LIMITED LIABILITY COMPANY AGREEMENT

 

Exhibit 10.4

 

 

 

 

 

LIMITED LIABILITY COMPANY AGREEMENT

 

of

 

 

[LEASECO, LLC]

 

a Delaware Limited Liability Company

 

 

 

 

Dated as of _______, 2005

 

 

 

TABLE OF CONTENTS

 

 

 

 

Exhibits

 

Index of Defined Terms

 

 

 

LIMITED LIABILITY COMPANY OPERATING AGREEMENT

of

LEASECO, LLC

 

 

THIS LIMITED LIABILITY COMPANY OPERATING AGREEMENT (this “ Agreement ”) of [LEASECO], LLC (the “ Company ”) is made and entered into as of ____________, 2005 (the “ Agreement Date ”) by and among [HERSHA TRS, LLC], a Virginia limited partnership, having an address at 510 Walnut Street, 9 ^th fl., Philadelphia PA 19106 (“ TRS Member ”), and [MYSTIC LEASE AFFILIATE], LLC, a Delaware limited liability company having an address at 914 Hartford Turnpike, P.O. Box 715, Waterford, CT 06385 (collectively, “ Mystic Member ”). TRS Member and Mystic Member are sometimes hereinafter collectively referred to as the “ Members ” and individually as a “ Member ”.

 

W   I   T   N   E   S   S   E   T   H :

 

WHEREAS:

 

Affiliates of the Members own all of the membership interests in Mystic Partners, LLC; and

 

Mystic Partners, LLC owns all of the membership interests in each of the Owner Entities; and

 

The Owner Entities collectively own or have a leasehold interest in the respective land, and the hotel and other improvements located thereon (each, individually, a “ Property ” and collectively, the “ Properties ”), all as more particularly described on Exhibit 1.1 ; and

 

The parties hereto desire to form a limited liability company to own membership interests in the Lessee subsidiaries that will lease the respective Properties from the Owner Entities and to operate the Properties as hotels in accordance with the Lease (as defined below); and

 

The Company was formed pursuant to a Certificate of Formation (the “ Certificate of Formation ”) filed with the Delaware Secretary of State on ___________, 2005.

 

NOW, THEREFORE, in consideration of the mutual covenants and promises contained herein and for other good and valuable consideration, the receipt and adequacy of which are hereby acknowledged, the parties hereto agree as follows:

 

 

 

In addition to the defined terms set forth above and elsewhere in this Agreement, the following terms shall have the definitions hereinafter indicated whenever used in this Agreement with initial capital letters:

 

“ Act ” means the Delaware Limited Liability Company Act, as previously or hereafter amended.

 

“ Adjusted Capital Account ” means, with respect to any Member, the balance, if any, in such Member’s Capital Account as of the end of the relevant taxable year, after: (i) crediting to such Capital Account any amounts that such Member is obligated to restore pursuant to Regulations Section 1.704-1(b)(2)(ii)(c) (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 (ii) debiting from such Capital Account the items described in Regulations Sections 1.704-1(b)(2)(ii)(d)(4), (5) and (6).

 

 

“ Adjusted Capital Account Deficit ” means, with respect to any Member, the deficit balance, if any, in such Member’s Adjusted Capital Account.

 

The foregoing definitions of Adjusted Capital Account and of Adjusted Capital Account Deficit are intended to comply with the provisions of Regulation Section 1.704-1(b)(2)(ii)(d) and shall be interpreted consistently therewith.

 

“ Affiliate ” means a Person that directly or indirectly, through one or more intermediaries, has Control of or is Controlled by, or is under common Control with, the Person specified. “Affiliate” shall also include the spouse, ancestors, descendents and siblings of any Person that is an individual, Affiliates of such family members and trusts for the benefit of an Affiliate of the relevant Person.

 

“ Business Day ” means any day other than a Saturday, Sunday or other day on which commercial banks in New York are authorized or required to close under the laws of the State of New York.

 

“ Capital Contribution ” means, with respect to any Member, the amount of money and the initial Gross Asset Value of any property (other than money) contributed to the Company by such Member, less the amount of liabilities of such Member assumed by the Company or that are secured by any property contributed by such Member to the Company. The initial Capital Contributions of the Members are as set forth on Exhibit A .

