Document:

Exhibit 10.38

 

AGREEMENT FOR THE SALE OF URANIUM
CONCENTRATES

 

THIS
AGREEMENT FOR THE SALE OF URANIUM CONCENTRATES (this “Agreement”) is made effective as of the 31st day of March
2006,

 

BETWEEN:

 

URI, Inc., a company organized under the laws of the State of Delaware having its
principal office in Lewisville, Texas (“URI”);

 

AND

 

UG U.S.A., INC., a company organized under the laws of the State
of Georgia having its principal office in Atlanta, Georgia (“UG”).

 

RECITALS:

 

WHEREAS, URI and UG are Parties to the
Contract for the Sale of Uranium Concentrates dated August 12, 2003, as amended
on August 30, 2004 and on April 29, 2005, UG-reference V03/020, and to the
Contract for the Sale of Uranium Concentrates dated April 29, 2005,
UG-reference V05/014 (collectively, the “Original
Contracts”);

 

WHEREAS, URI and UG agree to terminate the
Original Contracts and enter into this Agreement as an amendment and
restatement thereof upon the terms and conditions set forth herein;

 

NOW
THEREFORE, in consideration of the premises and the mutual obligations
hereinafter described and intending to be legally bound, the Parties agree as
follows:

 

ARTICLE I

INTERPRETATION

 

1.01       Definitions: 
In this Agreement the following terms and expressions shall have the
following meanings:

 

(a)          “Agreed
Rate” means a rate per annum that is equal to two (2%) percentage
points in excess of the prime rate of interest per annum announced by the JP
Morgan Chase Bank at New York, New York, as its prime rate of interest for U.S.
dollar commercial loans;

 

(b)          “Base
Quantity” shall mean in each Delivery Year one-half of the
Concentrates produced by URI from its Texas Properties (up to a maximum of
600,000 pounds per Delivery Year or a total of 3,000,000 pounds for the entire
Term of the Agreement);

 

(c)          “Book
Transfer” means the completion of the transfer of U3O8
upon delivery of the Concentrates on the books of the Converter from the
account of URI, or an account designated by URI, to the account of UG;

 

 

(d)          “Business
Day” means a day (other than a Saturday or Sunday) on which banks
are open for general business in the United States of America;

 

(e)          “Concentrates”
means natural uranium concentrates containing U3O8
produced from the Texas Properties;

 

(f)           “Converter”
means the conversion facilities of (i) ConverDyn, located in Metropolis, Ill.,
and/or (ii) Cameco, located in Blind River, Ontario, as applicable;

 

(g)          “Converter’s
Notice” means a written notice issued by the Converter to URI and UG
confirming the Origin and the Delivery Quantity that was delivered to Converter
by URI on the applicable Delivery Date by which Converter confirms the Book
Transfer of Concentrates for the account of and on behalf of UG, and which has
been signed by an authorized person of the Converter;

 

(h)          “Delivery
Date” means any Business Day during the first week of each calendar
month, as determined by URI, during the Term, beginning July 1, 2006, upon
which URI delivers Concentrates to the applicable Converter for Book Transfer
to UG;

 

(i)           “Delivery
Location” means the location of the respective Converter determined
by UG pursuant to a Delivery Notice.

 

(j)           “Delivery
Notice” means the written notice issued by UG and provided to URI at
least 15 days prior to a Delivery Date setting forth the Delivery Location for
an applicable delivery;

 

(k)          “Delivery
Quantity” means the amount of Concentrates to be delivered on a
Delivery Date as set forth in the Invoice from URI to UG as contemplated by
Section 4.03.

 

(l)           “Delivery
Year” means each twelve-month period starting July 1 and  ending 
June 30 throughout the Term during which the delivery of a quantity of
Concentrates is made or scheduled to be made pursuant to this Agreement;

 

(m)          “GDP-IPD”
means the Gross Domestic Product Implicit Price Deflator as published in the
Survey of Current Business by the U.S. Department of Commerce, Bureau of
Economic Analysis. In the event the basis for the GDP-IPD is substantially
modified or such index is discontinued, the appropriate adjustment to the Index
Value or selection of a substitute index, as applicable, shall be made by
agreement of the Parties. If the index is converted from one base period to a
new base period, U.S. Department of Commerce re-basing factors will be applied
so that the basis for determining the percentage change between the index is
not altered;

 

2

 

(n)         “Major
Uranium Exploration Plays” means properties owned or operated by URI
or its affiliates not subject to this Agreement, more specifically described in
a letter dated simultaneously herewith from URI to UG;

 

3

 

 (o)         “Market Price” means the average of the
month end long-term prices for U3O8 published for the
second month immediately preceding the month in which a Delivery Date occurs by
TradeTech in its Nuclear Market Review, defined as Long-Term Price Indicator U3O8
and the Ux Consulting Co., LLC, in its UX Weekly, defined as UX Price
Indicator U3O8 Long-Term. Both long-term prices shall be
applicable to origins of U3O8 legally acceptable for use
in US reactors on the applicable Delivery Date;

 

(p)          “Origin”
means the country in which the Delivery Quantity was mined and processed.

