Exhibit 3.1
----------------
FORM OF
SECOND AMENDED AND RESTATED
AGREEMENT OF LIMITED PARTNERSHIP
OF
HOST MARRIOTT, L.P.
----------------
TABLE OF CONTENTS
ARTICLE I DEFINED TERMS................................................... A-1
ARTICLE II ORGANIZATIONAL MATTERS......................................... A-12
Section 2.1Organization................................................. A-12
Section 2.2Name......................................................... A-12
Section 2.3Registered Office and Agent; Principal Office................ A-12
Section 2.4Term......................................................... A-13
ARTICLE III PURPOSE....................................................... A-13
Section 3.1Purpose and Business......................................... A-13
Section 3.2Powers....................................................... A-13
ARTICLE IV CAPITAL CONTRIBUTIONS AND ISSUANCES OF PARTNERSHIP INTERESTS... A-13
Section 4.1 Capital Contributions of the Existing Partners; Restatement
of Partnership Interests on the Date Hereof; General
Partnership Interest........................................ A-13
Section 4.2Future Issuances of Partnership Interests and Capital Contri-
butions................................................................ A-14
Section 4.3No Preemptive Rights......................................... A-15
Section 4.4Other Contribution Provisions................................ A-15
Section 4.5No Interest on Capital....................................... A-16
ARTICLE V DISTRIBUTIONS................................................... A-16
Section 5.1Requirement and Characterization of Distributions............ A-16
Section 5.2Amounts Withheld............................................. A-18
Section 5.3Distributions Upon Liquidation............................... A-18
Section 5.4Revisions to Reflect Issuance of Partnership Interests....... A-18
ARTICLE VI ALLOCATIONS.................................................... A-18
Section 6.1Allocations For Capital Account Purposes..................... A-18
Section 6.2Revisions to Allocations to Reflect Issuance of Partnership
Interests.............................................................. A-19
ARTICLE VII MANAGEMENT AND OPERATIONS OF BUSINESS......................... A-19
Section 7.1Management................................................... A-19
Section 7.2Certificate of Limited Partnership........................... A-22
Section 7.3Title to Partnership Assets.................................. A-22
Section 7.4Reimbursement of the General Partner......................... A-23
Section 7.5 Outside Activities of the General Partner; Relationship of
Shares to Units; Funding Debt............................... A-24
Section 7.6Transactions with Affiliates................................. A-26
Section 7.7Indemnification.............................................. A-26
Section 7.8Liability of the General Partner............................. A-27
Section 7.9Other Matters Concerning the General Partner................. A-28
Section 7.10Reliance by Third Parties................................... A-29
Section 7.11Restrictions on General Partner's Authority................. A-29
Section 7.12Loans by Third Parties...................................... A-30
ARTICLE VIII RIGHTS AND OBLIGATIONS OF LIMITED PARTNERS................... A-30
Section 8.1Limitation of Liability...................................... A-30
Section 8.2Management of Business....................................... A-30
Section 8.3Outside Activities of Limited Partners....................... A-30
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Section 8.4Return of Capital............................................ A-31
Section 8.5Rights of Limited Partners Relating to the Partnership....... A-31
Section 8.6Unit Redemption Right........................................ A-32
ARTICLE IX BOOKS, RECORDS, ACCOUNTING AND REPORTS......................... A-34
Section 9.1Records and Accounting....................................... A-34
Section 9.2Fiscal Year.................................................. A-34
Section 9.3Reports...................................................... A-34
ARTICLE X TAX MATTERS..................................................... A-35
Section 10.1Preparation of Tax Returns.................................. A-35
Section 10.2Tax Elections............................................... A-35
Section 10.3Tax Matters Partner......................................... A-35
Section 10.4Organizational Expenses..................................... A-36
Section 10.5Withholding................................................. A-36
ARTICLE XI TRANSFERS AND WITHDRAWALS...................................... A-36
Section 11.1Transfer.................................................... A-36
Section 11.2Transfers of Partnership Interests of General Partner....... A-37
Section 11.3Limited Partners' Rights to Transfer........................ A-37
Section 11.4Substituted Limited Partners................................ A-39
Section 11.5Assignees................................................... A-39
Section 11.6General Provisions.......................................... A-40
ARTICLE XII RESTRICTION ON OWNERSHIP OF UNITS............................. A-41
Section 12.1Definitions................................................. A-41
Section 12.2Ownership Limitation on Units............................... A-42
Section 12.3Exceptions to the Ownership Limitation...................... A-44
Section 12.4Transfer of Units in Trust.................................. A-44
Section 12.5Enforcement................................................. A-46
Section 12.6Non-Waiver.................................................. A-46
ARTICLE XIII ADMISSION OF PARTNERS........................................ A-46
Section 13.1Admission of a Successor General Partner.................... A-46
Section 13.2Admission of Additional Limited Partners.................... A-46
Section 13.3Amendment of Agreement and Certificate of Limited Partner-
ship................................................................... A-47
ARTICLE XIV DISSOLUTION AND LIQUIDATION................................... A-47
Section 14.1Dissolution................................................. A-47
Section 14.2Winding Up.................................................. A-47
Section 14.3Compliance with Timing Requirements of Regulations.......... A-48
Section 14.4Rights of Limited Partners.................................. A-49
Section 14.5Notice of Dissolution....................................... A-49
Section 14.6Cancellation of Certificate of Limited Partnership.......... A-49
Section 14.7Reasonable Time for Winding Up.............................. A-49
Section 14.8Waiver of Partition......................................... A-49
Section 14.9Liability of Liquidator..................................... A-49
ARTICLE XV AMENDMENT OF PARTNERSHIP AGREEMENT; MEETINGS................... A-49
Section 15.1Amendments.................................................. A-49
