Exhibit 3.1
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FORM OF
FIRST AMENDED AND RESTATED
AGREEMENT OF LIMITED PARTNERSHIP
OF
HOST MARRIOTT, L.P.
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TABLE OF CONTENTS
ARTICLE I DEFINED TERMS...................................................... 1
ARTICLE II ORGANIZATIONAL MATTERS............................................15
Section 2.1 Organization..............................................15
Section 2.2 Name......................................................15
Section 2.3 Registered Office and Agent; Principal Office.............15
Section 2.4 Term......................................................16
ARTICLE III PURPOSE..........................................................16
Section 3.1 Purpose and Business......................................16
Section 3.2 Powers....................................................16
ARTICLE IV CAPITAL CONTRIBUTIONS AND ISSUANCES OF PARTNERSHIP
INTERESTS..............................................................17
Section 4.1 Capital Contributions of the Partners; Restatement
of Capital Accounts on the Date Hereof.......................17
Section 4.2 Issuances of Partnership Interests........................17
Section 4.3 No Preemptive Rights......................................19
Section 4.4 Other Contribution Provisions.............................19
Section 4.5 No Interest on Capital....................................20
ARTICLE V DISTRIBUTIONS......................................................20
Section 5.1 Requirement and Characterization of Distributions.........20
Section 5.2 Amounts Withheld..........................................23
Section 5.3 Distributions Upon Liquidation............................23
Section 5.4 Revisions to Reflect Issuance of Partnership Interests....23
ARTICLE VI ALLOCATIONS.......................................................23
Section 6.1 Allocations For Capital Account Purposes..................23
Section 6.2 Revisions to Allocations to Reflect Issuance of
Partnership Interests........................................24
ARTICLE VII MANAGEMENT AND OPERATIONS OF BUSINESS............................25
Section 7.1 Management................................................25
Section 7.2 Certificate of Limited Partnership........................29
Section 7.3 Title to Partnership Assets...............................30
Section 7.4 Reimbursement of the General Partner......................30
Section 7.5 Outside Activities of the General Partner;
Relationship of Shares to Units; Funding Debt................32
Section 7.6 Transactions with Affiliates..............................33
Section 7.7 Indemnification...........................................34
Section 7.8 Liability of the General Partner..........................36
Section 7.9 Other Matters Concerning the General Partner..............37
Section 7.10 Reliance by Third Parties.................................38
Section 7.11 Restrictions on General Partner's Authority...............38
Section 7.12 Loans by Third Parties....................................39
ARTICLE VIII RIGHTS AND OBLIGATIONS OF LIMITED PARTNERS......................39
Section 8.1 Limitation of Liability...................................39
Section 8.2 Management of Business....................................39
Section 8.3 Outside Activities of Limited Partners....................40
Section 8.4 Return of Capital.........................................40
Section 8.5 Rights of Limited Partners Relating to the Partnership....40
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Section 8.6 Unit Redemption Right.....................................42
ARTICLE IX BOOKS, RECORDS, ACCOUNTING AND REPORTS............................45
Section 9.1 Records and Accounting....................................45
Section 9.2 Fiscal Year...............................................45
Section 9.3 Reports...................................................45
ARTICLE X TAX MATTERS........................................................46
Section 10.1 Preparation of Tax Returns................................46
Section 10.2 Tax Elections.............................................46
Section 10.3 Tax Matters Partner.......................................46
Section 10.4 Organizational Expenses...................................48
Section 10.5 Withholding...............................................48
ARTICLE XI TRANSFERS AND WITHDRAWALS.........................................49
Section 11.1 Transfer..................................................49
Section 11.2 Transfers of Partnership Interests of General Partner.....49
Section 11.3 Limited Partners' Rights to Transfer......................50
Section 11.4 Substituted Limited Partners..............................52
Section 11.5 Assignees.................................................52
Section 11.6 General Provisions........................................53
ARTICLE XII RESTRICTION ON OWNERSHIP OF UNITS................................55
Section 12.1 Definitions...............................................55
Section 12.2 Ownership Limitation on Units.............................56
Section 12.3 Exceptions to the Ownership Limitation....................59
Section 12.4 Transfer of Units in Trust................................59
Section 12.5 Enforcement...............................................61
Section 12.6 Non-Waiver................................................61
ARTICLE XIII ADMISSION OF PARTNERS...........................................61
Section 13.1 Admission of a Successor General Partner..................61
Section 13.2 Admission of Additional Limited Partners..................62
Section 13.3 Amendment of Agreement and Certificate of
Limited Partnership.........................................62
ARTICLE XIV DISSOLUTION AND LIQUIDATION......................................63
Section 14.1 Dissolution...............................................63
Section 14.2 Winding Up................................................64
Section 14.3 Compliance with Timing Requirements of Regulations........65
Section 14.4 Rights of Limited Partners................................65
Section 14.5 Notice of Dissolution.....................................66
Section 14.6 Cancellation of Certificate of Limited Partnership........66
Section 14.7 Reasonable Time for Winding Up............................66
Section 14.8 Waiver of Partition.......................................66
Section 14.9 Liability of Liquidator...................................66
ARTICLE XV AMENDMENT OF PARTNERSHIP AGREEMENT; MEETINGS......................66
Section 15.1 Amendments................................................66
Section 15.2 Meetings of the Partners..................................68
ARTICLE XVI GENERAL PROVISIONS...............................................69
Section 16.1 Addresses and Notice......................................69
Section 16.2 Titles and Captions.......................................69
Section 16.3 Pronouns and Plurals......................................69
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Section 16.4 Further Action...........................................70
Section 16.5 Binding Effect...........................................70
Section 16.6 Creditors................................................70
Section 16.7 Waiver...................................................70
Section 16.8 Counterparts.............................................70
Section 16.9 Applicable Law...........................................70
Section 16.10 Invalidity of Provisions.................................71
Section 16.11 Power of Attorney........................................71
Section 16.12 Entire Agreement.........................................72
Section 16.13 No Rights as Shareholders................................72
Section 16.14 Limitation to Preserve REIT Status.......................72
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EXHIBIT A
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PARTNERS AND PARTNERSHIP INTERESTS
EXHIBIT B
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CAPITAL ACCOUNT MAINTENANCE
EXHIBIT C
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SPECIAL ALLOCATION RULES
EXHIBIT D
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NOTICE OF REDEMPTION
EXHIBIT E
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VALUE OF CONTRIBUTED PROPERTY
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FIRST AMENDED AND RESTATED
AGREEMENT OF LIMITED PARTNERSHIP
OF
HOST MARRIOTT, L.P.
THIS FIRST AMENDED AND RESTATED AGREEMENT OF LIMITED PARTNERSHIP, dated as
of _______ __, 1998, is entered into by and among Host Marriott Trust, a
Maryland real estate investment trust, as the General Partner of Host Marriott,
L.P. (the "Partnership"), and the parties appearing on Exhibit A attached
hereto, as Limited Partners, together with any other Persons who become Partners
of the Partnership as provided herein.
WHEREAS, the Partnership was formed on April 15, 1998, and, on April 15,
1998 the Partnership adopted an agreement of limited partnership (the "Prior
Agreement");
WHEREAS, the General Partner has been admitted to the partnership as an
additional General Partner pursuant to the terms of the Prior Agreement;
WHEREAS, HMC Real Estate Corporation, a Delaware corporation and the
initial General Partner of the Partnership, has converted its General
Partnership Interest into a Limited Partnership Interest and withdrawn from the
Partnership as General Partner effective as of the date hereof;
WHEREAS, ▇▇▇▇▇▇▇▇▇▇▇ ▇. ▇▇▇▇▇▇▇▇, an individual residing in the State of
Maryland and the initial Limited Partner, has relinquished its Limited
Partnership Interest and such Limited Partnership Interest has been canceled;
and
WHEREAS, the Partners desire to (i) continue the business of the
Partnership pursuant to this Agreement, (ii) to admit certain Persons as Limited
Partners of the Partnership and (iii) reflect the withdrawal of the initial
General Partner and initial Limited Partner from the Partnership in their
capacities as such;
NOW, THEREFORE, in consideration of the mutual covenants set forth herein,
and for other good and valuable consideration, the receipt and sufficiency of
which are hereby acknowledged, the parties hereto hereby amend and restate the
Prior Agreement in its entirety and agree to continue the Partnership as a
limited partnership under the Delaware Revised Uniform Limited Partnership Act,
as amended from time to time, as follows:
ARTICLE I
DEFINED TERMS
The following definitions shall be for all purposes, unless otherwise
clearly indicated to the contrary, applied to the terms used in this Agreement.
"704(c) Value" of any Contributed Property means the fair market value
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of such property at the time of contribution as determined by the General
Partner using such
reasonable method of valuation as it may adopt; provided, however, subject to
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Exhibit B, the General Partner shall, in its sole and absolute discretion, use
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such method as it deems reasonable and appropriate to allocate the aggregate of
the 704(c) Value of Contributed Properties in a single or integrated transaction
among each separate property on a basis proportional to its respective fair
market value. The 704(c) Values of the Contributed Properties contributed to the
Partnership as of the date hereof are set forth on Exhibit E.
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"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
--------------------------
Partnership as a Limited Partner pursuant to Section 13.2 hereof and who is
shown as such on the books and records of the Partnership.
"Adjusted Capital Account" means the Capital Account maintained for
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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 deemed to be obligated to restore pursuant to the penultimate
sentences of Regulations Sections 1.704-2(g)(1) and 1.704-2(i)(5) and (ii)
decreased by the items described in Regulations Sections 1.704-
1(b)(2)(ii)(d)(4), 1.704-1(b)(2)(ii)(d)(5) and 1.704-1(b)(2)(ii)(d)(6). The
foregoing definition of Adjusted Capital Account is intended to comply with the
provisions of Regulations Section 1.704-1(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 B.
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"Adjustment Date" has the meaning set forth in Section 4.2.B.
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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, trustee or members of the Immediate
Family of such Person or any Person referred to in clauses (i), (ii), and (iii)
above. For purposes of this definition, "control," when used with respect to
any Person, means the power to direct the management and policies of such
Person, directly or indirectly, whether through the ownership of voting
securities, by contract or otherwise, and the terms "controlling" and
"controlled" have meanings correlative to the foregoing. Notwithstanding the
foregoing, neither (i) a corporation whose common stock is listed on a national
securities exchange or authorized for inclusion on the Nasdaq National Market,
or any subsidiary thereof, or (ii) Blackstone Real Estate Advisors II L.P. or
any of its Affiliates, shall be an "Affiliate" of the General Partner Entity or
any Affiliate thereof unless a Person (or Persons if such Persons would be
treated as part of the same group for
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purposes of Section 13(d) or 13(g) of the Securities Exchange Act of 1934)
directly or indirectly owns twenty percent (20%) or more of the outstanding
common stock of the General Partner Entity and such other corporation.
"Agreed Value" means (i) in the case of any Contributed Property
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contributed to the Partnership as of the date hereof, the amount set forth on
Exhibit E as the Agreed Value of such Property; (ii) in the case of any other
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Contributed Property, the 704(c) Value of such property as of the time of its
contribution to the Partnership, reduced by any liabilities either assumed by
the Partnership upon such contribution or to which such property is subject when
contributed; and (iii) in the case of any property distributed to a Partner by
the Partnership, the Partnership's Carrying Value of such property at the time
such property is distributed, reduced by any indebtedness either assumed by such
Partner upon such distribution or to which such property is subject at the time
of distribution as determined under Section 752 of the Code and the regulations
thereunder.
"Agreement" means this First Amended and Restated Agreement of Limited
---------
Partnership, as it may be amended, supplemented or restated from time to time.
"Appraised Value" means, with respect to any hotel, the value set
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forth in the appraisal of such hotel utilized by the General Partner in
determining the number of Units to be issued to any Limited Partner.
"Assignee" means a Person to whom one or more Units have been
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transferred in a manner permitted under this Agreement, but who has not become a
Substituted Limited Partner, and who has the rights set forth in Section 11.5.
"Available Cash" means, with respect to any period for which such
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calculation is being made:
(a) all cash revenues and funds received by the Partnership from
whatever source (excluding the proceeds of any Capital Contribution to the
extent determined by the General Partner) plus the amount of any reduction
(including, without limitation, a reduction resulting because the General
Partner determines such amounts are no longer necessary) in reserves of the
Partnership, which reserves are referred to in clause (b)(iv) below;
(b) less the sum of the following (except to the extent made with the
proceeds of any Capital Contribution):
(i) all interest, principal and other debt payments made
during such period by the Partnership,
(ii) all cash expenditures (including capital expenditures)
made by the Partnership during such period,
(iii) investments in any entity (including loans made thereto)
to the extent that such investments are permitted under this Agreement and are
not otherwise described in clauses (b)(i) or (ii), and
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(iv) the amount of any increase in reserves established
during such period which the General Partner determines is necessary or
appropriate in its sole and absolute discretion.
Notwithstanding the foregoing, Available Cash shall not include any
cash received or reductions in reserves, or take into account any disbursements
made or reserves established, after commencement of the dissolution and
liquidation of the Partnership.
"Book-Tax Disparities" means, with respect to any item of Contributed
--------------------
Property or Adjusted Property, as of the date of any determination, the
difference between the Carrying Value of such Contributed Property or Adjusted
Property and the adjusted basis thereof for federal income tax purposes as of
such date. A Partner's share of the Partnership's Book-Tax Disparities in all
of its Contributed Property and Adjusted Property will be reflected by the
difference between such Partner's Capital Account balance as maintained pursuant
to Exhibit B and the hypothetical balance of such Partner's Capital Account
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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
------------
which commercial banks in the City of New York are authorized or required by law
to close.
"Capital Account" means the Capital Account maintained for a Partner
---------------
pursuant to Exhibit B. The initial Capital Account balance for each Partner who
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is a Partner on the date hereof shall be the amount set forth opposite such
Partner's name on Exhibit A hereto.
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"Capital Contribution" means, with respect to any Partner, any cash,
--------------------
cash equivalents or the Agreed Value of Contributed Property which such Partner
contributes or is deemed to contribute to the Partnership pursuant to Section
4.1 or 4.2.
"Carrying Value" means (i) with respect to a Contributed Property or
--------------
Adjusted Property, the 704(c) Value of such property reduced (but not below
zero) by all Depreciation with respect to such Contributed Property or Adjusted
Property, as the case may be, charged to the Partners' Capital Accounts and (ii)
with respect to any other Partnership property, the adjusted basis of such
property for federal income tax purposes, all as of the time of determination.
The Carrying Value of any property shall be adjusted from time to time in
accordance with Exhibit B, and to reflect changes, additions (including capital
---------
improvements thereto) 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 equal to the Value on the
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Valuation Date of the Shares Amount.
"Certificate" means the Certificate of Limited Partnership relating to
-----------
the Partnership filed in the office of the Secretary of State of the State of
Delaware, as amended from time to time in accordance with the terms hereof and
the Act.
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"Class A" has the meaning set forth in Section 5.1.C.
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"Class A Share" has the meaning set forth in Section 5.1.C.
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"Class A Unit" means any Unit that is not specifically designated by
------------
the General Partner as being of another specified class of Units.
"Class B" has the meaning set forth in Section 5.1.C.
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"Class B Share" has the meaning set forth in Section 5.1.C.
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"Class B Unit" means a Unit that is specifically designated by the
------------
General Partner as being a Class B Unit.
"Code" means the Internal Revenue Code of 1986, as amended and in
----
effect from time to time, as interpreted by the applicable regulations
thereunder. Any reference herein to a specific section or sections of the Code
shall be deemed to include a reference to any corresponding provision of future
law.
"Common Shares" means the common shares of beneficial ownership (or
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other comparable equity interests) of the General Partner Entity.
"Consent" means the consent or approval of a proposed action by a
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Partner given in accordance with Section 15.2.
"Consent of the Outside Limited Partners" means the Consent of Limited
---------------------------------------
Partners (excluding for this purpose any Limited Partnership Interests held (i)
by the General Partner or the General Partner Entity, (ii) any Person of which
the General Partner or the General Partner Entity directly or indirectly owns or
controls more than fifty percent (50%) of the voting interests, (iii) any Person
directly or indirectly owning or controlling more than fifty percent (50%) of
the outstanding voting interests of the General Partner or the General Partner
Entity and (iv) any Person of which a Person described in clause (iii) directly
or indirectly owns or controls more than fifty percent (50%) of the voting
interest) holding Percentage Interests that are greater than fifty percent (50%)
of the aggregate Percentage Interest of all Limited Partners who are not
excluded for the purposes hereof.
"Contributed Property" means each property or other asset contributed
--------------------
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 Exhibit B, such property
---------
shall no longer constitute a Contributed Property for purposes of Exhibit B, but
---------
shall be deemed an Adjusted Property for such purposes.
"Conversion Factor" means 1.0; provided that, if the General Partner
----------------- -------------
Entity (i) declares or pays a dividend on its outstanding Shares in Shares or
makes a distribution to all holders of its outstanding Shares in Shares, (ii)
subdivides its outstanding Shares or (iii) combines its outstanding Shares into
a smaller number of Shares, the Conversion Factor shall be adjusted by
multiplying the Conversion Factor by a fraction, the numerator
-5-
of which shall be the number of 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 Shares (determined without the above assumption) issued and
outstanding on the record date for such dividend, distribution, subdivision or
combination; and provided further that if an entity shall cease to be the
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General Partner Entity (the "Predecessor Entity") and another entity shall
become the General Partner Entity (the "Successor Entity"), the Conversion
Factor shall be adjusted by multiplying the Conversion Factor by a fraction, the
numerator of which is the Value of one Share of the Predecessor Entity,
determined as of the date when the Successor Entity becomes the General Partner
Entity, and the denominator of which is the Value of one Share of the Successor
Entity, determined as of that same date. (For purposes of the second provision
in the preceding sentence, if any shareholders of the Predecessor Entity will
receive consideration in connection with the transaction in which the Successor
Entity becomes the General Partner Entity, the numerator in the fraction
described above for determining the adjustment to the Conversion Factor (that
is, the Value of one Share of the Predecessor Entity) shall be the sum of the
greatest amount of cash and the fair market value (as determined in good faith
by the General Partner) of any securities and other consideration that the
holder of one Share in the Predecessor Entity could have received in such
transaction (determined without regard to any provisions governing fractional
shares). Any adjustment to the Conversion Factor shall become effective
immediately after the effective date of the event retroactive to the record
date, if any, for the event giving rise thereto, it being intended that (x)
adjustments to the Conversion Factor are to be made to avoid unintended dilution
or anti-dilution as a result of transactions in which Shares are issued,
redeemed or exchanged without a corresponding issuance, redemption or exchange
of Units and (y) if a Specified Redemption Date shall fall between the record
date and the effective date of any event of the type described above, that the
Conversion Factor applicable to such redemption shall be adjusted to take into
account such event.
"Convertible Funding Debt" has the meaning set forth in Section 7.5.F.
------------------------
"Debt" means, as to any Person, as of any date of determination, (i)
----
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) obligations of such Person
incurred in connection with entering into a lease which, in accordance with
generally accepted accounting principles, should be capitalized.
"Declaration of Trust" means the Declaration of Trust of the General
--------------------
Partner filed with the State Department of Assessments and Taxation in the State
of Maryland on __________ __, 1998, as amended or restated from time to time.
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"Deemed Partnership Interest Value" means, as of any date with respect
---------------------------------
to any class of Partnership Interests, the Deemed Value of the Partnership
Interest of such class multiplied by the applicable Partner's Percentage
Interest of such class.
"Deemed Value of the Partnership Interest" means, as of any date with
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respect to any class of Partnership Interests, (a) if the common shares of
beneficial interest (or other comparable equity interests) of the General
Partner Entity are Publicly Traded (i) the total number of shares of beneficial
interest (or other comparable equity interest) of the General Partner Entity
corresponding to such class of Partnership Interest (as provided for in Section
4.2.B) issued and outstanding as of the close of business on such date
(excluding any treasury shares) multiplied by the Value of a share of such
beneficial interest (or other comparable equity interest) on such date divided
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by (ii) the Percentage Interest of the General Partner Entity, held directly or
--
indirectly through another entity, in such class of Partnership Interests on
such date, and (b) otherwise, the aggregate Value of such class of Partnership
Interests determined as set forth in the fourth and fifth sentences of the
definition of Value. For purposes of clause (a) of the preceding sentence,
"Value" means the average of the daily market price of such corresponding shares
of beneficial interest (or other comparable equity interests) of the General
Partner Entity for such number of consecutive trading days or the Business Day
immediately preceding the date with respect to which Value must be determined
(which number of days or the Business Day shall be determined by the General
Partner in its sole discretion), with the market price for each such trading day
being 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.
Notwithstanding any of the foregoing, with respect to any class or series of
Partnership Interests that is entitled to a preference as compared to the class
of Partnership Interests corresponding to common shares of beneficial interests
(or other comparable equity interests) of the General Partner Entity, "Value"
means the stated liquidation preference or value of such class or series of
Partnership Interests provided in the instrument establishing such class or
series of Partnership Interests (unless otherwise provided in such instrument).