 

(q)          “Party”
means either UG or URI and “Parties” means both of them;

 

(r)           “Shortfall”
means the amount by which the Base Quantity in any Delivery Year is less than
600,000 pounds. After any Delivery Year, to the extent that there is a
Shortfall, the Shortfall shall be added to the Base Quantity for the next
succeeding Delivery Year. If at the end of the Term of this Agreement there is
still a Shortfall, the Parties agree to extend the Term of this Agreement
accordingly to reach the full 3,000,000 lbs;

 

(s)           “Suspension
Agreement” means the suspension agreement which has been entered
into and is still in force as of the date of execution of this Agreement
between the United States Department of Commerce and The Russian Federation
concerning the import of uranium into the United States of America as such
agreement may be amended or replaced;

 

(t)           “Term”
means the period of time from the Effective Date until June 30, 2011, or
extended due to a Shortfall, during which URI shall deliver Concentrates to UG
pursuant to the terms and conditions of this Agreement; and

 

(u)          “Texas
Properties” means properties located in Texas currently owned by URI
or URI’s parent company or any of its subsidiaries and properties located in
Texas acquired by any of them in the future, excluding any Major Uranium
Exploration Plays. URI will describe the Texas Properties more specifically in
a letter to UG on or before the Effective Date;

 

(v)          “U3O8”
means natural triuranium octoxide, the quantity of the element uranium in
Concentrates being established by assay and converted to U3O8
by multiplying the quantity of uranium by 1.1792.

 

1.02       Headings: 
The division of this Agreement into articles and sections, and the
insertion of headings, are for convenience of reference only and shall not
affect the construction or interpretation of this Agreement. Any reference
herein to an article, section or other subdivision is a reference to such
provision as contained in this Agreement.

 

4

 

1.03       Expanded Meanings: 
In this Agreement, unless there is something in the subject matter or
context inconsistent therewith, the singular shall include the plural and the
plural shall include the singular.

 

1.04       Calculation of Number of Days: 
In any case in which a number of days is prescribed in this Agreement,
the same shall be determined exclusive of the first day and inclusive of the
last day.

 

1.05       Rounding of Numerical Figures: 
Whenever a numerical figure is to be rounded or calculated to fewer
digits than the number of digits available, the following procedure shall be
applied unless otherwise specified herein:

 

(a)           if the first digit discarded is less
than five (5), the last digit retained will not be changed; and

 

(b)          if the first digit discarded is equal
to or greater than five (5), the last digit retained will be increased by

one (1).

 

1.06       Currency: All amounts and sums of money
referred to in this Agreement are expressed in terms of United States dollars
and all amounts and sums payable hereunder shall be paid in lawful money of the
United States of America.

 

1.07       Entire Agreement: 
This Agreement contains all the terms of the mutual understanding
between the Parties with respect to the subject matter of this Agreement and
supersedes and replaces any and all written and oral arrangements,
correspondence, conversations, and documents made and exchanged between the
Parties with respect to the subject matter of this Agreement prior to the
execution of this Agreement except as otherwise specifically provided for
herein. Any modification, alteration, or amendment of this Agreement shall be
in writing dated after the date hereof and duly executed by both Parties.

 

ARTICLE II

CONDITIONS PRECEDENT TO TERMINATION OF THE
CONTRACTS

 

2.01       Generally: 
The Parties acknowledge and agree that the obligations set forth in
subsections (a) and (b) of Section 2.02 shall be conditions precedent to the
effectiveness of the terms and conditions of Articles III through VIII hereof
and the termination of the Original Contracts. Notwithstanding the foregoing,
until the earlier to occur of the Effective Date (as defined below) or the
termination of this Agreement in accordance with Section 2.03, the respective
rights, duties and obligations of the Parties set forth in the Original
Contracts shall be suspended.

 

2.02       Conditions: 
As partial consideration for the termination of the Contracts, URI shall
use reasonable efforts to:

 

5

 

(a)          Deliver to UG by Book Transfer at ConverDyn on or before
April 30, 2006, a quantity of 21,075 pounds of Concentrates at US$15.50 per
pound to be paid by UG within seven (7) working days after the Book Transfer
occurred,

 

(b)          Pay to UG on or before June 30, 2006, Twelve Million
Dollars (US$12,000,000.00); provided, however, that URI’s
obligation to pay such amount shall be contingent on its ability to obtain debt
and/or equity financing therefor on terms reasonably acceptable to URI.

 

2.03       Effectiveness: 
The date that both of the actions set forth in subsections (a) and (b)
of Section 2.02 shall have been effected shall be referred to as the “Effective Date.”  If the Effective Date occurs on or before
June 30, 2006, this Agreement shall amend and restate the Original Contracts in
their entirety, and the Original Contracts shall terminate and be of no further
force and effect. If the Effective Date does not occur on or before June 30,
2006, this Agreement shall terminate and be of no further force and effect and
the Original Contracts shall govern the respective rights, duties and
obligations of the Parties as more particularly described therein as if this Agreement
had not been executed by the Parties; provided, however, that URI shall have
the right to extend the June 30 date for up to 45 days if necessary to
accommodate the closing of its efforts to raise the $12 million.

