EXHIBIT 10.90
AMENDED AND RESTATED
AGREEMENT OF LIMITED PARTNERSHIP
OF
CNL HOSPITALITY PARTNERS, LP
TABLE OF CONTENTS
ARTICLE 1. DEFINED TERMS..........................................................................................1
ARTICLE 2 ORGANIZATIONAL MATTERS.................................................................................12
Section 2.1 Formation...................................................................................12
Section 2.2 Name........................................................................................12
Section 2.3 Registered Office and Agent: Principal Office...............................................12
Section 2.4 Power of Attorney...........................................................................12
Section 2.5 Term........................................................................................14
ARTICLE 3 PURPOSE................................................................................................14
Section 3.1 Purpose and Business........................................................................14
Section 3.2 Powers......................................................................................14
ARTICLE 4 CAPITAL CONTRIBUTIONS..................................................................................15
Section 4.1 Capital Contributions of the Partners.......................................................15
Section 4.2 Issuances of Additional Partnership Interests...............................................15
Section 4.3 Contribution of Proceeds of Issuance of REIT Shares.........................................17
ARTICLE 5 DISTRIBUTIONS..........................................................................................17
Section 5.1 Requirement and Characterization of Distributions...........................................17
Section 5.2 Amounts Withheld............................................................................18
Section 5.3 Distributions Upon Liquidation..............................................................18
Section 5.4 Revisions to Reflect Issuance of Additional Partnership Interests...........................18
ARTICLE 6 ALLOCATIONS............................................................................................19
Section 6.1 Allocations For Capital Account Purposes....................................................19
ARTICLE 7 MANAGEMENT AND OPERATIONS OF BUSINESS..................................................................21
Section 7.1 Management..................................................................................21
Section 7.2 Certificate of Limited Partnership..........................................................24
Section 7.3 Restrictions on General Partner Authority...................................................24
Section 7.4 Reimbursement of the General Partner and the Company; DRIP's and
Repurchase Programs.........................................................................25
Section 7.5 Outside Activities of the General Partner...................................................26
Section 7.6 Contracts with Affiliates...................................................................26
Section 7.7 Indemnification.............................................................................26
Section 7.8 Liability of the General Partner............................................................28
Section 7.9 Other Matters Concerning the General Partner................................................29
Section 7.10 Title to Partnership Assets.................................................................29
Section 7.11 Reliance by Third Parties...................................................................30
ARTICLE 8 RIGHTS AND OBLIGATIONS OF LIMITED PARTNERS.............................................................30
Section 8.1 Limitation of Liability.....................................................................30
Section 8.2 Management 6f Business......................................................................30
Section 8.3 Outside Activities of Limited Partners......................................................31
Section 8.4 Return of Capital...........................................................................31
Section 8.5 Rights of Limited Partners Relating to the Partnership......................................31
Section 8.6 Redemption Right............................................................................32
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ARTICLE 9 BOOKS, RECORDS, ACCOUNTING AND REPORTS.................................................................34
Section 9.1 Records and Accounting......................................................................34
Section 9.2 Fiscal Year.................................................................................34
Section 9.3 Reports.....................................................................................34
ARTICLE 10 TAX MATTERS...........................................................................................34
Section 10.1 Preparation of Tax Returns..................................................................34
Section 10.2 Tax Elections...............................................................................35
Section 10.3 Tax Matters Partner.........................................................................35
Section 10.4 Organizational Expenses.....................................................................36
Section 10.5 Withholding.................................................................................36
ARTICLE 11 TRANSFERS AND WITHDRAWALS.............................................................................37
Section 11.1 Transfer....................................................................................37
Section 11.2 Transfer of the Company's General Partner Interest and Limited Partner
Interest: Extraordinary Transactions.......................................................38
Section 11.3 Limited Partners' Rights to Transfer........................................................40
Section 11.4 Substituted Limited Partners................................................................41
Section 11.5 Assignees...................................................................................41
Section 11.6 General Provisions..........................................................................42
ARTICLE 12 ADMISSION OF PARTNERS.................................................................................42
Section 12.1 Admission of Successor General Partner......................................................42
Section 12.2 Admission of Additional Limited Partners....................................................43
Section 12.3 Amendment of Agreement and Certificate of Limited Partnership...............................43
ARTICLE 13 DISSOLUTION, LIQUIDATION AND TERMINATION..............................................................44
Section 13.1 Dissolution.................................................................................44
Section 13.2 Winding Up..................................................................................44
Section 13.3 Compliance with Timing Requirements of Regulations..........................................46
Section 13.4 Deemed Termination..........................................................................47
Section 13.5 Rights of Limited Partners..................................................................47
Section 13.6 Notice of Dissolution.......................................................................47
Section 13.7 Termination of Partnership and Cancellation of Certificate of Limited
Partnership.................................................................................48
Section 13.8 Reasonable Time for Winding-Up..............................................................48
Section 13.9 Waiver of Partition.........................................................................48
ARTICLE 14 AMENDMENT OF PARTNERSHIP AGREEMENT; MEETINGS..........................................................48
Section 14.1 Amendments..................................................................................48
Section 14.2 Meetings of the Partners....................................................................49
ARTICLE 15 GENERAL PROVISIONS....................................................................................50
Section 15.1 Addresses and Notice........................................................................50
Section 15.2 Titles and Captions.........................................................................51
Section 15.3 Pronouns and Plurals........................................................................51
Section 15.4 Further Action..............................................................................51
Section 15.5 Binding Effect..............................................................................51
Section 15.6 Creditors...................................................................................51
Section 15.7 Waiver......................................................................................51
Section 15.8 Counterparts................................................................................51
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Section 15.9 Applicable Law..............................................................................51
Section 15.10 Invalidity of Provisions....................................................................52
Section 15.11 Entire Agreement............................................................................52
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AMENDED AND RESTATED
AGREEMENT OF LIMITED PARTNERSHIP
OF
CNL HOSPITALITY PARTNERS, LP
THIS AMENDED AND RESTATED AGREEMENT OF LIMITED PARTNERSHIP OF CNL
HOSPITALITY PARTNERS, LP (this "Agreement"), dated as of [_______ ____], 2004,
is entered into by and between CNL Hospitality GP Corp., a Delaware corporation,
as the general partner of the Partnership (the "General Partner"), and CNL
Hospitality LP Corp., a Delaware corporation, as the limited partner of the
Partnership (the "Initial Limited Partner", and, together with the General
Partner, and together with any other Persons whose names are set forth on
Exhibit A, attached hereto, as such may be amended from time to time, the
"Partners").
WITNESSETH:
WHEREAS, this Partnership was formed on June 15, 1998, and an original
agreement of limited partnership was entered into by and between the General
Partner and the Initial Limited Partner; and
WHEREAS, the General Partner and the Initial Limited Partner desire to
amend such agreement to provide for the rights and obligation of the parties
hereto, now and hereafter.
NOW, THEREFORE, in consideration of the mutual covenants set forth
herein and for other good and valuable consideration, the receipt and
sufficiency of which is hereby acknowledged, the Partners hereby amend and
restate this Agreement as set forth in full below, and adopt this Amended and
Restated Agreement in full substitution of the original agreement.
ARTICLE 1.
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 Revised Uniform Limited Partnership Act, as it
may be amended from time to time, and any successor to such statute.
"Additional Limited Partner" means a Person admitted to the Partnership
as a Limited Partner pursuant to Sections 4.2 and 12.2 hereof and who is shown
as such on the books and records of the Partnership.
"Adjusted Capital Account" means the Capital Account maintained for
each Partner as of the end of each Partnership taxable year (i) increased by any
amounts which such Partner 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 (ii) 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-l(b)(2)(ii)(d) and shall be
interpreted consistently therewith.
"Adjusted Capital Account Deficit" means, with respect to any Partner,
the deficit balance, if any, in such. Partner's Adjusted Capital Account as of
the end of the relevant Partnership taxable year.
"Adjusted Property" means any property, the Carrying Value of which has
been adjusted pursuant to Exhibit B hereof. Once an Adjusted Property is deemed
distributed by, and recontributed to, the Partnership for federal income tax
purposes upon a termination thereof pursuant to Section 708, of the Code, such
property shall thereafter constitute a Contributed Property until the Carrying
Value of such property is further adjusted pursuant to Exhibit B hereof.
"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 "controlling" and "controlled" have
meanings correlative to the foregoing. No officer, director or stockholder of
the General Partner shall be considered an Affiliate of the General Partner
solely as a result of serving in such capacity or being a stockholder of the
General Partner.
"Agreed Value" means (i) in the case of any Contributed Property as of
the time of its contribution to the Partnership, the 704(c) Value of such
property, reduced by any liabilities either assumed by the Partnership upon such
contribution or to which such property is subject when contributed, and (ii) in
the case of any property distributed to a Partner by the Partnership, the
Partnership's Carrying Value of such property at the time such property is
distributed, reduced by any indebtedness either assumed by such Partner 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. The aggregate Agreed Value of the Contributed Property contributed
or deemed contributed by each Partner as of the date hereof is as set forth in
Exhibit A.
"Agreement" means this Amended and Restated Agreement of Limited
Partnership, as it may be amended, supplemented or restated from time to time,
including by way of adoption of a Certificate of Designations.
"Assignee" means a Person to whom one or more Partnership Units have
been transferred in a manner permitted under this Agreement, but who has not
become a Substituted Limited Partner, and who has the rights set forth in
Section 11.5.
"Available Cash" means, with respect to any period for which such
calculation is being made, (i) the sum of:
(a) the Partnership's Net Income or Net Loss (as the case may
be) for such period (without regard to adjustments resulting from
allocations described in Sections 1.A through 1.E of Exhibit C);
(b) Depreciation and all other noncash charges deducted in
determining Net Income or Net Loss for such period;
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(c) the amount of any reduction in the reserves of the
Partnership referred to in clause (ii)(f) below (including, without
limitation, reductions resulting because the General Partner determines
such amounts are no longer necessary);
(d) the excess of proceeds from the sale, exchange,
disposition, or refinancing of Partnership property for such period
over the gain recognized from such sale, exchange, disposition, or
refinancing during such period (excluding Terminating Capital
Transactions); and
(e) all other cash received by the Partnership for such period
that was not included in determining Net Income or Net Loss for such
period;
(ii) less the sum of:
(a) all principal debt payments made by the Partnership during
such period;
(b) capital expenditures made by the Partnership during such
period;
(c) investments made by the Partnership during such period in
any entity (including loans made thereto) to the extent that such
investments are not otherwise described in clause (ii)(a) or (ii)(b);
(d) all other expenditures and payments not deducted in
determining Net Income or Net Loss for such period;
(e) any amount included in determining Net Income or Net Loss
for such period that was not received or disbursed by the Partnership
during such period;
(f) the amount of any increase in reserves during such period
which the General Partner determines to be necessary or appropriate in
its sole and absolute discretion; and
(g) the amount of any working capital accounts and other cash
or similar balances which the General Partner determines to be
necessary or appropriate, in its sole and absolute discretion.
Notwithstanding the foregoing, Available Cash shall not include any
cash received or reductions in reserves, or take into account any disbursements
made or reserves established, after commencement of the dissolution and
liquidation of the Partnership.
"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 Partner's share of the Partnership's Book-Tax Disparities in all of
its Contributed Property and Adjusted Property will be reflected by the
difference between such Partner's Capital Account balance as maintained pursuant
to Exhibit B and the hypothetical balance of such Partner's Capital Account
computed as if it had been maintained strictly in accordance with federal income
tax accounting principles.
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"Business Day" means any day except a Saturday, Sunday or other day, on
which commercial banks in New York, New York are authorized or required by law
to close.
"Capital Account" means the Capital Account maintained for a Partner
pursuant to Exhibit B hereof.
"Capital Contribution" means, with respect to any Partner, any cash,
cash equivalents or the Agreed Value of Contributed Property which such Partner
contributes or is deemed to contribute to the Partnership pursuant to Section
4.1, 4.2, or 4.3 hereof.
"Carrying Value" means (i) with respect to a Contributed Property or
Adjusted Property, the 704(c) Value of such property, reduced (but not below
zero) by all Depreciation with respect to such Contributed Property or Adjusted
Property, as the case may be, charged to the Partners' Capital Accounts
following the contribution of or adjustment with respect to such Property; and
(ii) with respect to any other Partnership 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 Exhibit B hereof, and to reflect changes, additions or other
adjustments to the Carrying Value for dispositions and acquisitions of
Partnership properties, as deemed appropriate by the General Partner.
"Cash Amount" means an amount of cash per Common Unit equal to the
Value on the Valuation Date of the REIT Shares Amount.
"Certificate of Designations" means an amendment to this Agreement that
sets forth the designations, rights, powers, duties and preferences of holders
of any Partnership Interests issued pursuant to Section 4.2.A., which amendment
is in the form of a certificate signed by the General Partner and appended to
this agreement. A Certificate of Designations is not the exclusive manner in
which such an amendment may be effected. The General Partner may adopt a
Certificate of Designations without the consent of the Limited Partners to the
extent permitted pursuant to Section 14.1.B hereof.
"Certificate of Incorporation" means the Certificate of Incorporation
or other organizational document governing the Company, as amended or restated
from time to time.
"Certificate of Limited Partnership" means the Certificate of Limited
Partnership relating to the Partnership filed in the office of the Delaware
Secretary of State, as amended from time to time in accordance with the terms
hereof and the Act.
"Code" means the Internal Revenue Code of 1986, as amended and in
effect from time to time, as interpreted by the applicable regulations
thereunder. 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 Unit" means a Partnership Unit which is designated as a Common
Unit and which has the rights, preferences and other privileges designated
herein in respect of Common Unitholders. The allocation of Common Units among
the Partners shall be set forth on Exhibit A as may be amended from time to
time.
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"Common Unitholder" means a Partner that holds Common Units.
"Company" means CNL Hospitality Properties, Inc., a real estate
investment trust, and the sole shareholder of both the General Partner and the
Initial Limited Partner.
"Consent" means the consent or approval of a proposed action by a
Partner given in accordance with Section 14.2 hereof.
"Contributed Property" means each property or other asset, in such form
as may be permitted by the Act (but excluding cash), contributed or deemed
contributed to the Partnership (including deemed contributions to the
Partnership on termination and reconstitution thereof pursuant to Section 708 of
the Code). Once the Carrying Value of a Contributed Property is adjusted
pursuant to Exhibit B hereof, Such property shall no longer constitute a
Contributed Property for purposes of Exhibit B hereof, but shall be deemed an
Adjusted Property for such purposes.
"Conversion Factor" means 1.0, provided that in the event that the
Company (i) declares or pays a dividend on its outstanding REIT Shares in REIT
Shares or makes a distribution to all holders of its outstanding REIT Shares in
REIT Shares; (ii) subdivides its outstanding REIT Shares; or (iii) combines its
outstanding REIT Shares into a smaller number of REIT Shares, the Conversion
Factor shall be adjusted by multiplying the Conversion Factor by a fraction, the
numerator of which shall be the number of REIT Shares issued and outstanding on
the record date for such dividend, distribution, subdivision or combination
(assuming for such purpose that such dividend, distribution, subdivision or
combination has occurred as of such time), and the denominator of which shall be
the actual number of REIT Shares (determined without the above assumption)
issued and outstanding on the record date for such dividend, distribution,
subdivision or combination. Any adjustment to the Conversion Factor shall become
effective immediately after the effective date of such event retroactive to the
record date, if any, for such event (provided, however, if a Notice of
Redemption is given prior to such a record date and the Specified Redemption
Date is after such a record date, then the adjustment to the Conversion Factor
shall, with respect to such redeeming Partner, be retroactive to the date of
such Notice of Redemption). It is intended that adjustments to the Conversion
Factor are to be made in order to avoid unintended dilution or anti-dilution as
a result of transactions in which REIT Shares are issued, redeemed or exchanged
without a corresponding issuance, redemption or exchange of Common Units or of
Preferred Units that are convertible into Common Units. If, prior to a Specified
Redemption Date, Rights (other than Rights issued pursuant to an employee
benefit plan or other compensation arrangement) were issued and have expired,
and such Rights were issued with an exercise price that, together with the
purchase price for such Rights, was below fair market value in relation to the
security or other property to be acquired upon the exercise of such Rights, and
such Rights were issued to all holders of outstanding REIT shares or the General
Partner cannot in good faith represent that the issuance of such Rights
benefitted the Limited Partners, then the Conversion Factor applicable upon a
Notice of Redemption shall be equitably adjusted in a manner consistent with
antidilution provisions in warrants and other instruments in the case of such a
below market issuance or exercise price. A similar equitable adjustment to
protect the value of Common Units shall be made in all events if any Rights
issued under a "Shareholder Rights Plan" became exercisable and expired prior to
a Specified Redemption Date.
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"Depreciation" means, for each taxable year, an amount equal to the
federal income tax depreciation, amortization, or other cost recovery deduction
allowable With respect to an asset for such year, 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 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 General Partner.
"Effective Date" means [_______ ____, 2004], the date of closing of the
initial public offering of REIT Shares by the Company.
"Extraordinary Transaction" shall mean, with respect to the Company,
the occurrence of one or more of the following events: (i) a merger (including a
triangular merger), consolidation or other combination with or into another
Person; (ii) the direct or indirect sale, lease, exchange or other transfer of
all or substantially all of its assets in one transaction or a series of
transactions; (iii) any reclassification, recapitalization or change of its
outstanding equity interests (other than a change in par value, or from par
value to no par value, or as a result of a split, dividend or similar
subdivision); (iv) any issuance of equity securities of the Company in exchange
for assets (other than an issuance of securities for cash or an issuance of
securities pursuant to an employee benefit plan); (v) any Change of Control (as
defined in the Company's Certificate of Incorporation) or (vi) the adoption of
any plan of liquidation or dissolution of the Company (whether or not in
compliance with the provisions of this Agreement).
"General Partner" means CNL Hospitality GP Corp., a Delaware
corporation, in its capacity as the general partner of the Partnership, or its
successors as general partner of the Partnership.