"Depreciation" means, for each fiscal year, an amount equal to the
------------
federal income tax depreciation, amortization, or other cost recovery deduction
allowable with respect to an asset for such year, except that if the Carrying
Value of an asset differs from its adjusted basis for federal income tax
purposes at the beginning of such year or other period, Depreciation shall be an
amount which bears the same ratio to such beginning Carrying Value as the
federal income tax depreciation, amortization, or other cost recovery deduction
for such year bears to such beginning adjusted tax basis; provided, however,
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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 Period" has the meaning set forth in Section 5.1.C.
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"ERISA" means the Employee Retirement Income Security Act of 1974, as
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amended.
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"ERISA Plan Investor" means (i) a Plan, (ii) a trust which was
-------------------
established pursuant to a Plan, or a nominee for such trust or Plan, or (iii) an
entity whose underlying assets include assets of a Plan by reason of such Plan's
investment in such entity.
"Exchange Act" means the Securities Exchange Act of 1934, as amended.
------------
"Funding Debt" means the incurrence of any Debt by or on behalf of the
------------
General Partner Entity for the purpose of providing funds to the Partnership.
"General Partner" means Host Marriott Trust, a Maryland real estate
---------------
investment trust, or any of its successors as a general partner of the
Partnership.
"General Partner Entity" means the General Partner; provided, however,
---------------------- -----------------
that if (i) the common shares of beneficial interest (or other comparable equity
interests) of the General Partner (i.e., the Shares that would otherwise
correspond to the Class A Units) are at any time not Publicly Traded and (ii)
the common shares of beneficial interest (or other comparable equity interests)
of an entity that owns, directly or indirectly, fifty percent (50%) or more of
the common shares of beneficial interest (or other comparable equity interests)
of the General Partner are Publicly Traded, the term "General Partner Entity"
shall refer to such entity whose common shares of beneficial interest (or other
comparable equity securities) are Publicly Traded. If both requirements set
forth in clauses (i) and (ii) above are not satisfied, then the term "General
Partner Entity" shall mean the General Partner.
"General Partner Payment" has the meaning set forth in Section 16.14.
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"General Partnership Interest" means a Partnership Interest held by
----------------------------
the General Partner that is a general partnership interest. A General
Partnership Interest may be expressed as a number of Units.
"Immediate Family" means, with respect to any natural Person, such
----------------
natural Person's spouse, parents, descendants, nephews, nieces, brothers and
sisters.
"Incapacity" or "Incapacitated" means, (i) as to any individual
---------- -------------
Partner, death, total physical disability or entry by a court of competent
jurisdiction adjudicating such Partner incompetent to manage his or her Person
or estate, (ii) as to any corporation which is a Partner, the filing of a
certificate of dissolution, or its equivalent, for the corporation or the
revocation of its charter, (iii) as to any partnership or limited liability
company which is a Partner, the dissolution and commencement of winding up of
the partnership or limited liability company, (iv) as to any estate which is a
Partner, the distribution by the fiduciary of the estate's entire interest in
the Partnership, (v) as to any trustee of a trust which is a Partner, the
termination of the trust (but not the substitution of a new trustee) or (vi) as
to any Partner, the bankruptcy of such Partner. For purposes of this
definition, bankruptcy of a Partner shall be deemed to have occurred when (i)
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, (ii) 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,
(iii) the Partner executes and delivers a general assignment
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for the benefit of the Partner's creditors, (iv) 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 (ii) above, (v) 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, (vi) any proceeding seeking
liquidation, reorganization or other relief under any bankruptcy, insolvency or
other similar law now or hereafter in effect has not been dismissed within one
hundred twenty (120) days after the commencement thereof, (vii) the appointment
without the Partner's consent or acquiescence of a trustee, receiver of
liquidator has not been vacated or stayed within ninety (90) days of such
appointment or (viii) an appointment referred to in clause (vii) 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 its status as (A) the General Partner, (B) a Limited Partner and
Affiliates thereof or (C) a trustee, director or officer of the Partnership or
the General Partner and (ii) such other Persons (including Affiliates of the
General Partner, a Limited 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 Holding Period" means the period commencing on the date
----------------------
hereof and ending on the date on which the Unit Redemption Right first becomes
available under Section 8.6.
"IRS" means the Internal Revenue Service, which administers the
---
internal revenue laws of the United States.
"Limited Partner" means any Person named as a Limited Partner of the
---------------
Partnership in Exhibit A, as such Exhibit may be amended from time to time, or
---------
any Substituted Limited Partner or Additional Limited Partner, in such Person's
capacity as a Limited Partner in the Partnership.
"Limited Partnership Interest" means a Partnership Interest of a
----------------------------
Limited Partner of the Partnership representing a fractional part of the
Partnership Interests of all Limited Partners and includes any and all benefits
to which the holder of such a Partnership Interest may be entitled as provided
in this Agreement, together with all obligations of such Person to comply with
the terms and provisions of this Agreement. A Limited Partnership Interest may
be expressed as a number of Units.
"Liquidating Event" has the meaning set forth in Section 14.1.
-----------------
"Liquidator" has the meaning set forth in Section 14.2.A..
----------
"Marriott International" means Marriott International, Inc., a
----------------------
Delaware corporation.
"Net Income" means, for any taxable period, the excess, if any, of the
----------
Partnership's items of income and gain for such taxable period over the
Partnership's items of loss and deduction for such taxable period. The items
included in the calculation of Net
-9-
Income shall be determined in accordance with Exhibit B. If an item of income,
---------
gain, loss or deduction that has been included in the initial computation of Net
Income is subjected to the special allocation rules in Exhibit C, Net Income or
---------
the resulting Net Loss, whichever the case may be, shall be recomputed without
regard to such item.
"Net Loss" means, for any taxable period, the excess, if any, of the
--------
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
Exhibit B. If an item of income, gain, loss or deduction that has been included
---------
in the initial computation of Net Loss is subjected to the special allocation
rules in Exhibit C, Net Loss or the resulting Net Income, whichever the case may
---------
be, shall be recomputed without regard to such item.
"New Securities" mean (i) any rights, options, warrants or convertible
--------------
or exchangeable securities having the right to subscribe for or purchase shares
of beneficial interest (or other comparable equity interest) of the General
Partner, excluding grants under any Share Option Plan, or (ii) any Debt issued
by the General Partner that provides any of the rights described in clause (i).
"Nonrecourse Built-in Gain" means, with respect to any Contributed
-------------------------
Properties or Adjusted Properties that are subject to a mortgage or negative
pledge securing a Nonrecourse Liability, the amount of any taxable gain that
would be allocated to the Partners pursuant to Section 2.B of Exhibit C if such
---------
properties were disposed of in a taxable transaction in full satisfaction of
such liabilities and for no other consideration.
"Nonrecourse Deductions" has the meaning set forth in Regulations
----------------------
Section 1.704-2(b)(1), and the amount of Nonrecourse Deductions for a
Partnership Year shall be determined in accordance with the rules of Regulations
Section 1.704-2(c).
"Nonrecourse Liability" has the meaning set forth in Regulations
---------------------
Section 1.752-1(a)(2).
"Notice of Redemption" means a Notice of Redemption substantially in
--------------------
the form of Exhibit D.
---------
"OpCo" means [insert the name of a taxable corporation that would,
----
among other things, directly or indirectly, (i) lease hotel properties from the
Partnership and its subsidiaries, (ii) own the "senior living services" business
currently owned by HMC Senior Communities, Inc., (iii) contract for the
operation of the properties under management agreements with third party
managers and (iv) pay the Partnership rent that will qualify as "rents from real
property" under Section 856(d) of the Code in the case of Host Marriott Trust,
and as "real property rent" under Section 7704(d) of the Code in the case of the
Partnership].
"Partner" means the General Partner or a Limited Partner, and
-------
"Partners" means the General Partner and the Limited Partners.
---------
"Partner Minimum Gain" means an amount, with respect to each Partner
--------------------
Nonrecourse Debt, equal to the Partnership Minimum Gain that would result if
such
-10-
Partner Nonrecourse Debt were treated as a Nonrecourse Liability, determined in
accordance with Regulations Section 1.704-2(i)(3).
"Partner Nonrecourse Debt" has the meaning set forth in Regulations
------------------------
Section 1.704-2(b)(4).
"Partner Nonrecourse Deductions" has the meaning set forth in
------------------------------
Regulations Section 1.704-2(i)(2), and the amount of Partner Nonrecourse
Deductions with respect to a Partner Nonrecourse Debt for a Partnership 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 upon
-----------
the terms and conditions set forth in this Agreement, or any successor to such
limited partnership.
"Partnership Interest" means a Limited Partnership Interest or the
--------------------
General Partnership Interest and includes any and all rights and 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 Units.
"Partnership Minimum Gain" has the meaning set forth in Regulations
------------------------
Section 1.704-2(b)(2), and the amount of Partnership Minimum Gain, as well as
any net increase or decrease in 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
-----------------------
General Partner either (i) for the distribution of Available Cash pursuant to
Section 5.1 hereof, which record date shall be the same as the record date
established by the General Partner Entity for a distribution to its shareholders
of some or all of its portion of such distribution, or (ii) if applicable, for
determining the Partners entitled to vote on or consent to any proposed action
for which the consent or approval of the Partners is sought pursuant to Section
15.2 hereof.
"Partnership Year" means the fiscal year of the Partnership, which
----------------
shall end on the Friday falling closest to December 31 of each year.
"Percentage Interest" means, as to a Partner holding a class of
-------------------
Partnership Interests, its interest in such class, determined by dividing the
Units of such class owned by such Partner by the total number of Units of such
class then outstanding as specified in Exhibit A, as such exhibit may be amended
---------
from time to time, multiplied by the aggregate Percentage Interest allocable to
such class of Partnership Interests. If the Partnership shall at any time have
outstanding more than one class of Partnership Interests, the Percentage
Interest attributable to each class of Partnership Interests shall be determined
as set forth in Section 4.2.B.
"Person" means an individual, corporation, limited liability company,
------
partnership, estate, trust (including a trust qualified under Sections 401(a) or
501(c)(17) of the Code), a portion of a trust permanently set aside for or to be
used exclusively for the
-11-
purposes described in Section 642(c) of the Code, association, private
foundation within the meaning of Section 509(a) of the Code, joint stock company
or other entity and also includes a group as that term is used for purposes of
Section 13(d)(3) of the Exchange Act.
"Plan" means (i) an employee benefit plan subject to Title I of ERISA
----
or (ii) a plan as defined in Section 4975(e) of the Code.
"Predecessor Entity" has the meaning set forth in the definition of
------------------
"Conversion Factor" herein.
"Publicly Traded" means listed or admitted to trading on the New York
---------------
Stock Exchange, the American Stock Exchange or another national securities
exchange or designated for quotation on the Nasdaq National Market, or any
successor to any of the foregoing.
"Qualified REIT Subsidiary" means any Subsidiary of the General
-------------------------
Partner that is a "qualified REIT subsidiary" within the meaning of Section
856(i) of the Code.
"Recapture Income" means any gain recognized by the Partnership
----------------
(computed without regard to any adjustment required by Section 734 or Section
743 of the Code) upon the disposition of any property or asset of the
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.A.
-----------------
"Redemption Amount" means either the Cash Amount or the Shares Amount,
-----------------
as determined by the General Partner, in its sole and absolute discretion;
provided that, if the Shares are not Publicly Traded at the time a Redeeming
-------------
Partner exercises its Unit Redemption Right, the Redemption Amount shall be paid
only in the form of the Cash Amount unless the Redeeming Partner, in its sole
and absolute discretion, consents to payment of the Redemption Amount in the
form of the Shares Amount. A Redeeming Partner shall have no right, without the
General Partner's consent, in its sole and absolute discretion, to receive the
Redemption Amount in the form of the Shares Amount.
"Regulation" or "Regulations" means the Income Tax Regulations
---------- -----------
promulgated under the Code, as such regulations may be amended from time to time
(including corresponding provisions of succeeding regulations).
"REIT" means a real estate investment trust under Section 856 of the
----
Code.
"REIT Requirements" have the meaning set forth in Section 5.1.A.
-----------------
"Residual Gain" or "Residual Loss" means any item of gain or loss, as
------------- -------------
the case may be, of the Partnership recognized for federal income tax purposes
resulting from a sale, exchange or other disposition of Contributed Property or
Adjusted Property, to the extent such item of gain or loss is not allocated
pursuant to Section 2.B.1(a) or 2.B.2(a) of Exhibit C to eliminate Book-Tax
---------
Disparities.
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"Safe Harbor" has the meaning set forth in Section 11.6.F.
-----------
"Securities Act" means the Securities Act of 1933, as amended.
--------------
"Share" means a share of beneficial interest (or other comparable
-----
equity interest) of the General Partner Entity. Shares may be issued in one or
more classes or series in accordance with the terms of the Declaration of Trust
(or, if the General Partner is not the General Partner Entity, the
organizational documents of the General Partner Entity). If there is more than
one class or series of Shares, the term "Shares" shall, as the context requires,
be deemed to refer to the class or series of Shares that correspond to the class
or series of Partnership Interests for which the reference to Shares is made.
When used with reference to Class A Units or Class B Units (including, without
limitation, for purposes of the definition of "Conversion Factor"), the term
"Shares" refers to common shares of beneficial interest (or other comparable
equity interest) of the General Partner Entity.
"Shares Amount" means a number of Shares equal to the product of the
-------------
number of Units offered for redemption by a Redeeming Partner times the
Conversion Factor; provided that, if at any time the General Partner Entity
-------------
issues to all holders of such class of Shares rights, options, warrants or
convertible or exchangeable securities entitling such holders to subscribe for
or purchase Shares or any other securities or property (collectively, the
"rights"), then the Shares Amount shall also include such rights that a holder
of that number of Shares would have been entitled to receive had it owned such
Shares at the time such rights were issued.
"Share Option Plan" means any equity incentive plan of the General
-----------------
Partner, the Partnership and/or any Affiliate of the Partnership.
"Specified Redemption Date" means, except as otherwise provided in any
-------------------------
agreement between the Partnership and any Partner, the tenth Business Day after
receipt by the General Partner of a Notice of Redemption; provided that, if the
-------------
Shares are not Publicly Traded, the Specified Redemption Date means the
thirtieth Business Day after receipt by the General Partner of a Notice of
Redemption.
"Subsidiary" means, with respect to any Person, any corporation,
----------
limited liability company, trust, partnership or joint venture, or other entity
of which a majority of (i) the voting power of the voting equity securities or
(ii) the outstanding equity interests is owned, directly or indirectly, by such
Person.
"Substituted Limited Partner" means a Person who is admitted as a
---------------------------
Limited Partner to the Partnership pursuant to Section 11.4.
"Successor Entity" has the meaning set forth in the definition of
----------------
"Conversion Factor" herein.
"Terminating Capital Transaction" means any sale or other disposition
-------------------------------
of all or substantially all of the assets of the Partnership for cash 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 for
cash.
-13-
"Termination Transaction" has the meaning set forth in Section 11.2.B.
-----------------------
"Unit" means a fractional, undivided share of the Partnership
----
Interests of all Partners issued pursuant to Sections 4.1 and 4.2, and includes
Class A Units, Class B Units and any other classes or series of Units
established after the date hereof. The number of Units outstanding and the
Percentage Interests in the Partnership represented by such Units are set forth
in Exhibit A, as such Exhibit may be amended from time to time. The ownership
---------
of Units shall be evidenced by a certificate in a form approved by the General
Partner.
"Unit Redemption Right" has the meaning set forth in Section 8.6.
---------------------
"Unrealized Gain" attributable to any item of Partnership property
---------------
means, as of any date of determination, the excess, if any, of (i) the fair
market value of such property (as determined under Exhibit B) as of such date,
---------
over (ii) the Carrying Value of such property (prior to any adjustment to be
made pursuant to Exhibit B) as of such date.
---------
"Unrealized Loss" attributable to any item of Partnership property
---------------
means, as of any date of determination, the excess, if any, of (i) the Carrying
Value of such property (prior to any adjustment to be made pursuant to Exhibit
-------
B) as of such date, over (ii) the fair market value of such property (as
determined under Exhibit B) as of such date.
---------
"Valuation Date" means the date of receipt by the General Partner of a
--------------
Notice of Redemption or, if such date is not a Business Day, the first Business
Day thereafter.
"Value" means, with respect to any outstanding Shares of the General
-----
Partner Entity that are Publicly Traded, the average of the daily market price
for the ten consecutive trading days immediately preceding the date with respect
to which value must be determined. The market price for each such trading day
shall be 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.
If the outstanding Shares of the General Partner Entity are Publicly Traded and
the Shares Amount includes rights that a holder of Shares would be entitled to
receive, 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. If the
Shares of the General Partner Entity are not Publicly Traded, the Value of the
Shares Amount per Unit offered for redemption (which will be the Cash Amount per
Unit offered for redemption payable pursuant to Section 8.6.A) means the amount
that a holder of one Unit would receive if each of the assets of the Partnership
were to be sold for its fair market value on the Specified Redemption Date, the
Partnership were to pay all of its outstanding liabilities, and the remaining
proceeds were to be distributed to the Partners in accordance with the terms of
this Agreement. Such Value shall be determined by the General Partner, acting
in good faith and based upon a commercially reasonable estimate of the amount
that would be realized by the Partnership if each asset of the Partnership (and
each asset of each partnership, limited liability company, trust, joint venture
or other entity in which the Partnership owns a direct or indirect interest)
were sold to an unrelated purchaser in an arms' length transaction where neither
the purchaser nor the seller were under economic
-14-
compulsion to enter into the transaction (without regard to any discount in
value as a result of the Partnership's minority interest in any property or any
illiquidity of the Partnership's interest in any property). In connection with
determining the Deemed Value of the Partnership Interest for purposes of
determining the number of additional Units issuable upon a Capital Contribution
funded by an underwritten public offering or an arm's length private placement
of shares of beneficial interest (or other comparable equity interest) of the
General Partner, the Value of such shares shall be the public offering or arm's
length private placement price per share of such class of beneficial interest
(or other comparable equity interest) sold.
ARTICLE II
ORGANIZATIONAL MATTERS
Section 2.1 Organization
The Partnership is a limited partnership organized pursuant to the
provisions of the Act and upon the terms and conditions set forth in the Prior
Agreement. The Partners hereby agree to continue the business of the
Partnership upon the terms and conditions set forth in this Agreement. Except
as expressly provided herein to the contrary, the rights and obligations of the
Partners and the administration and termination of the Partnership shall be
governed by the Act. The Partnership Interest of each Partner shall be personal
property for all purposes.
Section 2.2 Name
The name of the Partnership is Host Marriott, L.P. The Partnership's
business may be conducted under any other name or names deemed advisable by the
General Partner, including the name of the General Partner or any Affiliate
thereof. The words "Limited Partnership," "L.P.," "Ltd." or similar words or
letters shall be included in the Partnership's name where necessary for the
purposes of complying with the laws of any jurisdiction that so requires. The
General Partner in its sole and absolute discretion may change the name of the
Partnership at any time and from time to time and shall notify the Limited
Partners of such change in the next regular communication to the Limited
Partners.
Section 2.3 Registered Office and Agent; Principal Office
The address of the registered office of the Partnership in the State
of Delaware shall be located at ▇▇▇▇ ▇▇▇▇▇▇ ▇▇▇▇, ▇▇▇▇▇▇ ▇▇ ▇▇▇ ▇▇▇▇▇▇,
▇▇▇▇▇▇▇▇▇▇, ▇▇▇▇▇▇▇▇ ▇▇▇▇▇, and the registered agent for service of process on
the Partnership in the State of Delaware at such registered office shall be The
▇▇▇▇▇▇▇▇-▇▇▇▇ Corporation System, Inc. 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 other place or
places within or outside the State of Delaware as the General Partner deems
advisable.
-15-
Section 2.4 Term
The term of the Partnership commenced on April 15, 1998, the date the
Certificate was filed in the office of the Secretary of State of the State of
Delaware in accordance with the Act, and shall continue until December 31, 2098,
unless it is dissolved sooner pursuant to the provisions of Article XIV or as
otherwise provided by law.
ARTICLE III
PURPOSE
Section 3.1 Purpose and Business
The purpose and nature of the business to be conducted by the
Partnership is (i) to conduct any business that may be lawfully conducted by a
limited partnership organized pursuant to the Act; provided, however, that such
-------- -------
business shall be limited to and conducted in such a manner as to permit the
General Partner Entity at all times to be classified as a REIT, unless the
General Partner Entity ceases to qualify or is not qualified as a REIT for any
reason or reasons not related to the business conducted by the Partnership, (ii)
to enter into any corporation, partnership, joint venture, trust, limited
liability company or other similar arrangement to engage in any of the foregoing
or the ownership of interests in any entity engaged, directly or indirectly, in
any of the foregoing and (iii) to do anything necessary or incidental to the
foregoing. In connection with the foregoing, the Partners acknowledge that the
status of the General Partner Entity as a REIT inures to the benefit of all the
Partners and not solely to the General Partner Entity or its Affiliates.