Section 15.2Meetings of the Partners.................................... A-51
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ARTICLE XVI GENERAL PROVISIONS............................................. A-52
Section 16.1Addresses and Notice......................................... A-52
Section 16.2Titles and Captions.......................................... A-52
Section 16.3Pronouns and Plurals......................................... A-52
Section 16.4Further Action............................................... A-52
Section 16.5Binding Effect............................................... A-52
Section 16.6Creditors.................................................... A-52
Section 16.7Waiver....................................................... A-52
Section 16.8Counterparts................................................. A-52
Section 16.9Applicable Law............................................... A-52
Section 16.10Invalidity of Provisions.................................... A-53
Section 16.11Power of Attorney........................................... A-53
Section 16.12Entire Agreement............................................ A-54
Section 16.13No Rights as Shareholders................................... A-54
Section 16.14Limitation to Preserve REIT Status.......................... A-54
EXHIBIT A PARTNERS AND PARTNERSHIP INTERESTS............................. A-56
EXHIBIT B CAPITAL ACCOUNT MAINTENANCE.................................... A-57
EXHIBIT C SPECIAL ALLOCATION RULES....................................... A-58
EXHIBIT D NOTICE OF REDEMPTION........................................... A-62
EXHIBIT E VALUE OF CONTRIBUTED PROPERTY.................................. A-63
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SECOND AMENDED AND RESTATED
AGREEMENT OF LIMITED PARTNERSHIP
OF
HOST MARRIOTT, L.P.
THIS SECOND AMENDED AND RESTATED AGREEMENT OF LIMITED PARTNERSHIP, dated as
of , 1998, is entered into by and between Host Marriott Corporation, a
Maryland corporation ("Host Marriott/Maryland"), as the General Partner of
Host Marriott, L.P. (the "Partnership"), and HMC Real Estate LLC, as a Limited
Partner of the Partnership, 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, which
agreement was amended and restated on August 6, 1998 (as so amended and
restated, the "Prior Agreement");
WHEREAS, Host Marriott/Maryland, which is the successor, by merger, to Host
Marriott Corporation, a Delaware corporation, was the sole limited partner of
the Partnership immediately prior to the execution and delivery of this
Agreement;
WHEREAS, HMC Real Estate LLC, a Delaware limited liability company that is
the successor by merger to HMC Real Estate Corporation, a Delaware
corporation, was the general partner of the Partnership immediately prior to
the execution and delivery of this Agreement;
WHEREAS, the Partners desire to (i) restate their respective Partnership
Interests effective upon the execution and delivery of this Agreement, (ii)
continue the business of the Partnership pursuant to this Agreement, and (iii)
admit certain Persons as Limited Partners of the Partnership;
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 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 Exhibit B, the General Partner shall, in its sole and absolute
discretion, use such method as it deems reasonable and appropriate to allocate
the aggregate of the 704(c) 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.
"Act" means the Delaware Revised Uniform Limited Partnership Act, as it may
be amended from time to time, and any successor to such statute.
"Additional Limited Partner" means a Person admitted to the Partnership as a
Limited Partner pursuant to Section 13.2 hereof and who is shown as such on
the books and records of the Partnership.
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"Adjusted Capital Account" means the Capital Account maintained for 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, 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 been
adjusted pursuant to Exhibit B.
"Adjustment Date" has the meaning set forth in Section 4.2.B.
"Affiliate" means, with respect to any Person, (i) any Person directly 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 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 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 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 Second 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 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.
"Articles of Incorporation" means the Articles of Incorporation of the
General Partner filed with the State Department of Assessments and Taxation in
the State of Maryland on September 28, 1998, as amended or restated from time
to time.
"Assignee" means a Person to whom one or more Units have been transferred in
a manner permitted under this Agreement, but who has not become a Substituted
Limited Partner, and who has the rights set forth in Section 11.5.
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"Available Cash" means, with respect to any period for which such
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
(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 (including any reserves that may be
necessary or appropriate to account for distributions required in
respect of Units having a preference over other classes of Units).
Notwithstanding the foregoing, Available Cash shall not include any cash
received or reductions in reserves, or take into account any disbursements
made or reserves established, after commencement of the dissolution and
liquidation of the Partnership.
"Book-Tax Disparities" means, with respect to any item of Contributed
Property or Adjusted Property, as of the date of any determination, the
difference between the Carrying Value of such Contributed Property or Adjusted
Property and the adjusted basis thereof for federal income tax purposes as of
such date. A Partner's share of the Partnership's Book-Tax Disparities in all
of its Contributed Property and Adjusted Property will be reflected by the
difference between such Partner's Capital Account balance as maintained
pursuant to Exhibit B and the hypothetical balance of such Partner's Capital
Account computed as if it had been maintained strictly in accordance with
federal income tax accounting principles.
"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 is a Partner on the date hereof shall be the amount set forth opposite
such Partner's name on Exhibit A hereto.
"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 Valuation
Date of the Shares Amount.
"CCC" means Crestline Capital Corporation, a Delaware corporation.
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"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.
"Class A" has the meaning set forth in Section 5.1.C.
"Class A Share" has the meaning set forth in Section 5.1.C.
"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.
"Class B Share" has the meaning set forth in Section 5.1.C.