"General Partner Interest" means a Partnership Interest held by the
General Partner, in its capacity as general partner. A General Partner Interest
may be expressed as a number of Partnership Units.
"IRS" means the Internal Revenue Service, which administers the
internal revenue laws of the United States.
"Incapacity" or "Incapacitated" means, (i) as to any individual
Partner, death, total physical disability or entry by a court of competent
jurisdiction adjudicating him incompetent to manage his or her Person or estate;
(ii) as to any corporation which is a Partner, the filing of a certificate of
dissolution, or its equivalent, for the corporation or the revocation of its
charter; (iii) as to any partnership which is a Partner, the dissolution and
commencement of winding up of the partnership; (iv) as to any estate which is a
Partner, the distribution by the fiduciary of the estate's entire interest in
the Partnership; (v) as to any trustee of a trust which is a Partner, the
termination of the trust (but not the substitution of a new trustee); or (vi) as
to any Partner, the bankruptcy of such Partner. For purposes of this definition,
bankruptcy of a Partner shall be deemed to have occurred when (a) the Partner
commences a voluntary proceeding seeking
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liquidation, reorganization or other relief under any bankruptcy, insolvency or
other similar law now or hereafter in effect; (b)the Partner 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 the Partner; (c) the Partner executes and delivers a general
assignment for the benefit of the Partner's creditors; (d) the Partner files an
answer or other pleading admitting or failing to contest the material
allegations of a petition filed against the Partner in any proceeding of the
nature described in clause (b) above; (e) the Partner seeks, consents to or
acquiesces in the appointment of a trustee, receiver or liquidator for the
Partner or for all or any substantial part of the Partner's properties; (f) any
proceeding seeking liquidation, reorganization or other relief of or against
such Partner under any bankruptcy, insolvency or other similar law now or
hereafter in effect has not been dismissed within one hundred twenty (120) days
after the commencement thereof; (g) the appointment without the Partner's
consent or acquiescence of a trustee, receiver or liquidator has not been
vacated or stayed within ninety (90), days of such appointment; or (ii) an
appointment referred to in clause (g) which has been stayed is not vacated
within ninety (90) days after the expiration of any such stay.
"Indemnitee" means (i) any Person made a party to a proceeding by
reason of (A) his status as the General Partner, or as a director or officer of
the Partnership or the General Partner, or (B) his or its liabilities, pursuant
to a loan guarantee or otherwise, for any indebtedness of the Partnership or any
Subsidiary of the Partnership (including, without limitation, any indebtedness
which the Partnership or any Subsidiary of the Partnership has assumed or taken
assets subject to); and (ii) such other Persons (including Affiliates of the
General Partner or the Partnership) as the General Partner may designate from
time to time (whether before or after the event giving rise to potential
liability), in its sole and absolute discretion.
"Limited Partner" means any Person named as a Limited Partner in
Exhibit A attached hereto, as such Exhibit may be amended from time to time, or
any Substituted Limited Partner or Additional Limited Partner, in such Person's
capacity as a Limited Partner of the Partnership.
"Limited Partner Interest" means a Partnership Interest of a Limited
Partner in the Partnership representing a fractional part of the Partnership
Interests of all Partners and includes any and all benefits to which the holder
of such a Partnership 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 Limited Partner Interest may be expressed as a
number of Partnership Units.
"Limited Partner Recourse Debt Percentage" means with respect to
certain of the Limited Partners the percentage listed with respect to such
Limited Partner on the recourse debt level schedule attached hereto as Exhibit
F.
"Liquidating Event" has the meaning set forth in Section 13.1.
"Liquidator" has the meaning set forth in Section 13.2.
"Modified Adjusted Capital Account Balance" means, with respect to any
Partner, the, Capital Account maintained for each Partner as of the end of each
Partnership taxable year (i) increased by any amounts which such Partner is
deemed to be obligated to restore pursuant to the
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penultimate sentences of Regulations Sections 1.704-2(g)(1) and 1.704-2(i)(5);
and (ii) 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).
"Net Income" means, for any taxable period, the excess, if any, of the
Partnership's items of income and gain for such taxable period over the
Partnership'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
federal income tax accounting principles, subject to the specific adjustments
provided for in Exhibit B.
"Net Loss" means, for any taxable period, the excess, if any, of the
Partnership's items of loss and deduction for such taxable period over the
Partnership'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
federal income tax accounting principles, subject to the specific adjustments
provided for in Exhibit B.
"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 Partners pursuant to Section 2.B of Exhibit C 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 taxable 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 the Notice of Redemption substantially in
the form of Exhibit D to this Agreement.
"Partner" means a General Partner or a Limited Partner, and "Partners"
means the General Partner and the Limited Partners collectively.
"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).
"Partner Nonrecourse Deductions" has the meaning set forth in
Regulations Section 1.704-2(i)(2), and the amount of Partner Nonrecourse
Deductions with respect to a Partner Nonrecourse Debt for a Partnership taxable
year shall be determined in accordance with the rules of Regulations Section
l.704-2(i)(2).
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"Partnership" means the limited partnership formed under the Act and
pursuant to this Agreement, as it may be amended and/or restated, and any
successor thereto.
"Partnership Interest" means an ownership interest in the Partnership
representing a Capital Contribution by either a Limited Partner or the General
Partner and includes any and all benefits to which the holder of such a
Partnership 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 Partnership. Interest may be expressed as a number of
Partnership Units.
"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 a Partnership Minimum Gain, for a Partnership
taxable year shall be determined in accordance with the rules of Regulations
Section 1.704-2(d).
"Partnership Record Date" means the record date established by the
General Partner for the distribution of Available Cash pursuant to Section 5.1
hereof, which record date shall be the same as the record date established by
the Company for a distribution to its shareholders of some of all of its portion
of such distribution.
"Partnership Unit" or "Unit" means a fractional, undivided share of the
Partnership Interests of all Partners issued pursuant to Sections 4.1, 4.2 and
4.3 (and includes any series or class of Preferred Units). The number of
Partnership Units outstanding and (in the case of Common Units) the Percentage
Interest in the Partnership represented by such Units are set forth in Exhibit A
attached hereto, as such Exhibit may be amended from time to time. The ownership
of Partnership Units shall be evidenced by such form of certificate for units as
the General Partner adopts from time to time unless the General Partner
determines that the Partnership Units shall be uncertificated securities..
"Partnership Year" means the fiscal year of the Partnership, which
shall be the calendar year.
"Percentage Interest" means, as to a Partner, its percentage interest
as a Common Unitholder determined by dividing the Common Units owned by such
Partner by the total number of Common Units then outstanding and as specified in
Exhibit A attached hereto, as such Exhibit may be amended from time to time.
"Person" means an individual or a corporation, partnership, trust,
unincorporated organization, association or other entity.
"Preferred Unit" means a limited partnership interest (of any series),
other than a Common Unit, represented by a fractional, undivided share of the
Partnership Interests of all Partners issued hereunder and which is designated
as a "Preferred Unit" (or as a particular class or series of Preferred Units)
herein and which has the rights, preferences and other privileges designated
herein (including by way of a Certificate of Designations) in respect of a
Preferred Unitholder. The allocation of Preferred Units among the Partners shall
be set forth on Exhibit A, as may be amended from time to time.
9
"Preferred Unitholder" means a limited, partner that holds Preferred
Units (of any class or series).
"Recapture Income" means any gain recognized by the Partnership upon
the disposition of any property or asset of the Partnership, which gain is
characterized as ordinary income because it represents the recapture of
deductions previously taken with respect to such property or asset.
"Recourse Debt Amount" has the meaning set forth in Section 6.1B(2)
hereof.
"Redeeming Partner" has the meaning set forth in Section 8.6 hereof.
"Redemption Right" shall have the meaning set forth in Section 8.6
hereof.
"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).
"REIT" means a real estate investment trust under Section 856 of the
Code.
"REIT Share" shall mean a share of common stock, par value $.01 per
share, of the Company.
"REIT Shares Amount" shall mean a number of REIT Shares equal to the
product of the number of Common Units offered for redemption by a Redeeming
Partner, multiplied by the Conversion Factor in effect on the date of receipt by
the General Partner of a Notice of Redemption, provided that in the event the
Company issues to all holders of REIT Shares rights, options, warrants or
convertible or exchangeable securities entitling the shareholders to subscribe
for or purchase REIT Shares, or any other securities or property (collectively,
"Rights"), and the Rights have not expired at the Specified Redemption Date,
then the REIT Shares Amount shall also include the Right that were issuable to a
holder of the REIT Shares Amount of REIT Shares on the applicable record date
relating to the issuance of such Rights.
"Residual Gain" or "Residual Loss" means any item of gain or loss, as
the case may be, of the Partnership 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 2.B. 1(a) or 2.B.2(a) of Exhibit C to eliminate Book-Tax
Disparities.
"Rights" shall have the meaning set forth in the definition of "REIT
Shares Amount."
"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 General Partner using such reasonable method of valuation as
it may adopt; provided, however, that the 704(c) Value of any property deemed
contributed to the Partnership for federal income tax purposes upon termination
and reconstitution thereof pursuant to Section 708 of the Code shall be
determined in accordance with Exhibit B hereof. Subject to Exhibit B hereof, the
General Partner shall, in its sole and absolute discretion, use such method as
it deems reasonable and appropriate to allocate
10
the aggregate of the 704(c) Values of Contributed Properties in a single or
integrated transaction among the separate properties on a basis proportional to
their respective fair market values.
"Specified Redemption Date" means the tenth (10th) Business Day after
receipt by the General Partner [and the Company] of a Notice of Redemption;
provided that no Specified Redemption Date shall occur before that date that is
[fourteen (14)] months after the Effective Date, [provided further that if the
Company combines its outstanding REIT Shares, no Specified Redemption Date shall
occur after the record date of such combination of REIT Shares and prior to the
effective date of such combination].
"Subsidiary" means, with respect to any Person, any corporation,
partnership or other entity of which a majority of (i) the voting power of the
voting equity securities; or (ii) the outstanding equity interests, is owned,
directly or indirectly, by such Person.
"Substituted Limited Partner" means a Person who is admitted as a
Limited Partner to the Partnership pursuant to Section 11.4.
"Successor Designated Property" has the meaning set forth in Section
8.7 hereof.
"Terminating Capital Transaction" means any sale or other disposition
of all or substantially all of the assets of the Partnership or a related series
of transactions that, taken together, result in the sale or other disposition of
all or substantially all of the assets of the Partnership.
"Unrealized Gain" attributable to any item of Partnership property
means, as of any date of determination, the excess, if any, of (i) the fair
market value of such property (as determined under Exhibit B hereof) as of such
date; over (ii) the Carrying Value of such property (prior to any adjustment to
be made pursuant to Exhibit B hereof) as of such date.
"Unrealized Loss" attributable to any item of Partnership property
means, as of any date of determination, the excess, if any, of (i) the Carrying
Value of such property (prior to any adjustment to be made pursuant to Exhibit B
hereof) as of such date; over (ii) the fair market value of such property (as
determined under Exhibit B hereof) as of such date.
"Valuation Date" means the date of receipt by the General Partner 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 REIT Share, the average of the daily
market price for the ten (10) consecutive trading days immediately preceding the
Valuation Date. The market price for each such trading day shall be: (i) if the
REIT Shares are: listed or admitted to trading on any securities exchange or the
Nasdaq National Market System, the closing price on such day, or if no such sale
takes place on such day, the average of the closing bid and asked prices on such
day; (ii) if the REIT 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 General Partner; or (iii) if the REIT 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
11
average of the reported high bid and low asked prices on such day, as reported
by a reliable quotation source designated by the General Partner, 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 ten (10)
days prior to the date in question) for which prices have been so reported;
provided that if there are no bid and asked prices reported during the ten (10)
days prior to the date in question, the Value of the REIT Shares, shall be
determined by the General Partner acting in good faith on the basis of such
quotations and other information as it considers, in its reasonable judgment,
appropriate. In the event the REIT Shares Amount includes Rights, then the Value
of such Rights shall be determined by the General Partner acting in good faith
on the basis of such quotations and other information as it considers, in its
reasonable judgment, appropriate, provided that the Value of any rights issued
pursuant to a "Shareholder Rights Plan" shall be deemed to have no value unless
a "triggering event" shall have occurred (i.e., if the Rights issued pursuant
thereto are no longer "attached" to the REIT Shares and are able to trade
independently).
ARTICLE 2
ORGANIZATIONAL MATTERS
Section 2.1 Formation
The Partnership is a limited partnership organized pursuant to the
provisions of the Act. The Partners hereby agree to continue the Partnership
upon the terms and conditions set forth in this Agreement. Except as expressly
provided herein to the contrary, the rights and obligations of the Partners and
the administration and termination of the Partnership shall be governed by the
Act. The Partnership Interest of each Partner shall be personal property for all
purposes.
Section 2.2 Name
The name of the Partnership is CNL Hospitality Partners, LP. The
Partnership's business may be conducted under any other name or names deemed
advisable by the General Partner, including the name of the General Partner or
any Affiliate thereof. The words "Limited Partnership," "L.P.," "Ltd." or
similar words or letters shall be included in the Partnership's name where
necessary for the purposes of complying with the laws of any jurisdiction that
so requires. The General Partner in its sole and absolute discretion may change
the name of the Partnership at any time and from time to time and shall notify
the Limited Partners of such change in the next regular communication to the
Limited Partners.
Section 2.3 Registered Office and Agent: Principal Office
The address of the principal office of the Partnership shall be located
at ▇▇▇ ▇▇▇▇▇ ▇▇▇▇▇▇ ▇▇▇▇▇▇, ▇▇▇▇▇▇▇, ▇▇▇▇▇▇▇ ▇▇▇▇▇, and the name and address of
the registered agent for service of process on the Partnership in the State of
Delaware is The Corporation Trust Company, Corporation Trust Center, ▇▇▇▇ ▇▇▇▇▇▇
▇▇▇▇▇▇, ▇▇▇▇▇▇▇▇▇▇, ▇▇▇▇▇▇▇▇ ▇▇▇▇▇. The Partnership may maintain offices at such
other place or places within or outside the State of Florida as the General
Partner deems advisable.
Section 2.4 Power of Attorney
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A. Each Limited Partner and each Assignee hereby constitutes and
appoints the General Partner, 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, file and
record in the appropriate public offices (a) all
certificates, documents and other instruments
(including, without limitation, this Agreement and
the Certificate of Limited Partnership and all
amendments or restatements thereof) that the General
Partner or the Liquidator deems appropriate or
necessary to form, qualify or continue the existence
or qualification of the Partnership as a limited
partnership (or a partnership in which the Limited
Partners have limited liability) in the State of
Delaware and in all other jurisdictions in which the
Partnership may or plans to conduct business or own
property; (b) all instruments that the General
Partner 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 General Partner or the Liquidator deems
appropriate or necessary to reflect the dissolution
and liquidation of the Partnership 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 Partner pursuant to,
or other events described in, Article 11, 12 or 13
hereof or the Capital Contribution of any Partner;
and (e) all certificates, documents and other
instruments relating to the determination of the
rights, preferences and privileges of Partnership
Interests; and
(2) execute, swear to, seal, acknowledge and file all
ballots, consents, approvals, waivers, certificates
and other instruments appropriate or necessary, in
the sole and absolute discretion of the General
Partner or any Liquidator, to make, evidence, give,
confirm or ratify any vote, consent, approval,
agreement or other action which is made or given by
the Partners hereunder or is consistent with the
terms of this agreement or appropriate or necessary,
in the sole discretion of the General Partner or any
Liquidator, to effectuate the terms or intent of this
Agreement.
Nothing contained herein shall be construed as authorizing the General Partner
or any Liquidator to amend this Agreement except in accordance with Article 14
hereof or as may be otherwise expressly provided for in this Agreement.
B. 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 Partners will be relying upon the power of the General Partner and any
Liquidator to act as contemplated by this Agreement in any filing or other
action by it on behalf of the Partnership, and it shall survive and not be
affected by the subsequent Incapacity of any Limited Partner or Assignee and the
transfer of all or any portion of such Limited Partner's or Assignee's
Partnership Units and shall extend to such Limited Partner's or Assignee's
heirs, successors, assigns and personal representatives. Each
13
such Limited Partner or Assignee hereby agrees to be bound by any representation
made by the General Partner or any Liquidator, acting in good faith pursuant to
such power of attorney, and each such Limited Partner or Assignee hereby waives
any and all defenses which may be available to contest, negate or disaffirm the
action of the General Partner or any Liquidator, taken in good faith under such
power of attorney. Each Limited Partner or Assignee shall execute and deliver to
the General Partner or the Liquidator, within fifteen (15) days after receipt of
the General Partner's or Liquidator's request therefor, such further
designation, powers of attorney and other instruments as the General Partner or
the Liquidator, as the case may be, deems necessary to effectuate this Agreement
and the purposes of the Partnership.
Section 2.5 Term
The term of the Partnership commenced on June 15, 1998, the date on
which the Certificate of Limited Partnership was filed in the office of the
Secretary of State of the State of Delaware, and shall continue until December
31, 2050, unless the Partnership is dissolved sooner pursuant to the provisions
of Article 13 or as otherwise provided by law.
ARTICLE 3
PURPOSE
Section 3.1 Purpose and Business
The purpose and nature of the business to be conducted by the
Partnership is (i) to conduct any business that may be lawfully conducted by a
limited partnership organized pursuant to the Act; provided, however, that such
business shall be limited to and conducted in such a manner as to permit the
Company at all times to be classified as a REIT, unless the Company ceases to
qualify as a REIT for reasons other than the conduct of the business of the
Partnership; (ii) to enter into any partnership, joint venture, limited
liability company or other similar arrangement to engage in any of the foregoing
or to own interests in any entity engaged, directly or indirectly, in any of the
foregoing; and (iii) to do anything necessary or incidental to the foregoing. In
connection with the foregoing, and without limiting the Company's right, in its
sole discretion, to cease qualifying as a REIT, the Partners acknowledge the
Company's current status as a REIT inures to the benefit of all of the Partners
and not solely the General Partner. The General Partner shall also be empowered
to do any and all acts and things necessary or prudent to ensure that the
Partnership will not be classified as a "publicly traded partnership" for
purposes of Section 7704 of the Code, including but not limited to imposing
restrictions on transfers and restrictions on redemptions.