 

2.04       Additional Deliveries Prior to the
Effective Date:  Notwithstanding anything to the
contrary contained herein, in the event that the Parties agree upon a delivery
of Concentrates in addition to the delivery described in Section 2.02(a) prior
to the Effective Date, the price therefor shall be in accordance with Section
4.01 and the payment terms therefor shall be in accordance with Section 4.03
through 4.05. Any such delivery will be credited to the amount of the first
Delivery Quantity hereunder.

 

ARTICLE III

TERMS OF PURCHASE AND SALE

 

3.01       Quantities:

 

(a)         Base
Quantity. Commencing on the Effective Date and subject to the terms
and conditions of this Agreement, URI shall sell and deliver to UG during each
Delivery Year on the Delivery Dates during the Term of this Agreement, and UG
shall purchase, pay for and take delivery from URI of, the Base Quantity. The
price for such Base Quantity shall be as set forth in Section 4.01.

 

(b)         Additional
Quantities. If in any Delivery Year, URI has delivered the Base
Quantity, and any existing Shortfall, if applicable, and URI has additional
production of Concentrates from the Texas Properties available for delivery in
such Delivery Year, UG shall have an exclusive right of first refusal (the “Right of First Refusal”) to purchase
additional Concentrates (“Additional Quantities”) up to an amount which when
added to the Base Quantity equals fifty percent (50%) of the Concentrates
produced at the Texas Properties in that Delivery Year.

 

6

 

Upon
the receipt of written notice from URI to UG of a Right of First Refusal, UG
shall have a period of 15 Business Days during which it may accept such Right
of First Refusal. If UG does not notify URI in writing within such 15 Business
Day period, the Right of First Refusal shall terminate for such Delivery Year. If
UG accepts the Right of First Refusal, the price for such Concentrates shall be
determined pursuant to Section 4.02, and the actual delivery date shall be as
mutually agreed upon by URI and UG with payment due in accordance with Sections
4.03 through 4.05.

 

(c)         Estimated
Production Schedule. URI has simultaneously herewith furnished to UG
an estimated production schedule. URI will periodically, but not less
frequently than on the last day of each calendar quarter, update the estimated
production schedule in writing to UG. It is understood that the estimate is
only an estimate and that URI shall have no liability to UG if it fails to meet
the estimated production schedule or if it fails to deliver 600,000 pounds of
Concentrates in any Delivery Year.

 

3.02       Delivery Notice:  At least 15 days prior to each
Delivery Date, UG shall provide URI in writing a Delivery Notice containing the
Delivery Location to be met by URI for such delivery.

 

3.03       Delivery, Delivery Location and Delivery
Date:  On each Delivery Date, URI shall deliver the Delivery Quantity to UG
by Book Transfer with the Converter at the applicable Delivery Location set
forth in the Delivery Notice. There shall be not more than 12 deliveries of
Concentrates in any given Delivery Year, except pursuant to a Right of First
Refusal.

 

3.04       Source of Supply/Origin:  The Concentrates delivered to UG will be
sourced from the Texas Properties.

 

3.06       Conveyance: 
URI shall issue to the Converter an instruction to effect the Book
Transfer of the Delivery Quantity on each Delivery Date. URI shall instruct the
Converter to provide UG and URI with a copy of the Converter’s Notice by
facsimile transmission immediately following the conclusion of such Book
Transfer.

 

3.07       Risk of Loss: 
Title to, and all risks of loss in, and liability for, any personal loss
or injury or any property damage caused by Concentrates delivered to UG shall
pass to UG when the Concentrates are transferred to UG’s account by Book
Transfer.

 

3.08       Permits: 
Each Party shall, at its own expense, be responsible for obtaining all
approvals, authorization, consents, licenses, and permits necessary to carry
out its obligations hereunder, and to the extent necessary, the other party
shall co-operate as to the obtaining of such approvals, authorizations,
consents, licenses, and permits.

 

3.09       Costs: 
URI will assume any fees, costs or charges incurred in carrying out the
Book Transfer.

 

7

 

ARTICLE
IV

PURCHASE PRICE AND PAYMENT

 

4.01       Price for Base Quantity and Shortfall: 
In each Delivery Year, the amount payable per pound of Concentratesby UG for the Base Quantity and Shortfall delivered by URI pursuant to
this Agreement shall be the Market Price less a discount of $6.00 per pound;
such discount to be escalated with the GDP-IPD last published prior to the
applicable Delivery Date as compared to the GDP-IPD last published prior to
February 15, 2006.

 

4.02       Price for Additional Quantities: 
For Concentrates delivered pursuant to a Right of First Refusal, the
price payable by UG for each pound of Concentrates delivered thereunder shall
be the average of the month-end Spot U3O8 Price
Indicators as published by TradeTech and UxC for the month immediately
preceding the month of delivery less a fixed discount of four percent (4%).

