EXHIBIT 10.1
[FORM OF]
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AGREEMENT OF LIMITED PARTNERSHIP
OF
LASALLE HOTEL OPERATING PARTNERSHIP, L.P.
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Dated as of ___________, 1998
TABLE OF CONTENTS
ARTICLE I DEFINED TERMS......................................... 1
ARTICLE II ORGANIZATIONAL MATTERS............................... 13
SECTION 2.1 ORGANIZATION.................................. 13
SECTION 2.2 NAME........................................... 13
SECTION 2.3 REGISTERED OFFICE AND AGENT; PRINCIPAL OFFICE.. 13
SECTION 2.4 TERM........................................... 13
ARTICLE III PURPOSE............................................. 13
SECTION 3.1 PURPOSE AND BUSINESS........................... 13
SECTION 3.2 POWERS......................................... 14
ARTICLE IV CAPITAL CONTRIBUTIONS AND ISSUANCES OF PARTNERSHIP
INTERESTS..................................................
SECTION 4.1 CAPITAL CONTRIBUTIONS OF THE PARTNERS.......... 14
SECTION 4.2 ISSUANCES OF PARTNERSHIP INTERESTS............. 15
SECTION 4.3 NO PREEMPTIVE RIGHTS........................... 16
SECTION 4.4 OTHER CONTRIBUTION PROVISIONS.................. 16
SECTION 4.5 NO INTEREST ON CAPITAL......................... 17
ARTICLE V DISTRIBUTIONS......................................... 17
SECTION 5.1 REQUIREMENT AND CHARACTERIZATION OF
DISTRIBUTIONS..............................................
SECTION 5.2 AMOUNTS WITHHELD............................... 19
SECTION 5.3 DISTRIBUTIONS UPON LIQUIDATION................. 20
SECTION 5.4 REVISIONS TO REFLECT ISSUANCE OF PARTNERSHIP
INTERESTS...............................................
ARTICLE VI ALLOCATIONS.......................................... 20
SECTION 6.1 ALLOCATIONS FOR CAPITAL ACCOUNT PURPOSES....... 20
SECTION 6.2 REVISIONS TO ALLOCATIONS TO REFLECT ISSUANCE OF
PARTNERSHIP INTERESTS...................................
ARTICLE VII MANAGEMENT AND OPERATIONS OF BUSINESS............... 21
SECTION 7.1 MANAGEMENT..................................... 21
SECTION 7.2 CERTIFICATE OF LIMITED PARTNERSHIP............. 25
SECTION 7.3 TITLE TO PARTNERSHIP ASSETS.................... 26
SECTION 7.4 REIMBURSEMENT OF THE GENERAL PARTNER
SECTION 7.5 OUTSIDE ACTIVITIES OF THE GENERAL
PARTNER; RELATIONSHIP OF SHARES TO
PARTNERSHIP UNITS; FUNDING DEBT 28
SECTION 7.6 TRANSACTIONS WITH AFFILIATES................... 29
SECTION 7.7 INDEMNIFICATION................................ 30
SECTION 7.8 LIABILITY OF THE GENERAL PARTNER............... 32
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SECTION 7.9 OTHER MATTERS CONCERNING THE GENERAL
PARTNER.................................................
SECTION 7.10 RELIANCE BY THIRD PARTIES..................... 34
SECTION 7.11 RESTRICTIONS ON GENERAL PARTNER'S AUTHORITY... 35
SECTION 7.12 LOANS BY THIRD PARTIES........................ 36
SECTION 7.13 ACTIONS OF THE GENERAL PARTNER................ 36
ARTICLE VIII RIGHTS AND OBLIGATIONS OF LIMITED PARTNERS......... 36
SECTION 8.1 LIMITATION OF LIABILITY........................ 36
SECTION 8.2 MANAGEMENT OF BUSINESS......................... 36
SECTION 8.3 OUTSIDE ACTIVITIES OF LIMITED PARTNERS......... 36
SECTION 8.4 RETURN OF CAPITAL.............................. 37
SECTION 8.5 RIGHTS OF LIMITED PARTNERS RELATING TO THE
PARTNERSHIP.............................................
SECTION 8.6 REDEMPTION RIGHT............................... 38
ARTICLE IX BOOKS, RECORDS, ACCOUNTING AND REPORTS............... 41
SECTION 9.1 RECORDS AND ACCOUNTING......................... 41
SECTION 9.2 FISCAL YEAR.................................... 41
SECTION 9.3 REPORTS........................................ 41
ARTICLE X TAX MATTERS........................................... 41
SECTION 10.1 PREPARATION OF TAX RETURNS.................... 41
SECTION 10.2 TAX ELECTIONS................................. 42
SECTION 10.3 TAX MATTERS PARTNER........................... 42
SECTION 10.4 ORGANIZATIONAL EXPENSES....................... 43
SECTION 10.5 WITHHOLDING................................... 43
ARTICLE XI TRANSFERS AND WITHDRAWALS............................ 44
SECTION 11.1 TRANSFER...................................... 44
SECTION 11.2 TRANSFERS OF PARTNERSHIP INTERESTS OF GENERAL
PARTNER.................................................
SECTION 11.3 LIMITED PARTNERS' RIGHTS TO TRANSFER.......... 45
SECTION 11.4 SUBSTITUTED LIMITED PARTNERS.................. 47
SECTION 11.5 ASSIGNEES..................................... 48
SECTION 11.6 GENERAL PROVISIONS............................ 48
ARTICLE XII ADMISSION OF PARTNERS............................... 50
SECTION 12.1 ADMISSION OF A SUCCESSOR GENERAL PARTNER...... 50
SECTION 12.2 ADMISSION OF ADDITIONAL LIMITED PARTNERS...... 50
SECTION 12.3 AMENDMENT OF AGREEMENT AND CERTIFICATE OF
LIMITED PARTNERSHIP.......................................
ARTICLE XIII DISSOLUTION AND LIQUIDATION........................ 51
SECTION 13.1 DISSOLUTION................................... 51
SECTION 13.2 WINDING UP.................................... 52
SECTION 13.3 COMPLIANCE WITH TIMING REQUIREMENTS OF
REGULATIONS............................................. 53
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SECTION 13.4 DEEMED DISTRIBUTION AND RECONTRIBUTION........ 54
SECTION 13.5 RIGHTS OF LIMITED PARTNERS.................... 54
SECTION 13.6 NOTICE OF DISSOLUTION......................... 54
SECTION 13.7 CANCELLATION OF CERTIFICATE OF LIMITED
PARTNERSHIP.............................................
SECTION 13.8 REASONABLE TIME FOR WINDING UP................ 54
SECTION 13.9 WAIVER OF PARTITION........................... 55
SECTION 13.10 LIABILITY OF LIQUIDATOR...................... 55
ARTICLE XIV AMENDMENT OF PARTNERSHIP AGREEMENT; MEETINGS........ 55
SECTION 14.1 AMENDMENTS.................................... 55
SECTION 14.2 MEETINGS OF THE PARTNERS...................... 56
ARTICLE XV GENERAL PROVISIONS................................... 57
SECTION 15.1 ADDRESSES AND NOTICE.......................... 57
SECTION 15.2 TITLES AND CAPTIONS........................... 57
SECTION 15.3 PRONOUNS AND PLURALS.......................... 57
SECTION 15.4 FURTHER ACTION................................ 58
SECTION 15.5 BINDING EFFECT................................ 58
SECTION 15.6 CREDITORS..................................... 58
SECTION 15.7 WAIVER........................................ 58
SECTION 15.8 COUNTERPARTS.................................. 58
SECTION 15.9 APPLICABLE LAW................................ 58
SECTION 15.10 INVALIDITY OF PROVISIONS..................... 58
SECTION 15.11 POWER OF ATTORNEY............................ 58
SECTION 15.12 ENTIRE AGREEMENT............................. 60
SECTION 15.13 NO RIGHTS AS SHAREHOLDERS.................... 60
SECTION 15.14 LIMITATION TO PRESERVE REIT STATUS........... 60
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EXHIBIT A
PARTNERS AND PARTNERSHIP INTERESTS
EXHIBIT B
CAPITAL ACCOUNT MAINTENANCE
EXHIBIT C
SPECIAL ALLOCATION RULES
EXHIBIT D
NOTICE OF REDEMPTION
EXHIBIT E
VALUE OF CONTRIBUTED PROPERTY
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AGREEMENT OF LIMITED PARTNERSHIP
OF
LASALLE HOTEL OPERATING PARTNERSHIP, L.P.
THIS AGREEMENT OF LIMITED PARTNERSHIP, dated as of _____________, 1998, is
entered into by and among LaSalle Hotel Properties, a Maryland real estate
investment trust, as the General Partners, and the Persons whose names are set
forth on Exhibit A hereto as Limited Partners, together with any other Persons
who become Partners in the Partnership as provided herein.
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 agree to form 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.
"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 12.2 hereof and who is shown as such on
the books and records of the Partnership.
"Adjusted Capital Account" means the Capital Account maintained for each
Partner as of the end of each Partnership 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-l(b)(2)
(ii)(d)(4), 1.704-l(b) (2)(ii)(d)(5) and 1.704-l(b)(2)(ii) (d) (6). The
foregoing definition of Adjusted Capital Account is intended to comply with the
provisions of Regulations Section 1.704-l(b)(2)(ii)(d) and shall be interpreted
consistently therewith.
"Adjusted Capital Account Deficit" means, with respect to any Partner, the
deficit balance, if any, in such Partner's Adjusted Capital Account as of the
end of the relevant Partnership 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.
"Advisor" means LaSalle Hotel Advisors, Inc., a Maryland corporation, as
Advisor to the General Partner pursuant to the Advisory Agreement.
"Advisory Agreement" means the Agreement dated January ___, 1998 between
the Advisor and the General Partner.
"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 or trustee 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.
"Agreed Value" means (i) in the case of any Contributed Property
contributed to the Partnership as part of or in connection with the
Consolidation, 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 Agreement of Limited Partnership, as it may be
amended, supplemented or restated from time to time.
"Assignee" means a Person to whom one or more Partnership Units have 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) 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.
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 New York, New York are authorized or required by law
to close.
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"Capital Account" means the Capital Account maintained for a Partner
pursuant to Exhibit B.
"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.
"Certificate" means the Certificate of Limited Partnership relating to the
Partnership filed in the office of the Delaware Secretary of State, as amended
from time to time in accordance with the terms hereof and the Act.
"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 Partnership Unit that is not specifically
designated by the General Partner as being of another specified class of
Partnership 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 Partnership 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.
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"Consent" means the consent or approval of a proposed action by a Partner
given in accordance with Section 14.2.
"Consent of the Outside Limited Partners" means the Consent of Limited
Partners (excluding for this purpose any Limited Partnership Interests held by
the General Partner, or any other Person of which the General Partner owns or
controls more than fifty percent (50%) of the voting interests and any Person
directly or indirectly owning or controlling more than fifty percent (50%) of
the outstanding voting interests of the General Partner) holding Percentage
Interests that are greater than fifty percent (50%) of the aggregate Percentage
Interest of all Limited Partners who are not excluded for the purposes hereof.
"Consolidation" means (i) the transactions whereby the Partnership will
acquire interests in certain hotel properties owned by the Target Entities by
way of merger or exchange of a Target Entity's interest for Operating
Partnership Units.
"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 (i)
declares or pays a dividend on its outstanding Shares in Shares or makes a
distribution to all holders of its outstanding Shares in Shares, (ii) subdivides
its outstanding Shares or (iii) combines its outstanding Shares into a smaller
number of Shares, the Conversion Factor shall be adjusted by multiplying the
Conversion Factor by a fraction, the numerator of which shall be the number of
Shares issued and outstanding on the record date for such dividend,
distribution, subdivision or combination (assuming for such purposes that such
dividend, distribution, subdivision or combination has occurred as of such time)
and the denominator of which shall be the actual number of Shares (determined
without the above assumption) issued and outstanding on the record date for such
dividend, distribution, subdivision or combination; and provided further that if
an entity shall cease to be the General Partner (the "Predecessor General
Partner") and another entity shall become the General Partner (the "Successor
General Partner"), the Conversion Factor shall be adjusted by multiplying the
Conversion Factor by a fraction, the numerator of which is the Value of one
Share of the Predecessor General Partner, determined as of the date when the
Successor General Partner becomes the general partner of the Partnership, and
the denominator of which is the Value of one Share of the Successor General
Partner, determined as of that same date. (For purposes of the second proviso
in the preceding sentence, if any shareholders of the Predecessor General
Partner will receive consideration in connection with the transaction in which
the Successor General Partner becomes the General Partner, the numerator in the
fraction described above for determining the adjustment to the Conversion Factor
(that is, the Value of one Share of the Predecessor General Partner) shall be
the sum of the greatest amount of cash
5
and the fair market value (as determined in good faith by the General Partner)
of any securities and other consideration that the holder of one Share in the
Predecessor General Partner could have received in such transaction (determined
without regard to any provisions governing fractional shares).) Any adjustment
to the Conversion Factor shall become effective immediately after the effective
date of the event retroactive to the record date, if any, for the event giving
rise thereto, it being intended that (x) adjustments to the Conversion Factor
are to be made to avoid unintended dilution or anti-dilution as a result of
transactions in which Shares are issued, redeemed or exchanged without a
corresponding issuance, redemption or exchange of Partnership Units and (y) if a
Specified Redemption Date shall fall between the record date and the effective
date of any event of the type described above, that the Conversion Factor
applicable to such redemption shall be adjusted to take into account such event.
