EXHIBIT 10.7
FORM OF
AMENDED AND RESTATED
AGREEMENT OF LIMITED PARTNERSHIP
OF
CAVANAUGHS HOSPITALITY LIMITED PARTNERSHIP
THIS AMENDED AND RESTATED AGREEMENT OF LIMITED PARTNERSHIP, dated as
of___________, 1998, is entered into by and among Cavanaughs Hospitality
Corporation, a Washington corporation ("CHC" or "General Partner"), as the
General Partner and the Persons whose names are set forth on Exhibit D attached
hereto, as the Limited Partners, together with any Persons who become Partners
in the Partnership as provided herein.
WHEREAS, the Partners desire to amend and restate the Original
Partnership Agreement in its entirety;
WHEREAS, the General Partner proposes to cause the Partnership to
acquire direct and indirect interests in real estate and other assets, to cause
the Partnership to enter into certain mortgage financing transactions and, in
the event of any public offering of CHC Stock, to contribute the remaining net
proceeds from the public offering to the Partnership in accordance with this
Agreement; and
WHEREAS, the Partnership will issue Partnership Interests to the
General Partner and other persons in accordance with this Agreement;
NOW, THEREFORE, that for good and adequate consideration, the receipt
of which is hereby acknowledged, the parties hereto agree as follows:
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
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it may be amended from time to time, and any successor to such statute.
"Additional Limited Partner" means a Person admitted to the
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Partnership as a Limited Partner pursuant to Section 4.1 hereof and who is shown
as such on the books and records of the Partnership.
"Adjusted Capital Account" means the Capital Account maintained for
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each Partner as of the end of each Partnership Year (i) increased by any amounts
which such Partner is obligated to restore pursuant to any provision of this
Agreement, or is treated as being obligated
to restore pursuant to Regulations Section 1.704-1(b)(2)(ii)(c), or is deemed to
be obligated to restore pursuant to the penultimate sentences of Regulations
Sections 1.704-2(g)(1), 1.704-2(i)(5), and (ii) decreased by the items described
in Regulations Sections 1.704-1(b)(ii)(d)(4), 1.704-1(b)(2)(ii)(d)(5), and
1.704-1(b)(2)(ii)(d)(6). The foregoing definition of Adjusted Capital Account
is intended to comply with the provisions of Regulations Section 1.704-
1(b)(2)(ii)(d) and shall be interpreted consistently therewith.
"Adjusted Capital Account Deficit" means, with respect to any Partner,
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the deficit balance, if any, in such Partner' s Adjusted Capital Account as of
the end of the relevant Partnership Year.
"Adjusted Property" means any property the Carrying Value of which has
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been adjusted pursuant to Exhibit A hereof.
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"Affiliate" means, with respect to any Person, (i) any Person directly
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or indirectly controlling, controlled by or under common control with such
Person, (ii) any Person owning or controlling ten percent (10%) or more of the
outstanding voting interests of such Person, (iii) any Person of which such
Person owns or controls ten percent (10%) or more of the voting interests, or
(iv) any officer, director, general partner or trustee of such Person or of any
Person referred to in clauses (i), (ii), and (iii) above. For the 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.
"Agreement" means this Amended and Restated Agreement of Limited
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Partnership, as it may be amended, supplemented or restated from time to time.
"Assignee" means a Person to whom one or more Partnership Units have
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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.
"Book-Tax Disparities" means, with respect to any item of Contributed
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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 A and the hypothetical balance of such Partner's Capital Account
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computed as if it had been maintained strictly in accordance with federal income
tax accounting principles.
"Business Day" means any day except a Saturday, Sunday or other day on
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which commercial banks in New York, New York are authorized or required by law
to close.
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"Capital Account" means the Capital Account maintained for a Partner
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pursuant to Exhibit A hereof.
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"Capital Contribution" means, with respect to any partner, any cash,
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cash equivalents or the 704(c) Value of Contributed Property which such Partner
contributes or is deemed to contribute to the Partnership pursuant to Section
4.1 or 4.2 hereof (reduced by any indebtedness either assumed by the Partnership
or to which such property is subject at the time of the contribution as
determined under Section 752 of the Code and the Regulations thereunder). The
principal amount of a promissory note which is not readily traded on an
established securities market and which is contributed by a Partner as the maker
of the note shall not be considered a capital contribution until the Partnership
makes a taxable disposition of the note or until (and to the extent) principal
payments are made on the note, all in accordance with Treasury Regulation
Section 1.704-1(b)(2)(iv)(d)(2).
"Carrying Value" means (i) with respect to a Contributed Property or
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Adjusted Property, the 704(c) Value of such property, reduced (but not below
zero) by all Depreciation with respect to such Property 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 A hereof, and to reflect changes,
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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 Partnership Unit equal to
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the Value on the Valuation Date of the CHC Shares Amount.
"Certificate" means the Certificate of Limited Partnership relating to
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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.
"CHC" means Cavanaughs Hospitality Corporation, a Washington
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Corporation.
"CHC Shares Amount" means a whole number of CHC Shares equal to the
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product of the number of Partnership Units offered for redemption by a Redeeming
Partner, multiplied by the Conversion Factor (rounded down to the nearest whole
number in the event such product is not a whole number); provided that in the
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event the General Partner at any time issues to all holders of CHC Shares
rights, options, warrants or convertible or exchangeable securities entitling
the shareholders to subscribe for or purchase CHC Shares, or any other
securities or property (collectively, the "rights"), which rights have not
expired pursuant to their terms, then the CHC Shares Amount thereafter shall
also include such rights that a holder of that number of CHC Shares would be
entitled to receive.
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"CHC Share" means a share of common stock, par value $.01 per share,
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of the General Partner.
"Code" means the Internal Revenue Code of 1986, as amended and in
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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.
"Consent" means the consent or approval of a proposed action by a
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Partner given in accordance with Section 14.2 hereof.
"Contributed Property" means each property or other asset contributed
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to the Partnership, in such form as may be permitted by the Act, but excluding
cash contributed or deemed contributed to the Partnership. Once the Carrying
Value of a Contributed Property is adjusted pursuant to Section 1.D of Exhibit A
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hereof, such property shall no longer constitute a Contributed Property for
purposes of Exhibit A hereof, but shall be deemed an Adjusted Property for such
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purposes.
"Conversion Factor" means 1.0, provided that in the event that the
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General Partner (i) declares or pays a dividend on its outstanding CHC Shares in
CHC Shares or makes a distribution to all holders of its outstanding CHC Shares
in CHC Shares; (ii) subdivides its outstanding CHC Shares; or (iii) combines its
outstanding CHC Shares into a smaller number of CHC Shares, the Conversion
Factor shall be adjusted by multiplying the Conversion Factor by a fraction, the
numerator of which shall be the number of CHC Shares issued and outstanding on
the record date for such dividend, distribution, subdivision or combination
(assuming for such purposes that such dividend, distribution, subdivision or
combination has occurred as of such time), and the denominator of which shall be
the actual number of CHC 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.
"Debt" means, as to any Person, as of any date of determination, (i)
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all indebtedness of such Person for borrowed money or for the deferred purchase
price of property or services; (ii) all amounts owed by such Person to banks or
other Persons in respect of reimbursement obligations under letters of credit,
surety bonds and other similar instruments guaranteeing payment or other
performance of obligations by such Person; (iii) all indebtedness for borrowed
money or for the deferred purchase price of property or services secured by any
lien on any property owned by such Person, to the extent attributable to such
Person's interest in such property, even though such Person has not assumed or
become liable for the payment thereof; and (iv) lease obligations of such Person
which, in accordance with generally accepted accounting principles, should be
capitalized.
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"Depreciation" means, for each Partnership year, an amount equal to
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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,
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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.
"Distribution Amount" means, with respect to any period for which
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there is a Distribution Event, an amount equal to the amount that the
Partnership would have paid in federal (but not state) income taxes, calculated
at the highest marginal individual federal income tax rate set forth in Section
1 of the Code for the taxable year in which the distribution is made, on the Net
Income for the taxable year through the calendar quarter to which the
distribution relates, minus all General Partner Distribution Amounts and all
Limited Partner Distribution Amounts previously distributed during the taxable
year.