Section 3.2 Powers
The Partnership is empowered to do any and all acts and things
necessary, appropriate, proper, advisable, incidental to or convenient for the
furtherance and accomplishment of the purposes and business described herein and
for the protection and benefit of the Partnership, including, without
limitation, full power and authority, directly or through its ownership interest
in other entities, to enter into, perform and carry out contracts of any kind,
borrow money and issue evidences of indebtedness, whether or not secured by
mortgage, deed of trust, pledge or other lien, acquire, own, manage, improve and
develop real property, and lease, sell, transfer and dispose of real property;
provided, however, that the Partnership shall not take, or refrain from taking,
-----------------
any action which, in the judgment of the General Partner, in its sole and
absolute discretion, (i) could adversely affect the ability of the General
Partner Entity to continue to qualify as a REIT, (ii) could subject the General
Partner Entity to any additional taxes under Section 857 or Section 4981 of the
Code or (iii) could violate any law or regulation of any governmental body or
agency having jurisdiction over the General Partner or its securities, unless
such action (or inaction) shall have been specifically consented to by the
General Partner in writing.
-16-
ARTICLE IV
CAPITAL CONTRIBUTIONS AND ISSUANCES
OF PARTNERSHIP INTERESTS
Section 4.1 Capital Contributions of the Partners; Restatement of Capital
Accounts on the Date Hereof
HMC Real Estate Corporation and ▇▇▇▇▇▇▇▇▇▇▇ ▇. ▇▇▇▇▇▇▇▇ previously
made Capital Contributions to the Partnership. Pursuant to the Act and the
Prior Agreement, the initial General Partner has converted its General
Partnership Interest into a Limited Partnership Interest and has withdrawn as
General Partner from the Partnership and the Limited Partnership Interest of
▇▇▇▇▇▇▇▇▇▇▇ ▇. ▇▇▇▇▇▇▇▇ has been canceled. On the date hereof, the Partners
made the Capital Contributions described in Exhibit E. On the date hereof the
---------
Partnership shall be recapitalized so that the Partners shall own Units in the
amounts set forth in Exhibit A and shall have a Percentage Interest in the
---------
Partnership as set forth in Exhibit A, which Percentage Interest shall be
---------
adjusted in Exhibit A from time to time by the General Partner to the extent
---------
necessary to reflect accurately redemptions, Capital Contributions, the issuance
of additional Units or similar events having an effect on a Partner's Percentage
Interest. To the extent the Partnership acquires any property by the merger of
any other Person into the Partnership, Persons who receive Partnership Interests
in exchange for their interests in the Person merging into the Partnership shall
become Partners and shall be deemed to have made Capital Contributions as
provided in the applicable merger agreement (or if not so provided, as
determined by the General Partner in its sole discretion) and as set forth in
Exhibit A. A number of Units held by the General Partner equal to one percent
---------
(1%) of all outstanding Units (as of the date hereof) shall be the General
Partnership Interest of the General Partner. All other Units held by the
General Partner shall be deemed to be Limited Partnership Interests and shall be
held by the General Partner in its capacity as a Limited Partner in the
Partnership. Except as provided in Sections 7.5 and 10.5 hereof, the Partners
shall have no obligation to make any additional Capital Contributions or provide
any additional funding to the Partnership (whether in the form of loans,
repayments of loans or otherwise). No Partner shall have any obligation to
restore any deficit that may exist in its Capital Account, either upon a
liquidation of the Partnership or otherwise.
Section 4.2 Issuances of Partnership Interests
A. General. The General Partner is hereby authorized to cause the
-------
Partnership from time to time to issue to Partners (including the General
Partner and its Affiliates) or other Persons (including, without limitation, in
connection with the contribution of property to the Partnership) Units or other
Partnership Interests in one or more classes, or in one or more series of any of
such classes, with such designations, preferences and relative, participating,
optional or other special rights, powers and duties, including rights, powers
and duties senior to Limited Partnership Interests, all as shall be determined,
subject to applicable Delaware law, by the General Partner in its sole and
absolute discretion, 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
-17-
Partnership distributions and (iii) the rights of each such class or series of
Partnership Interests upon dissolution and liquidation of the Partnership;
provided that, except in connection with the issuance of Units on the date
-------------
hereof, no such Units or other Partnership Interests shall be issued to (w) the
General Partner, (x) the General Partner Entity or (y) any Person that owns,
directly or indirectly, fifty percent (50%) or more of the common shares of
beneficial interest (or other comparable equity interests) of the General
Partner Entity unless either (a) the Partnership Interests are issued in
connection with the grant, award or issuance of Shares or other equity interests
in the General Partner Entity having designations, preferences and other rights
such that the economic interests attributable to such Shares or other equity
interests are substantially the same as the designations, preferences and other
rights (except voting rights) of the Partnership Interests issued to the General
Partner in accordance with this Section 4.2.A or (b) the additional Partnership
Interests are issued to all Partners holding Partnership Interests in the same
class in proportion to their respective Percentage Interests in such classes
(considering the Class A Units and Class B Units as one class for such
purposes). If the Partnership issues Partnership Interests pursuant to this
Section 4.2.A, the General Partner shall make such revisions to this Agreement
(including but not limited to the revisions described in Section 5.4, Section
6.2 and Section 8.6) as it deems necessary to reflect the issuance of such
Partnership Interests.
B. Percentage Interest Adjustments in the Case of Capital
------------------------------------------------------
Contributions for Units. Upon the acceptance of additional Capital
-----------------------
Contributions in exchange for Units and if the Partnership shall have
outstanding more than one class of Partnership Interests, the Percentage
Interest attributable to the additional Units issued by the Partnership shall be
equal to a fraction, the numerator of which is equal to the aggregate amount of
cash, if any, plus the Agreed Value of Contributed Property, if any, contributed
with respect to such additional Units and the denominator of which is equal to
the sum of (i) the Deemed Value of the Partnership Interests for all outstanding
classes (computed as of the Business Day immediately preceding the date on which
the additional Capital Contributions are made (an "Adjustment Date")) plus (ii)
the aggregate amount of cash, if any, plus the Agreed Value of Contributed
Property, if any, contributed to the Partnership on such Adjustment Date in
respect of such additional Units. For purposes of foregoing, Class A Units and
Class B Units shall be considered one class. The Percentage Interest of each
other Partner holding Partnership Interests not making a full pro rata Capital
Contribution shall be adjusted to a fraction the numerator of which is equal to
the sum of (a) the Deemed Partnership Interest Value of such Limited Partner
(computed as of the Business Day immediately preceding the Adjustment Date) plus
(b) the amount of additional Capital Contributions (such amount being equal to
the amount of cash, if any, plus the Agreed Value of Contributed Property, if
any, so contributed), if any, made by such Partner to the Partnership in respect
of such Partnership Interest as of such Adjustment Date and the denominator of
which is equal to the sum of (I) the Deemed Value of the Partnership Interests
of all outstanding classes (computed as of the Business Day immediately
preceding such Adjustment Date) plus (II) the aggregate amount of the additional
Capital Contributions contributed to the Partnership on such Adjustment Date in
respect of such additional Partnership Interests. For purposes of calculating a
Partner's Percentage Interest pursuant to this Section 4.2.B, cash Capital
Contributions by a General Partner will be deemed to equal the cash contributed
by such General Partner plus (A) in the case of cash contributions funded by an
offering of any equity interests in or
-18-
other securities of the General Partner, the offering costs attributable to the
cash contributed to the Partnership, and (B) in the case of Units issued
pursuant to Section 7.5.E, an amount equal to the difference between the Value
of the Shares sold pursuant to any Share Option Plan and the net proceeds of
such sale.
C. Classes of Units. From and after the date hereof, subject to
----------------
Section 4.2.A above, the Partnership shall have two classes of Units entitled
"Class A Units" and "Class B Units." Either Class A Units or Class B Units, at
the election of the General Partner, in its sole and absolute discretion, may be
issued to newly admitted Partners in exchange for the contribution by such
Partners of cash, real estate partnership interests, stock, notes or other
assets or consideration; provided, that all Units issued to Partners on the
--------
Closing Date shall be Class A Units; and, provided further, that any Unit that
----------------
is not specifically designated by the General Partner as being of a particular
class shall be deemed to be a Class A Unit. Each Class B Unit shall be
converted automatically into a Class A Unit on the day immediately following the
Partnership Record Date for the Distribution Period (as defined in Section
5.1.C) in which such Class B Unit was issued, without the requirement for any
action by either the Partnership or the Partner holding the Class B Unit.
D. Certain Restrictions on Issuances of Units or Other Partnership
---------------------------------------------------------------
Interests. Notwithstanding the foregoing, in no event may the General Partner
---------
cause the Partnership to issue to Partners (including the General Partner and
its Affiliates) or other Persons any Units or other Partnership Interests (i) if
such issuance would cause the Partnership Interests of "benefit plan investors"
to become "significant," as those terms are used in 29 C.F.R. (S)2510.3-101(f),
or any successor regulation thereto, or would cause the Partnership to become,
with respect to any employee benefit plan subject to Title I of ERISA, a "party-
in-interest" (as defined in Section 3(14) of ERISA) or, with respect to any plan
defined in Section 4975(e) of the Code, a "disqualified person" (as defined in
Section 4975(e) of the Code), or (ii) if such issuance would, in the opinion of
counsel to the Partnership, cause any portion of the assets of the Partnership
to constitute assets of any ERISA Plan Investor pursuant to 29 C.F.R.
(S)2510.3-101, or any successor regulation thereto.
Section 4.3 No Preemptive Rights
Except to the extent expressly granted by the Partnership pursuant to
another agreement, no Person 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 Units or other Partnership
Interests.
Section 4.4 Other Contribution Provisions
If any Partner is admitted to the Partnership and is given a Capital
Account in exchange for services rendered to the Partnership, such transaction
shall be treated by the Partnership and the affected Partner as if the
Partnership had compensated such Partner in cash, and the Partner had
contributed such cash to the capital of the Partnership.
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Section 4.5 No Interest on Capital
No Partner shall be entitled to interest on its Capital Contributions
or its Capital Account.
ARTICLE V
DISTRIBUTIONS
Section 5.1 Requirement and Characterization of Distributions
A. General. The Partnership shall distribute at least quarterly an
-------
amount equal to one hundred percent (100%) of Available Cash of the Partnership
during such quarter or shorter period to the Partners who are Partners on the
Partnership Record Date with respect to such quarter or shorter period as
provided in Sections 5.1.B, 5.1.C and 5.1.D. Notwithstanding anything to the
contrary contained herein, in no event may a Partner receive a distribution of
Available Cash with respect to a Unit for a quarter or shorter period if such
Partner is entitled to receive a distribution with respect to a Share for which
such Unit has been redeemed or exchanged. Unless otherwise expressly provided
for herein or in an agreement at the time a new class of Partnership Interests
is created in accordance with Article IV hereof, no Partnership Interest shall
be entitled to a distribution in preference to any other Partnership Interest.
The General Partner shall make such reasonable efforts, as determined by it in
its sole and absolute discretion and consistent with the qualification of the
General Partner Entity as a REIT, to distribute Available Cash (a) to Limited
Partners so as to preclude any such distribution or portion thereof from being
treated as part of a sale of property of the Partnership by a Limited Partner
under Section 707 of the Code or the Regulations thereunder; provided that, the
-------------
General Partner and the Partnership shall not have liability to a Limited
Partner under any circumstances as a result of any distribution to a Limited
Partner being so treated, and (b) to the General Partner in an amount sufficient
to enable the General Partner Entity to pay shareholder dividends that will (1)
satisfy the requirements for qualification as a REIT under the Code and the
Regulations (the "REIT Requirements") of, and (2) avoid any federal income or
excise tax liability for, the General Partner Entity.
B. Method. (i) Each holder of Partnership Interests that is entitled
------
to any preference in distribution shall be entitled to a distribution in
accordance with the rights of any such class of Partnership Interests (and,
within such class, pro rata in proportion to the respective Percentage Interests
on such Partnership Record Date); and
(ii) To the extent there is Available Cash remaining after the payment
of any preference in distribution in accordance with the foregoing clause (i),
with respect to Partnership Interests that are not entitled to any preference in
distribution, pro rata to each such class in accordance with the terms of such
class as set forth in this Agreement or otherwise established by the General
Partner pursuant to Section 4.2 (and, within each such class, pro rata in
proportion to the respective Percentage Interests on such Partnership Record
Date).
C. Distributions When Class B Units Are Outstanding. If for any
-------------------------------------------------
quarter or shorter period with respect to which a distribution is to be made (a
"Distribution
-20-
Period") Class B Units are outstanding on the Partnership Record Date for such
Distribution Period, the General Partner shall allocate the Available Cash with
respect to such Distribution Period available for distribution with respect to
the Class A Units and Class B Units collectively between the Partners who are
holders of Class A Units ("Class A") and the Partners who are holders of Class B
Units ("Class B") as follows:
(1) Class A shall receive that portion of the Available
Cash (the "Class A Share") determined by multiplying the amount
of Available Cash by the following fraction:
A x Y
-------------------------------
(A x Y)+(B x X)
(2) Class B shall receive that portion of the Available
Cash (the "Class B Share") determined by multiplying the amount
of Available Cash by the following fraction:
B x X
-------------------------------
(A x Y)+(B x X)
(3) For purposes of the foregoing formulas, (i) "A"
equals the number of Class A Units outstanding on the Partnership
Record Date for such Distribution Period; (ii) "B" equals the
number of Class B Units outstanding on the Partnership Record
Date for such Distribution Period; (iii) "Y" equals the number of
days in the Distribution Period; and (iv) "X" equals the number
of days in the Distribution Period for which the Class B Units
were issued and outstanding.
The Class A Share shall be distributed pro rata among Partners holding
Class A Units on the Partnership Record Date for the Distribution Period in
accordance with the number of Class A Units held by each Partner on such
Partnership Record Date; provided that, in no event may a Partner receive a
-------------
distribution of Available Cash with respect to a Class A Unit if a Partner is
entitled to receive a distribution with respect to a Share for which such Class
A Unit has been redeemed or exchanged. The Class B Share shall be distributed
pro rata among the Partners holding Class B Units on the Partnership Record Date
for the Distribution Period in accordance with the number of Class B Units held
by each Partner on such Partnership Record Date. In no event shall any Class B
-21-
Units be entitled to receive any distribution of Available Cash for any
Distribution Period ending prior to the date on which such Class B Units are
issued.
D. Distributions When Class B Units Have Been Issued on Different
--------------------------------------------------------------
Dates. If Class B Units which have been issued on different dates are
-----
outstanding on the Partnership Record Date for any Distribution Period, then the
Class B Units issued on each particular date shall be treated as a separate
series of Units for purposes of making the allocation of Available Cash for such
Distribution Period among the holders of Units (and the formula for making such
allocation, and the definitions of variables used therein, shall be modified
accordingly). Thus, for example, if two series of Class B Units are outstanding
on the Partnership Record Date for any Distribution Period, the allocation
formula for each series, "Series B\\1\\" and "Series B\\2\\" would be as
follows:
(1) Series B\\1\\ shall receive that portion of the
Available Cash determined by multiplying the amount of Available
Cash by the following fraction:
B\\1\\ x X\\1\\
-------------------------------------------
(A x Y)+(B\\1\\ x X\\1\\)+(B\\2\\ x X\\2\\)
(2) Series B\\2\\ shall receive that portion of the
Available Cash determined by multiplying the amount of Available
Cash by the following fraction:
B\\2\\ x X\\2\\
-------------------------------------------
(A x Y)+(B\\1\\ x X\\1\\)+(B\\2\\ x X\\2\\)
(3) For purposes of the foregoing formulas the
definitions set forth in Section 5.1.C.3 remain the same except
that (i) "B\\1\\" equals the number of Units in Series B\\1\\
outstanding on the Partnership Record Date for such Distribution
Period; (ii) "B\\2\\" equals the number of Units in Series B\\2\\
outstanding on the Partnership Record Date for such Distribution
Period; (iii) "X\\1\\" equals the number of days in the
Distribution Period for which the Units in Series B\\1\\ were
issued and outstanding; and (iv) "X\\2\\" equals the number of
days in the Distribution Period for which the Units in Series
B\\2\\ were issued and outstanding.
-22-
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 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, as the case may be, pursuant to Section 5.1 for all purposes under
this Agreement.
Section 5.3 Distributions Upon Liquidation
Proceeds from a Terminating Capital Transaction shall be distributed
to the Partners in accordance with Section 14.2.A.
Section 5.4 Revisions to Reflect Issuance of Partnership Interests
If the Partnership issues Partnership Interests to the General Partner
or any Additional Limited Partner pursuant to Article IV hereof, the General
Partner shall make such revisions to this Article V and Exhibit A as it deems
---------
necessary to reflect the issuance of such additional Partnership Interests
without the requirement for any other consents or approvals of any other
Partner.
ARTICLE VI
ALLOCATIONS
Section 6.1 Allocations For Capital Account Purposes
For purposes of maintaining the Capital Accounts and in determining
the rights of the Partners among themselves, the Partnership's items of income,
gain, loss and deduction (computed in accordance with Exhibit B) 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 C, 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, (ii) second, to the holders of any Partnership Interests that are
entitled to any preference in distribution in accordance with the rights of any
such class of Partnership Interests until each such Partnership Interest has
been allocated, on a cumulative basis pursuant to this clause (ii), Net Income
equal to the amount of distributions received which are attributable to the
preference of such class of Partnership Interests (and, within such class, pro
rata in proportion to the respective Percentage Interests as of the last day of
the period for which such allocation is being made) and (iii) third, with
respect to Partnership Interests that are not entitled to any preference in the
allocation of Net Income, pro rata to each such class in accordance with the
terms of such class as set forth in this Agreement or otherwise established by
the General Partner pursuant to Section 4.2 (and, within such class, pro rata in
proportion to
-23-
the respective Percentage Interests as of the last day of the period for which
such allocation is being made).
B. Net Losses. After giving effect to the special allocations set
----------
forth in Section 1 of Exhibit C, Net Losses shall be allocated (i) first, to the
---------
holders of any Partnership Interests that are entitled to any preference in
distribution in accordance with the rights of any such class of Partnership
Interests to the extent that any prior allocations of Net Income to such class
of Partnership Interests pursuant to Section 6.1.A (ii) exceed, on a cumulative
basis, distributions with respect to such Partnership Interests pursuant to
clause (i) of Section 5.1.B (and, within such class, pro rata in proportion to
the respective Percentage Interests as of the last day of the period for which
such allocation is being made) and (ii) second, with respect to classes of
Partnership Interests that are not entitled to any preference in distribution,
pro rata to each such class in accordance with the terms of such class as set
forth in this Agreement or otherwise established by the General Partner pursuant
to Section 4.2 (and, within such class, pro rata in proportion to the respective
Percentage Interests as of the last day of the period for which such allocation
is being made); 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 (or
increase any existing Adjusted Capital Account Deficit) at the end of such
taxable year (or portion thereof). 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 Regulation
------------------------------
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 by the
General Partner by taking into account the facts and circumstances relating to
each Partner's respective interest in the profits of the Partnership. For this
purpose, the General Partner shall have the sole and absolute discretion in any
fiscal year to allocate such excess Nonrecourse Liabilities among the Partners
in any manner permitted under Code Section 752 and the Regulations thereunder.
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 C, be characterized as Recapture Income in the same proportions and
---------
to the same extent as such Partners have been allocated any deductions directly
or indirectly giving rise to the treatment of such gains as Recapture Income.
Section 6.2 Revisions to Allocations to Reflect Issuance of Partnership
Interests
If the Partnership issues Partnership Interests to the General Partner
or any Additional Limited Partner pursuant to Article IV hereof, the General
Partner shall make such revisions to this Article VI and Exhibit A as it deems
---------
necessary to reflect the terms of the issuance of such Partnership Interests,
including making preferential allocations to
-24-
classes of Partnership Interests that are entitled thereto. Such revisions shall
not require the consent or approval of any other Partner.