"Convertible Funding Debt" has the meaning set forth in Section 7.5.F.
"Debt" means, as to any Person, as of any date of determination, (i) all
indebtedness of such Person for borrowed money or for the deferred purchase
price of property or services, (ii) all amounts owed by such Person to banks or
other Persons in respect of reimbursement obligations under letters of credit,
surety bonds and other similar instruments guaranteeing payment or other
performance of obligations by such Person, (iii) all indebtedness for borrowed
money or for the deferred purchase price of property or services secured by any
lien on any property owned by such Person, to the extent attributable to such
Person's interest in such property, even though such Person has not assumed or
become liable for the payment thereof, and (iv) obligations of such Person
incurred in connection with entering into a lease which, in accordance with
generally accepted accounting principles, should be capitalized.
"Declaration of Trust" means the Declaration of Trust of LaSalle Hotel
Properties filed in the State of Maryland on January 15, 1998, as amended or
restated from time to time.
"Deemed Partnership Interest Value" means, as of any date with respect to
any class of Partnership Interests, the Deemed Value of the Partnership Interest
of such class multiplied by the applicable Partner's Percentage Interest of such
class.
"Deemed Value of the Partnership Interest" means, as of any date with
respect to any class of Partnership Interests, (a) if the common shares of
beneficial interest (or other comparable equity interests) of the General
Partner are Publicly Traded (i) the total number of shares of beneficial
interest (or other comparable equity interest) of the General Partner
corresponding to such class of Partnership Interest (as provided for in Section
4.2.B) issued and outstanding as of the close of business on such date
(excluding any treasury shares) multiplied by the Value of a share of such
beneficial interest (or other comparable equity interest) on such date divided
by (ii) the Percentage Interest of the General Partner in such class of
Partnership Interests on such date, and (b) otherwise, the aggregate Value of
such class of Partnership Interests determined as set forth in the fourth and
fifth sentences of the definition of Value.
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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.
"Effective Date" means the date of the closing of the Consolidation.
"ERISA" means the Employee Retirement Income Security Act of 1974, as
amended.
"ERISA Plan" means an "employee benefit plan" as that term is defined in 29
U.S.C. Section 1002(3), and which is not exempt from regulation under ERISA by
virtue of 29 U.S.C. Section 1003(b).
"Exchange Act" means the Securities Exchange Act of 1934, as amended.
"Funding Debt" means the incurrence of any Debt by or on behalf of the
General Partner Entity for the purpose of providing funds to the Partnership.
"General Partner" means LaSalle Hotel Properties or its successor as
general partner.
"General Partnership Interest" means a Partnership Interest held by a
General Partner that is a general partnership interest. A General Partnership
Interest may be expressed as a number of Partnership Units.
"IRS" means the Internal Revenue Service, which administers the internal
revenue laws of the United States.
"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)
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as to any partnership or limited liability company which is a Partner, the
dissolution and commencement of winding up of the partnership or limited
liability company, (iv) as to any estate which is a Partner, the distribution by
the fiduciary of the estate's entire interest in the Partnership, (v) as to any
trustee of a trust which is a Partner, the termination of the trust (but not the
substitution of a new trustee) or (vi) as to any Partner, the bankruptcy of such
Partner. For purposes of this definition, bankruptcy of a Partner shall be
deemed to have occurred when (a) the Partner commences a voluntary proceeding
seeking liquidation, reorganization or other relief under any bankruptcy,
insolvency or other similar law now or hereafter in effect, (b) the Partner is
adjudged as bankrupt or insolvent, or a final and nonappealable order for relief
under any bankruptcy, insolvency or similar law now or hereafter in effect has
been entered against the Partner, (c) the Partner executes and delivers a
general assignment for the benefit of the Partner's creditors, (d) the Partner
files an answer or other pleading admitting or failing to contest the material
allegations of a petition filed against the Partner in any proceeding of the
nature described in clause (b) above, (e) the Partner seeks, consents to or
acquiesces in the appointment of a trustee, receiver or liquidator for the
Partner or for all or any substantial part of the Partner's properties, (f) any
proceeding seeking liquidation, reorganization or other relief under any
bankruptcy, insolvency or other similar law now or hereafter in effect has not
been dismissed within one hundred twenty (120) days after the commencement
thereof, (g) the appointment without the Partner's consent or acquiescence of a
trustee, receiver of liquidator has not been vacated or stayed within ninety
(90) days of such appointment or (h) an appointment referred to in clause (g) 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, 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.
"Limited Partner" means the General Partner, in its capacity as a Limited
Partner in the Partnership, or any Person named as a Limited Partner 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 in 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 Partnership Units.
"Liquidating Event" has the meaning set forth in Section 13.1.
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"Liquidator" has the meaning set forth in Section 13.2.A.
"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" means (i) any rights, options, warrants or convertible or
exchangeable securities having the right to subscribe for or purchase shares of
beneficial interest (or other comparable equity interest) of the General
Partner, excluding grants under any Share Option Plan, or (ii) any Debt issued
by the General Partner that provides any of the rights described in clause (i).
"Nonrecourse Built-in Gain" means, with respect to any Contributed
Properties or Adjusted Properties that are subject to a mortgage or negative
pledge securing a Nonrecourse Liability, the amount of any taxable gain that
would be allocated to the Partners pursuant to Section 2.B of Exhibit C if such
properties were disposed of in a taxable transaction in full satisfaction of
such liabilities and for no other consideration.
"Nonrecourse Deductions" has the meaning set forth in Regulations Section
1.704-2(b)(1), and the amount of Nonrecourse Deductions for a Partnership Year
shall be determined in accordance with the rules of Regulations Section 1.704-
2(c).
"Nonrecourse Liability" has the meaning set forth in Regulations Section
1.752-l(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.
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"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 benefits to which the holder of
such a Partnership Interest may be entitled as provided in this Agreement,
together with all obligations of such Person to comply with the terms and
provisions of this Agreement. A Partnership Interest may be expressed as a
number of Partnership Units.
"Partnership Minimum Gain" has the meaning set forth in Regulations Section
1.704-2(b)(2), and the amount of Partnership Minimum Gain, as well as any net
increase or decrease in Partnership Minimum Gain, for a Partnership Year shall
be determined in accordance with the rules of Regulations Section 1.704-2(d).
"Partnership Record Date" means the record date established by the General
Partner either (i) for the distribution of Available Cash pursuant to Section
5.1 hereof, which record date shall be the same as the record date established
by the General Partner for a distribution to its shareholders of some or all of
its portion of such distribution, or (ii) if applicable, for determining the
Partners entitled to vote on or consent to any proposed action for which the
consent or approval of the Partners is sought pursuant to Section 14.2 hereof.
"Partnership Unit" means a fractional, undivided share of the Partnership
Interests of all Partners issued pursuant to Sections 4.1 and 4.2, and includes
Class A Units, Class B Units and any other classes or series of Partnership
Units established after the date hereof. The number of Partnership Units
outstanding and the Percentage Interests in the Partnership represented by such
Partnership Units are set forth in Exhibit A, as such Exhibit may be amended
from time to time.
"Partnership Year" means the fiscal year of the Partnership, which shall be
the calendar year.
10
"Percentage Interest" means, as to a Partner holding a class of Partnership
Interests, its interest in such class, determined by dividing the Partnership
Units of such class owned by such Partner by the total number of Partnership
Units of such class then outstanding as specified in Exhibit A, as such exhibit
may be amended from time to time, multiplied by the aggregate Percentage
Interest allocable to such class of Partnership Interests. If the Partnership
shall at any time have outstanding more than one class of Partnership Interests,
the Percentage Interest attributable to each class of Partnership Interests
shall be determined as set forth in Section 4.2.B.
"Person" means a natural person, partnership (whether general or limited),
trust, estate, association, corporation, limited liability company,
unincorporated organization, custodian, nominee or any other individual or
entity in its own or any representative capacity.
"Predecessor Entity" has the meaning set forth in the definition of
"Conversion Factor" herein.
"Publicly Traded" means listed or admitted to trading on the New York Stock
Exchange, the American Stock Exchange or another national securities exchange or
designated for quotation on the NASDAQ National Market, or any successor to any
of the foregoing.
"Qualified REIT Subsidiary" means any Subsidiary of the General Partner
that is a "qualified REIT subsidiary" within the meaning of Section 856(i) of
the Code.
"Qualified Transferee" means an "Accredited Investor" as defined in Rule
501 promulgated under the Securities Act.
"Recapture Income" means any gain recognized by the Partnership (computed
without regard to any adjustment required by Section 734 or Section 743 of the
Code) upon the disposition of any property or asset of the Partnership, which
gain is characterized as ordinary income because it represents the recapture of
deductions previously taken with respect to such property or asset.
"Redeeming Partner" has the meaning set forth in Section 8.6.A.
"Redemption Amount" means either the Cash Amount or the Shares Amount, as
determined by the General Partner, in its sole and absolute discretion, provided
that if the Shares are not Publicly Traded at the time a Redeeming Partner
exercises its 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.
11
"Redemption Right" has the meaning set forth in Section 8.6.A.
"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" has 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.▇.▇(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.
"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 they may adopt, provided, however,
subject to Exhibit B, the General Partner shall, in their sole and absolute
discretion, use such method as they deem 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 fair market values. The 704(c) Values of the Contributed Properties
contributed to the Partnership as part of or in connection with the
Consolidation are set forth on Exhibit E.
"Share" means a share of beneficial interest (or other comparable equity
interest) of the General Partner. Shares may be issued in one or more classes
or series in accordance with the terms of the Declaration of Trust (or, if the
General Partner is not the General Partner, the organizational documents of the
General Partner). 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, the term "Shares" refers to common shares of beneficial interest (or
other comparable equity interest) of the General Partner.
"Shares Amount" means a number of Shares equal to the product of the number
of Partnership Units offered for redemption by a Redeeming Partner times the
Conversion Factor, provided that, if the General Partner issues to all holders
of Shares rights, options, warrants or convertible or exchangeable securities
entitling such holders to subscribe for or purchase Shares
12
or any other securities or property (collectively, the "rights"), then the
Shares Amount shall also include such rights that a holder of that number of
Shares would be entitled to receive.
"Share Option Plan" means any equity incentive plan of the General Partner,
the Partnership and/or any Affiliate of the Partnership.
"Specified Redemption Date" means the tenth Business Day after receipt by
the General Partner of a Notice of Redemption; provided that, if the Shares are
not Publicly Traded, the Specified Redemption Date means the thirtieth Business
Day after receipt by the General Partner of a Notice of Redemption.
"Subsidiary" means, with respect to any Person, any corporation, limited
liability company, trust, partnership or joint venture, or other entity of which
a majority of (i) the voting power of the voting equity securities or (ii) the
outstanding equity interests is owned, directly or indirectly, by such Person.
"Substituted Limited Partner" means a Person who is admitted as a Limited
Partner to the Partnership pursuant to Section 11.4.
"Successor Entity" has the meaning set forth in the definition of
"Conversion Factor" herein.
"Target Entities" shall mean the limited partnership, corporations, limited
liability companies listed on Exhibit A.
"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.
"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.
13
"Valuation Date" means the date of receipt by the General Partner of a
Notice of Redemption or, if such date is not a Business Day, the first Business
Day thereafter.
"Value" means, with respect to any outstanding Shares of the General
Partner that are Publicly Traded, the average of the daily market price for the
ten consecutive trading days immediately preceding the date with respect to
which value must be determined. The market price for each such trading day
shall be the closing price, regular way, on such day, or if no such sale takes
place on such day, the average of the closing bid and asked prices on such day.
If the outstanding Shares of the General Partner are Publicly Traded and the
Shares Amount includes rights that a holder of Shares would be entitled to
receive, then the Value of such rights shall be determined by the General
Partner acting in good faith on the basis of such quotations and other
information as it considers, in its reasonable judgment, appropriate. If the
Shares of the General Partner are not Publicly Traded, the Value of the Shares
Amount per Partnership Unit offered for redemption (which will be the Cash
Amount per Partnership Unit offered for redemption payable pursuant to Section
8.6.A) means the amount that a holder of one Partnership Unit would receive if
each of the assets of the Partnership were to be sold for its fair market value
on the Specified Redemption Date, the Partnership were to pay all of its
outstanding liabilities, and the remaining proceeds were to be distributed to
the Partners in accordance with the terms of this Agreement. Such Value shall
be determined by the General Partner, acting in good faith and based upon a
commercially reasonable estimate of the amount that would be realized by the
Partnership if each asset of the Partnership (and each asset of each
partnership, limited liability company, trust, joint venture or other entity in
which the Partnership owns a direct or indirect interest) were sold to an
unrelated purchaser in an arms' length transaction where neither the purchaser
nor the seller were under economic compulsion to enter into the transaction
(without regard to any discount in value as a result of the Partnership's
minority interest in any property or any illiquidity of the Partnership's
interest in any property). In connection with determining the Deemed Value of
the Partnership Interest for purposes of determining the number of additional
Partnership Units issuable upon a Capital Contribution funded by an underwritten
public offering or an arm's length private placement of shares of beneficial
interest (or other comparable equity interest) of the General Partner, the Value
of such shares shall be the public offering or arm's length private placement
price per share of such class of beneficial interest (or other comparable equity
interest) sold.