 

“ Capital Proceeds ” means the net proceeds of a Capital Transaction distributed to the Company by a Lessee.

 

“ Capital Sharing Ratio ” means the percentages in which the Members participate in, and bear, certain Company items. The initial Capital Sharing Ratios of the Members are as follows:

 

“ Capital Transaction ” means insurance proceeds or other damages in respect of any Property are recovered by the Company any other transaction that, in accordance with generally accepted accounting principles, is considered capital in nature.

 

 

“ Cause ” means the existence or occurrence of any of the following events or conditions with respect to (1) a Member, (2) any Controlling Affiliate of a Member or (3) any Affiliate of a Member regardless of whether Controlling, if such Affiliate or its executive officers and employees have direct involvement in the Company or any Property, as the case may be: (a) the indictment for a felony involving a crime or crimes of moral turpitude or dishonesty or for a Patriot Act (hereinafter defined) offense (in each case, whether or not convicted), misapplication, conversion or theft of any funds belonging to the Company; or (b) the commission of fraud, gross negligence or willful misconduct with respect to the Company or any Property. For the avoidance of doubt, the indictment of a Member or any executive officer or employee of them for a felony involving a crime or crimes of moral turpitude or dishonesty (whether or not convicted), or the misapplication of funds belonging to the Company or the commission of fraud, gross negligence or willful misconduct with respect to the Company or any Property shall not be curable and “Cause” shall be deemed to exist upon the occurrence or existence of any such event.

 

“ Change in Control ” means, with respect to any Person, the occurrence of any of the following:

 

“ Code ” means the Internal Revenue Code of 1986, as previously or hereafter amended.

 

“ Company Minimum Gain ” means “partnership minimum gain” as defined in Treasury Regulation Section 1.704-2(d).

 

“ Contribution Account ” means, with respect to each Member, an account maintained for such Member on the Company’s books and records in the amount of that Member’s Capital Contributions, but in no event less than zero.

 

“ Control ” (including the terms “controlling”, “controlled by” or “under common control with”) means the possession, directly or indirectly, through one or more intermediaries, of the power to direct or cause the direction of the management or policies of a Person, whether through the ownership of voting securities, by contract or otherwise.

 

“ 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 Gross Asset 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 that bears the same ratio to such beginning Gross Asset 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 Gross Asset Value using any reasonable method selected by Tax Matters Member.

 

 

“ Development Assets ” means the following Properties: Hartford Hilton, Hartford, CT (the “ Hartford Hilton ”); and the Hartford Marriott, Hartford, CT (the “ Hartford Marriott ”), but only, in the case of the Hartford Marriott, from and after the date (if ever) that a Lessee shall lease the Hartford Marriott Property.

 

“ Dissolution Event ” means any event specified in Section 10.2 that results in the dissolution and winding up of the Company.

 

“ Encumbrance ” means a pledge, alienation, mortgage, hypothecation, encumbrance, lien or collateral assignment by any other means, whether for value or no value and whether voluntary or involuntary (including by operation of law or by judgment, levy, attachment, garnishment, bankruptcy or other legal or equitable proceedings).

 

“ Entity ” means any general partnership, limited partnership, limited liability partnership, corporation, limited liability company, joint venture, trust, business trust, cooperative or association.

 

“ Event of Bankruptcy ” means, with respect to any Person, the occurrence of:

 

 

“ Gross Asset Value ” means, with respect to any asset, the asset’s adjusted basis for federal income tax purposes, except as follows:

 

 

“ Gross Revenue ” shall mean, as to any Year, all revenues and receipts of every kind derived from the operation of the Property and all departments and parts thereof, including, but not limited to, receipts (from both cash and credit transactions), before commissions and discounts for prompt or cash payments, from the rental of guest rooms, meeting rooms, stores, offices, exhibit or sales space of any kind, parking charges, license and concession fees and rentals (but not including the gross receipts of any licensees, lessees and concessionaires), booking fees, telephone and television viewing charges, food and beverage sales, wholesale and retail sales, proceeds, if any, from business interruption or other loss of income insurance; provided, however, Gross Revenues shall not included gratuities to Property employees or Federal, State and Municipal excise, sales and use taxes or similar impositions collected directly from patrons or guests or included as part of the sales price of any goods or services.