ARTICLE VII
MANAGEMENT AND OPERATIONS OF BUSINESS
Section 7.1 Management
▇. ▇▇▇▇▇▇ of the General Partner. 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 (unless the Shares of the General Partner Entity corresponding to Class A
Units are not Publicly Traded, in which case the General Partner may be removed
for cause). In addition to the powers now or hereafter granted a general
partner of a limited partnership under applicable law or which are granted to
the General Partner under any other provision of this Agreement, the General
Partner, subject to Section 7.11, 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 and to effectuate
the purposes set forth in Section 3.1, including, without limitation:
(1) the making of any expenditures, the lending or borrowing of
money (including, without limitation, making prepayments on
loans and borrowing money to permit the Partnership to make
distributions to its Partners in such amounts as are
required under Section 5.1.E or will permit the General
Partner Entity (so long as the General Partner Entity
qualifies as a REIT) to avoid the payment of any federal
income tax (including, for this purpose, any excise tax
pursuant to Section 4981 of the Code) and to make
distributions to its shareholders sufficient to permit the
General Partner Entity to maintain its REIT status), the
assumption or guarantee of, or other contracting for,
indebtedness and other liabilities, the issuance of
evidences of indebtedness (including the securing of same by
mortgage, deed of trust or other lien or encumbrance on the
Partnership's assets) and the incurring of any obligations
the General Partner Entity 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 or all of the assets of the
-25-
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 on such terms
as the General Partner deems proper;
(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 the Partnership has an equity investment and the
making of capital contributions to its Subsidiaries;
(5) the management, operation, leasing, landscaping, repair,
alteration, demolition or improvement of any real property
or improvements owned by the Partnership or any Subsidiary
of the Partnership or any Person in which the Partnership
has made a direct or indirect equity investment;
(6) the negotiation, execution, and performance of any
contracts, conveyances or other instruments that the General
Partner considers useful or necessary to the conduct of the
Partnership's operations or the implementation of the
General Partner's powers under this Agreement, including
contracting with contractors, developers, consultants,
accountants, legal counsel, other professional advisors and
other agents and the payment of their expenses and
compensation out of the Partnership's assets;
(7) the mortgage, pledge, encumbrance or hypothecation of any
assets of the Partnership, and 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 or the operations of the
General Partner or the Partnership, the lending of funds to
other Persons (including, without limitation, any
Subsidiaries of the Partnership) and the repayment of
obligations of the Partnership, any of its Subsidiaries and
any other Person in which it has an equity investment;
-26-
(8) the distribution of Partnership cash or other Partnership
assets in accordance with this Agreement;
(9) the holding, managing, investing and reinvesting of cash and
other assets of the Partnership;
(10) the collection and receipt of revenues and income of the
Partnership;
(11) the selection, designation of powers, authority and duties
and the dismissal of employees of the Partnership
(including, without limitation, employees having titles such
as "president," "vice president," "secretary" and
"treasurer") and agents, outside attorneys, accountants,
consultants and contractors of the Partnership and the
determination of their compensation and other terms of
employment or hiring;
(12) the maintenance of such insurance for the benefit of the
Partnership and the Partners as it deems necessary or
appropriate;
(13) the formation of, or acquisition of an interest (including
non-voting interests in entities controlled by Affiliates of
the Partnership or third parties) in, and the contribution
of property to, any further limited or general partnerships,
joint ventures, limited liability companies or other
relationships that it deems desirable (including, without
limitation, the acquisition of interests in, and the
contributions of funds or property to, or making of loans
to, its Subsidiaries and any other Person in which it has an
equity investment from time to time, or the incurrence of
indebtedness on behalf of such Persons or the guarantee of
the obligations of such Persons); provided that, as long as
the General Partner has determined to continue to qualify as
a REIT, the Partnership may not engage in any such
formation, acquisition or contribution that would cause the
General Partner to fail to qualify as a REIT;
(14) 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, 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
-27-
Person against liabilities and contingencies to the extent
permitted by law;
(15) the determination of the fair market value of any
Partnership property distributed in kind, using such
reasonable method of valuation as the General Partner may
adopt;
(16) the exercise, directly or indirectly, through any attorney-
in-fact acting under a general or limited power of attorney,
of any right, including the right to vote, appurtenant to
any assets 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,
individually 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 any interest pursuant to
contractual or other arrangements with such Person;
(19) the making, executing and delivering 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
other legal instruments or agreements in writing necessary
or appropriate in the judgment of the General Partner for
the accomplishment of any of the powers of the General
Partner enumerated in this Agreement;
(20) the distribution of cash to acquire Units held by a Limited
Partner in connection with a Limited Partner's exercise of
its Unit Redemption Right under Section 8.6; and
(21) the amendment and restatement of Exhibit A to reflect
---------
accurately at all times the Capital Contributions and
Percentage Interests of the Partners as the same are
adjusted from time to time to the extent necessary to
reflect redemptions, Capital Contributions, the issuance of
Units, the admission of any Additional Limited Partner or
any Substituted Limited Partner or otherwise, which
amendment and restatement, notwithstanding anything in this
Agreement to the contrary, shall not be deemed an amendment
of this Agreement, as long as the matter or event being
reflected in Exhibit A otherwise is authorized by this
---------
Agreement.
-28-
B. No Approval by Limited Partners. Except as provided in Section
-------------------------------
7.11, 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 full 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 any other
Persons under this Agreement or of any duty stated or implied by law or equity.
C. Insurance. At all times from and after the date hereof, the
---------
General Partner may 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 and (iii) such other insurance
as the General Partner, in its sole and absolute discretion, determines to be
necessary.
D. Working Capital and Other Reserves. At all times from and after
----------------------------------
the date hereof, the General Partner may cause the Partnership to establish and
maintain working capital reserves in such amounts as the General Partner, in its
sole and absolute discretion, deems appropriate and reasonable from time to
time, including upon liquidation of the Partnership under Article XIII.
E. No Obligation to Consider Tax Consequences of Limited Partners.
--------------------------------------------------------------
In exercising its authority under this Agreement, the General Partner may, but
shall be under no obligation to, take into account the tax consequences to any
Partner (including the General Partner) of any action taken (or not taken) by
any of them. The General Partner is acting on behalf of the Partnership's
Limited Partners and its shareholders collectively. The General Partner and the
Partnership shall not have liability to a Limited Partner for monetary damages
or otherwise for losses sustained, liabilities incurred or benefits not derived
by such Limited Partner in connection with such decisions, provided that the
General Partner has acted in good faith and pursuant to its authority under this
Agreement.
Section 7.2 Certificate of Limited Partnership
The initial General Partner has previously filed the Certificate with
the Secretary of State of Delaware. 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, the District of Columbia or other
jurisdiction in which the Partnership may elect to do business or own property.
Subject to the terms of Section 8.5.A(4), 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. 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
-29-
limited partnership (or a partnership in which the limited partners have limited
liability) in the State of Delaware and any other state, the District of
Columbia or other jurisdiction in which the Partnership may elect to do business
or own property.
Section 7.3 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 Partners, 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 that entity for the use and benefit of the
Partnership in accordance with the provisions of this Agreement. All
Partnership assets shall be recorded as the property of the Partnership in its
books and records, irrespective of the name in which legal title to such
Partnership assets is held.
Section 7.4 Reimbursement of the General Partner
A. No Compensation. Except as provided in this Section 7.4 and
---------------
elsewhere in this Agreement (including the provisions of Articles V and VI
regarding distributions, payments and allocations to which it may be entitled),
the General Partner shall not receive payment from the Partnership or otherwise
be compensated for its services as general partner of the Partnership.
B. Responsibility for Partnership and General Partner Expenses.
------------------------------------------------------------
The Partnership shall
be responsible for and shall pay all expenses relating to the Partnership's
organization, the ownership of its assets and its operations and the Partnership
shall be responsible for and shall pay or reimburse all expenses and discharge
all liabilities of any nature whatsoever that the General Partner may incur
(including, without limitation, expenses related to the operations of the
General Partner and to the management and administration of any Subsidiaries
of the General Partner permitted under Section 7.5.A or the Partnership
or Subsidiaries of the Partnership, such as auditing expenses and
filing fees); provided that, (i) the amount of any such reimbursement shall be
-------------
reduced by (x) 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 (which interest is considered to
belong to the Partnership and shall be paid over to the Partnership to the
extent not applied to reimburse the General Partner for expenses hereunder); and
(y) any amount derived by the General Partner from any investments permitted in
Section 7.5.A; (ii) the Partnership shall not be responsible for any taxes that
the General Partner would not have been required to pay if is qualified as a
REIT for federal income tax purposes or any taxes imposed on the General Partner
by reason of its failure to distribute to its shareholders an amount equal to
its taxable income; (iii) the Partnership shall not be responsible for expenses
or liabilities incurred by the General Partner in connection with any business
or assets of the General Partner other than its ownership of Partnership
Interests or operation of the business of the Partnership or ownership of
interest in Qualified REIT Subsidiaries to the extent permitted in Section
7.5.A; and (iv) the Partnership shall not be responsible for any expenses or
liabilities of the General Partner that are excluded from the scope of the
indemnification provisions of Section 7.7.A by reason of the provisions of
clause (i), (ii) or (iii) thereof. The General Partner shall determine in good
faith the amount of expenses incurred by it related to the ownership of
Partnership Interests or operation of, or for the benefit of, the Partnership.
If certain expenses are incurred that are related both to the ownership of
Partnership Interests or operation of, or for the benefit of the Partnership and
to the ownership of other assets (other than Qualified REIT Subsidiaries as
permitted under Section 7.7.A) or the operation of other businesses, such
expenses will be allocated to the Partnership and such other entities (including
the General Partner) owning such other assets or businesses in such a manner as
the General Partner in its sole and absolute discretion deems
-30-
fair and reasonable. Such reimbursements shall be in addition to any
reimbursement to the General Partner pursuant to Section 10.3.C and as a result
of indemnification pursuant to Section 7.7. All payments and reimbursements
hereunder shall be characterized for federal income tax purposes as expenses of
the Partnership incurred on its behalf, and not as expenses of the General
Partner.
C. Partnership Interest Issuance Expenses. The General Partner shall
--------------------------------------
also be reimbursed for all expenses it incurs relating to any issuance of
Partnership Interests, Shares, Debt of the Partnership or Funding Debt of the
General Partner or rights, options, warrants or convertible or exchangeable
securities pursuant to Article IV (including, without limitation, all costs,
expenses, damages and other payments resulting from or arising in connection
with litigation related to any of the foregoing), all of which expenses are
considered by the Partners to constitute expenses of, and for the benefit of,
the Partnership.
D. Purchases of Shares by the General Partner. If the General
------------------------------------------
Partner exercises its rights under the Declaration of Trust to purchase Shares
or otherwise elects to purchase from its shareholders Shares in connection with
a share repurchase or similar program or for the purpose of delivering such
Shares to satisfy an obligation under any dividend reinvestment or equity
purchase program adopted by the General Partner, any employee equity 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 those 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 reimbursable to the General Partner, subject to the
conditions that: (i) if those 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 those Shares (provided that a transfer of Shares for
Units pursuant to Section 8.6 would not be considered a sale for such purposes),
and (ii) if such Shares are not retransferred by the General Partner within
thirty (30) days after the purchase thereof, the General Partner shall cause the
Partnership to cancel a number of Units (rounded to the nearest whole Unit) held
by the General Partner equal to the product attained by multiplying the number
of those Shares by a fraction, the numerator of which is one and the denominator
of which is the Conversion Factor, which Units shall be treated as having been
redeemed by the Partnership for the payment made by the Partnership to the
General Partner with respect to the corresponding Shares.
E. Reimbursement not a Distribution. Except as set forth in the
--------------------------------
succeeding sentence, if and to the extent any reimbursement made pursuant to
this Section 7.4 is determined for federal income tax purposes not to constitute
a payment of expenses of the Partnership, the amount so determined shall
constitute a guaranteed payment with respect to capital within the meaning of
Section 707(c) of the Code, shall be treated consistently therewith by the
Partnership and all Partners and shall not be treated as a distribution for
purposes of computing the Partners' Capital Accounts. Amounts deemed paid by
the Partnership to the General Partner in connection with the redemption of
Units pursuant to clause (ii) of subparagraph (D) above shall be treated as a
distribution for purposes of computing the Partner's Capital Accounts.
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Section 7.5 Outside Activities of the General Partner; Relationship of Shares
to Units; Funding Debt
A. General. Without the Consent of the Outside Limited Partners, 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 or Limited Partner and
the management of the business of the Partnership and such activities as are
incidental thereto. Without the Consent of the Outside Limited Partners, the
assets of the General Partner shall be limited to Partnership Interests and
permitted debt obligations of the Partnership (as contemplated by Section
7.5.F), so that Shares and Units are completely fungible except as otherwise
specifically provided herein; provided, that the General Partner shall be
--------
permitted to hold such bank accounts or similar instruments or accounts in its
name as it deems necessary to carry out its responsibilities and purposes as
contemplated under this Agreement and its organizational documents (provided
that accounts held on behalf of the Partnership to permit the General Partner to
carry out its responsibilities under this Agreement shall be considered to
belong to the Partnership and the interest earned thereon shall, subject to
Section 7.4.B, be applied for the benefit of the Partnership); and, provided
--------
further, that the General Partner shall be permitted to acquire, directly or
-------
through a Qualified REIT Subsidiary or limited liability company, up to a one
percent (1%) equity interest in any partnership or limited liability company at
least ninety-nine percent (99%) of the equity of which is owned, directly or
indirectly, by the Partnership so that for every $1 distributed to the General
Partner or its Subsidiary at least $99 is distributed to the Partnership. The
General Partner and any of its Affiliates may acquire Limited Partnership
Interests and shall be entitled to exercise all rights of a Limited Partner
relating to such Limited Partnership Interests.
B. Repurchase of Shares. If the General Partner exercises its rights
--------------------
under the Declaration of Trust to purchase Shares or otherwise elects to
purchase from its shareholders Shares, then the General Partner shall cause the
Partnership to purchase from the General Partner that number of Units of the
appropriate class equal to the product obtained by multiplying the number of
Shares purchased by the General Partner times a fraction, the numerator of which
is one and the denominator of which is the Conversion Factor, on the same terms
and for the same aggregate price that the General Partner purchased such Shares.
C. Forfeiture of Shares. If the Partnership or the General Partner
--------------------
acquires Shares as a result of the forfeiture of such Shares under a restricted
share, share bonus or any other similar share plan, then the General Partner
shall cause the Partnership to cancel, without payment of any consideration to
the General Partner, that number of Units equal to the number of Shares so
acquired, and, if the Partnership acquired such Shares, it shall transfer such
Shares to the General Partner for cancellation.
D. Issuances of Shares. After the date hereof, the General Partner
-------------------
shall not grant, award or issue any additional Shares (other than Shares issued
pursuant to Section 8.6 hereof or pursuant to a dividend or distribution
(including any share split) of Shares to all of its shareholders that results in
an adjustment to the Conversion Factor pursuant to clause (i), (ii) or (iii) of
the definition thereof), other equity securities of the
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General Partner, New Securities or Convertible Funding Debt unless (i) the
General Partner shall cause, pursuant to Section 4.2.A hereof, 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 such additional Shares, other equity
securities, New Securities or Convertible Funding Debt, as the case may be, and
(ii) the General Partner transfers to the Partnership, as an additional Capital
Contribution, the proceeds from the grant, award or issuance of such additional
Shares, other equity securities, New Securities or Convertible Funding Debt, as
the case may be, or from the exercise of rights contained in such additional
Shares, other equity securities, New Securities or Convertible Funding Debt, as
the case may be. Without limiting the foregoing, the General Partner is
expressly authorized to issue additional Shares, other equity securities, New
Securities or Convertible Funding Debt, as the case may be, for less than fair
market value, and the General Partner is expressly authorized, pursuant to
Section 4.2.A hereof, to cause the Partnership to issue to the General Partner
corresponding Partnership Interests (for example, and not by way of limitation,
the issuance of Shares and corresponding Units pursuant to a share purchase plan
providing for purchases of Shares, either by employees or shareholders, at a
discount from fair market value or pursuant to employee share options that have
an exercise price that is less than the fair market value of the Shares, either
at the time of issuance or at the time of exercise), as long as (a) the General
Partner concludes in good faith that such issuance is in the interests of the
General Partner and the Partnership and (b) the General Partner transfers all
proceeds from any such issuance or exercise to the Partnership as an additional
Capital Contribution.
E. Share Option Plan. If at any time or from time to time, the
-----------------
General Partner sells Shares pursuant to any Share Option Plan, the General
Partner shall transfer the net proceeds of the sale of such Shares to the
Partnership as an additional Capital Contribution in exchange for an amount of
additional Units equal to the number of Shares so sold divided by the Conversion
Factor.
F. Funding Debt. The General Partner may incur a Funding Debt,
------------
including, without limitation, a Funding Debt that is convertible into Shares or
otherwise constitutes a class of New Securities ("Convertible Funding Debt"),
subject to the condition that the General Partner lend to the Partnership the
net proceeds of such Funding Debt; provided, that Convertible Funding Debt shall
be issued pursuant to Section 7.5.D above; and, provided further, that the
General Partner shall not be obligated to lend the net proceeds of any Funding
Debt to the Partnership in a manner that would be inconsistent with the General
Partner's ability to remain qualified as a REIT. If the General Partner enters
into any Funding Debt, the loan to the Partnership shall be on comparable terms
and conditions, including interest rate, repayment schedule, costs and expenses
and other financial terms, as are applicable with respect to or incurred in
connection with such Funding Debt.
Section 7.6 Transactions with Affiliates
A. Transactions with Certain Affiliates. Except as expressly
------------------------------------
permitted by this Agreement with respect to any non-arms'-length transaction
with an Affiliate, the
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Partnership shall not, directly or indirectly, sell, transfer or convey any
property to, or purchase any property from, or borrow funds from, or lend funds
to, any Partner or any Affiliate of the Partnership or the General Partner that
is not also a Subsidiary of the Partnership, except pursuant to transactions
that are on terms that are fair and reasonable and no less favorable to the
Partnership than would be obtained from an unaffiliated third party.
B. Conflict Avoidance. The General Partner is expressly authorized
------------------
to enter into, in the name and on behalf of the Partnership, a noncompetition
arrangement and other conflict avoidance agreements with various Affiliates of
the Partnership and the General Partner, and OpCo and Marriott International and
any Affiliates thereof on such terms as the General Partner, in its sole and
absolute discretion, believes is advisable.
C. Benefit Plans Sponsored by the Partnership. 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 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.
Section 7.7 Indemnification
A. General. The Partnership shall indemnify each Indemnitee to the
-------
fullest extent provided by the Act 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 or in connection with any and all
claims, demands, actions, suits or proceedings, civil, criminal, administrative
or investigative, incurred by the Indemnitee and relating to the Partnership or
the General Partner or the operation of, or the ownership of property by, any of
them as set forth in this Agreement in which any such Indemnitee may be
involved, or is threatened to be involved, as a party or otherwise, unless it is
established by a final determination of a court of competent jurisdiction 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 guarantee,
contractual obligation for any indebtedness or other obligation 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 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 or upon a plea of nolo
contendere or its equivalent, or an entry of an order of probation prior to
judgment, creates a rebuttable presumption that the Indemnitee acted in
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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 any insurance
proceeds from the liability policy covering the General Partner and any
Indemnitee, 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. Advancement of Expenses. Reasonable expenses incurred or expected
-----------------------
to be incurred by an Indemnitee shall be paid or reimbursed by the Partnership
in advance of the final disposition of any and all claims, demands, actions,
suits or proceedings, civil, criminal, administrative or investigative made or
threatened against an Indemnitee 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. No Limitation of Rights. 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 Partnership, 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. Insurance. The Partnership may 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
Indemnitee or Person against such liability under the provisions of this
Agreement.
E. Benefit Plan Fiduciary. For purposes of this Section 7.7, (i)
----------------------
excise taxes assessed on an Indemnitee, or for which the Indemnitee is otherwise
found liable, in connection with an ERISA Plan Investor pursuant to applicable
law shall constitute fines within the meaning of this Section 7.7 and (ii)
actions taken or omitted by the Indemnitee in connection with an ERISA Plan
Investor in the performance of its duties shall be deemed to be for a purpose
which is not opposed to the best interests of the Partnership.
F. No Personal Liability for Partners. In no event may an Indemnitee
----------------------------------
subject any of the Partners to personal liability by reason of the
indemnification provisions set forth in this Agreement.
G. Interested Transactions. 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.
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H. Benefit. The provisions of this Section 7.7 are for the benefit
-------
of the Indemnitees, their employees, officers, directors, trustees, 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 limitation 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 related
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.
I. Indemnification Payments Not Distributions. If and to the extent
------------------------------------------
any payments to the General Partner pursuant to this Section 7.7 constitute
gross income to the General Partner (as opposed to the repayment of advances
made on behalf of the Partnership), such amounts shall constitute guaranteed
payments within the meaning of Section 707(c) of the Code, shall be treated
consistently therewith by the Partnership and all Partners, and shall not be
treated as distributions for purposes of computing the Partners' Capital
Accounts.
J. Exception to Indemnification. Notwithstanding anything to the
----------------------------
contrary in this Agreement, the General Partner shall not be entitled to
indemnification hereunder for any loss, claim, damage, liability or expense for
which the General Partner is obligated to indemnify the Partnership under any
other agreement between the General Partner and the Partnership.
Section 7.8 Liability of the General Partner
A. General. 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, liabilities
incurred or benefits not derived as a result of errors in judgment or mistakes
of fact or law or of any act or omission unless the General Partner acted, or
failed to act, in bad faith and the act or omission was material to the matter
giving rise to the loss, liability or benefit not derived.