ARTICLE II
ORGANIZATIONAL MATTERS
SECTION 2.1 ORGANIZATION
The Partnership is a limited partnership organized pursuant to the
provisions of the Act and upon the terms and conditions set forth in this
Agreement. Except as expressly provided
14
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 LaSalle Hotel Operating Partnership, 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 any 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 their 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 Corporation Trust Center, ▇▇▇▇ ▇▇▇▇▇▇ ▇▇▇▇▇▇,
▇▇▇▇▇▇▇▇▇▇, ▇▇▇▇▇▇ of ▇▇▇ ▇▇▇▇▇▇, ▇▇▇▇▇▇▇▇ ▇▇▇▇▇, and the registered agent for
service of process on the Partnership in the State of Delaware at such
registered office shall be The Corporation Trust Company. The principal office
of the Partnership shall be ▇▇▇ ▇▇▇▇ ▇▇▇▇ ▇▇▇▇▇▇, ▇▇▇ ▇▇▇▇, ▇▇▇ ▇▇▇▇ ▇▇▇▇▇, or
such other place as the General Partner may from time to time designate by
notice to the Limited Partners. The Partnership may maintain offices at such
other place or places within or outside the State of Delaware as the General
Partner deems advisable.
SECTION 2.4 TERM
The term of the Partnership shall commence on ____________, 1997 and shall
continue until December 31, 2095, unless it is dissolved sooner pursuant to the
provisions of Article XIII 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 permit
the General Partner at all times to be classified
15
as a REIT, unless the General Partner 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 as a REIT inures to the
benefit of all the Partners and not solely to the General Partner 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 to
continue to qualify as a REIT, (ii) could subject the General Partner 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 PARTNERS
At the time of the execution of this Agreement, the Partners shall make or
shall have made the Capital Contributions as set forth in Exhibit A. The
Partners shall own Partnership Units in the amounts set forth in Exhibit A and
shall have a Percentage Interest in the Partnership as set forth in Exhibit A,
which Percentage Interest shall be adjusted in Exhibit A from time to time by
the General Partner to the extent necessary to reflect accurately redemptions,
Capital Contributions, the issuance of additional Partnership Units or similar
events having an effect on a Partner's Percentage Interest. To the extent the
Partnership is acquiring any property by the
16
merger of any other Person into the Partnership, Persons who receive Partnership
Interests in exchange for their interests in the Person merging into the
Partnership shall become Partners and shall be deemed to have made Capital
Contributions as provided in the applicable merger agreement and as set forth in
Exhibit A. A number of Partnership Units held by each of the General Partner
equal to one percent (1%) of all outstanding Partnership Units (as of the
closing date of the Consolidation) shall be deemed to be the General Partner
Partnership Units and shall be the General Partnership Interest of such General
Partner. All other Partnership Units held by the General Partner shall be
deemed to be Limited Partnership Interests and shall be held by the General
Partner in their capacity as Limited Partners in the Partnership. Except as
provided in Sections 7.5 and 10.5 hereof, the Partners shall have no obligation
to make any additional Capital Contributions or provide any additional funding
to the Partnership (whether in the form of loans, repayments of loans or
otherwise). No Partner shall have any obligation to restore any deficit that
may exist in its Capital Account, either upon a liquidation of the Partnership
or otherwise.
SECTION 4.2 ISSUANCES OF PARTNERSHIP INTERESTS
A. General. The General Partner is hereby authorized to cause the
Partnership from time to time to issue to Partners (including the General
Partner and its Affiliates) or other Persons (including, without limitation, in
connection with the contribution of property to the Partnership) Partnership
Units or other Partnership Interests in one or more classes, or in one or more
series of any of such classes, with such designations, preferences and relative,
participating, optional or other special rights, powers and duties, including
rights, powers and duties senior to Limited Partnership Interests, all as shall
be determined, subject to applicable Delaware law, by the General Partner in its
sole and absolute discretion, including, without limitation, (i) the allocations
of items of Partnership income, gain, loss, deduction and credit to each such
class or series of Partnership Interests, (ii) the right of each such class or
series of Partnership Interests to share in Partnership distributions and (iii)
the rights of each such class or series of Partnership Interests upon
dissolution and liquidation of the Partnership, provided that, no such
Partnership Units or other Partnership Interests shall be issued to the General
Partner 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 having designations, preferences and other rights such that the
economic interests attributable to such Shares or other equity interests are
substantially similar to 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. If the
Partnership issues Partnership Interests pursuant to this Section 4.2.A, the
General Partner shall make such revisions to this Agreement (including but not
limited to the revisions described in Section 5.4, Section 6.2 and Section 8.6)
as it deems necessary to reflect the issuance of such Partnership Interests.
B. Percentage Interest Adjustments in the Case of Capital Contributions
for Partnership Units. Upon the acceptance of additional Capital Contributions
in exchange for
17
Partnership Units and if the Partnership shall have outstanding more than one
class of Partnership Interests, the Percentage Interest related thereto shall be
equal to a fraction, the numerator of which is equal to the amount of cash, if
any, plus the Agreed Value of Contributed Property, if any, contributed with
respect to such additional Partnership Units and the denominator of which is
equal to the sum of (i) the Deemed Value of the Partnership Interests for all
outstanding classes (computed as of the Business Day immediately preceding the
date on which the additional Capital Contributions are made (an "Adjustment
Date")) plus (ii) the aggregate amount of additional Capital Contributions
contributed to the Partnership on such Adjustment Date in respect of such
additional Partnership Units. The Percentage Interest of each other Partner
holding Partnership Interests not making a full pro rata Capital Contribution
shall be adjusted to a fraction the numerator of which is equal to the sum of
(i) the Deemed Partnership Interest Value of such Limited Partner (computed as
of the Business Day immediately preceding the Adjustment Date) plus (ii) the
amount of additional Capital Contributions (such amount being equal to the
amount of cash, if any, plus the Agreed Value of Contributed Property, if any,
so contributed), if any, made by such Partner to the Partnership in respect of
such Partnership Interest as of such Adjustment Date and the denominator of
which is equal to the sum of (i) the Deemed Value of the Partnership Interests
of all outstanding classes (computed as of the Business Day immediately
preceding such Adjustment Date) plus (ii) the aggregate amount of the additional
Capital Contributions contributed to the Partnership on such Adjustment Date in
respect of such additional Partnership Interests. For purposes of calculating a
Partner's Percentage Interest pursuant to this Section 4.2.B, cash Capital
Contributions by the General Partner will be deemed to equal the cash
contributed by such General Partner plus (a) in the case of cash contributions
funded by an offering of any equity interests in or other securities of the
General Partner, the offering costs attributable to the cash contributed to the
Partnership, and (b) in the case of Partnership 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 Partnership Units. From and after the Effective Date,
subject to Section 4.2.A above, the Partnership shall have two classes of
Partnership Units entitled "Class A Units" and "Class B Units." Either Class A
Units or Class B Units, at the election of the General Partner, in its sole and
absolute discretion, may be issued to newly admitted Partners in exchange for
the contribution by such Partners of cash, real estate partnership interests,
stock, notes or other assets or consideration; provided, that all Partnership
Units issued to Partners in connection with the Consolidation shall be Class A
Units; and, provided further, that any Partnership 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.
18
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 Partnership Units or other
Partnership Interests.
SECTION 4.4 OTHER CONTRIBUTION PROVISIONS
If any Partner is admitted to the Partnership and is given a Capital
Account in exchange for services rendered to the Partnership, such transaction
shall be treated by the Partnership and the affected Partner as if the
Partnership had compensated such Partner in cash, and the Partner had
contributed such cash to the capital of the Partnership.
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 General Partner shall distribute at least quarterly an
amount equal to one hundred percent (100%) of Available Cash generated by the
Partnership during such quarter or shorter period to the Partners who are
Partners on the Partnership Record Date with respect to such quarter or shorter
period as provided in Sections 5.1.B, 5.1.C and 5.1.D. Notwithstanding anything
to the contrary contained herein, in no event may a Partner receive a
distribution of Available Cash with respect to a Partnership Unit for a quarter
or shorter period if such Partner is entitled to receive a distribution with
respect to a Share for which such Partnership Unit has been redeemed or
exchanged. Unless otherwise expressly provided for herein or in an agreement at
the time a new class of Partnership Interests is created in accordance with
Article IV hereof, no Partnership Interest shall be entitled to a distribution
in preference to any other Partnership Interest. The General Partner shall make
such reasonable efforts, as determined by them in their sole and absolute
discretion and consistent with the qualification of the General Partner 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
19
in an amount sufficient to enable the General Partner 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.
B. Method. (i) Each holder of Partnership Interests that is entitled to
any preference in distribution shall be entitled to a distribution in accordance
with the rights of any such class of Partnership Interests (and, within such
class, pro rata in proportion to the respective Percentage Interests on such
Partnership Record Date); and
(ii) To the extent there is Available Cash remaining after the payment of
any preference in distribution in accordance with the foregoing clause (i), with
respect to Partnership Interests that are not entitled to any preference in
distribution, pro rata to each such class in accordance with the terms of such
class (and, within each such class, pro rata in proportion to the respective
Percentage Interests on such Partnership Record Date).
C. Distributions When Class B Units Are Outstanding. If for any quarter
or shorter period with respect to which a distribution is to be made (a
"Distribution 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)
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(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 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 out of such Available Cash with respect to a Share for
which such Class A Unit has been redeemed or exchanged. The Class B Shares
shall be distributed 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
Partnership Units for purposes of making the allocation of Available Cash for
such Distribution Period among the holders of Partnership 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 B1" and "Series B2" would be as
follows:
(1) Series B1 shall receive that portion of the Available
Cash determined by multiplying the amount of Available Cash by
the following fractions:
B1 x X1
___________________________
(A x Y)+(B1 x X1)+(B2 x X2)
21
(2) Series B2 shall receive that portion of the Available
Cash determined by multiplying the amount of Available Cash by
the following fractions:
B2 x X2
___________________________
(A x Y)+(B1 x X1)+(B2 x X2)
(3) For purposes of the foregoing formulas the definitions
set forth in Section 5.1.C.3 remain the same except that (i) "B1"
equals the number of Partnership Units in Series B1 outstanding
on the Partnership Record Date for such Distribution Period; (ii)
"B2" equals the number of Partnership Units in Series B2
outstanding on the Partnership Record Date for such Distribution
Period;
(iii) "X1" equals the number of days in the Distribution Period for
which the Partnership Units in Series B1 were issued and outstanding,
and (iv) "X2" equals the number of days in the Distribution Period for
which the Partnership Units in Series B2 were issued and outstanding.
E. Minimum Distributions if Shares Not Publicly Traded. In addition (and
without regard to the amount of Available Cash), if the Shares of the General
Partner are not Publicly Traded, the General Partner shall make cash
distributions with respect to the Class A Units at least annually for each
taxable year of the Partnership beginning prior to the fifteenth (15th)
anniversary of the Effective Date in an aggregate amount with respect to each
such taxable year at least equal to 95% of the Partnership's taxable income for
such year allocable to the Class A Units, with such distributions to be made not
later than 60 days after the end of such year.
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 pursuant to Section 5.1 for all purposes under this Agreement.
22
SECTION 5.3 DISTRIBUTIONS UPON LIQUIDATION
Proceeds from a Terminating Capital Transaction shall be distributed to the
Partners, in accordance with Section 13.2.
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 requirements for any other consents or approvals.
ARTICLE VI
ALLOCATIONS
SECTION 6.1 ALLOCATIONS FOR CAPITAL ACCOUNT PURPOSES
For purposes of maintaining the Capital Accounts and in determining the
rights of the Partners among themselves, the Partnership's items of income,
gain, loss and deduction (computed in accordance with Exhibit B) shall be
allocated among the Partners in each taxable year (or portion thereof) as
provided herein below.
A. Net Income. After giving effect to the special allocations set forth
in Section 1 of Exhibit C, Net Income shall be allocated (i) first, to the
General Partner to the extent that Net Losses previously allocated to the
General Partner pursuant to the last sentence of Section 6.1.B exceed Net Income
previously allocated to the General Partner pursuant to this clause (i) of
Section 6.1.A, (ii) second, to the holders of any Partnership Interests that are
entitled to any preference in distribution in accordance with the rights of any
such class of Partnership Interests until each such Partnership Interest has
been allocated, on a cumulative basis pursuant to this clause (ii), Net Income
equal to the amount of distributions received which are attributable to the
preference of such class of Partnership Interests (and, within such class, pro
rata in proportion to the respective Percentage Interests as of the last day of
the period for which such allocation is being made) and (iii) third, with
respect to Partnership Interests that are not entitled to any preference in the
allocation of Net Income, pro rata to each such class in accordance with the
terms of such class (and, within such class, pro rata in proportion to the
respective Percentage Interests as of the last day of the period for which such
allocation is being made).