"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 shares of common stock (or other comparable equity
interests) of the General Partner Entity.
"Consent" means the consent or approval of a proposed action by a Partner
given in accordance with Section 15.2.
"Consent of the Outside Limited Partners" means, with respect to any matter,
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 Units
of Partnership Interests of such classes as are then entitled to vote on such
matter representing more than fifty percent (50%) of the aggregate Percentage
Interest of all Limited Partners holding such classes of Limited Partnership
Interests 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 Common Shares in Common
Shares or makes a distribution to all holders of its outstanding Common Shares
in Common Shares (excluding for these purposes any such dividend declared and
paid in connection with the Initial E&P Distribution), (ii) subdivides its
outstanding Common Shares or (iii) combines its outstanding Common Shares into
a smaller number of Common Shares, the Conversion Factor shall be adjusted by
multiplying the Conversion Factor by a fraction, the numerator of which shall
be the number of Common 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 Common Shares (determined without the above assumption) issued and
outstanding on the record date for such dividend,
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distribution, subdivision or combination; and provided further that if an
entity shall cease to be the 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
Common 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 Common Share of the Successor Entity, determined as
of that same date. (For purposes of the second proviso in the preceding
sentence, if any holders of Common Shares 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 Common 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 Common 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 Common Shares are issued, redeemed or exchanged without
a corresponding issuance, redemption or exchange of Class A 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. No adjustment to the Conversion Factor shall be made in connection with
the issuance of Common Shares or payment of cash or distribution of other
property by Host Marriott/Maryland in connection with rights issued as part of
the Initial E&P Distribution.
"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.
"Deemed Partnership Interest Value" means, as of any date with respect to
Units of any class of Partnership Interests held by a Partner, the Deemed
Value of the Partnership Interest of such class multiplied by such Partner's
Percentage Interest of such class.
"Deemed Value of the Partnership Interest" means, as of any date with
respect to any class of Partnership Interests, (a) if the Shares corresponding
to such class of Partnership Interests (as provided for in Section 4.2.A) are
Publicly Traded, (i) the total number of Shares corresponding to such class of
Partnership Interests issued and outstanding as of the close of business on
such date (excluding any treasury shares) multiplied by the Value of one Share
of such class on such date divided 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 third and fourth sentences of the definition of "Value." For purposes
of clause (a) of the preceding sentence, the "Value" of a Share shall be mean
the average of the daily market price for Shares of such class for a number of
consecutive trading days immediately preceding the date with respect to which
Value is being determined, which number shall be selected by the General
Partner in its sole discretion or, in the sole discretion of the General
Partner, on the Business Day immediately preceding the date with respect to
which Value is being 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.
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"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, 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.
"ERISA" means the Employee Retirement Income Security Act of 1974, as
amended.
"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, the General Partner, or any wholly owned Subsidiary of
either of them for the purpose of providing funds to the Partnership.
"General Partner" means Host Marriott/Maryland, 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 shares of common stock (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 shares of
common stock (or other comparable equity interests) of an entity that owns,
directly or indirectly, fifty percent (50%) or more of the shares of common
stock (or other comparable equity interests) of the General Partner are
Publicly Traded, the term "General Partner Entity" shall refer to such entity
whose shares of common stock (or other comparable equity interests) 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.
"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.
"Host Marriott/Delaware" means Host Marriott Corporation, a Delaware
corporation.
"Host Marriott/Maryland" means Host Marriott Corporation, a Maryland
corporation and the successor by merger to Host Marriott/Delaware.
"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,
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(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 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 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 E&P Distribution" means one or more dividends or distributions of
cash, stock of CCC, warrants, options, or other rights to receive stock of the
General Partner or cash or a combination thereof paid to holders of record of
shares of capital stock of Host Marriott/Delaware or the General Partner as of
a time prior to the closing of the Partnership Rollup, regardless of whether
the date of payment of any such dividend or distribution occurs after such
closing.
"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.
"Initial Right" means a right issued to Host Marriott/Delaware in exchange
for contributions of assets to the Partnership, and held by Host
Marriott/Maryland on the date hereof, entitling the holder thereof to receive,
at the holder's election, a Class A Unit (or a fraction of a Class A Unit as
specified therein) or a specified amount of cash.
"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.
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"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 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,
excluding grants under any Share Option Plan, or (ii) any Debt issued by the
General Partner or the General Partner Entity 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.
"Partner" means the General Partner or a Limited Partner, and "Partners"
means the General Partner and the Limited Partners or any of them, as the
context may require.
"Partner Minimum Gain" means an amount, with respect to each Partner
Nonrecourse Debt, equal to the Partnership Minimum Gain that would result if
such Partner Nonrecourse Debt were treated as a Nonrecourse Liability,
determined in accordance with Regulations Section 1.704-2(i)(3).
"Partner Nonrecourse Debt" has the meaning set forth in Regulations Section
1.704-2(b)(4).
"Partner Nonrecourse Deductions" has the meaning set forth in Regulations
Section 1.704-2(i)(2), and the amount of Partner Nonrecourse Deductions with
respect to a Partner Nonrecourse Debt for a Partnership 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.
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"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 any record date established by the General
Partner either (i) for the distribution of Available Cash pursuant to Section
5.1 hereof to holders of any class of Units, which record date shall be the
same as the record date established by the General Partner Entity for a
distribution, to holders of the corresponding class (if any) of Shares, 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 Rollup" means the mergers of one or more limited partnerships
with subsidiaries of the Partnership as described in the registration
statement on Form S-4 filed by the Partnership with the Securities and
Exchange Commission under the Securities Act of 1933, as amended (File No.