 

4.03       Invoices: 
At least ten (10) days prior to each Delivery Date, URI shall send UG an
invoice (the “Invoice”) setting
forth (i) the actual Delivery Quantity to be delivered on such Delivery Date or
(ii) the actual amount to be delivered pursuant to a Right of First Refusal. UG
agrees that the original invoice may be sent by facsimile and that the receipt
of such facsimile is receipt of the invoice for purposes of payment, provided
that the original written invoice is received at least ten (10) days before the
Delivery Date.

 

4.04       Payment: 
UG shall pay the Invoice by the end of the month in which the delivery
occurs for all deliveries prior to September 1, 2007 and within thirty (30)
days after the Delivery Date or the date of delivery pursuant to a Right of
First Refusal, as the case may be, subject to UG’s prior receipt of the
Converter’s Notice. If such day on which payment is due is not a Business Day,
the following Business Day will be substituted. Payment to URI of the full
amount invoiced shall be made by electronic transfer of funds immediately
available to URI at the bank account designated on the Invoice, free from all
charges or deductions.

 

4.05       Interest: 
Any amounts due hereunder from UG to URI not paid at or within the times
specified in Section 4.04 shall bear interest from the due date until the
actual date of payment at the Agreed Rate.

 

ARTICLE
V

TAXES, DUTIES OR CHARGES

 

5.01       Taxes, Duties or Charges: 
URI shall be responsible for and shall pay any taxes, imposts, or duties
imposed or levied by or payable to any taxing authority upon or with respect to
any or all of any Delivery Quantity or Concentrates delivered pursuant to a
Right of First Refusal, as the case may be, prior to Book Transfer. UG shall be
responsible for and shall pay any taxes, imposts, or duties imposed or levied
by or payable to any taxing authority upon or with respect to any or all of
such delivery, or the use thereof, coincident with or after Book Transfer.

 

8

 

ARTICLE
VI

REPRESENTATION AND WARRANTIES;

 

INDEMNIFICATION; NO OTHER WARRANTIES

 

6.01       Representation and Warranties by URI: 
URI represents and warrants to UG that:

 

(a)          URI will have good and marketable
title to the Delivery Quantity being sold to UG and will convey good and
marketable title thereto, free and clear of any liens, charges or encumbrances
of any description;

 

(b)          The Delivery Quantity will conform to
the Origin requirements described in Section 3.04;

 

(c)          No portion of the Delivery Quantity
will have been obtained by URI under or through any arrangement, swap, or
exchange that violates any of the laws of the United States of America
regarding the importation or use of U3O8 or is designed to
circumvent the import limits for uranium under the Suspension Agreement; and

 

(d)          The transaction set forth in this
Agreement is not part of any arrangement, swap, or exchange by URI that
violates any of the laws of the United States of America regarding the
importation or use of U3O8 or is designed to circumvent
the import limits for uranium under the Suspension Agreement.

 

The foregoing
representations and warranties constitute continuing representations and
warranties for the benefit of UG and will survive the completion of the
transactions contemplated by this Agreement.

 

6.02       Representations and Warranties of UG: 
UG represents and warrants to URI that:

 

(a)          The Delivery Quantity will be used
exclusively for peaceful, non-explosive purposes in accordance with all
applicable laws and regulations;

 

(b)          The transaction set forth in this
Agreement is not part of any arrangement, swap, or exchange by UG that violates
any of the laws of the United States of America regarding the importation or
use of uranium or which is designed to circumvent the import limits for uranium
under the Suspension Agreement; and

 

(c)          UG will impose the obligations in
Section 6.02 (a) and (b) on any person, company or other entity with which UG
enters into an arrangement for the sale, transfer exchange or other disposition
of any portion of the Delivery Quantity.

 

The foregoing
representations and warranties constitute continuing representations and
warranties for the benefit of URI and survive the completion of the
transactions contemplated by this Agreement.

 

9

 

6.03       Indemnification: 
Subject to the terms and conditions hereof, URI shall indemnify and hold
harmless UG from and against all costs, expenses, claims, damages and injuries
incurred or arising in respect of the ownership, storage, transportation,
possession or use of Concentrates prior to Book Transfer to UG by URI pursuant
to this Agreement. UG shall indemnify and hold harmless URI from and against
all costs, expenses, claims, damages and injuries arising in respect of the
ownership, storage, transportation, possession or use of Concentrates
subsequent to Book Transfer to UG by URI pursuant to this Agreement.

 

6.04       Exclusivity of Warranties: 
THE EXPRESS WARRANTIES SET FORTH HEREIN ARE EXCLUSIVE, AND NO OTHER
WARRANTIES OF ANY KIND, WHETHER STATUTORY, WRITTEN, ORAL OR IMPLIED (INCLUDING
WARRANTIES OF FITNESS FOR A PARTICULAR PURPOSE OR MERCHANTABILITY), SHALL
APPLY.