Section 3.2 Powers
The Partnership 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 Partnership, 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
14
dispose of real property; provided, however, that the Partnership shall not
take, or refrain from taking, any action which, in the judgment of the General
Partner, in its sole and absolute discretion, (1) could adversely affect the
ability of the Company to continue to qualify as a REIT; (ii) could subject the
Company to any additional taxes under Section 857 or Section 4981 of the Code;
or (iii) could violate any law or regulation of any governmental body or agency
having jurisdiction over the Company or its securities, unless such action (or
inaction) shall have been specifically consented to by the General Partner in
writing.
ARTICLE 4
CAPITAL CONTRIBUTIONS
Section 4.1 Capital Contributions of the Partners
A. Initial Capital Contributions. Upon the formation of the
Partnership, the General Partner and Initial Limited Partner made Capital
Contributions to the Partnership, as set forth in Exhibit A hereto.
B. General Partnership Interest. A number of Common Units held by the
General Partner equal to one percent (1%) of all outstanding Common Units [(or
if the Common Units held by the General Partner equal less than one percent (1%)
of all outstanding Common Units, such lesser amount)] shall be deemed to be the
General Partner Partnership Units and shall be the General Partnership Interest.
All other Partnership Units held by the General Partner shall be deemed to be
Limited Partnership Interests and shall be held by the General Partner in its
capacity as a Limited Partner in the Partnership.
C. Capital Contributions By Merger. To the extent the Partnership
acquires any property by the merger of any other Person into the Partnership,
Persons who, receive Partnership Interests in exchange for their interests, in
the Person merging into the Partnership shall become Partners and shall be
deemed to have made Capital Contributions as provided in the applicable merger
agreement and as set forth in Exhibit A, as amended to reflect such deemed
Capital Contributions.
D. No Obligation to Make Additional Capital Contributions. Each Partner
shall own the number of Common Units and other Partnership Units set forth for
such Partner in Exhibit A and shall have a Percentage Interest in the
Partnership as set forth in Exhibit A, which Percentage Interest shall be
adjusted in Exhibit A from time to time by the General Partner to the extent
necessary to reflect accurately redemptions, additional Capital Contributions,
the issuance of additional Common Units (pursuant to any merger or otherwise),
or similar events having an effect on any Partner's Percentage Interest. Except
as provided in Sections 4.2, 10.5 or elsewhere in this Agreement, the Partners
shall have no obligation to make any additional Capital Contributions or loans
to the Partnership.
Section 4.2 Issuances of Additional Partnership Interests
A. The General Partner is hereby authorized to cause the Partnership
from time to time to issue to the Partners (including the General Partner and
its Affiliates) or other Persons (including, without limitation, in connection
with the contribution of property to the Partnership) additional Common Units or
other Partnership Interests in one or more classes, or one or more
15
series of any of such classes, with such designations, preferences and relative,
participating, optional or other special rights, powers and duties, including
rights, powers and duties senior to the Limited Partner Interests currently
outstanding and any other Common Units hereafter issued, all as shall be
determined by the General Partner in its sole and absolute discretion subject to
Delaware law, including, without limitation, (1) the allocations of items of
Partnership income, gain, loss, deduction and credit to each such class or
series of Partnership Interests; (ii) the right of each such class or series of
Partnership Interests to share in Partnership distributions; and (iii) the
rights of each such class or series of Partnership Interests upon dissolution
and liquidation of the Partnership; provided that no such additional Partnership
Units or other Partnership Interests shall be issued to the General Partner
[and/or the Initial Limited Partner], unless either (a)(1) the additional
Partnership Interests are issued in connection with the grant, award or issuance
of REIT Shares or other equity interests by the Company, which REIT shares or
other equity interests have designations, preferences and other rights such that
the economic interests attributable to such REIT shares or other equity
interests are substantially similar to the designations, preferences and other
rights of the additional Partnership Interests issued to the General Partner
[and/or the Initial Limited Partner] in accordance with this Section 4.2.A, and
(2) the Company shall make a capital contribution to the General Partner [and/or
the Initial Limited Partner], which shall make a Capital Contribution to the
Partnership in an amount equal to the proceeds raised in connection with such
issuance, or (b) the additional Partnership Interests are issued to all Partners
in proportion to their respective Percentage Interests. In addition, the Company
may acquire Units from other Partners pursuant to this Agreement. In the event
that the Partnership issues Partnership Interests pursuant to this Section
4.2.A, the General Partner shall make such revisions to this Agreement (without
any requirement of receiving approval of the Limited Partners) including but not
limited to the revisions described in Section 5.4, Section 6.1 and Section 8.6
hereof, as it deems necessary to reflect the issuance of such additional
Partnership Interests and the special rights, powers and duties associated
therewith. Unless specifically set forth otherwise by the General Partner, any
Partnership Interest issued after the date hereof shall represent Common Units.
B. From and after the date hereof, the Company shall not issue any
additional REIT Shares (other than REIT Shares issued pursuant to Section 8.6),
or rights, options, warrants or convertible or exchangeable securities
containing the right to subscribe for or purchase REIT Shares (collectively "New
Securities") other than to all holders of REIT Shares unless (i) the General
Partner shall cause the Partnership to issue to the General Partner [and/or the
Initial Limited Partner], Partnership Interests or rights, options, warrants or
convertible or exchangeable securities of the Partnership having designations,
preferences and other rights, all such that the economic interests are
substantially similar to those of the New Securities; and (ii) the Company
contributes to the General Partner [and/or the Initial Limited Partner], which
contribute[s] to the Partnership, the proceeds from the issuance of such New
Securities and from the exercise of rights contained in such New Securities.
Without limiting the foregoing, the Company is expressly authorized to issue New
Securities for no tangible value or for less than fair market value, and the
General Partner is expressly authorized to cause the Partnership to issue to the
General Partner [and/or the Initial Limited Partner] corresponding Partnership
Interests, so long as (x) the General Partner concludes in good faith that such
issuance is in the interests of the Company and the Partnership (for example,
and not by way of limitation, the issuance of REIT Shares and corresponding
Units pursuant to an employee stock purchase plan providing for employee grants
or purchases of REIT Shares or employee stock options that have an exercise
16
price that is less than the fair market value of the REIT Shares, either at the
time of issuance or at the time of exercise); and (y) the Company contributes
all proceeds, if any, from such issuance and exercise to the Partnership.
Section 4.3 Contribution of Proceeds of Issuance of REIT Shares
In connection with the issuance of New Securities pursuant to Section
4.2, the Company shall contribute to the General Partner [and/or the Initial
Limited Partner], which shall contribute to the Partnership, any proceeds (or a
portion thereof) raised in connection with such issuance; provided that if the
proceeds actually received by the Company are less than the gross proceeds of
such issuance as a result of any underwriter's discount or other expenses paid
or incurred in connection with such issuance, then the Company shall be deemed
to have made a capital contribution to the General Partner [and/or the Initial
Limited Partner], which shall be deemed to have made a Capital Contribution to
the Partnership in the amount equal to the sum of the net proceeds of such
issuance plus the amount of such underwriter's discount and other expenses paid
by the Company (which discount and expense shall be treated as an expense for
the benefit of the Partnership for purposes of Section 7.4). In the case of
employee acquisitions of New Securities at a discount from fair market value or
for no value in connection with a grant of New Securities, the amount of such
discount representing compensation to the employee, as determined by the General
Partner, shall be treated as an expense of the issuance of such New Securities.
ARTICLE 5
DISTRIBUTIONS
Section 5.1 Requirement and Characterization of Distributions
Subject to the rights and preferences of any outstanding class or
series of Preferred Units as set forth in the Certificate of Designations
therefor attached hereto, or as otherwise provided herein with respect to
Partnership Interests other than Common Units, and except as provided in Section
5.1.B the General Partner shall distribute at least quarterly an amount equal to
one hundred percent (100%) of Available Cash generated by the Partnership during
such quarter or shorter period to the Common Unitholders who are Partners on the
Partnership Record Date with respect to such quarter or shorter period in
accordance with their respective Percentage Interests on such Partnership Record
Date; provided that in no event may a Partner receive a distribution of
Available Cash with respect to a Common Unit if such Partner is entitled to
receive a distribution out of such Available Cash with respect to a REIT Share
for which such Common Unit has been exchanged and such distribution shall
instead be made to the Company. The General Partner shall take such reasonable
efforts, as determined by it in its sole and absolute discretion and consistent
with the Company's qualification as a REIT, to distribute Available Cash (a) to
the Limited Partners so as to preclude any such distribution or portion thereof
from being treated as part of a sale of property to the Partnership by a Limited
Partner under Section 707 of the Code or the Regulations thereunder; provided
that the General Partner and the Partnership shall not have liability to a
Limited Partner under any circumstances as a result of any distribution to a
Limited Partner being so treated and (b) to satisfy the requirements for
qualifying as a REIT under the Code. Unless otherwise expressly provided for
herein or in an agreement at the time a new class of Partnership Interests is
created in accordance with Article 4
17
hereof, no Partnership Interest shall be entitled to a distribution in
preference to any other Partnership Interest.
A. Notwithstanding the provisions of Section 5.1.A above or any other
provision of this Agreement, if for any quarter or shorter period with respect
to which a distribution is to be made (a "Distribution Period"), a "Newly Issued
Unit" (as such term is defined below) is outstanding on the Partnership Record
Date for such Distribution Period, there shall not be distributed in respect of
such Newly Issued Unit the amount (the "Full Distribution Amount") that would
otherwise be distributed in respect of such Unit in accordance with Section
5.1.A. Rather, the General Partner shall cause to be distributed with respect to
each such Newly Issued Unit an amount equal to the Full Distribution Amount
multiplied by a fraction, the numerator of which equals the number of days such
Newly Issued Unit has been outstanding during the Distribution Period and the
denominator of which equals the total number of days in such Distribution
Period. Any Available Cash not distributed to the holders of Units by operation
of this Section 5.1.B shall be retained by the Partnership and applied toward
future distributions or payment of Partnership expenses. The General Partner
may, in its sole discretion, with respect to any distribution, waive the
application of this Section 5.1.B such that a Newly Issued Unit shall receive
the Full Distribution Amount (or any greater amount than would otherwise be
received under this Section 5.1 .B but not in excess of the Full Distribution
Amount). For purposes of this Section 5.1.B, the term "Newly Issued Unit" shall
mean, with respect to any Distribution Period, a Common Unit issued during such
Distribution Period, except that the term "Newly Issued Unit" shall not include
(i) a Common Unit issued: to the Company as a result of the contribution by it
of proceeds from the issuance of New Securities (as contemplated by Sections 4.2
and 4.3) or (ii) (unless otherwise provided by the General Partner) any Common
Units issued in connection with a split on or unit dividend of the Common Units.
Section 5.2 Amounts Withheld
All amounts withheld pursuant to the Code or any provisions of any
state or local tax law and Section 10.5 hereof with respect to any allocation,
payment or distribution to the Partners or Assignees shall be treated as amounts
distributed to the Partners or Assignees pursuant to Section 5.1 for all
purposes under this Agreement.
Section 5.3 Distributions Upon Liquidation
Proceeds from a Terminating Capital Transaction and any other cash
received or reductions in reserves made after commencement of the liquidation of
the Partnership shall be distributed to the Partners in accordance with Section
13.2.
Section 5.4 Revisions to Reflect Issuance of Additional Partnership
Interests
In the event that the Partnership issues additional Partnership
Interests to the General Partner or any Limited Partner pursuant to Article 4
hereof, the General Partner shall make such revisions to this Article 5 as it
deems necessary to reflect the issuance of such additional Partnership Interests
and any special rights, duties or powers with respect thereto.
18
ARTICLE 6
ALLOCATIONS
Section 6.1 Allocations For Capital Account Purposes
For purposes of maintaining the Capital Accounts and in determining the
rights of the Partners among themselves, the Partnership's items of income,
gain, loss and deduction (computed in accordance with Exhibit B hereof) shall be
allocated among the Partners in each taxable year (or portion thereof) as
provided herein below.
A. After taking into account the provisions of Section 6.1.B below, Net
Income shall be allocated
(i) First, to the Partners in the same ratio and reverse
order as Net Loss was allocated to such Partners
pursuant to Section 6.1.C(ii), (iii), (iv), (v) and
(vi) for all fiscal years until the aggregate amount
allocated to such Partners pursuant to such
provisions of Section 6.1.C equals the aggregate
amount allocated pursuant to this Section 6.1.A(i);
(ii) Thereafter, Net Income shall be allocated to the
Partners in accordance with their respective
Percentage Interests.
B. Notwithstanding the provisions of Section 6.1.A above, items of
gross income shall first be allocated to the holders of each class of Preferred
Units, (a) on a class by class basis (1) in the order of priority in which each
such class is entitled to receive distributions pursuant to the provisions of
Section 5.1 and/or the Certificate of Designations attached hereto and (2) in an
amount equal to the aggregate distributions made to each such class of Preferred
Units pursuant to the provisions of Section 5.1 or the Certificates of
Designations attached hereto (other than distributions properly treated as
return of capital), and (b) within each such class of Preferred Units in
proportion to the distributions with respect to such class referred to in clause
(2) above received by each holder of Preferred Units (other than distributions
properly treated as return of capital).
C. After giving effect to the special allocations set forth in Section
1 of Exhibit C attached hereto, Net Losses shall be allocated to the Partners in
the following order:
(i) First, in the same ratio and reverse order as Net
Income was allocated to the Partners pursuant to the
provisions of Section 6.1.A(ii) for all fiscal years
until the aggregate amount of Net Income previously
allocated to such Partners pursuant to such
provisions of Section 6.1.A(ii) equals the aggregate
amount of Net Loss allocated to such Partners
pursuant to this Section 6.1.B(i);
(ii) Second, to the Partners, in proportion to their
Percentage Interests until each Partner's Modified
Adjusted Capital Account balance has been reduced to
zero, excluding, for this purpose, the portion of any
such Capital Account attributable to Capital
Contributions made with respect to Preferred Units;
19
(iii) Third, to the holders of each class of Preferred
Units, on a class by class basis, in the reverse
priority in which each such class is entitled to
distributions pursuant to the provisions of Section
5.1.A and/or the Certificate of Designations attached
hereto, and within such class to each bolder of such
class of Preferred Units, pro rata, in proportion to
the portion of their Modified Adjusted Capital
Account balance attributable to Capital Contributions
made with respect to such class of Preferred Units
until such portion of their Modified Adjusted Capital
Account balance has been reduced to zero;
(iv) Fourth, to the General Partner until the General
Partner's negative Modified Adjusted Capital Account
balance is equal to the excess, if any, of the
aggregate recourse liabilities of the Partnership
over the aggregate amount of recourse partnership
debt (the "Recourse Debt Amount") set forth on the
recourse debt level schedule attached hereto as
Exhibit F, as appropriately amended from time to
time;
(v) Fifth, to the Limited Partners listed on the recourse
debt level schedule attached hereto as Exhibit F, in
proportion to each such Limited Partner's Limited
Partner Recourse Debt Percentage, until the sum of
such Limited Partners' negative Modified Adjusted
Capital Account balances equals the Recourse Debt
Amount; and
(vi) Sixth, 100% to the General Partner.
D. The Partners agree that Nonrecourse Liabilities of the Partnership
shall be allocated among the Partners in accordance with the provisions of
Regulations Section 1.752-3, as modified by any guidance published by the
Internal Revenue Service, or otherwise reasonably interpreted.
E. Any gain allocated to the Partners upon the sale or other taxable
disposition of any Partnership asset shall, to the extent possible, after taking
into account other required allocations of gain pursuant to Exhibit C, be
characterized as Recapture Income in the same proportions and to the same extent
as such Partners have been allocated any deductions directly or indirectly
giving rise to the treatment of such gains as Recapture Income.
In the event that the Partnership issues additional Partnership
Interests to the General Partner, or any Limited Partner pursuant to Article 4
hereof, the General Partner shall make such revisions to this Section 6.1 as it
determines are necessary to reflect the terms of the issuance of such additional
Partnership Interests, including making preferential allocations to certain
classes of Partnership Interests.