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
23
Partnership Interests to the extent that any prior allocations of Net Income to
such class of Partnership Interests pursuant to Section 6.1.A(ii) exceed, on a
cumulative basis, distributions with respect to such Partnership Interests
pursuant to clause (i) of Section 5.1.B (and, within such class, pro rata in
proportion to the respective Percentage Interests as of the last day of the
period for which such allocation is being made) and (ii) second, with respect to
classes of Partnership Interests that are not entitled to any preference in
distribution, pro rata to each such class in accordance with the terms of such
class (and, within such class, pro rata in proportion to the respective
Percentage Interests as of the last day of the period for which such allocation
is being made); provided that Net Losses shall not be allocated to any Limited
Partner pursuant to this Section 6.1.B to the extent that such allocation would
cause such Limited Partner to have an Adjusted Capital Account Deficit (or
increase any existing Adjusted Capital Account Deficit) at the end of such
taxable year (or portion thereof). All Net Losses in excess of the limitations
set forth in this Section 6.1 B shall be allocated to the General Partner.
C. Allocation of Nonrecourse Debt. For purposes of Regulation Section
1.752-3(a), the Partners agree that Nonrecourse Liabilities of the Partnership
in excess of the sum of (i) the amount of Partnership Minimum Gain and (ii) the
total amount of Nonrecourse Built-in Gain shall be allocated among the Partners
in accordance with their respective Percentage Interests.
D. Recapture Income. Any gain allocated to the Partners upon the sale or
other taxable disposition of any Partnership asset shall, to the extent possible
after taking into account other required allocations of gain pursuant to Exhibit
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.
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ARTICLE VII
MANAGEMENT AND OPERATIONS OF BUSINESS
SECTION 7.1 MANAGEMENT
▇. ▇▇▇▇▇▇ of General Partner. Except as otherwise expressly provided in
this Agreement, all management powers over the business and affairs of the
Partnership are and shall be exclusively vested in the General Partner, and no
Limited Partner shall have any right to participate in or exercise control or
management power over the business and affairs of the Partnership. The General
Partner may not be removed by the Limited Partners with or without cause. In
addition to the powers now or hereafter granted a general partner of a limited
partnership under applicable law or which are granted to the General Partner
under any other provision of this Agreement, the General Partner, subject to
Section 7.11, shall have full power and authority to do all things deemed
necessary or desirable by it to conduct the business of the Partnership, to
exercise all powers set forth in Section 3.2 and to effectuate the purposes set
forth in Section 3.1, including, without limitation:
(1) the making of any expenditures, the lending or borrowing of
money (including, without limitation, making prepayments on
loans and borrowing money to permit the Partnership to make
distributions to its Partners in such amounts as are
required under Section 5.1.E or will permit the General
Partner (so long as the General Partner qualifies as 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 to maintain 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 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 25
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 General
Partner, its Subsidiaries and the Partnership's
Subsidiaries) and the repayment of obligations of the
Partnership and its Subsidiaries and any other Person in
which the Partnership has an equity investment and the
making of capital contributions to its Subsidiaries;
(5) the management, operation, leasing, landscaping, repair,
alteration, demolition or improvement of any real property
or improvements owned by the Partnership or any Subsidiary
of the Partnership or any Person in which the Partnership
has made a direct or indirect equity investment;
(6) the negotiation, execution, and performance of any
contracts, conveyances or other instruments that the General
Partner considers useful or necessary to the conduct of the
Partnership's operations or the implementation of the
General Partner's powers under this Agreement, including
contracting with contractors, developers, consultants,
accountants, legal counsel, other professional advisors and
other agents and the payment of their expenses and
compensation out of the Partnership's assets;
(7) the mortgage, pledge, encumbrance or hypothecation of any
assets of the Partnership, and the use of the assets of the
Partnership (including, without limitation, cash on hand)
for any purpose consistent with the terms of this Agreement
and on any terms it sees fit, including, without limitation,
the financing of the conduct or the operations of the
General Partner or the Partnership, the lending of funds to
other Persons (including, without limitation, any
Subsidiaries of the Partnership) and the repayment of
obligations of the Partnership, any of its Subsidiaries and
any other Person in which it has an equity investment;
26
(8) the distribution of Partnership cash or other Partnership
assets in accordance with this Agreement;
(9) the holding, managing, investing and reinvesting of cash and
other assets of the Partnership;
(10) the collection and receipt of revenues and income of the
Partnership;
(11) the selection, designation of powers, authority and duties
and the dismissal of employees of the Partnership
(including, without limitation, employees having titles such
as "president," "vice president," "secretary" and
"treasurer") and agents, outside attorneys, accountants,
consultants and contractors of the Partnership and the
determination of their compensation and other terms of
employment or hiring;
(12) the maintenance of such insurance for the benefit of the
Partnership and the Partners as it deems necessary or
appropriate;
(13) the formation of, or acquisition of an interest (including
non-voting interests in entities controlled by Affiliates of
the Partnership or third parties) in, and the contribution
of property to, any further limited or general partnerships,
joint ventures, limited liability companies or other
relationships that it deems desirable (including, without
limitation, the acquisition of interests in, and the
contributions of funds or property to, or making of loans
to, its Subsidiaries and any other Person in which it has an
equity investment from time to time, or the incurrence of
indebtedness on behalf of such Persons or the guarantee of
the obligations of such Persons); provided that, as long as
the General Partner has determined to continue to qualify as
a REIT, the Partnership may not engage in any such
formation, acquisition or contribution that would cause the
General Partner to fail to qualify as a REIT;
(14) the control of any matters affecting the rights and
obligations of the Partnership, including the settlement,
compromise, submission to arbitration or any other form of
dispute resolution or abandonment of any claim, cause of
action, liability, debt or damages due or owing to or from
the Partnership, the commencement or defense of suits, legal
proceedings, administrative proceedings, arbitrations or
other forms of dispute resolution, the representation of the
27
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; and
(20) the distribution of cash to acquire Partnership Units held
by a Limited Partner in connection with a Limited Partner's
exercise of its Redemption Right under Section 8.6; and
(21) the amendment and restatement of Exhibit A to reflect
accurately at all times the Capital Contributions and
Percentage Interests of the Partners as the same are
adjusted from time to time to the extent necessary to
reflect redemptions, Capital Contributions, the issuance of
Partnership Units, the admission of any Additional
28
Limited Partner or any Substituted Limited Partner or
otherwise, which amendment and restatement, notwithstanding
anything in this Agreement to the contrary, shall not be
deemed an amendment of this Agreement, as long as the matter
or event being reflected in Exhibit A otherwise is
authorized by this Agreement.
B. No Approval by Limited Partners. Except as provided in Section 7.11,
each of the Limited Partners and the other General Partner 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 Indemnities 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 Section 13.
E. No Obligations to Consider Tax Consequences of Limited Partners. In
exercising their 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 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 have acted in
good faith and pursuant to their authority under this Agreement.
SECTION 7.2 CERTIFICATE OF LIMITED PARTNERSHIP
The General Partner have previously filed the Certificate of Limited
Partnership 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
29
to and restatements of the Certificate of Limited Partnership 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 of Limited
Partnership 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 declare
and warrant 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 General Partner 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 be compensated for their services as general partners
of the Partnership.
B. Responsibility for Partnership 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. The General
Partner shall be reimbursed on a monthly basis, or such other basis as the
General Partner may determine in its sole and absolute discretion, for all
expenses it incurs relating to the ownership and operation of, or for the
benefit of, the Partnership (including, without limitation, expenses related to
the operations of the General Partner and to the management and administration
of any Subsidiaries of the General Partner or the Partnership or Affiliates of
the Partnership, such as auditing expenses and filing fees and expenses incurred
30
on behalf of the foregoing by the Advisor on behalf of the General Partner
pursuant to the terms of the Advisory Agreement); provided that, the amount of
any such reimbursement shall be reduced by (i) 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 (ii) any amount derived by the General Partner from any
investments permitted in Section 7.5.A. The General Partner shall determine in
good faith the amount of expenses incurred by it related to the ownership and
operation of, or for the benefit of, the Partnership. If certain expenses are
incurred for the benefit of the Partnership and other entities (including the
General Partner), such expenses will be allocated to the Partnership and such
other entities 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 the General Partner or
rights, options, warrants or convertible or exchangeable securities pursuant to
Article IV (including, without limitation, all costs, expenses, damages and
other payments resulting from or arising in connection with litigation related
to any of the foregoing), all of which expenses are considered by the Partners
to constitute expenses of, and for the benefit of, the Partnership.
D. Purchases of Shares by the General Partner. If the General Partner
exercises its rights under the Declaration of Trust to purchase Shares or
otherwise elects to purchase from its shareholders Shares in connection with a
share repurchase or similar program or for the purpose of delivering such Shares
to satisfy an obligation under any dividend reinvestment or equity purchase
program adopted by the General Partner, any employee equity purchase plan
adopted by the General Partner or any similar obligation or arrangement
undertaken by the General Partner in the future, the purchase price paid by the
General Partner for those Shares and any other expenses incurred by the General
Partner in connection with such purchase shall be considered expenses of the
Partnership and shall be reimbursable to the General Partner, subject to the
conditions that: (i) if those Shares subsequently are to be sold by the General
Partner, the General Partner shall pay to the Partnership any proceeds received
by the General Partner for those Shares (provided that a transfer of Shares for
Partnership Units pursuant to Section 8.6 would not be considered a sale for
such purposes); and (ii) if such Shares are not retransferred by the General
Partner within thirty (30) days after the purchase thereof, the General Partner
shall cause the Partnership to cancel a number of Partnership Units (rounded to
the nearest whole Partnership Unit) held by the General Partner equal to the
product attained by multiplying the
31
number of those Shares by a fraction, the numerator of which is one and the
denominator of which is the Conversion Factor.
E. Reimbursement not a Distribution. 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.
SECTION 7.5 OUTSIDE ACTIVITIES OF THE GENERAL PARTNER; RELATIONSHIP OF SHARES
TO PARTNERSHIP 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 the General Partner or Limited Partner
and the management of the business of the Partnership and such activities as are
incidental thereto. Without the Consent of the Outside Limited Partners, the
assets of the General Partner shall be limited to Partnership Interests and
permitted debt obligations of the Partnership (as contemplated by Section
7.5.F), so that Shares and Partnership Units are completely fungible except as
otherwise specifically provided herein, provided, that the General Partner shall
be permitted to hold such bank accounts or similar instruments or accounts in
its name as it deems necessary to carry out its responsibilities and purposes as
contemplated under this Agreement and its organizational documents (provided
that accounts held on behalf of the Partnership to permit the General Partner to
carry out its responsibilities under this Agreement shall be considered to
belong to the Partnership and the interest earned thereon shall, subject to
Section 7.4.B, be applied for the benefit of the Partnership); and, provided
further, that the General Partner shall be permitted to acquire, directly or
through a Qualified REIT Subsidiary or limited liability company, up to a one
percent (1%) 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. The General Partner and any of its Affiliates
may acquire Limited Partnership Interests and shall be entitled to exercise all
rights of a Limited Partner relating to such Limited Partnership Interests.
B. Repurchase of Shares. If the General Partner exercises its rights
under the Declaration of Trust to purchase Shares or otherwise elects to
purchase from its shareholders Shares in connection with a share repurchase or
similar program or for the purpose of delivering such shares to satisfy an
obligation under any dividend reinvestment or share purchase program adopted by
the General Partner, any employee share purchase plan adopted by the General
Partner or any similar obligation or arrangement undertaken by the General
Partner in the future, then the General Partner shall cause the Partnership to
purchase from the General Partner that number
32
of Partnership Units of the appropriate class equal to the product obtained by
multiplying the number of Shares purchased by the General Partner times a
fraction, the numerator of which is one and the denominator of which is the
Conversion Factor, on the same terms and for the same aggregate price that the
General Partner purchased such Shares.
C. Forfeiture of Shares. If the Partnership or the General Partner
acquires Shares as a result of the forfeiture of such Shares under a restricted
or similar share plan, then the General Partner shall cause the Partnership to
cancel that number of Partnership Units equal to the number of Shares so
acquired, and, if the Partnership acquired such Shares, it shall transfer such
Shares to the General Partner for cancellation.
D. Issuances of Shares. After the Effective Date, the General Partner
shall not grant, award, or issue any additional Shares (other than Shares issued
pursuant to Section 8.6 hereof or pursuant to a dividend or distribution
(including any share split) of Shares to all of its shareholders), other equity
securities of the General Partner, New Securities or Convertible Funding Debt
unless (i) the General Partner shall cause, pursuant to Section 4.2.A hereof,
the Partnership to issue to the General Partner Partnership Interests or rights,
options, warrants or convertible or exchangeable securities of the Partnership
having designations, preferences and other rights, all such that the economic
interests are substantially the same as those of such additional Shares, other
equity securities, New Securities or Convertible Funding Debt, as the case may
be, and (ii) the General Partner transfers to the Partnership, as an additional
Capital Contribution, the proceeds from the grant, award, or issuance of such
additional Shares, other equity securities, New Securities or Convertible
Funding Debt, as the case may be, or from the exercise of rights contained in
such additional Shares, other equity securities, New Securities or Convertible
Funding Debt, as the case may be. Without limiting the foregoing, the General
Partner is expressly authorized to issue additional Shares, other equity
securities, New Securities or Convertible Funding Debt, as the case may be, for
less than fair market value, and the General Partner is expressly authorized,
pursuant to Section 4.2.A hereof, to cause the Partnership to issue to the
General Partner corresponding Partnership Interests, 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 (for example, and not by way of limitation,
the issuance of Shares and corresponding Partnership 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) and (b)
the General Partner transfers all proceeds from any such issuance or exercise to
the Partnership as an additional Capital Contribution.