 

“ Lease ” means a Lease Agreement with respect to the Properties between a Lessee and each respective Owner Entity as Lessor, substantially in the form attached hereto as Exhibit 1.2 .

 

“ Lessee ” means an entity in which the Company owns all or part of the outstanding Membership Interests and that has entered into a Lease with an Owner Entity.

 

“ Major Decision ” means any decision regarding each of the matters described below:

 

 

 

 

“ Major Dispute ” means the failure of the Members to agree upon or approve any Major Decision or other action requiring the consent of all Members, in accordance with Section 4.2 .

 

“ Managing Member ” means Mystic Member, initially, or any other Person who is hereafter appointed as a managing member of the Company in accordance with this Agreement and applicable law, until the date that such Person resigns or is removed from its role as a managing member.

 

“ Member Loan Interest Rate ” means a simple rate of interest equal to the prime rate of U.S. money center commercial banks as published in The Wall Street Journal (or if more than one such rate is published, the average of such rates), plus two percent per annum.

 

“ Member Minimum Gain ” means minimum gain attributable to “partner non-recourse debt” determined in accordance with Treasury Regulation Section 1.704-2(i).

 

“ Member Nonrecourse Debt ” means “partner nonrecourse debt” as defined in Treasury Regulation Section 1.704-2(b)(4).

 

“ Member Nonrecourse Deductions ” means “partner nonrecourse deductions” as defined in Treasury Regulation Section 1.704-2(i)(2).

 

“ Members ” mean, collectively, TRS Member and Mystic Member and/or any other Person hereafter admitted as a member of the Company in accordance with this Agreement and applicable law.

 

“ Membership Interest ” means the interest, as a Member, of any Person in the Company.

 

“ Minority Interests ” means the ownership interest of any Person (other than the Company) in an Owner Entity that owns any Part Owned Property.

 

“ Minority Interest Holder ” means any Person that owns a Minority Interest.

 

“ Mystic Member ” has the meaning set forth in the Preamble hereto.

 

“ Net Cash Flow ” means, with respect to any fiscal year or other accounting period, Net Operating Income less (a) rents paid to the Owner Entities, less (b) capital expenditures not paid from (i) reserves, (ii) capital contributions to the Company by its members or (iii) Capital Transactions, less (c) increases or decreases in reserves for working capital, operating deficits and capital items established by the Members or such other amount as may be approved by the Members, less (d) Incentive Fees.

 

“ Net Operating Income ” means, for any period, Operating Revenues, less (i) Operating Expenses, less (ii) real property and personal property taxes, income taxes, and other taxes other than payroll taxes paid by the Company, less (iii) insurance premiums and deductibles, less (iv) leases or purchase money financing of FF&E or of real property and improvements, less (v) Base Fees and fees payable to the asset manager, less (vi) Company-related expenses, and less (vii) additions to any operating and replacement reserves, in the amount of

 

 

 

or such higher amount as may be required pursuant to the franchise agreement or loan with respect to the applicable hotel.

 

[NOTE: INCOME AND EXPENSE RELATED DEFINITIONS TO BE CONFORMED WITH THE FINAL STRUCTURE OF COMPANY HOLDINGS, AS AGREED BY THE PARTIES IN GOOD FAITH. RESERVE REQUIREMENTS MAY BE REFERENCED IN OWNER ENTITY OPERATING AGREEMENTS]

 

“ Non-Discretionary Expenses ” shall mean third party expenses over which Managing Member and the Property Manager have no control (including, for example, and without limitation, items that are budgeted for and/or approved by the Members, taxes, water and sewer costs and assessments, union labor contract costs and property-related expenses reasonably required to be incurred as a result of force majeure ).

 

“ Non-Managing Member ” means any Member(s) other than Managing Member.

 

“ Nonrecourse Deductions ” means deductions as described in Treasury Regulation Section 1.704-2(c).

 

“ Operating Expenses ” means, for any period, the current obligations of the Company for such period, determined in accordance with sound accounting principles approved by the Company and applicable to commercial real estate, consistently applied, for operating expenses of the Property. Operating Expenses shall not include any non-cash expenses such as depreciation or amortization.