333-55807).
"Partnership Year" means the fiscal year of the Partnership, which shall be
the calendar year.
"Percentage Interest" means, as to a Partner holding Units of a class of
Partnership Interests, such Partner's interest in the Partnership, 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 attributable 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 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 Assets" means any of the following assets: (i) Partnership
Interests, rights, options, warrants or convertible or exchangeable securities
of the Partnership; (ii) Debt issued by the Partnership or any Subsidiary
thereof in connection with the incurrence of Funding Debt; (iii) equity
interests in Qualified REIT Subsidiaries and limited liability companies whose
assets consist solely of Qualified Assets; (iv) 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; (v) equity interests in any Person held by
Host Marriott/Maryland on the date hereof that are de minimis in relation to
the net assets of the Partnership and its Subsidiaries and transfer of which
would require the consent of third parties that has not been obtained; (vi)
assets subject to "safe harbor leases" held by Host Marriott/Maryland or any
of its Subsidiaries on the date hereof; (vii) the common securities issued by
Host Financial Trust (and any property that may be issued in respect thereof);
(viii) cash held for payment of administrative expenses or pending
distribution to securityholders of the General Partner Entity or any wholly
owned Subsidiary thereof or pending contribution to the Partnership; (ix) and
certain other tangible and intangible assets that, taken as a whole, are de
minimis in relation to the net assets of the Partnership and its Subsidiaries.
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"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 Common 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.
"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 capital stock (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 Articles of Incorporation (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 the Common Shares. References in this Agreement to a
"class" of Shares shall also mean a "series" of Shares, unless the context
requires otherwise.
"Shares Amount" means a number of Common Shares equal to the product of the
number of Class A 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 Common Shares rights, options,
warrants or convertible or exchangeable securities entitling such holders to
subscribe for or purchase Common Shares or any other securities or property
(collectively, "rights"), then the Shares Amount shall also include such
rights that a holder of that number of Common Shares would have been entitled
to receive had it owned such Common Shares at the time such rights were
issued.
"Share Option Plan" means any equity incentive plan of the General Partner
Entity, the Partnership and/or any Affiliate of the Partnership.
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"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 Common 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.
"Termination Transaction" has the meaning set forth in Section 11.2.B.
"Unit" means a fractional, undivided share of a class of Partnership
Interests and includes Class A Units, Class B Units and Units of any other
classes of Partnership Interests established after the date hereof. The number
of Units outstanding and the Percentage Interests in the Partnership
represented by each class of Units are set forth in Exhibit A, as such Exhibit
may be amended from time to time. The ownership of each class 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 one Share of a class of outstanding Shares
that are Publicly Traded and one Unit of the class of Partnership Interests
corresponding to such class of Shares, the average of the daily market price
for Shares of such class for the ten consecutive trading days immediately
preceding the date with respect to which Value is being 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. Value means, with respect to one
Unit of a class of Partnership Interests for which there is no corresponding
class of Shares that are Publicly Traded and with respect to one Share of a
class of outstanding Shares that are not Publicly Traded, the amount that a
holder of one such Unit (including a Unit corresponding to such a Share) would
receive if each of the assets of the Partnership were to be sold for its fair
market value on the date with respect to which Value is being determined, 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
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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 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
determining the Deemed Value of the Partnership Interest of any class of
Partnership Interests in connection with the issuance of additional Units
thereof in exchange for a Capital Contribution funded by an underwritten
public offering or an arm's length private placement of such Units or Shares
corresponding to such Units, the Value of all Units in such class of
Partnership Interests shall be equal to the public offering price or the
purchase price, as the case may be, of the Shares or Units sold in such
underwritten offering or private placement therein. In determining the Value
of any Shares Amount that includes rights that a holder of Common Shares would
be entitled to receive, the Value of such rights shall be determined by the
General Partner acting in good faith on the basis of such quotations or other
information as it considers, in its reasonable judgment, appropriate.
Notwithstanding any of the foregoing, with respect to any class of Partnership
Interests that is entitled to a preference as compared to the class of
Partnership Interests corresponding to Common Shares, "Value" means the stated
liquidation preference or value of such class of Partnership Interests
provided in the instrument establishing such class of Partnership Interests
(unless otherwise provided in such instrument).
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 ββββ ββββββ ββββ, ββββββ ββ βββ ββββββ,
ββββββββββ, ββββββββ βββββ, and the registered agent for service of process on
the Partnership in the State of Delaware at such registered office shall be
The ββββββββ-ββββ Corporation System, Inc. The principal office of the
Partnership shall be βββββ ββββββββ ββββ, ββββββββ, ββββββββ βββββ-ββββ, 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.
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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.
ARTICLE IV
Capital Contributions And Issuances
Of Partnership Interests
SECTION 4.1 CAPITAL CONTRIBUTIONS OF THE EXISTING PARTNERS; RESTATEMENT OF
PARTNERSHIP INTERESTS ON THE DATE HEREOF; GENERAL PARTNERSHIP
INTEREST
A. Prior Contributions of Existing Partners. Host Marriott/Maryland, HMC
Real Estate LLC, and other Subsidiaries of Host Marriott/Maryland and their
respective predecessors have previously made Capital Contributions to the
Partnership, as described in Exhibit E.