B. Obligation to Consider Interests of General Partner Entity. The
----------------------------------------------------------
Limited Partners expressly acknowledge that the General Partner, in considering
whether to dispose of any of the Partnership assets, shall take into account the
tax consequences to the General Partner Entity of any such disposition and shall
have no liability whatsoever to the Partnership or any Limited Partner for
decisions that are based upon or influenced by such tax consequences.
C. No Obligation to Consider Separate Interests of Limited Partners
----------------------------------------------------------------
or Shareholders. 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 for monetary damages for losses
-36-
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 and pursuant to its authority under this Agreement.
D. Actions of Agents. Subject to its obligations and duties as
-----------------
General Partner set forth in Section 7.1.A, 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 the General Partner in good faith.
E. Effect of Amendment. Notwithstanding any other provision
-------------------
contained herein, 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.
Section 7.9 Other Matters Concerning the General Partner
A. Reliance on Documents. 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. Reliance on Advisors. The General Partner may consult with legal
--------------------
counsel, accountants, appraisers, management consultants, investment bankers and
other consultants and advisers selected by it, and any act taken or omitted to
be taken in reliance upon the opinion of such Persons as to matters which the
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. Action Through Agents. 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.
D. Actions to Maintain REIT Status or Avoid Taxation of the General
----------------------------------------------------------------
Partner Entity. Notwithstanding any other provisions of this Agreement or the
--------------
Act, any action of the General Partner on behalf of the Partnership or any
decision of the General Partner to refrain from acting on behalf of the
Partnership undertaken in the good faith belief that such action or omission is
necessary or advisable in order (i) to protect the ability of the General
Partner Entity to continue to qualify as a REIT or (ii) to allow the
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General Partner Entity to avoid incurring any liability for taxes under Section
857 or 4981 of the Code, is expressly authorized under this Agreement and is
deemed approved by all of the Limited Partners.
Section 7.10 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, to enter into any contracts on behalf of the
Partnership and to take any and all actions on behalf of the Partnership, and
such Person shall be entitled to deal with the General Partner as if the General
Partner were the Partnership's sole party in interest, both legally and
beneficially. Each Limited Partner hereby waives any and all defenses or other
remedies which may be available against such Person to contest, negate or
disaffirm any action of the General Partner in connection with any such dealing,
in each case except to the extent that such action does or purports to impose
liability on the Limited Partner. 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.
Section 7.11 Restrictions on General Partner's Authority
A. Consent Required. The General Partner may not take any action in
----------------
contravention of an express prohibition or limitation of this Agreement without
the written Consent of (i) all Partners adversely affected or (ii) such lower
percentage of the Limited Partnership Interests as may be specifically provided
for under a provision of this Agreement or the Act. THE PRECEDING SENTENCE SHALL
NOT APPLY TO ANY LIMITATION OR PROHIBITION IN THIS AGREEMENT THAT EXPRESSLY
AUTHORIZES THE GENERAL PARTNER TO TAKE ACTION (EITHER IN ITS DISCRETION OR IN
SPECIFIED CIRCUMSTANCES) SO LONG AS THE GENERAL PARTNER ACTS WITHIN THE SCOPE OF
SUCH AUTHORITY.
B. Sale of All Assets of the Partnership. Except as provided in
-------------------------------------
Article XIV and subject to the provisions of Section 7.11.C, the General Partner
may not, directly or indirectly, cause the Partnership to sell, exchange,
transfer or otherwise dispose of all or substantially all of the Partnership's
assets in a single transaction or a series of related transactions (including by
way of merger (including a triangular merger), consolidation or other
combination with any other Persons) without the Consent of the Partners holding
at least a majority of the then outstanding Units (including any Units held by
the General Partner).
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C. Voting Rights of Limited Partners During the Initial Holding
------------------------------------------------------------
Period.
------
(1) During the Initial Holding Period, if a vote of the shareholders
of the General Partner is required, then (i) a sale of all or substantially all
of the assets of the Partnership, (ii) a merger involving the Partnership and
(iii) any issuance of Units in connection with an issuance of Common Shares
representing 20% or more of the outstanding Common Shares of the General Partner
which would require shareholder approval under the rules of the New York Stock
Exchange, would require the approval of a majority of all outstanding Units (or,
in the case of clause (iii), a majority of the Units that are voted, provided
that at least a majority of the Units are voted), including Units held by the
General Partner, voting as a single class with the General Partner voting its
Units in the same proportion as its shareholders vote.
(2) During the Initial Holding Period, any taxable sale or sales of
hotels representing more than 10% of the aggregate Appraised Value of the
hotels of any partnership the interests in which were contributed to the
Partnership in exchange for Units would require, in addition to any other
approval requirements, the approval of a majority of all outstanding Units held
by Persons who formerly were limited partners of such partnership, voting as a
separate class.
Section 7.12 Loans by Third Parties
The Partnership may incur Debt, or enter into similar credit,
guarantee, financing or refinancing arrangements for any purpose (including,
without limitation, in connection with any acquisition of property) with any
Person that is not the General Partner upon such terms as the General Partner
determines appropriate (subject to Section 7.6); provided that, the Partnership
-------------
shall not incur any Debt that is recourse to the General Partner, except to the
extent otherwise agreed to by such General Partner in its sole discretion.
ARTICLE VIII
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 and
Section 14.3, 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
-39-
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.
Section 8.3 Outside Activities of Limited Partners
Subject to Section 7.5 hereof, and subject to any agreements entered
into pursuant to Section 7.6.C hereof and to any other agreements entered into
by a Limited Partner or its Affiliates with the Partnership or a Subsidiary, any
Limited Partner (other than the General 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 in direct or indirect competition with 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 (other than the General
Partner) 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. No Limited
Partner or Assignee shall have priority over any other Limited Partner or
Assignee either as to the return of Capital Contributions (except as permitted
by Section 4.2.A) or, except to the extent provided by Exhibit C or as permitted
---------
by Sections 4.2.A, 5.1.B(i), 6.1.A(ii) and 6.1.B(i), or otherwise expressly
provided in this Agreement, as to profits, losses, distributions or credits.
Section 8.5 Rights of Limited Partners Relating to the Partnership
A. General. In addition to other rights provided by this Agreement
-------
or by the Act, and except as limited by Section 8.5.D, 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:
(1) to obtain a copy of the most recent annual and quarterly
reports filed with the Securities and Exchange Commission by
the General Partner Entity pursuant to the Exchange Act;
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(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, the Certificate and the
Declaration of Trust and all amendments thereto, together
with executed copies of all powers of attorney pursuant to
which this Agreement, the Certificate, the Declaration of
Trust 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. Notice of Conversion Factor. The Partnership shall promptly
---------------------------
notify each Limited Partner (i) upon request of the then current Conversion
Factor and (ii) of any changes to the Conversion Factor.
C. Notice of Extraordinary Transaction of the General Partner Entity.
------------------------------------------------------------------
The General Partner Entity shall not make any extraordinary distributions of
cash or property to its shareholders or effect a merger (including, without
limitation, a triangular merger), consolidation or other combination with or
into another Person, a sale of all or substantially all of its assets or any
other similar extraordinary transaction without providing written notice to the
Limited Partners of its intention to make such distribution or effect such
merger, consolidation, combination, sale or other extraordinary transaction at
least twenty (20) Business Days prior to the record date to determine equity
holders eligible to receive such distribution or to vote upon the approval of
such merger, sale or other extraordinary transaction (or, if no such record date
is applicable, at least twenty (20) Business Days before consummation of such
merger, sale or other extraordinary transaction), which notice shall describe in
reasonable detail the action to be taken. This provision for such notice shall
not be deemed (i) to permit any transaction that otherwise is prohibited by this
Agreement or requires a Consent of the Partners or (ii) to require a Consent of
the Limited Partners to a transaction that does not otherwise require Consent
under this Agreement. Each Limited Partner agrees, as a condition to the
receipt of the notice pursuant hereto, to keep confidential the information set
forth therein until such time as the General Partner Entity has made public
disclosure thereof and to use such information during such period of
confidentiality solely for purposes of determining whether to exercise the Unit
Redemption Right; provided, however, that a Limited Partner may disclose such
-------- -------
information to its attorney, accountant and/or financial advisor for purposes of
obtaining advice with respect to such exercise so long as such attorney,
accountant and/or financial advisor agrees to receive and hold such information
subject to this confidentiality requirement.
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D. Confidentiality. 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
unaffiliated third parties to keep confidential, provided that this Section
8.5.D shall not affect the twenty (20) Business Day requirements set forth in
Section 8.5.C above.
Section 8.6 Unit Redemption Right
A. General. (i) Subject to Section 8.6.C, Section 8.6.D and Section
-------
8.6.E, at any time on or after one year following the date of the initial
issuance thereof (which, in the event of the transfer of a Unit, shall be deemed
to be the date that the Unit was issued to the original recipient thereof for
purposes of this Section 8.6), the holder of a Unit (if other than the General
Partner or the General Partner Entity or any Subsidiary of either the General
Partner or the General Partner Entity) shall have the right (the "Unit
Redemption Right") to require the Partnership to redeem such Unit, with such
redemption to occur on the Specified Redemption Date and at a redemption price
equal to and in the form of the Cash Amount to be paid by the Partnership. Any
such Unit 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 Unit Redemption Right (the "Redeeming Partner").
A Limited Partner may exercise the Unit Redemption Right from time to time,
without limitation as to frequency, with respect to part or all of the Units
that it owns, as selected by the Limited Partner, provided that, a Limited
-------------
Partner may not exercise the Unit Redemption Right for less than one thousand
(1,000) Units unless such Redeeming Partner then holds less than one thousand
(1,000) Units, in which event the Redeeming Partner must exercise the Unit
Redemption Right for all of the Units held by such Redeeming Partner, and
provided further that, with respect to a Limited Partner which is an entity,
---------------------
such Limited Partner may exercise the Unit Redemption Right for less than one
thousand (1,000) Units without regard to whether or not such Limited Partner is
exercising the Unit Redemption Right for all of the Units held by such Limited
Partner as long as such Limited Partner is exercising the Unit Redemption Right
on behalf of one or more of its equity owners in respect of one hundred percent
(100%) of such equity owners' interests in such Limited Partner. For purposes
hereof, a Class A Unit issued upon conversion of a Class B Unit shall be deemed
to have been issued when the Class B Unit was issued.
(ii) The Redeeming Partner shall have no right with respect to
any Units so redeemed to receive any distributions paid in respect of a
Partnership Record Date occurring after the Specified Redemption Date of such
Units.
(iii) 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 exercise of such
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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.
(iv) If the General Partner provides notice to the Limited
Partners, pursuant to Section 8.5.C hereof, the Unit Redemption Right shall be
exercisable, without regard to whether the Units have been outstanding for any
specified period, during the period commencing on the date on which the General
Partner provides such notice and ending on the record date to determine
shareholders eligible to receive such distribution or to vote upon the approval
of such merger, sale or other extraordinary transaction (or, if no such record
date is applicable, at least twenty (20) Business Days before the consummation
of such merger, sale or other extraordinary transaction). If this subparagraph
(iv) applies, the Specified Redemption Date is the date on which the Partnership
and the General Partner receive notice of exercise of the Unit Redemption Right,
rather than ten (10) Business Days after receipt of the notice of redemption.
B. General Partner Assumption of Right. (i) If a Limited Partner has
-----------------------------------
delivered a Notice of Redemption, the General Partner may, in its sole and
absolute discretion (subject to the limitations on ownership and transfer of
Shares set forth in the Declaration of Trust) and upon providing written notice
to the Limited Partners at least three (3) Business Days in advance, elect to
assume directly and satisfy a Unit Redemption Right by paying to the Redeeming
Partner either the Cash Amount or the Shares Amount, as the General Partner
determines in its sole and absolute discretion (provided that, payment of the
-------------
Redemption Amount in the form of Shares shall be in Shares registered for resale
under Section 12 of the Exchange Act and listed for trading on the exchange or
national market on which the Shares are Publicly Traded, AND THE ISSUANCE OF
SHARES UPON REDEMPTION SHALL BE REGISTERED UNDER THE SECURITIES ACT OR, AT THE
ELECTION OF THE GENERAL PARTNER, RESALE OF THE SHARES ISSUED UPON REDEMPTION
SHALL BE REGISTERED (SO LONG AS THE REDEEMING PARTNER PROVIDES ALL INFORMATION
REQUIRED FOR SUCH REGISTRATION),and, provided further that, if the Shares are
---------------------
not Publicly Traded at the time a Redeeming Partner exercises its Unit
Redemption Right, the Redemption Amount shall be paid only in the form of the
Cash Amount unless the Redeeming Partner, in its sole and absolute discretion,
consents to payment of the Redemption Amount in the form of the Shares Amount),
on the Specified Redemption Date, whereupon the General Partner shall acquire
the Units offered for redemption by the Redeeming Partner and shall be treated
for all purposes of this Agreement as the owner of such Units. Unless the
General Partner, in its sole and absolute discretion, shall exercise its right
to assume directly and satisfy the Unit Redemption Right, the General Partner
shall not have any obligation to the Redeeming Partner or to the Partnership
with respect to the Redeeming Partner's exercise of the Unit Redemption Right.
If the General Partner shall exercise its right to satisfy the Unit Redemption
Right in the manner described in the first sentence of this Section 8.6.B and
shall fully perform its obligations in connection therewith, the Partnership
shall have no right or obligation to pay any amount to the Redeeming Partner
with respect to such Redeeming Partner's exercise of the Unit Redemption Right,
and each of the Redeeming Partner, the Partnership and the General Partner
shall, for federal income tax purposes, treat the transaction between the
General Partner and the Redeeming Partner as a sale of the Redeeming Partner's
Units to the General Partner. Nothing contained in this Section 8.6.B shall
imply any right of the General Partner to require any Limited Partner to
exercise the Unit Redemption Right afforded to such Limited Partner pursuant to
Section 8.6.A.
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(ii) If the General Partner determines to pay the Redeeming
Partner the Redemption Amount in the form of Shares, the total number of Shares
to be paid to the Redeeming Partner in exchange for the Redeeming Partner's
Units shall be the applicable Shares Amount. If this amount is not a whole
number of Shares, the Redeeming Partner shall be paid (i) that number of Shares
which equals the nearest whole number less than such amount plus (ii) an amount
of cash which the General Partner determines, in its reasonable discretion, to
represent the fair value of the remaining fractional Share which would otherwise
be payable to the Redeeming Partner.
(iii) Each Redeeming Partner agrees to execute such documents as
the General Partner may reasonably require in connection with the issuance of
Shares upon exercise of the Unit Redemption Right.
(iv) Any Shares issued in accordance with this Section 8.6.B will
be duly and validly authorized and will be validly issued, fully paid and
nonassessable and will not be subject to any preemptive rights.
C. Exceptions to Exercise of Unit Redemption Right. Notwithstanding
-----------------------------------------------
the provisions of Sections 8.6.A and 8.6.B, a Partner shall not be entitled to
exercise the Unit Redemption Right pursuant to Section 8.6.A if (but only as
long as) the delivery of Shares to such Partner on the Specified Redemption Date
would be (i) prohibited under those portions of the Declaration of Trust
relating to restrictions on ownership and transfer of Shares or (ii) prohibited
under applicable federal or state securities laws or regulations (in each case
regardless of whether the General Partner would in fact assume and satisfy the
Unit Redemption Right).
D. No Liens on Units Delivered for Redemption. Each Limited Partner
------------------------------------------
covenants and agrees with the General Partner that all 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
contained herein to the contrary, neither the General Partner nor the
Partnership shall be under any obligation to acquire Units which are or may be
subject to any liens. Each Limited Partner further agrees that, if any state or
local property transfer tax is payable as a result of the transfer of its Units
to the Partnership or the General Partner, such Limited Partner shall assume and
pay such transfer tax.
E. Additional Partnership Interests; Modification of Holding Period.
----------------------------------------------------------------
If the Partnership issues Partnership Interests to any Additional Limited
Partner pursuant to Article IV, the General Partner shall make such revisions to
this Section 8.6 as it determines are necessary to reflect the issuance of such
Partnership Interests (including setting forth any restrictions on the exercise
of the Unit Redemption Right with respect to such Partnership Interests which
differ from those set forth in this Agreement), provided that no such revisions
shall materially adversely affect the rights of any other Limited Partner to
exercise its Unit Redemption Rights without that Limited Partner's prior written
consent. In addition, the General Partner may, with respect to any holder or
holders of Units, at any time and from time to time, as it shall determine in
its sole discretion, reduce or waive the length of the period prior to which
such holder or holders may not exercise the Unit Redemption Right.
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ARTICLE IX
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 appropriate books and records with respect to the
Partnership's business, including, without limitation, all books and records
necessary to provide to the Limited Partners any information, lists and copies
of documents required to be provided pursuant to Section 9.3. Any records
maintained by or on behalf of the Partnership in the regular course of its
business may be kept on, or be in the form of, punch cards, magnetic tape,
photographs, micrographics or any other information storage device, provided
that the records so maintained are convertible into clearly legible written form
within a reasonable period of time. The books of the Partnership shall be
maintained, for financial and tax reporting purposes, on an accrual basis in
accordance with generally accepted accounting principles.
Section 9.2 Fiscal Year
The fiscal year of the Partnership shall end on the Friday falling
closest to December 31 of each year.
Section 9.3 Reports
A. Annual Reports. As soon as practicable, but in no event later
--------------
than the date on which the General Partner Entity mails its annual report to its
equity holders, the General Partner shall cause to be mailed to each Limited
Partner an annual report, as of the close of the most recently ended Partnership
Year, containing financial statements of the Partnership and its Subsidiaries,
or of the General Partner Entity if such statements are prepared solely on a
consolidated basis with the Partnership, 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 Entity.
B. Quarterly Reports. If and to the extent that the General Partner
-----------------
Entity mails quarterly reports to its shareholders, as soon as practicable, but
in no event later than the date on such reports are mailed, the General Partner
Entity shall cause to be mailed to each Limited Partner a report containing
unaudited financial statements, as of the last day of such fiscal quarter, of
the Partnership, or of the General Partner Entity if such statements are
prepared solely on a consolidated basis with the Partnership, and such other
information as may be required by applicable law or regulation, or as the
General Partner determines to be appropriate.
C. General Partner Entity Communications to Equity Holders. The
--------------------------------------------------------
General Partner shall cause to be mailed to each Limited Partner a copy of each
written report, proxy statement or other communication sent to holders of
Shares. Such materials
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will be sent to each Limited Partner on the same date on which they are first
sent to holders of Shares.
ARTICLE X
TAX MATTERS
Section 10.1 Preparation of Tax Returns
The General Partner shall arrange for the preparation and timely
filing of all returns of Partnership income, gains, deductions, losses and other
items required of the Partnership for federal and state income tax purposes and
shall use all reasonable efforts to furnish, within ninety (90) days of the
close of each taxable year, the tax information reasonably required by Limited
Partners for federal and state income tax reporting purposes.
Section 10.2 Tax Elections
Except as otherwise provided herein, the General Partner shall, in its
sole and absolute discretion, determine whether to make any available election
pursuant to the Code (including, without limitation, the election under Section
754 of the Code). The General Partner shall have the right to seek to revoke
any such election 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. General. The General Partner shall be the "tax matters partner"
-------
of the Partnership for federal income tax purposes. Pursuant to Section
6223(c)(3) 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 any Assignees;
provided, however, that such information is provided to the Partnership by the
-------- -------
Limited Partners.
▇. ▇▇▇▇▇▇. The tax matters partner is authorized, but not required:
------
(1) to enter into any settlement with the IRS with respect to
any administrative or judicial proceedings for the
adjustment of Partnership items required to be taken into
account by a Partner for income tax purposes (such
administrative proceedings being referred to as a "tax
audit" and such judicial proceedings being referred to as
"judicial review"), and in the settlement agreement the tax
matters partner may expressly state that such agreement
shall bind all Partners, except that such settlement
agreement shall not bind any Partner (i) who (within the
time prescribed pursuant to the Code and Regulations) files
a statement with the IRS providing that the
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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) if a notice of a final administrative adjustment at the
Partnership level of any item required to be taken into
account by a Partner for tax purposes (a "final adjustment")
is mailed to the tax matters partner, to seek judicial
review of such final adjustment, including the filing of a
petition for readjustment with the Tax Court or the filing
of a complaint for refund with the United States Claims
Court or the District Court of the United States for the
district in which the Partnership's principal place of
business is located;
(3) to intervene in any action brought by any other Partner for
judicial review of a final adjustment;
(4) to file a request for an administrative adjustment with the
IRS at any time 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 shall be fully applicable to the tax matters
partner in its capacity as such.
C. Reimbursement. The tax matters partner shall receive no
-------------
compensation for its services. All third-party costs and expenses incurred by
the tax matters partner in performing its duties as such (including legal and
accounting fees and expenses) shall be borne by the Partnership. Nothing herein
shall be construed to restrict the Partnership from engaging an accounting firm
and/or law 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.