E. Share Option Plan. If at any time or from time to time, the General
Partner sells Shares pursuant to any Share Option Plan, the General Partner
shall transfer the net proceeds of the sale of such Shares to the Partnership as
an additional Capital Contribution in exchange for an amount of additional
Partnership Units equal to the number of Shares so sold divided by the
Conversion Factor.
33
F. Funding Debt. The General Partner may incur a Funding Debt, including,
without limitation, a Funding Debt that is convertible into Shares or otherwise
constitutes a class of New Securities ("Convertible Funding Debt"), subject to
the condition that the General Partner lend to the Partnership the net proceeds
of such Funding Debt; provided, that Convertible Funding Debt shall be issued
pursuant to Section 7.5.D above; and, provided further, that the General Partner
shall not be obligated to lend the net proceeds of any Funding Debt to the
Partnership in a manner that would be inconsistent with the General Partner's
ability to remain qualified as a REIT. If the General Partner enters into any
Funding Debt, the loan to the Partnership shall be on comparable terms and
conditions, including interest rate, repayment schedule and costs and expenses,
as are applicable with respect to or incurred in connection with such Funding
Debt.
SECTION 7.6 TRANSACTIONS WITH AFFILIATES
A. Transactions with Certain Affiliates. Except as expressly permitted
by this Agreement, 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
that is not also a Subsidiary of the Partnership, except pursuant to
transactions that are on terms that are fair and reasonable and no less
favorable to the Partnership than would be obtained from an unaffiliated third
party.
B. Conflict Avoidance. The General Partner is expressly authorized to
enter into, in the name and on behalf of the Partnership, a right of first
opportunity arrangement and other conflict avoidance agreements with various
Affiliates of the Partnership and General Partner 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, the Advisor 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
34
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 expected to be incurred
by an Indemnitee shall be paid or reimbursed by the Partnership in advance of
the final disposition of any and all claims, demands, actions, suits or
proceedings, civil, criminal, administrative or investigative made or threatened
against an Indemnitee upon receipt by the Partnership of (i) a written
affirmation by the Indemnitee of the Indemnitee's good faith belief that the
standard of conduct necessary for indemnification by the Partnership as
authorized in this Section 7.7.A has been met and (ii) a written undertaking by
or on behalf of the Indemnitee to repay the amount if it shall ultimately be
determined that the standard of conduct has not been met.
C. No Limitation of Rights. The indemnification provided by this Section
7.7 shall be in addition to any other rights to which an Indemnitee or any other
Person may be entitled under any agreement, pursuant to any vote of the
Partners, as a matter of law or otherwise, and shall continue as to an
Indemnitee who has ceased to serve in such capacity unless otherwise provided in
a written agreement pursuant to which such Indemnitee is indemnified.
D. Insurance. The Partnership may purchase and maintain insurance on
behalf of the Indemnities 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
35
the Partnership's activities, regardless of whether the Partnership would have
the power to indemnify such Person against such liability under the provisions
of this Agreement.
E. Benefit Plan Fiduciary. For purposes of this Section 7.7, (i) excise
taxes assessed on an Indemnitee, of for which the Indemnitee is otherwise found
liable, with respect to an ERISA Plan pursuant to applicable law shall
constitute fines within the meaning of this Section 7.7 and (iii) actions taken
or omitted by the Indemnitee with respect to an ERISA Plan in the performance of
its duties for a purpose reasonably believed by it to be in the interest of the
participants and beneficiaries of such ERISA Plan shall be deemed to be for a
purpose which is not opposed to the best interests of the Partnership.
F. No Personal Liability for Limited 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 Indemnities, 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 such General Partner is obligated to indemnify the Partnership under any
other agreement between such General Partner and the Partnership.
36
SECTION 7.8 LIABILITY OF THE GENERAL PARTNER
A. GENERAL. NOTWITHSTANDING ANYTHING TO THE CONTRARY SET FORTH IN THIS
AGREEMENT, NO GENERAL PARTNER SHALL 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 that General Partner acted in
bad faith and the act or omission was material to the matter giving rise to the
loss, liability or benefit not derived.
B. 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, 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.
C. 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 them hereunder either directly or by or through their 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.
D. 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
37
advisers selected by them, 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. 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 to continue
to qualify as a REIT or (ii) to allow the General Partner to avoid incurring any
liability for taxes under Section 857 or 4981 of the Code, is expressly
authorized under this Agreement and is deemed approved by all of the Limited
Partners.
E. Actions to Maintain REOC Status. If and so long as the Partnership
Interests of "benefit plan investors" is "significant" (as such terms, or terms
succeeding thereto with the same objective, are used in 29 C.F.R. Section
2510.3-101(f) (such regulation or successor regulation being known as the "Plan
Assets Regulation")), or if the General Partner receives written notice from
another General Partner requesting that the affairs of the Partnership be
conducted in compliance with the exception for a real estate operating company
("REOC") as provided in the Plan Assets Regulation, then the General Partner
shall use its best efforts to conduct the affairs of the Partnership as a REOC
and so that the assets of the Partnership will not be "plan assets" (as such
term is defined in the Plan Assets Regulations) of any ERISA Partner.
(i) If the General Partner, pursuant to this Section 7.10.E, intends
to conduct the affairs of the Partnership as a REOC, the General Partner shall
promptly deliver to each ERISA Partner and to any requesting General Partner an
opinion of counsel reasonably acceptable to each such ERISA Partner or
requesting General Partner with respect to the "initial valuation date" and each
"annual valuation period" (as those terms, or terms succeeding thereto with the
same objective, are defined in the Plan Assets Regulation). Such opinion of
counsel shall state, (A) as to the opinion respecting the "initial valuation
date," that the Partnership shall qualify or be qualified as a REOC for the
period beginning on such "initial valuation date" and ending on the last day of
the first "annual valuation period," and (B) as to each annual opinion
respecting each "annual valuation period," that the Partnership shall qualify or
be qualified as a REOC for the 12-month period following the last day of such
"annual valuation period." Each opinion
38
referred to in the prior two sentences may rely upon, among other things, a
certificate of the General Partner as to the exercise of management rights with
respect to one or more investments during the appropriate period and as to a
description of such investments, and such counsel opinion also shall state
whether the Partnership has included in a certification to opinion counsel a
statement to the effect that on such "initial valuation date" or during such
"annual valuation period" at least 50 percent of Partnership assets (other than
short-term investments pending long-term commitment or distribution to
investors), valued at cost, were invested in real estate investments as
described in the Plan Assets Regulation.
(ii) If the opinion described in this subsection is not provided in
the affirmative, or if any ERISA Partner or a requesting General Partner shall
obtain and deliver to the General Partner an opinion of counsel to such ERISA
Partner or requesting General Partner (which opinion shall be reasonably
satisfactory to the General Partner) that there is a reasonable probability that
either (A) the Partnership was or will not be a REOC for any period in which
either participation by benefit plan investors in the Partnership is significant
or a requesting General Partner is an investor, or (B) the assets of the
Partnership were or will be "plan assets" of ERISA Plan investors, then the
General Partner is hereby authorized and empowered to take such actions as it
deems necessary and appropriate to mitigate, prevent, or cure such adverse
consequences resulting to the ERISA Plan investors or requesting General
Partner, including modifying the manner in which the Partnership conducts its
business, or requiring each ERISA Partner (on a pro rata basis unless otherwise
consented to by all ERISA Partners) to transfer all or a portion of its interest
at a price not less than the fair value of such interest or portion thereof.
Such calculation of fair value of an interest or of any Partnership asset shall
be made by the General Partner.
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 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
39
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.
B. Sale of All Assets of the Partnership. Except as provided in Article
XIII, 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 series of related
transactions (including by way of merger (including a triangular merger),
consolidation or other combination with any other Persons) (i) if such merger,
sale or other transaction is in connection with a Termination Transaction
permitted under Section 11.2.B hereof, without the Consent of the Partners
holding at least a majority of the then outstanding Partnership Units (including
any Partnership Units held by the General Partner), or (ii) otherwise, without
the Consent of the Outside Limited Partners.
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; 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, or under the Act.
40
SECTION 8.2 MANAGEMENT OF BUSINESS
No Limited Partner or Assignee (other than the General Partner or the
Advisor, any of their Affiliates or any officer, director, employee, partner,
agent or trustee of the General Partner or the Advisor, 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 or the Advisor, any of
its Affiliates or any officer, director, employee, partner, agent or trustee of
the General Partner or the Advisor, 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 (other than the General Partner) nor any other Person shall
have any rights by virtue of this Agreement or the partnership relationship
established hereby in any business ventures of any other Person (other than the
General Partner to the extent expressly provided herein), and such Person shall
have no obligation pursuant to this Agreement to offer any interest in any such
business ventures to the Partnership, any Limited Partner or any such other
Person, even if such opportunity is of a character which, if presented to the
Partnership, any Limited Partner or such other Person, could be taken by such
Person.
SECTION 8.4 RETURN OF CAPITAL
Except pursuant to the right of redemption set forth in Section 8.6, no
Limited Partner shall be entitled to the withdrawal or return of its Capital
Contribution, except to the extent of distributions made pursuant to this
Agreement or upon termination of the Partnership as provided herein. 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.
41
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 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 and the Certificate of Limited
Partnership and all amendments thereto, together with executed
copies of all powers of attorney pursuant to which this
Agreement, the Certificate of Limited Partnership and all
amendments thereto have been executed; and
(5) to obtain true and full information regarding the amount of cash
and a description and statement of any other property or services
contributed by each Partner and which each Partner has agreed to
contribute in the future, and the date on which each became a
Partner.
B. Notice of Conversion Factor. The Partnership shall notify each
Limited Partner upon request of the then current Conversion Factor and any
changes that have been made thereto.
C. Notice of Extraordinary Transaction of the General Partner. The
General Partner shall not make any extraordinary distributions of cash or
property to its shareholders or effect a merger (including, without limitation,
a triangular merger), a sale of all or substantially all of its assets or any
other similar extraordinary transaction without notifying the Limited Partners
of its intention to make such distribution or effect such merger, sale or other
extraordinary transaction at least twenty (20) Business Days prior to 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
consummation of such merger, sale or other extraordinary transaction). 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
42
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 has made public disclosure thereof and to
use such information during such period of confidentiality solely for purposes
of determining whether to exercise the 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.
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 determine 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.
SECTION 8.6 REDEMPTION RIGHT
A. General. (i) Subject to Section 8.6.C, at any time on or after the
first anniversary date of the issuance of a Partnership Unit to a Limited
Partner pursuant to Article IV hereof (which one-year period shall commence upon
the issuance of such Partnership Unit regardless of whether such Partnership
Unit is designated upon issuance as a Class A Unit, a Class B Unit or otherwise
and shall include the period of time from the date such Partnership Unit is
issued to such Limited Partner as other than a Class A Unit until the date such
Partnership Unit is converted automatically to a Class A Unit pursuant to
Section 4.2.C hereof), or on or after such date prior to the expiration of such
one-year period as the General Partner, in its sole and absolute discretion,
designates with respect to any or all Class A Units then outstanding, the holder
of a Partnership Unit (if other than the General Partner or any Subsidiary of
the General Partner) shall have the right (the "Redemption Right") to require
the Partnership to redeem such Partnership 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 Redemption
Right shall be exercised pursuant to a Notice of Redemption delivered to the
Partnership (with a copy to the General Partner) by the Limited Partner who is
exercising the Redemption Right (the "Redeeming Partner"). A Limited Partner
may exercise the Redemption Right from time to time, without limitation as to
frequency, with respect to part or all of the Units that is owns, as selected by
the Limited Partner, provided that a Limited Partner may not exercise the
Redemption Right for less than one thousand (1,000) Partnership Units unless
such Redeeming Partner then holds less than one thousand (1,000) Partnership
Units, in which event the Redeeming Partner must exercise the Redemption Right
for all of the Partnership Units held by such Redeeming Partner.
43
(ii) The Redeeming Partner shall have no right with respect to any
Partnership Units so redeemed to receive any distributions paid after the
Specified Redemption Date with respect to such Partnership 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 Redemption Right shall be exercisable,
without regard to whether the Partnership 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 Redemption Right,
rather than ten (10) Business Days after receipt of the notice of redemption.