B. Restatement of Existing Partnership Interests. Effective upon the
execution and delivery of this Agreement, the Partnership Interests of Host
Marriott/Maryland and HMC Real Estate LLC shall be restated so that the
Partnership Interests held by HMC Real Estate LLC shall be Limited Partnership
Interests and so that a portion of the Partnership Interests held by Host
Marriott/Maryland shall be General Partnership Interests, as set
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forth in Section 4.1.C, and the remainder shall be Limited Partnership
Interests. Immediately following such restatement, the Partners shall own the
respective numbers of Class A Units and Initial Rights and shall have the
respective Percentage Interests in the Partnership as set forth in Exhibit A,
which Percentage Interests 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.
C. General Partnership Interest. A number of Class A Units held by the
General Partner equal to one tenth of one percent (0.1%) of the aggregate
number of Class A Units and Class B Units outstanding from time to time 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.
SECTION 4.2 FUTURE ISSUANCES OF PARTNERSHIP INTERESTS AND CAPITAL
CONTRIBUTIONS
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 one or more other classes of 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 Partnership distributions, (iii) the rights of each such class or series of
Partnership Interests upon dissolution and liquidation of the Partnership, and
(iv) the consideration, if any, to be received by the Partnership in exchange
for the issuance of such Partnership Interests; provided that, except in
connection with the issuance of Units in connection with the Partnership
Rollup, 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 shares of
common stock (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 class (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. References in this Agreement to a
"class" of Partnership Interests or Units shall include a "series" of
Partnership Interests or Units, unless the context requires otherwise.
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 of the class of Partnership
Interests applicable to the additional Units immediately following such
Capital Contribution shall be equal to a fraction, the numerator of which is
equal to the sum of (i) the Deemed Value of the Partnership Interest of such
class 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 with respect to the additional Units of such
class on such Adjustment Date and the denominator of which is equal to the sum
of (x) the Deemed Value of the Partnership Interests for all outstanding
classes (computed as of the Business Day immediately preceding such Adjustment
Date) plus (y) the aggregate amount of cash, if any, plus the Agreed Value of
Contributed Property, if any, contributed to the Partnership on
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such Adjustment Date in respect of additional Units of all classes. For
purposes of foregoing, Class A Units and Class B Units shall be considered one
class. The Percentage Interest of each other class of Partnership Interests
with respect to which a Capital Contribution is not made concurrently with
such additional Capital Contribution on such Adjustment Date shall be adjusted
to a fraction the numerator of which is equal to the Deemed Value of the
Partnership Interest of such class (computed as of the Business Day
immediately preceding 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 cash, if any, plus the
Agreed Value of Contributed Property, if any, contributed to the Partnership
on such Adjustment Date in respect of additional Units of all classes. For
purposes of adjusting Percentage Interests pursuant to this Section 4.2.B
following a Capital Contribution by the General Partner, the amount of cash
Capital Contributions made with respect to the additional Units issued in
connection with such Capital Contribution 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 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, the Partnership shall
have two classes of Units entitled "Class A Units" and "Class B Units" and
such additional classes of Units as may be created pursuant to Section 4.2.A.
The Partnership may issue Class A Units, Class B Units or Units of a newly
created class of Partnership Interests, at the election of the General
Partner, in its sole and absolute discretion, in exchange for the contribution
of cash, real estate, partnership interests, stock, notes or other assets or
consideration; provided that all Units outstanding on the date hereof and
issued in connection with the Partnership Rollup or upon exercise of the
Initial Rights 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. Except as otherwise expressly provided in this Agreement,
holders of Class A Units and Class B Units shall be entitled to vote the
Partnership Interests represented by such Units on all matters as to which the
vote or consent of the Partners is required.
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
A. 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
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Partnership had compensated such Partner in cash, and the Partner had
contributed such cash to the capital of the Partnership.
B. 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.
C. To the extent the Partnership acquires any property (or an indirect
interest therein) by the merger of any other Person into the Partnership or
with or into a Subsidiary of the Partnership in a triangular merger, Persons
who receive Partnership Interests in exchange for their interests in the
Person merging into the Partnership or with or into a Subsidiary of 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.
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 Persons who are holders of Units
in some or all classes of Partnership Interests in accordance with the terms
established for each such class on the respective Partnership Record Dates
established for distributions to the applicable classes with respect to such
quarter or shorter period. Distributions shall be made in the manner provided
in Sections 5.1.B, 5.1.C and 5.1.D and in acordance with the respective terms
established for each other class of Partnership Interests hereafter created.
Notwithstanding anything to the contrary contained herein, in no event may a
Partner receive a distribution of Available Cash with respect to a Class A
Unit for a quarter or shorter period if such Partner is entitled to receive a
distribution with respect to a Common Share for which such Class A Unit has
been redeemed or exchanged. Unless otherwise expressly provided for herein or
in the terms established for any new class of Partnership Interests created in
accordance with Article IV hereof, no Units of Partnership Interest shall be
entitled to a distribution in preference to any other Unit of 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. Priority of Distributions. (i) Distributions to holders of Units of a
class of Partnership Interests that is entitled to any preference in
distribution shall be made in accordance with the rights of such class of
Partnership Interests to holders of such Units on the respective Partnership
Record Date established for the distribution to such class of Partnership
Interests (and, within such class, pro rata in proportion to the respective
Percentage Interests in such class on such Partnership Record Date).