 

ARTICLE
VII

DEFAULT

 

7.01       URI’s default: In the event that URI is in default
by failing to materially fulfil a delivery in accordance with an Invoice,
provided such failure to deliver is not caused by Force Majeure, and provided
such default continues for a period of twenty (20) days after notice from UG to
URI specifying the events of default, then UG shall have the option, without
prejudice to any other rights and remedies, to terminate such Delivery, and the
damages payable to UG by URI shall be limited to the amount, if any, by which
the cost of replacement U3O8 exceeds the cost of such U3O8,
if such Delivery had been purchased under this Agreement in accordance with the
Invoice; provided, however, that UG shall use its best efforts to obtain such
replacement U3O8, at the lowest available cost; and

 

7.02        UG’s default to
accept a Delivery: In
the event that UG is in default by failing to accept  a delivery in accordance with an Invoice or
otherwise as agreed upon by UG with respect to a delivery pursuant to a Right
of First Refusal; provided such failure to accept is not caused by Force
Majeure, and provided such default continues for a period of twenty (20) days
after notice from URI to UG specifying the events of default, then URI shall
have the option, without prejudice to any other rights and remedies, to terminate  such Delivery, and the damages payable to URI
by UG shall be limited to the amount, if any, by which the resale price of the
applicable amount of U3O8 is less than the Agreement
price of such U3O8 , if such Delivery had been accepted
under this Agreement; provided, however, that URI shall use its best efforts to
resell such U3O8 at the highest available price.

 

10

 

7.03        UG’s default of
payment: In the
event that UG is in default to pay for a delivery in accordance with an
Invoice  and provided such default to pay
continues for a period of sixty ( 60 ) days after notice from URI to UG
specifying the event of default, then URI shall have the option, without
prejudice to any other rights and remedies, to terminate the Agreement and the
damages payable to URI by UG shall be limited to the amount, if any, by which
the resale price of the thus terminated amount of U3O8 is less than the
Agreement price of such U3O8; provided, however, that URI shall use its best efforts
to resell such U3O8 at the highest available price.

 

ARTICLE VIII

LIMITATION OF REMEDIES AND DAMAGES

 

8.01       No Consequential Damages: 
EXCEPT AS OTHERWISE SPECIFICALLY SET FORTH HEREIN, IN NO EVENT, WHETHER
UNDER CONTRACT, TORT (INCLUDING NEGLIGENCE OR STRICT LIABILITY), WARRANTY, OR
OTHERWISE, SHALL EITHER PARTY TO THIS AGREEMENT BE LIABLE TO THE OTHER PARTY
FOR ANY INCIDENTAL OR CONSEQUENTIAL DAMAGES OR LOSSES OF ANY NATURE ARISING OUT
OF OR, CONNECTED WITH OR RESULTING FROM THE PERFORMANCE OF OR FAILURE TO
PERFORM THIS AGREEMENT, INCLUDING WITHOUT LIMITATION, LOSS OF PROFITS, LOSS OF
USE OF FACILITIES, OR COSTS OF CAPITAL.

 

ARTICLE IX

FORCE MAJEURE

 

9.01       Definition: 
“Event of Force Majeure” means an event which prevents or delays the
performance by a Party of its obligations under this Agreement and arises out
of causes beyond the reasonable control and without the fault or negligence of
such Party. An Event of Force Majeure includes but is not limited to acts of
God, fire, flood, explosion, strikes, labour disputes, sabotage, riots, acts of
any civil or military authority, government legislation, regulations, actions
or inactions, judgment or decision of a court of law or other authority with
the force of law, wars, major equipment failure or unavailability of
transportation facilities, including any failure or inability due to claim of
Force Majeure by the Converter to comply with the instructions of URI to effect
delivery of the Delivery Quantity to UG.

 

9.02       Non-Liability for Event of Force Majeure: 
Subject to the provisions of this Article, where either Party is
prevented from performing its obligations hereunder by an Event of Force
Majeure, other than the obligation to pay money, the obligations of both Parties
are suspended for the duration of such Event of Force Majeure and neither Party
shall be liable to the other for such failure to fulfil obligations.

 

9.03       Notices: 
A Party whose performance is affected by an Event of Force Majeure shall
promptly give the other Party notice of the occurrence of the Event of Force
Majeure and its anticipated effect on the Party’s performance under this
Agreement, of any significant change in the nature of the Event of Force
Majeure and of any progress made in eliminating it, and of the termination of
any Event of Force Majeure and of the anticipated date of resumed performance
of contractual obligations.

 

11

 

9.04       Obligations of Affected Party: 
A Party which fails to fulfil its obligations because of an Event of
Force Majeure shall use commercially reasonable efforts to minimize or
eliminate the Event of Force Majeure but shall not be required to settle a
strike, lockout, work slowdown, work stoppage, or other labour dispute, and
shall otherwise fulfil its obligations at a time to be agreed upon by the
Parties that will be as soon as is reasonably possible after the elimination of
the Event of Force Majeure.

 

9.05       Cancellation of the Delivery: 
If the a delivery cannot be made within sixty (60) days of the original
Delivery Date because of an Event of Force Majeure, the Party not claiming
Force Majeure may, at its option, terminate the affected  Delivery. In case that the event of Force
Majeure would continue after the date of termination of the affected Delivery,
the Party not claiming Force Majeure may, at its option, reduce or postpone
future Deliveries or terminate all or part of the remaining Deliveries.
Regarding the terminated Deliveries or this Agreement, neither Party shall have
any liability to the other Party due to the transaction contemplated by this
Agreement not taking place.