B. General Partner Assumption of Right. (i) If a Limited Partner has
delivered a Notice of Redemption, the General Partner may, in its sole and
absolute discretion (subject to the limitations on ownership and transfer of
Shares set forth in the Declaration of Trust), elect to assume directly and
satisfy a Redemption Right by paying to the Redeeming Partner either the Cash
Amount or the Shares Amount, as the General Partner determines in its sole and
absolute discretion (provided that payment of the Redemption Amount in the form
of Shares shall be in Shares registered for resale under Section 12 of the
Exchange Act and listed for trading on the exchange or national market on which
the Shares are Publicly Traded, and provided further that, if the Shares are not
Publicly Traded at the time a Redeeming Partner exercises its 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 Partnership
Units offered for redemption by the Redeeming Partner and shall be treated for
all purposes of this Agreement as the owner of such Partnership Units. Unless
the General Partner, in its sole and absolute discretion, shall exercise its
right to assume directly and satisfy the 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 Redemption Right. If
the General Partner shall exercise its right to satisfy the Redemption Right in
the manner described in the first sentence of this Section 8.6B and shall fully
perform its obligations in connection therewith, the Partnership shall have no
right or
44
obligation to pay any amount to the Redeeming Partner with respect to such
Redeeming Partner's exercise of the 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 Partnership 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 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 Shares, the total number of Shares to be
paid to the Redeeming Partner in exchange for the Redeeming Partner's
Partnership Units shall be the applicable Shares Amount. If this amount is not
a whole number of Shares, the Redeeming Partner shall be paid (i) that number of
Shares which equals the nearest whole number less than such amount plus (ii) an
amount of cash which the General Partner determines, in its reasonable
discretion, to represent the fair value of the remaining fractional Share which
would otherwise be payable to the Redeeming Partner.
(iii) Each Redeeming Partner agrees to execute such documents as the
General Partner may reasonably require in connection with the issuance of Shares
upon exercise of the Redemption Right.
C. Exceptions to Exercise of Redemption Right. Notwithstanding the
provisions of Sections 8.6.A and 8.6.B, a Partner shall not be entitled to
exercise the Redemption Right pursuant to Section 8.6.A if (but only as long as)
the delivery of Shares to such Partner on the Specified Redemption Date (i)
would be prohibited under the Declaration of Trust or (ii) would be 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
Redemption Right).
D. No Liens on Partnership Units Delivered for Redemption. Each Limited
Partner covenants and agrees with the General Partner that all Partnership Units
delivered for redemption shall be delivered to the Partnership or the General
Partner, as the case may be, free and clear of all liens, and, notwithstanding
anything contained herein to the contrary, neither the General Partner nor the
Partnership shall be under any obligation to acquire Partnership Units which are
or may be subject to any liens. Each Limited Partner further agrees that, if
any state or local property transfer tax is payable as a result of the transfer
of its Partnership Units to the Partnership or the General Partner, such Limited
Partner shall assume and pay such transfer tax.
E. Additional Partnership Interests. 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
45
Partnership Interests (including setting forth any restrictions on the exercise
of the Redemption Right with respect to such Partnership Interests).
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 mails its annual report to its
shareholders, 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, or of the General
Partner 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.
B. Quarterly Reports. If and to the extent that the General Partner
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 shall
cause to be mailed to each Limited Partner a report containing unaudited
financial statements, as of the last day of such calendar quarter, of the
Partnership, or of the General Partner if such statements are prepared solely on
a consolidated
46
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.
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, provided, however, that the General Partner shall make the
election under Section 754 of the Code in accordance with applicable regulations
thereunder. The General Partner shall have the right to seek to revoke any such
election (including, without limitation, the election under Section 754 of the
Code) upon the General Partner's determination in their 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, tax payer identification
number and profit interest of each of the Limited Partners and any Assignees,
provided, however, that such information is provided to the Partnership by the
Limited Partners.
▇. ▇▇▇▇▇▇. The tax matters partner is authorized, but not required:
(1) to enter into any settlement with the IRS with respect to any
administrative or judicial proceedings for the adjustment of
Partnership items required to be taken into account by a Partner
for income tax purposes (such administrative proceedings being
referred to as a "tax audit" and such judicial proceedings being
referred to as "judicial review"), and in the
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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.
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
48
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 Illinois) from the date such amount is due (i.e., fifteen (15) days
after demand) until such amount is paid in full. Each Limited Partner shall
take such actions as the Partnership or the General Partner shall request to
perfect or enforce the security interest created hereunder.
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ARTICLE XI
TRANSFERS AND WITHDRAWALS
SECTION 11.1 TRANSFER
A. Definition. The term "transfer," when used in this Article XI with
respect to a Partnership Interest or a Partnership Unit, shall be deemed to
refer to a transaction by which the General Partner purports to assign all or
any part of its General Partnership Interest to another Person or by which a
Limited Partner purports to assign all or any part of its Limited Partnership
Interest to another Person, and includes a sale, assignment, gift, pledge,
encumbrance, hypothecation, mortgage, exchange or any other disposition by law
or otherwise. The term "transfer" when used in this Article XI does not include
any redemption or repurchase of Partnership Units by the Partnership from a
Partner or acquisition of Partnership 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. Except for transfers of Partnership Units to the Partnership as
provided in Section 7.5 or Section 8.6, the General Partner may not transfer any
of its Partnership Interest (including both its General Partnership Interest and
its Limited Partnership Interest) except in connection with a transaction
described in Section 11.2.B or as otherwise expressly permitted under this
Agreement, nor shall the General Partner withdraw as the General Partner except
in connection with a transaction described in Section 11.2.B. The General
Partner may not transfer any of its Partnership Interests or withdraw as the
General Partner except (i) in connection with a transaction described in Section
11.2.B, (ii) as set forth in Section 11.2.C or (iii) as set forth in Section
7.9.E.
B. The General Partner shall not engage in any merger (including a
triangular merger), consolidation or other combination with or into another
person, 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 the Termination Transaction has been approved by the
Consent of the
50
Partners holding at least a majority of the then outstanding Partnership Units
(including any Partnership Units held by the General Partner) and in connection
with which all Limited Partners either will receive, or will have the right to
elect to receive, for each Partnership Unit an amount of cash, securities, or
other property equal to the product of the Conversion Factor multiplied by the
greatest amount of cash, securities or other property paid to a holder of Shares
corresponding to such Partnership 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 fifty percent (508) of the
outstanding Shares, each holder of Partnership Units shall receive, or shall
have the right to elect 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 Redemption Right and
received Shares in exchange for its Partnership Units immediately prior to the
expiration of such purchase, tender or exchange offer and had thereupon accepted
such purchase, tender or exchange offer.
SECTION 11.3 LIMITED PARTNERS' RIGHTS TO TRANSFER
A. General. Subject to the provisions of Sections 11.3.C, 11.3.D,
11.3.E, 11.4 and 11.6, a Limited Partner (other than the General Partner) may
transfer with or without the consent of the General Partner, all or any portion
of its Partnership Interest, or any of such Limited Partner's rights as a
Limited Partner, provided that prior written notice of such proposed transfer is
delivered to the General Partner. Notwithstanding the foregoing, any Limited
Partner may, at any time, without the consent of the General Partner, (i)
transfer all or any portion of its Partnership Interest to the General Partner,
(ii) transfer all or any portion of its Partnership Interest to an Affiliate,
another original Limited Partner or to an Immediate Family member, subject to
the provisions of Section 11.6, (iii) transfer all or any portion of its
Partnership Interest to a trust for the benefit of a charitable beneficiary or
to a charitable foundation, subject to the provisions of Section 11.6, and (iv)
subject to the provisions of Section 11.6, pledge (a "Pledge") all or any
portion of its Partnership Interest to a lending institution, which is not an
Affiliate of such Limited Partner, as collateral or security for a bona fide
loan or other extension of credit, and transfer such pledged Partnership
Interest to such lending institution in connection with the exercise of remedies
under such loan or extension or credit. Each Limited Partner or Assignee
(resulting from a transfer made pursuant to clauses (i) - (iv) of the proviso of
the preceding sentence) shall have the right to transfer all or any portion of
its Partnership Interest, subject to the provisions of Section 11.6 and the
satisfaction of each of the following conditions (in addition to the right of
each such Limited Partner or Assignee to continue to make any such transfer
permitted by clauses (i) - (iv) of such proviso without satisfying either of the
following conditions):
(a) GENERAL PARTNER RIGHT OF FIRST REFUSAL. The transferring Partner
shall give written notice of the proposed transfer to the General
51
Partner, which notice shall state (i) the identity of the
proposed transferee, and (ii) the amount and type of
consideration proposed to be received for the transferred
Partnership Units. The General Partner shall have ten (10) days
upon which to give the transferring Partner notice of its
election to acquire the Partnership Units on the proposed terms.
If it so elects, it shall purchase the Partnership Units on such
terms within ten (10) days after giving notice of such election.
If it does not so elect, the transferring Partner may transfer
such Partnership Units to a third party, on economic terms no
more favorable to the transferee than the proposed terms, subject
to the other condition of this Section 11.3.
(b) QUALIFIED TRANSFEREE. Any transfer of a Partnership Interest
shall be made only to Qualified Transferees.
It is a condition to any transfer otherwise permitted hereunder (excluding
Pledges of a Partnership Interest, but including any transfer of the pledged
Partnership Interest, whether to the secured party or otherwise, pursuant to the
secured party's exercise of its remedies under such Pledge or the related loan
or extension of credit) that the transferee assumes by operation of law or
express agreement all of the obligations of the transferor Limited Partner under
this Agreement with respect to such transferred Partnership Interest and no such
transfer (other than pursuant to a statutory merger or consolidation wherein all
obligations and liabilities of the transferor Partner are assumed by a successor
corporation by operation of law) shall relieve the transferor Partner of its
obligations under this Agreement without the approval of the General Partner, in
its reasonable discretion. Notwithstanding the foregoing, any transferee of any
transferred Partnership Interest shall be subject to any and all ownership
limitations contained in the Declaration of Trust. Any transferee, whether or
not admitted as a Substituted Limited Partner, shall take subject to the
obligations of the transferor hereunder. Unless admitted as a Substitute
Limited Partner, no transferee, whether by a voluntary transfer, by operation of
law or otherwise, shall have rights hereunder, other than the rights of an
Assignee as provided in 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. No Transfers Violating Securities Laws. The General Partner may
prohibit any transfer of Partnership 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 that such
transfer would not require filing of a registration statement under the
52
Securities Act or would not otherwise violate any federal, or state securities
laws or regulations applicable to the Partnership or the Partnership Unit or, at
the option of the Partnership, an opinion of legal counsel to the Partnership to
the same effect.
D. No Transfers Affecting Tax Status of Partnership. No transfer of
Partnership 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 or would result in a termination of the Partnership for federal income
tax purposes (except as a result of the redemption or exchange for Shares of all
Partnership Units held by all Limited Partners other than the General Partner or
any Subsidiary of either the General Partner 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 would adversely affect the ability of
the General Partner to continue to qualify as a REIT or would subject the
General Partner to any additional taxes under Section 857 or Section 4981 of the
Code or (iii) such transfer is effectuated through an "established securities
market" or a "secondary market (or the substantial equivalent thereof)" within
the meaning of Section 7704 of the Code.
E. No Transfers to Holders of Nonrecourse Liabilities. No Pledge or
transfer of any Partnership Units may be made to a lender to the Partnership or
any Person who is related (within the meaning of Section 1.752-4(b) of the
Regulations) to any lender to the Partnership whose loan constitutes a
Nonrecourse Liability unless (i) the General Partner is provided notice thereof
and (ii) the lender enters into an arrangement with the Partnership and the
General Partner to exchange or redeem for the Redemption Amount any Partnership
Units in which a security interest is held simultaneously with the time at which
such lender would be deemed to be a partner in the Partnership for purposes of
allocating liabilities to such lender under Section 752 of the Code.
SECTION 11.4 SUBSTITUTED LIMITED PARTNERS
A. 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. The General Partner hereby grants its consent
to the admission as a Substituted Limited Partner to any bona fide financial
institution that loans money or otherwise extends credit to a holder of Units
and thereafter becomes the owner of such Units pursuant to the exercise by such
financial institution of its rights under a Pledge of such Units granted in
connection with such loan or extension of credit.
53
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 15.11) 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 Partnership Units, and Percentage Interest of such
Substituted Limited Partner and to eliminate or adjust, if necessary, the name,
address, Capital Account and Percentage Interest and interest of the predecessor
of such Substituted Limited Partner.
SECTION 11.5 ASSIGNEES
If the General Partner, in its sole and absolute discretion, does not
consent to the admission of any permitted transferee under Section 11.3 as a
Substituted Limited Partner, as described in Section 11.4, such transferee shall
be considered an Assignee for purposes of this Agreement. An Assignee shall be
entitled to all the rights of an assignee of a limited partnership interest
under the Act, including the right to receive distributions from the Partnership
and the share of Net Income, Net Losses, gain, loss and Recapture Income
attributable to the Partnership 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 Partnership Units for any other purpose under this
Agreement, and shall not be entitled to vote such Partnership Units in any
matter presented to the Limited Partners for a vote (such Partnership Units
being deemed to have been voted on such matter in the same proportion as all
other Partnership Units held by Limited Partners are voted). If any such
transferee desires to make a further assignment of any such Partnership Units,
such transferee shall be subject to all the provisions of this Article XI to the
same extent and in the same manner as any Limited Partner desiring to make an
assignment of Partnership Units.
SECTION 11.6 GENERAL PROVISIONS
A. 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 Partnership Units in accordance with this Article XI or
Pursuant to redemption of all of its Partnership Units under Section 8.6.
B. Termination of Status as Limited Partner. Any Limited Partner who
shall transfer all of its Partnership Units in a transfer permitted pursuant to
this Article XI or pursuant to redemption of all of its Partnership Units under
Section 8.6 shall cease to be a Limited Partner.