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ARTICLE 7
MANAGEMENT AND OPERATIONS OF BUSINESS
Section 7.1 Management
A. Except as otherwise expressly provided in this Agreement, all
management powers over the business and affairs of the Partnership are and shall
be exclusively vested in the General Partner, and no Limited Partner shall have
any right to participate in or exercise control or management power over the
business and affairs of the Partnership. The General Partner may not be removed
by the Limited Partners with or without cause. In addition to the powers now or
hereafter granted a general partner of a limited partnership under applicable
law or which are granted to the General Partner under any other provision of
this Agreement, the General Partner, 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 Partnership, 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 (including, without limitation, making
prepayments on loans and borrowing money to permit the
Partnership to make distributions to its Partners in
such amounts as will permit the Company (so long as the
Company qualifies as a REIT) to avoid the payment of any
federal income tax (including, for this purpose, any
excise tax pursuant to Section 4981 of the Code) and to
make distributions to its shareholders in amounts
sufficient to permit the Company to maintain REIT
status), the assumption or guarantee of, or other
contracting for, indebtedness and other liabilities, the
issuance of evidence of indebtedness (including the
securing of the same by deed, mortgage, deed of trust or
other lien or encumbrance on the Partnership's assets)
and the incurring of any obligations it deems necessary
for the conduct of the activities of the Partnership;
(2) the making of tax, regulatory and other filings, or
rendering of periodic or other reports to governmental
or other agencies having jurisdiction over the business
or assets of the Partnership, the registration of any
class of securities of the Partnership under the
Securities Exchange Act of 1934, as amended, and the
listing of any debt securities of the Partnership On any
exchange;
(3) the acquisition, disposition, mortgage, pledge,
encumbrance, hypothecation or exchange of any assets of
the Partnership (including the exercise or grant of any
conversion, option, privilege, or subscription right or
other right available in connection with any assets at
any time held by the Partnership) or the merger or other
combination of the Partnership with or into another
entity (all of the foregoing subject to any prior
approval only to the extent required by Section 7.3
hereof);
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(4) the use of the assets of the Partnership (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 conduct of the operations of the
Company, the Partnership or any of the Partnership's
Subsidiaries, the lending of funds to other Persons
(including, without limitation, the Subsidiaries of the
Partnership and/or the Company) and the repayment of
obligations of the Partnership and its Subsidiaries and
any other Person in which it has an equity investment,
and the making of capital contributions to its
Subsidiaries;
(5) the management, operation, leasing, landscaping, repair,
alteration, demolition or improvement of any real
property or improvements owned by the Partnership or any
Subsidiary of the Partnership;
(6) the negotiation, execution, and performance of any
contracts, conveyances or other instruments that the
General Partner considers useful or necessary to the
conduct of the Partnership's operations or the
implementation of the General Partner's powers under
this Agreement, including contracting with contractors,
developers, consultants, accountants, legal counsel,
other professional advisors and other agents and the
payment of their expenses and compensation out of the
Partnership's assets;
(7) the distribution of Partnership cash or other
Partnership assets in accordance with this Agreement;
(8) holding, managing, investing and reinvesting cash and
other assets of the Partnership;
(9) the collection and receipt of revenues and income of the
Partnership;
(10) the establishment of one or more divisions of the
Partnership, the selection and dismissal of employees of
the Partnership (including, without limitation,
employees having titles such as "president," "vice
president," "secretary" and "treasurer" of the
Partnership), and agents, outside attorneys,
accountants, consultants and contractors of the
Partnership, and the determination of their compensation
and other terms of employment or hiring;
(11) the maintenance of such insurance for the benefit of the
Partnership, the Partner and directors and officers
thereof as it deems necessary or appropriate;
(12) 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 contributions of property to, its Subsidiaries and
any other Person in which it has an equity investment
from time to time);
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(13) the control of any matters affecting the rights and
obligations of the Partnership, including the
settlement, compromise, submission to arbitration or any
other form of dispute resolution, or abandonment of, any
claim, cause of action, liability, debt or damages, due
or owing to or from the Partnership, the commencement or
defense of suits, legal proceedings, administrative
proceedings, arbitration or other forms of dispute
resolution, and the representation of the Partnership in
all suits or legal proceedings, administrative
proceedings, arbitrations or other forms of dispute
resolution, the incurring of legal expense, and the
indemnification of any Person against liabilities and
contingencies to the extent permitted by law;
(14) the undertaking of any action in connection with the
Partnership's direct or indirect investment in its
Subsidiaries or any other Person (including, without
limitation, the contribution or loan of funds by the
Partnership to such Persons);
(15) the determination of the fair market value of any
Partnership property distributed in kind using such
reasonable method of valuation as the General Partner
may adopt;
(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
Partnership;
(17) the exercise of any of the powers of the General Partner
enumerated in this Agreement on behalf of or in
connection with any Subsidiary of the Partnership or any
other Person in which the Partnership 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 General Partner
enumerated in this Agreement on behalf of any Person in
which the Partnership 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, 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 General Partner, for
the accomplishment of any of the powers of the General
Partner enumerated in this Agreement; and
(20) the issuance of additional Partnership Units, as
appropriate, in connection with Capital Contributions by
Additional Limited Partners and additional Capital
Contributions by Partners pursuant to Article 4 hereof.
B. Each of the Limited Partners agrees that the General Partner is
authorized to execute, deliver and perform the above-mentioned agreements and
transactions on behalf of the
23
Partnership without any further act, approval or vote of the Partners,
notwithstanding any other provision of this Agreement (except as provided in
Section 7.3 or Section 8.7), 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 General Partner or the
Partnership of any agreement authorized or permitted under this Agreement shall
not constitute a breach by the General Partner of any duty that the General
Partner may owe the Partnership or the Limited Partners or any other Persons
under this Agreement or of any duty stated or implied by law or equity.
C. At all times from and after the date hereof, the General Partner may
cause the Partnership to establish and maintain at any and all times working
capital accounts and other cash or similar balances in such amounts as the
General Partner, in its sole and absolute discretion, deems appropriate and
reasonable from time to time.
D. In exercising its authority under this Agreement, the General
Partner may, but shall be under no obligation to, take into account the tax
consequences to any Partner of any action taken by it. The General Partner and
the Partnership shall not have liability to a Limited Partner under any
circumstances, as a result of an income tax liability incurred by such Limited
Partner as a result of an action (or inaction) by the General Partner taken
pursuant to its authority under this Agreement and in accordance with the terms
of Section 7.3 and Section 8.7. The Limited Partners expressly acknowledge that
the General Partner is acting on behalf of the Partnership, the Company and the
Company's stockholders collectively.
Section 7.2 Certificate of Limited Partnership
The General Partner has previously filed the Certificate of Limited
Partnership with the Secretary of State of the State of Delaware as required by
the Act. The General Partner 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 partnership (or a partnership in which the limited partners have limited
liability) in the State of Delaware and any other state, or the District of
Columbia, in which the Partnership may elect to do business or own property. To
the extent that such action is determined by the General Partner to be
reasonable and necessary or appropriate, the General Partner shall file
amendments to and restatements of the Certificate of Limited Partnership and do
all of the things to maintain the Partnership as a limited partnership (or a
partnership in which the limited partners have limited liability) under the laws
of the State of Delaware and each other state, or the District of Columbia, in
which the Partnership may elect to do business or own property. Subject to the
terms of Section 8.5.A(4) hereof, the General Partner shall not be required,
before or after filing, to deliver or mail a copy of the Certificate of Limited
Partnership or any amendment thereto to any Limited Partner.
Section 7.3 Restrictions on General Partner Authority.
The General Partner may not take any action in contravention of an
express prohibition or limitation of this Agreement without the written Consent
of Limited Partners holding a majority of the Common Units of the Limited
Partners (including Limited Partner Common Units held by
24
the General Partner and the Initial Limited Partner), or such other
percentage of the Limited Partners as may be specifically provided for
under a provision of this Agreement.
Section 7.4 Reimbursement of the General Partner and the Company;
DRIP's and Repurchase Programs
A. Except as provided in this Section 7.4 and elsewhere in this
Agreement (including the provisions of Articles 5 and 6 regarding distributions,
payments, and allocations to which it may be entitled), the General Partner
shall not be compensated for its services as general partner of the Partnership.
B. The General Partner and the Company shall be reimbursed on a monthly
basis, or such other basis as it may determine in its sole and absolute
discretion, for all expenses that it incurs relating to the ownership and
operation of, or for the benefit of, the Partnership (including, without
limitation, (i) expenses relating to the ownership of interests in and operation
of the Partnership, (ii) compensation of the Company's officers and employees
including, without limitation, payments under the Company's Stock Incentive
Plans that provides for stock units, or other phantom stock, pursuant to which
employees of the Company will receive payments based upon dividends on or the
value of REIT Shares, (iii) director fees and expenses and (iv) all costs and
expenses of being a public company, including costs of filings with the SEC,
reports and other distributions to its stockholders); provided that the amount
of any such reimbursement shall be reduced by any interest earned by the General
Partner or the Company with respect to bank accounts or other instruments or
accounts held by it on behalf of the Partnership. The Partners acknowledge that
all such expenses of the General Partner and the Company are deemed to be for
the benefit of the Partnership. Such reimbursement shall be in addition to any
reimbursement made as a result of indemnification pursuant to Section 7.7
hereof.
C. As set forth in Section 4.3, the Company shall be treated as having
made a capital contribution to the General Partner [and/or the Initial Limited
Partner], which shall be treated as having made a Capital Contribution to the
Partnership, in the amount of all expenses that it incurs relating to the
Company's initial public offering REIT of Shares.
D. In the event that the Company shall elect to purchase from its
shareholders REIT Shares for the purpose of delivering such REIT Shares to
satisfy an obligation under any dividend reinvestment program adopted by the
Company, any employee stock purchase plan adopted by the Company, or any similar
obligation or arrangement undertaken by the Company in the future or for the
purpose of retiring such REIT Shares, the purchase price paid by the Company for
such REIT Shares and any other expenses incurred by the Company in connection
with such purchase shall be considered expenses of the Partnership and shall be
advanced to the Company or reimbursed to the Company, subject to the condition
that: (i) if such REIT Shares subsequently are sold by the Company, the Company
shall pay to the Partnership any proceeds received by the Company for such REIT
Shares (which sales proceeds shall include the amount of dividends reinvested
under any dividend reinvestment or similar program provided that a transfer of
REIT Shares for Units pursuant to Section 8.6 would not be considered a sale for
such purposes); and (ii) if such REIT Shares are not retransferred by the
Company within thirty (30) days after the purchase thereof, or the Company
otherwise determines not to retransfer such REIT Shares, the General Partner
shall cause the Partnership to redeem a number of Common
25
Units held by the General Partner, as a Limited Partner, [and/or by the Initial
Limited Partner,] equal to the product obtained by dividing the number of such
REIT Shares by the Conversion Factor (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 Units held by the General Partner [and/or the
Initial Limited Partner]).
Section 7.5 Outside Activities of the General Partner
The General Partner shall not directly or indirectly enter into or
conduct any business other than in connection with the ownership, acquisition
and disposition of Partnership Interests and the management of the business of
the Partnership, and such activities as are incidental thereto. The General
Partner and any Affiliates of the General Partner may acquire Limited Partner
Interests and shall be entitled to exercise all rights of a Limited Partner
relating to such Limited Partner Interests.
Section 7.6 Contracts with Affiliates
A. The Partnership may lend or contribute funds or other assets to its
Subsidiaries or other Persons in which it has an equity investment and such
Persons may borrow funds from the Partnership, on terms and conditions
established in the sole and absolute discretion of the General Partner. The
foregoing authority shall not create any right or benefit in favor of any
Subsidiary or any other Person.
B. Except as provided in Section 7.5, the Partnership may transfer
assets to joint, ventures, other partnerships, corporations or other business
entities in which it is or thereby becomes a participant upon such terms and
subject to such conditions consistent with this Agreement and applicable law as
the General Partner, in its sole and absolute discretion, believes are
advisable.
C. Except as expressly permitted by this Agreement, neither the General
Partner nor any of its Affiliates shall sell, transfer or convey any property
to, or purchase any property from, the Partnership, directly or indirectly,
except pursuant to transactions that are determined by the General Partner in
good faith to be fair and reasonable.
D. The General Partner, in its sole and absolute discretion and without
the approval of the Limited Partners, may propose and adopt, on behalf of the
Partnership, employee benefit plans, stock option plans, and similar plans
funded by the Partnership for the benefit of employees of the General Partner,
the Partnership, Subsidiaries of the Partnership or any Affiliate of any of them
in respect of services performed, directly or indirectly, for the benefit of the
Partnership, the General Partner, or any Subsidiaries of the Partnership.
E. The General Partner is expressly authorized to enter into, in the
name and on behalf of the Partnership, a right of first opportunity arrangement
and other conflict avoidance agreements with various Affiliates of the
Partnership and the General Partner, on such terms as the General Partner, in
its sole and absolute discretion, believes are advisable.
Section 7.7 Indemnification
26
A. To the fullest extent permitted by Delaware law, the Partnership
shall indemnify each Indemnitee from and against any and all losses, claims,
damages, liabilities, joint or several, expenses (including, without limitation,
attorneys fees and other legal fees and expenses), judgments, fines,
settlements, and other amounts arising from any and all claims, demands,
actions, suits or proceedings, civil, criminal, administrative or investigative,
that relate to the operations of the Partnership or the Company as set forth in
this Agreement, in which such Indemnitee may be involved, or is threatened to be
involved, as a party or otherwise, unless it is established that: (i) the act or
omission of the Indemnitee was material to the matter giving rise to the
proceeding and either was committed in bad faith or was the result of active and
deliberate dishonesty; (ii) the Indemnitee actually received an improper
personal benefit in money, property or services; or (iii) in the case of any
criminal proceeding, the Indemnitee had reasonable cause to believe that the act
or omission was unlawful. Without limitation, the foregoing indemnity shall
extend to any liability of any Indemnitee, pursuant to a loan guaranty (except a
guaranty by a limited partner of nonrecourse indebtedness of the Partnership or
as otherwise provided in any such loan guaranty) or otherwise for any
indebtedness of the Partnership or any Subsidiary of the Partnership (including
without limitation, any indebtedness which the Partnership or any Subsidiary of
the Partnership has assumed or taken subject to), and the General Partner is
hereby authorized and empowered, on behalf of the Partnership, to enter into one
or more indemnity agreements consistent with the provisions of this Section 7.7
in favor of any Indemnitee having or potentially having liability for any such
indebtedness. The termination of any proceeding by conviction of an Indemnitee
or upon a plea of nolo contendere or its equivalent by an Indemnitee, or an
entry of an order of probation against an Indemnitee prior to judgment, creates
a rebuttable presumption that such Indemnitee acted in a manner contrary to that
specified in this Section 7.7.A. Any indemnification pursuant to this Section
7.7 shall be made only out of the assets of the Partnership, and neither the
General Partner nor any Limited Partner shall have any obligation to contribute
to the capital of the Partnership, or otherwise provide funds, to enable the
Partnership to fund its obligations under this Section 7.7.
B. Reasonable expenses incurred by an Indemnitee who is a party to a
proceeding shall be paid or reimbursed by the Partnership in advance of the
final disposition of the proceeding upon receipt by the Partnership of (i) a
written affirmation by the Indemnitee of the Indemnitee's good faith belief that
the standard of conduct necessary for indemnification by the Partnership as
authorized in Section 7.7.A. has been met, and (ii) a written undertaking by or
on behalf of the Indemnitee to repay the amount if it shall ultimately be
determined that the standard of conduct has not been met.
C. The indemnification provided by this Section 7.7 shall be in
addition to any other rights to which an Indemnitee or any other Person may be
entitled under any agreement, pursuant to any vote of the Partners, as a matter
of law or otherwise, and shall continue as to an Indemnitee who has ceased to
serve in such capacity unless otherwise provided in a written agreement pursuant
to which such Indemnitee is indemnified.
D. The Partnership may, but shall not be obligated to, purchase and
maintain insurance, on behalf of the Indemnitees and such other Persons as the
General Partner shall determine, against any liability that may be asserted
against or expenses that may be incurred by such Person in connection with the
Partnership's activities, regardless of whether the Partnership
27
would have the power to indemnify such Person against such liability under the
provisions of this Agreement.
E. For purposes of this Section 7.7, the Partnership shall be deemed to
have requested an Indemnitee to serve as fiduciary of an employee benefit plan
whenever the performance by it of its duties to the Partnership also imposes
duties on, or otherwise involves services by, it to the plan or participants or
beneficiaries of the plan; excise taxes assessed on an Indemnitee with respect
to an employee benefit plan pursuant to applicable law shall constitute fines
within the meaning of Section 7.7; and actions taken or omitted by the
Indemnitee with respect to an employee benefit plan in the performance of its
duties for a purpose reasonably believed by it to be in the interest of the
participants and beneficiaries of the plan shall be deemed to be for a purpose
which is not opposed to the best interests of the Partnership.
F. In no event may an Indemnitee subject any of the Partners to
personal liability by reason of the indemnification provisions set forth in this
Agreement.
G. An Indemnitee 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.
H. 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 Partnership'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.
Section 7.8 Liability of the General Partner
A. Notwithstanding anything to the contrary set forth in this
Agreement, the General Partner and its officers and directors shall not be
liable for monetary damages to the Partnership, any Partners or any Assignees
for losses sustained or liabilities incurred as a result of errors in judgment
or of any act or omission if the General Partner acted in good faith.
B. The Limited Partners expressly acknowledge that, as stated in
Section 7.1.D, the General Partner is acting on behalf of the Partnership and
the Company collectively, that the General Partner is under no obligation to
consider the separate interests of the Limited Partners in deciding whether to
cause the Partnership to take (or decline to take) any actions, and that the
General Partner shall not be liable for monetary damages for losses sustained,
liabilities incurred, or benefits not derived by Limited Partners in connection
with such decisions, provided that the General Partner has acted in good faith.
C. Subject to its obligations and duties as General Partner set forth
in Section 7.1.A hereof, the General Partner 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.
28
The General Partner shall not be responsible for any misconduct or negligence on
the part of any such agent appointed by the General Partner in good faith.
D. 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 General Partner's and its officers' and directors' liability
to the Partnership and the Limited Partners 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 General Partner
A. The General Partner 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 in good faith to be genuine and to have been
signed or presented by the proper party or parties.
B. The General Partner may consult with legal counsel, accountants,
appraisers, management consultants, investment bankers, architects, engineers,
environmental consultants 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 General Partner 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. The General Partner shall have the right, in respect of any of its
powers or obligations hereunder, to act through any of its duly authorized
officers and duly appointed attorneys-in-fact. Each such attorney shall, to the
extent provided by the General Partner 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 General Partner hereunder.
D. Notwithstanding any other provisions of this Agreement or the Act,
any action of the General Partner on behalf of the Partnership or any decision
of the General Partner to refrain from acting on behalf of the Partnership,
undertaken in the good faith belief that such action or omission is necessary or
advisable in order (i) to protect the ability of the Company to continue to
qualify as a REIT; or (ii) to avoid the Company incurring any taxes under
Section 857 or Section 4981 of the Code, is expressly authorized under this
Agreement and is deemed approved by all of the Limited Partners.