"Distribution Event" means any calendar quarter in which the General
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Partner determines that the Partnership has generated Net Income for such
quarter, after taking into consideration the Net Income and Net Losses for all
previous calendar quarters for the taxable year.
"Effective Date" means November 1, 1997.
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"General Partner" means Cavanaughs Hospitality Corporation, a
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Washington corporation, or its predecessors or successors as general partner of
the Partnership.
"General Partner Distribution Amount" means the Distribution Amount,
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multiplied by a fraction, the numerator of which is the Net Income allocable to
the General Partner for the taxable year through the quarter to which the
distribution relates, and the denominator is Net Income for the taxable year
through the quarter to which the distribution relates.
"General Partner Interest" means a Partnership Interest held by the
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General Partner that is a general partnership interest. A General Partner
Interest may be expressed as a number of Partnership Units.
"IRS" means the Internal Revenue Service, which administers the
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internal revenue laws of the United States.
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"Immediate Family" means, with respect to any natural Person, such
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natural Person's spouse and such natural Person's natural or adoptive parents,
descendants, nephews, nieces, brothers, and sisters.
"Incapacity" or "Incapacitated" means, (i) as to any individual
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Partner, death, total physical disability or entry by a court of competent
jurisdiction adjudicating him incompetent to manage his Person or his 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, 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 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 (h) 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
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reason of his status as (A) the General Partner or (B) a director or officer of
the Partnership or the General Partner, or (C) his or its liability, 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.
"initial public offering" means the first sale of CHC Shares by the
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General Partner pursuant to a registration under the Securities Act of 1933, as
amended.
"Limited Partner" means any person named as a Limited Partner in
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Exhibit A attached hereto, as such Exhibit may be amended from time to time, or
any Substituted Limited
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Partner or Additional Limited Partner, in such Person's capacity as a Limited
Partner in the Partnership.
"Limited Partner Distribution Amount" means the Distribution Amount
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less the General Partner Distribution Amount.
"Limited Partner Interest" means a Partnership Interest of a Limited
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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 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.
"Liquidator" has the meaning set forth in Section 13.2.
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"Net Income" means, for any taxable period, the excess, if any, of the
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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 A. Once an item of income, gain, loss or deduction that
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has been included in the initial computation of Net Income is subjected to the
special allocation rules in Exhibit B, Net Income or the resulting Net Loss,
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whichever the case may be, shall be recomputed without regard to such item.
"Net Loss" means, for any taxable period, the excess, if any, of the
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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 A. Once an item of income, gain, loss or deduction that
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has been included in the initial computation of Net Loss is subjected to the
special allocation rules in Exhibit B, Net Loss or the resulting Net Income,
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whichever the case may be, shall be recomputed without regard to such item.
"Nonrecourse Built-in Gain" means, with respect to any Contributed
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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 B if such
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properties were disposed of in a taxable transaction in full satisfaction of
such liabilities and for not other consideration.
"Nonrecourse Deductions" has the meaning set forth in Regulations
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Section 1.704-2(b)(1), and the amount of Nonrecourse Deduction for a Partnership
Year shall be determined in accordance with the rules of Regulations Section
1.704-2(c).
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"Nonrecourse Liability" has the meaning set forth in Regulations
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Section 1.752-1(a)(2).
"Notice of Redemption" means the Notice of Redemption substantially in
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the form of Exhibit C to this Agreement.
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"Original Limited Partner" means a Limited Partner who is or becomes a
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Partner on the Effective Date.
"Original Limited Partnership Unit" means a Partnership Unit held by
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an Original Limited Partner on the Effective Date.
"Partner" means a General Partner or a Limited Partner, and "Partners"
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means the General Partner and the Limited Partners.
"Partner Minimum Gain" means an amount, with respect to each Partner
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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
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Section 1.704-2(b)(4).
"Partner Nonrecourse Deductions" has the meaning set forth in
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Regulations Section 1.704-2(i)(2), and the amount of Partner Nonrecourse
Deductions with respect to a Partner Nonrecourse Debt for a Partnership Year
shall be determined in accordance with the rules of Regulations Section 1.704-
2(i)(2).
"Partnership" means the limited partnership formed under the Act and
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pursuant to the Original Partnership Agreement and any successor thereto.
"Partnership Interest" means an ownership interest in the Partnership
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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
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Section 1.704-2(b)(2), and the amount of Partnership Minimum Gain, as well as
any net increase or decrease in Partnership Minimum Gain, for a Partnership Year
shall be determined in accordance with the rules of Regulations Section 1.704-
2(d).
"Partnership Record Date" means the record date established by the
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General Partner for any distribution pursuant to Section 5.1 hereof.
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"Partnership Unit" means a fractional, undivided share of the
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Partnership interests of all Partners issued pursuant to Section 4.1 or 4.2. As
of the Effective Date, there shall be considered to be 10,504,422 Partnership
Units outstanding, representing 100% of the Percentage Interests in the
Partnership. The ownership of Partnership Units may be evidenced by such form
of certificate for units as the General Partner adopts from time to time.
"Partnership Year" means the fiscal year of the Partnership, which
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shall end on October 31, 1997.
"Percentage Interest" means, as to a Partner, its interest in the
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Partnership as determined by dividing the Partnership Units owned by such
Partner by the total number of Partnership Units then outstanding. In the event
differing classes of Partnership Interests are issued, Percentage Interests
shall be calculated on a class by class basis.
"Person" means an individual or a corporation, partnership, trust,
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unincorporated organization, association or other entity.
"Recapture Income" means any gain recognized by the Partnership upon
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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.
"Redeeming Partner" has the meaning set forth in Section 8.6 hereof.
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"Redemption Right" shall have the meaning set forth in Section 8.6
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hereof.
"Regulations" means the Income Tax Regulations promulgated under the
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Code, as such regulations may be amended from time to time (including
corresponding provisions of succeeding regulations).
"Residual Gain" or "Residual Loss" means any item of gain or loss, as
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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 B to eliminate Book-Tax
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Disparities.
"704(c) Value" of any Contributed Property means the fair market value
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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. The General Partner shall, in its sole and absolute discretion,
use such method as it deems reasonable and appropriate to allocate the aggregate
of the 704(c) Values of contributed Properties in a single or integrated
transactions among the separate properties on a basis proportional to their
respective fair market values.
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"Specified Redemption Date" means the tenth (10th) Business Day after
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receipt by the General Partner of a Notice of Redemption; provided that no
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Specified Redemption Date shall occur before the later of one (1) year from the
Effective Date or the date the Redemption Right arises under Section 8.6;
provided further that if the General Partner combines its outstanding CHC
Shares, no Specified Redemption Date shall occur after the record date and prior
to the effective date of such combination.
"Subsidiary" means, with respect to any Person, any corporation,
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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
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Limited Partner to the Partnership pursuant to Section 11.4.
"Terminating Capital Transaction" means any sale or other disposition
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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
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means, as of any date of determination, the excess, if any, of (i) the fair
market value of such property (as determined under Exhibit A hereof) as of such
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date, over (ii) the Carrying Value of such property (prior to any adjustment to
be made pursuant to Exhibit A hereof) as of such date.
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"Unrealized Loss" attributable to any item of Partnership property
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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 A
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hereof) as of such date, over (ii) the fair market value of such property (as
determined under Exhibit A hereof) as of such date.
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"Valuation Date" means the date of receipt by the General Partner of a
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Notice of Redemption or, if such date is not a Business Day, the first Business
Day thereafter.
"Value" means, with respect to a CHC Share, the average of the daily
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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 CHC Shares are listed or admitted to trading on any securities exchange or
the NASDAQ-National Market System, the closing price, regular way, on such day,
or if no such sale takes place on such day, the average of the closing bid and
asked prices on such day; (ii) if the CHC 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 CHC
Shares are not listed or admitted to trading on any securities exchange or the
NASDAQ National Market System and no such last reported sale price or closing
bid and asked prices are available, the average of the reported high bid and low
asked prices on such day, as reported by a
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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)
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days prior to the date in question, the Value of the CHC 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 CHC Shares Amount includes rights that a holder
of CHC Shares would be entitled to receive, and the General Partner acting in
good faith determines that the value of such rights is not reflected in the
Value of the CHC Shares determined as aforesaid, 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.