 

“ Operating Revenues ” means, for any period, the gross revenues of the Company arising from the operations of the Properties during such period, including proceeds of any business interruption insurance, but specifically excluding the proceeds of Capital Transactions or capital contributions made by members.

 

“ Owner Entity ” means an Entity that owns a Property.

 

“ Part Owned Property ” means any Property that is not wholly owned by the Company or by a wholly owned subsidiary of the Company. On the date hereof, the following Properties are a Part Owned Property:

 

 

 

“ Person ” means and includes any individual or Entity.

 

“ Preferred Return ” means, for each Member, an amount that accrues on the average daily balance of such Member’s Contribution Account at a per annum rate of eight and one-half percent (8.5%) from the date such Member’s Capital Contributions are made until the Preferred Return is paid to the respective contributing Member as provided herein. The Preferred Return of the Members shall not be compounded.

 

“ Preferred Return Account ” means for each Member an account maintained for such Member to which shall be credited the accrued Preferred Return of such Member and from which shall be debited the amount of any distributions of the Preferred Return to such Member pursuant to Sections 5.2.2.A or 5.2.2.B hereof as well as any distribution of the “Preferred Return” as defined in the Limited Liability Company Agreement of Mystic Partners, LLC.

 

“ Profits ” and “ Losses ” means for each fiscal year or other period an amount equal to the Company’s taxable income or loss with respect to the relevant period, determined in accordance with Code Section 703(a) (for this purpose, all items of income, gain, loss or deduction required to be stated separately pursuant to Code Section 703(a)(1) shall be included in taxable income or loss), with the following adjustments:

 

 

 

“ Residual Sharing Ratios ” means the percentages in which Members participate in distributions of Net Cash Flow and Capital Proceeds pursuant to Section 5.2 . The Residual Sharing Ratios of the Members are as follows:

 

“ Stabilized Assets ” means the following Properties: (1) Residence Inn by Marriott and Whitehall Mansion, Mystic, CT; (2) Courtyard by Marriott, Warwick, RI; (3) Courtyard by Marriott and Rosemont Suites, Norwich, CT; (4) SpringHill Suites by Marriott, Waterford, CT; (5) Mystic Marriott Hotel and Spa, Groton, CT; (6) Residence Inn by Marriott, Southington, CT, and ancillary Dunkin Donuts; (7) Residence Inn by Marriott, Danbury, CT.

 

“ Tax Contest ” means an audit, review, examination, or any other administrative or judicial proceeding with the purpose or effect of redetermining any taxes (including any administrative or judicial review of any claim for refund).

 

“ Tax Correspondence ” means all written and oral communications from the IRS (or other taxing authority) relating to any item of income, gain, loss or deduction arising with respect to any activities or assets of the Company, whether communicated with respect to an audit or otherwise.

 

 

“ Transfer ” and “ Transferred ” means a sale, transfer, assignment, conveyance, gift, bequest or disposition by any other means, whether for value or no value and whether voluntary or involuntary (including by realization upon any Encumbrance or by operation of law or by judgment, levy, attachment, garnishment, bankruptcy or other legal or equitable proceedings).

 

“ TRS Class A Member ” means the Member holding the interest so designated on Exhibit A hereto. On the date hereof, Investor Member is the TRS Class A Member.

 

“ TRS Class A Membership Interest ” means the class of Membership Interest issued to the TRS Class A Member.

 

“ TRS Class B Member ” means the Member holding the interest so designated on Exhibit A hereto. On the date hereof, Investor Member is the TRS Class B Member.

 

“ TRS Class B Membership Interest ” means the class of Membership Interest issued to the TRS Class B Member.

 

“ TRS Member ” has the meaning set forth in the Preamble hereto.

 

“ Wholly Owned Property ” means any Property that is wholly owned by an Owner Entity. On the date hereof, the following Properties are Wholly Owned Properties:

 

A reference to any agreement, budget, document or schedule shall include such agreement, budget, document or schedule as revised, amended, modified or supplemented from time to time in accordance with its terms and the terms of this Agreement. The singular includes the plural and the plural includes the singular. The words “include”, “includes” and “including” are not limiting. Reference to a particular “Section” or “Articles” refers to that section or articles of this Agreement unless otherwise indicated. The words “herein”, “hereof”, “hereunder” and words of like import shall refer to this Agreement as a whole and not to any particular section or subdivision of this Agreement.