Section 7.10 Title to Partnership Assets
Title to Partnership assets, whether real, personal or mixed and
whether tangible or intangible, shall be deemed to be owned by the Partnership
as an entity, and no Partner, individually or collectively, shall have any
ownership interest in such Partnership assets or any portion thereof. Title to
any or all of the Partnership assets may be held in the name of the Partnership,
the General Partner or one or more nominees, as the General Partner may
determine, including Affiliates of the General Partner. The General Partner
hereby declares and warrants that any Partnership assets for which legal title
is held in the name of the General Partner or any
29
nominee or Affiliate of the General Partner shall be held by the General Partner
for the use and benefit of the Partnership in accordance with the provisions of
this Agreement; provided, however, that the General Partner shall use its best
efforts to cause beneficial and record title to such assets to be vested in the
Partnership as soon as reasonably practicable if failure to so vest such title
would have a material adverse effect on the Partnership. All Partnership assets
shall be recorded as the property of the Partnership in its books and records,
irrespective of the name in which legal title to such Partnership assets is
held.
Section 7.11 Reliance by Third Parties
Notwithstanding anything to the contrary in this Agreement, any Person
dealing with the Partnership shall be entitled to assume that the General
Partner has full power and authority, without consent or approval of any other
Partner or Person, to encumber, sell or otherwise use in any manner any and all
assets of the Partnership and to enter into any contracts on behalf of the
Partnership, and take any and all actions on behalf of the Partnership and such
Person shall be entitled to deal with the General Partner as if the General
Partner were the Partnership's sole party in interest, both legally and
beneficially. Each Limited Partner 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 General Partner in connection with any such dealing.
In no event shall any Person dealing with the General Partner 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 General Partner or its representatives. Each and every
certificate, document or other instrument executed on behalf of the Partnership
by the General Partner or its representatives shall be conclusive evidence in
favor of any and every Person relying thereon or claiming thereunder that (i) at
the time of the execution and delivery of such certificate, document or
instrument, this Agreement was in full force and effect; (ii) the Person
executing and delivering such certificate, document or instrument was duly
authorized and empowered to do so for and on behalf of the Partnership; and
(iii) 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 Partnership.
ARTICLE 8
RIGHTS AND OBLIGATIONS OF LIMITED PARTNERS
Section 8.1 Limitation of Liability
The Limited Partners shall have no liability under this Agreement
except as expressly provided in this Agreement, including Section 10.5 hereof,
or under the Act.
Section 8.2 Management of Business
No Limited Partner or Assignee (other than the General Partner, any of
its Affiliates or any officer, director, employee, agent or trustee of the
General Partner, the Partnership 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 Partnership's business, transact any business in the
Partnership's name or have the power to sign documents for or otherwise bind the
Partnership. The transaction of any such business by the General Partner, any of
its Affiliates or any officer,
30
director, employee, partner, agent or trustee of the General Partner, the
Partnership or any of their Affiliates, in their capacity as such, shall not
affect, impair or eliminate the limitations on the liability of the Limited
Partners or Assignees under this Agreement.
Section 8.3 Outside Activities of Limited Partners
Subject to any agreements entered into pursuant to Section 7.6.E hereof
and any other agreements entered into by a Limited Partner or its Affiliates
with the Partnership or any of its Subsidiaries, any Limited Partner (other than
the General Partner or the Initial Limited Partner) and any officer, director,
employee, agent, trustee, Affiliate or shareholder of any Limited Partner shall
be entitled to and may have business interests and engage in business activities
in addition to those relating to the Partnership, including business interests
and activities that are in direct competition with the Partnership or that are
enhanced by the activities of the Partnership. Neither the Partnership nor any
Partners shall have any rights by virtue of this Agreement in any business
ventures of any Limited Partner or Assignee. None of the Limited Partners (other
than the General Partner in its capacity as such) nor any other Person shall
have any rights by virtue of this Agreement or the Partnership relationship
established hereby in any business ventures of any other Person and such Person
shall have no obligation pursuant to this Agreement to offer any interest in any
such business ventures to the Partnership, any Limited Partner or any such other
Person, even if such opportunity is of a character which, if presented to the
Partnership, any Limited Partner or such other Person, could be taken by such
Person.
Section 8.4 Return of Capital
Except pursuant to the right of redemption set forth in Section 8.6, no
Limited Partner shall be entitled to the withdrawal or return of its Capital
Contribution, except to the extent of distributions made pursuant to this
Agreement or upon termination of the Partnership as provided herein. Except to
the extent provided by Exhibit C hereof or as otherwise expressly provided in
this Agreement, no Limited Partner or Assignee shall have priority over any
other Limited Partner or Assignee, either as to the return of Capital
Contributions or as to profits, losses or distributions.
Section 8.5 Rights of Limited Partners Relating to the
Partnership
A. In addition to the other rights provided by this Agreement or by the
Act, and except as limited by Section 8.5.C hereof, each Limited Partner shall
have the right, for a purpose reasonably related to such Limited Partner's
interest as a limited partner in the Partnership, upon written demand with a
statement of the purpose of such demand and at such Limited Partner's own
expense (including such copying and administrative charges as the General
Partner may establish from time to time):
(1) to obtain a copy of the most recent annual and quarterly
reports filed with the Securities and Exchange
Commission by the Company pursuant to the Securities
Exchange Act of 1934;
(2) to obtain a copy of the Partnership's federal, state and
local income tax returns for each Partnership Year;
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(3) to obtain a current list of the name and last known
business, residence or mailing address of each Partner;
(4) to obtain a copy of this Agreement and the Certificate
of Limited Partnership and all amendments thereto,
together with executed copies of all powers of attorney
pursuant to which this Agreement, the Certificate of
Limited Partnership 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 Partner and
which each Partner has agreed to contribute in the
future, and the date on which each became a Partner.
B. The Partnership shall notify each Limited Partner, upon request, of
the then current Conversion Factor and the REIT Shares Amount per Common Unit
and, with reasonable detail, how the same was determined.
C. Notwithstanding any other provision of this Section 8.5, the General
Partner may keep confidential from the Limited Partners, for such period of time
as the General Partner determines in its sole and absolute discretion to be
reasonable, any information that (i) the General Partner reasonably believes to
be in the nature of trade secrets or other information, the disclosure of which
the General Partner in good faith believes is not in the best interests of the
Partnership or could damage the Partnership or its business; or (ii) the
Partnership is required by law or by agreements with an unaffiliated third party
to keep confidential.
Section 8.6 Redemption Right
A. Subject to Sections 8.6.B and 8.6.C hereof, on or after that date
which is [fourteen (14)] months after the Effective Date, each Limited Partner
(other than the General Partner, in its capacity as such or the Initial Limited
Partner) shall have the right (the "Redemption Right") to require the
Partnership to redeem on a Specified Redemption Date all or a portion of the
Common Units held by such Limited Partner at a redemption price per Common Unit
equal to and in the form of the Cash Amount to be paid by the Partnership. The
Redemption Right shall be exercised pursuant to a Notice of Redemption delivered
to the Partnership (with a copy to the Company) by the Limited Partner who is
exercising the Redemption Right (the "Redeeming Partner"); provided, however,
that the Partnership shall not be obligated to satisfy such Redemption Right if
the Company elects to cause the General Partner to purchase the Common Units
subject to the Notice of Redemption pursuant to Section 8.6.B. A Limited Partner
may not exercise the Redemption Right for less than one thousand (1,000) Common
Units or, if such Limited Partner holds less than one thousand (1,000) Common
Units, all of the Common Units held by such Partner. The Redeeming Partner shall
have no right, with respect to any Common Units so redeemed, to receive any
distributions paid on or after the Specified Redemption Date. The Assignee of
any Limited Partner may exercise the rights of such Limited Partner pursuant to
this Section 8.6, and such Limited Partner shall be deemed to have assigned such
rights to such Assignee and shall be bound by the exercise of such rights by
such Assignee. In connection with any exercise of such rights by an Assignee on
behalf of a Limited Partner, the Cash Amount shall be paid by the Partnership
directly to such Assignee and not to such Limited Partner. [In
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connection with the exercise of a Redemption Right by a Limited Partner pursuant
to which the election is made, pursuant to Section 8.6.B, to pay the REIT Share
Amount, such Limited Partner shall agree to pay to the Company, promptly after
such Limited Partner's (or its Assignee's) receipt of its first distribution
with respect to the REIT Shares received with respect to such redemption, an
amount equal to the amount of such distribution less such portion of such amount
as is determined by multiplying such amount by a fraction, the numerator of
which is the number of days in the period between the record date for such
distribution and the record date for the immediately prior distribution by the
Company during which such Limited Partner held such REIT Shares, and the
denominator of which is the total number of days during such period.]
B. Notwithstanding the provisions of Section 8.6.A, upon an election by
a Limited Partner to exercise the Redemption Right, the Company may, in its sole
and absolute discretion (subject to the limitations on ownership and transfer of
REIT Shares set forth in the articles of incorporation of the Company), cause
the General Partner to elect to assume directly and satisfy a Redemption Right
by paying to the Redeeming Partner either the Cash Amount or the REIT Shares
Amount, as the Company determines in its sole and absolute discretion, whereupon
the General Partner shall acquire the Common Units offered for redemption by the
Redeeming Partner and shall be treated for all purposes of this Agreement as the
owner of such Common Units. If the Company shall elect to exercise its right to
purchase Common Units under this Section 8.6.B with respect to a Notice of
Redemption, it shall so notify the Redeeming Partner within five (5) Business
Days after the receipt by it of such Notice of Redemption. Unless the Company
shall exercise its right to cause the General Partner to purchase Common Units
from the Redeeming Partner pursuant to this Section 8.6.B, the Company shall not
have any obligation to the Redeeming Partner or the Partnership with respect to
the Redeeming Partner's exercise of the Redemption Right. In the event the
Company shall exercise its right to cause the General Partner to purchase Common
Units with respect to the exercise of a Redemption Right in the manner described
in the first sentence of this Section 8.6.B, the Partnership shall have no
obligation to pay any amount to the Redeeming Partner with respect to such
Redeeming Partner's exercise of such Redemption Right, and each of the Redeeming
Partner, the Partnership, and the General Partner shall treat the transaction
between the General Partner and the Redeeming Partner, for federal income tax
purposes, as a sale of the Redeeming Partner's Common Units to the General
Partner. Each Redeeming Partner agrees to execute such documents as the General
Partner may reasonably require in connection with the issuance of REIT Shares
upon exercise of the Redemption Right.
C. Notwithstanding the provisions of Section 8.6.A and Section 8.6.B, a
Partner shall not be entitled to exercise the Redemption Right pursuant to
Section 8.6.A if the delivery of REIT Shares to such Partner on the Specified
Redemption Date by the General Partner pursuant to Section 8.6.B (regardless of
whether or not the General Partner would in fact exercise its rights under
Section 8.6.B) would be prohibited under the Certificate of Incorporation of the
Company.
D. In the event that the Partnership issues additional Partnership
Interests pursuant to Section 4.2.A hereof, the General Partner shall make such
revisions to this Section 8.6 as it determines are necessary to reflect the
issuance of such additional Partnership Interests.
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ARTICLE 9
BOOKS, RECORDS, ACCOUNTING AND REPORTS
Section 9.1 Records and Accounting
The General Partner shall keep or cause to be kept at the principal office
of the Partnership those records and documents required to be maintained by the
Act and other books and records deemed by the General Partner to be appropriate
with respect to the Partnership's business, including, without limitation, all
books and records necessary to provide to the Limited Partners any information,
lists and copies of documents required to be provided pursuant to Section 9.3
hereof. Any records maintained by or on behalf of the Partnership 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 that the records so maintained are convertible into clearly
legible written form within a reasonable period of time. The books of the
Partnership shall be maintained, for financial and tax reporting purposes, on an
accrual basis in accordance with generally accepted accounting principles, or
such other basis as the General Partner determines to be necessary or
appropriate.
Section 9.2 Fiscal Year
The fiscal year of the Partnership shall be the calendar year.
Section 9.3 Reports
A. As soon as practicable, but in no event later than one hundred five
(105) days after the close of each Partnership Year, the General Partner shall
cause to be mailed to each Limited Partner as of the close Of the Partnership
Year, an annual report containing financial statements of the Partnership, or of
the Company if such statements are prepared solely on a consolidated basis with
the Company, 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 General
Partner.
B. As soon as practicable, but in no event later than one hundred five
(105) days after the close of each calendar quarter (except the last calendar
quarter of each year), the General Partner shall cause to be mailed to each
Limited Partner as of the last day of the calendar quarter, a report containing
unaudited financial statements of the Partnership, or of the Company, if such
statements are prepared solely on a consolidated basis with the Company, and
such other information as may be required by applicable law or regulation, or as
the General Partner determines to be appropriate.
ARTICLE 10
TAX MATTERS
Section 10.1 Preparation of Tax Returns
The General Partner shall arrange for the preparation and timely filing of
all returns of Partnership income, gains, deductions, losses and other items
required of the Partnership for federal and state income tax purposes and shall
use all reasonable efforts to furnish, within ninety
34
(90) days of the close of each taxable year, the tax information reasonably
required by Limited Partners for federal and state income tax reporting
purposes.
Section 10.2 Tax Elections
Except as otherwise provided herein, the General Partner shall, in its
sole and absolute discretion, determine whether to make any available election
pursuant to the Code. Notwithstanding the above, in making any such tax election
the General Partner shall take into account the tax consequences to the Limited
Partners resulting from any such election. The General Partner shall make such
tax elections on behalf of the Partnership as the Limited Partners holding a
majority of the Percentage Interests of the Limited Partners (excluding Limited
Partner Interests held by the Company) request, provided that the General
Partner believes that such election is not adverse to the interests Of the
General Partner, including its interest in preserving its qualification as a
REIT under the Code. The General Partner intends that Section 704(c) allocations
with respect to contributed property shall be made by the election of the
so-called "traditional method" with curative allocations limited solely to
allocations of gain on sale of such contributed property to the extent
allocations of depreciation deductions with respect to such contributed property
to non-contributing Partners have been limited by the so-called "ceiling rule",
as described in Regulations Section 1.704-3(c)(3)(iii)(B). The General Partner
shall have the right to seek to revoke any tax election it makes (including,
without limitation, the election under Section 754 of the Code) upon the General
Partner's determination, in its sole and absolute discretion, that such
revocation is in the best interests of the Partners.
Section 10.3 Tax Matters Partner
A. The General Partner shall be the "tax matters partner" of the
Partnership for federal income tax purposes. Pursuant to Section 6230(e) of the
Code, upon receipt of notice from the IRS of the beginning of an administrative
proceeding with respect to the Partnership, the tax matters partner shall
furnish the IRS with the name, address, taxpayer identification number, and
profit interest of each of the Limited Partners and the Assignees; provided,
however, that such information is provided to the Partnership by the Limited
Partners and the Assignees.
B. The tax matters partner 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
Partnership items required to be taken into account by a
Partner 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 partner may
expressly state that such agreement shall bind all Partners,
except that such settlement agreement shall not bind any
Partner (i) who (within the time prescribed pursuant to the
Code and Regulations) files a statement with the IRS providing
that the tax matters partner shall not have the authority to
enter into a settlement agreement on behalf of such Partner;
or (ii) who is a "notice
35
partner" (as defined in Section 623 1(a)(8) of the Code) or a
member of a "notice group" (as defined in Section 6223(b)(2)
of the Code);
(2) in the event that a notice of a final administrative
adjustment at the Partnership level of any item required to be
taken into account by a Partner for tax purposes (a "final
adjustment") is mailed to the tax matters partner, to seek
judicial review of such final adjustment, including the filing
of a petition for readjustment with the Tax Court or the
filing of a complaint for refund with the United States Claims
Court or the District Court of the United States for the
district in which the Partnership's principal place of
business is located;
(3) to intervene in any action brought by any other Partner for
judicial review of a final adjustment;
(4) to file a request for an administrative adjustment with the
IRS and, if any part of such request is not allowed by the
IRS, to file an appropriate pleading (petition or complaint)
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 account of by a Partner for tax purposes,
or an item affected by such item; and
(6) to take any other action on behalf of the Partners or the
Partnership 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 partner 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 partner and the provisions relating to indemnification of the General
Partner set forth in Section 7.7 of this Agreement shall be fully applicable to
the tax matters partner in its capacity as such.
C. The tax matters partner shall receive no compensation for its services.
All third party costs and expenses incurred by the tax matters partner in
performing its duties as such (including legal and accounting fees and expenses)
shall be borne by the Partnership. Nothing herein shall be construed to restrict
the Partnership from engaging an accounting firm to assist the tax matters
partner in discharging its duties hereunder, so long as the compensation paid by
the Partnership for such services is reasonable.
Section 10.4 Organizational Expenses
The Partnership shall elect to deduct expenses, if any, incurred by it in
organizing the Partnership ratably over a sixty (60) month period as provided in
Section 709 of the Code.