54
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 Partnership Unit
with respect to which the Partnership Record Date is before the date of such
transfer, assignment or redemption shall be made to the transferor Partner or
the Redeeming Partner, as the case may be, and, in the case of a transfer or
assignment other than a redemption, all distributions of Available Cash
thereafter attributable to such Partnership Unit shall be made to the transferee
Partner.
E. Additional Restrictions. In addition to any other restrictions on
transfer herein contained, including without limitation the provisions of this
Article XI, 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 Partnership Units held by all Limited Partners 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
Partnership Units held by all Limited Partners or pursuant to a transaction
expressly permitted under Section 7.11.B or Section 11.2)7 (vi) if such transfer
would cause the Partnership Interests of "benefit plan investors" to become
"significant," as those terms are used in Section 7.9.E., 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 a "disqualified person" (as defined in Section 4975(c) 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 employee
benefit plan pursuant
55
to Department of Labor Regulations Section 2510.1-101t (viii) if such transfer
requires the registration of such Partnership Interest pursuant to any
applicable federal or state securities laws; (ix) if such transfer is
effectuated through an "established securities market" or a "secondary market"
(or the substantial equivalent thereof) within the meaning of Section 7704 of
the Code or such transfer causes the Partnership to become a "publicly traded
partnership," as such term is defined in Section 469(k)(2) or Section 7704(b) of
the Code (provided that this clause (ix) shall not be the basis for limiting or
restricting in any manner the exercise of the 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 to regulation under
the Investment Company Act of 1940, the Investment Advisors Act of 1940 or
ERISA, each as amended; (xi) such transfer could adversely affect the ability of
the General Partner 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 adversely affect the ability of the General
Partner to continue to qualify as a REIT or subject the General Partner 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) n 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) n 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 Partnership Unit to
exercise the 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
ADMISSION OF PARTNERS
56
SECTION 12.1 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 an
acceptance of all of the terms and conditions of this Agreement and such other
documents or instruments as may be required to effect the admission.
SECTION 12.2 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 4.1.C, or who exercises
an option to receive Partnership 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 15.11 and (ii) such other documents or instruments as may be required in
the discretion of the General Partner to effect such Person's admission as an
Additional Limited Partner. The admission of any Person as an Additional
Limited Partner shall become effective on the date upon which the name of such
Person is recorded on the books and records of the Partnership, following the
consent of the General Partner to such admission.
B. Allocations to Additional Limited Partners. If any Additional Limited
Partner is admitted to the Partnership on any day other than the first day of a
Partnership Year, then Net Income, Net Losses, each item thereof and all other
items allocable among Partners and Assignees for such Partnership Year shall be
allocated among such Additional Limited Partner and all other Partners and
Assignees by taking into account their varying interests during the Partnership
Year in accordance with Section 706(d) of the Code, using the interim closing of
the books method (unless the General Partner, in its sole and absolute
discretion, elects to adopt a daily, weekly or monthly proration method, in
which event Net Income, Net Losses, and each item thereof would be prorated
based upon the applicable period selected by the General Partner). Solely for
purposes of making such allocations, each of such items for the calendar month
in which an admission of any Additional Limited Partner occurs shall be
allocated among all the Partners and Assignees including such Additional Limited
Partner. All distributions of Available Cash with respect to which the
Partnership Record Date is before the date of such admission shall be made
solely to Partners and Assignees other than the Additional Limited Partner, and
all distributions of Available Cash thereafter shall be made to all the Partners
and Assignees including such Additional Limited Partner.
57
SECTION 12.3 AMENDMENT OF AGREEMENT AND CERTIFICATE OF LIMITED PARTNERSHIP
For the admission to the Partnership of any Partner, the General Partner
shall take all steps necessary and appropriate under the Act to amend the
records of the Partnership and, if necessary, to prepare as soon as practical an
amendment of this Agreement (including an amendment of Exhibit A) and, if
required by law, shall prepare and file an amendment to the Certificate of
Limited Partnership and may for this purpose exercise the power of attorney
granted pursuant to Section 15.11 hereof.
ARTICLE XIII
DISSOLUTION AND LIQUIDATION
SECTION 13.1 DISSOLUTION
The Partnership shall not be dissolved by the admission of Substituted
Limited Partners or Additional Limited Partners or by the admission of a
successor General Partner in accordance with the terms of this Agreement. Upon
the withdrawal of the General Partner, any successor General Partner shall
continue the business of the Partnership. The Partnership shall dissolve, and
its affairs shall be wound up, 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 (1) there is at least one
other General Partner, in which case the remaining General Partner shall
continue the business of the Partnership, or (2) 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, 2048, 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, 2046;
(v) entry of a decree of judicial dissolution of the Partnership
pursuant to the provisions of the Act;
58
(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 13.2 WINDING UP
A. General. Upon the occurrence of a Liquidating Event, the Partnership
shall continue solely for the purposes of winding up its affairs in an orderly
manner, liquidating its assets, and satisfying the claims of its creditors and
Partners. No Partner shall take any action that is inconsistent with, or not
necessary to or appropriate for, the winding up of the Partnership's business
and affairs. The General Partner (or, if there is no remaining General Partner,
any Person elected by a majority in interest of the Limited Partners (the
"Liquidation") shall be responsible for overseeing the winding up and
dissolution of the Partnership and shall take full account of the Partnership's
liabilities and property and the Partnership property shall be liquidated as
promptly as is consistent with obtaining the fair value thereof, and the
proceeds therefrom (which may, to the extent determined by the General Partner,
include equity or other securities of the General Partner or any other entity)
shall be applied and distributed in the following orders:
(1) First, to the payment and discharge of all of the Partnership's
debts and liabilities to creditors other than the Partners;
(2) Second, to the payment and discharge of all of the Partnership's
debts and liabilities to the General Partner;
(3) Third, to the payment and discharge of all of the Partnership's
debts and liabilities to the Limited Partners; and
59
(4) 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 XIII.
B. Deferred Liquidation. Notwithstanding the provisions of Section
13.2.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 13.2.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 13.3 COMPLIANCE WITH TIMING REQUIREMENTS OF REGULATIONS
Subject to Section 13.4, if the Partnership is "liquidated" within the
meaning of Regulations Section 1.704-l(b)(2)(ii)(g), distributions shall be made
under this Article XIII to the General Partner and Limited Partners who have
positive Capital Accounts in compliance with Regulations Section 1.704-
l(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 XIII may be: (A) distributed to a trust
established for the benefit of the General Partner and Limited Partners for the
purposes of liquidating Partnership assets, collecting amounts owed to the
Partnership and paying any contingent or unforeseen liabilities or obligations
of the Partnership or of the General Partner arising out of or in connection
with the Partnership (in which case the assets of any such trust shall be
distributed to the General Partner and Limited Partners from time to time, in
the reasonable discretion of the General Partner, in the same proportions as the
amount distributed to such trust by the Partnership would otherwise have been
60
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 13.4 DEEMED DISTRIBUTION AND RECONTRIBUTION
Notwithstanding any other provision of this Article XIII, if the
Partnership is deemed liquidated within the meaning of Regulations Section
1.704-l(b)(2)(ii)(g) but no Liquidating Event has occurred, the Partnership's
property shall not be liquidated, the Partnership's liabilities shall not be
paid or discharged and the Partnership's affairs shall not be wound up.
Instead, for federal income tax purposes and for purposes of maintaining Capital
Accounts pursuant to Exhibit B, the Partnership shall be deemed to have
distributed its assets in kind to the General Partner and Limited Partners, who
shall be deemed to have assumed and taken such assets subject to all Partnership
liabilities, all in accordance with their respective Capital Accounts.
Immediately thereafter, the General Partner and Limited Partners shall be deemed
to have recontributed the Partnership assets in kind to the Partnership, which
shall be deemed to have assumed and taken such assets subject to all such
liabilities.
SECTION 13.5 RIGHTS OF LIMITED PARTNERS
Except as otherwise provided in this Agreement, each Limited Partner shall
look solely to the assets of the Partnership for the return of its Capital
Contributions and shall have no right or power to demand or receive property
other than cash from the Partnership. Except as otherwise 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 13.6 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 13.1, result in a dissolution of the Partnership, the General Partner
shall, within thirty (30) days thereafter, provide written notice thereof to
each of the Partners and to all other parties with whom the Partnership
regularly conducts business (as determined in the discretion of the General
Partner).
SECTION 13.7 CANCELLATION OF CERTIFICATE OF LIMITED PARTNERSHIP
Upon the completion of the liquidation of the Partnership cash and property
as provided in Section 13.2, the Partnership shall be terminated and the
Certificate of Limited Partnership and all qualifications of the Partnership as
a foreign limited partnership in jurisdictions other than the
61
State of Delaware shall be canceled and such other actions as may be necessary
to terminate the Partnership shall be taken.
SECTION 13.8 REASONABLE TIME FOR WINDING UP
A reasonable time shall be allowed for the orderly winding up of the
business and affairs of the Partnership and the liquidation of its assets
pursuant to Section 13.2, 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 13.9 WAIVER OF PARTITION
Each Partner hereby waives any right to partition of the Partnership
property.
SECTION 13.10 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 XIV
AMENDMENT OF PARTNERSHIP AGREEMENT; MEETINGS
SECTION 14.1 AMENDMENTS
A. General. Amendments to this Agreement may be proposed by the General
Partner or by any Limited Partners holding twenty-five percent (25%) or more of
the Partnership Interests. Following such proposal (except an amendment
pursuant to Section 14.1.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 which is
consistent with the General Partner's recommendation with respect to the
proposal. Except as provided in Section 14.1.B, 14.1.C or 14.1.D, a proposed
amendment shall be adopted and be effective as an amendment hereto if it is
approved by the General Partner and it receives the Consent of Partners holding
a majority of the Percentage Interests of the Limited Partners (including
Limited Partnership Interests held by the General Partner).
62
B. Amendments Not Requiring Limited Partner Approval. Notwithstanding
Section 14.1.A or 14.1.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 when any action under
this Section 14.1.B is taken in the next regular communication to the Limited
Partners.
C. Amendments Requiring Limited Partner Approval (Excluding General
Partner). Notwithstanding Section 14.1.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 7.5, Section 7.6, Section
7.8, Section 7.11.B, Section 11.2, Section 13.1 (other than Section 13.1(iii)
which can be amended only with a Consent of 90% of the Partnership Units
(including Partnership Units held by the General Partner), the last sentence of
Section 11.4 (provided that no such amendment shall in any event adversely
affect the rights of any lender who made a loan or who extended credit and
received in connection therewith a Pledge of Units prior to the date such
amendment is adopted unless, and only to the extent such lender consents
thereto, this Section 14.1.C or Section 14.2.
63
D. Other Amendments Requiring Certain Limited Partner Approval.
Notwithstanding anything in this Section 14.1 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, (iii) amend Section
7.11.A, (iv) amend Article V or Article VI (except as permitted pursuant to
Sections 4.2, 5.1.E, 5.4, 6.2 and 14.1(B)(3)), (v) amend Section 8.6 or any
defined terms set forth in Article I that relate to the Redemption Right (except
as permitted in Section 8.6.E), or (vi) amend this Section 14.1.D. This Section
14.1.D does not require unanimous consent of all Partners adversely affected
unless the amendment is to be effective against all Partners adversely affected.
SECTION 14.2 MEETINGS OF THE PARTNERS
A. General. Meetings of the Partners may be called by the General
Partner and shall be called upon the receipt by the General Partner of a written
request by Limited Partners holding twenty-five percent (25%) or more of the
Partnership Interests. The call shall state the nature of the business to be
transacted. Notice of any such meeting shall be given to all Partners not less
than seven (7) days nor more than thirty (30) days prior to the date of such
meeting. Partners may vote in person or by proxy at such meeting. Whenever the
vote or Consent of Partners is permitted or required under this Agreement, such
vote or Consent may be given at a meeting of Partners or may be given in
accordance with the procedure prescribed in Section 14.1.A. Except as otherwise
expressly provided in this Agreement, the Consent of holders of a majority of
the Percentage Interests held by Limited Partners (including Limited Partnership
Interests held by the General Partner) shall control.
B. Actions Without a Meeting. Any action required or permitted to be
taken at a meeting of the Partners may be taken without a meeting if a written
consent setting forth the action so taken is signed by a majority of the
Percentage Interests of the Partners (or such other percentage as is expressly
required by this Agreement). Such consent may be in one instrument or in
several instruments, and shall have the same force and effect as a vote of a
majority of the Percentage Interests of the Partners (or such other percentage
as is expressly required by this Agreement). Such consent shall be filed with
the General Partner. An action so taken shall be deemed to have been taken at a
meeting held on the effective date so certified.
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.
64
D. Conduct of Meeting. Each meeting of Partners shall be conducted by
the General Partner or such other Person as the General Partner may appoint
pursuant to such rules for the conduct of the meeting as the General Partner or
such other Person deem appropriate.
ARTICLE XV
GENERAL PROVISIONS
SECTION 15.1 ADDRESSES AND NOTICE
Any notice, demand, request or report required or permitted to be given or
made to a Partner or Assignee under this Agreement shall be in writing and shall
be deemed given or made when delivered in person or when sent by first class
United States mail or by other means of written communication to the Partner or
Assignee at the address set forth in Exhibit A or such other address as the
Partners shall notify the General Partner in writing.