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(ii) Distributions to holders of Class A Units, Class B Units and Units
of any other class of Partnership Interests that are not entitled to any
preference in distribution shall be made quarterly (or more frequently), to
the extent there is Available Cash remaining after the payment of
distributions in respect of any classes of Partnership Interests entitled
to a preference in distribution in accordance with the foregoing clause
(i), 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 to holders of such Units on the respective Partnership Record
Date established for the distribution to each such class of Partnership
Interests (and, within each such class, pro rata in proportion to the
respective Percentage Interests in such class 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 with respect
to Class A Units and Class B Units (a "Distribution 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 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:
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(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.
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
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in such class 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 the respective
Percentage Interests in such class 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 in such class 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 in such class 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 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
β. ββββββ 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
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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 with or without cause by the Consent of
Limited Partners holding Percentage Interests that are more than fifty percent
(50%) of the aggregate Percentage Interest represented by all Limited
Partnership Interests then entitled to vote thereon (including for this
purpose any such Limited Partnership Interests held by the General Partner).
In addition to the powers now or hereafter granted a general partner of a
limited partnership under applicable law or which are granted to the General
Partner under any other provision of this Agreement, the General Partner,
subject to Section 7.11, 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.A 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 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;
(8) the distribution of Partnership cash or other Partnership assets in
accordance with this Agreement;
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(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 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;
(21) the acquisition of Units in exchange for cash, debt instruments, or
other property; and
(22) 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
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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.
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 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
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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, any expenses related
to or resulting from the operations of the General Partner or the Partnership
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 and any tax
liabilities of the General Partner and its Subsidiaries); 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 it 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
interests 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 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 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 Entity
exercises its rights under the Articles of Incorporation to purchase Shares or
otherwise elects to purchase from its shareholders Shares in
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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 Entity,
any employee equity purchase plan adopted by the General Partner Entity or any
similar obligation or arrangement undertaken by the General Partner Entity in
the future, the purchase price paid by the General Partner Entity for those
Shares and any other expenses incurred by the General Partner Entity in
connection with such purchase shall be considered expenses of the Partnership
and shall be reimbursable to the General Partner Entity, subject to the
conditions that: (i) if those Shares subsequently are to be sold by the
General Partner Entity, the General Partner Entity shall pay to the
Partnership any proceeds received by the General Partner Entity 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 Entity within thirty (30) days after
the purchase thereof, the General Partner Entity shall cause the Partnership
to cancel a number of Units (rounded to the nearest whole Unit) of the
corresponding class held by the General Partner Entity equal to (i) in the
case of Common Shares, the product attained by multiplying the number of those
Common Shares by a fraction, the numerator of which is one and the denominator
of which is the Conversion Factor, and (ii) in the case of any other Shares,
the number of such Shares, which Units shall be treated as having been
redeemed by the Partnership for the payment made by the Partnership to the
General Partner Entity 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.
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,
following the consummation of the Partnership Rollup, 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 hold and acquire, directly or
through a Qualified REIT Subsidiary or limited liability company, Qualified
Assets. The General Partner and any of its Subsidiaries 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 and Other Securities. If the General Partner Entity
exercises its rights under the Articles of Incorporation to purchase Shares or
otherwise elects to purchase from the holders thereof Shares, other equity
securities of the General Partner Entity, New Securities or Convertible
Funding Debt, then the General Partner shall cause the Partnership to purchase
from the General Partner (i) in the case of a purchase of Common Shares, that
number of Class A Units equal to the product obtained by multiplying the
number of Shares purchased by the General Partner Entity times a fraction, the
numerator of which is one and the denominator of which is the Conversion
Factor, or (ii) in the case of the purchase of any other class of Shares,
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other equity securities of the General Partner Entity, New Securities or
Convertible Funding Debt, the Units, other Partnership Interests or rights,
options, warrants or convertible or exchangeable securities of the Partnership
corresponding to the securities so purchased by the General Partner Entity, in
each case on the same terms and for the same aggregate price that the General
Partner Entity purchased such securities.
C. Forfeiture of Shares. If the Partnership or the General Partner Entity
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 of the appropriate
class 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 and Other Securities. After the date hereof, the
General Partner Entity shall not grant, award or issue any additional Common
Shares (other than Common Shares issued pursuant to Section 8.6 hereof or
pursuant to a dividend or distribution (including any share split) of Common
Shares to all of holders of Common Shares 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 General Partner Entity, 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 Common 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 Entity is expressly authorized to issue additional Common 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 Entity sells Common Shares pursuant to any Share Option Plan, the
General Partner shall transfer the net proceeds of the sale of such Common
Shares to the Partnership as an additional Capital Contribution in exchange
for an amount of additional Units equal to the number of Common Shares so sold
divided by the Conversion Factor.
F. Funding Debt. The General Partner or the General Partner Entity or any
wholly owned Subsidiary of either of them 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, the General Partner Entity
or such Subsidiary, as the case may be, lend to the Partnership the net
proceeds of such Funding Debt; provided that Convertible Funding Debt shall be
issued in accordance with the provisions of Section 7.5.D above; and, provided
further that the General Partner, the General Partner Entity or such
Subsidiary 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 Entity's ability to remain qualified as a REIT. If the General
Partner, General Partner Entity or such Subsidiary 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.
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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 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 determined in good faith by the General
Partner to be 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 CCC 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 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
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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.
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.
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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
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 General Partner Entity
to avoid incurring any
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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 Partners holding Percentage
Interests that are more than fifty percent (50%) of the aggregate Percentage
Interest represented by all Partnership Interests then entitled to vote
thereon (including for this purpose any such Partnership Interests held by the
General Partner), provided, however, that the foregoing limitation shall not
apply to any leases of all or substantially all of the Partnership's assets
entered into by the Partnership in order to satisfy any REIT Requirements.