Section 10.5 Withholding
36
Each Limited Partner hereby authorizes the Partnership to withhold from,
or pay on behalf of or with respect to, such Limited Partner any amount of
federal, state, local, or foreign taxes that the General Partner determines that
the Partnership is required to withhold or pay with respect to any amount
distributable or allocable to such Limited Partner pursuant to this Agreement,
including, without limitation, any taxes required to be withheld or paid by the
Partnership pursuant to Sections 1441, 1442, 1445, or 1446 of the Code. Any
amount paid on behalf of or with respect to a Limited Partner shall constitute a
loan by the Partnership to such Limited Partner, which loan shall be repaid by
such Limited Partner within fifteen (15) days after notice from the General
Partner that such payment must be made unless (i) the Partnership withholds such
payment from a distribution which, would otherwise be made to the Limited
Partner; or (ii) the General Partner determines, in its sole and absolute
discretion, that such payment may be satisfied out of the available funds of the
Partnership which would, but for such payment, be distributed to the Limited
Partner. Any amounts withheld pursuant to the foregoing clauses (i) or (ii)
shall be treated as having been distributed to such Limited Partner. Each
Limited Partner hereby unconditionally and irrevocably grants to the Partnership
a security interest in such Limited Partner's Partnership Interest to secure
such Limited Partner's obligation to pay to the Partnership any amounts required
to be paid pursuant to this Section 10.5. In the event that a Limited Partner
fails to pay any amounts owed to the Partnership pursuant to this Section 10.5
when due, the General Partner may, in its sole and absolute discretion, elect to
make the payment to the Partnership on behalf of such defaulting Limited
Partner, and in such event shall be deemed to have loaned such amount to such
defaulting Limited Partner and shall succeed to all rights and remedies of the
Partnership as against such defaulting Limited Partner. Without limitation, in
such event the General Partner shall have the right to receive distributions
that would otherwise be distributable to such defaulting Limited Partner until
such time as such loan, together with all interest thereon, has been paid in
full, and any such distributions so received by the General Partner shall be
treated as having been distributed to the defaulting Limited Partner and
immediately paid by the defaulting, Limited Partner to the General Partner in
repayment of such loan. Any amounts payable by a Limited Partner hereunder shall
bear interest at the lesser of (A) 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 (4) percentage points, or (B) the maximum
lawful rate of interest on such obligation, such interest to accrue from the
date such amount is due fifteen (15) days after demand) until such amount is
paid in full. Each Limited Partner shall take such actions as the Partnership or
the General Partner shall request in order to perfect or enforce the security
interest created hereunder.
ARTICLE 11
TRANSFERS AND WITHDRAWALS
Section 11.1 Transfer
A. The term "transfer," when used in this Article 11 with respect to a
Partnership Unit, shall be deemed to refer to a transaction by which the General
Partner purports to assign all or any part of its General Partner Interest to
another Person or by which a Limited Partner purports to assign all or any part
of its Limited Partner Interest to another Person, and includes a sale,
assignment, gift, pledge (except for a pledge in which the pledgee agrees not to
foreclose with respect to such Partnership Unit until after the first
anniversary of the initial public offering of the Company), encumbrance,
hypothecation, mortgage, exchange or any other disposition by
37
operation of law or otherwise. The term "transfer" when used in this Article 11
does not include any redemption of Partnership Interests by the Partnership from
a Limited Partner or any acquisition of Partnership Units from a Limited Partner
by the General Partner or the Company pursuant to Section 8.6. No part of the
interest of a Limited Partner shall be subject to the claims of any creditor,
any spouse for alimony or support, or to legal process, and may not be
voluntarily or involuntarily alienated or encumbered except as may be
specifically provided for in this Agreement or consented to by the General
Partner.
B. No Partnership Interest shall be transferred, in whole or in part,
except in accordance with the terms and conditions set forth in this Article 11.
Any transfer or purported transfer of a Partnership Interest not made in
accordance with this Article 11 shall be null and void.
Section 11.2 Transfer of the General Partner's General Partner or Limited
Partner Interest and Initial Limited Partner's Limited
Partner Interest: Extraordinary Transactions
A. The General Partner may not transfer any of its General Partner
Interest or withdraw as General Partner, or transfer any of its Limited Partner
Interest, and the Initial Limited Partner any not transfer any of its Limited
Partner Interest, or engage in an Extraordinary Transaction, except, in any such
case, (i) if such Extraordinary Transaction is, or such transfer or withdrawal
is pursuant to an Extraordinary Transaction that is, permitted under Section
11.2(B) or (ii) if Limited Partners holding at least three-fourths of the
Percentage Interests of the Limited Partners (other than Limited Partner
Interests held by the General Partner or its Affiliates) consent to such
transfer or withdrawal or Extraordinary Transaction, or (iii) if such transfer
is to an entity that is wholly-owned by the Company and is a Qualified REIT
Subsidiary under Section 856(i) of the Code.
B. The General Partner may engage in the following Extraordinary
Transactions without the approval or vote of the Limited Partners except as
provided in Section 11.2(C):
(i) an Extraordinary Transaction in connection with which all
Limited Partners either will receive, or will have the right
to elect to receive, for each Common Unit an amount of cash,
securities, or other property equal to the product of the REIT
Shares Amount and the greatest amount of cash, securities or
other property paid to a holder of one REIT Share in
consideration of one REIT Share pursuant to the terms of the
Extraordinary Transaction; provided that, if, in connection
with the Extraordinary Transaction, a purchase, tender or
exchange offer shall have been made to and accepted by the
holders of the outstanding REIT Shares, each holder of Common
Units shall receive, or shall have the right to elect to
receive, the greatest amount of cash, securities, or other
property which such holder would have received had it
exercised its right to Redemption (as set forth in Section
8.6) and received REIT Shares in exchange for its Common Units
immediately prior to the expiration of such purchase, tender
or exchange offer and had thereupon accepted such purchase,
38
tender or exchange offer and then such Extraordinary
Transaction shall have been consummated; and
(ii) a merger, or other combination of assets, with another entity
if: (w) immediately after such Extraordinary Transaction,
substantially all of the assets directly or indirectly owned
by the surviving entity, other than Common Units held by such
General Partner, are owned directly or indirectly by the
Partnership or another limited partnership or limited
liability company which is the survivor of a merger,
consolidation or combination of assets with the Partnership
(in each case, the "Surviving Partnership"); (x) the Common
Unitholders own a percentage interest of the Surviving
Partnership based on the relative fair market value of the net
assets of the Partnership (as determined pursuant to Section
11.2.E) and the other net assets of the Surviving Partnership
(as determined pursuant to Section 11.2.E) immediately prior
to the consummation of such transaction; (y) the rights,
preferences and privileges of the Common Unitholders in the
Surviving Partnership are at least as favorable as those in
effect immediately prior to the consummation of such
transaction and as those applicable to any other limited
partners or non-managing members of the Surviving Partnership
(who have, in either case, the rights of a "common" equity
holder); and (z) such rights of the Common Unitholders include
the right to exchange their Common Unit equivalent interests
in the Surviving Partnership for at least one of: (a) the
consideration available to such Common Unitholders pursuant to
Section 11.2.B(i) or (b) if the ultimate controlling person of
the Surviving Partnership has publicly traded common equity
securities, such common equity securities, with an exchange
ratio based on the relative fair market value of such
securities (as determined pursuant to Section 11.2.E) and the
REIT Shares.
C. The General Partner shall not consummate any Extraordinary Transaction
in connection with which it conducted a vote of its common stockholders (a
"Stockholder Vote") unless the General Partner also conducts a vote of the
Common Unitholders (the "Partnership Vote") in which (i) the General Partner
provides the Common Unitholders with advance notice equal in time to the advance
notice given in the case of the Stockholder Vote, (ii) in connection with such
advance notice the General Partner provides the Common Unitholders with written
materials describing the proposed Extraordinary Transaction as well as the tax
effect of the consummation thereof on the Limited Partners, (iii) in such vote
of the Partners, the General Partner votes all Common Units (General and
Limited) held by it in proportion to the manner in which all outstanding shares
of common stock of the General Partner were voted at the Stockholder Meeting
(such votes to be "For," "Against," "Abstain" and "Not Present"), and (iv) the
total votes of the General and Limited Partners in respect of their Common Units
voted "For," "Against," "Abstain" and "Not Present" would be sufficient
(measured in percentage terms), if such vote were a vote by the Company of its
stockholders, to approve the Extraordinary Transaction. For purposes of the
Partnership Vote, each holder of a Common Unit shall be entitled to a number of
votes equal to the total votes such holder would have been entitled to at the
Stockholder Meeting had such holder presented its Common Unit for
39
redemption and such Common Unit had been acquired by the Company, for the REIT
Shares Amount of REIT Shares prior to the record date therefor.
D. Without in any way limiting the exculpation from liability set forth in
Section 7.1.D and 7.8.B, in connection with any transaction permitted by Section
11.2.B or Section 11.2.C hereof, the General Partner shall use its commercially
reasonable efforts to structure such Extraordinary Transaction to avoid causing
the Limited Partners to recognize gain for federal income tax purposes by virtue
of the occurrence of or their participation in such Extraordinary Transaction.
E. In connection with any transaction permitted by Section 11.2.B or
11.2.C, the relative fair market values shall be reasonably determined by the
General Partner as of the time of such transaction and, to the extent
applicable, shall be no less favorable to the Limited Partners than the relative
values reflected in the terms of such transaction.
Section 11.3 Limited Partners' Rights to Transfer
A. Subject to the provisions of Sections 11.3.C, 11.3.D, 11.3.E, and 11.4,
a Limited Partner (other than the General Partner, in its capacity as such, or
the Initial Limited Partner) may transfer, with or without the consent of the
General Partner, all or any portion of its Partnership Interest, or any of such
Limited Partner's economic rights as a Limited Partner.
B. If a Limited Partner is subject to Incapacity, the executor,
administrator, trustee, committee, guardian, conservator or receiver of such
Limited Partner's estate shall have all of the rights of a Limited Partner, but
not more rights than those enjoyed by other Limited Partners, for the purpose of
settling or managing the estate and such power as the Incapacitated Limited
Partner possessed to transfer all or any part of his or its interest in the
Partnership. The Incapacity of a Limited Partner, in and of itself, shall not
dissolve or terminate the Partnership.
C. The General Partner may prohibit any transfer by a Limited Partner of
its Partnership Units if, in the opinion of legal counsel to the Partnership,
such transfer would require filing of a registration statement under the
Securities Act of 1933 or would otherwise violate any federal or state
securities laws or regulations applicable to the Partnership or the Partnership
Units.
D. No transfer by a Limited Partner of its Partnership Units may be made
to any Person if (i) in the opinion of legal counsel for the Partnership, it
would result in the Partnership being treated as an association taxable as a
corporation; (ii) it is made within one year after the consummation of the
initial public offering of the Company; (iii) such transfer is effectuated
through an "established securities market" or a "secondary market (or the
substantial equivalent thereof)" with the meaning of Section 7704 of the Code;
(iv) such transfer would cause the Partnership to become, with respect to any
employee benefit plan subject to Title I of ERISA, a "party-in-interest" (as
defined in Section 3(14) of ERISA) or a "disqualified person" (as defined in
Section 4975(c) of the Code); (v) such transfer would, in the opinion of legal
counsel for the Partnership, cause any portion of the assets of the Partnership
to constitute assets of any employee benefit plan pursuant to Department of
Labor Regulations Section 2510.2-101; or (vi) such transfer would subject the
Partnership to be regulated under the Investment Company Act
40
of 1940, the Investment Advisors Act of 1940 or the Employee Retirement Income
Security Act of 1974, each as amended.
E. No transfer of any Partnership Units may be made to a lender to the
Partnership or any Person who is related (within the meaning of Section
1.752-4(b) of the Regulations) to any lender to the Partnership whose loan
constitutes a Nonrecourse Liability, without the consent of the General Partner,
in its sole and absolute discretion; provided that as a condition to such
consent the lender will be required to enter into an arrangement with the
Partnership and the General Partner to redeem for the Cash Amount any
Partnership Units in which a security interest is held simultaneously with the
time at which such lender would be deemed to be a partner in the Partnership for
purposes of allocating liabilities to such lender under Section 752 of the Code.
Section 11.4 Substituted Limited Partners
A. No Limited Partner shall have the right to substitute a transferee as a
Limited Partner in his place. The General Partner shall, however, have the right
to consent to the admission of a transferee of the interest of a Limited Partner
pursuant to this Section 11.4 as a Substituted Limited Partner, which consent
may be given ,or withheld by the General Partner in its sole and absolute
discretion. The General Partner's failure or refusal to permit a transferee of
any such interests to become a Substituted Limited Partner shall not give rise
to any cause of action against the Partnership or any Partner.
B. A transferee who has been admitted as a Substituted Limited Partner in
accordance with this Article 11 shall have all the rights and powers and be
subject to all the restrictions and liabilities of a Limited Partner under this
Agreement.
C. Upon the admission of a Substituted Limited Partner, the General
Partner shall amend Exhibit A to reflect the name, address, number of
Partnership Units, and Percentage Interest of such Substituted Limited Partner
and to eliminate or adjust, if necessary, the name, address and interest of the
predecessor of such Substituted Limited Partner.
Section 11.5 Assignees
If the General Partner, in its sole and absolute discretion, does not
consent to the admission of any permitted transferee as a Substituted Limited
Partner, as described in Section 11.4, such transferee shall be considered an
Assignee for purposes of this Agreement. An Assignee shall be deemed to have had
assigned to it, and shall be entitled to receive distributions from the
Partnership and the share of Net Income, Net Losses, Recapture Income, and any
other items, gain, loss deduction and credit of the Partnership attributable to
the Partnership Units assigned to such transferee, but except as otherwise
provided in Section 8.6.A hereof shall not be deemed to be a holder of
Partnership Units for any other purpose under this Agreement, and shall not be
entitled to vote such Partnership Units in any matter presented to the Limited
Partners for a vote (such Partnership Units being deemed to have been voted on
such matter in the same proportion as all other Partnership Units held by
Limited Partners are voted). In the event any such transferee desires to make a
further assignment of any such Partnership Units, such
41
transferee shall be subject to all of the provisions of this Article 11 to the
same extent and in the same manner as any Limited Partner desiring to make an
assignment of Partnership Units.
Section 11.6 General Provisions
A. No Limited Partner may withdraw from the Partnership other than as a
result of a permitted transfer of all of such Limited Partner's Partnership
Units in accordance with this Article 11 or pursuant to redemption of all of its
Partnership Units under Section 8.6.
B. Any Limited Partner who shall transfer all of its Partnership Units in
a transfer permitted pursuant to this Article 11 shall cease to be a Limited
Partner upon the admission of all Assignees of such Partnership Units as
Substitute Limited Partners. Similarly, any Limited Partner who shall transfer
all of its Partnership Units pursuant to a redemption of all of its Partnership
Units under Section 8.6 shall cease to be a Limited Partner.
C. Transfers pursuant to this Article 11 may only be made on the
first day of a fiscal quarter of the Partnership, unless the General Partner
otherwise agrees.
D. If any Partnership Interest is transferred or assigned during any
quarterly segment of the Partnership's fiscal year in compliance with the
provisions of this Article 11 or redeemed or transferred pursuant to Section 8.6
on any day other than the first day of a Partnership Year, then Net Income, Net
Losses, each item thereof and all other items attributable to such interest for
such Partnership Year shall be divided and allocated between the transferor
Partner and the transferee Partner by taking into account their varying
interests during the Partnership Year in accordance with Section 706(d) of the
Code, using the interim closing of the books method. Solely for purposes of
making such allocations, each of such items for the calendar month in which the
transfer or assignment occurs shall be allocated to the transferee Partner, and
none of such items for the calendar month in which a redemption occurs shall be
allocated to the Redeeming Partner; provided, however, that the General Partner
may adopt such other conventions relating to allocations in connection with
transfers, assignments or redemptions as it determines are necessary or
appropriate. All distributions of Available Cash attributable to such
Partnership Unit with respect to which the Partnership Record Date is before the
date of such transfer, assignment, or redemption shall be made to the transferor
Partner or the Redeeming Partner, as the case may be, and in the case of a
transfer or assignment other than a redemption, all distributions of Available
cash thereafter attributable to such Partnership Unit shall be made to the
transferee Partner.
ARTICLE 12
ADMISSION OF PARTNERS
Section 12.1 Admission of Successor General Partner
A successor to all of the General Partner Interest pursuant to Section
11.2 hereof who is proposed to be admitted as a successor General Partner shall
be admitted to the Partnership as the General Partner, effective upon such
transfer. Any such transferee shall carry on the business of the Partnership
without dissolution. In each case, the admission shall be subject to the
successor General Partner executing and delivering to the Partnership an
acceptance of all of the terms and conditions of this Agreement and such other
documents or instruments as may be required to
42
effect the admission. In the case of such admission on any day other than the
first day of a Partnership Year, all items attributable to the General Partner
Interest for such Partnership Year shall be allocated between the transferring
General Partner and such successor as provided in Section 11.6.D hereof.
Section 12.2 Admission of Additional Limited Partners
A. After the date hereof, a Person who makes a Capital Contribution to the
Partnership in accordance with this Agreement shall be admitted to the
Partnership as an Additional Limited Partner only upon furnishing to the General
Partner (i) evidence of acceptance in form satisfactory to the General Partner
of all of the terms and conditions of this Agreement, including, without
limitation, the power of attorney granted in Section 2.4 hereof and (ii) such
other documents or instruments as may be required in the discretion of the
General Partner in order to effect such Person's admission as an Additional
Limited Partner.
B. Notwithstanding anything to the contrary in this Section 12.2, no
Person shall be admitted as an Additional Limited Partner without the consent of
the General Partner, which consent may be given or withheld in the General
Partner's sole and absolute discretion. The admission of any Person as an
Additional Limited Partner shall become effective on the date upon which the
name of such Person is recorded on the books and records of the Partnership,
following the consent of the General Partner to such admission.
C. If any Additional Limited Partner is admitted to the Partnership on any
day other than the first day of a Partnership Year, then Net Income, Net Losses,
each item thereof and all other items allocable among Partners and Assignees for
such Partnership Year shall be allocated among such Additional Limited Partner
and all other Partners and Assignees by taking into account their varying
interests during the Partnership Year in accordance with Section 706(d) of the
Code, using any convention permitted by law and selected by the General Partner.
Solely for purposes of making such allocations, each such item for the calendar
month in which an admission of any Additional Limited Partner occurs shall be
allocated among all of the Partners and Assignees, including such Additional
Limited Partner; provided, however, that the General Partner may adopt such
other conventions relating to allocations to Additional Limited Partners as it
determines are necessary or appropriate. All distributions of Available Cash
with respect to which the Partnership Record Date is before the date of such
admission shall be made solely to Partners and Assignees, other than the
Additional Limited Partner, and all distribution of Available Cash thereafter
shall be made to all of the Partners and Assignees, including such Additional
Limited Partner.