SECTION 15.2 TITLES AND CAPTIONS
All article or section titles or captions in this Agreement are for
convenience only. They shall not be deemed part of this Agreement and in no way
define, limit, extend or describe the scope or intent of any provisions hereof.
Except as specifically provided otherwise, references to "Articles", "Sections"
and "Exhibits" are to Articles, Sections and Exhibits of this Agreement.
SECTION 15.3 PRONOUNS AND PLURALS
Whenever the context may require, any pronoun used in this Agreement shall
include the corresponding masculine, feminine or neuter forms, and the singular
form of nouns, pronouns and verbs shall include the plural and vice versa.
SECTION 15.4 FURTHER ACTION
The parties shall execute and deliver all documents, provide all
information and take or refrain from taking action as may be necessary or
appropriate to achieve the purposes of this Agreement.
SECTION 15.5 BINDING EFFECT
This Agreement shall be binding upon and inure to the benefit of the
parties hereto and their heirs, executors, administrators, successors, legal
representatives and permitted assigns.
SECTION 15.6 CREDITORS
65
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 15.7 WAIVER
No failure by any party to insist upon the strict performance of any
covenant, duty, agreement or condition of this Agreement or to exercise any
right or remedy consequent upon a breach thereof shall constitute waiver of any
such breach or any other covenant, duty, agreement or condition.
SECTION 15.8 COUNTERPARTS
This Agreement may be executed in counterparts, all of which together shall
constitute one agreement binding on all the parties hereto, notwithstanding that
all such parties are not signatories to the original or the same counterpart.
Each party shall become bound by this Agreement immediately upon affixing its
signature hereto.
SECTION 15.9 APPLICABLE LAW
This Agreement shall be construed and enforced in accordance with and
governed by the laws of the State of Delaware, without regard to the principles
of conflicts of law.
SECTION 15.10 INVALIDITY OF PROVISIONS
If any provision of this Agreement is or becomes invalid, illegal or
unenforceable in any respect, the validity, legality and enforceability of the
remaining provisions contained herein shall not be affected thereby.
SECTION 15.11 POWER OF ATTORNEY
A. General. Each Limited Partner and each Assignee who accepts
Partnership Units (or any rights, benefits or privileges associated therewith)
is deemed to irrevocably constitute and appoint the General Partner, any
Liquidator and authorized officers and attorneys-in-fact of each, and each of
those acting singly, in each case with full power of substitution, as its true
and lawful agent and attorney-in-fact, with full power and authority in its
name, place and stead to:
(1) execute, swear to, acknowledge, deliver, file and record in the
appropriate public offices (a) all certificates, documents and
other instruments (including, without limitation, this Agreement
and the Certificate of Limited Partnership and all amendments or
restatements thereof) that the General Partner or any Liquidator
deems appropriate or necessary to form,
66
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 15.11 shall be construed as authorizing
the General Partner or any Liquidator to amend this Agreement except in
accordance with Article XIV 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 Partnership Units and shall extend to such Limited Partner's or
Assignee's heirs, successors, assigns and personal representatives. Each such
Limited Partner or Assignee hereby agrees to be bound by any representation made
by the General Partner or any Liquidator, acting in good faith pursuant to such
power of attorney, and each such Limited Partner or Assignee hereby waives any
and all defenses which may be available to contest, negate or disaffirm the
action of the General Partner or any Liquidator, taken in good faith under such
power of attorney. Each
67
Limited Partner or Assignee shall execute and deliver to the General Partner or
the Liquidator, within fifteen (15) days after receipt of the General Partner's
or Liquidator's request therefor, such further designation, powers of attorney
and other instruments as the General Partner or the Liquidator, as the case may
be, deems necessary to effectuate this Agreement and the purposes of the
Partnership.
SECTION 15.12 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 15.13 NO RIGHTS AS SHAREHOLDERS
Nothing contained in this Agreement shall be construed as conferring upon
the holders of the Partnership Units any rights whatsoever as partners or
shareholders of any of the General Partner, including, without limitation, any
right to receive dividends or other distributions made to shareholders of the
General Partner or partners of the other General Partner or to vote or to
consent or receive notice as (i) shareholders in respect to any meeting of
shareholders for the election of trustees of the General Partner or partners of
the other General Partner or any other matter or (ii) partners in respect to any
meeting of partners of the other General Partner or any other matter.
SECTION 15.14 LIMITATION TO PRESERVE REIT STATUS
To the extent that any amount paid or credited to the General Partner or
any of their 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
68
year which is described in subsections (A) through (I) of Section 856(c)(3) of
the Code over (b) the amount of gross income (within the meaning of Section
856(c)(3) of the Code) derived by the General Partner from sources other than
those described in subsections (A) through (I) of Section 856(c)(3) of the Code
(but not including the amount of any General Partner Payments);
provided, however, that General Partner Payments in excess of the amounts
set forth in subparagraphs (i) and (ii) above may be made if the General
Partner, as a condition precedent, obtains an opinion of tax counsel that the
receipt of such excess amounts would not adversely affect the General Partner's
ability to qualify as a REIT. To the extent General Partner Payments may not be
made in a year due to the foregoing limitations, such General Partner Payments
shall carry over and be treated as arising in the following year, provided,
however, that such amounts shall not carry over for more than five years, and if
not paid within such five year period, shall expire, provided further, that (i)
as General Partner Payments are made, such payments shall be applied first to
carry over amounts outstanding, if any, and (ii) with respect to carry over
amounts for more than one Partnership Year, such payments shall be applied to
the earliest Partnership Year first.
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IN WITNESS WHEREOF, the parties hereto have executed this Agreement as of
the date first written above.
General Partner:
LaSalle Hotel Properties
By:_______________________________________
Name:_____________________________________
Title:____________________________________
LIMITED PARTNERS:
By: LaSalle Hotel Properties, as Attorney-in-Fact for
the Limited Partners
By:__________________________________
Name:________________________________
Title:_______________________________
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EXHIBIT A
PARTNERS AND PARTNERSHIP INTERESTS
Class A Agreed Initial
Name and Address of Partner Partnership Class B Partnership Capital Account Percentage Interest
--------------------------- ---------- ------------------- --------------- -------------------
General Partner:
LaSalle Hotel Properties
▇▇▇ ▇▇▇▇ ▇▇▇▇ ▇▇▇▇▇▇
▇▇▇ ▇▇▇▇, ▇▇ ▇▇▇▇▇
LIMITED PARTNERS: 100.00%
========== =================== =============== ===================
TOTAL
EXHIBIT B
CAPITAL ACCOUNT MAINTENANCE
1. Capital Accounts of the Partners
A. The Partnership shall maintain for each Partner a separate Capital
Account in accordance with the rules of Regulations Section 1.704-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-
l(b)(2)(iv)(m), the computation of all items of income, gain,
loss and deduction shall be made without regard to any election
under Section 754 of the Code which may be made by the
Partnership, provided that the amounts of any adjustments to the
adjusted bases of the assets of the Partnership made pursuant to
Section 734 of the Code as a result of the distribution of
property by the Partnership to a Partner (to the extent that such
adjustments have not previously been reflected in the Partners'
Capital Accounts) shall be reflected in the Capital Accounts of
the Partners in the manner and subject to the limitations
prescribed in Regulations Section 1.704-l(b)(2)(iv)(m)(4).
(2) The computation of all items of income, gain, and deduction shall
be made without regard to the fact that items described in
Sections 705(a)(1)(B) or 705(a)(2)(B) of the Code are not
includable in gross income or are neither currently deductible
nor capitalized for federal income tax purposes.
B-1
(3) Any income, gain or loss attributable to the taxable disposition
of any Partnership property shall be determined as if the
adjusted basis of such property as of such date of disposition
were equal in amount to the Partnership's Carrying Value with
respect to such property as of such date.
(4) In lieu of the depreciation, amortization, and other cost
recovery deductions taken into account in computing such taxable
income or loss, there shall be taken into account Depreciation
for such fiscal year.
(5) In the event the Carrying Value of any Partnership Asset is
adjusted pursuant to Section 1.D hereof, the amount of any such
adjustment shall be taken into account as gain or loss from the
disposition of such asset.
(6) Any items specially allocated under Section 2 of Exhibit C hereof
shall not be taken into account.
C. Generally, a transferee (including any Assignee) of a Partnership Unit
shall succeed to a pro rata portion of the Capital Account of the transferor,
provided, however, that, if the transfer causes a termination of the Partnership
under Section 708(b)(1)(B) of the Code, the Partnership's properties shall be
deemed, solely for federal income tax purposes, to have been distributed in
liquidation of the Partnership to the holders of the Partnership units
(including the transferee) and recontributed by such Persons in reconstitution
of the Partnership. In such event, the Carrying Values of the Partnership
properties shall be adjusted immediately prior to such deemed distribution
pursuant to Section 1.D(2) hereof. The Capital Accounts of such reconstituted
Partnership shall be maintained in accordance with the principles of this
Exhibit B.
D. (1) Consistent with the provisions of Regulations Section 1.704-
l(b)(2)(iv)(f), and as provided in Section 1.D(2), the Carrying
Values of all Partnership assets shall be adjusted upward or
downward to reflect any Unrealized Gain or Unrealized Loss
attributable to such Partnership property, as of the times of the
adjustments provided in Section 1.D(2) hereof, as if such
Unrealized Gain or Unrealized Loss had been recognized on an
actual sale of each such property and allocated pursuant to
section 6.1 of the Agreement.
(2) Such adjustments shall be made as of the following times: (a)
immediately prior to the acquisition of an additional interest in
the Partnership by any new or existing Partner in exchange for
more than a de minimis Capital Contribution; (b) immediately
prior to the distribution by the Partnership to a Partner of more
than a de minimis amount of property as consideration for an
interest in the Partnership; and (c) immediately prior to the
liquidation of the Partnership within the meaning of Regulations
B-2
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 XIII 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-l(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 XIV of the Agreement, provided that it is not likely
to have a material effect on the amounts distributable to any Person pursuant to
Article XIII of the Agreement upon the dissolution of the Partnership. The
General Partner also shall (i) make any adjustments that are necessary or
appropriate to maintain equality between the Capital Accounts of the Partners
and the amount of Partnership capital reflected on the Partnership's balance
sheet, as computed for book purposes, in accordance with Regulations Section
1.704-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 1.704-1(b).
2. No Interest
B-3
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 and XIII of the
Agreement.
B-4
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 the General Partner and
each 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), 1.704-l(b)(2)(ii)(d)(5), or
1.704l(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-l(b)(2)(ii)(d) and shall be interpreted
consistently therewith.
▇. ▇▇▇▇▇ Income Allocation. In the event that any Partner has an
Adjusted Capital Account Deficit at the end of any Partnership Year (after
taking into account allocations to be made under the preceding paragraphs hereof
with respect to such Partnership Year), each such Partner shall be specially
allocated items of Partnership income and gain (consisting of a pro rata portion
of each item of Partnership income, including gross income and gain for the
Partnership Year) in an amount and manner sufficient to eliminate, to the extent
required by the Regulations, its Adjusted Capital Account Deficit.
E. Nonrecourse Deductions. Nonrecourse Deductions for any Partnership
Year shall be allocated to the Partners in accordance with their respective
Percentage Interests. If the General Partner determines in its good faith
discretion that the Partnership's Nonrecourse Deductions must be allocated in a
different ratio to satisfy the safe harbor requirements of the Regulations
promulgated under Section 704(b) of the Code, the General Partner is authorized,
upon notice to the Limited Partners, to revise the prescribed ratio for such
Partnership Year to the numerically closest ratio which would satisfy such
requirements.
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.
C-2
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.
(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-3
C. To the extent Regulations promulgated pursuant to Section 704(c) of the
Code permit a Partnership to utilize alternative methods to eliminate the
disparities between the Carrying Value of property and its adjusted basis, the
General Partner shall, subject to the following, have the authority to elect the
method to be used by the Partnership and such election shall be binding on all
Partners. With respect to the Contributed Property transferred to the
Partnership in connection with the Consolidation, the Partnership shall elect to
use the "traditional method" set forth in Treasury Regulation Section 1.704-
3(b).
C-4
EXHIBIT D
NOTICE OF REDEMPTION
The undersigned hereby irrevocably (i) redeems ______________ Partnership Units
in LaSalle Hotel Operating Partnership, L.P. in accordance with the terms of the
Agreement of Limited Partnership of LaSalle Hotel Operating Partnership, L.P.,
as amended, and the Redemption Right referred to therein, (ii) surrenders such
Partnership 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 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 Partnership Units, free and clear of
the rights of or interests of any other person or entity, (b) has the full
right, power and authority to redeem and surrender such Partnership Units as
provided herein and (c) has obtained the consent or approval of all persons or
entities, if any, having the right to consult or approve such redemption and
surrender.
Dated:_________ Name of Limited Partner:
------------------------------------
(Signature of Limited Partner)
------------------------------------
(Street Address)
------------------------------------
(City) (State) (Zip Code)
Signature Guaranteed by:
------------------------------------
IF SHARES ARE TO BE ISSUED, ISSUE TO:
Name:
Please insert social security or identifying number:
EXHIBIT E
VALUE OF CONTRIBUTED PROPERTY
UNDERLYING
PROPERTY 704(C) VALUE AGREED VALUE
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