ARTICLE 2
ORGANIZATIONAL MATTERS
Section 2.1 Organization
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The Partnership is a limited partnership organized pursuant to the
provisions of the Act and upon the terms and conditions set forth herein.
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
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The name of the Partnership shall be Cavanaughs Hospitality Limited
Partnership. 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, any Affiliate or such other business names as the General
Partner shall determine. 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
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The address of the registered office of the Partnership in the State of
Delaware is ▇▇▇▇ ▇▇▇▇▇▇ ▇▇▇▇, ▇▇▇▇▇▇▇▇▇▇, ▇▇▇ ▇▇▇▇▇▇ ▇▇▇▇▇▇, ▇▇▇▇▇▇▇▇, ▇▇▇▇▇,
and the registered agent for service of process on the Partnership in the State
of Delaware at such registered office shall be Prentice Hall. The principal
office of the Partnership shall be ▇▇▇ ▇. ▇▇▇▇▇ ▇▇▇▇▇ ▇▇▇▇▇, ▇▇▇▇▇ ▇▇▇,
▇▇▇▇▇▇▇, ▇▇▇▇▇▇▇▇▇▇ ▇▇▇▇▇, or such other place as the General Partner may from
time to time designate by notice to the Limited Partners. The Partnership may
maintain offices at such
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other place or places within or outside the State of Delaware as the General
Partner deems advisable.
Section 2.4 Power of Attorney
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A. Each Limited Partner and each Assignee who accepts Partnership Units
(or any rights, benefits or privileges associated therewith) is deemed to
irrevocably constitute and appoint 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 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 jurisdictions in which the Partnership may or plans to conduct business
or own property; (b) all instruments that the General Partner or the Liquidator
deems appropriate or necessary to reflect any amendment, change, modification or
restatement of this Agreement in accordance with its terms; (c) all conveyances
and other instruments or documents that the General Partner 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
12
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 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 October 21, 1997, the date the
Certificate was filed in the office of the Secretary of State of Delaware in
accordance with the Act and shall continue until October 31, 2097, 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,
directly and indirectly through Subsidiaries (including, without limitation,
partnerships for which the Partnership is a general partner) is to carry out all
activities which may be permitted by the Act, including without limitation
invest in, acquire, purchase, lease, own and operate hotels and similar
properties and businesses (including interests therein), to engage in all phases
of the hotel business, and to pursue such other purposes as may be incidental or
related thereto, including disposing of its interests in any or all of its
hotels or properties and reinvesting the proceeds thereof in furtherance of its
business.
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 Partner, 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 and develop real property, and lease, sell,
transfer and dispose of real property.
13
ARTICLE 4
CAPITAL CONTRIBUTIONS
Section 4.1 Issuances of Additional Interests
---------------------------------
A. The General Partner may, at any time and from time to time, determine
that the Partnership requires additional funds, which funds may consist of cash
or property ("Additional Funds") for any Partnership purposes as the General
Partner may determine. The General Partner may raise all or any portion of the
Additional Funds by accepting additional Capital Contributions (of cash or
property) in exchange for Partnership Units or other Partnership Interests, and
is hereby authorized to cause the Partnership from time to time to issue to the
Partners or other Persons (including, without limitation, admitting Persons to
the Partnership as additional Limited Partners ("Additional Limited Partners"))
in connection with the contribution of cash or property to the Partnership,
additional Partnership Units or other Partnership Interests in one or more
classes, with such designations, preferences and relative, participating,
optional or other special rights, powers and duties, including rights, powers
and duties senior to Limited Partnership Interests, all as shall be determined
by the General Partner in its sole and absolute discretion subject to Delaware
law, including, without limitation, (i) 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
unless either (a)(1) the additional Partnership Interests are issued in
connection with the grant, award, or issuance of shares of the General Partner,
which shares have designations, preferences and other rights (except for voting
rights) such that the economic interests attributable to such shares are
substantially similar to the designations, preferences and other rights of the
additional Partnership Interests issued to the General Partner in accordance
with this Section 4.1.A, and (2) the General Partner shall make a Capital
Contribution to the Partnership in an amount equal to the proceeds, if any,
raised in connection with the issuance of such shares of the General Partner, or
(b) the additional Partnership Interests are issued to all Partners in
proportion to their respective Percentage Interests.
B. After the Effective Date, the General Partner shall not grant, award,
or issue any additional CHC Shares (other than CHC Shares issued pursuant to
Section 8.6), or rights, options, warrants or convertible or exchangeable
securities containing the right to subscribe for or purchase CHC Shares
(collective "New Securities"), other than to all holders of CHC Shares unless
--------------
(i) the General Partner shall cause the Partnership to issue to the General
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 the same as
those of the grant, award or issuance of such New Securities, and (ii) the
General Partner contributes the net proceeds from the grant, award or issuance
of such New Securities and from the exercise of rights contained in such New
Securities to the Partnership. Without limiting the foregoing, the General
Partner is expressly authorized to issue
14
New Securities for less than fair market value, and to cause the Partnership to
issue to the General Partner corresponding Partnership Interests, so long as (x)
the General Partner concludes in good faith that such issuance is in the
interests of the General Partner and the Partnership (for example, and not by
way of limitation, the issuance of CHC Shares and corresponding Units pursuant
to an employee stock purchase plan providing for employee purchases of CHC
Shares at a discount from fair market value or employee stock options that have
an exercise price that is less than the fair market value of the CHC Shares,
either at the time of issuance or at the time of exercise), and (y) the General
Partner contributes all proceeds from such issuance and exercise to the
Partnership.
C. Upon the acceptance of additional Capital Contributions in exchange
for Partnership Units, the Percentage Interest related thereto shall be equal to
a fraction, the numerator of which is equal to the amount of cash and the
Carrying Value of the property contributed as of the Business Day immediately
preceding the date on which the additional Capital Contributions are made (an
"Adjustment Date") and the denominator of which is equal to the sum of (i) the
Value of a CHC Share (computed as of the Business Day immediately preceding the
Adjustment Date) multiplied by the CHC Shares Amount (assuming all outstanding
Partnership Units are being "offered for redemption") (the "Outstanding Value")
plus (ii) the aggregate amount of additional Capital Contributions contributed
to the Partnership on such Adjustment Date in respect of such Partnership Units.
The Percentage Interest of each other Partner holding Partnership Units shall be
adjusted downward accordingly. Notwithstanding the foregoing, solely for
purposes of calculating a Partner's Percentage Interest pursuant to this Section
4.1.C, (i) in the case of cash Capital Contributions by the General Partner,
such Capital Contributions will be deemed to equal the cash contributed by the
General Partner plus, in the case of cash contributions funded by an offering of
CHC Shares or other shares of capital stock of the General Partner, the offering
costs attributable to the cash contributed to the Partnership, and (ii) in the
case of the contribution of properties (or any portion thereof) by the General
Partner which were acquired by the General Partner in exchange for CHC Shares
immediately prior to such contribution, the General Partner shall be issued a
number of Partnership Units equal to the number of CHC Shares issued by the
General Partner in exchange for such properties, the Partnership Units held by
the other Partners shall not be adjusted, and the Partners' Percentage Interests
shall be adjusted accordingly. The General Partner shall promptly give each
Partner written notice of its Percentage Interest, as adjusted.
Section 4.2 Contributions of Proceeds of Issuance of CHC Shares
---------------------------------------------------
In connection with the initial public offering, and any other grant, award,
or issuance of CHC Shares or rights, options, warrants, or convertible or
exchangeable securities pursuant to Section 4.1, the General Partner shall make
a Capital Contribution to the Partnership of the proceeds raised in connection
with such grant, award, or issuance; provided that if the proceeds actually
-------- ----
received by the General Partner are less than the gross proceeds of such grant,
award, or issuance as a result of any underwriter's discount, commission, or fee
or other expenses paid or incurred in connection with such grant, award, or
issuance, then the General Partner shall be deemed to have made a Capital
Contribution to the Partnership in the amount of the gross
15
proceeds of such issuance and the Partnership shall be deemed simultaneously to
have reimbursed the General Partner pursuant to Section 7.4.C for the amount of
such underwriter's discount or other expenses.