 

ARTICLE
X

NOTICES

 

10.01     Notices: 
Any notice, invoice, or other written communication required or
permitted to be given hereunder shall be in writing and either be delivered personally
to the Party to whom it is directed or sent by facsimile and shall be effective
on the day of receipt of the notice if received during normal business hours of
the addressee, and if not received during such normal business hours, then on
the first Business Day of the addressee after such receipt.

 

10.02     Addresses: 
The addresses of the Parties to which all such notices shall be
forwarded are as follows:

 

	
   

  	
  if to UG:

  	
  UG U.S.A., Inc.

  115 Perimeter Center Place, NE

  Suite 647

  Atlanta, GA 30346

  Attention: Manager, Contract Administration

  Facsimile: (770) 396 - 3974

  
	
   

  	
   

  	
   

  
	
   

  	
  if to URI:

  	
  URI Inc.

  650 South Edmonds Lane

  Suite 108

  Lewisville, TX 75067

  Attention: Tom Ehrlich

  Facsimile:(972) 219 - 3311

  
	
   

  	
   

  	
   

  
	
   

  	
   

  	
  with copy to:

  
	
   

  	
   

  	
   

  
	
   

  	
   

  	
  Joe Card

  5180 Roswell Road,

  North Bldg., Suite 203

  Atlanta, GA 30342

  Facsimile: (404) 947 – 0906

  

 

12

 

	
   

  	
   

  	
  With an additional copy to:

  
	
   

  	
   

  	
   

  
	
   

  	
   

  	
  Alfred C. Chidester, Esq.

  Baker & Hostetler LLP

  303 E. Seventeenth Avenue, Suite 303

  Denver, CO 80203

  Facsimile:(303) 861-7805

  

 

The address of
a Party for notices may be changed by notice given to the other Party in
accordance with this Article X.

 

ARTICLE XI

ASSIGNMENTS;
AMENDMENTS

 

11.01     Consent Required for Assignment: 
Neither Party may assign any of its rights under this Agreement without
the prior written consent of the other Party, which consent shall not
unreasonably be withheld; provided, however, that either Party may assign any
of its rights hereunder, without such consent, to its parent company, its
affiliates, or its bank or other financial institution. No such assignment
shall relieve the assignor from any of its obligations hereunder.

 

11.02     Inurement: 
This Agreement shall inure to the benefit of and be binding upon the
Parties and their respective successors and permitted assigns.

 

11.03     Amendments: 
No amendment or modification of this Agreement shall be binding on the
parties unless made in writing and signed or executed by or on behalf of both
parties.

 

ARTICLE XII

APPLICABLE
LAW

 

12.01     Governing Law: 
This Agreement shall be governed by, construed, and enforced in
accordance with, and its validity shall be determined under, the laws of the
State of New York, the United States of America, without giving effect to any
conflicts-of-law rules requiring the application of the substantive law of any
other jurisdiction, and it shall be deemed to have been executed and performed
in the State of New York. The Parties hereby exclude the application of the
United Nations Convention on Contracts for the International Sale of Goods
(CISG) to this Agreement. The Parties expressly state their intention that the
laws of France and Germany shall not, under any circumstances, apply in any way
to the interpretation of this Contract. In the event this Contract is
translated and there exists any difference between the foreign language version
and the English version, this English version shall prevail.

 

13

 

12.02     Arbitration:

 

(a)          Any dispute,
controversy or claim arising out of or relating to this Agreement shall be
finally resolved by arbitration in accordance with the rules of the American
Arbitration Association then obtaining. Unless otherwise agreed in writing by
the Parties hereto, the arbitral panel shall consist of three (3) arbitrators,
one to be appointed by each Party and the third to be appointed by the two
arbitrators appointed by the Parties. In the event that a Party fails to
appoint an arbitrator within fifteen (15) days after any such dispute, controversy
or claim has been referred to arbitration hereunder, then, in such event, the
other Party may request the American Arbitration Association to appoint an
arbitrator for the Party failing to make such appointment. In the event that
the third arbitrator has not been appointed within thirty (30) days after any
such dispute, controversy or claim has been referred to arbitration hereunder,
then, in such event, either Party may request the American Arbitration
Association to appoint such third arbitrator. The arbitration proceedings, all
documents submitted therein and the award of the arbitral panel shall be in the
English language, and all members of the arbitral panel shall be fluent in
English. The arbitration proceedings shall be held in New York, New York, the
United States of America. The arbitral panel shall apply the rules of procedure
applicable to civil actions in the courts of the state of New York; provided,
however, that both Parties shall be entitled to representation by counsel,
to appear and present written or oral evidence and argument and to
cross-examine witnesses presented by the other Party. The arbitral award shall
be in writing and the arbitral panel shall provide written reason for its award.
The award of the arbitral panel shall be final and binding upon the Parties. The
Parties waive any rights to appeal or to review such award by any court or
tribunal, and such award shall be final and binding. Each Party agrees that any
arbitral award or final judgment rendered against it in any action or
proceeding relating in any way to this Agreement shall be conclusive and may be
enforced, to the extent permitted by applicable law, in any court in the state
of New York, by suit on the arbitral award or judgment, a certified copy of
which arbitral award or judgment shall be conclusive evidence thereof, or by
such other means provided by applicable law. The Parties further agree to
undertake to carry out without delay the provisions of any arbitral award or
order. A Party may disclose the contents of an award of the arbitral tribunal
only to affiliates, Governmental Authorities or other persons as required by
applicable law.