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 in connection with any of the transactions
described in clause (i), (ii) or (iii) below, the Partnership shall not
engage in such transaction unless such transaction is approved by the
holders of a majority of all outstanding Class A Units and Class B Units
(or, in the case of a transaction described in clause (iii), a majority of
the Class A Units and Class B Units that are voted, provided that at least
a majority of the Class A Units and Class B Units are voted), including
Class A Units and Class B Units held by the General Partner, voting as a
single class with the General Partner voting its Class A Units and Class B
Units in the same proportion as its shareholders vote. The transactions
subject to this paragraph are: (i) a sale of all or substantially all of
the assets of the Partnership; (ii) a merger involving the Partnership; or
(iii) any issuance
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of Units in connection with an issuance of Common Shares representing 20%
or more of the outstanding Common Shares of the General Partner Entity
which would require shareholder approval of such transaction under the
rules of the New York Stock Exchange.
(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 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.
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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;
(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 Articles
of Incorporation and all amendments thereto, together with executed copies
of all powers of attorney pursuant to which this Agreement, the
Certificate, the Articles of Incorporation 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 Class A Unit or Class B
Unit, shall be deemed to be the date that the Class A Unit (or corresponding
Class B Unit) or such Class B Unit, as the case may be, was issued to the
original recipient thereof for purposes of this Section 8.6), the holder of a
Class 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 holder of the Class A Units 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 Class A 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) Class A
Units unless such Redeeming Partner then holds less than one thousand (1,000)
Class A Units, in which event the Redeeming Partner must exercise the Unit
Redemption Right for all of the Class A 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) Class A Units without regard to whether or not such
Limited Partner is exercising the Unit Redemption Right for all of the Class A
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 Class A
Units so redeemed to receive any distributions paid in respect of a
Partnership Record Date for distributions in respect of Class A Units and
Class B Units 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 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.
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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 Articles of Incorporation) 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 Common Shares shall be in Common
Shares registered under Section 12 of the Exchange Act and listed for trading
on the exchange or national market on which the Common Shares are Publicly
Traded and the issuance of Common Shares upon redemption shall be registered
under the Securities Act or, at the election of the General Partner, resale of
the Common 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 Common 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.
(ii) If the General Partner determines to pay the Redeeming Partner the
Redemption Amount in the form of Common Shares, the total number of Common
Shares to be paid to the Redeeming Partner in exchange for the Redeeming
Partner's Class A Units shall be the applicable Shares Amount. If this amount
is not a whole number of Common Shares, the Redeeming Partner shall be paid
(i) that number of Common 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 Common 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 Common
Shares upon exercise of the Unit Redemption Right.
(iv) Any Common 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 holder of Class A Units 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 holder on the Specified
Redemption Date would be (i) prohibited under those portions of the Articles
of Incorporation 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. All Class A 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 Class A Units which are
or may be subject to any liens. If any state or local
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property transfer tax is payable as a result of the transfer of Units to the
Partnership or the General Partner pursuant to the Unit Redemption Right, the
Redeeming 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.
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 be the calendar 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 will be sent to each Limited Partner on the same date
on which they are first sent to holders of Shares.
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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.
β. ββββββ. The tax matters partner is authorized, but not required:
(1) to enter into any settlement with the IRS with respect to any
administrative or judicial proceedings for the adjustment of Partnership
items required to be taken into account by a Partner for income tax
purposes (such administrative proceedings being referred to as a "tax
audit" and such judicial proceedings being referred to as "judicial
review"), and in the settlement agreement the tax matters partner may
expressly state that such agreement shall bind all Partners, except that
such settlement agreement shall not bind any Partner (i) who (within the
time prescribed pursuant to the Code and Regulations) files a statement
with the IRS providing that the tax matters partner shall not have the
authority to enter into a settlement agreement on behalf of such Partner or
(ii) who is a "notice 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.
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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.
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.
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,
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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, any merger (including a triangular merger), consolidation or
other combination with or into another Person following the consummation of
which the shareholders of the surviving entity are substantially identical to
the shareholders of the General Partner Entity, 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 or any such merger, consolidation, or other combination described
above.
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 Partners holding Percentage Interests that are more
than fifty percent (50%) of the aggregate Percentage Interest represented by
all Partnership Interests then entitled to vote thereon (including for this
purpose any such Partnership Interests 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 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
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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, which consent may be withheld in the General Partner's sole and
absolute discretion. 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 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
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"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 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, or any transferee
does not request admission as a Substituted Limited Partner, 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 Units in any matter presented to the
Limited Partners holding Units of the same class of Partnership Interests 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.
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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 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)
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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 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.
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"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 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 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,
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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 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
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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) 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
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
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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 in such class 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 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
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(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 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
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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 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.
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
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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 in such class); 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 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
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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.
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
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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 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. A proposed amendment shall be adopted and be effective as an
amendment hereto if it is approved by the General Partner and, except as
provided in Section 15.1.B, 15.1.C or 15.1.D, it receives the Consent of
Limited Partners holding Percentage Interests that are more than fifty percent
(50%) of the aggregate Percentage Interest of all Limited Partners holding
Limited Partnership Interests of such classes as are then entitled to vote
thereon (including for such purpose any such 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, Section 11.2, Section 14.1 (other than
Section 14.1(iii)), Section 14.5, this Section 15.1.C or Section 15.2.
Notwithstanding Section 15.1.A, the General Partner shall not amend Section
14.1(iii) without the Consent of the Outside Limited Partners and the Consent
of holders of 90% of the Class A Units and Class B Units (voting together as a
single class), including Class A Units and Class B Units held by the General
Partner.