Section 4.3 No Preemptive Rights
--------------------
No existing Limited Partner shall have any preemptive, preferential or
other similar right with respect to (i) additional Capital Contributions or
loans to the Partnership; or (ii) issuance or sale of any Partnership Units or
other Partnership Interests.
Section 4.4 No Interest on Capital
----------------------
No Partner shall be entitled to interest on its Capital Contribution or its
Capital Account.
Section 4.5 Partnership Units for Initial Capital Contributions
---------------------------------------------------
In consideration for the Capital Contributions made by CHC and the Original
Limited Partner, the initial ownership of Partnership Units shall be as follows:
CHC:
_____ Partnership Units as a General Partner Interest
_____ Partnership Units as a Limited Partner Interest
Original Limited Partner:
_____ Partnership Units as a Limited Partner Interest
ARTICLE 5
DISTRIBUTIONS
Section 5.1 Requirement and Characterization of Distributions
-------------------------------------------------
The General Partner shall make distributions to the Partners when the
General Partner so determines in its sole and absolute discretion, in accordance
with the Partners' respective Percentage Interests on a "Partnership Record
Date" determined by the General Partner in its sole and absolute discretion;
provided, however, that if there is a Distribution Event, then the General
-------- -------
Partner shall distribute (i) an amount equal to the General Partner Distribution
Amount to the General Partner and (ii) an amount equal to the Limited Partner
Distribution Amount to the Limited Partners in accordance with the Limited
Partners' respective Percentage Interests as soon as practicable after the end
of the calendar quarter to which the Distribution Event relates. Further, it is
understood by the Partners that the General Partner shall generally not make any
distributions other than distributions in connection with a Distribution Event,
it being the intent of the Partners that the earnings of the Partnership
generally be reinvested in the business.
16
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 General Partner, the Limited Partners or Assignees shall be
treated as amounts distributed to the General Partner, Limited 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 or other Person under Article 4,
the General Partner shall make such revisions to this Article 5 as it determines
are necessary to reflect the issuance of such additional Partnership Interests.
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 A hereof) shall be
---------
allocated among the Partners in each taxable year (or portion thereof) as
provided herein below.
A. Net Income. After giving effect to the special allocations set forth
----------
in Section 1 of Exhibit B, Net Income shall be allocated (i) first, to the
---------
General Partner to the extent that Net Losses previously allocated to the
General Partner pursuant to the last sentence of Section 6.1.B exceed Net Income
previously allocated to the General Partner pursuant to this clause (i) of
Section 6.1.A, and (ii) thereafter, Net Income shall be allocated to the
Partners in accordance with their respective Percentage Interests.
B. Net Losses. After giving effect to the special allocations set forth
----------
in Section 1 of Exhibit B, Net Losses shall be allocated to the Partners in
---------
accordance with their respective Percentage Interests; provided that Net Losses
-------- ----
shall not be allocated to any Limited Partner pursuant to this Section 6.1.B to
the extent that such allocation would cause such Limited Partner to have an
Adjusted Capital Account Deficit at the end of such taxable year (or increase
any
17
existing Adjusted Capital Account Deficit). All Net Losses in excess of the
limitations set forth in this Section 6.1.B shall be allocated to the General
Partner.
C. Allocation of Nonrecourse Debt. For purposes of Regulations Section
------------------------------
1.752-3(a), the Partners agree that Nonrecourse Liabilities of the Partnership
in excess of the sum of (i) the amount of Partnership Minimum Gain and (ii) the
total amount of Nonrecourse Built-in Gain shall be allocated among the Partners
in accordance with their respective Percentage Interests.
D. Recapture Income. 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
-------
B, 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
(including deductions taken by any Partner with respect to Contributed Property
prior to the time such Property was contributed to the Partnership).
E. 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 or other Person under Article 4, the
General Partner shall make such revisions to this Article 6 as it determines are
necessary to reflect the issuance of such additional Partnership Interests.
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, except with the consent of the
General Partner. 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), the assumption or
guarantee of, or other contracting for, indebtedness and other liabilities, the
issuance of evidences of indebtedness (including the securing of same by deed to
secure debt, mortgage, deed of trust or other lien or
18
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;
(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;
(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 General Partner, the
Partnership or any of the Partnership's Subsidiaries, the lending of funds to
other Persons (including, without limitation, the Partnership's Subsidiaries)
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 General Partner, the Partnership of any of the Partnership's
Subsidiaries;
(6) the negotiation, execution, and the 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, any division of the
Partnership, or the General Partner (including, without limitation, employees
having titles such as "president," "vice president," "secretary" and "treasurer"
of the Partnership, any division of the Partnership, or the
19
General Partner), and agents, outside attorneys, accountants, consultants and
contractors of the General Partner, the Partnership or any division 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 and the Partners 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);
(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, arbitrations 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 it 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;
20
(19) the making, execution and delivery of any and all deeds, leases,
notes, deeds to secure debt, mortgages, deeds of trust, security agreements,
conveyances, contracts, guarantees, warranties, indemnities, waivers, releases
or legal instruments or agreements in writing necessary or appropriate in the
judgment of the General Partner for the accomplishment of any of the powers of
the General Partner; and
(20) the distribution of cash to acquire Partnership Units held by a
Limited Partner in connection with a Limited Partner's exercise of its
Redemption Right under Section 8.6.
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 Partnership without any further act, approval or
vote of the Partners, notwithstanding any other provision of this Agreement, the
Act or any applicable law, rule or regulation, to the fullest extent permitted
under the Act or other applicable law. 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 an 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 at
the expense of the Partnership, may or may not, cause the Partnership to obtain
and maintain (i) casualty, liability and other insurance on the properties of
the Partnership and (ii) liability insurance for the Indemnitees hereunder.
D. 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.
E. The General Partner shall have the full power and authority in the
name and on behalf of the Partnership in its capacity as the General Partner, to
take all such actions and to execute, deliver, and file all such agreements,
instruments, reports and documents as may be necessary or advisable in
connection with the formation of the General Partner, the issuance of Units in
connection with a proposed transaction or any transactions described in or
contemplated by the General Partner's Registration Statement on Form S-1 as may
be filed with the Securities and Exchange Commission.
F. Notwithstanding anything to the contrary contained in this Agreement,
any agreement of merger or consolidation of the Partnership entered into in
accordance with the provisions of this Agreement may, as provided in Section 17-
211(g) of the Delaware Revised Uniform Limited Partnership Act, (1) effect any
amendment to this Agreement or (2) effect the adoption of a new partnership
agreement for the Partnership if it is the surviving or resulting limited
partnership in the merger or consolidation (provided that no such amendment
shall be so
21
effected if it would, under Section 7.3 hereof, require the consent of the
Limited Partners (unless the requisite consent or consents shall be obtained),
and no provision shall be included in any such new partnership agreement if such
provision would, under Section 7.3 hereof, require the consent of the Limited
Partners if it were being incorporated in this Agreement by amendment (unless
the requisite consent shall be obtained).
Section 7.2 Certificate of Limited Partnership
----------------------------------
The Partnership has filed the Certificate with the Secretary of 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 and do all
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 or any
amendment thereto to any Limited Partner.
Section 7.3 Restrictions on General Partner's Authority
-------------------------------------------
The General Partner may not take an action in contravention of an express
prohibition or limitation of this Agreement without the written Consent of a
majority of the Partnership Units held by the Limited Partners (including
Limited Partnership Interests held by the General Partner or an Affiliate, or
such lower percentage of the Limited Partners as may be specifically provided
for under a provision of this Agreement or the Act). When there is a provision
in this Agreement that the General Partner may take a specific action or the
Agreement is silent with respect to a specific action, and there is provided no
restrictive qualifications, the General Partner may so act without the Consent
of the Limited Partners.