Section 12.3 Amendment of Agreement and Certificate of Limited Partnership
For the admission to the Partnership of any Partner, the General Partner
shall take all steps necessary and appropriate under the Act to amend the
records of the Partnership 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 of
Limited Partnership and may for this purpose exercise the power of attorney
granted pursuant to Section 2.4 hereof.
43
ARTICLE 13
DISSOLUTION, LIQUIDATION AND TERMINATION
Section 13.1 Dissolution
The Partnership shall not be dissolved by the admission of Substituted
Limited Partners or Additional Limited Partners or by the admission of a
successor General Partner in accordance with the terms of this Agreement. Upon
the withdrawal of the General Partner, any successor General Partner shall
continue the business of the Partnership. The Partnership shall dissolve, and
its affairs shall be wound up, only upon the first to occur of any of the
following ("Liquidating Events"):
A. the expiration of its term as provided in Section 2.5 hereof;
B. an event of withdrawal of the General Partner, as defined in the Act
(other than an event of bankruptcy), unless, within ninety (90) days after such
event of withdrawal a majority in interest of the remaining Partners agree in
writing to continue the business of the Partnership and to the appointment,
effective as of the date of withdrawal, of a successor General Partner;
C. from and after the date of this Agreement through December 31, 2050, an
election to dissolve the Partnership made by the General Partner with the
Consent of Partners holding eighty-five percent (85%) of the Percentage
Interests of the Limited Partners (including Limited Partner Interests held by
the Company);
D. on or after January 1, 2051, an election to dissolve the Partnership
made by the General Partner in its sole and absolute discretion;
E. entry of a decree of judicial dissolution of the Partnership pursuant
to the provisions of the Act;
F. the sale of all or substantially all of the assets and properties of
the Partnership; or
G. a final and non-appealable judgment is entered by a court of competent
jurisdiction ruling that the General Partner is bankrupt or insolvent, or a
final and non-appealable order for relief is entered by a court with appropriate
jurisdiction against the General Partner, in each case under any federal or
state bankruptcy or insolvency laws as now or hereafter in effect, unless prior
to the entry of such order or judgment all of the remaining Partners agree in
writing to continue the business of the Partnership and to the appointment,
effective as of a date prior to the date of such order or judgment, of a
substitute General Partner.
Section 13.2 Winding Up
A. Upon the occurrence of a Liquidating Event, the Partnership 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 Partners.
No Partner shall take any action that is inconsistent with, or not necessary to
or appropriate for, the winding up of the Partnership's business and affairs.
The General Partner, or, in the event there is no remaining General Partner, any
Person elected by a majority in interest of the Limited Partners (the General
Partner or such
44
other Person being referred to herein as the "Liquidator"), shall be responsible
for overseeing the winding up and dissolution of the Partnership and shall take
full account of the Partnership's liabilities and property and the Partnership
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 General Partner, include shares of common stock in the
Company) shall be applied and distributed in the following order:
(1) First, to the payment and discharge of all of the
Partnership's debts and liabilities to creditors other than
the Partners;
(2) Second, to the payment and discharge of all of the
Partnership's debts and liabilities to the General Partner;
(3) Third, to the payment and discharge of all of the
Partnership's debts and liabilities to the other Partners;
and
(4) The balance, if any, to the General Partner and Limited
Partners in accordance with their Capital Accounts, after
giving effect to all contributions, distributions, and
allocations for all periods.
The General Partner shall not receive any additional compensation for any
services performed pursuant to this Article 13.
B. Notwithstanding the provisions of Section 13.2.A hereof which require
liquidation of the assets of the Partnership, but subject to the order of
priorities set forth therein, if prior to or upon dissolution of the Partnership
the Liquidator determines that an immediate sale of part or all of the
Partnership's assets would be impractical or would cause undue loss to the
Partners, 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 Partnership (including to those Partners as creditors) and/or
distribute to the Partners, in lieu of cash, as tenants in common and in
accordance with the provisions of Section 13.2.A hereof, undivided interests in
such Partnership 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
Partners, 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.
C. In the discretion of the Liquidator, a pro ram portion of the
distributions that would otherwise be made to the General Partner and Limited
Partners pursuant to this Article 13 may be:
(1) distributed to a trust established for the benefit of the
General Partner and Limited Partners for the purposes of
liquidating Partnership assets, collecting amounts owed to,
the Partnership, and paying any contingent or unforeseen
liabilities or obligations of the Partnership or the General
Partner arising out of or in connection with the Partnership.
The assets of
45
any such trust shall be distributed to the General Partner and
Limited Partners from time to time, in the reasonable
discretion of the Liquidator, in the same proportions as the
amount distributed to such trust by the Partnership would
otherwise have been distributed to the General Partner and
Limited Partners pursuant to this Agreement; or
(2) withheld or escrowed to provide a reasonable reserve for
Partnership liabilities (contingent or otherwise) and to
reflect the unrealized portion of any installment obligations
owed to the Partnership, provided that such withheld or
escrowed amounts shall be distributed to the General Partner
and Limited Partners in the manner and order of priority set
forth in Section 13.2.A as soon as practicable.
Section 13.3 Compliance with Timing Requirements of Regulations
In the event the Partnership is "liquidated", within the meaning of
Regulations Section 1.704-1(b)(2)(ii)(g), distributions shall be made pursuant
to this Article 13 to the General Partner and Limited Partners who have positive
Capital Accounts in compliance with Regulations Section 1.704-1(b)(2)(ii)(b)(2).
If at such time as the Partnership (or the General Partner's interest
therein) is "liquidated" within the meaning of Treasury Regulations Section
1.704-1(b)(2)(ii)(g), the General Partner has a deficit balance in his Capital
Account (after giving effect to all contributions, distributions and allocations
for all Fiscal Years or portions thereof, including the year during which such
liquidation occurs, the General Partner shall contribute to the capital of the
Partnership the amount necessary to restore such deficit balance to zero in
compliance with Treasury Regulations Section 1.704-1(b)(2)(ii)(b)(3)). If at
such time as the Partnership (or any Limited Partner's interest therein) is
"liquidated" within the meaning of Treasury Regulations Section
1.704-1(b)(2)(ii)(g) any Limited Partner has a deficit balance in its Capital
Account (after giving effect to all contributions, distributions and allocations
for all Fiscal Years or portions thereof, including the year during which such
liquidation occurs), each such Limited Partner shall be obligated to contribute
cash to the capital of the Partnership in an amount equal to the lesser of (i)
the amount required to increase its Capital Account as of such date to zero
determined after applying the provisions of Treasury Regulations Section
1.704-1(b)(2)(iv)(f) so as to adjust (for this purpose) each such Partner's
Capital Account balance for the full amount of such Partner's unrealized gains
and losses on a fair market value basis (provided however, such adjustment shall
be made without regard to any value that may be deemed to exist with respect to
any redemption rights under Section 8.6) or (ii) such Limited Partner's Limited
Partner Recourse Debt Percentage multiplied by the Recourse Debt Amount. Any
such contribution required, of a Partner hereunder shall be made on or before
the later of (i) the end of the Partnership Year in which the interest of such
Partner is liquidated or (ii) the ninetieth (90th) day following the date of
such liquidation. Notwithstanding any provision hereof to the contrary, all
amounts so contributed by a Limited Partner to the capital of the Partnership
shall, upon the liquidation of the Partnership under Article XIII, be paid only
to any then creditors of the Partnership, including Partners that are
Partnership creditors (in the order provided in Section 13.2 hereof), and shall
not be distributed to the other Partners then having positive balances in their
respective Capital Accounts.
46
After the death of a Limited Partner, the executor of the estate of such
Limited Partner may elect to reduce (or eliminate) the deficit Capital Account
restoration obligation of such Limited Partner pursuant to this Section 13.3.
Such election may be made by such executor by delivering to the General Partner
within two hundred seventy (270) days of the death of such Limited Partner a
written notice setting forth the maximum deficit balance in his Capital Account
that such executor agrees to restore under Section 13.3, if any. If such
executor does not make a timely election pursuant to this Section 13.3 (whether
or not the balance in his Capital Account is negative at such time), then such
Limited Partner's estate (and the beneficiaries thereof who receive distribution
of Partnership Interests therefrom) shall be deemed to have a deficit Capital
Account restoration obligation as set forth pursuant to the terms of Section
13.3. Any Limited Partner which is itself a partnership may likewise elect,
after the death of its respective partner, to reduce (or eliminate) its deficit
Capital Account restoration obligation pursuant to Section 13.3 by delivering a
similar written notice to the General Partner within the time period specified
herein. Any such partnership that does not make any such timely election shall
similarly be deemed to have a deficit Capital Account restoration obligation as
set forth pursuant to the terms of Section 13.3.
Section 13.4 Deemed Termination
Notwithstanding any other provision of this Article 13, in the event the
Partnership is considered "liquidated" within the meaning of Regulations Section
1.704-1(b)(2)(ii)(g), but no Liquidating Event has occurred, the Partnership's
property shall not be liquidated, the Partnership's liabilities shall not be
paid or discharged, and the Partnership's affairs shall not be wound up.
Instead, for federal income tax purposes and for purposes of maintaining Capital
Accounts pursuant to Exhibit B hereto, the Partnership shall be deemed to have
(i) contributed the Partnership property in kind to a new partnership (the "New
Partnership"), which shall be deemed to have assumed and taken such property
subject to all Partnership liabilities in exchange for all of the interests in
such New Partnership, and (ii) distributed such interests to the Partners
pursuant to the provisions of this Agreement in liquidation of the Partnership,
subsequent to which the New Partnership shall be referred to as the Partnership
for all purposes of this Agreement.
Section 13.5 Rights of Limited Partners
Except as otherwise provided in this Agreement, each Limited Partner shall
look solely to the assets of the Partnership for the return of its Capital
Contributions and shall have no right or power to demand or receive property
other than cash from the Partnership. Except as otherwise provided in this
Agreement, no Limited Partner shall have priority over any other Partner as to
the return of its Capital Contributions, distributions, or allocations.
Section 13.6 Notice of Dissolution
In the event a Liquidating Event occurs or an event occurs that would, but
for the provisions of an election or objection by one or more Partners pursuant
to Section 13.1, result in a dissolution of the Partnership, the General Partner
shall, within thirty (30) days thereafter, provide written notice thereof to
each of the Partners.
47
Section 13.7 Termination of Partnership and Cancellation of Certificate of
Limited Partnership
Upon the completion of the liquidation of the Partnership's assets, .as
provided in Section 13.2 hereof, the Partnership shall be terminated, a
certificate of cancellation shall be filed, and all qualifications of the
Partnership as a foreign limited partnership in jurisdictions other than the
State of Delaware shall be canceled and such other actions as may be necessary
to terminate the Partnership shall be taken.
Section 13.8 Reasonable Time for Winding-Up
A reasonable time shall be allowed for the orderly winding-up of the
business and affairs of the Partnership 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 Partners during the period of liquidation.
Section 13.9 Waiver of Partition
Each Partner hereby waives any right to partition of the Partnership
property.
ARTICLE 14
AMENDMENT OF PARTNERSHIP AGREEMENT; MEETINGS
Section 14.1 Amendments
A. Amendments to this Agreement may be proposed by the General Partner or
by any Limited Partners (other than the General Partner, in its capacity as
such, or the Initial Limited Partner) holding twenty percent (20%) or more of
the, Common Units. Following such proposal, the General Partner shall submit any
proposed amendment to the Limited Partners. The General Partner shall seek the
written vote of the Partners 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 vote, the General Partner may require a
response within a reasonable specified time, but not less than fifteen (15)
days, and failure to respond in such time period shall constitute a vote which
is consistent with the General Partner's recommendation with respect to the
proposal. Except as provided in Section 13.1.C, 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 General Partner and it, receives the Consent of Limited
Partners holding a majority of the Common Units held by Limited Partners
(including Limited Partner Common Units held by the General Partner and the
Initial Limited Partner); provided, that, an action shall become effective at
such time as the requisite consents are received even if prior to such specified
time.
B. Notwithstanding Section 14.1.A, the General Partner shall have the
power, without the consent of the Limited Partners, to amend this Agreement as
may be required to facilitate or implement any of the following purposes:
48
(1) to add to the obligations of the General Partner or, surrender
any right or power granted to the General Partner or any
Affiliate of the General Partner for the benefit of the
Limited Partners;
(2) to reflect the admission, substitution, termination, or
withdrawal of Partners in accordance with this Agreement;
(3) to set forth and reflect in the Agreement the designations,
rights, powers, duties, and preferences of the holders of any
additional Partnership Interests issued pursuant to Section
4.2.A hereof;
(4) to reflect a change that is of an inconsequential nature and
does not adversely affect the Limited Partners 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, or make other changes, with respect to
matters arising under this Agreement that will not be
inconsistent with law or with the provisions of this
Agreement; and
(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.
The General Partner shall provide notice to the Limited Partners when any action
under this Section 14.1.B is taken.
C. Notwithstanding Section 14.1.A and 14.1.B hereof, this Agreement shall
not be amended without the Consent of each Partner adversely affected if such
amendment would (i) convert a Limited Partner's interest in the Partnership into
a General Partner Interest; (ii) modify the limited liability of a Limited
Partner in a manner adverse to such Limited Partner; (iii) alter rights of the
Partner (other than as a result of the issuance of Partnership Interests) to
receive distributions pursuant to Article 5 or Article 13 or the allocations
specified in Article 6 (except as permitted pursuant to Section 4.2 and, Section
14.1.B(3) hereof); (iv) alter or modify the Redemption Right and REIT Shares
Amount as set forth in Sections 8.6 and 11.2.B, and the related definitions, in
a manner adverse to such Partner; (v) cause the termination of the Partnership
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 General
Partner's authority set forth in Section 7.3.B without the Consent specified in
that section. In addition, Section 8.7 may only be amended as provided therein.
D. Notwithstanding Section 14.1.A or Section 14.1.B hereof, the General
Partner shall not (except in connection with amendments made to reflect the
issuance of additional Partnership Interests and the relative rights, powers and
duties incident thereto) amend Sections 4.2.A, 7.5, 7.6, 11.2 or 14.2 without
the Consent of Limited Partners holding a majority of the Common Units held by
Limited Partners, excluding Limited Partner Common Units held by the General
Partner or its Affiliates.
Section 14.2 Meetings of the Partners
49
A. Meetings of the Partners may be called by the General Partner and shall
be called upon the receipt by the General Partner of a written request by
Limited Partners (other than the General Partner in its capacity as Limited
Partner or the Initial Limited Partner) holding twenty percent (20%) or more of
the Common Units. The request shall state the nature of the business to be
transacted. Notice of any such meeting shall be given to all Partners not less
than seven (7) days nor more than thirty (30) days prior to the date of such
meeting. Partners may vote in person or by proxy at such meeting. Whenever the
vote or Consent of the Partners is permitted or required under this Agreement,
such vote or Consent may be given at a meeting of the Partners or may be given
in accordance with the procedure prescribed in Section 14.1.A hereof. Except as
otherwise expressly provided in this Agreement, the Consent of holders of a
majority of the Common Units held by Limited Partners (including Limited
Partnership Common Units held by the General Partner and the Initial Limited
Partner).
B. Any action required or permitted to be taken at a meeting of the
Partners may be taken without a meeting if a written consent setting forth the
action so taken is signed by a majority of the Common Units of the Partners (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 Common Units of the Partners (or
such other percentage as is expressly required by this Agreement). Such consent
shall be filed with the General Partner. An action so taken shall be deemed to
have been taken at a meeting held on the effective date so certified.
C. Each Limited Partner may authorize any Person or Persons to act for him
by proxy on all matters in which a Limited Partner is entitled to participate,
including waiving notice of any meeting, or voting or participating at a
meeting. Every proxy must be signed by the Limited Partner or his
attorney-in-fact. No proxy shall be valid after the expiration of twelve (12)
months from the date thereof unless otherwise provided in the proxy. Every proxy
shall be revocable at the pleasure of the Limited Partner executing it, such
revocation to be effective upon the Partnership's receipt of written notice of
such revocation from the Limited Partner executing such proxy.
D. Each meeting of the Partners shall be conducted by the General Partner
or such other Person as the General Partner may appoint pursuant to such rules
for the conduct of the meeting as the General Partner or such other Person deems
appropriate. Without limitation, meetings of Partners may be conducted in the
same manner as meetings of the shareholders of the Company and may be held at
the same time, and as part of, meetings of the shareholders of the Company.
ARTICLE 15
GENERAL PROVISIONS
Section 15.1 Addresses and Notice
Any notice, demand, request or report required or permitted to be given or
made to a Partner or Assignee under this Agreement shall be in writing and shall
be deemed given or made when delivered in person or when sent by first class
United States mail or by other means of
50
written communication to the Partner or Assignee at the address set forth in
Exhibit A or such other address of which the Partner shall notify the General
Partner in writing.
Section 15.2 Titles and Captions
All article or section titles or captions in this Agreement are for
convenience only. They shall not be deemed part of this Agreement and in no way
define, limit, extend or describe the scope or intent of any provisions hereof.
Except as specifically provided otherwise, references to "Articles" and
"Sections" are to Articles and Sections of this Agreement.
Section 15.3 Pronouns and Plurals
Whenever the context may require, any pronoun used in this Agreement shall
include the corresponding masculine, feminine or neuter forms, and the singular
form of nouns, pronouns and verbs shall include the plural and vice versa.
Section 15.4 Further Action
The parties shall execute and deliver all documents, provide all
information and take or refrain from taking action as may be necessary or
appropriate to achieve the purposes of this Agreement.
Section 15.5 Binding Effect
This Agreement shall be binding upon and inure to the benefit of the
parties hereto and their heirs, executors, administrators, successors, legal
representatives and permitted assigns.
Section 15.6 Creditors
Other than as expressly set forth herein with respect to the Indemnities,
none of the provisions of this Agreement shall be for the benefit of, or shall
be enforceable by, any creditor of the Partnership.