 

2.1   Continuation .    The Company was formed as a limited liability company under the Act by the filing of the Certificate of Formation. The Members hereby agree to continue the Company as a limited liability company under the Act, upon the terms and subject to the conditions set forth in this Agreement. If any terms of this Agreement are inconsistent with any terms of the Act that are not mandatory, then the terms of this Agreement shall control. Managing Member is hereby authorized to file and record any amendments to the Certificate of Formation and such other similar documents approved by the Members as may be required or appropriate to be filed or recorded under the Act or the laws of any other jurisdiction in which the Company may conduct business or own property.

 

 

2.2    Name and Principal Place of Business .

 

2.2.1    The name of the Company is set forth on the cover page to this Agreement. The Members may change the name of the Company or adopt such trade or fictitious names for use by the Company as the Members may from time to time determine. All business of the Company shall be conducted under such name, and title to all Company property shall be held in such name.

 

2.2.2     The principal place of business and office of the Company shall be located at 914 Hartford Turnpike, Waterford, CT 06385, or at such other place or places as TRS Member and Mystic Member (acting together) may from time to time designate.

 

2.3    Term .   The term of the Company commenced on ____________, 2005, the date of the filing of the Certificate of Formation pursuant to the Act, and shall continue until December 31, 2055, unless sooner terminated or further extended pursuant to the provisions of this Agreement.

 

2.4    Registered Agent and Registered Office .   The name of the Company’s registered agent for service of process shall be CT Corporation Systems, and the address of the Company’s registered agent in the State of Connecticut shall be ____________________. Managing Member may, upon notice to all Members, change such agent and such office from time to time.

 

2.5.1      The purpose of the Company is to engage in the following business activities in accordance with the terms of this Agreement: own membership interests in the Lessee’s that will lease and operate the Properties under the Leases, together with such other activities as may be ancillary or related to, or otherwise necessary or advisable in connection with the foregoing. The Company, without the written consent of all Members, shall not engage in any business unrelated to the Properties and shall not own any assets other than those in furtherance of the purposes of the Company.

 

2.5.2     Each Lessee shall enter into a Lease, as lessee, with an Owner Entity, as lessor, to lease, operate and manage the applicable Property.

 

2.5.3     Each Lessee shall be wholly owned by the Company or owned by the Company and the Minority Interest Holders. Each Lessee shall be operated under an agreement (each such agreement, a “ Lessee Operating Agreement ”) the form of which shall be agreed upon by the Parties thereto.

 

2.6.1     The Company shall have three classes of Membership Interests: TRS Class A, TRS Class B and Mystic Class, each class having identical rights on all matters other than as expressly provided herein.

 

 

2.6.2     Effective as of the Agreement Date, the Members of the Company shall be TRS Member and Mystic Member. Except as expressly permitted by this Agreement, no other Person shall be admitted as a member of the Company and no additional membership interests shall be issued.

 

2.6.3      The Company shall have a single class of Membership Interests. Mystic Member shall be the initial Managing Member of the Company, and shall bear responsibility and authority for the affairs and management of the Company to the extent contemplated hereby, except to the extent that this Agreement contemplates that a Non-Managing Member, the Property Manager or the Tax Matters Member shall have specific responsibility or authority with respect thereto.

 

2.7    Limitation on Liability .    Except as otherwise expressly provided in the Act, the debts, obligations and liabilities of the Company, whether arising in contract, tort or otherwise, shall be solely the debts, obligations and liabilities of the Company, and no Member shall be obligated personally for any such debt, obligation or liability of the Company solely by reason of being a Member of the Company. Except as otherwise expressly provided in the Act and in Section 4.6 hereof, the liability of each Member shall be limited to the amount of Capital Contributions required to be made by such Member in accordance with the provisions of this Agreement, but only when and to the extent the same shall become due pursuant to the provisions of this Agreement.

 

2.8     Title to Company Property .    All property owned by the Company, whether real or personal, tangible or intangible, shall be deemed to be owned by the Company as an entity, and no Member, individually, shall have any ownership of such property.