Section 7.4 Reimbursement of the General Partner
------------------------------------
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 shall be reimbursed on a monthly basis, or such
other basis as the General Partner may determine in its sole and absolute
discretion, for all expenses it incurs relating to the ownership and operation
of, or for the benefit of, the Partnership; provided that the
-------- ----
22
amount of any such reimbursement shall be reduced by any interest earned by the
General Partner with respect to bank accounts or other instruments or accounts
held by it on behalf of the Partnership as permitted in Section 7.5.A. The
Limited Partners acknowledge that, for purposes of this Section 7.4.B, all of
the General Partner's expenses (including without limitation, costs and expenses
associated with compliance with the periodic reporting requirements and all
other rules and regulations of the Securities and Exchange Commission or any
other federal, state or local regulatory body, salaries payable to officers and
employees of the General Partner, fees and expenses payable to directors of the
General Partner, and all other operating of administrative costs of the General
Partner) are deemed incurred for the benefit of the Partnership and shall be
paid by or reimbursed by the Partnership as provided in this Section 7.4.B.
Such reimbursement shall be in addition to any reimbursement to the General
Partner as a result of indemnification pursuant to Section 7.7 hereof. All
payments and reimbursements hereunder will be characterized for federal income
tax purposes as expenses of the Partnership incurred on its behalf, and not
expenses of the General Partner.
C. The General Partner shall also be reimbursed for all expenses it
incurs relating to the organization and/or reorganization of the Partnership and
the General Partner, the initial public offering and any other issuance of
additional Partnership Interests, CHC Shares or rights, options, warrants, or
convertible or exchangeable securities pursuant to Section 4.1 hereof
(including, without limitation, all costs, expenses, damages, and other payments
resulting from or arising in connection with litigation related to any of the
foregoing).
D. In the event that the General Partner shall elect to purchase from its
shareholders CHC Shares for the purpose of delivering such shares to satisfy an
obligation under any dividend reinvestment program adopted by the General
Partner, any employee stock purchase plan adopted by the General Partner, or any
similar obligation or arrangement undertaken by the General Partner in the
future, the purchase price paid by the General Partner for such CHC Shares and
any other expenses incurred by the General Partner in connection with such
purchase shall be considered expenses of the Partnership and shall be reimbursed
to the General Partner, subject to the condition that: (i) if such CHC Shares
subsequently are to be sold by the General Partner, the General Partner shall
pay to the Partnership any proceeds received by the General Partner for such CHC
Shares (provided that a transfer of CHC Shares for Units pursuant to Section 8.6
would not be considered a sale for such purposes); and (ii) if such CHC Shares
are not retransferred by the General Partner within 30 days after the purchase
thereof, the General Partner shall cause the Partnership to cancel a number of
Partnership Units (rounded to the nearest whole Unit) held by the General
Partner equal to the product obtained by multiplying the number of such CHC
Shares by a fraction, the numerator of which is one and the denominator of which
is the Conversion Factor.
Section 7.5 Outside Activities of the General Partner
-----------------------------------------
A. Subject to Section 7.5.C below, 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 as a General
Partner, and the management of the businesses
23
of the Partnership, and such activities as are incidental thereto. The General
Partner shall not incur any debts other than (i) debt of the Partnership for
which it may be liable in its capacity as General Partner of the Partnership,
and (ii) indebtedness for borrowed money the proceeds from which borrowing are
loaned to the Partnership on the same terms and conditions as the borrowing by
the General Partner. The General Partner shall not hold any assets other than
Partnership Interests as a General Partner and stock of CHC (and indirectly
there through, Partnership Interests as a Limited Partner), other than such bank
accounts or similar instruments or accounts as it deems necessary to carry out
its responsibilities contemplated under this Agreement and the Articles of
Incorporation. Notwithstanding the foregoing, the General Partner may acquire
property in exchange for CHC Shares, to the extent such properties are
immediately contributed by the General Partner to the Partnership, pursuant to
the terms described in Article 4. 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.
B. Subject to the next sentence, the General Partner may, from time to
time, purchase and/or redeem CHC Shares (including, without limitation, in
connection with a stock repurchase or similar program), if the General Partner
determines that it is in the interest of the Partnership for the General Partner
to purchase and/or redeem CHC Shares. In the event that the General Partner
purchases and/or redeems CHC Shares, then the General Partner shall cause the
Partnership to purchase from the General Partner, concurrently with the CHC
Share purchase, a number of Partnership Units as determined based on the
application of the Conversion Factor for the same consideration (including any
fees, commissions, and expenses payable by the General Partner in connection
therewith) and on the same terms as the General Partner purchases such CHC
Shares.
C. Notwithstanding Section 7.5.A above, the General Partner shall have
the right to hold assets, conduct business and incur indebtedness in connection
therewith, with respect to certain assets that the General Partner believes, in
its sole and absolute discretion, cannot or should not be held by or
transferred to the Partnership. All benefits and burdens of any activities
conducted in this fashion shall inure to the Partnership; all income, gain,
loss, deduction, credit, cash flow and indebtedness shall be considered
Partnership income, gain, loss, deduction, credit, cash flow and indebtedness.
Without limiting the foregoing, for all purposes of this Agreement, the General
Partner shall be considered the mere holder of legal title and the Partnership
shall be considered the beneficial owner.
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.
24
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 and no less favor to the Partnership than
would be obtained from an unaffiliated third party.
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 of the Partnership's Subsidiaries.
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
---------------
A. 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 Partnership 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 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 judgment, order or
settlement does not
25
create a presumption that the Indemnitee did not meet the requisite standard of
conduct set forth in this Section 7.7.A. 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 with respect to the
subject matter of such proceeding. 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 may 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 this 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 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.
26
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 limitations on 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 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 the General Partner is
acting on behalf of the Partnership and the General Partner's shareholders
collectively, that the General Partner is under no obligation to consider the
separate interests of the Limited Partners (including, without limitation, the
tax consequences to Limited Partners or Assignees) in deciding whether to cause
the Partnership to take (or decline to take) any actions, and that the General
Partner shall not be liable to the Partnership or to any Partner 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. The General Partner shall not be
responsible for any misconduct or negligence on the part of any such agent
appointed by it 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 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.
27
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 a duly appointed attorney or 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.
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 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. 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 Property 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
28
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.
The indemnification provision set forth in this Section 7.7 and the liability
provision set forth in Section 7.8 are for the benefit of the Partners hereto.
Any standard used therein is not intended to apply to any matter other than
those two Sections; such standards shall specifically not apply to transactions
between the Partnership and third parties.
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, partner, 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, 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.
29
Section 8.3 Outside Activities of Limited Partners
--------------------------------------
Subject to Section 7.5 hereof and any other agreements entered into by a
Limited Partner or its Affiliates with the Partnership or a Subsidiary, any
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 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 (other than the General
Partner to the extent expressly provided herein) 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. Nothing in
this Section 8.4 shall be interpreted as limiting the Partnership's right to
redeem all or a portion of the Partnership Units held by a Limited Partner, with
the consent of such Limited Partner, on such terms and for such consideration as
determined by the General Partner to be in the interests of the Partnership.
Except to the extent provided by Exhibit B hereof or as permitted by Section 4.1
---------
(relating to preferred interests issued subsequent to the date hereof), or
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 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 General Partner
pursuant to the Securities Exchange Act of 1934;
30
(2) to obtain a copy of the Partnership's federal, state and local
income tax returns for each Partnership Year;
(3) to obtain a current list of the name and last known business,
residence or mailing address of each Partner;
(4) to obtain a copy of this Agreement and the Certificate and all
amendments thereto, together with executed copies of all powers of attorney
pursuant to which this Agreement, the Certificate and all amendments thereto
have been executed; and
(5) to obtain true and full information regarding the amount of cash
and a description and statement of any other property or services contributed by
each 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 any change therein.