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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 Section 1441, 1442, 1445 or 1446 of the Code. Any
amount paid on behalf of or with respect to a Limited Partner shall constitute a
loan by the Partnership to such Limited Partner, which loan shall be repaid by
such Limited Partner within fifteen (15) days after notice from the General
Partner that such payment must be made unless (i) the Partnership withholds such
payment from a distribution which would otherwise be made to the Limited Partner
or (ii) the General Partner determines, in its sole and absolute discretion,
that such payment may be satisfied out of the available funds of the Partnership
which would, but for such payment, be distributed to the Limited Partner. Any
amounts withheld pursuant to the foregoing clauses (i) or (ii) shall be treated
as having been distributed to such Limited Partner. Each Limited Partner hereby
unconditionally and irrevocably grants to the Partnership a security interest in
such Limited Partner's Partnership Interest to secure such Limited Partner's
obligation to pay to the Partnership any amounts required to be paid pursuant to
this Section 10.5. If 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 (including, without limitation, the right to receive distributions).
Any amounts payable by a Limited Partner hereunder shall bear interest at the
base rate on corporate loans at large United States money center commercial
banks, as published from time to time in The Wall Street Journal, plus four (4)
percentage points (but not higher than the maximum lawful rate under the laws of
the State of Maryland) 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 to
perfect or enforce the security interest created hereunder.
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ARTICLE XI
TRANSFERS AND WITHDRAWALS
Section 11.1 Transfer
A. Definition. The term "transfer," when used in this Article XI
----------
with respect to a Partnership Interest or a Unit, shall be deemed to refer to a
transaction by which a General Partner purports to assign all or any part of its
General Partnership Interest to another Person or by which a Limited Partner
purports to assign all or any part of its Limited Partnership 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 XI does not include any redemption
or repurchase of Units by the Partnership from a Partner or acquisition of Units
from a Limited Partner by the General Partner pursuant to Section 8.6 or
otherwise. No part of the interest of a Limited Partner shall be subject to the
claims of any creditor, any spouse for alimony or support, or to legal process,
and may not be voluntarily or involuntarily alienated or encumbered except as
may be specifically provided for in this Agreement.
B. General. No Partnership Interest shall be transferred, in whole
-------
or in part, except in accordance with the terms and conditions set forth in this
Article XI. Any transfer or purported transfer of a Partnership Interest not
made in accordance with this Article XI shall be null and void.
Section 11.2 Transfers of Partnership Interests of General Partner
A. General. The General Partner may not transfer any of its
-------
Partnership Interest (including both its General Partnership Interest and its
Limited Partnership Interest) except in connection with a transaction described
in Section 11.2.B or as otherwise expressly permitted under this Agreement, nor
shall the General Partner withdraw as General Partner except in connection with
a transaction described in Section 11.2.B.
B. Specific Transactions Prohibited. The General Partner Entity
--------------------------------
shall not engage in any merger (including a triangular merger), consolidation or
other combination with or into another Person (other than any transaction
following the consummation of which the shareholders of the surviving entity are
substantially identical to the shareholders of the General Partner Entity), sale
of all or substantially all of its assets or any reclassification,
recapitalization or change of outstanding 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") ("Termination
Transaction"), unless (i) the Termination Transaction has been approved by the
Consent of the Partners holding at least a majority of the then outstanding
Units (including any Units held by the General Partner), (ii) following such
merger or other consolidation, substantially all of the assets of the surviving
entity consist of Units and (iii) in connection with which all Limited Partners
either will receive, or will have the right to receive, for each Unit an amount
of cash, securities, or other property equal to the product of the
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Conversion Factor and the greatest amount of cash, securities or other property
paid to a holder of Shares, if any, corresponding to such Unit in consideration
of one such Share at any time during the period from and after the date on which
the Termination Transaction is consummated; provided that, if, in connection
-------------
with the Termination Transaction, a purchase, tender or exchange offer shall
have been made to and accepted by the holders of more than sixty-six and two-
thirds percent (66 2/3%) of the outstanding Shares, or such other percentage
required for the approval of mergers under the charter documents of the General
Partner Entity, each holder of Units shall receive, or shall have the right to
receive without any right of Consent set forth above in this subsection B, the
greatest amount of cash, securities, or other property which such holder would
have received had it exercised the Unit Redemption Right and received Shares in
exchange for its Units immediately prior to the expiration of such purchase,
tender or exchange offer and had thereupon accepted such purchase, tender or
exchange offer. The General Partner shall not enter into an agreement or other
arrangement providing for or facilitating the creation of a General Partner
Entity other than the General Partner, unless the successor General Partner
Entity executes and delivers a counterpart to this Agreement in which such
General Partner Entity agrees to be fully bound by all of the terms and
conditions contained herein that are applicable to a General Partner Entity.
Section 11.3 Limited Partners' Rights to Transfer
A. General. Except to the extent expressly permitted in Sections
-------
11.3.B and 11.3.C or in connection with the exercise of a Unit Redemption Right
pursuant to Section 8.6, a Limited Partner may not transfer all or any portion
of its Partnership Interest, or any of such Limited Partner's rights as a
Limited Partner, without the prior written consent of the General Partner. Any
transfer otherwise permitted under Sections 11.3.B and 11.3.C shall be subject
to the conditions set forth in Section 11.3.D, 11.3.E and 11.3.F, and all
permitted transfers shall be subject to Section 11.5.
B. Incapacitated Limited Partners. 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 its interest in the Partnership. The Incapacity of a Limited Partner, in and
of itself, shall not dissolve or terminate the Partnership.
C. Permitted Transfers. A Limited Partner may transfer, with or
-------------------
without the consent of the General Partner, all or a portion of its Partnership
Interest (i) in the case of a Limited Partner who is an individual, to a member
of his Immediate Family, any trust formed for the benefit of himself and/or
members of his Immediate Family, or any partnership, limited liability company,
joint venture, corporation or other business entity comprised only of himself
and/or members of his Immediate Family and entities the ownership interests in
which are owned by or for the benefit of himself and/or members of his Immediate
Family, (ii) in the case of a Limited Partner which is a trust, to the
beneficiaries of such trust, (iii) in the case of a Limited Partner which is a
partnership, limited liability company, joint venture, corporation or other
business entity to which Units were transferred pursuant to clause (i) above, to
its partners, owners or stockholders, as
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the case may be, who are members of the Immediate Family of or are actually the
Person(s) who transferred Units to it pursuant to clause (i) above, (iv) in the
case of a Limited Partner which acquired Units as of the date hereof and which
is a partnership, limited liability company, joint venture, corporation or other
business entity, to its partners, owners, stockholders or Affiliates thereof, as
the case may be, or the Persons owning the beneficial interests in any of its
partners, owners or stockholders or Affiliates thereof (it being understood that
this clause (iv) will apply to all of each Person's Partnership Interests
whether the Units relating thereto were acquired on the date hereof or
hereafter), (v) in the case of a Limited Partner which is a partnership, limited
liability company, joint venture, corporation or other business entity other
than any of the foregoing described in clause (iii) or (iv), in accordance with
the terms of any agreement between such Limited Partner and the Partnership
pursuant to which such Partnership Interest was issued, (vi) pursuant to a gift
or other transfer without consideration, (vii) pursuant to applicable laws of
descent or distribution, (viii) to another Limited Partner and (ix) pursuant to
a grant of security interest or other encumbrance effectuated in a bona fide
---- ----
transaction or as a result of the exercise of remedies related thereto, subject
to the provisions of Section 11.3.F hereof. A trust or other entity will be
considered formed "for the benefit" of a Partner's Immediate Family even though
some other Person has a remainder interest under or with respect to such trust
or other entity.
D. No Transfers Violating Securities Laws. The General Partner may
--------------------------------------
prohibit any transfer of Units by a Limited Partner unless it receives a written
opinion of legal counsel (which opinion and counsel shall be reasonably
satisfactory to the Partnership) to such Limited Partner to the effect that such
transfer would not require filing of a registration statement under the
Securities Act or would not otherwise violate any federal or state securities
laws or regulations applicable to the Partnership or the Unit or, at the option
of the Partnership, an opinion of legal counsel to the Partnership to the same
effect.
E. No Transfers Affecting Tax Status of Partnership. No transfer of
------------------------------------------------
Units by a Limited Partner (including a redemption or exchange pursuant to
Section 8.6) 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 (except as
a result of the redemption or exchange for Shares of all Units held by all
Limited Partners other than the General Partner or the General Partner Entity or
any Subsidiary of either the General Partner or the General Partner Entity or
pursuant to a transaction expressly permitted under Section 7.11.B or Section
11.2), (ii) in the opinion of legal counsel for the Partnership, it likely would
cause the General Partner Entity to no longer qualify as a REIT or would subject
the General Partner Entity to any additional taxes under Section 857 or Section
4981 of the Code or (iii) 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.
F. No Transfers to Holders of Nonrecourse Liabilities. No pledge or
--------------------------------------------------
transfer of any 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
-51-
General Partner, in its sole and absolute discretion, if the deemed exercise by
such lender or Person of all of its rights under the pledge or Unit transfer
agreement would result in such lender or Person owning Units in violation of the
Ownership Limitation set forth in Section 12.2.A of this Agreement; provided
--------
that, as a condition to such consent the lender will be required to enter into
----
an arrangement with the Partnership and the General Partner to exchange or
redeem for the Redemption Amount any Units in which a security interest is held
simultaneously with the time at which such lender would be deemed to be a
partner in the Partnership for purposes of allocating liabilities to such lender
under Section 752 of the Code.
Section 11.4 Substituted Limited Partners
A. Consent of General Partner. No Limited Partner shall have the
--------------------------
right to substitute a transferee as a Limited Partner in its 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. Rights of Substituted Limited Partner. A transferee who has been
-------------------------------------
admitted as a Substituted Limited Partner in accordance with this Article XI
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 conditioned upon the
transferee executing and delivering to the Partnership an acceptance of all the
terms and conditions of this Agreement (including, without limitation, the
provisions of Section 16.11) and such other documents or instruments as may be
required to effect the admission.
C. Amendment of Exhibit A. Upon the admission of a Substituted
----------------------
Limited Partner, the General Partner shall amend Exhibit A to reflect the name,
---------
address, Capital Account, number of Units and Percentage Interest of such
Substituted Limited Partner and to eliminate or adjust, if necessary, the name,
address, Capital Account and Percentage Interest and interest of the predecessor
of such Substituted Limited Partner.
Section 11.5 Assignees
If the General Partner, in its sole and absolute discretion, does not
consent to the admission of any permitted transferee 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
entitled to all the rights of an assignee of a limited partnership interest
under the Act, including the right to receive distributions from the Partnership
and the share of Net Income, Net Losses, gain, loss and Recapture Income
attributable to the Units assigned to such transferee, and shall have the rights
granted to the Limited Partners under Section 8.6, but shall not be deemed to be
a holder of Units for any other purpose under this Agreement, and shall not be
entitled to vote such
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Units in any matter presented to the Limited Partners for a vote (such Units
being deemed to have been voted on such matter in the same proportion as all
other Units held by Limited Partners are voted). If any such transferee desires
to make a further assignment of any such Units, such transferee shall be subject
to all the provisions of this Article XI to the same extent and in the same
manner as any Limited Partner desiring to make an assignment of Units.
Section 11.6 General Provisions
A. Withdrawal of Limited Partner. No Limited Partner may withdraw
-----------------------------
from the Partnership other than as a result of a permitted transfer of all of
such Limited Partner's Units in accordance with this Article XI or pursuant to
redemption of all of its Units under Section 8.6.
B. Termination of Status as Limited Partner. Any Limited Partner who
----------------------------------------
shall transfer all of its Units in a transfer permitted pursuant to this Article
XI or pursuant to redemption of all of its Units under Section 8.6 shall cease
to be a Limited Partner.
C. Timing of Transfers. Transfers pursuant to this Article XI may
-------------------
only be made upon three Business Days prior notice, unless the General Partner
otherwise agrees.
D. Allocations. If any Partnership Interest is transferred during
-----------
any quarterly segment of the Partnership's fiscal year in compliance with the
provisions of this Article XI or redeemed or transferred pursuant to Section
8.6, Net Income, Net Losses, each item thereof and all other items attributable
to such interest for such fiscal year shall be divided and allocated between the
transferor 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
a monthly proration period, in which event Net Income, Net Losses, each item
thereof and all other items attributable to such interest for such fiscal year
shall be prorated based upon the applicable method 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 redemption occurs shall be
allocated to the Person who is a Partner as of midnight on the last day of said
month. All distributions of Available Cash attributable to any Unit with
respect to which the Partnership Record Date is before the date of such
transfer, assignment or redemption shall be made to the transferor Partner or
the Redeeming Partner, as the case may be, and, in the case of a transfer or
assignment other than a redemption, all distributions of Available Cash
thereafter attributable to such Unit shall be made to the transferee Partner.
E. Additional Restrictions. In addition to any other restrictions on
-----------------------
transfer herein contained, including without limitation the provisions of this
Article XI and Article VII, in no event may any transfer or assignment of a
Partnership Interest by any Partner (including pursuant to Section 8.6) be made
without the express consent of the General Partner, in its sole and absolute
discretion, (i) to any person or entity who lacks
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the legal right, power or capacity to own a Partnership Interest; (ii) in
violation of applicable law; (iii) of any component portion of a Partnership
Interest, such as the Capital Account, or rights to distributions, separate and
apart from all other components of a Partnership Interest; (iv) if in the
opinion of legal counsel to the Partnership such transfer would cause a
termination of the Partnership for federal or state income tax purposes (except
as a result of the redemption or exchange for Shares of all Units held by all
Limited Partners other than the General Partner, the General Partner Entity, or
any Subsidiary of either, or pursuant to a transaction expressly permitted under
Section 7.11.B or Section 11.2); (v) if in the opinion of counsel to the
Partnership, such transfer would cause the Partnership to cease to be classified
as a partnership for federal income tax purposes (except as a result of the
redemption or exchange for Shares of all Units held by all Limited Partners
other than the General Partner, the General Partner Entity, or any Subsidiary of
either, or pursuant to a transaction expressly permitted under Section 7.11.B or
Section 11.2); (vi) if such transfer would cause the Partnership Interests of
"benefit plan investors" to become "significant," as those terms are used in 29
C.F.R. (S) 2510.3-101(f), or any successor regulation thereto, or would cause
the Partnership to become, with respect to any employee benefit plan subject to
Title I of ERISA, a "party-in-interest" (as defined in Section 3(14) of ERISA)
or, with respect to any plan defined in Section 4975(e) of the Code, a
"disqualified person" (as defined in Section 4975(e) of the Code); (vii) if such
transfer would, in the opinion of counsel to the Partnership, cause any portion
of the assets of the Partnership to constitute assets of any ERISA Plan Investor
pursuant to 29 C.F.R. (S) 2510.3-101, or any successor regulation thereto;
(viii) if such transfer requires the registration of such Partnership Interest
pursuant to any applicable federal or state securities laws; (ix) if 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 or such transfer causes the Partnership to become a
"publicly traded partnership," as such term is defined in Section 469(k)(2) or
Section 7704(b) of the Code (provided that, this clause (ix) shall not be the
-------------
basis for limiting or restricting in any manner the exercise of the Unit
Redemption Right under Section 8.6 unless, and only to the extent that, outside
tax counsel provides to the General Partner an opinion to the effect that, in
the absence of such limitation or restriction, there is a significant risk that
the Partnership will be treated as a "publicly traded partnership" and, by
reason thereof, taxable as a corporation); (x) if such transfer subjects the
Partnership or the activities of the Partnership to regulation under the
Investment Company Act of 1940, the Investment Advisors Act of 1940 or ERISA,
each as amended; (xi) if such transfer could reasonably be expected to cause the
General Partner Entity to fail to remain qualified as a REIT; or (xii) if in the
opinion of legal counsel for the transferring Partner (which opinion and counsel
shall be reasonably satisfactory to the Partnership) or legal counsel for the
Partnership, such transfer would cause the General Partner Entity to fail to
continue to qualify as a REIT or subject the General Partner Entity to any
additional taxes under Section 857 or Section 4981 of the Code.
F. Avoidance of "Publicly Traded Partnership" Status. The General
-------------------------------------------------
Partner shall monitor the transfers of interests in the Partnership to determine
(i) if such interests are being traded on an "established securities market" or
a "secondary market (or the substantial equivalent thereof)" within the meaning
of Section 7704 of the Code and (ii) whether additional transfers of interests
would result in the Partnership being unable to qualify for at least one of the
"safe harbors" set forth in Regulations Section 1.7704-1 (or
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such other guidance subsequently published by the IRS setting forth safe harbors
under which interests will not be treated as "readily tradable on a secondary
market (or the substantial equivalent thereof)" within the meaning of Section
7704 of the Code) (the "Safe Harbors"). The General Partner shall take all steps
reasonably necessary or appropriate to prevent any trading of interests or any
recognition by the Partnership of transfers made on such markets and, except as
otherwise provided herein, to insure that at least one of the Safe Harbors is
met; provided, however, that the foregoing shall not authorize the General
Partner to limit or restrict in any manner the right of any holder of a Unit to
exercise the Unit Redemption Right in accordance with the terms of Section 8.6
unless, and only to the extent that, outside tax counsel provides to the General
Partner an opinion to the effect that, in the absence of such limitation or
restriction, there is a significant risk that the Partnership will be treated as
a "publicly traded partnership" and, by reason thereof, taxable as a
corporation.
ARTICLE XII
RESTRICTION ON OWNERSHIP OF UNITS
Section 12.1 Definitions
For the purpose of this Article XII, the following terms shall have
the following meanings:
"Charitable Beneficiary" means one or more beneficiaries of the
----------------------
Charitable Trust as determined pursuant to Section 12.4.G, provided that each
-------- ----
such organization must be described in Sections 501(c)(3), 170(b)(1)(A) and
170(c)(2) of the Code and that no such organization constitute ownership of
Units (including Units owned by it by reason of its being a Charitable
Beneficiary) that exceed the Ownership Limitation.
"Charitable Trust" means any trust provided for in Section 12.2.B and
----------------
Section 12.4.F.
"Charitable Trustee" means the Person unaffiliated with the
------------------
Partnership and a Prohibited Owner that is appointed by the Partnership to serve
as trustee of the Charitable Trust.
"Constructive Ownership" means ownership of Units by a Person, whether
----------------------
the interest in Units is held directly or indirectly (including by a nominee),
and shall include interests that would be treated as owned through the
application of Section 318(a) of the Code, as modified by Section 856(d)(5) of
the Code. The terms "Constructive Owner," "Constructively Owns" and
"Constructively Owned" shall have the correlative meanings.
"Initial Date" means the date upon which the Certificate is filed for
------------
record with the Secretary of State of the State of Delaware.
"Market Price" means, for any date, with respect to any class or
------------
series of outstanding Shares, the Closing Price for such Shares on such date.
The "Closing Price" on any date shall mean the last sale price on such date for
such Shares, regular way, or, in case no such sale takes place on such day, the
average of the closing bid and asked prices, regular
-55-
way, for such Shares, in either case as reported in the principal consolidated
transaction reporting system with respect to securities listed or admitted to
trading on the New York Stock Exchange or, if such Shares are not listed or
admitted to trading on the New York Stock Exchange, as reported on the principal
consolidated transaction reporting system with respect to securities listed on
the principal national securities exchange on which such Shares are listed or
admitted to trading or, if such Shares are not listed or admitted to trading on
any national securities exchange, the last quoted price, or, if not so quoted,
the average of the high bid and low asked prices in the over-the-counter market,
as reported by the Nasdaq National Market or, if such system is no longer in
use, the principal other automated quotation system that may then be in use or,
if such Shares are not quoted by any such organization, the average of the
closing bid and asked prices as furnished by a professional market maker making
a market in such Shares selected by the General Partner or, in the event that no
trading price is available for such Shares, the fair market value of such
Shares, as determined in good faith by the General Partner.
"Ownership Limitation" has the meaning set forth in Section 12.2.A.
--------------------
"Prohibited Owner" means, with respect to any purported Transfer, any
----------------
Person who, but for the provisions of Section 12.2.B, would Beneficially or
Constructively Own Units.
"Restriction Termination Date" means the first day after the Initial
----------------------------
Date on which the General Partner determines that it is no longer in the best
interests of the General Partner Entity to attempt to, or continue to, qualify
as a REIT or that compliance with the restrictions and limitations on Beneficial
Ownership, Constructive Ownership and Transfers of Units set forth herein is no
longer required in order for the General Partner Entity to qualify as a REIT.
"Transfer" means any issuance, sale, transfer, gift, assignment,
--------
devise or other disposition, as well as any other event that causes any Person
to acquire Constructive Ownership, or any agreement to take any such actions or
cause any such events, of Units or the right to vote or receive distributions on
Units, including (i) a change in the capital structure of the Partnership, (ii)
a change in the relationship between two or more Persons which causes a change
in ownership of Units by application of Section 318 of the Code, as modified by
Section 856(d)(5), (iii) the granting or exercise of any option or warrant (or
any disposition of any option or warrant), pledge, security interest or similar
right to acquire Units, (iv) any disposition of any securities or rights
convertible into or exchangeable for Units or any interest in Units or any
exercise of any such conversion or exchange right and (v) Transfers of interests
in other entities that result in changes in Constructive Ownership of Units; in
each case, whether voluntary or involuntary, whether owned of record or
Constructively Owned and whether by operation of law or otherwise. The terms
"Transferring" and "Transferred" shall have the correlative meanings.