Section 15.7 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 15.8 Counterparts
This Agreement may be executed in counterparts, all of which together
shall constitute one agreement binding on all of 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 15.9 Applicable Law
51
This Agreement shall be construed and enforced in accordance with and
governed by the laws of the State of Delaware, without regard to the principles
of conflicts of law.
Section 15.10 Invalidity of Provisions
If any provision of this Agreement shall to any extent be held void or
unenforceable (as to duration, scope, activity, subject or otherwise) by a court
of competent jurisdiction, such provision shall be deemed to be modified so as
to constitute a provision conforming as nearly as possible to the original
provision while still remaining valid and enforceable. In such event, the
remainder of this Agreement (or the application of such provision to persons or
circumstances other than those in respect of which it is deemed to be void or
unenforceable) shall not be affected thereby. Each other provision of this
Agreement, unless specifically conditioned upon the voided aspect of such
provision, shall remain valid and enforceable to the fullest extent permitted by
law; any other provisions of this Agreement that are specifically conditioned on
the voided aspect of such invalid provision shall also be deemed to be modified
so as to constitute a provision conforming as nearly as possible to the original
provision while still remaining valid and enforceable to the fullest extent
permitted by law.
Section 15.11 Entire Agreement
This Agreement contains the entire understanding and agreement among the
Partners with respect to the subject matter hereof and supersedes the Prior
Agreement, any other prior written or oral understandings or agreements among
them with respect thereto.
52
IN WITNESS WHEREOF, the parties hereto have executed this Amended and
Restated Agreement of Limited Partnership as of the date first written above.
GENERAL PARTNER:
CNL HOSPITALITY GP CORP.
By:
------------------------------
Name:
Title:
INITIAL LIMITED PARTNER:
CNL HOSPITALITY LP CORP.
By:
------------------------------
Name:
Title:
53
FORM OF LIMITED PARTNER SIGNATURE PAGE
FOR PARTNERS ADMITTED AFTER [________ ____], 2004
The undersigned, desiring to become one of the within named Limited
Partners of CNL Hospitality Partners, LP, hereby becomes a party to the Amended
and Restated Agreement of Limited Partnership of CNL Hospitality Partners, LP by
and among CNL Hospitality GP Corp. and such Limited Partners, dated as of
[_______ ____], 2004, as amended. The undersigned agrees that this signature
page may be attached to any counterpart of said Agreement of Limited
Partnership.
Signature Line for Limited Partner:
[Name]
By:
------------------------------------
Name:
Title:
Date:
Address of Limited Partner:
----------------------------------------
----------------------------------------
54
EXHIBIT A
Name and Address of Contributed Percentage Partnership
Partner Contribution Property Interest Units
------- ------------ -------- -------- -----
General Partner:
CNL Hospitality GP Corp. $20 20% 20
▇▇▇ ▇▇▇▇▇ ▇▇▇▇▇▇ ▇▇▇▇▇▇,
▇▇▇▇▇▇▇, ▇▇▇▇▇▇▇ ▇▇▇▇▇
Limited Partner:
CNL Hospitality LP Corp. $80 80% 80
▇▇▇ ▇▇▇▇▇ ▇▇▇▇▇▇ ▇▇▇▇▇▇,
▇▇▇▇▇▇▇, ▇▇▇▇▇▇▇ ▇▇▇▇▇
A-1
EXHIBIT B
Capital Account Maintenance
1. Capital Accounts of the Partners
A. The Partnership shall maintain for each Partner 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 (i) the amount Of all Capital
Contributions and any other deemed contributions made by such Partner to the
Partnership pursuant to this Agreement;, and (ii) all items of Partnership
income and gain (including income and gain exempt from tax) computed in
accordance with Section 1 .B hereof and allocated to such Partner pursuant to
Section 6.1 .A of the Agreement and Exhibit C hereof, and decreased by (x) the
amount of cash or Agreed Value of all actual and deemed distributions of cash or
property made to such Partner pursuant to this Agreement; and (y) all items of
Partnership deduction and loss computed in accordance with Section 1.B hereof
and allocated to such Partner pursuant to Section 6.1 .B of the Agreement and
Exhibit C hereof.
B. For purposes of computing the amount of any item of income, gain,
deduction or loss to be reflected in the Partners' 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 Partnership,
provided that the amounts of any adjustments to the
adjusted bases of the assets of the Partnership made
pursuant to Section 734 of the Code as a result of
the distribution of property by the Partnership to a
Partner (to the extent that such adjustments have not
previously been reflected in the Partners' Capital
Accounts) shall be reflected in the Capital Accounts
of the Partners in the manner and subject to the
limitations prescribed in Regulations Section
1.704(b)(2)(iv)(m)(4).
(2) The computation of all items of income, gain, 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 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 Partnership property shall be
determined as if the adjusted basis of such property
as of such date of disposition were equal in amount
to the Partnership'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 Partnership
Asset is adjusted pursuant to Section 1. D hereof,
the amount of any such adjustment shall be taken into
account as gain or loss from the disposition of such
asset.
C. A transferee (including an Assignee) of a Partnership Unit shall
succeed to a pro rata portion of the Capital Account of the transferor.
D. (1) Consistent with the provisions of Regulations
Section 1.704-1(b)(2)(iv)(f), and as provided in
Section 1 .D(2), the Carrying Value of all
Partnership assets shall be adjusted upward or
downward to reflect any Unrealized Gain or Unrealized
Loss attributable to such Partnership property, as of
the times of the adjustments provided in Section
1.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: (a) immediately prior to the acquisition of an
additional interest in the Partnership by any new or
existing Partner in exchange for more than a de
minimis Capital Contribution; (b) immediately prior
to the distribution by the Partnership to a Partner
of more than a de minimis amount of property as
consideration for an interest in the Partnership; and
(c) immediately prior to the liquidation of the
Partnership within the meaning of Regulations Section
1.704-1(b)(2)(ii)(g), provided, however, that
adjustments pursuant to clauses (a) and (b) above
shall be made only if the General Partner determines
that such adjustments are necessary or appropriate to
reflect the relative economic interests of the
Partners in the Partnership.
(3) In accordance with Regulations Section
1.704-1(b)(2)(iv)(e), the Carrying Value of
Partnership assets distributed in kind shall be
adjusted upward or downward to reflect any Unrealized
Gain or Unrealized Loss attributable to such
Partnership property, as of the time any such asset
is distributed.
(4) In determining Unrealized Gain or Unrealized Loss for
purposes of this Exhibit B, the aggregate cash amount
and fair market value of all Partnership assets
(including cash or cash equivalents) shall be
determined by the General Partner using such
reasonable method of valuation as it may adopt, or in
the case of a liquidating distribution pursuant to
Article 13 of the Agreement, shall be determined and
allocated by the Liquidator using such reasonable
methods of valuation as it may adopt. The General
Partner, or the Liquidator, as the case may be, shall
allocate such aggregate value among the assets of the
Partnership (in such manner as it
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determines in its sole and absolute discretion to
arrive at a fair market value for individual
properties).
E. The provisions of this Agreement (including this Exhibit B and other
Exhibits to this Agreement) relating to the maintenance of Capital Accounts are
intended to comply with Regulations Section 1.704-1(b), and shall be interpreted
and applied in a manner consistent with such Regulations. In the event the
General Partner shall determine that it is prudent to modify (1) 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 Partnership, the
General Partner, or the Limited Partners) are computed; or (ii) the manner in
which items are allocated among the Partners for federal income tax purposes in
order to comply with such Regulations or to comply with Section 704(c) of the
Code, the General Partner may make such modification without regard to Article
14 of the Agreement, provided that it is. not likely to have a material effect
on the amounts distributable to any Person pursuant to Article 13 of the
Agreement upon the dissolution of the Partnership. The General Partner also
shall (i) make any adjustments that are necessary or appropriate to maintain
equality between the Capital Accounts of the Partners and the amount of
Partnership capital reflected on the Partnership's balance sheet, as computed
for book purposes, in accordance with Regulations Section 1.704-1(b)(2)(iv)(q);
and (ii) make any appropriate modifications in the event unanticipated events
might otherwise cause this Agreement not to comply with Regulations Section
1.704-1(b). In addition, the General Partner may adopt and employ such methods
and procedures for (i) the maintenance of book and tax capital accounts; (ii)
the determination and allocation of adjustments under Sections 704(c), 734 and
743 of the Code; (iii) the determination of Net Income, Net Loss, taxable income
and loss and items thereof under this Agreement and pursuant to the Code; (iv)
the adoption of reasonable conventions and methods for the valuation of assets
and the determination of tax basis; (v) the allocation of asset value and tax
basis; and (vi) conventions for the determination of cost recovery, depreciation
and amortization deductions, as it determines in its sole discretion are
necessary or appropriate to execute the provisions o this Agreement, to comply
with federal and state tax laws, and are in the best interest of the Partners.
2. No Interest
No interest shall be paid by the Partnership on Capital Contributions
or on balances in Partners' Capital Accounts.
3. No Withdrawal
No Partner shall be entitled to withdraw any part of his Capital
Contribution or his Capital Account or to receive any distribution from the
Partnership, except as provided in Articles 4, 5, 7 and 13 of the Agreement.
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Exhibit C
Special Allocation Rules
1. Special Allocation Rules
Notwithstanding any other provision of the Agreement or this Exhibit C,
the following special allocations shall be made in the following order:
A. Minimum Gain Chargeback. Notwithstanding the provisions of Section
6.1 of the Agreement or any other provisions of this Exhibit C, if there is a
net decrease in Partnership Minimum Gain during any Partnership taxable year,
each Partner shall be specially allocated items of Partnership income and gain
for such year (and, if necessary, subsequent years) in an amount equal to such
Partner'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 Partner pursuant thereto. The items to be so allocated shall
be determined in accordance with Regulations Section 1.704-2(f)(6). This Section
l.A is intended to comply with the minimum gain chargeback requirements in
Regulations Section 1.704-2(t) and shall be interpreted consistently therewith.
Solely for purposes of this Section 1 .A, each Partner's Adjusted Capital
Account Deficit shall be determined prior to any other allocations pursuant to
Section 6.1 of Partner Minimum Gain during such Partnership taxable year.
B. Partner Minimum Gain Chargeback. Notwithstanding any other provision
of Section 6.1 of this Agreement. or any other provisions of this Exhibit C
(except Section 1.A hereof), if there is a net decrease in Partner Minimum Gain
attributable to a Partner Nonrecourse Debt during any Partnership taxable year,
each Partner who has a share of the Partner Minimum Gain attributable to such
Partner Nonrecourse Debt, determined in accordance with Regulations Section
1.702-2(i)(5), shall be specially allocated items of Partnership income and gain
for such year (and, if necessary, subsequent years) in an amount. equal to such
Partner'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 Partner
pursuant thereto. The items to be so allocated shall be determined in accordance
with Regulations Section 1.704-2(i)(4). This Section 1.B 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 the
Section 1.B, each Partner's Adjusted Capital Account Deficit shall be determined
prior to any other allocations pursuant to Section 6.1 of the Agreement or this
Exhibit with respect to such Partnership taxable year, other than allocations
pursuant to Section 1.A hereof.
C. Qualified Income Offset. In the event any Partner 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 l.A and 1.B hereof such Partner has an Adjusted Capital Account
Deficit, items of Partnership income and gain (consisting of a pro rata portion
of each item of Partnership income, including gross income and gain for the
Partnership taxable year)
shall be specially allocated to such Partner 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.
D. Nonrecourse Deductions. Nonrecourse Deductions for any Partnership
taxable year shall be allocated to the Partners in accordance with their
respective Percentage Interests. If the General Partner determines in its good
faith discretion that the Partnership's Nonrecourse Deductions must be allocated
in a different ratio to satisfy the safe harbor requirements of the Regulations
promulgated under Section 704(b) of the Code, the General Partner is authorized,
upon notice to the Limited Partners, to revise the prescribed ratio to the
numerically closest ratio for such Partnership taxable year which would satisfy.
such requirements.
E. Partner Nonrecourse Deductions. Any Partner Nonrecourse Deductions
for any Partnership taxable year shall be specially allocated to the Partner 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 Section 1.704-2(i).
F. Code Section 754 Adjustments. To the extent an adjustment to the
adjusted tax basis of any Partnership 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 treated as an item of gain (if the
adjustment increases the basis of the asset) or loss (if the adjustment
decreases such basis, and such item of gain or loss shall be specially allocated
to the Partners in a manner consistent with the manner in which their Capital
Accounts are required to be adjusted pursuant to such Section of the
Regulations.
G. Curative Allocations. The allocations set forth in Section 1 .A
through 1 .F of this Exhibit C (the "Regulatory Allocations") are intended to
comply with certain requirements of the Regulations under Section 704(b) of the
Code. The Regulatory Allocations may not be consistent with the manner in which
the Partners intend to divide Partnership distributions. Accordingly, the
General Partner is hereby authorized to divide other allocations of income,
gain, deduction and loss among the Partners so as to prevent the Regulatory
Allocations from distorting the manner in which Partnership distributions will
be divided among the Partners. In general, the Partners anticipate that, if
necessary, this will be accomplished by specially allocating other items of
income, gain, loss and deduction among the Partners so that the net amount of
the Regulatory Allocations and such special allocations to each person is zero.
However, the General Partner will have discretion to accomplish this result in
any reasonable manner; provided, however, that no allocation pursuant to this
Section, 1.G shall cause the Partnership to fail to comply with the requirements
of Regulations Sections 1.704-1(b)(2)(ii)(d), -2(e) or -2(i).
2. Allocations for Tax Purposes
A. Except as otherwise provided in this Section 2, for federal income
tax purposes, each item of income, gain, loss and deduction shall be allocated
among the Partners in the same manner as its correlative item of "book" income,
gain, loss or deduction is allocated pursuant to Section 6.1 of the Agreement
and Section 1 of this Exhibit C, provided however, gain on the sale
C-2
of property contributed (1) as of the .Effective Date or (2) subsequent to the
date on which this Second Amended and Restated Agreement of Limited Partnership
is effective and with respect to which the traditional method is elected shall
first be allocated to solely to the Partners who contributed such Property, pro
rata, in proportion to their Percentage Interests, to the extent allocations to
non-contributing Partners of depreciation deductions with respect to such
Contributed Property have been limited by the so-called "ceiling rule" as
described in Treasury Regulation Section 1.704-3(c)(3)(iii)(B), and further
provided, no such special allocation of gain for tax purposes shall be made with
respect to (1) properties contributed subsequent to the Effective Date and prior
to the date in which this Second Amended, and Restated Agreement of Limited
Partnership is effective or (2) properties contributed in connection with this
second amendment and restatement of the Agreement.
B. 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 Partners
as follows:
(1) (a) In the case of a Contributed Property,
such items attributable thereto, shall be
allocated among the Partners, consistent
with the principles of Section 704(c) of the
Code and the Regulations thereunder, to take
into account the variation between the
704(c) Value of such property and its
adjusted basis at the time of contribution;
and
(b) any item of Residual Gain or Residual Loss
attributable to a Contributed Property shall
be allocated among the Partners in the same
manner as its correlative item of "book"
gain or loss is allocated pursuant to
Section 6.1 of the Agreement and Section 1
of this Exhibit C.
(2) (a) In the case of an Adjusted Property, such
items shall
(1) first, be allocated among the Partners
in a manner consistent with the principles
of Section 704(c) of the Code and the
Regulations thereunder to take into account
the Unrealized Gain or Unrealized Loss
attributable to such property and the
allocations thereof pursuant to Exhibit B
and
(2) second, in the event such property was
originally a Contributed Property, be
allocated among the Partners in a manner
consistent with Section 2.B(1) of this
Exhibit C and
(b) any item of Residual Gain or Residual Loss
attributable to an Adjusted Property shall
be allocated among the Partners in the same
manner its correlative item of "book" gain
or loss is allocated pursuant to Section 6.1
of the Agreement and Section 1 of this
Exhibit C.
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(3) all other items of income, gain, loss and deduction
shall be allocated among the Partners the same manner
as their correlative item of "book" gain or loss is
allocated pursuant to Section 6.1 of the Agreement
and Section 1 of the Exhibit C.
C. To the extent that the Treasury Regulations promulgated pursuant to
Section 704(c) of the Code permit the Partnership to utilize alternative methods
to eliminate the disparities between the Carrying Value of property and its
adjusted basis, the General Partner shall have the authority to elect the method
to be used by the Partnership and such election shall be binding on all
Partners.
3. No Withdrawal
No Partner shall be entitled to withdraw any part of his Capital
Contribution or his Capital Account or to receive any distribution from the
Partnership, except as provided in Articles 4, 5, 8 and 13 of the Agreement.
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Exhibit D
Notice of Redemption
The undersigned Limited Partner hereby irrevocably (i) redeems
_________ Limited Partnership in CNL Hospitality Partners, LP in accordance with
the terms of the Amended and Restated Agreement of Limited Partnership of CNL
Hospitality Partners, LP and the Redemption Right referred to therein; (ii)
surrenders such Limited Partnership Units and all right, title and interest
therein; and (iii) directs that the Cash Amount or REIT Shares Amount (as
determined by the General Partner) deliverable upon exercise of the Redemption
Right be delivered to the address specified below, and if REIT Shares are to be
delivered, such REIT Shares be registered or placed in the name(s) and at the
address(es) specified below. The undersigned hereby, represents, warrants, and
certifies that the undersigned (a) has marketable and unencumbered title to such
Limited Partnership Units, free and clear of the rights or interests of any
other person or entity; (b) has the full right, power, and authority to redeem
and surrender such Limited Partnership Units as provided herein; and (c) has
obtained the consent or approval of all person or entities, if any, having the
right to consent or approve such redemption and surrender.
Dated:_____________________________
Name of Limited Partner:__________________________________
Please Print
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(Signature of Limited Partner)
---------------------------------------
(Street Address)
---------------------------------------
(City) (State) (Zip Code)
Signature Guaranteed by:
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If REIT Shares are to be issued, issue to:
Name:________________________________
Please insert social security or identifying number:______________________
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