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 Section 8.6.B, each Limited Partner shall have the right
(the "Redemption Right"), on or after the first anniversary of the date on which
such Limited Partner acquires its Partnership Units (or such later or earlier
date as shall be determined in the sole and absolute discretion of the General
Partner at the time of issuance of the Partnership Units), to require the
Partnership to redeem on a Specified Redemption Date all or a portion of the
Partnership Units held by such Limited Partner at a redemption price 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 General Partner) by the Limited Partner
who is exercising the redemption right (the "Redeeming Partner"). A Limited
Partner may not exercise the Redemption Right for less than one thousand (1,000)
Partnership Units, or, if such Limited Partner holds less than one thousand
(1,000) Partnership Units, all of the Partnership Units held by such Partner.
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 Limited Partner's Assignee. In connection with any
31
exercise of such rights by such Assignee on behalf of such Limited Partner, the
Cash Amount shall be paid by the Partnership directly to such Assignee and not
to such Limited Partner. Neither the Redeeming Partner nor any Assignee of any
Limited Partner shall have any right, with respect to any Partnership Units so
redeemed, to receive any distributions paid after the Specified Redemption Date.
B. Notwithstanding the provisions of Section 8.6.A, in the event a
Limited Partner elects to exercise the Redemption Right, the General Partner
may, in its sole and absolute discretion, elect to assume directly and satisfy
all or a portion of a Redemption Right by electing to buy some or all of the
Partnership Units from the Redeeming Partner for either the Cash Amount, the CHC
Shares Amount, or a combination thereof, relating to the Partnership Units
being purchased by the General Partner (in its sole and absolute discretion) on
the Specified Redemption Date, whereupon the General Partner shall acquire such
Partnership Units offered for redemption by the Redeeming Partner and shall be
treated for all purposes of this Agreement as the owner of such Partnership
Units. Unless the General Partner (in its sole and absolute discretion) shall
exercise its right to assume directly and satisfy all or a portion of a
Redemption Right, the General Partner itself shall have no obligation to the
Redeeming Partner or to the Partnership with respect to the Redeeming Partner's
exercise of the Redemption Right. In the event the General Partner shall
exercise its right to satisfy all or a portion 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 the Redemption Right to which the
General Partner's election relates, 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 such Redeeming Partner's Partnership 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 CHC Shares upon exercise
of the Redemption Right. If the Redemption Right is satisfied by the delivery of
CHC Shares, the Redeeming Partner shall be deemed to become a holder of CHC
Shares as of the close of business on the Specified Redemption Date.
C. Each Limited Partner covenants and agrees with General Partner that
all Partnership Units delivered for redemption shall be delivered to the
Partnership or the General Partner, as the case may be, free and clear of all
liens and, notwithstanding anything herein contained to the contrary, neither
the General Partner nor the Partnership shall be under any obligation to acquire
Partnership Units which are or may be subject to any liens. Each Limited
Partner further agrees that, in the event any state or local property transfer
tax is payable as a result of the transfer of its Partnership Units to the
Partnership or the General Partner, such Limited Partner shall assume and pay
such transfer tax.
D. Notwithstanding anything herein to the contrary in this Agreement,
with respect to any Redemption Right or exchange for CHC Shares pursuant to this
Section 8.6:
32
(1) All Partnership Units acquired by the General Partner pursuant
thereto shall automatically, and without further action required, be converted
into and deemed to be Limited Partner Interests comprised of the same number and
class of Partnership Units.
(2) Without the consent of the General Partner, each Limited Partner
may not effect a Redemption Right during the period after the Partnership Record
Date with respect to a distribution and before the record date established by
the General Partner for a distribution to its stockholders of some or all of its
portion of such distribution.
(3) The consummation of any Redemption Right or exchange for CHC
Shares shall be subject to the expiration or termination of the applicable
waiting period, if any, under the ▇▇▇▇-▇▇▇▇▇-▇▇▇▇▇▇ Antitrust Improvements Act
of 1976, as amended.
(4) Each Redeeming Partner shall continue to own all Partnership Units
subject to any Redemption Right or exchange for CHC Shares, and be treated as a
Limited Partner with respect to such Partnership Units for all purposes of this
Agreement, until such Partnership Units are transferred to the General Partner
and paid for or exchanged on the Specified Redemption Date. Until a Specified
Redemption Date, the Redeeming Partner shall have no rights as a stockholder of
the General Partner with respect to such Redeeming Partner's Partnership Units.
E. In the event that the Partnership issues additional Partnership
Interests to any Additional Limited Partner pursuant to Section 4.1 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.
F. Any Cash Amount to be paid to a Redeeming Partner pursuant to this
Section 8.06 shall be paid within 60 days after the Specified Redemption Date
relating to the Partnership Units to be redeemed or purchased; provided,
--------
however, that such 60-day period may be extended for up to an additional 180-day
-------
period to the extent required for the Company to cause additional CHC Shares to
be issued to provide financing to be used to make such payment of the Cash
Amount. Notwithstanding the foregoing, the Company and the General Partner
agree to use their best efforts to cause the closing of the acquisition of
redeemed Partnership Units hereunder to occur as quickly as reasonably possible.
SECTION 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
33
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, micro
graphics 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 other such basis as the General Partner
determines to be necessary or appropriate.
Section 9.2 Fiscal Year
-----------
The fiscal year of the Partnership shall end on October 31 of each 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 General Partner if such statements are prepared solely on a consolidated
basis with the General Partner, 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 General Partner, if
such statements are prepared solely on a consolidated basis with the General
Partner, 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 the time period for filing such
returns (without extensions), the tax information reasonably required by Limited
Partners for federal and state income tax reporting purposes.
34
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; provided, however, that the General Partner shall make the
--------
election under Section 754 of the Code in accordance with the applicable
regulations thereunder effective for the first calendar year following the
Effective Date. The General Partner shall have the right to seek to revoke any
such election (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 the 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 partner" (as defined in Section
6231(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;
35
(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 into
account 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 of 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 or legal 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
-----------
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
36
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 (i.e., 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 Interest or 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, encumbrance,
hypothecation, mortgage, exchange or any other disposition by law or otherwise.
The term "transfer" when used in this Article 11 does not include any redemption
of Partnership Units by a Limited Partner or acquisition of Partnership Units
from a Limited Partner by the General Partner pursuant to Section 8.6.
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.
37
Section 11.2 Transfer of General Partner's Partnership Interest
--------------------------------------------------
A. The General Partner may not transfer any of its General Partner
Interest or withdraw as General Partner except in connection with a transaction
described in Section 11.2.B or 11.2.C.
B. Except as otherwise provided in Section 11.2.C, the General Partner
shall not engage in any merger, consolidation or other combination with or into
another Person or sale of all or substantially all of its assets, or any
reclassification, or recapitalization or change of outstanding CHC Shares (other
than a change in par value, or from par value to no par value, or as a result of
a subdivision or combination as described in the definition of "Conversion
Factor") ("Transaction"), unless the Transaction also includes a merger of the
Partnership or sale of substantially all of the assets of the Partnership or
sale of substantially all of the assets of the Partnership which has been
approved by the requisite Consent of the Partners pursuant to Section 7.3 and as
a result of which all Limited Partners will receive for each Partnership Unit an
amount of cash, securities, or other property equal to the product of the
Conversion Factor and the greatest amount of cash, securities or other property
paid to a holder of one CHC Share in consideration of one CHC Share at any time
during the period from and after the date on which the Transaction is
consummated.
C. Notwithstanding Section 11.2.B, the General Partner may merge with
another entity if immediately after such merger substantially all of the assets
of the surviving entity, other than Partnership Units held by the General
Partner (whether such Partnership Units constitute the General Partnership
Interest or a Limited Partnership Interest), are contributed to the Partnership
as a Capital Contribution in exchange for Partnership Units with a fair market
value, as reasonably determined by the General Partner, equal to the 704(c)
Value of the assets so contributed.
Section 11.3 Limited Partners' Rights to Transfer
------------------------------------
A. Subject to the provisions of Section 11.3.F, no Limited Partner shall
have the right to transfer all or any portion of his Partnership Interest, or
any of such Limited Partner's rights as a Limited Partner, without the prior
written consent of the General Partner, which consent may be given or withheld
by the General Partner in its sole and absolute discretion. Any purported
transfer of a Partnership Interest by a Limited Partner in violation of this
Section 11.3.A shall be void ab initio and shall not be given effect for any
-- ------
purpose by the Partnership.
