements/train-00097-of-00352.parquet"}]]