Section 12.2 Ownership Limitation on Units
A. Basic Restriction. No Person (other than the General Partner and
-----------------
the wholly owned subsidiaries (direct and indirect) of the General Partner) may
Constructively
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Own more than 4.9% by value of any class of Partnership Interests (the
"Ownership Limitation").
B. Transfers in Trust. If any Transfer of Units occurs which, if
------------------
effective, would result in any Person (excluding the General Partner and the
wholly owned subsidiaries (direct and indirect) of the General Partner)
Constructively Owning Units in violation of the Ownership Limitation,
(1) then that number of Units the Constructive Ownership of which
otherwise would cause such Person to violate the Ownership Limitation (rounded
up to the next whole Unit) shall be automatically transferred to a Charitable
Trust for the benefit of a Charitable Beneficiary, as described in Section 12.4,
effective as of the close of business on the Business Day prior to the date of
such Transfer, and such Person shall acquire no rights in such Units; or
(2) if the transfer to the Charitable Trust described in clause
(1) of this sentence would not be effective for any reason to prevent the
violation of the Ownership Limitation, then the Transfer of that number of Units
that otherwise would cause any Person to violate the Ownership Limitation shall
be void ab initio, and the intended transferee shall acquire no rights in such
Units.
C. Notice of Restricted Transfer. Any Person who acquires or
-----------------------------
attempts or intends to acquire Constructive Ownership of Units that reasonably
could be expected to violate the Ownership Limitation, or any Person who would
have owned Units that resulted in a transfer to the Charitable Trust pursuant to
the provisions of Section 12.4.A, shall immediately give written notice to the
Partnership of such event, or in the case of such a proposed or attempted
transaction, give at least 15 days prior written notice, and shall provide to
the Partnership such other information as the Partnership may request in order
to determine the effect, if any, of such acquisition or ownership on the General
Partner Entity's status as a REIT.
D. Legend. Each certificate for Units shall bear substantially the
------
following legend:
The interests represented by this certificate are subject to
restrictions on Constructive Ownership and Transfer for the purpose of
the General Partner Entity's maintenance of its status as a Real
Estate Investment Trust (a "REIT") under the Internal Revenue Code of
1986, as amended (the "Code"). Subject to certain further
restrictions and except as expressly provided in the Partnership
Agreement of the Partnership, no Person may Constructively Own Units
of the Partnership in excess of 4.9 percent (in value) of the
outstanding Units of the Partnership (the "Ownership Limitation").
Any Person who Constructively Owns or attempts to Constructively Own
Units in excess or in violation of the Ownership Limitation must
immediately notify the Partnership. If the Ownership Limitation is
violated, the Units represented hereby will be
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automatically transferred to a Charitable Trustee of a Charitable
Trust for the benefit of one or more Charitable Beneficiaries. In
addition, upon the occurrence of certain events, attempted Transfers
in violation of the Ownership Limitation described above may be void
ab initio. A Person who attempts to Constructively Own Units in
violation of the Ownership Limitation described above shall have no
claim, cause of action, or any recourse whatsoever against a
transferor of such Units. All capitalized terms in this legend have
the meanings defined in the Partnership Agreement of the Partnership,
as the same may be amended from time to time, a copy of which,
including the restrictions on transfer and ownership, will be
furnished to each holder of Units of the Partnership on request and
without charge.
Instead of the foregoing legend, the certificate may state that
the Partnership will furnish a full statement about certain restrictions on
transferability to a Partner on request and without charge.
E. Increase in Ownership Limitation. The General Partner may from
--------------------------------
time to time increase the Ownership Limitation, as provided in this Section
12.2.E. Prior to the modification of the Ownership Limitation pursuant to this
Section 12.2.E, the General Partner may require such opinions of counsel,
affidavits, undertakings or agreements as it may deem necessary or advisable in
order to determine or ensure the General Partner Entity's status as a REIT if
the modification in the Ownership Limitation were to be made.
F. Ambiguity. In the case of an ambiguity in the application of any
---------
of the provisions of this Section 12.2, Section 12.3 or Section 12.4 or any
definition contained in Section 12.1, the General Partner shall have the power
to determine the application of the provisions of this Section 12.2, Section
12.3 or Section 12.4 with respect to any situation based on the facts known to
it. If Section 12.2, Section 12.3 or Section 12.4 requires an action by the
General Partner and this Agreement fails to provide specific guidance with
respect to such action, the General Partner shall have the power to determine
the action to be taken so long as such action is not contrary to the provisions
of Sections 12.1, 12.2, 12.3 and 12.4.
G. Remedies for Breach. If the General Partner shall at any time
-------------------
determine in good faith that a Transfer or other event has taken place that
results in a violation of the Ownership Limitation or that a Person intends to
acquire or has attempted to acquire Constructive Ownership of any Units in
violation of the Ownership Limitation (whether or not such violation is
intended), the General Partner shall take such action as it deems advisable to
refuse to give effect to or to prevent such Transfer or other event, including,
without limitation, causing the Partnership to redeem Units, refusing to give
effect to such Transfer on the books of the Partnership or instituting
proceedings to enjoin such Transfer or other event; provided, however, that any
-------- -------
Transfer or attempted Transfer or other event in violation of the Ownership
Limitation shall automatically result in the transfer to the Charitable Trust
described above, and, where applicable, such Transfer (or other event)
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shall be void ab initio as provided above irrespective of any action (or non-
action) by the General Partner.
H. Remedies Not Limited. Nothing contained in this Section 12.2
--------------------
shall limit the authority of the General Partner Entity to take such other
action as it deems necessary or advisable to protect the General Partner Entity
and the interests of its shareholders in preserving the General Partner Entity's
status as a REIT.
Section 12.3 Exceptions to the Ownership Limitation
A. Exception by Request. The General Partner, in its sole and
--------------------
absolute discretion, may grant to any Person who makes a request therefor an
exception to the Ownership Limitation with respect to the ownership of any
series or class of Units, subject to the following conditions and limitations:
(i) the General Partner shall have determined that assuming such Person would
Beneficially Own or Constructively Own the maximum amount of Units permitted as
a result of the exception to be granted, the Partnership would not be classified
as an association taxable as a corporation pursuant to Section 7704 of the Code
and would not otherwise cause the General Partners to fail to qualify as a REIT;
and (ii) such Person provides the General Partner such representations and
undertakings, if any, as the General Partner may, in its sole and absolute
discretion, determine to be necessary in order for it to make the determination
that the conditions set forth in clause (i) above of this Section 12.3 have been
and/or will continue to be satisfied (including, without limitation, an
agreement as to a reduced Ownership Limitation for such Person with respect to
the Constructive Ownership of one or more other classes of Units not subject to
the exception), and such Person agrees that any violation of such
representations and undertakings or any attempted violation thereof will result
in the application of Section 12.2.G with respect to Units held in excess of the
Ownership Limitation with respect to such Person (determined without regard to
the exception granted such Person under this subparagraph (A)).
B. Opinion. Prior to granting any exception or exemption pursuant to
-------
subparagraph (A), the General Partner may require a ruling from the IRS or an
opinion of counsel, in either case in form and substance satisfactory to the
General Partner, in its sole and absolute discretion, as it may deem necessary
or advisable in order to determine or ensure the General Partner Entity's status
as a REIT; provided, however, that the General Partner shall not be obligated to
-------- -------
require obtaining a favorable ruling or opinion in order to grant an exception
hereunder.
Section 12.4 Transfer of Units in Trust
A. Ownership in Trust. Upon any purported Transfer that would result
------------------
in a transfer of Units to a Charitable Trust, such Units shall be deemed to have
been transferred to the Charitable Trustee as trustee of a Charitable Trust for
the exclusive benefit of one or more Charitable Beneficiaries. Such transfer to
the Charitable Trustee shall be deemed to be effective as of the close of
business on the Business Day prior to the purported Transfer or other event that
results in the transfer to the Charitable Trust pursuant to Section 12.2.B. The
Charitable Trustee shall be appointed by the Partnership and shall be a Person
unaffiliated with the Partnership and any Prohibited Owner. Each
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Charitable Beneficiary shall be designated by the Partnership as provided in
subparagraph G.
B. Status of Units Held by the Charitable Trustee. Units held by the
----------------------------------------------
Charitable Trustee shall be issued and outstanding Units of the Partnership.
The Prohibited Owner shall have no rights in the Units held by the Charitable
Trustee. The Prohibited Owner shall not benefit economically from ownership of
any Units held in trust by the Charitable Trustee, shall have no rights to
distributions with respect to such Units, shall not have Unit Redemption Rights
with respect to such Units and shall not possess any rights to vote or other
rights attributable to the Units held in the Charitable Trust. The Prohibited
Owner shall have no claim, cause of action, or any other recourse whatsoever
against the purported transferor of such Units.
C. Distribution and Voting Rights. The Charitable Trustee shall have
------------------------------
all voting rights and rights to distributions with respect to Units held in the
Charitable Trust, which rights shall be exercised for the exclusive benefit of
the Charitable Beneficiary. Any distribution paid prior to the discovery by the
Partnership that Units have been transferred to the Charitable Trustee by the
recipient thereof shall be paid with respect to such Units to the Charitable
Trustee upon demand and any distribution authorized but unpaid shall be paid
when due to the Charitable Trustee. Any distributions so paid over to the
Charitable Trustee shall be held in trust for the Charitable Beneficiary. The
Prohibited Owner shall have no voting rights with respect to Units held in the
Charitable Trust and, subject to Delaware law, effective as of the date that
Units have been transferred to the Charitable Trustee, the Charitable Trustee
shall have the authority (at the Charitable Trustee's sole discretion) (i) to
rescind as void any vote cast by a Prohibited Owner prior to the discovery by
the Partnership that Units have been transferred to the Charitable Trustee and
(ii) to recast such vote in accordance with the desires of the Charitable
Trustee acting for the benefit of the Charitable Beneficiary; provided, however,
-------- -------
that if the Partnership has already taken irreversible action, then the
Charitable Trustee shall not have the power to rescind and recast such vote.
Notwithstanding the provisions of Section 11.3 and this Section 12.4, until the
Partnership has received notification that Units have been transferred into a
Charitable Trust, the Partnership shall be entitled to rely on its Unit transfer
and other Partnership records for purposes of preparing lists of Partners
entitled to vote at meetings, determining the validity and authority of proxies
or consents and otherwise conducting votes of Partners.
D. Rights Upon Liquidation. Upon any voluntary or involuntary
-----------------------
liquidation, dissolution or winding up of or any distribution of the assets of
the Partnership, the Charitable Trustee shall be entitled to receive, ratably
with each other holder of Units of the class or series of Units that is held in
the Charitable Trust, that portion of the assets of the Partnership available
for distribution to the holders of such class or series (and, within such class,
pro rata in proportion to the respective Percentage Interests of such holders).
The Charitable Trustee shall distribute any such assets received in respect of
the Units held in the Charitable Trust in any liquidation, dissolution or
winding up of, or distribution of the assets of the Partnership, in accordance
with Section 12.4.E.
E. Redemption of Units Held by Charitable Trustee. Within 20 days of
----------------------------------------------
receiving notice from the Partnership that Units have been transferred to the
Charitable Trust, the Partnership shall redeem the Units held in the Charitable
Trust in accordance
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with Section 8.6.B. Upon such redemption, the interest of the Charitable
Beneficiary in the Units redeemed shall terminate and the Charitable Trustee
shall distribute the net proceeds of the redemption to the Prohibited Owner and
to the Charitable Beneficiary as provided in this Section 12.4.E. The Prohibited
Owner shall receive the lesser of (1) the price paid by the Prohibited Owner for
the Units or, if the Prohibited Owner did not give value for the Units in
connection with the event causing the Units to be held in the Charitable Trust
(e.g., in the case of a gift, devise or other such transaction), the fair market
value (based on the Market Price of the Shares of the General Partner) of the
Units on the day of the event causing the Units to be held in the Charitable
Trust and (2) the price per Unit received by the Charitable Trustee from the
redemption or other disposition of the Units held in the Charitable Trust. Any
net proceeds in excess of the amount payable to the Prohibited Owner shall be
immediately paid to the Charitable Beneficiary. If, prior to the discovery by
the Partnership that Units have been transferred to the Charitable Trustee, such
Units are redeemed by a Prohibited Owner, then (i) such Units shall be deemed to
have been redeemed on behalf of the Charitable Trust and (ii) to the extent that
the Prohibited Owner received an amount for such Units that exceeds the amount
that such Prohibited Owner was entitled to receive pursuant to this Section
12.4.E, such excess shall be paid by the Prohibited Owner to the Charitable
Trustee upon demand.
F. Designation of Charitable Beneficiaries. By written notice to the
---------------------------------------
Charitable Trustee, the Partnership shall designate one or more nonprofit
organizations to be the Charitable Beneficiary of the interest in the Charitable
Trust such that (i) Units held in the Charitable Trust would not violate the
Ownership Limitation and (ii) each such organization must be described in
Sections 501(c)(3), 170(b)(1)(A) or 170(c)(2) of the Code and that no such
organization constitutes Ownership of Units (including Units owned by it by
reason of its being a Charitable Beneficiary) that exceeds the Ownership
Limitation.
Section 12.5 Enforcement
The Partnership is authorized specifically to seek equitable relief,
including injunctive relief, to enforce the provisions of this Article XII.
Section 12.6 Non-Waiver
No delay or failure on the part of the Partnership in exercising any
right hereunder shall operate as a waiver of any right of the Partnership, as
the case may be, except to the extent specifically waived in writing.
ARTICLE XIII
ADMISSION OF PARTNERS
Section 13.1 Admission of a Successor General Partner
A successor to all of the General Partner's General Partnership
Interest pursuant to Section 11.2 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
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each case, the admission shall be subject to such successor General Partner
executing and delivering to the Partnership a written acceptance of all of the
terms and conditions of this Agreement and such other documents or instruments
as may be required to effect the admission.
Section 13.2 Admission of Additional Limited Partners
A. General. No Person shall be admitted as an Additional Limited
-------
Partner without the consent of the General Partner, which consent shall be given
or withheld in the General Partner's sole and absolute discretion. A Person who
makes a Capital Contribution to the Partnership in accordance with this
Agreement, including without limitation, under Section 4.2.B, or who exercises
an option to receive Units shall be admitted to the Partnership as an Additional
Limited Partner only with the consent of the General Partner and 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 16.11 and (ii) such other documents or instruments as may be required in
the discretion of the General Partner to effect such Person's admission as an
Additional Limited Partner. 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.
B. Allocations to Additional Limited Partners. 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 (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 would 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 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 Available Cash with respect to
which the Partnership Record Date is before the date of such admission shall be
made solely to Partners and Assignees other than the Additional Limited Partner,
and all distributions of Available Cash thereafter shall be made to all the
Partners and Assignees including such Additional Limited Partner.
Section 13.3 Amendment of Agreement and Certificate of Limited Partnership
For the admission to the Partnership of any Partner, the General
Partner shall take all steps necessary and appropriate under the Act to amend
the records of the Partnership and, if necessary, to prepare as soon as
practical an amendment of this Agreement (including an amendment of Exhibit A)
---------
and, if required by law, shall prepare
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and file an amendment to the Certificate and may for this purpose exercise the
power of attorney granted pursuant to Section 16.11.
ARTICLE XIV
DISSOLUTION AND LIQUIDATION
Section 14.1 Dissolution
The Partnership shall not be dissolved by the admission of Substituted
Limited Partners or Additional Limited Partners or by the admission of a
successor General Partner in accordance with the terms of this Agreement. Upon
the withdrawal of the General Partner, any successor General Partner shall
continue the business of the Partnership. The Partnership shall dissolve, and
its affairs shall be wound up, upon the first to occur of any of the following
("Liquidating Events"):
(i) the expiration of its term as provided in Section 2.4
hereof;
(ii) an event of withdrawal of the General Partner, as defined
in the Act (other than an event of bankruptcy), unless, within ninety (90) days
after the withdrawal a "majority in interest" (as defined below) of the
remaining Partners Consent in writing to continue the business of the
Partnership and to the appointment, effective as of the date of withdrawal, of a
substitute General Partner;
(iii) through December 31, 2058, an election to dissolve the
Partnership made by the General Partner with the consent of Limited Partners who
hold ninety percent (90%) of the outstanding Units held by Limited Partners
(including Units held by the General Partner);
(iv) an election to dissolve the Partnership made by the
General Partner, in its sole and absolute discretion after December 31, 2058;
(v) entry of a decree of judicial dissolution of the
Partnership pursuant to the provisions of the Act;
(vi) the sale of all or substantially all of the assets and
properties of the Partnership for cash or for marketable securities; or
(vii) 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 or at the time of the entry of such order or judgment a
"majority in interest" (as defined below) of the remaining Partners Consent 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.
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As used herein, a "majority in interest" shall refer to Partners
(excluding the General Partner) who hold more than fifty percent (50%) of the
outstanding Percentage Interests not held by the General Partner.
Section 14.2 Winding Up
A. General. 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, if there is no
remaining General Partner, any Person elected by a majority in interest of the
Limited Partners (the "Liquidator")) shall be responsible for overseeing the
winding up and dissolution of the Partnership and shall take full account of the
Partnership's liabilities and property and the Partnership property shall be
liquidated as promptly as is consistent with obtaining the fair value thereof,
and the proceeds therefrom (which may, to the extent determined by the General
Partners, include equity or other securities of the General Partners or any
other entity) 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 Partners;
(3) Third, to the payment and discharge of all of the
Partnership's debts and liabilities to the Limited Partners;
(4) Fourth, to the holder of Partnership Interests that are
entitled to any preference in distribution upon liquidation
in accordance with the rights of any such class or series of
Partnership Interests (and, within each such class or
series, to each holder thereof pro rata in proportion to its
respective Percentage Interest); and
(5) The balance, if any, to the 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 XIV.
B. Deferred Liquidation. Notwithstanding the provisions of Section
--------------------
14.2.A 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
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those necessary to satisfy liabilities of the Partnership (including to those
Partners as creditors) or distribute to the Partners, in lieu of cash, as
tenants in common and in accordance with the provisions of Section 14.2.A,
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.
Section 14.3 Compliance with Timing Requirements of Regulations
Subject to Section 14.4, if the Partnership is "liquidated" within the
meaning of Regulations Section 1.704-1(b)(2)(ii)(g), distributions shall be made
under this Article XIV 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 its 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. In the discretion of the General Partner, a pro rata portion of the
distributions that would otherwise be made to the General Partner and Limited
Partners pursuant to this Article XIV may be: (A) distributed to a trust
established for the benefit of the General Partner and Limited Partners for the
purposes of liquidating Partnership assets, collecting amounts owed to the
Partnership and paying any contingent or unforeseen liabilities or obligations
of the Partnership or of the General Partner arising out of or in connection
with the Partnership (in which case, 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 the General Partner, 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 (B) withheld 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
amounts shall be distributed to the General Partner and Limited Partners as soon
as practicable.
Section 14.4 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 expressly provided in
this Agreement, no Limited Partner shall have priority over any other Limited
Partner as to the return of its Capital Contributions, distributions or
allocations.
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Section 14.5 Notice of Dissolution
If a Liquidating Event occurs or an event occurs that would, but for
provisions of an election or objection by one or more Partners pursuant to
Section 14.1, 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 and to all other parties with whom the Partnership
regularly conducts business (as determined in the discretion of the General
Partner).
Section 14.6 Cancellation of Certificate of Limited Partnership
Upon the completion of the liquidation of Partnership cash and
property as provided in Section 14.2, the Partnership shall be terminated and
the Certificate and all qualifications of the Partnership as a foreign limited
partnership in jurisdictions other than the State of Delaware shall be canceled
and such other actions as may be necessary to terminate the Partnership shall be
taken.
Section 14.7 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 14.2, to minimize any losses otherwise attendant upon such
winding up, and the provisions of this Agreement shall remain in effect among
the Partners during the period of liquidation.
Section 14.8 Waiver of Partition
Each Partner hereby waives any right to partition of the Partnership's
property.
Section 14.9 Liability of Liquidator
The Liquidator shall be indemnified and held harmless by the
Partnership in the same manner and to the same degree as an Indemnitee may be
indemnified pursuant to Section 7.7.