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 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.
38
C. The General Partner may prohibit any transfer by a Limited Partner of
his 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, state or foreign
securities laws or regulations applicable to the Partnership or the Partnership
Unit.
D. No transfer by a Limited Partner of his 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 for federal income tax purposes, or would result in a termination of
the partnership for federal income tax purposes or (ii) such transfer is
effectuated through an "established securities market" or a "secondary market
(or the substantial equivalent thereof)" within the meaning of Section 7704 of
the Code.
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, which
consent may be given or withheld by the General Partner in its sole and absolute
discretion, provided that as a condition to such consent being granted the
-------- ----
lender will be required to enter into an arrangement with the Partnership and
the General Partner to exchange or redeem for the CHC Shares 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.
F. Prior to the first anniversary of the Effective Date, no Limited
Partner shall transfer all or any portion of its Partnership Interest to any
transferee without the consent of the General Partner, which consent may be
withheld in its sole and absolute discretion; provided, however, that any
-------- -------
Limited Partner may, at any time (whether prior to or after such first
anniversary), without the consent of the General Partner, (i) transfer all or
any portion of its Partnership Interest to the General Partner, (ii) transfer
all or an portion of its Partnership Interest to an Affiliate, another Original
Limited Partner or to an Immediate Family member, subject to the provisions of
Section 11.6, or in the case of an Original Limited Partner, to such Original
Limited Partner's shareholders, members, partners or beneficiaries, as the case
may be, (iii) transfer all or any portion of its Partnership Interest to a trust
for the benefit of a charitable beneficiary or to a charitable foundation,
subject to the provisions of Section 11.6 and (iv) subject to the provisions of
Section 11.6, pledge (a "Pledge") all or any portion of its Partnership Interest
to a lending institution, which is not an Affiliate or such Limited Partner, as
collateral or security for a bona fide loan or other extension of credit, and
transfer such pledged Partnership Interest to such lending institution in
connection with the exercise of remedies under such loan or extension or credit.
39
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. The admission of any transferee as a substituted Limited Partner
shall be subject to the transferee executing and delivering to the Partnership
an acceptance of all of the terms and conditions of this Agreement (including,
without limitation, the provisions of Section 2.4) and such other documents or
instruments as may be required to effect the admission.
Section 11.5 Assignees
---------
If the General Partner, in its sole and absolute discretion, does not
consent to the admission of any permitted transferee under Section 11.3 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 of gain, loss, deduction and credit of the
Partnership attributable to the Partnership Units assigned to such transferee,
and shall be entitled to exercise Redemption Rights to the extent granted in
Section 8.6, but 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 transferee shall be subject to all 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 his Partnership Units in
a transfer permitted pursuant to this Article 11 shall cease to be a Limited
Partner upon the admission of all
40
Assignees of such Partnership Units as Substitute Limited Partners. Similarly,
any Limited Partner who shall transfer all of his Partnership Units pursuant to
a redemption of all of his 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 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 fiscal year in accordance with Section 706(d) of
the Code, using the interim closing of the books method (unless the General
Partner, in its sole and absolute discretion, elects to adopt a daily, weekly or
monthly proration method, in which event Net Income, Net Losses and each item
thereof for such Partnership Year shall be prorated based upon the applicable
period selected by the General Partner). 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. All distributions of the Partner Distribution Amount
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 the Partner Distribution Amount 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.C 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 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.
41
Section 12.2 Admission of Additional Limited Partners
----------------------------------------
A. A Person who makes a Capital Contribution to the Partnership in
accordance with this Agreement (or who exercises an option to receive
Partnership Units) 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 the interim closing of the books method. Solely for
purposes of making such allocations, each of such items for the calendar month
in which an admission of any Additional Limited Partner occurs shall be
allocated among all the Partners and Assignees including such Additional Limited
Partner. All distributions of the Partner Distribution Amount 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 distributions of the Partner Distribution Amount thereafter shall be
made to all 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 and, if required by law, shall prepare and file an
amendment to the Certificate and may for this purpose exercise the power of
attorney granted pursuant to Section 2.4 hereof.
42
ARTICLE 13
DISSOLUTION, LIQUIDATION AND TERMINATION
Section 13.1 Dissolution
-----------
Except as set forth in this Article 13, no Partner shall have the right to
dissolve the Partnership. 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, 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. (i) 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, or (ii) any other 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 of the
Partnership Units held by 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. an election to dissolve the Partnership made by the General Partner,
in its sole and absolute discretion;
D. entry of a decree of judicial dissolution of the Partnership pursuant
to the provisions of the Act; or
E. the sale of all or substantially all of the assets and properties of
the Partnership.
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 other Person being referred to herein as the "Liquidator") shall
be responsible for overseeing the
43
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 stock in the General Partner) 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 rata 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
44
the Partnership, and paying any contingent or unforeseen liabilities or
obligations of the Partnership or of the General Partner arising out of or in
connection with the Partnership. The assets of any such trust shall be
distributed to the General Partner and Limited Partners from time to time, in
the reasonable discretion of 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 any Partner has a deficit balance in his Capital Account (after giving effect
to all contributions, distributions and allocations for all taxable years,
including the year during which such liquidation occurs), such Partner shall
have no obligation to make any contribution to the capital of the Partnership
with respect to such deficit, and such deficit shall not be considered a debt
owed to the Partnership or to any other Person for any purpose whatsoever.
Section 13.4 Deemed Distribution and Recontribution
--------------------------------------
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 purposes of maintaining Capital
Accounts pursuant to Exhibit A hereto, the Partnership shall be deemed to have
---------
distributed the property in kind to the General Partner and Limited Partners,
who shall be deemed to have assumed and taken such property subject to all
Partnership liabilities, all in accordance with their respective Capital
Accounts. Immediately thereafter, the General Partner and Limited Partners
shall be deemed to have recontributed the Partnership property in kind to the
Partnership, which shall be deemed to have assumed and taken such property
subject to all such liabilities.
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
45
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
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.
Section 13.7 Termination of Partnership and Cancellation of Certificate of
-------------------------------------------------------------
Limited Partnership
-------------------
Upon the completion of the liquidation of the Partnership cash and property
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 cancelled 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.
Section 13.10 Liability of the Liquidator
---------------------------
The Liquidator shall be indemnified and held harmless by the Partnership
from and against any and all claims, demands, liabilities, costs, damages and
cause of action of any nature whatsoever arising out of or incidental to the
Liquidator's taking of an action authorized under or within the scope of this
Agreement; provided, however, that the Liquidator shall not be entitled to
-------- -------
indemnification, and shall not be held harmless, where the claim, demand,
liability, cost, damage or cause of action at issue arises out of:
(i) a matter entirely unrelated to the Liquidator's action or
conduct pursuant to the provisions of this Agreement; or
(ii) the proven willful misconduct or gross negligence of the
Liquidator.
46
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 holding twenty-five percent (25%) or more of the
Partnership Interests. Following such proposal, the General Partner shall submit
any proposed amendment to the Limited Partners. Subject to Section 14.2.B, 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
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 Partners holding a majority of the Percentage Interests of the
Limited Partners (including Limited Partner Interests held by the General
Partner).
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:
(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 the designations, rights, powers, duties, and
preferences of the holders of any additional Partnership Interests issued
pursuant to Section 4.1 hereof;
(4) to reflect a change that does not adversely affect any of 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.
47
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 the rights of
the Partner to receive distributions pursuant to Article 5, or the allocations
specified in Article 6 (except as permitted pursuant to Section 4.1 and Section
14.1.B(3) hereof) in a manner adverse to such Partner, (iv) alter or modify the
Redemption Right and CHC Shares Amount as set forth in Sections 8.6, and related
definitions hereof, (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 without the Consent specified in that
section.
D. Notwithstanding Section 14.1.A or Section 14.1.B hereof, the General
Partner shall not amend Sections 4.1.A, 7.5, 7.6, 11.2 or 14.2 without the
Consent of a majority of the Percentage Interests of the Limited Partners
including Limited Partnership Interests held directly or indirectly by the
General Partner.