 

(b)          To the extent any
Party has or may acquire any immunity (sovereign or otherwise) from
jurisdiction of any arbitral tribunal or court in or in connection with any
arbitration under this Agreement or any proceeding, action, lawsuit or process
(whether through service or notice, attachment in aid of execution, execution
or otherwise) pursuant to, in aid of, arising out of, in confirmation or
registration of, or to enforce, an award of an arbitration proceeding under
this Agreement, each Party, solely for the purpose of such arbitration
proceeding, action, lawsuit or process, hereby irrevocably waives such immunity.
The foregoing waiver and consent are intended to be effective to the fullest
extent now or hereafter permitted by the applicable law of any jurisdiction
where any suit, action or proceeding with respect to an arbitration under this
Agreement may be commenced, including the fullest extent permitted under the
Foreign Sovereign Immunities Act of 1976 of the United States of America and
are intended to be irrevocable and not subject to withdrawal for purposes of
such act.

 

14

 

(c)          Pending the final
decision of the arbitrator of a dispute hereunder, the Parties shall diligently
proceed with the performance of any portion of the Agreement without prejudice
to a final adjustment in accordance with the decision rendered by the arbitral
tribunal with respect to such dispute.

 

ARTICLE XIII

WAIVER

 

13.01     Waiver: 
No waiver, alteration, amendment, modification of this Agreement, or any
covenant, condition, or limitation herein contained is valid unless in writing
and duly executed by the Party to be charged therewith. Furthermore, no
evidence of any waiver, alteration, amendment, or modification shall be offered
or received in evidence in any proceeding, arbitration, or litigation between
the Parties arising out of or affecting this Agreement, or the rights or
obligations of any Party hereunder, unless such waiver, alteration, amendment,
or modification is in writing, and duly executed. Further, the provisions of
this Article may not be waived.

 

ARTICLE XIV

CONFIDENTIALITY

 

14.01     Confidentiality: 
The Parties shall treat this Agreement as confidential, and neither
Party shall disclose its contents without the prior written consent of the
other Party to any person except to its affiliates, legal advisors, financers
or auditors. If disclosure is required to comply with the laws or regulations
of a government or government agency or by a court having jurisdiction over one
of the Parties or if a Party is required by the rules of the Securities and
Exchange Commission or a stock exchange or if it is necessary in connection
with any financing activities to make timely disclosure of developments, such
Party may so disclose notwithstanding the foregoing upon prior notice to the
other Party.

 

ARTICLE XV

TERM
AND TERMINATION

 

15.01     Effect:  Termination
of this Agreement in accordance with Section 2.03 or Section 7.03 by a Party
entitled to effect such termination, shall;

 

(a)         take effect from the date of receipt of
the notice of termination by the other Party;

 

(b)         operate as a discharge of performance
of the unexecuted portion of this Agreement, except performance of any
obligation outstanding at the date on which the notice of termination takes
effect;

 

(c)         not abrogate or prejudice any right
(whether conferred by this Agreement or existing by law or in equity) of either
party in respect of any antecedent breach by the other of any obligations under
this Agreement.

 

15

 

IN
WITNESS WHEREOF the Parties have executed this Agreement as at the date first written
above.

 

 

UG U.S.A., Inc.

 

 

	
  By:

  	
   

  	
   

  	
   

  	
   

  	
   

  
	
   

  	
  Frederic Patreau

  	
   

  	
  Gerhard Loh

  
	
   

  	
  Vice President

  	
   

  	
  Executive Vice President

  
	
   

  	
   

  	
   

  	
   

  
	
   

  	
   

  	
   

  	
   

  
	
  URI INC.

  	
   

  	
   

  
	
   

  	
   

  
	
   

  	
   

  
	
  By:

  	
   

  	
   

  	
   

  	
   

  
	
   

  	
   

  	
   

  
	
  Name:

  	
   

  	
   

  	
   

  	
   

  
	
   

  	
   

  	
   

  
	
  Title:

  	
   

  	
   

  	
   

  	
   

  
	
   

  	
   

  	
   

  	
   

  
									

 

16Exhibit 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 17,
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 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
in the case of any Contributed Property and as of the time of its contribution
to the Company, the 704(c) Value of such property or other 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.

 

2

 

“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.

 

“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.

 

3

 

“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.

 

“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 

 

4

 

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.

 

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

 

“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.

 

5

 

“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.

 

“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).

 

6

 

“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.

 

“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 

 

7

 

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).

 

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

 

8

 

“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).

 

 “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).

 

9

 

“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 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 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 

 

10

 

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 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).

 

11

 

“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 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.

 

12

 

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 initial Capital Contributions.  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 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 

 

13

 

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.

 

(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.