ARTICLE XV
AMENDMENT OF PARTNERSHIP AGREEMENT; MEETINGS
Section 15.1 Amendments
A. General. Amendments to this Agreement may be proposed by a
-------
General Partner or by any Limited Partners holding twenty-five percent (25%) or
more of the Partnership Interests. Following such proposal (except an amendment
governed by Section 15.1.B), the General Partner shall submit any proposed
amendment to the Limited Partners. The General Partner shall seek the written
vote of the Partners on the proposed amendment or shall call a meeting to vote
thereon and to transact any other business that it may deem appropriate. For
purposes of obtaining a written vote, the General Partner
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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 in the same proportion as the votes of the Partners who responded in a
timely manner. Except as provided in Section 15.1.B, 15.1.C or 15.1.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 Partnership Interests held by the General Partner).
B. Amendments Not Requiring Limited Partner Approval. Notwithstanding
-------------------------------------------------
Section 15.1.A but subject to Section 15.1.C, 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
(which may be effected through the replacement of Exhibit A
---------
with an amended Exhibit A);
---------
(3) to set forth the designations, rights, powers, duties and
preferences of the holders of any additional Partnership
Interests issued pursuant to Article IV;
(4) to reflect a change that does not adversely affect the
Limited Partners in any material respect, or to cure any
ambiguity, correct or supplement any provision in this
Agreement not inconsistent with law or with other provisions
of this Agreement, 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, state or local agency or contained
in federal, state or local law.
The General Partner shall notify the Limited Partners in writing when
any action under this Section 15.1.B is taken in the next regular communication
to the Limited Partners or within 90 days of the date thereof, whichever is
earlier.
C. Amendments Requiring Limited Partner Approval (Excluding General
----------------------------------------------------------------
Partners). Notwithstanding Section 15.1.A, without the Consent of the Outside
--------
Limited Partners, the General Partner shall not amend Section 4.2.A, Section
5.1.E, Section 7.1.A (second sentence only), Section 7.4, Section 7.5, Section
7.6, Section 7.8, Section 7.10 (second sentence only), Section 7.11.B, Section
7.11.C, Section 8.5, Section 9.3,
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Section 11.2, Section 14.1 (other than Section 14.1(iii) which can be amended
only with a Consent of ninety percent (90%) of the Units (including Units held
by the General Partner)), Section 14.5, this Section 15.1.C or Section 15.2.
D. Other Amendments Requiring Certain Limited Partner Approval.
-----------------------------------------------------------
Notwithstanding anything in this Section 15.1 to the contrary, this Agreement
shall not be amended with respect to any Partner adversely affected without the
Consent of such Partner adversely affected if such amendment would (i) convert a
Limited Partner's interest in the Partnership into a general partner's interest,
(ii) modify the limited liability of a Limited Partner or require the Limited
Partner to make additional Capital Contributions or provide additional funding
to the Partnership, (iii) amend Section 4.1 (last two sentences only), (iv)
amend Section 7.11.A, (v) amend Article V, Article VI, clauses (1)-(5) of
Section 14.2.A or Section 14.3 (except as permitted pursuant to Sections 4.2,
5.4, 6.2 and 15.1(B)(3)), (vi) amend Section 8.3, (vii) amend Section 8.6 or any
defined terms set forth in Article I that relate to the Unit Redemption Right
(except as permitted in Section 8.6.E), (viii) amend Section 10.5, Section
11.2.B, Section 11.3.A, Section 11.3.B, Section 11.3.C., Section 11.4.B or
Section 11.5 (second sentence only), (ix) amend Section 16.1, (x) amend Article
XII (other than as reasonably necessary to maintain the General Partner Entity's
qualification as a REIT) or (xi) amend this Section 15.1.D. This Section 15.1.D
does not require unanimous consent of all Partners adversely affected unless the
amendment is to be effective against all Partners adversely affected.
E. Amendment and Restatement of Exhibit A Not An Amendment.
-------------------------------------------------------
Notwithstanding anything in this Article XV or elsewhere in this Agreement to
the contrary, any amendment and restatement of Exhibit A hereto by the General
---------
Partner to reflect events or changes otherwise authorized or permitted by this
Agreement, whether pursuant to Section 7.1.A(21) hereof or otherwise, shall not
be deemed an amendment of this Agreement and may be done at any time and from
time to time, as necessary by the General Partner without the Consent of the
Limited Partners.
Section 15.2 Meetings of the Partners
A. General. Meetings of the Partners may be called by the General
-------
Partner and shall be called upon the receipt by the General Partner of a written
request by Limited Partners 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 Partners is permitted or required under this Agreement, such
vote or Consent may be given at a meeting of Partners or may be given in
accordance with the procedure prescribed in Section 15.1.A. Except as otherwise
expressly provided in this Agreement, the consent of holders of a majority of
the Percentage Interests held by Limited Partners (including Limited Partnership
Interests held by the General Partner) shall control.
B. Actions Without a Meeting. 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
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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 date on which
written consents from the required Percentage Interests have been filed with the
General Partner.
C. Proxy. 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 its
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
thereof.
D. Conduct of Meeting. 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 deem appropriate.
ARTICLE XVI
GENERAL PROVISIONS
Section 16.1 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 at the address set forth in Exhibit A or such other address
---------
as the Partners shall notify the General Partner in writing.
Section 16.2 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" "Sections"
and "Exhibits" are to Articles, Sections and Exhibits of this Agreement.
Section 16.3 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.
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Section 16.4 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 16.5 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 16.6 Creditors
Other than as expressly set forth herein with regard to any
Indemnitee, none of the provisions of this Agreement shall be for the benefit
of, or shall be enforceable by, any creditor of the Partnership.
Section 16.7 Waiver
No failure by any party to insist upon the strict performance of any
covenant, duty, agreement or condition of this Agreement or to exercise any
right or remedy consequent upon a breach thereof shall constitute waiver of any
such breach or any other covenant, duty, agreement or condition.
Section 16.8 Counterparts
This Agreement may be executed in counterparts, all of which together
shall constitute one agreement binding on all the parties hereto,
notwithstanding that all such parties are not signatories to the original or the
same counterpart. Each party shall become bound by this Agreement immediately
upon affixing its signature hereto.
Section 16.9 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.
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Section 16.10 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.
Section 16.11 Power of Attorney
A. General. Each Limited Partner and each Assignee who accepts 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 any Liquidator deems appropriate or necessary to form,
qualify or continue the existence or qualification of the
Partnership as a limited partnership (or a partnership in
which the limited partners have limited liability) in the
State of Delaware and in all other jurisdictions in which
the Partnership may conduct business or own property, (b)
all instruments that the General Partner or any Liquidator
deem appropriate or necessary to reflect any amendment,
change, modification or restatement of this Agreement in
accordance with its terms, (c) all conveyances and other
instruments or documents that the General Partner or any
Liquidator deems appropriate or necessary to reflect the
dissolution and liquidation of the Partnership pursuant to
the terms of this Agreement, including, without limitation,
a certificate of cancellation, (d) all instruments relating
to the admission, withdrawal, removal or substitution of any
Partner pursuant to, or other events described in, Article
XI, XII or XIII 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, 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
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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 in this Section 16.11 shall be construed as
authorizing the General Partner or any Liquidator to amend this Agreement except
in accordance with Article XV hereof or as may be otherwise expressly provided
for in this Agreement.
B. Irrevocable Nature. 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 or any Liquidator to act as contemplated by this Agreement in
any filing or other action by it on behalf of the Partnership, and it shall
survive and not be affected by the subsequent Incapacity of any Limited Partner
or Assignee and the transfer of all or any portion of such Limited Partner's or
Assignee's 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 16.12 Entire Agreement
This Agreement contains the entire understanding and agreement among
the Partners with respect to the subject matter hereof and supersedes any prior
written oral understandings or agreements among them with respect thereto.
Section 16.13 No Rights as Shareholders
Nothing contained in this Agreement shall be construed as conferring
upon the holders of the Units any rights whatsoever as partners or shareholders
of the General Partner Entity, including, without limitation, any right to
receive dividends or other distributions made to shareholders of the General
Partner Entity or to vote or to consent or receive notice as shareholders in
respect to any meeting of shareholders for the election of trustees of the
General Partner Entity or any other matter.
Section 16.14 Limitation to Preserve REIT Status
To the extent that any amount paid or credited to the General Partner
or any of its officers, directors, trustees, employees or agents pursuant to
Section 7.4 or Section 7.7 would constitute gross income to the General Partner
for purposes of
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Section 856(c)(2) or 856(c)(3) of the Code (a "General Partner Payment") then,
notwithstanding any other provision of this Agreement, the amount of such
General Partner Payment for any fiscal year shall not exceed the lesser of:
(i) an amount equal to the excess, if any, of (a) 4.20% of the
General Partner's total gross income (but not including the amount of any
General Partner Payments) for the fiscal year which is described in subsections
(A) though (H) of Section 856(c)(2) of the Code over (b) the amount of gross
income (within the meaning of Section 856(c)(2) of the Code) derived by the
General Partner from sources other than those described in subsections (A)
through (H) of Section 856(c)(2) of the Code (but not including the amount of
any General Partner Payments); or
(ii) an amount equal to the excess, if any of (a) 25% of the
General Partner's total gross income (but not including the amount of any
General Partner Payments) for the fiscal year which is described in subsections
(A) through (I) of Section 856(c)(3) of the Code over (b) the amount of gross
income (within the meaning of Section 856(c)(3) of the Code) derived by the
General Partner from sources other than those described in subsections (A)
through (I) of Section 856(c)(3) of the Code (but not including the amount of
any General Partner Payments);
provided, however, that General Partner Payments in excess of the
-----------------
amounts set forth in subparagraphs (i) and (ii) above may be made if the General
Partner, as a condition precedent, obtains an opinion of tax counsel that the
receipt of such excess amounts would not adversely affect the General Partner's
ability to qualify as a REIT. To the extent General Partner Payments may not be
made in a year due to the foregoing limitations, such General Partner Payments
shall carry over and be treated as arising in the following year, provided,
---------
however, that such amounts shall not carry over for more than five years, and if
-------
not paid within such five year period, shall expire; provided further, that (i)
----------------
as General Partner Payments are made, such payments shall be applied first to
carry over amounts outstanding, if any, and (ii) with respect to carry over
amounts for more than one Partnership Year, such payments shall be applied to
the earliest Partnership Year first.
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IN WITNESS WHEREOF, the parties hereto have executed this Agreement as
of the date first written above.
GENERAL PARTNER:
HOST MARRIOTT TRUST
By:
----------------------------
Name:
Title:
LIMITED PARTNERS:
By:
----------------------------
as Attorney-in-Fact for the
Limited Partners
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EXHIBIT A
PARTNERS AND PARTNERSHIP INTERESTS
Class A Class B Agreed Initial Percentage
Name and Address of Partner Partnership Units Partnership Units Capital Account Interest
--------------------------- ----------------- ----------------- --------------- ----------
GENERAL PARTNER:
LIMITED PARTNERS:
TOTAL 100.00%
================= ================= =============== ==========
EXHIBIT B
CAPITAL ACCOUNT MAINTENANCE
1. Capital Accounts of the Partners
--------------------------------
A. The Partnership shall maintain for each Partner a separate Capital
Account in accordance with the rules of Regulations Section l.704-l(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 of the
Agreement and Exhibit C thereof, and decreased by (x) the amount of cash or
---------
Agreed Value of all actual and deemed distributions of cash or property made to
such Partner pursuant to this Agreement and (y) all items of Partnership
deduction and loss computed in accordance with Section 1.B hereof and allocated
to such Partner pursuant to Section 6.1 of the Agreement and Exhibit C thereof.
---------
B. For purposes of computing the amount of any item of income, gain,
deduction or loss to be reflected in the Partners' Capital Accounts, unless
otherwise specified in this Agreement, the determination, recognition and
classification of any such item shall be the same as its determination,
recognition and classification for federal income tax purposes determined in
accordance with Section 703(a) of the Code (for this purpose all items of
income, gain, loss or deduction required to be stated separately pursuant to
Section 703(a) (1) of the Code shall be included in taxable income or loss),
with the following adjustments:
(1) Except as otherwise provided in Regulations Section 1.704-
1(b)(2)(iv)(m), the computation of all items of income, gain,
loss and deduction shall be made without regard to any election
under Section 754 of the Code which may be made by the
Partnership, provided that the amounts of any adjustments to the
adjusted bases of the assets of the Partnership made pursuant to
Section 734 of the Code as a result of the distribution of
property by the Partnership to a Partner (to the extent that
such adjustments have not previously been reflected in the
Partners' Capital Accounts) shall be reflected in the Capital
Accounts of the Partners in the manner and subject to the
limitations prescribed in Regulations Section l.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)(l)(B) or 705(a)(2)(B) of the Code are not
includable in gross income or are neither currently deductible
nor capitalized for federal income tax purposes.
(3) Any income, gain or loss attributable to the taxable disposition
of any 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 specially allocated under Section 2 of Exhibit C
---------
hereof shall not be taken into account.
C. Generally, a transferee (including any Assignee) of a 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)(l)(B) of the Code, the Partnership's properties shall be
deemed, solely for federal income tax purposes, to have been distributed in
liquidation of the Partnership to the holders of the Partnership units
(including the transferee) and recontributed by such Persons in reconstitution
of the Partnership. In such event, the Carrying Values of the Partnership
properties shall be adjusted immediately prior to such deemed distribution
pursuant to Section 1.D(2) hereof. The Capital Accounts of such reconstituted
Partnership shall be maintained in accordance with the principles of this
Exhibit B.
----------
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-l(b)(2)(ii)(g), provided however that adjustments
pursuant to clauses (a) and (b) above shall be made only if the
General Partner determines that such adjustments are necessary
or appropriate to reflect the relative economic interests of the
Partners in the Partnership.
B-2
(3) In accordance with Regulations Section 1.704- l(b)(2)(iv)(e),
the Carrying Value of Partnership assets distributed in kind
shall be adjusted upward or downward to reflect any Unrealized
Gain or Unrealized Loss attributable to such Partnership
property, as of the time any such asset is distributed.
(4) In determining Unrealized Gain or Unrealized Loss for purposes
of this Exhibit B, the aggregate cash amount and fair market
---------
value of all Partnership assets (including cash or cash
equivalents) shall be determined by the General Partner using
such reasonable method of valuation as it may adopt, or in the
case of a liquidating distribution pursuant to Article XIV 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 fair market 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 the Agreement (including this Exhibit B and the
---------
other Exhibits to the 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 XV of the Agreement, provided that it is not likely to
have a material effect on the amounts distributable to any Person pursuant to
Article XIV of the Agreement upon the dissolution of the Partnership. The
General Partner also shall (i) make any adjustments that are necessary or
appropriate to maintain equality between the Capital Accounts of the Partners
and the amount of Partnership capital reflected on the Partnership's balance
sheet, as computed for book purposes, in accordance with Regulations Section
l.704-l(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 l.704-1(b).
2. No Interest
-----------
No interest shall be paid by the Partnership on Capital Contributions or on
balances in Partners' Capital Accounts.
3. No Withdrawal
-------------
No Partner shall be entitled to withdraw any part of its Capital
Contribution or Capital Account or to receive any distribution from the
Partnership, except as provided in Articles IV, V, VII, XIII and XIV of the
Agreement.
B-3
EXHIBIT C
SPECIAL ALLOCATION RULES
1. Special Allocation Rules.
-------------------------
Notwithstanding any other provision of the Agreement or this Exhibit C, the
---------
following special allocations shall be made in the following order:
A. Minimum Gain Chargeback. Notwithstanding the provisions of Section 6.1
------------------------
of the Agreement or any other provisions of this Exhibit C, if there is a net
---------
decrease in Partnership Minimum Gain during any Partnership 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. Partner Minimum Gain Chargeback. Notwithstanding any other provision
--------------------------------
of Section 6.1 of this Agreement or any other provisions of this Exhibit C
---------
(except Section 1.A hereof), if there is a net decrease in Partner Minimum Gain
attributable to a Partner Nonrecourse Debt during any Partnership 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 specially allocated items of Partnership income and gain for such
year (and, if necessary, subsequent years) in an amount equal to such Partner's
share of the net decrease in Partner Minimum Gain attributable to such Partner
Nonrecourse Debt, determined in accordance with Regulations Section 1.704-2(i)
(5). Allocations pursuant to the previous sentence shall be made in proportion
to the respective amounts required to be allocated to each 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
Sections 1.704-l(b)(2)(ii)(d)(4), l.704-1(b)(2)(ii)(d)(5), or 1.704-
l(b)(2)(ii)(d)(6), and after giving effect to the allocations required under
Sections 1.A and 1.B hereof with respect to such Partnership Year, 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)
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.
▇. ▇▇▇▇▇ Income Allocation. In the event that any Partner has an
------------------------
Adjusted Capital Account Deficit at the end of any Partnership Year (after
taking into account allocations to be made under the preceding paragraphs hereof
with respect to such Partnership Year), each such Partner shall be specially
allocated 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) in an amount and manner sufficient to eliminate, to the extent
required by the Regulations, its Adjusted Capital Account Deficit.
E. Nonrecourse Deductions. Except as may otherwise be expressly
-----------------------
[provided] by the General Partner pursuant to Section 4.2 with respect to other
classes of Units, Nonrecourse Deductions for any Partnership Year shall be
allocated only to the Partners holding Class A Units and Class B Units 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.
F. Partner Nonrecourse Deductions. Any Partner Nonrecourse Deductions
-------------------------------
for any Partnership Year shall be specially allocated to the Partner who bears
the economic risk of loss with respect to the Partner Nonrecourse Debt to which
such Partner Nonrecourse Deductions are attributable in accordance with
Regulations Sections 1.704-2(b)(4) and 1.704-2(i).
G. 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-l(b)(2)(iv)(m),
to be taken into account in determining Capital Accounts, the amount of such
adjustment to the Capital Accounts shall be treated as an item of gain (if the
adjustment increases the basis of the asset) or loss (if the adjustment
decreases such basis), and such item of gain or loss shall be specially
allocated to the Partners in a manner consistent with the manner in which their
Capital Accounts are required to be adjusted pursuant to such Section of the
Regulations.
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
C-2
deduction is allocated pursuant to Section 6.1 of the Agreement and Section 1 of
this Exhibit C.
---------
B. In an attempt to eliminate Book-Tax Disparities attributable to a
Contributed Property or Adjusted Property, items of income, gain, loss, and
deduction shall be allocated for federal income tax purposes among the Partners
as follows:
(1) (a) In the case of a Contributed Property, such items
attributable thereto shall be allocated among the Partners
consistent with the principles of Section 704(c) of the
Code 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 C); and
---------
(b) any item of Residual Gain or Residual Loss attributable
to a Contributed Property shall be allocated among the
Partners in the same manner as its correlative item of
"book" gain or loss is allocated pursuant to Section 6.1
of the Agreement and Section 1 of this Exhibit C.
---------
(2) (a) In the case of an Adjusted Property, such items shall
(i) 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 B;
---------
(ii) second, in the event such property was originally a
Contributed Property, be allocated among the
Partners in a manner consistent with Section 2.B(1)
of this Exhibit C; and
---------
(b) any item of Residual Gain or Residual Loss attributable to
an Adjusted Property shall be allocated among the Partners
in the same manner its correlative item of "book" gain or
loss is allocated pursuant to Section 6.1 of the Agreement
and Section 1 of this Exhibit C.
---------
(3) all other items of income, gain, loss and deduction shall be
allocated among the Partners the same manner as their
correlative item of "book" gain or loss is allocated pursuant to
Section 6.1 of the Agreement and Section 1 of this Exhibit C.
---------
C. To the extent 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 as of the date hereof, the
C-3
Partnership shall elect to use the "traditional method" set forth in Treasury
Regulation (S) 1.704-3(b).
C-4
EXHIBIT D
NOTICE OF REDEMPTION
The undersigned hereby irrevocably (i) redeems _________ Units in Host
Marriott, L.P. in accordance with the terms of the First Amended and Restated
Agreement of Limited Partnership of Host Marriott, L.P., as amended, and the
Unit Redemption Right referred to therein, (ii) surrenders such Units and all
right, title and interest therein and (iii) directs that the Cash Amount or
Shares Amount (as determined by the General Partner) deliverable upon exercise
of the Unit Redemption Right be delivered to the address specified below, and if
Shares are to be delivered, such 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 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 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)
----------------------------------
(Street Address)
----------------------------------
(City) (State) (Zip Code)
Signature Guaranteed by:
----------------------------------
If Shares are to be issued, issue to:
Name:
Please insert social security or identifying number:
EXHIBIT E
VALUE OF CONTRIBUTED PROPERTY
Contributed Property 704(c) Value Agreed Value
-------------------- ------------ ------------
.............................$ $
.............................
------------ -----------
Subtotal.....................$ $
------------ -----------
.............................$ $
.............................
----------- -----------
Subtotal.....................$ $
----------- -----------
.............................$ $
.............................
------------ -----------
Subtotal.....................$ $
------------ -----------
.............................$ $
.............................
------------ -----------
Subtotal.....................$ $
------------ -----------
.............................$ $
.............................
------------ -----------
Subtotal.....................$ $
------------ -----------
.............................$ $
.............................
------------ -----------
Subtotal.....................$ $
------------ -----------
TOTAL CONTRIBUTED PROPERTY.............$ $
============ ===========