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
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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 ten percent (10%) 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 Partners
holding Percentage Interests that are more than fifty percent (50%) of the
aggregate Percentage Interest represented by the Partnership Interests then
entitled to vote thereon (including any such Partnership Interests held by the
General Partner) shall control.
B. Actions Without a Meeting. Except as otherwise expressly provided by this
Agreement, 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 Partners holding Percentage Interests that are
more than fifty percent (50%) (or such other percentage as is expressly
required by this Agreement) of the aggregate Percentage Interest represented
by the Partnership Interests then entitled to vote thereon (including any such
Partnership Interests held by the General Partner). Such consent may be in one
instrument or in several instruments, and shall have the same force and effect
as a vote of Partners holding Percentage Interests that are more than fifty
percent (50%) (or such other percentage as is expressly required by this
Agreement) of the aggregate Percentage Interest represented by the Partnership
Interests then entitled to vote thereon. 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 Partners holding the
required Percentage Interest 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.
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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.
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 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.
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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 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.
HOST MARRIOTT CORPORATION, a
Maryland corporation
By: _________________________________
Name:
Title:
HMC REAL ESTATE LLC, a Delaware
limited liability company
By: _________________________________
Name:
Title:
A-55
EXHIBIT A
Partners and Partnership Interests
CLASS A CLASS B
PARTNERSHIP PARTNERSHIP AGREED INITIAL PERCENTAGE
NAME AND ADDRESS OF PARTNER UNITS UNITS CAPITAL ACCOUNT INTEREST
--------------------------- ----------- ------------ ---------------- ----------
GENERAL PARTNER:
LIMITED PARTNERS:
TOTAL.................... 100.00%
==== ==== ==== ======
--------
In connection with the issuance of Units in the Partnership Rollup and the
other Capital Contributions being made contemporaneously with the Partnership
Rollup (including the acquisition of properties from entities affiliated with
The Blackstone Group), the foregoing Exhibit A shall be completed to reflect
the numbers of Units held by Partners, the Agreed Initial Capital Accounts,
and the Percentage Interests only at such time as all elections to exchange
Units received in the Partnership Rollup for Common Shares or notes expire,
all rights issued by the General Partner corresponding to the Initial Rights
expire, and the other information required to complete the foregoing table
becomes available. At such time, the table shall be completed as of the date
of this Agreement to give effect to the Partnership Interests issued in
connection with the Partnership Rollup and the other Capital Contributions
made contemporaneously with the Partnership Rollup and, at such time, the
table also shall be amended and restated as of the later of the expiration
date of the Initial Rights or the determination of the number of Units that
are exchanged for Common Shares or notes to give effect to all such
transactions.
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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.
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.
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(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.
(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.
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EXHIBIT C
Special Allocation Rules
1. Special Allocation Rules.
Notwithstanding any other provision of the Agreement or this Exhibit C, the
following special allocations shall be made in the following order:
A. Minimum Gain Chargeback. Notwithstanding the provisions of Section 6.1
of the Agreement or any other provisions of this Exhibit C, if there is a
net decrease in Partnership Minimum Gain during any Partnership 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.
β. βββββ 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.
A-59
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 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.
A-60
(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. Subject to the exceptions described in the next three sentences,
with respect to the Contributed Property transferred to the Partnership as of
the date hereof, the Partnership shall elect to use the "traditional method"
set forth in Regulations Section 1.704-3(b), but may make a curative
allocation pursuant to Regulations Section 1.704-3(c) to a partner of taxable
gain recognized by the Partnership on the sale or other taxable disposition of
part or all of such Contributed Property to reduce or eliminate disparities
between the book and tax items of the noncontributing Partners attributable to
the application of the "ceiling rule" under the "traditional method." With
respect to the Contributed Property transferred to the Partnership as of the
date hereof by (i) various affiliates of the Blackstone Group and a series of
funds controlled by Blackstone Real Estate Partners pursuant to that certain
contribution agreement dated April 16, 1998 and (ii) Hopeport, Ltd. (or,
alternatively, its partners) and Timeport, Ltd. (or, alternatively, its
partners), the Partnership shall elect to use the "traditional method" set
forth in Regulations Section 1.704-3(b). With respect to the Contributed
Property transferred to the Partnership by The ββββ-βββββββ Hotels as of the
date hereof, the Partnership shall use the method specified pursuant to the
agreement governing the contribution of the Contributed Property. With respect
to the Contributed Property transferred to the Partnership by Capitol Center
Associates Limited Partnership as of the date hereof, the Partnership shall
use the "remedial method" set forth in Regulations Section 1.704-3(d).
A-61
EXHIBIT D
Notice of Redemption
The undersigned hereby irrevocably (i) redeems Units in Host Marriott,
L.P. in accordance with the terms of the Second 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:
A-62
EXHIBIT E
Value of Contributed Property
CONTRIBUTED PROPERTY 704(C) VALUE AGREED VALUE
-------------------- ------------ ------------
$ $
---- ----
Subtotal............................................ $ $
---- ----
$ $
---- ----
Subtotal............................................ $ $
---- ----
$ $
---- ----
Subtotal............................................ $ $
---- ----
$ $
---- ----
Subtotal............................................ $ $
---- ----
$ $
---- ----
Subtotal............................................ $ $
---- ----
$ $
---- ----
TOTAL CONTRIBUTED PROPERTY............................ $ $
==== ====
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