 

14

 

(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
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 

 

15

 

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 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 

 

16

 

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
Formation and Structuring 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 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 

 

17

 

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.

 

(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 

 

18

 

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.

 

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.

 

19

 

(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.

 

(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.

 

20

 

(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 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 

 

21

 

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 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 

 

22

 

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 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 

 

23

 

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.  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 

 

24

 

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 C 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 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 D 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.

 

25

 

(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 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

 

26

 

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 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 

 

27

 

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.

 

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 

 

28

 

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 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.

 

29

 

(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).

 

(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.

 

30

 

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 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.

 

31

 

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;

 

(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 

 

32

 

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;

 

(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 

 

33

 

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 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.

 

34

 

(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 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)

 

35

 

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, 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 

 

36

 

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 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 

 

37

 

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 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 

 

38

 

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 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.

 

39

 

(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 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 

 

40

 

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 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.

 

41

 

(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 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 

 

42

 

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 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 

 

43

 

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.

 

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.

 

44

 

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 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:

 

45

 

(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 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 

 

46

 

(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 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.

 

47

 

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.

 

(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 

 

48

 

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.

 

(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

 

49

 

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.

 

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.

 

50

 

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, 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 

 

51

 

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 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.

 

52

 

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 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 

 

53

 

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.

 

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 

 

54

 

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 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 

 

55

 

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 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:

 

56

 

(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 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 

 

57

 

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.

 

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 

 

58

 

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 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;

 

59

 

(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 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 

 

60

 

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.

 

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

 

61

 

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 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.

 

62

 

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 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.

 

63

 

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.

 

Section 15.17                           Uniform Commercial Code.  Each
Membership Unit shall constitute a “security” within the meaning of Section 8-102(a)(15)
of the Uniform Commercial Code as in effect from time to time in the States of
Delaware and New York (and each Membership Unit shall be treated as such a “security”
for all purposes, including, without limitation, perfection of a security
interest therein under Article 8 of the applicable Uniform Commercial
Code).

 

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 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

 

64

 

(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:

  	
  /s/ W. Edward Scheetz

  	
   

  
	
   

  	
  Name:

  	
  W. Edward Scheetz

  
	
   

  	
  Title:

  	
  Chief Executive Officer

  
	
   

  	
   

  
	
   

  	
   

  
	
   

  	
  Non-Managing Members:

  
	
   

  	
   

  
	
   

  	
   

  
	
   

  	
  MORGANS HOTEL GROUP LLC

  
	
   

  	
   

  
	
   

  	
   

  
	
   

  	
  By:

  	
  /s/ W. Edward Scheetz

  	
   

  
	
   

  	
  Name:

  	
  W. Edward Scheetz

  
	
   

  	
  Title:

  	
  Chief Executive Officer

  
	
   

  	
   

  
	
   

  	
   

  
	
   

  	
  NORTHSTAR PARTNERSHIP, L.P.

  
	
   

  	
   

  
	
   

  	
   

  
	
   

  	
  By:

  	
  /s/ Richard J. McCready

  	
   

  
	
   

  	
  Name:

  	
  Richard J. McCready

  
	
   

  	
  Title:

  	
  President

  
	
   

  	
   

  
	
   

  	
   

  
	
   

  	
  RSA ASSOCIATES, L.P.

  
	
   

  	
   

  
	
   

  	
   

  
	
   

  	
  By:

  	
  /s/ Ian Schrager

  	
   

  
	
   

  	
  Name:

  	
  Ian Schrager

  
	
   

  	
  Title:

  	
  President

  
						

 

66

 

EXHIBIT A

MEMBERS, CONTRIBUTIONS AND

MEMBERSHIP INTERESTS

 

	
  Name and Address of Member

  	
   

  	
  Membership

  Units

  	
   

  	
  LTIP

  Units

  	
   

  	
  Percentage

  Interest

  	
   

  
	
   

  	
   

  	
   

  	
   

  	
   

  	
   

  	
   

  	
   

  
	
  Managing
  Member:

  	
   

  	
   

  	
   

  	
   

  	
   

  	
   

  	
   

  
	
   

  	
   

  	
   

  	
   

  	
   

  	
   

  	
   

  	
   

  
	
  Morgans Hotel Group Co.

  475 Tenth Avenue

  New York, New York 10018

  	
   

  	
  33,500,000

  	
   

  	
  0

  	
   

  	
  97.1

  	
  %

  
	
  Non-Managing
  Members:

  	
   

  	
   

  	
   

  	
   

  	
   

  	
   

  	
   

  
	
   

  	
   

  	
   

  	
   

  	
   

  	
   

  	
   

  	
   

  
	
  Morgans Hotel Group LLC

  475 Tenth Avenue

  New York, New York 10018

  	
   

  	
  1,000,000

  	
   

  	
  0

  	
   

  	
  2.9

  	
  %

  
	
   

  	
   

  	
   

  	
   

  	
   

  	
   

  	
   

  	
   

  
	
  Total

  	
   

  	
  34,500,000

  	
   

  	
  0

  	
   

  	
  100

  	
  %

  

 

 

EXHIBIT B

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 C

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 D

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:

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