Section 14.2 Meetings of the Partners
------------------------
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 request by Limited
Partners holding twenty-five percent (25%) or more of the Partnership Interests.
The call 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
Percentage Interests shall be that Consent required to obtain approval by the
Partnership on all Partnership votes.
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 Percentage Interests 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 Percentage Interests 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.
48
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 eleven (11)
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 form the Limited Partner executing such proxy.
D. Each meeting of 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 in its sole discretion. Without limitation, meetings of Partners
may be conducted in the same manner as meetings of the shareholders of the
General Partner and may be held at the same time as, and as part of, meetings of
the shareholders of the General Partner.
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 written communication to the Partner or
Assignee. Such communications shall be deemed sufficiently given, served, sent
or received for all purposes at such time as delivered to the addressee (with
the return receipt or delivery receipt being deemed conclusive evidence of such
delivery) or at such time as delivery is refused by the addressee upon
presentation.
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.
49
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 Indemnitees,
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 partner 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 an 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
--------------
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 is or becomes invalid, illegal or
unenforceable in any respect, the validity, legality and enforceability of the
remaining provisions contained herein shall not be affected thereby.
50
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 any other
prior written or oral understandings or agreements among them with respect
thereto.
Section 15.12 No Rights as Shareholders
-------------------------
Nothing contained in this Agreement shall be construed as conferring upon
the holders of the Partnership Units any rights whatsoever as shareholders of
the General Partner, including without limitation any right to receive dividends
or other distributions made to shareholders of the General Partner or to vote or
to consent or to receive notice as shareholders in respect of any meeting of
shareholders for the election of directors of the General Partner or any other
matter.
IN WITNESS WHEREOF, the parties hereto have executed this Agreement under
seal as of the date first written above.
AS GENERAL PARTNER:
CAVANAUGHS HOSPITALITY CORPORATION, a Washington
corporation
By _______________________________________
▇▇▇▇▇▇ ▇. ▇▇▇▇▇▇▇▇, President
LIMITED PARTNERS:
NORTH RIVER DRIVE COMPANY, a Washington
corporation
By _______________________________________
▇▇▇▇▇▇▇ ▇. ▇▇▇▇▇▇▇▇, Vice President
51
EXHIBIT A
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 B hereof, and decreased by (x) the amount of cash or
---------
the Carrying Value of all actual and deemed distributions of cash or property
made to such partner pursuant to this Agreement (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) 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 B 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)(1) 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 1.704-1(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.
1
(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.
(6) Any items specifically allocated under Section 2 of Exhibit B hereof
---------
shall not be taken into account.
C. Generally, a transferee (including an Assignee) of a Partnership Unit
shall succeed to a pro rata portion of the Capital Account of the transferor;
provided, however, that, if the transfer causes a termination of the Partnership
-------- -------
under Section 708(b)(1)(B) of the Code, the Partnership's properties shall be
deemed solely for federal income tax purposes, to have been contributed to a new
partnership in exchange for interests therein and then liquidated. In such
event, the Carrying Values of the Partnership properties shall be adjusted, if
appropriate, in accordance with Section 1.D(2) hereof. The Capital Account of
such reconstituted Partnership shall be maintained in accordance with principles
of this Exhibit A.
---------
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
Values 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
2
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 A, 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 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 A and the
---------
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 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 in order
to comply with such Regulations, 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 the Partnership capital reflected on the Partnership's balance
sheet, as computed for book purposes, in accordance with Regulation'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).
2. 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 5, 7 and 13 of the Agreement.
3
EXHIBIT B
SPECIAL ALLOCATION RULES
1. Special Allocation Rules.
------------------------
Notwithstanding any other provision of the Agreement or this Exhibit B, 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 B, if there is a
---------
net decrease in the Partnership Minimum Gain during any Partnership 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 1.A is intended to comply with the minimum gain chargeback requirements
in Regulations Section 1.704-2(f) and for purposes of this Section 1.A only,
each Partner's Adjusted Capital Account Deficit shall be determined prior to any
other allocations pursuant to Section 6.1 of this Agreement with respect to such
Partnership Year and without regard to any decrease in Partner Minimum Gain
during such Partnership Year.
B. Partnership Minimum Gain Chargeback. Notwithstanding any other
-----------------------------------
provision of Section 6.1 of this Agreement or any other provisions of this
Exhibit B (except Section 1.A hereof), if there is a net decrease in Partner
---------
Minimum Gain attributable to a Partner Nonrecourse Debt during any Partnership
Year, each Partner who has a share of the Partner Minimum Gain attributable to
such Partner Nonrecourse Debt, determined in accordance with Regulations Section
1.704-2(i)(5), shall be specifically 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)(4). Allocations pursuant to the previous sentence shall be made in
proportion to the respective amounts required to be allocated to each General
Partner and Limited 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 this 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 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
Section 1.704-1(b)(2)(ii)(d)(4), 1.704-1(b)(2)(ii)(d)(5), or 1.704-
1(b)(2)(ii)(d)(6), and after giving effect to the allocations
1
required under Section 1.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 Year) and shall be specifically 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. This Section 1.C is
intended to constitute a "qualified income offset" under Regulations Section
1.704-1(b)(2)(ii)(d) and shall be interpreted consistently therewith.
D. Nonrecourse Deductions. Nonrecourse Deductions for any Partnership
----------------------
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 for such
Partnership Year to the numerically closest ratio which would satisfy such
requirements.
E. Partner Nonrecourse Deductions. Any Partner Nonrecourse Deductions
------------------------------
for any Partnership Year shall be specifically 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(b)(4) and 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 specifically
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.
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 B.
---------
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:
(i) (a) In the case of a Contributed Property, such items attributable
thereto shall be allocated among the Partners consistent with the
principles of
2
Section 704(c) of the Code to take into account the variation
between the 704(c) Value of such property and its adjusted basis
at the time of contribution (taking into account Section 2.C of
this Exhibit B), 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 B.
---------
(ii) (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 to take into
account the Unrealized Gain or Unrealized Loss attributable to
such property and the allocations thereof pursuant to Exhibit A,
---------
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 B; 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 the Exhibit B.
---------
(iii) all other items of income, gain, loss and deduction shall be
allocated among the Partner 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 B.
---------
C. To the extent Treasury Regulations promulgated pursuant to Section
704(c) of the Code permit a Partnership to utilize alternative methods to
eliminate the disparities between the Carrying Value of property and its
adjusted basis, the General Partner shall, subject to the following, have the
authority to elect the method to be used by the Partnership and such election
shall be binding on all Partners. With respect to the Contributed Property
transferred to the Partnership on or about the Effective date, the Partnership
shall elect to use the "traditional method" set forth in Treasury Regulations
Section 1.704-3(b).
3
EXHIBIT C
FORM OF NOTICE OF REDEMPTION
The undersigned hereby irrevocably (i) redeems ______ Partnership Units in
Cavanaughs Hospitality Limited Partnership in accordance with the terms of the
Limited Partnership Agreement of Cavanaughs Hospitality Limited Partnership 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 CHC Shares Amount (as determined by the General Partner)
deliverable upon exercise of the Redemption Right be delivered to the addresses
specified below, and if CHC Shares are to be delivered, such CHC 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 Partnership Units, free and clear
of the rights of or interests of any other person or entity, (b) has the full
right, power and authority to redeem and surrender such Partnership Units as
provided herein, and (c) has obtained the consent or approval of all persons or
entities, if any, having the right to consult or approve such redemption and
surrender.
Dated:
Name of Limited Partner:
________________________________
(Signature of Limited Partner)
________________________________
(▇▇▇▇▇▇ ▇▇▇▇▇▇▇)
________________________________
(City, State, Zip Code)
Signature Guaranteed by:
________________________________
If CHC Shares are to be issued, issue to:
Name:
Please insert social security or identifying number:
1
EXHIBIT D
LIST OF LIMITED PARTNERS
1. North River Drive Company, a Washington corporation, ▇▇▇ ▇. ▇▇▇▇▇ ▇▇▇▇▇
▇▇▇▇▇, ▇▇▇▇▇▇▇, ▇▇▇▇▇▇▇▇▇▇, ▇▇▇▇▇.
1