 

 

 

3.1   Initial Capital Contributions . The Members acknowledge that on or prior to the date hereof, Mystic Member and TRS Member have made Capital Contributions to the Company as shown on Schedule A .

 

3.2.1     Except as otherwise required by law or pursuant to this Section and Section 3.1 , no Member shall be required to make any additional Capital Contributions to the Company. At any time and from time to time following the making of the initial Capital Contributions set forth in Section 3.1 , the Members may determine that the Company requires additional cash Capital Contributions and the amount, terms and conditions thereof (including for payment of Operating Expenses but subject, in the case of the Part Owned Properties, to the approval rights of the Minority Interest Holders in respect of additional Capital Contributions and agreement to bear their ratable share of any additional Capital Contributions). Any such additional Capital Contributions shall be made in accordance with the Capital Sharing Ratios for Capital Contributions.

 

3.2.2     Upon a determination by the Members to require additional Capital Contributions, Managing Member shall issue a written notice of such determination and stating the amount of each Member’s Capital Contribution. Each Member shall make payment of its Capital Contribution within 15 Business Days after written notice of the call therefor, in the case where the aggregate Capital Contributions demanded of all Members are less than or equal to $100,000, and within 20 Business Days, in the case where the aggregate Capital Contributions demanded of all Members exceed $100,000. Capital Contributions (other than the initial Capital Contribution of Mystic Member as provided in Section 3.1 ) shall be made in cash unless otherwise agreed by each Member. Failure to make a Capital Contribution when required hereunder shall be a “ Capital Contribution Default ,” following which:

 

 

 

3.2.3   If a Member or the Managing Member believes that there are insufficient Company resources available to meet the emergency expenditures of the Company, occasioned on account of imminent threats of property damage or personal injury or death, in order to remedy such emergency or casualty, it shall notify the other Members and provide details of the amounts required and the reasons therefor. The Members may thereafter agree but shall have no obligation to, contribute the additional capital as a Capital Contribution pursuant to the provisions of Section 3.2.1 . If, for any reason, any Member is unwilling or unable to contribute its share of such additional capital, the other Member may loan to the Company the required amount as an advance to the Company (a “ Member Loan ”). Each such Member Loan shall be evidenced by a note of the Company bearing interest at the Member Loan Interest Rate. Repayment of a Member Loan shall not be a distribution under Article 5 . All outstanding Member Loans shall be repaid in full, together with all accrued interest, prior to any distribution to the Members.

 

3.3      Return of Capital; No Interest on Capital .    Except as expressly provided in this Agreement, no Member shall be entitled to the return of any or all of its Capital Contribution. Neither a Member’s Capital Account nor its Capital Contribution shall earn interest.

 

3.4      No Third-Party Beneficiary .    No creditor or other third party having dealings with the Company shall have the right to enforce the right or obligation of any Member to make Capital Contributions or to pursue any other right or remedy hereunder or at law or in equity, it being understood and agreed that the provisions of this Agreement shall be solely for the benefit of, and may be enforced solely by, the parties hereto and their respective successors and assigns. None of the rights or obligations of the Members herein set forth to make Capital Contributions to the Company shall be deemed an asset of the Company for any purpose by any creditor or other third party, nor may such rights or obligations be sold, transferred or assigned by the Company or pledged or encumbered by the Company to secure any debt or other obligation of the Company or of any of the Members.

 

 

 

3.5.1         There shall be established for each Member on the books of the Company, as of the date hereof, a Capital Account, which shall be increased and decreased in the manner set forth herein.

 

3.5.2         “ Capital Account ” means, with respect to each Member, an account maintained for such Member on the Company’s books and records in accordance with the following provisions:

 

3.5.3       Adjustments to Capital Accounts in respect to Company income, gain, loss, deduction and non-deductible expenditures (or item thereof) shall be made with reference to the federal tax treatment of such items (and, in the case of book items, with reference to the federal tax treatment of the corresponding tax items) at the Company level, without regard to any requisite or elective tax treatment of such items at the Member level.

 

 

3.5.4     The provisions of this Section and the other provisions of this Agreement relating to the maintenance of Capital Accounts are intended to comply with Regulations Sections 1.704-1(b) and 1.704-2 and shall be interprete